Carrying on with its aggressive portfolio transformation initiatives, DDR Corp. (DDR) made $660 million of transactions in the second quarter of 2014. The company also disclosed its intention to remain net sellers this year.
Specifically, this retail real estate investment trust (:REIT) closed 4 prime power center acquisitions in Q2. These assets are positioned in downtown Chicago, Sacramento, Cincinnati, and Colorado Springs. The total purchase price was $265 million. With solid demographic features across each trade area and an average of more than 450,000 people with household incomes of $87,000, their acquisition is a strategic fit for DDR.
Furthermore, DDR is currently under contract to purchase an asset in Philadelphia as well as a 76 assets portfolio from American Realty Capital Properties, Inc.’s (ARCP) affiliates in collaboration with The Blackstone Group L.P. (BX) affiliates for $1.98 billion. DDR’s share is expected to be $384 million. (Read: DDR, Blackstone Form JV for $2 Billion Shopping Centers Buy).
On the other hand, DDR vended 11 operating assets and 6 land parcels of which the company’s share is $51 million. The company also accomplished the sale of its 50% ownership stake in Sonae Sierra Brazil BV Sarl for $344 million in gross proceeds, marking the company’s complete exit from the Brazilian market.
Moreover, there are 25 assets aggregating $369 million at full ownership (including 58 million of non-income producing assets) that are under contract for sale currently. These correspond to a total $355 million of proceeds at DDR's share.
Apart from these, the company closed on a $75 million non-recourse mortgage loan secured by a 636,000-square-foot shopping center - Plaza Escorial - in Puerto Rico.
Going forward, we believe that DDR’s portfolio repositioning efforts and capital allocation strategies would help it to ride on the growth trajectory. The company intends to remain net sellers this year and redeploy the capital in its prime power centers in top MSAs at opportunistic pricing. While this is a strategic fit for the company’s long-term growth, the near-term dilutive effect of such moves is unavoidable.
DDR currently carries a Zacks Rank #3 (Hold). Investors interested in the retail REIT may consider another stock – Acadia Realty Trust (AKR) – that has a Zacks Rank #2 (Buy).
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