DDR Closes Deals Worth $729M in Q3
In tune with its capital-recycling program, DDR Corp. (DDR) recently disclosed the completion of strategic transactions worth $729 million in third-quarter 2013. Notably, this retail real estate investment trust (:REIT) closed acquisitions worth $591 million and divestitures worth $138 million in the third quarter of 2013.
Acquisitions
In particular, during the quarter, DDR bought two premium regional power centers – Winter Garden Village in Orlando and Cumming Town Center in Atlanta – for around $259 million during the quarter. Winter Garden Village spans 1.1 million square foot and Cumming Town Center, which is fully leased, stretches 311,000 square foot.
In addition, DDR – through a joint venture formed with an affiliate of The Blackstone Group L.P. (BX) – completed the acquisition of a portfolio comprising 7 prime shopping centers for $332 million. Spanning 2.4 million square feet of GLA, the assets are located in supply constrained MSA's (Metropolitan Statistical Areas) such as Los Angeles, San Diego, Washington DC, Portland and Cincinnati. These shopping centers are currently 93% leased.
These above-mentioned 9 prime shopping centers, located in supply constrained top 50 MSA's, benefit from the average trade area population of over 340,000 people. Moreover, the acquired properties are occupied by high-quality retailers like Target Corp. (TGT), Best Buy Co., Inc. (BBY), Dick's Sporting Goods and Petco. These buyouts were financed through proceeds from asset divestitures, new common equity, assumed debt and new mortgage debt.
Divestitures
During third-quarter 2013, DDR divested 16 non-prime and 6 non-income generating assets and obtained gross proceeds of $138 million, of which DDR’s share was $104 million. Currently, DDR has around $79 million worth of non-prime assets under contracts for sale, which include non-income producing properties of $48 million.
Our Take
DDR’s long-term strategy of repositioning its overall portfolio by upgrading the quality of shopping centers strengthens its position in top MSAs of U.S. In particular, the successful execution of the company’s capital recycling efforts bodes well for its long-term growth. Moreover, the addition of premium assets to its high-end assets pool, along with strengthening of the tenant base, promises steady rental revenues for DDR in the future.
Encouraged by its strong quarterly transactions, we look forward to DDR’s third-quarter 2013 result that is scheduled to release on Nov 4, after the closing bell. The Zacks Consensus Estimate for third-quarter funds from operations (:FFO) is currently pegged at 28 cents per share, depicting estimated year-over-year growth of 3.21%.
DDR currently carries a Zacks Rank #3 (Hold).
Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.
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