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DDR Corp (DDR) Surpasses FFO, Revenue Estimates in Q1

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DDR Corp.’s DDR first-quarter 2018 funds from operations (FFO) per share of 26 cents surpassed the Zacks Consensus Estimate of 23 cents. However, the figure declined a couple of cents from the prior-year quarter.

The company generated revenues of $207 million for the first quarter, surpassing the Zacks Consensus Estimate of $199.3 million. However, the top line fell short of $231 million recorded in the year-ago quarter.

Quarter in Detail

Same-store net operating income (NOI) for the total portfolio on a pro rata basis, excluding Puerto Rico, was 2.6%. Further, the company, on a pro rata basis for the total portfolio for the quarter, generated new leasing and renewal leasing spreads of 21.2% and 6.4%, respectively, in the reported quarter.

DDR reported a leased rate of 93.7% as of Mar 31, 2018, compared with 93.6% at the end of 2017, on a pro rata basis for the total portfolio.

Annualized base rent per occupied square-foot for the total portfolio increased 1.7%, on a pro rata basis, to $17.29 as of Mar 31, 2018, from $17.00 a year ago.

Notably, DDR sold 15 shopping centers and land parcels for a total sale price of $365.9 million during the quarter under review, thereby aggregating $208.7 million at DDR's share.

Moreover, the company repaid $452 million of mortgage debt.

DDR exited the first quarter with $16.56 million in cash compared with $92.61 million as of Dec 31, 2017.

Outlook

DDR reiterated its previously-issued guidance.

DDR provided guidance for 2018 except for OFFO, which was provided for the third quarter of 2018 for New DDR. New DDR informed about the assets that are going to remain within the company after the completion of the $900-million disposition program and the spin-off of RVI.

For third-quarter 2018, the company continues to expect OFFO to be at least 15 cents, assuming a spin-off date in July 2018. Net income attributable to shareholders is expected to be two to three cents per share.

Bottom Line

In December 2017, DDR announced its board's decision to spin off a portfolio of 50 sellable assets into a separate public-traded REIT. This move might help the company streamline its portfolio and focus on the core markets. Further, this aggressive capital-recycling program is expected to drive the company's growth over the long term.

However, the choppy retail real estate environment is anticipated to limit demand for space in the near term, thanks to the shift in customers’ shopping preferences toward online purchases. Also, an aggressive asset disposition is likely to leave a dilutive effect on earnings. Hike in interest rate adds to its woes.

DDR carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DDR Corp. Price, Consensus and EPS Surprise

DDR Corp. Price, Consensus and EPS Surprise | DDR Corp. Quote

We now look forward to the earnings releases of other REITs like Alexandria Real Estate Equities, Inc. ARE, Regency Centers Corp. REG and Welltower Inc. WELL. Alexandria and Regency Centers are scheduled to release results on Apr 30 while WELL is slated to report its numbers on May 1.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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