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DDR Corp Posts In-Line FFO

Zacks Equity Research

Real estate investment trust (:REIT) DDR Corp. (DDR) reported fourth-quarter 2013 operating FFO (funds from operations) per share of 29 cents, in line with the Zacks Consensus Estimate and up 7.4% from 27 cents reported in the year-ago quarter. The year-over-year increase was mainly aided by organic growth, investments in prime tower center acquisitions and strong leasing activity.

Including non-recurring items, DDR reported fourth-quarter 2013 FFO of 33 cents per share, up from 20 cents per share in the year-ago quarter. For 2013, it advanced 6.6% year over year to $1.13 per share.

Total revenue for the quarter increased 26.7% year over year to $256.8 million and outpaced the Zacks Consensus Estimate of $192 million.

For full-year 2013, DDR reported operating FFO per share of $1.11 on revenues of $888.8 million. Results were higher than the prior-year operating FFO per share of $1.03 on revenues of $761.5 million.

Leasing and Operating Activity

DDR executed strong leasing activities during the quarter under review. The company signed 180 new leases (0.8 million square feet) and 204 renewal leases (1.7 million square feet). As of Dec 31, 2013, the company’s portfolio was 95.1% leased, an improvement of 30 bps (basis point) sequentially and 90 bps year over year.

DDR’s portfolio generated positive leasing spreads, with new leases climbing 13.9% and renewals up 8.0% while blended spreads escalated 9.2% at 100% ownership. Also, same-store net operating income (:NOI) increased 3.4% on a year-over-year basis. As of Dec 31, 2013, total portfolio average annualized base rent per occupied square foot was $14.18, up from $13.66 as of Dec 31, 2012.

Portfolio Restructuring Activity

During the quarter, DDR acquired sole possession of 30 major power centers for $1.46 billion that were previously owned by the company’s joint venture with an affiliate of The Blackstone Group L.P. (BX). The company experienced a gain of $18.8 million on change in control and sale of stake.

Further, DDR realized a net gain of around $4.2 million by disposing 11 consolidated operating shopping centers along with non-core assets of $184 million.


As of Dec 31, 2013, DDR had $86.7 million of cash, compared with $31.2 million as of Dec 31, 2012.


Driven by solid operating trends in 2013, DDR reaffirmed the guidance that it issued on Jan 6, 2014. The company expects operating FFO per share in the range of $1.17 to $1.121 for 2014.

Our Viewpoint

Results of DDR reflect a decent performance throughout the year. We remain encouraged owing to its strategic portfolio repositioning activities, operational activities along with a sound balance sheet. Going forward, we believe that the addition of upscale assets to its high-end asset portfolio along with strengthening of the tenant base promise strong growth prospects for DDR.

However, stiff competition from other players in the market, rise in interest rates, dependency on few tenants, and elevated Internet sales that adversely affect the demand for retail space remain our concerns.

DDR currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the REIT sector include AmREIT, Inc. (AMRE), Federal Realty Investment Trust (FRT). Both the stocks hold a Zacks Rank #2 (Buy).

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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