DDR Corp. (DDR), a real estate investment trust (:REIT), has recently provided an update of the various transactions and portfolio restructuring activities that it embarked on in the second quarter of 2012. With these transactions, the company presently has no outstanding unsecured debt maturities until May 2015 and over 95% availability on its $815 million lines of credit.
In tune with its long-term strategic objectives of restructuring the overall portfolio by upgrading the quality of shopping centers and improving the balance sheet by reducing leverage, DDR completed approximately $1.6 billion of acquisitions and asset sale transactions in the second quarter. These included the acquisition of the ‘EDT Retail Portfolio’ for $1.4 billion; acquisition of a 50% ownership interest in two prime shopping centers in Portland and Phoenix for $140 million; and non-core asset sale of $81 million.
The EDT Retail Portfolio comprises of 46 open-air, value-oriented shopping centers spanning 10.6 million square feet of gross leasable area. The portfolio is currently 90% leased. The property was acquired through a joint venture formed by DDR and the flagship real estate fund of The Blackstone Group LP (BX).
DDR also acquired its joint venture partner’s 50% ownership interests in Tanasbourne Town Center – a 566,000 square foot prime power center in Portland, Oregon, and Arrowhead Crossing – a 412,000 square foot prime power center in Phoenix, Arizona. The properties were 95% leased to a host of leading retailers in the country.
The company sold 24 non-core assets during the quarter for total proceeds of $81 million to bring the tally for the first half of 2012 to $126 million. DDR presently has an additional $18 million worth of wholly owned assets under contract for sale.
Headquartered in Beachwood, Ohio, DDR acquires, owns, develops, leases and manages shopping centers and business centers across 39 states in the U.S., along with Puerto Rico and Brazil. Currently, DDR owns and manages 469 retail operating (primarily open-air, value-oriented shopping centers) and development properties spanning approximately 119 million square feet.
The company continues to minimize ground-up development spending in its domestic portfolio, and instead allocates capital to the lease-up of existing projects as it believes there may be opportunities to redevelop many of its existing assets. These redevelopments should create a growth opportunity of the company’s existing assets and create future value without the level of risk or capital required for a new development.
We maintain our Neutral recommendation on DDR for the long term. The company presently has a Zacks #3 Rank, which translates into a short-term Hold rating.
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