DDR Reports in Sync with Estimates - Analyst Blog
February 17 2012 - 5:30AM
Zacks
DDR Corp. (DDR), a
real estate investment trust (REIT), reported fourth quarter 2011
FFO (fund from operations) of $47.4 million or 17 cents per share
compared to a FFO loss of $37.0 million or 14 cents per share in
the year-earlier quarter. Fund from operations, a widely used
metric to gauge the performance of REITs, is obtained after adding
depreciation and amortization and other non-cash expenses to net
income.
Excluding non-recurring items
totaling $24.7 million primarily related to non-cash impairment
charges, FFO in the fourth quarter of 2011 was $72.1 million or 26
cents per share. The recurring FFO was in line with the Zacks
Consensus Estimate.
For full year 2011, DDR reported
FFO of $227.6 million or 75 cents per share compared to $76.3
million or 30 cents per share in the previous year. Excluding
non-recurring items totaling $39.5 million primarily related to
non-cash impairment charges, FFO for fiscal 2011 was $267.1 million
or 97 cents per share. The recurring FFO for full year 2011 was
also in line with the Zacks Consensus Estimate.
Total revenues during fourth
quarter 2011 were $194.5 million compared with $193.5 million in
the year-ago quarter. Total revenues during the quarter exceeded
the Zacks Consensus Estimate of $192 million. For full year 2011,
total revenues were $771.0 million compared with $763.1 million in
the prior year.
DDR executed strong leasing
activities during the quarter. The company signed 239 new leases
and 304 renewal leases spanning 1.1 million square feet and 1.8
million square feet, respectively. The core portfolio of the
company was 93.6% leased at the end of the quarter, compared with
92.6% in the prior-year quarter. During fiscal 2011, DDR signed 876
new leases and 1,232 renewal leases spanning 4.0 million square
feet and 7.7 million square feet, respectively.
Rental rates for new leases
increased by 9.6% (cash) over prior rents and renewals increased by
4.5% during the reported quarter, resulting in an overall blended
spread of 5.8%. For full year 2011, rental rates for new leases
increased by 11.2% (cash) over prior rents and renewals increased
by 5.0%, resulting in an overall blended spread of 6.1%.
Average annualized base rents in
the company’s portfolio reached $13.81 per square foot at the end
of the quarter, up from $13.36 in the year-ago quarter. Same-store
net operating income (NOI) increased 2.9% during the reported
quarter on a year-over-year basis.
During fourth quarter 2011, DDR
acquired a shopping center named ‘PolarisTowneCenter’ in Ohiofor
$80 million. The acquisition of the 700,000 square feet center
consolidates DDR's position as the major owner and operator of
prime shopping centers in the Columbusmetropolitan area. The
acquisition was part of the asset swap transaction (to better align
the portfolio with the operating platform) that was announced
earlier in September 2011 with one of its peers Glimcher
Realty Trust (GRT).
Subsequent to the quarter-end, DDR
formed a joint venture to acquire a portfolio of 46 shopping
centers valued at approximately $1.4 billion, including an assumed
debt of $640 million and about $305 million of new financings.
During the fourth quarter 2011, the
company divested 13 shopping centers spanning 1.2 million square
feet for aggregate proceeds of $164.7 million. In addition, DDR
sold $30.6 million worth of non-strategic assets to improve
portfolio demographics and increase its liquidity. Simultaneously,
two of the company's joint ventures sold 4 shopping centers,
spanning 0.7 million square feet, generating gross proceeds of
$51.3 million.
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 $2.8
billion of capital transactions and financing activities during
2011. These included $270 million worth of acquisitions of prime
shopping centers and $461 million worth of asset sale, out of which
DDR’s share was $230 million and $371 million, respectively.
The company refinanced a $550
million senior secured term loan scheduled to mature in February
2012 with a new $500 million senior secured term loan scheduled to
mature in September 2015, thereby extending the debt duration.
At the same time, DDR extended the
term of each of the two senior unsecured revolving credit
facilities to February 2016. These enabled the company to extend
the weighted average maturity of consolidated debt from 3.9 years
to 4.3 years and also reduce the aggregate amount from $4.3 billion
to $4.1 billion in 2011.
During 2011, DDR sold 9.5 million
common shares generating net proceeds of about $130 million, the
bulk of which was utilized to reduce debt. The company also issued
$300 million worth of 4.75% seven-year unsecured notes. At year-end
2011, DDR had $41.2 million of cash and cash equivalents compared
with $19.4 million in the year-ago quarter.
For full year 2011, DDR paid cash
dividends of $0.22 per share – an increase of 175% from 2010.
Furthermore, the company hiked its quarterly dividend by 50% to 12
cents per share for the first quarter of 2012.
For fiscal 2012, DDR expects a
recurring FFO of $0.98 - $1.04 per share. The initial FFO guidance
is based on the assumptions that same-store NOI growth would be 2%
- 3%, core portfolio lease rate at year-end would be above 94.5%,
and about $100 million worth of non-core assets would be divested
during the year with the proceeds mostly being invested in the
acquisition of prime shopping centers.
We maintain our long-term ‘Neutral’
recommendation on DDR, which currently retains a Zacks #3 Rank that
translates into a short-term ‘Hold’ rating.
DDR CORP (DDR): Free Stock Analysis Report
GLIMCHER REALTY (GRT): Free Stock Analysis Report
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