Retail REIT – DDR Corp. DDR – announced transactions worth $1.1 billion in 2016. This included $148 million of acquisitions and $1.0 billion of dispositions, which were at its full ownership. These came as part of the company’s transition plan and included exit of the upstate New York portfolio, in addition to disposition of select lower-quality and lower-growth properties at favorable cap rates.
Specifically, during fourth-quarter 2016, DDR accomplished disposition of 27 assets for a total of $532 million at 100% ownership. Notably, the fourth-quarter asset sales in 2016 included a portfolio of 16 assets, situated mainly in upstate New York, which DDR sold for $390 million.
Further, there are six additional operating assets and four land parcels under contract for sale, presently. These assets represented aggregate gross proceeds of $74 million at DDR's share. However, the company did not go for any asset acquisitions in the fourth quarter.
Moreover, for full-year 2016, the company sold 50 operating assets and nine land parcels for $833 million at DDR’s share. The proceeds from these asset sales helped the company lower its leverage.
On the other hand, the company acquired one shopping center in Phoenix, AZ, and one in Portland, OR; for a total of $148 million at DDR's share. Further, it is under contract to buy a Mariano's-anchored center in the Lincoln Park neighborhood of Chicago, IL, for $81 million. This deal is slated to close in early 2017.
Notably, DDR’s portfolio restructuring through selective acquisitions, strategic assets sales and reuse of the proceeds for leverage reduction support its long-term growth strategy. In fact, per its CEO, the “transactional momentum” is expected to continue in 2017.
However, the near-term earnings dilutive effects of divestitures, competition from other retailers, such as e-commerce and catalogs, and hike in interest rate pose concerns for the company.
Amid this, estimates for funds from operations (FFO) per share for 2017 moved south, over the past 60 days. Currently, DDR carries a Zacks Rank #5 (Strong Sell).
In addition, DDR’s shares have underperformed the Zacks categorized REIT and Equity Trust – Retail industry for the past three months. In fact, shares of DDR descended around 6.1% against the 4.2% decline of the industry.
However, investors interested in the REIT industry may consider better-ranked stocks like Prologis Inc. PLD, Urban Edge Properties UE and Seritage Growth Properties SRG. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Prologis has been a steady performer, having beaten the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive surprise of 3.15%.
For Urban Edge Properties, the projected growth rate for FFO per share is 37.6% for 2016 and 6.3% for 2017.
Seritage Growth Properties’ current-year FFO per share estimates inched up 0.9% to $2.34 per share, over the past 60 days.
Note: Funds from operations (“FFO”) 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.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment