DDR Sheds JV Assets to Exit Buffalo MSA Market - Analyst Blog

In sync with its strategy of reducing exposure to non-core markets, DDR Corp. (DDR) disclosed the shedding of an 11-property portfolio in Buffalo MSA that it owned in a JV with Kuwaiti Financial Centre II for $154 million. The move was also in line with DDR's continued focus on simplifying its business.

The vended non-core portfolio comprises small-format and single tenant grocery-anchored assets. Notably, Kuwaiti Financial Centre II is the 13^th JV, since 2009, that DDR had left or plans to exit by this year. Moreover, with this divestiture, DDR has trimmed its total gross leasable area in the Buffalo market by 68% from 40 to 10 assets, since 2007. This figure includes the assets currently under contract for sale.

We are encouraged with DDR's ongoing portfolio restructuring activities and expect it to pave the way for strengthening the bottom line in the future. Notably, DDR has been following an aggressive capital-recycling program through strategic asset management, which is aimed at reducing currency and development risk and aid expansion in premium U.S. markets.

Last month, continuing with the trend of reporting in-line results, DDR reported third-quarter 2014 operating funds from operations (FFO) per share of 29 cents, in line with the Zacks Consensus Estimate and a penny above the year-ago quarter figure. Notable leasing momentum, portfolio strengthening activity and same-store net operating income (NOI) gains aided the improvement.

DDR has a Zacks Rank #2 (Buy). Investors interested in the retail REITs may consider better-ranked stocks like The Macerich Company (MAC), Acadia Realty Trust (AKR) and CBL & Associates Properties Inc. (CBL). All stocks have the same rank as DDR.

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.