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It appears that hard work to transform the company over the past few years has paid off for patient shareholders of power-center focused REIT
DDR CorpDDR.
On January 5, DDR announced that it was raising its quarterly dividend by 11 percent. This good news follows a series of even larger dividend increases each year since 2011.
DDR provided full year operating guidance for 2015 on January 7, of $1.20 to $1.25 per share, an increase in funds from operations (FFO) by 3 to 8 percent from 2014 mid-point guidance.
DDR rose 2.55 percent on the news to a new 52-week high of $19.31 per share. DDR shares have already seen a spike up of 5.17 percent during the first week of trading of 2015.
DDR Had A Busy 2014
The company continues to undergo a transformation by refocusing its portfolio on prime retail power centers primarily located in 20 top growth markets, while shedding smaller centers and centers located in less desirable markets.
During 2014, DDR disposed of $1.63 billion in properties including the remainder of its former investments in Brazil. DDR acquired $2.64 billion of targeted assets during 2014.
The acquisitions included a JV with
The Blackstone Group L.P.BX to acquire 71 multi-tenant centers formerly owned by
American Realty Capital Properties IncARCP, which closed in October 2014.
However, considering the scale of the DDR portfolio transformation, 2014 total returns were still fairly impressive.
DDR C-Suite Shake-Up
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This is especially true given that Daniel Hurwitz, the DDR board and 15 year veteran CEO, announced a parting of the ways September 11, 2014.
DDR shares were immediately downgraded by some analysts on the news, while notably
MLV & Co. reaffirmed its Buy rating and $20 PT for the stock. The company is currently being led by President and CFO David Oates. DDR shares are up just over 19 percent since the announcement last September.
5 Quick Slides Tell The DDR Story
DDR has a laser focus on power centers.
During 2015, DDR has guided that it will be far less active in transforming the portfolio, with only $250 million of acquisitions planned to be self-funded through recycling capital from dispositions.
A smaller, higher quality portfolio with greater occupancy and higher rents, located in growing trade areas with strong demographics.
Power center anchors that the consumer prefers also have strong credit metrics. Top DDR tenants by base rent:
TJX Companies,
Wal-Mart Stores,
Bed Bath & Beyond,
DDR has the ability to grow FFO in the near term by managing the balance sheet. The majority of debt expirations 2018 and beyond are well laddered and at rates between 3.2 to 6.1 percent.
"Free cash flow to reinvest and room to grow the dividend" bodes well for the future.
Investor Takeaway
DDR Corp. has come a long way in a relatively short period of time after the company was forced to severely cut its dividend in the depths of the Great Recession. The DDR prime power center formula appears to be working -- supported by both U.S. retail trends and increased consumer spending. Another DDR plus is its relationship with Blackstone Group. The ability to invest in JV's alongside the largest publicly traded private equity firm may be hard to quantify moving forward. However, at the very least, it is an endorsement of the DDR platform by one of the world's premier real estate investors.Loading...
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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Posted In: NewsREITGuidanceDividendsManagementAnalyst RatingsGeneralReal Estate52 Week HighsDaniel HurwitzDavid OatesMLV & Co.
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