DDR Offers Comment Following OfficeMax, Office Depot Deal, Says Has Limited Risk to Cash Flow Interruption
DDR Corp. (NYSE: DDR) today commented that the merger announcement involving Office Depot and OfficeMax will have a positive overall effect on the Company's portfolio.
"Over the past three years we have leased over 34 million square feet across our portfolio while simultaneously increasing rental rates and improving the credit quality of cash flow," said Paul Freddo, senior executive vice president of leasing and development for DDR. "With our continued increase in portfolio leased rate, we are excited about the opportunity presented by the Office Depot and OfficeMax merger, and we will maintain a close dialogue with both retailers to assist them in their transition and pursue opportunities to recapture valuable space."
DDR owns 50 OfficeMax stores totaling 1.2 million square feet with average remaining lease term through February 2016, and 15 Office Depot stores totaling approximately 365,000 square feet with average remaining lease term through January 2017.
Between the two retailers, DDR owns 65 stores, of which 59 are located in prime assets that are 95.5% leased, with an average trade area population of 448,000 and household incomes over $80,000. The average rent per square foot for both retailers is currently $11.00 and approximately 30% below DDR's prime portfolio average. With an average remaining lease term of nearly four years, the Company has limited risk to cash flow interruption, and enjoys the opportunity to recognize termination fee income and unique mark-to-market opportunities in this supply constrained environment.
"Consolidation in the office supply sector has been highly anticipated and based upon our market knowledge, store spacing, and store performance, we expect the opportunity to recapture certain locations. If executed as proposed, the merger will enable us to realize positive rental increases by backfilling the newly available space with a variety of today's fastest growing, high credit quality retailers, including T.J.Maxx, Marshalls, HomeGoods, Ross Dress for Less, Bed Bath & Beyond, buybuy BABY, Cost Plus World Market, Nordstrom Rack, and many others." concluded Mr. Freddo.
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