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Is it Wise to Hold DDR Corp (DDR) Stock in Your Portfolio?

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DDR Corp has been putting in strategic efforts to revamp its portfolio through an aggressive capital-recycling program. However, this involves large scale dispositions which are anticipated to impact the company’s bottom-line performance in the near term.

Specifically, this retail real estate investment trust (REIT) intends reducing currency and development risks, as well as expanding its presence in upscale U.S. markets through strategic asset management. Hence, the company is shedding non-core and non-income producing assets, and reinvesting the proceeds in premium U.S. shopping centers.

Apart from portfolio restructuring, DDR is also enhancing its capital structure and improving liquidity. In September, the company refinanced two revolving credit facilities that expanded its line of credit and extended maturities. In fact, it has a well-laddered debt maturity profile with no significant unsecured debt maturing until 2021.

DDR remains focused on its deleveraging process as it continues to sell assets. Notably, the company sold $392 million of assets in the third quarter, in addition to the $237 million in the second quarter. Further, the company sold an additional $190 million shortly after the end of the recently-reported quarter.

While these dispositions are likely to enhance its portfolio mix, the near-term dilution effect of such moves is unavoidable.  In fact, the dilutive impact of deleveraging generated through sale of assets was primarily responsible for the decline in third-quarter 2017 funds from operations (FFO) from the prior-year quarter.

Moreover, the retail apocalypse has considerably curbed demand for the retail real estate space in the United States. Mall traffic has been adversely affected and retail landlords, including DDR, Macerich Company (MAC - Free Report) , Taubman Centers and Kimco Realty Corporation (KIM - Free Report) , are suffering due to consumers’ preferences increasingly shifting toward online retail. This has resulted in widespread store closures and bankruptcy filing by the retailers.
 
In fact, shares of this Zacks Rank #3 (Hold) company have underperformed its industry in the year so far. During this time frame, the stock has tanked 48.4%, whereas the industry has registered growth of 9.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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