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DDR Corp (DDR) Q2 FFO Beats Estimates, Revenues Miss

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DDR Corp. (DDR - Free Report) reported second-quarter 2017 funds from operations (FFO) per share of 30 cents, beating the Zacks Consensus Estimate by 2 cents. However, the number declined 3 cents from the prior-year quarter.

Dilutive effect of deleveraging generated through sale of assets was primarily responsible for the decline in FFO.

This real estate investment trust (REIT) posted revenues of $227.4 million for the second quarter, marginally missing the Zacks Consensus Estimate of $228 million. The figure also came in lower than $245.8 million recorded in the prior-year quarter.

DDR Corp. Price, Consensus and EPS Surprise


Note: The EPS numbers presented in the above chart represent funds from operations (FFO) per share.

Quarter in Detail

DDR signed 258 new and renewal leases for 1.9 million square feet of space during the quarter. On a pro rata basis and including Puerto Rico, the company generated new leasing spreads of 10% and renewal leasing spreads of 5.7% for the quarter. Also, same-store net operating income (NOI), including Puerto Rico, edged down 0.1% year over year on a pro rata basis.

As of Jun 30, 2017, the company’s portfolio was 93.7% leased, down 240 basis points from the prior-year quarter end. Annualized base rent per occupied square foot increased 7.8% on a pro rata basis to $16.09 as of Jun 30, 2017, from $14.92 at the end of the year-ago quarter.

During the reported quarter, DDR completed its strategic planning and portfolio review process timely. Consequently, the company realized $28.1 million of impairment charges on two undeveloped land parcels and a shopping centre. It also sold two Puerto Rico based shopping centers for $57.3 million. Nine shopping centers in the U.S. were sold for an aggregate price of $149.2 million, of which DDR’s share totaled $137.5 million.

DDR exited the second quarter with $414.1 million in cash compared with $30.4 million as of Dec 31, 2016.

2017 Outlook Remains Unchanged

The company’s expectation regarding its same-store NOI growth rate remained constant in the range of -1.5–0.0%.

Bottom Line

DDR deleveraged its balance sheet and stretched the average debt maturity period by selling off assets and gaining access to capital markets. This resulted in asset sale and loan repayment proceeds of $237.5 million, aggregating to $225.7 million. Recovering from large scale tenant bankruptcy, the company displayed strong financial results and efficient operational execution.

However, declining same-store net operating income growth, fall in occupancy and the dilutive effects of divestitures cannot be ignored. Also, rate hike and competition from other retailers, such as e-commerce and catalogs, add to its woes.

Currently, DDR carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has lost 32.5% year to date versus the 3.8% decline of the industry it belongs to.

We now look forward to the earnings releases of other REITs like Ramco-Gershenson Properties Trust (RPT - Free Report) , Boston Properties, Inc. (BXP - Free Report) and Macerich Company (The) (MAC - Free Report) . While Ramco-Gershenson Properties and Boston Properties are scheduled to announce results on Aug 1, Macerich Company is slated to report Q2 numbers on Aug 2.

Note: 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.

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