DDR Corp. Headquarters - Beachwood OH.jpg
DDR Corp. reported first-quarter financial results on Tuesday, after markets closed. The company, under a new executive team, is speeding up shopping-center sales.
(DDR Corp.; Roger Mastroianni )
BEACHWOOD, Ohio - DDR Corp. plans to sell off more shopping centers at a swifter clip - a decision that factored heavily into the company's nearly $250 million loss for the first three months of this year.
The retail landlord, based in Beachwood, has earmarked 25 shopping centers and five land parcels - development sites that DDR, at least, won't build on - for sale. The company took a $279 million accounting loss as part of its first-quarter financial results, to reflect the shortened ownership period for those properties.
"Although taking a large impairment charge is disappointing, we believe that disposing of these assets is in the best interest of shareholders," David Oakes, the company's president and chief executive officer, said in a written statement.
As part of its post-recession makeover, DDR has been shedding smaller retail properties and focusing on bigger-box shopping centers in areas with more people and higher spending potential. From roughly 800 properties in 2007, the company is down to 407 shopping centers in 41 states and Puerto Rico today.
Now it appears that new management including Oakes, who became CEO early this year, is speeding up the property-sales pace.
DDR did not identify the individual properties or land parcels slated for sale. During a Wednesday conference call, executives said they expect the dispositions to occur during the next 12 to 24 months.
"The scary part, the hardest part, the dilutive part, the most challenging part of selling true non-institutional-quality real estate is overwhelmingly finished at this point. ... I think that the next steps of it going forward represent something much closer to a portfolio-management exercise of looking at the entirety of what we own and saying what represents something that has either lower growth or higher risk over time," Oakes told analysts and investors Wednesday.
He said DDR's portfolio will continue to shrink as the company sells more properties than it buys. But, through targeted pruning and selective acquisitions, DDR hopes to cultivate a more valuable crop of shopping centers.
"We only seek to own assets that sit on high-quality dirt with attractive growth profiles," he said. "And those shopping centers that do not meet these criteria will be disposed of."
The real estate investment trust said operating funds from operations - the key measurement watched by analysts and investors - rose to $107.1 million, or 30 cents per share, during the first quarter, from $100.7 million, or 28 cents per share, a year before.
Funds from operations, which cast a wider net to include things like the hefty accounting loss on real estate slated for sale, came to 4 cents per share, down from 24 cents per share a year before.
The first-quarter loss, of $249.4 million, shook out to 69 cents per share.
Revenues surpassed $250.7 million, up 7.5 percent from early 2014.
DDR's portfolio was 95.5 percent leased on March 31, a slight improvement from a year before. Rents also inched up.
During the quarter, DDR took full ownership of a large shopping center in Orange County, California, as the company ended a joint venture with Coventry Real Estate Advisors. Coventry acquired DDR's 20 percent stake in 21 additional, smaller shopping centers. That deal rid DDR of the last lingering charges in a long-running legal battle with Coventry.
DDR sold 10 other properties between January and March.
The company reported financial results after markets closed Tuesday. Its shares, listed on the New York Stock Exchange, ended the day at $17.79, down 0.11 percent or 2 cents.