DDR Acquires Two Prime Power Centers for $151 million in the Fourth Quarter and Closes $2.1 billion of Acquisitions in 2012
BEACHWOOD, Ohio, Jan. 3, 2013 /PRNewswire/ -- DDR Corp. (NYSE: DDR) today announced the acquisition of two prime power centers for $151 million and the disposition of $255 million of non-prime operating assets ($62 million at DDR's share) during the fourth quarter of 2012. For the full year 2012, the Company closed $2.1 billion of acquisitions ($760 million at DDR's share) and disposed of $347 million of non-prime operating assets ($143 million at DDR's share). In addition, the Company sold $61 million of non-income producing assets during the quarter and $107 million ($96 million at DDR's share) for the year. DDR issued $75 million of common equity in the fourth quarter and $511 million in 2012 to fund the net acquisition of market dominant power centers and to further reduce overall leverage. Prime acquisitions in 2012 have an average leased rate of 94% with average trade area household income of $83,000 and population of 548,000 people.
Fourth quarter acquisition activity:
Fourth quarter acquisitions consist of two prime power centers located in North Carolina that closed in late December. The Company funded these acquisitions through a combination of proceeds from asset sales, new common equity, and the November unsecured notes issuance. The Company accessed its at-the-market common equity program and issued 4.8 million new common shares during the quarter at an average price of $15.50, generating gross proceeds of $75 million. The acquired properties are not encumbered by mortgage debt, and were added to DDR's growing, high quality unencumbered asset pool.
DDR purchased Carolina Pavilion, from Blackstone Real Estate Partners VII, located in Charlotte, North Carolina, for $106 million. The 94% leased, 852,000 square foot prime power center features anchor tenants such as Target, Kohl's, Nordstrom Rack, Ross Dress for Less, buybuy BABY, Bed Bath & Beyond, Jo-Ann Fabric and Craft Stores and AMC Theatres. In addition, new leasing activity with national anchors including PetSmart and Golfsmith will soon fill 85,000 square feet of currently vacant space. The prime power center has an average trade area household income of $82,000 and a trade area population of 812,000 people.
Poyner Place, in Raleigh, North Carolina, was purchased for $45 million. This 434,000 square foot prime power center is 96% leased, anchored by Target, Ross Dress for Less, Old Navy, World Market, Shoe Carnival, and Pier 1 Imports. Trade area demographics include an average household income of $78,000 and population of 367,000 people.
Fourth quarter disposition activity:
During the quarter, DDR disposed of seven non-prime operating assets for aggregate proceeds of $255 million ($62 million at DDR's share). For the full year, the Company disposed of $347 million of non-prime operating assets, of which DDR's share is $143 million. In addition, the Company sold $61 million of non-income producing assets during the quarter and $107 million ($96 million at DDR's share) for the year. An additional $96 million of non-prime assets ($90 million at DDR's share) are currently under contract for sale, including $31 million of non-income producing assets.
Other transactions activity:
Additionally, the Company's joint venture Sonae Sierra Brasil completed the sale of its 10% ownership interest in Patio Brasil, its 51% interest in Shopping Penha, and 30% interest in Tivoli Shopping, for $103 million ($34 million at DDR's share). Sonae Sierra Brasil will continue to manage and lease Shopping Penha and Tivoli Shopping for at least three years.
Also, DDR reached agreement to recapture a 150,000 square foot store from Macy's in Pasadena, California. Gaining control of this highly desirable space will allow DDR to commence a significant redevelopment of Paseo Colorado, a 566,000 square foot prime shopping center with average trade area household income of $96,200 and trade area population of nearly 1,000,000 people.
DDR issued $150 million of unsecured notes at a yield to maturity of 3.5% in November through the reopening of its $300 million ten year senior unsecured notes. In December, DDR closed $365 million of new long-term financings, comprised of a $265 million mortgage loan and a $100 million increase in the unsecured term loan that initially closed in January 2012. The mortgage is a seven-year loan with New York Life, is secured by four prime shopping centers, and interest is fixed for the term at 3.95%. DDR has entered into interest rate swap contracts that fix LIBOR on the $100 million of additional unsecured term loan proceeds resulting in a fixed interest rate of 2.98% for its term through 2019. Proceeds from these financings were used to repay the $350 million mortgage loan, secured by six prime shopping centers, that was set to mature in April 2013 with a 5% fixed rate. As a result of this refinancing, two high quality prime power centers have been added to the Company's unencumbered asset pool in addition to the prime power centers acquired in the fourth quarter. Only $41 million of consolidated maturities remain in 2013.
David J. Oakes, president and chief financial officer of DDR, commented, "We continued to prudently grow and improve our portfolio in 2012 through selective acquisitions of dominant power centers and the sale of non-prime assets. In addition, net investment activity well in excess of our budget was primarily funded with half a billion dollars of equity issuance, allowing our balance sheet to continue to improve along with our portfolio. All of these activities should improve our near and long term growth rates in EBITDA, Net Asset Value and Funds From Operations as well as further reduce our risk profile. We expect that growth in 2013 will come from further lease-up, off market acquisitions and the active management of our assets."
DDR is an owner and manager of 459 value-oriented shopping centers representing 116 million square feet in 39 states, Puerto Rico and Brazil. The company's assets are concentrated in high barrier-to-entry markets with stable populations and high growth potential and its portfolio is actively managed to create long-term shareholder value. DDR is a self-administered and self-managed REIT operating as a fully integrated real estate company, and is publicly traded on the New York Stock Exchange under the ticker symbol DDR. Additional information about the company is available at www.ddr.com.
DDR considers portions of the information in this press release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company's expectation for future periods. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including, among other factors, local conditions such as oversupply of space or a reduction in demand for real estate in the area; competition from other available space; dependence on rental income from real property; the loss of, significant downsizing of or bankruptcy of a major tenant; constructing properties or expansions that produce a desired yield on investment; our ability to buy or sell assets on commercially reasonable terms; our ability to complete acquisitions or dispositions of assets under contract; our ability to secure equity or debt financing on commercially acceptable terms or at all; our ability to enter into definitive agreements with regard to our financing and joint venture arrangements or our failure to satisfy conditions to the completion of these arrangements; and the success of our capital recycling strategy. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements, please refer to the Company's Form 10-K for the year ended December 31, 2011, as amended. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
SOURCE DDR Corp.