Retail REIT Will Continue To Be a Net Seller as Long as Property Prices Remain Historically High
|David J. Oakes, president and CEO of DDR, laid out the REIT's guidance for 2016.|
In a preview of the coming year, DDR Corp. told analysts this week it expects to continue taking advantage of strong demand for retail property to sell from $600 million to $800 million of its portfolio.
As long as shopping centers command current historically high pricing levels, DDR said it will continue to seek to sell 'bottom tier' properties in a bid to upgrade the overall quality of its portfolio.
"The aggressive transactions market encourages us to be a net seller of assets, which weighs on 2016 earnings but should benefit DDR in the future," said David J. Oakes, president and CEO of Beachwood, Ohio-based DDR.
The company's acquisition target for the year would come in between $200 million and $300 million, making it a net seller of about $450 million of properties.
Oakes said he expects the bulk of sales to occur in the first half of the year as it currently has 17 centers under contract totaling approximately $226 million and nine land parcels totaling $20 million.
"We are engaged in discussions for a significant amount of additional sales," Oakes added.
The REIT plans to use proceeds from the asset sales primarily to pay off maturing debt. By the second half of 2016, Oakes expects DDR to own 250 to 300 centers. The firm currently owns and manages 367 value-oriented shopping centers representing 115 million square feet in 38 states and Puerto Rico.
For the full year 2015, DDR closed on $564 million of acquisitions and $1 billion of dispositions.
"Our portfolio upgrade was dramatic in 2015 as we improved our asset base by selling over $1 billion of lower-quality assets into an environment of historically low cap rates," said DDR CFO Luke J. Petherbridge. "We expect to continue to take advantage of the competitive transactional market and will use sale proceeds to selectively acquire prime assets and to further reduce leverage."