Zacks_Analysts' Blog : DDR to Redevelop 4 Malls - Analyst Blog

DDR Corp. (DDR), a real estate investment trust (REIT), has recently announced its plans to redevelop four shopping centers as part of its long-term strategy to follow a significant redevelopment program to fuel its growth engine. These include the expansion of its existing stores in Ohio and Puerto Rico and the addition of two new stores for Wal-Mart Stores Inc. (WMT) in Florida.

DDR is expected to invest approximately $20 million for the redevelopment of these assets. The projects will be funded with retained cash flow and recycled capital from the continued sale of non-core assets. The company expects the redevelopment projects to yield a return on investment of over 10%.

Wal-Mart intends to build a 160,000 square foot store on an undeveloped five-acre land parcel adjacent to ‘The Shops at Midtown Miami’ – a 645,000 square foot mixed-use center in Miami, Florida, owned by DDR. At the same time, the retailer plans to open an 85,000 square foot store at ‘Tarpon Square’ – a 199,447 square foot retail property in Tarpon Springs, Florida, also owned by DDR.

DDR Corp. has long been minimizing ground-up development spending in its domestic portfolio, and instead started allocating capital to the lease-up of existing projects. These redevelopments have created a growth opportunity for the company’s existing assets without the level of risk or capital required for new development. This in turn has enabled DDR to de-lever the balance sheet and generate considerable cash flow for portfolio reinvestment as well as increase the cash distribution to its shareholders.

Headquartered in Beachwood, Ohio, DDR Cop. acquires, owns, develops, leases and manages shopping centers and business centers across 41 states in the U.S., along with Puerto Rico and Brazil. At the end of second quarter 2011, DDR Corp. owned and managed 546 retail operating (primarily open-air, value-oriented shopping centers) and development properties spanning approximately 126 million square feet.

We maintain our "Neutral" recommendation on DDR Corp. for the long term. The company presently has a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.