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DDR Reports Earnings, Sells Assets

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Update 1, 11:39 AM

Update 2, 11:55 AM

Update 3. 4:15 PM

Developers Diversified Realty Corp.

* FFO: $100 million, up $500,000

* FFO per diluted share: $0.83, up $0.03

* Net income: $27.9 million; down $4.8 million

* Net income per diluted share: $0.23; down $0.03

* Core NOI: Up 1.8%

* Operating base rent: $12.38 per square foot; Up $0.10 per square foot

* New store rents:16.4% above base rents

* Renewal rents:6.9% above base rents

* Occupancy: 94.5%; down 140 basis points

Here's some information on its joint venture asset sale, worth $890 million. The net proceeds will be $260 million, which I imagine it will use to pay down debt.

Developers Diversified Realty has reached an agreement on terms to sell 13 properties to a new joint venture with an institutional investor. The properties, which comprise 5.9 million square feet, are expected to sell for $890 million.

The joint venture, announced this morning, could close in mid-December. Developers Diversified will hold a 20 percent stake, while the unidentified institutional investor will own 80 percent. Developers Diversified will get property management and development or redevelopment fees, plus leasing and ancillary income fees at closing.

Developers Diversified expects more than $260 million in total net proceeds from the sale, with more than $170 million of that available at closing. The remainder should be available during the first half of 2009. The planned sale is part of Developers Diversified's effort to cut its debt and build relationships with large institutional investors.

Update 1: The company also announced that it is suspending its dividend during the fourth quarter.

Due to prior compliance with minimum REIT payout requirements, the Company will not pay a fourth quarter dividend for 2008. The 2009 dividends are estimated to be $1.50 per share annually, to be paid quarterly. These revisions are intended to enhance the Company's current liquidity by generating more than $80 million of additional capital in 2008 and additional capital for 2009.

Update 2: Investors have responded well to all of this. Today, DDR's stock is up $2.71 per share, or 31.8 percent, as I write this. Since bottoming at a new 52-week low yesterday of $4.01 per share, the price has nearly tripled to its current $11.19 per share. Anyone that got into the bottom yesterday has made a quick killing.

Update 3: It seems like there's been a lot of "pumping and dumping" with this stock. I'm guessing there was also a lot of action with some of its big institutional investors. At the end of the day it ended up below where it started. It peaked at $11.42 per share then fell back to $8.08 by the market's close. The volume today was 13.4 million shares--about four times the average for the stock.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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