DDR Corp. (DDR), a real estate investment trust (REIT), recently priced an underwritten public offering of unsecured senior notes worth $300 million at 99.397%, with a yield to maturity of 3.447%. The notes, scheduled to mature in 2023, bear an interest rate of 3.375%, which is payable semi-annually on May 15 and November 15. The offering is projected to close by May 23, subject to customary closing conditions.
DDR intends to utilize a major share of net proceeds from the notes offering to finance part of the cash expenses associated with the recently inked acquisition deal. Notably, on May 15, DDR agreed to buy 30 of 44 shopping centers from its existing joint venture with The Blackstone Group L.P. (BX) for $1.46 billion. In addition, the company plans to use the remaining amount to pay off debt and for other corporate purposes.
Several banking giants such as – UBS Securities LLC, Jefferies LLC, RBS Securities Inc. of The Royal Bank of Scotland Group plc (RBS), Scotia Capital (USA) Inc. and U.S. Bancorp Investments, Inc. of U.S. Bancorp (USB) – served as joint book-running managers for the offering.
We expect this underwritten public offering to enable DDR to attain financial flexibility and position it favorably to pursue investment opportunities and acquisitions, which will go a long way in enhancing top-line growth.
Last month, DDR reported first-quarter 2013 operating FFO (funds from operations) per share of 27 cents. This was in line with the Zacks Consensus Estimate and surpassed the year-ago figure of 24 cents.
Strategic acquisitions made in the past 2 years aided the year-over-year growth. Moreover, as of Mar 31, 2013, DDR had $18.9 million of cash compared with $31.2 million as of Dec 31, 2012.
Currently, DDR carries a Zacks Rank #3 (Hold).
Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.
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