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5 年前
TEXT-S&P revises DDR Corp outlook to positive
2012年2月29日 / 晚上10点04分 / 5 年前

TEXT-S&P revises DDR Corp outlook to positive

Overview	
     -- Retail availability appears to have stabilized and should modestly 	
improve in 2012, in our opinion. 	
     -- We revised our outlook on DDR Corp. to positive from stable based on 	
continued improvement in the company's operating performance and the 	
expectation for further balance sheet deleveraging.	
     -- We affirmed our corporate credit rating on DDR at 'BB'. In addition, 	
we affirmed our rating on the company's senior unsecured notes at 'BB+'.	
	
Rating Action	
On Feb. 29, 2012, Standard Poor's Ratings Services revised its outlook on DDR 	
Corp. to positive from stable and affirmed its 'BB' corporate credit
rating on the company. Additionally, we affirmed our 'BB+' rating on the
company's senior unsecured notes. We also maintain a '2' recovery rating on the 	
company's senior unsecured notes. These rating actions affect roughly $2.1 	
billion of rated debt (see list).	
	
	
Rationale	
We revised our outlook on DDR Corp. to positive to reflect continued 	
improvement in the company's operating performance and execution of capital 	
transactions that further reduce leverage and extend debt tenor. Leasing 	
remained strong in the fourth quarter ended Dec. 31, 2011, as both occupancy 	
and rental rates increased and same-store net operating income (NOI) grew for 	
the seventh consecutive quarter. The company used proceeds from the company's 	
$353 million of new debt financing in January 2012 to effectively address much 	
of its debt maturities this year and reduce outstanding balances under the 	
revolving credit facilities. We expect leverage and debt coverage metrics to 	
strengthen over the next year, albeit slowly, as any substantial amount of new 	
equity appears unlikely and the company recognizes deleveraging benefits 	
through portfolio income growth in a less-than-robust economic environment, in 	
our view.	
	
Beachwood, Ohio-based DDR is a large community shopping center owner, manager, 	
developer, and acquirer, with $8.3 billion of real estate at cost on balance 	
sheet as of Dec. 31, 2011. Top tenants include value oriented retailers, such 	
as Wal-Mart Stores Inc. (AA/Stable/A-1+) at 3.2% of base rents, TJX Cos. Inc. 	
(A/Stable/A-1) at 2.1%, PetSmart Inc. (BB+/Stable/--) at 2.0%, and Kohl's 	
Corp.(BBB+/Stable/--) at 1.8%. No other tenants contribute to more than 1.7% 	
of DDR's base rent, and the top 20 tenants make up 28.3% of DDR's annual base 	
rent. DDR owns and manages 481 retail operating and development properties in 	
39 states, Puerto Rico, and Brazil, totaling approximately 123 million sq. ft.	
	
DDR has aggressively leased space to improve core occupancy (leased rate of 	
93.6% at Dec. 31, 2011), with close to 2.5 million sq. ft. of space signed in 	
the fourth quarter of 2011. Importantly, leasing spreads remained strong for 	
both new leases (up 9.6%) and renewals (up 4.5%) for a total blended spread of 	
5.8% (versus 5.4% for fourth-quarter 2010). We expect leasing to remain strong 	
through 2012, with a 100 basis point gain to the leased rate by year-end 2012. 	
DDR projects the lease-up of big box space (60%) will outweigh small shop 	
leased space (40%), but small shop space should provide a greater opportunity 	
for upside (150 basis point gain to 86% by year-end). Nonetheless, existing 	
anchor tenants' (such as Best Buy and Old Navy) desire to reduce store size 	
could pose occupancy challenges longer-term in the absence of a more robust 	
macroeconomic recovery, in our view.	
	
DDR continues to make steady progress toward its long-term strategy to reduce 	
leverage, with targeted consolidated debt-to-EBITDA of 6.0x to 7.0x (and 6.5x 	
to 7.5x pro rata for joint ventures). At Dec. 31, 2011, DDR-calculated 	
consolidated debt-to-EBITDA was 7.3x and 7.7x on a pro rata basis. In January 	
2012, the company closed on $353 million of new long-term debt financing, 	
consisting of a $250 million unsecured term loan and a $103 million mortgage 	
loan. Proceeds from the new debt financing effectively addressed much of the 	
debt maturities this year, while reducing outstanding balances and freeing up 	
much of the availability under the $815 million in combined revolving credit 	
facilities. While the transaction improved the near-term debt maturity profile 	
of the company, any further deleveraging will require EBITDA growth, as 	
management has stated it does not plan to issue any substantial amount of new 	
equity. We believe debt-to-EBITDA measures will continue to tick down during 	
2012, with greater improvement toward the end of the year due to the timing of 	
lease commencements and move-outs.	
	
While DDR's leverage measures have slowly improved, the company's fixed-charge 	
coverage (FCC) remained relatively flat as portfolio income growth was offset 	
by higher interest expense. S&P-calculated FCC (including preferred dividends 	
and principal amortization) for the year-ended 2011 was roughly 1.55x. We 	
expect FCC to rise to close to 1.75x over the next 12 months, as leasing 	
momentum drives NOI growth. Total coverage (including common dividends) is 	
projected to decline from roughly 1.3x at year-end 2011 to just under 1.2x at 	
year-end 2012 due to the announced January 2012 share offering and dividend 	
increase.	
	
Liquidity	
DDR's liquidity is adequate, in our opinion, to meet its capital needs through 	
year-end 2012. (Please see "Methodology And Assumptions: Standard & Poor's 	
Standardizes Liquidity Descriptors For Global Corporate Issuers," published 	
July 2, 2010, on RatingsDirect on the Global Credit Portal).	
	
We based our liquidity assessment on the following factors:	
     -- We expect the company's sources (including cash, funds from operations 	
{FFO}, and revolver availability) through year-end 2012 to exceed its uses by 	
more than 1.2x;	
     -- Debt maturities through year-end 2012 total roughly $254 million (pro 	
forma for the January 2012 long-term financings);	
     -- The company has sound relationships with its banks, in our view, and 	
has a satisfactory standing in the credit markets.	
 	
The company's sources of liquidity over the next 12 months include roughly $41 	
million of unrestricted cash, a projected $255 million-$265 million of FFO, 	
and roughly $743 million of combined availability under its $750 million and 	
$65 million revolvers (pro forma for the January 2012 long-term financings).	
	
Identified cash needs include roughly $254 million of debt maturities (pro 	
forma for the January 2012 long-term financings), a projected $45 million for 	
leasing and maintenance capital expenditures, approximately $150 million for 	
redevelopment funding, $28 million of preferred dividend distributions, and 	
$138 million of common dividend distributions. We did not include cash needs 	
for discretionary acquisitions, as the company will likely fund its cash needs 	
with proceeds from noncore asset dispositions.	
	
	
Recovery Analysis	
The '2' recovery rating on the company's senior unsecured notes indicates that 	
lenders can expect a substantial recovery (70%-90%) in the event of a payment 	
default. For our complete recovery analysis, see Standard & Poor's recovery 	
report to be published shortly after this report on RatingsDirect.	
	
	
Outlook	
The positive outlook reflects our belief that DDR's FCC measures will begin to 	
improve in the next 12 months, as new lease commencements accelerate in the 	
back half of 2012. We would consider raising our corporate credit rating if 	
S&P-calculated FCC strengthens to 1.8x, the common dividend remains adequately 	
covered, and debt-to-EBITDA (including the company's pro rata share of joint 	
venture debt) falls to the company's stated low 7x target range. Although we 	
presently believe it is unlikely in the near term, we would consider lowering 	
the corporate credit rating if leverage or liquidity materially weakened.	
	
	
Related Criteria And Research	
     -- Industry Economic And Ratings Outlook: Gradual Improvements In 	
Operating Fundamentals Continue To Support North American REITS, published 	
Feb. 3, 2012.	
     -- Key Credit Factors: Global Criteria For Rating Real Estate Companies, 	
published June 21, 2011.	
     -- Methodology And Assumptions: Standard & Poor's Standardizes Liquidity 	
Descriptors For Global Corporate Issuers, published July 2, 2010.	
Ratings List	
	
Ratings Affirmed; CreditWatch/Outlook Action	
                                        To                 From	
DDR Corp.	
 Corporate Credit Rating                BB/Positive/--     BB/Stable/--	
	
JDN Realty Corp.	
 Corporate Credit Rating                BB/Positive/--     BB/Stable/--	
	
Ratings Affirmed	
	
DDR Corp.	
 Senior Unsecured        BB+                	
 Recovery Rating         2                  	
 Preferred Stock         B	
	
	
Complete ratings information is available to subscribers of RatingsDirect on 	
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 	
by this rating action can be found on Standard & Poor's public Web site at 	
www.standardandpoors.com. Use the Ratings search box located in the left 	
column.

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