DDR Sees Positive Momentum to Start 2010

CLEVELAND-Executives at Developers Diversified Realty told investors this morning during an earnings call that many retailers experienced a better than expected Holiday season. This boost is giving retailers momentum to shift from a damage control mentality to a forward thinking one, according to CEO Daniel Hurwitz.

Still, the company reports a loss of $28 million, $0.14 per diluted share, in Funds From Operation in the fourth quarter. This loss is significantly less than the previous year’s FFO, which totaled a $119.3 million, $0.98 per diluted share loss.

For the year, FFO was a loss of $144.6 million, $0.90 per diluted share, compared to the revised FFO from 2008 of a $169.7 million, $1.40 per diluted share, loss.

“Although we continue to operate in a challenging macroeconomic environment, our platform and portfolio continue to perform at a high level,” Hurwitz says. “We are encouraged by fourth quarter retail sales and profitability results, and signs indicate that leasing deal flow in 2010 will compare favorably to our record performance in 2009. We remain keenly focused on our various balance sheet and operating initiatives to further enhance shareholder value.”

During Q4, DDR inked 166 new leases and 306 lease renewals accounting for more than three million square feet. Total for the year, the company closed on 583 new leases and 1,079 renewals. The core portfolio is now 91.2% occupied, a slight increase over Q3′s 90.9% occupancy.

Rental rates continued to decline, falling an average of 4.6% when combining both the renewals and new leases. However, DDR executives told investors this morning on the earnings call that they are beginning to see a slight increase in rental rates. “We have the ability to test the market drive rents a little. It’s not substantial; the slightest incremental gain is positive and I think we will continue to see it gain. We are starting to see activity… that is a very present surprise. “

During Q4, DDR sold five shopping centers, totaling 0.6 million square feet, bringing in gross proceeds of $30.5 million. Another three assets were sold in the first quarter of 2010 for a total of $26 million.

The executives on the investor call this morning were a different group than previous calls. David Oakes, the new senior executive vice president and CFO, offered thoughts on the financial side. Oakes was previously senior executive vice president of finance and CIO. Hurwitz is also in a new position, taking on the role of CEO in November from Scott Wolstein. Also Paul Freddo is the new senior executive vice president of leasing and development.