Fitch Ratings Affirms DDR's Credit Ratings, Revises Outlook to Stable

Strategic Insights -

Fitch Ratings has affirmed the credit ratings of Developers Diversified Realty Corporation (DDR), a real estate investment trust (REIT), citing stabilization of its retail property portfolio performance and improved liquidity position. As of March 31, 2010, DDR's portfolio included 643 shopping centers and interests in retail properties, with a total market capitalization of $8.3 billion.

Key Takeaways:

  • Fitch Ratings has affirmed DDR's credit ratings, including the Issuer Default Rating (IDR) at 'BB' and senior unsecured debt rating at 'BB'.
  • The Rating Outlook has been revised to Stable from Negative, reflecting DDR's stabilizing retail property portfolio performance and improved liquidity position.
  • DDR's retail property portfolio occupancy rate has rebounded from 90.7% in 1Q'09 to 91.3% in 1Q'10, with approximately 63% of space formerly occupied by bankrupt tenants leased or sold as of March 31, 2010.
  • Fitch expects DDR's same-store net operating income (NOI) to decline modestly, with NOI growth at negative 2.6% in 1Q'10 and negative 2% in 4Q'09.
  • DDR's fixed charge coverage ratio (FCCR) was 1.4x for the 12 months ended March 31, 2010, with adjustments for non-cash general and administrative expenses increasing FCCR to 1.5x.
  • DDR's leverage ratio, measured as net debt-to-recurring operating EBITDA, was 10.5x as of March 31, 2010, with adjustments for non-cash general and administrative expenses decreasing leverage to 10.1x.
  • DDR's debt maturity schedule features significant maturities in 2012, with 29.6% of consolidated debt maturing that year.

Statistics:

  • As of March 31, 2010, DDR's portfolio included 643 shopping centers and interests in retail properties.
  • DDR's total market capitalization was $8.3 billion as of March 31, 2010.
  • DDR's net debt-to-recurring operating EBITDA ratio was 10.5x as of March 31, 2010.
  • DDR's fixed charge coverage ratio (FCCR) was 1.4x for the 12 months ended March 31, 2010.
  • DDR's occupancy rate was 91.3% as of March 31, 2010, with 63% of space formerly occupied by bankrupt tenants leased or sold as of that date.

Sources:

  • Fitch Ratings, "Developers Diversified Realty Corporation," April 16, 2010
  • Fitch Ratings, "Criteria for Rating U.S. Equity REITs and REOCs," April 16, 2010
  • Fitch Ratings, "Equity Credit for Hybrids & Other Capital Securities - Amended," Dec. 29, 2009
  • Fitch Ratings, "Rating Hybrid Securities," Dec. 29, 2009
  • Fitch Ratings, "Recovery Rating and Notching Criteria for REITs," Dec. 23, 2009
  • Fitch Ratings, "Corporate Rating Methodology," Nov. 24, 2009
  • Fitch Ratings, "Evaluating Corporate Governance," Dec. 12, 2007