Developers Diversified Realty Corp. (DDR) reported first quarter 2011 FFO (fund from operations) of $89.1 million or 25 cents per share compared to an FFO loss of $28.4 million or 12 cents per share in the year-earlier quarter. The reported FFO beat the Zacks Consensus Estimate by four cents. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Excluding non-recurring charges of $25.9 million primarily related to non-cash impairment charges, FFO in the fourth quarter of 2010 was $63.2 million or 24 cents per share.

Total revenues during fourth quarter 2010 were $202.9 million compared with $202.1 million in the year-ago quarter. Total revenues during the quarter exceeded the Zacks Consensus Estimate of $198 million.

Developers Diversified executed strong leasing activities during the quarter. The company signed 168 new leases and 260 renewal leases spanning 0.8 million square feet and 1.8 million square feet, respectively. The core portfolio of the company was 92.4% leased at the end of the quarter, compared with 91.3% in the prior-year quarter.

Rental rates for new leases increased by 9.0% (cash) over prior rents and renewals increased by 4.9% during the quarter. Average annualized base rents in the company’s portfolio (including Brazil) reached $13.37 per square foot at the end of the quarter, up from $13.04 in the year-ago quarter. Same-store net operating income (NOI) increased 3.9% during the reported quarter on a year-over-year basis.

Developers Diversified acquired its partners’ 50% ownership interests in two prime shopping centers for $40 million during the first quarter of 2011.  As a result, the company now owns 100% of the two prime shopping centers.  The value of the shopping centers is $80 million and helped realize a net gain of $21.7 million from the acquisition.

Developers Diversified sold non-strategic assets to improve portfolio demographics and increase liquidity. The company sold 2 consolidated assets totaling 0.1 million square feet generating gross proceeds of $5.3 million and realized a net gain of $0.2 million. The company also sold $ 8.0 million of non income producing assets.

In the first quarter of 2011, two of the company’s joint ventures sold two shopping centers, spanning 0.3 million square feet, generating proceeds of approximately $29.7 million.

During the quarter, Developers Diversified issued $300 million of 4.75% convertible senior notes due April 2018. At the same time, the company executed the extension option on its term loan with KeyBank, N.A. to extend the maturity date by one year to February 2012.  The outstanding balance of the term loan was reduced to $550 million with proceeds from the unsecured notes offering.

At quarter-end, the company had $21.0 million of cash and cash equivalents compared with $19.4 million in the year-ago quarter.

For full-year 2011, the company expects recurring FFO in the range of $0.90 to $1.05 per share.

Developers Diversified currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Kimco Realty Corporation. (KIM) currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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