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TheStreet Open House

DDR's CEO on the Reincarnation of His Brand and Lack of Competition in His Space

NEW YORK (TheStreet) -- The Great Recession was devastating for many companies. Investors must remember that this financial collapse was only paralleled by the Great Depression. Most REITs got hammered during the downturn, but the same cycle also saw the end of Lehman Brothers and Bear Stearns with the near collapse of Citigroup (C) and AIG (AIG). At that time, the financial markets were in utter turmoil and there was no certainty that any REIT would have access to the capital markets.

One REIT that came close to its grave was DDR Corporation (DDR). The Beachwood, Ohio-based REIT saw shares plummet as the company was facing a massive $3.5 billion in debt payments coming due in late 2009, and the company opted to slash dividend payments. Its share price tanked from more than $67.00 to a low of around $2.13. An hour before Thursday's close, DDR was trading at $17.08, up 10 cents, or 0.59% for the day.

Since the recession, DDR has made considerable progress transforming its portfolio by pruning off a number of properties, from 658 assets in 2008 to 396 locations today. In addition, DDR has transformed its balance sheet by improving asset quality via noncore asset sales and by selecting strong credit tenants -- all improving the company's financial flexibility. As a result of these initiatives, DDR has begun to steadily increase its dividend and in January 2014, the company announced a dividend increase of 15%, from $.135 to $.155.

While attending the ReCon 2014 in Las Vegas this week, I caught up with DDR's CEO, Daniel B. Hurwitz. The veteran shopping center executive has been instrumental in transforming DDR from a once "zombie" REIT into a focused contender. Hurwitz has been with DDR since 1999, so he has witnessed first-hand, the evolutionary transformation and the reincarnation of the DDR brand.

Hurwitz says that while there is talk of construction, nothing new is getting built in his space, so demand is greatly outstripping supply. The firm has been pruning assets of low quality, having sold about $4 billion of assets over the last several years. What is driving the space now is tenant demand for high-quality, "prime power centers" -- an asset class that takes a sizable equity check to enter.

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Brad Thomas is a contributor for The Street and he is also the editor of a monthly newsletter, The Intelligent REIT Investor.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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