Fitch Upgrades DDR’s IDR to BBB-

Fitch Ratings has upgraded the credit ratings of DDR Corp. The rating outlook has been revised to stable from positive. The upgrade of the IDR to ‘BBB-‘ reflects that pro forma for the $1.46 billion acquisition of a portfolio of power centers from DDR’s joint venture with Blackstone Real Estate Partners VII, recurring cash flow will remain in excess of fixed-charges at a level consistent with an investment-grade rating.

PRESS RELEASE

Fitch Ratings has upgraded the credit ratings of DDR Corp. (NYSE: DDR) as follows: –Issuer Default Rating (IDR) to ‘BBB-‘ from ‘BB+’; –$815 million unsecured revolving credit facilities to ‘BBB-‘ from ‘BB+’; –$350 million unsecured term loans to ‘BBB-‘ from ‘BB+’; –$2.1 billion senior unsecured notes to ‘BBB-‘ from ‘BB+’; –$320.5 million senior unsecured convertible notes to ‘BBB-‘ from ‘BB+’; –$405 million preferred stock to ‘BB’ from ‘BB-‘. The Rating Outlook has been revised to Stable from Positive. KEY RATING DRIVERS The upgrade of the IDR to ‘BBB-‘ reflects that pro forma for the $1.46 billion acquisition of a portfolio of power centers from DDR’s joint venture (JV) with Blackstone Real Estate Partners VII, DDR’s recurring cash flow will remain in excess of fixed-charges at a level consistent with an investment-grade rating. The upgrade also takes into account a management team continually focused on improving credit metrics, as well as good liquidity and strong access to capital. Pro forma leverage is high relative to the REIT universe, though expected to be within a range reflective of a ‘BBB-‘ rating given DDR’s good portfolio quality. Further, the company continues to grow the unencumbered pool and improve financial flexibility. Blackstone JV Portfolio Purchase a Credit Positive Properties within the Blackstone JV portfolio are located in markets with stronger demographics such as higher household income and greater population density than properties within the existing DDR portfolio. The Blackstone JV portfolio has a larger big-box component than the existing DDR portfolio, as shown by annualized base rents of $13.81 per square foot, which is 5% below the DDR-defined prime portfolio. Notably, DDR has been leasing and managing the portfolio under various ownership structures (i.e., EDT Retail Trust, EPN Group, the Blackstone JV) for more than 10 years, lessening underwriting and operational risk. Improving Fixed-Charge Coverage First quarter 2013 (1Q’13 pro forma fixed-charge coverage is 2.3x compared with 2.0x in 2012 and 1.7x in 2011. Same-store net operating income (NOI) growth (derived from rising occupancy as well as positive lease rollover) along with incremental cash flow from redevelopment activity and joint ventures, and lower fixed charges, drove the increase. Fitch defines fixed-charge coverage as recurring operating EBITDA including Fitch’s estimate of recurring cash distributions from unconsolidated entities less recurring capital expenditures less straight-line rent adjustments, divided by total interest incurred and preferred dividends. Property-level fundamentals are favorable as evidenced by leasing activity on vacant space as well as positive rent rollover. Since reaching a cyclical trough of 90.7% in 1Q’09, the leased percentage stood at 94.4% in 1Q’13. Leasing spreads including new and renewal leases grew by 7.6% in 1Q’13 compared with 6.7% in 2012 and 6.1% in 2011, and rental rate growth should be the primary driver of same-store NOI growth going forward. Same-store NOI increased by 3.3% in 1Q’13, following increases of 4.0% in 2012 and 3.5% in 2011, and Fitch projects 2%-3% same-store growth in 2013 due to a supply-demand dynamic in DDR’s favor. Fitch anticipates that coverage will approach 2.5x in 2014-2015 due to same-store growth along with the full-year impact of the Blackstone JV portfolio NOI, as the acquisition is expected to close in 4Q’13. Coverage in the 2.0x-2.5x range is strong for a shopping center REIT at the ‘BBB-‘ level. In a stress case not anticipated by Fitch in which the company repeats its same-store NOI results from 2009-2010, coverage would remain at 2.0x, which is adequate for the ‘BBB-‘ rating. Big-Box Retailer Exposure The company’s top tenants as of March 31, 2013 were Walmart (Fitch IDR of ‘AA’ with a Stable Outlook) at 4.0% of pro rata rental revenues followed by TJX Companies at 2.6% and Bed Bath & Beyond at 2.5%, indicative of confined tenant credit risk. Lease expirations are measured, with 1.8%, 6.7%, and 6.8% of revenue on big-box space greater than 10,000 square feet expiring in 2013, 2014, and 2015, respectively. On small-shop space less than 10,000 square feet, 5.1%, 6.5%, and 5.9% of revenues expire in 2013, 2014, and 2015, respectively. DDR has a broad geographic footprint, and its top three geographic regions in 1Q’13 were Brazil at 9.7% of annual base rent, followed by Florida at 8.7% and Georgia at 8.3%. Credit-Focused Management Team Since the 2009-2010 period, DDR’s management team has been steadfast in decreasing leverage via common equity offerings and retained cash flow, extending debt duration, and improving liquidity. The company’s liquidity coverage ratio, calculated as liquidity sources divided by uses, is 2.0x for the period April 1, 2013 to Dec. 31, 2014, which is strong for the ‘BBB-‘ IDR. Liquidity sources include unrestricted cash pro forma for capital raising related to the Blackstone JV portfolio acquisition, availability under unsecured revolving credit facilities, and projected retained cash flows from operating activities after dividends and distributions. Liquidity uses include consolidated and pro rata joint venture debt maturities and projected recurring capital expenditures. When including development cost to complete as a liquidity use, liquidity coverage remains good at 1.7x. Liquidity coverage improves to 4.8x assuming 90% of 2013-2014 secured debt maturities are refinanced. The company has no unsecured debt maturities until May 2015, and pro forma debt maturities are manageable in 2013-2014 when 0.8% and 6.8% of respective pro rata debt matures, followed by 15.6% in 2015. The company’s 1Q’13 adjusted funds from operations payout ratio was 49.3%, up from 41.2% and 20.1% in 2011, but still reflective of strong internally-generated liquidity. Strong Access to Capital Capital access remains solid and terms have continued to improve. In June 2012, the company issued $300 million 4.625% senior unsecured notes due 2022 priced to yield 4.865% to maturity, or 325 basis points over the benchmark treasury rate, and in July 2012, DDR issued $200 million 6.5% class J preferred stock. In November 2012, DDR re-opened the 4.625% notes due 2022 and priced $150 million to yield 3.465% to maturity, or 185 basis points over the benchmark treasury rate. DDR also accessed the secured debt market and its at-the-market equity offering program in 4Q’12. In January 2013, the company refinanced its unsecured revolving credit facilities with a pricing reduction to LIBOR plus 140 basis points (a decrease of 25 basis points from the previous rate) and refinanced its secured term loan with a pricing reduction to LIBOR plus 155 basis points (a decrease of 15 basis points). DDR subsequently issued $150 million of 6.25% class K preferred stock. On May 15, in connection with the Blackstone JV portfolio acquisition, the company forward-funded a follow-on common stock offering for 34 million shares at $18.90 per share, which including the overallotment option will total approximately $739 million. On May 16, the company issued $300 million 3.375% senior unsecured notes due 2023 priced to yield 3.447% to maturity or 158 basis points over the benchmark treasury rate. Fitch has assigned a ‘BBB-‘ rating to these securities. Leverage Expected to be Consistent with ‘BBB-‘ Pro forma leverage is slightly high for the ‘BBB-‘ rating at 7.2x, compared with 8.0x in 2011 and 8.2x in 2010. Debt repayment via follow-on common stock offerings and retained cash flow has accelerated leverage reduction. Fitch projects that leverage will fall below 7.0x in 2014-2015 due to positive fundamentals and the full year impact of the Blackstone JV portfolio NOI. Leverage in the 6.5x-7.0x range is appropriate for a ‘BBB-‘ rating for a shopping center REIT. In a stress case not anticipated by Fitch which DDR repeats its same-store NOI results from 2009-2010, leverage would remain around 7.5x, which would be weak for the ‘BBB-‘ rating. Growing Unencumbered Pool DDR has incrementally added power centers and other retail assets across multiple MSAs to the unencumbered pool. The company is selectively re-developing unencumbered assets such as Plaza Del Sol in San Juan, Puerto Rico and Aspen Grove in Denver, CO to bolster unencumbered cash flow. Unencumbered properties, defined as pro forma unencumbered NOI divided by a stressed 8% capitalization rate plus a 50% haircut on unencumbered land, covered unsecured debt by 1.8x as of Mar. 31, 2013 pro forma, which is low for the ‘BBB-‘ rating. However, a haircut on land is conservative given impairments incurred on DDR’s land during previous years. Stable Outlook The Stable Outlook reflects Fitch’s expectation that coverage will sustain between 2.0x and 2.5x, due principally to 2%-3% same-store NOI growth, that leverage will sustain just below 7.0x, and that unencumbered asset coverage will approach 2.0x as DDR continues to reduce secured debt levels via unsecured debt and common stock offerings. In addition, the covenants in the company’s debt agreements do not restrict financial flexibility. Preferred Stock Notching The ‘BB’ rating of the preferred stock (a two-notch differential from the IDR) is consistent with Fitch’s criteria for corporate entities with an IDR of ‘BBB-‘. Based on Fitch’s research on ‘Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit Analysis,’ these preferred securities are deeply subordinated and have loss absorption elements that would likely result in poor recoveries in the event of a corporate default. RATING SENSITIVITIES The following factors may have a positive impact on DDR’s ratings and/or Outlook: –Fitch’s expectation of fixed-charge coverage sustaining above 2.3x (pro forma coverage is 2.3x); –Fitch’s expectation of leverage sustaining below 6.5x (pro forma leverage is 7.2x and leverage is expected to fall below 7.0x in 2014). The following factors may have a negative impact on DDR’s ratings and/or Outlook: –Fitch’s expectation of fixed charge coverage sustaining below 2.0x; –Fitch’s expectation of leverage sustaining above 7.5x; –Base case liquidity coverage sustaining below 1.25x. Contact: Primary Analyst Sean Pattap Senior Director +1-212-908-0642 Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 Secondary Analyst Steven Marks Managing Director +1-212-908-9161 Committee Chairperson Philip Zahn Senior Director +1-312-606-2336 Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com. Additional information is available at ‘www.fitchratings.com’. Applicable Criteria and Related Research: –Criteria for Rating U.S. Equity REITs and REOCs (Feb. 26, 2013); –Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit Analysis (Dec. 13, 2012); –Recovery Ratings and Notching Criteria for Equity REITs (Nov. 12, 2012); –Corporate Rating Methodology (Aug. 8, 2012). Applicable Criteria and Related Research: Corporate Rating Methodology here Recovery Ratings and Notching Criteria for Equity REITs here Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit Analysis here Criteria for Rating U.S. Equity REITs and REOCs here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM’. 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