Shopping center developer in financial turmoil

SEABROOK, Apr 06, 2009 (The Daily News of Newburyport - McClatchy-Tribune Information Services via COMTEX) -- DDR | Quote | Chart | News | PowerRating -- The developer proposing a massive shopping center for Route 1 has fallen into financial distress as it continues to refuse to widen the state highway that town officials say would assure the project's approval.

Developers Diversified Realty has already poured more than $20 million into buying and improving the site for its proposed 500,000-square-foot shopping center. The additional roadwork would add a few million to its investment.

The company, however, has widely reported financial problems, its stock losing about 95 percent of its value in the last year.

Although doing very well in 2005 when it began its initiative in Seabrook, DDR -- a publicly traded company -- has been hit hard by the recession. A look at its stock values in the past four years shows stock that once traded at a high of $72.33 per share in February of 2007 opened on the stock exchange late last week at $2.39 a share.

According to market reports, the company has been suffering from rising debt and a cash shortage. Last month, DDR was dropped from Standard & Poor's 500 Index "due to low market capitalization," according to a report from Zacks, an Web-based market reporting site.

Because some investment funds are linked to the S&P 500, stocks can be sold off by those funds once the stock is dropped from the list.

The company, which is coping with mounting debt, recently sold shopping center assets, and to obtain a much-needed infusion of cash, sold 30 million shares of its stock to the Otto family, a Germany shopping center giant, whose Internet retail business and real estate holdings are said to be worth $13.2 billion. Otto also agreed to loan DDR an additional $60 million.

The company sold off assets and stock to raise the money needed to pay debts that were coming due in 2009 and 2010. The financial fall of DDR may be due to the toll taken from the recession, its related credit crisis and stress of the retail sector due to a slowdown in consumer spending.

A call was placed to DDR requesting comment on the impact the company's financial situation might be having on its Seabrook project, but Scott Schroeder, senior vice president for marketing and communications, could not be reached.

In Seabrook, DDR has fought the desired Route 1 road improvements 1 to mitigate the 1,700 to 2,200 additional cars per hour its mall is forecast to bring to the Route 1/107 intersection, via feeder roads like Route 1. The company has said those improvements are too expensive and unnecessary.

The combined total of the road improvements DDR is proposing comes to about $7.7 million. They include $3 million in improvements to widen two access roads into the shopping center, add traffic lights and realign portions of Route 1 directly in front of its two main entrances, and add traffic lights and improve the eastern portion of Route 107 as it heads east from the northbound ramp off I-95.

DDR also proposes to up-front $4.6 million to add one lane westbound on the Route 107 bridge overpass. The offer requires it be paid back for portions of the cost by future developers. The improvement should allow shopping center patrons to more easily get back home via I-95 southbound.

Traffic engineers and Route 1 business owners believe that is not enough.

Mike Kettenbach, director of Demoulas Corporation's realty division that for decades has had two grocery store-anchored shopping centers on Route 1, told the Planning Board last month that DDR's mall will "choke" Route 1, unless the developer agrees to "fix its front door" and widen the intersection and Route 1 north and southbound.

Kettenbach isn't alone in his criticism of DDR's plan

Two town-hired traffic engineers, all safety and town officials and dozens of residents and other Route 1 business owners have predicted gridlock on surrounding roads if the mall goes through without expanding Route 1 both north and south of the mall's intersection.

When first reviewing the traffic mitigation plans in 2006, a road design expert at New Hampshire's Department of Transportation said Route 1 southbound to Railroad Avenue should be widened, along with the Route 107 bridge that passes over I-95 or the roadway would suffer extended delays.

According to the company's Web site, it owns 710 retail operating and development properties in 45 states, plus Puerto Rico, Brazil and Canada, totaling 157 million square feet.

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