Great insights on DDR. Like you I was concerned with debt and this stopped me from buying shares when the stock was trading on multiples that implied little or no growth (a big mistake). However, I increasingly feel that not only is the debt not a problem, but it is actually a benefit as it improves the capital strucutre of the company. This is because debt is cheaper than equity. For example, average debt was $102 million in 2018 and finance and borrowing costs totalled $6.8 million. As the cost of debt is paid before tax (unlike equity), there is also a tax benefit from using debt. So the effective cost of debt in 2018 was 0.7*6.8 = $4.8 million or 4.7%. On the other hand, the stock trades on an earnings yield of about 5.9% (2018 NPAT of $32.5m/$548m market cap) and this is probably the lowest earnings yield the stock has ever traded on. So even when trading on a record low earning yield, the cost of debt is still lower.
Of course, there is also the risk of default when using debt (unlike equity) but this risk is low given debt is only 1.9x EBITDA. In other words, the company could pay off all its debt in about 2 years if it stopped investing in capex or interest rates would have to rise to ~50% before the company was unable to pay the interest on the debt.
Then when I got over the question of debt, I was put off by the higher prices that DDR charges. I assumed that it would lose market share because of this but in fact the reverse has happened! I don't understand what is going on here but perhaps Claude is right that they offer a superior service somehow. I have heard that there is a well aligned incentive structure for staff so perhaps this is part of the reason.
You make a good question about how they will fund the warehouse construction and it was remiss of me to leave this out of my article. It would make sense to me that they raise equity capital at these levels given the stock is trading at historically high multiples of earnings. Even though debt is still a little cheaper, we may be at a cyclical low in interest rates and the company also already has a sizeable amount of borrowings so my preference would be for an equity injection. You are right that this will probably lead to a subdued share price in the short term (shouldn't be anything too severe though) but in the longterm it will probably lead to a higher share price (all else equal). This is because they are expanding warehouse facilities to grow the business and the company has historically achieved high returns on capital (27.6% in 2018). Assuming they can achieve a 20% return on the capital raised for the warehouse build (less than historical performance) then there will be significant value creation for shareholders given they can raise equity on an earnings yield of about 6% right now (see above).