SOURCE: Developers Diversified

June 08, 2007 11:11 ET

Developers Diversified Announces Formation of $1.5 Billion DDR Domestic Retail Fund I

CLEVELAND, OH--(Marketwire - June 8, 2007) - Developers Diversified (NYSE: DDR), the leading owner, manager and developer of market-dominant shopping centers in the U.S., announced the formation of DDR Domestic Retail Fund I ("the Fund"), a Developers Diversified-sponsored, fully-seeded commingled fund, and the Fund's commitment to purchase a $1.5 billion portfolio of 63 shopping center assets ("the Portfolio") from Developers Diversified and its affiliates.

Developers Diversified and its affiliates today transferred 52 shopping center assets to the Fund and are expected, subsequent to closing and subject to the assumption of debt, to transfer an additional 11 shopping center assets to the Fund.

Fund Structure

Developers Diversified and a consortium of institutional investors (the "Investor Group") have committed approximately $539 million of equity to the Fund. The transaction was financed at approximately 65% loan to value. The debt financing for the 52 transferred properties was comprised of $885 million of secured, 10-year, 5.60% fixed rate debt, while the debt financing for the 11 properties to be transferred consists of approximately $84 million of assumed debt with a weighted average interest rate of 4.94%.

The Fund will be capitalized 80% by the Investor Group and 20% by Developers Diversified, and will have an initial term of 10 years. Pursuant to the terms of the fund agreements, Developers Diversified will receive fees for asset management and property management, leasing, construction management and ancillary income. Developers Diversified will also receive a promoted interest above a 9.5% leveraged threshold return.

Real Estate Portfolio

The Portfolio is comprised of 54 assets recently acquired by Developers Diversified through its acquisition of Inland Retail Real Estate Trust, Inc. ("IRRETI"), seven assets formerly held in a joint venture with Kuwait Financial Centre, and two assets from the Company's wholly owned portfolio.

Due to the recapitalization of the assets from the Kuwait Financial Centre joint venture, Developers Diversified will recognize a promote of approximately $13 million, which will be included in the Company's second quarter 2007 earnings and FFO.

The 63 properties in the Portfolio have an aggregate gross asset value of approximately $1.5 billion, which equates to a cap rate of approximately 6.2% based on leases in place. The Portfolio, which totals 8.3 million square feet of owned GLA, consists primarily of grocery-anchored shopping centers with a geographic concentration in the Southeastern United States. Primary markets include Miami, Tampa, Atlanta and Orlando. The Portfolio is approximately 97% leased, and is anchored by retailers such as Publix, Kohl's, Kroger, Beall's and Ross Dress for Less. A complete list of the properties comprising the Portfolio appears below.

Scott A. Wolstein, Developers Diversified's Chairman and Chief Executive Officer, commented, "We are pleased to announce the formation of DDR Domestic Retail Fund I. This venture represents the next step in the evolution of our business model and significantly expands our existing funds management platform. We are now uniquely positioned to access capital in a manner that allows us to build upon our core competencies and create value for both our fund investors and our shareholders.

"Entering into this transaction establishes relationships with new institutional clients, allows us to maintain control of high quality real estate assets and continues to improve our balance sheet position after the IRRETI acquisition," Mr. Wolstein continued.

Daniel B. Hurwitz, Developers Diversified's President and Chief Operating Officer, added, "Our ability to recognize a promote from an existing joint venture exemplifies the multi-faceted goals of our funds management business: generate strong returns for our clients, earn promotes once threshold returns are met for our clients and leverage our existing platform to ensure we maximize the value creation for all investment opportunities. We look forward to working with our institutional partners in achieving our common goals."

M3 Capital Partners LLC (formerly Macquarie Capital Partners LLC) served as exclusive financial advisor to Developers Diversified in connection with formation of the Fund.

Developers Diversified

Developers Diversified owns and manages 800 retail operating and development properties in 45 states, plus Puerto Rico and Brazil, totaling 162 million square feet. The Company is a self-administered and self-managed real estate investment trust (REIT) operating as a fully integrated real estate company which acquires, develops and leases shopping centers. Additional information about Developers Diversified is available on the Internet at http://www.ddr.com.

FFO is a supplemental non-GAAP financial measurement used as a standard in the real estate industry. Management believes that FFO provides an additional indicator of the financial performance of a REIT. The Company also believes that FFO more appropriately measures the core operations of the Company and provides a benchmark to its peer group. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles, is not necessarily indicative of cash available to fund cash needs and should not be considered as an alternative to net income computed in accordance with GAAP as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. For the Company's definition and reconciliation of FFO, please refer to the Company's Form on 10-K as of December 31, 2006.

Developers Diversified considers portions of this information to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of 1934, both as amended, with respect to the Company's expectation for future periods. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including, among other factors, local conditions such as oversupply of space or a reduction in demand for real estate in the area, competition from other available space, dependence on rental income from real property, the loss of a major tenant, constructing properties or expansions that produce a desired yield on investment or inability to enter into definitive agreements with regard to our financing arrangements or our failure to satisfy conditions to the completion of these arrangements. For more details on the risk factors, please refer to the Company's Form on 10-K as of December 31, 2006.

   Property Name       MSA      State Owned GLA  Key Tenants       Original
                                                                  Portfolio

                                                 PetsMart,
                                                 Ross Dress,
1  Hilltop Plaza  San Francisco  CA     245,774  Barnes & Noble,     KFC I
                                                 Circuit City,
                                                 Century Theatres

                                                 OfficeMax, Corners,
2  Apple Blossom                                 Martin's Foods,     KFC I
    Corners          Washington  DC     240,562  Kohl's,
                                                 Books A Million

                                                 Value City,
3  Harundale Plaza   Washington  DC      217,619 Super Fresh,       IRRETI
                                                 AJ Wright

                                                 Marshalls,
4  Largo Town Center Washington  DC      260,797 Dollar Tree,       IRRETI
                                                 Shoppers Food
                                                  Warehouse

                                                 Publix,
5  Citrus Hills        Hernando  FL      68,927  Blockbuster,       IRRETI
                                                 Quiznos

                                                 Publix,
6  Crystal Springs      Crystal                  Blockbuster,       IRRETI
    Shopping Center       River  FL      66,986  Hallmark,
                                                 Subway

7  Shoppes at Paradise
    Pointe               Destin  FL      83,929  Publix, GNC        IRRETI

8  Watercolor Crossing   Destin  FL      43,200  Publix, UPS        IRRETI

9  Melbourne Shopping Melbourne  FL      204,217 Publix, Big Lots,
    Center                                       Beall's Outlet     IRRETI

10 Meadows Square         Miami  FL      106,224 Publix       Wholly Owned

11 Plaza Del Paraiso      Miami  FL      82,441  Publix,
                                                 Hair Cuttery       IRRETI

                                                 Fresh Market,
12 Flamingo Falls         Miami  FL      108,565 CVS,               IRRETI
                                                 Atlanta Bread

                                                 Publix,
13 Paraiso Plaza          Miami  FL      60,712  Washington Mutual, IRRETI
                                                 Hollywood Video

                                                 Publix,
14 Sheridan Square        Miami  FL      67,475  Dollar Tree,       IRRETI
                                                 T Mobile

15 Midway Plaza           Miami  FL      226,209 Publix, Ross,
                                                 Petco, Blockbuster IRRETI

                                                 Publix,
16 River Run              Miami  FL      93,645  Radio Shack,       IRRETI
                                                 Subway

17 Aberdeen Square        Miami  FL      70,555  Publix             IRRETI

                                                 Publix,
18 Village Square at Golf Miami  FL      126,488 Wachovia Bank,     IRRETI
                                                 Hallmark

19 Northlake Commons      Miami  FL      146,816 Ross, Home Depot   IRRETI

                                                 Publix,
20 Paradise Promenade     Miami  FL      70,271  Washington Mutual, IRRETI
                                                 Super Cuts,
                                                 Quiznos

                                                 Sweet Bay,
21 Countryside           Naples  FL      73,986  Blockbuster,       IRRETI
                                                 UPS Store,
                                                 Advance Auto

                                                 Publix,
22 Heather Island Plaza   Ocala  FL      70,970  Dollar Tree,       IRRETI
                                                 Blockbuster

                                                 OfficeMax,
                                                 Ross Dress,
23 Oviedo Park Crossing Orlando  FL      186,212 Michael's,          KFC I
                                                 T.J. Maxx,
                                                 Linens 'N Things

                                                 Publix,
24 Casselberry Commons  Orlando  FL      228,976 Beall's Outlet,    IRRETI
                                                 Ross, Stein Mart

                                                 Publix,
25 Chickasaw Trails                              Blockbuster,
    Shopping Center     Orlando  FL      75,492  Southtrust,        IRRETI
                                                 State Farm,
                                                 Great Clips

                                                 Publix,
26 Conway Plaza         Orlando  FL      117,723 Beall's Outlet,    IRRETI
                                                 Dollar Tree,
                                                 Aaron's Rental

                                                 Publix, Kmart,
27 Skyview Plaza        Orlando  FL      281,244 Office Depot,      IRRETI
                                                 Circuit City,
                                                 Walgreens

28 West Oaks Towne                               PetSmart,
    Center              Orlando  FL      66,539  Michael's,         IRRETI
                                                 Best Buy

29 Killearn Shopping                             Publix,
    Center          Tallahassee  FL      95,229  Eckerds,           IRRETI
                                                 Radio Shack

30 Southwood
    Plantation      Tallahassee  FL      62,840  Publix             IRRETI

31 North Pointe           Tampa  FL      104,460 Wal-Mart,
    Plaza                                        Publix Supermarket  KFC I

32 Bardmoor Shopping                             Publix,
    Center                Tampa  FL      152,667 Beall's Outlet,
                                                 Hallmark           IRRETI

33 Lakewood Ranch         Tampa  FL      69,471  Publix,
                                                 UPS Store, Curves  IRRETI

34 Shoppes at New Tampa   Tampa  FL      158,222 Publix, Beall's,
                                                 UPS, Curves        IRRETI

35 Publix Brooker Creek   Tampa  FL      77,596  Publix, Subway,
                                                 State Farm,
                                                 Mailboxes

                                                 Beall's,
36 Creekwood Crossing     Tampa  FL      227,085 Beall's Outlet,    IRRETI
                                                 LTM Party Store,
                                                 Lane Bryant

37 Shoppes of Golden      Tampa  FL      130,609 Publix,
    Acres                                        Amscot Financial   IRRETI

                                                 Publix, Beall's,
38 Shoppes on the Ridge   Tampa  FL      115,671 Blockbuster,       IRRETI
                                                 Aaron's

39 Shoppes of Lithia      Tampa  FL      71,430  Publix, UPS,
                                                 Curves, Cingular   IRRETI

40 Cofer Crossing       Atlanta  GA      137,757 Wal-Mart, Kroger,  Wholly
                                                 Goody's             Owned

                                                 Belk, Ross,
41 Riverstone Plaza     Atlanta  GA      307,716 Goody's,
                                                 Michael's, Publix  IRRETI

42 Southampton Village  Atlanta  GA      77,956  Publix, Pak Mail,
                                                 Cingular           IRRETI

                                                 Kroger,
43 Sharon Greens        Atlanta  GA      98,317  Dollar Tree,       IRRETI
                                                 Washington Mutual

44 Hairston Crossing    Atlanta  GA      57,884  Publix,
                                                 Washington Mutual  IRRETI

                                                 Publix,
45 Shoppes of Ellenwood Atlanta  GA      67,721  Washington Mutual, IRRETI
                                                 H&R Block

46 Clearwater Crossing  Atlanta  GA      90,566  Kroger             IRRETI

                                                 Publix,
47 Shoppes at Lake Dow  Atlanta  GA      73,271  Blockbuster,       IRRETI
                                                 Subway, UPS,
                                                 Great Clips

                                                 Office Depot,
48 Market Square        Atlanta  GA      121,766 Petco,             IRRETI
                                                 Tuesday Morning

                                                 Target, Kohl's,
49 Highland Grove       Chicago  IL      312,546 Circuit City,       KFC I
                                                 OfficeMax,
                                                 Borders

50 Riverdale Shops  Springfield  MA      273,307 Kohl's,
                                                 Stop & Shop        IRRETI

51 Rosedale Shopping  Charlotte  NC      119,197 Harris Teeter,
    Center                                       CVS, Blockbuster   IRRETI

52 Meadowmont Village    Durham  NC      132,745 Harris Teeter,
    Center                                       Great Clips        IRRETI


                                                 Food Lion,
53 Fayetteville                                  Marshall's,
    Pavilion       Fayetteville  NC      272,385 Radio Shack,       IRRETI
                                                 Michael's

54 Sexton Commons       Raleigh  NC      49,097  Harris Teeter      IRRETI

55 Clayton Corners      Raleigh  NC      125,653 Lowe's Foods,
                                                 Cato, GNC          IRRETI

56 Shops at Oliver's                             Lowe's Food,
    Crossing      Winston-Salem  NC      76,512  Dollar Tree        IRRETI

57 West Falls Plaza    New York  NY      88,913  A&P,
                                                 Computer City      IRRETI

58 Derby Square        Columbus  OH     128,212  Giant Eagle         KFC I

                                                 Giant Eagle,
59 Hilliard Rome       Columbus  OH     110,871  American Dental    IRRETI
                                                  Center

                                                 Kohl's,
                                                 Gander Mountain,
60 Springfield Commons   Toledo  OH      271,729 Bed Bath & Beyond,  KFC I
                                                 Old Navy,
                                                 Babies 'R Us

61 Crossroads                                    Lowe's,
    Plaza          Philadelphia  PA      89,627  Giant Food,        IRRETI
                                                 Perkasie Bank

62 Center Pointe     Greenville  SC      72,287  Home Depot,
    Plaza I&II                                   Publix, Ross       IRRETI

                                                 Sentry Foods,
63 Village Center     Milwaukee  WI      227,887 Kohl's, Starbucks, IRRETI
                                                 Noodle & Co,
                                                 Fedex Kinko's,
                                                 Cingular

Contact Information

  • Contact:
    Michelle M. Dawson
    Vice President of Investor Relations
    Developers Diversified
    Ph: 216.755.5500
    Email: Email Contact