SOURCE: Developers Diversified

October 25, 2007 18:02 ET

Developers Diversified Realty Reports an Increase of 14.7% in Diluted FFO per Share for the Nine Months Ended September 30, 2007

CLEVELAND, OH--(Marketwire - October 25, 2007) - Developers Diversified Realty Corporation (NYSE: DDR), the nation's leading owner, manager and developer of market-dominant community centers, today reported operating results for the third quarter ended September 30, 2007.

--  Funds From Operations ("FFO") per diluted share increased 14.7% to
    $2.97 and net income per diluted share increased 16.1% to $1.59 for the
    nine months ended September 30, 2007, as compared to the prior year.
    Excluding transactional activity relating to merchant building and land
    sale gains and joint venture promoted income aggregating $73.3 million and
    $57.6 million in 2007 and 2006, respectively, diluted FFO per share
    increased approximately 14.5% in 2007 as compared to 2006.
    
--  FFO per diluted share decreased 3.6% to $0.80 and net income per
    diluted share decreased 42.2% to $0.26 for the three month period ended
    September 30, 2007, as compared to the prior year.  Excluding transactional
    activity relating to merchant building gains, land sale gains and joint
    venture promoted income aggregating $4.2 million and $16.8 million in 2007
    and 2006, respectively, diluted FFO per share increased approximately 12.8%
    in 2007 as compared to 2006.
    
--  Executed leases during the third quarter totaled approximately 2.5
    million square feet, including 179 new leases and 299 renewals.
    
--  On a cash basis, base rental rates increased 41.8% on new leases, 7.4%
    on renewals and 13.8% overall.
    
--  Core portfolio leased percentage at September 30, 2007 was 95.9%.
    
--  Same store net operating income ("NOI") for the nine-month period
    increased 2.3% over the prior-year comparable period.
    

Scott Wolstein, DDR's Chairman and Chief Executive Officer, stated, "We are pleased to announce this quarter's financial results, which reflect the consistent growth of our core portfolio and the implementation of our investment strategy. Our leasing team completed a record quarter in terms of volume and rental spreads on new leases, and our development team continued to identify and execute on attractive investment opportunities. Furthermore, we have proactively taken steps to improve the quality of our portfolio through disposition, development and acquisition and allocate our capital to where we expect the best returns. These actions have had the complementary effect of strengthening our balance sheet and enhancing our liquidity position."

Financial Results:

For the three months ended September 30, 2007, FFO, a widely accepted measure of a Real Estate Investment Trust ("REIT") performance, on a per share basis was $0.80 (diluted and basic) as compared to $0.83 (diluted and basic) for the same period in the previous year. FFO available to common shareholders was $99.5 million, as compared to $91.7 million for the three months ended September 30, 2007 and 2006, respectively, an increase of 8.5%. Net income available to common shareholders was $32.7 million or $0.26 per share (diluted) and $0.27 per share (basic) for the three months ended September 30, 2007, as compared to $49.0 million, or $0.45 per share (diluted and basic) for the prior-year comparable period. The decrease in net income and FFO for the three months ended September 30, 2007, is primarily related to a reduction of $12.6 million, or $0.11 per share in 2006, in transactional income relating to merchant building and land sale gains, including gains and promoted income from joint ventures, offset by increases in same store net operating income and operating results from the merger with Inland Retail Real Estate Trust, Inc. ("IRRETI").

For the nine months ended September 30, 2007, FFO, on a per share basis was $2.97 (diluted) and $2.98 (basic) as compared to $2.59 (diluted) and $2.61 (basic) for the same period in the previous year, an increase of 14.7% on a diluted basis. FFO available to common shareholders was $365.0 million, as compared to $287.7 million for the nine months ended September 30, 2007 and 2006, respectively, an increase of 26.9%. Net income available to common shareholders was $192.9 million or $1.59 per share (diluted) and $1.60 per share (basic) for the nine months ended September 30, 2007, as compared to $149.9 million, or $1.37 per share (diluted and basic) for the prior-year comparable period. The increase in net income for the nine months ended September 30, 2007, is primarily related to the merger with IRRETI, the release of certain valuation reserves and an increase in the gain on sale of assets including those recognized through the Company's merchant building program and promoted income earned from certain joint ventures. These increases were partially offset by a non-cash charge relating to the redemption of preferred shares, certain integration related costs and a charge relating to the departure of the Company's former President.

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. FFO is defined and calculated by the Company as net income, adjusted to exclude: (i) preferred dividends, (ii) gains (or losses) from disposition of depreciable real estate property, except for those sold through the Company's merchant building program, (iii) sales of securities, (iv) extraordinary items, (v) cumulative effect of changes in accounting standards and (vi) certain non-cash items. These non-cash items principally include real property depreciation and amortization of intangibles, equity income from joint ventures and equity income from minority equity investments and adding the Company's proportionate share of FFO from its unconsolidated joint ventures and minority equity investments, determined on a consistent basis. Other real estate companies may calculate FFO in a different manner. A reconciliation of net income to FFO is presented in the financial highlights section.

Leasing:

The following results from the third quarter ended September 30, 2007, highlight continued strong leasing activity throughout the portfolio:

--  Executed 179 new leases aggregating 941,434 square feet and 299
    renewals aggregating 1,574,283 square feet.
    
--  On a cash basis, rental rates on new leases increased 41.8% and rental
    rates on renewals increased 7.4%.  Overall, rental rates for new leases and
    renewals increased 13.8%.
    
--  Total portfolio average annualized base rent per occupied square foot
    as of September 30, 2007 was $12.58, as compared to $11.68 at September 30,
    2006.
    
--  Core portfolio leased rate was 95.9% as of September 30, 2007 as
    compared to 96.1% at September 30, 2006.
    

The Company and its joint ventures (at 100%) estimate total annual recurring leasing capital expenditures to be approximately $24 million ($0.21 psf of owned GLA) in 2007.

Strategic Real Estate Transactions:

Macquarie DDR Trust

In August and September 2007, the Company sold three shopping center properties, aggregating 0.5 million square feet to the Company's joint venture with Macquarie DDR Trust (ASX: MDT) ("MDT"), an Australian Listed Property Trust sponsored by Macquarie Bank Limited (ASX: MBL), an international investment bank and leading advisor and manager of specialized real estate funds in Australia. The aggregate purchase price for the properties was $49.8 million. The assets were recently acquired by the Company as part of its acquisition of IRRETI and these assets offer redevelopment potential during the next several years. As these assets were recently acquired, the Company did not record a gain on the transaction.

The Company retained a 14.5% ownership interest in the properties, remains responsible for day-to-day operations of the properties and receives ongoing fees for property management, leasing and construction management, and base asset management fees. The Company will also receive a promoted interest above a 10.0% leveraged IRR. The promoted interest will be calculated based on the implied value of the assets at stabilization.

Dispositions:

The Company sold eight shopping center properties in the third quarter of 2007, as part of its portfolio sale in which 52 properties were sold at the end of the second quarter, aggregating 0.9 million square feet for approximately $86.6 million. In the third quarter, the Company recognized a nominal non-FFO gain which was offset by certain additional transaction costs associated with the initial sale at the end of the second quarter. These dispositions represent the remaining assets sold in connection with the transaction announced in the second quarter of 2007.

Common Share Repurchase Program:

During the second quarter of 2007, the Company's Board of Directors authorized a common share repurchase program. Under the terms of the program, the Company may purchase up to a maximum value of $500 million of its common shares during the next two years. Through October 25, 2007, the Company repurchased 2.2 million of its common shares in open market transactions at an aggregate cost of approximately $105.8 million at a weighted-average price per share of $48.42.

Development (Wholly-Owned and Consolidated Joint Ventures):

The Company currently has the following shopping center projects under construction:

        Wholly-Owned and Consolidated Joint Venture Developments
                       Currently in Progress

                                                 Targeted
                                      Expected  Substantial
                                      Gross Cost Completion
         Property           Total GLA($Millions)   Date      Description
---------------------------  ------- --------- ---------  -----------------
Ukiah (Mendocino),
 California                  669,406 $   113.5      2009   Community Center
Homestead, Florida           398,759      95.2      2008   Community Center
Miami, Florida               644,999     155.7 2006-2009          Mixed Use
Tampa (Brandon), Florida     370,700      70.7      2009   Community Center
Tampa (Wesley Chapel),
 Florida                      95,408      17.4      2008   Community Center
Atlanta (Douglasville),
 Georgia                     124,200      22.4      2008   Community Center
Boise (Nampa), Idaho         829,975     147.0 2007-2008   Community Center
Chicago (McHenry),
 Illinois                    454,378      74.3      2007   Community Center
Boston, Massachusetts
 (Seabrook, New Hampshire)   461,825      74.5      2009   Community Center
Elmira (Horseheads), New
 York                        668,619      77.1 2007-2008   Community Center
Raleigh (Apex), North
 Carolina (Promenade)         87,780      20.2      2008   Community Center
Raleigh (Apex), North
 Carolina Beaver Creek
 Crossing, (Phase II)        283,217      52.3      2009   Community Center
San Antonio (Stone Oak),
 Texas                       665,229      93.4      2007      Hybrid Center
                           --------- ---------
   Total                   5,754,495 $ 1,013.7
                           ========= =========


The Company anticipates commencing construction in 2007 on the following additional shopping centers:

        Wholly-Owned and Consolidated Joint Venture Developments
                   to Commence Construction in 2007

                                                  Targeted
                                       Expected  Substantial
                                      Gross Cost Completion
         Property            Total GLA($Millions)   Date    Description
---------------------------  --------- ---------  -------- ----------------
Guilford, Connecticut          147,619 $    43.4      2008 Community Center
Atlanta (Union City),
 Georgia                       200,000      47.5      2008 Community Center
Chicago (Grayslake),
 Illinois                      689,799     144.2      2009 Community Center
Gulfport, Mississippi          703,379      91.2      2009    Hybrid Center
Isabela, Puerto Rico           290,085      57.1      2009 Community Center
Austin (Kyle), Texas           778,415      97.2      2009 Community Center
San Antonio (Shertz), Texas    506,639      50.7      2009 Community Center
Toronto (Richmond Hill),
 Canada                        710,000     190.7      2011        Mixed Use
                             --------- ---------
   Total                     4,025,936 $   722.0
                             ========= =========

At September 30, 2007, $623.1 million of costs were incurred in relation to the Company's thirteen development projects under construction and the eight that will commence construction in 2007.

In addition to these developments, the Company has identified several additional development opportunities reflecting an aggregate estimated cost of over $1 billion. While there are no assurances any of these projects will move forward, they provide a source of potential development projects over the next several years. As of September 30, 2007, the projected unleveraged GAAP return, on the Company's aggregate development and redevelopment pipeline is approximately 10%.

Development (Unconsolidated Joint Ventures):

The Company's joint ventures have the following shopping center projects under construction. At September 30, 2007, $184.8 million of costs had been incurred in relation to these development projects.

                    Unconsolidated Joint Venture Developments
                              Currently in Progress


                          DDR's           Expected  Targeted
                Joint   Effective          Gross  Substantial
               Venture  Ownership  Total    Cost  Completion
 Property      Partner  Percentage  GLA  ($Millions) Date    Description
------------  ---------  -------  -------- -------  ----- ----------------
Kansas City   Coventry
 (Merriam),         II      20.0%  280,516 $  71.0  2008  Community Center
 Kansas
Detroit       Coventry                              2008-
 (Bloomfield        II      10.0%  882,197   335.6  2009  Lifestyle Center
 Hills),
 Michigan
Dallas        Coventry
 (Allen),           II      10.0%  831,413   207.5  2008   Lifestyle Center
 Texas
Manaus,           Sonae
 Brazil           Sierra    47.2%   477,630    95.7  2009     Enclosed Mall
                                  --------- -------
                                  2,471,756 $ 709.8
                                  ========= =======

The Company's joint venture with Sonae Sierra anticipates commencing construction on a 350,000 square foot enclosed mall in Uberlandia, Brazil, with an estimated gross cost of approximately $70 million.

Redevelopments and Expansions (Wholly-Owned and Consolidated Joint Ventures):

The Company is currently expanding/redeveloping the following shopping centers at a projected aggregate gross cost of approximately $117.4 million. At September 30, 2007, approximately $53.8 million of costs had been incurred in relation to these projects.

      Summary of Significant Wholly-Owned and Consolidated Joint Venture
            Redevelopments and Expansions Currently in Progress

Property                        Description
------------------------------  ------------
Miami (Plantation), Florida     Redevelop shopping center to include Kohl’s
                                 and additional junior anchors
Chesterfield, Michigan          Construct 25,400 sf of small shop space and
                                 retail space
Olean, New York                 Wal-Mart expansion and tenant relocation
Fayetteville, North Carolina    Redevelop 18,000 sf of small shop space and
                                 construct an outparcel building
Akron (Stow), Ohio              Redevelop former K-Mart space and develop
                                 new outparcels
Dayton (Huber Heights), Ohio    Construct 45,000 sf junior anchor

The Company anticipates commencing construction on the following redevelopment and expansion projects in the next year:

    Summary of Significant Wholly-Owned and Consolidated Joint Venture
     Redevelopments and Expansions to Commence Construction in 2007

Property                        Description
------------------------------  ------------
Hatillo, Puerto Rico            Construct 21,000 sf of junior anchor space
San Juan (Bayamon), Puerto Rico
 (Plaza Del Sol)                Construct 144,000 sf of junior anchor space
                                 and retail shops
Dallas (McKinney), Texas        Construct 87,757 sf of retail shops and
                                 Outparcels

Redevelopments and Expansions (Unconsolidated Joint Ventures):

The Company's joint ventures are currently expanding/redeveloping the following shopping centers at a projected gross cost of $577.1 million, which includes the initial acquisition costs for the Coventry II redevelopment projects. At September 30, 2007, approximately $459.2 million of costs had been incurred in relation to these projects.

       Summary of Significant Unconsolidated Joint Venture Redevelopment
                  and Expansion Projects Currently in Progress


                                             DDR’s
                                   Joint    Effective
                                  Venture   Ownership
Property                          Partner   Percentage     Description
-------------------------------  ---------- --------- --------------------
Phoenix, Arizona                  Coventry       20.0% Large-scale
                                    II                 redevelopment of
                                                       enclosed mall to
                                                       open-air format
Buena Park, California            Coventry       20.0% Large-scale
                                    II                 redevelopment of
                                                       enclosed mall to
                                                       open-air format
Los Angeles (Lancaster),         Prudential      21.0% Relocate Wal-Mart
 California                       Real                 and redevelop former
                                  Estate               Wal-Mart space
                                  Investors
Chicago (Deer Park), Illinois    Prudential     25.75% Retenant former
                                  Real                 retail shop space
                                  Estate               with junior anchor
                                  Investors            and construct 13,500
                                                       sf multi-tenant
                                                       outparcel building
Benton Harbor, Michigan          Coventry       20.0%  Construct 89,000 sf
                                   II                  of anchor space and
                                                       retail shops
Kansas City, Missouri            Coventry       20.0%  Relocate retail
                                  II                   shops and retenant

                                                       former retail shop
                                                       space
Cincinnati, Ohio                Coventry II/    18.0%  Redevelop former JC
                                 Thor                  Penney space
                                 Equities

The Company's joint ventures anticipate commencing expansion/redevelopment projects at the following shopping centers:

Summary of Significant Joint Venture Redevelopment and Expansion Projects
                 to Commence Construction in 2007


                                             DDR’s
                                   Joint    Effective
                                  Venture   Ownership
Property                          Partner   Percentage     Description
------------------------------  ----------- --------- --------------------
Seattle (Kirkland), Washington  Coventry II     20.00% Large-scale
                                                       redevelopment of
                                                       shopping center
Sao Paulo (Sao Bernado de       Sonae Sierra    47.20% Expansion and
  Campo), Brazil                                       renovation of the
                                                       existing mall to
                                                       accommodate theater
                                                       tenant and redesign
                                                       of the food court

Developers Diversified currently owns and manages over 740 retail operating and development properties in 45 states, plus Puerto Rico, Brazil, Russia and Canada, totaling over 160 million square feet. Developers Diversified Realty is a self-administered and self-managed real estate investment trust (REIT) operating as a fully integrated real estate company which acquires, develops, leases and manages shopping centers.

A copy of the Company's Supplemental Financial/Operational package is available to all interested parties upon request at our corporate office to Michelle M. Dawson, Vice President of Investor Relations, Developers Diversified Realty Corporation, 3300 Enterprise Parkway, Beachwood, OH 44122 or on our Web site which is located at http://www.ddr.com.

Developers Diversified Realty Corporation 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.

                DEVELOPERS DIVERSIFIED REALTY CORPORATION
                           Financial Highlights
                  (In thousands - except per share data)


                                 Three-Month Period     Nine-Month Period
                                 Ended September 30,   Ended September 30,
Revenues:                         2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
   Minimum rents (A)            $ 158,868  $ 134,937  $ 484,317  $ 397,542
   Percentage and overage rents
    (A)                             1,988      1,583      5,564      5,246
   Recoveries from tenants         52,139     43,543    153,873    125,138
   Ancillary and other property
    income                          5,129      4,753     14,096     13,471
   Management, development and
    other fee income               13,827      8,366     34,906     21,320
   Other (B)                        2,110      1,018     13,564      9,226
                                ---------  ---------  ---------  ---------
                                  234,061    194,200    706,320    571,943
                                ---------  ---------  ---------  ---------
Expenses:
   Operating and maintenance       33,270     26,529     95,460     77,941
   Real estate taxes               26,772     23,551     82,944     66,446
   General and administrative
    (C)                            19,626     14,974     60,304     45,805
   Depreciation and
    amortization                   56,565     46,172    163,196    135,194
                                ---------  ---------  ---------  ---------
                                  136,233    111,226    401,904    325,386
                                ---------  ---------  ---------  ---------
Other income (expense):
   Interest income                  1,569      1,587      7,751      7,543
   Interest expense               (62,524)   (52,244)  (196,975)  (155,312)
   Other (expense) income (D)        (225)      (203)      (675)       464
                                ---------  ---------  ---------  ---------
                                  (61,180)   (50,860)  (189,899)  (147,305)
                                ---------  ---------  ---------  ---------
Income before equity in net
 income of joint ventures,
 minority equity interests,
 income tax benefit of taxable
 REIT subsidiaries and
 franchise taxes, discontinued
 operations and gain on
 disposition of real estate        36,648     32,114    114,517     99,252
Equity in net income of joint
 ventures (E)                       6,003     12,868     33,887     22,956
Minority equity interests (F)      (1,974)    (2,283)   (15,689)    (6,504)
Income tax (expense) benefit of
 taxable REIT subsidiaries and
 franchise taxes (G)                 (484)       330     15,287      2,690
                                ---------  ---------  ---------  ---------
Income from continuing
 operations                        40,193     43,029    148,002    118,394
(Loss) income from discontinued
 operations (H)                      (601)     5,821     21,541     11,757
                                ---------  ---------  ---------  ---------
Income before gain on
 disposition of real estate        39,592     48,850    169,543    130,151
Gain on disposition of real
 estate, net of tax                 3,691     13,962     63,713     61,124
                                ---------  ---------  ---------  ---------
Net income                      $  43,283  $  62,812  $ 233,256  $ 191,275
                                =========  =========  =========  =========
Net income, applicable to
 common shareholders            $  32,716  $  49,020  $ 192,889  $ 149,898
                                =========  =========  =========  =========
Funds From Operations ("FFO"):
   Net income applicable to
    common shareholders         $  32,716  $  49,020  $ 192,889  $ 149,898
   Depreciation and
    amortization of real estate
    investments                    54,235     47,235    160,819    138,072
   Equity in net income of
    joint ventures (E)             (6,003)   (12,868)   (33,887)   (22,956)
   Joint ventures' FFO (E)         17,602     13,682     62,475     32,963
   Minority equity interests
    (OP Units) (F)                    569        534      1,706      1,601
   Loss (gain) on disposition
    of depreciable real estate,
    net of tax                        430     (5,870)   (19,013)   (11,869)
                                ---------  ---------  ---------  ---------
   FFO available to common
    shareholders                   99,549     91,733    364,989    287,709
   Preferred dividends             10,567     13,792     40,367     41,377
                                ---------  ---------  ---------  ---------
   FFO                          $ 110,116  $ 105,525  $ 405,356  $ 329,086
                                =========  =========  =========  =========
   Per share data:
      Earnings per common share
         Basic                  $    0.27  $    0.45  $    1.60  $    1.37
                                =========  =========  =========  =========
         Diluted                $    0.26  $    0.45  $    1.59  $    1.37
                                =========  =========  =========  =========
   Dividends Declared           $    0.66  $    0.59  $    1.98  $    1.77
                                =========  =========  =========  =========
   Funds From Operations -
    Basic (I)                   $    0.80  $    0.83  $    2.98  $    2.61
                                =========  =========  =========  =========
   Funds From Operations -
    Diluted (I)                 $    0.80  $    0.83  $    2.97  $    2.59
                                =========  =========  =========  =========
   Basic - average shares
    outstanding (I)               123,329    109,120    120,910    109,124
                                =========  =========  =========  =========
   Diluted - average shares
    outstanding (I)               123,727    109,670    121,594    109,714
                                =========  =========  =========  =========


                DEVELOPERS DIVERSIFIED REALTY CORPORATION

                           Financial Highlights
                  (In thousands - except per share data)


(A) Increases in base and percentage rental revenues for the nine-month
    period ended September 30, 2007, as compared to 2006, aggregated $89.7
    million consisting of $6.0 million related to leasing of core portfolio
    properties (an increase of 1.7% from 2006), $86.1 million from the
    acquisition of assets and the merger with IRRETI, $4.8 million related
    to developments and redevelopments and $1.1 million from an increase in
    occupancy at the business centers.  These amounts were offset by a
    decrease of $8.3 million due to the disposition of properties in 2006
    and 2007.  Included in the rental revenues for the nine-month periods
    ended September 30, 2007 and 2006, is approximately $9.4 million and
    $12.1 million, respectively, of revenue resulting from the recognition
    of straight-line rents.

(B) Other income for the three and nine month periods ended September 30,
    2007 and 2006 was comprised of the following (in millions):


                                 Three-Month Period     Nine-Month Period
                                 Ended September 30,   Ended September 30,
                                  2007       2006       2007       2006
                                ---------- ---------- ---------- ----------
Acquisition fees                $      0.1 $        - $      6.4 $        -
Lease termination fees                 1.4        0.9        4.9        7.2
Financings fees                        0.1          -        1.5        0.4
Other miscellaneous                    0.5        0.1        0.8        1.6
                                ---------- ---------- ---------- ----------
                                $      2.1 $      1.0 $     13.6 $      9.2
                                ========== ========== ========== ==========


(C) General and administrative expenses include internal leasing salaries,
    legal salaries and related expenses associated with the releasing of
    space, which are charged to operations as incurred.  For the nine-month
    periods ended September 30, 2007 and 2006, general and administrative
    expenses were approximately 4.6% and 5.0%, respectively, of total
    revenues, including joint venture revenues, respectively.  For the nine
    months ended September 30, 2007, the Company recorded a charge of
    approximately $4.1 million to general and administrative expense in
    connection with the former President's departure from the Company.
    Excluding this charge, general and administrative expenses were 4.3% of
    total revenues for the nine months ended September 30, 2007.  In
    addition, the Company incurred certain one time integration costs in
    connection with the IRRETI acquisition that have aggregated
    approximately $2.4 million for the nine-month period ended September
    30, 2007.

(D) Other income/expense primarily relates to abandoned acquisition and
    development project costs.  In 2006, the Company received proceeds of
    approximately $1.3 million from a litigation settlement.



                DEVELOPERS DIVERSIFIED REALTY CORPORATION
                           Financial Highlights
                  (In thousands - except per share data)


(E) The following is a summary of the combined operating results of the
    Company's joint ventures:


                                 Three-Month Period     Nine-Month Period
                                Ended September 30,   Ended September 30,
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ----------
Revenues from operations (a)    $ 230,935  $ 104,287  $ 577,877  $  306,994
                                ---------  ---------  ---------  ----------

Operating expense                  81,594     35,074    195,232     101,249
Depreciation and amortization
 of real estate investments        55,568     19,553    135,207      59,082
Interest expense                   80,884     35,885    192,974      93,787
                                ---------  ---------  ---------  ----------
                                  218,046     90,513    523,413     254,118
                                ---------  ---------  ---------  ----------
Income from operations before
 tax expense, gain on
 disposition of real estate and
 discontinued operations           12,889     13,774     54,464      52,876
Income tax expense                  4,545          -          -           -
(Loss) gain on disposition of
 real estate                         (103)       193     92,987         237
(Loss) income from discontinued
 operations, net of tax              (323)       (22)      (649)        805
Gain on disposition of
 discontinued operations, net
 of tax                             1,790     21,460      2,529      19,910
                                ---------  ---------  ---------  ----------
Net income                      $  18,798  $  35,405  $ 149,331  $   73,828
                                =========  =========  =========  ==========
DDR Ownership interests (b)     $   5,669  $  12,583  $  34,520  $   22,360
                                =========  =========  =========  ==========

FFO from joint ventures are
 summarized as follows:
   Net income                   $   18,798 $  35,405  $ 149,331  $  73,828
   Loss (gain) on disposition
    of real estate, including
    discontinued operations            103   (21,418)   (91,339)   (21,437)
   Depreciation and
    amortization of real estate
    investments                     55,702    19,795    135,539     60,510
                                ---------- ---------  ---------  ---------
                                $   74,603 $  33,782  $ 193,531  $ 112,901
                                ========== =========  =========  =========
   DDR Ownership interests (b)  $   17,602 $  13,682  $  62,475  $  32,963
                                ========== =========  =========  =========
   DDR Partnership distributions
    received, net (c)           $   14,088 $  23,686  $  79,782  $  43,366
                                ========== =========  =========  =========


    (a) Revenues for the three-month periods ended September 30, 2007 and
        2006 included approximately $2.3 million and $1.4 million,
        respectively, resulting from the recognition of straight-line rents
        of which the Company's proportionate share is $0.3 million and $0.2
        million, respectively.  Revenues for the nine-month periods ended
        September 30, 2007 and 2006 included approximately $6.6 million and
        $3.9 million, respectively, resulting from the recognition of
        straight-line rents of which the Company's proportionate share is
        $1.0 million and $0.7 million, respectively.

    (b) The Company's share of joint venture net income decreased by $0.2
        million and increased by $0.2 million for the three-month periods
        ended September 30, 2007 and 2006, respectively.  The Company's
        share of joint venture net income decreased by $0.6 million and
        increased by $0.5 million for the nine-month periods ended
        September 30, 2007 and 2006, respectively. These adjustments
        reflect basis differences impacting amortization and depreciation
        and gain on dispositions.  During the nine-month period ended
        September 30, 2007, the Company received $14.3 million of promoted
        income, of which $13.6 million related to the sale of assets from
        the DDR Markaz Joint Venture which is included in the Company's
        proportionate share of net income and FFO.

        At September 30, 2007 and 2006, the Company owned joint venture
        interests, excluding consolidated joint ventures, in 273 and 108
        shopping center properties, respectively.  In addition, at
        September 30, 2007 and 2006, the Company owned 44 and 51 shopping
        center sites formerly owned by Service Merchandise, respectively,
        through its 20% owned joint venture with Coventry II.

    (c) Distributions may include funds received from asset sales and
        refinancings in addition to ongoing operating distributions.




                DEVELOPERS DIVERSIFIED REALTY CORPORATION
                           Financial Highlights
                  (In thousands - except per share data)



(F) Minority equity interests are comprised of the following:


                                 Three-Month Period     Nine-Month Period
                                 Ended September 30,   Ended September 30,
                                  2007       2006       2007       2006
                                ---------- ---------- ---------- ----------
Minority interests              $    1,405 $    1,749 $    4,293 $    4,903
Operating partnership units            569        534      1,706      1,601
Preferred operating partnership
 units                                   -          -      9,690          -
                                ---------- ---------- ---------- ----------
                                $    1,974 $    2,283 $   15,689 $    6,504
                                ========== ========== ========== ==========


    The preferred operating partnership units were redeemed in June 2007.

(G) During the first quarter of 2007, the Company released to income
    approximately $15.0 million of previously established valuation
    allowances against certain deferred tax assets as management had
    determined, due to several factors, that it is more likely than not
    that the deferred tax asset will be realized. The release was primarily
    due to the Company's increased use of its taxable REIT subsidiaries
    relating to its merchant building program.

(H) The operating results relating to assets classified as discontinued
    operations are summarized as follows:



                                 Three-Month Period     Nine-Month Period
                                 Ended September 30,   Ended September 30,
                                   2007       2006       2007       2006
                                ---------  ---------- ---------- ----------
Revenues                        $   1,345  $   12,306 $   28,060 $   37,211
                                ---------  ---------- ---------- ----------

Expenses:
   Operating                        1,101       3,453      7,938      9,800
   Interest, net                      325       3,319      6,801     10,051
   Depreciation                       210       2,882      5,103      8,772
                                ---------  ---------- ---------- ----------
     Total expenses                 1,636       9,654     19,842     28,623
                                ---------  ---------- ---------- ----------
   Income before (loss) gain on
     disposition of real estate      (291)      2,652      8,218      8,588

   (Loss) gain on disposition
    of real estate                   (310)      3,169     13,323      3,169
                                ---------  ---------- ---------- ----------
     Net (loss) income          $    (601) $    5,821 $   21,541 $   11,757
                                ---------  ---------- ---------- ----------

(I) For purposes of computing FFO per share (basic), the weighted average
    shares outstanding were adjusted to reflect the conversion of
    approximately 0.9 million of Operating Partnership Units (OP Units)
    outstanding at September 30, 2007 and 2006, into 0.9 million common
    shares of the Company for both of the three-month periods ended
    September 30, 2007 and 2006, and 0.9 million and 1.0 million for the
    nine-month periods ended September 30, 2007 and 2006, respectively, on
    the weighted average basis.  The weighted average diluted shares and OP
    Units outstanding, for purposes of computing FFO, were approximately
    125.1 million and 110.8 million for the three-month periods ended
    September 30, 2007 and 2006, respectively, and 122.8 and 111.0 million
    for the nine-month periods ended September 30, 2007 and 2006,
    respectively.


                DEVELOPERS DIVERSIFIED REALTY CORPORATION
                           Financial Highlights
                              (In thousands)



Selected Balance Sheet Data:
                                              September 30,  December 31,
                                                2007  (A)      2006  (A)
                                              -------------  -------------
Assets:
Real estate and rental property:
   Land                                       $   2,083,569  $   1,768,702
   Buildings                                      5,899,244      5,023,665
   Fixtures and tenant improvements                 236,167        196,275
   Construction in progress                         583,235        453,493
                                              -------------  -------------
                                                  8,802,215      7,442,135
Less accumulated depreciation                      (973,316)      (861,266)
                                              -------------  -------------
Real estate, net                                  7,828,899      6,580,869

Cash                                                 49,700         28,378
Investments in and advances to joint ventures       644,318        291,685
Notes receivable                                     16,778         18,161
Receivables, including straight-line rent,
 net                                                204,725        152,161
Assets held for sale                                      -          5,324
Other assets, net                                   168,847        103,175
                                              -------------  -------------
                                              $   8,913,267  $   7,179,753
                                              =============  =============

Liabilities:
Indebtedness:
   Revolving credit facilities                $     625,000  $     297,500
   Unsecured debt                                 2,624,003      2,218,020
   Mortgage and other secured debt                1,955,143      1,733,292
                                              -------------  -------------
                                                  5,204,146      4,248,812
   Dividends payable                                 88,052         71,269
   Other liabilities                                297,089        241,556
                                              -------------  -------------
                                                  5,589,287      4,561,637
Minority interests                                  115,708        121,933
Shareholders' equity                              3,208,272      2,496,183
                                              -------------  -------------
                                              $   8,913,267  $   7,179,753
                                              =============  =============

(A) Amounts include the consolidation of Mervyns, a 50% owned joint
    venture, which includes $405.8 million of real estate assets at
    September 30, 2007 and December 31, 2006, $258.5 million of mortgage
    debt at September 30, 2007 and December 31, 2006, and $75.3 million
    and $77.6 million of minority interest at September 30, 2007 and
    December 31, 2006, respectively.


                DEVELOPERS DIVERSIFIED REALTY CORPORATION
                           Financial Highlights
                              (in thousands)


Selected Balance Sheet Data (Continued):

Combined condensed balance sheets relating to the Company's joint ventures
are as follows:

                                              September 30,  December 31,
                                                  2007           2006
                                              -------------  -------------

Land                                          $   2,373,760  $     933,916
Buildings                                         6,234,496      2,788,863
Fixtures and tenant improvements                    107,653         59,166
Construction in progress                            139,153        157,762
                                              -------------  -------------
                                                  8,855,062      3,939,707
Accumulated depreciation                           (363,102)      (247,012)
                                              -------------  -------------
Real estate, net                                  8,491,960      3,692,695
Receivables, including straight-line rent,
 net                                                123,866         75,024
Leasehold interests                                  14,313         15,195
Other assets                                        388,030        132,984
                                              -------------  -------------
                                              $   9,018,169  $   3,915,898
                                              =============  =============

Mortgage debt (a)                             $   5,525,724  $   2,495,080
Notes and accrued interest payable to DDR             8,811          4,960
Other liabilities                                   199,211         94,648
                                              -------------  -------------
                                                  5,733,746      2,594,688
   Accumulated equity                             3,284,423      1,321,210
                                              -------------  -------------
                                              $   9,018,169  $   3,915,898
                                              =============  =============

(a)  The Company's proportionate share of joint venture debt aggregated
     approximately $1,029.3 million and $525.6 million at September 30,
     2007 and December 31, 2006, respectively.

Contact Information

  • Contact:
    Scott A. Wolstein
    Chairman and Chief Executive Officer
    216-755-5500

    Michelle M. Dawson
    Vice President of Investor Relations
    216-755-5455