SOURCE: Developers Diversified Realty

February 13, 2006 18:11 ET

Developers Diversified Realty Reports an 8.8% Increase in FFO per Share for the Year Ended December 31, 2005

CLEVELAND, OH -- (MARKET WIRE) -- February 13, 2006 -- Developers Diversified Realty Corporation (NYSE: DDR), a real estate investment trust ("REIT"), today announced that fourth quarter 2005 Funds From Operations ("FFO"), a widely accepted measure of REIT performance, on a per share basis was $0.74 (diluted and basic) as compared to $0.69 (diluted) and $0.70 (basic) per share for the same period in the previous year, an increase of 7.2% diluted and 5.7% basic. FFO available to common shareholders was $81.7 million for the quarter ended December 31, 2005, as compared to $73.0 million for the fourth quarter of 2004, an increase of 11.9%. Net income available to common shareholders for the three month period ended December 31, 2005 decreased 52.6% to $35.1 million or $0.32 per share (diluted and basic) compared to fourth quarter 2004 net income of $74.1 million, or $0.71 per share (diluted) and $0.72 per share (basic). The decrease in net income for the quarter ended December 31, 2005 is primarily related to a decrease in gain on sales of real estate assets and discontinued operations, of $43 million of which $37 million is excluded from the computation of FFO.

On a per share basis, FFO (diluted) was $3.21 and $2.95 for the years ended December 31, 2005 and 2004, respectively, an increase of 8.8%. FFO available to common shareholders for the year ended December 31, 2005 was $355.1 million compared to FFO available to common shareholders for the year ended December 31, 2004 of $292.3 million. Net income available to common shareholders for the twelve month period ended December 31, 2005 was $227.5 million, or $2.08 per share (diluted) and $2.10 (basic) in 2005, compared to net income available to common shareholders of $219.1 million, or $2.24 per share (diluted) and $2.27 (basic) for 2004.

Scott Wolstein, DDR's Chairman and Chief Executive Officer, stated, "I'm pleased to report this quarter's earnings, which reflect outstanding tenant demand for space in our community center portfolio and strong portfolio fundamentals, as well as a strong balance sheet position, with significant cashflow liquidity and financial flexibility. Our year-end results reflect the growing strength of our asset class and successful execution of a focused and disciplined capital recycling strategy. We sold nearly $600 million in assets, which helped generate the capital needed to fund our development pipeline and expand our footprint into Puerto Rico and the Western U.S. through key portfolio acquisitions from Caribbean Property Group and Mervyns."

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 sales of depreciable real estate property, except for those sold through the Company's merchant building program, which are presented net of taxes, (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:

Leasing activity continues to be strong throughout the portfolio. During the fourth quarter of 2005, the Company executed 101 new leases aggregating approximately 740,000 square feet and 182 renewals aggregating approximately 674,000 square feet. Rental rates on new leases increased by 29.2% to $14.35 per square foot and rental rates on renewals increased by 9.4% to $12.87 per square foot as compared to previously occupied rental rates. On a blended basis, rental rates for new leases and renewals increased by 14.2% to $13.56 per square foot. At December 31, 2005, the average annualized base rent per occupied square foot, including those properties owned through joint ventures, was $11.30.

At December 31, 2005, the portfolio, including those properties owned through joint ventures, was 96.4% leased. Excluding the impact of the properties acquired from Benderson Development, Caribbean Property Group and Mervyns, the portfolio was also 96.4% leased, as compared to 95.4% at December 31, 2004. These percentages include tenants for which signed leases have been executed and occupancy has not occurred. Based on tenants in place and responsible for paying rent as of December 31, 2005, the portfolio was 95.3% occupied. Excluding the impact of the properties acquired from Benderson Development, Caribbean Property Group and Mervyns, the portfolio was 95.1% occupied, as compared to 94.6% at December 31, 2004.

Same store Net Operating Income ("NOI") relating to Core Portfolio Properties (i.e., shopping center properties owned since January 1, 2004, including those owned through joint ventures and excluding properties under redevelopment) increased approximately $8.5 million (or 2.2%) for the year ended December 31, 2005.

Strategic Real Estate Transactions:

Mervyns Stores

In mid September 2005, the Company formed a joint venture (the "Mervyns Joint Venture") with Macquarie DDR Trust ("MDT"), which acquired the underlying real estate of 36 operating Mervyns stores. The Mervyns Joint Venture is owned 50% by the Company and 50% by MDT. However, the assets, liabilities and operating results are consolidated within the DDR accounts in accordance with FIN 46. The Mervyns Joint Venture acquired one additional asset in the fourth quarter of 2005 for approximately $20.7 million and the final asset was acquired by the joint venture for approximately $11.0 million in January 2006.

Expansions:

During the year ended December 31, 2005, the Company completed nine expansions and redevelopment projects located in Hoover, Alabama; Tallahassee, Florida; Suwanee, Georgia; Princeton, New Jersey; Hendersonville, North Carolina; Allentown, Pennsylvania; Erie, Pennsylvania; Bayamon, Puerto Rico and Johnson City, Tennessee at an aggregate cost of $41.6 million. The Company is currently expanding/redeveloping eight shopping centers located in Gadsden, Alabama; Ocala, Florida; Stockbridge, Georgia; Ottumwa, Iowa; Gaylord, Michigan; Rome, New York; Mooresville, North Carolina and Bayamon, Puerto Rico at a projected incremental cost of approximately $38.5 million. The Company is also scheduled to commence construction on an additional expansion and redevelopment project at its shopping center located in Amherst, New York.

During the year ended December 31, 2005, two of the Company's joint ventures completed expansion/redevelopment projects at their shopping centers located in St. Petersburg, Florida and Merriam, Kansas at an aggregate cost of $9.3 million. Three of the Company's joint ventures are currently expanding/redeveloping their shopping centers located in Phoenix, Arizona; Lancaster, California and Kansas City, Missouri at a projected incremental cost of approximately $57.4 million. Two of the Company's joint ventures are also scheduled to commence additional expansion/redevelopment projects at their shopping centers located in Deer Park, Illinois and Kirkland, Washington.

Development (Consolidated):

During the year ended December 31, 2005, the Company substantially completed the construction of four shopping center projects located in Overland Park, Kansas; Lansing, Michigan; Freehold, New Jersey and Mt. Laurel, New Jersey. Many of these tenants are open and operating.

The Company currently has eight shopping center projects under construction. These projects are located in Miami, Florida; Nampa, Idaho; McHenry, Illinois; Chesterfield, Michigan; Horseheads, New York; Apex, North Carolina (Beaver Creek Crossings -- Phase I); Pittsburgh, Pennsylvania and San Antonio, Texas. These projects are scheduled for completion during 2006 through 2007 at a projected aggregate cost of approximately $428.6 million and will create an additional 4.1 million square feet of retail space. At December 31, 2005, approximately $178.3 million of costs were incurred in relation to these development projects.

The Company anticipates commencing construction in early 2006 on four additional shopping centers located in Homestead, Florida; Norwood, Massachusetts; Seabrook, New Hampshire and McKinney, Texas.

Development (Joint Ventures):

The Company has joint venture development agreements for four shopping center projects. These projects have an aggregate projected cost of approximately $119.3 million. These projects are located in Merriam, Kansas; Jefferson County (St. Louis), Missouri; Apex, North Carolina (Beaver Creek Crossings -- Phase II, adjacent to a wholly-owned development project) and San Antonio, Texas. The projects located in Merriam, Kansas and San Antonio, Texas are being developed through the Coventry II program. The project located in San Antonio, Texas was substantially completed during 2005 and a portion of the project located in Jefferson County (St. Louis), Missouri has been substantially completed. The remaining projects are scheduled for completion during 2007. At December 31, 2005, approximately $60.7 million of costs were incurred in relation to these development projects.

Dispositions:

In the fourth quarter of 2005, the Company sold three shopping center properties aggregating 0.1 million square feet for approximately $18.8 million and recognized a non-FFO gain of approximately $2.7 million.

In December 2005, one of the Company's joint ventures with Coventry Real Estate Partners sold a 0.3 million square foot shopping center in San Ysidro, California for approximately $42.5 million. The joint venture recognized an aggregate gain of approximately $9.1 million. In conjunction with this transaction, the Company recognized a contribution to FFO of $1.9 million, as the Company considers this sale part of its merchant build program due to the recent redevelopment of this former factory outlet center, which is reflected through its equity in earnings of joint ventures.

Financings:

In October 2005, the Company issued $350 million of seven-year senior unsecured notes. The 5.375% notes are due on October 15, 2012 and were offered at 99.52% of par. The notes are redeemable prior to maturity at par value plus a make-whole premium. If the notes are redeemed within 90 days of the maturity date, no make-whole premium will be paid. The effective interest rate, after taking into account the treasury rate locks that were previously entered into by the Company, will adjust the seven-year rate to an effective rate of 5.1%. Proceeds from the offering were used for general corporate purposes, including repayment of floating rate debt on the Company's revolving credit facilities.

Developers Diversified Realty Corporation currently owns and manages approximately 500 retail operating and development properties in 44 states, plus Puerto Rico, comprising approximately 113 million square feet of real estate. DDR 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 Website 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, 2004.


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

                               Three Month Period         Year Ended
                               Ended December 31,         December 31,
                               2005        2004        2005        2004
                            ----------  ----------  ----------  ----------
Revenues:
  Minimum rents (A)         $  137,805  $  113,131  $  512,206  $  407,700
  Percentage and
   overage rents (A)             5,417       2,916      10,299       7,572
  Recoveries from tenants       43,227      33,749     158,076     116,975
  Ancillary income               2,960       1,007       9,548       3,162
  Other property related
   income                          894         879       4,888       4,147
  Management fee income          5,681       4,162      19,657      14,626
  Development fees               1,289         587       3,202       2,311
  Other (B)                      1,174         931       9,300      13,081
                            ----------  ----------  ----------  ----------
                               198,447     157,362     727,176     569,574
                            ----------  ----------  ----------  ----------
 Expenses:
  Operating and maintenance     28,402      20,812      98,549      64,742
  Real estate taxes             23,284      20,441      85,592      73,601
  General and
   administrative (C)           13,860      14,145      54,048      47,126
  Depreciation and
   amortization                 47,829      35,748     164,868     124,175
                            ----------  ----------  ----------  ----------
                               113,375      91,146     403,057     309,644
                            ----------  ----------  ----------  ----------
Other income (expense):
  Interest income                3,686       1,065      10,078       4,233
  Interest expense             (50,845)    (36,172)   (182,279)   (124,543)
  Other expense (D)                 (7)       (320)     (2,532)     (1,779)
                            ----------  ----------  ----------  ----------
                               (47,166)    (35,427)   (174,733)   (122,089)
                            ----------  ----------  ----------  ----------
Income before equity in net
 income of joint ventures,
 minority equity interests,
 income tax of taxable REIT
 subsidiaries and franchise
 taxes, discontinued
 operations, gain on sales
 of real estate and
 cumulative effect of
 adoption of a new
 accounting standard            37,906      30,789     149,386     137,841
Equity in net income of
 joint ventures (E)              8,890      10,409      34,873      40,895
Minority equity interests (F)   (2,677)     (1,727)     (7,881)     (5,064)
Income tax benefit (expense)
 of taxable REIT
 subsidiaries and franchise
 taxes                             213         789        (342)     (1,469)
                            ----------  ----------  ----------  ----------
Income from continuing
 operations                     44,332      40,260     176,036     172,203
Income from discontinued
 operations (G)                  2,455       9,438      18,467      15,918
                            ----------  ----------  ----------  ----------
Income before gain on sales
 of real estate and
 cumulative effect of
 adoption of a new
 accounting standard            46,787      49,698     194,503     188,121
Gain on sales of real
 estate, net of tax              2,075      38,150      88,140      84,642
                            ----------  ----------  ----------  ----------
Income before cumulative
 effect of adoption of a
 new accounting standard        48,862      87,848     282,643     272,763
Cumulative effect of
 adoption of a new
 accounting standard (H)             -           -           -      (3,001)
                            ----------  ----------  ----------  ----------
Net income                  $   48,862  $   87,848  $  282,643  $  269,762
                            ==========  ==========  ==========  ==========
Net income, applicable to
 common shareholders        $   35,070  $   74,055  $  227,474  $  219,056
                            ==========  ==========  ==========  ==========
Funds From
 Operations ("FFO"):
  Net income applicable to
   common shareholders      $   35,070  $   74,055  $  227,474  $  219,056
  Depreciation and
   amortization of real
   estate investments           46,610      37,647     169,117     130,536
  Equity in net income of
   joint ventures (E)           (8,890)    (10,409)    (34,873)    (40,895)
  Joint ventures' FFO (E)       11,864      11,824      49,302      46,209
  Minority equity interests
   (OP Units) (F)                  729         691       2,916       2,607
  Gain on sales of
   depreciable real
   estate, net                  (3,671)    (40,778)    (58,834)    (68,179)
  Cumulative effect of
   adoption of a new
   accounting standard (H)           -           -           -       3,001
                            ----------  ----------  ----------  ----------
  FFO available to common
   shareholders                 81,712      73,030     355,102     292,335
  Preferred dividends           13,792      13,793      55,169      50,706
                            ----------  ----------  ----------  ----------
  FFO                       $   95,504  $   86,823  $  410,271  $  343,041
                            ==========  ==========  ==========  ==========
  Per share data:
   Earnings per common share
     Basic                  $     0.32  $     0.72  $     2.10  $     2.27
                            ==========  ==========  ==========  ==========
     Diluted                $     0.32  $     0.71  $     2.08  $     2.24
                            ==========  ==========  ==========  ==========
  Dividends Declared        $     0.54  $     0.51  $     2.16  $     1.94
                            ==========  ==========  ==========  ==========
  Funds From
   Operations - Basic (I)   $     0.74  $     0.70  $     3.23  $     2.98
                            ==========  ==========  ==========  ==========
  Funds From
   Operations - Diluted (I) $     0.74  $     0.69  $     3.21  $     2.95
                            ==========  ==========  ==========  ==========
  Basic - average shares
   outstanding
   (thousands) (I)             108,523     102,979     108,310      96,638
                            ==========  ==========  ==========  ==========
  Diluted - average shares
   outstanding
   (thousands) (I)             109,168     105,264     109,142      99,024
                            ==========  ==========  ==========  ==========

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

(A) Increases in base and percentage rental revenues for the twelve month
    period ended December 31, 2005 as compared to 2004, aggregated $100.2
    million consisting of $4.9 million related to leasing of core portfolio
    properties (an increase of 1.9% from 2004), $132.7 million from the
    acquisition of assets and $9.8 million related to developments and
    redevelopments.  These amounts were offset by a decrease of $2.6
    million related to the Company’s remaining seven business center
    properties and $44.6 million due to the sale of properties in 2004 and
    2005 to joint ventures.  Included in the rental revenues for the twelve
    month periods ended December 31, 2005 and 2004 is approximately $14.4
    million and $7.4 million, respectively, of revenue resulting from the
    recognition of straight line rents.

(B) Other income for the three and twelve month periods ended December 31,
    2005 and 2004 was comprised of the following (in millions):

                                  Three Month Period   Twelve Month Period
                                   Ended December 31,    Ended December 31,
                                    2005      2004        2005      2004
                                    ----      ----        ----      ----
    Lease termination fees and
     bankruptcy settlements       $    0.8  $    0.7   $    5.9  $    9.8
    Financing fees                     0.1         -        2.4       3.0
    Other miscellaneous                0.3       0.2        1.0       0.3
                                  --------  --------   --------  --------
                                  $    1.2  $    0.9   $    9.3  $   13.1
                                  ========  ========   ========  ========

(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 twelve
    month periods ended December 31, 2005 and 2004, general and
    administrative expenses were approximately 4.6% and 4.9%, respectively,
    of total revenues, including joint venture revenues, for each period.

(D) Other expense is comprised of abandoned acquisition and development
    project costs and certain litigation costs.  In  2005, the Company
    incurred certain litigation costs of $1.6 million.

(E) The following is a summary of the Company's share of the combined
    operating results relating to its joint ventures (in thousands):

                                  Three Month Period   Twelve Month Period
                                   Ended December 31,   Ended December 31,
                                    2005      2004       2005      2004
                                    ----      ----       ----      ----
Revenues from operations (a)      $112,467  $ 93,553   $428,587  $324,497
                                  --------  --------   --------  --------
Operating expense                   42,234    32,419    152,664   111,313
Depreciation and amortization
 of real estate investments         21,815    26,303     84,737    64,079
Interest expense                    31,091    22,720    117,058    76,994
                                  --------  --------   --------  --------
                                    95,140    81,442    354,459   252,386
                                  --------  --------   --------  --------
Income from operations before gain
 on sales of real estate and
 discontinued operations            17,327    12,111     74,128    72,111
Gain (loss) on sales of real estate     60       (38)       858     4,787
(Loss) income from discontinued
 operations, net of tax               (905)    1,379     (1,382)    2,269
Gain on sales of discontinued
 operations, net of tax             13,527    14,727     48,982    39,612
                                  --------  --------   --------  --------
Net income                        $ 30,009  $ 28,179   $122,586  $118,779
                                  ========  ========   ========  ========
DDR Ownership interests (b)       $  8,775  $ 10,667   $ 36,828  $ 42,150
                                  ========  ========   ========  ========

Funds From Operations from joint
 ventures are summarized as follows:
    Net income                    $ 30,009  $ 28,179   $122,586  $118,779
    Gain on sales of real estate,
     including discontinued
     operations                     (6,287)  (13,577)   (19,014)  (37,866)
    Depreciation and amortization
     of real estate investments     22,029    27,891     87,508    68,456
                                  --------  --------   --------  --------
                                  $ 45,751  $ 42,493   $191,080  $149,369
                                  ========  ========   ========  ========
 DDRC Ownership interests (b)     $ 11,864  $ 11,824   $ 49,302  $ 46,209
                                  ========  ========   ========  ========
 DDRC Partnership distributions
  received, net (c)               $ 12,927  $ 15,585   $126,647  $ 77,505
                                  ========  ========   ========  ========

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

    (a)  Revenues for the three month periods ended December 31, 2005 and
         2004 included approximately $1.1 million and $2.0 million,
         respectively, resulting from the recognition of straight line
         rents of which the Company's proportionate share is $0.1 million
         and $0.4 million, respectively.  Revenues for the twelve month
         periods ended December 31, 2005 and 2004 included approximately
         $6.6 million and $6.5 million, respectively, resulting from the
         recognition of straight line rents of which the Company's
         proportionate share is $1.1 and $1.4 million, respectively.

    (b)  Included in the Company’s equity in net income and FFO from joint
         ventures for the twelve months ended December 31, 2004, is
         approximately $3.2 million of gain related to the sale of a joint
         venture property at the end of 2003.  This amount was recorded as
         a gain at the joint venture level in 2003 but was deferred by DDR
         until certain construction and leasing obligations were achieved.

         The Company's share of joint venture net income has been reduced
         by $0.3 million for the three month period ended December 31,
         2004, and by $2.1 million and $1.3 million for the twelve month
         periods ended December 31, 2005 and 2004, respectively, to reflect
         additional basis depreciation and adjustments to gain on sales.

         At December 31, 2005 and 2004, the Company owned joint venture
         interests, excluding consolidated joint ventures, relating to 110
         and 103 shopping center properties, respectively.  In addition, at
         December 31, 2005 and 2004, respectively, the Company, through a
         joint venture, owned an interest of approximately 25% in 53 and 63
         shopping center sites formerly owned by Service Merchandise,
         respectively.

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

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

                                  Three Month Period   Twelve Month Period
                                   Ended December 31,   Ended December 31,
                                    2005      2004       2005      2004
                                    ----      ----       ----      ----
Minority interests                $  1,948  $  1,036   $  4,965  $  2,457
Operating partnership units            729       691      2,916     2,607
                                  --------  --------   --------  --------
                                  $  2,677   $ 1,727   $  7,881  $  5,064
                                  ========  ========   ========  ========

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

                                  Three Month Period   Twelve Month Period
                                  Ended December 31,    Ended December 31,
                                    2005      2004       2005      2004
                                    ----      ----       ----      ----
Revenues                          $    249  $  8,185   $ 21,395  $ 35,672
                                  --------  --------   --------  --------

Expenses:
  Operating                            392     3,165      9,139    13,402
  Impairment charge                      -         -        642       586
  Interest, net                         39     1,384      3,914     5,902
  Depreciation                          51     2,147      5,833     8,472
  Minority interests                     3        (7)        67       (47)
                                  --------  --------   --------  --------
      Total expenses                   485     6,689     19,595    28,315
                                  --------  --------   --------  --------
  (Loss) income before gain on
   sales of real estate               (236)    1,496      1,800     7,357
  Gain on sales of real
   estate (1)                        2,691     7,942     16,667     8,561
                                  --------  --------   --------  --------
      Net income                  $  2,455  $  9,438   $ 18,467  $ 15,918
                                  ========  ========   ========  ========


    (1)  During 2005, the Company’s gain on sales of real estate was
         reduced by $1.9 million relating to debt prepayment costs
         incurred as a result of the sales transaction.  This debt
         prepayment has been accounted for as a cost of sale and neither
         the gross gain on sale nor the related costs of the sale have been
         included in FFO.

(H) The Company recorded a charge of $3.0 million in 2004 as a cumulative
    effect of adoption of a new accounting standard (FIN 46) attributable
    to the consolidation of the shopping center in Martinsville, Virginia.
    This amount represents the minority partner's share of cumulative
    losses in the partnership.

(I) For purposes of computing FFO per share (basic), the weighted average
    shares outstanding were adjusted to reflect the conversion of 1.3
    million Operating Partnership Units (OP Units) outstanding at December
    31, 2005 and 2004 into 1.3 million and 1.4 million common shares of the
    Company for the three month periods ended December 31, 2005 and 2004,
    respectively, and 1.3 million for each of the twelve month periods
    ended December 31, 2005 and 2004, on a weighted average basis.  The
    weighted average diluted shares and OP Units outstanding were 110.8
    million and 105.4 million for the three month periods ended December
    31, 2005 and 2004, respectively, and 110.7 million and 99.1 million
    for the twelve month periods ended December 31, 2005 and 2004,
    respectively.

                DEVELOPERS DIVERSIFIED REALTY CORPORATION
                          Financial Highlights
                             (In thousands)

Selected Balance Sheet Data:
                                  December 31, 2005(1)   December 31, 2004
                                  -----------------      -----------------
Assets:
Real estate and rental property:
   Land                                $ 1,721,321            $ 1,238,242
   Buildings                             4,806,373              3,998,972
   Fixtures and tenant
    improvements                           152,958                120,350
   Construction in progress                348,685                245,860
                                       -----------            -----------
                                         7,029,337              5,603,424
Less accumulated depreciation             (692,823)              (568,231)
                                       -----------            -----------
Real estate, net                         6,336,514              5,035,193

Cash                                        30,655                 49,871
Advances to and investments in
 joint ventures                            275,136 (2)            288,020
Notes receivable                            24,996                 17,823
Receivables, including straight
 line rent, net                            112,464                 84,843
Other assets, net                           83,212                107,797
                                       -----------            -----------
                                       $ 6,862,977            $ 5,583,547
                                       ===========            ===========

Liabilities:
Indebtedness:
   Revolving credit facilities         $   150,000            $    60,000
   Variable rate unsecured term debt       200,000                350,000
   Unsecured debt                        1,966,268              1,220,143
   Mortgage and other secured debt       1,574,733              1,088,547
                                       -----------            -----------
                                         3,891,001              2,718,690
   Dividends payable                        65,799                 62,089
   Other liabilities                       204,447                192,514
                                       -----------            -----------
                                         4,161,247              2,973,293
Minority interests                         131,449                 55,935
Shareholders' equity                     2,570,281              2,554,319
                                       -----------            -----------
                                       $ 6,862,977            $ 5,583,547
                                       ===========            ===========

(1)     Amounts include the consolidation of the Mervyns, 50% owned joint
        venture, formed in September 2005, which includes $394.7 million
        of real estate assets, $258.5 million of mortgage debt and $75.1
        million of minority interests.
(2)     Includes $91.6 million of advances to the Service Merchandise
        Joint Venture funded in the second quarter of 2005.

                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:

                                  December 31, 2005      December 31, 2004
                                  -----------------      -----------------

Land                                   $   894,477            $   798,852
Buildings                                2,480,025              2,298,424
Fixtures and tenant improvements            58,060                 42,922
Construction in progress                    37,550                 25,151
                                       -----------            -----------
                                         3,470,112              3,165,349
Accumulated depreciation                  (195,708)              (143,170)
                                       -----------            -----------
Real estate, net                         3,274,404              3,022,179
Receivables, including straight
 line rent, net                             76,744                 68,596
Leasehold interests                         23,297                 26,727
Other assets                               109,490                 96,264
                                       -----------            -----------
                                       $ 3,483,935            $ 3,213,766
                                       ===========            ===========

Mortgage debt (a)                      $ 2,173,401            $ 1,803,420
Notes and accrued interest payable
 to DDR                                    108,020                 20,616
Amounts payable to other partners                -                 46,161
Other liabilities                           78,406                 75,979
                                       -----------            -----------
                                         2,359,827              1,946,176
   Accumulated equity                    1,124,108              1,267,590
                                       -----------            -----------
                                       $ 3,483,935            $ 3,213,766
                                       ===========            ===========

(a)     The Company's proportionate share of joint venture debt aggregated
        approximately $510.5 million and $420.8 million at December 31,
        and December 31, 2004, respectively.

Contact Information

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

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