SOURCE: Developers Diversified Realty

October 27, 2005 17:31 ET

Developers Diversified Realty Reports FFO of $0.74 per Share for the Three Month Period Ended September 30, 2005

CLEVELAND, OH -- (MARKET WIRE) -- October 27, 2005 -- Developers Diversified Realty Corporation (NYSE: DDR), a real estate investment trust ("REIT"), today announced that third 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 $0.72 (diluted and basic) per share for the same period in the previous year, an increase of 2.8%. FFO available to common shareholders was $81.8 million for the quarter ended September 30, 2005, as compared to $74.9 million for the third quarter of 2004, an increase of 9.2%. Net income available to common shareholders for the three month period ended September 30, 2005 increased 52.4% to $46.5 million or $0.43 per share (diluted and basic) compared to third quarter 2004 net income of $30.5 million, or $0.30 per share (diluted and basic). The increase in net income for the quarter ended September 30, 2005 is primarily related to the acquisition of 15 properties from Caribbean Property Group ("CPG") in January 2005 and gain on sale of real estate assets.

On a per share basis, FFO (diluted) was $2.47 and $2.26 for the nine month periods ended September 30, 2005 and 2004, respectively, an increase of 9.3%. FFO available to common shareholders for the nine months ended September 30, 2005 was $273.4 million compared to FFO available to common shareholders for the nine month period ended September 30, 2004 of $219.3 million. Net income available to common shareholders for the nine month period ended September 30, 2005 was $192.4 million, or $1.76 per share (diluted) and $1.78 (basic) in 2005, compared to net income available to common shareholders of $145.0 million, or $1.52 per share (diluted) and $1.53 (basic) for the prior comparable period. The increase in net income is primarily attributable to an increase on gain on sales of real estate, primarily to the Company's MDT Joint Venture, the acquisition of assets from Benderson in May 2004 and the acquisition of 15 properties from CPG in January 2005.

Scott Wolstein, DDR's Chairman and Chief Executive Officer stated, "I am pleased to report this quarter's earnings which reflect the continued solid operating performance of our community center portfolio. In addition to our strong operating results, we have also improved our balance sheet by terming out our maturities, reducing our exposure to variable rate debt and creating a significant amount of liquidity and cash flow. As we continue to focus on our core competencies of leasing and developing retail real estate, I believe we are well positioned to capture future opportunities to further enhance our growth and capital structure."

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 third quarter of 2005, the Company executed 128 new leases aggregating approximately 770,000 square feet and 207 renewals aggregating approximately 745,000 square feet. Rental rates on new leases increased by 10.3% to $12.48 per square foot and rental rates on renewals increased by 11.0% to $14.06 per square foot as compared to previously occupied rental rates. On a blended basis, rental rates for new leases and renewals increased by 10.8% to $13.25 per square foot. At September 30, 2005, the average annualized base rent per occupied square foot, including those properties owned through joint ventures, was $11.22.

At September 30, 2005, the portfolio, including those properties owned through joint ventures, was 96.0% leased. Excluding the impact of the properties acquired from Benderson Development, Caribbean Property Group and Mervyn's, the portfolio was 95.7% leased, as compared to 95.4% at September 30, 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 September 30, 2005, the portfolio was 95.0% occupied. Excluding the impact of the properties acquired from Benderson Development, Caribbean Property Group and Mervyn's, the portfolio was 94.8% occupied, as compared to 94.5% at September 30, 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 $6.0 million (or 2.1%) for the nine months ended September 30, 2005.

Strategic Real Estate Transactions:

Mervyn's Stores

In mid September 2005, the Company formed a joint venture (the "Mervyn's Joint Venture") with Macquarie DDR Trust ("MDT"), which acquired the underlying real estate of 35 operating Mervyn's stores for approximately $375.5 million. The Mervyn's Joint Venture, owned 50% by the Company and 50% by MDT, obtained approximately $244.0 million of debt, of which $212.6 million is a five-year secured non-recourse financing at a fixed rate of approximately 5.2% and $31.4 million is at LIBOR plus 72 basis points for two years. The Company owns a 50% interest in the Mervyn's Joint Venture and is responsible for the day-to-day management of the assets and receives fees in accordance with the same fee schedule as the Company's other joint venture with MDT for property management. The Mervyn's Joint Venture is expected to acquire two additional assets in the fourth quarter of 2005. The Company funded its portion of the equity in the Mervyn's Joint Venture with the Company's primary revolving credit facility.

During the third quarter, the Company earned approximately $2.5 million of acquisition and financing fees from MDT. Pursuant to Financial Interpretation 46 ("FIN 46"), the Company is required to consolidate the Mervyn's Joint Venture and, therefore, the $2.5 million of fees earned are accounted for as reduction of basis in the real estate assets. As a result, these fees are eliminated in consolidation and not reflected in net income or FFO.

On September 30, 2005, the Company also purchased an additional Mervyn's site for the Company's wholly owned portfolio in a shopping center, currently owned by the Company, in Salt Lake City, Utah for approximately $14.4 million. The Company expects to purchase a second Mervyn's site in California for the Company's wholly owned portfolio in the fourth quarter of 2005.

Sale of Office and Industrial Assets

On September 30, 2005, the Company sold 25 office and industrial buildings aggregating approximately 3.2 million square feet for approximately $177.0 million, which includes a contingent purchase price of approximately $7.0 million in subordinated equity, based on the portfolio's subsequent performance, including proceeds from a potential disposition. The Company recorded a gain of approximately $5.3 million which does not include any contingent purchase price.

Expansions:

During the nine month period ended September 30, 2005, the Company completed five expansions and redevelopment projects located in Tallahassee, Florida; Suwanee, Georgia; Hendersonville, North Carolina; Allentown, Pennsylvania and Johnson City, Tennessee at an aggregate cost of $16.8 million. The Company is currently expanding/redeveloping twelve shopping centers located in Gadsden, Alabama; Hoover, Alabama; Ocala, Florida; Stockbridge, Georgia; Ottumwa, Iowa; Gaylord, Michigan; Princeton, New Jersey; Rome, New York; Mooresville, North Carolina; Erie, Pennsylvania and two projects in Bayamon, Puerto Rico, at a projected incremental cost of approximately $62.4 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 nine month period ended September 30, 2005, a joint venture of the Company completed the expansion of its shopping center located in Merriam, Kansas at an aggregate cost of $1.2 million. Four of the Company's joint ventures are currently expanding/redeveloping their shopping centers located in Phoenix, Arizona; Lancaster, California; St. Petersburg, Florida and Kansas City, Missouri at a projected incremental cost of approximately $61.0 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 nine month period ended September 30, 2005, the Company substantially completed the construction of three shopping center projects located in Overland Park, Kansas; Lansing, Michigan and Mt. Laurel, New Jersey.

The Company currently has seven shopping center projects under construction. These projects are located in Miami, Florida; Nampa, Idaho; Chesterfield, Michigan; Freehold, New Jersey; Apex, North Carolina (Beaver Creek Crossings - Phase I); Pittsburgh, Pennsylvania and San Antonio, Texas. These projects are scheduled for completion during 2005 through 2007 at a projected aggregate cost of approximately $349.7 million and will create an additional 3.4 million square feet of retail space. At September 30, 2005, approximately $152 million of costs were incurred in relation to these development projects.

The Company anticipates commencing construction in 2005 and early 2006 on six additional shopping centers located in Homested, Florida; McHenry, Illinois; Norwood, Massachusetts; Seabrook, New Hampshire; Horseheads, New York 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 $119.2 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. A portion of the project located in Jefferson County (St. Louis), Missouri has been substantially completed. The remaining projects are scheduled for completion during 2005 through 2007. At September 30, 2005, approximately $57.1 million of costs were incurred in relation to these development projects.

Dispositions:

In addition to the sale of business centers discussed above, in the third quarter of 2005, the Company sold five shopping center properties aggregating 0.4 million square feet for approximately $12.8 million and recognized a non-FFO gain of approximately $5.7 million. The Company sold several out parcels during the third quarter and recognized a gain of approximately $1.3 million from these sales.

In August 2005, one of the Company's joint ventures with Coventry Real Estate Partners sold a 283,000 square foot shopping center in Long Beach, California for approximately $75.6 million. The joint venture recorded an aggregate gain of $20.2 million. In conjunction with this transaction, the Company recognized a contribution to FFO of $3.7 million through its investment in the joint venture.

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. After taking into account the above transaction the Company's total floating rate debt was approximately 20% of total consolidated debt at September 30, 2005.

In July 2005, the Company's Community Centers V and VII joint ventures closed on several loans aggregating $298.0 million of which $280.0 million bears a fixed rate of 5.295% for five years and the remaining $18.0 million bears a floating rate of LIBOR plus 2.0% for two years. The loan proceeds were used to repay existing debt of approximately $167.0 million, with a weighted average interest rate of 6.5%. The additional $131 million was remitted to DDR, of which $65.2 million related to the repayment of an advance made to certain joint venture partners in the Community Centers V and VII joint ventures in April 2005.

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   Nine Month Period
                                   Ended September 30,  Ended September 30,
                                      2005      2004      2005      2004
Revenues:                           --------  --------  --------  --------
   Minimum rents (A)                $126,863  $115,682  $375,563  $295,698
   Percentage and overage rents (A)    1,335     1,565     4,915     4,657
   Recoveries from tenants            39,527    30,896   115,233    83,605
   Ancillary income                    2,797       857     6,601     2,161
   Other property related income       1,333     1,257     3,998     3,276
   Management fee income               4,701     3,761    13,976    10,463
   Development fees                      745       930     1,913     1,724
   Other (B)                           3,771     2,184     8,126    12,151
                                    --------  --------  --------  --------
                                     181,072   157,132   530,325   413,735
                                    --------  --------  --------  --------
Expenses:
   Operating and maintenance          22,989    15,779    70,400    44,207
   Real estate taxes                  21,808    20,556    62,585    53,427
   General and administrative (C)     14,146    11,486    40,188    32,980
   Depreciation and amortization      39,965    35,584   117,321    88,679
                                    --------  --------  --------  --------
                                      98,908    83,405   290,494   219,293
                                    --------  --------  --------  --------
Other income (expense):
   Interest income                     2,959       811     6,392     3,168
   Interest expense                  (46,942)  (35,789) (131,683)  (88,597)
   Other expense (D)                    (660)   (1,427)   (2,526)   (1,460)
                                    --------  --------  --------  --------
                                     (44,643)  (36,405) (127,817)  (86,889)
                                    --------  --------  --------  --------
Income before equity in net income
 of joint ventures, minority equity
 interests, income tax of taxable
 REIT subsidiaries, discontinued
 operations, gain on sales of real
 estate and cumulative effect of
 adoption of a new accounting
 standard                             37,521    37,322   112,014   107,553
Equity in net income of joint
 ventures (E)                         11,418     5,322    25,984    30,486
Minority equity interests (F)         (2,605)   (1,199)   (5,204)   (3,338)
Income benefit (tax) of taxable REIT
 subsidiaries and franchise taxes         10      (881)     (555)   (2,257)
                                    --------  --------  --------  --------
Income from continuing operations     46,344    40,564   132,239   132,444
Income from discontinued
 operations (G)                       11,402     2,637    15,478     5,979
                                    --------  --------  --------  --------
Income before gain on sales of real
 estate and cumulative effect of
 adoption of a new accounting
 standard                             57,746    43,201   147,717   138,423
Gain on sales of real estate, net
 of tax                                2,531     1,115    86,065    46,492
                                    --------  --------  --------  --------
Income before cumulative effect of
 adoption of a new accounting
 standard                             60,277    44,316   233,782   184,915
Cumulative effect of adoption of
 a new accounting standard (H)             -         -         -    (3,001)
                                    --------  --------  --------  --------
Net income                          $ 60,277  $ 44,316  $233,782   181,914
                                    ========  ========  ========  ========
Net income, applicable to common
 shareholders                       $ 46,485  $ 30,524  $192,405   145,000
                                    ========  ========  ========  ========
Funds From Operations ("FFO"):
   Net income applicable to common
    shareholders                    $ 46,485  $ 30,524  $192,405  $145,000
   Depreciation and amortization of
    real estate investments           42,172    36,925   122,506    92,890
   Equity in net income of joint
    ventures (E)                     (11,418)   (5,322)  (25,984)  (30,486)
   Joint ventures' FFO (E)            15,358    10,642    37,438    34,384
   Minority equity interests
    (OP Units) (F)                       729       719     2,187     1,916
   (Gain) loss on sales of
    depreciable real estate, net     (11,543)    1,399   (55,162)  (27,400)
   Cumulative effect of adoption of
    a new accounting standard (H)          -         -         -     3,001
                                    --------  --------  --------  --------
   FFO available to common
    shareholders                      81,783    74,887   273,390   219,305
   Preferred dividends                13,792    13,792    41,377    36,914
                                    --------  --------  --------  --------
   FFO                              $ 95,575  $ 88,679  $314,767  $256,219
                                    ========  ========  ========  ========
   Per share data:
      Earnings per common share
         Basic                      $   0.43  $   0.30  $   1.78  $   1.53
                                    ========  ========  ========  ========
         Diluted                    $   0.43  $   0.30  $   1.76  $   1.52
                                    ========  ========  ========  ========
   Dividends Declared               $   0.54  $   0.51  $   1.62  $   1.43
                                    ========  ========  ========  ========
   Funds From Operations -
    Basic (I)                       $   0.74  $   0.72  $   2.49  $   2.28
                                    ========  ========  ========  ========
   Funds From Operations -
    Diluted (I)                     $   0.74  $   0.72  $   2.47  $   2.26
                                    ========  ========  ========  ========
   Basic - average shares
    outstanding (thousands) (I)      108,431   102,079   108,239    94,509
                                    ========  ========  ========  ========
   Diluted - average shares
    outstanding (thousands) (I)      109,211   103,030   110,453    96,921
                                    ========  ========  ========  ========



                 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, 2005 as compared to 2004, aggregated $76.3
    million consisting of $4.5 million related to leasing of core
    portfolio properties (an increase of 2.3% from 2004), $100.7 million
    from the acquisition of assets, and $5.4 million related to
    developments and redevelopments. These amounts were offset by a
    decrease of $1.6 million relating to the Company's remaining seven
    business center properties and $32.7 million due to the sale of
    properties to joint ventures in 2004 and 2005. Included in the rental
    revenues for the nine month period ended September 30, 2005 and 2004
    is approximately $9.0 million and $5.3 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,
    2005 and 2004 was comprised of the following (in millions):

                                 Three Month Period    Nine Month Period
                                 Ended September 30,   Ended September 30,
                                  2005        2004      2005        2004
                                 ------      ------    ------      ------

     Lease termination fees and
      bankruptcy settlements     $  3.6      $  2.2    $  5.1      $  9.1
     Financing fees                   -           -       2.3         3.0
     Other miscellaneous            0.2           -       0.7         0.1
                                 ------      ------    ------      ------
                                 $  3.8      $  2.2    $  8.1      $ 12.2
                                 ======      ======    ======      ======

(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, 2005 and 2004, general and
    administrative expenses were approximately 4.6% 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 non-recurring 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    Nine Month Period
                               Ended September 30,   Ended September 30,
                               2005 (b)   2004 (b)   2005          2004
                               --------  --------    --------  --------
Revenues from operations (a)   $108,641  $ 83,175    $319,064  $233,505
                               --------  --------    --------  --------

Operating expense                37,817    28,551     111,481    79,919
Depreciation and amortization
 of real estate investments      22,214    20,653      63,814    44,209
Interest expense                 29,636    20,060      87,106    55,062
                               --------  --------    --------  --------
                                 89,667    69,264     262,401   179,190
                               --------  --------    --------  --------
Income from operations before
 gain on sale of real estate
 and discontinued operations     18,974    13,911      56,663    54,315
Gain on sale of real estate          38     4,834         797     4,826
(Loss) income from discontinued
 operations, net of tax            (154)      (62)       (378)    1,065
Gain on sale of discontinued
 operations, net of tax          26,773       993      35,495    24,885
                               --------  --------    --------  --------
Net income                     $ 45,631  $ 19,676    $ 92,577  $ 85,091
                               ========  ========    ========  ========
DDR Ownership interests (b)    $ 14,086  $  6,061    $ 28,083  $ 31,426
                               ========  ========    ========  ========
Funds From Operations from
 joint ventures are summarized
 as follows:
    Net income                 $ 45,631  $ 19,676    $ 92,577  $ 85,091
    Gain on sale of real
     estate, including
     discontinued operations    (22,594)   (4,834)    (12,727)  (24,250)
    Depreciation and
     amortization of real
     estate investments          22,554    21,827      65,478    46,263
                               --------  --------    --------  --------
                               $ 45,591  $ 36,669    $145,328  $107,104
                               ========  ========    ========  ========
   DDRC Ownership interests (b)$ 15,358  $ 10,642    $ 37,438  $ 34,384
                               ========  ========    ========  ========
   DDRC Partnership
    distributions received,
    net (c)                    $ 90,250  $ 12,866    $113,720  $ 61,920
                               ========  ========    ========  ========


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

     (a) Revenues for the three month periods ended September 30, 2005
         and 2004 included approximately $2.0 million and $1.7 million,
         respectively, resulting from the recognition of straight line
         rents of which the Company's proportionate share is $0.4 million
         and $0.5 million, respectively. Revenues for the nine month
         periods ended September 30, 2005 and 2004 included approximately
         $5.6 million and $4.4 million, respectively, resulting from the
         recognition of straight line rents of which the Company's
         proportionate share is $1.0 million, in each period.

     (b) Included in the Company's equity in net income and FFO from joint
         ventures for the nine months ended September 30, 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 $2.6 million and $0.7 million for the three month period ended
         September 30, 2005 and 2004, respectively and by $2.1 million and
         $1.0 million for the nine month period ended September 30, 2005
         and 2004, respectively, to reflect additional basis depreciation
         and adjustments to gain on sale.

         At September 30, 2005 and 2004, the Company owned joint venture
         interests, excluding consolidated joint ventures, relating to 112
         and 74 shopping center properties, respectively. In addition, at
         September 30, 2005 and 2004, respectively, the Company, through a
         joint venture, owned an interest of approximately 25% in 55 and 66
         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        Nine Month Period
                          Ended September 30,       Ended September 30,
                            2005        2004         2005        2004
                          --------    -------      ---------   --------
Minority interests        $  1,876    $   480      $   3,017   $  1,422
Operating partnership
 units                         729        719          2,187      1,916
                          --------    -------      ---------   --------
                          $  2,605    $ 1,199      $   5,204   $  3,338
                          ========    =======      =========   ========

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

                            Three Month Period       Nine Month Period
                            Ended September 30,      Ended September 30,
                             2005        2004        2005         2004
                          ---------   ---------    ---------   ----------
Revenues                  $   6,345   $   8,695    $  19,550   $   25,965
                          ---------   ---------    ---------   ----------

Expenses:
    Operating                 2,974       3,295        8,217        9,694
    Impairment charge             -         586          642          586
    Interest, net             1,171       1,413        3,625        4,291
    Depreciation              1,773       2,099        5,501        6,073
    Minority interests            3         (15)          64          (39)
                          ---------   ---------    ---------   ----------
         Total expenses       5,921       7,378       18,049       20,605
                          ---------   ---------    ---------   ----------
    Income before gain on
     sale of real estate        424       1,317        1,501        5,360
    Gain on sales of real
     estate (1)              10,978       1,320       13,977          619
                          ---------   ---------    ---------   ----------
         Net income       $  11,402   $   2,637    $  15,478   $    5,979
                          =========   =========    =========   ==========


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


     (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 and 1.4 million Operating Partnership Units (OP Units)
    outstanding at September 30, 2005 and 2004 into 1.3 million and 1.4
    million common shares of the Company for each of the three month
    periods ended September 30, 2005 and 2004, respectively, and 1.3
    million for each of the nine month periods ended September 30, 2005
    and 2004, on a weighted average basis. The weighted average diluted
    shares and OP Units outstanding were 110.8 million and 104.6 million
    for the three month periods ended September 30, 2005 and 2004,
    respectively, and 110.7 million and 97.1 million for the nine month
    periods ended September 30, 2005 and 2004, respectively.



               DEVELOPERS DIVERSIFIED REALTY CORPORATION
                         Financial Highlights
                           (In thousands)

Selected Balance Sheet Data:
                                          September 30,       December 31,
                                              2005 (1)            2004
Assets:                                  -------------       -------------
Real estate and rental property:
    Land                                 $   1,815,470       $   1,238,242
    Buildings                                4,597,943           3,998,972
    Fixtures and tenant improvements           138,236             120,350
    Construction in progress                   372,250             245,860
                                         -------------       -------------
                                             6,923,899           5,603,424
Less accumulated depreciation                 (632,717)           (568,231)
                                         -------------       -------------
Real estate, net                             6,291,182           5,035,193

Cash                                            38,880              49,871
Advances to and investments
 in joint ventures                             295,022 (2)         288,020
Notes receivable                                17,245              17,823
Receivables, including straight
 line rent, net                                103,018              84,843
Other assets, net                               95,005             107,797
                                         -------------       -------------
                                         $   6,840,352       $   5,583,547
                                         =============       =============

Liabilities:
Indebtedness:
    Revolving credit facilities          $     440,000       $      60,000
    Variable rate unsecured term debt          200,000             350,000
    Unsecured debt                           1,618,727           1,220,143
    Mortgage and other secured debt          1,578,507           1,088,547
                                         -------------       -------------
                                             3,837,234           2,718,690
    Dividends payable                           65,753              62,089
    Other liabilities                          218,467             192,514
                                         -------------       -------------
                                             4,121,454           2,973,293
Minority interests                             126,321              55,935
Shareholders' equity                         2,592,577           2,554,319
                                         -------------       -------------
                                         $   6,840,352       $   5,583,547
                                         =============       =============

   (1)  Amounts include the consolidation of the Mervyn's, 50% owned joint
        venture, formed in September 2005, of $368.6 million of real estate
        assets, $244.0 million of mortgage debt and $70.5 million of
        minority interests.
   (2)  Includes $94.1 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:

                                          September 30,       December 31,
                                              2005                2004
                                         -------------       -------------

Land                                     $     895,165       $     798,852
Buildings                                    2,516,155           2,298,424
Fixtures and tenant improvements                54,867              42,922
Construction in progress                        45,047              25,151
                                         -------------       -------------
                                             3,511,234           3,165,349
Accumulated depreciation                      (197,103)           (143,170)
                                         -------------       -------------
Real estate, net                             3,314,131           3,022,179
Receivables, including straight
 line rent, net                                 75,399              68,596
Leasehold interests                             23,790              26,727
Other assets                                   129,653              96,264
                                         -------------       -------------
                                         $   3,542,973       $   3,213,766
                                         =============       =============

Mortgage debt (a)                        $   2,205,887       $   1,803,420
Notes and accrued interest payable to DDR      106,390              20,616
Amounts payable to other partners                    -              46,161
Other liabilities                               86,544              75,979
                                         -------------       -------------
                                             2,398,821           1,946,176
     Accumulated equity                      1,144,152           1,267,590
                                         -------------       -------------
                                         $   3,542,973       $   3,213,766
                                         =============       =============

(a)  The Company's proportionate share of joint venture debt aggregated
     approximately $516.8 million and $420.8 million at September 30, 2005,
     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