Developers Diversified Realty Reports FFO per Diluted Share of $0.83 for the Quarter Ended March 31, 2008

CLEVELAND, OH -- (MARKET WIRE) -- 04/24/08 -- Developers Diversified Realty Corporation (NYSE: DDR), the nation's leading owner, manager and developer of market-dominant shopping centers, today reported operating results for the first quarter ended March 31, 2008.

-- Funds From Operations ("FFO") per diluted share was $0.83 and net income per diluted share was $0.28 for the three-month period ended March 31, 2008, as compared to the prior-year comparable period of $0.91 and $0.42, respectively. The decrease in FFO and net income per share for the three-month period ended March 31, 2008, is primarily related to the release of certain tax reserves in the first quarter of 2007 and a reduction in the amount of transactional income offset by a full three months of operating results as a result of the merger with Inland Retail Real Estate Trust, Inc.("IRRETI"). -- Executed leases during the first quarter totaled approximately 2.9 million square feet, including 144 new leases and 329 renewals. -- On a cash basis, base rental rates increased 27.8% on new leases, 7.0% on renewals and 10.7% overall. -- Core portfolio leased percentage at March 31, 2008 was 95.8%. -- Same store net operating income ("NOI") for the quarter increased 2.0% over the prior-year comparable period.

Scott Wolstein, Developers Diversified's Chairman and Chief Executive Officer, commented, "We're pleased to report this quarter's financial results, which demonstrate the strength of our portfolio and consistency in our performance, despite challenges in the broader economy. We expect property fundamentals in our portfolio to remain strong as our largest tenant relationships continue to benefit from market share gains due to solid balance sheets and price-sensitive consumers."

"We're pleased with the progress we've made in addressing our 2008 debt and loan maturities and we remain focused on our balance sheet in order to minimize our risk profile while allowing us to pursue opportunities created by the credit market dislocation," Mr. Wolstein continued.

Financial Results:

Net income applicable to common shareholders was $32.9 million, or $0.28 per share (diluted and basic), for the three-month period ended March 31, 2008, as compared to $48.7 million, or $0.42 per share (diluted and basic), for the prior-year comparable period. The decrease in net income for the three-month period ended March 31, 2008, is primarily related to the release of certain tax reserves in the first quarter of 2007 and a reduction in the amount of transactional income offset by a full three months of operating results as a result of the merger with IRRETI.

For the three-month periods ended March 31, 2008 and 2007, FFO per share was $0.83 (diluted and basic) and $0.91 (diluted and basic), respectively. FFO applicable to common shareholders was $99.6 million for the three-month period ended March 31, 2008, as compared to $106.2 million for the three-month period ended March 31, 2007. The decrease in FFO for the three-month period ended March 31, 2008, is a result of the same factors impacting net income as described above.

FFO is a supplemental non-GAAP financial measurement used as a standard in the real estate industry and a widely accepted measure of real estate investment trust ("REIT") performance. 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 ("GAAP"), 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 share dividends, (ii) gains from disposition of depreciable real estate property, except for those sold through the Company's merchant building program, which are presented net of taxes, (iii) extraordinary items and (v) 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 first quarter ended March 31, 2008 highlight continued strong leasing activity throughout the portfolio:

-- Executed 144 new leases aggregating 0.8 million square feet and 329 renewals aggregating 2.1 million square feet. -- On a cash basis, rental rates on new leases increased 27.8% and rental rates on renewals increased 7.0%. Overall, rental rates for new leases and renewals increased 10.7%. -- Total portfolio average annualized base rent per occupied square foot, excluding Brazil, as of March 31, 2008 was $12.38, as compared to $12.36 at March 31, 2007. -- Core portfolio leased rate was 95.8% as of March 31, 2008, as compared to 96.0% at March 31, 2007.

The Company and its joint ventures (at 100%) estimate total annual recurring leasing capital expenditures to be approximately $25 million ($0.21 per square foot of owned GLA) in 2008.

Acquisitions:

In January 2008, through a 50% consolidated joint venture interest with Holborn Brampton Limited Partnership, the Company acquired 43 acres of land in Brampton, Ontario, Canada, for approximately $32.6 million to develop a retail shopping center.

Dispositions:

In the first quarter of 2008, the Company sold two shopping centers, including one which was considered held for sale at December 31, 2007, aggregating approximately 0.1 million square feet for an aggregate sales price of $8.0 million.

Macquarie DDR Trust Share Purchase:

In February 2008, the Company began purchasing units of Macquarie DDR Trust ("MDT"), an Australian Based Listed Property Trust sponsored by Macquarie Bank Limited (ASX: MBL), an international investment bank, advisor and manager of specialized real estate funds. MDT is DDR's joint venture partner in the DDR Macquarie Fund LLC joint venture ("the Fund"). Through the combination of its purchase of the units in MDT and its direct and indirect ownership of the Fund, DDR is entitled to an approximate 17.2% of the economic interest in the Fund at March 31, 2008. Through April 21, 2008, the Company has purchased 59.7 million MDT units in open market transactions at an aggregate cost of approximately $27.5 million, which reflects a weighted-average price per unit of $0.46.

Wholly-Owned and Consolidated Joint Venture Development:

The Company currently has the following wholly-owned and consolidated joint venture shopping center projects under construction:

Estimated Expected Initial Net Cost Anchor Location Owned GLA ($ Millions) Opening* Description --------- ----------- --------- -----------Ukiah (Mendocino), Community California ** 409,900 $ 101.4 1H 10 Center Community Miami (Homestead), Florida 275,839 74.9 2H 08 Center Miami, Florida 400,685 142.6 2H 06 Mixed Use Community Tampa (Brandon), Florida 241,700 55.5 2H 09 Center Community Tampa (Wesley Chapel), Florida 73,360 13.7 2H 09 Center Community Boise (Nampa), Idaho 450,855 123.1 2H 07 Center Boston, Massachusetts Community (Seabrook, New Hampshire) 210,180 50.1 2H 09 Center Community Elmira (Horseheads), New York 350,987 53.0 1H 07 Center Raleigh (Apex), North Carolina Community (Promenade) 81,780 17.9 2H 09 Center Raleigh (Apex), North Carolina (Beaver Creek Crossing, Phase Community II) 162,270 50.8 2H 10 Center Community Austin (Kyle), Texas ** 325,005 60.0 2H 09 Center --------- -----------Total 2,982,561 $ 743.0 ========= ========== * 1H = First Half, 2H = Second Half ** Consolidated 50% Joint Venture

At March 31, 2008, $430.3 million of costs were incurred in relation to the Company's 11 development projects under construction.

In addition to these current developments, the Company and its Joint Ventures are scheduled to commence construction on various other developments, including several international projects. The Company has also identified several additional potential development opportunities reflecting an aggregate estimated cost of over $1 billion. While there are no assurances any of these projects will be undertaken, they provide a source of potential development projects over the next several years. As of March 31, 2008, the projected unleveraged GAAP return on the Company's aggregate development and redevelopment pipeline is approximately 10%.

Unconsolidated Joint Venture Development:

The Company's unconsolidated joint ventures have the following shopping center projects under construction. At March 31, 2008, $283.7 million of costs had been incurred in relation to these development projects.

DDR's Estimated Effective Expected Initial Ownership Owned Net Cost Anchor Location Percentage GLA ($ Millions) Opening* Description ---------- --------- --------- --------- -----------Kansas City Community (Merriam), Kansas 20.0% 202,116 $ 46.8 2H 08 Center Detroit (Bloomfield Lifestyle Hills), Michigan 10.0% 882,197 192.5 2H 09 Center Lifestyle Dallas (Allen), Texas 10.0% 797,665 171.2 1H 08 Center Enclosed Manaus, Brazil 47.4% 477,630 82.6 1H 09 Mall --------- ---------Total 2,359,608 $ 493.1 ========= ======== * 1H = First Half, 2H = Second Half

Wholly-Owned and Consolidated Joint Venture Redevelopments and Expansions:

The Company is currently expanding/redeveloping the following wholly-owned and consolidated joint venture shopping centers at a projected aggregate net cost of approximately $152.5 million. At March 31, 2008, approximately $99.6 million of costs had been incurred in relation to these projects.

Property Description ---------------------------- -------------------------------------------Miami (Plantation), Florida Redevelop shopping center to include Kohl's and additional junior tenants 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 tenant

Unconsolidated Joint Venture Redevelopments and Expansions:

The Company's unconsolidated joint ventures are currently expanding/redeveloping the following shopping centers at a projected net cost of $458.9 million, which includes original acquisition costs related to assets acquired for development. At March 31, 2008, approximately $404.4 million of costs had been incurred in relation to these projects. The following is a summary of these joint venture redevelopment and expansion projects:

DDR's Effective Ownership Property Percentage Description ---------------------- --------- ---------------------------------------Buena Park, California 20.0% Large-scale redevelopment of enclosed mall to open-air format Los Angeles (Lancaster), Relocate Wal-Mart and redevelop former California 21.0% Wal-Mart space Chicago (Deer Park), Re-tenant former retail shop space with Illinois 25.75% junior tenant and construct 13,500 sf multi-tenant outparcel building Benton Harbor, Michigan 20.0% Construct 89,000 sf of anchor space and retail shops Kansas City, Missouri 20.0% Relocate retail shops and re-tenant former retail shop space Cincinnati, Ohio 18.0% Redevelop former JCPenney space

Financing:

In March 2008, the Company entered into mortgage loans with Metropolitan Life Insurance Company on six of its shopping center assets, four of which are located in the continental U.S. and two of which are located in Puerto Rico, for an aggregate of $350.0 million with a maturity date of April 2013. The loans have a fixed interest rate of 5.0% and provide for interest-only debt service payments with a balloon payment at maturity. The Company used the proceeds from the loans to repay scheduled 2008 debt maturities and the remaining balance to repay revolving credit facilities.

Other loan closings during the quarter included a $71 million construction loan on our Homestead, Florida development and the refinancing of $72 million of joint venture debt. In addition, our 50% joint venture with Sonae Sierra, which owns and develops retail real estate in Brazil, closed on a R$50 million Reais credit facility in late February.

In January 2008, the Company repaid unsecured notes aggregating $100.0 million through borrowings on the Company's revolving credit facilities.

Developers Diversified Realty Corporation currently owns and manages over 740 retail operating and development properties in 45 states, plus Puerto Rico, Brazil, Russia and Canada, totaling approximately 162 million square feet. Developers Diversified Realty Corporation is a self-administered and self-managed 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 10-K as of December 31, 2007.

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

Three-Month Periods Ended March 31, Revenues: 2008 2007 --------- --------- Minimum rents (A) $ 160,852 $ 149,825 Percentage and overage rents (A) 3,006 2,005 Recoveries from tenants 53,602 45,722 Ancillary and other property income 4,662 4,702 Management, development and other fee income 16,287 9,082 Other (B) 3,487 7,709 --------- --------- 241,896 219,045 --------- ---------Expenses: Operating and maintenance 36,869 27,342 Real estate taxes 27,675 25,810 General and administrative (C) 20,715 21,518 Depreciation and amortization 57,139 52,096 --------- --------- 142,398 126,766 --------- ---------Other income (expense): Interest income 582 3,682 Interest expense (62,214) (60,471) Other expense (D) (497) (225) --------- --------- (62,129) (57,014) --------- ---------Income before equity in net income of joint ventures, minority equity interests, income tax (expense) benefit of taxable REIT subsidiaries and franchise taxes, discontinued operations and gain on disposition of real estate, net of tax 37,369 35,265 Equity in net income of joint ventures (E) 7,388 6,281 Minority equity interests (F) (2,371) (5,839) Income tax (expense) benefit of taxable REIT subsidiaries and franchise taxes (G) (1,045) 15,061 --------- ---------Income from continuing operations 41,341 50,768 (Loss) income from discontinued operations (H) (284) 5,758 --------- ---------Income before gain on disposition of real estate 41,057 56,526 Gain on disposition of real estate, net of tax 2,367 6,010 --------- ---------Net income $ 43,424 $ 62,536 ========= ========Net income applicable to common shareholders $ 32,857 $ 48,744 ========= ========Funds From Operations ("FFO"): Net income applicable to common shareholders $ 32,857 $ 48,744 Depreciation and amortization of real estate investments 54,362 52,449 Equity in net income of joint ventures (E) (7,388) (6,281) Joint ventures' FFO (E) 19,181 13,559 Minority equity interests (OP Units) (F) 595 569 Gain on disposition of depreciable real estate (19) (2,857) --------- --------- FFO applicable to common shareholders 99,588 106,183 Preferred dividends 10,567 13,792 --------- --------- FFO $ 110,155 $ 119,975 ========= ======== Per share data: Earnings per common share Basic $ 0.28 $ 0.42 ========= ======== Diluted $ 0.28 $ 0.42 ========= ======== Dividends Declared $ 0.69 $ 0.66 ========= ======== Funds From Operations - Basic (I) $ 0.83 $ 0.91 ========= ======== Funds From Operations - Diluted (I) $ 0.83 $ 0.91 ========= ======== Basic - average shares outstanding (I) 119,148 114,851 ========= ======== Diluted - average shares outstanding (I) 119,349 115,661 ========= ======== (A) Increases in base and percentage rental revenues for the three-month period ended March 31, 2008, as compared to the prior-year comparable period, aggregated $12.1 million, consisting of $3.2 million related to leasing of core portfolio properties (an increase of 2.5% from 2007), $17.8 million from the acquisition of assets and the merger with IRRETI, $1.4 million related to developments and redevelopments and $0.4 million from an increase in occupancy at the business centers. These amounts were offset by a decrease of $10.7 million due to the disposition of properties in 2007 and 2008. Included in the rental revenues for the three-month periods ended March 31, 2008 and 2007, is approximately $2.8 million and $3.1 million, respectively, of revenue resulting from the recognition of straight-line rents.

(B) Other income for the three-month periods ended March 31, 2008 and 2007 was comprised of the following (in millions):

Three-Month Periods Ended March 31, 2008 2007 ---------- ---------- Acquisition fees $ - $ 6.3 Lease termination fees 3.3 1.3 Other miscellaneous 0.2 0.1 ---------- ---------- $ 3.5 $ 7.7 ========== ========= (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 three-month periods ended March 31, 2008 and 2007, general and administrative expenses were approximately 4.3% and 5.7%, respectively, of total revenues, including joint venture revenues. For the three-month period ended March 31, 2007, the Company recorded a charge of approximately $4.1 million to general and administrative expense in connection with the Company's former president's departure as an executive officer. Excluding this charge, general and administrative expenses were 4.6% of total revenues for the three-month period ended March 31, 2007.

(D) Other income/expense primarily relates to abandoned acquisition and development project costs.

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

Three-Month Periods Ended March 31, 2008 2007 --------- --------- Revenues from operations (a) $ 238,187 $ 145,258 --------- --------- Operating expense 80,918 48,443 Depreciation and amortization of real estate investments 56,604 30,502 Interest expense 77,295 45,669 --------- --------- 214,817 124,614 --------- --------- Income from operations before tax expense and discontinued operations 23,370 20,644 Income tax expense (3,780) (2,249) Loss from discontinued operations, net of tax - (157) Loss on disposition of discontinued operations, net of tax (2) (341) Other gain, net 6,439 - --------- --------- Net income $ 26,027 $ 17,897 ========= ======== DDR ownership interests (b) $ 7,489 $ 6,511 ========= ======== FFO from joint ventures are summarized as follows: Net income $ 26,027 $ 17,897 Loss on disposition of real estate, including discontinued operations 2 - Depreciation and amortization of real estate investments 56,604 30,963 --------- --------- $ 82,633 $ 48,860 ========= ======== DDR ownership interests (b) $ 19,181 $ 13,559 ========= ======== DDR joint venture distributions received, net (c) $ 13,700 $ 10,218 ========= ======== (a) Revenues for the three-month periods ended March 31, 2008 and 2007 included approximately $2.3 million and $1.3 million, respectively, resulting from the recognition of straight-line rents of which the Company's proportionate share was $0.3 million and $0.2 million, respectively.

(b) The Company's share of joint venture net income decreased by $0.1 million and $0.3 million for the three-month periods ended March 31, 2008 and 2007, respectively. These adjustments reflect basis differences impacting amortization and depreciation and gain on dispositions.

At March 31, 2008 and 2007, the Company owned joint venture interests, excluding consolidated joint ventures, in 273 and 212 shopping center properties, respectively. In addition, at March 31, 2008 and 2007, the Company owned 44 and 48 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.

(F) Minority equity interests are comprised of the following: Three-Month Periods Ended March 31, 2008 2007 ---------- ---------- Minority equity interests $ 1,776 $ 1,488 Operating partnership units 595 569 Preferred operating partnership units - 3,782 ---------- ---------- $ 2,371 $ 5,839 ========== ========= 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 Periods Ended March 31, 2008 2007 --------- ---------- Revenues $ 119 $ 11,916 --------- ---------- Expenses: Operating 134 3,257 Interest, net 10 3,220 Depreciation 68 2,500 --------- ---------- Total expenses 212 8,977 --------- ---------- (Loss) income before (loss) gain on disposition of real estate (93) 2,939 (Loss) gain on disposition of real estate (191) 2,819 --------- ---------- Net (loss) income $ (284) $ 5,758 ========= ========= (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 Operating Partnership Units (OP Units) outstanding at March 31, 2008 and 2007, into 0.9 million common shares of the Company for both of the three-month periods ended March 31, 2008 and 2007, respectively, on a weighted average basis. The weighted average diluted shares and OP Units outstanding, for purposes of computing FFO, were approximately 120.6 million and 116.9 million for the three-month periods ended March 31, 2008 and 2007, respectively.

DEVELOPERS DIVERSIFIED REALTY CORPORATION Financial Highlights (In thousands)

Selected Balance Sheet Data: March 31, December 31, 2008 (A) 2007 (A) ----------- -----------Assets: Real estate and rental property: Land $ 2,103,771 $ 2,142,942 Buildings 5,945,652 5,933,890 Fixtures and tenant improvements 245,980 237,117 ----------- ----------- 8,295,403 8,313,949 Less: Accumulated depreciation (1,077,841) (1,024,048) ----------- ----------- 7,217,562 7,289,901 Construction in progress 782,534 664,926 Assets held for sale - 5,796 ----------- -----------Real estate, net 8,000,096 7,960,623

Investments in and advances to joint ventures 646,627 638,111 Cash 70,964 49,547 Restricted cash 49,635 58,958 Notes receivable 19,076 18,557 Receivables, including straight-line rent, net 197,552 199,354 Other assets, net 169,793 164,666 ----------- ----------- $ 9,153,743 $ 9,089,816 =========== ========== Liabilities: Indebtedness: Revolving credit facilities $ 741,818 $ 709,459 Unsecured debt 2,522,431 2,622,219 Mortgage and other secured debt 2,445,552 2,259,336 ----------- ----------- 5,709,801 5,591,014 Dividends payable 89,606 85,851 Other liabilities 281,835 285,245 ----------- ----------- 6,081,242 5,962,110 Minority equity interests 130,857 128,881 Shareholders' equity 2,941,644 2,998,825 ----------- ----------- $ 9,153,743 $ 9,089,816 =========== ========== (A) Amounts include the consolidation of Mervyns, a 50% owned joint venture, which includes $405.8 million of real estate assets at March 31, 2008 and December 31, 2007, $258.5 million of mortgage debt at March 31, 2008 and December 31, 2007, and $73.4 million and $74.6 million of minority equity interest at March 31, 2008 and December 31, 2007, 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:

March 31, December 31, 2008 2007 ----------- ----------- Land $ 2,386,799 $ 2,384,069 Buildings 6,269,832 6,253,167 Fixtures and tenant improvements 113,309 101,115 ----------- ----------- 8,769,940 8,738,351 Less: Accumulated depreciation (463,607) (412,806) ----------- ----------- 8,306,333 8,325,545 Construction in progress 260,845 207,387 ----------- -----------Real estate, net 8,567,178 8,532,932 Receivables, including straight-line rent, net 119,732 124,540 Leasehold interests 13,634 13,927 Other assets 439,253 365,925 ----------- ----------- $ 9,139,797 $ 9,037,324 =========== ========== Mortgage debt (a) $ 5,581,082 $ 5,551,839 Notes and accrued interest payable to DDR 8,196 8,492 Other liabilities 269,393 201,083 ----------- ----------- 5,858,671 5,761,414 Accumulated equity 3,281,126 3,275,910 ----------- ----------- $ 9,139,797 $ 9,037,324 =========== ========== (a) The Company's proportionate share of joint venture debt aggregated approximately $1,070.9 million and $1,034.1 million at March 31, 2008 and December 31, 2007, respectively.

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

Michelle M. Dawson Vice President of Investor Relations 216-755-5500 mdawson@ddr.com

2008-04-24 18:24:11 0345041 MARKETWIRE