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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
FORM 10-K
 
ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
     
(Mark One)
   
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
OR
o
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to                
 
Commission file number 1-11690
DEVELOPERS DIVERSIFIED REALTY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
 
     
Ohio   34-1723097
 
(State or Other Jurisdiction
of Incorporation or Organization)
  (I.R.S. Employer Identification No.)
 
3300 Enterprise Parkway, Beachwood, Ohio 44122
(Address of Principal Executive Offices — Zip Code)
 
(216) 755-5500
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
     
    Name of Each Exchange on
Title of Each Class
  Which Registered
 
Common Shares, Without Par Value
  New York Stock Exchange
Depositary Shares Representing
Class F Cumulative Redeemable Preferred Shares
  New York Stock Exchange
Depositary Shares Representing
Class G Cumulative Redeemable Preferred Shares
  New York Stock Exchange
Depositary Shares Representing
Class H Cumulative Redeemable Preferred Shares
  New York Stock Exchange
Depositary Shares Representing
Class I Cumulative Redeemable Preferred Shares
  New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  þ      No  o
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o      No  þ
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ      No  o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   þ
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
 
Large accelerated filer  þ      Accelerated filer  o      Non-accelerated filer  o      
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o      No  þ
 
The aggregate market value of the voting stock held by non-affiliates of the registrant at June 30, 2006, was $5.5 billion.
 
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
 
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.
 
109,452,823 common shares outstanding as of February 5, 2007
 
DOCUMENTS INCORPORATED BY REFERENCE
 
The registrant incorporates by reference in Part III hereof portions of its definitive Proxy Statement for its 2007 Annual Meeting of Shareholders.
 


 

 
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PART I
 
Item 1.  BUSINESS
 
General Development of Business
 
Developers Diversified Realty Corporation, an Ohio Corporation (the “Company” or “DDR”), a self-administered and self-managed real estate investment trust (a “REIT”), is in the business of acquiring, developing, redeveloping, owning, leasing and managing shopping centers. Unless otherwise provided, references herein to the Company or DDR includes Developers Diversified Realty Corporation, its wholly-owned and majority-owned subsidiaries and its consolidated and unconsolidated joint ventures.
 
From January 1, 2002, to February 5, 2007, the Company and its joint ventures have acquired 319 shopping center properties. The Company has not acquired any properties from January 1, 2007 through February 5, 2007. The Company acquired 20 properties in 2006 (including 15 acquired through joint ventures and four by acquiring its joint venture partners’ interests), 52 properties in 2005 (including 36 acquired through a consolidated joint venture and one by acquiring its joint venture partner’s interest), 112 properties in 2004 (including 18 acquired through joint ventures and one by acquiring its joint venture partner’s interest), 124 properties in 2003 (including 117 shopping center and development properties acquired through the merger with JDN Realty Corporation (“JDN”) and three of which were joint ventures), and 11 properties in 2002 (four by acquiring its joint venture partners’ interests). In addition, in 2002 a joint venture in which the Company owned an approximate 25% equity interest was awarded the asset designation rights of Service Merchandise retail real estate interests in approximately 200 properties. In 2006, the remaining Service Merchandise assets were sold to a joint venture in which the Company owns a 20% equity interest. At December 31, 2006, 50 of these properties remained. Of the 15 properties acquired through joint ventures in 2006, nine properties are located in Brazil. Of the 52 properties acquired in 2005, 15 properties are located in Puerto Rico.
 
The Company’s executive offices are located at 3300 Enterprise Parkway, Beachwood, Ohio 44122, and its telephone number is (216) 755-5500. The Company’s website is located at http://www.ddr.com . On its website, you can obtain a copy of the annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company files such material electronically with, or furnishes it to, the Securities and Exchange Commission (the “SEC”). A copy of these filings is available to all interested parties upon written request to Michelle M. Dawson, Vice President of Investor Relations, at the Company’s corporate offices.
 
The Company files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.W., Washington, D.C. 20549. You may obtain information about the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC (http://www.sec.gov) .
 
You can inspect reports and other information that the Company files with the New York Stock Exchange at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
 
Financial Information About Industry Segments
 
The Company is in the business of acquiring, developing, redeveloping, owning, leasing and managing shopping centers. See the consolidated financial statements and notes thereto included in Item 15 of this Annual Report on Form 10-K for certain information required by Item 1.
 
Narrative Description of Business
 
The Company’s portfolio as of February 5, 2007, consisted of 461 shopping centers and seven business centers (including 167 properties owned through unconsolidated joint ventures and 39 of which are consolidated by the Company) and more than 1,170 acres of undeveloped land (of which approximately 170 acres are owned through


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joint ventures) (together the “Portfolio Properties”). These properties consist of shopping centers, mini-malls and lifestyle centers. From January 1, 2004, to February 5, 2007, the Company acquired 184 shopping centers (including 69 properties owned through joint ventures) containing an aggregate of approximately 25.3 million square feet of gross leasable area (“GLA”) owned by the Company for an aggregate purchase price of approximately $6.4 billion.
 
As of February 5, 2007, the Company was expanding eight wholly-owned properties and six of its joint venture properties and expected to commence construction at 12 wholly-owned and three joint venture shopping centers. As of December 31, 2006, the Company had seven wholly-owned shopping centers and four joint venture shopping centers under development and expected to commence construction at two additional wholly-owned shopping centers in 2007.
 
At December 31, 2006, the aggregate occupancy of the Company’s shopping center portfolio was 95.2%, as compared to 95.3% at December 31, 2005. The Company owned 467 shopping centers at December 31, 2006. The average annualized base rent per occupied square foot was $11.56 at December 31, 2006, as compared to $11.01 at December 31, 2005.
 
At December 31, 2006, the aggregate occupancy of the Company’s wholly-owned shopping centers was 94.1%, as compared to 94.4% at December 31, 2005. The Company owned 261 wholly-owned shopping centers at December 31, 2006. The average annualized base rent per leased square foot was $10.80 at December 31, 2006, as compared to $10.42 at December 31, 2005.
 
At December 31, 2006, the aggregate occupancy rate of the Company’s joint venture shopping centers was 96.9%, as compared to 97.0% at December 31, 2005. The Company’s joint ventures owned 167 shopping centers, including 39 consolidated centers primarily owned through the Mervyns Joint Venture, at December 31, 2006. The average annualized base rent per leased square foot was $12.69 at December 31, 2006, as compared to $12.05 at December 31, 2005.
 
At December 31, 2006, the aggregate occupancy of the Company’s business centers was 42.1%, as compared to 43.2% at December 31, 2005. The business centers consist of seven assets in five states.
 
The Company is self-administered and self-managed and, therefore, does not engage or pay for a REIT advisor. The Company manages all of the Portfolio Properties. At December 31, 2006, the Company owned and/or managed more than 110 million square feet of GLA, which included all of the Portfolio Properties and 12 properties owned by third parties.
 
Strategy and Philosophy
 
The Company’s investment objective is to increase cash flow and the value of its Portfolio Properties and to seek continued growth through the selective acquisition, development, redevelopment, renovation and expansion of income-producing real estate properties, primarily shopping centers. In addition, the Company may pursue the disposition of certain real estate assets and utilize the proceeds to repay debt, reinvest in other real estate assets and developments and apply to other corporate purposes. In pursuing its investment objective, the Company will continue to seek to acquire and develop high quality, well-located shopping centers with attractive initial yields and strong prospects for future cash flow growth and capital appreciation where the Company’s financial strength and management and leasing capabilities can enhance value.
 
Management believes that opportunities to acquire existing shopping centers have been and will continue to be available to a buyer, such as the Company, with access to capital markets and institutional investors. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” within Item 7.
 
The Company’s real estate strategy and philosophy is to grow its business through a combination of leasing, expansion, acquisition and development. The Company seeks to:
 
  •  Increase cash flows and property values through strategic leasing, re-tenanting, renovation and expansion of the Company’s portfolio;


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  •  Continue to selectively acquire well-located, quality shopping centers (individually or in portfolio transactions) that have leases at rental rates below market rates or other cash flow growth or capital appreciation potential where the Company’s financial strength, relationships with retailers and management capabilities can enhance value;
 
  •  Increase cash flows and property values by continuing to take advantage of attractive financing and refinancing opportunities (see “Recent Developments — Financings”);
 
  •  Increase per share cash flows through the strategic disposition of low growth assets and utilizing the proceeds to repay debt, invest in other real estate assets and/or developments;
 
  •  Selectively develop the Company’s undeveloped parcels or new sites in areas with attractive demographics;
 
  •  Hold properties for long-term investment and place a strong emphasis on regular maintenance, periodic renovation and capital improvements and
 
  •  Continue to manage and develop the properties of others to generate fee income, subject to restrictions imposed by federal income tax laws, and pursue opportunities for acquisitions.
 
As part of its ongoing business, the Company engages in discussions with public and private real estate entities regarding possible portfolio or asset acquisitions or business combinations.
 
In addition, the Company intends to maintain a conservative debt capitalization ratio. At December 31, 2006, the Company’s capitalization, excluding the Company’s proportionate share of indebtedness of its unconsolidated joint ventures, consisted of $4.2 billion of debt, $705 million of preferred shares and $6.9 billion of market equity (market equity is defined as common shares and Operating Partnership Units (“OP Units”) outstanding, multiplied by $62.95, the closing price of the common shares on the New York Stock Exchange at December 31, 2006), resulting in a debt to total market capitalization ratio of 0.36 to 1.0, as compared to the ratios of 0.40 to 1.0 and 0.33 to 1.0 at December 31, 2005 and 2004, respectively. Fluctuations in the market price of the Company’s common shares may cause this ratio to vary from time to time. At December 31, 2006, the Company’s total debt consisted of $3.8 billion of fixed-rate debt and $0.4 billion of variable-rate debt, including $60 million of fixed-rate debt that has been effectively swapped to a variable rate and $500 million of floating rate debt that has been effectively swapped to a fixed rate.
 
The strategy, philosophy, investment and financing policies of the Company, and its policies with respect to certain other activities, including its growth, debt capitalization, distributions, status as a REIT and operating policies, are determined by the Board of Directors. Although it has no present intention to do so, the Board of Directors may amend or revise these policies from time to time without a vote of the shareholders of the Company.
 
Recent Developments
 
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 and the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report on Form 10-K for further information on certain of the recent developments.
 
Competition
 
As one of the nation’s largest owners and developers of shopping centers, the Company has established close relationships with a large number of major national and regional retailers. The Company’s management is associated with and actively participates in many shopping center and REIT industry organizations.
 
Notwithstanding these relationships, numerous developers and real estate companies compete with the Company in seeking properties for acquisition and leasing space in these properties to tenants.
 
Employees
 
As of February 5, 2007, the Company employed 641 full-time individuals, including executive, administrative and field personnel. The Company considers its relations with its personnel to be good.


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Qualification as a Real Estate Investment Trust
 
As of December 31, 2006, the Company met the qualification requirements of a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”). As a result, the Company, with the exception of its taxable REIT subsidiaries, will not be subject to federal income tax to the extent it meets certain requirements of the Code.
 
Item 1a.  RISK FACTORS
 
The Economic Performance and Value of the Company’s Shopping Centers Depend on Many Factors, Each of Which Could Have an Adverse Impact on Its Cash Flows and Operating Results
 
The economic performance and value of the Company’s real estate holdings can be affected by many factors, including the following:
 
  •  Changes in the national, regional and local economic climate;
 
  •  Local conditions such as an oversupply of space or a reduction in demand for real estate in the area;
 
  •  The attractiveness of the properties to tenants;
 
  •  Competition from other available space;
 
  •  The Company’s ability to provide adequate management services and to maintain its properties;
 
  •  Increased operating costs, if these costs cannot be passed through to tenants and
 
  •  The expense of periodically renovating, repairing and reletting spaces.
 
The Company’s properties consist primarily of community and neighborhood shopping centers and, therefore, the Company’s performance is linked to general economic conditions in the market for retail space. The market for retail space has been and may continue to be adversely affected by weakness in the national, regional and local economies, the adverse financial condition of some large retailing companies, the ongoing consolidation in the retail sector, the excess amount of retail space in a number of markets and increasing consumer purchases through catalogs and the Internet. To the extent that any of these conditions occur, they are likely to affect market rents for retail space. In addition, the Company may face challenges in the management and maintenance of its properties or encounter increased operating costs, such as real estate taxes, insurance and utilities, which may make its properties unattractive to tenants. The loss of rental revenues from a number of the Company’s tenants and its inability to replace such tenants may adversely affect the Company’s profitability and ability to meet its debt and other financial obligations and make distributions to the shareholders.
 
The Company’s Dependence on Rental Income May Adversely Affect Its Ability to Meet Its Debt Obligations and Make Distributions to the Shareholders
 
Substantially all of the Company’s income is derived from rental income from real property. As a result, the Company’s performance depends on its ability to collect rent from tenants. The Company’s income and funds for distribution would be negatively affected if a significant number of its tenants, or any of its major tenants.
 
  •  Experience a downturn in their business that significantly weakens their ability to meet their obligations to the Company;
 
  •  Delay lease commencements;
 
  •  Decline to extend or renew leases upon expiration;
 
  •  Fail to make rental payments when due or
 
  •  Close stores or declare bankruptcy.
 
Any of these actions could result in the termination of tenants’ leases and the loss of rental income attributable to the terminated leases. Lease terminations by an anchor tenant or a failure by that anchor tenant to occupy the premises could also result in lease terminations or reductions in rent by other tenants in the same shopping centers


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under the terms of some leases. In addition, the Company cannot be sure that any tenant whose lease expires will renew that lease or that it will be able to re-lease space on economically advantageous terms. The loss of rental revenues from a number of the Company’s tenants and its inability to replace such tenants may adversely affect the Company’s profitability and its ability to meet debt and other financial obligations and make distributions to the shareholders.
 
The Company Relies on Major Tenants, Making It Vulnerable to Changes in the Business and Financial Condition of, or Demand for, Its Space by Such Tenants
 
As of December 31, 2006, the annualized base rental revenues from Wal-Mart, Mervyns, Royal Ahold (Tops Markets), T.J. Maxx, PETsMART, Bed Bath & Beyond and Lowe’s Home Improvement represented 4.5%, 2.8%, 2.8%, 2.0%, 1.9%, 1.6% and 1.6%, respectively, of the Company’s aggregate annualized shopping center base rental revenues, including its proportionate share of joint venture aggregate annualized shopping center base rental revenues. The Company’s income and ability to meet its financial obligations could be adversely affected in the event of the bankruptcy, insolvency, or significant downturn in the business of one of these tenants or any of the Company’s other major tenants. In addition, the Company’s results could be adversely affected if any of these tenants do not renew multiple lease terms as they expire.
 
The Company’s Acquisition Activities May Not Produce the Cash Flows That It Expects and May Be Limited by Competitive Pressures or Other Factors
 
The Company intends to acquire existing retail properties to the extent that suitable acquisitions can be made on advantageous terms. Acquisitions of commercial properties entail risks such as:
 
  •  The Company’s estimates on expected occupancy and rental rates may differ from actual conditions;
 
  •  The Company’s estimates of the costs of any redevelopment or repositioning of acquired properties may prove to be inaccurate;
 
  •  The Company may be unable to operate successfully in new markets where acquired properties are located, due to a lack of market knowledge or understanding of local economies;
 
  •  The Company may be unable to successfully integrate new properties into its existing operations or
 
  •  The Company may have difficulty obtaining financing on acceptable terms or paying the operating expenses and debt service associated with acquired properties prior to sufficient occupancy.
 
In addition, the Company may not be in a position or have the opportunity in the future to make suitable property acquisitions on advantageous terms due to competition for such properties with others engaged in real estate investment who may have greater financial resources than the Company. The Company’s inability to successfully acquire new properties may affect the Company’s ability to achieve anticipated return on investment, which could have an adverse effect on its results of operations.
 
The Company May Fail to Consummate the Merger with Inland
 
As previously announced, the Company has entered into an agreement and plan of merger with Inland Retail Real Estate Trust, Inc., (“IRRETI”). The merger is scheduled to close in February 2007 at an aggregate value of approximately $6.2 billion. The consummation of the merger is, itself, subject to certain conditions, including the approval of the holders of 66 2 / 3 % of the outstanding IRRETI common stock. The Company intends to consummate the merger as soon as it is practical; however, there can be no assurance that the conditions required to consummate the merger will be satisfied on the anticipated schedule or at all. The Company will need additional funding to consummate the merger. The Company may obtain such funds through debt and equity offerings and borrowings under the existing revolving credit facilities and expansion of its secured term loan. The Company has received a commitment from a major lending institution to fund up to $1.65 billion of the total merger cost through a bridge facility. The bridge facility has an initial six-month term with one, three-month extension option and will bear interest at LIBOR plus 75 basis points. There can be no assurance that the Company will receive such funding, that the Company will be able to complete all of the anticipated loan assumptions, that the Company will finance the


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transaction as described or will not subsequently enter into alternate financing arrangements including long-term debt or equity financing or the potential sale of assets to third parties or equity affiliates, to fund all or a portion of the merger consideration. If the Company is unable to obtain adequate funding for the merger consideration, the Company will be unable to consummate the merger. In the event that the Company fails to consummate the merger, the Company may be obligated to make certain payments to IRRETI. In addition, the Company will still be obligated to consummate the transactions entered into through the forward sale agreements for 11.6 million of DDR common shares, through physical settlement, which would result in the issuance of the Company’s common shares, or cash settlement that could involve a cash payment by the Company.
 
The Company May Encounter Difficulties in Assimilating the Inland Portfolio
 
The IRRETI portfolio is a large acquisition. The Company may encounter difficulties in integrating such a large portfolio in the Company’s existing systems and personnel, which could result in additional expense and adversely affect results of operations and have a negative impact on the market price of the Company’s common shares after completion of the merger.
 
The completion of the merger poses risks for the Company’s operations, such as:
 
  •  Following the merger, the Company may not achieve expected cost savings and operating efficiencies, including the elimination of redundant administrative costs and property management costs;
 
  •  The Company may not effectively integrate the operations of IRRETI;
 
  •  The acquisition of the Inland portfolio may subject the Company to liabilities, including environmental liabilities;
 
  •  The IRRETI portfolio, including its development projects, may not perform or provide for additional revenue opportunities as well as the Company anticipates;
 
  •  The Company may experience difficulties and incur expenses associated with the assimilation and retention of Inland employees and
 
  •  The diversion of management’s attention to the integration of the operations of IRRETI could have an adverse effect on the financial condition and operating results of Inland and the Company.
 
If the Company fails to successfully integrate IRRETI or fails to realize intended benefits of the merger due to any of the foregoing or other reasons, the market price of the Company’s common shares could decline from the market price at the time of completion of the merger.
 
The Company’s Articles of Incorporation Contain Limitations on Acquisitions and Changes in Control
 
In order to maintain the Company’s status as a REIT, its Articles of Incorporation prohibit any person, except for certain existing shareholders at the time of its initial public offering, from owning more than 5% of the Company’s outstanding common shares. This restriction is likely to discourage third parties from acquiring control of the Company without consent of its Board of Directors even if a change in control was in the best interest of shareholders.
 
Real Estate Property Investments Are Illiquid, and Therefore the Company May Not Be Able to Dispose of Properties When Appropriate or on Favorable Terms
 
Real estate property investments generally cannot be disposed of quickly. In addition, the federal tax code imposes restrictions on the ability of a REIT to dispose of properties that are not applicable to other types of real estate companies. Therefore, the Company may not be able to diversify its portfolio in response to economic or other conditions promptly or on favorable terms, which could cause the Company to incur extended losses and reduce its cash flows and adversely affect distributions to shareholders.


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The Company’s Development and Construction Activities Could Affect Its Operating Results
 
The Company intends to continue the selective development and construction of retail properties in accordance with its development and underwriting policies as opportunities arise. The Company’s development and construction activities include risks that:
 
  •  The Company may abandon development opportunities after expending resources to determine feasibility;
 
  •  Construction costs of a project may exceed the Company’s original estimates;
 
  •  Occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable;
 
  •  Rental rates per square foot could be less than projected;
 
  •  Financing may not be available to the Company on favorable terms for development of a property;
 
  •  The Company may not complete construction and lease-up on schedule, resulting in increased debt service expense and construction costs and
 
  •  The Company may not be able to obtain, or may experience delays in obtaining, necessary zoning, land use, building, occupancy and other required governmental permits and authorizations.
 
Additionally, the time frame required for development, construction and lease-up of these properties means that the Company may have to wait years for a significant cash return. If any of the above events occur, the development of properties may hinder the Company’s growth and have an adverse effect on its results of operations. In addition, new development activities, regardless of whether or not they are ultimately successful, typically require substantial time and attention from management.
 
The Company Has Variable-Rate Debt and Is Subject to Interest Rate Risk
 
The Company has a substantial amount of mortgage debt with interest rates that vary depending upon the market index. In addition, the Company has a revolving credit facility that bears interest at a variable-rate on any amounts drawn on the facility. The Company may incur additional variable-rate debt in the future. Increases in interest rates on variable-rate debt would increase the Company’s interest expense, which would adversely affect net earnings and cash available for payment of its debt obligations and distributions to the shareholders.
 
The Company’s Ability to Increase Its Debt Could Aversely Affect Its Cash Flow
 
At December 31, 2006, the Company had outstanding debt of approximately $4.2 billion (excluding its proportionate share of joint venture mortgage debt aggregating $525.6 million). The Company intends to continue to maintain a conservative debt capitalization with a ratio of debt to total market capitalization (the sum of the aggregate market value of the Company’s common shares, the liquidation preference on any preferred shares outstanding and its total indebtedness) of less than 50%. In addition, the Company is subject to limitations under its credit facilities and indentures relating to its ability to incur further debt; however, the Company’s organizational documents do not contain any limitation on the amount or percentage of indebtedness it may incur. If the Company were to become more highly leveraged, its cash needs to fund debt service would increase accordingly. Under such circumstances, the Company’s risk of decreases in cash flow, due to fluctuations in the real estate market, reliance on its major tenants, acquisition and development costs and the other factors discussed above could subject the Company to an even greater adverse impact on its financial condition and results of operations. In addition, increased leverage could increase the risk of default on the Company’s debt obligations, which could further reduce its cash available for distribution and adversely affect its ability to dispose of its portfolio on favorable terms, which could cause the Company to incur extended losses and reduce its cash flows.


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The Company’s Cash Flows and Operating Results Could Be Adversely Affected by Required Payments of Debt or Related Interest and Other Risks of Its Debt Financing
 
The Company is generally subject to the risks associated with debt financing. These risks include:
 
  •  The Company’s cash flow may not satisfy required payments of principal and interest;
 
  •  The Company may not be able to refinance existing indebtedness as necessary, or the terms of the refinancing may be less favorable to the Company than the terms of existing debt;
 
  •  Required debt payments are not reduced if the economic performance of any property declines;
 
  •  Debt service obligations could reduce funds available for distribution to the Company’s shareholders and funds available for acquisitions;
 
  •  Any default on the Company’s indebtedness could result in acceleration of those obligations and possible loss of property to foreclosure and
 
  •  The risk that necessary capital expenditures for purposes such as re-leasing space cannot be financed on favorable terms.
 
If a property is mortgaged to secure payment of indebtedness and the Company cannot make the mortgage payments, it may have to surrender the property to the lender with a consequent loss of any prospective income and equity value from such property. Any of these risks can place strains on the Company’s cash flows, reduce its ability to grow and adversely affect its results of operations.
 
The Company’s Financial Condition Could Be Adversely Affected by Financial Covenants
 
The Company’s credit facilities and the indentures under which its senior and subordinated unsecured indebtedness is, or may be, issued contain certain financial and operating covenants, including, among other things, certain coverage ratios, as well as limitations on the Company’s ability to incur secured and unsecured indebtedness, sell all or substantially all of its assets and engage in mergers and consolidations and certain acquisitions. These covenants could limit the Company’s ability to obtain additional funds needed to address cash shortfalls or pursue growth opportunities or transactions that would provide substantial return to its shareholders. In addition, a breach of these covenants could cause a default or accelerate some or all of the Company’s indebtedness, which could have a material adverse effect on its financial condition.
 
The Company’s Ability to Continue to Obtain Permanent Financing Cannot Be Assured
 
In the past, the Company has financed certain acquisition and development activities in part with proceeds from its credit facilities or offerings of its debt or equity securities. These financings have been, and may continue to be, replaced by other financings. However, the Company may not be able to obtain more permanent financing for future acquisitions or development activities on acceptable terms. If market interest rates were to increase or other unfavorable market conditions were to exist at a time when amounts were outstanding under the Company’s credit facilities, or if other variable-rate debt was outstanding, the Company’s interest costs would increase, causing potentially adverse effects on its financial condition and results of operations.
 
If the Company Fails to Qualify as a REIT in Any Taxable Year, It Will Be Subject to U.S. Federal Income Tax as a Regular Corporation and Could Have Significant Tax Liability
 
The Company intends to operate in a manner that allows it to qualify as a REIT for U.S. federal income tax purposes. However, REIT qualification requires that the Company satisfy numerous requirements (some on an annual or quarterly basis) established under highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”), for which there are a limited number of judicial or administrative interpretations. The Company’s status as a REIT requires an analysis of various factual matters and circumstances that are not entirely within its control. Accordingly, it is not certain that the Company will be able to qualify and remain qualified as a REIT for U.S. federal income tax purposes. Even a technical or inadvertent violation of the REIT requirements could jeopardize the Company’s REIT qualification. Furthermore, Congress or the Internal Revenue


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Service (IRS), might change the tax laws or regulations and the courts might issue new rulings, in each case potentially having retroactive effect that could make it more difficult or impossible for the Company to continue to qualify as a REIT. If the Company fails to qualify as a REIT in any tax year, then:
 
  •  The Company would be taxed as a regular domestic corporation, which, among other things, means that it would be unable to deduct distributions to its shareholders in computing its taxable income and would be subject to U.S. federal income tax on its taxable income at regular corporate rates;
 
  •  Any resulting tax liability could be substantial and would reduce the amount of cash available for distribution to shareholders and could force the Company to liquidate assets or take other actions that could have a detrimental effect on its operating results and
 
  •  Unless the Company was entitled to relief under applicable statutory provisions, it would be disqualified from treatment as a REIT for the four taxable years following the year during which the Company lost its qualification, and its cash available for distribution to its shareholders therefore would be reduced for each of the years in which the Company does not qualify as a REIT.
 
Even if the Company remains qualified as a REIT, it may face other tax liabilities that reduce its cash flow. The Company may also be subject to certain federal, state and local taxes on its income and property either directly or at the level of its subsidiaries. Any of these taxes would decrease cash available for distribution to the Company’s shareholders.
 
Compliance with REIT Requirements May Negatively Affect the Company’s Operating Decisions
 
To maintain its status as a REIT for U.S. federal income tax purposes, the Company must meet certain requirements, on an on-going basis, including requirements regarding its sources of income, the nature and diversification of its assets, the amounts the Company distributes to its shareholders and the ownership of its shares. The Company may also be required to make distributions to its shareholders when it does not have funds readily available for distribution or at times when the Company’s funds are otherwise needed to fund capital expenditures.
 
As a REIT, the Company must distribute at least 90% of its annual net taxable income (excluding net capital gains) to its shareholders. To the extent that the Company satisfies this distribution requirement, but distributes less than 100% of its net taxable income, the Company will be subject to U.S. federal corporate income tax on its undistributed taxable income. In addition, the Company will be subject to a 4% nondeductible excise tax if the actual amount paid to its shareholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. From time to time, the Company may generate taxable income greater than its income for financial reporting purposes, or its net taxable income may be greater than its cash flow available for distribution to its shareholders. If the Company does not have other funds available in these situations, it could be required to borrow funds, sell a portion of its securities at unfavorable prices or find other sources of funds in order to meet the REIT distribution requirements and to avoid corporate income tax and the 4% excise tax.
 
In addition, the REIT provisions of the Code impose a 100% tax on income from “prohibited transactions.” Prohibited transactions generally include sales of assets that constitute inventory or other property held for sale to customers in the ordinary course of business, other than foreclosure property. This 100% tax could impact the Company’s decisions to sell property if it believes such sales could be treated as a prohibited transaction. However, the Company would not be subject to this tax if it were to sell assets through a taxable REIT subsidiary. The Company will also be subject to a 100% tax on certain amounts if the economic arrangements between the Company and a taxable REIT subsidiary are not comparable to similar arrangements among unrelated parties.
 
Dividends Paid by REITs Generally Do Not Qualify for Reduced Tax Rates
 
In general, the maximum U.S. federal income tax rate for dividends paid to individual U.S. shareholders is 15% (through 2008). Unlike dividends received from a corporation that is not a REIT, the Company’s distributions to individual shareholders generally are not eligible for the reduced rates.


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Property Ownership Through Partnerships and Joint Ventures Could Limit the Company’s Control of Those Investments and Reduce Its Expected Return
 
Partnership or joint venture investments may involve risks not otherwise present for investments made solely by the Company, including the possibility that the Company’s partner or co-venturer might become bankrupt, that its partner or co-venturer might at any time have different interests or goals than the Company, and that its partner or co-venturer may take action contrary to the Company’s instructions, requests, policies or objectives, including the Company’s policy with respect to maintaining its qualification as a REIT. Other risks of joint venture investments include impasse on decisions, such as a sale, because neither the Company’s partner or co-venturer nor the Company would have full control over the partnership or joint venture. These factors could limit the return that the Company receives from such investments or cause its cash flows to be lower than its estimates. There is no limitation under the Company’s amended and restated Articles of Incorporation, or its code of regulations as to the amount of funds that the Company may invest in partnerships or joint ventures. As of December 31, 2006, the Company had approximately $291.7 million of investments in and advances to unconsolidated partnerships and joint ventures holding 167 operating shopping centers.
 
The Company’s joint venture with TIAA-CREF is subject to various closing conditions, and property ownership through partnerships and joint ventures, including with TIAA-CREF, could limit the Company’s control of those investments and reduce the expected return.
 
In addition, the acquisition of the 66 IRRETI properties by the proposed TIAA-CREF joint venture is subject to additional conditions and the TIAA-CREF joint venture may not elect to acquire all of such properties. If the TIAA-CREF joint venture does not close or the TIAA-CREF joint venture does not elect to purchase all 66 IRRETI properties, but the Company nevertheless consummates the merger with IRRETI, then the Company will have to seek alternative arrangements for the ownership and management of the properties expected to be held by the TIAA-CREF joint venture, which could have an adverse effect on the expected results of operations following the merger.
 
The Company Expects to Continue to Pursue International Expansion Opportunities That May Subject It to Different or Greater Risks Than Those Associated with the Company’s Domestic Operations.
 
The Company holds interests in a joint venture in Brazil and assets in Puerto Rico. The Company expects to pursue additional investment opportunities outside the United States. International development and ownership activities carry risks that are different from those the Company faces with its domestic properties and operations. These risks include:
 
  •  Adverse effects of changes in exchange rates for foreign currencies;
 
  •  Changes in foreign political environments;
 
  •  Challenges of complying with a wide variety of foreign laws including corporate governance, operations, taxes and litigation;
 
  •  Different lending practices;
 
  •  Cultural differences;
 
  •  Changes in applicable laws and regulations in the United States that affect foreign operations;
 
  •  Difficulties in managing international operations and
 
  •  Obstacles, including taxes, relating to the repatriation of earnings and cash.
 
Although the Company’s international activities currently are a relatively small portion of its business, to the extent the Company expands its international activities, these risks could increase in significance and adversely affect its results of operations and financial condition.


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The Company’s Inability to Realize the Anticipated Returns from Its Retail Real Estate Assets Outside the United States Could Adversely Affect Its Results of Operations
 
The Company may not realize the intended benefits of the transactions outside the United States as the Company may not have any prior experience with local economies or culture. The assets may not perform as well as the Company anticipates or may not be successfully integrated, or the Company may not realize the improvements in occupancy and operating results that it anticipated. In addition, the Company could be subject to local laws governing these properties, with which it has no prior experience, and which may present new challenges for the management of the Company’s operations. Each of these factors may adversely affect the Company’s ability to achieve anticipated return on investment, which could have an adverse effect on its results of operations.
 
The Company’s Real Estate Investments May Contain Environmental Risks That Could Adversely Affect Its Operating Results
 
The acquisition of certain assets may subject the Company to liabilities, including environmental liabilities. The Company’s operating expenses could be higher than anticipated due to the cost of complying with existing or future environmental laws and regulations. In addition, under various federal, state and local laws, ordinances and regulations, the Company may be considered an owner or operator of real property or to have arranged for the disposal or treatment of hazardous or toxic substances. As a result, the Company may become liable for the costs of removal or remediation of certain hazardous substances released on or in its property. The Company may also be liable for other potential costs that could relate to hazardous or toxic substances (including governmental fines and injuries to persons and property). The Company may incur such liability whether or not it knew of, or was responsible for, the presence of such hazardous or toxic substances. Such liability could be of substantial magnitude and divert management’s attention from other aspects of the Company’s business and, as a result, could have a material adverse effect on the Company’s operating results and financial condition, as well as its ability to make distributions to its shareholders.
 
An Uninsured Loss or a Loss That Exceeds the Policies on the Company’s Properties Could Subject the Company to Lost Capital or Revenue on Those Properties
 
Under the terms and conditions of the Company’s standard lease form, tenants generally are required to indemnify and hold the Company harmless from liabilities resulting from injury to persons or property, on or off the Company’s property, due to activities conducted by the tenant on its premises, unless due to the negligence or intentional misconduct of the Company or its agents. Additionally, tenants generally are required, at the tenant’s expense, to obtain and keep in full force during the term of the lease, liability and full replacement value personal property damage insurance policies. The Company has obtained comprehensive liability, casualty, flood, earthquake, windstorm and rental loss insurance policies on the properties. Some or all of these policies may involve substantial deductibles and certain exclusions. Although the Company requires tenants to provide evidence of their required liability and casualty insurance under the terms and conditions of the Company’s standard lease form, the Company cannot be assured that the tenants will properly maintain their insurance policies or have the ability to pay the deductibles. Should a loss occur that is uninsured or in an amount exceeding the combined aggregate limits for the policies noted above, or in the event of a loss that is subject to a substantial deductible under an insurance policy, the Company could lose all or part of its capital invested in, and anticipated revenue from, one or more of the properties, which could have a material adverse effect on the Company’s operating results and financial condition, as well as its ability to make distributions to shareholders.
 
Compliance with the Americans with Disabilities Act and Fire, Safety and Other Regulations May Require the Company to Make Unintended Expenditures That Could Adversely Impact the Company’s Cash Flows
 
All of the Company’s properties are required to comply with the Americans with Disabilities Act (“ADA”). The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers, and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both. While the tenants to whom the Company


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leases properties are obligated by law to comply with the ADA provisions, and typically under leases, tenants are obligated to cover costs associated with compliance, if required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these tenants to cover costs could be adversely affected. As a result, the Company could be required to expend funds to comply with the provisions of the ADA, which could adversely affect the results of operations and financial condition and its ability to make distributions to shareholders. In addition, the Company is required to operate the properties in compliance with applicable fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to the properties. The Company may be required to make substantial capital expenditures to comply with those requirements, and these expenditures could have a material adverse effect on its ability to meet its financial obligations and make distributions to the shareholders.
 
Changes in Market Conditions Could Adversely Affect the Market Price of the Company’s Publicly Traded Securities
 
As with other publicly traded securities, the market price of the Company’s publicly traded securities depends on various market conditions, which may change from time to time. Among the market conditions that may affect the market price of the Company’s publicly traded securities are the following:
 
  •  The extent of institutional investor interest in the Company;
 
  •  The reputation of REITs in general and the reputation of REITs with similar portfolios;
 
  •  The attractiveness of the securities of REITs in comparison to securities issued by other entities (including securities issued by other real estate companies);
 
  •  The Company’s financial condition and performance;
 
  •  The market’s perception of the Company’s growth potential and future cash dividends;
 
  •  An increase in market interest rates, which may lead prospective investors to demand a higher distribution rate in relation to the price paid for the Company’s shares;
 
  •  General economic and financial market conditions and
 
  •  Counterparties to certain transactions may enter into hedging transactions that could impact the price of the Company’s common shares. In August 2006, the Company entered into a capped call transaction in connection with the sale of its 3.50% convertible senior notes due 2011, and in December 2006, the Company entered into a forward sale agreement for DDR common shares.
 
The Company Can Issue Additional Securities Without Shareholder Approval
 
The Company can issue preferred, equity and common stock without shareholder approval subject to certain limitations in the Company’s Articles of Incorporation. Holders of preferred stock have priority over holders of common stock, and the issuance of additional shares of common stock reduces the interest of existing holders in the Company.
 
The Company’s Executive Officers Have Agreements That Provide Them with Benefits in the Event of a Change in Control of the Company or if Their Employment Agreements Are Not Renewed
 
The Company has entered into employment agreements with certain of its executive officers that provide them with severance benefits if their employment ends under certain circumstances following a change in control of the Company or if the Company terminates the executive officer “without cause” as defined in the employment agreements. These benefits could increase the cost to a potential acquirer of the Company and thereby prevent or deter a change in control of the Company that might involve a premium price for the common shares or otherwise adversely affect the interests of the shareholders.


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Item 1b.   UNRESOLVED STAFF COMMENTS
 
None
 
Item 2.   PROPERTIES
 
At December 31, 2006, the Portfolio Properties included 467 shopping centers (167 of which are owned through unconsolidated joint ventures and 39 that are consolidated by the Company) and seven business centers. The shopping centers consist of 446 community shopping centers, 17 enclosed mini-malls and four lifestyle centers. The Portfolio Properties also include more than 1,170 undeveloped acres primarily located adjacent to certain of the shopping centers. The shopping centers aggregate approximately 85.3 million square feet of Company-owned GLA (approximately 109.1 million square feet of total GLA) and are located in 44 states, plus Puerto Rico and Brazil, principally in the Southeast and Midwest, with significant concentrations in New York, Florida and Ohio. The business centers aggregate 0.8 million square feet of Company-owned GLA and are located in five states, primarily in Maryland.
 
The Company’s shopping centers are designed to attract local area customers and are typically anchored by two or more national tenant anchors (such as Wal-Mart, Kohl’s or Target). The properties often include a supermarket, drug store, junior department store and/or other major “category-killer” discount retailers as additional anchors. The tenants of the shopping centers typically offer day-to-day necessities rather than high-priced luxury items. As one of the nation’s largest owners and operators of shopping centers, the Company has established close relationships with a large number of major national and regional retailers, many of which occupy space in the shopping centers.
 
Shopping centers make up the largest portion of the Company’s portfolio, comprising 78.6 million (92.1%) square feet of Company-owned GLA. Enclosed mini-malls account for 5.1 million (6.0 %) square feet of Company-owned GLA, and lifestyle centers account for 1.6 million (1.9%) square feet of the Company-owned GLA. At December 31, 2006, the average annualized base rent per square foot of Company-owned GLA of the Company’s 261 wholly-owned shopping centers was $10.80. For the 167 shopping centers owned through joint ventures, 39 of which are consolidated assets, annualized base rent per square foot was $12.69. The average annualized base rent per square foot of the Company’s business centers was $11.18.
 
Information as to tenants that individually accounted for at least 1.0% of total annualized base rent of the Company’s properties at December 31, 2006, is set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of this Annual Report on Form 10-K. In addition, as of December 31, 2006, unless otherwise indicated, with respect to the 467 shopping centers:
 
  •  129 of these properties are anchored by a Wal-Mart, Kohl’s or Target store;
 
  •  These properties range in size from 10,000 square feet to approximately 1,100,000 square feet of total GLA (with 73 properties exceeding 400,000 square feet of total GLA);
 
  •  Approximately 65.8% of the aggregate Company-owned GLA of these properties is leased to national tenants, including subsidiaries, approximately 20.1% is leased to regional tenants and approximately 9.3% is leased to local tenants;
 
  •  Approximately 95.2% of the aggregate Company-owned GLA of these properties was occupied as of December 31, 2006. With respect to the properties owned by the Company as of December 31 for each of the last five years beginning with 2002, between 94.3% and 95.3% of aggregate Company-owned GLA of these properties was occupied;
 
  •  Eight wholly-owned properties are currently being expanded by the Company, and six properties owned by joint ventures are being expanded. The Company is pursuing the expansion of 12 additional wholly-owned properties and three joint venture properties and
 
  •  Seven wholly-owned properties and four joint venture properties are currently being developed by the Company. The Company is pursuing the development of two additional wholly-owned properties.


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Tenant Lease Expirations and Renewals
 
The following table shows tenant lease expirations for the next ten years at the Company’s 261 wholly-owned shopping centers and seven business centers, assuming that none of the tenants exercise any of their renewal options:
 
                                                 
                      Average
             
                      Base
    Percentage of
    Percentage of
 
                Annualized
    Rent Per
    Total Leased
    Total Base
 
          Approximate
    Base Rent
    Sq. Foot
    Sq. Footage
    Rental Revenues
 
    No. of
    Lease Area in
    Under Expiring
    Under
    Represented
    Represented by
 
Expiration
  Leases
    Square Feet
    Leases
    Expiring
    by Expiring
    Expiring
 
Year
  Expiring     (Thousands)     (Thousands)     Leases     Leases     Leases  
 
2007
    796       3,551     $ 39,425     $ 11.10       7.0 %     7.8 %
2008
    707       3,670       43,679       11.90       7.2       8.6  
2009
    674       4,191       49,032       11.70       8.2       9.6  
2010
    610       3,969       44,521       11.22       7.8       8.8  
2011
    640       5,063       61,903       12.23       9.9       12.2  
2012
    295       3,860       42,499       11.01       7.6       8.4  
2013
    156       2,724       27,570       10.12       5.4       5.4  
2014
    165       2,934       31,271       10.66       5.8       6.2  
2015
    163       2,751       30,049       10.92       5.4       5.9  
2016
    148       2,508       29,952       11.94       4.9       5.9  
                                                 
Total
    4,354       35,221     $ 399,901     $ 11.35       69.2 %     78.8 %
                                                 
 
The following table shows tenant lease expirations for the next ten years at the Company’s 167 joint venture shopping centers, including 39 consolidated shopping centers, assuming that none of the tenants exercise any of their renewal options:
 
                                                 
                      Average
             
                      Base
    Percentage of
    Percentage of
 
                Annualized
    Rent Per
    Total Leased
    Total Base
 
          Approximate
    Base Rent
    Sq. Foot
    Sq. Footage
    Rental Revenues
 
    No. of
    Lease Area in
    Under Expiring
    Under
    Represented
    Represented by
 
Expiration
  Leases
    Square Feet
    Leases
    Expiring
    by Expiring
    Expiring
 
Year
  Expiring     (Thousands)     (Thousands)     Leases     Leases     Leases  
 
2007
    943       2,313     $ 43,914     $ 18.99       6.6 %     10.6 %
2008
    509       1,758       26,631       15.15       5.0       6.4  
2009
    620       2,647       36,139       13.65       7.5       8.7  
2010
    516       3,099       43,388       14.00       8.8       10.5  
2011
    591       3,003       51,045       17.00       8.5       12.3  
2012
    165       2,044       25,142       12.30       5.8       6.1  
2013
    112       1,361       17,932       13.18       3.9       4.3  
2014
    111       2,013       25,212       12.52       5.7       6.1  
2015
    80       1,709       19,305       11.30       4.9       4.7  
2016
    91       2,387       23,981       10.05       6.8       5.8  
                                                 
Total
    3,738       22,334     $ 312,689     $ 14.00       63.5 %     75.5 %
                                                 
 
The rental payments under certain of these leases will remain constant until the expiration of their base terms, regardless of inflationary increases. There can be no assurance that any of these leases will be renewed or that any replacement tenants will be obtained if not renewed.


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Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
    Alabama                                                                                
1
  Birmingham, AL   Brook Highland Plaza
5291 Hwy 280 South
    35242     SC     Fee     1994/2003     1994       100%       423,493     $ 4,685,857     $ 10.01       94.9%     Dick’s Sporting Goods (2017), Goody’s (2009), Regal Cinemas (2014), Stein Mart (2011), Office Max (2011), Michaels (2009), Home Goods (2016), Books-A-Million (2010), Ross Dress For Less (2014), Lowe’s Home Improvement (Not Owned)
2
  Birmingham, AL   Eastwood Festival Center
7001 Crestwood Boulevard
    35210     SC     Fee     1989/1999     1995       100%       300,280     $ 1,458,818     $ 7.30       66.6%     Office Depot (2007), Dollar Tree (2009), Burlington Coat Factory (2008), Home Depot (Not Owned), Western Supermarkets (Not Owned)
3
  Birmingham, AL   Riverchase Promenade
Montgomery Highway
    35244     SC     Fee (3 )   1989     2002       14.5%       120,108     $ 1,761,372     $ 15.42       95.1%     Marshall’s (2008), Goody’s (Not Owned), Toys ’R Us (Not Owned)
4
  Gadsden, AL   East Side Plaza
3010-3036 E. Meighan Boulevard
    35903     SC     Fee     1979/2004     2003       100%       85,196     $ 271,508     $ 5.12       62.3%     Fred’s (2009), Food World (Not Owned)
5
  Opelika, AL   Pepperell Corners
2300-2600 Pepperell Parkway OP
    36801     SC     Fee     1995     2003       100%       306,224     $ 1,506,377     $ 5.81       84.7%     Lowe’s Home Improvement (2012), Goody’s (2010), Steve & Barry’s (2014)
6
  Scottsboro, AL   Scottsboro Marketplace
24833 John P Reid Parkway
    35766     SC     Fee     1999     2003       100%       40,560     $ 455,004     $ 11.22       100%     Goody’s (2011), Wal-Mart (Not Owned)
    Arizona                                                                                
7
  Ahwatukee, AZ   Foothills Towne Center (II)
4711 East Ray Road
    85044     SC     Fee (3 )   1996/1997/
1999
    1997       50%       647,883     $ 10,286,617     $ 15.62       98.1%     Jo-Ann Stores (2010), Best Buy (2014), Bassett Furniture (2010), AMC Theatres (2021), Ashley Furniture Homestore (2011), Barnes & Noble (2012), Stein Mart (2011), Babies ’R Us (2007), Ross Dress For Less (2012), Office Max (2012)
8
  Chandler, AZ   Mervyns Plaza
2992 N. Alma School Road
    85224     MV     Fee     1985     2005       50%       74,862     $ 673,200     $ 8.99       100%     Mervyns (2020)
9
  Mesa, AZ   Superstition Springs Center
6505 East Southern Avenue
    85206     MV     Fee     1990     2005       50%       86,858     $ 1,151,580     $ 13.26       100%     Mervyns (2020)
10
  Phoenix, AZ   Paradise Village Gateway
Tatum & Shea Boulevards
    85028     SC     Fee     1997/2004     2003       67%       223,161     $ 4,083,270     $ 17.54       93.4%     Bed Bath & Beyond (2011), Ross Dress For Less (2007), PETsMART (2015), Staples (2010), Albertson’s-Osco Drug (Not Owned)


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Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
11
  Phoenix, AZ   Deer Valley Towne Center
2805 West Agua Fria Freeway
    85027     SC     Fee     1996     1999       100%       197,009     $ 3,106,346     $ 15.77       100%     Ross Dress For Less (2009), Office Max (2013), PETsMART (2014), Michaels (2009), Target (Not Owned), AMC Theatres (Not Owned)
12
  Phoenix, AZ   Deer Valley
4255 W. Thunderbird Road
    85053     MV     Fee     1979     2005       50%       81,009     $ 819,060     $ 10.11       100%     Mervyns (2020)
13
  Phoenix, AZ   Arrowhead Crossing
7553 West Bell Road
    85382     SC     Fee (3 )   1995     1996       50%       346,428     $ 4,551,902     $ 13.41       98.0%     Staples (2009), CompUSA (2013), Mac Frugal’s (2010), Barnes & Noble (2011), T.J. Maxx (2011), Circuit City (2016), DSW Shoe Warehouse (2017), Bassett Furniture (2009), Linens ’N Things (2011), Fry’s (Not Owned)
14
  Phoenix, AZ   Silver Creek Plaza
4710 E. Ray Road
    85044     MV     Fee     1994     2005       50%       76,214     $ 855,780     $ 11.23       100%     Mervyns (2020)
15
  Phoenix, AZ   Phoenix Spectrum Mall
1641 West Bethany Home Road
    85015     SC     GL (3 )   1961     2004       20%       391,436     $ 5,313,524     $ 9.01       100%     Costco Wholesale (2020), Ross Dress For Less (2013), PETsMART (2019), Harkins Theatre (2002), Wal-Mart (Not Owned), Dillard’s (Not Owned)
16
  Tucson, AZ   Santa Cruz Plaza
3660 S. 16th Avenue
    85713     MV     Fee     1982     2005       50%       76,126     $ 513,060     $ 6.74       100%     Mervyns (2020)
    Arkansas                                                                                
17
  Fayetteville, AR   Spring Creek Centre
464 E. Joyce Boulevard
    72703     SC     Fee (3 )   1997/1999/
2000/2001
    1997       14.5%       262,827     $ 3,078,826     $ 11.71       100%     T.J. Maxx (2011), Best Buy (2017), Goody’s (2013), Old Navy (2010), Bed Bath & Beyond (2009), Wal-Mart Super Center (Not Owned), Home Depot (Not Owned)
18
  Fayetteville, AR   Steele Crossing
3533-3595 N. Shiloh Drive
    72703     SC     Fee (3 )   2003     2003       14.5%       50,314     $ 1,005,371     $ 14.40       100%     Kohl’s (Not Owned), Target (Not Owned)
19
  N. Little Rock, AR   McCain Plaza
4124 East McCain Boulevard
    72117     SC     Fee     1991/2004     1994       100%       295,013     $ 1,866,558     $ 6.88       92.0%     Bed Bath & Beyond (2013), T.J. Maxx (2007), Cinemark (2011), Burlington Coat Factory (2014), Michaels (2014), Sports Authority (2013)
20
  Russellville, AR   Valley Park Centre
3093 East Main Street
    72801     SC     Fee     1992     1994       100%       205,429     $ 1,427,695     $ 7.33       94.8%     Hobby Lobby (2016), Stage (2010), J.C. Penney (2012)


18


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
    Brazil                                                                                
21
  Brasilia   Patio Brasil Shopping
SCS Quadra 07 BL A
    70307-902     SC     Fee     1997/2001     2006       4.85%       329,642     $ 10,592,498     $ 32.59       98.6%     Lojas Americanas (2999), Otoch (2007), Riachuelo (2007), C&A (Not Owned) (2999), Renner (2011), Centauro (2007)
22
  Capinas   Parque Dom Pedro
Av. Guilherme Campos, 500
    01387-001     SC     Fee     2001     2006       48.27%       1,367,064     $ 21,271,498     $ 16.18       96.2%     Lojas Americanas (2014), Casas Bahia (2011), Centauro (2012), Marisa (2016), Big (2021), Etna (2015), Pernambucanas (2012), Riachuelo (2012), C&A (Not Owned) (2999), Zara (2014), Renner (2014), FNAC (2012)
23
  Estrada Do Campo
Limpo
  Campo Limpo Shopping
Estrada Do Campo Limpo 459
    05777-001     SC     Fee     2005     2006       9.32%       215,390     $ 1,952,987     $ 10.47       86.6%     C&A (2016), Marisa (2016), Compre Bem (2012), Casas Bahia (2011)
24
  Franca   Franca Shopping
Av. Rio Negro, 1100
    14406-901     SC     Fee     1993     2006       30.06%       194,452     $ 1,408,105     $ 8.19       88.4%     C&A (2016), Casas Bahia (2009), Magazine Luiza (2010), Lojas Americanas (2014), C&C (2011)
25
  Sao Bernado Do
Campo
  Shopping Metropole
Praca Samuel Sabatine, 200
    09750-902     SC     Fee     1980/1995/1997     2006       4.66%       273,613     $ 7,310,718     $ 31.12       85.9%     Lojas Americanas (2007), Renner (2007)
26
  Sao Paulo   Shopping Penha
Ruo Dr Joao Ribeiro, 304
    03634-010     SC     Fee     1992/2004     2006       34.1%       321,299     $ 5,052,366     $ 16.83       93.4%     Marisa & Familia (2014), Sonda (2014), Lojas Americanas (2013), Kalunga (2010), C&A (2014)
27
  Sao Paulo   Plaza Sul
Praca Leonor Kaupa
    04151-100     SC     Fee     1994     2006       9.32%       265,322     $ 6,791,170     $ 31.31       81.7%     Lojas Americanas (2011), C&A (Not Owned) (2020), Luigi Bertolli (2007), Camicado (2010), Monday ACADEMIA (2009), Renner (2010), DEPAMERICANAS (2011), DEPOSITO VIVENDA DO CAMARAO (2007), DEP ShoeBIZ (2007)
28
  Sao Paulo   Boavista Shopping
Rua Borba Gato, 59
    04747-030     SC     Fee     2004     2006       46.61%       279,933     $ 3,023,762     $ 12.95       83.4%     C&A (2014), Marisa & Familia (2014), Sonda (2999)
29
  Sao Paula   Tivoli Shopping
Av. Santa Barbara, 777
    13456-080     SC     Fee     1993/2006     2006       11.65%       221,910     $ 2,401,498     $ 11.30       95.8%     Lojas Americanas (2014), Unimed (2010), Magazine Luiza (2008), C&A (Not Owned) (2016), Paulistao (2016)


19


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
    California                                                                                
30
  Anaheim, CA   Anaheim Hills Festival Center
8100 E. Santa Ana Canyon Road
    92808     MV     Fee     1992     2005       50%       77,883     $ 1,301,520     $ 16.71       100%     Mervyns (2020)
31
  Antioch, CA   County East Shopping Center
2602 Somersville Road
    94509     MV     Fee     1970     2005       50%       75,339     $ 1,181,160     $ 15.68       100%     Mervyns (2020)
32
  Buena Park, CA   Buena Park Mall and Entertain
100 Buena Park
    90620     SC     Fee (3 )   1965     2004       50%       723,988     $ 9,244,282     $ 16.44       76.4%     Circuit City (2018), DSW Shoe Warehouse (2013), Ross Dress For Less (2010), Bed Bath & Beyond (2011), Steve & Barry’s (2014), Kohl’s (2024), Krikorian Premier Theatres (2023), Michaels (2014), Sears (Not Owned), Wal-Mart (Not Owned)
33
  Burbank, CA   Burbank Town Center
245 E. Magnolia Boulevard
    91502     MV     GL     1991     2005       50%       89,182     $ 1,624,860     $ 18.22       100%     Mervyns (2020)
34
  Chino, CA   Chino Town Square Shopping
5517 Philadelphia Street
    91710     MV     Fee     1986     2005       50%       81,282     $ 870,060     $ 10.70       100%     Mervyns (2020)
35
  Clovis, CA   Sierra Vista Mall
1000 Shaw Avenue
    93612     MV     GL     1988     2005       50%       75,088     $ 714,000     $ 9.51       100%     Mervyns (2020)
36
  El Cajon, CA   Westfield Shopping Town
565 Fletcher Parkway
    92020     MV     GL     1989     2005       50%       85,744     $ 1,253,580     $ 14.62       100%     Mervyns (2020)
37
  Fairfield, CA   Westfield Solano Mall
1451 Gateway Boulevard
    94533     MV     Fee     1981     2005       50%       89,223     $ 1,625,880     $ 18.22       100%     Mervyns (2020)
38
  Folsom, CA   Folsom Square
1010 E. Bidwell Street
    95630     MV     Fee     2003     2005       50%       79,080     $ 1,154,640     $ 14.60       100%     Mervyns (2020)
39
  Foothills Ranch, CA   Foothills Ranch Town Center
26732 Portola Parkway
    92610     MV     Fee     1993     2005       50%       77,934     $ 1,050,600     $ 13.48       100%     Mervyns (2020)
40
  Garden Grove, CA   Garden Grove Center
13092 Harbor Boulevard
    92843     MV     Fee     1982     2005       50%       83,746     $ 752,760     $ 8.99       100%     Mervyns (2020)
41
  Lancaster, CA   Valley Central Discount
44707-44765 Valley Central Way
    93536     SC     Fee (3 )   1990     2001       20%       353,483     $ 3,784,221     $ 10.77       99.4%     Marshall’s (2007), Circuit City (2011), Staples (2008), Cinemark Movies 12 (2017), Wal-Mart (2010), 99 Cents Only (2014), Costco (Not Owned)
42
  Lompoc, CA   Mission Plaza
1600 N. H Street
    93436     MV     Fee     1992     2005       50%       62,523     $ 350,880     $ 5.61       100%     Mervyns (2020)


20


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
43
  Long Beach, CA   The Pike
95 South Pine Avenue
    90802     SC     Fee     2005     1*       100%       220,913     $ 3,217,049     $ 14.06       88.1%     Cinemark (2008), Borders Books and Music (2016), Club V2O (2019)
44
  Madera, CA   Madera
1467 Country Club Drive
    93638     MV     Fee     1990     2005       50%       59,720     $ 200,940     $ 3.36       100%     Mervyns (2020)
45
  North Fullerton, CA   North Fullerton
200 Imperial Highway
    92835     MV     Fee     1991     2005       50%       76,360     $ 772,140     $ 10.11       100%     Mervyns (2020)
46
  Northridge, CA   Northridge Plaza
8800 Corbin Avenue
    91324     MV     GL     1980     2005       50%       75,326     $ 542,640     $ 7.20       100%     Mervyns (2020)
47
  Oceanside, CA   Ocean Place Cinemas
401-409 Mission Avenue
    92054     SC     Fee     2000     1*       100%       80,450     $ 1,266,104     $ 16.36       96.2%     Regal Cinemas (2014)
48
  Palmdale, CA   Antelope Valley Mall
1305 W. Rancho Vista Boulevard
    93551     MV     Fee     1992     2005       50%       76,550     $ 829,260     $ 10.83       100%     Mervyns (2020)
49
  Pasadena, CA   Paseo Colorado
280 East Colorado Boulevard
    91101     SC     Fee     2001     2003       100%       556,961     $ 11,295,175     $ 21.72       93.4%     Gelson’s Market (2021), Loehmann’s (2015), Equinox (2017), Macy’s (2010), Pacific Theatres Exhib. Corp (2016), DSW Shoe Warehouse (2011), J. Jill (2012), PF Changs China Bistro (2016), Bombay Company (2011), Tommy Bahama (2011), Sephora (2011)
50
  Pleasant Hill, CA   Downtown Pleasant Hill
2255 Contra Costa Blvd. #101
    94523     SC     Fee (3 )   1999/2000     2001       20%       345,930     $ 6,739,976     $ 20.84       93.5%     Albertson’s (2020), Michaels (2010), Borders Books and Music (2015), Century Theatre (2016), Bed Bath & Beyond (2010), Ross Dress For Less (2010)
51
  Porterville, CA   Porterville Market Place
1275 W. Henderson Avenue
    93257     MV     Fee     1991     2005       50%       76,378     $ 515,100     $ 6.74       100%     Mervyns (2020)
52
  Redding, CA   Shasta Center
1755 Hilltop Drive
    96002     MV     Fee     1984     2005       50%       61,363     $ 620,160     $ 10.11       100%     Mervyns (2020)
53
  Richmond, CA   Hilltop Plaza
3401 Blume Drive
    94806     SC     Fee (3 )   1996/2000     2002       20%       245,774     $ 3,759,633     $ 15.49       98.8%     Office Max (2011), PETsMART (2012), Ross Dress For Less (2008), Barnes & Noble (2011), Circuit City (2017), Century Theatre (2016)
54
  San Diego, CA   Southland Shopping Plaza
575 Saturn Boulevard
    92154     MV     Fee     1982     2005       50%       75,207     $ 1,013,880     $ 13.48       100%     Mervyns (2020)
55
  San Diego, CA   College Grove Shopping Center
3450 College Avenue
    92115     MV     Fee     1991     2005       50%       73,872     $ 846,576     $ 11.46       100%     Mervyns (2020)


21


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
56
  San Francisco, CA   Van Ness Plaza 215
1000 Van Ness Avenue
    94109     SC     GL     1998     2002       100%       123,755     $ 3,796,758     $ 36.78       83.4%     AMC Theatres (2030), Crunch Fitness (2008)
57
  Santa Maria, CA   Town Center West
201 Town Center West
    93458     MV     Fee     1988     2005       50%       84,886     $ 762,960     $ 8.99       100%     Mervyns (2020)
58
  Santa Rosa, CA   Santa Rosa Plaza
600 Santa Rosa Plaza
    95401     MV     Fee     1981     2005       50%       90,348     $ 1,526,940     $ 16.90       100%     Mervyns (2020)
59
  Slatten Ranch, CA   Slatten Ranch Shopping Center
5849 Lone Tree Way
    94531     MV     Fee     2002     2005       50%       78,819     $ 1,328,040     $ 16.85       100%     Mervyns (2020)
60
  Sonora, CA   Sonora Crossroad Shopping
1151 Sanguinetti Road
    95370     MV     Fee     1993     2005       50%       62,214     $ 733,380     $ 11.79       100%     Mervyns (2020)
61
  Tulare, CA   Arbor Faire Shopping Center
1675 Hillman Street
    93274     MV     Fee     1991     2005       50%       62,947     $ 566,100     $ 8.99       100%     Mervyns (2020)
62
  Ukiah, CA   Ukiah
437 North Orchard Avenue
    95482     MV     Fee     1990     2005       50%       58,841     $ 330,480     $ 5.62       100%     Mervyns (2020)
63
  Valencia, CA   24235 Magic Mountain Parkway
    91355     MV     GL     1986     2006       100%       75,590     $ 951,000     $ 12.58       100%     Mervyns (2020)
64
  West Covina, CA   West Covina Shopping Center
2753 E. Eastland Center Drive
    91791     MV     GL     1979     2005       50%       79,800     $ 1,545,300     $ 19.36       100%     Mervyns (2020)
    Colorado                                                                                
65
  Alamosa, CO   Alamosa Plaza
145 Craft Drive
    81101     SC     Fee     1986     1*/2*       100%       19,875     $ 76,213     $ 7.53       88.7%     City Market, Inc. (Not Owned), Big ‘‘R” (Not Owned)
66
  Aurora, CO   Pioneer Hills
5400-5820 South Parker
    80012     SC     Fee (3 )   2003     2003       14.5%       127,215     $ 2,437,017     $ 17.52       100%     Bed Bath & Beyond (2012), Office Depot (2017), Home Depot (Not Owned), Wal-Mart (Not Owned)
67
  Broomfield, CO   Flatiron Marketplace Garden
1 West Flatiron Circle
    80021     SC     Fee     2001     2003       100%       245,182     $ 5,066,906     $ 20.65       95.8%     Nordstrom Rack (2011), Linens ’N Things (2017), Best Buy (2016), Office Depot (2016), Great Indoors (Not Owned)
68
  Denver, CO   Tamarack Square
777 East Hampden
    80231     SC     Fee     1976     2001       100%       174,780     $ 1,936,476     $ 13.49       70.8%     Regency Theatres Tamarac Sq. (2008)


22


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
69
  Denver, CO   Centennial Promenade
9555 East County Line Road
    80223     SC     Fee     1997/2002     1997       100%       408,337     $ 6,856,637     $ 16.79       100%     Golfsmith Golf Center (2012), Soundtrack (2017), Ross Dress For Less (2008), Office Max (2012), Michaels (2007), Toys ’R Us (2011), Borders Books and Music (2017), Loehmann’s (2012), Home Depot (Not Owned), Recreational Equipment (Not Owned)
70
  Denver, CO   University Hills
2730 South Colorado Boulevard
    80222     SC     Fee     1997     2003       100%       244,383     $ 4,107,334     $ 16.81       100%     Linens ’N Things (2013), Pier 1 Imports (2014), Office Max (2012), King Soopers (2017)
71
  Fort Collins, CO   Mullberry and Lemay Crossings
Mullberry Street & S. Lemay Avenue
    80525     SC     Fee     2004     2003       100%       18,988     $ 425,171     $ 22.39       100%     Wal-Mart (Not Owned), Home Depot (Not Owned)
72
  Littleton, CO   Aspen Grove
7301 South Santa Fe
    80120     LC     Fee     2002     1*       100%       231,450     $ 6,608,751     $ 28.10       95.2%     Coldwater Creek (2011), Talbots (2012), Ann Taylor (2012), J. Crew (2012), Banana Repubic (2012), Gap (2012), Williams-Sonoma (2014), J. Jill (2012), Bombay Company (2012), Pier 1 Imports (2011), Joseph A. Bank Clothers (2012), Buca di Beppo (2013), Champps (2022), Pottery Barn (2014)
73
  Parker, CO   Flatacres Marketcenter
South Parker Road
    80134     SC     GL (3 )   2003     2003       14.5%       116,644     $ 2,036,712     $ 14.89       100%     Bed Bath & Beyond (2014), Gart Sports (2014), Michaels (2013), Kohl’s (Not Owned)
74
  Parker, CO   Parker Pavilions
11153-11183 South Parker Road
    80134     SC     Fee (3 )   2003     2003       14.5%       89,631     $ 1,717,576     $ 18.82       96.0%     Office Depot (2016), Home Depot (Not Owned), Wal-Mart (Not Owned)
    Connecticut                                                                                
75
  Plainville, CT   Connecticut Commons
I-84 & Route 9
    06062     SC     Fee (3 )   1999/2001     1*       14.5%       463,394     $ 6,078,340     $ 11.81       93.9%     Lowe’s Home Improvement (2019), Kohl’s (2022), DSW Shoe Warehouse (2015), Dick’s Sporting Goods (2020), PETsMART (2015), A.C. Moore (2014), Old Navy (2011), Linens ’N Things (2017), Plainville Theatre (Not Owned)


23


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
    Florida                                                                                
76
  Bayonet Point, FL   Point Plaza
US 19 & SR 52
    34667     SC     Fee     1985/2003     1*/2*       100%       209,714     $ 1,368,254     $ 6.52       100%     Publix Super Markets (2010), Beall’s (2014), T.J. Maxx (2010)
77
  Boynton Bay, FL   Meadows Square
Hypoluxo Road & N. Congress Avenue
    33461     SC     Fee     1986     2004       100%       106,224     $ 1,430,752     $ 13.92       96.8%     Publix Super Markets (2011)
78
  Brandon, FL   Kmart Shopping Center
1602 Brandon Boulevard
    33511     SC     GL     1972/1997/
2003
    2*       100%       161,900     $ 787,939     $ 3.60       100%     Kmart (2007), Kane Furniture (Not Owned)
79
  Brandon, FL   Lake Brandon Plaza
Causeway Boulevard
    33511     SC     Fee (3 )   1999     2003       14.5%       148,267     $ 1,887,491     $ 11.65       100%     CompUSA (2017), Jo-Ann Stores (2017), Publix Super Markets (2019), Babies ’R Us (Not Owned)
80
  Brandon, FL   Lake Brandon Village
Causeway Boulevard
    33511     SC     Fee (3 )   1997/2004     2003       14.5%       113,986     $ 1,485,688     $ 13.03       100%     Linens ’N Things (2014), Sports Authority (2018), PETsMART (2020), Lowe’s Home Improvement (Not Owned)
81
  Crystal River, FL   Crystal River Plaza
420 Sun Coast Highway
    33523     SC     Fee     1986/2001     1*/2*       100%       160,135     $ 768,030     $ 7.39       64.9%     Beall’s (2012), Beall’s Outlet (2011)
82
  Daytona Beach, FL   Volusia
1808 W. International Speedway
    32114     SC     Fee     1984     2001       100%       76,087     $ 885,207     $ 12.83       90.7%     Marshall’s (2010)
83
  Englewood, FL   Rotondo Plaza
5855 Placida Road
    34224     SC     Fee     1991     2004       100%       46,835     $ 450,719     $ 9.92       97.0%     Kash N’ Karry (2011)
84
  Gulf Breeze, FL   Gulf Breeze Marketplace
3749-3767 Gulf Breeze Parkway
    32561     SC     Fee     1998     2003       100%       29,827     $ 415,604     $ 15.97       87.3%     Lowe’s Home Improvement (Not Owned) Wal-Mart (Not Owned)
85
  Jacksonville, FL   Jacksonville Regional
300 Dunn Avenue
    32218     SC     Fee     1988     1995       100%       219,735     $ 1,412,132     $ 6.72       95.6%     J.C. Penney (2007) Winn Dixie Stores (2009)
86
  Jacksonville, FL   Arlington Road Plaza
926 Arlington Road
    32211     SC     Fee     1990/1999     2004       100%       182,098     $ 861,692     $ 6.95       68.1%     Food Lion (2010)
87
  Lakeland, FL   Highlands Plaza Shopping Center
2228 Lakelands Highland Road
    33803     SC     Fee     1990     2004       100%       102,572     $ 803,907     $ 8.50       92.2%     Winn Dixie Stores (2017)
88
  Marianna, FL   The Crossroads
2814-2822 Highway 71
    32446     SC     Fee     1990     1*/2*       100%       63,894     $ 309,150     $ 5.45       88.9%     Beall’s (2008)
89
  Miami, FL   The Shops of Midtown
3401 North Miami Avenue
    33127     SC     Fee     2006     1*       100%       208,976     $ 782,760     $ 3.75       100%     Circuit City (2022)


24


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
90
  Naples, FL   Carillon Place
5010 Airport Road North
    33942     SC     Fee (3 )   1994     1995       14.5%       267,808     $ 3,141,120     $ 11.98       97.9%     Wal-Mart (2014), T.J. Maxx (2009), Circuit City (2015), Ross Dress For Less (2010), Office Max (2010)
91
  Ocala, FL   Ocala West
2400 SW College Road
    32674     SC     Fee     1991     2003       100%       104,563     $ 832,398     $ 7.96       100%     Sports Authority (2012), Hobby Lobby (2016)
92
  Orange Park, FL   The Village Shopping Center
950 Blanding Boulevard
    32065     SC     Fee     1993/2000     2004       100%       72,531     $ 695,320     $ 9.59       100%     Beall’s (2009), Albertson’s (Not Owned)
93
  Ormond Beach, FL   Ormond Towne Square
1458 West Granada Boulevard
    32174     SC     Fee     1993     1994       100%       234,042     $ 1,925,447     $ 8.67       94.8%     Beall’s (2018), Ross Dress For Less (2016), Publix Super Markets (2013)
94
  Oviedo, FL   Oviedo Park Crossing
Rte. 417 & Red Bug Lake Road
    32765     SC     Fee (3 )   1999     1*       20%       186,212     $ 2,020,892     $ 10.85       100%     Office Max (2014), Ross Dress For Less (2010), Michaels (2009), T.J. Maxx (2010), Linens ’N Things (2011), Lowe’s Home Improvement (Not Owned)
95
  Palm Harbor, FL   The Shoppes of Boot Ranch
300 East Lake Road
    34685     SC     Fee     1990     1995       100%       52,395     $ 963,566     $ 18.39       100%     Albertson’s (Not Owned), Target (Not Owned)
96
  Pensacola, FL   Palafox Square
8934 Pensacola Boulevard
    32534     SC     Fee     1988/1997/
1999
    1*/2*       100%       17,150     $ 243,830     $ 14.22       100%     Wal-Mart (Not Owned)
97
  Spring Hill, FL   Mariner Square
13050 Cortez Boulevard
    34613     SC     Fee     1988/1997     1*/2*       100%       188,924     $ 1,625,916     $ 8.45       98.8%     Beall’s (2011), Ross Dress For Less (2014), Wal-Mart (Not Owned)
98
  Tallahassee, FL   Capital West
4330 West Tennessee Street
    32312     SC     Fee     1994/2004     2003       100%       58,386     $ 437,776     $ 7.71       97.3%     Beall’s Outlet (2009), Wal-Mart (Not Owned)
99
  Tampa, FL   North Pointe Plaza
15001-15233 North Dale Mabry
    33618     SC     Fee (3 )   1990     1*/2*       20%       104,460     $ 1,301,376     $ 12.70       98.1%     Publix Super Markets (2010), Wal-Mart (Not Owned)
100
  Tampa, FL   Horizon Park Shopping Center
3908 West Hillsborough Highway
    33614     SC     Fee     1987/2003     2004       100%       215,817     $ 1,771,557     $ 9.97       82.3%     Northern Tool (2015), Babies ’R Us (2008), Pearl Artist & Craft Supply (2007)
101
  Tampa, FL   Town ’N Country
7021-7091 West Waters Avenue
    33634     SC     Fee     1990     1*/2*       100%       134,309     $ 1,026,791     $ 8.27       92.5%     Beall’s (2007), Kash N Karry (2010), Wal-Mart (Not Owned)
102
  Tarpon Springs, FL   Tarpon Square
41232 US 19, North
    34689     SC     Fee     1974/1998     1*/2*       100%       198,797     $ 1,402,282     $ 6.75       100%     Kmart (2009), Big Lots (2012), Staples (2013)
103
  West Pasco, FL   Pasco Square
7201 County Road 54
    34653     SC     Fee     1986     1*/2*       100%       135,421     $ 793,789     $ 7.25       80.8%     Beall’s Outlet (2013), Dollar General (2016), Wal-Mart (Not Owned)


25


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
    Georgia                                                                                
104
  Athens, GA   Athens East
4375 Lexington Road
    30605     SC     Fee     2000     2003       100%       24,000     $ 304,884     $ 14.95       85.0%     Wal-Mart (Not Owned)
105
  Atlanta, GA   Pleasant Hill Plaza
1630 Pleasant Hill Road
    30136     SC     Fee     1990     1994       100%       99,025     $ 664,794     $ 13.00       51.6%     Wal-Mart (Not Owned)
106
  Atlanta, GA   Perimeter Pointe
1155 Mt. Vernon Highway
    30136     SC     Fee (3 )   1995/2002     1995       14.5%       343,155     $ 4,784,540     $ 14.22       92.8%     Stein Mart (2010), Babies ’R Us (2012), Sports Authority (2012), L.A. Fitness (2016), Office Depot (2012), United Artists Theatre (2015)
107
  Chamblee, GA   Chamblee Plaza
Peachtree Industrial Boulevard
    30341     SC     Fee     1976     2003       100%       175,969     $ 928,495     $ 9.10       58.0%     POP-N-SHOP (2006)
108
  Columbus, GA   Bradley Park Crossing
1591 Bradley Park Drive Columbus
    31904     SC     Fee     1999     2003       100%       119,786     $ 1,339,825     $ 11.32       98.8%     Goody’s (2011), PETsMART (2015), Michaels (2009), Target (Not Owned)
109
  Cummings, GA   Cummings Marketplace
Marketplace Boulevard
    30041     SC     Fee     1997/1999     2003       100%       308,557     $ 3,755,272     $ 11.67       100%     Goody’s (2012), Lowe’s Home Improvement (2019), Michaels (2010), Office Max (2013), Home Depot (Not Owned), Wal-Mart (Not Owned)
110
  Douglasville, GA   Douglasville Marketplace
6875 Douglas Boulevard
    30135     SC     Fee     1999     2003       100%       86,158     $ 1,450,285     $ 10.41       100%     Best Buy (2015), Babies ’R Us (2011), Lowe’s Home Improvement (Not Owned)
111
  Lafayette, GA   Lafayette Center
1109 North Main Street
    30728     SC     Fee     1990     2003       100%       75,622     $ 466,121     $ 6.75       87.8%     Farmers Home Furniture (2009), Food Lion (2019)
112
  Lawrenceville, GA   Five Forks Village
850 Mall Parkway
    30044     SC     Fee (3 )   1990     2003       10%       89,064     $ 496,220     $ 15.73       35.4%      
113
  Lilburn, GA   Five Forks Crossing
3055 Five Forks Trickum Road
    30047     SC     Fee (3 )   2000/2001     2003       10%       73,910     $ 700,052     $ 9.47       100%     Kroger (2012)
114
  Lithonia, GA   The Shoppes at Turner Hill
8200 Mall Parkway
    30038     SC     Fee (3 )   2004     2003       14.5%       113,675     $ 1,655,283     $ 13.15       100%     Best Buy (2018), Bed Bath & Beyond (2013), Toys ’R Us (Not Owned), Sam’s Club (Not Owned)
115
  Loganville, GA   Midway Plaza
910 Athens Highway
    30052     SC     Fee (3 )   1995     2003       20%       91,196     $ 960,455     $ 11.01       95.6%     Kroger (2016)
116
  Madison, GA   Beacon Heights
1462-1532 Eatonton Road
    30650     SC     Fee     1989     2003       100%       85,105     $ 481,872     $ 5.66       100%     Ingles (2010), Fred’s (2011)


26


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
117
  Marietta, GA   Town Center Prado
2609 Bells Ferry Road
    30066     SC     Fee (3 )   1995/2002     1995       14.5%       301,297     $ 3,898,122     $ 12.98       98.2%     Stein Mart (2007), Ross Dress For Less (2013), Publix Super Markets (2015), Crunch Fitness (2011)
118
  McDonough, GA   McDonough Marketplace (LP-II)
NE Corner 175 & Highway 20
    30253     SC     Fee (3 )   2003     2003       14.5%       53,158     $ 845,151     $ 13.55       100%     Office Depot (2016), Lowe’s Home Improvement (Not Owned), Wal-Mart (Not Owned)
119
  Newnan, GA   Newnan Crossing
955-1063 Bullsboro Drive
    30264     SC     Fee     1995     2003       100%       156,497     $ 1,291,915     $ 8.32       99.2%     Lowe’s Home Improvement (2015), Belk (Not Owned), Wal-Mart (Not Owned)
120
  Stockbridge, GA   Freeway Junction
3797-3879 Highway 138 West
    30281     SC     Fee     1988     2003       100%       162,778     $ 829,736     $ 6.32       80.7%     Fred’s (2013), Northern Tool (2015), Farmers Home Furniture (2011), Goodwill Industries (2011)
121
  Stockbridge, GA   Pike Nurseries-Stockbridge
599 Highway 138 West
    30281     SC     Fee     1997     2003       100%       0     $ 244,145     $ 0.00       100%      
122
  Stone Mountain, GA   Rivercliff Village
Stone Mountain Highway
    30047     SC     Fee     1999     2003       100%       2,000     $ 46,200     $ 23.10       100%      
123
  Suwannee, GA   Johns Creek Towne Center
3630 Peachtree Parkway
    30024     SC     Fee     2001/2004     2003       100%       285,336     $ 3,906,154     $ 13.76       99.5%     Borders Books and Music (2021), PETsMART (2020), Kohl’s (2022), Michaels (2011), Staples (2016), Shoe Gallery (2014)
124
  Tucker, GA   Cofer Crossing
4349-4375 Lawrenceville Highway
    30084     SC     Fee     1998/2003     2003       100%       130,832     $ 1,283,169     $ 9.23       100%     Goody’s (2014), Kroger (2019), Wal-Mart (Not Owned)
125
  Union City, GA   Shannon Square
4720 Jonesboro Road
    30291     SC     Fee     1986     2003       100%       100,002     $ 510,696     $ 7.97       64.1%     Wal-Mart (Not Owned)
126
  Warner Robbins, GA   Warner Robins Place
2724 Watson Boulevard
    31093     SC     Fee     1997     2003       100%       107,941     $ 1,209,282     $ 11.26       93.3%     T.J. Maxx (2010), Staples (2016), Lowe’s Home Improvement (Not Owned), Wal-Mart (Not Owned)
127
  Woodstock, GA   Woodstock Place
10029 Highway 928
    30188     SC     GL     1995     2003       100%       44,691     $ 323,533     $ 12.89       56.1%      


27


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
    Idaho                                                                                
128
  Idaho Falls, ID   Country Club Mall
1515 Northgate Mile
    83401     SC     Fee     1976/1992/1997     1998       100%       148,593     $ 750,828     $ 7.13       70.9%     Office Max (2011), World Gym (2008), Fred Meyer, Inc. (Not Owned)
129
  Meridian, ID   Meridian Crossroads
Eagle & Fairview Road
    83642     SC     Fee     1999/2001/
2002/2003/
2004
    1 *     100%       461,023     $ 6,190,132     $ 12.45       97.2%     Bed Bath & Beyond (2011), Old Navy (2010), Shopko (2020), Office Depot (2010), Ross Dress For Less (2012), Marshall’s (2012), Sportsman’s Warehouse (2015), Craft Warehouse (2013), Babies ’R Us (Not Owned), Wal-Mart (Not Owned)
    Illinois                                                                                
130
  Decatur, IL   Decatur Marketplace
Maryland Street
    62521     SC     Fee     1999     2003       100%       22,775     $ 257,970     $ 12.85       88.1%     Wal-Mart (Not Owned)
131
  Deer Park, IL   Deer Park Town Center
20530 North Rand Road #303
    60010     LC     Fee (3 )   2000/2004     1 *     24.75%       286,889     $ 7,702,840     $ 28.26       88.0%     Gap #581 (2010), Barnes & Noble (Not Owned), Century Cinemas (Not Owned), Pier 1 Imports (2012), Banana Repubic (2010), Pottery Barn Kids (2012), Pottery Barn (2013), Restoration Hardware (2010), Eddie Bauer Home (2011), Eddie Bauer Sportswear (2011), Coldwater Creek (2010), J. Crew(2011), Ann Taylor(2011), Talbots/Talbots Petites (2011), Williams-Sonoma (2013), Joseph A. Bank Clothiers (2011), California Pizza Kitchen (2013), Bath and Body Works (2011), J. Jill (2013), Bombay (2007), American Eagle (2007), Victoria’s Secret (2007)
132
  McHenry, IL   The Shops at Fox River
3340 Shoppers Drive
    60050     SC     Fee     2006     1 *     100%       41,400     $ 304,200     $ 7.35       100%     Bed Bath & Beyond (2008)
133
  Mount Vernon, IL   Times Square Mall
42nd & Broadway
    62864     MM     Fee     1974/1998/2000     2 *     100%       269,328     $ 1,001,627     $ 4.30       82.2%     Sears (2013), Goody’s (2015), J.C. Penney (2007)
134
  Orland Park, IL   Marley Creek Square
179th & South Wolf Road
    60467     SC     Fee (3 )   2006     2006       50%       57,658     $ 407,539     $ 21.92       32.2%      


28


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
135
  Orland Park, IL   Home Depot Center
15800 Harlem Avenue
    60462     SC     Fee     1987/1993     2004       100%       149,498     $ 1,448,664     $ 10.08       96.1%     Home Depot (2012)
136
  Schaumburg, IL   Woodfield Village Green
1430 East Golf Road
    60173     SC     Fee (3 )   1993/1998/2002     1995       14.5%       508,815     $ 8,690,198     $ 17.08       100%     Circuit City (2009), Off 5TH (2011), PETsMART (2014), Home Goods (2014), Office Max (2010), Container Store (2011), Filene’s Basement (2014), Marshall’s (2009), Nordstrom Rack (2009), Borders Books and Music (2009), Expo Design Center (2019), Costco (Not Owned), Prairie Rock Restaurant (Not Owned)
    Indiana                                                                                
137
  Bedford, IN   Town Fair Center
1320 James Avenue
    47421     SC     Fee     1993/1997     2*       100%       223,431     $ 1,155,653     $ 6.22       83.2%     Kmart (2008), Goody’s (2008), J.C. Penney (2008)
138
  Highland, IN   Highland Grove Shopping Center
Highway 41 & Main Street
    46322     SC     Fee (3 )   1995/2001     1996       20%       312,546     $ 3,559,373     $ 11.45       99.5%     Marshall’s (2011), Kohl’s (2016), Circuit City (2016), Office Max (2012), Target (Not Owned), Jewel (Not Owned), Borders Books and Music (Not Owned)
139
  Lafayette, IN   Park East Marketplace
4205-4315 Commerce Drive
    47905     SC     Fee     2000     2003       100%       35,100     $ 378,350     $ 13.85       77.8%     Wal-Mart (Not Owned)
    Iowa                                                                                
140
  Cedar Rapids, IA   Northland Square
303-367 Collins Road, NE
    52404     SC     Fee     1984     1998       100%       187,068     $ 1,871,609     $ 10.00       100%     T.J. Maxx (2010), Office Max (2010), Barnes & Noble (2010), Kohl’s (2021)
141
  Ottumwa, IA   Quincy Place Mall
1110 Quincy Avenue
    52501     MM     Fee     1990/1999/2002     1*/2*       100%       241,427     $ 1,334,540     $ 6.58       84.1%     Herberger’s (2020), J.C. Penney (2010), Goody’s (2014), Target (Not Owned)


29


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
    Kansas                                                                                
142
  Leawood, KS   Town Center Plaza
5000 West 119th Street
    66209     LC     Fee     1996/2002     1998       100%       308,628     $ 7,990,126     $ 27.10       93.6%     Barnes & Noble #2668 (2011), Coldwater Creek (2009), Limited/Limited Too (2009), Victoria’s Secret (2009), Express/Bath & Body/Structure (2009), Gap/Gap Body (2008), Gap Kids (2005), J. Jill (2013), Pottery Barn (2009), Williams-Sonoma (2009), American Eagle (2013), Pacific Sunwear (2012), Bravo Cucina Italiana (2013), Restoration Hardware (2012), Houlihans (2025), Bristol Seafood Bar & Grill (2011), Bombay (2006),The Jones Store (2009)
143
  Merriam, KS   Merriam Town Center
57 Antioch Road
    66202     SC     Fee (3 )   1998/2004     1 *     14.5%       351,234     $ 4,192,624     $ 12.08       98.8%     Office Max (2013), PETsMART (2019), Hen House (2018), Marshall’s (2008), Dick’s Sporting Goods (2016), Cinemark (2018), Home Depot #2202 (Not Owned)
144
  Overland Park, KS   Cherokee North Shopping Center
8800-8934 West 95th Street
    66212     SC     Fee (3 )   1987/2002     1998       24.75%       60,765     $ 792,150     $ 14.06       91.6%      
145
  Overland Park, KS   Overland Pointe Marketplace
Intersection 135th & Antioch Road
    66213     SC     Fee (3 )   2001/2004     2003       14.5%       42,632     $ 906,347     $ 17.51       100%     Home Depot (Not Owned), Sam’s Club (Not Owned), Babies ’R Us (Not Owned)
146
  Wichita, KS   Eastgate Plaza
South Rock Road
    67207     SC     Fee     1955     2002       100%       203,997     $ 2,048,017     $ 12.27       84.1%     Office Max (2007), T.J. Maxx (2011), Barnes & Noble (2012), Burlington Coat Factory (Not Owned)
    Kentucky                                                                                
147
  Florence, KY   Turfway Plaza
6825 Turfway Road
    41042     SC     Fee     1975/1998     2004       100%       133,985     $ 968,461     $ 7.63       94.8%     Office Depot (2011), Party Town (2016), Big Lots (2008)
148
  Frankfort, KY   Eastwood Shopping Center
260 Versailles Road
    40601     SC     Fee     1963/1994     2004       100%       155,104     $ 849,673     $ 5.71       95.9%     Sears (2011)
149
  Lexington, KY   North Park Marketplace
524 West New Circle
    40511     SC     Fee     1998     2003       100%       46,647     $ 610,374     $ 14.15       92.5%     Staples (2016), Wal-Mart (Not Owned)


30


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
150
  Lexington, KY   South Farm Marketplace
Man-O-War Boulevard & Nichol
    40503     SC     Fee     1998     2003       100%       27,643     $ 595,780     $ 21.55       100%     Lowe’s Home Improvement (Not Owned), Wal-Mart (Not Owned)
151
  Louisville, KY   Outer Loop Plaza
7505 Outer Loop Highway
    40228     SC     Fee     1973/1989/1998     2004       100%       120,777     $ 644,549     $ 5.91       90.3%     Valu Discount (2009)
152
  Richmond, KY   Carriage Gate
833-847 Eastern By-Pass
    40475     SC     Fee     1992     2003       100%       158,041     $ 257,700     $ 6.84       23.9%     Food Lion (2017), Ballard’s (Not Owned)
    Maine                                                                                
153
  Brunswick, ME   Cook’s Corners
172 Bath Road
    04011     SC     GL     1965     1997       100%       301,992     $ 2,603,208     $ 8.41       98.5%     Hoyt’s Cinemas (2010), Brunswick Bookland (2014), Big Lots (2008), T.J. Maxx (2010), Sears (2012)
    Maryland                                                                                
154   Salisbury, MD   The Commons
East North Point Drive
    21801     SC     Fee     1999     1*       100%       126,135     $ 1,683,102     $ 13.30       96.3%     Best Buy (2013), Michaels (2009), Home Depot (Not Owned), Target (Not Owned)
    Massachusetts                                                                                
155
  Everett, MA   Gateway Center
1 Mystic View Road
    02149     SC     Fee     2001     1*       100%       222,287     $ 4,535,719     $ 16.23       100%     Bed Bath & Beyond (2011), Old Navy (2011), Office Max (2020), Babies ’R Us (2013), Michaels (2012), Costco (Not Owned)
156
  Framingham, MA   Shoppers World
1 Worcester Road
    01701     SC     Fee (3 )   1994     1995       14.5%       769,276     $ 14,428,379     $ 18.45       100%     Toys ’R Us (2020), Macy’s Furniture Gallery (2020), T.J. Maxx (2010), Babies ’R Us (2013), DSW Shoe Warehouse (2012), A.C. Moore (2007), Marshall’s (2011), Bob’s (2011), Linens ’N Things (2011), Sports Authority (2015), PETsMART (2011), Best Buy (2014), Barnes & Noble (2011), AMC Theatres (2014), Kohl’s (2010)
157
  Bad Axe, MI   Huron Crest Plaza
850 North Van Dyke Road
    48413     SC     Fee     1991     1993       100%       63,415     $ 396,808     $ 8.51       73.5%     FARMER JACK (2012), Wal-Mart (Not Owned)
158
  Benton Harbor, MI   Fairplain Plaza
100 Napier Avenue
    49022     SC     Fee (3 )   1998     2006       20%       222,739     $ 1,546,949     $ 9.55       72.1%     Office Depot (2008), T.J. Maxx (2009), Kohl’s (Not Owned), Target (Not Owned)
159
  Cheboygan, MI   Kmart Shopping Plaza
1190 East State
    49721     SC     Fee     1988     1994       100%       70,076     $ 255,713     $ 3.78       96.4%     Kmart (2010), Kmart (Not Owned)


31


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
160
  Detroit, MI   Belair Center
8400 East Eight Mile Road
    48234     SC     GL     1989/2002     1998       100%       343,619     $ 2,453,512     $ 6.81       97.7%     National Wholesale Liquidators (2016), Phoenix Theatres (2011), Bally Total Fitness (2016), Big Lots (2008), Kids ’R Us (2013), Forman Mills (2012), Target (Not Owned)
161
  Gaylord, MI   Pine Ridge Square
1401 West Main Street
    49735     SC     Fee     1991/2004     1993       100%       150,203     $ 682,194     $ 5.22       87.0%     Dunham’s Sporting Goods (2011), Big Lots (2010), Buy Low (2011)
162
  Grandville, MI   Grandville Marketplace
Intersection 44th Street & Canal Avenue
    49418     SC     Fee (3 )   2003     2003       14.5%       201,726     $ 2,542,211     $ 12.27       98.4%     Circuit City (2017), Linens ’N Things (2013), Gander Mountain (2016), Office Max (2013), Lowe’s Home Improvement (Not Owned)
163
  Houghton, MI   Copper Country Mall
Highway M26
    49931     SC     Fee     1981/1999     1*/2*       100%       257,863     $ 995,195     $ 5.16       74.8%     Steve & Barry’s (2013), J.C. Penney (2010), Office Max (2014)
164
  Howell, MI   Grand River Plaza
3599 East Grand River
    48843     SC     Fee     1991     1993       100%       215,047     $ 994,340     $ 6.12       75.6%     Elder-Beerman (2011), Dunham’s Sporting Goods (2011)
165
  Lansing, MI   The Marketplace at Delta Towns
8503 West Saginaw Highway 196 Ramp
    48917     SC     Fee     2000/2001     2003       100%       135,697     $ 1,449,584     $ 11.14       95.9%     Michaels (2011), Gander Mountain (2015), Staples (2016), PETsMART (2016), Lowe’s Home Improvement (Not Owned), Wal-Mart (Not Owned)
166
  Mt. Pleasant, MI   Indian Hills Plaza
4208 East Blue Grass Road
    48858     SC     Fee     1990     2*       100%       249,680     $ 1,665,584     $ 6.75       98.8%     Wal-Mart (2009), T.J. Maxx (2014), Kroger (2011)
167
  Sault St. Marie, MI   Cascade Crossings
4516 I-75 Business Spur
    49783     SC     Fee     1993/1998     1994       100%       270,761     $ 1,727,682     $ 6.43       99.3%     Wal-Mart (2012), J.C. Penney (2008), Dunham’s Sporting Goods (2011), Glen’s Market (2013)
168
  Walker, MI   Green Ridge Square II
3410 Alpine Avenue
    49504     SC     Fee     1991/1995     2004       100%       91,749     $ 930,669     $ 11.68       86.8%     Circuit City (2010), Bed Bath & Beyond (2015)
169
  Walker, MI   Green Ridge Square
3390-B Alpine Avenue NW
    49504     SC     Fee     1989     1995       100%       133,538     $ 1,551,937     $ 12.05       96.4%     T.J. Maxx (2011), Office Depot (2010), Target (Not Owned), Toys ’R Us (Not Owned)
    Minnesota                                                                                
170
  Bemidji, MN   Paul Bunyan Mall
1201 Paul Bunyan Drive
    56601     MM     Fee     1977/1998     2*       100%       297,803     $ 1,516,618     $ 5.30       96.2%     Kmart (2007), Herberger’s (2010), J.C. Penney (2008)
171
  Brainerd, MN   Westgate Mall
1200 Highway 210 West
    56401     SC     Fee     1985/1998     1*/2*       100%       260,319     $ 1,853,790     $ 7.95       89.5%     Steve & Barry’s (2013), Herberger’s (2013), Movies 10 (2011)


32


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
172
  Coon Rapids, MN   Riverdale Village
12921 Riverdale Drive
    55433     SC     Fee (3 )   2003     1*       14.5%       551,867     $ 8,948,743     $ 14.65       97.9%     Kohl’s (2020), Jo-Ann Stores (2010), Linens ’N Things (2016), Borders Books and Music (2023), Old Navy (2012), Sportsman’s Warehouse (2017), Best Buy (2013), DSW Shoe Warehouse (2016), Sears (Not Owned), Costco (Not Owned), J.C. Penney (Not Owned)
173
  Eagan, MN   Eagan Promenade
1299 Promenade Place
    55122     SC     Fee (3 )   1997/2001     1997       50%       278,211     $ 3,559,763     $ 12.80       100%     Byerly’s (2016), PETsMART (2018), Barnes & Noble (2012), Office Max (2013), T.J. Maxx (2007), Bed Bath & Beyond (2012), Ethan Allen Furniture (Not Owned)
174
  Hutchinson, MN   Hutchinson Mall
1060 SR 15
    55350     SC     Fee     1981     1*/2*       100%       121,001     $ 449,534     $ 4.53       74.1%     J.C. Penney (2011), Hennen’s Furniture (Not Owned)
175
  Minneapolis, MN   Maple Grove Crossing
Weaver Lake Road & I-94
    55369     SC     Fee (3 )   1995/2002     1996       50%       265,957     $ 3,002,577     $ 11.29       100%     Kohl’s (2016), Barnes & Noble (2011), Gander Mountain (2011), Michaels (2012), Bed Bath & Beyond (2012), Cub Foods (Not Owned)
176
  St. Paul, MN   Midway Marketplace
1450 University Avenue
    55104     SC     Fee (3 )   1995     1997       14.5%       324,354     $ 2,684,640     $ 8.28       100%     Wal-Mart (2022), Cub Foods (2015), PETsMART (2011), Mervyns (2016), Borders Books and Music Books And Music (Not Owned), Herberger’s (Not Owned)
177
  Worthington, MN   Northland Mall
1635 Oxford Street
    56187     SC     Fee     1977     1*/2*       100%       185,658     $ 533,516     $ 5.07       56.7%     J.C. Penney (2007), Hy Vee Food StoreS (2011)
    Mississippi                                                                                
178   Gulfport, MS   Crossroads Center
Crossroads Parkway
    39503     SC     GL     1999     2003       100%       457,119     $ 5,285,910     $ 11.08       99.1%     Academy Sports (2015), Bed Bath & Beyond (2014), Ross Dress For Less (2015), Goody’s (2011), T.J. Maxx (2009), Cinemark (2019), Office Depot (2014), Barnes & Noble (2014), Belk’s (Not Owned)
179
  Jackson, MS   The Junction
6351 I-55 North 3
    39213     SC     Fee     1996     2003       100%       107,780     $ 1,173,321     $ 10.89       100%     PETsMART (2012), Office Depot (2016), Home Depot (Not Owned), Target (Not Owned)


33


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
180
  Jackson, MS   Metro Station
4700 Robinson Road
    39204     SC     Fee     1997     2003       100%       52,617     $ 293,052     $ 7.85       70.9%     Office Depot (2012), Home Depot (Not Owned)
181
  Oxford, MS   Oxford Place
2015-2035 University Avenue
    38655     SC     Fee (3 )   2000     2003       20%       13,200     $ 331,088     $ 13.57       100%     Kroger (Not Owned)
182
  Saltillo, MS   Cross Creek Shopping Center
1040-1184 Cross Creek Drive
    38866     SC     Fee     1999     2003       100%       55,749     $ 545,774     $ 10.05       87.1%     Staples (2016), Home Depot (Not Owned)
183
  Starkville, MS   Starkville Crossing
882 Highway 12 West
    39759     SC     Fee     1999/2004     1994       100%       133,691     $ 915,148     $ 6.85       100%     J.C. Penney (2010), Kroger (2042), Lowe’s Home Improvement (Not Owned)
184
  Tupelo, MS   Big Oaks Crossing
3850 North Gloster Street
    38801     SC     Fee     1992     1994       100%       348,236     $ 1,926,726     $ 5.70       97.0%     Sam’s Club (2012), Goody’s (2007), Wal-Mart (2012)
    Missouri                                                                                
185
  Arnold, MO   Jefferson County Plaza
Vogel Road
    63010     SC     Fee (3 )   2002     1*       50%       42,091     $ 426,080     $ 15.00       67.5%     Home Depot(Not Owned), Target(Not Owned)
186
  Fenton, MO   Fenton Plaza
Gravois & Highway 141
    63206     SC     Fee     1970/1997     1*/2*       100%       93,420     $ 932,664     $ 10.69       92.0%      
187
  Independence, MO   Independence Commons
900 East 39th Street
    64057     SC     Fee (3 )   1995/1999     1995       14.5%       386,066     $ 5,022,374     $ 13.10       99.3%     Kohl’s (2016), Bed Bath & Beyond (2012), Marshall’s (2012), Best Buy (2016), Barnes & Noble (2011), AMC Theatres (2015)
188
  Kansas City, MO   Ward Parkway
8600 Ward Parkway
    64114     SC     Fee (3 )   1959/2004     2003       20%       358,373     $ 5,341,077     $ 13.91       95.6%     Dick’s Sporting Goods (2016), 24 Hour Fitness (2023), PETsMART (2016), Steve & Barry’s (2014), AMC Theatres (2011), Off Broadway Shoes (2015), T.J. Maxx (2013), Target (Not Owned), Dillard’s (Not Owned)
189
  Springfield, MO   Morris Corners
1425 East Battlefield
    65804     SC     GL     1989     1998       100%       56,033     $ 491,757     $ 8.78       100%     Toys ’R Us (2013)
190
  St. John, MO   St. John Crossing
9000-9070 St. Charles Rock Road
    63114     SC     Fee     2003     2003       100%       93,513     $ 1,016,406     $ 11.56       94.0%     Shop ’N Save (2022)
191
  St. Louis, MO   Plaza at Sunset Hills
10980 Sunset Plaza
    63128     SC     Fee     1997     1998       100%       415,435     $ 5,519,995     $ 12.09       99.5%     Toys ’R Us (2013), CompUSA (2013), Bed Bath & Beyond (2012), Marshall’s (2012), Home Depot (2023), PETsMART (2012), Borders Books and Music (2011)
192
  St. Louis, MO   Keller Plaza
4500 Lemay Ferry Road
    63129     SC     Fee     1987     1998       100%       52,842     $ 528,029     $ 6.91       100%     Keller Plaza 8 (2011), Sam’s Club (Not Owned)


34


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
193
  St. Louis, MO   Southtowne
Kings Highway & Chippewa
    63109     SC     Fee     2004     1998       100%       67,628     $ 1,052,058     $ 16.33       95.3%     Office Max (2014)
194
  St. Louis, MO   Promenade at Brentwood
1 Brentwood Promenade Court
    63144     SC     Fee     1998     1998       100%       299,584     $ 4,022,889     $ 13.43       100%     Target (2023), Bed Bath & Beyond (2009), PETsMART (2014), Lane Home Furnishings (2013)
195
  St. Louis, MO   Gravois Village
4523 Gravois Village Plaza
    63049     SC     Fee     1983     1998       100%       110,992     $ 597,912     $ 5.60       96.2%     Kmart (2008)
196
  St. Louis, MO   Olympic Oaks Village
12109 Manchester Road
    63121     SC     Fee     1985     1998       100%       92,372     $ 1,167,973     $ 15.70       80.5%     T.J. Maxx (2008)
    Nevada                                                                                
197
  Carson City, NV   Eagle Station
3871 South Carson Street
    89701     SC     Fee     1983     2005       50%       60,494     $ 543,660     $ 8.99       100%     Mervyns (2020)
198
  Las Vegas, NV   Family Place at Las Vegas
Charleston & Maryland Boulevards
    89102     SC     Fee     2003     1*       100%       24,032     $ 431,256     $ 14.95       100%      
199
  Las Vega, NV   Loma Vista Shopping Center
4700 Meadow Lane
    89107     MV     Fee     1979     2005       50%       75,687     $ 765,000     $ 10.11       100%     Mervyns (2020)
200
  Las Vegas, NV   Nellis Crossing Shopping
1300 S. Nellis Boulevard
    89104     MV     Fee     1986     2005       50%       76,016     $ 683,400     $ 8.99       100%     Mervyns (2020)
201
  Reno, NV   Sierra Town Center
6895 Sierra Center Parkway
    89511     MV     Fee     2002     2005       50%       79,239     $ 623,220     $ 7.87       100%     Mervyns (2020)
202
  Reno, NV   Reno Riverside
East First Street & Sierra
    89505     SC     Fee     2000     2000       100%       52,474     $ 693,866     $ 13.22       100%     Century Theatre (2014)
203
  SW Las Vegas, NV   Grand Canyon Parkway Shopping Ctr.
4265 S. Grand Canyon Drive
    89147     MV     Fee     2003     2005       50%       79,294     $ 890,460     $ 11.23       100%     Mervyns (2020)
    New Jersey                                                                                
204
  Freehold, NJ   Freehold Marketplace
NJ Hwy 33 & W. Main Street (Rte. 537)
    07728     SC     Fee     2005     1*       100%       0     $ 0     $ 0.00       0%     Wal-Mart (Not Owned), Sam’s Club (Not Owned)
205
  Hamilton, NJ   Hamilton Marketplace
NJ State Highway 130 & Klockner Road
    08691     SC     Fee     2004     2003       100%       446,940     $ 7,906,961     $ 14.97       100%     Staples (2015), Kohl’s (2023), Linens ’N Things (2014), Michaels (2013), Ross Dress For Less (2014), Shoprite (2028), Barnes & Noble (2014), Lowe’s Home Improvement (Not Owned), BJ’s Wholesale (Not Owned), Wal-Mart (Not Owned)


35


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
206
  Mays Landing, NJ   Hamilton Commons
4215 Black Horse Pike
    08330     SC     Fee     2001     2004       100%       398,870     $ 5,967,617     $ 15.59       96.0%     Regal Cinemas (2021), Ross Dress For Less (2012), Bed Bath & Beyond (2017), Marshall’s (2012), Sports Authority (2015), Circuit City (2020)
207
  Mays Landing, NJ   Wrangleboro Consumer Square
2300 Wrangleboro Road
    08330     SC     Fee     1997     2004       100%       839,019     $ 9,564,888     $ 11.83       96.3%     Best Buy (2017), Borders Books and Music (2017), Kohl’s (2018), Staples (2012), Babies ’R Us (2013), BJ’s Wholesale Club (2016), Dick’s Sporting Goods (2013), Linens ’N Things (2012), Michaels (2008), Target (2023), PETsMART (2013)
208
  Mt. Laurel, NJ   Centerton Square
Centerton Road & Marter Avenue
    08054     SC     Fee     2005     1*       100%       284,177     $ 6,671,795     $ 18.58       99.0%     Bed Bath & Beyond (2015), PETsMART (2015), DSW Shoe Warehouse (2015), Jo-Ann Stores (2015), T.J. Maxx (2015), Sports Authority (2016), Wegmans (Not Owned), Target (Not Owned), Costco (Not Owned)
209
  Princeton, NJ   Nassau Park Shopping Center
Route 1 & Quaker Bridge Road
    02071     SC     Fee     1995     1997       100%       287,686     $ 5,497,412     $ 19.21       99.5%     Borders Books and Music (2011), Best Buy (2012), Linens ’N Things (2011), PETsMART (2011), Babies ’R Us (2016), Target (Not Owned)
210
  Princeton, NJ   Nassau Park Pavilion
Route 1 and Quaker Bridge Road
    02071     SC     Fee     1999/2004     1*       100%       202,622     $ 4,057,254     $ 15.68       100%     Dick’s Sporting Goods (2015), Michaels (2009), Kohl’s (2019)
211
  West Long Branch, NJ   Monmouth Consumer Center
310 State Highway #36
    07764     SC     Fee     1993     2004       100%       292,999     $ 4,035,362     $ 13.77       100%     Sports Authority (2012), Barnes & Noble (2009), PETsMART (2008), Home Depot (2013)
    New Mexico                                                                                
212
  Los Alamos, NM   Mari Mac Village
800 Trinity Drive
    87533     SC     Fee     1978/1997     1*/2*       100%       93,021     $ 662,544     $ 7.12       100%     Smith’s Food & Drug (2007), Furr’s Pharmacy (2008), Beall’s (2009)
    New York                                                                                
213
  Alden, NY   Tops Plaza-Alden
12775 Broadway
    14004     SC     Fee     1999     2004       100%       67,992     $ 711,350     $ 11.74       89.1%     Tops Markets (2019)


36


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
214
  Amherst, NY   Tops Plaza-Amherst
3035 Niagara Falls Boulevard
    14828     SC     Fee (3 )   1986     2004       20%       145,192     $ 1,141,412     $ 8.03       97.9%     Tops Markets (2010)
215
  Amherst, NY   Boulevard Consumer Square
1641-1703 Niagara Falls Boulevard
    14228     SC     Fee     1998/2001/
2003
    2004       100%       573,952     $ 6,473,693     $ 10.37       96.9%     Target (2019), Kmart (2007), Babies ’R Us (2015), Barnes & Noble (2014), Best Buy (2016), Bed Bath & Beyond (2018), A.C. Moore (2013), Lowe’s Home Improvement (Not Owned)
216
  Amherst, NY   Burlington Plaza
1551 Niagara Falls Boulevard
    14228     SC     GL     1978/1982/
1990/1998
    2004       100%       199,504     $ 2,106,207     $ 10.56       100%     Burlington Coat Factory (2014), Jo-Ann Stores (2014)
217
  Amherst, NY   Sheridan Harlem Plaza
4990 Harlem Road
    14226     SC     Fee     1960/1973/
1982/1988/
2003
    2004       100%       58,413     $ 630,581     $ 10.92       98.8%      
218
  Amherst, NY   Tops Plaza-Transit/N. French
9660 Transit Road
    14226     SC     Fee     1995/1998     2004       100%       114,177     $ 1,172,939     $ 10.27       100%     Tops Markets (2016)
219
  Amherst, NY   University Plaza
3500 Main Street
    14226     SC     GL     1965/1995/
2002
    2004       100%       162,879     $ 1,436,220     $ 9.09       97.0%     A.J. Wright (2012), Tops Markets (2009)
220
  Arcade, NY   Tops Plaza-Arcade
Route 39
    14009     SC     Fee (3 )   1995     2004       10%       65,915     $ 662,409     $ 10.05       100%     Tops Markets (2015)
221
  Avon, NY   Tops Plaza-Avon
270 E. Main Street
    14414     SC     Fee (3 )   1997/2002     2004       10%       63,288     $ 454,162     $ 8.05       89.2%     Tops Markets (2017)
222
  Batavia, NY   BJ’s Plaza
8326 Lewiston Road
    14020     SC     Fee (3 )   1996     2004       14.5%       95,846     $ 821,821     $ 8.57       100%     BJ’s Wholesale Club (2016)
223
  Batavia, NY   Batavia Commons
419 West Main Street
    14020     SC     Fee (3 )   1990     2004       14.5%       49,431     $ 530,599     $ 10.73       100%      
224
  Batavia, NY   Martin’s Plaza
8351 Lewiston Road
    14020     SC     Fee (3 )   1994     2004       14.5%       37,140     $ 445,778     $ 14.43       83.2%     Martin’s (Not Owned)
225
  Big Flats, NY   Big Flats Consumer Square
830 County Route 64
    14814     SC     Fee     1993/2001     2004       100%       641,264     $ 6,171,908     $ 9.62       100%     Dick’s Sporting Goods (2008), Wal-Mart (2013), Sam’s Club (2013), Tops Markets (2013), Bed Bath & Beyond (2014), Michaels (2010), Old Navy (2009), Staples (2011), Barnes & Noble (2011), T.J. Maxx (2007)
226
  Buffalo, NY   Delaware Consumer Square
2636-2658 Delaware Avenue
    14216     SC     GL     1995     2004       100%       238,531     $ 2,138,328     $ 9.23       97.2%     A.J. Wright (2012), Office Max (2012), Target (2015)
227
  Buffalo, NY   Elmwood Regal Center
1951-2023 Elmwood Avenue
    14207     SC     Fee     1997     2004       100%       133,940     $ 1,524,235     $ 13.71       83.0%     Regal Cinemas (2017), Office Depot (2012)
228
  Buffalo, NY   Marshall’s Plaza
2150 Delaware Avenue
    14216     SC     Fee     1960/1975/
1983/1995
    2004       100%       82,196     $ 795,587     $ 10.77       89.8%     Marshall’s (2009)


37


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
229
  Canandaigua, NY   Tops Plaza
5150 North Street
    14424     SC     Fee     2002     2004       100%       57,498     $ 769,500     $ 13.38       100%     Tops Markets (2023)
230
  Cheektowaga, NY   Borders Books and Music
2015 Walden Avenue
    14225     SC     Fee (3 )   1994     2004       14.5%       26,500     $ 609,500     $ 23.00       100%     Borders Books and Music (2015)
231
  Cheektowaga, NY   Thruway Plaza
2195 Harlem Road
    14225     SC     Fee     1965/1995/
1997/2004
    2004       100%       371,512     $ 2,656,718     $ 7.28       98.2%     Wal-Mart (2017), Movieland 8 Theatres (2019), Tops Markets (2019), A.J. Wright (2015), Value City Furniture (2009), M & T BANK (2017), Home Depot (Not Owned)
232
  Cheektowaga, NY   Tops Plaza-Union Road
3825-3875 Union Road
    14225     SC     Fee (3 )   1978/1989/
1995/2004
    2004       20%       151,357     $ 1,567,462     $ 11.22       92.3%     Tops Markets (2013)
233
  Cheektowaga, NY   Union Consumer Square
3733-3735 Union Road
    14225     SC     Fee (3 )   1989/1998/
2004
    2004       14.5%       386,548     $ 4,390,405     $ 12.37       91.8%     Marshall’s (2009), Office Max (2010), Sam’s Club (2024), Circuit City (2016), Jo-Ann Stores (2015)
234
  Cheektowaga, NY   Union Road Plaza
3637 Union Road
    14225     SC     Fee (3 )   1979/1982/
1997/2003
    2004       14.5%       174,438     $ 1,198,011     $ 7.21       95.3%     Dick’s Sporting Goods (2015)
235
  Cheektowaga, NY   Walden Place
2130-2190 Walden Avenue
    14225     SC     Fee (3 )   1994/1999     2004       14.5%       68,002     $ 267,125     $ 17.47       22.5%      
236
  Cheektowaga, NY   Consumer Square
1700-1750 Walden Avenue
    14225     SC     Fee (3 )   1997/1999/
2004
    2004       14.5%       255,964     $ 2,330,224     $ 9.18       99.2%     Office Depot (2009), Linens ’N Things (2015), Michaels (2013), Target (2015)
237
  Chili, NY   Chili Plaza
800 Paul Road
    14606     SC     Fee     1998     2004       100%       116,868     $ 748,189     $ 6.02       100%     Sears (2019)
238
  Cicero, NY   Bear Road Plaza
709-729 North Main Street
    13212     SC     Fee     1978/1988/
1995
    2004       100%       59,483     $ 447,223     $ 8.15       92.3%      
239
  Clarence, NY   Barnes & Noble
7370 Transit Road
    14031     SC     Fee (3 )   1992     2004       14.5%       16,030     $ 304,249     $ 18.98       100.0%      
240
  Clarence, NY   Eastgate Plaza
Transit & Greiner Road
    14031     SC     GL (3 )   1995/1997/
1999/2001/
2004
    2004       14.5%       520,876     $ 4,160,296     $ 8.15       98.0%     BJ’s Wholesale Club (2021), Dick’s Sporting Goods (2011), Linens ’N Things (2015), Michaels (2010), Wal-Mart (2019)
241
  Clarence, NY   Jo-Ann Plaza
4101 Transit Road
    14221     SC     Fee (3 )   1994     2004       14.5%       92,720     $ 743,588     $ 8.02       100%     Office Max (2009), Jo-Ann Stores (2015), Big Lots (2015), Home Depot (Not Owned)
242
  Cortland, NY   Tops Plaza-Cortland Staples
3836 Route 281
    13045     SC     Fee     1995     2004       100%       134,223     $ 1,731,453     $ 12.90       100%     Tops Markets (2016), Staples (2017)
243
  Dansville, NY   Tops Plaza-Dansville
23-65 Franklin Street
    14437     SC     Fee     2001     2004       100%       67,400     $ 629,039     $ 10.18       91.7%     Tops Markets (2021)
244
  Depew, NY   Tops Plaza-Depew
5175 Broadway
    14043     SC     Fee     1980/1990/
1996
    2004       100%       148,245     $ 1,573,914     $ 10.84       98.0%     Tops Markets (2016), Big Lots (2011)


38


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
245
  Dewitt, NY   Marshall’s Plaza
3401 Erie Boulevard East
    13214     SC     Fee     2001/2003     2004       100%       304,177     $ 2,969,020     $ 10.03       97.3%     Toys ’R Us (2018), Old Navy (2011), Marshall’s (2019), Bed Bath & Beyond (2018), A.C. Moore (2014), Syracuse Orthopedic Specialist (2017)
246
  Dewitt, NY   Michaels-Dewitt
3133 Erie Boulevard
    13214     SC     Fee     2002     2004       100%       49,713     $ 570,166     $ 11.47       100%     Michaels (2010)
247
  Elmira, NY   Tops Plaza-Elmira
Hudson Street
    14904     SC     Fee (3 )   1997     2004       10%       98,330     $ 1,117,100     $ 11.36       100%     Tops Markets (2017)
248
  Gates, NY   Westgate Plaza
2000 Chili Avenue
    14624     SC     Fee     1998     2004       100%       334,752     $ 3,219,908     $ 9.75       98.7%     Wal-Mart (2021), Staples (2015)
249
  Greece, NY   Jo-Ann/PETsMART Plaza
3042 West Ridge Road
    14626     SC     Fee     1993/1999     2004       100%       75,916     $ 799,191     $ 10.53       100%     PETsMART (2008), Jo-Ann Stores (2015)
250
  Hamburg, NY   BJ’s Plaza-Hamburg
4408 Milestrip Road
    14075     SC     GL     1990/1997     2004       100%       175,965     $ 1,725,858     $ 10.23       95.9%     Office Max (2010), BJ’s Wholesale Club (2010)
251
  Hamburg, NY   McKinley Place
3701 McKinley Parkway
    14075     SC     Fee     1990/2001     2004       100%       128,944     $ 1,450,399     $ 11.44       98.3%     Dick’s Sporting Goods (2011), Rosa’s Home Store (2009)
252
  Hamburg, NY   Hamburg Village Square
140 Pine Street
    14075     SC     Fee     1960/1972/
1984/1996
    2004       100%       92,717     $ 881,916     $ 10.82       87.9%      
253
  Hamburg, NY   Home Depot Plaza-Hamburg
4405 Milestrip Road
    14219     SC     GL     1999/2000     2004       100%       139,413     $ 1,507,396     $ 10.81       100%     Home Depot (2012)
254
  Hamburg, NY   McKinley Milestrip Center
3540 McKinley Parkway
    14075     SC     Fee     1999     2004       100%       106,774     $ 1,472,383     $ 13.79       100%     Old Navy (2010), Jo-Ann Stores (2015)
255
  Hamburg, NY   South Park Plaza-Tops
6150 South Park Avenue
    14075     SC     Fee (3 )   1990/1992     2004       10%       84,000     $ 730,500     $ 8.70       100%     Tops Markets (2015)
256
  Hamlin, NY   Tops Plaza-Hamlin
1800 Lake Road
    14464     SC     Fee (3 )   1997     2004       10%       60,488     $ 491,705     $ 8.33       97.6%     Tops Markets (2017)
257
  Irondequoit, NY   Culver Ridge Plaza
2255 Ridge Road East
    14622     SC     Fee (3 )   1972/1984/
1997
    2004       20%       226,812     $ 2,206,041     $ 11.03       88.2%     Regal Cinemas (2022), A.J. Wright (2014)
258
  Irondequoit, NY   Ridgeview Place
1850 Ridge Road East
    14617     SC     Fee     2000     2004       100%       64,732     $ 847,629     $ 13.09       100%      
259
  Ithaca, NY   Tops Plaza-Ithaca
614-722 South Meadow
    14850     SC     Fee     1990/1999/
2003
    2004       100%       229,320     $ 3,554,447     $ 16.00       96.9%     Office Depot (2014), Tops Markets (2022), Michaels (2013), Barnes & Noble (2018)
260
  Jamestown, NY   Tops Plaza-Jamestown
75 Washington Street
    14702     SC     Fee (3 )   1997     2004       20%       98,001     $ 1,178,454     $ 13.08       92.0%     Tops Markets (2018)
261
  Jamestown, NY   Southside Plaza
708-744 Foote Avenue
    14701     SC     Fee     1980/1997     2004       100%       63,140     $ 573,269     $ 9.30       97.7%     Quality Market (2017)
262
  Lancaster, NY   Regal Center
6703-6733 Transit Road
    14221     SC     Fee (3 )   1997     2004       14.5%       112,949     $ 927,990     $ 8.43       97.5%     Regal Cinemas (2017)
263
  Leroy, NY   Tops Plaza-Leroy
128 West Main Street
    14482     SC     Fee (3 )   1997     2004       20%       62,747     $ 583,543     $ 9.30       100%     Tops Markets (2017)


39


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
264
  Lockport, NY   Wal-Mart/Tops Plaza-Lockport
5789 & 5839 Transit Road & Hamm
    14094     SC     GL     1993     2004       100%       296,582     $ 2,718,853     $ 9.17       100%     Wal-Mart (2015), Tops Markets (2021), Sears Hardware (2011)
265
  Medina, NY   Tops Plaza-Medina
11200 Maple Ridge Road
    14103     SC     Fee     1996     2004       100%       80,028     $ 526,400     $ 6.58       100%     Tops Markets (2016)
266
  New Hartford, NY   Consumer Square
4725-4829 Commercial Drive
    13413     SC     Fee (3 )   2002     2004       14.5%       514,717     $ 6,115,602     $ 11.97       99.3%     Barnes & Noble (2013), Bed Bath & Beyond (2018), Best Buy (2013), Staples (2018), Michaels (2013), Wal-Mart (2022), T.J. Maxx (2012)
267
  New Hartford, NY   Tops Plaza-New Hartford
40 Kellopp Road
    13413     SC     Fee     1998     2004       100%       127,740     $ 1,180,160     $ 12.60       73.3%     Hanaford Brothers (2018)
268
  Niagara Falls, NY   Home Depot Plaza-Niagara Falls
720 & 750 Builders Way
    14304     SC     Fee     1994/2000     2004       100%       43,842     $ 577,615     $ 13.38       98.5%     Regal Cinemas (2019), Home Depot (Not Owned)
269
  Niagara Falls, NY   Pine Plaza
8207-8351 Niagara Falls Boulevard
    14304     SC     Fee     1980/1992/
1998
    2004       100%       83,273     $ 709,286     $ 10.33       82.4%     Office Max (2015)
270
  Niagara Falls, NY   Tops-Portage
1000 Portage Road
    14301     SC     Fee     1991     2004       100%       117,014     $ 1,200,084     $ 10.26       100%     Tops Markets (2013)
271
  Niagara Falls, NY   Wegmans Plaza-N Falls
1575-1653 Military Road
    14304     SC     Fee     1998     2004       100%       122,876     $ 701,855     $ 6.42       89.0%     Wegmans Food Markets (2023)
272
  Niskayuna, NY   Mohawk Commons
402-442 Balltown Road
    12121     SC     Fee     2002     2004       100%       399,901     $ 4,569,092     $ 11.22       100%     Price Chopper (2022), Lowe’s Home Improvement (2022), Marshall’s (2012), Barnes & Noble (2014), Bed Bath & Beyond (2019), Target (Not Owned)
273
  North Tonawanda, NY   Mid-City Plaza
955-987 Payne Avenue
    14120     SC     Fee     1960/1976/
1980/1995/
2004
    2004       100%       215,998     $ 2,044,760     $ 11.88       79.7%     Tops Markets (2024)
274
  Norwich, NY   Tops Plaza-Norwich
54 East Main Street
    13815     SC     GL (3 )   1997     2004       10%       85,453     $ 1,098,685     $ 13.04       98.6%     Tops Markets (2018)
275
  Olean, NY   Wal-Mart Plaza-Olean
3142 West State Street
    14760     SC     Fee     1993/2004     2004       100%       285,400     $ 2,249,822     $ 8.17       96.4%     Wal-Mart (2014), Eastwynn Theatres (2014), BJ’s Wholesale Club (2014), Home Depot (Not Owned)
276
  Ontario, NY   Tops Plaza-Ontario Blockbuster
6254-6272 Furnace Road
    14519     SC     Fee (3 )   1998     2004       20%       77,040     $ 787,174     $ 10.22       100%     Tops Markets (2019)
277
  Orchard Road Park, NY   Crossroad Plaza
3245 Southwestern Boulevard
    14127     SC     Fee (3 )   2000     2004       20%       167,805     $ 1,763,751     $ 11.24       93.5%     Tops Markets (2022), Stein Mart (2012), Lowe’s Home Improvement (Not Owned)


40


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
278
  Plattsburgh, NY   Consumer Square
Rt. 3-Cornelia Road
    12901     SC     Fee     1993/2004     2004       100%       491,513     $ 3,452,394     $ 7.31       96.1%     Sam’s Club (2013), Wal-Mart (2020), T.J. Maxx (2013), PETsMART (2014), Michaels (2011)
279
  Rochester, NY   Hen-Jef Plaza
400 Jefferson Road at Henrietta
    14620     SC     Fee     1983/1993     2004       100%       159,517     $ 1,242,067     $ 9.42       82.7%     City Mattress (2009), CompUSA (2008), PETsMART (2008), The Tile Shop (2015)
280
  Rochester, NY   Panorama Plaza
1601 Penfield Road
    14625     SC     Fee (3 )   1959/1965/
1972/1980/
1986/1994
    2004       20%       278,241     $ 3,234,166     $ 12.46       93.3%     Linens ’N Things (2008), Tops Markets (2014)
281
  Rochester, NY   Henrietta Plaza
1100 Jefferson Road
    14467     SC     Fee     1972/1980/
1988/1999
    2004       100%       245,426     $ 1,857,705     $ 8.23       92.0%     Big Lots (2010), Office Depot (2009), Tops Markets (2013)
282
  Rome, NY   Freedom Plaza
205-211 Erie Boulevard West
    13440     SC     Fee     1978/2000/
2001
    2004       100%       194,467     $ 1,192,712     $ 5.86       100%     Staples (2015), J.C. Penney (2008), Tops Markets (2021), Marshall’s (2016)
283
  Springville, NY   Springville Plaza
172-218 South Cascade Drive
    14141     SC     Fee     1980/1999/
2004
    2004       100%       105,636     $ 910,679     $ 9.16       94.1%     Tops Markets (2023), Salvation Army (2009)
284
  Tonawanda, NY   Del-Ton Plaza
4220 Delaware Avenue
    14150     SC     Fee     1985/1996     2004       100%       55,473     $ 375,366     $ 7.14       94.7%      
285
  Tonawanda, NY   Office Depot Plaza
2309 Eggert Road
    14150     SC     Fee     1976/1985/
1996
    2004       100%       121,846     $ 1,117,828     $ 10.17       90.2%     CompUSA (2010), Office Depot (2011)
286
  Tonawanda, NY   Sheridan/Delaware Plaza
1692-1752 Sheridan Drive
    14223     SC     Fee     1950/1965/
1975/1986/
2000
    2004       100%       188,200     $ 1,342,313     $ 7.16       99.7%     Bon Ton (2010), Bon Ton Home Store (2010), Tops Markets (2020)
287
  Tonawanda, NY   Tops Plaza-Niagara Street
150 Niagara Street
    14150     SC     Fee (3 )   1997     2004       10%       97,014     $ 1,237,690     $ 12.98       98.3%     Tops Markets (2017)
288
  Tonawanda, NY   Youngmann Plaza
750 Young Street
    14150     SC     Fee (3 )   1985/2003     2004       10%       310,921     $ 2,324,541     $ 7.58       95.5%     BJ’s Wholesale Club (2010), Big Lots (2012), Gander Mountain (2015), Tops Markets (2021)
289
  Utica, NY   Tops Plaza-Dollar Tree
1154 Mohawk Street
    13501     SC     Fee     1961/1972/
1988/1998
    2004       100%       191,047     $ 1,473,725     $ 10.75       71.7%     A.J. Wright (2014), Hanaford Brothers (2025)
290
  Victor, NY   Victor Square
2-10 Commerce Drive
    14564     SC     Fee     2000     2004       100%       56,134     $ 913,696     $ 17.24       94.4%      
291
  Warsaw, NY   Tops Plaza-Warsaw
2382 Route 19
    14569     SC     Fee (3 )   1998     2004       20%       74,105     $ 715,721     $ 9.66       100%     Tops Markets (2015)
292
  West Seneca, NY   Home Depot Plaza
1881 Ridge Road
    14224     SC     GL     1975/1983/
1987/1995
    2004       100%       139,453     $ 1,399,505     $ 10.33       97.2%     Home Depot (2016)


41


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
293
  West Seneca, NY   Seneca-Ridge Plaza
3531 Seneca Street
    14224     SC     Fee     1980/1996/
2004
    2004       100%       62,403     $ 291,082     $ 11.74       39.7%      
294
  Williamsville, NY   Williamsville Place
5395 Sheridan Drive
    14221     SC     Fee     1986/1995/
2003
    2004       100%       98,846     $ 1,028,789     $ 13.46       77.3%      
295
  Williamsville, NY   Premier Place
7864-8020 Transit Road
    14221     SC     Fee (3 )   1986/1994/
1998
    2004       14.5%       142,536     $ 1,295,070     $ 10.77       84.4%     Premier Liquors (2010), Stein Mart (2008)
    North Carolina
                                                                               
296
  Apex, NC   Beaver Creek Commons
1335 W Williams Street
    27502     SC     Fee     2005     1*       100%       116,429     $ 2,255,511     $ 16.80       95.6%     Linens ’N Things (2016), Office Max (2014), Lowe’s Home Improvement (Not Owned), Super Target (Not Owned)
297
  Apex, NC   Beaver Creek Crossings South
1335 W Williams Street
    27502     SC     Fee     2006     1*       100%       207,524     $ 2,150,267     $ 9.25       100%     Dick’s Sporting Goods (2017), Consolidated Theatres (2026), T.J. Maxx (2016), Circuit City (2021), Borders Books and Music (2022)
298
  Asheville, NC   River Hills
299 Swannanoa River Road
    28805     SC     Fee (3 )   1996     2003       14.5%       190,970     $ 2,014,236     $ 10.55       100%     Goody’s (2007), Carmike Cinemas (2017), Circuit City (2017), Dick’s Sporting Goods (2017), Michaels (2008), Office Max (2011)
299
  Durham, NC   Oxford Road Commons
3500 Oxford Road
    27702     SC     Fee     1990/2001     1*/2*       100%       203,069     $ 1,262,491     $ 6.68       93.0%     Food Lion (2010), Burlington Coat Factory (2007), Wal-Mart (Not Owned)
300
  Fayetteville, NC   Cross Pointe Centre
5075 Morganton Road
    28314     SC     Fee     1985/2003     2003       100%       196,279     $ 1,500,496     $ 8.02       95.3%     Developers Realty Corp. (2012), T.J. Maxx (2011), Bed Bath & Beyond (2014)
301
  Hendersonville, NC   East Ridge Crossing
200 Thompson Street
    28792     SC     GL     1995/2004     2003       100%       124,432     $ 655,227     $ 4.00       100%     Epic Theatres (2018), Ingles (2009), Burke’s Outlet (2011), Big Lots (Not Owned)
302
  Indian Trail, NC   Union Town Center
Independence & Faith Church Road
    28079     SC     Fee     1999     2004       100%       96,160     $ 909,365     $ 10.86       87.1%     Food Lion (2020)
303
  Mooresville, NC   Mooresville Consumer Square I
355 West Plaza Drive
    28117     SC     Fee     1999     2004       100%       472,182     $ 4,327,214     $ 9.43       97.2%     Wal-Mart (2019), Goody’s (2010), Gander Mountain (2021)
304
  New Bern, NC   Rivertowne Square
3003 Claredon Boulevard
    28561     SC     Fee     1989/1999     1*/2*       100%       68,130     $ 598,928     $ 8.96       98.2%     Goody’s (2012), Wal-Mart (Not Owned)


42


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
305
  Washington, NC   Pamlico Plaza
536 Pamlico Plaza
    27889     SC     Fee     1990/1999     1*/2*       100%       80,269     $ 527,902     $ 6.67       98.5%     Goody’s (2009), Office Depot (2009), Wal-Mart (Not Owned)
306
  Wilmington, NC   University Centre
S. College Road & New Centre Drive
    28403     SC     Fee     1989/2001     1*/2*       100%       411,887     $ 3,536,859     $ 9.20       93.2%     Lowe’s Home Improvement (2014), Old Navy (2011), Bed Bath & Beyond (2012), Ross Dress For Less (2012), Steve & Barry’s (2014), Badcock Furniture (2014), Sam’s Club (Not Owned)
    North Dakota
                                                                               
307
  Dickinson, ND   Prairie Hills Mall
1681 Third Road Avenue
    58601     MM     Fee     1978     1*/2*       100%       266,502     $ 1,120,171     $ 4.62       90.9%     Kmart (2008), Herberger’s (2010), J.C. Penney (2008)
    Ohio                                                                                
308
  Ashtabula, OH   Tops Plaza-Ashtabula
1144 West Prospect Road
    44004     SC     Fee     2000     2004       100%       57,874     $ 904,720     $ 15.63       100%     Tops Markets (2021)
309
  Aurora, OH   Barrington Town Square
70-130 Barrington Town Square
    44202     SC     Fee     1996/2004     1*       100%       102,683     $ 1,036,287     $ 11.70       82.7%     Cinemark (2011), Heinen’s (Not Owned)
310
  Bellefontaine, OH   South Main Street Plaza
2250 South Main Street
    43311     SC     Fee     1995     1998       100%       52,399     $ 445,579     $ 8.50       100%     Goody’s (2010), Staples (2010)
311
  Boardman, OH   South Land Crossing
I-680 & Us Route 224
    44514     SC     Fee     1997     1*       100%       506,254     $ 4,185,018     $ 8.26       98.8%     Lowe’s Home Improvement (2016), Babies ’R Us (2009), Staples (2012), Dick’s Sporting Goods (2012), Wal-Mart (2017), PETsMART (2013), Giant Eagle (2018)
312
  Canton, OH   Belden Park Crossings
5496 Dressker Road
    44720     SC     Fee (3 )   1995/2001/
2003
    1*       14.5%       478,106     $ 5,194,192     $ 10.95       99.3%     Value City Furniture (2011), H.H. Gregg Appliances (2011), Jo-Ann Stores (2008), PETsMART (2013), Dick’s Sporting Goods (2010), DSW Shoe Warehouse (2012), Kohl’s (2016), Target (Not Owned)
313
  Chillicothe, OH   Chillicothe Place
867 N Bridge Street
    45601     SC     GL (3 )   1974/1998     1*/2*       20%       106,262     $ 1,019,135     $ 9.59       100%     Kroger (2041), Office Max (2013)
314
  Chillicothe, OH   Chillicothe Place (Lowe’s)
867 N Bridge Street
    45601     SC     Fee     1998     1*       100%       130,497     $ 822,132     $ 6.30       100%     Lowe’s Home Improvement (2015)
315
  Cincinnati, OH   Glenway Crossing
5100 Glen Crossing Way
    45238     SC     Fee     1990     2*       100%       235,433     $ 1,926,940     $ 10.81       75.7%     Steve & Barry’s (2014), Michaels (2011)


43


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
316
  Cincinnati, OH   Tri County Mall
117000 Princeton Park
    45246     SC     Fee (3 )   1960/1990/
1992
    2005       18%       667,659     $ 10,052,257     $ 17.87       88.8%     Dillard’s (2018), Macy’s (Not Owned), Sears (Not Owned)
317
  Columbus, OH   Consumer Square West Columbus
3630 Soldano Boulevard
    43228     SC     Fee     1989/2003     2004       100%       356,515     $ 2,238,410     $ 7.34       85.5%     Kroger (2014), Target (2011)
318
  Columbus, OH   Dublin Village Center
6561-6815 Dublin Center Drive
    43017     SC     Fee     1987     1998       100%       227,003     $ 1,574,433     $ 11.76       59.0%     AMC Theatres (2007), Max Sports Center (2007), BJ’s Wholesale Club (Not Owned)
319
  Columbus, OH   Easton Market
3740 Easton Market
    43230     SC     Fee     1998     1998       100%       509,611     $ 6,010,166     $ 12.15       97.0%     CompUSA (2013), Staples (2013), PETsMART (2014), Golfsmith Golf Center (2013), Michaels (2008), Dick’s Sporting Goods (2013), DSW Shoe Warehouse (2012), Kittle’s Home Furnishings (2012), Bed Bath & Beyond (2014), T.J. Maxx (2008)
320
  Columbus, OH   Lennox Town Center
1647 Olentangy River Road
    43212     SC     Fee (3 )   1997     1998       50%       352,913     $ 3,458,841     $ 9.80       100%     Target (2016), Barnes & Noble (2007), Staples (2011), AMC Theatres (2021)
321
  Columbus, OH   Sun Center
3622-3860 Dublin Granville Road
    43017     SC     Fee (3 )   1995     1998       79.45%       305,428     $ 3,610,228     $ 11.91       99.2%     Babies ’R Us (2011), Michaels (2013), Ashley Furniture Homestore (2012), Stein Mart (2012), Whole Food Markets (2016), Staples (2010)
322
  Dublin, OH   Perimeter Center
6644-6804 Perimeter Loop Road
    43017     SC     Fee     1996     1998       100%       137,556     $ 1,514,461     $ 11.27       97.7%     Giant Eagle (2014)
323
  Elyria, OH   Elyria Shopping Center
841 Cleveland Street
    44035     SC     Fee     1977     2*       100%       92,125     $ 704,695     $ 7.65       100%     Tops Markets (2010)
324
  Gallipolis, OH   Gallipolis Market Place
2145 Eastern Avenue
    45631     SC     Fee     1998     2003       100%       25,950     $ 337,254     $ 13.63       95.4%     Wal-Mart (Not Owned)
325
  Grove City, OH   Derby Square Shopping Center
2161-2263 Stringtown Road
    43123     SC     Fee (3 )   1992     1998       20%       128,210     $ 1,124,578     $ 9.40       93.3%     Giant Eagle (2016)
326
  Huber Hts., OH   North Heights Plaza
8280 Old Troy Pike
    45424     SC     Fee     1990     1993       100%       163,819     $ 1,346,389     $ 10.83       75.9%     Cub Foods (2011), Wal-Mart (Not Owned)
327
  Lebanon, OH   Countryside Place
1879 Deerfield Road
    45036     SC     Fee     1990/2002     1993       100%       17,000     $ 79,374     $ 5.75       81.2%     Wal-Mart (Not Owned), Erb Lumber (Not Owned)
328
  Macedonia, OH   Macedonia Commons
Macedonia Commons Boulevard
    44056     SC     Fee (3 )   1994     1994       50%       233,619     $ 3,050,811     $ 12.01       99.5%     Tops Markets (2019), Kohl’s (2016), Wal-Mart (Not Owned)


44


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
329
  Macedonia, OH   Macedonia Commons (Phase II)
8210 Macedonia Commons
    44056     SC     Fee     1999     1*       100%       169,481     $ 1,601,734     $ 9.45       100%     Cinemark (2019), Home Depot (2020)
330
  North Olmsted, OH   Great Northern Plaza North
25859-26437 Great Northern
    44070     SC     Fee (3 )   1958/1998/
2003
    1997       14.5%       624,587     $ 8,111,991     $ 13.06       99.0%     Best Buy (2010), DSW Shoe Warehouse (2015), Bed Bath & Beyond (2012), Marshall’s (2008), PETsMART (2008), Steve & Barry’s (2014), Home Depot (2019), K & G Menswear (2008), Jo-Ann Stores (2009), Marc’s (2012), CompUSA (2008), Remington College (Not Owned)
331
  Pataskala, OH   Village Market/Rite-Aid Center
78-80 Oak Meadow Drive
    43062     SC     Fee     1980     1998       100%       33,270     $ 201,200     $ 6.05       100%     Cardinal Foods (2007)
332
  Pickerington, OH   Shoppes at Turnberry
1701-1797 Hill Road North
    43147     SC     Fee     1990     1998       100%       59,495     $ 628,011     $ 13.22       77.0%      
333
  Solon, OH   Uptown Solon
Kruse Drive
    44139     SC     Fee     1998     1*       100%       183,255     $ 2,792,384     $ 15.74       96.8%     Mustard Seed Market & Cafe (2019), Bed Bath & Beyond (2009), Borders Books and Music (2018)
334
  Stow, OH   Stow Community Shopping Center
Kent Road
    44224     SC     Fee     1997/2000     1*       100%       404,480     $ 2,986,704     $ 7.46       98.9%     Kmart (2006), Bed Bath & Beyond (2011), Giant Eagle (2017), Kohl’s (2019), Office Max (2011), Target (Not Owned)
335
  Tiffin, OH   Tiffin Mall
870 West Market Street
    44883     MM     Fee     1980/2004     1*/2*       100%       170,868     $ 731,821     $ 6.11       70.0%     Cinemark (2011), J.C. Penney (2010)
336
  Toledo, OH   Springfield Commons Shopping
S. Holland-Sylvania Road
    43528     SC     Fee (3 )   1999     1*       20%       241,129     $ 2,779,908     $ 11.03       99.3%     Kohl’s (2019), Gander Mountain (2014), Bed Bath & Beyond (2010), Old Navy (2010)
337
  Toledo, OH   Dick’s-Toledo
851 West Alexis Road
    43612     SC     Fee     1995     2004       100%       80,160     $ 501,000     $ 6.25       100%     Dick’s Sporting Goods (2016)
338
  Westlake, OH   West Bay Plaza
30100 Detroit Road
    44145     SC     Fee     1974/1997/
2000
    1*/2*       100%       162,330     $ 1,370,403     $ 8.54       98.8%     Marc’s (2009), Kmart (2009)
339
  Xenia, OH   West Park Square
1700 West Park Square
    45385     SC     Fee     1994/1997/
2001
    1*       100%       104,873     $ 738,682     $ 8.12       77.9%     Kroger (2019), Wal-Mart (Not Owned)


45


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
    Oregon                                                                                
340
  Portland, OR   Tanasbourne Town Center
NW Evergreen Parkway & NW Ring Road
    97006     SC     Fee (3 )   1995/2001     1996       50%       309,617     $ 5,586,982     $ 18.18       99.2%     Linens ’N Things (2012), Ross Dress For Less (2008), Barnes & Noble (2011), Michaels (2009), Office Depot (2010), Haggan’s (2021), Nordstrom (Not Owned), Target (Not Owned), Mervyns (Not Owned)
    Pennsylvania                                                                                
341
  Allentown, PA   West Valley Market Place
1091 Mill Creek Road
    18106     SC     Fee     2001/2004     2003       100%       259,239     $ 2,698,873     $ 10.47       99.5%     Wal-Mart (2021)
342
  E. Norriton, PA   Kmart Plaza
2692 Dekalb Pike
    19401     SC     Fee     1975/1997     1*/2*       100%       173,876     $ 1,331,209     $ 7.23       100%     Kmart (2010), Big Lots (2010)
343
  Erie, PA   Peach Street Square
1902 Keystone Drive
    16509     SC     GL     1995/1998/
2003
    1*       100%       557,769     $ 4,779,195     $ 8.89       91.3%     Lowe’s Home Improvement (2015), PETsMART (2015), Circuit City (2020), Kohl’s (2016), Wal-Mart (2015), Cinemark (2011), Home Depot (Not Owned)
344
  Erie, PA   Erie Market Place
6660-6750 Peach Street
    16509     SC     Fee (3 )   2003     2003       14.5%       107,537     $ 1,065,115     $ 9.18       100%     Marshall’s (2013), Bed Bath & Beyond (2013), Babies ’R Us (2015), Target (Not Owned)
345
  Erie, PA   Tops Plaza-Erie
1520 West 25th Street
    16505     SC     Fee     1995     2004       100%       103,691     $ 1,325,624     $ 12.78       100%     Tops Markets (2016)
346
  Hanover, PA   BJ’s-Hanover
1785 Airport Road South
    18109     SC     Fee     1991     2004       100%       112,230     $ 858,844     $ 7.65       100%     BJ’s Wholesale Club (2011)
347
  Monaca, PA   Township Market Place
115 Wagner Road
    15061     SC     GL (3 )   1999/2004     2003       14.5%       298,589     $ 2,757,341     $ 9.23       100%     Cinemark (2019), Lowe’s Home Improvement (2016), Shop ’N Save (2019)
348
  Mt. Nebo, PA   Mt. Nebo Point
Mt. Nebo Road & Lowries Run Road
    15237     SC     Fee     2005     1*       100%       72,882     $ 1,124,207     $ 13.93       100%     Sportsman’s Warehouse (2020), Sam’s Club (Not Owned), Target (Not Owned)
    Puerto Rico                                                                                
349
  Arecibo, PR   Plaza Del Atlantico
PR #KM 80.3
    00612     MM     Fee     1980/1993     2005       100%       215,451     $ 3,209,401     $ 15.35       89.7%     Kmart (2013), Capri Del Atlantico (2013)
350
  Bayamon, PR   Plaza Del Sol
Road PR#29 & PR#167, Hato Tejas
    00961     MM     Fee     1998/2003/
2004
    2005       100%       526,373     $ 15,807,439     $ 30.70       93.5%     Wal-Mart (2022), Old Navy (2011), Science Park Cinema (2019), Bed Bath & Beyond (2017), Home Depot (Not Owned)
351
  Bayamon, PR   Rexville Plaza
PR #167, KM 18.8
    00961     SC     Fee     1980/2002     2005       100%       126,023     $ 1,553,961     $ 11.42       98.9%     Pueblo Xtra (2009), Tiendas Capri (2013)


46


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
352
  Bayamon, PR   Rio Hondo
PR #22, PR #167
    00961     MM     Fee     1982/2001     2005       100%       461,321     $ 11,457,429     $ 23.63       97.0%     Tiendas Capri (2009), CompUSA (2021), Kmart (2011), Pueblo Xtra (2012), Marshall’s (2015), Rio Hondo Cinema (Not Owned)
353
  Carolina, PR   Plaza Escorial
Carreterra #3, KM 6.1
    00987     SC     Fee     1997     2005       100%       385,665     $ 7,534,321     $ 15.66       99.4%     Office Max (2015), Wal-Mart (2024), Borders Books and Music (2017), Old Navy (2009), Sam’s Club (2024), Home Depot (Not Owned), Caribbean Cinemas (Not Owned)
354
  Cayey, PR   Plaza Cayey
State Road #1 & PR #735
    00736     SC     Fee     1999/2004     2005       100%       261,126     $ 3,173,157     $ 9.06       100%     Wal-Mart (2021), Cayey Cinema Corp. (Not Owned)
355
  Fajardo, PR   Plaza Fajardo
Road PR #3 INT PR #940
    00738     SC     Fee     1992     2005       100%       245,319     $ 3,823,351     $ 15.29       100%     Wal-Mart (2012), Pueblo Xtra (2012)
356
  Guayama, PR   Plaza Wal-Mart
Road PR #3 KM 135.0
    00784     SC     Fee     1994     2005       100%       163,598     $ 1,676,518     $ 10.44       98.2%     Wal-Mart (2018)
357
  Hatillo, PR   Plaza Del Norte
Road #2,KM 81.9
    00659     MM     Fee     1992     2005       100%       505,877     $ 10,959,561     $ 22.22       93.8%     J.C. Penney (2012), Pueblo Xtra (2012), Wal-Mart (2012), Toys ’R Us/Kids ’R Us (Not Owned)
358
  Humacao, PR   Palma Real
State Road #3, KM 78.20
    00791     SC     Fee     1995     2005       100%       340,608     $ 6,440,284     $ 16.58       99.0%     Capri Stores (2011), Pueblo Xtra (2020), Cinevista Theatres (2006), Wal-Mart (2020), Pep Boys (Not Owned), J. C. Penney (Not Owned)
359
  Isabela, PR   Plaza Isabela
State Road #2 & #454,KM 111.6
    00662     SC     Fee     1994     2005       100%       238,410     $ 3,644,244     $ 14.13       100%     Pueblo Xtra (2014), Wal-Mart (2019)
360
  San German, PR   Camino Real
State Road PR #122
    00683     SC     Fee     1991     2005       100%       22,356     $ 315,950     $ 5.14       100%     Pep Boys (2015)
361
  San German, PR   Del Oeste
Road PR #2 INT PR #122
    00683     SC     Fee     1991     2005       100%       174,172     $ 2,317,077     $ 12.12       98.8%     Kmart (2016), Pueblo Xtra (2011)
362
  San Juan, PR   Senorial Plaza
PR #53 & PR #177
    00926     MM     Fee     1978/Mutiple     2005       100%       169,136     $ 2,597,385     $ 16.17       88.6%     Kmart (2010), Pueblo Xtra (Not Owned)
363
  Vega Baja, PR   Plaza Vega Baja
Road PR #2 INT PR #155
    00693     SC     Fee     1990     2005       100%       174,728     $ 2,088,246     $ 10.71       100%     Kmart (2015), Pueblo Xtra (2010)
    South Carolina                                                                                
364
  Camden, SC   Springdale Plaza
1671 Springdale Drive
    29020     SC     Fee     1990/2000     1993       100%       180,127     $ 1,275,113     $ 7.13       99.3%     Steve & Barry’s (2014), Belk (2015), Wal-Mart Super Center (Not Owned)


47


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
365
  Charleston, SC   Ashley Crossing
2245 Ashley Crossing Drive
    29414     SC     Fee     1991     2003       100%       188,883     $ 1,45,549     $ 7.76       92.5%     Food Lion (2011), Wal-Mart (2011)
366
  Columbia, SC   Harbison Court
Harbison Boulevard
    29212     SC     Fee (3 )   1991     2002       14.5%       236,707     $ 2,863,329     $ 12.41       97.5%     Barnes & Noble (2011), Ross Dress For Less (2014), Marshall’s (2012), Office Max (2011), Babies ’R Us #8890 (Not Owned)
367
  Mt. Pleasant, SC   Wando Crossing
1500 Highway 17 North
    29465     SC     Fee     1992/2000     1995       100%       209,139     $ 1,759,609     $ 10.81       77.8%     Office Depot (2010), T.J. Maxx (2007), Marshall’s (2011), Wal-Mart (Not Owned)
368
  N. Charleston, SC   North Pointe Plaza
7400 Rivers Avenue
    29406     SC     Fee     1989/2001     2*       100%       294,471     $ 2,066,522     $ 7.04       99.7%     Wal-Mart (2009), Office Max (2007), Helig Meyers (Not Owned)
369
  N. Charleston, SC   North Charleston Center
5900 Rivers Avenue
    29406     SC     Fee     1980/1993     2004       100%       235,501     $ 1,071,400     $ 7.80       58.4%     Northern Tool (2016), Big Lots (2009)
370
  Orangeburg, SC   North Road Plaza
2795 North Road
    29115     SC     Fee     1994/1999     1995       100%       50,760     $ 532,648     $ 10.49       100%     Goody’s (2008), Wal-Mart (Not Owned)
371
  S. Anderson, SC   Crossroads Plaza
406 Highway 28 Bypass
    29624     SC     Fee     1990     1994       100%       13,600     $ 53,812     $ 3.96       100%      
372
  Simpsonville, SC   Fairview Station
621 Fairview Road
    29681     SC     Fee     1990     1994       100%       142,086     $ 881,915     $ 6.21       100%     Ingles (2011), Kohl’s (2015)
373
  Union, SC   West Towne Plaza
U.S. Hwy 176 Bypass #1
    29379     SC     Fee     1990     1993       100%       184,331     $ 651,550     $ 5.04       70.1%     Wal-Mart (2009), Belk (2010)
    South Dakota                                                                                
374
  Watertown, SD   Watertown Mall
1300 9th Avenue
    56401     MM     Fee     1977     1*/2*       100%       240,262     $ 1,574,446     $ 6.92       94.7%     Dunham’s Sporting Goods (2011), Herberger’s (2009), J.C. Penney (2008), Hy Vee Supermarket (Not Owned)
    Tennessee                                                                                
375
  Brentwood, TN   Cool Springs Pointe
I-65 and Moore’s Lane
    37027     SC     Fee (3 )   1999/2004     2000       14.5%       201,414     $ 2,572,784     $ 12.77       100%     Best Buy (2014), Ross Dress For Less (2015), Linens ’N Things (2014), DSW Shoe Warehouse (2008)
376
  Chattanooga, TN   Overlook at Hamilton Place
2288 Gunbarrel Road
    37421     SC     Fee     1992/2004     2003       100%       207,244     $ 1,797,167     $ 8.67       100%     Best Buy (2014), Hobby Lobby (2014), Fresh Market (2014)
377
  Columbia, TN   Columbia Square
845 Nashville Highway
    38401     SC     Fee (3 )   1993     2003       10%       68,948     $ 502,041     $ 7.94       91.7%     Kroger (2022)
378
  Farragut, TN   Farragut Pointe
11132 Kingston Pike
    37922     SC     Fee (3 )   1991     2003       10%       71,311     $ 536,825     $ 7.84       96.0%     Food City (2011)
379
  Goodlettsville, TN   Northcreek Commons
101-139 Northcreek Boulevard
    37072     SC     Fee (3 )   1987     2003       20%       84,441     $ 728,601     $ 8.63       100%     Kroger (2012)


48


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
380
  Hendersonville, TN   Hendersonville Lowe’s
1050 Lowe’s Road
    37075     SC     Fee     1999     2003       100%       133,144     $ 1,222,439     $ 9.18       100%     Lowe’s Home Improvement (2019)
381
  Johnson City, TN   Johnson City Market Place
Franklin & Knob Creek Roads
    37604     SC     GL     2005     2003       100%       4,060     $ 413,892     $ 15.00       100%     Kohl’s (Not Owned)
382
  Murfreesboro, TN   Memorial Village
710 Memorial Boulevard
    37130     SC     Fee     1993     2003       100%       117,697     $ 747,140     $ 6.35       100%     Murfreesboro Athletic Club (2014)
383
  Murfreesboro, TN   Towne Centre
Old Fort Parkway
    37129     SC     Fee (3 )   1998     2003       14.5%       108,023     $ 1,320,615     $ 12.23       100%     T.J. Maxx (2008), Books-A-Million (2009), Lowe’s Home Improvement (Not Owned), Toys ’R Us (Not Owned), Target (Not Owned)
384
  Nashville, TN   The Market Place
Charlotte Pike
    37209     SC     Fee (3 )   1998     2003       14.5%       167,795     $ 1,673,979     $ 9.98       100%     Lowe’s Home Improvement (2019), Wal-Mart (Not Owned)
    Texas                                                                                
385
  Austin, TX   Shops at Tech Ridge
Center Ridge Drive
    78728     SC     Fee (3 )   2003     2003       24.75%       282,798     $ 4,250,669     $ 14.56       99.3%     Ross Dress For Less (2014), Linens ’N Things (2014), Hobby Lobby (2018), Best Buy (2017), Toys ’R Us (Not Owned), Super Target (Not Owned)
386
  Frisco, TX   Frisco Market Place
7010 Preston Road
    75035     SC     Fee (3 )   2003     2003       14.5%       20,959     $ 731,059     $ 19.33       100%     Kohl’s (Not Owned)
387
  Irving, TX   MacArthur Market Place
Market Place Boulevard
    75063     SC     Fee (3 )   2004     2003       14.5%       146,941     $ 2,084,490     $ 10.75       100%     Hollywood Theatres (2016), Office Max (2014), Kohl’s (Not Owned), Sam’s Club (Not Owned), Wal-Mart (Not Owned)
388
  Lewisville, TX   Lakepointe Crossings
S Stemmons Freeway
    75067     SC     Fee (3 )   1991     2002       14.5%       311,039     $ 3,509,234     $ 11.43       98.8%     99 Cents Only Store (2009), RoomStore, The (2007), PETsMART(2009), Best Buy (2010), Academy Sports (2016), Mardell Christian Book Store (2012), Toys ’R Us (Not Owned), Conn’s Appliance (Not Owned), Garden Ridge (Not Owned)
389
  McKinney, TX   McKinney Market Place
US Hwy 75 & El Dorado Parkway
    75070     SC     Fee (3 )   2000     2003       14.5%       118,967     $ 1,168,375     $ 10.53       93.3%     Kohl’s (2021), Albertson’s (Not Owned)


49


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
390
  Mesquite, TX   The Market Place at Towne Centre
Southbound Frontage Road I 635
    75150     SC     Fee (3 )   2001     2003       14.5%       170,625     $ 2,349,200     $ 12.71       100%     Linens ’N Things (2013), Michaels (2012), Ross Dress For Less (2013), Home Depot (Not Owned), Kohl’s (Not Owned)
391
  San Antonio, TX   Bandera Point North
State Loop 1604/Bandera Road
    78227     SC     Fee     2001/2002     1 *     100%       278,721     $ 4,374,724     $ 14.88       97.7%     T.J. Maxx (2011), Linens ’N Things (2012), Old Navy (2011), Ross Dress For Less (2012), Barnes & Noble (2011), Target (Not Owned), Lowe’s Home Improvement (Not Owned), Kohl’s (Not Owned), Chuck E Cheese (Not Owned), Credit Union (Not Owned), Racquetball & Fitness (Not Owned)
392
  San Antonio, TX   Ingram Park
6157 NW Loop 410
    78238     MV     Fee     1985     2005       50%       76,597     $ 430,440     $ 5.62       100%     Mervyns (2020)
393
  San Antonio, TX   Westover Market Place
SH 151 at Loop 410
    78209     SC     Fee (3 )   2005     1 *     10%       188,062     $ 2,620,336     $ 13.74       98.1%     PETsMART (2016), Office Depot (2016), Sportsman’s Warehouse (2015), Ross Dress For Less (2016), Lowe’s Home Improvement (Not Owned), Target (Not Owned)
    Utah                                                                                
394
  Logan, UT   Family Place at Logan
400 North Street
    84321     SC     Fee     1975     1998       100%       19,200     $ 209,194     $ 10.90       100%     Rite-Aid (Not Owned)
395
  Midvale, UT   Family Center at Fort Union 50
900 East Ft. Union Boulevard
    84047     SC     Fee     1973/2000     1998       100%       612,257     $ 7,171,398     $ 12.82       91.4%     Babies ’R Us (2014), Office Max (2012), Smith’s Food & Drug (2024), Media Play (2009), Bed Bath & Beyond (2014), Wal-Mart (2015), Ross Dress For Less (2016)
396
  Ogden, UT   Family Center at Ogden 5-Point
21-129 Harrisville Road
    84404     SC     Fee     1977     1998       100%       162,316     $ 661,027     $ 5.41       75.3%     Harmon’s (2012)
397
  Orem, UT   Family Center at Orem
1300 South Street
    84058     SC     Fee     1991     1998       100%       150,667     $ 1,621,278     $ 10.76       100%     Kids ’R Us (2011), Media Play (2009), Office Depot (2008), Jo-Ann Stores (2012), R.C. Willey (Not Owned)


50


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
398
  Riverdale, UT   Family Center at Riverdale 510
1050 West Riverdale Road
    84405     SC     Fee     1995/2003     1998       100%       593,398     $ 4,882,292     $ 8.45       95.9%     Meier & Frank Department Store (2011), Office Max (2008), Gart Sports (2012), Sportsman’s Warehouse (2009), Target SuperStore (2017), Media Play (2009), Circuit City (2016)
399
  Riverdale, UT   Family Center at Riverdale 526
1050 West Riverdale Road
    84405     SC     Fee     2005     1 *     100%       35,347     $ 335,796     $ 9.50       100%     Jo-Ann Stores (2015), Sam’s Club (Not Owned), Super Wal-Mart (Not Owned)
400
  Salt Lake City, UT   Family Place at 33rd South
3300 South Street
    84115     SC     Fee     1978     1998       100%       34,209     $ 200,588     $ 9.00       65.2%      
401
  Taylorsville, UT   Family Center at Midvalley 503
5600 South Redwood
    84123     SC     Fee     1982/2003     1998       100%       641,256     $ 6,231,524     $ 10.41       93.3%     Shopko (2014), Jo-Ann Stores (2015), Gart Sports (2017), 24 Hour Fitness (2017), Bed Bath & Beyond (2015), Ross Dress For Less (2014), Home USA Warehouse (2012), Media Play (2009), PETsMART (2012), Harmon’s Superstore (Not Owned)
    Vermont                                                                                
402
  Berlin, VT   Berlin Mall
282 Berlin Mall Road, Unit #28
    05602     MM     Fee     1986/1999     2 *     100%       174,624     $ 1,667,090     $ 9.55       99.9%     Wal-Mart (2014), J.C. Penney (2009)
    Virginia                                                                                
403
  Chester, VA   Bermuda Square
12607-12649 Jefferson Davis
    23831     SC     Fee     1978     2003       100%       116,310     $ 1,214,315     $ 10.72       97.4%     Ukrop’s (2008)
404
  Fairfax, VA   Fairfax Towne Center
12210 Fairfax Towne Center
    22033     SC     Fee(3 )   1994     1995       14.5%       253,392     $ 4,849,085     $ 19.14       100%     Safeway (2019), T.J. Maxx (2009), Tower Records (2009), Bed Bath & Beyond (2010), United Artists Theatre (2014)
405
  Lynchburg, VA   Candlers Station
3700 Candlers Mountain Road
    24502     SC     Fee     1990     2003       100%       270,765     $ 2,277,564     $ 8.46       99.0%     Goody’s (2008), Cinemark (2015), Circuit City (2009), Staples (2013), T.J. Maxx (2009), Steve & Barry’s (2014), Toys ’R Us (Not Owned)
406
  Lynchburg, VA   Fairview Square
2215 Florida Avenue
    24501     SC     Fee     1992     2004       100%       85,209     $ 362,745     $ 6.60       64.5%     Food Lion (2012)
407
  Martinsville, VA   Liberty Fair Mall
240 Commonwealth Boulevard
    24112     MM     Fee     1989/1997     1 */2*     50%       435,057     $ 2,796,347     $ 7.03       90.8%     Goody’s (2007), Belk (2009), J.C. Penney (2009), Sears (2009), Office Max (2012), Kroger (2017)


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Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Shopping Center Property List at December 31, 2006
                                    Company-
      Average
       
                                    Owned
      Base
       
                Type of
      Year
      DDR
  Gross
  Total
  Rent
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  (Per SF)
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (2)   Leased   Anchor Tenants (Lease Expiration)
 
408
  Midlothian, VA   Genito Crossing
Hull Street Road
    23112     SC     Fee     1985     2003       100%       79,407     $ 677,383     $ 9.29       91.8%     Food Lion (2010)
409
  Pulaski, VA   Memorial Square
1000 Memorial Drive
    24301     SC     Fee     1990     1993       100%       143,299     $ 813,944     $ 6.28       90.5%     Wal-Mart (2011), Food Lion (2011)
410
  Winchester, VA   Apple Blossom Corners
2190 S. Pleasant Valley
    22601     SC     Fee(3 )   1990/1997     2 *     20%       240,560     $ 2,427,948     $ 9.95       100%     Martin’s Food Store (2040), Kohl’s (2018), Office Max (2012), Books-A-Million (2013)
    Washington                                                                                
411
  Kirkland, WA   Totem Lakes Upper
Totem Lakes Boulevard
    98034     SC     Fee(3 )   1999/2004     2004       20%       228,210     $ 2,720,261     $ 15.63       77.8%     Guitar Center (2007), Ross Dress For Less (2010), CompUSA (2006), Rite-Aid (Not Owned)
    West Virginia                                                                                
412
  Barboursville, WV   Barboursville Center
5-13 Mall Road
    25504     SC     GL     1985     1998       100%       70,900     $ 389,425     $ 5.49       100%     Discount Emporium (2006), Goody’s (2014), Value City (Not Owned)
    Wisconsin                                                                                
413
  Brookfield, WI   Shoppers World of Brookfield
North 124th Street and West CA
    53005     SC     Fee(3 )   1967     2003       14.5%       182,722     $ 1,420,459     $ 7.77       100%     T.J. Maxx (2010), Marshall’s Mega Store (2009), Office Max (2010), Burlington Coat Factory (2012)
414
  Brown Deer, WI   Brown Deer Center
North Green Bay Road
    53209     SC     Fee(3 )   1967     2003       14.5%       266,716     $ 1,951,845     $ 7.46       98.1%     Kohl’s (2023), Michaels (2012), Office Max (2010), T.J. Maxx (2007), Old Navy (2012)
415
  Brown Deer, WI   Market Place of Brown Deer
North Green Bay Road
    53209     SC     Fee(3 )   1989     2003       14.5%       143,372     $ 1,133,461     $ 8.10       97.6%     Marshall’s Mega Store (2009), Pick ’N Save (2010)
416
  Milwaukee, WI   Point Loomis
South 27th Street
    53221     SC     Fee     1962     2003       100%       160,533     $ 707,571     $ 4.41       100%     Kohl’s (2007), Pick ’N Save (2007)
417
  West Allis, WI   West Allis Center
West Cleveland Avenue and S. 108
    53214     SC     Fee     1968     2003       100%       246,081     $ 1,421,496     $ 5.47       100%     Kohl’s (2008), Marshall’s Mega Store (2009), Pick ’N Save (2008)
 
 
1* Property developed by the Company.
 
2* Original IPO Property.
 
(1) “SC” indicates a power center or a community shopping center, “LC” indicates a lifestyle center, “MM” indicates an enclosed mini-mall, and “MV” indicates a Mervyns site.
 
(2) Calculated as total annualized base rentals divided by Company-owned GLA actually leased as of December 31, 2006.
 
(3) One of the one hundred seventeen (117) properties owned through unconsolidated joint ventures, which serve as collateral for joint venture mortgage debt aggregating approximately $2.5 billion (of which the Company’s proportionate share is $525.6 million) as of December 31, 2006, and which is not reflected in the consolidated indebtedness.


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Table of Contents

                                                                                         
Developers Diversified Realty Corporation
  Company-
               
Service Merchandise Property List at December 31, 2006
  Owned
      Average
       
                Type of
      Year
      DDR
  Gross
  Total
  Base
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  Rent
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (Per SF) (2)   Leased   Anchor Tenants (Lease Expiration)
 
        Alabama                                                                                
  1     Huntsville, AL   930A Old Monrovia Road     35806     SC   Fee     1984       2002       20%       54,200     $ 381,500     $ 7.04       100%     H.H. Gregg Appliances (2014)
        Arizona                                                                                
  2     Mesa, AZ   6233 East Southern Boulevard     85206     SC   Fee     1991       2002       20%       53,312     $ 724,182     $ 13.58       100%     Ashley Furniture Homestore (2013)
  3     Mesa, AZ   Continental Fiesta Plaza
1360 West Southern Avenue
    85202     SC   Fee     1984       2002       20%       50,000     $ 208,000     $ 4.16       100%     IRCA (2009)
        Connecticut                                                                                
  4     Danbury, CT   67 Newton Road     06810     SC   Lease     1978       2002       20%       51,750     $ 543,000     $ 10.49       100%     Homegoods (2012), Namco Pool Supplies (2012)
  5     Manchester, CT   1520 Pleasant Valley Road     06040     SC   GL     1993       2002       20%       49,905     $ 485,844     $ 9.74       100%     Michaels (2014), PETsMART (2014)
        Delaware                                                                                
  6     Dover, DE   1380 North Dupont Highway     19901     SC   Fee     1992       2002       20%       50,001     $ 352,047     $ 7.04       100%     Furniture & More (2009), PETsMART (2011)
        Florida                                                                                
  7     Bradenton, FL   825 Cortez Road West     34207     SC   Lease     1995       2002       20%       53,638     $ 330,870     $ 6.17       100%     Bed Bath & Beyond (2018), Michaels (2014)
  8     Ocala, FL   Shady Oaks Shopping Center
2405 Southwest 27th Avenue
    32671     SC   Lease     1981       2002       20%       54,816     $ 286,732     $ 5.23       100%     Kimco Ocala 665 (2007), Beall’s Outlet (2012)
  9     Orlando, FL   7175 West Colonial Drive     32818     SC   Fee     1989       2005       20%       51,550     $ 0     $ 0.00       0%      
  10     Pembrooke Pines, FL   11251 Pines Boulevard     33026     SC   Fee     1994       2004       20%       50,000     $ 506,116     $ 10.12       100%     Homegoods (2010), 99 Cent Stuff (2014)
  11     Pensacola, FL   7303 Plantation Road     32504     SC   Fee     1976       2004       20%       64,053     $ 800,663     $ 12.50       100%     American Water Works (2015)
  12     St. Petersburg, FL   2500 66th Street North     33710     SC   Fee     1975       2002       20%       76,438     $ 1,099,479     $ 13.27       100%     Jo-Ann Stores (2014), Homegoods (2015)
  13     Stuart, FL   3257 NW Federal Highway     34957     SC   GL     1989       2002       20%       50,000     $ 427,968     $ 8.56       100%     Office Depot (2011), 99 Cent Stuff (2014)
  14     Tampa, FL   Hillsborough Galleria
4340 Hillsborough Avenue
    33614     SC   Fee     1989       2002       20%       50,000     $ 240,000     $ 4.80       100%     Burdine’s-Macy’s Furniture & Mattress (2006)
        Georgia                                                                                
  15     Duluth, GA   2075 Market Street     30136     SC   Fee     1983       2002       20%       56,225     $ 307,193     $ 5.46       100%     Mega Amusement (2013)
        Illinois                                                                                
  16     Burbank, IL   7600 South Lacrosse Avenue     60459     SC   Fee     1984       2002       20%       27,213     $ 162,000     $ 11.73       50.8%      
  17     Crystal Lake, IL   5561 Northwest Highway     60014     SC   Fee     1989       2002       20%       50,092     $ 335,300     $ 8.02       83.4%     Big Lots (2012)
  18     Downers Grove, IL   1508 Butterfield Road     60515     SC   Lease     1973       2003       20%       35,943     $ 420,000     $ 11.69       100%     Wickes Funiture (2018)
  19     Lansing, IL   16795 South Torrence Avenue     60438     SC   Fee     1986       2002       20%       51,177     $ 380,899     $ 8.03       92.7%     Pay/Half (2017)
        Indiana                                                                                
  20     Evansville, IN   300 North Green River Road     47715     SC   Lease     1978       2002       20%       60,000     $ 374,238     $ 8.98       69.5%     Bed Bath & Beyond (2009)


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Table of Contents

                                                                                         
Developers Diversified Realty Corporation
  Company-
               
Service Merchandise Property List at December 31, 2006
  Owned
      Average
       
                Type of
      Year
      DDR
  Gross
  Total
  Base
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  Rent
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (Per SF) (2)   Leased   Anchor Tenants (Lease Expiration)
 
        Kentucky                                                                                
  21     Lexington, KY   1555 New Circle Road     40509     SC   Lease     1978       2002       20%       60,000     $ 367,684     $ 6.13       100%     Homegoods (2009), The Tile Shop (2013)
  22     Louisville, KY   4601 Outer Loop Road     40219     SC   Fee     1973       2002       20%       49,410     $ 293,468     $ 5.94       100%     PETsMART (2018), A.J. Wright (2014)
  23     Owensboro, KY   4810 Frederica Street     42301     SC   Fee     1984       2002       20%       49,980     $ 0     $ 0.00       0%      
  24     Paducah, KY   5109 Hinkleville Road     42001     SC   Fee     1984       2002       20%       52,500     $ 0     $ 0.00       0%      
        Louisiana                                                                                
  25     Baton Rouge, LA   9501 Cortina Mall     70815     SC   Fee     1997       2004       20%       90,000     $ 148,900     $ 1.65       100%     Flor-Line Associates (2008)
  26     Bossier City, LA   2950 East Texas Street     71111     SC   Fee     1982       2003       20%       58,500     $ 0     $ 0.00       0%      
  27     Houma, LA   1636 Martin Luther King Boulevard     70360     SC   Fee     1992       2002       20%       49,721     $ 324,689     $ 8.12       80.4%     Best Buy (2015), Bed Bath & Beyond (2018)
  28     Metairie, LA   6851 Veterans Boulevard     70003     SC   Fee     1972       2002       20%       92,992     $ 1,000,611     $ 10.76       100%     Office Depot (2009), Babies ’R Us (2014), PETsMART (2018)
        Massachusetts                                                                                
  29     Burlington, MA   34 Cambridge Street     01803     SC   Lease     1978       2003       20%       70,800     $ 898,814     $ 12.70       100%     E & A Northeast (2014), Off Broadway Shoes (2014)
  30     Swansea, MA   58 Swansea Mall Drive     02777     SC   GL     1985       2002       20%       49,980     $ 277,380     $ 5.55       100%     Pricerite Supermarket (2016)
        Michigan                                                                                
  31     Westland, MI   7638 Nankin Road     48185     SC   Fee     1980       2002       20%       50,000     $ 0     $ 0.00       0%      
        Mississippi                                                                                
  32     Hattiesburg, MS   1000 Turtle Creek Drive
Suite 2
    39402     SC   Fee     1995       2002       20%       50,809     $ 406,472     $ 8.00       100%     Circuit City (2020)
        Nevada                                                                                
  33     Las Vegas, NV   4701 Faircenter Parkway     89102     SC   Lease     1990       2004       20%       24,975     $ 174,825     $ 7.00       100%     Michaels (2011)
        New Hampshire                                                                                
  34     Salem, NH   271 South Broadway     03079     SC   Lease     1985       2003       20%       50,110     $ 574,539     $ 11.47       100%     Bed Bath & Beyond (2011), A.C. Moore (2016)
        New Jersey                                                                                
  35     Paramus, NJ   Bishops Corner East
651 Route 71 East
    06117     SC   Lease     1978       2003       20%       54,850     $ 898,563     $ 18.29       89.6%     Homegoods (2008)
  36     Wayne, NJ   Route 23 West Belt Plaza     07470     SC   Lease     1978       2002       20%       49,157     $ 756,173     $ 15.38       100%     Homegoods (2010), PETsMART (2015)
        New York                                                                                
  37     Middletown, NY   88-25 Dunning Road     10940     SC   Lease     1989       2002       20%       50,144     $ 409,649     $ 8.17       100%     Homegoods (2010), PETsMART (2010)
        North Carolina                                                                                
  38     Raleigh, NC   U.S. 17 Millbrook     27604     SC   Fee     1994       2002       20%       50,000     $ 457,028     $ 9.14       100%     A.C. Moore (2010), K & G Menswear (2014)
        Oklahoma                                                                                
  39     Warr Acres, OK   5537 Northwest Expressway     73132     SC   Fee     1985       2002       20%       50,000     $ 0     $ 0.00       0%      


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Developers Diversified Realty Corporation
  Company-
               
Service Merchandise Property List at December 31, 2006
  Owned
      Average
       
                Type of
      Year
      DDR
  Gross
  Total
  Base
       
            Zip
  Property
  Ownership
  Developed/
  Year
  Ownership
  Leasable
  Annualized
  Rent
  Percent
   
    Center/Property   Location   Code   (1)   Interest   Redeveloped   Acquired   Interest   Area (SF)   Base Rent   (Per SF) (2)   Leased   Anchor Tenants (Lease Expiration)
 
        South Carolina                                                                                
  40     N. Charleston, SC   7400 Rivers Avenue     29418     SC   Fee     1989       2002       20%       50,000     $ 321,638     $ 6.43       100%     DDR Office (2011), Dollar Tree (2008)
        Tennessee                                                                                
  41     Antioch, TN   5301 Hickory Hollow Parkway     37013     SC   Fee     1984       2002       20%       59,319     $ 558,821     $ 9.42       100%     Office Depot (2010), Bed Bath & Beyond (2018)
  42     Franklin, TN   1735 Galleria Boulevard     37064     SC   Fee     1992       2002       20%       60,000     $ 683,409     $ 11.39       100%     H.H. Gregg Appliances (2010), Wild Oats Markets (2014)
  43     Knoxville, TN   9333 Kingston Pike     37922     SC   Fee     1986       2002       20%       50,092     $ 262,983     $ 5.25       100%     Hobby Lobby (2010)
        Texas                                                                                
  44     Baytown, TX   6731 Garth Road     77521     SC   Fee     1981       2002       20%       52,288     $ 0     $ 0.00       0%      
  45     Beaumont, TX   4450 Dowlen     77706     SC   Lease     1977       2003       20%       63,404     $ 128,707     $ 4.25       47.8%     Marshall’s (2012)
  46     Longview, TX   3520 McCann Road     75605     SC   Fee     1978       2004       20%       40,524     $ 324,192     $ 8.00       100%     Stage (2015)
  47     McAllen, TX   6600 US Expressway 83     78503     SC   Fee     1993       2002       20%       59,086     $ 431,230     $ 7.96       91.6%     Michaels (2012), Bed Bath & Beyond (2018)
  48     Richardson, TX   1300 East Beltline     75081     SC   Fee     1978       2002       20%       62,463     $ 454,600     $ 7.28       100%     Staples (2011), Conn’s Appliance Store (2014)
  49     Sugarland, TX   15235 South West Freeway     77478     SC   GL     1992       2002       20%       50,000     $ 325,000     $ 6.50       100%     Conn’s Appliance Store (2018)
        Virginia                                                                                
  50     Chesapeake, VA   4300 Portsmouth Boulevard     23321     SC   GL     1990       2002       20%       50,062     $ 364,093     $ 7.27       100%     PETsMART (2016), Michaels (2011)
 
 
(1) SC indicates a power center or a community shopping center.
 
(2) Calculated as total annualized base rentals divided by Company-owned GLA actually leased as of December 31, 2006.


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Developers Diversified Realty Corporation
Office and Industrial Property List at December 31, 2006
 
                                                                                                 
                                              Company-
                         
                                              Owned
          Average
             
                Type of
          Year
          DDR
    Gross
    Total
    Base Rent
             
            Zip
  Property
    Ownership
    Developed/
    Year
    Ownership
    Leasable
    Annualized
    (Per SF)
    Percent
       
    Center/Property   Location   Code   (1)     Interest     Redeveloped     Acquired     Interest     Area (SF)     Base Rent     (2)     Leased     Anchor Tenants (Lease Expiration)  
 
    Maryland                                                                                        
1
  Silver Springs, MD(I)   Tech Center 29 Phase I   20904     IND       Fee       1970       2001       100%       176,674     $ 1,264,699     $ 9.59       18.3%          
        2120-2162 Tech Road                                                                                    
2
  Silver Springs, MD (II)   Tech Center 29 Phase II   20904     IND       Fee       1991       2001       100%       58,280     $ 324,450     $ 8.07       0%          
        2180 Industrial Parkway                                                                                    
3
  Silver Springs, MD (III)   Tech Center 29 Phase III   20904     OFF       Fee       1988       2001       100%       55,901     $ 920,882     $ 22.07       0%          
        12200 Tech Road                                                                                    
    Massachusetts                                                                                        
4   Chelmsford, MA   Apollo Drive Office Building   01824     OFF       Fee       1987       2001       100%       291,424     $ 0     $ 0       0%          
        300 Apollo Drive                                                                                    
    Ohio                                                                                        
5   Twinsburg, OH   Heritage Business I   44087     IND       Fee       1990       3 *     100%       35,866     $ 155,154     $ 6.82       0%          
        9177 Dutton Drive                                                                                    
    Pennsylvania                                                                                        
6   Erie, PA   38th Street Plaza   16506     IND       GL       1973       2 *     100%       96,000     $ 219,150     $ 5.40       42.3%       West Telemarketing (2008 )
        2310 West 38th Street                                                                                    
    Utah                                                                                        
7   Salt Lake City, UT   The Hermes Building   84111     IND       Fee       1985       1998       100%       53,476     $ 724,479     $ 15.90       84.9%          
      (Hermes)   455 East 500 South Street                                                                                    
 
 
2* Original IPO Property
 
3* Original IPO Property transferred to American Industrial Properties (“AIP”) in 1998 and reacquired in 2001 through AIP merger.
 
(1) These properties are classified as the Company’s business center segment. “OFF” indicates office property and “IND” indicates industrial property.
 
(2) Calculated as total annualized base rental divided by Company-owned GLA actually leased as of December 31, 2006.


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Item 3.   LEGAL PROCEEDINGS
 
Other than routine litigation and administrative proceedings arising in the ordinary course of business, the Company is not presently involved in any litigation nor, to its knowledge, is any litigation threatened against the Company or its properties that is reasonably likely to have a material adverse effect on the liquidity or results of operations of the Company.
 
Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
 
EXECUTIVE OFFICERS
 
Pursuant to Instruction 3 to Item 401(b) of Regulation S-K, the following information is reported below.
 
(a) The executive officers of the Company are as follows:
 
             
Name
 
Age
 
Position and Office with the Company
 
Scott A. Wolstein
  54   Chairman of the Board of Directors and Chief Executive Officer
David M. Jacobstein
  60   President and Chief Operating Officer
Daniel B. Hurwitz
  42   Senior Executive Vice President and Chief Investment Officer
Joan U. Allgood
  54   Executive Vice President Corporate Transactions and Governance
Richard E. Brown
  55   Executive Vice President of International
Timothy J. Bruce
  49   Executive Vice President of Development
William H. Schafer
  48   Executive Vice President and Chief Financial Officer
Robin R. Walker-Gibbons
  50   Executive Vice President of Leasing
Christa A. Vesy
  36   Senior Vice President and Chief Accounting Officer
 
Scott A. Wolstein has been the Chief Executive Officer and a Director of the Company since its organization in 1992. Mr. Wolstein has been Chairman of the Board of Directors of the Company since May 1997. Prior to the organization of the Company, Mr. Wolstein was a principal and executive officer of Developers Diversified Group (“DDG”), the Company’s predecessor. Mr. Wolstein graduated cum laude from both the Wharton School at the University of Pennsylvania and the University of Michigan Law School. Following law school, Mr. Wolstein was associated with the law firm of Thompson, Hine & Flory. He is currently a member of the Board of Governors and Executive Committee of NAREIT — National Real Estate Investment Trusts, Board of Directors of the Real Estate Roundtable, Board of Trustees of Hathaway Brown School, Board of Directors and Executive Committee Member of the Cleveland Chapter of the Red Cross, Board Member of the Cleveland Chapter of the Anti-Defamation League, Board of Directors of University Hospitals Health System, Board Member of the Greater Cleveland Partnership, Board Member of the Cleveland Development Advisors and member of the Executive Committee and Board of Trustees of the Zell-Lurie Wharton Real Estate Center. He is also a current member of the Urban Land Institute (ULI) , PREA, the Visiting Committee and Advisory Council for the Case Western Reserve University’s Weatherhead School of Management, the National Advisory Council to Cleveland State University Law School and the World’s President Organization. He has also served as past Chairman of the State of Israel Bonds, Ohio Chapter, a past Trustee of the International Council of Shopping Centers (ICSC), President of the Board of Trustees of the United Cerebral Palsy Association of Greater Cleveland and as a member of the Board of the Great Lakes Theater Festival, The Park Synagogue and the Convention and Visitors Bureau of Greater Cleveland. Mr. Wolstein is a four-time recipient of the Realty Stock Review’s Outstanding CEO Award.
 
David M. Jacobstein was appointed President and Chief Operating Officer of the Company in May 1999 and served on the Company Board of Directors from May 2000 to May 2004. Prior to joining the Company,


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Mr. Jacobstein served as Vice Chairman and Chief Operating Officer of Wilmorite, Inc., a Rochester, New York-based, shopping center developer. He is a graduate of Colgate University in Hamilton, New York and The George Washington University Law School in Washington, D.C. Prior to that, Mr. Jacobstein was engaged in corporate and securities law practice, as a partner with Harris, Beach & Wilcox, a Rochester, New York-based law firm, and as an associate attorney with Thompson, Hine & Flory, based in Cleveland, Ohio. Mr. Jacobstein is a member of ICSC, NAREIT, and ULI and has served as President of the Allendale Columbia School Board of Trustees (Rochester, New York) and as a Board member and Officer of the Colgate University Alumni Corporation.
 
Daniel B. Hurwitz was appointed Senior Executive Vice President and Chief Investment Officer in May 2005. Mr. Hurwitz has served as Executive Vice President of the Company from June 1999 through April 2005 and on the Company’s Board of Directors from May 2002 to May 2004. Prior to joining the Company, Mr. Hurwitz served as Senior Vice President and Director of Real Estate and Corporate Development for Boscov’s Department Stores, Inc. Prior to Boscov’s, Mr. Hurwitz served as Development Director for the Shopco Group, a New York City-based developer and acquirer of regional and super regional shopping malls. Mr. Hurwitz is a graduate of Colgate University and the Wharton School of Business Executive Management Program at the University of Pennsylvania. In addition, Mr. Hurwitz is a member of the Board of Directors of Boscov’s Department Stores Inc., a member of the Board of Trustees of Hawken School, a member of the Board of Directors of the Network, and a Vice Chairman of the Board for Summer on the Cuyahoga, a civic internship program. He is a member of ICSC and ULI and serves as a member of ICSC’s Open Air Centers Committee. Mr. Hurwitz has also served on the Board of Directors of the Colgate University Alumni Corporation, Colgate University Maroon Council, Berks County Food Bank and the Reading Jewish Community Center.
 
Joan U. Allgood was appointed Executive Vice President — Corporate Transactions and Governance in September 2005. Mrs. Allgood also serves as Corporate Secretary. Mrs. Allgood was the Senior Vice President — Corporate Affairs and Governance from 2002 to September 2005 and the Company’s Vice President and General Counsel from 1993 when the Company was organized as a public company until 2003, and was General Counsel of its predecessor entities since 1987. She was promoted to Senior Vice President in 1999. Mrs. Allgood is a member of the ICSC, the American College of Real Estate Lawyers and the Ohio and Cleveland Bar Associations, and is a Trustee of United Cerebral Palsy Association of Greater Cleveland. She received her B.A. from Denison University, Granville, Ohio, and her J.D. from Case Western Reserve University School of Law in 1977.
 
Richard E. Brown has been the Executive Vice President of International since October 2006, the Executive Vice President of Real Estate Operations from September 2005 to October 2006, the Senior Vice President of Real Estate Operations from March 2002 to September 2005, the Senior Vice President of Asset Management and Operations from February 2001 to March 2002 and Vice President of Asset Management and Operations from January 2000 to February 2001. Prior to joining the Company in 1996, Mr. Brown was Vice President of Asset Management of PREIT-Rubin, Inc., located in Philadelphia, Pennsylvania, and Vice President of Retail Asset Management of the Balcor Company, in Chicago, Illinois, since 1987. Mr. Brown is a Canadian chartered accountant and received his Bachelor of Commerce from Carleton University, in Ottawa, Canada.
 
Timothy J. Bruce has been the Executive Vice President of Development since September 2005, and Senior Vice President of Development from September 2002 to September 2005. Mr. Bruce oversees the development department for the Company’s nationwide retail real estate portfolio. From 1988 to the time he joined the Company, Mr. Bruce, a 20-year shopping center industry veteran, served as Senior Vice President, Director of Leasing for Acadia Realty Trust in New York, where his responsibilities included all aspects of leasing and redevelopment of the Company’s 10 million square foot portfolio of community and neighborhood shopping centers. Mr. Bruce earned his B.A. from the School of Architecture at the University of Illinois at Chicago and a Masters of Management from the J.L. Kellogg Graduate School of Business at Northwestern University. Mr. Bruce is a member of ICSC.


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William H. Schafer has been the Executive Vice President and Chief Financial Officer since September 2005, Senior Vice President and Chief Financial Officer from May 1999 to September 2005, Vice President and Chief Financial Officer of the Company from its organization as a public company in 1993 and the Chief Financial Officer of its predecessor entities from April 1992. Mr. Schafer joined the Cleveland, Ohio, office of the Price Waterhouse LLP accounting firm in 1983 and served there as a Senior Manager from July 1990, until he joined the organization in 1992. Mr. Schafer graduated from the University of Michigan with a Bachelor of Arts degree in Business Administration. Mr. Schafer is a member of ICSC and a Board member of The Gathering Place.
 
Robin R. Walker-Gibbons was appointed Executive Vice President of Leasing in October 2005, Senior Vice President of Leasing for the Southeast Region from March 2005 to October 2005, Vice President of Leasing from November 1995 to March 2005 and a leasing manager from April 1995 to November 1995. Prior to joining the Company, Ms. Walker-Gibbons was President of Aroco, Inc., a retail brokerage and tenant representation firm based in Alabama. Ms. Walker-Gibbons is a graduate of the University of Alabama and is a member of ICSC.
 
Christa A. Vesy was appointed Senior Vice President and Chief Accounting Officer of the Company in November 2006. Beginning in September 2004, Mrs. Vesy worked for The Lubrizol Corporation, where she served as manager of external financial reporting and then as controller for the lubricant additives business segment. Prior to joining Lubrizol, from 1993 to September 2004, Mrs. Vesy held various positions with the Assurance and Business Advisory Services group of PricewaterhouseCoopers LLP, a registered public accounting firm, including Senior Manager from 1999 to September 2004. Mrs. Vesy graduated with a Bachelor of Science degree in Business Administration from Miami University, Oxford, Ohio. She serves on the Board of Trustees of the Boys & Girls Clubs of Cleveland.
 
PART II
 
Item 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
The high and low sale prices per share of the Company’s common shares, as reported on the New York Stock Exchange (the “NYSE”) composite tape, and declared dividends per share for the quarterly periods indicated were as follows:
 
                         
    High     Low     Dividends  
 
2006:
                       
First
  $ 56.99     $ 46.96     $ 0.59  
Second
    54.81       48.49       0.59  
Third
    56.18       51.11       0.59  
Fourth
    66.36       55.33       0.59  
2005:
                       
First
  $ 44.50     $ 38.74     $ 0.54  
Second
    47.59       38.91       0.54  
Third
    49.49       43.87       0.54  
Fourth
    48.29       42.03       0.54  
 
As of February 5, 2007, there were 2,353 record holders and approximately 28,000 beneficial owners of the Company’s common shares.
 
In February 2007, the Company declared its 2007 first quarter dividend to shareholders of record on March 23, 2007, of $0.66 per share.


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The Company intends to continue to declare quarterly dividends on its common shares. However, no assurances can be made as to the amounts of future dividends, since such dividends are subject to the Company’s cash flow from operations, earnings, financial condition, capital requirements and such other factors as the Board of Directors considers relevant. The Company is required by the Internal Revenue Code of 1986, as amended, to distribute at least 90% of its REIT taxable income. The amount of cash available for dividends is impacted by capital expenditures and debt service requirements to the extent that the Company were to fund such items out of cash flow from operations.
 
In June 1995, the Company implemented a dividend reinvestment plan under which shareholders may elect to reinvest their dividends automatically in common shares. Under the plan, the Company may, from time to time, elect to purchase common shares in the open market on behalf of participating shareholders or may issue new common shares to such shareholders.
 
The Company does not currently have in effect a plan to repurchase its common shares in the open market and did not repurchase any shares during the quarter ended December 31, 2006.


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Item 6.   SELECTED FINANCIAL DATA
 
The financial data included in the following table has been derived from the financial statements for the last five years and includes the information required by Item 301 of Regulation S-K.
 
COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
(Amounts in thousands, except per share data)
 
                                         
    For the Years Ended December 31,  
    2006 (1)     2005 (1)     2004 (1)     2003 (1)     2002 (1)  
 
Operating Data:
                                       
Revenues
  $ 818,098     $ 719,563     $ 562,356     $ 429,982     $ 313,316  
                                         
Expenses:
                                       
Rental operations
    269,767       236,403       183,905       146,574       103,149  
Depreciation & amortization
    192,219       163,341       122,783       85,507       69,385  
                                         
      461,986       399,744       306,688       232,081       172,534  
                                         
Interest income
    9,113       10,078       4,233       5,082       5,904  
Interest expense
    (221,525 )     (181,040 )     (123,527 )     (83,084 )     (69,493 )
Other expense
    (446 )     (2,532 )     (1,779 )     (10,119 )     (1,018 )
                                         
      (212,858 )     (173,494 )     (121,073 )     (88,121 )     (64,607 )
                                         
Income before equity in net income from joint ventures, gain on disposition of joint venture interests, minority interests, income tax of taxable REIT subsidiaries and franchise taxes, discontinued operations, gain on disposition of real estate and cumulative effect of adoption of a new accounting standard
    143,254       146,325       134,595       109,780       76,175  
Equity in net income from joint ventures
    30,337       34,873       40,895       44,967       32,769  
Gain on disposition of joint venture interests
                      7,950        
Minority interests
    (8,453 )     (7,881 )     (5,064 )     (5,365 )     (21,569 )
Income tax benefit (expenses) of taxable REIT subsidiaries and franchise taxes
    2,481       (342 )     (1,469 )     (1,626 )     (742 )
                                         
Income from continuing operations
    167,619       172,975       168,957       155,706       86,633  
                                         
Discontinued operations:
                                       
Income from discontinued operations
    2,571       4,861       10,603       10,163       7,632  
Gain on disposition of real estate, net
    11,051       16,667       8,561       460       4,276  
                                         
      13,622       21,528       19,164       10,623       11,908  
                                         
Income before gain on disposition of real estate
    181,241       194,503       188,121       166,329       98,541  
Gain on disposition of real estate
    72,023       88,140       84,642       73,932       3,429  
Cumulative effect of adoption of a new accounting standard
                (3,001 )            
                                         
Net income
  $ 253,264     $ 282,643     $ 269,762     $ 240,261     $ 101,970  
                                         
Net income applicable to common shareholders
  $ 198,095     $ 227,474     $ 219,056     $ 189,056     $ 69,368  
                                         


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    For the Years Ended December 31,  
    2006 (1)     2005 (1)     2004 (1)     2003 (1)     2002 (1)  
 
Earnings per share data — Basic:
                                       
Income from continuing operations
  $ 1.69     $ 1.90     $ 2.10     $ 2.18     $ 0.90  
Income from discontinued operations
    0.13       0.20       0.20       0.13       0.19  
Cumulative effect of adoption of a new accounting standard
                (0.03 )            
                                         
Net income applicable to common shareholders
  $ 1.82     $ 2.10     $ 2.27     $ 2.31     $ 1.09  
                                         
Weighted average number of common shares
    109,002       108,310       96,638       81,903       63,807  
Earnings per share data — Diluted:
                                       
Income from continuing operations
  $ 1.69     $ 1.88     $ 2.08     $ 2.14     $ 0.89  
Income from discontinued operations
    0.12       0.20       0.19       0.13       0.18  
Cumulative effect of adoption of a new accounting standard
                (0.03 )            
                                         
Net income applicable to common shareholders
  $ 1.81     $ 2.08     $ 2.24     $ 2.27     $ 1.07  
                                         
Weighted average number of common shares
    109,613       109,142       99,024       84,188       64,837  
Cash dividends
  $ 2.36     $ 2.16     $ 1.94     $ 1.69     $ 1.52  
 
                                         
    At December 31,  
    2006     2005     2004     2003     2002  
 
Balance Sheet Data:
                                       
Real estate (at cost)
  $ 7,442,135     $ 7,029,337     $ 5,603,424     $ 3,884,911     $ 2,804,056  
Real estate, net of accumulated depreciation
    6,580,869       6,336,514       5,035,193       3,426,698       2,395,264  
Investments in and advances to joint ventures
    291,685       275,136       288,020       260,143       258,610  
Total assets
    7,179,753       6,862,977       5,583,547       3,941,151       2,776,852  
Total debt
    4,248,812       3,891,001       2,718,690       2,083,131       1,498,798  
Shareholders’ equity
    2,496,183       2,570,281       2,554,319       1,614,070       945,561  
 
                                         
    For the Years Ended December 31,  
    2006 (1)     2005 (1)     2004 (1)     2003 (1)     2002 (1)  
 
Cash Flow Data:
                                       
Cash flow provided by (used for):
                                       
Operating activities
  $ 340,692     $ 355,423     $ 292,226     $ 263,129     $ 210,739  
Investing activities
    (203,047 )     (339,443 )     (1,134,601 )     (16,246 )     (279,997 )
Financing activities
    (139,922 )     (35,196 )     880,553       (251,561 )     66,560  

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    For the Years Ended December 31,  
    2006 (1)     2005 (1)     2004 (1)     2003 (1)     2002 (1)  
 
Other Data:
                                       
Funds from operations (2):
                                       
Net income applicable to common shareholders
  $ 198,095     $ 227,474     $ 219,056     $ 189,056     $ 69,368  
Depreciation and amortization of real estate investments
    185,449       169,117       130,536       93,174       76,462  
Equity in net income from joint ventures
    (30,337 )     (34,873 )     (40,895 )     (44,967 )     (32,769 )
Gain on disposition of joint venture interests
                      (7,950 )      
Joint ventures’ funds from operations (2)
    44,473       49,302       46,209       47,942       44,473  
Minority interests (OP Units)
    2,116       2,916       2,607       1,769       1,450  
Gain on disposition of depreciable real estate investments, net
    (21,987 )     (58,834 )     (68,179 )     (67,352 )     (4,276 )
Cumulative effect of adoption of a new accounting standard
                3,001              
                                         
Funds from operations applicable to common shareholders (2)
    377,809       355,102       292,335       211,672       154,708  
Preferred dividends
    55,169       55,169       50,706       51,205       32,602  
                                         
    $ 432,978     $ 410,271     $ 343,041     $ 262,877     $ 187,310  
                                         
Weighted average shares and OP Units (Diluted) (3)
    110,826       110,700       99,147       84,319       65,910  
 
 
(1) As described in the consolidated financial statements, the Company acquired 20 properties in 2006 (including 15 of which were acquired through joint ventures and four of which the Company acquired its joint venture partners’ interest), 52 properties in 2005 (including 36 of which were acquired through joint ventures and one of which the Company acquired its joint venture partner’s interest), 112 properties in 2004 (18 of which were acquired through joint ventures and one of which the Company acquired its joint venture partner’s interest), 124 properties in 2003 (three of which the Company acquired its joint venture partners’ interest) and 11 properties in 2002 (four of which the Company acquired its joint venture partners’ interests). The Company sold 15 properties in 2006 (nine of which were owned through joint ventures), 47 properties in 2005 (12 of which were owned through joint ventures), 28 properties in 2004 (13 of which were owned through joint ventures), 38 properties in 2003 (12 of which were owned through joint ventures) and 15 properties in 2002 (six of which were owned through joint ventures). All amounts have been presented in accordance with Statement of Financial Accounting Standards (“SFAS’’) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” In accordance with that standard, long-lived assets that were sold or are classified as held for sale as a result of disposal activities, have been classified as discontinued operations for all periods presented.
 
(2) Management believes that Funds From Operations (“FFO”), which is a non-GAAP financial measure, provides an additional and useful means to assess the financial performance of a REIT. It is frequently used by securities analysts, investors and other interested parties to evaluate the performance of REITs, most of which present FFO along with net income as calculated in accordance with GAAP. FFO applicable to common shareholders is generally defined and calculated by the Company as net income, adjusted to exclude: (i) preferred dividends, (ii) gains (or losses) from disposition of depreciable real estate property, except for those sold through the Company’s merchant building program, which are presented net of taxes, (iii) sales of securities, (iv) extraordinary items and (v) certain non-cash items. These non-cash items principally include real property depreciation, 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. Management believes that FFO provides the Company and investors with an important indicator of the Company’s operating performance. This measure of performance is used by the Company for several business purposes and for REITs it provides a recognized measure of performance other than GAAP net income, which may include non-cash items (often large). Other real estate companies may calculate FFO in a different manner.
 
(3) Represents weighted average shares and operating partnership units, or OP Units, at the end of the respective period.

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Item 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with the consolidated financial statements, the notes thereto and the comparative summary of selected financial data appearing elsewhere in this report. Historical results and percentage relationships set forth in the consolidated financial statements, including trends that might appear, should not be taken as indicative of future operations. The Company considers portions of this information to be “forward-looking statements” within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company’s expectations for future periods. Forward-looking statements include, without limitation, statements related to acquisitions (including any related pro forma financial information) and other business development activities, future capital expenditures, financing sources and availability and the effects of environmental and other regulations. Although the Company believes that the expectations reflected in those 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 statements of historical fact should be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates” and similar expressions are intended to identify forward-looking statements. Readers should exercise caution in interpreting and relying on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company’s control and that could materially affect the Company’s actual results, performance or achievements.
 
Factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following:
 
  •  The Company is subject to general risks affecting the real estate industry, including the need to enter into new leases or renew leases on favorable terms to generate rental revenues;
 
  •  The Company could be adversely affected by changes in the local markets where its properties are located, as well as by adverse changes in national economic and market conditions;
 
  •  The Company may fail to anticipate the effects on its properties of changes in consumer buying practices, including sales over the Internet and the resulting retailing practices and space needs of its tenants;
 
  •  The Company is subject to competition for tenants from other owners of retail properties, and its tenants are subject to competition from other retailers and methods of distribution. The Company is dependent upon the successful operations and financial condition of its tenants, in particular of its major tenants, and could be adversely affected by the bankruptcy of those tenants;
 
  •  The Company may not realize the intended benefits of an acquisition or merger transaction. The assets may not perform as well as the Company anticipated or the Company may not successfully integrate the assets and realize the improvements in occupancy and operating results that the Company anticipates. The acquisition of certain assets may subject the Company to liabilities, including environmental liabilities;
 
  •  The Company may not be able to consummate its merger with Inland Retail Real Estate Trust, Inc. (“IRRETI”), as it is subject to certain conditions, including IRRETI shareholder approval (see 2006 Activity-Strategic Real Estate Transactions — IRRETI Merger below);
 
  •  Although the Company anticipates completing the IRRETI merger in late February 2007, the merger is subject to certain closing conditions, including IRRETI shareholder approval. Once the merger is completed, the Company may not realize the intended benefits of the merger. For example, the Company may not achieve the anticipated costs savings and operating efficiencies, the Company may not be able to complete loan assumptions or financing on favorable terms. The Company may not effectively integrate the operations of IRRETI and the IRRETI portfolio, including its development projects, may not perform as well as the Company anticipates;
 
  •  The Company may fail to identify, acquire, construct or develop additional properties that produce a desired yield on invested capital, or may fail to effectively integrate acquisitions of properties or portfolios of


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  properties. In addition, the Company may be limited in its acquisition opportunities due to competition and other factors;
 
  •  The Company may fail to dispose of properties on favorable terms. In addition, real estate investments can be illiquid and limit the Company’s ability to promptly make changes to its portfolio to respond to economic and other conditions;
 
  •  The Company may abandon a development opportunity after expending resources if it determines that the development opportunity is not feasible or if it is unable to obtain all necessary zoning and other required governmental permits and authorizations;
 
  •  The Company may not complete projects on schedule as a result of various factors, many of which are beyond the Company’s control, such as weather, labor conditions and material shortages, resulting in increased debt service expense and construction costs and decreases in revenue;
 
  •  The Company’s financial condition may be affected by required payments of debt or related interest, the risk of default and restrictions on its ability to incur additional debt or enter into certain transactions under its credit facilities and other documents governing its debt obligations. In addition, the Company may encounter difficulties in obtaining permanent financing;
 
  •  Debt and/or equity financing necessary for the Company to continue to grow and operate its business may not be available or may not be available on favorable terms;
 
  •  The Company is subject to complex regulations related to its status as a real estate investment trust (“REIT”) and would be adversely affected if it failed to qualify as a REIT;
 
  •  The Company must make distributions to shareholders to continue to qualify as a REIT, and if the Company borrows funds to make distributions, those borrowings may not be available on favorable terms;
 
  •  Partnership or joint venture investments may involve risks not otherwise present for investments made solely by the Company, including the possibility a partner or co-venturer might become bankrupt, might at any time have different interests or goals than those of the Company and may take action contrary to the Company’s instructions, requests, policies or objectives, including the Company’s policy with respect to maintaining its qualification as a REIT;
 
  •  The Company may not realize anticipated returns from its real estate assets outside of the United States. The Company expects to continue to pursue international opportunities that may subject the Company to different or greater risk from those associated with its domestic operations. The Company holds an interest in a joint venture in Brazil and assets in Puerto Rico;
 
  •  International development and ownership activities carry risks that are different from those the Company faces with the Company’s domestic properties and operations. These risks include:
 
  •   Adverse effects of changes in exchange rates for foreign currencies;
 
  •   Changes in foreign political environments;
 
  •   Challenges of complying with a wide variety of foreign laws including corporate governance, operations, taxes and litigation;
 
  •   Different lending practices;
 
  •   Cultural differences;
 
  •   Changes in applicable laws and regulations in the United States that affect foreign operations;
 
  •   Difficulties in managing international operations and
 
  •   Obstacles to the repatriation of earnings and cash.


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  •  Although the Company’s international activities currently are a relatively small portion of the Company’s business, to the extent the Company expands its international activities, these risks could significantly increase and adversely affect its results of operations and financial condition;
 
  •   The Company is subject to potential environmental liabilities;
 
  •   The Company may incur losses that are uninsured or exceed policy coverage due to its liability for certain injuries to persons, property or the environment occurring on its properties;
 
  •   The Company could incur additional expenses in order to comply with or respond to claims under the Americans with Disabilities Act or otherwise be adversely affected by changes in government regulations, including changes in environmental, zoning, tax and other regulations and
 
  •   Changes in interest rates could adversely affect the market price of the Company’s common shares, as well as its performance and cash flow.
 
Executive Summary
 
Market Position
 
The Company is the leading owner, developer and manager of market-dominant open-air community shopping centers in the United States. The Company believes this format provides an optimal environment for some of the nation’s most successful retailers by appealing to consumers’ shopping preferences for value and convenience. The Company also believes its investment in this retail format enables it to capture some of the strongest growth in retail real estate.
 
Community shopping centers are large, retail properties that draw shoppers from the immediate neighborhood, as well as the surrounding trade area, and typically have the following characteristics:
 
  •  250,000 - 1,000,000 total square feet of retail stores;
 
  •  Two or more national tenant anchors such as Target, Wal-Mart, Home Depot or Lowe’s Home Improvement;
 
  •  Two or more junior anchor tenants such as Bed Bath & Beyond, Kohl’s, Circuit City, T.J. Maxx or PETsMART;
 
  •  20,000 - 80,000 square feet of small retail shops and
 
  •  Two to four outparcels available for sale or ground lease.


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The following table sets forth information as to anchor and/or national retail tenants that individually accounted for at least 1.0% of total annualized base rent of the wholly-owned properties and the Company’s proportionate share of joint venture properties as of December 31, 2006:
 
                 
    % of Total
    % of Total
 
    Shopping Center
    Shopping Center
 
Tenant
  Base Rent     GLA  
 
Wal-Mart/Sam’s Club
    4.5 %     7.7 %
Mervyns
    2.8       2.5  
Royal Ahold (Tops Markets)
    2.8       2.7  
T.J. Maxx/Marshalls/A.J. Wright/Homegoods
    2.0       2.4  
PETsMART
    1.9       1.5  
Bed Bath & Beyond
    1.6       1.4  
Lowe’s Home Improvement
    1.6       2.7  
Kohl’s
    1.5       2.1  
The Gap/Old Navy/Banana Republic
    1.2       0.9  
Michaels
    1.2       1.1  
Sears/Kmart
    1.2       3.4  
Barnes & Noble/B. Dalton
    1.1       0.7  
Home Depot
    1.1       1.4  
OfficeMax
    1.1       1.1  
AMC Theatres
    1.0       0.4  
Staples
    1.0       0.9  


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The following table sets forth information as to anchor and/or national retail tenants that individually accounted for at least 1.0% of total annualized base rent of the wholly-owned properties and the Company’s joint venture properties as of December 31, 2006:
 
                                 
    Wholly-Owned Properties     Joint Venture Properties  
    % of
    % of
    % of
    % of
 
    Shopping
    Company-
    Shopping
    Company-
 
    Center Base
    Owned
    Center Base
    Owned
 
    Rental
    Shopping
    Rental
    Shopping
 
Tenant
  Revenues     Center GLA     Revenues     Center GLA  
 
Wal-Mart/Sam’s Club
    5.2 %     8.7 %     1.8 %     3.1 %
Royal Ahold (Tops Markets)
    3.0       2.7       2.7       3.2  
T.J. Maxx/Marshalls/A.J. Wright/Homegoods
    2.0       2.3       2.7       3.5  
PETsMART
    1.9       1.5       2.4       2.2  
Lowe’s Home Improvement
    1.8       3.0       0.8       1.1  
Bed Bath & Beyond
    1.6       1.4       1.8       1.8  
Kohl’s
    1.4       1.9       2.4       4.1  
Sears/Kmart
    1.4       3.8       0.2       1.4  
The Gap/Old Navy/Banana Republic
    1.2       0.8       1.1       0.9  
Home Depot
    1.2       1.5       0.6       0.6  
Michaels
    1.1       1.0       1.3       1.4  
OfficeMax
    1.1       1.1       1.2       1.4  
Barnes & Noble/B. Dalton
    1.0       0.6       1.5       0.9  
Dollar Tree
    1.0       1.1       0.5       0.7  
Staples
    1.0       0.9       0.4       0.4  
Dick’s Sporting Goods
    0.9       1.0       1.0       1.0  
AMC Theatres
    0.8       0.3       1.5       1.0  
Best Buy
    0.8       0.7       1.5       1.4  
Ross Dress For Less
    0.8       0.8       1.3       1.3  
Circuit City
    0.7       0.5       1.3       1.3  
DSW/Filene’s Basement/Value City Department Stores
    0.5       0.3       1.0       0.9  
Linens ’N Things
    0.4       0.3       1.5       1.4  
Mervyns
    0.2       0.2       7.8       8.2  
 
Investment Strategy
 
The Company pursues the following key initiatives to enhance its competitive position, capture emerging trends and maximize long-term shareholder value:
 
  •  Acquisition of high-quality stabilized retail real estate portfolios through joint ventures with institutional capital partners to preserve the Company’s equity and enhance its investment returns through the creation of long-term fee income and promoted interests in the asset value;
 
  •  Ground-up development of new retail assets, as well as expansion and redevelopment of existing assets, to capture the valuation differential between development returns and current market pricing for stabilized retail assets;
 
  •  Value-added investments in well-located retail properties in need of re-tenanting or redevelopment and forward commitments with local joint venture partners as a means of controlling market-dominant sites and earning disproportionately higher returns on invested equity through fee income and promoted interests;


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  •  Opportunities for retail investment in select international markets through joint ventures with dominant local retail developers and property managers to take advantage of growing consumerism in international markets and the increasing globalization of the retail industry and
 
  •  Capital recycling opportunities to sell low-growth or non-core assets to increase the Company’s internal growth and generate capital for reinvestment into higher yielding retail assets that better fit the Company’s long-term investment strategy.
 
The Company leverages its unique set of core competencies in the implementation of its investment strategy. The Company believes its aggregate skill set and market position enable it to earn investment returns superior to its competitors. Such core competencies include:
 
  •  Premier relationships with the nation’s leading retailers;
 
  •  Broad in-house development and redevelopment capability;
 
  •  Dedicated ancillary income and peripheral land development departments;
 
  •  National asset management platform focused on maximizing portfolio profitability through strategic leasing and efficient property management;
 
  •  Ability to successfully source and execute accretive acquisitions, as well as integrate large portfolios into the Company’s operations and
 
  •  Efficient access to capital through multiple relationships with private capital partners, banking institutions and other capital sources.
 
Executive Management Team
 
The Company’s executive management team is responsible for the implementation of its investment strategy. This team is comprised of experienced professionals who have worked together for many years through the Company’s growth and who also bring a breadth of experience from many years in other facets of the retail real estate industry.
 
The Company’s executive management team is committed to providing the investment community with extensive disclosure to enhance financial transparency. The National Association of Real Estate Investment Trusts ® (“NAREIT”), the representative voice for U.S. REITs and publicly traded real estate companies worldwide, has selected the Company’s Management Discussion & Analysis as the large cap winner of its Gold Award for outstanding financial disclosure for the last four consecutive years.
 
Executive Management Team
 
                     
        Years
    Years in
 
        with
    Real Estate
 
Name
 
Title
  Company     Industry  
 
Scott A. Wolstein
  CEO & Chairman     25 (1)     25  
David M. Jacobstein
  President & COO     7       21  
Daniel B. Hurwitz
  Senior EVP & CIO     7       20  
Joan U. Allgood
  EVP-Corporate Transactions & Governance     19 (1)     24  
Richard E. Brown
  EVP-International     7       26  
Timothy J. Bruce
  EVP-Development     4       20  
William H. Schafer
  EVP & CFO     14 (1)     22  
Robin R. Walker-Gibbons
  EVP-Leasing     11       25  
                     
Average per Executive
        12       23  
                     
Total Years
        94       183  
                     
 
 
(1) Affiliated with pre-IPO entity. IPO in February 1993.


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Growth Opportunities
 
Despite changes in the overall economy, retail sales over the last 10 years have grown by more than 70% and, according to the U.S. Census, are expected to continue growing at an annual rate of approximately 4%. As retail sales continue to grow, the Company believes it is well-positioned to benefit from shoppers’ preferences for an open-air retail format compared to an enclosed mall format, as well as consumers’ shift from shopping at traditional department stores in favor of specialized “category killers” and general merchandise discounters.
 
(GROWTH IN RETAIL SALES GRAPH)
 
(MARKET SHARE TRANSITION)


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Because of these long-term retail trends, the Company is experiencing significant tenant demand for retail space in its portfolio. Traditional community center tenants such as Target, Wal-Mart, Lowe’s Home Improvement, Home Depot, Kohls, PETsMART, Bed Bath & Beyond, etc., continue to grow their store locations by 8% to 12% annually. Moreover, many traditionally mall-based retailers are migrating to the open-air format, where their occupancy costs, as a percentage of sales, are significantly lower. Through its growing lifestyle center and hybrid center portfolios, the Company is expanding the roster of tenants with which it has leasing relationships.
 
As a result of this tenant demand, the aggregate occupancy of the Company’s shopping center portfolio was 95.2% at December 31, 2006, which is consistent with the Company’s long-term average occupancy rate since 1987 of approximately 96%. This performance underscores the portfolio’s ability to withstand economic fluctuations, retailer bankruptcies and store closures, which in turn, produces highly stable and consistent cash flow.
 
(CORE PORTFOLIO LEASE __% GRAPH)
 
Tenant demand for new store locations is also driving the growth of the Company’s development pipeline, which represents over $3.5 billion in gross project costs. The Company is pursuing development of a variety of open-air shopping centers that reflect popular consumer shopping trends, including:
 
  •  Lifestyle centers, which feature a critical mass of specialty retailers traditionally found in enclosed malls;
 
  •  Hybrid centers, which combine community center tenants with lifestyle tenants and
 
  •  Mixed use centers, which complement retail space with residential or office components.
 
The Company believes that as consolidation in the retail REIT industry continues and as more retailers and retail landlords grow their international operations, the dominant, world-class REITs will earn superior returns. To that end, the Company has formed a department dedicated to sourcing foreign investment opportunities and managing relationships with international joint venture partners. The Company has undertaken a joint venture investment in Brazil and continues to evaluate opportunities for prudent expansion in other emerging markets.
 
Historical Performance
 
The Company has experienced significant growth over the past several years. During the last four years, the Company acquired large, privately-held retail portfolios from Benderson Development Company (“Benderson”)


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and Caribbean Property Group (“CPG”). Also during that time, the Company acquired JDN Realty Corporation, a publicly traded retail REIT. The Company recently announced its pending acquisition of IRRETI, a registered, non-traded retail REIT.
 
This portfolio growth, when combined with the internal growth of the Company’s core portfolio shopping centers and the value created through the Company’s development platform, has contributed to the Company’s increased FFO and dividends per share. The Company’s ability to consistently increase these key financial metrics in various economic environments has contributed to significant appreciation in the value of the Company’s common stock over the last several years.
 
(STOCK PRICE GRAPH)
 
The Company’s total market capitalization (defined as common shares and OP Units outstanding multiplied by the closing price of the common shares on the New York Stock Exchange at December 31, 2006, plus preferred shares at liquidation value and consolidated debt) has also increased significantly as a result of both the growth in the Company’s asset base and its common stock price. The total market capitalization was $11.9 billion at December 31, 2006.
 


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(MARKET CAP GROWTH GRAPH)
 
At December 31, 2006, the Company owned 467 shopping centers (167 of which are owned through unconsolidated joint ventures and 39 that are consolidated by the Company) in 44 states, plus Puerto Rico and Brazil, comprising approximately 85.3 million square feet of Company-owned GLA (approximately 109.1 million square feet of total GLA). In addition, the Company owned or had an interest in seven office and industrial properties in five states comprising approximately 0.8 million square feet.
 
Year in Review — 2006
 
Net income for the year ended December 31, 2006, was $253.3 million, or $1.81 per share (diluted), compared to net income of $282.6 million, or $2.08 per share (diluted) for the prior comparable period. FFO applicable to common shareholders for the year ended December 31, 2006, was $377.8 million compared to the year ended December 31, 2005, of $355.1 million, an increase of 6.4%. The decrease in net income of approximately $29.3 million is due to (i) increases in NOI from operating properties, offset by (ii) decreases in non-FFO gains on disposition of real estate, (iii) increases in depreciation of the assets acquired and developed and (iv) increases in short-term interest rates and related interest expense. The reduction in net income per share is directly affected by the decrease in net income generated from the factors described above.
 
The Company’s operating and development portfolios continue to be driven by tenant demand for new store locations in the open air format. Property fundamentals continue to perform and same store net operating income (“NOI”) growth is improving as the Company implements new asset management strategies to increase rents and improve profitability. With respect to the Company’s investment strategy, certain 2006 results should have important long-term implications to shareholders and creation of shareholder value. A few examples are summarized below:
 
  •  First, the Company’s new relationship with TIAA-CREF (see 2006 Strategic Transactions) and its existing relationship with MDT, two infinite-life vehicles, provide DDR with alternative sources of private equity and a fee stream that is both highly profitable and easily scaleable given the Company’s existing operating platform.
 
  •  Second, the continued growth of the development pipeline and redevelopments, with average leveraged investment returns in the low double digits, represents a value creation opportunity for the Company.

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  Strong development competencies can manufacture new products at yields significantly above cap rates currently available in the market for acquisitions. The Company’s in-house development capability creates a competitive advantage, particularly with larger projects that need more expertise to successfully navigate the entitlement process and more financial strength to fund the project through to completion.
 
  •  Third, the Company invested approximately $485 million in value-add projects and forward commitments through the Coventry  II Joint Venture during 2006. Although Coventry has deployed its remaining capital from Fund II, the Company will still leverage its internal expertise by pursuing value-add opportunities and placing such opportunities both with Coventry and other capital sources, as appropriate. The Company continues to seek amply opportunities to create value and to exercise greater flexibility with which to operate.
 
  •  Lastly, the Company has expanded with an international investment division to evaluate new opportunities and manage existing foreign joint venture relationships.
 
Since the announcement of the proposed merger with IRRETI, the Company has been executing a financing plan. With these arrangements in place, a significant amount of the initial financing risk associated with the transaction may be eliminated. The financing options available to DDR, combined with the equity raised through a forward transaction and the issuance of equity to IRRETI shareholders, should provide DDR with sufficient flexibility with its debt covenants. The Company continues to prove its ability to finance large portfolio acquisitions and effectively maintain financial ratios at consistent levels. The Company intends to continue to operate its business within these parameters.
 
After the completion of the merger, the Company expects to complete additional joint venture transactions and non-core asset sales from both the DDR and IRRETI portfolios to allow for financial flexibility and investment in higher-yielding assets.
 
The Company has reviewed the combined portfolios to identify assets that could be sold to a joint venture and assets that could be sold to outside interests. The Company performed a strategic asset management initiative and gathered detailed input from its leasing, development and property management teams. A pool of high quality assets was identified for which the Company would expect to maintain day-to-day leasing and management responsibilities, but were found to be better suited for a joint venture structure. As a result of this exercise, the Company is currently negotiating potential joint ventures with potential private equity partners. A second group of assets was identified that, due to their smaller size, market position, and future growth potential, does not fit the Company’s long-term investment objectives. The sale of such assets by the Company will enhance the overall quality of the portfolio and improve the Company’s balance sheet through this initiative.
 
The Company intends to maintain a portfolio of dominant centers in quality markets where population density, income growth and buying power will substantially increase over time. Dominance has its benefits and the Company intends to leverage its position in growing markets and generate increasing leasing spreads over time.
 
CRITICAL ACCOUNTING POLICIES
 
The consolidated financial statements of the Company include accounts of the Company and all majority-owned subsidiaries where the Company has financial or operating control. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has utilized available information, including the Company’s history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments of certain amounts included in the consolidated financial statements, giving due consideration to materiality. It is possible that the ultimate outcome as anticipated by management in formulating its estimates inherent in these financial statements might not materialize. Application of the critical accounting policies described below involves the exercise of judgment and the use of assumptions as to future uncertainties. As a result, actual results could differ from these estimates. In addition, other companies


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may utilize different estimates that may affect the comparability of the Company’s results of operations to those of companies in similar businesses.
 
Revenue Recognition and Accounts Receivable
 
Rental revenue is recognized on a straight-line basis that averages minimum rents over the current term of the leases. Certain of these leases provide for percentage and overage rents based upon the level of sales achieved by the tenant. Percentage and overage rents are recognized after a tenant’s reported sales have exceeded the applicable sales break point set forth in the applicable lease. The leases also typically provide for tenant reimbursements of common area maintenance and other operating expenses and real estate taxes. Accordingly, revenues associated with tenant reimbursements are recognized in the period in which the expenses are incurred based upon the tenant lease provision. Management fees are recorded in the period earned. Ancillary and other property-related income, which includes the leasing of vacant space to temporary tenants, are recognized in the period earned. Lease termination fees are included in other income and recognized and earned upon termination of a tenant’s lease and relinquishment of space in which the Company has no further obligation to the tenant. Acquisition and financing fees are recognized at the completion of the respective transaction and earned in accordance with the underlying agreements. Fee income derived from the Company’s joint venture investments is recognized to the extent attributable to the unaffiliated ownership interest.
 
The Company makes estimates of the collectibility of its accounts receivable related to base rents, including straight-line rentals, expense reimbursements and other revenue or income. The Company specifically analyzes accounts receivable and analyzes historical bad debts, customer credit worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, the Company makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectibility of the related receivable. In some cases, the ultimate resolution of these claims can exceed one year. These estimates have a direct impact on the Company’s net income because a higher bad debt reserve results in less net income.
 
Real Estate
 
Land, buildings and fixtures and tenant improvements are recorded at cost and stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations and/or replacements that improve or extend the life of the asset are capitalized and depreciated over their estimated useful lives.
 
Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:
 
     
Buildings
  Useful lives, ranging from 30 to 40 years
Furniture/fixtures and tenant improvements
  Useful lives, which approximate lease terms, where applicable
 
The Company is required to make subjective assessments as to the useful lives of its properties for purposes of determining the amount of depreciation to reflect on an annual basis with respect to those properties. These assessments have a direct impact on the Company’s net income. If the Company would lengthen the expected useful life of a particular asset, it would be depreciated over more years and result in less depreciation expense and higher net income.
 
Assessment of recoverability by the Company of certain other lease-related assets must be made when the Company has a reason to believe that the tenant may not be able to perform under the terms of the lease as originally expected. This requires management to make estimates as to the recoverability of such assets.
 
Gains from disposition of outlots, land parcels and shopping centers are generally recognized using the full accrual or partial sale method (as applicable) in accordance with the provisions of SFAS No. 66, “Accounting for Real Estate Sales,” provided that various criteria relating to the terms of sale and any subsequent involvement by the Company with the properties sold are met.


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Long–Lived Assets
 
On a periodic basis, management assesses whether there are any indicators that the value of real estate properties may be impaired. A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. In management’s estimate of cash flows, it considers factors such as expected future operating income, trends and prospects, the effects of demand, competition and other factors. In addition, the undiscounted cash flows may consider a probability-weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or a range is estimated. The determination of undiscounted cash flows requires significant estimates by management and considers the expected course of action at the balance sheet date. Subsequent changes in estimated undiscounted cash flows arising from changes in anticipated actions could impact the determination of whether an impairment exists and whether the effects could have a material impact on the Company’s net income. To the extent an impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the fair value of the property.
 
When assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the sales price, net of selling costs of such assets. If, in management’s opinion, the net sales price of the assets that have been identified for sale is less than the net book value of the assets, an impairment charge is recorded.
 
The Company is required to make subjective assessments as to whether there are impairments in the value of its real estate properties and other investments. These assessments have a direct impact on the Company’s net income because recording an impairment charge results in an immediate negative adjustment to net income.
 
The Company allocates the purchase price to assets acquired and liabilities assumed on a gross basis based on their relative fair values at the date of acquisition pursuant to the provisions of SFAS No. 141, “Business Combinations.” In estimating the fair value of the tangible and intangible assets and liabilities acquired, the Company considers information obtained about each property as a result of its due diligence, marketing and leasing activities. It applies various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. Depending upon the size of the acquisition, the Company may engage an outside appraiser to perform a valuation of the tangible and intangible assets acquired. The Company is required to make subjective estimates in connection with these valuations and allocations.
 
Off Balance Sheet Arrangements
 
The Company has a number of off balance sheet joint ventures and other unconsolidated arrangements with varying structures. The Company consolidates certain entities in which it owns less than a 100% equity interest if it is deemed to have a controlling interest or is the primary beneficiary in a variable interest entity, as defined in Financial Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities” (“FIN 46(R)”) or is deemed the general partner pursuant to EITF 04-05.
 
To the extent that the Company contributes assets to a joint venture, the Company’s investment in the joint venture is recorded at the Company’s cost basis in the assets that were contributed to the joint venture. To the extent that the Company’s cost basis is different from the basis reflected at the joint venture level, the basis difference is amortized over the life of the related assets and included in the Company’s share of equity in net income of joint ventures. In accordance with the provisions of Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures,” the Company will recognize gains on the contribution of real estate to joint ventures, relating solely to the outside partner’s interest, to the extent the economic substance of the transaction is a sale.
 
Discontinued Operations
 
Pursuant to the definition of a component of an entity as described in SFAS No. 144, assuming no significant continuing involvement, the sale of a retail or industrial property is considered a discontinued operation. In addition, the operations from properties classified as held for sale are considered a discontinued operation. The Company generally considers assets to be held for sale when the transaction has been approved by the appropriate


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level of management and there are no known significant contingencies relating to the sale such that the sale of the property within one year is considered probable. Accordingly, the results of operations of operating properties disposed of or classified as held for sale, for which the Company has no significant continuing involvement, are reflected as discontinued operations. On occasion, the Company will receive unsolicited offers from third parties to buy an individual shopping center. The Company generally will classify properties as held for sale when a sales contract is executed with no contingencies and the prospective buyer has significant funds at risk to ensure performance.
 
Interest expense, which is specifically identifiable to the property, is used in the computation of interest expense attributable to discontinued operations. Consolidated interest and debt at the corporate level is allocated to discontinued operations pursuant to the methods prescribed under Emerging Issue Task Force (“EITF”) 87-24, “Allocation of Interest to Discontinued Operations,” based on the proportion of net assets sold.
 
Included in discontinued operations as of and for the three years ending December 31, 2006, are 57 properties aggregating 5.6 million square feet of gross leasable area including one property that is considered held for sale at December 31, 2006. The operations of such properties have been reflected on a comparative basis as discontinued operations in the consolidated financial statements for each of the three years ending December 31, 2006, included herein.
 
Stock–Based Employee Compensation
 
The Company applied Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for its stock-based compensation plans, prior to January 1, 2006. Accordingly, the Company did not recognize compensation cost for stock options when the option exercise price equaled or exceeded the market value on the date of the grant. The Company adopted SFAS 123(R), “Share-Based Payment,” (SFAS 123(R)) on January 1, 2006. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure an amendment of SFAS No. 123,” for the years ended December 31, 2005 and 2004 (in thousands, except per share amounts):
 
                 
    Year Ended December 31,  
    2005     2004  
 
Net income, as reported
  $ 282,643     $ 269,762  
Add: Stock-based employee compensation included in reported net income
    5,652       6,308  
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards
    (5,319 )     (5,062 )
                 
    $ 282,976     $ 271,008  
                 
Earnings Per Share:
               
Basic — as reported
  $ 2.10     $ 2.27  
                 
Basic — pro forma
  $ 2.10     $ 2.28  
                 
Diluted — as reported
  $ 2.08     $ 2.24  
                 
Diluted — pro forma
  $ 2.09     $ 2.25  
                 
 
Certain of the Company’s executive officers were granted performance unit awards that provide for the issuance of up to 666,666 common shares. The amount of the total grant is determined based on the annualized total shareholders’ return over a five-year period with the common shares issued vesting over the remaining five-year period. As of December 31, 2006, the determination period for all of these awards was complete and the maximum common shares of 666,666 was achieved.
 
SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair value. The fair value is estimated at the date of grant


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using a Black-Scholes option pricing model with weighted average assumptions for the activity under stock plans. Option pricing model input assumptions, such as expected volatility, expected term and risk-free interest rate, impact the fair value estimate. Further, the forfeiture rate impacts the amount of aggregate compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on or determined from external data, and other assumptions may be derived from historical experience with share-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances.
 
The risk-free interest rate is based upon a U.S. Treasury Strip with a maturity date that approximates the expected term of the option. The expected life of an award is derived by referring to actual exercise experience. The expected volatility of stock is derived by referring to changes in the Company’s historical stock prices over a time frame similar to the expected life of the award.
 
Accrued Liabilities
 
The Company makes certain estimates for accrued liabilities including accrued professional fees, interest, real estate taxes, insurance and litigation reserves. These estimates are subjective and based on historical payments, executed agreements, anticipated trends and representations from service providers. These estimates are prepared based on information available at each balance sheet date and are reevaluated upon the receipt of any additional information. Many of these estimates are for payments that occur in one year. These estimates have a direct impact on the Company’s net income because a higher accrual will result in less net income.
 
The Company has made estimates in assessing the impact of the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FAS No. 109” (“FIN 48”). The assessment of this provision requires management to estimate the amounts recorded in preparing the Company’s tax provision. These estimates could have a direct impact as a difference in the tax provision could alter the Company’s net income.
 
Comparison of 2006 to 2005 Results of Operations Continuing Operations
 
Revenues from Operations
 
                                 
    (In thousands)        
    2006     2005     $ Change     % Change  
 
Base and percentage rental revenues
  $ 574,905     $ 516,186     $ 58,719       11.4 %
Recoveries from tenants
    177,665       156,793       20,872       13.3 %
Ancillary income and other property income
    21,048       14,425       6,623       45.9 %
Management, development and other fee income
    30,294       22,859       7,435       32.5 %
Other
    14,186       9,300       4,886       52.5 %
                                 
Total revenues
  $ 818,098     $ 719,563     $ 98,535       13.7 %
                                 
 
Base and percentage rental revenues relating to new leasing, re-tenanting and expansion of the Core Portfolio Properties (shopping center properties owned as of January 1, 2005, including the assets located in Puerto Rico for a comparable eleven months of ownership, but excluding properties under development and those classified as discontinued operations) (“Core Portfolio Properties”) increased approximately $12.5 million, or 2.7%, for the year


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ended December 31, 2006, as compared to the same period in 2005. The increase in base and percentage rental revenues is due to the following (in millions):
 
         
    Increase
 
    (Decrease)  
 
Core Portfolio Properties
  $ 12.5  
Acquisition of real estate assets
    44.5  
Development and redevelopment of 14 shopping center properties
    3.5  
Consolidation of a joint venture asset (EITF 04-05)
    4.3  
Transfer of 18 properties to unconsolidated joint ventures
    (9.3 )
Business center properties under redevelopment
    (1.4 )
Service Merchandise assets(1)
    2.9  
Straight-line rents
    1.7  
         
    $ 58.7  
         
 
 
(1) During 2006 the Company acquired the Service Merchandise sites previously owned through the KLA/SM Joint Venture and subsequently sold these assets to the Service Holdings LLC Joint Venture. These assets were consolidated within the Company’s accounts for approximately two months during the third quarter of 2006.
 
At December 31, 2006, the aggregate occupancy of the Company’s shopping center portfolio was 95.2%, as compared to 95.3% at December 31, 2005. The Company owned 467 shopping centers at December 31, 2006. The average annualized base rent per occupied square foot was $11.56 at December 31, 2006, as compared to $11.01 at December 31, 2005.
 
At December 31, 2006, the aggregate occupancy of the Company’s wholly-owned shopping centers was 94.1%, as compared to 94.4% at December 31, 2005. The Company owned 261 wholly-owned shopping centers at December 31, 2006. The average annualized base rent per leased square foot was $10.80 at December 31, 2006, as compared to $10.42 at December 31, 2005.
 
At December 31, 2006, the aggregate occupancy of the Company’s joint venture shopping centers was 96.9%, as compared to 97.0% at December 31, 2005. The Company’s joint ventures owned 167 shopping centers including 39 consolidated centers primarily owned through the Mervyns Joint Venture at December 31, 2006. The average annualized base rent per leased square foot was $12.69 at December 31, 2006, as compared to $12.05 at December 31, 2005.
 
At December 31, 2006, the aggregate occupancy of the Company’s business centers was 42.1%, as compared to 43.2% at December 31, 2005. The business centers consist of seven assets in five states.
 
Recoveries from tenants increased $20.9 million, or 13.3%, for the year ended December 31, 2006, as compared to the same period in 2005. This increase is primarily due to an increase in operating expenses and real estate taxes that aggregated $26.7 million, primarily due to acquisitions and developments coming on line as discussed below. Recoveries were approximately 85.0% and 86.0% of operating expenses and real estate taxes for the years ended December 31, 2006 and 2005, respectively.


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The increase in recoveries from tenants was primarily related to the following (in millions):
 
         
    Increase
 
    (Decrease)  
 
Acquisition and development/redevelopment of 32 shopping center properties in 2006 and 2005
  $ 17.9  
Transfer of properties to joint ventures in 2006 and 2005
    (3.3 )
Consolidation of a joint venture asset (EITF 04-05)
    1.2  
Service Merchandise assets
    0.8  
Net increase in operating expenses at the remaining shopping center and business center properties
    4.3  
         
    $ 20.9  
         
 
Ancillary and other properly related income increased due to income earned from the acquisition of portfolios from CPG and Benderson. The Company believes that its ancillary income will continue to grow with additional opportunities in these portfolios. The Company believes that its ancillary income program continues to be an industry leader among “open-air” shopping centers. Continued growth is anticipated in the area of ancillary or non-traditional revenue, as additional revenue opportunities are pursued and as currently established revenue opportunities proliferate throughout the Company’s core, acquired and development portfolios. Ancillary revenue opportunities have in the past included short-term and seasonal leasing programs, outdoor advertising programs, wireless tower development programs, energy management programs, sponsorship programs and various other programs.
 
The increase in management, development and other fee income, which aggregated $7.4 million, is primarily due to unconsolidated joint venture interests formed in 2005, the continued growth of the MDT Joint Venture aggregating $1.3 million and an increase in other income of approximately $4.9 million. This increase was offset by the sale of several of the Company’s joint venture properties that contributed approximately $1.8 million in management fee income in the prior year and a decrease in development fee income of approximately $0.2 million. The remaining increase of $3.2 million is due to an increase in other fee income. Management fee income is expected to continue to increase as the MDT Joint Venture and other joint ventures acquire additional properties and as unconsolidated joint venture assets under development become operational. Additionally, the proposed TIAA-CREF joint venture is anticipated to generate additional management fee income in 2007. Development fee income was primarily earned relating to the redevelopment of assets through the Coventry II Joint Venture. The Company expects to continue to pursue additional development joint ventures as opportunities present themselves.
 
Other income is comprised of the following (in millions):
 
                 
    Year Ended
 
    December 31,  
    2006     2005  
 
Lease termination fees (1)
  $ 13.3     $ 5.9  
Financing fees (2)
    0.4       2.4  
Other
    0.5       1.0  
                 
    $ 14.2     $ 9.3  
                 
 
 
(1) For the year ended December 31, 2006, the Company executed lease terminations on four vacant Wal-Mart spaces in the Company’s wholly-owned portfolio.
 
(2) Represents financing fees received in connection with the MDT Joint Venture, excluding the Company’s retained ownership of approximately 14.5%. The Company’s fees are earned in conjunction with the timing and amount of the transaction by the joint venture.


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Expenses from Operations
 
                                 
    (In thousands)        
    2006     2005     $ Change     % Change  
 
Operating and maintenance
  $ 113,468     $ 97,599     $ 15,869       16.3 %
Real estate taxes
    95,620       84,756       10,864       12.8 %
General and administrative
    60,679       54,048       6,631       12.3 %
Depreciation and amortization
    192,219       163,341       28,878       17.7 %
                                 
    $ 461,986     $ 399,744     $ 62,242       15.6 %
                                 
 
Operating and maintenance expenses include the Company’s provision for bad debt expense, which approximated 0.8% and 1.0% of total revenues for the years ended December 31, 2006 and 2005, respectively (see Economic Conditions).
 
The increase in rental operation expenses, excluding general and administrative, is due to the following (in millions):
 
                         
    Operating
             
    and
    Real Estate
       
    Maintenance     Taxes     Depreciation  
 
Core Portfolio Properties
  $ 4.5     $ 5.3     $ 5.6  
Acquisition and development/redevelopment of 32 shopping center properties
    11.6       6.8       20.7  
Consolidation of a joint venture asset (EITF 04-05)
    0.5       0.7       1.0  
Transfer of 18 properties to unconsolidated joint ventures
    (1.6 )     (2.4 )     (2.4 )
Business center properties
    0.1             0.6  
Service Merchandise assets
    1.2       0.5       1.3  
Provision for bad debt expense
    (0.4 )            
Personal property
                2.1  
                         
    $ 15.9     $ 10.9     $ 28.9  
                         
 
In the third quarter of 2006, the Company formed two wholly-owned captive insurance companies (the “Captives”). The Captives will insure the Company’s self-insured retentions for the first $100,000 of general liability insurance and the first $100,000 of property damage insurance on a per occurrence basis. The Company believes the wholly-owned captive insurance companies, licensed and regulated by the state of Vermont, are adequately funded to cover the per-occurrence retentions for liability coverage and property damage subject to certain aggregate limits as defined in the respective policies. While the Company believes that the self-insurance reserves are adequate, the Company cannot assure that the self-insurance reserves will be adequate to cover any incurred losses.
 
The increase in general and administrative expenses is primarily attributable to certain executive outperformance incentive compensation plans as noted below in the adoption of SFAS 123(R) of approximately $2.6 million and increased expense from the directors deferred compensation plan of approximately $0.9 million. Other increases in general and administrative costs are a result of the growth of the Company and include salaries and wages, information systems and legal and consulting costs of approximately $0.3 million, $0.8 million and $0.9 million, respectively. Total general and administrative expenses were approximately 4.8% and 4.6% of total revenues, including total revenues of joint ventures, for the years ended December 31, 2006 and 2005, respectively.
 
The Company continues to expense internal leasing salaries, legal salaries and related expenses associated with certain leasing and re-leasing of existing space. In addition, the Company capitalized certain direct and incremental internal construction and software development and implementation costs consisting of direct wages and benefits, travel expenses and office overhead costs of $10.0 million and $6.2 million in 2006 and 2005, respectively.


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The Company adopted SFAS 123(R) as required on January 1, 2006, using the modified prospective method. The Company’s consolidated financial statements as of the year ended December 31, 2006, reflect the impact of SFAS 123(R). In accordance with the modified prospective method, the Company’s consolidated financial statements for prior periods have not been restated to reflect the impact of SFAS 123(R). The compensation cost recognized under SFAS 123(R) was approximately $8.3 million for the year ended December 31, 2006. There were no significant capitalized stock-based compensation costs at December 31, 2006. For the year ended December 31, 2005, the Company recorded compensation expense related to its restricted stock plan and its performance unit awards of approximately $5.7 million.
 
Other Income and Expenses
 
                                 
    (In thousands)        
    2006     2005     $ Change     % Change  
 
Interest income
  $ 9,113     $ 10,078     $ (965 )     (9.6 )%
Interest expense
    (221,525 )     (181,040 )     (40,485 )     22.4 %
Other expense, net
    (446 )     (2,532 )     2,086       (82.4 )%
                                 
    $ (212,858 )   $ (173,494 )   $ (39,364 )     22.7 %
                                 
 
Interest income for the year ended December 31, 2006, decreased primarily as a result of advances to the Service Merchandise joint venture beginning in July 2005. This advance was repaid as the Company acquired its partners’ interest in the KLA/SM Joint Venture in August 2006. The 51 KLA/SM Joint Venture assets were sold to a newly formed Service Holdings LLC Joint Venture, which the Company has a 20% ownership interest, and the Company did not advance funds to this new entity to fund the acquisition.
 
Interest expense increased primarily due to the acquisition of assets and associated borrowings combined with other development assets becoming operational and the increase in short-term interest rates. The weighted average debt outstanding and related weighted average interest rate during the year ended December 31, 2006, was $4.1 billion and 5.8%, compared to $3.6 billion and 5.5%, for the same period in 2005. At December 31, 2006, the Company’s weighted average interest rate was 5.8%, compared to 5.7% at December 31, 2005. Interest costs capitalized, in conjunction with development and expansion projects and development joint venture interests, were $20.0 million for the year ended December 31, 2006, compared to $12.7 million for the same period in 2005.
 
Other expense is comprised of litigation settlements or costs and abandoned acquisition and development project costs.
 
Other
 
                                 
    (In thousands)        
    2006     2005     $ Change     % Change  
 
Equity in net income of joint ventures
  $ 30,337     $ 34,873     $ (4,536 )     (13.0 )%
Minority interests
    (8,453 )     (7,881 )     (572 )     7.3 %
Income tax benefit (expense) of taxable REIT subsidiaries and franchise taxes
    2,481       (342 )     2,823       (825.4 )%


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A summary of the decrease in equity in net income of joint ventures for the year ended December 31, 2006, is comprised of the following (in millions):
 
         
    Increase
 
    (Decrease)  
 
Reduction in gains from disposition transactions as compared to 2005
  $ (6.4 )
Disposition of joint venture interests to DDR
    1.5  
Adoption of EITF 04-05
    (0.8 )
Acquisition of assets by unconsolidated joint ventures
    1.9  
Debt refinancing and increased interest rates at various joint ventures
    (0.7 )
         
    $ (4.5 )
         
 
The decrease in equity in net income of joint ventures is due to several factors, including increased interest costs resulting from an increase in interest rates on variable rate borrowings and refinancings at higher debt proceeds levels at certain joint ventures. These decreases were partially offset by an increase in joint venture income from newly formed joint ventures in 2005 and 2006, including assets acquired by the Company’s MDT Joint Venture. In 2006, the Company’s unconsolidated joint ventures recognized an aggregate gain from the disposition of joint venture assets of $20.3 million, of which the Company’s proportionate share was $3.1 million. In addition, in 2006 the Company recognized promoted income of approximately $5.5 million relating to the disposition of a shopping center. In 2005, the Company’s unconsolidated joint ventures recognized an aggregate gain from the disposition of joint venture assets of $49.0 million, of which the Company’s proportionate share was $13.0 million.
 
The Company’s unconsolidated joint ventures sold the following assets in the years ended December 31, 2006 and 2005, which excludes the Company’s acquisitions during the year ended December 31, 2006, of its partners’ 50% interest in shopping centers in Salisbury, Maryland, and Phoenix, Arizona, its partner’s 75% interest in a shopping center in Pasadena, California, and its partner’s 80% interest in a development in Apex, North Carolina.
 
     
2006 Dispositions
 
2005 Dispositions
 
One 50% effectively owned shopping center
  Three 20% owned shopping centers
Four 25.5% effectively owned shopping centers
  One 24.75% owned shopping center
One 20.75% effectively owned shopping center
  Eight sites formerly occupied by Service Merchandise
Two sites formerly occupied by Service Merchandise
   
One 10% effectively owned shopping center
   
 
Minority equity interest expense increased for the year ended December 31, 2006, primarily due to the following (in millions):
 
         
    (Increase)
 
    Decrease  
 
Formation of the Mervyns Joint Venture consolidated investment in September 2005, which is owned approximately 50% by the Company
  $ (3.9 )
Conversion of 0.4 million operating partnership units into common shares of the Company in 2006
    1.0  
Consolidation of a joint venture asset (EITF 04-05)
    (0.7 )
Net decrease in net income from consolidated joint venture investments
    3.0  
         
    $ (0.6 )
         


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Discontinued Operations
 
                                 
    (In thousands)        
    2006     2005     $ Change     % Change  
 
Income from discontinued operations
  $ 2,571     $ 4,861     $ (2,290 )     (47.1 )%
Gain on disposition of real estate, net
    11,051       16,667       (5,616 )     (33.7 )%
                                 
    $ 13,622     $ 21,528       (7,906 )     (36.7 )%
                                 
 
Included in discontinued operations for the years ended December 31, 2006 and 2005, are six properties sold in 2006, aggregating 0.8 million square feet, one property classified as held for sale at December 31, 2006 and ten shopping centers and 25 business centers sold in 2005, aggregating 3.8 million square feet.
 
Gain on Disposition of Real Estate
 
                                 
    (In thousands)        
    2006     2005     $ Change     % Change  
 
Gain on disposition of real estate
  $ 72,023     $ 88,140     $ (16,117 )     (18.3 )%
 
The Company recorded gains on disposition of real estate and real estate investments for the years ended December 31, 2006 and 2005, as follows (in millions):
 
                 
    Year Ended
 
    December 31,  
    2006     2005  
 
Transfer of assets to the Service Holdings LLC (1)
  $ 6.1     $  
Transfer of assets to the DPG Realty Holdings Joint Venture (2)
    0.6        
Transfer of assets to the MDT Joint Venture (3)
    9.2       81.2  
Transfer of assets to the MDT Preferred Joint Venture (4)
    38.9        
Land sales (5)
    14.8       6.0  
Previously deferred gains (6)
    1.3       0.9  
Other loss on dispositions
    1.1        
                 
    $ 72.0     $ 88.1  
                 
 
 
(1) For the year ended December 31, 2006, the Company transferred 51 retail sites previously occupied by Service Merchandise. This disposition is not classified as discontinued operations due to the Company’s continuing involvement through its retained ownership interest and management agreements.
 
(2) For the year ended December 31, 2006, the Company transferred a newly developed expansion area adjacent to a shopping center owned by the joint venture. This disposition is not classified as discontinued operations due to the Company’s continuing involvement through its retained ownership interest and management agreements.
 
(3) For the year ended December 31, 2006, the Company transferred newly developed expansion areas adjacent to four shopping centers owned by the joint venture. For the year ended December 31, 2005, the Company transferred 12 assets. These dispositions are not classified as discontinued operations due to the Company’s continuing involvement through its retained ownership interest and management agreements.
 
(4) For the year ended December 31, 2006, the Company transferred six assets. These dispositions are not classified as discontinued operations due to the Company’s continuing involvement through its retained ownership interest and management agreements.
 
(5) These dispositions do not qualify for discontinued operations presentation.
 
(6) These were primarily attributable to the recognition of additional gains from the leasing of units associated with master lease and other obligations on disposed properties.


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Net Income
 
                                 
    (In thousands)        
    2006     2005     $ Change     % Change  
 
Net Income
  $ 253,264     $ 282,643     $ (29,379 )     (10.4 )%
                                 
 
Net income decreased primarily due to a reduction in gain on disposition of real estate and increased interest costs offset by the acquisition of assets. A summary of the changes from 2005 is as follows (in millions):
 
         
Increase in net operating revenues (total revenues in excess of operating and maintenance expenses and real estate taxes)
  $ 71.8  
Increase in general and administrative expenses
    (6.6 )
Increase in depreciation expense
    (28.9 )
Decrease in interest income
    (1.0 )
Increase in interest expense
    (40.5 )
Change in other expense
    2.1  
Decrease in equity in net income of joint ventures
    (4.5 )
Increase in minority interest expense
    (0.6 )
Change in income tax benefit/expense
    2.8  
Decrease in income from discontinued operations
    (2.3 )
Decrease in gain on disposition of real estate of discontinued operations properties
    (5.6 )
Decrease in gain on disposition of real estate
    (16.1 )
         
Decrease in net income
  $ (29.4 )
         
 
Comparison of 2005 to 2004 Results of Operations
 
Continuing Operations
 
Revenues from Operations
 
                                 
    (In thousands)        
    2005     2004     $ Change     % Change  
 
Base and percentage rental revenues
  $ 516,186     $ 409,209     $ 106,977       26.1 %
Recoveries from tenants
    156,793       115,854       40,939       35.3 %
Ancillary income and other property related income
    14,425       7,274       7,151       98.3 %
Management, development and other fee income
    22,859       16,937       5,922       35.0 %
Other
    9,300       13,082       (3,782 )     (28.9 )%
                                 
Total revenues
  $ 719,563     $ 562,356     $ 157,207       28.0 %
                                 
 
Base and percentage rental revenues relating to new leasing, re-tenanting and expansion of the Core Portfolio Properties (shopping center properties owned as of January 1, 2004, excluding properties under development and those classified as discontinued operations) increased approximately $4.9 million, which is an increase of 1.9%, for


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the year ended December 31, 2005, as compared to the same period in 2004. The increase in base and percentage rental revenues is due to the following (in millions):
 
         
    Increase
 
    (Decrease)  
 
Core Portfolio Properties
  $ 4.9  
Acquisition of real estate assets in 2005 and 2004
    132.5  
Development and redevelopment of 12 shopping center properties in 2005 and 2004
    9.8  
Transfer of 49 properties to unconsolidated joint ventures in 2005 and 2004
    (44.6 )
Business center properties
    (2.6 )
Straight–line rents
    7.0  
         
    $ 107.0  
         
 
At December 31, 2005, the aggregate occupancy of the Company’s shopping center portfolio was 95.3%, as compared to 94.7% at December 31, 2004. The Company owned 469 shopping centers at December 31, 2005. The average annualized base rent per occupied square foot was $11.01 at December 31, 2005, as compared to $10.79 at December 31, 2004.
 
At December 31, 2005, the aggregate occupancy of the Company’s wholly-owned shopping centers was 94.4%, as compared to 93.7% at December 31, 2004. The Company owned 269 wholly-owned shopping centers at December 31, 2005. The average annualized base rent per leased square foot was $10.42 at December 31, 2005, as compared to $9.70 at December 31, 2004.
 
At December 31, 2005, the aggregate occupancy rate of the Company’s joint venture shopping centers was 97.0%, as compared to 97.1% at December 31, 2004. The Company’s joint ventures owned 200 shopping centers including 37 consolidated centers primarily owned through the Mervyns Joint Venture at December 31, 2005. The average annualized base rent per leased square foot was $12.05 at December 31, 2005, as compared to $12.15 at December 31, 2004. The decrease in average annualized base per leased square foot is attributed to the change in property owned by joint ventures. For example, the average annual base rent per square foot excluding the Mervyns Joint Venture that was acquired in the third quarter of 2005 was $12.08 per square foot.
 
At December 31, 2005, the aggregate occupancy of the Company’s business centers was 43.2%, as compared to 76.0% at December 31, 2004. The decrease in occupancy is a result of the Company selling 25 of its business centers in September 2005. The remaining business centers consist of seven assets in five states at December 31, 2005.
 
Recoveries were approximately 86.0% and 84.7% of operating expenses and real estate taxes for the years ended December 31, 2005 and 2004, respectively. The increase is primarily attributable to changes in the Company’s portfolio of properties and an increase in occupancy.
 
The increase in recoveries from tenants was primarily related to the following (in millions):
 
         
    Increase
 
    (Decrease)  
 
Acquisition of properties in 2005 and 2004
  $ 47.3  
Transfer of properties to unconsolidated joint ventures in 2005 and 2004
    (11.9 )
Development properties becoming operational and an increase in operating expenses at the remaining shopping center and business center properties
    5.5  
         
    $ 40.9  
         
 
Ancillary income increased due to income earned from acquisition of properties from the CPG portfolio.
 
The increase in management, development and other fee income is primarily from unconsolidated joint venture interests formed in 2004 and 2005 and the continued growth of the MDT Joint Venture that aggregated $5.5 million. This increase was offset by the disposition of several of the Company’s joint venture properties, which contributed approximately $0.7 million management fee income in 2004. The remaining increase of $0.2 million is


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due to an increase in fee income at several of the Company’s operating joint ventures. Management fee income is expected to continue to increase as the MDT Joint Venture and other joint ventures acquire additional properties. Development fee income was primarily earned through the redevelopment of five assets through the Coventry II Joint Venture. The Company expects to continue to pursue additional development joint ventures as opportunities present themselves.
 
Other income is comprised of the following (in millions):
 
                 
    Year Ended
 
    December 31,  
    2005     2004  
Lease termination fees and bankruptcy settlements
  $ 5.9     $ 9.8  
Acquisition and financing fees (1)
    2.4       3.0  
Other
    1.0       0.3  
                 
    $ 9.3     $ 13.1  
                 
 
 
(1) Financing fees received in connection with the MDT Joint Venture. The Company’s fees are earned in conjunction with the timing and the amount of the transaction at the joint venture.
 
Expenses from Operations
 
                                 
    (In thousands)        
    2005     2004     $ Change     % Change  
 
Operating and maintenance
  $ 97,599     $ 63,929     $ 33,670       52.7 %
Real estate taxes
    84,756       72,850       11,906       16.3 %
General and administrative
    54,048       47,126       6,922       14.7 %
Depreciation and amortization
    163,341       122,783       40,558       33.0 %
                                 
    $ 399,744     $ 306,688     $ 93,056       30.3 %
                                 
 
Operating and maintenance expenses include the Company’s provision for bad debt expense, which approximated 1.0% and 0.8% of total revenues for the years ended December 31, 2005 and 2004, respectively (see Economic Conditions).
 
The increase in expenses from operations is due to the following (in millions):
 
                         
    Operating and
             
    Maintenance     Real Estate Taxes     Depreciation  
 
Core Portfolio Properties
  $ 2.0     $ 2.1     $ 2.4  
Acquisition and development/redevelopment of shopping center properties
    35.1       18.3       49.1  
Transfer of 49 properties to unconsolidated joint ventures
    (6.1 )     (8.4 )     (11.1 )
Business center properties
          (0.1 )     (0.6 )
Provision for bad debt expense
    2.7              
Personal property
                0.8  
                         
    $ 33.7     $ 11.9     $ 40.6  
                         
 
The increase in general and administrative expenses is primarily attributable to the growth of the Company through recent acquisitions, expansions and developments, the acquisition of assets from Benderson and CPG. Total general and administrative expenses were approximately 4.6% and 4.9% of total revenues, including total revenues of joint ventures, for the years ended December 31, 2005 and 2004, respectively.
 
The Company expensed internal leasing salaries, legal salaries and related expenses associated with the leasing and re-leasing of existing space. In addition, the Company capitalized certain direct and incremental


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internal construction costs consisting of direct wages and benefits, travel expenses and office overhead costs of $6.2 million and $5.7 million in 2005 and 2004, respectively.
 
Other Income and Expenses
 
                                 
    (In thousands)        
    2005     2004     $ Change     % Change  
 
Interest income
  $ 10,078     $ 4,233     $ 5,845       138.1 %
Interest expense
    (181,040 )     (123,527 )     (57,513 )     46.6 %
Other expense
    (2,532 )     (1,779 )     (753 )     42.3 %
                                 
    $ (173,494 )   $ (121,073 )   $ (52,421 )     43.3 %
                                 
 
Interest income increased primarily as a result of advances to the Service Merchandise joint venture and the Community Centers V and VII joint ventures in 2005. The Service Merchandise advance was $91.6 million at December 31, 2005. The Community Centers advance was repaid in July 2005.
 
Interest expense increased primarily due to the acquisitions of assets combined with other development assets becoming operational and the increase in short-term interest rates. The weighted average debt outstanding and related weighted average interest rate during the year ended December 31, 2005, were $3.6 billion and 5.5% compared to $2.8 billion and 5.0% for the same period in 2004. At December 31, 2005, the Company’s weighted average interest rate was 5.7%, compared to 5.4% at December 31, 2004. Interest costs capitalized, in conjunction with development and expansion projects and development joint venture interests, were $12.7 million for the year ended December 31, 2005, as compared to $9.9 million for the same period in 2004.
 
Other expense is comprised of the following (in millions):
 
                 
    Year Ended
 
    December 31,  
    2005     2004  
 
Abandoned acquisition and development projects
  $ 0.9     $ 1.8  
Litigation expense
    1.6        
                 
    $ 2.5     $ 1.8  
                 
 
Other
 
                                 
    (In thousands)        
    2005     2004     $ Change     % Change  
 
Equity in net income of joint ventures
  $ 34,873     $ 40,895     $ (6,022 )     (14.7 )%
Minority interests
    (7,881 )     (5,064 )     (2,817 )     55.6 %
Income tax of taxable REIT subsidiaries and franchise taxes
    (342 )     (1,469 )     1,127       (76.7 )%
 
The decrease in equity in net income of joint ventures is comprised of the following (in millions):
 
         
    Increase
 
    (Decrease)  
 
Reduction in sale transactions as compared to 2004
  $ (5.2 )
Joint ventures formed in 2004 and 2005
    2.5  
Debt refinancings, increased interest rates and increased depreciation and amortization charges at various joint ventures
    (3.3 )
         
    $ (6.0 )
         
 
The decrease in equity in net income of joint ventures is due to several factors including increased interest costs resulting from an increase in interest rates on variable rate borrowings and refinancings at higher debt


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proceeds levels at certain joint ventures. In addition, in 2005 the Company’s unconsolidated joint ventures recognized an aggregate gain from the disposition of joint venture assets of $49.0 million, of which the Company’s proportionate share was $13.0 million. In 2004, the Company’s unconsolidated joint ventures recognized an aggregate gain from the disposition of joint venture assets of approximately $44.4 million, of which the Company’s proportionate share was $14.4 million. In 2004 the Company also recognized promoted income of approximately $3.3 million relating to the disposition of a shopping center transferred to the MDT Joint Venture in November 2003 upon elimination of contingencies and substantial completion and lease-up in 2004. The Company’s joint ventures sold the following assets:
 
     
2005 Dispositions
 
2004 Dispositions
 
Three 20% owned shopping centers
 
One 20% owned shopping center
One 24.75% owned shopping center
 
One 35% owned shopping center
Eight sites formerly occupied by Service Merchandise
 
Ten sites formerly occupied by Service Merchandise
   
A portion of a 24.75% owned shopping center
 
These decreases above were partially offset by an increase in joint venture income from newly formed joint ventures in 2004 and 2005, including assets acquired by the Company’s MDT Joint Venture.
 
Minority equity interest expense increased primarily due to the following (in millions):
 
         
    Increase
 
    (Decrease)  
 
Issuance of common operating partnership units in conjunction with the acquisition of assets from Benderson in May 2004
  $ 0.4  
Formation of the Mervyns Joint Venture consolidated investment in September 2005, which is owned approximately 50% by the Company
    1.6  
Dividends on common operating partnership units and a net increase in net income from consolidated joint venture investments
    1.0  
Conversion of 0.2 million operating partnership units into an equal amount of common shares of the Company in 2004
    (0.2 )
         
    $ 2.8  
         
 
Income tax expense of the Company’s taxable REIT subsidiaries decreased due to a reduction in franchise taxes from assets disposed of in 2004 and the loss on disposition of an asset in 2005.
 
Discontinued Operations
 
                                 
    (In thousands)        
    2005     2004     $ Change     % Change  
 
Income from discontinued operations
  $ 4,861     $ 10,603     $ (5,742 )     (54.2 )%
Gain on disposition of real estate, net
    16,667       8,561       8,106       94.7 %
                                 
    $ 21,528     $ 19,164     $ 2,364       12.3 %
                                 
 
Included in discontinued operations are the operations of 30 shopping center properties and 27 business center properties aggregating approximately 5.6 million square feet of GLA, of which six were sold in 2006, one was considered held for sale at December 31, 2006, 35 were sold in 2005 and 15 in 2004. The Company recorded an impairment charge of $0.6 million for the year ended December 31, 2005 and 2004, related to the disposition of a shopping center in 2005 and the disposition of a business center in 2004.
 
Gain on the disposition of discontinued operations is primarily due to the disposition of 10 non-core properties and 25 business center properties in 2005.


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Gain on Disposition of Real Estate and Cumulative Effect of Adoption of a New Accounting Standard
 
                                 
    (In thousands)        
    2005     2004     $ Change     % Change  
 
Gain on disposition of real estate
  $ 88,140     $ 84,642     $ 3,498       4.1 %
Cumulative effect of adoption of a new accounting standard
          (3,001 )     3,001       (100.0 )%
 
The cumulative effect of adoption of a new accounting standard is attributable to the consolidation of a partnership that owns a shopping center in Martinsville, Virginia, upon adoption of FIN 46. This amount represents the minority partner’s share of cumulative losses in the partnership that were eliminated upon consolidation.
 
The Company recorded gains on disposition of real estate and real estate investments for the years ended December 31, 2005 and 2004, as follows (in millions):
 
                 
    For the Year Ended
 
    December 31,  
    2005     2004  
 
Transfer of assets to the MDT Joint Venture (1)
  $ 81.2     $ 65.4  
Transfer of assets to the DPG Realty Holdings Joint Venture (2)
          4.2  
Transfer of assets to the DDR Markaz II Joint Venture (3)
          2.5  
Land sales (4)
    6.0       14.3  
Previously deferred gains (5)
    0.9       0.8  
Loss on disposition of non-core assets (6)
          (2.6 )
                 
    $ 88.1     $ 84.6  
                 
 
 
(1) The Company transferred 12 and 11 assets in 2005 and 2004, respectively. These dispositions are not classified as discontinued operations due to the Company’s continuing involvement through its retained ownership interest and management agreements.
 
(2) The Company transferred 12 assets in 2004. These dispositions are not classified as discontinued operations due to the Company’s continuing involvement through its retained ownership interest and management agreements.
 
(3) The Company transferred 13 assets in 2004. These dispositions are not classified as discontinued operations due to the Company’s continuing involvement through its retained ownership interest and management agreements.
 
(4) These sales did not meet the discontinued operations disclosure requirement.
 
(5) These were primarily attributable to the recognition of additional gains from the leasing of units associated with master lease obligations and other obligations on disposed properties.
 
(6) May be recovered through an earnout arrangement with the buyer over the next several years.
 
Net Income
 
                                 
    (In thousands)        
    2005     2004     $ Change     % Change  
 
Net Income
  $ 282,643     $ 269,762     $ 12,881       4.8 %
                                 


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Net income increased primarily due to the acquisition of assets and gain on disposition of real estate. A summary of the changes from 2004 is as follows (in millions):
 
         
Increase in net operating revenues (total revenues in excess of operating and maintenance expenses and real estate taxes)
  $ 111.6  
Increase in general and administrative expense
    (6.9 )
Increase in other expense
    (0.8 )
Increase in depreciation expense
    (40.5 )
Increase in interest income
    5.8  
Increase in interest expense
    (57.5 )
Decrease in equity in net income of joint ventures
    (6.0 )
Increase in minority interest expense
    (2.8 )
Decrease in income tax expense
    1.1  
Increase in gain on disposition of real estate
    3.5  
Increase in income from discontinued operations
    2.4  
Decrease in cumulative effect of adoption of a new accounting standard (FIN 46)
    3.0  
         
    $ 12.9  
         
 
FUNDS FROM OPERATIONS
 
The Company believes that Funds From Operations (“FFO”), which is a non-GAAP financial measure, provides an additional and useful means to assess the financial performance of real estate investment trusts (“REITs”). FFO is frequently used by securities analysts, investors and other interested parties to evaluate the performance of REITs, most of which present FFO along with net income as calculated in accordance with GAAP.
 
FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and real estate investments, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions, and many companies utilize different depreciable lives and methods. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from depreciable property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, acquisition and development activities and interest costs. This provides a perspective of the Company’s financial performance not immediately apparent from net income determined in accordance with GAAP.
 
FFO is generally defined and calculated by the Company as net income, adjusted to exclude: (i) preferred dividends, (ii) gains (or losses) from disposition of depreciable real estate property, except for those sold through the Company’s merchant building program, which are presented net of taxes, (iii) sales of securities, (iv) extraordinary items, (v) cumulative effect of adoption of new accounting standards and (vi) certain non-cash items. These non-cash items principally include real property depreciation, 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.
 
For the reasons described above, management believes that FFO provides the Company and investors with an important indicator of the Company’s operating performance. This measure of performance is used by the Company for several business purposes and by other REITs. It provides a recognized measure of performance other than GAAP net income, which may include non-cash items (often large). Other real estate companies may calculate FFO in a different manner.
 
The Company uses FFO (i) in executive employment agreements to determine incentives based on the Company’s performance, (ii) as a measure of a real estate asset’s performance, (iii) to shape acquisition, disposition and capital investment strategies and (iv) to compare the Company’s performance to that of other publicly traded shopping center REITs.


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Management recognizes FFO’s limitations when compared to GAAP’s income from continuing operations. FFO does not represent amounts available for needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. Management does not use FFO as an indicator of the Company’s cash obligations and funding requirements for future commitments, acquisitions or development activities. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs, including the payment of dividends. FFO should not be considered an alternative to net income (computed in accordance with GAAP) or as an alternative to cash flow as a measure of liquidity. FFO is simply used as an additional indicator of the Company’s operating performance.
 
In 2006, FFO applicable to common shareholders was $377.8 million, as compared to $355.1 million in 2005 and $292.3 million in 2004. The increase in total FFO in 2006 is principally attributable to increases in revenues from the Core Portfolio Properties, the acquisition of assets, developments and the gain on disposition of certain recently developed assets. The Company’s calculation of FFO is as follows (in thousands):
 
                         
    For the Years Ended  
    2006     2005     2004  
 
Net income applicable to common shareholders (1)
  $ 198,095     $ 227,474     $ 219,056  
Depreciation and amortization of real estate investments
    185,449       169,117       130,536  
Equity in net income of joint ventures
    (30,337 )     (34,873 )     (40,895 )
Joint ventures’ FFO (2)
    44,473       49,302       46,209  
Minority equity interests (OP Units)
    2,116       2,916       2,607  
Gain on disposition of depreciable real estate (3)
    (21,987 )     (58,834 )     (68,179 )
Cumulative effect of adoption of a new accounting standard (4)
                3,001  
                         
FFO applicable to common shareholders
    377,809       355,102       292,335  
Preferred dividends
    55,169       55,169       50,706  
                         
Total FFO
  $ 432,978     $ 410,271     $ 343,041  
                         
 
 
(1) Includes straight-line rental revenues of approximately $16.0 million in 2006, $14.4 million in 2005 and $7.4 million in 2004 (including discontinued operations).
 
(2) Joint ventures’ FFO is summarized as follows (in thousands):
 
                         
    For the Years Ended  
    2006     2005     2004  
 
Net income (a)
  $ 92,624     $ 122,586     $ 118,779  
Depreciation and amortization of real estate investments
    83,017       87,508       68,456  
Gain on disposition of real estate, net (b)
    (22,013 )     (19,014 )     (37,866 )
                         
    $ 153,628     $ 191,080     $ 149,369  
                         
DDR Ownership interests (c)
  $ 44,473     $ 49,302     $ 46,209  
                         
 
 
(a) Includes straight-line rental revenue of approximately $5.1 million, $6.6 million and $6.5 million in 2006, 2005 and 2004, respectively. The Company’s proportionate share of straight-line rental revenues was $0.9 million, $1.1 million and $1.4 million in 2006, 2005 and 2004, respectively. These amounts include discontinued operations.
 
(b) The gain or loss on disposition of recently developed shopping centers, owned by the Company’s taxable REIT affiliates, is included in FFO, as the Company considers these properties as part of the merchant building program. These properties were either developed through the Retail Value Investment Program with Prudential Real Estate Investors, or were assets sold in conjunction with the formation of the joint venture that holds the designation rights for the Service Merchandise properties. For the year ended December 31, 2006, a loss of $1.3 million was recorded, of which $0.3 million was the Company’s proportionate share. These gains aggregated $30.8 million and $6.5 million for the years ended December 31, 2005, and 2004, respectively, of which the Company’s proportionate share aggregated $7.6 million and $1.7 million, respectively.


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(c) The Company’s share of joint venture net income has been increased by $1.6 million and reduced by $2.1 million and $1.3 million for the years ended December 31, 2006, 2005 and 2004, respectively, related to basis differentials. At December 31, 2006, 2005 and 2004, the Company owned unconsolidated joint venture interests relating to 117, 110 and 103 operating shopping center properties, respectively. In addition, at December 31, 2006, the Company owned 50 shopping center sites formerly owned by Service Merchandise through its 20% owned joint venture. At December 31, 2005 and 2004, the Company owned 53 and 63 of these Service Merchandise sites, respectively, through its approximate 25% owned joint venture. The Company also owned an approximate 25% interest in the Prudential Retail Value Fund and a 50% joint venture equity interest in a real estate management/development company.
 
(3) The amount reflected as gain on disposition of real estate and real estate investments from continuing operations in the consolidated statement of operations includes residual land sales, which management considers the disposition of non-depreciable real property and the sale of newly developed shopping centers, for which the Company maintained continuing involvement. These dispositions are included in the Company’s FFO and therefore are not reflected as an adjustment to FFO. For the year ended December 31, 2006, 2005 and 2004, net gains resulting from residual land sales aggregated $14.8 million, $6.0 million and $13.7 million, respectively. For the years ended December 31, 2006, 2005 and 2004, merchant building gains aggregated $46.3 million, $39.9 million and $11.4 million, respectively. In 2005, these gains included a portion of the net gain recognized of approximately $6.6 million from the sale of a shopping center located in Plainville, Connecticut, through the Company’s taxable REIT subsidiary, associated with its merchant building program. The remaining $14.3 million of the gain recognized on the disposition of the shopping center located in Plainville, Connecticut, was not included in the computation of FFO, as the Company believes such amount was derived primarily from the acquisition of its partner’s approximate 75% interest in the shopping center following substantial completion of development. Additionally, during 2005, the Company’s gain on disposition of real estate was reduced by $1.9 million relating to debt prepayment costs incurred as a result of a sales transaction. This debt prepayment has been accounted for as a cost of sale, and neither the gross gain on disposition nor the related costs of the sale have been included in FFO.
 
(4) The Company recorded a charge of $3.0 million in 2004 as a cumulative effect of adoption of a new accounting standard 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.


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LIQUIDITY AND CAPITAL RESOURCES
 
The Company anticipates that cash flow from operating activities will continue to provide adequate capital for all interest and monthly principal payments on outstanding indebtedness, recurring tenant improvements and dividend payments in accordance with REIT requirements. Although the Company is evaluating its financing alternatives with expected transactions, the Company anticipates that cash on hand, borrowings available under its existing revolving credit facilities and other debt and equity alternatives, including the issuance of common and preferred shares, OP Units, joint venture capital and asset dispositions, will provide the necessary capital to achieve continued growth. The proceeds from the sale of assets classified as discontinued operations and other asset dispositions are utilized to acquire and develop assets. The Company believes that its acquisition and developments completed in 2006, new leasing, expansion and re-tenanting of the Core Portfolio Properties continue to add to the Company’s operating cash flow. Additionally, the Company believes that the anticipated merger with IRRETI will contribute to the Company’s long-term growth.
 
Changes in cash flow from investing activities in 2006, as compared to 2005, are primarily due to a decrease in real estate acquired with cash and a decrease in proceeds from the disposition of real estate as described in Acquisitions, Developments and Expansions offset by the additional equity contributions to joint ventures, primarily Sonae Sierra Brazil BV Sarl. Changes in cash flow from financing activities in 2006, as compared to 2005, primarily relate to a decrease in acquisition activity in 2006 as compared to 2005 and the Company’s repurchase of its common shares in 2006.
 
The Company’s cash flow activities are summarized as follows (in thousands):
 
                         
    Year Ended December 31,  
    2006     2005     2004  
 
Cash flow provided by operating activities
  $ 340,692     $ 355,423     $ 292,226  
Cash flow used for investing activities
    (203,047 )     (339,443 )     ( 1,134,601 )
Cash flow (used for) provided by financing activities
    (139,922 )     (35,196 )     880,553  
 
The Company satisfied its REIT requirement of distributing at least 90% of ordinary taxable income with declared common and preferred share dividends of $313.1 million in 2006, as compared to $290.1 million and $245.3 million in 2005 and 2004, respectively. Accordingly, federal income taxes were not incurred at the corporate level. The Company’s common share dividend payout ratio for the year approximated 68.8% of its 2006 FFO, as compared to 67.0% and 67.3% in 2005 and 2004, respectively.
 
In December 2006, the Company announced the Board of Directors intent to increase the 2007 quarterly dividend per common share to $0.66 from $0.59 in 2006. The increase in the dividend results from the anticipated merger with IRRETI. The Company anticipates that the increased dividend level will continue to result in a conservative payout ratio. The payout ratio is determined based on common and preferred dividends declared as compared to the Company’s FFO. A low payout ratio enables the Company to retain more capital that will be utilized toward attractive investment opportunities in the development, acquisition and expansion of portfolio properties or for debt repayment. See “Off Balance Sheet Arrangements” and “Contractual Obligations and Other Commitments” sections for further discussion of capital resources.
 
The following is an overview of the anticipated financing vehicles the Company expects to have in place when the IRRETI merger closes. With these arrangements in place and a number of alternate financial options available, the Company believes that the financing risk associated with the transaction has been largely eliminated. The ultimate determination of which vehicles will be utilized depends on several variables, including market pricing, debt maturities and the ultimate structure and timing of expected asset sales and new joint venture(s) opportunities.


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A summary of the initial projected financing of the IRRETI acquisition is summarized as follows (in millions):
 
         
Total purchase price
  $ 6,200  
Assets acquired by a joint venture with TIAA-CREF
    (3,000 )
         
Assets acquired directly by DDR
    3,200  
DDR equity contribution to TIAA-CREF joint venture
    179  
         
Total DDR financing requirements
    3,379  
Less: Debt assumed
    (489 )
         
Total cash required at closing
  $ 2,890  
         
 
DDR initial cash sources are expected to be provided as follows (in millions):
 
         
DDR common shares from forward equity transaction
  $ 750  
DDR common shares issued to IRRETI shareholders
    395  
Increase in secured term loan
    150  
Temporary bridge financing provided through revolving credit facilities, bridge loans and/or preferred operating partnership units
    1,595 (1)
         
    $ 2,890  
         
 
 
(1) Amounts are expected to be repaid through asset sales and formation of new joint venture(s).


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ACQUISITIONS, DEVELOPMENTS AND EXPANSIONS
 
During the three-year period ended December 31, 2006, the Company and its consolidated and unconsolidated joint ventures expended $5.2 billion, net, of proceeds, to acquire, develop, expand, improve and re-tenant its properties, as follows (in millions):
 
                         
    2006     2005     2004  
 
Company (Including Consolidated Joint Ventures):
                       
Acquisitions
  $ 370.2 (1)   $ 1,610.8 (8)   $ 2,170.8 (13)
Completed expansions
    73.1       41.6       25.2  
Developments and construction in progress
    246.0       246.1       203.8  
Tenant improvements and building renovations (2)
    11.7       7.5       6.6  
Furniture and fixtures and equipment
    10.2 (3)     10.7 (9)     1.3  
                         
      711.2       1,916.7       2,407.7  
Less: Real estate dispositions and property contributed to joint ventures
    (289.8 )(4)     (490.8 )(10)     (689.2 )(14)
                         
Company total
    421.4       1,425.9       1,718.5  
                         
Unconsolidated Joint Ventures:
                       
Acquisitions/contributions
    729.9 (5)     350.0 (11)     1,147.0 (15)
Completed expansions
    0.0       9.3       10.3  
Developments and construction in progress
    139.6 (6)     87.5       38.9  
Tenant improvements and building renovations (2)
    9.1       6.8       0.6  
                         
      878.6       453.6       1,196.8  
Less: Real estate dispositions
    (409.0 )(7)     (148.8 )(12)     (306.7 )(16)
                         
Joint ventures total
    469.6       304.8       890.1  
                         
      891.0       1,730.7       2,608.6  
Less: Proportionate joint venture share owned by others
    (401.0 )     (285.0 )     (807.8 )
                         
Total DDR net additions
  $ 490.0     $ 1,445.7     $ 1,800.8  
                         
 
 
(1) Includes transfer to the Company from joint ventures (KLA/SM and Salisbury, Maryland), final earnout adjustments for acquisitions, redemption of OP units and the consolidation of a joint venture asset pursuant to EITF 04-05, “Determining whether a General Partner, or the General Partner’s as a Group Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.”
 
(2) In 2007, the Company anticipates recurring capital expenditures, including tenant improvements of approximately $13 million associated with its wholly-owned and consolidated portfolio and $11 million associated with its joint venture portfolio.
 
(3) Includes certain Information Technology (“IT”) projects.
 
(4) Includes asset dispositions, the sale of the KLA/SM Joint Venture to Service Holdings LLC, the sale of properties to the MDT Joint Venture and the MDT Preferred Joint Venture and the sale of several outparcels.
 
(5) Reflects the DPG Joint Venture acquisition and adjustments to GAAP presentation from previous acquisitions.
 
(6) Includes the acquisition of land in Allen, Texas, and Bloomfield Hills, Michigan, for the development of shopping centers by Coventry II joint ventures.
 
(7) Includes asset dispositions, the transfer to DDR of the KLA/SM Joint Venture, five assets located in Pasadena, California; Phoenix, Arizona (two properties); Salisbury, Maryland and Apex, North Carolina.
 
(8) Includes the transfer to DDR from a joint venture of a shopping center in Dublin, Ohio.
 
(9) Includes the expansion of corporate headquarters, certain IT projects and fractional ownership interest in corporate jets.
 
(10) Includes the transfer of 12 assets to the MDT Joint Venture, asset dispositions and the disposition of several outparcels.


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(11) Reflects the MDT Joint Venture acquisition and adjustments to GAAP presentation from previous acquisitions.
 
(12) Includes asset dispositions, the disposition of several outparcels by the RVIP VII joint venture and the transfer to DDR from a joint venture of a shopping center in Dublin, Ohio.
 
(13) In addition to the acquisition of assets from Benderson, amount includes the consolidation of certain joint venture assets due to FIN 46, the transfers to DDR from joint ventures of assets in Littleton, Colorado and Merriam, Kansas, and the purchase of DDR corporate headquarters.
 
(14) Includes the transfer of 11 assets to the MDT Joint Venture, the transfer of 12 assets to the DPG Joint Venture, the transfer of 13 assets to the DDR Markaz II Joint Venture and the disposition of several outparcels.
 
(15) In addition to the acquisition of assets discussed in (13) above, this amount included the MDT Joint Venture’s acquisition of 14 assets from Benderson, the purchase of a joint venture partner’s interest in shopping center developments in Deer Park, Illinois and Austin, Texas, the purchase of a fee interest in several Service Merchandise units and an earnout of two outparcels in Kildeer, Illinois.
 
(16) Includes the transfer to DDR from joint ventures of shopping center assets in Littleton, Colorado and Merriam, Kansas, and adjustments due to GAAP presentation (FIN 46(R) and SFAS No. 144) and the demolition of a portion of an asset in Lancaster, California.
 
2006 Activity
 
     Strategic Real Estate Transactions
 
Inland Retail Real Estate Trust
 
In October 2006, the Company and IRRETI announced that they entered into a definitive merger agreement. Under the terms of the agreement, the Company will acquire all of the outstanding shares of IRRETI for a total merger consideration of $14.00 per share plus accrued unpaid dividends. The Company has elected to pay IRRETI shareholders a combination of $12.50 in cash and $1.50 in DDR common shares. The actual number of the Company’s common shares that IRRETI shareholders are entitled to receive for each IRRETI common share held will be determined by dividing $1.50 by the average closing price of the Company’s common shares for the 10 trading days immediately preceding the two trading days prior to the IRRETI shareholders’ meeting, scheduled for February 22, 2007.
 
The transaction has a total enterprise value of approximately $6.2 billion. This amount includes approximately $2.3 billion of existing debt, a significant portion of which is expected to be extinguished at closing. IRRETI’s real estate portfolio aggregates over 300 community shopping centers, neighborhood shopping centers and single tenant/net leased retail properties, comprising approximately 43.6 million square feet of total GLA.
 
The Company announced the formation of a joint venture with TIAA-CREF to purchase a portfolio of 66 community retail centers from the IRRETI portfolio of assets for approximately $3.0 billion of total asset value. An affiliate of TIAA-CREF will contribute 85% of the equity in the joint venture, and an affiliate of DDR will contribute 15% of the equity in the joint venture. In addition to its earnings from the joint venture, DDR will be entitled to certain fees for asset management, leasing, property management, development/tenant coordination and acquisitions. DDR will also earn a promoted interest equal to 20% of the cash flow of the joint venture after the partners have received an internal rate of return equal to 10% on their equity investment. The joint venture agreement is subject to certain closing conditions.
 
In addition to the portfolio of operating properties, DDR will acquire a development pipeline of five projects and numerous potential expansion and redevelopment projects. DDR plans to generate additional value by implementing its proactive leasing, development, redevelopment and property management systems. In addition, DDR intends, immediately upon closing, to incorporate the IRRETI assets into its ancillary income program, which the Company anticipates will result in additional value creation.
 
The completion of the transaction, which is expected to occur in February 2007, is subject to approval of the merger agreement by IRRETI shareholders and other customary closing conditions described in the merger agreement. The merger was unanimously approved by DDR’s Board of Directors. The merger was unanimously approved by IRRETI’s Board of Directors, with two related party directors recusing themselves. There is no assurance that the transaction will close in February 2007 as expected.


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Sonae Sierra Brazil BV Sarl
 
In October 2006, the Company acquired a 50% joint venture interest in Sonae Sierra Brazil, a fully integrated retail real estate company based in Sao Paulo, Brazil for approximately $147.5 million. Sonae Sierra Brazil is a subsidiary of Sonae Sierra, an international owner, developer and manager of shopping centers based in Portugal. Sonae Sierra Brazil is the managing partner of a partnership that owns direct and indirect interests in nine retail assets aggregating 3.5 million square feet and a property management company in Sao Paulo, Brazil, that oversees the leasing and management operations of the portfolio. Sonae Sierra Brazil owns approximately 93% of the partnership and Enplanta Engenharia owns approximately 7%.
 
MDT Preferred Joint Venture
 
During the second quarter of 2006, the Company sold six properties, aggregating 0.8 million owned square feet, to a newly formed joint venture (“MDT Preferred Joint Venture”) with Macquarie DDR Trust (“MDT”), an Australian-based Listed Property Trust, with Macquarie Bank Limited (ASX: “MBL”), an international investment bank, advisor and manager of specialized real estate funds in Australia, for approximately $122.7 million and recognized gains totaling approximately $38.9 million, of which $32.8 million represented merchant building gains from recently developed shopping centers.
 
Under the terms of the new MDT Preferred Joint Venture, MDT receives a 9% preferred return on its preferred equity investment of approximately $12.2 million and then receives a 10% return on its common equity investment of approximately $20.8 million before the Company receives a 10% return on an agreed upon common equity investment of $3.5 million, which has not been recognized in the consolidated balance sheet due to the terms of its subordination. The Company is then entitled to a 20% promoted interest in any cash flow achieved above a 10% leveraged internal rate of return on all common equity. The Company recognizes its proportionate share of equity in earnings of the MDT Preferred Joint Venture at an amount equal to increases in the Company’s common equity investment based upon an assumed liquidation including consideration of cash received from the joint venture at its depreciated book value as of the end of each reporting period. The Company has not recorded any equity in earnings from the MDT Preferred Joint Venture at December 31, 2006.
 
The Company has been engaged to perform all day-to-day operations of the properties and earns and/or may be entitled to receive ongoing fees for property management, leasing and construction management, in addition to a promoted interest, along with other periodic fees such as financing fees.
 
MDT Joint Venture
 
The Company owns an interest in an additional joint venture with MDT (“MDT Joint Venture”). The MDT Joint Venture focuses on acquiring ownership interests in institutional-quality community center properties in the United States. The Company has been engaged to provide day-to-day operations of the properties and receives fees at prevailing rates for property management, leasing, construction management, acquisitions, due diligence, dispositions (including outparcel dispositions) and financing. Through this joint venture, the Company and MBL will also receive base asset management fees and incentive fees based on the performance of MDT.
 
At December 31, 2006, MDT, which was listed on the Australian Stock Exchange in November 2003, owned an approximate 83% interest in the portfolio. The Company retained an effective 14.5% ownership interest in the assets with MBL primarily owning the remaining 2.5%. At December 31, 2006, the MDT Joint Venture owned 48 operating shopping center properties. MDT is governed by a board of directors that includes three members selected by DDR, three members selected by MBL and three independent members.
 
In 2006, the Company sold four additional expansion areas in McDonough, Georgia; Coon Rapids, Minnesota; Birmingham, Alabama and Monaca, Pennsylvania to the MDT Joint Venture for approximately $24.7 million. These expansion areas are adjacent to shopping centers currently owned by the MDT Joint Venture. The Company recognized an aggregate merchant build gain of $9.2 million and deferred gains of approximately $1.6 million relating to the Company’s effective 14.5% ownership interest in the venture.


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Coventry II Joint Ventures
 
In 2003, the Coventry II Fund was formed with several institutional investors and Coventry Real Estate Advisors (“CREA”) as the investment manager (“Coventry II Joint Venture”). Neither the Company nor any of its officers owns a common equity interest in the Coventry II Fund or has any incentive compensation tied to this fund. The Coventry II Fund and the Company acquired value-added retail properties in the United States. The Coventry II Fund’s strategy is to invest in a variety of retail properties that present opportunities for value creation, such as re-tenanting, market repositioning, redevelopment or expansion. As further discussed below, the Coventry II Joint Venture acquired 51 assets formerly occupied by Service Merchandise from the Company in September 2006. At December 31, 2006, the Company will not acquire additional assets through the Coventry II Joint Venture, but will continue to advance funds associated with those projects undergoing development or redevelopment activities.
 
The Company is responsible for day-to-day management of the properties. Pursuant to the terms of the joint venture, The Company will earn fees for property management, leasing and construction management. The Company also will earn a promoted interest, along with CREA, above a 10% preferred return after return of capital to fund investors.
 
The assets of the Coventry II Joint Venture at December 31, 2006, are as follows:
 
                 
        Company-
     
    DDR’s
  Owned
  Acquisition
 
    Effective
  Square Feet
  Price
 
Location
  Interest (1)   (Thousands)   (Millions)  
 
2006:
               
Orland Park, Illinois
  10.0%   58     $12.2  
Benton Harbor, Michigan (2)
  20.0%   223     27.1  
Bloomfield Hills, Michigan(3)
  10.0%   Under Development     68.4  
Cincinnati, Ohio (4)
  18.0%   668     194.4  
Allen, Texas(3)
  10.0%   Under Development     10.9  
50 retail sites in several states formerly occupied by Service Merchandise
  20.0%   2,691     171.6  
2005:
               
Merriam, Kansas
  20.0%   Under Development     15.7  
2004:
               
Phoenix, Arizona
  20.0%   391     45.6  
Buena Park, California
  20.0%   724     91.5  
San Antonio, Texas
  10.0%   188     8.1 (5)
Kirkland, Washington
  20.0%   228     37.0  
2003:
               
Kansas City, Missouri
  20.0%   358     48.4  
 
 
(1) The Fund invested in certain assets with development partners, as such, the Company’s effective interest may be less than 20%.
 
(2) Approximately 100,000 sq. ft. under redevelopment.
 
(3) A third party developer owns 50% of this investment.
 
(4) Approximately 160,000 sq. ft. under redevelopment.
 
(5) Net of $2.5 million sale to Target.
 
Service Merchandise Joint Venture
 
In March 2002, the Company entered into a joint venture with Lubert-Adler Real Estate Funds and Klaff Realty, L.P. that was awarded asset designation rights for all of the retail real estate interests of the bankrupt estate of Service Merchandise Corporation. The Company had an approximate 25% interest in the joint venture. In addition,


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the Company earned fees for the management, leasing, development and disposition of the real estate portfolio. The designation rights enabled the joint venture to determine the ultimate use and disposition of the real estate interests held by the bankrupt estate.
 
In August 2006, the Company purchased its then partners’ approximate 75% interest in the remaining 52 assets formerly occupied by Service Merchandise owned by the KLA/SM Joint Venture at a gross purchase price of approximately $138 million relating to the partners’ ownership, based on a total valuation of approximately $185 million for all remaining assets, including outstanding indebtedness.
 
In September 2006, the Company sold 51 of the assets formerly occupied by Service Merchandise to the Coventry II Joint Venture. The Company retained a 20% interest in the joint venture. The Company recorded a gain of approximately $6.1 million of which $3.2 million is included in FFO.
 
In 2006, the Company earned an aggregate of $5.7 million including disposition, development, management and leasing fees and interest income from the KLA/SM Joint Venture investment.
 
Expansions
 
During the year ended December 31, 2006, the Company completed eight expansions and redevelopment projects located in Birmingham, Alabama; Lakeland, Florida; Ocala, Florida; Stockbridge, Georgia; Rome, New York; Mooresville, North Carolina; Bayamon, Puerto Rico (Rio Hondo) and Ft. Union, Utah, at an aggregate gross cost of $73.4 million. The Company is currently expanding/redeveloping eight shopping centers located in Gadsden, Alabama; Ottumwa, Iowa; Chesterfield, Michigan; Gaylord, Michigan; Hamilton, New Jersey; Olean, New York; Stow, Ohio and Brookfield, Wisconsin, at a projected aggregate gross cost of approximately $45.4 million. At December 31, 2006, approximately $12.3 million of costs had been incurred in relation to these projects. The Company anticipates commencing construction on twelve additional expansion and redevelopment projects at shopping centers located in Crystal River, Florida; Tallahassee, Florida; Louisville, Kentucky; Gulfport, Mississippi; Amherst, New York; Fayetteville, North Carolina; Huber Heights, Ohio; Allentown, Pennsylvania; Bayamon, Puerto Rico (Plaza Del Sol); Hatillo, Puerto Rico; San Juan, Puerto Rico and McKinney, Texas.
 
Six of the Company’s joint ventures are currently expanding/redeveloping their shopping centers located in Phoenix, Arizona; Buena Park, California; Lancaster, California; Benton Harbor, Michigan; Kansas City, Missouri and Cincinnati, Ohio at a projected gross cost of approximately $554.3 million (which includes the initial acquisition costs for the Coventry II redevelopment projects located in Phoenix, Arizona; Buena Park, California; Benton Harbor, Michigan; Kansas City, Missouri and Cincinnati, Ohio). At December 31, 2006, approximately $432.8 million of costs had been incurred in relation to these projects. Three of the Company’s joint ventures anticipate commencing expansion/redevelopment projects at their shopping centers located in Deer Park, Illinois; Macedonia, Ohio and Kirkland, Washington.
 
Acquisitions
 
In 2006, the Company acquired the following shopping center assets:
 
             
        Gross
 
    Company-Owned
  Purchase
 
    Square Feet
  Price
 
Location
  (Thousands)   (Millions)  
 
Phoenix, Arizona (1)
  197   $ 15.6  
Pasadena, California (2)
  557     55.9  
Valencia, California (3)
  76     12.4  
Salisbury, Maryland (1)
  126     1.5  
Apex, North Carolina (4)
  324     4.4  
San Antonio, Texas (5)
  Under Development     22.4  
             
    1,280   $ 112.2  
             


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(1) Reflects the Company’s purchase price, net of debt assumed, associated with the acquisition of its partner’s 50% ownership interest.
 
(2) Reflects the Company’s purchase price, net of prepayment of debt, associated with the acquisition of its partner’s 75% ownership interest.
 
(3) Mervyns asset structured as a financing lease.
 
(4) Reflects the Company’s purchase price associated with the acquisition of its partner’s 80% and 20% ownership interests in separate phases.
 
(5) Reflects the Company’s purchase price associated with the acquisition of its partner’s 50% ownership interest.
 
In 2006, the Company’s joint ventures acquired the following shopping center properties, excluding those assets purchased from the Company or its joint ventures:
 
         
    Company-
  Gross
    Owned
  Purchase
    Square Feet
  Price
Location
  (Thousands)   (Millions)
 
San Diego, California (1)
  74   $ 11.0
Orland Park, Illinois (2)
  58   12.2
Benton Harbor, Michigan (3)
  223   27.1
Bloomfield Hills, Michigan (2)
  Under Development   68.4
Cincinnati, Ohio (4)
  668   194.4
Allen, Texas (2)
  Under Development   10.9
Sonae Sierra Brazil (5)
  3,469   180.3
         
    4,492   $504.3
         
 
 
(1) The Company purchased a 50% equity interest through its investment in the Mervyns Joint Venture.
 
(2) The Company purchased a 10% equity interest through its investment in the Coventry II Joint Venture.
 
(3) The Company purchased a 20% equity interest through its investment in the Coventry II Joint Venture. Approximately 100,000 sq. ft. under redevelopment.
 
(4) The Company purchased an 18% equity interest through its investment in the Coventry II Joint Venture. Approximately 160,000 sq. ft. under redevelopment.
 
(5) The Company purchased a 50% interest in an entity which owns a 93% interest in nine properties located in Sao Paulo, Brazil.
 
Development (Wholly-Owned and Consolidated Joint Ventures)
 
As of December 31, 2006, the Company has substantially completed the construction of the Freehold, New Jersey; Apex, North Carolina (Beaver Creek Crossings — Phase I) and Pittsburgh, Pennsylvania, shopping centers, at an aggregate gross cost of $156.7 million.
 
The Company currently has seven shopping center projects under construction. These projects are located in Miami, Florida; Nampa, Idaho; McHenry, Illinois; Seabrook, New Hampshire; Horseheads, New York; Apex, North Carolina (Beaver Creek Crossings — Phase II) and San Antonio, Texas. These projects are scheduled for completion during 2007 through 2008 at a projected aggregate gross cost of approximately $604.3 million and will create an additional 4 million square feet of gross leasable retail space.
 
The Company anticipates commencing construction in 2007 on two additional shopping centers located in Ukiah, California and Homestead, Florida. These projects have an estimated aggregate gross cost of $186.1 million and will create an additional 1.1 million square feet of gross leasable retail space.
 
At December 31, 2006, approximately $336.7 million of costs were incurred in relation to the above projects under construction and projects that will be commencing construction.


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The wholly-owned and consolidated development estimated funding schedule as of December 31, 2006, is as follows (in millions):
 
         
Funded as of December 31, 2006
  $ 439.0  
Projected net funding during 2007
    154.8  
Projected net funding thereafter
    173.8  
         
Total
  $ 767.6  
         
 
In addition to the above developments, the Company has identified several development sites in its development pipeline for future development at a projected aggregate estimated cost of over $700 million. While there are no assurances that any of these potential projects will be developed, they provide a source of potential development projects over the next several years.
 
Development (Joint Ventures)
 
Four of the Company’s joint ventures have shopping center projects under construction. These projects are located in Merriam, Kansas; Bloomfield Hills, Michigan; Allen, Texas and San Antonio, Texas. These four projects are being developed through the Coventry II program. A significant portion of the project located in San Antonio, Texas, was substantially completed during 2005. The remaining three projects are scheduled for completion during 2007 through 2009. These projects have an aggregate gross projected cost of approximately $496.5 million and a net cost of approximately $337.4 million. At December 31, 2006, approximately $147.7 million of costs had been incurred in relation to these development projects.
 
The joint venture development estimated funding schedule as of December 31, 2006, is as follows (in millions):
 
                                 
                Anticipated
       
    DDR’s
    JV Partners’
    Proceeds from
       
    Proportionate
    Proportionate
    Construction
       
    Share     Share     Loans     Total  
 
Funded as of December 31, 2006
  $ 12.6     $ 50.3     $ 84.9     $ 147.8  
Projected net funding during 2007
    1.5       6.0       80.4       87.9  
Projected net funding thereafter
    1.9       7.7       92.1       101.7  
                                 
Total
  $ 16.0     $ 64.0     $ 257.4     $ 337.4  
                                 
 
Dispositions
 
In 2006, the Company sold the following properties:
 
                         
    Company-Owned
             
    Square Feet
    Sale Price
    Gain
 
Location
  (Thousands)     (Millions)     (Millions)  
 
Shopping Center Properties
                       
Core Portfolio Properties (1)
    822     $ 54.8     $ 11.1  
Transfers to Joint Ventures Interests
                       
Parker, Colorado; Lithonia, Georgia; Overland Park, Kansas; Frisco, Texas; McKinney, Texas and Mesquite, Texas (2)
    644       122.7       38.9  
Birmingham, Alabama; McDonough, Georgia; Coon Rapids, Minnesota and Monaca, Pennsylvania (3)
    1,024       24.7       9.2  
                         
      2,490     $ 202.2     $ 59.2  
                         
 
 
(1) Properties located in Canton, Georgia; Cartersville, Georgia; Fort Olgethorpe, Georgia; Harrisburg, Illinois; Amherst, New York and Waynesville, North Carolina.


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(2) The Company contributed six wholly-owned assets of the Company to the MDT Preferred Joint Venture. The Company did not retain an ownership interest in the joint venture, but maintained a promoted interest. The amount includes 100% of the selling price (see 2006 Strategic Real Estate Transactions).
 
(3) The Company contributed four newly developed expansion areas adjacent to shopping centers currently owned by the MDT Joint Venture. The Company retained a 14.5% effective interest in these assets. The amount includes 100% of the selling price; the Company eliminated that portion of the gain associated with its 14.5% ownership interest (see 2006 Strategic Real Estate Transactions).
 
In 2006, the Company’s joint ventures sold the following shopping center properties, excluding the properties purchased by the Company as described above:
 
                                 
                      Company’s
 
    Company’s
                Proportionate
 
    Effective
    Company-Owned
          Share of
 
    Ownership
    Square Feet
    Sale Price
    Gain (Loss)
 
Location
  Percentage     (Thousands)     (Millions)     (Millions)  
 
Olathe, Kansas; Shawnee, Kansas and Kansas City, Missouri
    25.50 %     432     $ 20.0     $ (0.5 )
Fort Worth, Texas
    50.00 %     235       22.0       0.2  
Everett, Washington
    20.75 %     41       8.1       1.2  
Kildeer, Illinois
    10.00 %     162       47.3       7.3 (1)
Service Merchandise Site
    24.63 %     52       3.2       (2)
Service Merchandise Site
    20.00 %           1.4       (2)
                                 
              922     $ 102.0     $ 8.2  
                                 
 
 
(1) Includes promoted income.
 
(2) Less than $0.1 million.
 
2005 Activity
 
Strategic Real Estate Transactions
 
Caribbean Properties Group
 
In January 2005, the Company completed the acquisition of 15 retail real estate assets located in Puerto Rico, totaling nearly 5.0 million square feet of total GLA, from CPG at an aggregate cost of approximately $1.2 billion. The financing for the transaction was provided by the assumption of approximately $660 million of existing debt and line of credit borrowings of approximately $449.5 million on the Company’s $1.0 billion senior unsecured credit facility and the application of a $30 million deposit funded in 2004.
 
Mervyns Joint Venture
 
In 2005, the Company formed the Mervyns Joint Venture, a consolidated joint venture, with MDT, owned approximately 50% by the Company and 50% by MDT, that acquired the underlying real estate of 36 operating Mervyns stores for approximately $396.2 million. The Company is responsible for the day-to-day management of the assets and receives fees for property management in accordance with the same fee schedule as the Company’s MDT Joint Venture.
 
During 2005, the Company received approximately $2.5 million of acquisition and financing fees in connection with the acquisition of the Mervyns assets. Pursuant to FIN 46(R), the Company is required to consolidate the Mervyns Joint Venture and, therefore, the $2.5 million of fees has been eliminated in consolidation and reflected as an adjustment in basis and is not reflected in net income.
 
The Company also purchased an additional Mervyns site at one of the Company’s wholly-owned shopping centers in Salt Lake City, Utah, for $14.4 million.


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MDT Joint Venture
 
The MDT Joint Venture purchased 12 properties from DDR in 2005 with an aggregate purchase price of approximately $348.0 million. DDR recognized gains of approximately $81.2 million and deferred gains of approximately $13.8 million relating to the Company’s effective 14.5% ownership interest in the venture.
 
MDT is governed by a board of directors that includes three members selected by DDR, three members selected by MBL and three independent members.
 
Service Merchandise Joint Venture
 
During 2005, the KLA/SM Joint Venture sold eight sites and received gross proceeds of approximately $19.4 million and recorded an aggregate gain of $7.6 million, of which the Company’s proportionate share was approximately $1.9 million. In 2005, the Company earned fees aggregating $6.4 million including disposition, development, management and leasing fees and interest income relating to this investment. In 2005, the Company advanced funds to this joint venture to repay mortgage debt. This advance was applied as consideration in the acquisition of the assets from the joint venture in 2006 (see 2006 Strategic Transactions).
 
Disposition of Office and Industrial Assets
 
In September 2005, the Company sold 25 office and industrial buildings acquired through the AIP merger, aggregating approximately 3.2 million square feet, for approximately $177.0 million that included 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 that does not include any contingent purchase price. The Company has included the historical operations and disposition of these real estate assets as discontinued operations in its consolidated statements of operations as the contingent consideration that may be received from the subordinated equity is not a direct cash flow of the properties pursuant to the terms of the transaction.
 
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.
 
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.
 
Acquisitions
 
In 2005, the Company acquired the following shopping center assets:
 
                 
    Company-
    Gross
 
    Owned
    Purchase
 
    Square Feet
    Price
 
Location
  (Thousands)     (Millions)  
 
Caribbean Property Group (see 2005 Strategic Real Estate Transactions)
    3,967     $ 1,173.8  
Mervyns (see 2005 Strategic Real Estate transactions) (1)
    2,823       410.6  
Columbus, Ohio (2)
    162       3.2  
                 
      6,952     $ 1,587.6  
                 
 
 
(1) Includes 36 assets consolidated by the Company and one wholly-owned asset of the Company.
 
(2) Reflects the Company’s purchase price, associated with the acquisition of its partner’s 20% ownership interest.


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In 2005, the Coventry II Joint Venture, in which the Company has a 20% equity interest, purchased land for the development of a shopping center in Merriam, Kansas, for approximately $15.7 million.
 
Development
 
In 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. In 2005, the Company’s joint venture development project located in San Antonio, Texas was substantially completed and a portion of the joint venture development project located in Jefferson County (St. Louis), Missouri, was substantially completed.
 
Dispositions
 
In 2005, the Company sold the following properties:
 
                         
    Company-
             
    Owned
             
    Square Feet
    Sale Price
    Gain
 
Location
  (Thousands)     (Millions)     (Millions)  
 
Shopping Center Properties
                       
Core Portfolio Properties (1)
    637     $ 35.7     $ 10.7  
Transfers to Joint Venture Interests
                       
Aurora, Colorado; Parker, Colorado; Plainville, Connecticut; Brandon, Florida (2 properties); McDonough, Georgia; Grandville, Michigan; Brentwood, Tennessee; Irving, Texas; Brookfield, Wisconsin and Brown Deer Wisconsin (2 properties) (2)
    2,097       348.0       81.2  
Business Center Properties (3)
    3,183       177.0       5.3  
                         
      5,917     $ 560.7     $ 97.2  
                         
 
 
(1) Properties located in Fern Park, Florida; Melbourne, Florida; Connersville, Indiana; Grand Forks, North Dakota; Ashland, Ohio; Cleveland (W 65th), Ohio; Hillsboro, Ohio; Wilmington, Ohio; Memphis, Tennessee and Fort Worth, Texas. The property in Grand Forks, North Dakota, represents the disposition of an asset through the merchant building program. This property was consolidated into the Company with the adoption of FIN 46 in 2004.
 
(2) The Company transferred 12 wholly-owned assets of the Company to the MDT Joint Venture. The Company retained an effective 14.5% equity ownership interest in the joint venture. The amount includes 100% of the selling price; the Company eliminated that portion of the gain associated with its 14.5% ownership interest (see 2005 Strategic Real Estate Transactions).
 
(3) Represents the disposition of 25 assets (see 2005 Strategic Real Estate Transactions).
 
In 2005, the Company’s joint ventures sold the following shopping center properties, excluding the one property purchased by the Company as described above:
 
                                 
                      Company’s
 
    Company’s
    Company-
          Proportionate
 
    Effective
    Owned
          Share
 
    Ownership
    Square Feet
    Sale Price
    of Gain
 
Location
  Percentage     (Thousands)     (Millions)     (Millions)  
 
City of Industry, California (1); Richmond, California and San Ysidro, California
    20.75 %     416     $ 73.3     $ 6.7  
Long Beach, California (1)
    25.50 %     343       75.6       4.4  
Service Merchandise Sites
    24.63 %     409       19.4       1.9  
                                 
              1,168     $ 168.3     $ 13.0  
                                 
 
 
(1) The joint venture sold the remaining portion of the shopping center.


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2004 Activity
 
Strategic Real Estate Transactions
 
Benderson Transaction
 
In 2004, the Company completed the purchase of 107 properties (of which 93 were purchased by the Company and 14 were purchased directly by the MDT Joint Venture) aggregating approximately 15.0 million square feet of GLA from Benderson. The purchase price of the assets, including associated expenses, was approximately $2.3 billion, including assumed debt and the value of a 2% equity interest in certain assets valued at approximately $16.2 million that Benderson retained in the form of operating partnership units. In 2006, this interest was converted into approximately 0.4 million DDR common shares.
 
The Company funded the transaction through a combination of new debt financing, the issuance of cumulative preferred shares and common shares, asset transfers to the MDT Joint Venture (see 2004 MDT Joint Venture), line of credit borrowings and assumed debt. With respect to assumed debt, the fair value of indebtedness assumed upon closing was approximately $400 million, which included an adjustment of approximately $30.0 million to fair value, based on rates for debt with similar terms and remaining maturities as of the closing date.
 
Benderson entered into a five-year master lease for certain vacant space that was either covered by a letter of intent as of the closing date or a new lease with respect to which the tenant was not obligated to pay rent as of the closing date. During the five-year master lease, Benderson agreed to pay the rent for such vacant space until each applicable tenant’s rent commencement date. The Company recorded the master lease receivable as part of the purchase price allocation.
 
MDT Joint Venture
 
In May 2004, the MDT Joint Venture acquired an indirect ownership interest in 23 retail properties that consisted of over 4.0 million square feet of Company-owned GLA. The aggregate purchase price of the properties was approximately $538.0 million. Eight of the properties acquired by the MDT Joint Venture were owned by the Company and one of the properties was held by the Company through a joint venture with an aggregate purchase price of approximately $239 million. Fourteen of the properties acquired by the MDT Joint Venture were owned by Benderson and valued at approximately $299 million. In December 2004, the Company transferred three operating properties to the MDT Joint Venture for approximately $96.6 million. These transactions aggregating $634.3 million were funded by approximately $321.4 million of equity and $312.9 million of debt and assets and liabilities assumed. The Company recognized a gain of approximately $65.4 million relating to the sale of the effective 85.5% interest in these properties and deferred a gain of approximately $11.1 million relating to the Company’s effective 14.5% ownership interest in the venture.
 
Coventry II
 
In 2004, the Coventry II Joint Venture acquired operating shopping centers in Phoenix, Arizona; Buena Park, California and Seattle, Washington, and a project under development in San Antonio, Texas, for an aggregate initial purchase price of approximately $182.2 million.
 
Prudential Joint Venture
 
In October 2004, the Company completed a $128 million joint venture transaction (“DPG Joint Venture”) with Prudential Real Estate Investors (“PREI”). The Company contributed 12 neighborhood grocery-anchored retail properties to the joint venture, eight of which were acquired by the Company from Benderson and four of which were acquired from JDN. The joint venture assumed approximately $12.0 million of secured, non-recourse financing associated with two properties. The Company maintains a 10% ownership in the joint venture and continues day-to-day management of the assets. The Company earns fees for property management, leasing and development. The Company recognized a gain of approximately $4.2 million relating to the sale of the 90% interest in these properties and deferred a gain of approximately $0.5 million relating to the Company’s 10% interest.


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Kuwait Financial Centre Joint Venture II
 
In November 2004, the Company completed a $204 million joint venture transaction (“DDR Markaz II”) with an investor group led by Kuwait Financial Centre-Markaz (a Kuwaiti publicly traded company). The Company contributed 13 neighborhood grocery-anchored retail properties to the joint venture, nine of which were acquired by the Company from Benderson, three of which were acquired from JDN and one that was owned by the Company. DDR Markaz II obtained approximately $150 million of seven-year secured non-recourse financing at a fixed rate of approximately 5.1%. The Company maintains a 20% equity ownership in the joint venture and continues day-to-day management of the assets. The Company earns fees at prevailing rates for property management, leasing and development. The Company recognized a gain of approximately $2.5 million relating to the sale of the 80% interest in these properties and deferred a gain of approximately $0.7 million relating to the Company’s 20% ownership interest in the venture.
 
Service Merchandise Joint Venture
 
During 2004, the KLA/SM Joint Venture sold ten sites and received gross proceeds of approximately $20.7 million and recorded an aggregate gain of $2.0 million, of which the Company’s proportionate share was approximately $0.5 million. In 2004, the Company earned an aggregate of $1.4 million including disposition, development, management and leasing fees and interest income of $1.2 million relating to this investment.
 
Expansions
 
In 2004, the Company completed seven expansion and redevelopment projects located in North Little Rock, Arkansas; Brandon, Florida; Starkville, Mississippi; Aurora, Ohio; Tiffin, Ohio; Monaca, Pennsylvania and Chattanooga, Tennessee, at an aggregate cost of approximately $25.2 million.
 
Acquisitions
 
In 2004, the Company acquired the following shopping center assets:
 
                 
    Company-
    Gross
 
    Owned
    Purchase
 
    Square Feet
    Price
 
Location
  (Thousands)     (Millions)  
 
Benderson Development Company (see 2004 Strategic Real Estate Transactions)
    12,501     $ 2,014.4  
Littleton, Colorado (1)
    228       6.3  
                 
      12,729     $ 2,020.7  
                 
 
 
(1) Reflects the Company’s purchase price, net of debt assumed, associated with the acquisition of its partner’s 50% ownership interest.
 
In 2004, the Company’s joint ventures acquired the following shopping center properties, excluding those assets purchased from the Company or its joint ventures:
 
             
    Company-
  Gross
 
    Owned
  Purchase
 
    Square Feet
  Price
 
Location
 
(Thousands)
  (Millions)  
 
Phoenix, Arizona (1)
  1,134   $ 45.6  
Buena Park, California (1)
  738     91.5  
San Antonio, Texas (2)
  Under Development     8.1  
Kirkland, Washington (1)
  291     37.0  
Benderson Development Company (3)
  2,497     299.0  
             
    4,660   $ 481.2  
             
 
(1) The Company purchased a 20% equity interest through its investment in the Coventry II Joint Venture.


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(2) The Company purchased a 10% equity interest through its investment in the Coventry II Joint Venture. Approximately 16 acres of land were sold to Target for $2.5 million subsequent to the purchase. This project was substantially completed in 2006.
 
(3) The MDT Joint Venture acquired an indirect ownership interest in 23 retail properties. Eight of the properties acquired by the MDT Joint Venture were owned by the Company and one of the properties was held by the Company through a joint venture. These nine properties were valued at approximately $239 million. Of the properties acquired by the MDT Joint Venture, 14 were owned by Benderson and valued at approximately $299 million. The Company owns a 14.5% equity interest in the MDT Joint Venture.
 
Development
 
In 2004, the Company substantially completed the construction of seven shopping centers located in Long Beach, California; Fort Collins, Colorado; St. Louis, Missouri; Hamilton, New Jersey; Apex, North Carolina; Irving, Texas and Mesquite, Texas. In 2004, the Company’s joint ventures substantially completed the construction of a shopping center in Jefferson County (St. Louis), Missouri.
 
Dispositions
 
In 2004, the Company sold the following properties:
 
                         
    Company-
             
    Owned
             
    Square Feet
    Sale Price
    Gain
 
Location
  (Thousands)     (Millions)     (Millions)  
 
Shopping Center Properties
                       
Core Portfolio Properties (1)
    684     $ 56.7     $ 6.1  
Transfers to Joint Ventures Interests
                       
Birmingham, Alabama; Fayetteville, Arkansas (2 properties); Coon Rapids, Minnesota; Asheville, North Carolina; Erie, Pennsylvania; Monaca, Pennsylvania; Columbia, South Carolina; Murfreesboro, Tennessee; Nashville, Tennessee and Lewisville, Texas (2)
    2,321       285.3       65.4  
Lawrenceville, Georgia; Lilburn, Georgia; Arcade, New York; Avon, New York; Elmira, New York; Hamburg, New York; Hamlin, New York; Norwich, New York; Tonawanda, New York (2 properties); Columbia, Tennessee and Farragut, Tennessee (3)
    1,168       128.6       4.2  
Loganville, Georgia; Oxford, Mississippi; Amherst, New York; Cheektowaga, New York; Irondequoit, New York; Jamestown, New York; Leroy, New York; Ontario, New York; Orchard Park, New York; Rochester, New York; Warsaw, New York; Chillicothe, Ohio and Goodlettsville, Tennessee (4)
    1,577       203.8       2.5  
Business Center Properties (5)
    94       8.3       1.9  
                         
      5,844     $ 682.7     $ 80.1  
                         
 
 
(1) Properties located in Trinidad, Colorado; Waterbury, Connecticut; Canton, Georgia; Cumming, Georgia; Marietta, Georgia; Peachtree City, Georgia; Suwanee, Georgia; Hazard, Kentucky; Las Vegas, Nevada; North Olmsted, Ohio; Sumter, South Carolina; Franklin, Tennessee and Milwaukee, Wisconsin. The property in North Olmsted, Ohio, represents the disposition of an asset through the merchant building program. This property was consolidated by the Company with the adoption of FIN 46 in 2004.
 
(2) The Company transferred eleven wholly-owned assets of the Company to the MDT Joint Venture. The Company retained an effective 14.5% equity ownership interest in the joint venture. The amount includes 100% of the selling price; the Company eliminated that portion of the gain associated with its 14.5% ownership interest (see 2004 Strategic Real Estate Transactions).


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(3) The Company formed the DPG Joint Venture with PREI in 2004 and contributed 12 neighborhood grocery-anchored retail properties of the Company. The Company retained a 10% equity ownership interest in the joint venture. The amount includes 100% of the selling price; the Company eliminated that portion of the gain associated with its 10% ownership interest (see 2004 Strategic Real Estate Transactions).
 
(4) The Company formed DDR Markaz II in 2004 and contributed 13 neighborhood grocery-anchored retail properties of the Company. The Company retained a 20% equity ownership interest in the joint venture. The amount includes 100% of the selling price; the Company eliminated that portion of the gain associated with its 20% ownership interest (see 2004 Strategic Real Estate Transactions).
 
(5) Properties located in Sorrento, California and Mentor, Ohio.
 
In 2004, the Company’s joint ventures sold the following shopping center properties, excluding the one property purchased by the Company as described above:
 
                                 
                      Company’s
 
    Company’s
    Company-
          Proportionate
 
    Effective
    Owned
          Share of
 
    Ownership
    Square Feet
    Sale Price
    Gain
 
Location
  Percentage     (Thousands)     (Millions)     (Millions)  
 
Long Beach, California (1)
    25.50 %     85     $ 16.6     $ 1.3  
Mission Viejo, California
    20.75 %     46       18.0       2.0  
Puente Hills, California (1)
    20.75 %     519       66.2       4.0  
San Antonio, Texas
    35.00 %     320       59.1       6.7  
Service Merchandise sites
    24.63 %     692       20.7       0.5  
                                 
              1,662     $ 180.6     $ 14.5  
                                 
 
 
(1) The joint venture sold a portion of the shopping center.
 
OFF BALANCE SHEET ARRANGEMENTS
 
The Company has a number of off balance sheet joint ventures and other unconsolidated entities with varying economic structures. Through these interests, the Company has investments in operating properties, development properties and a management and development company. Such arrangements are generally with institutional investors and various developers located throughout the United States.
 
In connection with the development of shopping centers owned by certain of these affiliates, the Company and/or its equity affiliates have agreed to fund the required capital associated with approved development projects aggregating approximately $6.8 million at December 31, 2006. These obligations, comprised principally of construction contracts, are generally due in 12 to 18 months as the related construction costs are incurred and are expected to be financed through new or existing construction loans.
 
The Company has provided loans and advances to certain unconsolidated entities and/or related partners in the amount of $3.2 million at December 31, 2006, for which the Company’s joint venture partners have not funded their proportionate share. These entities are current on all debt service owed to DDR. The Company guaranteed base rental income from one to three years at certain centers held through the Service Holdings LLC Joint Venture, aggregating $2.8 million at December 31, 2006. The Company has not recorded a liability for the guarantee, as the subtenants of the Service Holdings LLC Joint Venture affiliates are paying rent as due. The Company has recourse against the other parties in the partnership for their pro rata share of any liability under this guarantee.
 
The Company is involved with overseeing the development activities for several of its joint ventures that are constructing, redeveloping or expanding shopping centers. The Company earns a fee for its services commensurate with the level of oversight provided. The Company generally provides a completion guarantee to the third party lending institution(s) providing construction financing.
 
The Company’s joint ventures have aggregate outstanding indebtedness to third parties of approximately $2.5 billion and $2.2 billion at December 31, 2006 and 2005, respectively. Such mortgages and construction loans are generally non-recourse to the Company and its partners. Certain mortgages may have recourse to the


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Company’s partners in certain limited situations, such as misuse of funds and material misrepresentations. In connection with certain of the Company’s joint ventures, the Company agreed to fund any amounts due the joint venture’s lender if such amounts are not paid by the joint venture based on the Company’s pro rata share of such amount aggregating $61.1 million at December 31, 2006. The Company and its joint venture partner provided a $33.0 million payment and performance guaranty on behalf of the Mervyns Joint Venture to the joint venture’s lender in certain events such as the bankruptcy of Mervyns. The Company’s maximum obligation is equal to its approximate 50% ownership percentage, or $16.5 million.
 
In October 2006, the Company entered into a joint venture that owns real estate assets in Brazil. The Company has chosen not to mitigate any of the foreign currency risk through the use of hedging instruments. The Company will continue to monitor and evaluate this risk and may enter into hedging agreements at a later date.
 
FINANCING ACTIVITIES
 
The Company has historically accessed capital sources through both the public and private markets. The Company’s acquisitions, developments and expansions are generally financed through cash provided from operating activities, revolving credit facilities, mortgages assumed, construction loans, secured debt, unsecured public debt, common and preferred equity offerings, joint venture capital, OP Units and asset sales. Total debt outstanding at December 31, 2006, was approximately $4.2 billion, as compared to approximately $3.9 billion and $2.7 billion at December 31, 2005 and 2004, respectively.
 
The aggregate financings through the issuance of common shares, preferred shares, construction loans, medium term notes, term loans and OP Units (units issued by the Company’s partnerships) aggregates $4.7 billion during the three-year period ended December 31, 2006, is summarized as follows (in millions):
 
                         
    2006     2005     2004  
 
Equity:
                       
Common shares
  $ (1)   $     $ 737.4 (5)
Preferred shares
                170.0 (6)
OP Units
                16.2  
                         
Total equity
                923.6  
                         
Debt:
                       
Construction
    11.1       14.6       55.4  
Permanent financing
          327.1        
Mortgage debt assumed
    132.3       661.5       420.2  
Tax increment financing
                8.6  
Medium term notes
          750.0 (4)     525.0 (7)
Convertible notes
    250.0 (2)            
Unsecured term loan
                200.0 (8)
Secured term loan
    180.0 (3)     220.0 (3)      
                         
Total debt
    573.4       1,973.2       1,209.2  
                         
    $ 573.4     $ 1,973.2     $ 2,132.8  
                         
 
 
(1) Forward sale agreements to sell an aggregate of 11.6 million common shares were executed in December 2006. The proceeds are expected to be funded in February 2007 as a source of funding for the merger with IRRETI.
 
(2) Issuance of 3.50% convertible senior unsecured notes due 2011. The notes have an initial conversion rate of approximately 15.3589 common shares per $1,000 principal amount of the notes, which represents a conversion price of approximately $65.11 per common share and a conversion premium of approximately 22.5% based on the last reported sale price of $53.15 per common share on August 22, 2006. The initial conversion rate is subject to adjustment under certain circumstances. Upon closing of the sale of the notes, the Company repurchased $48.3 million of its common shares. In connection with the offering, the Company entered into an option arrangement, settled in shares of the Company’s


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common stock, with an investment bank that had the economic impact of effectively increasing the conversion price of the notes to $74.41 per common share, which represents a 40.0% premium based on the August 22, 2006, closing price of $53.15 per common share. The cost of this arrangement was approximately $10.3 million and has been recorded as an equity transaction in the Company’s condensed consolidated balance sheet.
 
(3) This facility bears interest at LIBOR plus 0.85% and matures in June 2008. This facility has two one-year extension options to 2010.
 
(4) Includes $200 million of five-year senior unsecured notes and $200 million of ten-year senior unsecured notes. The five-year notes have an interest coupon rate of 5.0%, are due on May 3, 2010, and were offered at 99.806% of par. The ten-year notes have an interest coupon rate of 5.5%, are due on May 1, 2015, and were offered at 99.642% of par. Also includes $350 million of seven-year senior unsecured notes. The seven-year notes have an interest coupon rate of 5.375%, are due on October 15, 2012, and were offered at 99.52% of par.
 
(5) 15.0 million shares issued in May 2004 and 5.45 million shares in December 2004.
 
(6) Issuance of Class I 7.5% Preferred Shares.
 
(7) Includes $275 million five-year senior unsecured notes with a coupon rate of 3.875%. These notes are due January 30, 2009, and were offered at 99.584% of par. Also includes $250 million seven-year senior unsecured notes with a coupon rate of 5.25%. These notes are due April 15, 2011, and were offered at 99.574% of par.
 
(8) This facility bore interest at LIBOR plus 0.75% and was repaid in 2006.
 
CAPITALIZATION
 
At December 31, 2006, the Company’s capitalization consisted of $4.2 billion of debt, $705 million of preferred shares and $6.9 billion of market equity (market equity is defined as common shares and OP Units outstanding multiplied by $62.95, the closing price of the common shares on the New York Stock Exchange at December 31, 2006), resulting in a debt to total market capitalization ratio of 0.36 to 1.0, as compared to the ratios of 0.40 to 1.0 and 0.33 to 1.0, at December 31, 2005 and 2004, respectively. The closing price of the common shares on the New York Stock Exchange was $47.02 and $44.37 at December 31, 2005 and 2004, respectively. At December 31, 2006, the Company’s total debt consisted of $3.8 billion of fixed-rate debt and $0.4 billion of variable-rate debt, including $60 million of fixed-rate debt that has been effectively swapped to a variable rate and $500 million of variable-rate debt that had been effectively swapped to a fixed rate. At December 31, 2005, the Company’s total debt consisted of $3.1 billion of fixed-rate debt and $0.8 billion of variable-rate debt, including $60 million of fixed-rate debt that was effectively swapped to a variable rate.
 
It is management’s strategy to have access to the capital resources necessary to expand and develop its business. Accordingly, the Company may seek to obtain funds through additional equity offerings, debt financings or joint venture capital in a manner consistent with its intention to operate with a conservative debt capitalization policy and maintain its investment grade ratings with Moody’s Investors Service and Standard and Poor’s. The security rating is not a recommendation to buy, sell or hold securities, as it may be subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating.
 
The Company’s credit facilities and the indentures under which the Company’s senior and subordinated unsecured indebtedness is, or may be, issued contain certain financial and operating covenants, including, among other things, debt service coverage and fixed charge coverage ratios, as well as limitations on the Company’s ability to incur secured and unsecured indebtedness, sell all or substantially all of the Company’s assets and engage in mergers and certain acquisitions. Although the Company intends to operate in compliance with these covenants, if the Company were to violate those covenants, the Company may be subject to higher finance costs and fees. Foreclosure on mortgaged properties or an inability to refinance existing indebtedness would likely have a negative impact on the Company’s financial condition and results of operations.
 
As of December 31, 2006, the Company had $1.0 billion available under its $1.3 billion revolving credit facilities and cash of $28.4 million. As of December 31, 2006, the Company also had 212 unencumbered operating properties generating $444.4 million, or 54.3% of the total revenue of the Company for the year ended December 31, 2006, thereby providing a potential collateral base for future borrowings, subject to consideration of the financial covenants on unsecured borrowings.


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In anticipation of the joint venture with TIAA-CREF, expected to close in the first quarter of 2007, an affiliate of the Company purchased two interest rate swaption agreements during 2006 that limits the benchmark interest rate component of future interest rates on $500 million of forecasted five-year borrowings and $750 million of forecasted ten-year borrowings. As these swaption agreements were not designated for hedge accounting, the Company recorded a charge to interest expense of approximately $1.2 million for the year ended December 31, 2006, relating to the mark-to-market adjustments.
 
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
 
The Company has debt obligations relating to its revolving credit facilities, term loan, fixed-rate senior notes and mortgages payable (excluding the effect of the fair value hedge) with maturities ranging from 1 to 25 years. In addition, the Company has capital and non-cancelable operating leases, principally for office space and ground leases.
 
These obligations are summarized as follows for the subsequent five years ending December 31 (in thousands):
 
                         
          Operating
    Capital
 
Year
  Debt     Leases     Leases  
 
2007
  $ 428,609     $ 5,320     $ 305  
2008
    664,517       5,232       315  
2009
    391,870       4,970       315  
2010
    1,059,147       4,882       315  
2011
    704,340       4,879       315  
Thereafter
    1,000,329       204,465       12,283  
                         
    $ 4,248,812     $ 229,748     $ 13,848  
                         
 
In 2007, debt maturities are anticipated to be repaid through several sources. The $168.4 million in mortgage loans will be refinanced or paid from operating cash flow. Construction loans of $63.6 million are anticipated to be refinanced or extended on similar terms. The unsecured notes aggregating $196.7 million are expected to be repaid from operating cash flow, revolving credit facilities and/or other unsecured debt or equity financings and asset dispositions. No assurance can be provided that the aforementioned obligations will be refinanced or repaid as anticipated.
 
In 2008, the Company has mortgage and unsecured obligations of $164.5 million and $100.0 million, respectively, that are anticipated to be refinanced or paid from operating cash flow, asset dispositions and/or other unsecured debt or equity financings or refinanced or extended on similar terms. The $400 million of term loan is expected to be extended on similar terms. These obligations generally have monthly payments of principal and/or interest over the term of the obligation. The interest payable over the term of the credit facilities and construction loans is determined based on the amount outstanding. The Company continually changes its asset base and borrowing base, so that the amount of interest payable on the mortgages over its life cannot be easily determined and is therefore excluded from the table above.
 
At December 31, 2006, the Company had letters of credit outstanding of approximately $20.6 million. The Company has not recorded any obligation associated with these letters of credit. The majority of letters of credit are collateral for existing indebtedness and other obligations of the Company.
 
In conjunction with the development of shopping centers, the Company has entered into commitments aggregating approximately $63.7 million with general contractors for its wholly-owned properties at December 31, 2006. These obligations, comprised principally of construction contracts, are generally due in 12 to 18 months as the related construction costs are incurred and are expected to be financed through operating cash flow and/or new or existing construction loans or revolving credit facilities.


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In 2003, the Company entered into an agreement with DRA Advisors, one of its joint venture partners, to pay an $0.8 million annual consulting fee for 10 years for services relating to the assessment of financing and strategic investment alternatives.
 
In connection with the transfer of one of the properties to the MDT Joint Venture, the Company deferred the recognition of approximately $2.8 million, $2.9 million and $3.6 million at December 31, 2006, 2005 and 2004, respectively, of the gain on disposition of real estate related to a shortfall agreement guarantee maintained by the Company. The MDT Joint Venture is obligated to fund any shortfall amount caused by the failure of the landlord or tenant to pay taxes on the shopping center when due and payable. The Company is obligated to pay any shortfall to the extent that it is not caused by the failure of the landlord or tenant to pay taxes on the shopping center when due and payable. No shortfall payments have been made on this property since the completion of construction in 1997.
 
The Company entered into master lease agreements during 2003 through 2006 with the transfer of properties to certain joint ventures that are recorded as a liability and reduction of its related gain. The Company is responsible for the monthly base rent, all operating and maintenance expenses and certain tenant improvements and leasing commissions for units not yet leased at closing for a three-year period. At December 31, 2006, the Company’s material master lease obligations, included in accounts payable and other expenses, in the following amounts, were incurred with the properties transferred to the following joint ventures (in millions):
 
         
MDT Joint Venture
  $ 2.1  
MDT Preferred Joint Venture
    3.3  
DDR Markaz II
    0.6  
         
    $ 6.0  
         
 
Related to one of the Company’s developments in Long Beach, California, the Company guaranteed the payment of any special taxes levied on the property within the City of Long Beach Community Facilities District No. 6 and attributable to the payment of debt service on the bonds for periods prior to the completion of certain improvements related to this project. In addition, an affiliate of the Company has agreed to make an annual payment of approximately $0.6 million to defray a portion of the operating expenses of a parking garage through the earlier of October 2032 or until the city’s parking garage bonds are repaid. There are no assets held as collateral or liabilities recorded related to these obligations.
 
Related to the development of a shopping center in San Antonio, Texas, the Company guaranteed the payment of certain road improvements expected to be funded by the City of San Antonio, Texas, of approximately $1.5 million. These road improvements are expected to be completed in 2007. There are no assets held as collateral or liabilities recorded related to this guarantee.
 
The Company routinely enters into contracts for the maintenance of its properties which typically can be cancelled upon 30-60 days notice without penalty. At December 31, 2006, the Company had purchase order obligations, typically payable within one year, aggregating approximately $4.3 million related to the maintenance of its properties and general and administrative expenses.
 
The Company has entered into employment contracts with certain executive officers. These contracts provide for base pay, bonuses based on the results of operations of the Company, option and restricted stock grants and reimbursement of various expenses (health insurance, life insurance, automobile expenses, country club expenses and financial planning expenses). These contracts are renewable for one-year terms and subject to cancellation without cause upon one year notice with respect to the Chairman and Chief Executive Officer and 90 days notice with respect to the other officers.
 
The Company continually monitors its obligations and commitments. There have been no other material items entered into by the Company since December 31, 2003, through December 31, 2006, other than as described above. See discussion of commitments relating to the Company’s joint ventures and other unconsolidated arrangements in “Off Balance Sheet Arrangements.”


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INFLATION
 
Substantially all of the Company’s long-term leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive additional rental income from escalation clauses that generally increase rental rates during the terms of the leases and/or percentage rentals based on tenants’ gross sales. Such escalations are determined by negotiation, increases in the consumer price index or similar inflation indices. In addition, many of the Company’s leases are for terms of less than ten years, permitting the Company to seek increased rents upon renewal at market rates. Most of the Company’s leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing the Company’s exposure to increases in costs and operating expenses resulting from inflation.
 
ECONOMIC CONDITIONS
 
Historically, real estate has been subject to a wide range of cyclical economic conditions that affect various real estate markets and geographic regions with differing intensities and at different times. Different regions of the United States have been experiencing varying degrees of economic growth. Adverse changes in general or local economic conditions could result in the inability of some tenants of the Company to meet their lease obligations and could otherwise adversely affect the Company’s ability to attract or retain tenants. The Company’s shopping centers are typically anchored by two or more national tenants (Wal-Mart and Target), home improvement stores (Home Depot, Lowe’s Home Improvement) and two or more junior tenants (Bed Bath & Beyond, Kohl’s, Circuit City, T.J. Maxx or PETsMART), which generally offer day-to-day necessities, rather than high-priced luxury items. In addition, the Company seeks to reduce its operating and leasing risks through ownership of a portfolio of properties with a diverse geographic and tenant base.
 
The retail shopping sector has been affected by the competitive nature of the retail business and the competition for market share where stronger retailers have out-positioned some of the weaker retailers. These shifts have forced some market share away from weaker retailers and required them, in some cases, to declare bankruptcy and/or close stores. Certain retailers have announced store closings even though they have not filed for bankruptcy protection. Notwithstanding any store closures, the Company does not expect to have any significant losses associated with these tenants. Overall, the Company’s portfolio remains stable. While negative news relating to troubled retail tenants tends to attract attention, the vacancies created by unsuccessful tenants may also create opportunities to increase rent.
 
Although certain individual tenants within the Company’s portfolio have filed for bankruptcy protection, the Company believes that several of its major tenants, including Wal-Mart, Home Depot, Kohl’s, Target, Lowe’s Home Improvement, T.J. Maxx and Bed Bath & Beyond, are financially secure retailers based upon their credit quality. This stability is further evidenced by the tenants’ relatively constant same store tenant sales growth in this economic environment. In addition, the Company believes that the quality of its shopping center portfolio is strong, as evidenced by the high historical occupancy rates, which have ranged from 92% to 96% since 1993. Also, average base rental rates have increased from $5.48 to $11.56 since the Company’s public offering in 1993.
 
LEGAL MATTERS
 
The Company and its subsidiaries are subject to various legal proceedings, which, taken together, are not expected to have a material adverse effect on the Company. The Company is also subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of its business, most of which are covered by insurance. While the resolution of all matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Company’s liquidity, financial position or results of operations.


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NEW ACCOUNTING STANDARDS
 
Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights — EITF 04-05
 
In June 2005, the FASB ratified the consensus reached by the EITF regarding EITF 04-05, “Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights.” The conclusion provides a framework for addressing the question of when a sole general partner, as defined in EITF 04-05, should consolidate a limited partnership. The EITF has concluded that the general partner of a limited partnership should consolidate a limited partnership unless the limited partners have the substantive right to remove the general partner, liquidate the limited partnership or substantive participating rights (veto rights decisions made in the ordinary course of business). This EITF is effective for all new limited partnerships formed and, for existing limited partnerships for which the partnership agreements are modified after June 29, 2005 and, as of January 1, 2006, for existing limited partnership agreements. As a result of the adoption of this EITF, the Company consolidated one limited partnership with total assets and liabilities of $24.4 million and $17.7 million, respectively, which were consolidated into the Company’s financial statements at January 1, 2006.
 
Accounting Changes and Error Corrections — SFAS 154
 
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, on the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 was effective for the Company in the first quarter of 2006. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations or cash flows.
 
Accounting for Uncertainty in Income Taxes — FIN 48
 
In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of SFAS No. 109” (“FIN 48”). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction). Under FIN 48, the financial statements will reflect expected future tax consequences of such positions presuming the taxing authorities’ full knowledge of the position and all relevant facts, but without considering time values. FIN 48 also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits. FIN 48 is effective for fiscal years beginning after December 15, 2006 (i.e., fiscal year ending December 31, 2007 for the Company). The Company is currently evaluating the impact that FIN 48 will have on its financial statements.
 
Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements — SAB 108
 
In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements,” to address the observed diversity in quantification practices with respect to annual financial statements. This bulletin was adopted by the Company in the fourth quarter of 2006. This bulletin did not have a material impact on the Company’s results of operations, cash flows or financial position.
 
Fair Value Measurements — SFAS 157
 
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This Statement defines fair value and establishes a framework for measuring fair value in generally accepted accounting principles. The key


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changes to current practice are (1) the definition of fair value, which focuses on an exit price rather than an entry price; (2) the methods used to measure fair value, such as emphasis that fair value is a market-based measurement, not an entity-specific measurement, as well as the inclusion of an adjustment for risk, restrictions and credit standing and (3) the expanded disclosures about fair value measurements. This Statement does not require any new fair value measurements.
 
This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is required to adopt SFAS 157 in the first quarter of 2008. The Company is currently evaluating the impact that this Statement will have on its financial statements.
 
Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
The Company’s primary market risk exposure is interest rate risk. The Company’s debt, excluding joint venture debt, is summarized as follows:
 
                                                                 
    December 31, 2006     December 31, 2005  
          Weighted
    Weighted
                Weighted
    Weighted
       
          Average
    Average
    Percentage
          Average
    Average
    Percentage
 
    Amount
    Maturity
    Interest
    of
    Amount
    Maturity
    Interest
    of
 
    (Millions)     (Years)     Rate     Total     (Millions)     (Years)     Rate     Total  
 
Fixed-Rate Debt (1)
  $ 3,799.0       4.8       5.6 %     89.4 %   $ 3,079.3       6.3       5.8 %     79.1 %
Variable-Rate Debt (1)
  $ 449.8       1.9       6.2 %     10.6 %   $ 811.4       1.9       5.1 %     20.9 %
 
(1) Adjusted to reflect the $500 million of variable-rate debt that was swapped to a fixed-rate at December 31, 2006, and $60 million of fixed-rate debt that was swapped to a variable rate at December 31, 2006 and 2005.
 
The Company’s joint ventures’ fixed-rate indebtedness, including $557 million and $150 million of variable-rate LIBOR that was swapped to a weighted average fixed rate of approximately 5.3% and 4.4%, respectively, at December 31, 2006 and 2005, is summarized as follows (in millions):
 
                                                                 
    December 31, 2006     December 31, 2005  
                Weighted
    Weighted
                Weighted
    Weighted
 
    Joint
    Company’s
    Average
    Average
    Joint
    Company’s
    Average
    Average
 
    Venture
    Proportionate
    Maturity
    Interest
    Venture
    Proportionate
    Maturity
    Interest
 
    Debt     Share     (Years)     Rate     Debt     Share     (Years)     Rate  
 
Fixed-Rate Debt
  $ 1,745.0     $ 393.3       4.4       5.1 %   $ 1,564.6     $ 385.8       4.7       5.0 %
Variable-Rate Debt
  $ 750.1     $ 132.3       1.4       6.5 %   $ 608.8     $ 124.7       1.8       5.9 %
 
The Company intends to utilize variable-rate indebtedness available under its revolving credit facilities and construction loans to initially fund future acquisitions, developments and expansions of shopping centers. Thus, to the extent the Company incurs additional variable-rate indebtedness, its exposure to increases in interest rates in an inflationary period would increase. The Company does not believe, however, that increases in interest expense as a result of inflation will significantly impact the Company’s distributable cash flow.
 
The interest rate risk on the Company’s and its unconsolidated joint ventures’ variable rate debt described above has been mitigated through the use of interest rate swap agreements (the “Swaps”) with major financial institutions. At December 31, 2006, the interest rate on the Company’s $500 million consolidated floating rate debt, and at December 31, 2006 and 2005, respectively, on $557 million and $150 million of joint venture floating rate debt (of which $80.8 million and $27.5 million, respectively, is the Company’s proportionate share) was swapped to fixed-rates. The Company is exposed to credit risk in the event of non-performance by the counter-parties to the Swaps. The Company believes it mitigates its credit risk by entering into Swaps with major financial institutions.
 
At December 31, 2006 and 2005, the Company had a variable-rate interest swap that carried a notional amount of $60 million, a fair value that represented an asset of $0.1 million and a liability of $0.3 million, respectively, and converted fixed-rate debt to a variable-rate of 7.2% and 6.3%, respectively.
 
In January 2006, one of the Company’s joint ventures terminated an interest rate swap aggregating $55 million after the underlying hedged instrument was repaid. The Company recorded a termination fee of approximately $0.4 million through equity in net income of joint venture.


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The Company’s joint venture interest rate swaps had a fair value that represented a liability of $5.0 million and an asset of $1.0 million, of which $0.7 million and $0.3 million were the Company’s proportionate share at December 31, 2006 and 2005, respectively. At December 31, 2006, these swaps carry notional amounts of $70 million, $75 million, $75 million, $100 million, $157.3 million and $80 million and effectively converted variable-rate LIBOR to a fixed rate of 5.79%, 4.9%, 5.22%, 5.47%, 5.25% and 5.09%. At December 31, 2005, these swaps carried notional amounts of $75 million, $55 million and $20 million and effectively converted variable-rate LIBOR to a fixed-rate of 5.22%, 3.33% and 3.96%, respectively. One of the Company’s joint ventures, the MDT Joint Venture, entered into fixed-rate interest swaps that carry notional amounts of $79.1 million and $59.1 million, respectively, of which the Company’s proportionate share was $11.5 million and $8.6 million at December 31, 2006 and 2005, respectively. These swaps converted variable-rate LIBOR to a weighted average fixed-rate of 4.6% and 3.6%, respectively. As the joint venture has not elected hedge accounting for this derivative, it is marked to market with the adjustments flowing through its income statement. The fair value adjustment at December 31, 2006 and 2005, was not significant. The fair value of the swaps referred to above was calculated based upon expected changes in future benchmark interest rates.
 
The fair value of the Company’s fixed-rate debt adjusted to: (i) include the $500 million that was swapped to a fixed rate at December 31, 2006; (ii) exclude the $60 million that was swapped to a variable rate at December 31, 2006 and 2005, respectively; (iii) include the Company’s proportionate share of the joint venture fixed-rate debt and (iv) include the Company’s proportionate share of $80.8 million and $27.5 million that was swapped to a fixed rate at December 31, 2006 and 2005, respectively, and an estimate of the effect of a 100 point decrease in market interest rates, is summarized as follows (in millions):
 
                                                 
    December 31, 2006     December 31, 2005  
                100 Basis Point
                100 Basis Point
 
                Decrease in
                Decrease in
 
    Carrying
    Fair
    Market
    Carrying
    Fair
    Market
 
    Value     Value     Interest Rates     Value     Value     Interest Rates  
 
Company’s fixed-rate debt
  $ 3,799.0     $ 3,817.7 (1)   $ 3,946.0 (2)   $ 3,079.3     $ 3,106.0     $ 3,247.0  
Company’s proportionate share of joint venture fixed-rate debt
  $ 393.3     $ 391.0 (3)   $ 409.4 (4)   $ 385.8     $ 386.9 (3)   $ 402.9 (4)
 
 
(1) Includes the fair value of interest rate swaps that was a liability of $1.1 million at December 31, 2006.
 
(2) Includes the fair value of interest rate swaps that was a liability of $15.4 million at December 31, 2006.
 
(3) Includes the Company’s proportionate share of the fair value of interest rate swaps that was a liability of $0.7 million and an asset of $0.3 million at December 31, 2006 and 2005, respectively.
 
(4) Includes the Company’s proportionate share of the fair value of interest rate swaps that was a liability of $4.8 million and $0.4 million at December 31, 2006 and 2005, respectively.
 
The sensitivity to changes in interest rates of the Company’s fixed-rate debt was determined utilizing a valuation model based upon factors that measure the net present value of such obligations that arise from the hypothetical estimate as discussed above.
 
Further, a 100 basis point increase in short-term market interest rates at December 31, 2006 and 2005, would result in an increase in interest expense of approximately $4.5 million and $8.1 million, respectively, for the Company and $1.3 million and $1.2 million, respectively, representing the Company’s proportionate share of the joint ventures’ interest expense relating to variable-rate debt outstanding, for the twelve-month periods. The estimated increase in interest expense for the year does not give effect to possible changes in the daily balance for the Company’s or joint ventures’ outstanding variable-rate debt.
 
The Company also has made advances to several partnerships or other entities in the form of notes receivable that accrue interest at rates ranging from 6.9% to 12%. Maturity dates range from payment on demand to June 2020. The following table summarizes the aggregate notes receivable, the percentage at fixed rates with the remainder at variable rates, and the effect of a 100 basis point decrease in market interest rates (in millions). The estimated increase in interest income does not give effect to possible changes in the daily outstanding balance of the variable-rate loan receivables.


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    December 31,  
    2006     2005  
 
Total notes receivable
  $ 28.4     $ 127.7  
Percent fixed-rate loans
    55.8 %     90.4 %
Fair value of fixed-rate loans
  $ 16.50     $ 129.9  
Impact on fair value of 100 basis point decrease in market interest rates
  $ 17.2     $ 131.3  
 
The Company and its joint ventures intend to continually monitor and actively manage interest costs on their variable-rate debt portfolio and may enter into swap positions based on market fluctuations. In addition, the Company believes that it has the ability to obtain funds through additional equity and/or debt offerings, including the issuance of medium term notes and joint venture capital. Accordingly, the cost of obtaining such protection agreements in relation to the Company’s access to capital markets will continue to be evaluated. The Company has not, and does not plan to, enter into any derivative financial instruments for trading or speculative purposes. As of December 31, 2006, the Company had no other material exposure to market risk.
 
Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
The response to this item is included in a separate section at the end of this report beginning on page F-1.
 
Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.
 
Item 9A.   CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures
 
Based on their evaluation as required by Securities Exchange Act Rules 13a-15(b) and 15d-15(b), the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have concluded that the Company’s disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) are effective as of December 31, 2006, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and were effective as of December 31, 2006, to ensure that information required to be disclosed by the Company issuer in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to the Company’s management, including its CEO and CFO, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
Management’s Report on Internal Control Over Financial Reporting
 
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Management assessed the effectiveness of its internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on those criteria, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2006.
 
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, has been audited by PricewaterhouseCoopers, LLP, an independent registered public accounting firm, as stated in their report, which is included in Part IV; Item 15 of this Annual Report on Form 10-K.


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Changes in Internal Control Over Financial Reporting
 
During the three-month period ended December 31, 2006, there were no changes in the Company’s internal control over financial reporting that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
 
Item 9B.   OTHER INFORMATION
 
None.


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PART III
 
Item 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
The Company’s Board of Directors has adopted the following corporate governance documents:
 
  •  Corporate Governance Guidelines that guide the Board of Directors in the performance of its responsibilities to serve the best interests of the Company and its shareholders;
 
  •  Written charters of the Audit Committee, Executive Compensation Committee and Nominating and Corporate Governance Committee;
 
  •  Code of Ethics for Senior Financial Officers that applies to the chief executive officer, chief financial officer, controllers, treasurer, and chief internal auditor, if any, of the Company and
 
  •  Code of Business Conduct and Ethics that governs the actions and working relationships of the Company’s employees, officers and directors with current and potential customers, consumers, fellow employees, competitors, government and self-regulatory agencies, investors, the public, the media, and anyone else with whom the Company has or may have contact.
 
Copies of the Company’s corporate governance documents are available on the Company’s website, www.ddr.com, under “Investor Relations” and can be provided, free of charge, to any shareholder who requests a copy by calling Michelle M. Dawson, Vice President of Investor Relations, at (216) 755-5500, or by writing to Developers Diversified Realty Corporation, Investor Relations at 3300 Enterprise Parkway, Beachwood, Ohio 44122.
 
Certain other information required by this Item 10 is incorporated by reference to the information under the headings “Proposal One: Election of Directors — Nominees for Director” and “— Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” contained in the Company’s Proxy Statement in connection with its annual meeting of shareholders to be held on May 8, 2007, and the information under the heading “Executive Officers” in Part I of this Annual Report on Form 10-K.
 
Item 11.   EXECUTIVE COMPENSATION
 
Information required by this Item 11 is incorporated herein by reference to the information under the headings “Proposal One: Election of Directors — Compensation of Directors” and “Executive Compensation” contained in the Company’s Proxy Statement in connection with its annual meeting of shareholders to be held on May 8, 2007.
 
Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
Certain information required by this Item 12 is incorporated herein by reference to the “Security Ownership of Certain Beneficial Owners and Management” section of the Company’s Proxy Statement in connection with its annual meeting of shareholders to be held on May 8, 2007. The following table sets forth the number of securities issued and outstanding under the existing plans, as of December 31, 2006, as well as the weighted average exercise price of outstanding options.


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EQUITY COMPENSATION PLAN INFORMATION
 
                         
                Number of Securities
 
                Remaining Available for
 
    Number of Securities
          Future Issuance Under
 
    to Be Issued upon
    Weighted-Average
    Equity Compensation
 
    Exercise of
    Exercise Price of
    Plans (excluding
 
    Outstanding Options,
    Outstanding Options,
    securities reflected in
 
    Warrants and Rights
    Warrants and Rights
    column (a))
 
Plan category
  (a)     (b)     (c)  
 
Equity compensation plans approved by security holders (1)
    1,485,530 (2)   $ 37.81       2,140,792  
Equity compensation plans not approved by security holders (3)
    41,666     $ 18.41       N/A  
                         
Total
    1,527,196     $ 37.28       2,140,792  
 
 
(1) Includes information related to the Company’s 1992 Employee’s Share Option Plan, 1996 Equity-Based Award Plan, 1998 Equity-Based Award Plan, 2002 Equity-Based Award Plan and 2004 Equity-Based Award Plan. Does not include 466,666 shares reserved for issuance under performance unit agreements and 184,220 shares reserved for issuance under outperformance unit agreements.
 
(2) Does not include 297,958 shares of restricted stock, as these shares have been reflected in the Company’s total shares outstanding.
 
(3) Represents options issued to directors of the Company. The options granted to the directors were at the fair market value at the date of grant and vested over a three-year period.
 
Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
Information required by this Item 13 is incorporated herein by reference to the “Certain Transactions” section of the Company’s Proxy Statement in connection with its annual meeting of shareholders to be held on May 8, 2007.
 
Item 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES
 
Incorporated herein by reference to the “Fees Paid to PricewaterhouseCoopers LLP” section of the Company’s Proxy Statement in connection with its annual meeting of shareholders to be held on May 8, 2007.
 
PART IV
 
Item 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
a.) 1.  Financial Statements
 
The following documents are filed as a part of this report:
 
Report of Independent Registered Public Accounting Firm.
 
Consolidated Balance Sheets as of December 31, 2006 and 2005.
 
Consolidated Statements of Operations for the three years ended December 31, 2006.
 
Consolidated Statements of Shareholders’ Equity for the three years ended December 31, 2006.
 
Consolidated Statements of Cash Flows for the three years ended December 31, 2006.
 
Notes to the Consolidated Financial Statements.
 
    2.  Financial Statement Schedules
 
The following financial statement schedules are filed herewith as part of this Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements of the registrant:
 
Schedule
 
 II — Valuation and Qualifying Accounts and Reserves for the three years ended December 31, 2006.


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III — Real Estate and Accumulated Depreciation at December 31, 2006.
 
Schedules not listed above have been omitted because they are not applicable or because the information required to be set forth therein is included in the Consolidated Financial Statements or notes thereto.
 
b.)    Exhibits — The following exhibits are filed as part of, or incorporated by reference into, this report:
 
                     
Exhibit No.
             
Under Reg.
    Form 10-K
      Filed Herewith or
S-K
    Exhibit
      Incorporated Herein by
Item 601
    No.  
Description
 
Reference
 
  2       2 .1   Agreement and Plan of Merger dated as of October 20, 2006 by and among the Company, Inland Retail Real Estate Trust, Inc., and DDR IRR Acquisition LLC   Current Report on Form 8-K (Filed October 23, 2006)
  2       2 .2   Purchase and Sale Agreement between
MPR Del Norte LP, S.E.,
MPR Vega Baja LP, S.E.,
MPR Fajarado LP, S.E.,
MPR Del Oeste LP, S.E. and
MPR Guyama LP, S.E. and the Company
dated November 2, 2004
  Current Report on Form 8-K (Filed with the SEC on November 5, 2004)
  2       2 .3   Purchase and Sale Agreement between
CRV Rio Hondo LP, LLLP,
CRV Del Atlantico LP, LLLP,
CRV Rexville LP, LLLP,
CRV Senorial LP, LLLP and
CRV Hamilton Land Acquisition LP, LLLP
and the Company dated November 2, 2004
  Current Report on Form 8-K (Filed with the SEC on November 5, 2004)
  2       2 .4   Purchase and Sale Agreement between
CPR Del Sol LP, S.E.,
CPR Escorial LP, S.E.,
CPR Cayey LP, S.E.,
CPR Palma Real LP, S.E.,
CPR Isabela LP, S.E. and
CPR San Germain LP, S.E. and
the Company dated November 2, 2004
  Current Report on Form 8-K (Filed with the SEC on November 5, 2004)
  3       3 .1   Amended and Restated Articles of Incorporation of the Company, as amended   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  3       3 .2   Second Amendment to the Amended and Restated Articles of Incorporation of the Company   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  3       3 .3   Third Amendment to the Amended and Restated Articles of Incorporation of the Company   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  3       3 .4   Fourth Amendment to the Amended and Restated Articles of Incorporation of the Company   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  3       3 .5   Fifth Amendment to the Amended and Restated Articles of Incorporation of the Company   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  3       3 .6   Sixth Amendment to the Amended and Restated Articles of Incorporation of the Company   Form S-4 Registration No. 333-117034 (Filed with the SEC on June 30, 2004)


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Exhibit No.
             
Under Reg.
    Form 10-K
      Filed Herewith or
S-K
    Exhibit
      Incorporated Herein by
Item 601
    No.  
Description
 
Reference
 
  3       3 .7   Seventh Amendment to the Amended and Restated Articles of Incorporation of the Company   Form S-4 Registration No. 333-117034 (Filed with the SEC on June 30, 2004)
  3       3 .8   Code of Regulations of the Company   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  4       4 .1   Specimen Certificate for Common Shares   Form S-3 Registration No. 33-78778 (Filed with the SEC on May 10, 1994)
  4       4 .2   Specimen Certificate for 8.60% Class F Cumulative Redeemable Preferred Shares   Form 8-A Registration Statement (Filed with the SEC on March 21, 2002)
  4       4 .3   Specimen Certificate for Depositary Shares Relating to 8.60% Class F Cumulative Redeemable Preferred Shares   Annual Report on Form 10-K (Filed with the SEC on March 15, 2004)
  4       4 .4   Specimen Certificate for 8.0% Class G Cumulative Redeemable Preferred Shares   Form 8-A Registration Statement (Filed with the SEC on March 25, 2003)
  4       4 .5   Specimen Certificate for Depositary Shares Relating to 8.0% Class G Cumulative Redeemable Preferred Shares   Form 8-A Registration Statement (Filed with the SEC on March 25, 2003)
  4       4 .6   Specimen Certificate for 7 3 / 8 % Class H Cumulative Redeemable Preferred Shares   Form 8-A Registration Statement (Filed with the SEC on July 17, 2003)
  4       4 .7   Specimen Certificate for Depositary Shares Relating to 7 3 / 8 % Class H Cumulative Redeemable Preferred Shares   Form 8-A Registration Statement (Filed with the SEC on July 17, 2003)
  4       4 .8   Specimen Certificate for 7.50% Class I Cumulative Redeemable Preferred Shares   Form 8-A Registration Statement (Filed with the SEC on May 4, 2004)
  4       4 .9   Specimen Certificate for Depositary Shares Relating to 7.50% Class I Cumulative Redeemable Preferred Shares   Form 8-A Registration Statement (Filed with the SEC on May 4, 2004)
  4       4 .10   Indenture dated as of May 1, 1994 by and between the Company and Chemical Bank, as Trustee   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  4       4 .11   Indenture dated as of May 1, 1994 by and between the Company and National City Bank, as Trustee (the “NCB Indenture”)   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  4       4 .12   First Supplement to NCB Indenture   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  4       4 .13   Second Supplement to NCB Indenture   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  4       4 .14   Third Supplement to NCB Indenture   Form S-4 Registration No. 333-117034 (Filed with the SEC on June 30, 2004)

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Exhibit No.
             
Under Reg.
    Form 10-K
      Filed Herewith or
S-K
    Exhibit
      Incorporated Herein by
Item 601
    No.  
Description
 
Reference
 
  4       4 .15   Fourth Supplement to NCB Indenture   Form S-4 Registration No. 333-117034 (Filed with the SEC on June 30, 2004)
  4       4 .16   Fifth Supplement to NCB Indenture   Filed herewith
  4       4 .17   Sixth Supplement to NCB Indenture   Filed herewith
  4       4 .18   Seventh Supplement to NCB Indenture   Current Report on Form 8-K (Filed with the SEC on September 1, 2006)
  4       4 .19   Form of Fixed Rate Senior Medium-Term Note   Annual Report on Form 10-K (Filed with the SEC on March 30, 2000; File No. 001-11690)
  4       4 .20   Form of Floating Rate Senior Medium- Term Note   Annual Report on Form 10-K (Filed with the SEC on March 30, 2000; File No. 001-11690)
  4       4 .21   Form of Fixed Rate Subordinated Medium-Term Note   Annual Report on Form 10-K (Filed with the SEC on March 30, 2000; File No. 001-11690)
  4       4 .22   Form of Floating Rate Subordinated Medium-Term Note   Annual Report on Form 10-K (Filed with the SEC on March 30, 2000; File No. 001-11690)
  4       4 .23   Form of 3.875% Note due 2009   Current Report on Form 8-K (Filed with the SEC on January 22, 2004)
  4       4 .24   Form of 5.25% Note due 2011   Form S-4 Registration No. 333-117034 (Filed with the SEC on June 30, 2004)
  4       4 .25   Form of 3.50% Convertible Senior Note due 2011   Current Report on Form 8-K (Filed with the SEC on September 1, 2006)
  4       4 .26   Seventh Amended and Restated Credit Agreement dated as of June 29, 2006 among the Company and JPMorgan Securities, Inc. and Banc of America Securities LLC, and other lenders named therein   Current Report on Form 8-K (Filed with the SEC on July 6, 2006)
  4       4 .27   Credit Agreement dated as of March 13, 2003 among the Company and Banc of America Securities, LLC and Wells Fargo Bank, National Association and other lenders named therein   Quarterly Report on Form 10-Q (Filed with the SEC on June 24, 2003)
  4       4 .28   Term Loan Credit Agreement dated as of May 20, 2004 among the Company and Banc One Capital Markets, Inc. and Wachovia Capital Markets, LLC and other lenders named therein   Current Report on Form 8-K (Filed with the SEC on June 24, 2004)
  4       4 .29   Waiver and First Amendment to Term Loan Credit Agreement dated as of March 10, 2006 between the Company and JPMorgan Chase Bank, N.A.   Quarterly Report on Form 10-Q (Filed with the SEC on May 10, 2006)
  4       4 .30   First Amended and Restated Secured Term Loan Agreement dated as of June 29, 2006 among the Company and Keybanc Capital Markets and Banc of America Securities, LLC and other lenders named therein   Current Report on Form 8-K (Filed with the SEC on July 6, 2006)

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Exhibit No.
             
Under Reg.
    Form 10-K
      Filed Herewith or
S-K
    Exhibit
      Incorporated Herein by
Item 601
    No.  
Description
 
Reference
 
  4       4 .31   Form of Indemnification Agreement   Annual Report on Form 10-K (Filed with the SEC on March 15, 2004)
  4       4 .32   Shareholder Rights Agreement dated as of May 26, 1999 between the Company and National City Bank   Quarterly Report on Form 10-Q (Filed with the SEC on August 16, 1999; File No. 001-11690)
  4       4 .33   Registration Rights Agreement dated as of August 28, 2006 among the Company and the Initial Purchasers named therein.   Current Report on Form 8-K (Filed with the SEC on September 1, 2006)
  10       10 .1   Registration Rights Agreement   Form S-11 Registration No. 33-54930 (Filed with the SEC on November 23, 1992)
  10       10 .2   Stock Option Plan*   Form S-8 Registration No. 33-74562 (Filed with the SEC on January 28, 1994)
  10       10 .3   Amended and Restated Directors’ Deferred Compensation Plan*   Annual Report on Form 10-K (filed with the SEC on April 2, 2001)
  10       10 .4   Elective Deferred Compensation Plan*   Annual Report on Form 10-K (Filed with the SEC on March 15, 2004)
  10       10 .5   Developers Diversified Realty Corporation Equity Deferred Compensation Plan*   Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
  10       10 .6   Developers Diversified Realty Corporation Equity-Based Award Plan*   Annual Report on Form 10-K (Filed with the SEC on March 15, 2004)
  10       10 .7   Amended and Restated 1998 Developers Diversified Realty Corporation Equity- Based Award Plan*   Form S-8 Registration No. 333-76537 (Filed with the SEC on April 19, 1999)
  10       10 .8   2002 Developers Diversified Realty Corporation Equity-Based Award Plan*   Quarterly Report on Form 10-Q (Filed with the SEC on August 14, 2002)
  10       10 .9   2004 Developers Diversified Realty Corporation Equity-Based Award Plan*   Form S-8 Registration No. 333-117069 (Filed with the SEC on July 1, 2004)
  10       10 .10   Form of Restricted Share Agreement under the 1996/1998/2002/2004 Developers Diversified Realty Corporation Equity-Based Award Plan*   Annual Report on Form 10-K (Filed with the SEC on March 16, 2005)
  10       10 .11   Form of Restricted Share Agreement for Executive Officers under the 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .12   Form of Incentive Stock Option Grant Agreement for Executive Officers under the 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .13   Form of Incentive Stock Option Grant Agreement for Executive Officers (with accelerated vesting upon retirement) under the 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)

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Exhibit No.
             
Under Reg.
    Form 10-K
      Filed Herewith or
S-K
    Exhibit
      Incorporated Herein by
Item 601
    No.  
Description
 
Reference
 
  10       10 .14   Form of Non-Qualified Stock Option Grant Agreement for Executive Officers under the 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .15   Form of Non-Qualified Stock Option Grant Agreement for Executive Officers (with accelerated vesting upon retirement) under the 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .16   Form of Directors’ Restricted Shares Agreement, dated January 1, 2000*   Form S-11 Registration No. 333-76278 (Filed with SEC on January 4, 2002; see Exhibit 10(ff) therein)
  10       10 .17   Performance Units Agreement, dated as of March 1, 2000, between the Company and Scott A. Wolstein*   Annual Report on Form 10-K (Filed with the SEC on March 8, 2002)
  10       10 .18   Performance Units Agreement, dated as of January 2, 2002, between the Company and Scott A. Wolstein*   Annual Report on Form 10-K (Filed with the SEC on March 8, 2002)
  10       10 .19   Performance Units Agreement, dated as of January 2, 2002, between the Company and David M. Jacobstein*   Quarterly Report on Form 10-Q (Filed with the SEC on May 15, 2002)
  10       10 .20   Performance Units Agreement, dated as of January 2, 2002, between the Company and Daniel B. Hurwitz*   Quarterly Report on Form 10-Q (Filed with the SEC on May 15, 2002)
  10       10 .21   Incentive Compensation Agreement, effective as of February 11, 1998, between the Company and Scott A. Wolstein*   Quarterly Report on Form 10-Q (Filed with the SEC on May 15, 2002)
  10       10 .22   Amended and Restated Employment Agreement dated as of November 6, 2006 between the Company and Joan U. Allgood*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .23   Amended and Restated Employment Agreement, dated as of November 6, 2006, between the Company and Timothy J. Bruce*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .24   Employment Agreement dated as of May 25, 1999 between the Company and Daniel B. Hurwitz*   Quarterly Report on Form 10-Q (Filed with the SEC on August 16, 1999; File No. 001-11690)
  10       10 .25   Employment Agreement dated as of April 21, 1999 between the Company and David M. Jacobstein*   Quarterly Report on Form 10-Q (Filed with the SEC on August 16, 1999; File No. 001-11690)
  10       10 .26   Amended and Restated Employment Agreement dated as of November 6, 2006 between the Company and William H. Schafer*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .27   Employment Agreement dated as of December 6, 2001, between the Company and Scott A. Wolstein*   Annual Report on Form 10-K (Filed with the SEC on March 8, 2002)

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Exhibit No.
             
Under Reg.
    Form 10-K
      Filed Herewith or
S-K
    Exhibit
      Incorporated Herein by
Item 601
    No.  
Description
 
Reference
 
  10       10 .28   Amended and Restated Employment Agreement dated as of November 6, 2006 between the Company and Richard E. Brown*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .29   Employment Agreement dated as of November 6, 2006 between the Company and Robin R. Walker-Gibbons*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .30   Amended and Restated Change of Control Agreement dated as of November 6, 2006 between the Company and Joan U. Allgood*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .31   Amended and Restated Change of Control Agreement dated as of November 6, 2006 between the Company and Richard E. Brown*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .32   Amended and Restated Change of Control Agreement dated as of November 6, 2006 between the Company and William H. Schafer*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .33   Form of Change of Control Agreement dated as of March 24, 1999 between the Company and each of Scott A. Wolstein*   Quarterly Report on Form 10-Q (Filed with the SEC on May 17, 1999; File No. 001-11690)
  10       10 .34   Amended and Restated Change of Control Agreement, dated as of November 6, 2006, between the Company and Timothy J. Bruce*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .35   Change of Control Agreement dated as of May 25, 1999 between the Company and Daniel B. Hurwitz*   Quarterly Report on Form 10-Q (Filed with the SEC on August 16, 1999; File No. 001-11690)
  10       10 .36   Change of Control Agreement dated as of May 17, 1999 between the Company and David M. Jacobstein*   Quarterly Report on Form 10-Q (Filed with the SEC on August 16, 1999; File No. 001-11690)
  10       10 .37   Amended and Restated Change of Control Agreement dated as of November 6, 2006 between the Company and Robin R. Walker-Gibbons*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .38   Outperformance Long-Term Incentive Plan Agreement dated as of August 18, 2006 between the Company and Scott A. Wolstein*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .39   Outperformance Long-Term Incentive Plan Agreement dated as of August 18, 2006 between the Company and Daniel B. Hurwitz*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .40   Outperformance Long-Term Incentive Plan Agreement dated as of February 23, 2006 between the Company and Joan U. Allgood*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .41   Outperformance Long-Term Incentive Plan Agreement dated as of February 23, 2006 between the Company and Richard E. Brown*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)

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Exhibit No.
             
Under Reg.
    Form 10-K
      Filed Herewith or
S-K
    Exhibit
      Incorporated Herein by
Item 601
    No.  
Description
 
Reference
 
  10       10 .42   Outperformance Long-Term Incentive Plan Agreement dated as of February 23, 2006 between the Company and Timothy J. Bruce*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .43   Outperformance Long-Term Incentive Plan Agreement dated as of February 23, 2006 between the Company and William H. Schafer*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .44   Outperformance Long-Term Incentive Plan Agreement dated as of February 23, 2006 between the Company and Robin R. Walker-Gibbons*   Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006)
  10       10 .45   Form of Medium-Term Note Distribution Agreement   Annual Report on Form 10-K (Filed with the SEC on March 30, 2000; File No. 001-11690)
  10       10 .46   Program Agreement for Retail Value Investment Program, dated as of February 11, 1998, among Retail Value Management, Ltd., the Company and The Prudential Insurance Company of America   Annual Report on Form 10-K (Filed with the SEC on March 15, 2004)
  10       10 .47   Confirmation of Forward Sale Transaction dated as of December 4, 2006 between the Company and Deutsche Bank AG London   Current Report on Form 8-K (Filed with the SEC on December 7, 2006)
  10       10 .48   Confirmation of Forward Sale Transaction dated as of December 4, 2006 between the Company and Merrill Lynch International   Current Report on Form 8-K (Filed with the SEC on December 7, 2006)
  10       10 .49   Confirmation of Forward Sale Transaction dated as of December 4, 2006 between the Company and JPMorgan Chase Bank, National Association   Current Report on Form 8-K (Filed with the SEC on December 7, 2006)
  14       14 .1   Developers Diversified Realty Corporation Code of Ethics for Senior Financial Officers   Annual Report on Form 10-K (Filed with the SEC on March 15, 2004)
  21       21 .1   List of Subsidiaries   Filed herewith
  23       23 .1   Consent of PricewaterhouseCoopers LLP   Filed herewith
  31       31 .1   Certification of principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934   Filed herewith
  31       31 .2   Certification of principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934   Filed herewith
  32       32 .1   Certification of chief executive officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350   Filed herewith

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Exhibit No.
             
Under Reg.
    Form 10-K
      Filed Herewith or
S-K
    Exhibit
      Incorporated Herein by
Item 601
    No.  
Description
 
Reference
 
  32       32 .2   Certification of chief financial officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350   Filed herewith
  99       99 .1   Voting Agreement, dated October 4, 2002, between the Company and certain stockholders named therein   Current Report on Form 8-K (Filed with the SEC on October 9, 2002)
 
 
* Management contracts and compensatory plans or arrangements required to be filed as an exhibit pursuant to Item 15(b) of Form 10-K.

129


 

 
DEVELOPERS DIVERSIFIED REALTY CORPORATION
 
INDEX TO FINANCIAL STATEMENTS
 
     
    Page
 
Financial Statements:
   
  F-2
  F-4
  F-5
  F-6
  F-7
  F-8
Financial Statement Schedules:
   
  F-54
  F-55
 
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
 
Financial statements of the Company’s unconsolidated joint venture companies have been omitted because they do not meet the significant subsidiary definition of S-X 210.1-02(w).


F-1


Table of Contents

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Shareholders of
Developers Diversified Realty Corporation:
 
We have completed integrated audits of Developers Diversified Realty Corporation’s consolidated financial statements and of its internal control over financial reporting as of December 31, 2006, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
 
Consolidated financial statements and financial statement schedules
 
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Developers Diversified Realty Corporation and its subsidiaries (the “Company”) at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
As discussed in Notes 1 and 2 to the consolidated financial statements, the Company, on April 1, 2004, adopted FIN 46R, “Consolidation of Variable Interest Entities — an interpretation of ARB 51,” as interpreted.
 
Internal control over financial reporting
 
Also, in our opinion, management’s assessment, included “Management’s Report on Internal Control over Financial Reporting” appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,


F-2


Table of Contents

accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
/s/ PRICEWATERHOUSECOOPERS LLP
 
Cleveland, Ohio
February 21, 2007


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Table of Contents

 
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 
                 
    December 31,  
    2006     2005  
 
Assets
               
Land
  $ 1,768,702     $ 1,721,321  
Buildings
    5,023,665       4,806,373  
Fixtures and tenant improvements
    196,275       152,958  
Construction in progress and land under development
    453,493       348,685  
                 
      7,442,135       7,029,337  
Less: Accumulated depreciation
    (861,266 )     (692,823 )
                 
Real estate, net
    6,580,869       6,336,514  
Cash and cash equivalents
    28,378       30,655  
Accounts receivable, net
    152,161       112,464  
Notes receivable
    18,161       24,996  
Investments in and advances to joint ventures
    291,685       275,136  
Deferred charges, net
    23,708       21,157  
Other assets
    79,467       62,055  
Real estate held for sale
    5,324        
                 
    $ 7,179,753     $ 6,862,977  
                 
Liabilities and Shareholders’ Equity
               
Unsecured indebtedness:
               
Senior notes
  $ 2,218,020     $ 1,966,268  
Term debt
          200,000  
Revolving credit facility
    297,500       150,000  
                 
      2,515,520       2,316,268  
Secured indebtedness:
               
Term debt
    400,000       220,000  
Mortgage and other secured indebtedness
    1,333,292       1,354,733  
                 
      1,733,292       1,574,733  
                 
Total indebtedness
    4,248,812       3,891,001  
Accounts payable and accrued expenses
    134,781       111,186  
Dividends payable
    71,269       65,799  
Other liabilities
    106,775       93,261  
                 
      4,561,637       4,161,247  
                 
Minority equity interests
    104,596       99,181  
Operating partnership minority interests
    17,337       32,268  
                 
      4,683,570       4,292,696  
Commitments and contingencies (Note 11)
               
Shareholders’ equity:
               
Preferred shares (Note 12)
    705,000       705,000  
Common shares, without par value, $.10 stated value; 200,000,000 shares authorized; 109,739,262 and 108,947,748 shares issued at December 31, 2006 and 2005, respectively
    10,974       10,895  
Paid-in-capital
    1,959,629       1,945,245  
Accumulated distributions in excess of net income
    (159,615 )     (99,756 )
Deferred obligation
    12,386       11,616  
Accumulated other comprehensive income
    7,829       10,425  
Less: Unearned compensation-restricted stock
          (13,144 )
      Common shares in treasury at cost: 752,975 shares at December 31, 2006
    (40,020 )      
                 
      2,496,183       2,570,281  
                 
    $ 7,179,753     $ 6,862,977  
                 
 
The accompanying notes are an integral part of these consolidated financial statements.


F-4


Table of Contents

 
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
Revenues from operations:
                       
Minimum rents
  $ 563,611     $ 506,221     $ 402,016  
Percentage and overage rents
    11,294       9,965       7,193  
Recoveries from tenants
    177,665       156,793       115,854  
Ancillary and other property income
    21,048       14,425       7,275  
Management, development and other fee income
    30,294       22,859       16,937  
Other
    14,186       9,300       13,081  
                         
      818,098       719,563       562,356  
                         
Rental operation expenses:
                       
Operating and maintenance
    113,468       97,599       63,929  
Real estate taxes
    95,620       84,756       72,850  
General and administrative
    60,679       54,048       47,126  
Depreciation and amortization
    192,219       163,341       122,783  
                         
      461,986       399,744       306,688  
                         
      356,112       319,819       255,668  
                         
Other income (expense):
                       
Interest income
    9,113       10,078       4,233  
Interest expense
    (221,525 )     (181,040 )     (123,527 )
Other expense, net
    (446 )     (2,532 )     (1,779 )
                         
      (212,858 )     (173,494 )     (121,073 )
                         
Income before equity in net income of joint ventures, minority interests, tax benefit (expense) of taxable REIT subsidiaries and franchise taxes, discontinued operations, gain on disposition of real estate and cumulative effect of adoption of a new accounting standard
    143,254       146,325       134,595  
Equity in net income of joint ventures
    30,337       34,873       40,895  
Income before minority interests, tax benefit (expense) of taxable REIT subsidiaries and franchise taxes, discontinued operations, gain on disposition of real estate and cumulative effect of adoption of a new accounting standard
    173,591       181,198       175,490  
Minority interests:
                       
Minority equity interests
    (6,337 )     (4,965 )     (2,457 )
Operating partnership minority interests
    (2,116 )     (2,916 )     (2,607 )
                         
      (8,453 )     (7,881 )     (5,064 )
Tax benefit (expense) of taxable REIT subsidiaries and franchise taxes
    2,481       (342 )     (1,469 )
                         
Income from continuing operations
    167,619       172,975       168,957  
                         
Discontinued operations:
                       
Income from discontinued operations
    2,571       4,861       10,603  
Gain on disposition of real estate, net of tax
    11,051       16,667       8,561  
                         
      13,622       21,528       19,164  
                         
Income before gain on disposition of real estate and cumulative effect of adoption of a new accounting standard
    181,241       194,503       188,121  
Gain on disposition of real estate
    72,023       88,140       84,642  
                         
Income before cumulative effect of adoption of a new accounting standard
    253,264       282,643       272,763  
Cumulative effect of adoption of a new accounting standard
                (3,001 )
                         
Net income
  $ 253,264     $ 282,643     $ 269,762  
                         
Preferred dividends
    55,169       55,169       50,706  
                         
Net income applicable to common shareholders
  $ 198,095     $ 227,474     $ 219,056  
                         
Per share data:
                       
Basic earnings per share data:
                       
Income from continuing operations
  $ 1.69     $ 1.90     $ 2.10  
Income from discontinued operations
    0.13       0.20       0.20  
Cumulative effect of adoption of a new accounting standard
                (0.03 )
                         
Net income applicable to common shareholders
  $ 1.82     $ 2.10     $ 2.27  
                         
Diluted earnings per share data:
                       
Income from continuing operations
  $ 1.69     $ 1.88     $ 2.08  
Income from discontinued operations
    0.12       0.20       0.19  
Cumulative effect of adoption of a new accounting standard
                (0.03 )
                         
Net income applicable to common shareholders
  $ 1.81     $ 2.08     $ 2.24  
                         
 
The accompanying notes are an integral part of these consolidated financial statements.


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Table of Contents

 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except per share amounts)
 
                                                                         
                      Accumulated
          Accumulated
    Unearned
             
                      Distributions in
          Other
    Compensation -
    Treasury
       
    Preferred
    Common
    Paid in
    Excess of
    Deferred
    Comprehensive
    Restricted
    Stock at
       
    Shares     Shares     Capital     Net Income     Obligation     Income/(Loss)     Stock     Cost     Total  
 
Balance, December 31, 2003
  $ 535,000     $ 9,379     $ 1,301,232     $ (116,737 )   $ 8,336     $ (541 )   $ (3,892 )   $ (118,707 )   $ 1,614,070  
Issuance of 457,378 common shares for cash related to exercise of stock options and dividend reinvestment plan
          (27 )     (1,390 )                             6,323       4,906  
Issuance of 105,974 common shares related to restricted stock plan
                                        (2,956 )     1,861       (1,095 )
Vesting of restricted stock
                            1,929             1,433             3,362  
Issuance of 20,450,000 common shares for cash — underwritten offerings
          1,500       637,662                               97,587       736,749  
Redemption of 284,304 operating partnership units in exchange for common shares
                1,716                               5,084       6,800  
Issuance of Class I preferred shares for cash — underwritten offerings
    170,000             (5,787 )                                   164,213  
Dividends declared — common shares
                      (194,078 )                             (194,078 )
Dividends declared — preferred shares
                      (51,237 )                             (51,237 )
Comprehensive income (Note 14):
                                                                       
Net income
                      269,762                               269,762  
Other comprehensive income:
                                                                       
Change in fair value of interest rate contracts
                                  867                   867  
                                                                         
Comprehensive income
                      269,762             867                   270,629  
                                                                         
Balance, December 31, 2004
    705,000       10,852       1,933,433       (92,290 )     10,265       326       (5,415 )     (7,852 )     2,554,319  
Issuance of 425,985 common shares for cash related to exercise of stock options, dividend reinvestment plan and performance unit plan
          43       10,857                         (6,740 )     6,206       10,366  
Issuance of 88,360 common shares related to restricted stock plan
                2,306                         (2,905 )     1,646       1,047  
Vesting of restricted stock
                (1,351 )           1,351             1,916             1,916  
Dividends declared — common shares
                      (234,940 )                             (234,940 )
Dividends declared — preferred shares
                      (55,169 )                             (55,169 )
Comprehensive income (Note 14):
                                                                       
Net income
                      282,643                               282,643  
Other comprehensive income:
                                                                       
Change in fair value of interest rate contracts
                                  10,619                   10,619  
Amortization of interest rate contracts
                                  (520 )                 (520 )
                                                                         
Comprehensive income
                      282,643             10,099                   292,742  
                                                                         
Balance, December 31, 2005
    705,000       10,895       1,945,245       (99,756 )     11,616       10,425       (13,144 )           2,570,281  
Issuance of 726,574 common shares for cash related to exercise of stock options, dividend reinvestment plan and director compensation
          28       (1,819 )                             10,028       8,237  
Redemption of operating partnership units in exchange for common shares
          45       22,371                                     22,416  
Repurchase of 909,000 common shares
                                              (48,313 )     (48,313 )
Issuance of 64,940 common shares related to restricted stock plan
          6       653                               (150 )     509  
Vesting of restricted stock
                1,628             770                   (1,585 )     813  
Purchased option arrangement on common shares
                (10,337 )                                   (10,337 )
Adoption of SFAS 123(R)
                (1,558 )                       13,144             11,586  
Stock-based compensation
                3,446                                     3,446  
Dividends declared — common shares
                      (257,954 )                             (257,954 )
Dividends declared — preferred shares
                      (55,169 )                             (55,169 )
Comprehensive income (Note 14):
                                                                       
Net income
                      253,264                               253,264  
Other comprehensive income:
                                                                       
Change in fair value of interest rate contracts
                                  (2,729 )                 (2,729 )
Amortization of interest rate contracts
                                  (1,454 )                 (1,454 )
Foreign currency translation
                                  1,587                   1,587  
                                                                         
Comprehensive income
                      253,264             (2,596 )                 250,668  
                                                                         
Balance, December 31, 2006
  $ 705,000     $ 10,974     $ 1,959,629     $ (159,615 )   $ 12,386     $ 7,829     $     $ (40,020 )   $ 2,496,183  
                                                                         
 
The accompanying notes are an integral part of these consolidated financial statements.


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CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
Cash flow from operating activities:
                       
Net income
  $ 253,264     $ 282,643     $ 269,762  
Adjustments to reconcile net income to net cash flow provided by operating activities:
                       
Depreciation and amortization
    193,527       170,701       132,647  
Stock-based compensation
    3,446              
Amortization of deferred finance costs and settled interest rate protection agreements
    7,756       7,433       7,300  
Net cash received from interest rate hedging contracts
          10,645        
Ineffective portion of derivative financing investments
    1,157              
Equity in net income of joint ventures
    (30,337 )     (34,873 )     (40,895 )
Cash distributions from joint ventures
    23,304       39,477       38,724  
Operating partnership minority interest expense
    2,116       2,916       2,607  
Gain on disposition of real estate and impairment charge, net
    (83,074 )     (104,165 )     (92,616 )
Cumulative effect of adoption of a new accounting standard
                3,001  
Net change in accounts receivable
    (38,013 )     (32,207 )     (6,611 )
Net change in accounts payable and accrued expenses
    9,875       11,146       (15,048 )
Net change in other operating assets and liabilities
    (2,329 )     1,707       (6,645 )
                         
Total adjustments
    87,428       72,780       22,464  
                         
Net cash flow provided by operating activities
    340,692       355,423       292,226  
                         
Cash flow from investing activities:
                       
Real estate developed or acquired, net of liabilities assumed
    (454,357 )     (863,795 )     (1,907,683 )
Decrease in restricted cash
                99,340  
Equity contributions to joint ventures
    (206,645 )     (28,244 )     (11,433 )
Repayment (advances) to joint ventures, net
    622       (83,476 )     (7,355 )
Repayment (issuance) of notes receivable, net
    6,834       (7,172 )     2,228  
Proceeds resulting from contribution of properties to joint ventures and repayments of advances from affiliates
    298,059       344,292       635,445  
Return of investments in joint ventures
    50,862       87,349       39,342  
Proceeds from disposition of real estate
    101,578       211,603       15,515  
                         
Net cash flow used for investing activities
    (203,047 )     (339,443 )     (1,134,601 )
                         
Cash flow from financing activities:
                       
Proceeds from (repayment of) revolving credit facilities, net
    147,500       90,000       (126,500 )
Proceeds from borrowings from term debt, net
    (20,000 )     70,000       50,000  
Proceeds from mortgage and other secured debt
    11,093       158,218       105,394  
Principal payments on rental property debt
    (153,732 )     (809,396 )     (203,255 )
Repayment of senior notes
          (1,000 )     (140,000 )
Proceeds from issuance of convertible senior notes, net of underwriting commissions and offering expenses of $5,550 in 2006
    244,450              
Proceeds from issuance of medium term notes, net of underwriting commissions and $1,390 and $421 of offering expenses paid in 2005 and 2004, respectively
          741,139       520,003  
Payment of deferred financing costs (bank borrowings)
    (4,047 )     (6,994 )     (4,120 )
Payment of underwriting commissions for forward equity contract
    (4,000 )            
Purchased option arrangement on common shares
    (10,337 )            
Purchase of operating partnership minority interests
    (2,097 )            
Proceeds from the issuance of common shares, net of underwriting commissions and $609 of offering expenses paid in 2004
                736,749  
Proceeds from the issuance of preferred shares, net of underwriting commissions and $432 of offering expenses paid in 2004
                164,213  
Proceeds from the issuance of common shares in conjunction with exercise of stock options, 401(k) plan and dividend reinvestment plan
    9,560       12,139       7,170  
Distributions to operating partnership minority interests
    (2,347 )     (2,902 )     (2,354 )
Repurchase of common shares
    (48,313 )            
Dividends paid
    (307,652 )     (286,400 )     (226,747 )
                         
Net cash (used for) provided by financing activities
    (139,922 )     (35,196 )     880,553  
                         
(Decrease) increase in cash and cash equivalents
    (2,277 )     (19,216 )     38,178  
Cash and cash equivalents, beginning of year
    30,655       49,871       11,693  
                         
Cash and cash equivalents, end of year
  $ 28,378     $ 30,655     $ 49,871  
                         
 
The accompanying notes are an integral part of these consolidated financial statements.


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1.  Summary of Significant Accounting Policies
 
Nature of Business
 
Developers Diversified Realty Corporation and its subsidiaries (the “Company” or “DDR”) are primarily engaged in the business of acquiring, expanding, owning, developing, managing and operating shopping centers and enclosed malls. The Company’s shopping centers are typically anchored by two or more national tenant anchors (Wal-Mart and Target), home improvement stores (Home Depot, Lowe’s Home Improvement) and two or more junior tenants (Bed Bath & Beyond, Kohl’s, Circuit City, T.J. Maxx or PETsMART). At December 31, 2006, the Company owned or had interests in 467 shopping centers in 44 states plus Puerto Rico and Brazil and seven business centers in five states. The Company has an interest in 206 of these shopping centers through equity method investments. The tenant base primarily includes national and regional retail chains and local retailers. Consequently, the Company’s credit risk is concentrated in the retail industry.
 
Consolidated revenues derived from the Company’s largest tenant, Wal-Mart, aggregated 4.7%, 5.1% and 4.0% of total revenues for the years ended December 31, 2006, 2005 and 2004, respectively. The total percentage of Company-owned gross leasable area (“GLA” unaudited) attributed to Wal-Mart was 8.7% at December 31, 2006. The Company’s ten largest tenants comprised 17.7%, 20.0% and 19.4% of total revenues for the years ended December 31, 2006, 2005 and 2004, respectively, including revenues reported within discontinued operations. Management believes the Company’s portfolio is diversified in terms of the location of its shopping centers and its tenant profile. Adverse changes in general or local economic conditions could result in the inability of some existing tenants to meet their lease obligations and could otherwise adversely affect the Company’s ability to attract or retain tenants. During the three-year period ended December 31, 2006, 2005 and 2004, certain national and regional retailers experienced financial difficulties, and several filed for protection under bankruptcy laws. The Company does not believe that these bankruptcies will have a material impact on the Company’s financial position, results of operations or cash flows.
 
Principles of Consolidation
 
The Company consolidates certain entities if it is deemed to be the primary beneficiary in a variable interest entity (“VIE”), as defined in FIN No. 46(R), “Consolidation of Variable Interest Entities” (“FIN 46”). For those entities that are not VIEs, the Company also consolidates entities in which it has financial and operating control. All significant inter-company balances and transactions have been eliminated in consolidation. Investments in real estate joint ventures and companies in which the Company has the ability to exercise significant influence, but does not have financial or operating control, are accounted for using the equity method of accounting. Accordingly, the Company’s share of the earnings (or loss) of these joint ventures and companies is included in consolidated net income.
 
In 2005, the Company formed a joint venture (the “Mervyns Joint Venture”) with an Australia-based Listed Property Trust, MDT, that acquired the underlying real estate of 36 operating Mervyns stores. The Company holds a 50% economic interest in the Mervyns Joint Venture, which is considered a VIE, and the Company was determined to be the primary beneficiary. The Company earns property management, acquisition and financing fees from this VIE, which are eliminated in consolidation. The VIE has total real estate assets and total non-recourse mortgage debt of approximately $405.8 million and $258.5 million, respectively, at December 31, 2006, and is consolidated in the results of the Company.
 
In 2003, the Company formed a joint venture (the “MDT Joint Venture”) with Macquarie Bank Limited, that focuses on acquiring community center properties in the United States. The Company maintains an interest in the MDT Joint Venture, a VIE in which the Company has an approximate 12% economic interest. The Company was not determined to be the primary beneficiary. The Company earns asset management and performance fees from a joint venture that serves as the manager of the MDT Joint Venture (“MDT Manager”). The Company has a 50% ownership and serves as the managing member, accounted for under the equity method of accounting. The MDT Joint Venture has total real estate assets and total non-recourse mortgage debt of approximately $1.7 billion and $1.1 billion and $1.7 billion and $1.0 billion, respectively, at December 31, 2006 and 2005, respectively. The Company’s maximum exposure to loss associated with this joint venture is primarily limited to the Company’s aggregate capital investment, which was approximately $63.6 million at December 31, 2006. The financial


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statements of the MDT Joint Venture are included as part of the combined joint ventures financial statements in Note 2.
 
Statement of Cash Flows and Supplemental Disclosure of Non-Cash Investing and Financing Information
 
Non-cash investing and financing activities are summarized as follows (in millions):
 
                         
    For the Year Ended
 
    December 31,  
    2006     2005     2004  
 
Contribution of net assets to joint ventures
  $ 2.9     $ 13.6     $ 70.7  
Consolidation of the net assets (excluding mortgages as disclosed below) of joint ventures
    368.9             10.2  
Mortgages assumed, shopping center acquisitions and consolidation of joint ventures
    132.9       661.5       458.7  
Liabilities assumed with the acquisition of shopping centers
                46.9  
Consolidation of net assets from adoption of EITF 04-05
    43.0              
Mortgages assumed, adoption of EITF 04-05
    17.1              
Dividends declared, not paid
    71.3       65.8       62.1  
Fair value of interest rate swaps
    1.1       0.3       2.6  
Deferred payment of swaption
    2.8              
Share issuance for operating partnership unit redemption
    14.9             6.8  
 
The transactions above did not provide or use cash in the years presented and, accordingly, are not reflected in the consolidated statements of cash flows.
 
Real Estate
 
Real estate assets held for investment are stated at cost less accumulated depreciation, which, in the opinion of management, is not in excess of the individual property’s estimated undiscounted future cash flows, including estimated proceeds from disposition.
 
Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets as follows:
 
     
Buildings
  Useful lives, ranging from 30 to 40 years
Furniture/fixtures and tenant improvements
  Useful lives, which approximate lease terms, where applicable
 
Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations that improve or extend the life of the assets are capitalized. Included in land at December 31, 2006, was undeveloped real estate, generally outlots or expansion pads adjacent to shopping centers owned by the Company (excluding shopping centers owned through joint ventures) and excess land of approximately 1,000 acres.
 
Construction in progress includes shopping center developments and significant expansions and redevelopments. The Company capitalizes interest on funds used for the construction, expansion or redevelopment of shopping centers, including funds invested in or advanced to joint ventures with qualifying development activities. Capitalization of interest ceases when construction activities are substantially completed and the property is available for occupancy by tenants. In addition, the Company capitalized certain direct and incremental internal construction and software development and implementation costs of $10.0 million, $6.2 million and $5.7 million in 2006, 2005 and 2004, respectively.
 
Purchase Price Accounting
 
Upon acquisition of properties, the Company estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and, if determined to be material, identifies intangible assets generally consisting


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of the fair value of (i) above- and below-market leases, (ii) in-place leases and (iii) tenant relationships. The Company allocates the purchase price to assets acquired and liabilities assumed based on their relative fair values at the date of acquisition pursuant to the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.” In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence, marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections using appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. Depending upon the size of the acquisition, the Company may engage an outside appraiser to perform a valuation of the tangible and intangible assets acquired. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.
 
Above- and below-market lease values for acquired properties are recorded based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed-rate renewal options for below-market leases. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases. At December 31, 2006 and 2005, the below-market leases aggregated $22.9 million and $11.5 million, respectively. At December 31, 2006 and 2005, the above-market leases aggregated $2.3 million and $1.4 million, respectively.
 
The total amount allocated to in-place lease values and tenant relationship values is based upon management’s evaluation of the specific characteristics of the acquired lease portfolio and the Company’s overall relationship with anchor tenants. Factors considered in the allocation of these values include the nature of the existing relationship with the tenant, the expectation of lease renewals, the estimated carrying costs of the property during a hypothetical, expected lease-up period, current market conditions and costs to execute similar leases. Estimated carrying costs include real estate taxes, insurance, other property operating costs and estimates of lost rentals at market rates during the hypothetical, expected lease-up periods, based upon management’s assessment of specific market conditions.
 
The value of in-place leases including origination costs is amortized to expense over the estimated weighted average remaining initial term of the acquired lease portfolio. The value of tenant relationship intangibles is amortized to expense over the estimated initial and renewal terms of the lease portfolio; however, no amortization period for intangible assets will exceed the remaining depreciable life of the building.
 
Intangible assets associated with property acquisitions are included in other assets and other liabilities, with respect to the below-market leases, in the Company’s consolidated balance sheets.
 
Impairment of Long-Lived Assets
 
The Company follows the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). If an asset is held for sale, it is stated at the lower of its carrying value or fair value, less cost to sell. The determination of undiscounted cash flows requires significant estimates made by management and considers the expected course of action at the balance sheet date. Subsequent changes in estimated undiscounted cash flows arising from changes in anticipated actions could affect the determination of whether an impairment exists.
 
The Company reviews its long-lived assets used in operations for impairment when there is an event or change in circumstances that indicates an impairment in value. An asset is considered impaired when the undiscounted future cash flows are not sufficient to recover the asset’s carrying value. If such impairment is present, an impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value. The Company records impairment losses and reduces the carrying amounts of assets held for sale when the carrying amounts exceed the estimated selling proceeds, less the costs to sell.


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Deferred Charges
 
Costs incurred in obtaining indebtedness are included in deferred charges in the accompanying consolidated balance sheets and are amortized on a straight-line basis over the terms of the related debt agreements, which approximates the effective interest method. Such amortization is reflected as interest expense in the consolidated statements of operations.
 
Revenue Recognition
 
Minimum rents from tenants are recognized using the straight-line method over the lease term of the respective leases. Percentage and overage rents are recognized after a tenant’s reported sales have exceeded the applicable sales breakpoint set forth in the applicable lease. Revenues associated with tenant reimbursements are recognized in the period that the expenses are incurred based upon the tenant lease provision. Management fees are recorded in the period earned based on a percentage of collected rent at the properties under management. Ancillary and other property-related income, which includes the leasing of vacant space to temporary tenants, is recognized in the period earned. Lease termination fees are included in other income and recognized upon the effective termination of a tenant’s lease when the Company has no further obligations with the lease. Fee income derived from the Company’s joint venture investments is recognized to the extent attributable to the unaffiliated ownership interest.
 
Accounts Receivable
 
The Company makes estimates of the uncollectability of its accounts receivable related to base rents, expense reimbursements and other revenues. The Company analyzes accounts receivable and historical bad debt levels, customer credit worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy are analyzed and estimates are made in connection with the expected recovery of pre-petition and post-petition claims. The Company’s reported net income is directly affected by management’s estimate of the collectability of accounts receivable.
 
Accounts receivable, other than straight-line rents receivable, are expected to be collected within one year and are net of estimated unrecoverable amounts of approximately $14.5 million and $19.0 million at December 31, 2006 and 2005, respectively. At December 31, 2006 and 2005, straight-line rents receivable, net of a provision for uncollectable amounts of $3.5 million and $2.4 million, aggregated $54.7 million and $38.5 million, respectively.
 
Disposition of Real Estate and Real Estate Investments
 
Disposition of real estate relates to the sale of outlots and land adjacent to existing shopping centers, shopping center properties and real estate investments. Gains from dispositions are recognized using the full accrual or partial sale methods, as applicable, in accordance with the provisions of SFAS No. 66, “Accounting for Real Estate Sales,” (“SFAS 66”) provided that various criteria relating to the terms of sale and any subsequent involvement by the Company with the properties sold are met.
 
SFAS 144 retains the basic provisions for presenting discontinued operations in the income statement but broadens the scope to include a component of an entity rather than a segment of a business. Pursuant to the definition of a component of an entity in SFAS 144, assuming no significant continuing involvement, the sale of a retail or industrial operating property is considered discontinued operations. In addition, properties classified as held for sale are also considered a discontinued operation. Accordingly, the results of operations of properties disposed of, or classified as held for sale, for which the Company has no significant continuing involvement, are reflected as discontinued operations. Interest expense, which is specifically identifiable to the property, is used in the computation of interest expense attributable to discontinued operations. Consolidated interest at the corporate level is allocated to discontinued operations pursuant to the methods prescribed under Emerging Issues Task Force (“EITF”) 87-24, “Allocation of Interest to Discontinued Operations,” based on the proportion of net assets disposed.
 
Real Estate Held for Sale
 
The Company generally considers assets to be held for sale when the transaction has been approved by the appropriate level of management and there are no known significant contingencies relating to the sale such that the


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property sale within one year is considered probable. The Company evaluates the held for sale classification of its owned real estate each quarter. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value less cost to sell. The results of operations of these shopping centers are reflected as discontinued operations in all periods presented.
 
On occasion, the Company will receive unsolicited offers from third parties to buy individual shopping centers. The Company will generally classify the properties as held for sale when a sales contract is executed with no contingencies and the prospective buyer has significant funds at risk to ensure performance.
 
General and Administrative Expenses
 
General and administrative expenses include certain internal leasing and legal salaries and related expenses directly associated with the re-leasing of existing space, which are charged to operations as incurred.
 
Stock Option and Other Equity-Based Plans
 
Prior to January 1, 2006, the Company followed Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Accordingly, the Company did not recognize compensation cost for stock options when the option exercise price equaled or exceeded the market value on the date of the grant. Prior to January 1, 2006, no stock-based employee compensation cost for stock options was reflected in net income, as all options granted under those plans had an exercise price equal to or in excess of the market value of the underlying common stock on the date of grant. The Company recorded compensation expense related to its restricted stock plan and its performance unit awards.
 
In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R) is an amendment of SFAS 123 and requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements based upon the grant date fair value. The grant date fair value of the portion of the restricted stock and performance unit awards issued prior to the adoption of SFAS 123(R) that is ultimately expected to vest is recognized as expense on a straight-line attribution basis over the requisite service periods in the Company’s consolidated financial statements. SFAS 123(R) requires forfeitures to be estimated at the time of grant in order to estimate the amount of share-based awards that will ultimately vest. The forfeiture rate is based on historical rates.
 
The Company adopted SFAS 123(R) as required on January 1, 2006, using the modified prospective method. The Company’s consolidated financial statements as of and for the year ended December 31, 2006, reflect the impact of SFAS 123(R). In accordance with the modified prospective method, the Company’s consolidated financial statements for prior periods have not been restated to reflect the impact of SFAS 123(R). Share-based compensation expense recognized in the Company’s consolidated financial statements for the year ended December 31, 2006, includes (i) compensation expense for share-based payment awards granted prior to, but not yet vested, as of December 31, 2005, based on the grant-date fair value and (ii) compensation expense for the share-based payment awards granted subsequent to December 31, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R).
 
The adoption of this standard changed the balance sheet and resulted in decreasing other liabilities and increasing shareholders’ equity by $11.6 million. In addition, unearned compensation — restricted stock (included in shareholder’s equity) of $13.1 million was eliminated and reclassed to paid in capital. These balance sheet changes relate to deferred compensation under the performance unit plans and unvested restricted stock awards. Under SFAS 123(R), deferred compensation is no longer recorded at the time unvested shares are issued. Share-based compensation expense is recognized over the requisite service period with an offsetting credit to equity.


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The compensation cost recognized under SFAS 123(R) was $8.3 million for the year ended December 31, 2006. There were no significant capitalized stock-based compensation costs at December 31, 2006. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure an amendment of SFAS No. 123,” for the years ended December 31, 2005 and 2004 (in thousands, except per share amounts):
 
                 
    Year Ended December 31,  
    2005     2004  
 
Net income, as reported
  $ 282,643     $ 269,762  
Add: Stock-based employee compensation included in reported net income
    5,652       6,308  
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards
    (5,319 )     (5,062 )
                 
    $ 282,976     $ 271,008  
                 
Earnings per share:
               
Basic — as reported
  $ 2.10     $ 2.27  
                 
Basic — pro forma
  $ 2.10     $ 2.28  
                 
Diluted — as reported
  $ 2.08     $ 2.24  
                 
Diluted — pro forma
  $ 2.09     $ 2.25  
                 
 
See Note 17, “Benefit Plans,” for additional information.
 
Interest and Real Estate Taxes
 
Interest and real estate taxes incurred during the development and significant expansion of real estate assets are capitalized and depreciated over the estimated useful life of the building. Interest paid during the years ended December 31, 2006, 2005 and 2004, aggregated $239.3 million, $190.0 million and $133.8 million, respectively, of which $20.0 million, $12.7 million and $9.9 million, respectively, was capitalized.
 
Goodwill
 
SFAS 142, “Goodwill and Other Intangible Assets,” requires that intangible assets not subject to amortization and goodwill be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. Amortization of goodwill, including such assets associated with joint ventures acquired in past business combinations, ceased upon adoption of SFAS 142. Goodwill is included in the balance sheet caption Investments in and Advances to Joint Ventures in the amount of $5.4 million as of December 31, 2006 and 2005. The Company evaluated the goodwill related to its joint venture investments for impairment and determined that it was not impaired as of December 31, 2006 and 2005.
 
Intangible Assets
 
In addition to the intangibles discussed above in purchase price accounting, the Company has finite-lived intangible assets, comprised of management contracts associated with the Company’s acquisition of a joint venture, stated at cost less amortization calculated on a straight-line basis over 15 years. Intangible assets, net, are included in the balance sheet caption Investments in and Advances to Joint Ventures in the amount of $4.3 million and $4.4 million as of December 31, 2006 and 2005, respectively. The 15-year life approximates the expected turnover rate of the original management contracts acquired. The estimated amortization expense associated with this intangible asset for each of the five succeeding fiscal years is approximately $0.3 million per year.


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Investments in and Advances to Joint Ventures
 
To the extent that the Company contributes assets to a joint venture, the Company’s investment in the joint venture is recorded at the Company’s cost basis in the assets that were contributed to the joint venture. To the extent that the Company’s cost basis is different from the basis reflected at the joint venture level, the basis difference is amortized over the life of the related assets and included in the Company’s share of equity in net income of the joint venture. In accordance with the provisions of SFAS No. 66 and Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures,” paragraph 30, the Company recognizes gains on the contribution of real estate to joint ventures, relating solely to the outside partner’s interest, to the extent the economic substance of the transaction is a sale. The Company continually evaluates its investments in and advances to joint ventures for other than temporary declines in market value. The Company records impairment charges based on these evaluations. The Company has determined that these investments are not impaired as of December 31, 2006.
 
Foreign Currency Translation
 
The financial statements of Sonae Sierra Brazil, an equity method investment, are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for revenues, expenses, gains and losses, with the Company’s proportionate share of the resulting translation adjustments recorded as Accumulated Other Comprehensive Income (Loss). Foreign currency gains or losses from changes in exchange rates are not material to the consolidated operating results.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash deposits with a major financial institution, which from time to time may exceed federally insured limits. The Company periodically assesses the financial condition of the institution and believes that the risk of loss is minimal. Cash flows associated with items intended as hedges of identifiable transactions or events are classified in the same category as the cash flows from the items being hedged.
 
Income Taxes
 
The Company has made an election to qualify, and believes it is operating so as to qualify, as a REIT for federal income tax purposes. Accordingly, the Company generally will not be subject to federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under Section 856 through 860 of the Code.
 
In connection with the REIT Modernization Act, which became effective January 1, 2001, the Company is now permitted to participate in certain activities which it was previously precluded from in order to maintain its qualification as a REIT, so long as these activities are conducted in entities which elect to be treated as taxable subsidiaries under the Code. As such, the Company is subject to federal and state income taxes on the income from these activities.
 
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.
 
Treasury Stock
 
The Company’s share repurchases are reflected as treasury stock utilizing the cost method of accounting and are presented as a reduction to consolidated shareholders’ equity.
 
Use of Estimates in Preparation of Financial Statements
 
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the


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disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.
 
New Accounting Standards
 
Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights — EITF 04-05
 
In June 2005, the FASB ratified the consensus reached by the EITF regarding EITF 04-05, “Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights.” The conclusion provides a framework for addressing the question of when a sole general partner, as defined in EITF 04-05, should consolidate a limited partnership. The EITF has concluded that the general partner of a limited partnership should consolidate a limited partnership unless the limited partners have the substantive right to remove the general partner, liquidate the limited partnership or substantive participating rights (veto rights decisions made in the ordinary course of business). This EITF is effective for all new limited partnerships formed and, for existing limited partnerships for which the partnership agreements are modified after June 29, 2005 and, as of January 1, 2006, for existing limited partnership agreements. As a result of the adoption of this EITF, the Company consolidated one limited partnership with total assets and liabilities of $24.4 million and $17.7 million, respectively, which were consolidated into the Company’s financial statements at January 1, 2006.
 
Accounting Changes and Error Corrections — SFAS 154
 
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28.” SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, on the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS 154 was effective for the Company in the first quarter of 2006. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations or cash flows.
 
Accounting for Uncertainty in Income Taxes — FIN 48
 
In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of SFAS No. 109” (“FIN 48”). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction). Under FIN 48, the financial statements will reflect expected future tax consequences of such positions presuming the taxing authorities’ full knowledge of the position and all relevant facts, but without considering time values. FIN 48 also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits. FIN 48 is effective for fiscal years beginning after December 15, 2006 (i.e., fiscal year ending December 31, 2007 for the Company). The Company is currently evaluating the impact that FIN 48 will have on its financial statements.
 
Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements — SAB 108
 
In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements,” to address the observed diversity in quantification practices with respect to annual financial statements. This bulletin was adopted by the Company in the fourth quarter of 2006. This bulletin did not have a material impact on the Company’s results of operations, cash flows or financial position.


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Fair Value Measurements — SFAS 157
 
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This Statement defines fair value and establishes a framework for measuring fair value in generally accepted accounting principles. The key changes to current practice are (1) the definition of fair value, which focuses on an exit price rather than an entry price; (2) the methods used to measure fair value, such as emphasis that fair value is a market-based measurement, not an entity-specific measurement, as well as the inclusion of an adjustment for risk, restrictions and credit standing and (3) the expanded disclosures about fair value measurements. This Statement does not require any new fair value measurements.
 
This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is required to adopt SFAS 157 in the first quarter of 2008. The Company is currently evaluating the impact that this Statement will have on its financial statements.


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2.  Investments in and Advances to Joint Ventures
 
The Company’s substantial unconsolidated joint ventures at December 31, 2006, are as follows:
 
             
    Effective
   
    Ownership
   
Unconsolidated Real Estate Ventures
  Percentage (1)  
Assets Owned
 
Sun Center Limited
    79.45 %   A shopping center in Columbus, Ohio
Continental Sawmill LLC
    63.4     Land
DDR Aspen Grove Office Parcel LLC
    50.0     Land
DDRA Community Centers Five, LP
    50.0     Six shopping centers in several states
DOTRS LLC
    50.0     A shopping center in Macedonia, Ohio
Jefferson County Plaza LLC
    50.0     A shopping center in St. Louis (Arnold), Missouri
Lennox Town Center Limited
    50.0     A shopping center in Columbus, Ohio
Sansone Group/DDRC LLC
    50.0     A management and development company
Sonae Sierra Brazil BV Sarl
    47.0     Nine shopping centers and a management company in Sao Paulo, Brazil
Retail Value Investment Program IIIB LP
    25.5     A shopping center in Deer Park, Illinois
Retail Value Investment Program VI LP
    25.5     A shopping center in Overland Park, Kansas
Retail Value Investment Program VIII LP
    25.5     A shopping center in Austin, Texas
Retail Value Investment Program VII LLC
    20.75     Two shopping centers in California
Coventry II DDR Buena Park LLC
    20.0     A shopping center in Buena Park, California
Coventry II DDR Fairplain LLC
    20.0     A shopping center in Benton Harbor, Michigan
Coventry II DDR Merriam Village LLC
    20.0     A shopping center under development in Merriam, Kansas
Coventry II DDR Phoenix Spectrum LLC
    20.0     A shopping center in Phoenix, Arizona
Coventry II DDR Totem Lakes LLC
    20.0     A shopping center in Kirkland, Washington
Coventry II DDR Ward Parkway LLC
    20.0     A shopping center in Kansas City, Missouri
DDR Markaz LLC
    20.0     Seven shopping centers in several states
DDR Markaz II LLC
    20.0     13 neighborhood grocery-anchored retail properties in several states
Service Holdings LLC
    20.0     50 retail sites in several states
Coventry II DDR Tri-County LLC
    18.0     A shopping center in Cincinnati, Ohio
DDR Macquarie LLC
    14.5     48 shopping centers in several states
Coventry II DDR Bloomfield LLC
    10.0     A shopping center under development in Bloomfield Hills, Michigan
Coventry II DDR Marley Creek Square LLC
    10.0     A shopping center in Orland Park, Illinois
Coventry II DDR Montgomery Farm LLC
    10.0     A shopping center under development in Allen, Texas
Coventry II DDR Westover LLC
    10.0     A shopping center under development in San Antonio (Westover), Texas
DPG Realty Holdings LLC
    10.0     12 neighborhood grocery-anchored retail properties in several states
DDR MDT PS LLC
    0.00 (2)   Seven shopping centers in several states
 
 
(1) Ownership may be held through different investment structures. Percentage ownerships are subject to change as certain investments contain promoted structures.
 
(2) See MDT Preferred Joint Venture discussed below.


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Combined condensed unconsolidated financial information of the Company’s unconsolidated joint venture investments is summarized as follows (in thousands):
 
                 
    December 31,  
    2006     2005  
 
Combined balance sheets
               
Land
  $ 933,916     $ 894,477  
Buildings
    2,788,863       2,480,025  
Fixtures and tenant improvements
    59,166       58,060  
Construction in progress
    157,762       37,550  
                 
      3,939,707       3,470,112  
Less: Accumulated depreciation
    (247,012 )     (195,708 )
                 
Real estate, net
    3,692,695       3,274,404  
Receivables, net
    75,024       76,744  
Leasehold interests
    15,195       23,297  
Other assets
    132,984       109,490  
                 
    $ 3,915,898     $ 3,483,935  
                 
Mortgage debt
  $ 2,495,080     $ 2,173,401  
Amounts payable to DDR
    4,960       108,020  
Other liabilities
    94,648       78,406  
                 
      2,594,688       2,359,827  
Accumulated equity
    1,321,210       1,124,108  
                 
    $ 3,915,898     $ 3,483,935  
                 
Company’s share of accumulated equity(1)
  $ 252,937     $ 178,908  
                 
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
Combined statements of operations
                       
Revenues from operations
  $ 430,877     $ 417,434     $ 313,480  
                         
Rental operation expenses
    146,631       147,983       106,526  
Depreciation and amortization expense
    81,618       82,753       62,089  
Interest expense
    129,708       113,466       73,491  
                         
      357,957       344,202       242,106  
                         
Income before gain on disposition of real estate and discontinued operations
    72,920       73,232       71,374  
Tax expense
    (1,176 )            
Gain on disposition of real estate
    398       858       4,787  
                         
Income from continuing operations
    72,142       74,090       76,161  
                         
Discontinued operations:
                       
Income (loss) from discontinued operations, net of tax
    139       (486 )     3,006  
Gain on disposition of real estate, net of tax
    20,343       48,982       39,612  
                         
      20,482       48,496       42,618  
                         
Net income
  $ 92,624     $ 122,586     $ 118,779  
                         
Company’s share of net income (2)
  $ 28,530     $ 36,828     $ 42,150  
                         


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Investments in and advances to joint ventures include the following items, which represent the difference between the Company’s investment and its proportionate share of the joint ventures’ underlying net assets (in millions):
 
                 
    For the Year Ended
 
    December 31.  
    2006     2005  
 
Company’s proportionate share of accumulated equity
  $ 252.9     $ 178.9  
Basis differentials (2)
    92.3       46.3  
Deferred development fees, net of portion relating to the Company’s interest
    (3.0 )     (3.0 )
Basis differential upon transfer of assets (2)
    (74.3 )     (74.9 )
Notes receivable from investments
    18.8       19.8  
Amounts payable to DDR (3)
    5.0       108.0  
                 
Investments in and advances to joint ventures (1)
  $ 291.7     $ 275.1  
                 
 
 
(1) The difference between the Company’s share of accumulated equity and the investments in and advances to joint ventures recorded on the Company’s consolidated balance sheets primarily results from the basis differentials, as described below, deferred development fees, net of the portion relating to the Company’s interest, notes and amounts receivable from the joint ventures’ investments.
 
(2) Basis differentials occur primarily when the Company has purchased interests in existing joint ventures at fair market values, which differ from their proportionate share of the historical net assets of the joint ventures. In addition, certain acquisition, transaction and other costs, including capitalized interest, may not be reflected in the net assets at the joint venture level. Basis differentials upon transfer of assets are primarily associated with assets previously owned by the Company that have been transferred into a joint venture at fair value. This amount represents the aggregate difference between the Company’s historical cost basis and the basis reflected at the joint venture level. Certain basis differentials indicated above are amortized over the life of the related assets. Differences in income also occur when the Company acquires assets from joint ventures. The difference between the Company’s share of net income, as reported above, and the amounts included in the consolidated statements of operations is attributable to the amortization of such basis differentials, deferred gains and differences in gain (loss) on sale of certain assets due to the basis differentials. The Company’s share of joint venture net income has been increased by $1.6 million and reduced by $2.1 million and $1.3 million for the years ended December 31, 2006, 2005 and 2004, respectively, to reflect additional basis depreciation and basis differences in assets sold.
 
(3) In 2005, the Company advanced $101.4 million to the KLA/SM LLC joint venture. This advance was repaid when the Company acquired its partners’ interests in the joint venture and subsequently sold these assets to the Service Holdings LLC joint venture, and the Company did not advance funds to this partnership to fund the acquisition.
 
The Company has made advances to several partnerships in the form of notes receivable and fixed-rate loans that accrue interest at rates ranging from 6.3% to 12%. Maturity dates range from payment on demand to June 2020. Included in the Company’s accounts receivable is approximately $1.1 million and $1.2 million at December 31, 2006 and 2005, respectively, due from affiliates related to construction receivables.
 
Service fees earned by the Company through management, leasing, development and financing activities performed related to the Company’s joint ventures are as follows (in millions):
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
Management and other fees
  $ 23.7     $ 16.7     $ 11.4  
Acquisition, financing and guarantee fees
    0.5       2.4       3.0  
Development fees and leasing commissions
    6.1       5.6       3.8  
Interest income
    5.4       6.8       1.9  
Disposition fees
          0.2       0.2  
 
The Company’s joint venture agreements generally include provisions whereby each partner has the right to trigger a purchase or sale of its interest in the joint venture (Reciprocal Purchase Rights), to initiate a purchase or


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sale of the properties (Property Purchase Rights) after a certain number of years, or if either party is in default of the joint venture agreements. Under these provisions, the Company is not obligated to purchase the interest of its outside joint venture partners.
 
Joint Venture Interests
 
Macquarie DDR Trust
 
The Company owns an interest in Macquarie DDR Trust, an Australia-based Listed Property Trust (“MDT”), with Macquarie Bank Limited (ASX: MBL), an international investment bank, advisor and manager of specialized real estate funds in Australia (“MDT Joint Venture”). MDT focuses on acquiring ownership interests in institutional-quality community center properties in the United States.
 
At December 31, 2006, MDT, which listed on the Australian Stock Exchange in November 2003, owns an approximate 83% interest in the portfolio of assets. The Company retained an effective 14.5% ownership interest in the assets, with MBL primarily owning the remaining 2.5%. The Company has been engaged to provide day-to-day operations of the properties and will receive fees at prevailing rates for property management, leasing, construction management, acquisitions, due diligence, dispositions (including outparcel sales) and financing. Through their joint venture, the Company and MBL receives base asset management fees and incentive fees based on the performance of MDT. The Company recorded fees aggregating $0.4 million, $2.4 million and $3.0 million in 2006, 2005 and 2004, respectively, in connection with the acquisition, structuring, formation and operation of the MDT Joint Venture.
 
In 2006, the Company sold four additional expansion areas in Birmingham, Alabama; McDonough, Georgia; Coon Rapids, Minnesota and Monaca, Pennsylvania to the MDT Joint Venture for approximately $24.7 million. These expansion areas are adjacent to shopping centers currently owned by the MDT Joint Venture. The Company recognized an aggregate merchant build gain of $9.2 million, and deferred gains of approximately $1.6 million relating to the Company’s effective 14.5% ownership interest in the venture.
 
MDT Preferred Joint Venture
 
During the second quarter of 2006, the Company sold six properties, aggregating 0.8 million owned square feet, to a newly formed joint venture with MDT (“MDT Preferred Joint Venture”), for approximately $122.7 million and recognized gains of approximately $38.9 million.
 
Under the terms of the new MDT Preferred Joint Venture, MDT receives a 9% preferred return on its preferred equity investment of approximately $12.2 million and then receives a 10% return on its common equity investment of approximately $20.8 million before the Company receives a 10% return on an agreed upon common equity investment of $3.5 million that has not been recognized in the consolidated balance sheet due to the terms of its subordination. The Company is then entitled to a 20% promoted interest in any cash flow achieved above a 10% leveraged internal rate of return on all common equity. The Company recognizes its proportionate share of equity in earnings of the MDT Preferred Joint Venture at an amount equal to increases in its common equity investment, based upon an assumed liquidation, including consideration of cash received, of the joint venture at its depreciated book value as of the end of each reporting period. The Company has not recorded any equity in earnings from the MDT Preferred Joint Venture as of December 31, 2006.
 
The Company has been engaged to perform all day-to-day operations of the properties and earns and/or may be entitled to receive ongoing fees for property management, leasing and construction management, in addition to a promoted interest, along with other periodic fees such as financing fees.
 
Sonae Sierra Brazil BV Sarl
 
In October 2006, the Company acquired a 50% joint venture interest in Sonae Sierra Brazil, a fully integrated retail real estate company based in Sao Paulo, Brazil, for approximately $147.5 million. Sonae Sierra Brazil is a subsidiary of Sonae Sierra, an international owner, developer and manager of shopping centers based in Portugal. Sonae Sierra Brazil is the managing partner of a partnership that owns direct and indirect interests in nine retail assets aggregating 3.5 million square feet and a property management company in Sao Paulo, Brazil that oversees


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the leasing and management operations of the portfolio. Sonae Sierra Brazil owns approximately 93% of the joint venture and Enplanta Engenharia, a third party, owns approximately 7%.
 
Coventry II
 
In 2003, the Company and Coventry Real Estate Advisors (“CREA”) announced the formation of Coventry Real Estate Fund II (the “Fund”). The Fund was formed with several institutional investors and CREA as the investment manager. Neither the Company nor any of its officers owns a common equity interest in this Fund or has any incentive compensation tied to this Fund. The Fund and the Company have agreed to jointly acquire value-added retail properties in the United States. The Fund’s strategy is to invest in a variety of retail properties that present opportunities for value creation, such as retenanting, market repositioning, redevelopment or expansion.
 
The Company co-invested 20% in each joint venture and is responsible for day-to-day management of the properties. Pursuant to the terms of the joint venture, the Company will earn fees for property management, leasing and construction management. The Company also will earn a promoted interest, along with CREA, above a 10% preferred return after return of capital, to fund investors. The retail properties at December 31, 2006, are as follows:
 
             
    DDR
     
    Effective
    Owned
    Ownership
    Square Feet
Location
  Interest(1)     (Thousands)
 
Phoenix, Arizona
    20 %   391
Buena Park, California
    20 %   724
Orland Park, Illinois
    10 %   58
Merriam, Kansas
    20 %   Under Development
Benton Harbor, Michigan
    20 %   223
Bloomfield Hills, Michigan
    10 %   Under Development
Kansas City, Missouri
    20 %   358
Cincinnati, Ohio
    18 %   668
Allen, Texas
    10 %   Under Development
San Antonio (Westover), Texas
    10 %   188
Kirkland, Washington
    20 %   228
50 retail sites in several states formerly occupied by Service Merchandise
    20 %   2,691
 
 
(1)  The Fund invested in certain assets with development partners, as such, the Company’s effective interest may be less than 20%.
 
Retail Value Fund
 
In February 1998, the Company and an equity affiliate of the Company entered into an agreement with Prudential Real Estate Investors (“PREI”) and formed the Retail Value Fund (the “PREI Fund”). The PREI Fund’s ownership interests in each of the projects, unless discussed otherwise, are generally structured with the Company owning (directly or through its interest in the management service company) a 24.75% limited partnership interest, PREI owning a 74.25% limited partnership interest and Coventry Real Estate Partners (“Coventry”), which was 75% owned by a consolidated entity of the Company, owning (directly or through its interest in the management service company) (Note 21) a 1% general partnership interest. The PREI Fund invests in retail properties within the United States that are in need of substantial re-tenanting and market repositioning and may also make equity and debt investments in companies owning or managing retail properties as well as in third party development projects that provide significant growth opportunities. The retail property investments may include enclosed malls, neighborhood and community centers or other potential retail commercial development and redevelopment opportunities.


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The PREI Fund owned the following shopping center investments at December 31, 2006:
 
                 
    DDR
       
    Effective
    Company-Owned
 
    Ownership
    Square Feet
 
Location   Interest     (Thousands)  
 
Deer Park, Illinois
    25.5 %     287  
Kansas City, Kansas
    25.5 %     61  
Austin, Texas
    25.5 %     283  
 
In 2006, four shopping centers in Kansas City, Kansas, and Kansas City, Missouri, aggregating 0.4 million square feet, were sold for approximately $20.0 million. The joint venture recognized a loss of approximately $1.8 million, of which the Company’s proportionate share was approximately $0.5 million.
 
In addition, in 2000 the PREI Fund entered into an agreement to acquire ten properties located in western states from Burnham Pacific Properties, Inc. (“Burnham”), with PREI owning a 79% interest, the Company owning a 20% interest and Coventry owning a 1% interest. The Company earns fees for managing and leasing the properties. At December 31, 2006, the joint venture owned two of these properties. The properties sold in 2006, 2005 and 2004 are summarized as follows:
 
                             
              Joint
    Company’s
 
    Number of
  Sale
    Venture
    Proportionate
 
    Properties
  Price
    Gain
    Share of Gain
 
Year
  Sold   (Millions)     (Millions)     (Millions)  
 
2006
  One   $ 8.1     $ 3.7     $ 1.2  
2005
  Three (1)     73.3       21.1       6.7  
2004
  One (1)     84.2       18.6       6.0  
 
 
(1) One of the properties was sold over a two-year period. A majority of the shopping center was sold in 2004 and the outparcels were sold in 2005.
 
As discussed above, Coventry generally owns a 1% interest in each of the PREI Fund’s investments. Coventry is entitled to receive an annual asset management fee equal to 0.5% of total assets for the Kansas City properties and the property in Deer Park, Illinois. Except for the PREI Fund’s investment associated with properties acquired from Burnham, Coventry is entitled to one-third of all profits (as defined), after the limited partners have received a 10% preferred return and previously advanced capital. The remaining two-thirds of the profits (as defined) in excess of the 10% preferred return are split proportionately among the limited partners.
 
With regard to the PREI Fund’s investment associated with the acquisition of shopping centers from Burnham, Coventry has a 1% general partnership interest. Coventry also receives annual asset management fees equal to 0.8% of total revenue collected from these assets, plus a minimum of 25% of all amounts in excess of an 11% annual preferred return to the limited partners, that could increase to 35% if returns to the limited partners exceed 20%.
 
Management Service Companies
 
The Company owns a 50% equity ownership interest in a management and development company in St. Louis, Missouri.
 
KLA/SM Joint Venture
 
The Company entered into a joint venture in 2002 with Lubert-Adler Real Estate Funds and Klaff Realty, L.P. (Note 16), that was awarded asset designation rights for all of the retail real estate interests of the bankrupt estate of Service Merchandise Corporation for approximately $242 million. The Company had an approximate 25% interest in the joint venture (“KLA/SM”). In addition, the Company earned fees for the management, leasing, development and disposition of the real estate portfolio. The designation rights enabled the joint venture to determine the ultimate disposition of the real estate interests held by the bankrupt estate.
 
In August 2006, the Company purchased its then partners’ approximately 75% interest in the remaining 52 assets formerly occupied by Service Merchandise owned by the KLA/SM Joint Venture at a gross purchase price of


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approximately $138 million relating to the partners’ approximate 75% ownership interest, based on a total valuation of approximately $185 million for all remaining assets, including outstanding indebtedness.
 
In September 2006, the Company sold 51 of these assets to the Service Holdings LLC at a gross purchase price of approximately $185 million and assumed debt of approximately $29 million. The Company has a 20% interest in the newly formed joint venture. The Company recorded a gain of approximately $6.1 million.
 
The Service Merchandise site dispositions by the KLA/SM Joint Venture are summarized as follows:
 
                             
              Joint
    Company’s
 
    Number of
  Sales
    Venture
    Proportionate
 
    Properties
  Price
    Gain
    Share of Gain
 
Year
  Sold   (Millions)     (Millions)     (Millions)  
 
2006
  One   $ 3.2     $ 0.2  (1)   $  (1)
2005
  Eight     19.4       7.6       1.9  
2004
  Ten     20.7       2.0       0.5  
 
 
(1) Less than $0.1 million.
 
The Company also earned disposition, development, management, leasing fees and interest income aggregating $5.7 million, $6.4 million and $2.6 million in 2006, 2005 and 2004, respectively, relating to this investment.
 
Adoption of FIN 46 (Note 1) and EITF 04-05
 
In 2006, as a result of the adoption of EITF 04-5, the Company consolidated one limited partnership with total assets and liabilities of $24.4 million and $17.7 million, respectively, which were consolidated into the Company’s financial statements.
 
In 2004, the Company recorded a charge of $3.0 million as a cumulative effect of adoption of a new accounting standard attributable to the consolidation of a 50% owned shopping center in Martinsville, Virginia. This amount represents the minority partner’s share of cumulative losses in excess of its cost basis in the partnership.
 
Acquisitions of Joint Venture Interests by the Company
 
The Company purchased its joint venture partner’s interest in the following shopping centers in 2006, 2005 and 2004:
 
  •  A 20% interest in a shopping center in Columbus, Ohio, purchased in 2005;
 
  •  A 20% interest in a shopping center development in Apex, North Carolina, purchased in 2006;
 
  •  A 50% interest in a shopping center in Phoenix, Arizona, purchased in 2006;
 
  •  A 50% interest in a shopping center in Littleton, Colorado, purchased in 2004;
 
  •  A 50% interest in a shopping center in Salisbury, Maryland, purchased in 2006 and
 
  •  A 75% interest in a shopping center in Pasadena, California, purchased in 2006.
 
The MDT Joint Venture acquired the interest in one shopping center owned through other joint venture interests in 2004.
 
Discontinued Operations
 
Included in discontinued operations in the combined statements of operations for the joint ventures are the following properties sold subsequent to December 31, 2003:
 
  •  A 10% interest in a shopping center in Kildeer, Illinois, sold in 2006;
 
  •  A 20.75% interest in five properties held in the PREI Fund originally acquired from Burnham. The shopping center in Everett, Washington, was sold in 2006. The shopping centers in City of Industry,


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  California; Richmond, California and San Ysidro, California, were sold in 2005. The shopping center Mission Viejo, California, was sold in 2004;
 
  •  A 24.75% interest in a property held in the PREI Fund in Long Beach, California, sold in 2005;
 
  •  A 24.75% interest in four properties held in the PREI Fund in Kansas City, Kansas and Kansas City, Missouri, sold in 2006;
 
  •  An approximate 25% interest in one, eight and ten Service Merchandise sites sold in 2006, 2005 and 2004, respectively;
 
  •  A 20% interest in a Service Merchandise site sold in 2006;
 
  •  A 35% interest in a shopping center in San Antonio, Texas, sold in 2004 and
 
  •  A 50% interest in a property held in Community Centers Five in Fort Worth, Texas, sold in 2006.
 
3.  Acquisitions and Pro Forma Financial Information
 
Acquisitions
 
In 2005, the Mervyns Joint Venture acquired the underlying real estate of 36 operating Mervyns stores for approximately $396.2 million. The assets were acquired from several funds, one of which was managed by Lubert-Adler Real Estate Funds (Note 16). The Mervyns Joint Venture, owned approximately 50% by the Company and 50% by MDT, obtained approximately $258.5 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 $45.9 million is at LIBOR plus 72 basis points for two years. In 2006, the Mervyns Joint Venture purchased one additional site for approximately $11.0 million and the Company purchased one additional site for approximately $12.4 million. The Company is responsible for the day-to-day management of the assets and receives fees in accordance with the same fee schedule as the MDT Joint Venture for property management services.
 
During 2005, the Company received approximately $2.5 million of acquisition and financing fees in connection with the acquisition of the Mervyns assets. Pursuant to FIN 46(R), the Company is required to consolidate the Mervyns Joint Venture and, therefore, the $2.5 million of fees has been eliminated in consolidation and has been reflected as an adjustment in basis and is not reflected in net income.
 
In 2005, the Company completed the acquisition of 15 retail real estate assets located in Puerto Rico from Caribbean Property Group, LLC and related entities (“CPG”) for approximately $1.2 billion (“CPG Properties”). The financing for the transaction was provided by the assumption of approximately $660 million of existing debt and line of credit borrowings on the Company’s senior unsecured credit facility and the application of a $30 million deposit funded in 2004. Included in the assets acquired are the land, building and tenant improvements associated with the underlying real estate. The other assets allocation of $12.6 million relates primarily to in-place leases, leasing commissions, tenant relationships and tenant improvements of the properties (Note 6). There was a separate allocation in the purchase price of $8.1 million for above-market leases and $1.4 million for below-market leases. The Company entered into this transaction to obtain a shopping center portfolio in Puerto Rico, a market where the Company previously did not have any assets.
 
In 2004, the Company entered into an agreement to purchase interests in 110 retail real estate assets, with approximately 18.8 million square feet of GLA, from Benderson Development Company and related entities (“Benderson”). The purchase price of the assets, including associated expenses, was approximately $2.3 billion, less assumed debt and the value of a 2% equity interest in certain assets valued at approximately $16.2 million at December 31, 2005, that Benderson converted its interest into the Company’s common shares in 2006 (Note 12). Benderson transferred a 100% ownership in certain assets or entities owning certain assets. The remaining assets were held by a joint venture in which the Company held a 98.0% interest and Benderson held a 2.0% interest. Benderson’s minority interest was classified as operating partnership minority interests on the Company’s consolidated balance sheet at December 31, 2005.


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The Company completed the purchase of 107 properties from Benderson, including 14 purchased directly by the MDT Joint Venture (Note 2) and 52 held by a consolidated joint venture with Benderson at various dates commencing May 14, 2004, through December 21, 2004. The remaining three properties were not acquired.
 
The Company funded the transaction through a combination of new debt financing of approximately $450 million, net proceeds of approximately $164.2 million from the issuance of 6.8 million cumulative preferred shares, net proceeds of approximately $491 million from the issuance of 15.0 million common shares, asset transfers to the MDT Joint Venture that generated net proceeds of approximately $194.3 million (Note 2), line of credit borrowings and assumed debt. With respect to the assumed debt, the fair value was approximately $400 million, which included an adjustment of approximately $30 million to increase its stated principal balance, based on rates for debt with similar terms and remaining maturities as of May 2004. Included in the assets acquired were the land, building and tenant improvements associated with the underlying real estate. The other assets allocation of $30.9 million relates primarily to in-place leases, leasing commissions, tenant relationships and tenant improvements of the properties (Note 6). There was a separate allocation in the purchase price of $4.7 million for certain below-market leases. The Company entered into this transaction to acquire the largest privately owned retail shopping center portfolio in markets where the Company previously did not have a strong presence.
 
Pro Forma Financial Information
 
The following unaudited supplemental pro forma operating data is presented for the year ended December 31, 2005, as if the acquisition of the CPG Properties were completed on January 1, 2005. The following unaudited supplemental pro forma operating data is presented for the year ended December 31, 2004, as if the acquisition of the CPG Properties, the common share offering completed in December 2004 and the acquisition of the properties from Benderson and related financing activity, including the sale of eight wholly-owned assets to the MDT Joint Venture, were completed on January 1, 2004.
 
These acquisitions were accounted for using the purchase method of accounting. The revenues and expenses related to assets and interests acquired are included in the Company’s historical results of operations from the date of purchase.


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The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the acquisitions occurred as indicated, nor does it purport to represent the results of the operations for future periods (in thousands, except per share data):
 
                 
    For the Year Ended
 
    December 31,
 
    (Unaudited)  
    2005     2004  
 
Pro forma revenues
  $ 727,508     $ 739,458  
                 
Pro forma income from continuing operations
  $ 174,526     $ 211,230  
                 
Pro forma income from discontinued operations
  $ 21,528     $ 15,918  
                 
Pro forma income before cumulative effect of adoption of a new accounting standard
  $ 284,194     $ 311,790  
                 
Pro forma net income applicable to common shareholders
  $ 229,025     $ 253,620  
                 
Per share data:
               
Basic earnings per share data:
               
Income from continuing operations applicable to common shareholders
  $ 1.92     $ 2.24  
Income from discontinued operations
    0.20       0.15  
Cumulative effect of adoption of a new accounting standard
          (0.03 )
                 
Net income applicable to common shareholders
  $ 2.12     $ 2.36  
                 
Diluted earning per share data:
               
Income from continuing operations applicable to common shareholders
  $ 1.90     $ 2.22  
Income from discontinued operations
    0.20       0.15  
Cumulative effect of adoption of a new accounting standard
          (0.03 )
                 
Net income applicable to common shareholders
  $ 2.10     $ 2.34  
                 
 
The supplemental pro forma financial information does not present the acquisitions described below or the disposition of real estate assets.
 
During the year ended December 31, 2006, the Company acquired its partners’ interests, at an initial aggregate investment of approximately $94.1 million, net of mortgages assumed, in the following joint venture properties:
 
                 
          Company-
 
          Owned
 
    Interest
    Square Feet
 
    Acquired     (Thousands)_  
 
Phoenix, Arizona
    50%       197  
Pasadena, California
    75%       557  
Salisbury, Maryland
    50%       126  
Apex, North Carolina
    80%/20%       324  
San Antonio, Texas
    50%       Under Development  
                 
              1,204  
                 
 
Additionally, the Company acquired one Mervyns site for approximately $12.4 million (Note 16).
 
During the year ended December 31, 2005, the Company acquired its partner’s 20% interest in one joint venture. This property aggregates approximately 0.4 million square feet of Company-owned GLA at an initial aggregate investment of approximately $3.2 million. Additionally, the Company acquired one Mervyns site for approximately $14.4 million (Note 16).


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During the year ended December 31, 2004, the Company acquired a 20% interest in two shopping centers and an effective 10% interest in a shopping center and its partner’s 50% interest in a joint venture. These four properties aggregate approximately 2.4 million square feet of Company-owned GLA at an initial aggregate investment of approximately $180 million.
 
4.  Notes Receivable
 
The Company owns notes receivables aggregating $18.2 million and $25.0 million, including accrued interest, at December 31, 2006 and 2005, respectively, which are classified as held to maturity. The notes are secured by certain rights in future development projects and partnership interests. The notes bear interest ranging from 6.9% to 12.0% with maturity dates ranging from payment on demand through July 2026.
 
Included in notes receivable are $16.5 million and $23.2 million of tax incremental financing bonds or notes (“TIF Bonds”), plus accrued interest at December 31, 2006 and 2005, respectively, from the Town of Plainville, Connecticut (the “Plainville Bonds”), the City of Merriam, Kansas (the “Merriam Bonds”), and the City of St. Louis, Missouri (the “Southtown Notes”). The Plainville Bonds, with a principal balance of $7.1 million and $7.2 million at December 31, 2006 and 2005, respectively, mature in April 2021 and bear interest at 7.125%. The Merriam Bonds, with a principal balance of $7.1 million and $8.0 million at December 31, 2006 and 2005, respectively, mature in February 2016 and bear interest at 6.9%. The Southtown Notes, with a principal balance of $2.3 million and $8.0 million at December 31, 2006 and 2005, respectively, mature in July 2026 and bear interest ranging from 7.13% to 8.50%. Interest and principal are payable solely from the incremental real estate taxes, if any, generated by the respective shopping center and development project pursuant to the terms of the financing agreement.
 
5.  Deferred Charges
 
Deferred charges consist of the following (in thousands):
 
                 
    December 31,  
    2006     2005  
 
Deferred financing costs
  $ 39,748     $ 31,681  
Less: Accumulated amortization
    (16,040 )     (10,524 )
                 
    $ 23,708     $ 21,157  
                 
 
The Company incurred deferred financing costs aggregating $9.6 million and $13.1 million in 2006 and 2005, respectively. Deferred financing costs paid in 2006 primarily relate to the modification of the Company’s unsecured credit agreements and expansion of term loans (Note 7) and issuance of convertible notes (Note 8). Deferred financing costs paid in 2005 primarily relate to the modification of the Company’s unsecured revolving credit agreements and term loan (Note 7), issuance of medium term notes (Note 8) and mortgages payable (Note 9) obtained in connection with the Mervyns Joint Venture. Amortization of deferred charges was $7.1 million, $6.1 million and $5.6 million for the years ended December 2006, 2005 and 2004, respectively.


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6.  Other Assets
 
Other assets consist of the following (in thousands):
 
                 
    December 31,  
    2006     2005  
 
Intangible assets:
               
In-place leases (including lease origination costs and fair market value of leases), net
  $ 1,485     $ 2,568  
Tenant relations, net
    12,969       14,538  
                 
Total intangible assets
    14,454       17,106  
Other assets:
               
Fair value hedge
          292  
Prepaids, deposits and other assets
    65,013       44,657  
                 
Total other assets
  $ 79,467     $ 62,055  
                 
 
The amortization period of the in-place leases and tenant relations is approximately two to 31 years and ten years, respectively. The Company recorded amortization expense of approximately $5.5 million, $6.1 million and $4.0 million for the years ended December 31, 2006, 2005 and 2004, respectively. The estimated amortization expense associated with the Company’s intangible assets is $3.0 million, $2.9 million, $2.9 million, $2.9 million and $2.0 million for the years ending December 31, 2007, 2008, 2009, 2010 and 2011, respectively. Other assets consist primarily of deposits, land options and other prepaid expenses.
 
7.  Revolving Credit Facilities and Term Loans
 
The Company maintains its primary unsecured revolving credit facility with a syndicate of financial institutions, for which JP Morgan serves as the administrative agent (the “Unsecured Credit Facility”). The Unsecured Credit Facility was amended in June 2006. As a result of the amendment, the borrowing capacity on the Unsecured Credit Facility increased from $1.0 billion to $1.2 billion, provided for an accordion feature of a future expansion to $1.4 billion, extended the maturity date to June 2010, with a one-year extension option, and amended the pricing. The Unsecured Credit Facility includes a competitive bid option on periodic interest rates for up to 50% of the facility. The Company’s borrowings under the Unsecured Credit Facility bear interest at variable rates at the Company’s election, based on the prime rate as defined in the facility or LIBOR, plus a specified spread (0.60% at December 31, 2006). The specified spread over LIBOR varies depending on the Company’s long-term senior unsecured debt rating from Standard and Poor’s and Moody’s Investors Service. The Company is required to comply with certain covenants relating to total outstanding indebtedness, secured indebtedness, maintenance of unencumbered real estate assets and fixed charge coverage. The Unsecured Credit Facility is used to finance the acquisition, development and expansion of shopping center properties, to provide working capital and for general corporate purposes. At December 31, 2006 and 2005, total borrowings under the Unsecured Credit Facility aggregated $297.5 million and $150.0 million, respectively, with a weighted average interest rate of 5.6% and 4.6%, respectively.
 
The Company also maintains a $60 million unsecured revolving credit facility with National City Bank (together with the $1.2 billion Unsecured Credit Facility, the “Revolving Credit Facilities”). This facility was also amended in June 2006 to extend the maturity date to June 2010 and to reflect terms consistent with those contained in the Unsecured Credit Facility. Borrowings under the facility bear interest at variable rates based on the prime rate as defined in the facility or LIBOR plus a specified spread (0.60% at December 31, 2006). The specified spread over LIBOR is dependent on the Company’s long-term senior unsecured debt rating from Standard and Poor’s and Moody’s Investors Service. The Company is required to comply with certain covenants relating to total outstanding indebtedness, secured indebtedness, maintenance of unencumbered real estate assets and fixed charge coverage. At December 31, 2006 and 2005, there were no borrowings outstanding.


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The Company also maintains term loan facilities (collectively the “Term Loans”) with various lenders. These loans are summarized as follows:
 
                                                 
                Borrowings
    Weighted
 
    Spread
          Outstanding
    Average
 
    Over
          (Millions)
    Interest Rate
 
    LIBOR
    Maturity
    December 31     December 31  
Financial Institution
  12/31/06     Date     2006     2005     2006     2005  
 
Key Bank Capital Markets and Banc of America Securities LLC (1)
    0.85 %     June 2008     $ 400.0     $ 220.0       5.9 %     5.1 %
JP Morgan and several other lenders (2)
    0.75 %     May 2007           $ 200.0             5.1 %
 
 
(1) Facility allows for two one-year extension options. In 2006, the facility was amended to add an accordion feature to increase the loan, at the Company’s option, up to $500 million and covenant modifications. The Term Loan is secured by the equity in certain assets that are already encumbered by first mortgages. The weighted average interest rate at December 31, 2006 reflects the effect of $400 million of interest rate swaps (Note 10).
 
(2) This facility was repaid in 2006.
 
For each of the Term Loans, the spread is dependent on the Company’s corporate credit ratings from Standard & Poor’s and Moody’s Investors Service. The Term Loans are subject to the same covenants associated with the Unsecured Credit Facility.
 
Total fees paid by the Company on its Revolving Credit Facilities and Term Loans in 2006, 2005 and 2004 aggregated approximately $1.7 million, $2.0 million and $1.7 million, respectively. At December 31, 2006 and 2005, the Company was in compliance with all of the financial and other covenant requirements.
 
8.  Fixed-Rate Notes
 
The Company had outstanding unsecured notes of approximately $2.2 billion and $2.0 billion at December 31, 2006 and 2005, respectively. Several of the notes were issued at a discount aggregating $3.9 million and $6.0 million at December 31, 2006 and 2005, respectively. The effective interest rates of the unsecured notes range from 3.9% to 8.4% per annum.
 
In August 2006, the Company issued $250 million of Senior Convertible Notes due 2011 (the “Senior Convertible Notes”). The Senior Convertible Notes have an initial conversion price of $65.11 per share into the Company’s common shares or cash, at the option of the Company. In connection with the issuance of these notes, the Company entered into a registration rights agreement for the common shares that may be issuable upon conversion of the Senior Convertible Notes.
 
Concurrent with the issuance of the Senior Convertible Notes, the Company purchased an option on its common stock in a private transaction, effectively increasing the conversion price of the notes to $74.41 per common share. This option allows the Company to receive shares of the Company’s common stock (up to a maximum of approximately 480,000 shares) from counterparties equal to the amounts of common stock and/or cash related to the excess conversion value that the Company would pay to the holders of the Senior Convertible Notes upon conversion. The option will terminate upon the earlier of the maturity dates of the related Senior Convertible Notes or the first day all of the related Senior Convertible Notes are no longer outstanding due to conversion or otherwise. The option, which cost $10.3 million, was recorded as a reduction of shareholders’ equity.
 
The fixed-rate notes have maturities ranging from March 2007 to July 2018. Interest coupon rates ranged from approximately 3.5% to 7.5% (averaging 5.1% and 5.3% at December 31, 2006 and 2005, respectively). Notes issued prior to December 31, 2001, aggregating $212.0 million, may not be redeemed by the Company prior to maturity and will not be subject to any sinking fund requirements. Notes issued subsequent to 2001 and the notes assumed with the JDN merger, aggregating $1.4 billion at December 31, 2006, may be redeemed based upon a yield maintenance calculation. The notes issued in October 2005 (aggregating $348.6 million) are redeemable prior to maturity at par value plus a make-whole premium. If the notes issued in October 2005 are redeemed within 90 days of the maturity date, no make-whole premium will be paid. The Senior Convertible Notes aggregating $250 million may be converted prior to maturity into cash equal to the lesser of the principal amount of the note or the conversion value and, to the extent the conversion value exceeds the principal amount of the note, shares of the Company’s


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common stock. The fixed-rate senior notes and Senior Convertible Notes were issued pursuant to an indenture dated May 1, 1994, as amended, which contains certain covenants including limitation on incurrence of debt, maintenance of unencumbered real estate assets and debt service coverage. Interest is paid semi-annually in arrears.
 
9.  Mortgages Payable and Scheduled Principal Repayments
 
At December 31, 2006, mortgages payable, collateralized by investments and real estate with a net book value of approximately $2.5 billion and related tenant leases, are generally due in monthly installments of principal and/or interest and mature at various dates through 2028. Fixed-rate debt obligations included in mortgages payable at December 31, 2006 and 2005, aggregated approximately $1,140.9 million and $1,173.3 million, respectively. Fixed interest rates ranged from approximately 4.4% to 10.2% (averaging 6.6% at both December 31, 2006 and 2005). Variable- rate debt obligations totaled approximately $192.4 million and $181.4 million at December 31, 2006 and 2005, respectively. Interest rates on the variable-rate debt averaged 6.2% and 5.3% at December 31, 2006 and 2005, respectively.
 
Included in mortgage debt are $14.1 million and $15.1 million of tax-exempt certificates with a weighted average fixed interest rate of 7.0% at December 31, 2006 and 2005, respectively. As of December 31, 2006, the scheduled principal payments of the Revolving Credit Facilities, Term Loans, fixed-rate senior notes and mortgages payable for the next five years and thereafter are as follows (in thousands):
 
         
Year
  Amount  
 
2007
  $ 428,609  
2008
    664,517  
2009
    391,870  
2010
    1,059,147  
2011
    704,340  
Thereafter
    1,000,329  
         
    $ 4,248,812  
         
 
Included in principal payments are $400 million in the year 2008 and $297.5 million in the year 2010, associated with the maturing of the Term Loans and the Revolving Credit Facilities, respectively.
 
10.  Financial Instruments
 
The following methods and assumptions were used by the Company in estimating fair value disclosures of financial instruments:
 
Cash and cash equivalents, accounts receivable, accounts payable, accruals and other liabilities
 
The carrying amounts reported in the balance sheet for these financial instruments approximated fair value because of their short-term maturities. The carrying amount of straight-line rents receivable does not materially differ from its fair market value.
 
Notes receivable and advances to affiliates
 
The fair value is estimated by discounting the current rates at which management believes similar loans would be made. The fair value of these notes was approximately $29.0 million and $129.9 million at December 31, 2006 and 2005, respectively, as compared to the carrying amounts of $28.4 million and $127.7 million, respectively. The carrying value of the TIF Bonds (Note 4) approximated its fair value at December 31, 2006 and 2005. The fair value of loans to affiliates is not readily determinable and has been estimated by management based upon its assessment of the interest rate and credit risk.


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Debt
 
The carrying amounts of the Company’s borrowings under its Revolving Credit Facilities and Term Loans approximate fair value because such borrowings are at variable rates and the spreads are typically adjusted to reflect changes in the Company’s credit rating. The fair value of the fixed-rate senior notes is based on borrowings with a similar remaining maturity based on the Company’s estimated interest rate spread over the applicable treasury rate or quoted market price. Fair value of the mortgages payable is estimated using a discounted cash flow analysis, based on the Company’s incremental borrowing rates for similar types of borrowing arrangements with the same remaining maturities.
 
Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments.
 
Financial instruments at December 31, 2006 and 2005, with carrying values that are different than estimated fair values, are summarized as follows (in thousands):
 
                                 
    2006     2005  
    Carrying
    Fair
    Carrying
    Fair
 
    Amount     Value     Amount     Value  
 
Senior notes
  $ 2,218,020     $ 2,221,553     $ 1,966,268     $ 1,960,210  
Term Loans
    400,000       400,000       420,000       420,000  
Mortgages payable
    1,333,292       1,347,501       1,354,733       1,387,136  
                                 
    $ 3,951,312     $ 3,969,054     $ 3,741,001     $ 3,767,346  
                                 
 
Accounting Policy for Derivative and Hedging Activities
 
All derivatives are recognized on the balance sheet at their fair value. On the date that the Company enters into a derivative, it designates the derivative as a hedge against the variability of cash flows that are to be paid in connection with a recognized liability or forecasted transaction. Subsequent changes in the fair value of a derivative designated as a cash flow hedge that is determined to be highly effective are recorded in other comprehensive income (loss), until earnings are affected by the variability of cash flows of the hedged transaction. Any hedge ineffectiveness is reported in current earnings.
 
From time to time, the Company enters into interest rate swaps to convert certain fixed-rate debt obligations to a floating rate (a “fair value hedge”). This is consistent with the Company’s overall interest rate risk management strategy to maintain an appropriate balance of fixed-rate and variable-rate borrowings. Changes in the fair value of derivatives that are highly effective and that are designated and qualify as a fair value hedge, along with changes in the fair value of the hedged liability that are attributable to the hedged risk, are recorded in current-period earnings. If hedge accounting is discontinued due to the Company’s determination that the relationship no longer qualified as an effective fair value hedge, the Company will continue to carry the derivative on the balance sheet at its fair value but cease to adjust the hedged liability for changes in fair value.
 
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company formally assesses (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the cash flows of the hedged items and whether those derivatives may be expected to remain highly effective in future periods. Should it be determined that a derivative is not (or has ceased to be) highly effective as a hedge, the Company will discontinue hedge accounting on a prospective basis.
 
Risk Management
 
The Company enters into derivative contracts to minimize significant unplanned fluctuations in earnings that are caused by interest rate volatility or in the case of a fair value hedge to minimize the impacts of changes in the fair value of the debt. The Company does not typically utilize these arrangements for trading or speculative purposes.


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The principal risk to the Company through its interest rate hedging strategy is the potential inability of the financial institutions, from which the interest rate swaps were purchased, to cover all of their obligations. To mitigate this exposure, the Company purchases its interest rate swaps from major financial institutions.
 
Cash Flow Hedges
 
In 2006, the Company entered into five interest rate swaps with notional amounts aggregating $500 million ($200 million for a three-year term and $300 million for a four-year term). Interest rate swaps aggregating $400 million effectively convert Term Loan floating rate debt into a fixed rate of approximately 5.9%. Interest rate swaps aggregating $100 million effectively convert Revolving Credit Facilities floating rate debt into a fixed rate of approximately 5.25%. As of December 31, 2006, the aggregate fair value of the Company’s interest rate swaps was a liability of $1.1 million, which is included in other liabilities in the consolidated balance sheets. For the year ended December 31, 2006, the amount of hedge ineffectiveness was not material.
 
All components of the interest rate swaps were included in the assessment of hedge effectiveness. The Company expects that within the next 12 months it will reflect as an increase to earnings $0.9 million of the amount recorded in accumulated other comprehensive income. The fair value of the interest rate swaps is based upon the estimated amounts the Company would receive or pay to terminate the contracts at the reporting date and is determined using interest rate market pricing models.
 
In March 2002, the Company entered into an interest rate swap agreement, with a notional amount of $60 million for a five-year term, effectively converting a portion of the outstanding fixed-rate debt under a fixed-rate senior note to a variable rate of six-month LIBOR.
 
Swaptions
 
In anticipation of the joint venture with TIAA-CREF (Note 21), an affiliate of the Company purchased two interest rate swaption agreements during 2006 that economically limits the benchmark interest rate component of future interest rates on $500 million of forecasted five-year borrowings at 5.72% and $750 million of forecasted ten-year borrowings at 5.78%. These swaptions were not designated for hedge accounting, and accordingly, gains or losses are reported in earnings as a component of interest expense, which approximated $1.2 million of additional expense for the year ended December 31, 2006. The fair value was calculated based upon expected changes in forward interest rates. TIAA-CREF will be obligated to fund its proportionate share of the cost and be entitled to the economic benefits, if any, of the swaptions upon formation of the joint venture.
 
Joint Venture Derivative Instruments
 
At December 31, 2006 and 2005, certain of the Company’s joint ventures had interest rate swaps with notional amounts aggregating $557 million and $150 million, respectively, converting LIBOR to a weighted average fixed rate of approximately 5.28% and 4.36%, respectively. The aggregate fair value of these instruments at December 31, 2006 and 2005, was a liability of $5.0 million and an asset of $1.0 million, respectively.
 
11.  Commitments and Contingencies
 
Leases
 
The Company is engaged in the operation of shopping centers, which are either owned or, with respect to certain shopping centers, operated under long-term ground leases that expire at various dates through 2070, with renewal options. Space in the shopping centers is leased to tenants pursuant to agreements that provide for terms ranging generally from one month to 30 years and, in some cases, for annual rentals subject to upward adjustments based on operating expense levels, sales volume, or contractual increases as defined in the lease agreements.


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The scheduled future minimum revenues from rental properties under the terms of all non-cancelable tenant leases, assuming no new or renegotiated leases or option extensions for such premises for the subsequent five years ending December 31, are as follows for continuing operations (in thousands):
 
         
2007
  $ 529,293  
2008
    494,445  
2009
    450,326  
2010
    404,942  
2011
    349,553  
Thereafter
    1,829,388  
         
    $ 4,057,947  
         
 
Scheduled minimum rental payments under the terms of all capital and non-cancelable operating leases in which the Company is the lessee, principally for office space and ground leases, for the subsequent five years ending December 31, are as follows for continuing operations (in thousands):
 
                 
    Operating
    Capital
 
    Leases     Leases  
 
2007
  $ 5,320     $ 305  
2008
    5,232       315  
2009
    4,970       315  
2010
    4,882       315  
2011
    4,879       315  
Thereafter
    204,465       12,283  
                 
    $ 229,748     $ 13,848  
                 
 
Commitments and Guarantees
 
In conjunction with the development and expansion of various shopping centers, the Company has entered into agreements with general contractors for the construction of shopping centers aggregating approximately $63.7 million as of December 31, 2006.
 
At December 31, 2006, the Company had letters of credit outstanding of approximately $20.6 million. The Company has not recorded any obligation associated with these letters of credit. The majority of letters of credit are collateral for existing indebtedness and other obligations of the Company.
 
As discussed in Note 2, the Company and certain equity affiliates entered into several joint ventures with various third-party developers. In conjunction with certain joint venture agreements, the Company and/or its equity affiliate has agreed to fund the required capital associated with approved development projects, comprised principally of outstanding construction contracts, aggregating approximately $6.8 million as of December 31, 2006. The Company and/or its equity affiliate are entitled to receive a priority return on these capital advances at rates ranging from 10.0% to 11.0%.
 
In connection with certain of the Company’s joint ventures, the Company agreed to fund any amounts due the joint venture’s lender if such amounts are not paid by the joint venture based on the Company’s pro rata share of such amount, aggregating $61.1 million at December 31, 2006. The Company and its joint venture partner provided a $33.0 million payment and performance guarantee on behalf of the Mervyns Joint Venture to the joint venture’s lender in certain events such as the bankruptcy of Mervyns. The Company’s maximum obligation is equal to its effective 50% ownership percentage, or $16.5 million.
 
In 2003, the Company entered into an agreement with DRA Advisors, one of its joint venture partners, to pay a $0.8 million annual consulting fee for ten years for ongoing services relating to the assessment of financing and strategic investment alternatives.


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In connection with the transfer of one of the properties to the MDT Joint Venture, the Company deferred the recognition of approximately $2.8 million and $2.9 million at December 31, 2006 and 2005, respectively, of the gain on sale of real estate related to a shortfall agreement guarantee maintained by the Company. The MDT Joint Venture is obligated to fund any shortfall amount caused by the failure of the landlord or tenant to pay taxes on the shopping center when due and payable. The Company is obligated to pay any shortfall to the extent that the shortfall is not caused by the failure of the landlord or tenant to pay taxes on the shopping center when due and payable. No shortfall payments have been made on this property since the completion of construction in 1997.
 
The Company entered into master lease agreements during 2003 through 2006 with the transfer of properties to certain joint ventures, which are recorded as a liability and reduction of its related gain. The Company is responsible for the monthly base rent, all operating and maintenance expenses and certain tenant improvements and leasing commissions for units not yet leased at closing for a three-year period. At December 31, 2006, the Company’s material master lease obligations, included in accounts payable and other expenses, in the following amounts, were incurred with the properties transferred to the following joint ventures (in millions):
 
                 
    December 31  
    2006     2005  
 
MDT Joint Venture
  $ 2.1     $ 4.9  
MDT Preferred Joint Venture
    3.3        
DDR Markaz II
    0.6       2.5  
                 
    $ 6.0     $ 7.4  
                 
 
In connection with the Service Holdings LLC joint venture, the Company guaranteed the base rental income from one to three years for various affiliates of the Service Holdings LLC joint venture in the aggregate amount of $2.8 million. The Company has not recorded a liability for the guarantee, as the subtenants of the Service Holdings LLC affiliates are paying rent as due. The Company has recourse against the other parties in the partnership in the event of default. No assets of the Company are currently held as collateral to pay this guarantee.
 
In the event of any loss or the reduction in the historic tax credit allocated or to be allocated to a joint venture partner in connection with a historic commercial parcel acquired in 2002, the Company guaranteed payment in the maximum amount of $0.7 million to the other joint venture partner. The Company has a liability recorded as of December 31, 2006, related to this guarantee. The Company does not have recourse against any other party in the event of default. No assets of the Company are currently held as collateral to pay this guarantee.
 
Related to one of the Company’s developments in Long Beach, California, the Company guaranteed the payment of any special taxes levied on the property within the City of Long Beach Community Facilities District No. 6 and attributable to the payment of debt service on the bonds for periods prior to the completion of certain improvements related to this project. In addition, an affiliate of the Company has agreed to make an annual payment of approximately $0.6 million to defray a portion of the operating expenses of a parking garage through the earlier of October 2032 or until the City’s parking garage bonds are repaid. There are no assets held as collateral or liabilities recorded related to these obligations.
 
Related to the development of a shopping center in San Antonio, Texas, the Company guaranteed the payment of certain road improvements expected to be funded by the City of San Antonio, Texas, of approximately $1.5 million. These road improvements are expected to be completed in 2007. There are no assets held as collateral or liabilities recorded related to this guarantee.
 
The Company continually monitors obligations and commitments entered into on its behalf. There have been no other material items entered into by the Company since December 31, 2003, through December 31, 2006, other than as described above.
 
Legal Matters
 
The Company and its subsidiaries are subject to various legal proceedings, which, taken together, are not expected to have a material adverse effect on the Company. The Company is also subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of its business, most of which are covered by


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insurance. While the resolution of all matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Company’s liquidity, financial position or results of operations.
 
12.  Minority Equity Interests, Operating Partnership Minority Interests, Preferred Shares, Common Shares and Common Shares in Treasury and Deferred Obligations
 
Minority Equity Interests
 
Minority equity interests consist of the following (in millions):
 
                 
    December 31  
    2006     2005  
 
Mervyns Joint Venture
  $ 77.6     $ 75.1  
Shopping centers and development parcels in Arizona, Missouri, New York, Texas and Utah
    8.2       6.8  
Business center in Massachusetts
    16.5       14.3  
Coventry
    2.3       3.0  
                 
    $ 104.6     $ 99.2  
                 
 
Operating Partnership Minority Interests
 
At December 31, 2006 and 2005, the Company had 872,373 and 1,349,822 OP Units outstanding, respectively. These OP Units, issued to different partnerships, are exchangeable, by the election of the OP Unit holder, and under certain circumstances at the option of the Company, into an equivalent number of the Company’s common shares or for the equivalent amount of cash. Most of these OP Units have registration rights agreements equivalent to the amount of OP Units held by the holder if the Company elects to settle in its common shares. The liability for the OP Units is classified on the Company’s balance sheet as operating partnership minority interests.
 
The OP Unit holders are entitled to receive distributions, per OP Unit, generally equal to the per share distributions on the Company’s common shares.
 
In 2004, the Company issued 0.5 million OP Units in conjunction with the purchase of assets from Benderson. In December 2005, Benderson exercised its option to convert its remaining 0.4 million OP Units (Note 3), effective February 2006. The Company agreed to issue an equivalent number of common shares of the Company. In 2004 the Company exchanged 284,304 OP Units for common shares of the Company including 60,260 OP Units issued to Benderson. Also in 2006, the Company purchased 32,274 OP Units for cash of $2.1 million. These transactions were treated as a purchase of minority interest.


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Preferred Shares
 
The Company’s preferred shares outstanding at December 31 are as follows (in thousands):
 
                 
    2006     2005  
 
Class F — 8.60% cumulative redeemable preferred shares, without par value, $250 liquidation value; 750,000 shares authorized; 600,000 shares issued and outstanding at December 31, 2006 and 2005
  $ 150,000     $ 150,000  
Class G — 8.0% cumulative redeemable preferred shares, without par value, $250 liquidation value; 750,000 shares authorized; 720,000 shares issued and outstanding at December 31, 2006 and 2005
    180,000       180,000  
Class H — 7.375% cumulative redeemable preferred shares, without par value, $500 liquidation value; 410,000 shares authorized; 410,000 shares issued and outstanding at December 31, 2006 and 2005
    205,000       205,000  
Class I — 7.5% cumulative redeemable preferred shares, without par value, $500 liquidation value; 360,000 shares authorized; 360,000 shares issued and outstanding at December 31, 2006 and 2005
    170,000       170,000  
                 
    $ 705,000     $ 705,000  
                 
 
In May 2004, the Company issued $170.0 million, 7.5% Preferred I Depositary shares and received net proceeds of approximately $164.2 million.
 
The Class F and G depositary shares represent 1/10 of a share of their respective preferred class of shares and have a stated value of $250 per share. The Class H and I depositary shares represent 1/20 of a share of a preferred share and have a stated value of $500 per share. The Class F, Class G, Class H and Class I depositary shares are not redeemable by the Company prior to March 27, 2007, March 28, 2008, July 28, 2008, and May 7, 2009, respectively, except in certain circumstances relating to the preservation of the Company’s status as a REIT.
 
The Company’s authorized preferred shares consist of the following:
 
  •  750,000 Class A Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Class B Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Class C Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Class D Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Class E Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Class F Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Class G Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Class H Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Class I Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Class J Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Class K Cumulative Redeemable Preferred Shares, without par value
 
  •  750,000 Non Cumulative preferred shares, without par value
 
Common Shares
 
The Company’s common shares have a $0.10 per share stated value.
 
In December 2006, the Company entered into forward sale agreements in anticipation of a merger (Note 21). Pursuant to the terms of the forward sale agreements, and subject to the Company’s right to elect cash settlement, the Company agreed to sell, upon physical settlement of such forward sale agreements, an aggregate of 11,599,134 of its common shares for approximately $750 million. The forward sale contract expires September 2007 and will


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be reflected in shareholders equity as the contract does not include any provision that could require the Company to net cash settle the contract. The Company will not receive any proceeds from the sale of its common shares until settlement of the forward sale agreements, which is expected to occur on or before September 2007.
 
Common share issuances over the three-year period ended December 31, 2006, are as follows (in millions):
 
                 
Issuance Date
  Shares     Net Proceeds  
 
December 2004
    5.45     $ 248  
May 2004
    15.0     $ 491  
 
Common Shares in Treasury and Deferred Obligations
 
In August 2006, the Company’s Board of Directors authorized the Company to repurchase 909,000 common shares of the Company’s common stock at a cost of $53.15 per share in connection with the convertible debt financing (Note 8).
 
In 2006, 2005 and 2004, certain officers and a director of the Company completed a stock for stock option exercise and received approximately 0.3 million, 0.1 million and 1.0 million common shares, respectively, in exchange for 0.2 million, 0.1 million and 0.6 million common shares of the Company. In addition, vesting of restricted stock grants approximating less than 0.1 million, 0.1 million and 0.1 million shares in 2006, 2005 and 2004, respectively, of common stock of the Company was deferred. The Company recorded $0.8 million, $1.4 million and $1.9 million in 2006, 2005 and 2004, respectively, in shareholders’ equity as deferred obligations for the vested restricted stock deferred into the Company’s non-qualified deferred compensation plans.
 
13. Other Income
 
Other income from continuing operations was comprised of the following (in thousands):
 
                         
    For the Year Ended December 31  
    2006     2005     2004  
 
Lease terminations and bankruptcy settlements
  $ 13,313     $ 5,912     $ 9,827  
Acquisitions and financing fees
    414       2,424       2,997  
Other, net
    459       964       257  
                         
Total other income
  $ 14,186     $ 9,300     $ 13,081  
                         
 
14. Comprehensive Income
 
Comprehensive income is as follows (in thousands):
 
                         
    For the Year Ended December 31  
    2006     2005     2004  
 
Net income
  $ 253,264     $ 282,643     $ 269,762  
Other comprehensive income:
                       
Change in fair value of interest rate contracts
    (2,729 )     10,619       867  
Amortization of interest rate contracts
    (1,454 )     (520 )      
Foreign currency translation
    1,587              
                         
Other comprehensive income
    (2,596 )     10,099       867  
                         
Total comprehensive income
  $ 250,668     $ 292,742     $ 270,629  
                         
 
15. Discontinued Operations and Disposition of Real Estate and Real Estate Investments
 
Discontinued Operations
 
During the year ended December 31, 2006, the Company sold six properties and one property was classified as held for sale at December 31, 2006, which were classified as discontinued operations for the years ended


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December 31, 2006, 2005 and 2004, aggregating 1.0 million square feet. The Company did not have any properties considered as held for sale at December 31, 2005 or 2004. Included in discontinued operations for the three years ending December 31, 2006, are 57 properties aggregating 5.6 million square feet. Of these properties, 30 previously had been included in the shopping center segment and 27 of these properties previously had been included in the business center segment (Note 20). The operations of these properties have been reflected on a comparative basis as discontinued operations in the consolidated financial statements for the three years ended December 31, included herein.
 
The balance sheet relating to the assets held for sale and the operating results relating to assets sold or designated as assets held for sale after December 31, 2003, are as follows (in thousands):
 
         
    December 31
 
    2006  
 
Land
  $ 685  
Building
    7,679  
Other real estate assets
    194  
         
      8,558  
Less: Accumulated depreciation
    (3,326 )
         
      5,232  
Other assets
    92  
         
Total assets held for sale
  $ 5,324  
         
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
Revenues
  $ 6,627     $ 29,008     $ 42,890  
                         
Expenses:
                       
Operating
    1,406       10,926       14,967  
Impairment charge
          642       586  
Interest, net
    1,342       5,152       6,917  
Depreciation
    1,308       7,360       9,864  
Minority interests
          67       (47 )
                         
      4,056       24,147       32,287  
                         
Income from discontinued operations
    2,571       4,861       10,603  
Gain on dispostion of real estate
    11,051       16,667       8,561  
                         
    $ 13,622     $ 21,528     $ 19,164  
                         
 
The Company sold properties and recorded gains on disposition as described below, for the three years ended December 31, 2006 (in millions):
 
                 
    Number
       
    of
    Gain on
 
    Properties
    Dispostion of
 
    Sold     Real Estate  
 
2006
    6     $ 11.1  
2005
    35       16.7  
2004
    15       8.6  
 
In the second quarter of 2005, the Company recorded an impairment charge of $0.6 million relating to one remaining former Best Products site sold in the third quarter of 2005. In the third quarter of 2004, the Company recorded an impairment charge of $0.6 million relating to the sale of a business center in the fourth quarter of 2004.


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These impairment charges were reclassified into discontinued operations (see table above) due to the sale of the property.
 
Disposition of Real Estate and Real Estate Investments
 
The Company recorded gains on disposition of real estate and real estate investments for the three years ended December 31, 2006, as follows (in millions):
 
                         
    For the Year Ended December 31  
    2006     2005     2004  
 
Transfer of assets to the Service Holdings LLC Joint Venture (1)
  $ 6.1     $     $  
Transfer of assets to the DPG Realty Holdings Joint Venture (2)
    0.6             4.2  
Transfer of assets to the Markaz II Joint Venture (3)
                2.5  
Transfer of assets to the MDT Joint Venture (4)
    9.2       81.2       65.4  
Transfer of assets to the MDT Preferred Joint Venture (5)
    38.9              
Land sales (6)
    14.8       6.0       14.3  
Previously deferred gains (7)
    1.3       0.9       0.8  
Gain (loss) on disposition of non-core assets (8)
    1.1             (2.6 )
                         
    $ 72.0     $ 88.1     $ 84.6  
                         
 
 
(1) The Company transferred 51 retail sites previously occupied by Service Merchandise. This disposition is not classified as discontinued operations because of the Company’s continuing involvement due to its retained ownership interest and management agreements.
 
(2) The Company transferred a newly developed expansion area adjacent to a shopping center owned by the joint venture in 2006. The Company transferred 12 assets in 2004. These dispositions are not classified as discontinued operations because of the Company’s continuing involvement due to its retained ownership interest and management agreements.
 
(3) The Company transferred 13 assets in 2004. These dispositions are not classified as discontinued operations because of the Company’s continuing involvement due to its retained ownership interest and management agreements.
 
(4) The Company transferred newly developed expansion areas adjacent to four shopping centers owned by the joint venture in 2006. The Company transferred 12 and 11 assets in 2005 and 2004, respectively. These dispositions are not classified as discontinued operations because of the Company’s continuing involvement due to its retained ownership interest and management agreements.
 
(5) The Company transferred six assets in 2006. These dispositions are not classified as discontinued operations because of the Company’s continuing involvement due to its retained ownership interest and management agreements.
 
(6) These dispositions do not qualify for discontinued operations presentation.
 
(7) These were primarily attributable to the recognition of additional gains from the leasing of units associated with master lease obligations and other obligations on disposed assets.
 
(8) The loss recorded in 2004 may be recovered through an earnout arrangement with the buyer over the next several years.
 
16. Transactions With Related Parties
 
The Company sold a 4% interest in Coventry to certain Coventry employees in 2005. At December 31, 2006, the Company owns a 75% interest in Coventry.
 
As discussed in Note 2, the Company entered into the KLA/SM joint venture in March 2002 with Lubert-Adler Real Estate Funds, which is owned in part by a director of the Company. In August 2006, the Company purchased its then partners’ approximate 75% interest in the remaining 52 assets at a gross purchase price of approximately $138 million relating to the partners’ ownership, based on a total valuation of approximately $185 million. The Company sold 51 of the assets to the Service Holding LLC in September 2006.
 
In 1999, the Company entered into a joint venture owned 75% by Lubert-Adler Real Estate Funds, which is owned in part by a director of the Company and 25% by the Company. The asset, a shopping center in Coon Rapids, Minnesota, was sold to the MDT Joint Venture in November 2003. The Company had a management agreement and


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performed certain administrative functions for the joint venture pursuant to which the Company earned management, leasing, development fees and interest income of $2.6 million in 2004.
 
As discussed in Note 3, in 2005, the Company entered into the Mervyns Joint Venture that acquired the underlying real estate of 36 operating Mervyns stores for approximately $396.2 million. In 2006, the Mervyns Joint Venture purchased one additional site for approximately $11.0 million and the Company purchased one additional site for approximately $12.4 million. In 2005, the Company also purchased an additional site for approximately $14.4 million. The assets were acquired from several funds, one of which was managed by Lubert-Adler Real Estate Funds, which is owned in part by a director of the Company.
 
The Company utilizes a law firm for one of its development projects in which the father of one of the Company’s executive officers is a partner. The Company paid less than $0.1 million to this law firm in 2006 and 2005.
 
In 1995, the Company entered into a lease for office space owned by the mother of the Chairman of the Board and CEO (“CEO”). General and administrative rental expense associated with this office space aggregated $0.6 million, $0.6 million and $0.5 million for the years ended December 31, 2006, 2005 and 2004, respectively. The Company periodically utilizes a conference center owned by the trust of Bert Wolstein, deceased founder of the Company, father of the CEO, and one of its principal shareholders, for Company-sponsored events and meetings. The Company paid less than $0.1 million in 2006 and 2005 for the use of this facility.
 
The Company was also a party to a lawsuit that involved various claims against the Company relating to certain management-related services provided by the Company. The owner of the properties had entered into a management agreement with two entities (“Related Entities”) controlled by one of its principal shareholders and a former director of the Company, to provide management services. The Company agreed to perform those services on behalf of the Related Entities, and the fees paid by the owner of the properties were paid to the Company. One of the services to be provided by the Company was to obtain and maintain casualty insurance for the owner’s properties. A loss was incurred at one of the owner’s properties and the insurance company denied coverage. The Company filed a lawsuit against the insurance company. Separately, the Company entered into a settlement pursuant to which the Company paid $750,000 to the owner of the properties in 2004 and agreed to indemnify the Related Entities for any loss or damage incurred by either of the Related Entities if it were judicially determined that the owner of the property is not entitled to receive insurance proceeds under a policy obtained and maintained by the Company. The lawsuit against the insurance company was resolved with the insurance company agreeing to compensate the claimant for the loss as well as reimburse the Company for a portion of its attorneys fees.
 
In connection with the settlement, the CEO entered into a joint venture with the principal of the owner of the properties, and the Company entered into a management agreement with the joint venture effective February 1, 2004. The CEO holds an ownership interest of approximately 25% in the joint venture. The Company provides management and administrative services and receives fees equal to 3% of the gross income of each property for which services are provided, but not less than $5,000 per year from each such property, of which an aggregate of $0.1 million was earned in 2006 and 2005. The management agreement expires on February 28, 2007, unless terminated earlier at any time by the joint venture upon 30 days notice to the Company or by the Company upon 60 days notice to the joint venture.
 
Transactions with the Company’s equity affiliates are described in Note 2.
 
17.  Benefit Plans
 
Stock-Based Compensation
 
The Company’s stock option and equity-based award plans provide for grants to employees of the Company of incentive and non-qualified stock options to purchase common shares of the Company, rights to receive the appreciation in value of common shares, awards of common shares subject to restrictions on transfer, awards of common shares issuable in the future upon satisfaction of certain conditions and rights to purchase common shares and other awards based on common shares. Under the terms of the award plans, awards available for grant approximated 2.1 million shares at December 31, 2006. Options may be granted at per share prices not less than fair market value at the date of grant, and in the case of incentive options, must be exercisable within the maximum


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contractual term of 10 years thereof (or, with respect to incentive options granted to certain shareholders, within five years thereof). Options granted under the plans generally vest one year after the date of grant as to one-third of the optioned shares, with the remaining options vesting over the following two-year period.
 
The Company grants options to its directors. Such options are granted at the fair market value on the date of grant. Options granted generally become exercisable one year after the date of grant as to one-third of the options, with the remaining options being exercisable over the following two-year period.
 
Effective January 1, 2006, the Company adopted SFAS 123(R) using the modified prospective method. The Company’s consolidated financial statements as of and for the year ended December 31, 2006, reflect the impact of SFAS 123(R). In accordance with the modified prospective method, the Company’s consolidated financial statements for prior periods have not been restated to reflect the impact of SFAS 123(R). Prior to the adoption of FAS 123(R), the Company applied APB 25, “Accounting for Stock Issued to Employees,” in accounting for its plans. Accordingly, the Company did not recognize compensation cost for stock options when the option exercise price equaled or exceeded the market value on the date of the grant. See Note 1 for disclosure of pro forma information regarding net income and earnings per share for 2005 and 2004. Assuming application of the fair value method pursuant to SFAS 123, the compensation cost, which was required to be charged against income for all of the above mentioned plans, was $5.3 million and $5.1 million for 2005 and 2004, respectively.
 
The fair values for stock-based awards granted in 2006, 2005 and 2004 were estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
 
             
    For the Year Ended December 31
    2006   2005   2004
 
Weighted average fair value of grants
  $6.50   $4.52   $3.40
Risk-free interest rate (range)
  4.4% - 5.1%   3.2% - 4.3%   2.2% - 3.3%
Dividend yield (range)
  4.2% - 5.0%   4.6% - 5.4%   4.5% - 5.8%
Expected life (range)
  3 - 4 years   3 - 6 years   3 - 5 years
Expected volatility (range)
  19.8% - 20.3%   19.8% - 22.9%   19.9% - 22.7%
 
The risk-free rate was based upon a U.S. Treasury Strip with a maturity date that approximates the expected term of the award. The expected life of the award was derived by referring to actual exercise experience. The expected volatility of the stock was derived by referring to changes in the Company’s historical stock prices over a time frame similar to the expected life of the award. The Company has no reason to believe that future stock volatility is likely to materially differ from historical volatility.


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The following table reflects the stock option activity described above (aggregate intrinsic value in thousands):
 
                                         
                      Weighted-
       
                Weighted-
    Average
       
                Average
    Remaining
    Aggregate
 
    Number of Options     Exercise
    Contractual
    Intrinsic
 
    Employees     Directors     Price     Term     Value  
 
Balance December 31, 2003
    2,785       125     $ 20.48                  
Granted
    665             36.40                  
Exercised
    (1,402 )     (37 )     20.06                  
Forfeited
    (72 )           26.92                  
                                         
Balance December 31, 2004
    1,976       88     $ 25.66                  
Granted
    622             41.96                  
Exercised
    (639 )     (26 )     20.00                  
Forfeited
    (56 )           34.76                  
                                         
Balance December 31, 2005
    1,903       62     $ 32.46                  
Granted
    302             51.19                  
Exercised
    (679 )     (20 )     29.31                  
Forfeited
    (41 )           42.85                  
                                         
Balance December 31, 2006
    1,485       42     $ 37.28       7.4     $ 39,205  
                                         
Options exercisable at December 31,
                                       
2006
    616       42     $ 28.75       6.1     $ 22,517  
2005
    635       62       25.22       6.2       15,198  
2004
    532       84       18.63       5.7       15,865  
 
The following table summarizes the characteristics of the options outstanding at December 31, 2006 (in thousands):
 
                                         
Options Outstanding   Options Exercisable
        Weighted-
           
    Outstanding
  Average
  Weighted-
      Weighted-
Range of
  as of
  Remaining
  Average
  Exercisable as
  Average
Exercise Prices
  12/31/06   Contractual Life   Exercise Price   of 12/31/06   Exercise Price
 
$11.50-$16.00
    26,211       3.4     $ 13.18       26,211     $ 13.18  
$16.01-$22.50
    130,343       3.7       20.10       130,343       20.10  
$22.51-$29.00
    196,990       6.0       23.38       196,990       23.38  
$29.01-$35.50
    37,240       6.8       29.86       35,572       29.63  
$35.51-$42.00
    789,020       7.7       39.01       261,356       38.02  
$42.01-$48.50
    60,101       8.6       45.86       7,898       46.30  
$48.51-$56.00
    287,291       9.2       51.21              
                                         
      1,527,196       7.4     $ 37.28       658,370     $ 28.75  
                                         


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The following table reflects the activity for unvested stock option awards for the year ended December 31, 2006 (in thousands):
 
                 
          Weighted-
 
          Average
 
          Grant Date
 
    Options     Fair Value  
 
Unvested at December 31, 2005
    1,268     $ 4.27  
Granted
    302       6.50  
Vested
    (660 )     3.74  
Forfeited
    (41 )     4.64  
                 
Unvested at December 31, 2006
    869     $ 5.42  
                 
 
As of December 31, 2006, total unrecognized stock option compensation cost of share-based compensation arrangements aggregated $2.6 million. The cost is expected to be recognized over a weighted-average period of approximately 0.9 years.
 
Exercises of Employee Stock Options
 
The total intrinsic value of options exercised for the year ended December 31, 2006, was approximately $17.6 million. The total cash received from employees as a result of employee stock option exercises for the year ended December 31, 2006, was approximately $11.2 million. The Company settles employee stock option exercises primarily with newly issued common shares and, occasionally, with treasury shares.
 
Performance Units
 
In 2000, the Board of Directors approved a grant of 30,000 Performance Units to the Company’s CEO. Pursuant to the provisions of the Plan, the 30,000 Performance Units were converted on December 31, 2004, to 200,000 restricted common shares based on the annualized total shareholders’ return for the five-year period ended December 31, 2004. These shares will vest over the following five-year period. In 2002, the Board of Directors approved grants aggregating 70,000 Performance Units to the Company’s CEO, President and Senior Executive Vice President. The 70,000 Performance Units granted to each of the individuals in 2002 converted to common restricted shares in amounts ranging from 70,000 to 466,666 common shares based on the annualized total shareholders’ return, as defined by the Plan, for the five-year period ending December 31, 2006. These restricted shares will vest over the following five-year period.
 
The fair value of each Performance Unit grant was estimated on the date of grant using a simulation approach model using the following assumptions:
 
     
    Range
 
Risk-free interest rate
  4.4%-6.4%
Dividend yield
  7.8%-10.9%
Expected life
  10 years
Expected volatility
  20%-23%
 
The performance units awards granted in 2000, were converted into restricted stock after the measurement date. The following table reflects the activity for the unvested awards for the year ended December 31, 2006 (in thousands):
 
         
    Awards  
 
Unvested at December 31, 2005
    170  
Vested
    (34 )
         
Unvested at December 31, 2006
    136  
         


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As of December 31, 2006, total unrecognized compensation cost of the 2000 and 2002 Performance Units granted, aggregated $0.2 million and $1.4 million, respectively. The cost is expected to be recognized over a three- and five-year term, respectively.
 
Outperformance Awards
 
In December 2005 and August 2006, the Board of Directors approved a grant of outperformance long-term incentive plan agreements with certain executive officers. The outperformance agreements provide for awards of the Company’s common shares, or an equivalent amount in cash, at the Company’s option, to certain officers of the Company if stated performance metrics are achieved.
 
With respect to the award plans granted to the Company’s Chief Executive Officer and Senior Executive Vice President (the “Senior Executive Officers”), the performance metrics are as follows: (a) a specified level of growth in the Company’s funds from operations (the “FFO Target”), (b) an increase in the market price of the Company’s common shares (the “Share Price Target”), (c) an increase in the market price of the Company’s common shares relative to the increase in the market prices of the relative common stock of companies included in a specified peer group (the “Comparative Share Price Target,”) together with the Share Price Target (the “Share Price Metrics”) and (d) non-financial performance criteria established by the Compensation Committee of the Board of Directors of the Company (the “Discretionary Metrics)” and, together with the FFO Target and the Share Price Metrics (the “Senior Executive Officer Targets”). The beginning of the measurement period for the Senior Executive Officer Targets is January 1, 2005, because the prior performance award measurement period for the Chief Executive Officer ended December 31, 2004. The current measurement period ends the earlier of December 31, 2007, or the date of a change in control.
 
If the FFO Target is achieved, the Company will issue to the Senior Executive Officers a number of common shares equal to (a) the dollar value assigned to the FFO Target set forth in such officer’s outperformance agreement, divided by (b) the greater of (i) the average closing price for the common shares over the 20 trading days ending on the applicable valuation date (as defined in the outpeformance agreements) or (ii) the closing price per common share on the last trading date before the senior officer valuation date (as defined in the outperformance agreements), or the equivalent amount of cash, at the Company’s option, as soon as practicable following the applicable vesting date, March 1, 2008.
 
If one or both of the Share Price Metrics are achieved, the Company will issue to the officer a number of shares set forth in the agreement, depending on whether one or both of the Share Price Metrics have been achieved, or the equivalent amount of cash, at the Company’s option, as soon as practicable following the applicable vesting date, March 1, 2008. The value of the number of common shares or equivalent amount paid in cash with respect to the Share Price Metrics that may be paid is capped at the amount specified in each Senior Executive Officer’s outperformance agreement.
 
If in the discretion of the Compensation Committee, the Discretionary Metrics have been achieved, the Company will issue to the officer a number of common shares equal to (a) the dollar value assigned to the Discretionary Metrics set forth in such Senior Executive Officer’s outperformance agreement, (b) divided by the greater of (i) the average closing price for the common shares over the twenty trading days ending on the valuation date (as defined in the outperformance agreements), or (ii) the closing price per common share on the last trading date before the senior officer valuation date (as defined in the outperformance agreements), or the equivalent amount of cash, at the Company’s option, as soon as practicable following the applicable vesting date, March 1, 2008.
 
With respect to nine additional executive officers (the “Officers”), the performance metrics are as follows: (a) the FFO Target, (b) a total return to the Company’s shareholders target (the “TRS Target”) and (c) a total return to the Company’s shareholders target relative to that of the total return to shareholders of companies included in a specified peer group (the “Comparative TRS Target,” together with the TRS Target, the “TRS Metrics” and, together with the FFO Target and the TRS Target, the “Officer Targets”). The measurement period for the Officer Targets is January 1, 2005, through the earlier of December 31, 2009, or the date of a change in control.


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If the FFO Target is achieved, the Company will issue to the Officer a number of common shares equal to (a) the dollar value assigned to the FFO Target set forth in such officer’s outperformance agreement and (b) divided by the greater of (i) the average closing price for the common shares over the twenty trading days ending on the valuation date (as defined in the outperformance agreements) or (ii) the closing price per common share on the last trading date before the officer valuation date (as defined in the outperformance agreements), or the equivalent amount of cash, at the Company’s option, as soon as practicable following the applicable vesting date, March 1, 2010.
 
If one or both of the TRS Metrics are achieved, the Company will issue to the Officer a number of shares set forth in the agreement, depending on whether one or both of the TRS Metrics have been achieved, or the equivalent amount of cash, at the Company’s option, as soon as practicable following the applicable vesting date. The value of the number of common shares or equivalent amount paid in cash with respect to the TRS Metrics that may be paid is capped at an amount specified in each Officer’s outperformance agreement, which management believes does not represent an obligation that is based solely or predominantly on a fixed monetary amount known at the grant date.
 
The fair value of each outperformance unit grant for the share price metrics was estimated on the date of grant using a Monte Carlo approach model using the following assumptions:
 
     
    Range
 
Risk-free interest rate
  4.4%-5.0%
Dividend yield
  4.4%-4.5%
Expected life
  3-5 years
Expected volatility
  19%-21%
 
As of December 31, 2006, there was $1.2 million and $1.1 million of total unrecognized compensation costs related to the two market metric components associated with the Senior Executive Officer and the Officers outperformance plans granted, respectively, and expected to be recognized over a 3.25-and 1.25-year term, respectively.
 
Restricted Stock Awards
 
In 2004, 2005 and 2006, the Board of Directors approved a grant of 105,974, 88,360 and 64,940 restricted shares of common stock, respectively, to several executives and outside directors of the Company. The restricted stock grants vest in equal annual amounts over a five-year period for the Company’s executives and over a three-year period for the restricted grants in 2004 to the outside directors of the Company. Restricted stock awards have the same cash dividend and voting rights as other common stock and are considered to be currently issued and outstanding. These grants have a weighted-average fair value at the date of grant ranging from $23.00 to $50.81, which was equal to the market value of the Company’s stock at the date of grant. In 2006 and 2005, grants of 9,497 and 6,912 shares of common stock, respectively, were issued as compensation to the outside directors. These grants had a weighted-average fair value at the date of grant ranging from $45.60 to $61.12, which was equal to the market value of the Company’s stock at the date of grant.
 
The following table reflects the activity for unvested restricted stock awards for the year ended December 31, 2006 (in thousands):
 
                 
          Weighted-
 
          Average
 
          Grant Date
 
    Awards     Fair Value  
 
Unvested at December 31, 2005
    191     $ 33.46  
Granted
    65       50.81  
Vested
    (94 )     32.37  
                 
Unvested at December 31, 2006
    162     $ 41.04  
                 
 
As of December 31, 2006, total unrecognized compensation of restricted stock award arrangements granted under the plans aggregated $6.6 million The cost is expected to be recognized over a weighted-average period of approximately 1.1 years.


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During 2006, 2005 and 2004, approximately $8.3 million, $5.7 million and $6.3 million, respectively, was charged to expense associated with awards under the equity-based award plans relating to stock grants, restricted stock and Performance Units.
 
401(k) Plan
 
The Company has a 401(k) defined contribution plan, covering substantially all of the officers and employees of the Company, that permits participants to defer up to a maximum of 15% of their compensation. The Company matched the participant’s contribution in an amount equal to 50% of the participant’s elective deferral for the plan year up to a maximum of 6% of a participant’s base salary plus annual cash bonus, not to exceed the sum of 3% of the participant’s base salary plus annual cash bonus. The Company’s plan allows for the Company to also make additional discretionary contributions. No discretionary contributions have been made. Employees’ contributions are fully vested, and the Company’s matching contributions vest 20% per year. Once an employee has been with the Company five years, all matching contributions are fully vested. The Company funds all matching contributions with cash. The Company’s contributions for each of the three years ended December 31, 2006, 2005 and 2004, were $0.6 million, $0.6 million and $0.5 million, respectively. The 401(k) plan is fully funded at December 31, 2006.
 
Elective Deferred Compensation Plan
 
The Company has a non-qualified elective deferred compensation plan for certain officers that permits participants to defer up to 100% of their base salaries and annual performance-based cash bonuses, less applicable taxes and benefits deductions. The Company matched the participant’s contribution to any participant who has contributed the maximum permitted under the 401(k) plan. This matching contribution is equal to the difference between (a) 3% of the sum of the participant’s base salary and annual performance-based bonus deferred under the 401(k) plan and the deferred compensation combined and (b) the actual employer matching contribution under the 401(k) plan. Deferred compensation related to an employee contribution is charged to expense and is fully vested. Deferred compensation related to the Company’s matching contribution is charged to expense and vests 20% per year. Once an employee has been with the Company five years, all matching contributions are fully vested. The Company’s contribution was $0.1 million annually for the three years ended December 31, 2006. At December 31, 2006, 2005 and 2004, deferred compensation under this plan aggregated approximately $12.3 million, $9.9 million and $8.7 million, respectively. The plan is fully funded at December 31, 2006.
 
Equity Deferred Compensation Plan
 
In 2003, the Company established the Developers Diversified Realty Corporation Equity Deferred Compensation Plan (the “Plan”), a non-qualified compensation plan for certain officers and directors of the Company to defer the receipt of restricted shares and, for compensation earned prior to December 31, 2004, the gain otherwise recognizable upon the exercise of options (see Note 12 regarding the deferral of stock to this Plan.) At December 31, 2006 and 2005, there were 0.6 million common shares of the Company in the Plan in each year, valued at $39.6 million and $28.6 million, respectively. The Plan is fully funded at December 31, 2006.
 
Other Compensation
 
During 2006, 2005 and 2004, the Company recorded a $0.7 million, $1.5 million and $0.8 million charge, respectively, as additional compensation to the Company’s CEO, relating to an incentive compensation agreement associated with the Company’s investment in the Retail Value Fund Program. Pursuant to this agreement, the Company’s CEO is entitled to receive up to 25% of the distributions made by Coventry (Note 2), provided the Company achieves certain performance thresholds in relation to funds from operations growth and/or total shareholder return.
 
18.  Earnings and Dividends Per Share
 
Earnings Per Share (“EPS”) have been computed pursuant to the provisions of SFAS No. 128. The following table provides a reconciliation of income from continuing operations and the number of common shares used in the


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computations of “basic” EPS, which utilizes the weighted average of common shares outstanding without regard to dilutive potential common shares, and “diluted” EPS, which includes all such shares.
 
                         
    For the Year Ended December 31,
 
    (In thousands, except per share amounts)  
    2006     2005     2004  
 
Income from continuing operations
  $ 167,619     $ 172,975     $ 168,957  
Add: Gain on disposition of real estate and real estate investments
    72,023       88,140       84,642  
Less: Preferred stock dividends
    (55,169 )     (55,169 )     (50,706 )
                         
Basic — Income from continuing operations applicable to common shareholders
    184,473       205,946       202,893  
Add: Operating partnership minority interests
                2,607  
                         
Diluted — Income from continuing operations applicable to common shareholders
  $ 184,473     $ 205,946     $ 205,500  
                         
Number of Shares:
                       
Basic — Average shares outstanding
    109,002       108,310       96,638  
Effect of dilutive securities:
                       
Stock options
    546       677       997  
Operating partnership minority interests
                1,308  
Restricted stock
    65       155       81  
                         
Diluted — Average shares outstanding
    109,613       109,142       99,024  
                         
Per share data:
                       
Basic earnings per share data:
                       
Income from continuing operations applicable to common shareholders
  $ 1.69     $ 1.90     $ 2.10  
Income from discontinued operations
    0.13       0.20       0.20  
Cumulative effect of adoption of a new accounting standard
                (0.03 )
                         
Net income applicable to common shareholders
  $ 1.82     $ 2.10     $ 2.27  
                         
Diluted earnings per share data:
                       
Income from continuing operations applicable to common shareholders
  $ 1.69     $ 1.88     $ 2.08  
Income from discontinued operations
    0.12       0.20       0.19  
Cumulative effect of adoption of a new accounting standard
                (0.03 )
                         
Net income applicable to common shareholders
  $ 1.81     $ 2.08     $ 2.24  
                         
 
Options to purchase 1.5 million, 2.0 million and 2.1 million shares of common stock were outstanding at December 31, 2006, 2005 and 2004, respectively (Note 17), a portion of which has been reflected above in diluted per share amounts using the treasury stock method. Options aggregating 0.1 million were antidilutive at December 31, 2005, and none of the options outstanding at 2006 or 2004 were antidilutive. Accordingly, the antidilutive options were excluded from the computations.
 
Basic average shares outstanding do not include restricted shares totaling 161,958, 191,406 and 202,198 that were not vested at December 31, 2006, 2005 and 2004, respectively, or Performance Units totaling 136,000 and 170,000, that were not vested at December 31, 2006 and 2005, respectively (there were none in 2004).
 
The exchange into common stock of the minority interests, associated with OP Units, was not included in the computation of diluted EPS for 2006 or 2005 because the effect of assuming conversion was antidilutive (Note 12).


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The Senior Convertible Notes issued in August 2006, which are convertible into common shares of the Company at a price of $65.11, were not included in the computation of diluted EPS for 2006 as the Company’s stock price did not exceed the strike price of the conversion feature (Note 8). These notes were not outstanding in 2005 or 2004.
 
The forward equity contract entered into in December 2006 for 11.6 million common shares of the Company, was not included in the computation of diluted EPS for 2006 because the effect of assuming conversion was antidilutive (Note 12). This contract was not outstanding in 2005 or 2004.
 
19. Federal Income Taxes
 
The Company elected to be treated as a Real Estate Investment Trust (“REIT”) under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 1993. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that the Company distribute at least 90% of its taxable income to its stockholders. It is management’s current intention to adhere to these requirements and maintain the Company’s REIT status. As a REIT, the Company generally will not be subject to corporate level federal income tax on taxable income it distributes to its stockholders. As the Company distributed sufficient taxable income for the three years ended December 31, 2006, no U.S. federal income or excise taxes were incurred.
 
If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. In addition, the Company has two taxable REIT subsidiaries that generate taxable income from non-REIT activities and are subject to federal, state and local income taxes.
 
At December 31, 2006, 2005 and 2004, the tax cost basis of assets was approximately $7.3 billion, $6.9 billion and $5.6 billion, respectively.
 
The following represents the combined activity of all of the Company’s taxable REIT subsidiaries (in thousands):
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
Book income (loss) before income taxes
  $ 7,770     $ (5,166 )   $ (5,952 )
                         
Components of income tax (benefit) expense are as follows:
                       
Current:
                       
Federal
  $ 3,410     $     $  
State and local
    490              
                         
      3,900              
                         
Deferred:
                       
Federal
    (6,428 )     (1,875 )     366  
State and local
    (945 )     (276 )     53  
                         
      (7,373 )     (2,151 )     419  
                         
Total (benefit) expense
  $ (3,473 )   $ (2,151 )   $ 419  
                         
 
The 2006 income tax benefit is primarily attributable to the Company’s ability to deduct intercompany interest costs due to the increased gain on disposition of real estate. The allowance of intercompany interest expense within the Company’s taxable REIT subsidiaries is subject to certain intercompany limitations based upon taxable income as required under Internal Revenue Code Section 163(j).


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The differences between total income tax expense or benefit and the amount computed by applying the statutory federal income tax rate to income before taxes were as follows (in thousands):
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
Statutory rate of 34% applied to pre-tax income (loss)
  $ 2,642     $ (1,757 )   $ (2,024 )
Effect of state and local income taxes, net of federal tax benefit
    388       (258 )     (298 )
Valuation allowance (decrease) increase
    (13,043 )     2,855       (1,226 )
Other
    6,540       (2,991 )     3,967  
                         
Total (benefit) expense
  $ (3,473 )   $ (2,151 )   $ 419  
                         
Effective tax rate
    (44.70 )%     41.64 %     (7.04 )%
                         
 
Deferred tax assets and liabilities of the Company’s taxable REIT subsidiaries were as follows (in thousands):
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
Deferred tax assets (1)
  $ 45,100     $ 53,394     $ 49,390  
Deferred tax liabilities
    (237 )     (2,861 )     (3,863 )
Valuation allowance (1)
    (36,037 )     (49,080 )     (46,225 )
                         
Net deferred tax asset (liability)
  $ 8,826     $ 1,453     $ (698 )
                         
 
 
(1) The majority of the deferred tax assets and valuation allowance is attributable to interest expense, subject to limitations and basis differentials in assets due to purchase price accounting. Reconciliation of GAAP net income to taxable income is as follows (in thousands):
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
GAAP net income
  $ 253,263     $ 282,643     $ 269,762  
Add: Book depreciation and amortization (1)
    93,189       64,854       38,999  
Less: Tax depreciation and amortization (1)
    (80,852 )     (52,362 )     (31,066 )
Book/tax differences on gains/losses from capital transactions
    12,161       (4,382 )     (7,006 )
Joint venture equity in earnings, net (1)
    (41,694 )     (111,351 )     (64,578 )
Dividends from subsidiary REIT investments
    33,446       96,868       32,997  
Deferred income
    (2,136 )     1,495       (2,085 )
Compensation expense
    (9,215 )     (10,589 )     2,301  
Legal judgment
                (9,190 )
Miscellaneous book/tax differences, net
    (6,068 )     (12,186 )     (8,503 )
                         
Taxable income before adjustments
    252,094       254,990       221,631  
Less: Capital gains
    (69,977 )     (84,041 )     (73,110 )
                         
Taxable income subject to the 90% dividend requirement
  $ 182,117     $ 170,949     $ 148,521  
                         
 
 
(1) Depreciation expense from majority-owned subsidiaries and affiliates, which are consolidated for financial reporting purposes, but not for tax reporting purposes, is included in the reconciliation item “Joint venture equity in earnings, net.”


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Reconciliation between cash dividends paid and the dividends paid deduction is as follows (in thousands):
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
Cash dividends paid
  $ 306,929     $ 285,710     $ 226,537  
Less: Dividends designated to prior year
    (6,900 )     (14,651 )     (19,557 )
Plus: Dividends designated from the following year
    6,900       6,900       14,651  
Less: Portion designated capital gain distribution
    (69,977 )     (84,041 )     (73,110 )
Less: Return of capital
    (54,835 )     (22,969 )      
                         
Dividends paid deduction
  $ 182,117     $ 170,949     $ 148,521  
                         
 
Characterization of distributions is as follows (per share):
 
                         
    For the Year Ended December 31,  
    2006     2005     2004  
 
Ordinary income
  $ 1.31     $ 1.24     $ 1.19  
Capital gains
    0.37       0.44       0.51  
Return of capital
    0.50       0.21        
Unrecaptured Section 1250 gain
    0.13       0.17       0.08  
                         
    $ 2.31     $ 2.06     $ 1.78  
                         
 
All or a portion of the fourth quarter dividends for each of the years ended December 31, 2006, 2005 and 2004, have been allocated and reported to shareholders in the subsequent year. Dividends per share reported to shareholders for the years ended December 31, 2006, 2005 and 2004, are summarized as follows:
 
                                         
          Gross
                   
2006
  Date
    Ordinary
    Capital Gain
    Return of
    Total
 
Dividends
  Paid     Income     Distributions     Capital     Dividends  
 
4th quarter 2005
    01/06/06     $ 0.30     $ 0.12     $ 0.12     $ 0.54  
1st quarter
    04/03/06       0.33       0.13       0.13       0.59  
2nd quarter
    07/05/06       0.34       0.12       0.13       0.59  
3rd quarter
    10/02/06       0.34       0.13       0.12       0.59  
4th quarter
    01/08/07                          
                                         
            $ 1.31     $ .50     $ .50     $ 2.31  
                                         
 
                                         
          Gross
                   
2005
  Date
    Ordinary
    Capital Gain
    Return of
    Total
 
Dividends
  Paid     Income     Distributions     Capital     Dividends  
 
4th quarter 2004
    01/06/05     $ 0.26     $ 0.13     $ 0.05     $ 0.44  
1st quarter
    04/04/05       0.32       0.16       0.06       0.54  
2nd quarter
    07/05/05       0.33       0.16       0.05       0.54  
3rd quarter
    10/03/05       0.33       0.16       0.05       0.54  
4th quarter
    01/08/06                          
                                         
            $ 1.24     $ 0.61     $ 0.21     $ 2.06  
                                         
 


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          Gross
             
2004
  Date
    Ordinary
    Capital Gain
    Total
 
Dividends
  Paid     Income     Distributions     Dividends  
 
4th quarter 2003
    01/05/04     $ 0.18     $ 0.10     $ 0.28  
1st quarter
    04/05/04       0.31       0.15       0.46  
2nd quarter
    07/06/04       0.31       0.15       0.46  
3rd quarter
    10/04/04       0.34       0.17       0.51  
4th quarter
    01/06/05       0.05       0.02       0.07  
                                 
            $ 1.19     $ 0.59     $ 1.78  
                                 
 
20.  Segment Information
 
The Company had two reportable business segments, shopping centers and business centers, determined in accordance with SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information.” The Company sold the majority of its business center assets in 2005. Each shopping center and business center is considered a separate operating segment, and both segments utilize the accounting policies described in Note 1; however, each shopping center on a stand-alone basis is less than 10% of the revenues, profit or loss, and assets of the combined reported operating segment and meets the majority of the aggregation criteria under SFAS 131.
 
At December 31, 2006, the shopping center segment consisted of 467 shopping centers (including 167 owned through unconsolidated joint ventures and 39 consolidated by the Company) in 44 states, plus Puerto Rico and Brazil. At December 31, 2006, the business center segment consists of seven business centers in five states.
 
The table below presents information about the Company’s reportable segments for the years ended December 31, 2006, 2005 and 2004 (in thousands):
 
                                 
    2006  
    Business
    Shopping
             
    Centers     Centers     Other     Total  
 
Total revenues
  $ 4,386     $ 813,712             $ 818,098  
Operating expenses
    (1,999 )     (207,089 )             (209,088 )
                                 
      2,387       606,623               609,010  
Unallocated expenses (1)
                  $ (463,275 )     (463,275 )
Equity in net income of joint          ventures
            30,337               30,337  
Minority interests
                    (8,453 )     (8,453 )
                                 
Income from continuing operations
                          $ 167,619  
                                 
Total real estate assets
  $ 90,772     $ 7,359,921             $ 7,450,693  
                                 
 
                                 
    2005  
    Business
    Shopping
             
    Centers     Centers     Other     Total  
 
Total revenues
  $ 7,077     $ 712,486             $ 719,563  
Operating expenses
    (1,800 )     (180,554 )             (182,354 )
                                 
      5,277       531,932               537,209  
Unallocated expenses (1)
                  $ (391,226 )     (391,226 )
Equity in net income of joint ventures
            34,873               34,873  
Minority interests
                    (7,881 )     (7,881 )
                                 
Income from continuing operations
                          $ 172,975  
                                 
Total real estate assets
  $ 86,374     $ 6,942,963             $ 7,029,337  
                                 

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    2004  
    Business
    Shopping
             
    Centers     Centers     Other     Total  
 
Total revenues
  $ 8,674     $ 553,682             $ 562,356  
Operating expenses
    (1,734 )     (135,045 )             (136,779 )
                                 
      6,940       418,637               425,577  
Unallocated expenses (1)
                  $ (292,451 )     (292,451 )
Equity in net income of joint          ventures
            40,895               40,895  
Minority interests
                    (5,064 )     (5,064 )
                                 
Income from continuing operations
                          $ 168,957  
                                 
Total real estate assets
  $ 264,615     $ 5,338,809             $ 5,603,424  
                                 
 
 
(1) Unallocated expenses consist of general and administrative, interest income, interest expense, tax benefit/expense, other income/expense and depreciation and amortization as listed in the consolidated statements of operations.
 
21.  Subsequent Events
 
Inland Retail Real Estate Trust, Inc.
 
In October 2006, the Company and Inland Retail Real Estate Trust, Inc. (“IRRETI”) announced that they entered into a definitive merger agreement. Under the terms of the agreement, the Company will acquire all of the outstanding shares of IRRETI for a total merger consideration of $14.00, of which $12.50 per share is expected to be funded in cash and $1.50 per share in the form of DDR common stock is to be based upon the ten-day average closing price of DDR’s shares determined two trading days prior to the IRRETI stockholders’ meeting to approve the transaction (plus accrued unpaid dividends), scheduled for February 22, 2007.
 
The transaction has a total value of approximately $6.2 billion. This amount includes approximately $2.3 billion of existing debt, a significant portion of which is expected to be extinguished at closing. IRRETI’s real estate portfolio aggregates over 300 community shopping centers, neighborhood shopping centers and single tenant/net leased retail properties.
 
In November 2006, the Company announced the formation of a joint venture with TIAA-CREF to purchase a portfolio of 66 community retail centers from the IRRETI portfolio of assets for approximately $3.0 billion of total asset value. An affiliate of TIAA-CREF expects to contribute 85% of the equity in the joint venture, and an affiliate of DDR expects to contribute 15% of the equity in the joint venture.
 
It is anticipated that this transaction will be approved by the IRRETI shareholders and will close at the end of February 2007. However, there is no assurance that the transaction will close in February 2007 as expected.
 
Coventry
 
Effective January 2007, the Company acquired the remaining 25% minority interest in Coventry (Note 2) and, as such, the Company now owns 100% in this entity. The aggregate purchase price was approximately $12.8 million.
 
President and Chief Operating Officer
 
In February 2007, David M. Jacobstein announced he was stepping down from the Company effective May 2007. Daniel B. Hurwitz, who currently serves as Senior Executive Vice President and Chief Investment Officer will assume the role of President and Chief Operating Officer effective May 2007. The Company will record a severance charge of approximately $4.1 million to general and administrative expense in 2007 in connection with these agreements.
 
Forward Sale Agreements
 
In February 2007, the Company exercised its option to settle, pursuant to the terms the forward sale agreements, in its common shares on February 26, 2007 (Note 12).


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22. Quarterly Results of Operations (Unaudited)
 
The following table sets forth the quarterly results of operations, restated for discontinued operations, for the years ended December 31, 2006 and 2005 (in thousands, except per share amounts):
 
                                         
    First     Second     Third     Fourth     Total  
 
2006:
                                       
Revenues
  $ 200,565     $ 198,342     $ 204,779     $ 214,412     $ 818,098  
Net income
    49,727       78,736       62,812       61,989       253,264  
Net income applicable to common shareholders
    35,935       64,943       49,020       48,197       198,095  
Basic:
                                       
Net income per common share
  $ 0.33     $ 0.59     $ 0.45     $ 0.44     $ 1.82  
Weighted average number of shares
    108,962       109,393       109,120       108,638       109,002  
Diluted:
                                       
Net income per common share
  $ 0.33     $ 0.59     $ 0.45     $ 0.44     $ 1.81  
Weighted average number of shares
    109,609       110,866       109,670       109,308       109,613  
2005:
                                       
Revenues
  $ 170,003     $ 174,432     $ 178,638     $ 196,490     $ 719,563  
Net income
    105,550       67,954       60,277       48,862       282,643  
Net income applicable to common shareholders
    91,758       54,162       46,485       35,069       227,474  
Basic:
                                       
Net income per common share
  $ 0.85     $ 0.50     $ 0.43     $ 0.32     $ 2.10  
Weighted average number of shares
    108,005       108,276       108,431       108,523       108,310  
Diluted:
                                       
Net income per common share
  $ 0.84     $ 0.50     $ 0.43     $ 0.32     $ 2.08  
Weighted average number of shares
    110,244       109,022       109,211       109,168       109,142  


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SCHEDULE II
 
DEVELOPERS DIVERSIFIED REALTY CORPORATION
 
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the years ended December 31, 2006, 2005 and 2004
(In thousands)
 
                                 
    Balance at
                   
    Beginning
    Charged to
          Balance at
 
    of Year     Expense     Deductions     End of Year  
 
Year ended December 31, 2006
                               
Allowance for uncollectable accounts
  $ 21,408     $ 7,498     $ 10,882     $ 18,024  
                                 
Valuation allowance for a deferred tax asset
  $ 49,080     $ (13,043 )   $     $ 36,037  
                                 
Year ended December 31, 2005
                               
Allowance for uncollectable accounts
  $ 14,192     $ 8,170     $ 954     $ 21,408  
                                 
Valuation allowance for a deferred tax asset
  $ 46,225     $ 2,855     $     $ 49,080  
                                 
Year ended December 31, 2004
                               
Allowance for uncollectable accounts
  $ 15,206     $ 5,268     $ 6,282     $ 14,192  
                                 
Valuation allowance for a deferred tax asset
  $ 48,081     $     $ 1,856     $ 46,225  
                                 


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Developers Diversified Realty Corporation
                               
Real Estate and Accumulated Depreciation
                               
December 31, 2006
                  Total
          Date
(In thousands)
                  Cost,
          of
    Initial Cost   Total Cost (B)       Net
      Depreciable
  Construction
        Buildings
          Buildings
          of
      Lives
  (C)
        &
          &
      Accumulated
  Accumulated
      (Years)
  Acquisition
    Land   Improvements   Improvements   Land   Improvements   Total   Depreciation   Depreciation   Encumbrances   (1)   (A)
 
Brandon, FL
  $ 0     $ 4,111     $ 0     $ 0     $ 6,363     $ 6,363     $ 4,683     $ 1,680     $ 0       S/L 30     1972(C)
Stow, OH
    1,036       9,028       0       993       23,307       24,300       9,064       15,236       0       S/L 30     1969(C)
Westlake, OH
    424       3,803       203       424       9,976       10,400       5,131       5,269       0       S/L30     1974(C)
E. Norrition, PA
    80       4,698       233       70       8,745       8,815       5,874       2,941       0       S/L 30     1975(C)
Palm Harbor, FL
    1,137       4,089       0       1,137       4,163       5,300       1,582       3,718       0       S/L 31.5     1995(A)
Tarpon Springs, FL
    248       7,382       81       244       11,892       12,136       8,723       3,413       0       S/L 30     1974(C)
Bayonet Pt., FL
    2,113       8,181       128       1,887       11,629       13,516       6,528       6,988       0       S/L 30     1985(C)
McHenry, IL
    963       3,949       0       963       3,949       4,912       10       4,902       0       S/L 31.5     2006(C)
Miami, FL
    11,626       30,457       0       11,626       30,457       42,083       161       41,922       0       S/L 31.5     2006(C)
Starkville, MS
    1,271       8,209       0       703       6,486       7,189       2,265       4,924       0       S/L 31.5     1994(A)
Gulfport, MS
    8,795       36,370       0       0       47,817       47,817       5,401       42,416       0       S/L 31.5     2003(A)
Tupelo, MS
    2,282       14,979       0       2,213       17,454       19,667       6,316       13,351       11,166       S/L 31.5     1994(A)
Jacksonville, FL
    3,005       9,425       0       3,028       9,907       12,935       3,713       9,222       6,407       S/L 31.5     1995(A)
Long Beach, CA (Pike)
    0       111,512       0       0       130,839       130,839       10,436       120,403       0       S/L 31.5     2005(C)
Brunswick, MA
    3,836       15,459       0       3,796       18,975       22,771       5,656       17,115       0       S/L 30     1973(C)
Oceanside, CA
    0       10,643       0       0       14,134       14,134       2,503       11,631       0       S/L 31.5     2000(C)
Reno, NV
    0       366       0       1,132       4,699       5,831       327       5,504       3,479       S/L 31.5     2000(C)
Everett, MA
    9,311       44,647       0       9,311       49,273       58,584       8,514       50,070       0       S/L 31.5     2001(C)
Pasadena, CA
    47,215       101,475       2,053       47,215       104,182       151,397       3,505       147,892       0       S/L 31.5     2003(A)
Salisbury, MD
    2,070       12,495       277       2,070       12,817       14,887       2,264       12,623       0       S/L 31.5     1999(C)
Atlanta, GA
    475       9,374       0       475       9,787       10,262       4,162       6,100       0       S/L 31.5     1994(A)
Jackson, MS
    4,190       6,783       0       4,190       6,813       11,003       877       10,126       0       S/L 31.5     2003(A)
Saltillo, MS
    2,217       4,132       0       2,217       4,145       6,362       535       5,827       0       S/L 31.5     2003(A)
Gadsen, AL
    322       965       0       322       2,176       2,498       651       1,847       0       S/L 31.5     2003(A)
Jackson, MS (Metro)
    622       2,271       0       622       2,283       2,905       289       2,616       0       S/L 31.5     2003(A)
Opelika, AL
    3,183       11,666       0       2,415       14,411       16,826       1,705       15,121       0       S/L 31.5     2003(A)
Scottsboro, AL
    788       2,781       0       788       2,793       3,581       356       3,225       0       S/L 31.5     2003(A)
Gulf Breeze, FL
    2,485       2,214       0       2,485       2,214       4,699       289       4,410       0       S/L 31.5     2003(A)
Apex, NC
    7,473       16,701       0       17,230       60,730       77,960       1,526       76,434       15,573       S/L 31.5     2006(C)
Ocala, FL
    1,916       3,893       0       1,916       5,866       7,782       557       7,225       0       S/L 31.5     2003(A)
Tallahassee, FL
    1,881       2,956       0       1,881       5,681       7,562       575       6,987       0       S/L 31.5     2003(A)
Chamblee, GA
    5,862       5,971       0       5,862       6,276       12,138       846       11,292       0       S/L 31.5     2003(A)
Cumming, GA (Marketplace)
    14,255       23,653       0       14,543       23,848       38,391       3,040       35,351       0       S/L 31.5     2003(A)
Douglasville, GA
    3,856       9,625       0       3,540       9,723       13,263       1,261       12,002       0       S/L 31.5     2003(A)


F-55


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Real Estate and Accumulated Depreciation — (continued)
December 31, 2006
(In thousands)
                                Total
          Date
                                Cost,
          of
    Initial Cost   Total Cost (B)       Net
      Depreciable
  Construction
        Buildings
          Buildings
          of
      Lives
  (C)
        &
          &
      Accumulated
  Accumulated
      (Years)
  Acquisition
    Land   Improvements   Improvements   Land   Improvements   Total   Depreciation   Depreciation   Encumbrances   (1)   (A)
 
Athens, GA
    1,649       2,084       0       1,477       2,087       3,564       267       3,297       0       S/L 31.5     2003(A)
Griffin, GA
    138       2,638       0       138       2,643       2,781       332       2,449       0       S/L 31.5     2003(A)
Columbus, GA
    4,220       8,159       0       4,220       8,274       12,494       1,054       11,440       0       S/L 31.5     2003(A)
Lafayette, GA
    1,493       2,572       0       1,493       2,586       4,079       332       3,747       0       S/L 31.5     2003(A)
Madison, GA
    1,816       2,297       0       1,816       2,659       4,475       309       4,166       0       S/L 31.5     2003(A)
Newnan, GA
    2,632       11,063       0       2,620       11,075       13,695       1,403       12,292       0       S/L 31.5     2003(A)
Stockbridge, GA (Freeway)
    963       1,911       0       963       4,586       5,549       338       5,211       0       S/L 31.5     2003(A)
Stockbridge, GA (Pike)
    987       972       0       987       972       1,959       126       1,833       0       S/L 31.5     2003(A)
Union City, GA
    2,288       6,246       0       2,288       6,438       8,726       799       7,927       0       S/L 31.5     2003(A)
Tucker, GA
    1,121       10,299       0       1,171       10,844       12,015       1,333       10,682       0       S/L 31.5     2003(A)
Warner Robins, GA
    5,977       7,459       0       5,977       7,472       13,449       964       12,485       0       S/L 31.5     2003(A)
Woodstock, GA
    2,022       8,440       0       2,022       8,453       10,475       1,071       9,404       0       S/L 31.5     2003(A)
Fayetteville, NC
    8,524       10,627       0       8,524       11,113       19,637       1,376       18,261       0       S/L 31.5     2003(A)
Hendersonville, NC
    2,049       1,718       0       2,049       4,670       6,719       369       6,350       0       S/L 31.5     2003(A)
Charleston, SC
    3,479       9,850       0       3,479       10,022       13,501       1,263       12,238       0       S/L 31.5     2003(A)
Denver, CO (University)
    20,733       22,818       0       20,786       23,665       44,451       3,013       41,438       27,800       S/L 31.5     2003(A)
Chattanooga, TN
    1,845       13,214       0       1,845       14,919       16,764       1,902       14,862       0       S/L 31.5     2003(A)
Hendersonville, TN
    3,743       9,268       0       3,607       9,335       12,942       1,182       11,760       8,577       S/L 31.5     2003(A)
Johnson City, TN
    124       521       0       41       1,124       1,165       31       1,134       0       S/L 31.5     2003(A)
Murfreesboro, TN (Memorial)
    1,462       4,355       0       1,462       5,951       7,413       878       6,535       0       S/L 31.5     2003(A)
Chester, VA
    10,780       4,752       0       10,780       4,878       15,658       693       14,965       0       S/L 31.5     2003(A)
Lynchburg,VA
    5,447       11,194       0       5,447       11,227       16,674       1,452       15,222       0       S/L 31.5     2003(A)
Midlothian, VA
    2,982       4,143       0       2,982       4,143       7,125       534       6,591       0       S/L 31.5     2003(A)
Brookfield, WI
    588       0       0       588       8       596       0       596       0       S/L 31.5     2003(A)
Milwaukee, WI
    4,527       3,600       0       4,527       4,406       8,933       484       8,449       0       S/L 31.5     2003(A)
Decatur, IL
    767       2,224       0       700       2,275       2,975       296       2,679       0       S/L 31.5     2003(A)
Gallipolis, OH
    1,249       1,790       0       1,249       1,797       3,046       232       2,814       0       S/L 31.5     2003(A)
Lexington, KY (South)
    3,344       2,805       0       3,344       2,805       6,149       367       5,782       0       S/L 31.5     2003(A)
Lexington, KY (North)
    2,915       3,447       0       2,919       3,057       5,976       437       5,539       0       S/L 31.5     2003(A)
Richmond, KY
    1,870       5,661       0       1,870       5,819       7,689       720       6,969       0       S/L 31.5     2003(A)
Overland Park, KS
    2,720       2,702       0       175       0       175       0       175       0       S/L 31.5     2003(A)
Allentown, PA
    5,882       20,060       0       5,882       22,726       28,608       2,564       26,044       17,378       S/L 31.5     2003(A)
St. John, MO
    2,613       7,040       0       2,827       7,806       10,633       897       9,736       0       S/L 31.5     2003(A)
Suwanee, GA
    13,479       23,923       0       13,479       28,489       41,968       3,470       38,498       0       S/L 31.5     2003(A)

F-56


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Real Estate and Accumulated Depreciation — (continued)
December 31, 2006
(In thousands)
                                Total
          Date
                                Cost,
          of
    Initial Cost   Total Cost (B)       Net
      Depreciable
  Construction
        Buildings
          Buildings
          of
      Lives
  (C)
        &
          &
      Accumulated
  Accumulated
      (Years)
  Acquisition
    Land   Improvements   Improvements   Land   Improvements   Total   Depreciation   Depreciation   Encumbrances   (1)   (A)
 
West Allis, WI
    2,452       10,982       0       2,452       11,207       13,659       1,395       12,264       0       S/L 31.5     2003(A)
Ft. Collins, CO
    2,767       2,054       0       1,129       4,504       5,633       438       5,195       0       S/L 31.5     2003(A)
Lafayette, IN
    1,217       2,689       0       1,217       2,705       3,922       351       3,571       0       S/L 31.5     2003(A)
Stone Mountain, GA
    2,156       0       0       2,179       0       2,179       0       2,179       0       S/L 31.5     2003(A)
Hamilton, NJ
    8,039       49,896       0       11,613       72,376       83,989       7,043       76,946       65,000       S/L 31.5     2003(A)
Lansing, MI
    1,598       6,999       0       1,801       11,471       13,272       1,017       12,255       0       S/L 31.5     2003(A)
Erie, PA (Peach)
    10,880       19,201       0       6,373       43,952       50,325       13,983       36,342       27,917       S/L 31.5     1995(C)
Erie, PA (Hills)
    0       2,564       13       0       3,796       3,796       3,122       674       0       S/L 30     1973(C)
San Francisco, CA
    15,332       35,803       0       6,075       14,189       20,264       2,150       18,114       0       S/L 31.5     2002(A)
Chillicothe, OH
    43       2,549       2       1,170       4,366       5,536       1,560       3,976       0       S/L 30     1974(C)
Phoenix, AZ
    18,701       18,811       118       18,701       18,941       37,642       415       37,227       17,181       S/L 31.5     1999(A)
Martinsville, VA
    3,163       28,819       0       3,163       29,374       32,537       14,612       17,925       19,435       S/L 30     1989(C)
Tampa, FL (Waters)
    4,105       6,640       324       3,905       7,433       11,338       3,824       7,514       0       S/L 31.5     1990(C)
Macedonia, OH (Phase II)
    4,392       10,885       0       4,392       10,996       15,388       2,654       12,734       0       S/L 31.5     1998(C)
Huber Hts, OH
    757       14,469       1       757       14,606       15,363       6,219       9,144       0       S/L 31.5     1993(A)
Lebanon, OH
    651       911       31       812       1,445       2,257       372       1,885       0       S/L 31.5     1993(A)
Xenia, OH
    948       3,938       0       673       6,064       6,737       2,262       4,475       0       S/L 31.5     1994(A)
Boardman, OH
    9,025       27,983       0       8,152       28,223       36,375       8,401       27,974       25,992       S/L 31.5     1997(A)
Solon, OH
    6,220       7,454       0       6,220       21,435       27,655       5,107       22,548       15,467       S/L 31.5     1998(C)
Cincinnati, OH
    2,399       11,238       172       2,399       15,983       18,382       5,677       12,705       0       S/L 31.5     1993(A)
Mt. Laruel, NJ
    9,586       46,773       0       9,755       49,426       59,181       2,856       56,325       48,000       S/L 31.5     2005(C)
Bedford, IN
    706       8,425       6       1,067       10,189       11,256       4,082       7,174       0       S/L 31.5     1993(A)
Watertown, SD
    63       6,443       442       63       11,641       11,704       7,504       4,200       0       S/L 30     1977(C)
Pensacola, FL
    1,805       4,010       273       816       3,147       3,963       774       3,189       0       S/L 30     1988(C)
Los Alamos, NM
    725       3,500       30       725       4,902       5,627       3,428       2,199       0       S/L 30     1978(C)
Pulaski, VA
    528       6,396       2       499       6,607       7,106       2,886       4,220       0       S/L 31.5     1993(A)
St. Louis, MO (Sunset)
    12,791       38,404       0       13,394       44,018       57,412       12,317       45,095       33,695       S/L 31.5     1998(A)
St. Louis, MO (Brentwood)
    10,628       32,053       0       10,018       32,330       42,348       8,793       33,555       25,027       S/L 31.5     1998(A)
Cedar Rapids, IA
    4,219       12,697       0       4,219       13,369       17,588       3,981       13,607       9,406       S/L 31.5     1998(A)
St. Louis, MO (Olympic)
    2,775       8,370       0       2,775       9,936       12,711       3,247       9,464       2,826       S/L 31.5     1998(A)
St. Louis, MO (Gravois)
    1,336       4,050       0       1,525       4,875       6,400       1,322       5,078       1,243       S/L 31.5     1998(A)
St. Louis, MO (Morris)
    0       2,048       0       0       2,143       2,143       632       1,511       0       S/L 31.5     1998(A)
St. Louis, MO (Keller)
    1,632       4,936       0       1,632       5,425       7,057       1,392       5,665       1,065       S/L 31.5     1998(A)
St. Louis, MO (Southtowne)
    4,159       3,818       0       5,403       6,993       12,396       475       11,921       0       S/L 31.5     2004(C)

F-57


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Real Estate and Accumulated Depreciation — (continued)
December 31, 2006
(In thousands)
                                Total
          Date
                                Cost,
          of
    Initial Cost   Total Cost (B)       Net
      Depreciable
  Construction
        Buildings
          Buildings
          of
      Lives
  (C)
        &
          &
      Accumulated
  Accumulated
      (Years)
  Acquisition
    Land   Improvements   Improvements   Land   Improvements   Total   Depreciation   Depreciation   Encumbrances   (1)   (A)
 
Aurora, OH
    832       7,560       0       1,592       13,759       15,351       3,392       11,959       0       S/L 31.5     1995(C)
Worthington, MN
    374       6,404       441       374       7,421       7,795       6,099       1,696       0       S/L 30     1977(C)
Idaho Falls, ID (DDRC)
    1,302       5,703       0       1,418       6,406       7,824       1,756       6,068       0       S/L 31.5     1998(A)
Mount Vernon, IL
    1,789       9,399       111       1,789       16,518       18,307       5,859       12,448       0       S/L 31.5     1993(A)
Fenton, MO
    414       4,244       476       430       7,378       7,808       4,398       3,410       0       S/L 30     1983(A)
Simpsonville, SC
    431       6,563       0       417       6,805       7,222       2,917       4,305       0       S/L 31.5     1994(A)
Cambden, SC
    627       7,519       7       871       10,222       11,093       4,045       7,048       0       S/L 31.5     1993(A)
Union, SC
    685       7,629       1       685       7,873       8,558       3,326       5,232       0       S/L 31.5     1993(A)
N. Charleston, SC
    911       11,346       1       1,081       16,387       17,468       6,985       10,483       11,074       S/L 31.5     1993(A)
S. Anderson, SC
    1,366       6,117       13       1,366       6,155       7,521       4,264       3,257       0       S/L 31.5     1994(A)
Orangeburg, SC
    318       1,693       0       318       3,425       3,743       1,072       2,671       0       S/L 31.5     1995(A)
Mt. Pleasant, SC
    2,584       10,470       0       2,430       16,516       18,946       5,031       13,915       0       S/L 31.5     1995(A)
Sault St. Marie, MI
    1,826       13,710       0       1,826       15,218       17,044       5,793       11,251       0       S/L 31.5     1994(A)
Cheboygan, MI
    127       3,612       0       127       3,840       3,967       1,552       2,415       0       S/L 31.5     1993(A)
Walker, MI ( Grand Rapids)
    1,926       8,039       0       1,926       8,790       10,716       3,051       7,665       8,146       S/L 31.5     1995(A)
Detroit, MI
    6,738       26,988       27       6,738       30,485       37,223       8,193       29,030       0       S/L 31.5     1998(A)
Houghton, MI
    440       7,301       1,821       440       15,352       15,792       9,501       6,291       0       S/L 30     1980(C)
Bad Axe, MI
    184       3,647       0       184       4,068       4,252       1,718       2,534       0       S/L 31.5     1993(A)
Gaylord, MI
    270       8,728       2       270       10,504       10,774       4,078       6,696       0       S/L 31.5     1993(A)
Howell, MI
    332       11,938       1       332       12,904       13,236       5,510       7,726       0       S/L 31.5     1993(A)
Mt. Pleasant, MI
    767       7,769       20       767       13,670       14,437       5,354       9,083       7,505       S/L 31.5     1993(A)
Elyria, OH
    352       5,693       0       352       8,451       8,803       4,029       4,774       0       S/L 30     1977(C)
Meridian, ID
    24,591       31,779       0       22,142       48,356       70,498       7,186       63,312       24,254       S/L 31.5     2001(C)
Midvale, UT ( FT. Union I, II, III & Wingers)
    25,662       56,759       0       23,180       62,295       85,475       15,399       70,076       0       S/L 31.5     1998(A)
Taylorsville, UT
    24,327       53,686       0       29,873       74,359       104,232       19,066       85,166       0       S/L 31.5     1998(A)
Orem, UT
    5,428       12,259       0       5,428       13,190       18,618       3,564       15,054       0       S/L 31.5     1998(A)
Logan, UT
    774       1,651       0       774       1,751       2,525       488       2,037       0       S/L 31.5     1998(A)
St. Lake City, UT (33rd)
    986       2,132       0       986       2,142       3,128       581       2,547       0       S/L 31.5     1998(A)
Riverdale, UT
    15,845       36,479       0       15,845       43,413       59,258       11,525       47,733       0       S/L 31.5     1998(A)
Bemidji, MN
    442       8,229       500       442       10,900       11,342       7,713       3,629       0       S/L 30     1977(C)
Salt Lake City, UT
    2,801       5,997       0       2,801       6,521       9,322       1,938       7,384       0       S/L 31.5     1998(A)
Ogden, UT
    3,620       7,716       0       3,620       8,057       11,677       2,246       9,431       0       S/L 31.5     1998(A)
Las Vegas, NV (Maryland)
    936       3,747       0       1,547       5,949       7,496       757       6,739       0       S/L 31.5     2003(C)

F-58


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Real Estate and Accumulated Depreciation — (continued)
December 31, 2006
(In thousands)
                                Total
          Date
                                Cost,
          of
    Initial Cost   Total Cost (B)       Net
      Depreciable
  Construction
        Buildings
          Buildings
          of
      Lives
  (C)
        &
          &
      Accumulated
  Accumulated
      (Years)
  Acquisition
    Land   Improvements   Improvements   Land   Improvements   Total   Depreciation   Depreciation   Encumbrances   (1)   (A)
 
Birmingham, AL Eastwood)
    3,726       13,974       0       3,726       17,483       21,209       6,211       14,998       0       S/L 31.5     1994(A)
Birmingham, Al (Brook)
    10,573       26,002       0       11,434       48,008       59,442       13,393       46,049       26,267       S/L 31.5     1995(A)
Ormond Beach, FL
    1,048       15,812       4       1,048       18,020       19,068       6,798       12,270       0       S/L 31.5     1994(A)
Antioch, CA
    3,066       12,220       0       3,066       12,220       15,286       385       14,901       0       S/L 40.0     2005(A)
Santa Rosa, CA
    3,783       15,964       0       3,783       15,964       19,747       502       19,245       0       S/L 40.0     2005(A)
San Diego, CA (College)
    0       11,079       55       0       11,135       11,135       257       10,878       0       S/L 40.0     2005(A)
Las Vegas, NV
    6,458       3,488       0       6,458       3,488       9,946       112       9,834       0       S/L 40.0     2005(A)
West Covina, CA
    0       20,456       0       0       20,456       20,456       642       19,814       0       S/L 40.0     2005(A)
Phoenix, AZ
    2,443       6,221       0       2,443       6,221       8,664       198       8,466       0       S/L 40.0     2005(A)
Northridge, CA
    0       56       0       0       56       56       5       51       0       S/L 40.0     2005(A)
Fairfield, CA
    9,140       11,514       0       9,140       11,514       20,654       363       20,291       0       S/L 40.0     2005(A)
Garden Grove, CA
    4,955       5,392       0       4,955       5,392       10,347       172       10,175       0       S/L 40.0     2005(A)
San Diego, CA
    5,508       8,294       0       5,508       8,294       13,802       262       13,540       0       S/L 40.0     2005(A)
Carson City, NV
    1,928       4,841       0       1,928       4,841       6,769       154       6,615       0       S/L 40.0     2005(A)
Tucson, AZ
    1,938       4,151       0       1,938       4,151       6,089       133       5,956       0       S/L 40.0     2005(A)
Redding, CA
    1,978       5,831       0       1,978       5,831       7,809       185       7,624       0       S/L 40.0     2005(A)
San Antonio, TX
    2,403       2,697       0       2,403       2,697       5,100       87       5,013       0       S/L 40.0     2005(A)
Chandler, AZ
    2,136       5,831       0       2,136       5,831       7,967       185       7,782       0       S/L 40.0     2005(A)
Chino, CA
    4,974       7,052       0       4,974       7,052       12,026       224       11,802       0       S/L 40.0     2005(A)
Las Vegas, NV
    2,621       6,039       0       2,621       6,039       8,660       192       8,468       0       S/L 40.0     2005(A)
Clovis, CA
    0       9,057       0       0       9,057       9,057       286       8,771       0       S/L 40.0     2005(A)
Santa Maria, CA
    1,117       8,736       0       1,117       8,736       9,853       276       9,577       0       S/L 40.0     2005(A)
El Cajon, CA
    0       15,648       0       0       15,648       15,648       492       15,156       0       S/L 40.0     2005(A)
Ukiah, CA
    1,632       2,368       0       1,632       2,368       4,000       76       3,924       0       S/L 40.0     2005(A)
Madera, CA
    1,770       746       0       1,770       746       2,516       26       2,490       0       S/L 40.0     2005(A)
Mesa, AZ
    2,551       11,951       0       2,551       11,951       14,502       377       14,125       0       S/L 40.0     2005(A)
Burbank, CA
    0       20,834       0       0       20,834       20,834       611       20,223       0       S/L 40.0     2005(A)
North Fullerton, CA
    4,163       5,980       0       4,163       5,980       10,143       190       9,953       0       S/L 40.0     2005(A)
Tulare, CA
    2,868       4,200       0       2,868       4,200       7,068       134       6,934       0       S/L 40.0     2005(A)
Porterville, CA
    1,681       4,408       0       1,681       4,408       6,089       141       5,948       0       S/L 40.0     2005(A)
Lompac, CA
    2,275       2,074       0       2,275       2,074       4,349       67       4,282       0       S/L 40.0     2005(A)
Palmdale, CA
    4,589       6,544       0       4,589       6,544       11,133       207       10,926       0       S/L 40.0     2005(A)
Anaheim, CA
    8,900       11,925       0       8,900       11,925       20,825       376       20,449       0       S/L 40.0     2005(A)
Sonora, CA
    1,889       6,860       0       1,889       6,860       8,749       217       8,532       0       S/L 40.0     2005(A)

F-59


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Real Estate and Accumulated Depreciation — (continued)
December 31, 2006
(In thousands)
                                Total
          Date
                                Cost,
          of
    Initial Cost   Total Cost (B)       Net
      Depreciable
  Construction
        Buildings
          Buildings
          of
      Lives
  (C)
        &
          &
      Accumulated
  Accumulated
      (Years)
  Acquisition
    Land   Improvements   Improvements   Land   Improvements   Total   Depreciation   Depreciation   Encumbrances   (1)   (A)
 
Phoenix, AZ
    2,334       8,453       0       2,334       8,453       10,787       267       10,520       0       S/L 40.0     2005(A)
Foot Hill Ranch, CA
    5,409       9,383       0       5,409       9,383       14,792       296       14,496       0       S/L 40.0     2005(A)
Reno, NV
    2,695       5,078       0       2,695       5,078       7,773       162       7,611       0       S/L 40.0     2005(A)
Las Vegas, NV
    5,736       5,795       0       5,736       5,795       11,531       184       11,347       0       S/L 40.0     2005(A)
Folsom, CA
    3,461       11,036       0       3,461       11,036       14,497       348       14,149       0       S/L 40.0     2005(A)
Slatten Ranch, CA
    5,439       11,728       0       5,439       11,728       17,167       370       16,797       0       S/L 40.0     2005(A)
Cicero, NY (Bear Rd)
    1,784       3,242       0       1,784       3,277       5,061       282       4,779       0       S/L 31.5     2004(A)
Buffalo, NY
    2,341       8,995       0       2,341       9,232       11,573       811       10,762       0       S/L 31.5     2004(A)
West Seneca, NY
    2,929       12,926       0       2,929       12,926       15,855       1,096       14,759       0       S/L 31.5     2004(A)
N. Tonawanda, NY
    5,878       21,291       0       5,878       21,746       27,624       1,928       25,696       0       S/L 31.5     2004(A)
Amherst, NY
    5,873       22,458       0       5,873       22,860       28,733       1,971       26,762       0       S/L 31.5     2004(A)
Jamestown, NY
    155       4,849       0       155       4,860       5,015       433       4,582       1,454       S/L 31.5     2004(A)
Hamburg, NY
    2,655       7,369       0       2,655       7,746       10,401       642       9,759       0       S/L 31.5     2004(A)
Ithaca, NY
    9,198       42,969       0       9,198       43,003       52,201       3,583       48,618       18,272       S/L 31.5     2004(A)
Hamburg, NY
    3,303       16,239       0       3,303       16,597       19,900       1,441       18,459       0       S/L 31.5     2004(A)
Lynchburg, VA
    1,848       1,911       0       1,848       1,935       3,783       184       3,599       0       S/L 31.5     2004(A)
Depew, NY
    5,017       16,867       0       5,017       17,134       22,151       1,425       20,726       0       S/L 31.5     2004(A)
Rochester, NY
    9,323       15,757       0       9,323       15,858       25,181       1,404       23,777       0       S/L 31.5     2004(A)
Niagara, NY
    894       6,699       0       894       6,826       7,720       603       7,117       0       S/L 31.5     2004(A)
West Seneca, NY
    2,576       2,590       0       2,576       2,688       5,264       233       5,031       0       S/L 31.5     2004(A)
Tonawanda, NY
    1,519       1,830       0       1,519       2,165       3,684       183       3,501       0       S/L 31.5     2004(A)
Orland Park, IL
    10,430       13,081       0       10,430       13,090       23,520       1,119       22,401       0       S/L 31.5     2004(A)
Florence, KY
    3,946       6,296       0       3,946       6,414       10,360       571       9,789       0       S/L 31.5     2004(A)
Hamburg, NY
    4,071       17,142       0       4,071       17,142       21,213       1,488       19,725       0       S/L 31.5     2004(A)
Tonawanda, NY
    3,061       6,887       0       3,061       6,906       9,967       596       9,371       0       S/L 31.5     2004(A)
Hamburg, NY
    4,152       22,075       0       4,152       22,075       26,227       1,856       24,371       0       S/L 31.5     2004(A)
Columbus, OH (Consumer Square)
    9,828       22,858       0       9,828       23,271       33,099       2,038       31,061       13,522       S/L 31.5     2004(A)
Louisville, KY (Outer Loop)
    4,180       747       0       4,180       981       5,161       97       5,064       0       S/L 31.5     2004(A)
Frankfurt, KY (Eastwood)
    2,307       8,546       0       2,307       8,654       10,961       767       10,194       0       S/L 31.5     2004(A)
Tampa, FL (Horizon Park)
    12,112       11,277       0       12,112       12,422       24,534       1,135       23,399       0       S/L 31.5     2004(A)
Olean, NY
    8,834       29,813       0       8,834       30,260       39,094       2,845       36,249       4,410       S/L 31.5     2004(A)
N. Charleston SC (N Charl Ctr)
    5,146       5,990       0       5,146       8,173       13,319       619       12,700       10,458       S/L 31.5     2004(A)
Jacsonville, FL (Arlington Road)
    4,672       5,085       0       4,672       5,126       9,798       482       9,316       0       S/L 31.5     2004(A)
West Long Branch, NJ (Monmouth)
    14,131       51,982       0       14,131       52,840       66,971       4,431       62,540       12,742       S/L 31.5     2004(A)

F-60


Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Real Estate and Accumulated Depreciation — (continued)
December 31, 2006
(In thousands)
                                Total
          Date
                                Cost,
          of
    Initial Cost   Total Cost (B)       Net
      Depreciable
  Construction
        Buildings
          Buildings
          of
      Lives
  (C)
        &
          &
      Accumulated
  Accumulated
      (Years)
  Acquisition
    Land   Improvements   Improvements   Land   Improvements   Total   Depreciation   Depreciation   Encumbrances   (1)   (A)
 
Big Flats, NY (Big Flats I)
    22,229       52,579       0       22,229       55,694       77,923       5,420       72,503       13,361       S/L 31.5     2004(A)
Hanover, PA
    4,408       4,707       0       4,408       4,707       9,115       428       8,687       0       S/L 31.5     2004(A)
Mays Landing, NJ (Wrangelboro)
    49,033       107,230       0       49,033       108,175       157,208       9,122       148,086       48,127       S/L 31.5     2004(A)
Plattsburgh, NY
    10,734       34,028       0       10,734       34,941       45,675       3,122       42,553       8,253       S/L 31.5     2004(A)
Niagara Falls, NY
    3,175       7,432       0       3,175       7,729       10,904       642       10,262       0       S/L 31.5     2004(A)
Williamsville, NY
    5,021       6,768       0       5,021       7,110       12,131       590       11,541       0       S/L 31.5     2004(A)
Niagara Falls, NY
    4,956       11,370       0       1,973       3,191       5,164       282       4,882       0       S/L 31.5     2004(A)
Amherst, NY
    29,729       78,602       0       29,729       79,617       109,346       6,831       102,515       24,492       S/L 31.5     2004(A)
Greece, NY
    3,901       4,922       0       3,901       4,922       8,823       423       8,400       0       S/L 31.5     2004(A)
Buffalo, NY (Elmwood)
    6,010       19,044       0       6,010       19,098       25,108       1,609       23,499       0       S/L 31.5     2004(A)
Orange Park, FL (The Village)
    1,929       5,476       0       1,929       5,514       7,443       470       6,973       0       S/L 31.5     2004(A)
Lakeland, FL (Highlands)
    4,112       4,328       0       4,112       4,403       8,515       389       8,126       0       S/L 31.5     2004(A)
Lockport, NY
    9,253       23,829       0       9,253       23,882       33,135       2,042       31,093       12,090       S/L 31.5     2004(A)
Cortland, NY
    1,622       22,235       0       1,622       22,235       23,857       1,858       21,999       0       S/L 31.5     2004(A)
Rochester, NY (Hen-Jef)
    7,156       7,581       0       7,156       7,584       14,740       663       14,077       0       S/L 31.5     2004(A)
Buffalo, , NY (Delaware)
    3,568       29,001       0       3,620       29,458       33,078       2,360       30,718       998       S/L 31.5     2004(A)
Amherst, NY (University Plaza)
    3,909       14,134       0       3,909       14,214       18,123       1,208       16,915       0       S/L 31.5     2004(A)
Cheektowaga, NY (Thruway)
    15,471       25,600       0       15,471       26,671       42,142       2,458       39,684       4,689       S/L 31.5     2004(A)
Walker, MI (Alpine Ave)
    1,454       9,284       0       1,454       11,540       12,994       1,257       11,737       0       S/L 31.5     2004(A)
Toledo, OH
    1,316       3,961       0       1,316       3,961       5,277       346       4,931       0       S/L 31.5     2004(A)
Amherst, NY
    4,054       11,995       0       4,054       12,184       16,238       1,030       15,208       4,910       S/L 31.5     2004(A)
Erie, PA
    2,175       13,286       0       2,175       14,487       16,662       1,168       15,494       0       S/L 31.5     2004(A)
New Hartford, NY
    1,279       13,685       0       1,279       13,732       15,011       1,163       13,848       0       S/L 31.5     2004(A)
Niagara Falls, NY
    2,784       3,872       0       2,784       3,988       6,772       392       6,380       0       S/L 31.5     2004(A)
Medina, NY
    2,269       2,881       0       2,269       2,881       5,150       257       4,893       3,637       S/L 31.5     2004(A)
Tonawanda, NY (Sher/Delaware)
    5,090       14,874       0       5,090       14,942       20,032       1,269       18,763       0       S/L 31.5     2004(A)
Mays Landing, NJ (Hamilton)
    36,224       56,949       0       36,224       57,393       93,617       4,870       88,747       14,078       S/L 31.5     2004(A)
Gates, NY
    9,369       40,672       0       9,369       40,772       50,141       3,428       46,713       24,454       S/L 31.5     2004(A)
Lantana, FL
    5,448       12,333       0       5,448       12,402       17,850       812       17,038       3,937       S/L 31.5     2004(A)
Rome, NY (Freedom)
    4,565       5,078       0       4,565       8,786       13,351       571       12,780       4,181       S/L 31.5     2004(A)
Englewood, FL
    2,172       2,983       0       2,172       3,155       5,327       211       5,116       1,839       S/L 31.5     2004(A)
Utica, NY
    2,869       14,621       0       2,869       14,637       17,506       1,249       16,257       0       S/L 31.5     2004(A)
Hamburg, NY (Milestrip)
    2,527       14,711       0       2,527       14,872       17,399       1,309       16,090       0       S/L 31.5     2004(A)
Mooresville, NC
    14,369       43,748       422       14,369       44,190       58,559       3,161       55,398       23,489       S/L 31.5     2004(A)

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Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Real Estate and Accumulated Depreciation — (continued)
December 31, 2006
(In thousands)
                                              Total
                Date
                                              Cost,
                of
    Initial Cost     Total Cost (B)           Net
          Depreciable
    Construction
          Buildings
                Buildings
                of
          Lives
    (C)
          &
                &
          Accumulated
    Accumulated
          (Years)
    Acquisition
    Land     Improvements     Improvements     Land     Improvements     Total     Depreciation     Depreciation     Encumbrances     (1)     (A)
 
Alden, NY
    4,547       3,926       0       4,547       3,926       8,473       340       8,133       4,256       S/L 31.5     2004(A)
Amherst, NY (Sheridan/Harlem)
    2,620       2,554       0       2,620       2,702       5,322       234       5,088       0       S/L 31.5     2004(A)
Indian Trail, NC
    3,172       7,075       0       3,172       7,543       10,715       636       10,079       6,830       S/L 31.5     2004(A)
Dewitt, NY
    1,140       6,756       0       1,140       6,756       7,896       567       7,329       0       S/L 31.5     2004(A)
Chili, NY
    2,143       8,109       0       2,143       8,109       10,252       696       9,556       0       S/L 31.5     2004(A)
Ashtabula, OH
    1,444       9,912       0       1,444       9,912       11,356       828       10,528       6,801       S/L 31.5     2004(A)
Irondequoit, NY (Ridgeview)
    4,163       2,502       0       4,163       2,699       6,862       277       6,585       0       S/L 31.5     2004(A)
Springville, NY
    1,454       9,835       0       1,454       9,879       11,333       837       10,496       5,851       S/L 31.5     2004(A)
Niskayuna, NY
    20,297       51,155       0       20,297       51,916       72,213       4,522       67,691       23,715       S/L 31.5     2004(A)
Dansville, NY
    2,806       4,905       0       2,806       4,925       7,731       420       7,311       0       S/L 31.5     2004(A)
Canandaigua, NY
    5,132       5,073       0       5,132       5,073       10,205       348       9,857       5,364       S/L 31.5     2004(A)
Dewitt, NY (Dewitt Commons)
    9,738       26,351       0       9,738       31,140       40,878       3,164       37,714       0       S/L 31.5     2004(A)
Victor, NY
    2,374       6,433       0       2,374       6,433       8,807       507       8,300       6,504       S/L 31.5     2004(A)
Alamosa, CO
    161       1,034       211       161       1,307       1,468       926       542       0       S/L 30     1986(C)
Wilmington, NC
    4,785       16,852       1,183       4,287       34,765       39,052       12,662       26,390       20,135       S/L 31.5     1989(C)
Berlin, VT
    859       10,948       24       866       14,371       15,237       7,826       7,411       4,940       S/L 30     1986(C)
Brainerd, MN
    703       9,104       272       1,182       16,653       17,835       6,516       11,319       0       S/L 31.5     1991(A)
Spring Hill, FL
    1,084       4,816       266       2,096       11,078       13,174       4,448       8,726       4,955       S/L 30     1988(C)
Tiffin, OH
    432       5,908       435       432       10,863       11,295       4,854       6,441       0       S/L 30     1980(C)
Broomfield, CO (Flatiron Gard)
    23,681       31,809       0       13,841       42,775       56,616       4,246       52,370       0       S/L 31.5     2003(A)
Denver, CO (Centennial)
    7,833       35,550       0       7,971       53,270       61,241       14,471       46,770       37,544       S/L 31.5     1997(C)
Dickinson, ND
    57       6,864       355       51       7,881       7,932       7,388       544       0       S/L 30     1978(C)
West Pasco, FL
    1,422       6,552       9       1,358       6,666       8,024       4,394       3,630       4,784       S/L 30     1986(C)
Marianna, FL
    1,496       3,500       130       1,496       3,736       5,232       1,938       3,294       0       S/L 31.5     1990(C)
Hutchinson, MN
    402       5,510       657       427       6,987       7,414       5,551       1,863       0       S/L 30     1981(C)
New Bern, NC
    780       8,204       72       441       5,280       5,721       2,407       3,314       0       S/L 31.5     1989(C)
Bayamon, PR (Plaza Del Sol)
    132,074       152,441       0       132,759       154,565       287,324       9,343       277,981       0       S/L 31.5     2005(A)
Carolina, PR (Plaza Escorial)
    28,522       76,947       0       28,601       77,190       105,791       4,794       100,997       0       S/L 31.5     2005(A)
Humacao, PR (Palma Real)
    16,386       74,059       0       16,386       74,094       90,480       4,607       85,873       0       S/L 31.5     2005(A)
Isabela, PR (Plaza Isabela)
    8,175       41,094       0       8,175       41,841       50,016       2,577       47,439       0       S/L 31.5     2005(A)
San German, PR (Camino Real)
    3,215       24       0       3,223       24       3,247       7       3,240       0       S/L 31.5     2005(A)
Cayey, PR (Plaza Cayey)
    19,214       25,584       0       19,611       26,105       45,716       1,637       44,079       0       S/L 31.5     2005(A)
Bayamon, PR (Rio Hondol)
    91,645       98,007       0       91,898       101,354       193,252       5,913       187,339       55,802       S/L 31.5     2005(A)
San Juan, PR (Senorial Plaza)
    10,338       23,285       0       10,338       23,850       34,188       1,474       32,714       14,490       S/L 31.5     2005(A)

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Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Real Estate and Accumulated Depreciation — (continued)
December 31, 2006
(In thousands)
                                              Total
                Date
                                              Cost,
                of
    Initial Cost     Total Cost (B)           Net
          Depreciable
    Construction
          Buildings
                Buildings
                of
          Lives
    (C)
          &
                &
          Accumulated
    Accumulated
          (Years)
    Acquisition
    Land     Improvements     Improvements     Land     Improvements     Total     Depreciation     Depreciation     Encumbrances     (1)     (A)
 
Bayamon, PR (Rexville Plaza)
    4,294       11,987       0       4,294       12,149       16,443       767       15,676       8,730       S/L 31.5     2005(A)
Arecibo, PR (Atlantico)
    7,965       29,898       0       8,094       30,717       38,811       1,890       36,921       14,580       S/L 31.5     2005(A)
Hatillo, PR (Plaza Del Norte)
    101,219       105,465       0       101,219       106,421       207,640       6,555       201,085       0       S/L 31.5     2005(A)
Vega Baja, PR (Plaza Vega Baja)
    7,076       18,684       0       7,076       18,699       25,775       1,178       24,597       0       S/L 31.5     2005(A)
Guyama, PR (Plaza Wal-Mart)
    1,960       18,721       0       1,960       18,736       20,696       1,171       19,525       0       S/L 31.5     2005(A)
Fajardo, PR (Plaza Fajardo)
    4,376       41,199       0       4,376       41,199       45,575       2,562       43,013       0       S/L 31.5     2005(A)
San German, PR (Del Oeste)
    6,470       20,751       0       6,470       21,117       27,587       1,310       26,277       0       S/L 31.5     2005(A)
Princeton, NJ
    7,121       29,783       0       7,121       35,934       43,055       9,226       33,829       25,310       S/L 31.5     1998(A)
Princeton, NJ (Pavilion)
    6,327       44,466       0       7,217       54,639       61,856       9,063       52,793       0       S/L 31.5     2000(C)
Phoenix, AZ
    15,352       22,812       1,601       15,352       26,141       41,493       7,217       34,276       16,733       S/L 31.5     2000(C)
Wichita, KS ( Eastgate)
    5,058       11,362       0       5,222       12,386       17,608       1,982       15,626       0       S/L 31.5     2002(A)
Russellville, AR
    624       13,391       0       624       14,019       14,643       5,513       9,130       0       S/L 31.5     1994(A)
N. Little Rock, AR
    907       17,160       0       907       18,973       19,880       5,768       14,112       0       S/L 31.5     1994(A)
Ottumwa, IA
    338       8,564       103       321       16,725       17,046       6,273       10,773       0       S/L 31.5     1990(C)
Washington, NC
    991       3,118       34       878       4,414       5,292       1,988       3,304       0       S/L 31.5     1990(C)
Leawood, KS
    13,002       69,086       0       13,231       76,088       89,319       8,916       80,403       49,117       S/L 31.5     1998(A)
Littleton, CO
    12,249       50,709       0       12,448       52,426       64,874       7,072       57,802       0       S/L 31.5     2002(C)
Durham, NC
    2,210       11,671       278       2,210       13,795       16,005       6,881       9,124       6,864       S/L 31.5     1990(C)
San Antonio, TX (N. Bandera)
    3,475       37,327       0       3,475       37,691       41,166       5,464       35,702       0       S/L 31.5     2002(A)
Crystal River, FL
    1,217       5,796       365       1,219       7,433       8,652       4,398       4,254       0       S/L 31.5     1986(C)
Bellefontaine, OH
    998       3,221       0       998       5,544       6,542       1,387       5,155       0       S/L 30     1998(A)
Dublin, OH (Perimeter Center)
    3,609       11,546       0       3,609       11,743       15,352       3,353       11,999       0       S/L 31.5     1998(A)
Hamilton, OH
    495       1,618       0       495       1,618       2,113       449       1,664       0       S/L 31.5     1998(A)
Pataskala, OHI
    514       1,679       0       514       1,707       2,221       469       1,752       0       S/L 31.5     1998(A)
Pickerington, OH
    1,896       6,086       0       1,896       6,824       8,720       1,758       6,962       0       S/L 31.5     1998(A)
Barboursville, WV
    431       1,417       2       0       2,555       2,555       524       2,031       0       S/L 31.5     1998(A)
Columbus, OH (Easton Market)
    11,087       44,494       0       12,075       48,280       60,355       12,803       47,552       0       S/L 31.5     1998(A)
Columbus, OH (Dublin Village))
    6,478       29,792       0       6,478       29,771       36,249       25,131       11,118       0       S/L 31.5     2005(A)
Denver, CO (Tamarac Square Mall)
    2,990       12,252       0       2,987       13,575       16,562       3,061       13,501       0       S/L 31.5     2001(A)
Chelmsford, MA (Apollo Drive)
    8,124       26,760       0       8,116       26,804       34,920       4,271       30,649       0       S/L 31.5     2001(A)
Daytona Beach, FL (Volusia Point)
    3,838       4,485       0       3,834       4,741       8,575       879       7,696       0       S/L 31.5     2001(A)
Twinsburg, OH (Heritage Business)
    254       1,623       0       254       1,798       2,052       309       1,743       0       S/L 31.5     2001(A)
Silver Springs, MD (Tech Center 29-1)
    7,484       20,980       0       7,476       23,901       31,377       4,419       26,958       6,552       S/L 31.5     2001(A)

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Table of Contents

                                                                                         
Developers Diversified Realty Corporation
Real Estate and Accumulated Depreciation — (continued)
December 31, 2006
(In thousands)
                                              Total
                Date
                                              Cost,
                of
    Initial Cost     Total Cost (B)           Net
          Depreciable
    Construction
          Buildings
                Buildings
                of
          Lives
    (C)
          &
                &
          Accumulated
    Accumulated
          (Years)
    Acquisition
    Land     Improvements     Improvements     Land     Improvements     Total     Depreciation     Depreciation     Encumbrances     (1)     (A)
 
Portfolio Balance (DDR)
    223,278       333,678       0       223,278       330,119       553,397       14,504       542,452       276,104 (2)     S/L 31.5      
                                                                                     
    $ 1,988,701     $ 4,937,976     $ 14,288     $ 1,970,291 (3)   $ 5,480,402 (4)   $ 7,450,693     $ 864,592     $ 6,589,660     $ 1,319,232              
                                                                                     
 
 
(1) S/L refers to straight-line depreciation.
 
(2) Includes $258.5 million of mortgage debt which encumbers 37 Mervyns sites.
 
(3) Includes $200.9 million of land under development at December 31, 2006.
 
(4) Includes $252.6 million of construction in progress at December 31, 2006.
 
(B) The aggregate cost for federal income tax purposes was approximately $7.3 billion at December 31, 2006.

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Table of Contents

The changes in total real estate assets for the three years ended December 31, 2006 are as follows:
 
                         
    2006     2005     2004  
 
Balance, beginning of year
  $ 7,029,337     $ 5,603,424     $ 3,884,911  
Acquisitions and transfers from joint ventures
    370,218       1,610,808       2,170,793  
Developments, improvements and expansions
    236,147       203,054       243,929  
Changes in land under development and construction in progress
    104,808       102,826       (7,011 )
Real estate held for sale
    (8,558 )            
Sales, retirements and transfers to joint ventures
    (289,817 )     (490,775 )     (689,198 )
                         
Balance, end of year
  $ 7,442,135     $ 7,029,337     $ 5,603,424  
                         
 
The changes in accumulated depreciation and amortization for the three years ended December 31, 2006 are as follows:
 
                         
    2006     2005     2004  
 
Balance, beginning of year
  $ 692,823     $ 568,231     $ 458,213  
Depreciation for year
    193,527       170,701       132,647  
Real estate held for sale
    (3,326 )            
Sales and retirements
    (21,758 )     (46,109 )     (22,629 )
                         
Balance, end of year
  $ 861,266     $ 692,823     $ 568,231  
                         


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Table of Contents

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
DEVELOPERS DIVERSIFIED REALTY CORPORATION
 
  By: 
/s/   Scott A. Wolstein

Scott A. Wolstein, Chairman and Chief Executive Officer
 
Date: February 21, 2007
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated on the 21st day of February, 2007.
 
         
/s/   Scott A. Wolstein
Scott A. Wolstein
 
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
     
/s/   William H. Schafer

William H. Schafer
 
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
     
/s/   Dean S. Adler

Dean S. Adler
 
Director
     
/s/   Terrance R. Ahern

Terrance R. Ahern
 
Director
     
/s/   Robert H. Gidel

Robert H. Gidel
 
Director
     
     

Victor MacFarlane
 
Director
     
/s/   Craig Macnab

Craig Macnab
 
Director
     
/s/   Scott D. Roulston

Scott D. Roulston
 
Director
     
/s/   Barry A. Sholem

Barry A. Sholem
 
Director
     
/s/   William B. Summers, Jr.

William B. Summers, Jr.
 
Director

 

Exhibit 4.16
FIFTH SUPPLEMENTAL INDENTURE
     THIS FIFTH SUPPLEMENTAL INDENTURE is entered into as of April 28, 2005, by and between Developers Diversified Realty Corporation, an Ohio corporation (the “Company”), and US Bank Trust National Association (the “Trustee”), a national banking association organized and existing under the laws of the United States, as successor trustee to National City Bank (“NCB”).
     WHEREAS, the Company and NCB entered into the Indenture dated as of May 1, 1994 (as supplemented by a First Supplemental Indenture dated as of May 10, 1995, by a Second Supplemental Indenture dated July 18, 2003, by a Third Supplemental Indenture dated January 23, 2004, and by a Fourth Supplemental Indenture dated April 22, 2004 the “Indenture”), relating to the Company’s senior debt securities;
     WHEREAS, the Trustee is the successor to NCB’s corporate trust business and, therefore, is the successor trustee under the Indenture pursuant to Section 610 of the Indenture;
     WHEREAS, the Company has made a request to the Trustee that the Trustee join with it, in accordance with Section 901 of the Indenture, in the execution of this Fifth Supplemental Indenture to include the Company’s $200,000,000 principal amount of 5.0% Notes Due 2010 and the Company’s $200,000,000 principal amount of 5.5% Notes Due 2015 in the definition of Designated Securities such that the covenant in Section 1015 of the Indenture will inure to their benefit;
     WHEREAS, the Company and the Trustee are authorized to enter into this Fifth Supplemental Indenture; and
     NOW, THEREFORE, the Company and the Trustee agree as follows:
          Section 1. Relation to Indenture . This Fifth Supplemental Indenture supplements the Indenture and shall be a part and subject to all the terms thereof. Except as supplemented hereby, the Indenture and the Securities issued thereunder shall continue in full force and effect.
          Section 2. Capitalized Terms . Capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture.
          Section 3. Definitions . The definition of “Designated Securities” is hereby amended in its entirety as follows:
     “Designated Securities” means the Company’s $300,000,000 principal amount of 4.625% Notes Due 2010, the Company’s $275,000,000 principal amount of 3.875% Notes Due 2009, the Company’s $250,000,000 principal amount of 5.25% Notes Due 2011, the Company’s $200,000,000 principal amount of 5.0% Notes Due 2010 and the Company’s $200,000,000 principal amount of 5.5% Notes Due 2015.

 


 

          Section 4. Confirmation of Successor Trustee . The parties hereby confirm that the Trustee is the successor to NCB pursuant to Section 610 of the Indenture.
          Section 5. Counterparts . This Fifth Supplemental Indenture may be executed in counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.
          Section 6. Governing Law . THIS FIFTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
          Section 7. Concerning the Trustee . The Trustee shall not be responsible for any recital herein (other than the fourth recital as it appears as it applies to the Trustee) as such recitals shall be taken as statements of the Company, or the validity of the execution by the Company of this Fifth Supplemental Indenture. The Trustee makes no representations as to the validity or sufficiency of this Fifth Supplemental Indenture.

-2-


 

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.
           
Attest:     DEVELOPERS DIVERSIFIED REALTY CORPORATION
 
 
/s/ Joan U. Allgood    By:   /s/ William H. Schafer    
Name: Joan U. Allgood       Name:   William H. Schafer   
Title: Senior Vice President of Corporate
Affairs and Governance and Secretary  
    Title:   Senior Vice President and Chief Financial Officer   
 
           
Attest:    US BANK TRUST NATIONAL ASSOCIATION, as Trustee
 
 
/s/ Beverly A. Freeney    By:   /s/ Ignazio Tamburello    
Name: Beverly A. Freeney      Name:   Ignazio Tamburello   
Title: Vice President      Title:   Assistant Vice President   
 

-3-


 

             
STATE OF OHIO
    )      
 
    )     SS:
COUNTY OF CUYAHOGA
    )      
          On the 28th day of April, 2005, before me personally came William H. Schafer, to me known, who, being by me duly sworn, did depose and say that he resides at Beachwood, Ohio, that he is the Senior Vice President and Chief Financial Officer of DEVELOPERS DIVERSIFIED REALTY CORPORATION, one of the corporations described in and which executed the foregoing instrument and that he signed his name thereto by authority of the Board of Directors of said corporation.
[Notarial Seal]
         
     
  /s/ Tammy Battler    
  Notary Public   
  COMMISSION EXPIRES   
 

-4-


 

             
STATE OF NEW YORK
    )
)
    SS:
COUNTY OF QUEENS
    )      
     On the 28th day of April, 2005, before me personally came, to me known, who, being by me duly sworn, did depose and say that he resides at New York, New York, that he is the A.V.P. of US BANK TRUST NATIONAL ASSOCIATION, one of the corporations described in and which executed the foregoing instrument and that he signed his name thereto by authority of the Board of Directors of said corporation.
[Notarial Seal]
         
     
  /s/ Janet P. O’Hara    
  Notary Public   
  COMMISSION EXPIRES   
 

-5-

 

Exhibit 4.17
SIXTH SUPPLEMENTAL INDENTURE
     THIS SIXTH SUPPLEMENTAL INDENTURE is entered into as of October 7, 2005, by and between Developers Diversified Realty Corporation, an Ohio corporation (the “Company”), and US Bank Trust National Association (the “Trustee”), a national banking association organized and existing under the laws of the United States, as successor trustee to National City Bank.
     WHEREAS, the Company and the Trustee entered into the Indenture dated as of May 1, 1994 (as supplemented by a First Supplemental Indenture dated as of May 10, 1995, by a Second Supplemental Indenture dated July 18, 2003, by a Third Supplemental Indenture dated January 23, 2004, by a Fourth Supplemental Indenture dated April 22, 2004 and by a Fifth Supplemental Indenture dated April 28, 2005, the “Indenture”), relating to the Company’s senior debt securities;
     WHEREAS, the Company has made a request to the Trustee that the Trustee join with it, in accordance with Section 901 of the Indenture, in the execution of this Sixth Supplemental Indenture to include the Company’s $350,000,000 principal amount of 5.375% Notes Due 2012 in the definition of Designated Securities such that the covenant in Section 1015 of the Indenture will inure to their benefit;
     WHEREAS, the Company and the Trustee are authorized to enter into this Sixth Supplemental Indenture; and
     NOW, THEREFORE, the Company and the Trustee agree as follows:
          Section 1. Relation to Indenture . This Sixth Supplemental Indenture supplements the Indenture and shall be a part and subject to all the terms thereof. Except as supplemented hereby, the Indenture and the Securities issued thereunder shall continue in full force and effect.
          Section 2. Capitalized Terms . Capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture.
          Section 3. Definitions . The definition of “Designated Securities” is hereby amended in its entirety as follows:
     “Designated Securities” means the Company’s $300,000,000 principal amount of 4.625% Notes Due 2010, the Company’s $275,000,000 principal amount of 3.875% Notes Due 2009, the Company’s $250,000,000 principal amount of 5.25% Notes Due 2011, the Company’s $200,000,000 principal amount of 5.0% Notes Due 2010, the Company’s $200,000,000 principal amount of 5.5% Notes Due 2015 and the Company’s $350,000,000 principal amount of 5.375% Notes Due 2012.

 


 

          Section 4. Counterparts . This Sixth Supplemental Indenture may be executed in counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.
          Section 5. Governing Law . THIS SIXTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
          Section 6. Concerning the Trustee . The Trustee shall not be responsible for any recital herein (other than the fourth recital as it appears as it applies to the Trustee) as such recitals shall be taken as statements of the Company, or the validity of the execution by the Company of this Sixth Supplemental Indenture. The Trustee makes no representations as to the validity or sufficiency of this Sixth Supplemental Indenture.

-2-


 

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.
           
Attest:    DEVELOPERS DIVERSIFIED REALTY
CORPORATION
 
       
/s/ David E. Weiss    By:   /s/ William H. Schafer    
Name: David E. Weiss      Name:   William H. Schafer   
Title: General Counsel       Title:   Executive Vice President and   
  Chief Financial Officer  
           
    US BANK TRUST NATIONAL ASSOCIATION, as Trustee
 
 
/s/ Stacey A. Pagliaro    By:   /s/ Ignazio Tamburello    
Name: Stacey A. Pagliaro     Name:   Ignazio Tamburello   
Title: Assistant Vice President     Title:   Assistant Vice President   
   

-3-


 

             
STATE OF OHIO
    )
)
    SS:
COUNTY OF CUYAHOGA
    )      
     On the 7th day of October, 2005, before me personally came William H. Schafer, to me known, who, being by me duly sworn, did depose and say that he resides at Beachwood, Ohio, that he is the Executive Vice President and Chief Financial Officer of DEVELOPERS DIVERSIFIED REALTY CORPORATION, one of the corporations described in and which executed the foregoing instrument and that he signed his name thereto by authority of the Board of Directors of said corporation.
[Notarial Seal]
         
     
  /s/ Tammy Battler    
  Notary Public   
  COMMISSION EXPIRES   
 

-4-


 

             
STATE OF NEW YORK
    )
)
    SS:
COUNTY OF QUEENS
    )      
     On the 7 day of October, 2005, before me personally came, to me known, who, being by me duly sworn, did depose and say that he resides at New York, New York, that he is the Ignazio Tamburello of US BANK TRUST NATIONAL ASSOCIATION, one of the corporations described in and which executed the foregoing instrument and that he signed his name thereto by authority of the Board of Directors of said corporation.
[Notarial Seal]
         
     
  /s/ Janet P. O’Hara    
  Notary Public   
  COMMISSION EXPIRES   
 

-5-

 

EXHIBIT 21.1
DEVELOPERS DIVERSIFIED REALTY CORPORATION
LIST OF SUBSIDIARIES/AFFILIATES
1000 VAN NESS OWNERS ASSOCIATION, a California corporation
93-1 CORTLAND ASSOCIATES, LLC, a New York limited liability company
AIP OFFICE FLEX II, LLC, an Ohio limited liability company
AIP PROPERTIES #1, L.P., a Delaware limited partnership
AIP PROPERTIES #2, L.P., a Delaware limited partnership
AIP PROPERTIES #3 GP, INC., a Texas corporation
AIP PROPERTIES #3, L.P., a Delaware limited partnership
AIP TAMARAC, INC., a Texas corporation
AIP WARD PARKWAY, INC., a Delaware corporation
AIP-ALFRED, INC., a Texas corporation
AIP-SWAG GP, INC., a Texas corporation
AIP-SWAG OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
AIP/GREENBRIER GP, INC., a Texas corporation
AIP/POST OFFICE GP, INC., a Delaware corporation
AMERICAN INDUSTRIAL PROPERTIES REIT, a Texas real estate investment trust
AMERICAN INDUSTRIAL PROPERTIES REIT, INC., a Maryland corporation
AMERICAN PROPERTY PROTECTION COMPANY, a Vermont corporation
ASH ASSOCIATES SPE, LLC, a Delaware limited liability company
ASH-I ASSOCIATES, LLC, an Ohio limited liability company
ASH-L ASSOCIATES, LLC, an Ohio limited liability company
BANDERA POINTE INVESTMENT LLC, a Delaware limited liability company
BELDEN PARK CROSSINGS I LLC, an Ohio limited liability company
BENDERSON-ARCADE ASSOCIATES, LLC, a New York limited liability company
BENDERSON-ERIE ASSOCIATES, LLC, a New York limited liability company
BENDERSON-FRENCH ASSOCIATES, LLC, a New York limited liability company
BENDERSON-MEDINA ASSOCIATES, LLC, a New York limited liability company
BENDERSON-WAINBERG ASSOCIATES II, L.P., a Delaware limited partnership
BENDERSON-WAINBERG ASSOCIATES, L.P., a Delaware limited partnership
BENDERSON-WARSAW ASSOCIATES, LLC, a New York limited liability company
BFW/PIKE ASSOCIATES, LLC, a New York limited liability company
BG ALDEN STOP, LLC, a New York limited liability company
BG ARCADE STOP, LLC, a New York limited liability company

 


 

BG ARLINGTON ROAD, LLC, a Florida limited liability company
BG BCF, LLC, a New York limited liability company
BG BEAR ROAD II, LLC, a New York limited liability company
BG BEAR ROAD, LLC, a New York limited liability company
BG BIG FLATS I SPE LLC, a Delaware limited liability company
BG BIG FLATS I, LLC, a New York limited liability company
BG BIG FLATS II-III SPE LLC, a Delaware limited liability company
BG BIG FLATS II-III, LLC, a New York limited liability company
BG BIG FLATS IV SPE LLC, a Delaware limited liability company
BG BIG FLATS IV, LLC, a New York limited liability company
BG BIG FLATS, LLC, a New York limited liability company
BG BOULEVARD II, LLC, a New York limited liability company
BG BOULEVARD III, LLC, a New York limited liability company
BG BOULEVARD, LLC, a New York limited liability company
BG CANANDAIGUA LLC, a Delaware limited liability company
BG CHILI, LLC, a New York limited liability company
BG D & L STOP, LLC, a New York limited liability company
BG DANSVILLE STOP, LLC, a New York limited liability company
BG DEL-ARROW, LLC, a New York limited liability company
BG DEL-TON, LLC, a New York limited liability company
BG DELAWARE CONSUMER SQUARE LLC, a Delaware limited liability company
BG DELAWARE HOLDINGS LLC, a Delaware limited liability company
BG DEWITT M & CEC, LLC, a New York limited liability company
BG EASTWOOD, LLC, a Kentucky limited liability company
BG FAIRVIEW SQUARE, LLC, a Virginia limited liability company
BG GMT II, LLC, a New York limited liability company
BG GMT III, LLC, a New York limited liability company
BG GMT, LLC, a New York limited liability company
BG GREECE, LLC, a New York limited liability company
BG HAMBURG HD, LLC, a New York limited liability company
BG HAMBURG SJB, LLC, a New York limited liability company
BG HAMBURG VILLAGE, LLC, a New York limited liability company
BG HEN-JEF II, LLC, a New York limited liability company
BG HENRIETTA, LLC, a New York limited liability company
BG HIGHLANDS, LLC, a Florida limited liability company
BG HOLDINGS LLC, a Delaware limited liability company
BG HORIZON, LLC, a Florida limited liability company

 


 

BG KELLOGG STOP, LLC, a New York limited liability company
BG LOCKPORT II, LLC, a New York limited liability company
BG M-K, LLC, a New York limited liability company
BG MAPLE ROAD, LLC, a New York limited liability company
BG MCKINLEY II, LLC, a New York limited liability company
BG MCKINLEY, LLC, a New York limited liability company
BG MEADOWS SQUARE LLC, a Delaware limited liability company
BG MID CITY I, LLC, a New York limited liability company
BG MILESTRIP, LLC, a New York limited liability company
BG MOHAWK STOP, LLC, a New York limited liability company
BG MONMOUTH, LLC, a New York limited liability company
BG NEW HARTFORD, LLC, a New York limited liability company
BG NIAGARA HD, LLC, a New York limited liability company
BG NORTH CHARLESTON SPE, LLC, a Delaware limited liability company
BG NORTH CHARLESTON, LLC, a South Carolina limited liability company
BG NORWICH STOP, LLC, a New York limited liability company
BG ODP TONAWANDA, LLC, a New York limited liability company
BG OLEAN, LLC, a New York limited liability company
BG ORLAND PARK HD, LLC, an Illinois limited liability company
BG OUTER LOOP, LLC, a Kentucky limited liability company
BG PINE PLAZA, LLC, a New York limited liability company
BG PORTAGE STOP, LLC, a New York limited liability company
BG ROTONDA LLC, a Delaware limited liability company
BG SENECA RIDGE, LLC, a New York limited liability company
BG SHERIDAN-DELAWARE, LLC, a New York limited liability company
BG SHERIDAN-HARLEM II, LLC, a New York limited liability company
BG SOUTH PARK, LLC, a New York limited liability company
BG SOUTHSIDE SPE LLC, a Delaware limited liability company
BG SOUTHSIDE, LLC, a New York limited liability company
BG THRUWAY, LLC, a Delaware limited liability company
BG TOLEDO, LLC, an Ohio limited liability company
BG TONAWANDA STOP, LLC, a New York limited liability company
BG TRANSIT JA I, LLC, a New York limited liability company
BG TRANSIT JA II, LLC, a New York limited liability company
BG TRANSIT JA III, LLC, a New York limited liability company
BG TURFWAY, LLC, a Kentucky limited liability company
BG UNION TOWN, LLC, a North Carolina limited liability company

 


 

BG VILLAGE LLC, a Delaware limited liability company
BG WALKER, LLC, a Michigan limited liability company
BG WEST SENECA HD, LLC, a New York limited liability company
BG WILLIAMSVILLE, LLC, a New York limited liability company
BG WNF LLC, a Delaware limited liability company
BLACK CHERRY LIMITED LIABILITY COMPANY, a Colorado limited liability company
BUFFALO-AVON HOLDINGS, LLC, a Delaware limited liability company
BUFFALO-BROAD ASSOCIATES, LLC, an Ohio limited liability company
BUFFALO-DEWITT ASSOCIATES, LLC, a New York limited liability company
BUFFALO-ELMWOOD ASSOCIATES, LLC, a New York limited liability company
BUFFALO-ELMWOOD SPE, LLC, a New York limited liability company
BUFFALO-HAMLIN HOLDINGS, LLC, a Delaware limited liability company
BUFFALO-ITHACA ASSOCIATES I, LLC, a New York limited liability company
BUFFALO-ITHACA ASSOCIATES, LLC, a New York limited liability company
BUFFALO-MOORESVILLE II, LLC, a Delaware limited liability company
BUFFALO-MOORESVILLE, LLC, a New York limited liability company
BUFFALO-NISKAYUNA ASSOCIATES, LLC, a New York limited liability company
BUFFALO-NORFOLK ASSOCIATES, L.L.P., a Virginia limited liability company
BUFFALO-POST FALLS ASSOCIATES, LLC, a New York limited liability company
BUFFALO-SPRINGVILLE ASSOCIATES, LLC, a New York limited liability company
BUFFALO-SUNSET RIDGE ASSOCIATES, LLC, a New York limited liability company
BUFFALO-WESTGATE ASSOCIATES, LLC, a New York limited liability company
BUFFALO-WESTGATE SPE, LLC, a New York limited liability company
CANAL STREET PARTNERS, L.L.C., a Michigan limited liability company
CENTERTON SQUARE LLC, a Delaware limited liability company
CHELMSFORD ASSOCIATES LLC, a Delaware limited liability company
CHESTERFIELD EXCHANGE, LLC, a Georgia limited liability company
COMMUNITY CENTERS ONE L.L.C., a Delaware limited liability company
COMMUNITY CENTERS THREE L.L.C., a Delaware limited liability company
COMMUNITY CENTERS TWO L.L.C., a Delaware limited liability company
COMMUNITY I LLC, a Delaware limited liability company
CONTINENTAL SAWMILL LIMITED LIABILITY COMPANY, an Ohio limited liability company
CONTINENTAL SAWMILL LIMITED PARTNERSHIP, an Ohio limited partnership
COON RAPIDS RIVERDALE VILLAGE LLC, an Ohio limited liability company
COVENTRY II DDR BLOOMFIELD LLC, a Delaware limited liability company
COVENTRY II DDR BLOOMFIELD TRS LLC, a Delaware limited liability company
COVENTRY II DDR BLOOMFIELD TRS PARENT LLC, a Delaware limited liability company

 


 

COVENTRY II DDR BUENA PARK LLC, a Delaware limited liability company
COVENTRY II DDR BUENA PARK PLACE HOLDINGS LLC, a Delaware limited liability company
COVENTRY II DDR BUENA PARK PLACE LP, a Delaware limited partnership
COVENTRY II DDR FAIRPLAIN LLC, a Delaware limited liability company
COVENTRY II DDR HARBOR BLOOMFIELD PHASE 1 LLC, a Delaware limited liability company
COVENTRY II DDR HARBOR BLOOMFIELD PHASE 2 LLC, a Delaware limited liability company
COVENTRY II DDR MARLEY CREEK SQUARE LLC, a Delaware limited liability company
COVENTRY II DDR MERRIAM VILLAGE LLC, a Delaware limited liability company
COVENTRY II DDR MONTGOMERY FARM HOLDINGS LLC, a Delaware limited liability company
COVENTRY II DDR MONTGOMERY FARM LLC, a Delaware limited liability company
COVENTRY II DDR PHOENIX SPECTRUM FEE LLC, a Delaware limited liability company
COVENTRY II DDR PHOENIX SPECTRUM LLC, a Delaware limited liability company
COVENTRY II DDR PHOENIX SPECTRUM OP LLC, a Delaware limited liability company
COVENTRY II DDR PHOENIX SPECTRUM SPE LLC, a Delaware limited liability company
COVENTRY II DDR SM LLC, a Delaware limited liability company
COVENTRY II DDR TOTEM LAKE LLC, a Delaware limited liability company
COVENTRY II DDR TRI COUNTY LLC, a Delaware limited liability company
COVENTRY II DDR TRI COUNTY SPE LLC, a Delaware limited liability company
COVENTRY II DDR WARD PARKWAY LLC, a Delaware limited liability company
COVENTRY II DDR WESTOVER HOLDINGS LLC, a Delaware limited liability company
COVENTRY II DDR WESTOVER LLC, a Delaware limited liability company
COVENTRY II DDR/TRADEMARK MONTGOMERY FARM L.P., a Texas limited partnership
COVENTRY II DDR/TUCKER MARLEY CREEK SQUARE LLC, a Delaware limited liability company
COVENTRY II MM DDR TRI COUNTY LLC, a Delaware limited liability company
COVENTRY LONG BEACH PLAZA LLC, a Delaware limited liability company
COVENTRY REAL ESTATE PARTNERS, LTD., an Ohio limited liability company
COVENTRY ROUND ROCK LLC, an Ohio limited liability company
CRRV CENTRAL LLC, a Delaware limited liability company
DD COMMUNITY CENTERS EIGHT, INC., an Ohio corporation
DD COMMUNITY CENTERS FIVE, INC., a Delaware corporation
DD COMMUNITY CENTERS INVESTMENTS LLC, a Delaware limited liability company
DD COMMUNITY CENTERS ONE, INC., an Ohio corporation
DD COMMUNITY CENTERS THREE, INC., an Ohio corporation
DD COMMUNITY CENTERS TWO, INC., an Ohio corporation
DD DEVELOPMENT COMPANY II, INC., an Ohio corporation
DDPD OPP LLC, a Maryland limited liability company
DDR APPLE BLOSSOM LLC, a Delaware limited liability company

 


 

DDR ASPEN GROVE LIFESTYLE CENTER PROPERTIES, LLC, a Delaware limited liability company
DDR ATLANTICO LLC, S.E., a Delaware limited liability company
DDR AURORA LLC, a Delaware limited liability company
DDR CAMINO REAL LLC, S.E., a Delaware limited liability company
DDR CARIBBEAN LLC, a Delaware limited liability company
DDR CARIBBEAN PROPERTY MANAGEMENT LLC, a Delaware limited liability company
DDR CAYEY LLC, S.E., a Delaware limited liability company
DDR CHANDLER LLC, an Ohio limited liability company
DDR CHILLICOTHE LLC, a Delaware limited liability company
DDR CM, INC., a California corporation
DDR CONTINENTAL INC., an Ohio corporation
DDR CONTINENTAL LP, an Ohio limited partnership
DDR COPPER COUNTRY LLC, a Delaware limited liability company
DDR CPR I PORTFOLIO LLC, S.E., a Delaware limited liability company
DDR CPR II PORTFOLIO LLC, S.E., a Delaware limited liability company
DDR CPR PORTFOLIO LLC, S.E., a Delaware limited liability company
DDR CROSSROADS CENTER LLC, an Ohio limited liability company
DDR CROSSROADS NY LLC, a Delaware limited liability company
DDR CRV PORTFOLIO LLC, S.E., a Delaware limited liability company
DDR CULVER RIDGE LLC, a Delaware limited liability company
DDR DB 151 VENTURES LP, a Texas limited partnership
DDR DB DEVELOPMENT VENTURES LP, a Texas limited partnership
DDR DB MENDOCINO LLC, a Delaware limited liability company
DDR DB OPPORTUNITY SUB INC., an Ohio corporation
DDR DB OUTLOT II LP, a Texas limited partnership
DDR DB OUTLOT LP, a Texas limited partnership
DDR DB SA PHASE II LP, a Texas limited partnership
DDR DB SA VENTURES LP, a Texas limited partnership
DDR DB STONE OAK LP, a Texas limited partnership
DDR DB TECH VENTURES LP, a Texas limited partnership
DDR DEER PARK TOWN CENTER LLC, an Ohio limited liability company
DDR DEL SOL LLC, S.E., a Delaware limited liability company
DDR DERBY SQUARE LLC, a Delaware limited liability company
DDR DOWNREIT LLC, an Ohio limited liability company
DDR EASTGATE PLAZA LLC, a Delaware limited liability company
DDR ESCORIAL LLC, S.E., a Delaware limited liability company
DDR FAJARDO LLC, S.E., a Delaware limited liability company

 


 

DDR FAMILY CENTERS I, INC., an Ohio corporation
DDR FAMILY CENTERS LP, a Delaware limited partnership
DDR FC LAKEPOINTE I LP, a Texas limited partnership
DDR FC LAKEPOINTE LLC, a Delaware limited liability company
DDR FLATIRON LLC, an Ohio limited liability company
DDR FOSSIL CREEK LLC, a Delaware limited liability company
DDR GC VENTURES LLC, a Delaware limited liability company
DDR GLH BUFFALO-NORFOLK HOLDINGS LLC, a Delawre limited liability company
DDR GLH ERIE PLAZA TRUST, a Delaware statutory trust
DDR GLH FREEDOM PLAZA LLC, a Delaware limited liability company
DDR GLH GP HOLDINGS II LLC, a Delaware limited liability company
DDR GLH GP HOLDINGS LLC, a Delaware limited liability company
DDR GLH HANOVER TRUST, a Delaware statutory trust
DDR GLH LLC, a Delaware limited liability company
DDR GLH MARKETPLACE PLAZA LLC, a Delaware limited liability company
DDR GUAYAMA WM LLC, S.E., a Delaware limited liability company
DDR GUILFORD LLC, a Delaware limited liability company
DDR GULFPORT PROMENADE LLC, a Delaware limited liability company
DDR HAMILTON LLC, S.E., a Delaware limited liability company
DDR HARBISON COURT LLC, a Delaware limited liability company
DDR HENDON NASSAU PARK II LP, a Georgia limited partnership
DDR HERMES ASSOCIATES LC, a Utah limited liability company
DDR HIGHLAND GROVE LLC, a Delaware limited liability company
DDR HILLTOP PLAZA LLC, a Delaware limited liability company
DDR HOMESTEAD LLC, a Delaware limited liability company
DDR HORSEHEADS LLC, a Delaware limited liability company
DDR HOUSTON LLC, a Delaware limited liability company
DDR INDEPENDENCE LLC, a Delaware limited liability company
DDR IRR ACQUISITION LLC, a Delaware limited liability company
DDR ISABELA LLC, S.E., a Delaware limited liability company
DDR JAMESTOWN PLAZA LLC, a Delaware limited liability company
DDR JUPITER FALLS, LLC, a Delaware limited liability company
DDR KILDEER INC., an Illinois corporation
DDR LEROY PLAZA LLC, a Delaware limited liability company
DDR LIBERTY FAIR, INC., a Delaware corporation
DDR LONG BEACH LLC, a Delaware limited liability company
DDR MACQUARIE BISON HOLDINGS LLC, a Delaware limited liability company

 


 

DDR MACQUARIE FUND LLC, a Delaware limited liability company
DDR MACQUARIE LONGHORN HOLDINGS LLC, a Delaware limited liability company
DDR MACQUARIE LONGHORN II HOLDINGS LLC, a Delaware limited liability company
DDR MACQUARIE LONGHORN III HOLDINGS LLC, a Delaware limited liability company
DDR MANAGEMENT LLC, a Delaware limited liability company
DDR MARKAZ II LLC, a Delaware limited liability company
DDR MARKAZ LLC, a Delaware limited liability company
DDR MCHENRY SQUARE LLC, a Delaware limited liability company
DDR MDT ASHEVILLE RIVER HILLS LLC, a Delaware limited liability company
DDR MDT BATAVIA COMMONS LLC, a Delaware limited liability company
DDR MDT BATAVIA SJB PLAZA LLC, a Delaware limited liability company
DDR MDT BATAVIA STOP PLAZA LLC, a Delaware limited liability company
DDR MDT BELDEN PARK II LLC, a Delaware limited liability company
DDR MDT BELDEN PARK LLC, a Delaware limited liability company
DDR MDT BN LLC, a Delaware limited liability company
DDR MDT BROOKFIELD LLC, a Delaware limited liability company
DDR MDT BROWN DEER CENTER LLC, a Delaware limited liability company
DDR MDT BROWN DEER MARKET LLC, a Delaware limited liability company
DDR MDT CARILLON PLACE LLC, a Delaware limited liability company
DDR MDT CHEEKTOWAGA WALDEN PLACE LLC, a Delaware limited liability company
DDR MDT CONNECTICUT COMMONS LLC, a Delaware limited liability company
DDR MDT COOL SPRINGS POINTE LLC, a Delaware limited liability company
DDR MDT EASTGATE PLAZA LLC, a Delaware limited liability company
DDR MDT EASTGATE PLAZA RESTAURANT LLC, a Delaware limited liability company
DDR MDT ERIE MARKETPLACE LLC, a Delaware limited liability company
DDR MDT FAIRFAX TOWNE CENTER LLC, a Delaware limited liability company
DDR MDT FAYETTEVILLE SPRING CREEK LLC, a Delaware limited liability company
DDR MDT FAYETTEVILLE STEELE CROSSING LLC, a Delaware limited liability company
DDR MDT FLATACRES MARKETCENTER LLC, a Delaware limited liability company
DDR MDT FRISCO MARKETPLACE GP LLC, a Delaware limited liability company
DDR MDT FRISCO MARKETPLACE LP, a Delaware limited partnership
DDR MDT GRANDVILLE MARKETPLACE LLC, a Delaware limited liability company
DDR MDT GREAT NORTHERN LLC, a Delaware limited liability company
DDR MDT HARBISON COURT LLC, a Delaware limited liability company
DDR MDT INDEPENDENCE COMMONS LLC, a Delaware limited liability company
DDR MDT LAKE BRANDON PLAZA LLC, a Delaware limited liability company
DDR MDT LAKE BRANDON VILLAGE LLC, a Delaware limited liability company

 


 

DDR MDT LANCASTER CINEMAS LLC, a Delaware limited liability company
DDR MDT LIQUIDATING SUB LLC, a Delaware limited liability company
DDR MDT MACARTHUR GP LLC, a Delaware limited liability company
DDR MDT MACARTHUR MARKETPLACE LP, a Delaware limited partnership
DDR MDT MARKETPLACE AT TOWNE CENTER GP LLC, a Delaware limited liability company
DDR MDT MARKETPLACE AT TOWNE CENTER LP, a Delaware limited partnership
DDR MDT MCDONOUGH MARKETPLACE LLC, a Delaware limited liability company
DDR MDT MCKINNEY MARKETPLACE GP LLC, a Delaware limited liability company
DDR MDT MCKINNEY MARKETPLACE LP, a Delaware limited partnership
DDR MDT MERRIAM TOWN CENTER LLC, a Delaware limited liability company
DDR MDT MIDWAY MARKETPLACE LLC, a Delaware limited liability company
DDR MDT MONACA TOWNSHIP MARKETPLACE LLC, a Delaware limited liability company
DDR MDT MTC HOLDINGS LLC, a Delaware limited liability company
DDR MDT MURFREESBORO TOWNE CENTER LLC, a Delaware limited liability company
DDR MDT MV ANAHEIM HILLS LP, a Delaware limited partnership
DDR MDT MV ANTIOCH LP,a Delaware limited partnership
DDR MDT MV BURBANK LP, a Delaware limited partnership
DDR MDT MV CARSON CITY LLC, a Delaware limited liability company
DDR MDT MV CHANDLER LLC, a Delaware limited liability company
DDR MDT MV CHINO LP, a Delaware limited partnership
DDR MDT MV CLOVIS LP, a Delaware limited partnership
DDR MDT MV COLLEGE GROVE LP, a Delaware limited partnership
DDR MDT MV DEER VALLEY LLC, a Delaware limited liability company
DDR MDT MV EL CAJON LP, a Delaware limited partnership
DDR MDT MV FAIRFIELD LP, a Delaware limited partnership
DDR MDT MV FOLSOM LP, a Delaware limited partnership
DDR MDT MV FOOTHILL RANCH LP, a Delaware limited partnership
DDR MDT MV GARDEN GROVE LP, a Delaware limited partnership
DDR MDT MV GP II LLC, a Delaware limited liability company
DDR MDT MV GP LLC, a Delaware limited liability company
DDR MDT MV HOLDINGS II LLC, a Delaware limited liability company
DDR MDT MV INGRAM LP, a Delaware limited partnership
DDR MDT MV LLC, a Delaware limited liability company
DDR MDT MV LOMPOC LP, a Delaware limited partnership
DDR MDT MV MADERA LP, a Delaware limited partnership
DDR MDT MV NELLIS CROSSING LLC, a Delaware limited liability company
DDR MDT MV NORTH FULLERTON I LP, a Delaware limited partnership

 


 

DDR MDT MV NORTH FULLERTON II LP, a Delaware limited partnership
DDR MDT MV NORTHRIDGE LP, a Delaware limited partnership
DDR MDT MV PALMDALE LP, a Delaware limited partnership
DDR MDT MV PORTERVILLE LP, a Delaware limited partnership
DDR MDT MV REDDING LP, a Delaware limited partnership
DDR MDT MV RENO LLC, a Delaware limited liability company
DDR MDT MV SANTA MARIA LP, a Delaware limited partnership
DDR MDT MV SANTA ROSA LP, a Delaware limited partnership
DDR MDT MV SILVER CREEK LLC, a Delaware limited liability company
DDR MDT MV SLATTEN RANCH LP, a Delaware limited partnership
DDR MDT MV SONORA LP, a Delaware limited partnership
DDR MDT MV SOUTH SAN DIEGO LP, a Delaware limited partnership
DDR MDT MV SUPERSTITION SPRINGS LLC, a Delaware limited liability company
DDR MDT MV SW LAS VEGAS LLC, a Delaware limited liability company
DDR MDT MV TUCSON LLC, a Delaware limited liability company
DDR MDT MV TULARE LP, a Delaware limited partnership
DDR MDT MV UKIAH LP, a Delaware limited partnership
DDR MDT MV WEST COVINA LP, a Delaware limited partnership
DDR MDT MV WEST LAS VEGAS LLC, a Delaware limited liability company
DDR MDT NASHVILLE MARKETPLACE LLC, a Delaware limited liability company
DDR MDT OVERLAND POINTE MARKETPLACE LLC, a Delaware limited liability company
DDR MDT PARKER PAVILIONS II LLC, a Delaware limited liability company
DDR MDT PARKER PAVILIONS LLC, a Delaware limited liability company
DDR MDT PERIMETER POINTE LLC, a Delaware limited liability company
DDR MDT PIONEER HILLS CP LLC, a Delaware limited liability company
DDR MDT PIONEER HILLS LLC, a Delaware limited liability company
DDR MDT PS LLC, a Delaware limited liability company
DDR MDT RIVERDALE VILLAGE INNER RING LLC, a Delaware limited liability company
DDR MDT RIVERDALE VILLAGE LLC, a Delaware limited liability company
DDR MDT RIVERDALE VILLAGE OUTER RING LLC, a Delaware limited liability company
DDR MDT SHOPPERS WORLD LLC, a Delaware limited liability company
DDR MDT SHOPS AT TURNER HILL LLC, a Delaware limited liability company
DDR MDT SW HOLDINGS TRUST, a Maryland trust
DDR MDT TOWNE CENTER PRADO LLC, a Delaware limited liability company
DDR MDT TURNER HILL MARKETPLACE LLC, a Delaware limited liability company
DDR MDT UNION CONSUMER SQUARE LLC, a Delaware limited liability company
DDR MDT UNION ROAD PLAZA LLC, a Delaware limited liability company

 


 

DDR MDT VENICE HOLDINGS LLC, a Delaware limited liability company
DDR MDT WALDEN AVENUE BOOKSTORE LLC, a Delaware limited liability company
DDR MDT WALDEN CONSUMER SQUARE LLC, a Delaware limited liability company
DDR MDT WILLIAMSVILLE PREMIER PLACE LLC, a Delaware limited liability company
DDR MDT WOODFIELD VILLAGE LLC, a Delaware limited liability company
DDR MIAMI AVENUE, LLC, a Delaware limited liability company
DDR MICHIGAN II LLC, a Delaware limited liability company
DDR MIDWAY PLAZA LLC, a Delaware limited liability company
DDR MPR PORTFOLIO LLC, S.E., a Delaware limited liability company
DDR NAMPA LLC, a Delaware limited liability company
DDR NASSAU PARK II INC., an Ohio corporation
DDR NASSAU PAVILION ASSOCIATES LP, a Georgia limited partnership
DDR NASSAU PAVILION INC., an Ohio corporation
DDR NORTE LLC, S.E., a Delaware limited liability company
DDR NORTH POINTE PLAZA LLC, a Delaware limited liability company
DDR NORTHCREEK COMMONS LLC, a Delaware limited liability company
DDR OCEANSIDE LLC, a Delaware limited liability company
DDR OESTE LLC, S.E., a Delaware limited liability company
DDR OFFICE FLEX CORPORATION, a Delaware corporation
DDR OFFICE FLEX LP, an Ohio limited partnership
DDR OHIO OPPORTUNITY II LLC, an Ohio limited liability company
DDR OHIO OPPORTUNITY III LLC, an Ohio limited liability company
DDR OHIO OPPORTUNITY LLC, an Ohio limited liability company
DDR ONTARIO PLAZA LLC, a Delaware limited liability company
DDR ORCHARD PARK LLC, a Delaware limited liability company
DDR OVIEDO PARK LLC, a Delaware limited liability company
DDR OXFORD PLACE LLC, a Delaware limited liability company
DDR P&M ASPEN GROVE OFFICE PARCEL LLC, a Delaware limited liability company
DDR PALMA REAL LLC, S.E., a Delaware limited liability company
DDR PANORAMA PLAZA LLC, a Delaware limited liability company
DDR PARADISE LLC, an Ohio limited liability company
DDR PR GC VENTURES LLC, a Delaware limited liability company
DDR PR VENTURES II LLC, a Delaware limited liability company
DDR PR VENTURES LLC, S.E., a Delaware limited liability company
DDR QUEENSWAY CM LLC, an Ohio limited liability company
DDR QUEENSWAY LLC, an Ohio limited liability company
DDR REAL ESTATE SERVICES, INC., a California corporation

 


 

DDR REALTY COMPANY, a Maryland trust
DDR RENO LLC, a Delaware limited liability company
DDR REXVILLE LLC, S.E., a Delaware limited liability company
DDR RIO HONDO LLC, S.E., a Delaware limited liability company
DDR RIVERCHASE II LLC, a Delaware limited liability company
DDR RIVERCHASE LLC, a Delaware limited liability company
DDR ROBINSON STOP LLC, a Delaware limited liability company
DDR SANSONE DEVELOPMENT VENTURES LLC, a Missouri limited liability company
DDR SCOTTSDALE PAVILIONS LLC, a Delaware limited liability company
DDR SEABROOK LLC, a Delaware limited liability company
DDR SENORIAL LLC, S.E., a Delaware limited liability company
DDR SM LLC, a Delaware limited liability company
DDR SPRINGFIELD LLC, a Delaware limited liability company
DDR STONE OAK HOLDINGS LLC, a Delaware limited liability company
DDR TC LLC, a Delaware limited liability company
DDR TINTON FALLS LLC, a Ohio limited liability company
DDR UNION ROAD LLC, a Delaware limited liability company
DDR UNIVERSITY SQUARE ASSOCIATES L.C., a Utah limited liability company
DDR URBAN LP, a Delaware limited partnership
DDR URBAN, INC., a Delaware corporation
DDR VALENCIA HOLDINGS LLC, a Delaware limited liability company
DDR VALENCIA L.P., a Delaware limited partnership
DDR VAN NESS, INC., an Ohio corporation
DDR VEGA BAJA LLC, S.E., a Delaware limited liability company
DDR VIC I L.C., a Utah limited liability company
DDR WARSAW PLAZA LLC, a Delaware limited liability company
DDR WATERTOWN LLC, an Ohio limited liability company
DDR WILSHIRE, INC., an Ohio corporation
DDR WOODMONT LLC, a Delaware limited liability company
DDR XENIA AND NEW BERN LLC, a Delaware limited liability company
DDR/1ST CAROLINA CROSSINGS NORTH LLC, a Delaware limited liability company
DDR/1ST CAROLINA CROSSINGS SOUTH LLC, a Delaware limited liability company
DDR/POST OFFICE LIMITED PARTNERSHIP, a Virginia limited partnership
DDR/TECH 29 LIMITED PARTNERSHIP, a Maryland limited partnership
DDR/VAN NESS OPERATING COMPANY, L.P., a Delaware limited partnership
DDRA AHWATUKEE FOOTHILLS LLC, a Delaware limited liability company
DDRA ARROWHEAD CROSSING LLC, a Delaware limited liability company

 


 

DDRA COMMUNITY CENTERS EIGHT, L.P., a Delaware limited partnership
DDRA COMMUNITY CENTERS FIVE, L.P., a Delawere limited partnership
DDRA COMMUNITY CENTERS FOUR, L.P., a Texas limited partnership
DDRA COMMUNITY CENTERS SIX, L.P., a Delaware limited partnership
DDRA EAGAN PROMENADE LLC, a Delaware limited liability company
DDRA EASTCHASE MARKET GP LLC, a Delaware limited liability company
DDRA EASTCHASE MARKET LP, a Delaware limited partnership
DDRA KILDEER LLC, a Delaware limited liability company
DDRA MAPLE GROVE CROSSING LLC, a Delaware limited liability company
DDRA TANASBOURNE TOWN CENTER LLC, a Delaware limited liability company
DDRC GATEWAY LLC, a Delaware limited liability company
DDRC GREAT NORTHERN LIMITED PARTNERSHIP, an Ohio limited partnership
DDRC MICHIGAN LLC, an Ohio limited liability company
DDRC PDK EASTON LLC, an Ohio limited liability company
DDRC PDK HAGERSTOWN LLC,an Ohio limited liability company
DDRC PDK SALISBURY LLC, an Ohio limited liability company
DDRC PDK SALISBURY PHASE III LLC, an Ohio limited liability company
DDRC PIKE ENTERTAINMENT, LLC, a California limited liability company
DDRC SALEM LLC, a Delaware limited liability company
DDRTC CORE RETAIL FUND, LLC, a Delaware limited liability company
DEVELOPERS DIVERSIFIED COOK’S CORNER LLC, an Ohio limited liability company
DEVELOPERS DIVERSIFIED OF ALABAMA, INC., an Alabama corporation
DEVELOPERS DIVERSIFIED OF INDIANA, INC., an Ohio corporation
DEVELOPERS DIVERSIFIED OF MISSISSIPPI, INC., an Ohio corporation
DEVELOPERS DIVERSIFIED OF PENNSYLVANIA, INC., an Ohio corporation
DEVELOPERS DIVERSIFIED OF TENNESSEE, INC., an Ohio corporation
DLA VENTURES LLC, an Ohio limited liability company
DOGWOOD DRIVE, L.L.C., a Georgia limited liability company
DOTRS LIMITED LIABILITY COMPANY, an Ohio limited liability company
DPG COLUMBIA SQUARE LLC, a Delaware limited liability company
DPG FARRAGUT POINT LLC, a Delaware limited liability company
DPG FIVE FORKS CROSSING LLC, a Delaware limited liability company
DPG FIVE FORKS VILLAGE LLC, a Delaware limited liability company
DPG REALTY HOLDINGS LLC, a Delaware limited liability company
DREXEL WASHINGTON LIMITED LIABILITY COMPANY, an Ohio limited liability company
DREXEL WASHINGTON LIMITED PARTNERSHIP, an Ohio limited partnership
EASTCHASE FORT WORTH LP, a Delaware limited partnership

 


 

EASTON MARKET LIMITED LIABILITY COMPANY, a Delaware limited liability company
ENERGY MANAGEMENT STRATEGIES, INC., a Delaware corporation
FAYETTEVILLE BLACK INVESTMENT, INC., a Georgia corporation
FAYETTEVILLE EXCHANGE, LLC, a Georgia limited liability company
FAYETTEVILLE MORGANTON ROAD ASSOCIATES LIMITED PARTNERSHIP, a North Carolina limited partnership
FLATACRES MARKETCENTER, LLC, a Georgialimited liability company
FORT UNION ASSOCIATES, L.C., a Utah limited liability company
FT. COLLINS PARTNERS I, LLC, a Colorado limited liability company
GEORGIA FINANCE CORPORATION, a Delaware corporation
GS BOARDMAN LLC, a Delaware limited liability company
GS BRENTWOOD LLC, a Delaware limited liability company
GS CENTENNIAL LLC, a Delaware limited liability company
GS DDR LLC, an Ohio limited liability company
GS ERIE LLC, a Delaware limited liability company
GS II BIG OAKS LLC, a Delaware limited liability company
GS II BROOK HIGHLAND LLC, a Delaware limited liability company
GS II DDR LLC, an Ohio limited liability company
GS II GREEN RIDGE LLC, a Delaware limited liability company
GS II INDIAN HILLS LLC, a Delaware limited liability company
GS II JACKSONVILLE REGIONAL LLC, a Delaware limited liability company
GS II MERIDIAN CROSSROADS LLC, a Delaware limited liability company
GS II NORTH POINTE LLC, a Delaware limited liability company
GS II OXFORD COMMONS LLC, a Delaware limited liability company
GS II UNIVERSITY CENTRE LLC, a Delaware limited liability company
GS II UPTOWN SOLON LLC, a Delaware limited liability company
GS SUNSET LLC, a Delaware limited liability company
HAGERSTOWN DEVELOPMENT LLC, an Ohio limited liability company
HAGERSTOWN TIF LLC, an Ohio limited liability company
HENDON/ATLANTIC RIM JOHNS CREEK, LLC, a Georgia limited liability company
HENDON/DDR/BP, LLC, a Delaware limited liability company
HERMES ASSOCIATES, a Utah general partnership
HERMES ASSOCIATES, LTD., a Utah limited partnership
HICKORY HOLLOW EXCHANGE, LLC, a Georgia limited liability company
HIGHLAND GROVE LIMITED LIABILITY COMPANY, an Ohio limited liability company
HISTORIC VAN NESS LLC, a California limited liability company
HUDSON-ELMIRA ASSOCIATES, LLC, a New York limited liability company
HWWM ASSOCIATES, LLC, a New York limited liability company

 


 

JDN ASH II LLC, a Delaware limited liability company
JDN ASH LLC, a Delaware limited liability company
JDN BG UNION TOWN LLC, a Delaware limited liability company
JDN DEVELOPMENT COMPANY, INC., a Delaware corporation
JDN DEVELOPMENT INVESTMENT, L.P., a Georgia limited partnership
JDN DEVELOPMENT LP, INC., a Delaware corporation
JDN INTERMOUNTAIN DEVELOPMENT CORP., a Delaware corporation
JDN INTERMOUNTAIN DEVELOPMENT PIONEER HILLS, LLC, a Georgia limited liability company
JDN INTERMOUNTAIN DEVELOPMENT, PARKER PAVILION, LLC, a Georgia limited liability company
JDN INTERMOUNTAIN HOLDINGS, INC., a Colorado corporation
JDN MOORESVILLE, LLC, a Delaware limited liability company
JDN OF ALABAMA REALTY CORPORATION, an Alabama corporation
JDN QRS INC, a New York corporation
JDN REAL ESTATE — APEX, L.P., a Georgia limited partnership
JDN REAL ESTATE — BRIDGEWOOD FORT WORTH, L.P., a Georgia limited partnership
JDN REAL ESTATE — CONYERS, L.P., a Georgia limited partnership
JDN REAL ESTATE — CUMMING, L.P., a Georgia limited partnership
JDN REAL ESTATE — ERIE, L.P., a Georgia limited partnership
JDN REAL ESTATE — FAYETTEVILLE, L.P., a Georgia limited partnership
JDN REAL ESTATE — FREEHOLD, L.P., a Georgia limited partnership
JDN REAL ESTATE — FRISCO, L.P., a Georgia limited partnership
JDN REAL ESTATE — GULF BREEZE II, L.P., a Georgia limited partnership
JDN REAL ESTATE — HAMILTON, L.P., a Georgia limited partnership
JDN REAL ESTATE — HICKORY CREEK, L.P., a Georgia limited partnership
JDN REAL ESTATE — LAKELAND, L.P., a Georgia limited partnership
JDN REAL ESTATE — MCDONOUGH II, L.P., a Georgia limited partnership
JDN REAL ESTATE — MCDONOUGH, L.P., a Georgia limited partnership
JDN REAL ESTATE — MCKINNEY, L.P., a Georgia limited partnership
JDN REAL ESTATE — MESQUITE, L.P., a Georgia limited partnership
JDN REAL ESTATE — NORWOOD, LLC, a Georgia limited liability company
JDN REAL ESTATE — OAKLAND, L.P., a Georgia limited partnership
JDN REAL ESTATE — OVERLAND PARK, L.P., a Georgia limited partnership
JDN REAL ESTATE — PARKER PAVILIONS, L.P., a Georgia limited partnership
JDN REAL ESTATE — PENSACOLA, L.P.,a Georgia limited partnership
JDN REAL ESTATE — PIONEER HILLS II, L.P., a Georgia limited partnership
JDN REAL ESTATE — RALEIGH, L.P., a Georgia limited partnership
JDN REAL ESTATE — SACRAMENTO, L.P., a Georgia limited partnership

 


 

JDN REAL ESTATE — STONE MOUNTAIN, L.P., a Georgia limited partnership
JDN REAL ESTATE — SUWANEE, L.P., a Georgia limited partnership
JDN REAL ESTATE — TURNER HILL, L.P., a Georgia limited partnership
JDN REAL ESTATE — WEST LAFAYETTE, L.P., a Georgia limited partnership
JDN REAL ESTATE — WEST LANSING, L.P., a Georgia limited partnership
JDN REALTY AL, INC., an Alabama corporation
JDN REALTY CORPORATION, a Maryland corporation
JDN REALTY CORPORATION GP, INC., a Delaware corporation
JDN REALTY HOLDINGS, L.P., a Georgia limited partnership
JDN REALTY INVESTMENT, L.P., a Georgia limited partnership
JDN REALTY LP, INC., a Delaware corporation
JDN WARD PARKWAY, INC., a Delaware corporation
JDN WEST ALLIS ASSOCIATES LIMITED PARTNERSHIP, a Georgia limited partnership
JDN WESTGATE LLC, a Delaware limited liability company
JEFFERSON COUNTY PLAZA LLC, a Missouri limited liability company
LAFRONTERA INVESTMENT LLC, a Delaware limited liability company
LENNOX TOWN CENTER LIMITED, an Ohio limited liability company
LIBERTY FAIR MALL ASSOCIATES LIMITED PARTNERSHIP, a Virginia limited partnership
LIBERTY FAIR MALL ASSOCIATES, INC., an Ohio corporation
LIBERTY FAIR VA II LP, a Virginia limited partnership
LIBERTY FAIR VA LP, a Virginia limited partnership
MACQUARIE DDR MANAGEMENT LLC, a Delaware limited liability company
MACQUARIE DDR U.S. TRUST II INC., a Maryland corporation
MACQUARIE DDR U.S. TRUST INC., a Maryland corporation
MERRIAM I LLC, a Delaware limited liability company
MERRIAM TOWN CENTER LTD., an Ohio limited liability company
METRO STATION DEVELOPMENT COMPANY, L.L.C., a Mississippi limited liability company
MITCHELL BRIDGE ASSOCIATES, INC., a Georgia corporation
MT. NEBO POINTE LLC, an Ohio limited liability company
MZ I COMMUNITY I LLC, a Delaware limited liability company
MZ II COMMUNITY I LLC, a Delaware limited liability company
NATIONAL PROPERTY PROTECTION COMPANY, a Vermont corporation
NIAGARA-COLONIAL ASSOCIATES, LLC, a New York limited liability company
PARCEL J-1B LIMITED PARTNERSHIP, a Virginia limited partnership
PASEO COLORADO HOLDINGS LLC, a Delaware limited liability company
PECAN PARK, LLC, a Mississippi limited liability company
PEDRO COMMUNITY CENTER, INC., an Ohio corporation

 


 

PEPPERELL CORNERS, LTD., an Alabama limited partnership
PLAINVILLE CONNECTICUT L.L.C., an Ohio limited liability company
PLAINVILLE DEVELOPMENT L.P., an Oho limited partnership
PLAINVILLE INVESTMENT IA LLC, a Delaware limited liability company
PR II DEER PARK TOWN CENTER LLC, a Delaware limited liability company
RETAIL VALUE INVESTMENT PROGRAM IIIA LIMITED PARTNERSHIP, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM IIIC LIMITED PARTNERSHIP, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM LIMITED PARTNERSHIP I, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM LIMITED PARTNERSHIP IA, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM LIMITED PARTNERSHIP II, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM LIMITED PARTNERSHIP IIA, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM LIMITED PARTNERSHIP III, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM LIMITED PARTNERSHIP IIIB, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM LIMITED PARTNERSHIP IV, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM LIMITED PARTNERSHIP IVA, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM LIMITED PARTNERSHIP V, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM LIMITED PARTNERSHIP VI, a Delaware limited partnership
RETAIL VALUE INVESTMENT PROGRAM VII LIMITED LIABILITY COMPANY, a Delaware limited liability company
RETAIL VALUE INVESTMENT PROGRAM VIII LIMITED PARTNERSHIP, a Delaware limited partnership
RIVERDALE RETAIL ASSOCIATES, L.C., a Utah limited liability company
ROCKY MOUNTAIN REAL ESTATE, L.L.C., a Utah limited liability company
RVIP CA/WA/OR PORTFOLIO LLC, a Delaware limited liability company
RVIP CAMERON PARK MANAGER LLC, a Delaware limited liability company
RVIP OLYMPIAD PLAZA MANAGER LLC, a Delaware limited liability company
RVIP OLYMPIAD PLAZA, L.P., a California limited partnership
RVIP PUENTE HILLS LLC a Delaware limited liability company
RVIP PUENTE HILLS MANAGER LLC, a Delaware limited liability company
RVIP PUGET PARK LLC, a Delaware limited liability company
RVIP RICHMOND LLC, a Delaware limited liability company
RVIP VALLEY CENTRAL MANAGER LLC, a Delaware limited liability company
RVIP VALLEY CENTRAL, L.P., a California limited partnership
RVIP VIII HOLDINGS LLC, a Delaware limited liability company
RVM BRYWOOD LLC, a Delaware limited liability company
RVM CHEROKEE LLC, a Delaware limited liability company
RVM DEVONSHIRE LLC, a Delaware limited liability company
RVM LONG BEACH PLAZA LLC, a Delaware limited liability company
RVM TEN QUIVIRA LLC, a Delaware limited liability company

 


 

RVM TQ PAD LLC, a Delaware limited liability company
RVM WILLOW CREEK LLC, a Delaware limited liability company
SANSONE GROUP/DDR LLC, a Missouri limited liability company
SERVICE BATON ROUGE, LLC, a Delaware limited liability company
SERVICE BRIDGE LLC, a Delaware limited liability company
SERVICE HOLDINGS II LLC, a Delaware limited liability company
SERVICE HOLDINGS LLC, a Delaware limited liability company
SERVICE LONGVIEW GP, LLC, a Delaware limited liability company
SERVICE LONGVIEW, L.P., a Texas limited partnership
SERVICE PENSACOLA, LLC, a Delaware limited liability company
SHEA AND TATUM ASSOCIATES LIMITED PARTNERSHIP, an Arizona limited partnership
SHOPPERS WORLD COMMUNITY CENTER, L.P., a Delaware limited partnership
SHORESALES, LLC, a Delaware limited liability company
SM LTCB BAYTOWN GP, LLC, a Delaware limited liability company
SM LTCB BAYTOWN, L.P., a Texas limited partnership
SM LTCB LANSING, LLC, a Delaware limited liability company
SM LTCB LOUISVILLE, LLC, a Delaware limited liability company
SM LTCB ST. PETERSBURG, LLC, a Delaware limited liability company
SM LTCB STUART, LLC, a Delaware limited liability company
SM NEWCO ANTIOCH, LLC, a Delaware limited liability company
SM NEWCO AUGUSTA, LLC, a Delaware limited liability company
SM NEWCO BEAUMONT GP, LLC, a Delaware limited liability company
SM NEWCO BEAUMONT, L.P., a Texas limited partnership
SM NEWCO BOSSIER CITY, LLC, a Delaware limited liability company
SM NEWCO BRADENTON, LLC, a Delaware limited liability company
SM NEWCO BURBANK, LLC, a Delaware limited liability company
SM NEWCO BURLINGTON, LLC, a Delaware limited liability company
SM NEWCO CHESAPEAKE, LLC, a Delaware limited liability company
SM NEWCO CRYSTAL LAKE, LLC, a Delaware limited liability company
SM NEWCO DANBURY, LLC, a Delaware limited liability company
SM NEWCO DOVER, LLC, a Delaware limited liability company
SM NEWCO DOWNERS GROVE, LLC, a Delaware limited liability company
SM NEWCO DULUTH, LLC, a Delaware limited liability company
SM NEWCO EVANSVILLE, LLC, a Delaware limited liability company
SM NEWCO FRANKLIN, LLC, a Delaware limited liability company
SM NEWCO HATTIESBURG, LLC, a Delaware limited liability company
SM NEWCO HOUMA, LLC, a Delaware limited liability company

 


 

SM NEWCO HUNTSVILLE, LLC, a Delaware limited liability company
SM NEWCO KNOXVILLE, LLC, a Delaware limited liability company
SM NEWCO LAS VEGAS, LLC, a Delaware limited liability company
SM NEWCO LEXINGTON, LLC, a Delaware limited liability company
SM NEWCO MANCHESTER, LLC, a Delaware limited liability company
SM NEWCO MCALLEN GP, LLC, a Delaware limited liability company
SM NEWCO MCALLEN, L.P., a Texas limited partnership
SM NEWCO MESA — EAST SOUTHERN AVENUE LLC, a Delaware limited liability company
SM NEWCO MESA, LLC, a Delaware limited liability company
SM NEWCO METAIRIE, LLC, a Delaware limited liability company
SM NEWCO MIDDLETOWN, LLC, a Delaware limited liability company
SM NEWCO NORTH CHARLESTON, LLC, a Delaware limited liability company
SM NEWCO OCALA, LLC, a Delaware limited liability company
SM NEWCO ORLANDO-WEST COLONIAL DRIVE LLC, a Delaware limited liability company
SM NEWCO OWENSBORO, LLC, a Delaware limited liability company
SM NEWCO PADUCAH, LLC, a Delaware limited liability company
SM NEWCO PARAMUS, LLC, a Delaware limited liability company
SM NEWCO PEMBROKE PINES, LLC, a Delaware limited liability company
SM NEWCO RALEIGH, LLC, a Delaware limited liability company
SM NEWCO RICHARDSON GP, LLC, a Delaware limited liability company
SM NEWCO RICHARDSON, L.P., a Texas limited partnership
SM NEWCO SALEM, LLC, a Delaware limited liability company
SM NEWCO SUGAR LAND GP, LLC, a Delaware limited liability company
SM NEWCO SUGAR LAND, L.P., a Texas limited partnership
SM NEWCO SWANSEA, LLC, a Delaware limited liability company
SM NEWCO TAMPA, LLC, a Delaware limited liability company
SM NEWCO WARR ACRES, LLC, a Delaware limited liability company
SM NEWCO WAYNE, LLC, a Delaware limited liability company
SM NEWCO WESTLAND, LLC, a Delaware limited liability company
SONAE SIERRA BRAZIL B.V., S.A`R.L., a private company w/limited liability having its corporate seal at Amsterdam, the Netherlands
SOUTHTOWN REALTY LLC, a Delaware limited liability company
ST. JOHN CROSSINGS, LLC, a Missouri limited liability company
SUN CENTER LIMITED, an Ohio limited liability company
TECH CENTER 29 LIMITED PARTNERSHIP, a Maryland limited partnership
TECH CENTER 29 PHASE II LIMITED PARTNERSHIP, a Maryland limited partnership
TECH CENTER DEVELOPMENT ASSOCIATES LIMITED PARTNERSHIP, a Maryland limited partnership
TECH RIDGE COVENTRY LLC, a Delaware limited liability company

 


 

TFCM ASSOCIATES, LLC, a Utah limited liability company
THOR GALLERY AT TRI COUNTY, LLC, a Delaware limited liability company
TOWN CENTER PLAZA, L.L.C., a Delaware limited liability company
UNIVERSITY SQUARE ASSOCIATES, LTD., a Utah limited partnership
VICTOR SQUARE SPE I LLC, a Delaware limited liability company
VICTOR SQUARE SPE, LLC, a New York limited liability company
WHF, INC., a Georgia corporation
WSJNY ASSOCIATES, LLC, a New York limited liability company

 

 

Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-108361, 333-117550, 333-117075, 333-138489 and 333-132335) and in the Registration Statements on Form S-8 (Nos. 333-33819, 333-76537, 333-85691, 333-108681 and 333-117069) of Developers Diversified Realty Corporation of our report dated February 21, 2007 relating to the financial statements, financial statement schedules, management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Cleveland, Ohio
February 21, 2007

 

Exhibit 31.1
CERTIFICATIONS
I, Scott A. Wolstein, certify that:
1.   I have reviewed this annual report on Form 10-K of Developers Diversified Realty Corporation (“DDR”);
 
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of DDR as of, and for, the periods presented in this report;
 
4.   DDR’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for DDR and have:
  a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to DDR, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  c)   evaluated the effectiveness of DDR’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d)   disclosed in this report any change in DDR’s internal control over financial reporting that occurred during DDR’s most recent fiscal quarter (DDR’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, DDR’s internal control over financial reporting; and
5.   DDR’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to DDR’s auditors and the audit committee of DDR’s board of directors:
  a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect DDR’s ability to record, process, summarize and report financial information; and
 
  b)   any fraud, whether or not material, that involves management or other employees who have a significant role in DDR’s internal control over financial reporting.
     
 
   
February 21, 2007
   
 
Date
   
 
   
/s/ Scott A. Wolstein
   
 
Signature
   
 
   
Chief Executive Officer and Chairman of the Board
   
 
Title
   

 

 

Exhibit 31.2
CERTIFICATIONS
I, William H. Schafer, certify that:
1.   I have reviewed this annual report on Form 10-K of Developers Diversified Realty Corporation (“DDR”);
 
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of DDR as of, and for, the periods presented in this report;
 
4.   DDR’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for DDR and have:
  a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to DDR, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  c)   evaluated the effectiveness of DDR’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d)   disclosed in this report any change in DDR’s internal control over financial reporting that occurred during DDR’s most recent fiscal quarter (DDR’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, DDR’s internal control over financial reporting; and
5.   DDR’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to DDR’s auditors and the audit committee of DDR’s board of directors:
  a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect DDR’s ability to record, process, summarize and report financial information; and
 
  b)   any fraud, whether or not material, that involves management or other employees who have a significant role in DDR’s internal control over financial reporting.
     
February 21, 2007
 
Date
    
 
   
/s/ William H. Schafer
 
Signature
    
 
   
Executive Vice President and Chief Financial Officer
 
Title
    

 

 

Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
     I, Scott A. Wolstein, Chairman of the Board and Chief Executive Officer of Developers Diversified Realty Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The annual report on Form 10-K of the Company for the period ended December 31, 2006 which this certification accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the Company.
     
/s/ Scott A. Wolstein
 
Scott A. Wolstein
Chairman of the Board and Chief Executive Officer
February 21, 2007
    

 

 

Exhibit 32.2
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
     I, William H. Schafer, Executive Vice President and Chief Financial Officer of Developers Diversified Realty Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The annual report on Form 10-K of the Company for the period ended December 31, 2006 which this certification accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the Company.
     
/s/ William H. Schafer
 
William H. Schafer
Executive Vice President and Chief Financial Officer
February 21, 2007