Developers Diversified Realty Announces Year End Updates and Guidance for 2011

BEACHWOOD, Ohio, Jan. 10, 2011 /PRNewswire/ -- Developers Diversified Realty Corporation (NYSE: DDR) today announced an update on 2010 activities as well as its outlook for 2011.

In 2010, the Company completed approximately $2.7 billion of capital transactions and financing activities including the following:

• Sold $454 million of common equity, of which $350 million was issued through an underwritten public offering and $104 million was issued through the Company's "at the market" equity program.
• Completed $791 million in asset sales, of which the Company's pro rata share was $250 million.
• Purchased $259 million aggregate principal amount of its near-term senior unsecured notes through a tender offer and open market purchases at an aggregate discount to par of approximately $8 million.
• Issued $600 million aggregate principal amount of 7 and 10-year senior unsecured notes at a weighted average interest rate of 7.69%.
• Issued $350 million aggregate principal amount of 1.75% convertible senior notes.
• Raised $69 million of new unconsolidated mortgage capital of which the Company's pro rata share was $12 million.
• Refinanced two senior unsecured revolving credit facilities providing $1.015 billion of borrowing capacity through February 2014.
• Reduced consolidated debt from $5.2 billion to $4.3 billion.
• Increased the consolidated weighted average maturity of debt from 3 years to 4 years.
• Eliminated approximately $682 million of unconsolidated mortgage debt with a weighted average term of 3.5 years, of which the Company's pro-rata share was $110 million.

The Company also achieved the following operational accomplishments in 2010:

• Leased approximately 11.3 million square feet of retail space.
• Increased core portfolio leased rate to 92.3%, up from 91.2% at year-end 2009.
• Increased total portfolio average annualized base rent per occupied square foot by approximately 2.6%.
• Continued to improve portfolio demographic and credit quality through the disposition of more than 50 non-Prime assets.
• Increased the percentage of total portfolio NOI from the Prime portfolio from 80% to more than 83%.
• Increased total portfolio ancillary income by approximately 22% from 2009 for a total of approximately $44 million.
• Reduced development expenditures by 56% from 2009.

In addition, the Company expects to recognize approximately $73 million of non-cash charges in the fourth quarter of 2010 associated with an abandoned development project and a tax-related reserve. The Company incurred an approximate $23 million non-cash charge associated with a development project that it no longer plans to pursue. A subsidiary of the Company's taxable REIT subsidiary ("TRS") acquired a leasehold interest in the development as part of a portfolio acquisition in 2003, and no longer expects to fund the ground rent expense. The Company also incurred a fourth quarter non-cash income tax expense of approximately $50 million recognized due to the establishment of a reserve against certain deferred tax assets within its TRS. Based upon the continued loss activity recognized by the TRS, including the estimated $23 million charge associated with the development project described above, it was determined that it was more likely than not that the deferred tax assets would not be utilizable, thus requiring a current reserve.

2011 Guidance

The Company expects to achieve the following goals during 2011:

• 2011 operating FFO per diluted share of approximately $0.90 - $1.05.
• Pro rata EBITDA in the range of $600 million to $625 million.
• Annualized consolidated debt to EBITDA in the high-6x range by year-end.
• Annualized pro rata debt to EBITDA in the mid-7x range by year-end.
• Total consolidated debt reduced to $4.1 billion by year-end.

The assumptions that support this guidance include the following:

• Same store net operating income growth projected to be approximately 3.0%.
• Year-end core portfolio leased rate increasing 100 basis points, resulting in a leased rate above 93%.
• Portfolio ancillary income increasing by approximately 10%.
• $100 million of operating non-Prime asset sales with net proceeds reinvested into acquisitions of Prime assets.
• Total general corporate expense reductions of $12 million annually, a portion of which had been capitalized.
• Approximately $81 million in aggregate general and administrative expenses.
• Capitalized interest of $8 million, down approximately $4 million from 2010.
• Capitalized general and administrative expenses of $9 million, down approximately $1 million from 2010.
• Straight line rent of $0.4 million, down approximately $2 million from 2010.
• An annualized common share dividend of $0.16 per share.
• Opportunistic capital raising activity to improve liquidity, extend debt maturities and improve credit metrics.

Daniel B. Hurwitz, President and Chief Executive Officer, commented, "We are pleased with the progress made in 2010, and remain acutely focused on continuing to execute with similar success in 2011. Our primary goals include growing EBITDA, making further improvements to our balance sheet and continuing to achieve positive operating results even in a volatile economic environment."

Developers Diversified owns and manages approximately 570 retail operating and development properties in 40 states, Brazil, Canada and Puerto Rico. Totaling approximately 132 million square feet, the Company's shopping center portfolio features open-air, value-oriented neighborhood and community centers, mixed-use centers and lifestyle centers located in prime markets with stable populations and high-growth potential. Developers Diversified is the largest landlord in Puerto Rico and owns a premier portfolio of regional malls in and around Sao Paulo, Brazil. Developers Diversified is a self-administered and self-managed REIT operating as a fully integrated real estate company. Additional information about the Company is available on the Internet at www.ddr.com.

Developers Diversified Realty Corporation considers portions of this information to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company's expectation for future periods. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including, among other factors, local conditions such as oversupply of space or a reduction in demand for real estate in the area; competition from other available space; dependence on rental income from real property; the loss of, significant downsizing of or bankruptcy of a major tenant; constructing properties or expansions that produce a desired yield on investment; our ability to sell assets on commercially reasonable terms; our ability to secure equity or debt financing on commercially acceptable terms or at all; our ability to enter into definitive agreements with regard to our financing and joint venture arrangements or our failure to satisfy conditions to the completion of these arrangements; the outcome of pending or future litigation, including litigation with tenants or joint venture partners; the completion of our financial statements for the year ended December 31, 2010; and the assumptions underlying our guidance for 2011 may be incorrect or may not occur. For additional factors that could cause the results of the Company to differ materially from these indicated in the forward-looking statements, please refer to the Company's Form 10-K as of December 31, 2009. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

SOURCE Developers Diversified Realty Corporation