DEVELOPERS DIVERSIFIED REALTY CORP - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] 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
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)

3300 ENTERPRISE PARKWAY, BEACHWOOD, OHIO 44122
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(Address of principal executive offices -- zip code)

(216) 755-5500
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(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Shares, Without Par Value............................ New York Stock Exchange
Depositary Shares Representing Class A Cumulative Redeemable
Preferred Shares.......................................... New York Stock Exchange
Depositary Shares Representing Class B Cumulative Redeemable
Preferred Shares.......................................... New York Stock Exchange
Depositary Shares Representing Class C Cumulative Redeemable
Preferred Shares.......................................... New York Stock Exchange
Depositary Shares Representing Class D Cumulative Redeemable
Preferred Shares.......................................... New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

NONE
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(Title of class)

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 [X] No [ ]

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. [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant at March 15, 2000 was $712.7 million.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.

58,355,946 common shares outstanding as of March 15, 2000
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DOCUMENTS INCORPORATED BY REFERENCE.

The registrant incorporates by reference in Part III hereof portions of its
definitive Proxy Statement for its 2000 Annual Meeting of Shareholders.
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TABLE OF CONTENTS

REPORT
ITEM NO. PAGE
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PART I
1. Business.................................................... 3
2. Properties.................................................. 8
3. Legal Proceedings........................................... 26
4. Submission of Matters to a Vote of Security Holders......... 26

PART II
5. Market for the Registrant's Common Equity and Related
Shareholder Matters....................................... 28
6. Selected Financial Data..................................... 29
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 31
7a. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 45
8. Financial Statements and Supplementary Data................. 45
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 45

PART III
10. Directors and Executive Officers of the Registrant.......... 46
11. Executive Compensation...................................... 46
12. Security Ownership of Certain Beneficial Owners and
Management................................................ 46
13. Certain Relationships and Related Transactions.............. 46

PART IV
14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K.................................................. 46

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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 and business 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 joint ventures.

From January 1, 1997 to March 15, 2000, the Company has acquired 54
shopping center properties, including those owned through joint ventures, five
of which were acquired in 1999, 41 of which were acquired in 1998 and eight of
which were acquired in 1997. In February 2000, the Company sold one property.
The Company also contributed one property to a 50% joint venture and entered
into an agreement to sell 60% of its 50% joint venture interest in a joint
venture which owns 10 shopping centers.

The Company's executive offices are located at 3300 Enterprise Parkway,
Beachwood, Ohio 44122, and its telephone number is (216) 755-5500.

SHARE SPLIT

Effective August 3, 1998, the Company effected a two for one share split to
shareholders of record on July 27, 1998 in the form of a stock dividend. All per
share amounts and the number of common shares outstanding reflect this split,
unless indicated otherwise.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company is in the business of managing, operating, leasing, acquiring,
developing and investing in shopping centers and business centers. See the
consolidated financial statements and notes thereto included in Item 8 of this
Annual Report on Form 10-K for certain information required by Item 1.

NARRATIVE DESCRIPTION OF BUSINESS

Since 1965, the Company and Developers Diversified Group ("DDG"), its
predecessor, have owned and managed approximately 342 shopping centers and
business centers. The Company's portfolio as of March 15, 2000, not including
those properties owned through the Company's minority equity investment,
consisted of 184 shopping centers and one business center (including 44
properties which are owned through joint ventures) and approximately 119
undeveloped acres (of which approximately 9 acres are owned through joint
ventures) (the "Portfolio Properties"). From January 1, 1997 to March 15, 2000,
the Company has acquired 54 shopping centers, including those owned through
joint ventures, containing an aggregate of 11.1 million square feet of gross
leasable area ("GLA") owned by the Company for an aggregate purchase price of
approximately $1.3 billion. During 1997, 1998 and 1999, the Company completed
expansions at 34 of its shopping centers.

As of March 15, 2000, the Company was expanding three shopping centers and
expects to commence expansions at additional shopping centers in 2000. The
Company has also substantially completed the development of twelve shopping
centers since December 31, 1996, at an aggregate cost of approximately $525
million aggregating approximately 3.9 million square feet of GLA. As of March
15, 2000, the Company had fourteen shopping centers under development.

The Company's shopping centers were approximately 95.7% leased as of
December 31, 1999. On December 31, 1999, the average annualized base rent per
square foot of Company-owned GLA of the shopping centers was $9.20.

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, 1999, the Company owned and/or managed approximately
47.3 million total square feet of GLA, which included all of the Portfolio
Properties and 21 properties owned by third parties.

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STRATEGY AND PHILOSOPHY

The Company's investment objective is to increase cash flow and the value
of its portfolio of 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 also pursue the disposition of certain real estate
assets and utilize the proceeds to repay debt, repurchase the Company's common
shares, reinvest in other real estate assets and developments and for other
corporate purposes. In pursuing its investment objective, the Company will
continue to seek to acquire and develop high quality, well-located shopping
centers and business 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 buyers with access to capital
markets and institutional investors, such as the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

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;

- continue to selectively acquire well-located, quality shopping
centers (individually or in portfolio transactions) which 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 selective disposition of
certain real estate assets and utilizing the proceeds to repay debt,
repurchase of the Company's common shares and for other corporate
purposes;

- 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 create 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, 1999, the Company's debt to total market
capitalization ratio, excluding the Company's proportionate share of non-
recourse indebtedness of its unconsolidated joint ventures, was approximately
0.48 to 1.0; and at March 15, 2000 this ratio was approximately 0.49 to 1.0. At
December 31, 1999, the Company's capitalization consisted of $1.2 billion of
debt (excluding the Company's proportionate share of joint venture mortgage debt
aggregating $466.6 million), $413.8 million of preferred stock and preferred
operating partnership units and $826.7 billion of market equity. (Market equity
is defined as common shares outstanding and operating partnership units
outstanding multiplied by the closing price of common shares on the New York
Stock Exchange at December 31, 1999 of $12.875.) At December 31, 1999, the
Company's total debt consisted of $751.0 million of fixed-rate debt and $401.1
million of variable rate debt. Fluctuations in the market price of the Company's
common shares may cause this ratio to vary from time to time.

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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

Financings

Through December 31, 1999, the Company purchased in open market
transactions 1,860,300 of its common shares, at prices ranging from $12.69 to
$14.00, for an aggregate purchase price of approximately $25.8 million. For the
period January 1, 2000 through March 15, 2000, the Company initiated the
purchase of an additional 1,368,000 shares, at prices ranging from $11.61 to
$12.29, for an aggregate purchase price of approximately $16.2 million. In
February and August 1999, the Company's Board of Directors authorized the
officers of the Company to implement and continue a common share repurchase
program in response to what the Company believed was a distinct undervaluation
of the Company's common shares in the public market. Under the terms authorized
by the Company's Board, as amended in November 1999, the Company may purchase in
the open market, subject to certain requirements, common shares of the Company,
up to a maximum value of $200 million. The Company may invest proceeds from the
sale of assets to purchase these shares. It is not the Company's intention to
increase the leverage on its balance sheet to implement this stock repurchase
program.

Also in December 1999, one of the Company's joint ventures refinanced its
secured mortgage and entered into a ten year fixed rate mortgage for $21.3
million with interest at 8.46%. Additional proceeds from this refinancing of
approximately $6.4 million were used to repay a portion of a note payable to the
Company.

During 1999, the Prudential/DDR Retail Value Fund ("Fund"), a joint venture
in which the Company effectively owns a 25% interest, agreed to acquire the
Company's 50% joint venture interests relating to the development of six
shopping centers. The Company was reimbursed by the Fund for approximately $74.3
million associated with development costs incurred on each of these projects.
The Company also obtained third party financing for three of these projects
aggregating approximately $77.1 million with rates ranging from LIBOR plus 175
to LIBOR plus 180. In addition, the Company transferred its interest in a
shopping center development in Coon Rapids, Minnesota, a suburb of Minneapolis,
to a joint venture in which the Company retained a 25% interest and was
reimbursed $2.5 million relating to development costs previously incurred on
this project. The Company also sold certain land parcels adjacent to its
shopping center in Wilmington, North Carolina, Jacksonville, North Carolina and
Erie, Pennsylvania and a portion of a shopping center and residual land in
Pensacola, Florida and received aggregate proceeds of approximately $13.9
million.

In September 1999, the Company completed a $75 million private placement of
0.3 million, 8.875% perpetual preferred "down-REIT" partnership units with an
institutional investor. The units may be exchanged, under certain circumstances,
for Class K, 8.875% cumulative preferred shares. The units may be exchangeable
into common shares if the Company fails to pay dividends for six consecutive
quarters. The net proceeds of approximately $73.1 million were effectively used
to repay approximately $25.8 million in mortgage indebtedness and $40.1 million
in convertible debentures which matured on August 15, 1999. The balance of these
proceeds was used to repay variable rate borrowings under the Company's
revolving credit facilities.

In March 1999, the Company filed a $750 million shelf registration
statement with the SEC pursuant to which the Company may issue senior or
subordinated debt securities, common shares, preferred shares or warrants to
purchase common shares.

In March 1999, the Company amended its revolving credit facility with
National City Bank to increase the available borrowings to $25 million from $20
million, to convert it to a secured facility and to extend the agreement through
November 2002. The credit facility is secured by certain partnership
investments. The Company also maintains the right to convert the credit facility
back to an unsecured credit facility and to reduce the credit facility amount to
$20 million.

In January 1999, the Company repaid a third party mortgage of a 50% owned
joint venture partnership aggregating approximately $49.2 million. In return,
the joint venture entered into a corresponding mortgage note payable to the
Company bearing an interest rate of LIBOR plus 2.75%. In addition, the Company
received a loan

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origination fee for this transaction of $0.4 million. In March 1999, the joint
venture obtained a bridge loan and used the proceeds to repay the mortgage note
to the Company. In June 1999, the joint venture entered into a 10 year, fixed
rate mortgage for $55.5 million at 7.31%.

During the year ended December 31, 1999, the Company issued $2.7 million in
OP Units in conjunction with the purchase of certain expansion areas at two
recently acquired shopping centers and the purchase of joint venture interests.
These OP Units are, in certain circumstances and at the election of the Company,
exchangeable into approximately 139,000 common shares of the Company or for
cash.

Property Acquisitions, Developments and Expansions

During 1999, the Company and its joint ventures completed the acquisition
of, or investment in five shopping centers aggregating 0.9 million square feet
of Company owned GLA for an aggregate investment of approximately $79.7 million.

In November 1999, the Company acquired, through a 50% owned joint venture,
the fourth phase of a shopping center in Phoenix, Arizona which aggregates
125,000 square feet. The total purchase price for the fourth phase of this
center aggregated approximately $15.6 million.

In July 1999, the Company acquired Deer Valley Towne Center, a 198,000
square foot shopping center in Phoenix, Arizona, for an aggregate purchase price
of $25.8 million. The Company contributed this property in March 2000 to a 50%
owned joint venture with DRA Advisors.

In July 1999, the Company purchased the remaining 50% interest of a 289,000
square foot shopping center located in Salisbury, Maryland which was developed
through one of the Company's joint ventures. The Company paid approximately $7.3
million for the remaining interest which was funded through the use of cash and
the issuance of approximately 47,000 Units.

In April 1999, the Company acquired a 50% interest in a 206,000 square foot
shopping center in St. Louis, Missouri. The joint venture's aggregate purchase
price was $16.6 million and included the assumption of debt aggregating $13.0
million.

In February 1999, the Company acquired Spring Creek Centre (Phase III), a
65,000 square foot shopping center located in Fayetteville, Arkansas, for an
aggregate purchase price of $6.2 million.

In August 1998, the Company announced a strategic investment in AIP.
Through December 31, 1998, the Company acquired 5.9 million common shares of AIP
at an aggregate cost of $91.3 million. In January 1999, the Company acquired 3.4
million additional common shares of AIP for approximately $51.8 million. In
August 1999, the Company purchased an additional 0.4 million shares of AIP for
approximately $5.5 million. At December 31, 1999, the Company's ownership in AIP
approximated 46.1% of the total outstanding shares of AIP.

In June 1999, DD Development Company, a Company in which DDR has an equity
ownership interest, acquired Prudential Real Estate Investors' ("PREI") limited
partnership interest in a joint venture, Hendon/DDR/ BP, LLC, which owned 15
sites formerly occupied by Best Products at a cost of approximately $29.7
million. As a result, the Company's aggregate investment in the joint venture
increased to approximately $36 million. Eleven of the sites are leased as of
December 31, 1999 and two were sold as of December 31, 1999. In addition, in
June 1999, Hendon/DDR/BP, LLC, entered into a $25 million mortgage, with a
financial institution secured by the leased sites. The net financing proceeds
were used to repay advances made by the Company to the joint venture.

Expansions 1999

During 1999, the Company, on a wholly-owned basis and through certain joint
ventures, completed fourteen expansion projects at an aggregate cost of $46.6
million. In addition, the Company is currently expanding/redeveloping three of
its shopping centers at an aggregate cost of $6.3 million. The Company is also
planning to commence expansion/redevelopment projects at five additional
shopping centers located in: North

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Charleston, South Carolina; North Canton, Ohio; Maple Grove, Minnesota; Mount
Pleasant, South Carolina and Wilmington, North Carolina.

Development (Wholly Owned) 1999

During 1999, the Company completed construction at five shopping centers
located in Solon, Ohio; Erie, Pennsylvania; Toledo, Ohio; Ovideo, Florida and
Macedonia, Ohio. Phase II of both the Toledo, Ohio and Oviedo, Florida projects
are under construction and scheduled for completion in 2000. In addition, the
Company is developing projects located in Meridian, Idaho and Riverdale, Utah.

Development (Joint Ventures) 1999

During 1999, the Company through certain joint ventures completed
construction of three shopping centers located in Salem, New Hampshire;
Salisbury, Maryland and Plainville, Connecticut.

During 1998 and 1999, the Company entered into joint venture development
agreements on an additional eight shopping center projects with leading regional
developers. These eight projects have a projected aggregate cost of
approximately $321.7 million. Several of these projects have commenced
development and are currently scheduled for completion in 2000. In addition to
the Salem, New Hampshire and Plainville, Connecticut developments completed, the
Company is currently financing projects located in Round Rock, Texas;
Hagerstown, Maryland; Deer Park, Illinois and Long Beach, California, through
the Prudential/DDR Retail Value Fund and also intends to finance its investment
in the Fenton, Missouri project through this fund.

In 1999, the Company entered into a joint venture relating to a 642,000
square foot shopping center in Coon Rapids, Minnesota, the initial phase of
which is scheduled to be completed in March 2000 and is anchored by a Kohl's
(opened fourth quarter 1999) and Jo-Ann, ETC. The Company owns a 25% equity
interest.

The Company, through its affiliate DDR OliverMcMillan, LP ("DDROM")
continued to pursue six urban entertainment and retail projects aggregating 1.2
million square feet of GLA at a projected cost of approximately $233 million.
The majority of the above projects are scheduled to commence construction in
1999 and 2000 with completion occurring between 2000 and 2002. The Company may
also pursue partnership relationships with institutional investors in
conjunction with the above projects.

RETAIL ENVIRONMENT

During 1999, certain national and regional retailers experienced financial
difficulties and several have filed for protection under bankruptcy laws. No
significant bankruptcies have occurred during the period January 1, 1999 through
March 15, 2000 with regard to the Company's portfolio of tenants.

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 described above.

COMPETITION

As one of the nation's largest owners and developers of neighborhood and
community shopping centers, the Company has established close relationships with
a large number of major national and regional retailers. Management is
associated with and actively participates in many shopping center and REIT
industry organizations.

Notwithstanding these relationships, there are numerous developers and real
estate companies that compete with the Company in seeking properties for
acquisition and tenants who will lease space in these properties.

Many investors believe e-commerce would seriously erode traditional retail
business, particularly big box commodity retailers. The Company believes these
fears are unfounded with the majority of the e-commerce sales occurring in the
travel and computer categories, which account for a small portion of the
Company's tenant base. In addition, the Company believes that the individual
consumer is primarily shopping in discount stores, the majority of the Company's
tenant base, rather than through e-commerce.

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EMPLOYEES

As of March 15, 2000, the Company employed 251 full-time individuals,
including executive, administrative and field personnel. The Company considers
its relations with its personnel to be good.

QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST

The Company presently meets 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 generally will not be subject to federal income tax to
the extent it meets certain requirements of the Code.

ITEM 2. PROPERTIES

At December 31, 1999 the Portfolio Properties included 185 shopping centers
and one business center (44 of which are owned through joint ventures). The
shopping centers consist of 154 community shopping centers and power centers, 12
enclosed mini-malls and 19 neighborhood shopping centers. The Portfolio
Properties also include approximately 119 undeveloped acres primarily located
adjacent to certain of the shopping centers. The shopping centers aggregate
approximately 36.3 million square feet of Company-owned GLA (approximately 45.1
million square feet of total GLA) and are located in 37 states, principally in
the East and Midwest, with significant concentrations in Ohio, Florida,
Missouri, Michigan and South Carolina.

The Company's shopping centers are designed to attract local area customers
and are typically anchored by one or more discount department stores and often
include a supermarket, drug store, junior department store and/or other major
"category-killer" discount retailer as additional anchors. Substantially all of
the shopping centers are anchored by a Wal-Mart, Kmart or Target, and the power
centers are anchored by two or more national or regional tenants. 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.

Neighborhood and community shopping centers and power centers make up the
largest portion of the Company's portfolio, comprising 32.2 million (88.6%)
square feet of Company-owned GLA. Enclosed mini-malls account for 2.9 million
(8.1%) square feet of Company-owned GLA and neighborhood shopping centers
account for 1.2 million (3.3%) square feet of Company-owned GLA. On December 31,
1999, the average annualized base rent per square foot of Company-owned GLA of
the shopping centers, including those owned through joint ventures, was $9.20.

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The following table sets forth, as of December 31, 1999, information as to
anchor and/or national retail tenants which individually accounted for at least
1.0% of total annualized base rent of the properties, including those owned
though joint ventures:

% OF SHOPPING CENTER % OF COMPANY-OWNED
BASE RENTAL REVENUES SHOPPING CENTER GLA
-------------------- -------------------

Wal-Mart...................................... 5.7% 9.3%
Kmart......................................... 3.9% 7.1%
Homeplace/Waccamaw............................ 2.3% 1.7%
OfficeMax..................................... 2.3% 2.0%
T. J. Maxx/Marshall's......................... 2.2% 2.3%
Kohl's Dept. Store............................ 2.7% 3.0%
Barnes & Noble/B. Dalton...................... 1.8% 1.0%
Best Buy...................................... 1.7% 1.0%
Lowes Home Centers............................ 1.7% 2.2%
Bed Bath & Beyond............................. 1.2% 1.0%
AMC Theaters.................................. 1.4% 1.2%
Toys R Us..................................... 1.2% 1.7%
Michaels...................................... 1.2% 1.0%
Gap/Old Navy.................................. 1.0% 0.6%
Circuit City.................................. 1.0% 0.7%

In addition, as of December 31, 1999 unless otherwise indicated, with
respect to the 185 shopping centers:

- 49 of these properties were developed by DDG, 16 were developed by
the Company and the balance were acquired by the Company;

- 97 of these properties are anchored by a Wal-Mart, Kmart or Target
store;

- these properties range in size from 4,000 square feet to
approximately 900,000 square feet of GLA (with 30 properties
exceeding 400,000 square feet of GLA);

- approximately 62.3% of the Company-owned GLA of these properties is
leased to national chains, including subsidiaries, with
approximately 26.3% of the Company-owned GLA leased to regional
chains and approximately 7.1% of the Company-owned GLA leased to
local tenants;

- approximately 95.7% of the aggregate Company-owned GLA of these
properties was leased as of December 31, 1999 (and, with respect to
the properties owned by the Company at December 31, for each of the
five years beginning with 1995, between 94.8% and 97.2% of aggregate
Company-owned GLA of these properties was leased);

- Three of these properties are currently being expanded by the
Company, and the Company is pursuing the expansion of additional
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 shopping centers, including joint ventures, assuming that none
of the tenants exercise any of their renewal options:

PERCENTAGE OF PERCENTAGE OF
TOTAL LEASED TOTAL BASE
ANNUALIZED AVERAGE BASE SQ. FOOTAGE RENTAL REVENUES
NO. OF APPROXIMATE BASE RENT RENT PER SQ. FOOT REPRESENTED REPRESENTED
EXPIRATION LEASES LEASE AREA IN UNDER EXPIRING UNDER EXPIRING BY EXPIRING BY EXPIRING
YEAR EXPIRING SQUARE FEET LEASES LEASES LEASES LEASES
- -------------- -------- ------------- -------------- ----------------- ------------- ---------------

2000.......... 464 2,414,125 $ 30,488,752 $12.63 7.0% 9.7%
2001.......... 493 1,765,804 18,322,532 $10.38 5.1% 5.8%
2002.......... 472 2,298,377 20,237,220 $ 8.81 6.6% 6.4%
2003.......... 353 1,950,237 18,283,991 $ 9.38 5.6% 5.8%
2004.......... 312 1,827,419 19,089,010 $10.45 5.3% 6.1%
2005.......... 138 1,598,680 12,845,747 $ 8.04 4.6% 4.1%
2006.......... 94 966,898 11,594,295 $11.99 2.8% 3.7%
2007.......... 95 1,224,875 14,453,031 $11.80 3.5% 4.6%
2008.......... 99 1,434,630 14,179,554 $ 9.88 4.1% 4.5%
2009.......... 109 2,566,780 24,414,552 $ 9.51 7.4% 7.8%
----- ---------- ------------ ------ ---- ----
TOTAL......... 2,629 18,047,825 $183,908,684 $10.19 52.0% 58.4%

The rental payments under several 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
new tenants will be obtained if not renewed.

The Company's 119 undeveloped acres primarily consist of outlots, retail
pads and expansion pads which are primarily located adjacent to certain of the
shopping centers. The Company is pursuing an active marketing program to lease,
develop or sell its undeveloped acres.

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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST DECEMBER 31, 1999

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

ALABAMA
-----------------
1 Birmingham (Brook 5291 Highway 280 South 35242 PC 100% Fee 1994 1994 64.46
Highland), AL
2 Birmingham 7001 Crestwood Blvd 35210 PC 100% Fee 1989 1995 45.49
(Eastwood
Festival), AL
3 Huntsville, AL 6140-A University 35806 PC 100% Fee 1995 1995 5.29
Drive
ARIZONA
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4 Phoenix 4711 East Ray Road 85044 PC 50% Fee(3) 1996 1997 59.28
(Ahwatukee), AZ
5 Phoenix (Deer 2805 - 3053 West Auga 85027 PC 100% Fee 1996 1999
Valley), AZ Freeway
6 Phoenix (Peoria), 7553 West Bell Road 85382 PC 50% Fee(3) 1995 1996 24.12
AZ
ARKANSAS
-----------------
7 Fayetteville, AR 464 E. Joyce Boulevard 72703 PC 100% Fee 1997 1997
8 North Little 4124 East McCain Blvd 72117 PC 100% Fee 1991 1994 27.76
Rock, AR

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

1 503,350 $ 3,957,973 $ 8.09 97.2% Wal-Mart (2004/2024), Winn-Dixie
(2014/2044), Goody's (2004/2019),
Stein Mart (2011/2021), OfficeMax
(2011/2026), Rhodes Furniture
(2004/2014), Regal Cinemas
(2014/2029)
2 301,067 2,131,147 8.12 88.0% Home Depot (not owned) Western
Supermarkets (not owned), Office
Depot (2004/2014), Goody's
(2004/2019), Cobb Theaters
(2006/2016)
3 41,000 462,125 11.27 100.0% Wal-Mart (not owned)

4 647,833 8,086,442 12.45 100.0% HomePlace (2012/2027), Smith's
(2021/2046), Stein Mart (2011/2026),
AMC Theatre (2021/2036), Barnes &
Noble (2012/2027), Baby Superstore
(2007/2022), Ross Dress For Less
(2007/2022), Best Buy (2014/2029)
5 197,889 2,710,958 13.77 100.0% Target (2077/2077), AMC Theatres
(2077/2077), Ross Dress For Less
(2009/2024), PetsMart (2014/2029),
OfficeMax (2013/2028), Michael's
(2009/2019)
6 346,430 3,928,454 11.34 100.0% Lil' Things (2009/2024), Barnes &
Noble(2011/2026), TJMaxx
(2005/2020), Circuit City
(2016/2036), Oshman's (2017/2037),
Linens 'N Things (2011/2026),
Staples (2009/2024), MacFrugal's
(2010/2025), Fry's (not owned)

7 235,932 2,032,643 8.83 97.6% TJMaxx (2005/2020), Service
Merchandise (2016/2031), Wal-Mart
(not owned)
8 294,357 1,791,416 6.51 94.0% Kmart (2016/2066), Wards
(2014/2034), TJMaxx (2001/2011),
Cinemark (2011/2031)

11
12

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

{9 Russellville, AR 3093 East Main Street 72801 PC 100% Fee 1992 1994 31.20
CALIFORNIA
-----------------
10 San Diego, CA 11610 Carmel Mntn. Rd 92128 PC 50% Fee(3) 1993 1995 50.00
COLORADO
-----------------
11 Alamosa, CO 145 Craft Avenue 81101 PC 100% Fee 1986 IPO 13.10
12 Denver (Broadway 505 South Broadway 80223 PC 50% Fee(3) 1993 1995 38.59
Marketplace), CO
13 Denver 9555 E. County Line 80223 PC 100% Fee 1997 1997 46.07
(Centennial), CO Road
14 Trinidad, CO Hwy 239 @ I25 Frontage 81082 PC 100% Fee 1986 IPO 17.88
CONNETICUT
-----------------
15 Plainville, CT 292 New Britain Ave. 06062 PC 50% Fee(3) 1999 DEV
16 Waterbury (Kmart 899 Wolcott Street 06705 PC 100% GL 1973 IPO 15.60
Plaza), CT

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

{9 272,245 $ 1,689,078 $ 6.26 99.1% Wal-Mart (2011/2041), JCPenney
(2012/2032), Beall-Ladymon
(2007/2022)

10 439,939 6,263,573 14.74 97.3% Mervyn's (not owned), Kmart
(2018/2048), Pacific Theaters
(2013/2023), Sportmart (2008/2023),
Circuit City (2009/2024), Marshall's
(2009/2029), Ross Dress For Less
(2004/2019), Michael's (2004/2014),
Barnes & Noble (2003/2013),
Blockbuster Video (2003/2013)

11 19,875 144,399 8.78 82.8% Wal-Mart (not owned)
12 369,386 3,568,429 9.83 98.3% Kmart (2019/2069), Albertson's
(2019/2049), Sam's (2018/2058),
Office Max (2010/2035), Pep Boys
(2014/2035)
13 418,608 5,864,741 14.01 100.0% Border's (2017/2027), Golfsmith
(2007/2022), HomePlace (2017/2037),
Ross Dress For Less (2008/2028),
Toys R Us (2011/2046), Soundtrack
(2017/2028), Office Max (2013/2033),
Michael's (2007/2027)
14 63,836 92,923 4.47 32.5% Wal-Mart (not owned)

15 347,916 3,275,423 9.41 100.0% Lowe's Home Improvement (2019/2044),
Kmart (2019/2049), Loew's Theaters
(2019/2044), AC Moore (2014/2029)
16 124,310 417,500 3.36 100.0% Kmart (2003/2048), Jo-Ann ETC
(2010/2025)

12
13

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

FLORIDA
-----------------
17 Cape Coral, FL 1420 Del Prado Blvd 33904 NC 100% Fee 1985 IPO 9.61
18 Crystal River, FL 420 Sun Coast Hwy 33523 PC 100% Fee 1986 IPO 21.18
19 Jacksonville, FL 3000 Dunn Avenue 32218 PC 100% Fee 1988 1995 30.82
20 Marianna, FL 2820 Highway 71 32446 PC 100% Fee 1990 IPO 17.34
21 Melbourne, FL 750-850 Apollo Blvd 32935 PC 100% GL 1978 IPO 15.52
22 Naples, FL 5010 Airport Road 33942 PC 50% Fee(3) 1994 1995 30.60
North
23 Ocala, FL 3711 Silver Sprgs, NE 32671 PC 100% Fee 1974 IPO 2.23
24 Orlando (Fern 6735 U.S. 17/92 32720 PC 100% Fee 1970 IPO 3.04
Park), FL
25 Orlando (Pine 5250 W. Colonial Dr 32808 PC 100% Fee 1989 IPO 30.57
Hills), FL
26 Orlando (Oviedo), Rte. 417 and Red Bug 32765 PC 100% Fee 1999 DEV 30.57
FL Lake Rd
27 Ormond Beach, FL 1458 West Granada Blvd 32174 PC 100% Fee 1993 1994 32.09
28 Pensacola, FL 8934 Pensacola Blvd 32534 PC 100% Fee 1998 DEV 21.00
29 Tampa, FL 15233 No. Dale Mabry 33618 PC 100% Fee 1990 IPO 23.70
30 Tampa, FL 7039 West Waters Ave 33634 PC 100% Fee 1990 IPO 30.61
31 Tampa (Bayonet U.S. 19 & S.R. 52 34667 PC 100% Fee 1985 IPO 58.67
Point), FL
32 Tampa (Brandon), 1602 Brandon Blvd 33511 PC 100% GL 1972 IPO 17.33
FL
33 Tampa (Palm 300 East Lake Road 34685 PC 100% Fee 1990 1995 5.80
Harbor), FL
34 Tampa (Spring 13050 Cortez Blvd 34613 PC 100% Fee 1988 IPO 21.60
Hill), FL

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

17 74,318 $ 498,279 $ 7.38 90.8% TJMaxx (2007/2017), Office Max
(2012/2027)
18 147,005 485,485 3.47 95.1% Beall's (2001/2016), Beall's Outlet
(2001/2016), Scotty's (2008/2038)
19 219,073 1,360,889 6.60 94.2% Wal-Mart (not owned), J.C.Penney
(2002/2022), Winn Dixie (2009/2034),
Walgreen's (2029/2029)
20 63,894 453,927 7.32 97.0% Wal-Mart (not owned), Beall's
(2005/2020), Eckerd (2010/2030)
21 121,913 407,035 3.45 96.9% Kmart (2003/2048)
22 267,838 2,956,875 11.04 100.0% Winn Dixie (2014/2038), TJMaxx
(2009/2024), Service Merchandise
(2015/2035), Ross Dress For Less
(2005/2025), Circuit City
(2015/2035), OfficeMax (2010/2025)
23 19,280 51,500 3.88 68.9% Kmart (not owned), Eckerd
(2008/2018)
24 16,000 94,768 7.40 80.0% Kmart (not owned)

25 177,037 1,182,947 6.88 97.9% Wal-Mart (not owned), Publix
(2009/2019), Walgreens (2029/2029)
26 106,229 883,060 9.79 84.9%

27 234,045 1,787,185 7.88 96.9% Kmart (2018/2064), Publix
(2013/2033), Bealls (2004/2024)
28 17,150 115,687 9.52 45.2% Wal-Mart (not owned)
29 104,473 1,177,895 11.27 100.0% Wal-Mart (not owned), Publix
(2010/2030)
30 134,166 937,223 8.31 84.0% Wal-Mart (not owned), Beall's
(2005/2029), Kash N Karry
(2010/2040)
31 203,760 1,097,696 5.76 93.5% Publix (2005/2025), Beall's
(2002/2017), TJMaxx (2010/2030)*,
Eckerd (2005/2025)
32 136,900 265,205 2.16 89.6% Kmart (2002/2047)

33 52,395 804,750 15.36 100.0% Target (not owned), Albertson's (not
owned), Eckerd (2010/2025)
34 196,073 1,331,095 7.06 96.1% Wal-Mart (not owned), Publix
(2008/2028), Walgreens (2028/2028),
Beall's (2006/2046)

13
14

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

{35 Tampa (Tarpon 41232 U.S. 19, North 34689 PC 100% Fee 1974 IPO 23.30
Springs), FL
36 Tampa (West 7201 County Rd 54 34653 PC 100% Fee 1986 IPO 24.40
Pasco), FL
GEORGIA
-----------------
37 Atlanta (Duluth), 1630 Pleasant Hill 30136 PC 100% Fee 1990 1994 30.67
GA Road
38 Atlanta 1155 Mt. Vernon 30338 PC 50% Fee(3) 1995 1995 8.70
(Dunwoody), GA Highway
39 Atlanta 2609 Bells Ferry Road 30066 PC 50% Fee(3) 1995 1995 48.28
(Marietta), GA
40 Atlanta (Stone 5615 Memorial Drive 30083 PC 100% Fee 1973 IPO 16.60
Mountain), GA
IDAHO
-----------------
41 Idaho Falls, ID 1515 Northgate Mile 83401 PC 100% Fee 1976 1998 24.46
42 Meridian, ID Eagle and Fairview Rds 83642 PC 100% Fee 1999 DEV
ILLINOIS
-----------------
43 Chicago 1430 East Golf Road 60173 PC 50% Fee(3) 1993 1995 62.80
(Schaumburg), IL
44 Harrisburg, IL 701 North Commercial 62946 PC 100% Fee 1991 1994 24.46
45 Mount Vernon, IL 42nd and Broadway 62864 MM 100% Fee 1974 1993 39.25

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

{35 198,797 $ 1,016,953 $ 5.72 90.2% Kmart (2009/2049), Big Lots
(2002/2012), Beall's Outlet
(2003/2018)
36 135,421 1,006,991 7.86 94.6% Wal-Mart (not owned), Publix
(2006/2026), Bealls (2001/2016),
Walgreens (2026/2026)

37 99,025 1,175,418 13.05 90.9% Wal-Mart (not owned), Office Depot
(2000/2020), Ethan Allen (2000/2010)
38 343,115 4,012,646 14.06 83.6% SteinMart (2010/2025), HomePlace
(2011/2026), United Artists
(2015/2035), Babies R Us
(2007/2027), Office Depot
(2012/2027), St. Joseph's Hospital
(2006/2016)
39 318,038 3,677,995 11.56 100.0% Publix (2015/2035), HomePlace
(2011/2026), PetsMart (2011/2021),
Barnes & Noble (2011/2026),
Sportslife (2011/2021), Stein Mart
(2007/2027)
40 143,860 Property sold 2/00

41 148,593 808,122 5.67 96.0% Fred Meyer (not owned), Lamonts
(2001/2016), OfficeMax, (2011/2026),
Payless Drug (2006/2026), JoAnn
Fabrics (2002/2022), Hollywood
Theaters (2001/2001)
42 109,783 876,068 7.98 100.0% Shopko (2020/2045)

43 501,092 7,369,774 14.85 99.1% Builder's Square (2019/2049),
Service Merchandise (2014/2049),
OfficeMax (2010/2020), Sports
Authority (2013/2033), Marshall's
(2009/2024), Nordstrom Rack
(2009/2024), Border's Books
(2009/2029), Circuit City
(2010/2025), Off 5th Saks Fifth
Avenue (2011/2026), Container Store
(2011/2026)
44 168,424 875,298 5.30 98.0% Wal-Mart (2011/2041), Roundy's
Grocery (2011/2031)
45 268,263 912,408 3.68 92.3% Wal-Mart (2008/2028),J.C.Penney
(2002/2022), Stage (2004/2014)

14
15

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

INDIANA
-----------------
46 Bedford, IN 1320 James Avenue 47421 PC 100% Fee 1993 1993 20.56
47 Connersville, IN 2100 Park Road 47331 PC 100% Fee 1991 1993 21.99
48 Highland Highway 41 & Main 46322 PC 100% Fee 1995 1996 16.08
(Chicago), IN Street
IOWA
-----------------
49 Cedar Rapids, IA 303-367 Collins Road, 52404 PC 100% Fee 1984 1998
N.E
50 Ottumwa, IA 1110 Quincy Avenue 52501 MM 100% Fee 1990 IPO 34.00
KANSAS
-----------------
51 Leawood (Kansas 5100 W. 119th. St 66209 PC 50.0% Fee(3) 1990 1998 34.00
City), KS
52 Merriam, KS 5700 Antioch Road 66202 PC 50% Fee(3) 1998 DEV
KENTUCKY
-----------------
53 Florence, KY 55 Spiral Blvd 41701 PC 100% Fee 1998 1998 11.74
54 Hazard, KY Kentucky Highway 80 41701 PC 100% Fee 1978 IPO 11.74
MAINE
-----------------
55 Brunswick, ME 172 Bath Road 42071 PC 100% GL 1965 1997 28.46

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

46 223,431 $ 1,324,507 $ 5.93 100.0% Kmart (2018/2068), J.C.Penney
(2008/2028), Goody's (2003/2018),
Buehler's (2010/2025)
47 141,791 823,542 5.81 100.0% Wal-Mart (2011/2041), Cox
Supermarket (2011/2026)
48 290,592 2,753,170 9.93 94.2% Marshall's (2011/2021), Circuit City
(2016/2036), Kohl's (2016/2036),
OfficeMax (2012/2032), Jewel (not
owned), Target (not owned)

49 187,068 1,531,973 8.56 95.7% Kohl's (2021/2046), TJMaxx
(2004/2014), Barnes & Noble
(2010/2025), Office Max (2010/2025)
50 184,560 1,392,402 7.40 99.0% Wal-Mart (not owned), J.C. Penney
(2005/2035), Herberger (2004/2019),
OfficeMax (2020/2020)

51 388,962 7,105,658 19.21 94.5% Jacobson's (2021/2051), Gaylan's
(not owned), AMC Theaters (not
owned), Barnes and Nobles
(2011/2011), Express/Structure
(2009/2009), Pottery Barn
(2009/2009), Limited/Limited TOO
(2009/2009), Restoration Hardware
(2011/2011)
52 302,509 3,238,165 11.03 99.5% Home Depot (not owned), Cinemark
(2018/2038), Hen House (2018/2038),
Marshall's (2008/2023), PetsMart
(2016/2041), Office Max (2013/2033)

53 15,000 273,000 18.20 100.0%
54 111,492 438,079 4.10 91.4% Kmart* (2003/2053), A&P (2003/2038)

55 314,620 2,249,702 7.44 96.1% Hoyt's Cinemas (2010/2025), TJMaxx
(2004/2019), Sears (2002/2027),
Bookland (2004/2004), Porteous
(2001/2006)

15
16

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

MARYLAND
-----------------
56 Glen Burnie, MD 8115 Governor Ritchie 21061 NC-BP 71% Fee(3) 1980 1999
Hwy
57 Salisbury, MD E. North Point Dr 21801 PC 100% Fee 1999 DEV
MASSACHUSETTS
-----------------
58 Boston 1 Worcester Road 01701 PC 50% Fee(3) 1994 1995 177.00
(Framingham), MA
MICHIGAN
-----------------
59 Bad Axe, MI 850 No. Van Dyke Rd 48413 PC 100% Fee 1991 1993 18.58
60 Cheboygan, MI 1109 East State 49721 PC 100% Fee 1988 1993 16.75
61 Detroit, MI 8400 E. Eight Mile 48234 PC 100% GL 1989 1998 24.46
Road
62 Gaylord, MI 1401 West Main Street 49735 PC 100% Fee 1991 1993 19.49
63 Grand Rapids 3390-B Alpine Ave., 49504 PC 100% Fee 1989 1995 16.40
(Walker), MI N.W
64 Houghton, MI Highway M26 49931 MM 100% Fee 1981 IPO 21.48
65 Howell, MI 3599 East Grand River 48843 PC 100% Fee 1991 1993 26.52
66 Mt Pleasant, MI 4208 E. Blue Grass Rd 48858 PC 100% Fee 1990 1993 51.13

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

56 58,000 $ 250,000 $ 4.31 100.0%

57 66,052 778,735 100.0% Home Depot (not owned), Target (not
owned), Michael's (2009/2029),
OfficeMax (2013/2033), PetsMart
(2014/2029)

58 768,136 12,170,679 15.84 100.0% General Cinema (2014/2034), TJMaxx
(2010/2020), Sears Homelife
(2004/2024), Marshall's (2011/2026),
Bob's (2011/2026), Linens 'N Things
(2011/2026), Sports Authority
(2015/2035), Barnes & Noble
(2011/2026), OfficeMax (2011/2026),
Toys R Us (2020/2070), Kids R Us
(2020/2070), Bradlee's (2005/2020),
Jordan Marsh (2020/2070), DSW
(2007/2022)

59 63,415 542,418 8.55 100.0% Wal-Mart (not owned), Farmer Jack's
(2012/2037)
60 95,094 400,693 4.45 94.7% Kmart (2005/2055), Carters Food
Center (2004/2024)
61 450,232 3,300,445 9.67 99.4% Target Stores (2017/2032), Builders
Square (2014/2029), Farmer Jack
(2008/2023), Toys 'R' Us
(2021/2036), American Multi-Cinema
(2008/2018), Kids 'R' Us
(2002/2013), Arbor Drugs (2000/2008)
62 190,482 1,135,557 5.96 100.0% Wal-Mart (2010/2040), Buy-Low
(2011/2031)
63 133,981 1,404,626 10.48 100.0% Circuit City (not owned), Target
(not owned), Toys R Us (not owned),
TJMaxx (2005/2020), Office Depot
(2005/2019)
64 257,479 1,238,762 5.06 95.0% Kmart (2005/2055), J.C. Penney
(2000/2020)
65 215,147 1,273,646 6.12 95.5% Wal-Mart (2011/2041), Kroger
(2012/2042)
66 248,963 1,541,016 6.19 100.0% Wal-Mart (2009/2039), Kroger
(2011/2041)

16
17

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

67 Sault Ste Marie, 4516 I-75 Business 49783 PC 100% Fee 1993 1994 40.08
MI Spur
MINNESOTA
-----------------
68 Bemidji, MN 1201 Paul Bunyan Dr 56601 MM 100% Fee 1977 IPO 31.55
69 Brainerd, MN 1200 Hwy 210 West 56401 MM 100% Fee 1985 IPO 17.19
70 Coon Rapids, MN 12921 Riverdale Dr 55433 PC 25% Fee(3) 1999 DEV
71 Hutchinson, MN 1060 S.R. 15 55350 MM 100% Fee 1981 IPO 36.88
72 Minneapolis I299 Promenade Place 55122 PC 50% Fee(3) 1997 1997 45.70
(Eagan), MN
73 Minneapolis Weaver Lake Road 55369 PC 50% Fee(3) 1995 1996 25.61
(Maple Grove), MN & I-94
74 St. Paul, MN 1450 University Avenue 55104 PC 100% Fee 1995 1997 20.27
75 Worthington, MN 1635 Oxford Street 56187 MM 100% Fee 1977 IPO 38.02
MISSISSIPPI
-----------------
76 Starkville, MS 882 Highway 12 West 39759 PC 100% Fee 1990 1994 28.81
77 Tupelo, MS 3850 North Gloster 38801 PC 100% Fee 1992 1994 41.91
MISSOURI
-----------------
78 Fenton, MO Gravois Rd-Hwy 141 63026 NC 100% Fee 1970 IPO 11.07
79 Independence, MO 900 East 39th Street 64057 PC 50% Fee(3) 1995 1995 46.95
80 Springfield, MO 1425 East Battlefield 65804 NC 100% GL 1989 1998

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

67 270,761 $ 1,783,726 $ 6.59 100.0% Wal-Mart (2012/2042), J.C. Penney
(2008/2033), Glen's Supermarket
(2013/2033), Office Max (2013/2028)

68 297,720 1,326,853 4.91 90.8% Kmart (2002/2052), J.C. Penney
(2003/2018), Herberger's (2005/2030)
69 260,199 1,833,673 7.16 99.5% Kmart (2004/2054), Herberger's
(2008/2023), Movies 10 Theatre
(2011/2026),
70 86,584 735,964 8.50 100.0% Kohl's (2020/2040)
71 121,001 794,870 6.90 95.2% Kmart (not owned), J.C. Penney
(2001/2021)
72 278,510 3,295,758 11.80 99.0% HomePlace (2017/2037), Office Max
(2013/2033), TJMaxx (2007/2022),
Byerly's (2016/2046), Barnes & Noble
(2012/2027)
73 250,436 2,441,552 9.75 100.0% Kohl's (2016/2036), Barnes & Noble
(2011/2026), Holiday Sports
(2011/2027), HomePlace (2016/2036),
Cub Foods (not owned)
74 324,354 2,600,755 8.02 100.0% Kmart (2022/2057), Cub Foods
(2015/2045), PetsMart
(2011/2036),Mervyn's (2016/2046)
75 185,658 1,019,597 5.85 93.8% Kmart (2001/2051), J.C. Penney
(2007/2032), Sterling (2001/2021),
Hy-Vee (2011/2031)

76 234,652 1,277,580 5.50 99.0% Wal-Mart (2015/2045), J.C. Penney
(2010/2040), Kroger (2012/2042)
77 348,236 1,927,609 5.54 100.0% Wal-Mart (2012/2042), Sam's
(2012/2042), Goody's (2002/2017)

78 93,548 789,408 9.45 90.1% Family Dollar (2003/2028), Fashion
Bug (2005/2025), Blockbuster Video
(2004/2009)
79 374,914 4,015,393 10.84 98.8% Kohl's (2016/2036), Bed Bath &
Beyond (2012/2027), Marshall's
(2012/2027), Rhodes Furniture
(2016/2026), Barnes & Noble
(2011/2026), American Multi-Cinema
(2015/2034)
80 56,033 454,293 8.11 100.0% Toys R Us (2013/2038), Pier 1
(2000/2013)

17
18

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

81 St. Louis 3144 South 63139 NC 100% Fee 1998 1998
(American), MO Kingshighway
82 St. Louis 1 Brentwood Promenade 63144 PC 100% Fee 1998 1998
(Brentwood), MO Court
83 St. Louis 11298 W. Florissant 63033 NC 50% Fee(3) 1998 1998
(Clocktower), MO
84 St. Louis 4523 Gravois Village 63049 PC 100% Fee 1983 1998
(Gravois), MO Plaza
85 St. Louis (HQ), 6303 S. Lindbergh Blvd 63123 PC 100% Fee 1992 1998
MO
86 St. Louis 4500 LeMay Ferry Road 63129 NC 100% Fee 1987 1998
(Keller), MO
87 St. Louis 12109 Manchester Road 63121 NC 100% Fee 1985 1998
(Olympic Oaks),
MO
88 St. Louis Kings Highway & 63109 PC 100% Fee 1992 1998
(Southtowne), MO Chippewa
89 St. Louis (Sunset 10980 Sunset Plaza 63128 PC 100% Fee 1997 1998
Hill), MO
NEVADA
-----------------
90 Las Vegas, NV 14833 West Charleston 89102 NC 100% Fee 1973 1998
Blvd
NEW HAMPSHIRE
-----------------
91 Salem, NH 14 Kelly Rd 03079 PC 12% Fee(3) 1999 DEV 177.00
NEW JERSEY
-----------------
92 Deptford, NJ 1450 Almonesson Road 08096 NC-BP 71% Fee(3) 1978 1999 9.45
93 Eatontown, NJ 90 Highway 36 07724 NC-BP 71% Fee(3) 1981 1999 9.12
94 Lawrenceville, NJ 4152 Quakerbridge Rd 08648 NC-BP 71% Fee(3) 1981 1999 7.26
95 Maple Shade, NJ 590 Route 38 East 08052 NC-BP 71% Fee(3) 1978 1999 10.16

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

81 0 $ 46,000 $ 0.00 n.a Home Depot (not owned), National
Tire (Gd Lease:2018/2038)
82 299,584 3,914,797 13.07 100.0% Target (2023/2048), Sports Authority
(2013/2028), Petsmart (2014/2039)
83 206,365 1,883,982 9.92 92.1% Dierberg's Market (2007/2037),
Office Depot (2008/2023), TJ Maxx
(2002/2012)
84 110,992 613,436 5.53 100.0% Kmart (2008/2048)

85 118,611 0 0.00 0.0%

86 52,842 570,307 10.79 100.0% Wehrenberg Theatres (2003/2023)

87 92,372 1,229,130 13.51 98.5% TJ Maxx (2001/2006), Michael's
(2005/2010), Walgreen's (2020/2020)

88 0 0 0.00 n.a.

89 420,867 4,527,989 10.89 98.8% Homeplace (2011/2026), Marshall's
(2012/2022), Home Depot (2023/2063),
Petsmart (2011/2031), Comp USA
(2013/2028), Toys R Us (2013/2038),
Cost Plus (2009/2024), Borders
(2011/2026)

90 62,005 696,365 11.57 97.1% Big 5 Sports (2007/2017), Chief Auto
Parts (2006/2011), Family Books
(2003/2003)

91 169,242 2,752,742 16.27 100.0% Best Buy (2020/2040), Linen N'
Things (2015/2030), M.V.P. Sports
(2019/2039), Comp USA (2014/2029),
Michael's (2009/2029), Big Party
(2010/2020)

92 50,000 775,000 16.24 100.0%
93 69,412 1,332,111 19.31 100.0%
94 67,234 425,000 6.32 100.0%
95 66,750 467,250 7.00 100.0%

18
19

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

96 Princeton, NJ Route 1 and Quaker 42071 PC 100% Fee 1995 1997
(Nassau Park) Bridge Road
97 Princeton, NJ Route 1 and Quaker 42071 PC 57% Fee(3) 1999 DEV
(Nassau Pavilion) Bridge Road
98 Tom's River, NJ 1240 Hooper Avenue 08753 NC-BP 71% Fee(3) 1981 1999 5.00
NEW MEXICO
-----------------
99 Los Alamos, NM 800 Trinity Drive 87533 NC 100% Fee 1978 IPO 8.72
NORTH CAROLINA
-----------------
100 Ahoskie, NC 1400 East Memorial 27910 PC 100% Fee 1992 1994 26.95
Drive
101 Durham, NC 5428-B New Hope 27707 PC 50% Fee(3) 1995 1995 39.53
Commons
102 Durham, NC 3500 Oxford Road 27702 PC 100% Fee 1990 IPO 41.70
103 Jacksonville, NC US Hwy 17-Western Ave 28540 PC 100% Fee 1989 IPO 27.51
104 New Bern, NC 3003 Claredon Blvd 28561 PC 100% GL 1989 IPO 28.18
105 Washington, NC 536 Pamlico Plaza 27889 PC 100% Fee 1990 IPO 22.17
106 Waynesville, NC 201 Paragon Parkway 28721 PC 100% Fee 1990 1993 28.40
107 Wilmington, NC S. College-New Centre 28403 PC 100% Fee 1989 IPO 57.78
Dr
NORTH DAKOTA
-----------------
108 Dickinson, ND 1681 Third Avenue 58601 MM 100% Fee 1978 IPO 27.10
109 Grand Forks, ND 2500 South Columbia 58201 NC-BP 71% Fee(3) 1978 1999 6.63
Road

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

96 202,121 $ 3,435,862 $17.00 100.0% Border's Books & Music (2011/2026),
Best Buy (2012/2027), Linens N
Things (2011/2026), PetsMart
(2011/2026), Wal-Mart (not owned),
Sam's (not owned), Home Depot (not
owned)
97 215,584 1,983,946 9.20 100.0% Wegman's (2024/2049), Kohl's
(2009/2039)
98 33,552 494,346 14.73 100.0%
99 97,970 569,059 6.12 94.9% Furrs (2002/2027), Furrs Pharmacy
(2003/2013), TG&Y (2018/2033)
100 188,428 923,449 5.01 97.8% Wal-Mart (2013/2043), Belk
(2008/2033), Food Lion (2012/2032)
101 408,292 4,593,183 11.25 98.2% Wal-Mart (2015/2035), Upton's (not
owned), Michael's (2005/2020),
Marshall's (2011/2026), Linens 'N
Things (2011/2026), Best Buy
(2011/2026), OfficeMax (2010/2025),
Barnes & Noble (2010/2025)
102 206,827 1,307,353 6.71 94.2% Wal-Mart (not owned), Food Lion
(2010/2030), Lowe's (2011/2031)
103 67,060 538,433 8.24 97.4% Wal-Mart (not owned), Wilson's
(2009/2024)
104 258,690 1,414,703 5.61 97.5% Wal-Mart (2009/2034), Goody's
(2007/2017)
105 278,311 1,424,924 5.12 100.0% Wal-Mart (2009/2034)
106 181,894 1,054,177 6.00 98.5% Wal-Mart (2011/2041), Food Lion
(2011/2031)
107 442,110 3,085,918 7.08 98.6% Wal-Mart (2009/2034), Sam's (not
owned), Lowes (2009/2029), Hamrick's
(2002/2007), Goody's (2005/2015),
Barnes & Noble (2007/2022)
108 267,506 1,085,101 4.28 94.8% Kmart (2003/2053), J.C. Penney
(2003/2018), Herberger (2000/2020),
Thrifty Drug (2001/2001)
109 65,008 0 0.00 0.0%

19
20

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

OHIO
-----------------
110 Akron, OH 1990 Buchholzer Blvd 44310 NC-BP 71% Fee(3) 1973 1999 4.78
111 Akron (Stow), OH 4332 Kent Road 44224 PC 100% Fee 1969 IPO 20.14
112 Akron (Stow), OH Kent Road 44224 PC 100% Fee 1997 DEV
113 Ashland, OH U.S. Route 42 44805 PC 100% Fee 1977 IPO 6.26
114 Bellefontaine, OH 2250 South Main Street 43311 NC 100% Fee 1995 1998
115 Boardman, OH I-680 & US-224 44514 PC 100% Fee 1997 DEV 57.04
116 Canton, OH 5496 Dressler Road 44720 PC 50% Fee(3) 1995 DEV 20.00
117 Canton (II), OH Dressler Road 44720 PC 100% Fee 1997 DEV
118 Chillicothe, OH 867 North Bridge 45601 PC 100% GL 1974 IPO 16.70
Street
119 Cincinnati, OH 5100 Glencrossing Way 45238 PC 100% Fee 1990 1993 24.47
120 Cincinnati 1371 Main Street 43450 NC 100% Fee 1986 1998
(Hamilton), OH
121 Cleveland 70-130 Barrington Town 44202 NC 100% Fee 1996 DEV
(Aurora), OH Square Drive
122 Cleveland 33752 Vine Street 44094 PC 100% Fee 1971 IPO 0.99
(Eastlake), OH
123 Cleveland 825 Cleveland 44035 PC 100% Fee 1977 IPO 16.30
(Elyria), OH
124 Cleveland 6235 Wilson Mills Rd 44143 PC 100% Fee 1995 IPO 11.63
(Highland Hts.),
OH
125 Cleveland (Mac 8210 Macedonia Commons 44056 PC 100% Fee 1999 DEV
II), OH
126 Cleveland 8210 Macedonia Commons 44056 PC 50% Fee(3) 1994 1994 19.94
(Macedonia), OH

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

110 45,000 $ 517,500 $11.50 100.0% Dick's (2013/2028)
111 116,806 189,344 1.62 100.0% Kmart (2001/2006)
112 283,140 2,164,862 7.94 96.3% Target (not owned), Giant Eagle
(2017/2032), Stein Mart (2007/2022),
OfficeMax (2011/2026)
113 110,656 233,382 2.11 100.0% Kmart (2002/2052), Quality Farm
(2000/2003)
114 54,780 0 0.00 0.0% Big Bear Supermarket (2016/2031)
115 506,254 4,147,108 8.19 100.0% Lowe's (2016/2046), Staples
(2012/2032), Dick's Clothing &
Sporting Goods (2012/2027), Wal-
Mart (2017/2047), PetsMart
(2013/2038), Giant Eagle (2018/2033)
116 230,065 1,967,323 11.08 77.2% Kohl's (2016/2046), Target (not
owned), London Fog (2011/2011),
Dick's Clothing & Sporting Goods
(2010/2025)
117 225,874 1,160,373 9.13 76.7% PetsMart (2013/2028), Service
Merchandise (2013/2028), Homeplace
(2012/2027), Jo-Ann ETC. (2008/2023)
118 236,009 1,808,673 7.66 100.0% Lowes, (2015/2035), Kroger
(2001/2031), Super X (2001/2031),
Office Max (2012/2027)
119 235,616 2,265,964 9.85 97.6% Thriftway (2009/2029), Service
Merchandise (2006/2031)
120 40,000 230,000 5.75 100.0% Roundy's (2006/2021)

121 65,373 629,421 12.20 78.9% Heinens (not owned)

122 4,000 68,400 17.10 100.0% Kmart (not owned)

123 150,200 761,970 5.07 100.0% Hill's (2003/2028), Finast
(2010/2045)
124 247,146 2,563,263 10.37 100.0% Builders Square (2020/2070), Kohl's
(2007/2047), Dick's Clothing and
Sporting Goods (2016/2036)
125 169,481 1,601,734 9.45 100.0% Home Depot (2020/2040), Cinemark
(2019/2039)
126 234,789 2,345,024 9.99 100.0% Wal-Mart (not owned), Finast
(2018/2049), Kohl's (2016/2041)

20
21

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

127 Cleveland 5140-25877 Great 44070 PC 100% Fee 1958 1997 43.14
(N.Olmsted), OH Northern Blvd
128 Cleveland (N. 26520 Lorain Avenue 44070 NC-BP 71% Fee(3) 1978 1999 6.20
Olmsted), OH
129 Cleveland Kruse Drive 44139 PC 100% Fee 1998 DEV
(Solon), OH
130 Cleveland 3250 West 65th Street 44102 PC 100% Fee 1977 IPO 4.18
(W.65th) (Kmart
Plaza), OH
131 Columbus (Lennox 1647 Olentangy River 43212 PC 50% Fee(3) 1997 1998
Town), OH Road
132 Columbus (Sun 3622-3860 W. Dublin 43017 PC 79.5% Fee(3) 1995 1998
Center), OH Granville Road
133 Columbus (Dublin 6561-6815 Dublin 43017 PC 80% Fee(3) 1987 1998
Vlg), OH Center Drive
134 Columbus 6644-6804 Perimeter 43017 PC 100% Fee 1996 1998
(Dublin), OH Loop Road
135 Columbus 3740 Easton Market 43230 PC 100% Fee 1998 1998
(Easton), OH
136 Columbus (Grove 2161-2263 Stringtown 43123 PC 100% Fee 1992 1998
City), OH Road
137 Columbus (New 1370-1399 E. Johnstown 43230 NC 100% Fee 1995 1998
Albany), OH Rd
138 Columbus 78-80 Oak Meadow Drive 43062 NC 100% Fee 1980 1998
(Pataskala), OH
139 Columbus 1701-1797 Hill Road No 43147 NC 100% Fee 1990 1998
(Pickerington),
OH

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

127 619,058 $ 6,829,148 $11.04 99.9% HomePlace (2017/2032), Best Buy
(2010/2025), PetsMart (2003/2013),
Kids R Us (2008/2008), Marshall's
(2000/2005), Regal Cinemas
(2001/2001), Marc's (2002/2007),
CompUSA (2008/2023), Kronheim's
(2009/2009), Finast (not owned)
128 61,000 0 0.00 100.0% Kids R' Us (2008/2008)
129 181,318 2,642,160 14.63 98.2% Bed, Bath, & Beyond (2009/2029),
Borders Books (2018/2043), Mustard
Seed (2019/2044)
130 49,420 267,604 5.41 100.0% Kmart (not owned), A&P (2002/2027)
131 336,273 2,880,191 8.94 95.8% Target (2016/2031), AMC Theatres
(2021/2036), Barnes & Noble
(2007/2022), Staples (2011/2026),
Just For Feet (2007/2022), Old Navy
(2009/2009)
132 317,581 3,426,209 10.84 99.5% Big Bear (2016/2031), Homeplace
(2010/2025), Babies R Us
(2011/2026), Rhodes Furniture
(2012/2027), Stein Mart (2007/2022),
Staples (2010/2025), Old Navy
(2009/2009)
133 327,242 2,962,432 10.56 85.7% AMC (2007/2033), DSW (2005/2015),
PharMor (2003/2015), Michaels
(2014/2019)
134 137,610 1,467,399 11.05 96.5% Big Bear Supermarket (2016/2031),
CVS (2011/2026)
135 509,959 5,570,905 11.33 96.4% Kittle's (2012/2037), Galyans
(2013/2038), TJMaxx (2008/2023),
Staples (2013/2028), Comp USA
(2013/2028), PetsMart (2015/2035),
Golfsmith (2013/2028), Michael's
(2013/2023), DSW Shoe Warehouse
(2012/2027), Bed Bath & Beyond
(2014/2029)
136 128,050 1,249,629 9.76 100.0% Big Bear Supermarket (2012/2027)
137 30,110 463,775 15.40 100.0% Hoggy's Barn & Grille (2005/2015)
138 33,270 184,340 5.54 100.0% Village Market (2007/2017), Rite Aid
(2000/2010)
139 59,495 792,208 13.68 97.3% CVS (2020/2035)

21
22

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

140 Dayton (Huber 8280 Old Troy Pike 45424 PC 100% Fee 1990 1993 17.39
Hts.), OH
141 Dayton 615-799 Lyons Road 45458 PC 50% Fee(3) 1990 1998
(Washington), OH
142 Hillsboro, OH 1100 North High St 45133 PC 100% Fee 1979 IPO 11.02
143 Lebanon, OH 1879 Deerfield Road 45036 PC 100% Fee 1990 1993 14.40
144 Niles, OH 909 Great East Plaza 44446 NC-BP 71% Fee(3) 1980 1999 4.83
145 St. Clairsville, 67781 Mall Road 43950 NC-BP 71% Fee(3) 1999 5.05
OH
146 S. Dayton, OH 8336 Springboro Pike 45342 NC-BP 71% Fee(3) 1978 1999 6.38
147 Tiffin, OH 870 West Market St 44883 MM 100% Fee 1980 IPO 27.62
148 Toledo (Airport 5245 Airport Highway 43615 PC 100% Fee 1993 1995 22.87
Square), OH
149 Toledo 5245 Airport Highway 43615 PC 100% Fee 1999 DEV
(Springfield), OH
150 Westlake, OH 30100 Detroit Road 44145 PC 100% Fee 1974 IPO 12.71
151 Wilmington, OH 1025 S. South Street 45177 PC 100% Fee 1977 IPO 7.38
152 Xenia, OH 1700 West Park Square 45385 PC 100% Fee 1994 DEV 7.38
153 Zanesville, OH 3431 North Maple Ave 43701 PC 100% Fee 1990 IPO 3.28
OREGON
-----------------
154 Portland NW Evergreen Pkwy. & 97006 PC 50% Fee(3) 1995 1996 18.29
(Hillsboro), OR NW Ring Road
PENNSYLVANIA
-----------------
155 Erie, PA 2301 West 38th Street 16506 PC 100% GL 1973 IPO 13.27
156 Erie (Peach 1902 Keystone Drive 16509 PC 100% Fee 1995 DEV 65.69
Street), PA

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

140 163,741 $ 1,469,242 $ 9.13 98.3% Wal-Mart (not owned), Cub Foods
(2011/2031), Sears (2002/2012)
141 213,798 1,361,641 8.15 78.9% Books-A-Million (2005/2015), PharMor
(2008/2023), Just For Feet
(2007/2017)
142 58,583 257,539 4.55 96.6% Kmart (2004/2054) *, CVS
(2000/2000), Bob & Carls (not owned)
143 26,500 230,090 8.68 89.4% Wal-Mart (not owned), PK Lumber (not
owned)
144 23,500 0 0.00 0.0%
145 33,292 0 0.00 0.0%

146 33,379 239,250 5.90 100.0% National City Mortgage (2008/2019)
147 231,793 797,364 3.99 83.9% Kmart (2005/2055), J.C. Penney
(2000/2010), Heileg-Myers
(2004/2014)
148 187,674 1,504,451 8.02 100.0% Best Buy (2009/2024),Office Depot
(2009/2024),Michaels
(2004/2014)Sears (2002/2012), The
Pharm (2004/2014)
149 188,264 1,431,328 9.08 100.0% Kohl's (2019/2049), Bed Bath and
Beyond (2010/2030), Gander Mtn
(2014/2034), Babies 'R' Us
(2010/2045)
150 165,120 806,385 5.88 84.5% Kmart (2004/2049), Marc's
(2004/2019)
151 55,130 218,892 4.09 97.1% Kmart (not owned), Super Valu
(2003/2018)
152 104,873 741,356 7.82 90.4% Wal-Mart (not owned), Kroger
(2019/2049)
153 13,283 138,777 10.45 100.0% Kmart (not owned)

154 306,269 4,568,124 14.92 100.0% Office Depot (2010/2025), Haggan
Supermarket (2021/2046), Barnes &
Noble (2011/2026), Mervyn's (not
owned), Target (not owned)

155 95,000 263,488 5.23 50.5% West Telemarketing (2015/2015)
156 484,030 3,694,037 7.94 96.1% Wal-Mart (2015/2045), Lowe's
(2015/2045), Media Play (2010/2025),
Kohl's (2016/2046), Cinemark
(2011/2026)

22
23

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

157 Erie (Peach 1902 Keystone Drive 16509 PC 100% GL 1999 DEV
Street), PA
158 Philadelphia 2700 DeKalb Pike 19401 PC 100% Fee 1975 IPO 24.22
(E.Norriton), PA
SOUTH CAROLINA
-----------------
159 Anderson 406 Highway 28 By-Pass 29624 PC 100% Fee 1990 1994 20.90
(Crossroads), SC
160 Anderson 3812 Liberty Highway 29621 PC 100% Fee 1993 1995 2.13
(Northtowne), SC
161 Camden, SC 1671 Springdale Drive 29020 PC 100% Fee 1990 1993 22.97
162 Charleston 1500 Highway 17 North 29465 PC 100% Fee 1992 1995 22.70
(Mt.Pleasant), SC
163 Charleston 7400 Rivers Avenue 29406 PC 100% Fee 1989 1993 28.10
(North), SC
164 Columbia, SC 5420 Forest Drive 29206 PC 100% Fee 1995 1995 7.04
165 Greenville 621 Fairview Road 29681 PC 100% Fee 1990 1994 17.23
(Simpsonville),
SC
166 Orangeburg, SC 2795 North Road 29115 PC 100% Fee 1994 1995 2.65
167 Union, SC Highway 176 By-Pass #1 29379 PC 100% Fee 1990 1993 45.65
SOUTH DAKOTA
-----------------
168 Rapid City, SD 740-780 Mountain View 57702 NC 100% Fee 1972 1998
Road
169 Watertown, SD 1300 9th Avenue, S.E 56401 MM 100% Fee 1977 IPO 29.30
TEXAS
-----------------
170 El Paso, TX 10501 Gateway West 79925 NC-BP 71% Fee(3) 1982 1999
171 Ft. Worth, TX SWC Eastchase Pkwy. 76112 PC 50% Fee(3) 1995 1996 17.00
and I-30
172 San Antonio, TX 125 NE Loop 410 78216 PC 35% Fee(3) 1996 1997 26.45

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

157 54,257 $ 633,731 $11.68 100.0% Home Depot (not owned), PetsMart
(2015/2040), Circuit City
(2020/2040)
158 179,609 1,128,174 6.48 100.0% Kmart (2000/2050), Acme (2002/2027),
Thrift Drug (2002/2022)

159 163,809 652,679 4.72 84.4% Wal-Mart (2010/2040), Ingles
(2011/2066)
160 14,250 145,315 10.20 100.0% Wal-Mart (not owned), Sam's (not
owned)
161 349,475 1,735,565 4.97 95.1% Wal-Mart (2009/2039), Winn-Dixie
(2011/2036), Goody's (2001/2016),
Belk (2020/2020)
162 205,032 1,295,093 6.42 98.4% Wal-Mart (not owned), Lowe's
(2012/2032), Piggly Wiggly
(2012/2022), TJMaxx (2002/2012)
163 251,039 1,746,909 7.17 97.1% Wal-Mart (2009/2039), Office
Warehouse (2002/2012), Service
Merchandise (not owned), Rainbow Bay
Crafts (2000/2015)
164 46,700 496,350 10.63 100.0% Wal-Mart (not owned)
165 142,133 747,357 5.61 93.8% Kmart (2015/2065), Ingles
(2011/2065)

166 50,760 447,537 8.82 100.0% Wal-Mart (not owned)
167 184,331 1,010,778 5.52 99.3% Wal-Mart (2009/2039), Belk's
(2010/2030), Winn-Dixie (2010/2035)

168 35,544 249,247 7.01 100.0% Computerland (2005/2005)

169 285,525 1,441,461 5.18 98.3% Kmart (2002/2052), J.C. Penney
(2003/2018), Herberger's
(2004/2019), Osco (2003/2003)

170 35,175 228,637 6.50 100.0%
171 204,997 1,785,505 10.83 82.9% PetsMart (2011/2036), MJ Designs
(2011/2031), Ross Dress For Less
(2006/2026), United Artists
(2012/2027), Toys R Us (not owned),
Target (not owned)
172 310,394 4,444,130 14.32 100.0% Ross Dress For Less (2007/2027), DSW
Warehouse (2007/2027), Best Buy
(2011/2026), Oshman's (2017/2037),
HomePlace (2012/2027)

23
24

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

UTAH
-----------------
173 Logan, UT 400 North Street 84321 NC 100% Fee 1975 1998
174 Ogden, UT 21-129 Harrisville 84404 PC 100% Fee 1977 1998
Road
175 Orem, UT 1300 South Street 84058 PC 100% Fee 1991 1998
176 Riverdale, UT 1050 West Riverdale 84405 PC 100% Fee 1995 1998
Road
177 Salt Lake City 3300 South Street 84115 NC 100% Fee 1978 1998
(FC at 33rd), UT
178 Salt Lake City 455 East 500 South 84111 BC 100% Fee 1985 1998
(Hermes Street
Building), UT
179 Salt Lake City 900 East Ft. Union 84047 PC 100% Fee 1973 1998
(Midvale), UT Blvd
180 Salt Lake City 5600 South Redwood 84123 PC 100% Fee 1982 1998
(Taylorsville), Road
UT
VERMONT
-----------------
181 Berlin, VT Route 4 05602 MM 100% Fee 1986 IPO 50.25
VIRGINIA
-----------------
182 Fairfax, VA 12210 Fairfax Towne 22033 PC 50% Fee(3) 1994 1995 22.79
Center
183 Martinsville, VA 240 Commonwealth Blvd 24112 MM 50% Fee(3) 1989 IPO 43.73

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

173 19,200 $ 201,730 $10.51 100.0% Hasting's (2003/2008), Kinko's
(2002/2002)
174 162,316 792,300 5.23 93.4% Harmon's (2002/2012)

175 147,976 1,518,286 10.26 100.0% Kids R Us (2011/2021), Media Play
(2015/2035), Toys R Us (2090/2090),
Heart's Desire (2013/2023)
176 590,338 4,292,560 7.38 98.5% Wal-Mart (2011/2041), Gart Sports
(2012/2017), OfficeMax (2008/2023),
Target (2017/2047), Media Play
(2016/2036), Circuit City
(2016/2036), PetsMart (2014/2039)
177 39,032 305,676 8.37 93.6% Brighton Bank (2004/2019)

178 42,543 652,620 15.94 95.1%

179 667,769 6,699,078 10.49 95.6% Mervyn's (2005/2045), OfficeMax
(2007/2017), Wal-Mart (2015/2045),
Future Shop (2016/2036), Media Play
(2016/2036), Bed Bath & Beyond
(2014/2029), Baby Superstore
(2013/2033)
180 756,205 7,072,351 9.88 94.7% Cineplex Odeon (2017/2027), Future
Shop (2016/2036), Gart Sports
(2017/2032), Circuit City
(2016/2041), Media Play (2015/2035),
OfficeMax (2008/2018), PetsMart
(2012/2027), Shopko (2014/2044)

181 174,646 1,400,827 8.47 94.7% J.C. Penney (2009/2034)

182 253,941 3,987,559 16.06 97.8% United Artists (2014/2034), Safeway
(2019/2054), TJMaxx (2009/2024),
Bed, Bath & Beyond (2010/2020),
Tower Records (2009/2019)
183 435,402 2,803,479 7.05 90.9% J.C. Penney (2009/2034), Leggett
(2009/2024), Sears (2009/2029),
Kroger (2017/2062), Goody's
(2006/2016), Office Max (2012/2027)

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25

OWNERSHIP
INTEREST
(GROUND
LEASE
TYPE OF DDR TERMINATION/ LAND
PROPERTY OWNERSHIP OPTION YEAR YEAR AREA
CENTER/PROPERTY LOCATION ZIP CODE (1) INTEREST TERMINATION) DEVELOPED ACQUIRED (ACRES)
----------------- ---------------------- -------- -------- --------- ------------ --------- -------- -------

{184 Pulaski, VA 1000 Memorial Dr 24301 PC 100% Fee 1990 1993 21.93
185 Winchester, VA 2190 So Pleasant 22601 PC 100% Fee 1990 1993 26.42
Valley
WEST VIRGINIA
-----------------
186 Huntington 5-13 Mall Road 25504 NC 100% GL 1985 1998
(Barboursville),
WV

AVERAGE
COMPANY BASE
GROSS TOTAL RENT
LEASABLE ANNUALIZED (PER SF) PERCENT ANCHOR TENANTS
AREA (SF) BASE RENT (2) LEASED (LEASE EXPIRATION/OPTION EXPIRATION)
-------------- ------------ ---------- --------- ------------------------------------

{18 143,299 $ 890,185 $ 6.29 98.7% Wal-Mart (2011/2041), Food Lion
(2011/2031)
185 230,940 2,089,355 9.05 100.0% Office Max (2012/2027), Kohl's
(2018/2048), Giant Foods
(2010/2040), Books-A-Million
(2007/2017)
186 70,900 272,125 3.84 100.0% OfficeMax (2006/2021), Jo Ann
Fabrics (2004/2009)
=========== ============
36,316,515 $314,927,672 95.7%

- ---------------

(1) "PC" indicates a power center or a community shopping center, "NC" indicates
a neighborhood shopping center, "MM" indicates an enclosed mini-mall, "BC"
indicates a business center and "BP" indicates the former Best Products
sites acquired through the Retail Value Fund.

(2) Calculated as total annualized base rentals divided by Company-owned GLA
actually leased as of December 31, 1999.

(3) One of the forty-four (44) properties owned through joint ventures which
serve as collateral for joint venture mortgage debt aggregating
approximately $25.0 million (of which the Company's proportionate share is
$66.6 million) which is not reflected in the consolidated indebtedness.

* This anchor tenant has closed and sublet the space.

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26

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, which 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 47 Chairman of the Board of Directors and Chief
Executive Officer
James A. Schoff 54 Vice Chairman, Chief Investment Officer and a
Director
David M. Jacobstein 53 President and Chief Operating Officer and a
Director Nominee
Daniel B. Hurwitz 35 Executive Vice President
Joan U. Allgood 47 Vice President and General Counsel
William H. Schafer 42 Vice President and Chief Financial Officer
Eric Mallory 39 Vice President of Development

Scott A. Wolstein has been the Chief Executive Officer and a Director of
the Company since its organization. Mr. Wolstein has been Chairman of the Board
of Directors of the Company since May 1997 and was President of the Company from
its organization until May 1999, when Mr. Jacobstein joined the Company. 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 is a graduate of the Wharton School at the University of Pennsylvania
and of the University of Michigan Law School. He has served as 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, Heartland PAC,
Neighborhood Progress, Inc., The Park Synagogue, the Convention and Visitors
Bureau of Greater Cleveland and Bellefaire. Mr. Wolstein also serves as Chairman
of the Board of Trust Managers of American Industrial Properties REIT ("AIP"), a
New York Stock Exchange listed REIT in which the Company has a significant
investment, as a representative of the Company.

James A. Schoff has been the Vice Chairman of the Board of Directors and
Chief Investment Officer of the Company since March 1998. From the organization
of the Company until March 1998, Mr. Schoff served as Executive Vice President,
Chief Operating Officer and a Director of the Company. Prior to the organization
of the Company, Mr. Schoff was a principal and executive officer of DDG. After
graduating from Hamilton College and Cornell University Law School, Mr. Schoff
practiced law with the firm of Thompson, Hine and Flory LLP in Cleveland, Ohio
where he specialized in the acquisition and syndication of real estate
properties. Mr. Schoff serves as a member of the Executive Committee and Board
of Trustees of the Western Reserve Historical Society and the National Committee
for Community and Justice. Mr. Schoff also serves as a director of AIP as a
representative of the Company.

David M. Jacobstein has been the President and Chief Operating Officer of
the Company since May 1999. From 1986 until the time he joined the Company, Mr.
Jacobstein was employed by Wilmorite, Inc., a Rochester, New York based shopping
center developer where most recently he served as Vice Chairman and Chief
Operating Officer. Mr. Jacobstein is a graduate of Colgate University and George
Washington University Law School. Prior to joining Wilmorite, Mr. Jacobstein
practiced law with the firms of Thompson, Hine & Flory in Cleveland, Ohio and
Harris, Beach & Wilcox in Rochester, New York where he specialized in corporate
and securities law. He is a member of the International Council of Shopping
Centers and has served as a Vice-President of the Colgate

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27

University Alumni Corporation and as President of the Allendale Columbia School
(Rochester, NY) Board of Trustees.

Daniel B. Hurwitz was appointed Executive Vice President in June 1999. Mr.
Hurwitz most recently served as Senior Vice President and Director of Real
Estate and Development for Reading, Pennsylvania based Boscov's Department
Store, Inc., a privately held department store chain from 1991 until he joined
the Company. Prior to Boscov's, Mr. Hurwitz served as Development Director for
The Shopco Group, a New York City based developer of 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. He is a
member of the International Council of Shopping Centers and has served as a
Board member of the Colgate University Alumni Corporation, Reading JCC, American
Cancer Society (Regional), and the Greater Berk's Food Bank.

Joan U. Allgood has been a Vice President and General Counsel of the
Company since its organization as a public company and General Counsel of its
predecessor entities since 1987. Mrs. Allgood practiced law with the firm of
Thompson, Hine and Flory from 1983 to 1987, and is a graduate of Denison
University and Case Western Reserve University School of Law.

William H. Schafer has been a Vice President and Chief Financial Officer of
the Company since its organization as a public company and the Chief Financial
Officer of its predecessor entities since 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.

Eric Mallory is the Vice President of Development since April 1999. Prior
to that Mr. Mallory was Executive Vice President of PREIT-Rubin, Inc. in
Philadelphia, Pennsylvania since 1993. Mr. Mallory is a graduate of the
University of Pittsburgh and received his MBA from the University of Evansville.

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28

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The following table shows the high and low sales price of the Company's
common shares on the New York Stock Exchange (the "NYSE") composite tape for the
quarterly periods indicated and the dividends declared per common share with
respect to each such quarter:

1999 HIGH LOW DIVIDENDS
---- -------- ------- ---------

First..................................... $18 1/2 $13 5/8 $ .35
Second.................................... 17 1/2 13 7/8 .35
Third..................................... 16 5/8 13 5/16 .35
Fourth.................................... 14 7/8 12 5/16 .35
-----
$1.40

1998 HIGH LOW DIVIDENDS
---- -------- ------- ---------

First..................................... $20 7/16 $18 1/4 $.3275
Second.................................... 21 15/32 18 21/32 .3275
Third..................................... 20 9/16 16 .3275
Fourth.................................... 19 5/8 15 7/8 .3275
------
$ 1.31

The approximate number of record holders of the Company's common shares
(its only class of common equity) at March 15, 2000 was 452, and the approximate
number of beneficial owners of such shares was 18,500.

In March 2000, the Company declared its 2000 first quarter dividend to
shareholders of record on March 22, 2000 of $.36 per share, a 2.9% increase over
the quarterly dividend rate of $.35 per share in 1998.

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 95% 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.

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29

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)

YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1999(1) 1998(1) 1997(1) 1996(1) 1995(1)
-------- -------- -------- -------- --------

OPERATING DATA:
Revenues (primary real estate
rentals).......................... $263,933 $228,168 $169,223 $130,905 $107,805
-------- -------- -------- -------- --------
Expenses:
Rental operation.................. 69,670 59,498 47,200 35,123 28,069
Depreciation & amortization....... 52,444 43,180 32,313 25,062 21,865
Interest.......................... 68,023 57,196 35,558 29,888 29,595
-------- -------- -------- -------- --------
190,137 159,874 115,071 90,073 79,529
-------- -------- -------- -------- --------
Income before equity in net income
from joint ventures, minority
equity investment, minority equity
interests, (loss) gain on
disposition of real estate and
extraordinary items............... 73,796 68,294 54,152 40,832 28,276
Equity in net income of joint
ventures.......................... 20,621 12,888 10,893 8,710 486
Equity in net income from minority
equity investment................. 6,453 686 -- -- --
Minority equity interests........... (11,809) (3,312) (1,049) -- --
(Loss) gain on disposition of real
estate............................ (1,664) 248 3,526 -- 300
-------- -------- -------- -------- --------
Income before extraordinary item.... 87,397 78,804 67,522 49,542 29,062
Extraordinary item (2).............. -- (882) -- -- (3,557)
-------- -------- -------- -------- --------
Net income..................... $ 87,397 $ 77,922 $ 67,522 $ 49,542 $ 25,505
======== ======== ======== ======== ========
Net income applicable to common
shareholders...................... $ 60,135 $ 57,969 $ 53,322 $ 35,342 $ 24,250
======== ======== ======== ======== ========
Earnings per share data -- Basic: (3)
Income before extraordinary
item.............................. $ 0.99 $ 1.03 $ 1.03 $ 0.84 $ 0.74
Net income........................ $ 0.99 $ 1.02 $ 1.03 $ 0.84 $ 0.65
Weighted average number of common
shares......................... 60,985 56,949 51,760 42,294 37,560
Earnings per share data- Diluted: (3)
Income before extraordinary
item.............................. $ 0.95 $ 1.00 $ 1.03 $ 0.84 $ 0.74
Net income........................ $ 0.95 $ 0.98 $ 1.03 $ 0.84 $ 0.64
Weighted average number of common
shares......................... 63,468 58,509 52,124 42,372 37,818
Annual cash dividend................ $ 1.40 $ 1.31 $ 1.26 $ 1.20 $ 1.08

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30

AT DECEMBER 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- -------- --------

BALANCE SHEET DATA:
Real estate (at cost).......... $2,068,274 $1,896,763 $1,325,742 $991,647 $848,373
Real estate, net of accumulated
depreciation................. 1,818,362 1,693,666 1,154,005 849,608 728,333
Advances to and investments in
joint ventures............... 299,176 266,257 136,267 106,796 83,190
Total assets................... 2,320,860 2,126,524 1,391,918 975,126 830,060
Total debt..................... 1,152,051 1,000,481 668,521 478,432 405,726
Shareholders' equity........... 852,345 902,785 669,050 469,336 404,161

YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1999(1) 1998(1) 1997(1) 1996(1) 1995(1)
-------- -------- --------- --------- ---------

OTHER DATA:
Cash flow provided from (used in):
Operating activities............ $152,652 $140,078 $ 94,393 $ 75,820 $ 49,039
Investing activities............ (209,708) (538,289) (416,220) (199,670) (217,198)
Financing activities............ 60,788 400,453 321,832 123,851 167,252
Funds from operations(4):
Net income applicable to common
shareholders................. $ 60,135 $ 57,969 $ 53,322 $ 35,342 $ 24,250
Depreciation and amortization of
real estate investments...... 51,498 42,631 31,955 24,832 21,706
Equity in net income of joint
ventures..................... (20,621) (12,888) (10,893) (8,710) (486)
Joint venture funds from
operations................... 32,316 20,779 16,077 13,172 1,364
Equity in net income from
minority equity investment... (6,453) (686) -- -- --
Minority equity investment funds
from operations.............. 12,965 1,493 -- -- --
Minority interest expense (OP
Units)....................... 6,541 3,069 10 -- --
Loss (gain) on disposition of
real estate.................. 1,664 (248) (3,526) -- (300)
Non-recurring and extraordinary
items(2)..................... 802 882 -- -- 3,557
-------- -------- --------- --------- ---------
$138,847 $113,001 $ 86,945 $ 64,636 $ 50,091
======== ======== ========= ========= =========
Weighted average number of common
shares outstanding (Basic)(3)... 60,985 56,949 51,760 42,294 37,560

- ---------------

(1) As described in the consolidated financial statements, the Company acquired
five properties in 1999 (two of which are owned through joint ventures), 41
properties in 1998 (five of which are owned through joint ventures), eight
properties in 1997 (one of which is owned through a joint venture), five
properties in 1996 and 20 properties in 1995 (10 of which are owned through
joint ventures).

(2) In 1999, the non-recurring charge related to severance costs and in 1998 and
1995, the extraordinary charges relate primarily to the write-off of
deferred finance costs.

(3) Effective August 3, 1998, the Company executed a two-for-one stock split for
shareholders of record on July 27, 1998. Earnings per share data is
reflected for all years utilizing SFAS 128.

(4) Industry analysts generally consider funds from operations ("FFO") to be an
appropriate measure of the performance of an equity REIT. FFO does not
represent cash generated from operating activities in accordance with
generally accepted accounting principles and is not necessarily indicative
of cash available

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31

to fund cash needs and should not be considered as an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flow as a measure of liquidity. FFO is defined generally
as net income applicable to common shareholders excluding gains (losses) on
sales of property, non-recurring charges and extraordinary items, adjusting
for certain noncash items, principally real property depreciation, equity
income (loss) from its joint ventures and minority equity investment and
adding the Company's proportionate share of FFO of its unconsolidated joint
ventures and minority equity investment, determined on a consistent basis.
The Company calculates FFO in accordance with the foregoing definition,
which is currently used by NAREIT. Certain other real estate companies may
calculate FFO in a different manner.

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 which 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, 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 may 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 which are, in some cases, beyond the Company's
control and 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 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,
particularly certain of its most prominent tenants, and could be
adversely affected by the bankruptcy of those tenants;

- 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;

- E-commerce may affect the sales volume of the Company's tenants which may
reduce the amount of percentage rental income;

- The Company may fail to identify, acquire, construct or develop
additional properties that do not produce a desired yield on invested
capital, or may fail to effectively integrate acquisitions of properties
or portfolios of properties;

- Debt and equity financing may not be available, or may not be available
on favorable terms, for the Company to continue to grow and operate its
business;

- 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;

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32

- The Company must make distributions to shareholders to continue to
qualify as a REIT, and if the Company borrows funds to make distributions
then those borrowings may not be available on favorable terms;

- 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 is subject to potential environmental liabilities;

- The Company could 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 for the
Company's common shares, as well as its performance and cash flow.

COMPARISON OF 1999 TO 1998 RESULTS OF OPERATIONS

Revenues from Operations

Total revenues increased $35.8 million, or 15.7%, to $263.9 million for the
year ended December 31, 1999 as compared to $228.1 million in 1998. Base and
percentage rents for 1999 increased $22.9 million, or 13.4%, to $193.8 million
as compared to $170.9 million in 1998. Approximately $6.6 million of the
increase in base and percentage rental income was the result of new leasing,
re-tenanting and expansion of the Core Portfolio Properties (shopping center
properties owned as of January 1, 1998), an increase of 5.8% over 1998 revenues
from Core Portfolio Properties. The 38 shopping centers acquired by the Company
in 1999 and 1998 contributed $28.1 million of additional revenue and the nine
shopping center developments contributed $4.6 million. These increases were
offset by a decrease of $16.4 million relating to the transfer of five business
centers to American Industrial Properties REIT ("AIP") in July 1998 and the
transfer of six properties to a joint venture in September 1998.

At December 31, 1999, the aggregate occupancy rate of the Company's
shopping centers was 95.7% as compared to 96.5% at December 31, 1998. The
average annualized base rent per leased square foot, including those properties
owned through joint ventures, was $9.20 at December 31, 1999 as compared to
$8.99 at December 31, 1998. During 1999, same store sales, for those tenants
required to report sales (approximately 18.9 million square feet), increased
3.4% to $235 per square foot.

The increase in recoveries from tenants of $4.7 million was directly
related to the increase in operating and maintenance expenses and real estate
taxes primarily associated with the 1999 and 1998 shopping center acquisitions
and developments. Recoveries were approximately 92.1% of operating and
maintenance expenses and real estate taxes in 1999 as compared to 92.5% in 1998.

Management fee income increased by approximately $1.5 million, primarily
associated with twelve additional joint ventures formed in 1998 and 1999, and
interest income increased $1.3 million primarily associated with advances made
to certain joint ventures formed in 1998 and 1999. Other income generally
related to increases in (i) development fee income of approximately $2.3
million, (ii) lease termination fees of approximately $1.8 million and (iii)
other income, comprised of commissions, financing fees and other miscellaneous
revenue items, increased approximately $1.2 million.

Expenses from Operations

Rental operating and maintenance expenses for the year ended December 31,
1999 increased $4.6 million, or 22.8%, to $24.6 million as compared to $20.0
million in 1998. An increase of $3.0 million was attributable to the 47 shopping
centers acquired and developed in 1999 and 1998 and $3.1 million related to the
Core Portfolio Properties generally associated with increased snow removal costs
and other maintenance related costs. These increases were offset by a decrease
of $1.5 million relating to the transfer of five business center properties to
AIP in August 1998 and the transfer of six shopping center properties into a
joint venture in September 1998.

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33

Real estate taxes increased $0.7 million, or 2.8%, to $27.2 million for the
year ended December 31, 1999 as compared to $26.5 million in 1998. This increase
was primarily attributable to the growth related to the 47 shopping centers
acquired and developed in 1999 and 1998 which contributed $4.1 million of the
increase and an additional $0.4 million of the increase primarily related to
expansions associated with the Core Portfolio Properties. These increases were
offset by a decrease of $3.8 million relating to the transfer of five business
center properties to AIP in August 1998 and the transfer of six shopping center
properties into a joint venture in September 1998.

General and administrative expenses increased $4.9 million, or 37.6%, to
$17.8 million for the year ended December 31, 1999 as compared to $12.9 million
in 1998. Total general and administrative expenses were approximately 4.1% (3.9%
after excluding a $0.8 million severance charge, described below) and 3.8% of
total revenues, including revenues of joint ventures, for the years ended
December 31, 1999 and 1998, respectively.

The increase in general and administrative expenses is attributable to the
growth of the Company primarily related to shopping center acquisitions,
expansions and developments (including those owned through joint ventures),
relocation of the Company's headquarters to a new office, additional consulting
costs, professional services, several new key executives and a severance charge.
The increase was offset by adjustments to certain variable rate executive
incentive compensation accruals of approximately $1.3 million. The Company
continues to maintain a conservative policy with regard to the expensing of all
internal leasing salaries, legal salaries and related expense associated with
the leasing and re-leasing of existing space.

Depreciation and amortization expense increased $9.2 million, or 21.5%, to
$52.4 million for the year ended December 31, 1999 as compared to $43.2 million
in 1998. The increase was primarily attributable to the growth related to the 47
shopping centers acquired and developed in 1999 and 1998 which contributed $10.4
million of the increase, an additional $2.4 million increase related to the
expansions and improvements associated with the Core Portfolio Properties and
approximately $0.4 million related to increased depreciation expense related to
personal property primarily associated with the relocation of the Company's
headquarters. These increases were offset by a decrease of $4.0 million relating
to the transfer of five business center properties to AIP in August 1998 and the
transfer of six shopping center properties into a joint venture in September
1998.

Interest expense, net of amounts capitalized, increased $10.8 million, or
18.9%, to $68.0 million for the year ended December 31, 1999 as compared to
$57.2 million in 1998. The overall increase in interest expense was primarily
related to the acquisition and development of shopping centers during 1999 and
1998. The weighted average debt outstanding and related weighted average
interest rate during 1999 was $1.1 billion and 7.2%, respectively, as compared
to $911.7 million and 7.4%, respectively, during 1998. Interest capitalized, in
connection with development and expansion projects, was $13.5 million for the
year ended December 31, 1999 as compared to $9.9 million in 1998.

Other

Equity in net income of joint ventures increased $7.7 million, or 60.0%, to
$20.6 million in 1999 as compared to $12.9 million in 1998. An increase of $6.9
million is primarily attributable to the joint ventures formed/acquired during
1998 and 1999 and the remaining $1.1 million increase is primarily due to the
Community Centers Joint Venture and Liberty Fair Joint Venture of $0.9 million
and $0.2 million, respectively. This increase in income of $6.9 million is
comprised of $2.8 million relating to the formation of a joint venture in
September 1998 with DRA Advisors whereby the Company contributed six wholly
owned shopping centers, $1.1 million from DD Development Company and $1.5
million through the formation of the Sansone management and development
companies. An additional $0.3 million relates to the acquisition of four joint
venture interests acquired from Continental Real Estate Companies
("Continental") of Columbus, Ohio during the first half of 1998. The Company's
joint venture in Merriam, Kansas contributed $0.4 million of additional income
and a joint venture in Leawood, Kansas contributed $0.7 million of additional
income. The remaining $0.1 million increase primarily relates to various other
joint ventures formed in 1998 to develop shopping center properties which were
in the lease-up phase in 1999.

Equity in net income of minority equity investment increased $5.8 million,
to $6.5 million for the year ended December 31, 1999, as compared to $0.7
million for the same period in 1998. This increase related to the
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34

Company's equity investment in AIP (NYSE: IND) which began in August 1998.
Initially, the Company owned approximately 16% of the outstanding shares of AIP
and as of December 31, 1999, the Company owned approximately 9.7 million shares
of AIP which approximates 46.1% of AIP's outstanding common shares.

The expense relating to minority interests increased $8.5 million, to $11.8
million for the year ended December 31, 1999 as compared to $3.3 million in
1998. An increase of $5.0 million relates to the Company's issuance of preferred
operating partnership minority units ("Units") in September 1999 and December
1998. These units may be exchanged, under certain circumstances, into preferred
and/or common shares of the Company. An increase of $3.6 million relates to the
Company's issuance of operating partnership units ("OP Units") as partial
consideration for shopping centers acquired in 1998 and 1999. This increase
related to the Company's purchase of 22 shopping centers in 1998 and 1999 and as
consideration, the related issuance of OP Units which are exchangeable, in
certain circumstances and at the option of the Company, into 4.7 million common
shares of the Company or for cash. This expense represents the income allocation
associated with the priority distributions associated with the minority equity
interests. These increases were offset by a $0.1 million net decrease related to
minority interests in shopping centers.

The loss on disposition of real estate aggregating $1.7 million primarily
relates to the sale of a shopping center and residual land in Pensacola, Florida
aggregating a $2.2 million loss. The shopping center was sold to a major
retailer. In connection with this disposition, the Company developed a 17,000
square foot shopping center adjacent to the site sold. In addition, the Company
sold four properties at an aggregate gain of approximately $0.5 million which
offsets the previously described loss. Net proceeds received in conjunction with
the above sales aggregated $13.9 million.

The extraordinary item, which aggregated $0.9 million for the year ended
December 31, 1998, relates to the write-off of unamortized deferred finance
costs associated with the amended and restated $375 million revolving credit
facility.

Net Income

Net income increased $9.5 million to $87.4 million for the year ended
December 31, 1999 as compared to $77.9 million in 1998. The increase in net
income was primarily attributable to increased net operating revenues (total
revenues less operating and maintenance expenses, real estate taxes, and general
and administrative expense) aggregating $25.5 million, resulting from new
leasing, re-tenanting and expansion of Core Portfolio Properties and the 47
shopping centers acquired and developed in 1999 and 1998. An additional increase
of $13.5 million related to equity in net income from joint ventures and
minority equity investment and an increase of $0.9 million relating to the 1998
extraordinary item. This increase was offset by increases in interest expense,
depreciation and amortization, minority interest expense and a loss on
disposition of real estate of $10.8 million, $9.2 million, $8.5 million and $1.9
million, respectively.

COMPARISON OF 1998 TO 1997 RESULTS OF OPERATIONS

Revenues from Operations

Total revenues increased $58.9 million, or 34.8%, to $228.1 million for the
year ended December 31, 1998 as compared to $169.2 million in 1997. Base and
percentage rents for 1998 increased $44.6 million, or 35.3%, to $170.9 million
as compared to $126.3 million in 1997. Approximately $4.8 million of the
increase in base and percentage rental income was the result of new leasing,
re-tenanting and expansion of the Core Portfolio Properties (shopping center
properties owned as of January 1, 1997), an increase of 4.6% over 1997 revenues
from Core Portfolio Properties. The 48 shopping centers acquired by the Company
in 1998 and 1997 contributed $44.1 million of additional revenue and the 5 new
shopping center developments contributed $4.2 million. These increases were
offset by a decrease of $1.3 million relating to the sale of one shopping center
in December 1997 and the transfer of five business centers to AIP in July 1998
and $7.2 million relating to the transfer of six properties to a joint venture
in September 1998.

At December 31, 1998, the aggregate occupancy rate of the Company's
shopping centers was 96.5% as compared to 96.1% at December 31, 1997. The
average annualized base rent per leased square foot, including

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those properties owned through joint ventures, was $8.99 at December 31, 1998 as
compared to $8.49 at December 31, 1997. During 1998, same store sales, for those
tenants required to report sales (approximately 17.5 million square feet),
increased 3.0% to $231 per square foot.

The increase in recoveries from tenants of $10.7 million was directly
related to the increase in operating and maintenance expenses and real estate
taxes primarily associated with the 1998 and 1997 shopping center acquisitions
and developments. Recoveries were approximately 92.5% of operating and
maintenance expenses and real estate taxes in 1998 as compared to 90.0% in 1997.

Management fee income and other income increased by approximately $3.7
million which generally related to increases in (i) interest income of
approximately $3.0 million, (ii) management fee income of approximately $0.6
million primarily related to the acquisition of four properties owned through
joint ventures and the formation of a joint venture in September 1998, (iii)
development fee income of approximately $0.7 million and (iv) other income of
approximately $0.6 million. These increases were offset by a decrease in lease
termination fees of $1.2 million.

Expenses from Operations

Rental operating and maintenance expenses for the year ended December 31,
1998 increased $3.9 million, or 24.3%, to $20.0 million as compared to $16.1
million in 1997. An increase of $5.2 million was attributable to the 53 shopping
centers acquired and developed in 1998 and 1997. This increase was offset by
decreases of $0.6 million related to the Core Portfolio Properties generally
associated with lower maintenance activities in 1998 as compared to 1997 at a
majority of the Company's shopping centers, and $0.7 million relating to the
sale and/or transfer of 12 properties in 1998 and 1997.

Real estate taxes increased $6.5 million, or 32.5%, to $26.5 million for
the year ended December 31, 1998 as compared to $20.0 million in 1997. This
increase was primarily attributable to the growth related to the 53 shopping
centers acquired and developed in 1998 and 1997 which contributed $7.5 million
of the increase. An additional $0.8 million increase primarily related to
expansions associated with the Core Portfolio Properties. These increases were
offset by a decrease of $1.8 million relating to the sale and/or transfer of 12
properties in 1997 and 1998.

General and administrative expenses increased $1.8 million, or 16.8%, to
$12.9 million for the year ended December 31, 1998 as compared to $11.1 million
in 1997. The increase is attributable to the growth of the Company primarily
related to the 1998 and 1997 acquisitions, expansions and developments. The
Company continues to maintain a conservative policy with regard to the expensing
of all internal leasing salaries, legal salaries and related expenses associated
with the leasing and re-leasing of existing space. Total general and
administrative expenses were approximately 3.8% and 4.4% of total revenues,
including revenues of joint ventures, for the years ended December 31, 1998 and
1997, respectively.

Depreciation and amortization expense increased $10.9 million, or 33.6%, to
$43.2 million for the year ended December 31, 1998 as compared to $32.3 million
in 1997. The increase was primarily attributable to the growth related to the 53
shopping centers acquired and developed in 1998 and 1997 which contributed an
$11.4 million increase and an additional $1.3 million increase related to the
expansions and improvements associated with the Core Portfolio Properties. These
increases were offset by a decrease of $1.8 million relating to the sale and/or
transfer of 12 properties in 1998 and 1997.

Interest expense, net of amounts capitalized, increased $21.6 million, or
60.9%, to $57.2 million for the year ended December 31, 1998 as compared to
$35.6 million in 1997. The overall increase in interest expense was primarily
related to the acquisition and development of 53 shopping centers during 1998
and 1997. The weighted average debt outstanding and related weighted average
interest rate during 1998 was $911.7 million and 7.4%, respectively, as compared
to $510.5 million and 7.7%, respectively, during 1997. Interest capitalized, in
connection with development and expansion projects, was $9.9 million for the
year ended December 31, 1998 as compared to $4.0 million in 1997.

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Other

Equity in net income of joint ventures increased $2.0 million, or 18.3%, to
$12.9 million in 1998 as compared to $10.9 million in 1997. This increase is
primarily attributable to the joint ventures formed or acquired during 1998
which aggregated approximately $3.2 million of income. Approximately $1.3
million related to four joint venture interests acquired from Continental during
the first half of 1998. An additional $1.2 million relates to the formation of a
joint venture in September 1998 with DRA Advisors whereby the Company
contributed six wholly owned shopping centers to a newly formed joint venture in
exchange for cash of $192 million and a 50% joint venture interest. The
remaining $0.7 million increase primarily relates to various other joint
ventures formed including Merriam, Nassau Pavilion, Retail Value Fund,
OliverMcMillan and Sansone Management Company. The above increases were offset
by a decrease in net income from the Community Center Joint Ventures of
approximately $1.0 million, primarily associated with an increase in interest
costs relating to the refinancing of the variable rate bridge financings to long
term fixed rate financing in May 1997.

Equity in net income of minority equity investment of $0.7 million relates
to the Company's investment in AIP for the period July 30, 1998 to December 31,
1998. At December 31, 1998, the Company owned 5.9 million shares of AIP which
represented approximately 34.5% of AIP's outstanding common shares.

The expense relating to minority interests increased $2.3 million, to $3.3
million for the year ended December 31, 1998 as compared to $1.0 million in
1997. The increase generally relates to the Company's issuance of OP Units as
partial consideration for 21 shopping centers acquired in 1998. These OP Units
are exchangeable, in certain circumstances and at the option of the Company,
into approximately 4.6 million common shares of the Company. This increase is
offset by the Company's purchase, in March 1998, of the minority interest in one
shopping center located in Cleveland, Ohio, for approximately $16.3 million. The
minority equity interest expense primarily represents the priority distributions
associated with such interests.

The extraordinary item, which aggregated $0.9 million for the year ended
December 31, 1998, relates to the write-off of unamortized deferred finance
costs associated with the Company's former $150 million revolving credit
facility which was replaced with a $375 million revolving credit facility.

Net Income

Net income increased $10.4 million to $77.9 million for the year ended
December 31, 1998 as compared to $67.5 million in 1997. The increase in net
income was primarily attributable to increased net operating revenues (total
revenues less operating and maintenance expenses, real estate taxes, and general
and administrative expense) aggregating $46.7 million, resulting from new
leasing, re-tenanting and expansion of Core Portfolio Properties and the 53
shopping centers acquired and developed in 1998 and 1997. An additional increase
of $2.7 million related to equity in net income from joint ventures and minority
equity investment. This increase was offset by increases in interest expense,
depreciation and amortization, minority interest expense, extraordinary item and
a reduction of gain on sales of real estate of $21.6 million, $10.9 million,
$2.3 million, $0.9 million and $3.3 million, respectively.

FUNDS FROM OPERATIONS

Management believes that Funds From Operations ("FFO") provides an
additional indicator of the financial performance of a Real Estate Investment
Trust. FFO is defined generally as net income applicable to common shareholders
excluding gains (or losses) from sales of real estate, non-recurring charges and
extraordinary items, adjusted for certain non-cash items, principally real
property depreciation, equity income from its joint ventures and equity income
from its minority equity investment and adding the Company's proportionate share
of FFO from its unconsolidated joint ventures and minority equity investment,
determined on a consistent basis.

The Company calculates FFO in accordance with the foregoing definition,
which is currently used by the National Association of Real Estate Investment
Trusts ("NAREIT"). Certain other real estate companies may calculate FFO in a
different manner.

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In 1999, FFO increased $25.8 million, or 22.8%, to $138.8 million as
compared to $113.0 million in 1998 and $86.9 million in 1997. The increases in
each year were attributable to the continuing increases in revenues from Core
Portfolio Properties, acquisitions, developments and joint venture interests.

The Company's calculation of FFO is as follows (in thousands):

YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------

Net income applicable to common shareholders(1)............ $ 60,135 $ 57,969 $ 53,322
Depreciation and amortization of real estate investments... 51,498 42,631 31,955
Equity in net income of joint ventures..................... (20,621) (12,888) (10,893)
Equity in net income of minority equity investment......... (6,453) (686) --
Joint ventures' FFO(2)..................................... 32,316 20,779 16,077
Minority equity investment FFO............................. 12,965 1,493 --
Minority interest (OP Units)............................... 6,541 3,069 10
Loss (gain) on disposition of real estate.................. 1,664 (248) (3,526)
Non-recurring and extraordinary items...................... 802 882 --
-------- -------- --------
$138,847 $113,001 $ 86,945
======== ======== ========

- ---------------

(1) Includes straight-line rental revenues, which approximated $4.1 million,
$3.3 million and $2.0 million in 1999, 1998 and 1997, respectively,
primarily relating to acquisitions and new developments.

(2) Joint ventures' FFO is summarized as follows (in thousands):

YEAR ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------

Net income(a)............................................. $38,045 $25,070 $22,132
Depreciation and amortization of real estate
investments............................................. 22,948 16,009 11,658
Gain on sales of real estate.............................. (344) (314) (1,085)
------- ------- -------
$60,649 $40,765 $32,705
------- ------- -------
DDRC ownership interests(b)............................... $32,316 $20,779 $16,077
======= ======= =======

--------------------

(a) Includes straight-line rental revenue of approximately $4.2 million,
$3.1 million and $2.9 million in 1999, 1998 and 1997, respectively. The
Company's proportionate share of straight-line rental revenues was $2.1
million, $1.5 million and $1.4 million in 1999, 1998 and 1997,
respectively.

(b) At December 31, 1999, the Company owned joint venture interests
relating to 28 operating shopping center properties, a 25% interest in
the Prudential Retail Value Fund and a 50% joint venture in a real
estate management company. At December 31,1998, the Company owned joint
venture interests relating to 26 operating shopping center properties,
a 25% interest in the Prudential Retail Value Fund and a 50% joint
venture interest in a real estate management company. At December 31,
1997, the Company owned joint venture interests relating to 14
operating shopping center properties.

LIQUIDITY AND CAPITAL RESOURCES

The Company anticipates that cash flow from operating activities will
continue to provide adequate capital for all interest and principal payments on
outstanding indebtedness, recurring tenant improvements, as well as dividend
payments in accordance with REIT requirements and that cash on hand, borrowings
under its existing revolving credit facilities, as well as other debt and equity
alternatives, including the issuance of OP Units and joint venture capital, will
provide the necessary capital to achieve continued growth. Cash flow from
operating activities for 1999 increased to $152.7 million as compared to $137.5
million in 1998. The increase was attributable to the 47 shopping center
acquisitions and developments completed in 1999 and 1998, new leasing, expansion
and re-tenanting of the Core Portfolio Properties and the equity offerings
completed in 1999 and 1998.

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The Company satisfied its REIT requirement of distributing at least 95% of
ordinary taxable income with declared common and preferred share dividends of
$112.5 million in 1999 as compared to $95.1 million and $79.7 million in 1998
and 1997, respectively. Accordingly, federal income taxes were not incurred at
the corporate level. The Company's common share dividend payout ratio for the
year approximated 61.4% of its 1999 FFO as compared to 67.0% and 75.3% in 1998
and 1997, respectively.

In December 1999, the REIT Modernization Act ("RMA") was passed by the
federal government. The RMA, which is effective in 2001, allows REITs to own a
taxable REIT subsidiary which can provide services to a REIT's tenants without
disqualifying the rents that a REIT receives from these tenants. In addition,
this act lowers the distribution requirements for a REIT from 95% to 90% of its
ordinary taxable income.

An increase in the 2000 quarterly dividend per common share to $0.36 from
$0.35 was approved in March 2000 by the Company's Board of Directors. It is
anticipated that the new dividend level will continue to result in a
conservative payout ratio. A low payout ratio enables the Company to retain more
capital which will be utilized towards attractive investment opportunities in
the development, acquisition and expansion of portfolio properties.

ACQUISITIONS, EXPANSIONS AND DEVELOPMENTS

During the three year period ended December 31, 1999, the Company and its
joint ventures expended $2.1 billion, net, to acquire, develop, expand, improve
and re-tenant its properties as follows (in millions):

1999 1998 1997
------ -------- ------

COMPANY:
Acquisitions.............................................. $ 78.3(1) $ 688.4(3) $267.9
Completed expansions...................................... 43.3 11.2 29.8
Developments and construction in progress................. 75.6 121.0 41.1
Tenant improvements and building renovations.............. 6.6 4.4 3.5
Furniture and fixtures and equipment...................... 5.3 2.3 0.7
Other real estate investments............................. -- -- 72.1
------ -------- ------
209.1 827.3 415.1
Less real estate sales and property contributed to joint
ventures............................................... (37.6) (328.8) (8.9)
------ -------- ------
Company total........................................ 171.5 498.5 406.2
------ -------- ------
JOINT VENTURES:
Acquisitions/Contributions................................ 96.5(2) 489.3(4) 38.8
Completed expansions...................................... 3.3 -- 9.2
Developments and construction in progress................. 169.0 86.7 31.9
Tenant improvements and building renovations.............. 1.5 1.8 0.2
Minority equity investment in AIP......................... 42.2 95.1 --
------ -------- ------
312.5 672.9 80.1
Less real estate sales............................... (26.5)(1) (33.8) (6.1)
------ -------- ------
Joint ventures total................................. 286.0 639.1 74.0
------ -------- ------
$457.5 $1,137.6 $480.2
====== ======== ======

- ---------------

(1) Includes a transfer of the Everett development project to the Company and
Salem to DD Development Company.

(2) Includes a transfer of $20.4 million from the Company relating to the
development project in Coon Rapids, MN and the transfer of the 13 remaining
Best Products sites from the Retail Value Fund, which had an aggregate cost
basis of $43.9 million at December 31, 1999.

(3) Includes developments and construction in progress aggregating $64.9 million
at the date of acquisition.

(4) Includes transfers aggregating $323.1 million from the Company and the
acquisition of joint venture interests aggregating $166.2 million.

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Acquisitions 1999

In November 1999, the Company acquired, through a 50% owned joint venture,
the fourth phase of a shopping center in Phoenix, Arizona which aggregates
125,000 square feet. The total purchase price for the fourth phase of this
center aggregated approximately $15.6 million.

In July 1999, the Company acquired Deer Valley Towne Center, a 198,000
square foot shopping center in Phoenix, Arizona, for an aggregate purchase price
of $25.8 million. The Company transferred this property in March 2000 to a 50%
owned joint venture with DRA Advisors.

In August 1998, the Company announced a strategic investment in AIP.
Through December 31, 1998, the Company acquired 5.9 million common shares of AIP
at an aggregate cost of $91.3 million. In January 1999, the Company acquired 3.4
million additional common shares of AIP for approximately $51.8 million. In
August 1999, the Company purchased an additional 0.4 million shares of AIP for
approximately $5.5 million. At December 31, 1999, the Company's ownership in AIP
approximated 46.1% of the total outstanding shares of AIP.

In June 1999, DD Development Company, a Company in which DDR has an equity
ownership interest, acquired Prudential Real Estate Investors' ("PREI") limited
partnership interest in a joint venture, Hendon/DDR/ BP, LLC, which owned 15
sites formerly occupied by Best Products at a cost of approximately $29.7
million. As a result, the Company's aggregate investment in the joint venture
increased to approximately $36 million. Eleven of the sites are leased as of
December 31, 1999 and two were sold as of December 31, 1999. In addition, in
June 1999, Hendon/DDR/BP, LLC, entered into a $25 million mortgage, with a
financial institution secured by the leased sites. The net financing proceeds
were used to repay advances made by the Company to the joint venture.

In April 1999, the Company acquired a 50% interest in a 206,000 square foot
shopping center in St. Louis, Missouri. The joint venture's aggregate purchase
price was $16.6 million and included the assumption of debt aggregating $13.0
million.

Expansions 1999

During 1999, the Company, on a wholly-owned basis and through certain joint
ventures, completed fourteen expansion projects at an aggregate cost of $46.6
million. The major expansion projects completed during 1999 are as follows:

- A 132,000 square foot Home Depot and Cost Plus expansion at The Plazas at
Great Northern in North Olmsted, Ohio.

- A 183,000 square foot Wal-Mart Superstore at Springdale Plaza in Camden,
South Carolina.

- A 33,500 square foot Office Max and retail expansion at Quincy Place Mall
in Ottumwa, Iowa.

- A 137,800 square foot Wal-Mart and Office Max expansion at Western Plaza
in Jacksonville, North Carolina.

- A 32,000 square foot Bed, Bath & Beyond expansion at Spring Creek Centre
in Fayetteville, Arkansas.

- A 23,500 square foot Office Max expansion at Copper Country Mall in
Houghton, Michigan.

In addition, the Company is currently expanding/redeveloping three of its
shopping centers at an aggregate cost of $6.3 million. These expansion projects
include:

- A 71,000 square foot retail expansion at Springdale Plaza in Camden,
South Carolina.

- A 26,000 square foot retail expansion at the K-Mart shopping center in
Brandon, Florida.

- A 25,000 square foot Old Navy expansion at the Spring Creek Centre in
Fayetteville, Arkansas.

The Company is also planning to commence expansion/redevelopment projects
at five additional shopping centers located in: North Charleston, South
Carolina; North Canton, Ohio; Maple Grove, Minnesota; Mount Pleasant, South
Carolina and Wilmington, North Carolina.

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Development (Wholly Owned) 1999

During 1999, the Company completed construction at the following five
shopping centers:

- A 185,000 square foot shopping center in Solon, Ohio, which includes a
Borders, Bed, Bath & Beyond, Mustard Seed (a gourmet grocery store), Old
Navy, Talbots, Pier 1 and Newman Outfitters.

- A 200,000 square foot second phase of its Erie, Pennsylvania center
anchored by Home Depot (not owned by the Company), PETsMART and Circuit
City.

- Phase I of the 282,000 square foot shopping center in Toledo, Ohio, which
includes Kohl's, Gander Mountain, Bed, Bath & Beyond and Babies R Us.

- Phase I of the 185,000 square foot shopping center in Oviedo, Florida (a
suburb of Orlando), which included OfficeMax, Michael's, Ross Dress for
Less and Shoe Carnival.

- A 170,000 square foot Phase II development in Macedonia, Ohio which
includes Home Depot and Cinemark Theaters.

Phase II of both the Toledo, Ohio and Oviedo, Florida projects are under
construction and scheduled for completion in 2000. The other wholly-owned
development projects are as follows:

- A 416,000 square foot shopping center in Meridian, Idaho (a suburb of
Boise), which is scheduled for completion in 2000 and is expected to be
anchored by Wal-Mart (not owned by the Company), Shopko (which opened
during the fourth quarter of 1999), Shepler's, Bed, Bath & Beyond, Office
Depot and Old Navy.

- The Company is also in the initial phase of development relating to a
shopping center located in Riverdale, Utah.

Development (Joint Ventures) 1999

During 1999, the Company through certain joint ventures completed
construction of the following three shopping centers:

- The Village Shoppes of Salem, a 170,278 square foot shopping center in
Salem, New Hampshire, which is anchored by Best Buy, Linens N' Things,
MVP Sports, CompUSA, Michael's and Big Party.

- Phase I of The Commons, a 310,475 square foot shopping center in
Salisbury, Maryland. Phase I is anchored by Michael's, OfficeMax,
PETsMART, Home Depot (not owned by the Company) and Target (not owned by
the Company). Upon completion, the Company acquired its joint venture
partners' interest.

- Phase I of Connecticut Commons, a 569,340 square foot shopping center in
Plainville, Connecticut. Phase I is anchored by Lowe's Home Improvement,
K-mart, Sony/Loews Theater and A.C. Moore.

During 1998 and 1999, the Company entered into joint venture development
agreements on an additional eight shopping center projects with leading regional
developers. These eight projects have a projected aggregate cost of
approximately $321.7 million. Several of these projects have commenced
development and are currently scheduled for completion in 2000. In addition to
the Salem, New Hampshire and Plainville, Connecticut developments discussed
above, the Company is currently financing projects located in Round Rock, Texas;
Hagerstown, Maryland; Deer Park, Illinois and Long Beach, California, through
the Prudential/DDR Retail Value Fund and also intends to finance its investment
in the Fenton, Missouri project through this fund.

In 1999, the Company entered into a joint venture relating to a 642,000
square foot shopping center in Coon Rapids, Minnesota, the initial phase of
which is scheduled to be completed in March 2000 and is anchored by a Kohl's
(opened fourth quarter 1999) and Jo-Ann, ETC. The Company owns a 25% equity
interest.

The Company, through its affiliate DDR OliverMcMillan, LP ("DDROM")
continued to pursue six urban entertainment and retail projects aggregating 1.2
million square feet of gross leasable area ("GLA") at a projected cost of
approximately $233 million. The majority of the above projects are scheduled to
commence

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construction in 1999 and 2000 with completion occurring between 2000 and 2002.
The Company may also pursue partnership relationships with institutional
investors in conjunction with the above projects.

1998 Activity

During 1998, the Company and its joint ventures completed the acquisition
of, or investment in, 41 shopping centers aggregating 7.4 million square feet of
Company owned gross leasable area (GLA) for an aggregate investment of
approximately $854.6 million. In December 1998, the Company acquired a 50%
ownership interest in a 0.4 million square foot shopping center in Leawood,
Kansas. The Company's investment aggregated approximately $18 million and was
comprised of an equity investment of approximately $12.3 million and a note
receivable due from the joint venture partner of $5.7 million. In September
1998, the Company entered into a 50/50 joint venture with DRA Advisors. In
conjunction with this joint venture the Company contributed properties valued at
approximately $238 million to the joint venture and DRA contributed cash of
approximately $42 million. In addition, the joint venture entered into a $156
million, seven year mortgage with a coupon interest rate of 6.64%. Net proceeds
aggregating approximately $192 million were distributed to the Company and used
to repay borrowings on the Company's revolving credit facilities. The Company
continues to manage the shopping centers and receive market fees for these
services.

In 1998, the Company, in a joint release with AIP, announced the execution
of a definitive agreement providing for the strategic investment in AIP by the
Company. In July 1998, the Company, in exchange for five industrial properties
owned by the Company with a net book value of $7.4 million and valued at
approximately $19.5 million, acquired approximately 1.3 million additional newly
issued AIP shares of beneficial interest. As of December 31, 1998, the Company
had purchased 5.9 million of common shares for approximately $91.3 million.
Combined, the Company's acquired shares represented 34.5% of AIP's total
outstanding shares as of December 31, 1998.

During 1998, the Company completed seven expansion projects at an aggregate
cost of $11.2 million. During 1998, the Company substantially completed the
construction of a 445,000 square foot shopping center in Merriam, Kansas which
was being developed through a joint venture formed in October 1996, 50% of which
is owned by the Company. The Company began construction at four shopping centers
including: (i) a 200,000 square foot second phase of the Company's Erie,
Pennsylvania center; (ii) a 280,000 square foot shopping center in Toledo, Ohio;
(iii) a 185,000 square foot shopping center in Solon, Ohio and (iv) a 220,000
square foot shopping center in Oviedo, Florida (a suburb of Orlando).

In 1998, the Company entered into joint venture development agreements for
six additional projects with various developers throughout the country. In May
1998, the Company formed DDROM, with OliverMcMillan, LLC, based in San Diego,
California to develop, acquire, operate and manage urban entertainment and
retail projects throughout the United States. DDROM's initial investments are
comprised of six OliverMcMillan urban entertainment and retail projects located
in Southern California and Reno, Nevada.

1997 Activity

During 1997, the Company acquired seven shopping centers aggregating 2.4
million square feet of Company owned GLA for an aggregate investment of
approximately $267.9 million. In addition, in January 1997, the Company entered
into a joint venture with certain institutional investors which are advised by
DRA Advisors, Inc. to acquire a 0.3 million square foot shopping center located
in San Antonio, Texas. The aggregate cost of the shopping center was
approximately $38.3 million of which the Company's proportionate ownership share
is 35%. The Company also contributed approximately $0.5 million of additional
assets to the DOTRS Joint Venture during 1997.

During 1997, the Company and its joint ventures completed expansions and
redevelopments aggregating approximately 0.8 million square feet at an aggregate
cost of approximately $39.0 million at 13 of its shopping centers.

During 1997, the Company substantially completed the construction of four
shopping centers which included: (i) a 235,000 square foot Phase II development
of the Canton, Ohio shopping center; (ii) a 500,000

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square foot shopping center in Boardman, Ohio; (iii) a 475,000 square foot
shopping center in Stow, Ohio and (iv) an 84,000 square foot shopping center in
Aurora, Ohio.

Development activity was completed at two of the Company's joint venture
shopping centers located in Atlanta, Georgia and Framingham, Massachusetts which
were acquired in connection with the Community Center Joint Ventures in November
1995.

In December 1997, the Company acquired 33 retail redevelopment sites,
formerly occupied by Best Products, at a cost of approximately $54.5 million. In
February 1998, these assets were contributed to the Prudential/DDR Retail Value
Fund, a joint venture with Prudential Real Estate Investors.

FINANCING ACTIVITIES

The above acquisitions, developments and expansions were generally financed
through cash provided from operating activities, revolving credit facilities,
mortgages assumed, construction loans, unsecured public debt, common and
preferred equity offerings, joint venture capital, OP Units and asset sales.
Total debt outstanding at December 31, 1999 was $1.2 billion as compared to $1.0
billion and $668.5 million at December 31, 1998 and 1997, respectively. In 1999,
the Company increased total debt by $151.6 million primarily to fund
acquisitions, developments, expansions and other real estate investments.

Through December 31, 1999, the Company purchased in open market
transactions 1,860,300 of its common shares, at prices ranging from $12.69 to
$14.00, for an aggregate purchase price of approximately $25.8 million. For the
period January 1, 2000 through March 3, 2000, the Company initiated the purchase
of an additional 1,163,700 shares for an aggregate purchase price of
approximately $13.7 million. In February and August 1999, the Company's Board of
Directors authorized the officers of the Company to implement and continue a
common share repurchase program in response to what the Company believed was a
distinct undervaluation of the Company's common shares in the public market.
Under the terms authorized by the Company's Board, as amended in November 1999,
the Company may purchase in the open market, subject to certain requirements,
common shares of the Company, up to a maximum value of $200 million. The Company
may invest proceeds from the sale of assets to purchase these shares. It is not
the Company's intention to increase the leverage on its balance sheet to
implement this stock repurchase program.

Also in December 1999, one of the Company's joint ventures refinanced its
secured mortgage and entered into a ten year fixed rate mortgage for $21.3
million with interest at 8.46%. Additional proceeds from this refinancing of
approximately $6.4 million were used to repay a portion of a note payable to the
Company.

During 1999, the Prudential/DDR Retail Value Fund ("Fund"), a joint venture
in which the Company effectively owns a 25% interest, agreed to acquire the
Company's 50% joint venture interests relating to the development of six
shopping centers. The Company was reimbursed by the Fund for approximately $74.3
million associated with development costs incurred on each of these projects.
The Company also obtained third party financing for three of these projects
aggregating approximately $77.1 million with rates ranging from LIBOR plus 175
to LIBOR plus 180. In addition, the Company transferred its interest in a
shopping center development in Coon Rapids, Minnesota, a suburb of Minneapolis,
to a joint venture in which the Company retained a 25% interest and was
reimbursed $2.5 million relating to development costs previously incurred on
this project. The Company also sold certain land parcels adjacent to its
shopping center in Wilmington, North Carolina and received aggregate proceeds of
approximately $6.1 million.

In September 1999, the Company completed a $75 million private placement of
0.3 million, 8.875% perpetual preferred "down-REIT" partnership units with an
institutional investor. The units may be exchanged, under certain circumstances,
for Class K, 8.875% cumulative preferred shares. The units may be exchangeable
into common shares if the Company fails to pay dividends for six consecutive
quarters. The net proceeds of approximately $73.1 million were effectively used
to repay approximately $25.8 million in mortgage indebtedness and $40.1 million
in convertible debentures which matured on August 15, 1999. The balance of these
proceeds was used to repay variable rate borrowings under the Company's
revolving credit facilities.

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43

In March 1999, the Company filed a $750 million shelf registration
statement with the SEC pursuant to which the Company may issue senior or
subordinated debt securities, common shares, preferred shares or warrants to
purchase common shares.

In March 1999, the Company amended its revolving credit facility with
National City Bank to increase the available borrowings to $25 million from $20
million, to convert it to a secured facility and to extend the agreement through
November 2002. The credit facility is secured by certain partnership
investments. The Company also maintains the right to convert the credit facility
back to an unsecured credit facility and to reduce the credit facility amount to
$20 million.

In January 1999, the Company repaid a third party mortgage of a 50% owned
joint venture partnership aggregating approximately $49.2 million. In return,
the joint venture entered into a corresponding mortgage note payable to the
Company bearing an interest rate of LIBOR plus 2.75%. In addition, the Company
received a loan origination fee for this transaction of $0.4 million. In March
1999, the joint venture obtained a bridge loan and used the proceeds to repay
the mortgage note to the Company. In June 1999, the joint venture entered into a
10 year, fixed rate mortgage for $55.5 million at 7.31%.

During the year ended December 31, 1999, the Company issued $2.7 million in
OP Units in conjunction with the purchase of certain expansion areas at two
recently acquired shopping centers and the purchase of joint venture interests.
These OP Units are, in certain circumstances and at the election of the Company,
exchangeable into approximately 139,000 common shares of the Company or for
cash.

A summary of the aggregate gross proceeds raised through the issuance of
common shares, preferred shares, preferred partnership units, warrants, senior
unsecured notes, construction loans and OP Units issued as consideration for the
purchase of real estate assets aggregated $983.5 million during the three year
period ended December 31, is as follows (in millions):

1999 1998 1997
----- ------ ------

EQUITY:
Common shares............................................. $ -- $ 80.9 $204.1
Operating partnership units............................... 2.7 91.4 0.4
Class C preferred shares.................................. -- 100.0 --
Class D preferred shares.................................. -- 54.0 --
Preferred partnership units and warrant................... 75.0 35.0 --
----- ------ ------
Total Equity...................................... 77.7 361.3 204.5
DEBT:
Senior fixed rate notes................................... -- 200.0 102.0
Construction loans........................................ 8.3 29.7 --
----- ------ ------
$86.0 $591.0 $306.5
===== ====== ======

During the year ended December 31, 1999, the Company also assumed mortgage
debt in conjunction with certain property acquisitions aggregating $18.0
million.

CAPITALIZATION

At December 31, 1999, the Company's capitalization consisted of $1.2
billion of debt (excluding the Company's proportionate share of joint venture
mortgage debt aggregating $466.6 million), $413.8 million of preferred stock and
preferred partnership units and $826.7 million of market equity (market equity
is defined as common shares outstanding and operating partnership units
outstanding multiplied by the closing price of the common shares on the New York
Stock Exchange at December 31, 1999 of $12.875) resulting in a debt to total
market capitalization ratio of .48 to 1.0 as compared to the ratios of .40 to
1.0 and .36 to 1.0 at December 31, 1998 and 1997, respectively. At December 31,
1999, the Company's total debt consisted of $751.0 million of fixed rate debt
and $401.1 million of variable rate debt.

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44

It is management's intention that the Company 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 or debt financings
in a manner consistent with its intention to operate with a conservative debt
capitalization policy and maintain its investment grade ratings with Moody's
Investor Services and Standard and Poor's. As of December 31, 1999, the Company
had a shelf registration statement with the Securities and Exchange Commission
under which $750 million of debt securities, preferred shares or common shares
may be issued. In addition, as of December 31, 1999, the Company had $109.2
million available under its $400.0 million of revolving credit facilities. As of
December 31, 1999, the Company also had 118 operating properties with $201.4
million, or 72.5%, of the total revenue for the year ended December 31, 1999
which were unencumbered thereby providing a potential collateral base for future
borrowings.

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 percentage rentals based on tenants'
gross sales, which generally increase as prices rise, and/or escalation clauses,
which generally increase rental rates during the terms of the leases. Such
escalation clauses are often related to increases in the consumer price index or
similar inflation indices. 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. In
addition, many of the Company's leases are for terms of less than ten years,
which permits the Company to seek to increase rents upon re-rental at market
rates.

The Company intends to continuously monitor and actively manage interest
costs on its 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.

ECONOMIC CONDITIONS

Historically, real estate has been subject to a wide range of cyclical
economic conditions which affect various real estate sections and geographic
regions with differing intensities and at different times. Adverse changes in
general or local economic conditions could result in the inability of some
existing 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 one or more discount
department stores (Wal-Mart, Kmart, Target), off price department stores
(Kohl's, TJ Maxx/Marshalls), home improvement stores (Home Depot, Lowes) and
supermarkets which generally offer day-to-day necessities, rather than high-
priced luxury items. Since these merchants typically perform better in an
economic recession than those who market high priced luxury items, the
percentage rents received by the Company have remained relatively stable. 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.

During 1999 and 1998, certain national and regional retailers have
experienced financial difficulties and several have filed for protection under
bankruptcy laws. Although the Company has a number of tenants filing for
protection under bankruptcy laws, the Company has not incurred any significant
financial losses through March 3, 2000 with regard to the Company's portfolio of
tenants.

YEAR 2000

The Year 2000 issue ("Year 2000") resulted from computer programs being
written using two digits rather than four to define the applicable year. A
concern arose that if not corrected, computer programs having time-sensitive
hardware and software may have interpreted a date using "00" as the year 1900
rather than the year 2000. This situation could result in a system failure or
erroneous results.

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45

In 1999 and through March 3, 2000, the Company did not experience any
difficulties with either its information technology ("IT"), non-IT systems or
significant suppliers or vendors with the arrival of the Year 2000. The Company
expended approximately $94,000 in connection with upgrading building management,
mechanical and computer systems and believes that the Company's Year 2000
assessments are complete. The Company does not anticipate any further expense to
be incurred for Year 2000 remediation.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's primary market risk exposure is interest rate risk. At
December 31, 1999 and 1998, approximately 65.2% and 83.6%, respectively, of the
Company's debt (excluding joint venture debt) bore interest at fixed rates with
a weighted average maturity of approximately 7.3 years and 7.9 years,
respectively, and a weighted average interest rate of approximately 7.5% and
7.6%, respectively. The remainder of the Company's debt bears interest at
variable rates with a weighted average maturity of approximately 1.2 years and
2.3 years, respectively, and a weighted average interest rate of approximately
7.4% and 6.5%, respectively, at December 31, 1999 and 1998. As of December 31,
1999 and 1998, the Company's joint ventures' indebtedness aggregated $721.9
million and $601.6 million, respectively, of fixed rate debt, of which the
Company's proportionate share was $364.4 million and $310.0 million,
respectively, and $203.1 million and $117.2 million, respectively, of variable
rate debt, of which the Company's proportionate share was $102.2 million and
$59.6 million, respectively. The Company intends to utilize variable rate
indebtedness available under its revolving credit facilities in order to
initially fund future acquisitions, developments and expansions of shopping
centers. Thus, to the extent that the Company incurs additional variable rate
indebtedness, its exposure to increases in interest rates in an inflationary
period would increase. The Company believes, however, that in no event would
increases in interest expense as a result of inflation significantly impact the
Company's distributable cash flow.

At December 31, 1999 and 1998, the fair value of the Company's fixed rate
debt amounted to a liability of $729.0 million and $823.5 million, respectively
(excluding joint venture debt) compared to its carrying amount of $751.0 million
and $836.3 million, respectively. The fair value of the Company's proportionate
share of joint venture fixed rate debt was $353.3 million and $315.8 million,
respectively, compared to its carrying amount $364.4 million and $310 million,
respectively. The Company estimates that a 100 basis point decrease in market
interest rates at December 31, 1999 and 1998 would have changed the fair value
of the Company's fixed rate debt to a liability of $765.9 million and $866.1
million, respectively, and would have changed the fair value of the Company's
proportionate share of joint ventures fixed rate debt to a liability of $366.5
million and $319.7 million, respectively. The sensitivity to changes in interest
rate 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 which
arise from the hypothetical estimate as discussed above.

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.

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46

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item 10 is incorporated by reference to
the information under the headings "Election of Directors" 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 15, 2000, and the information under the heading "Executive Officers" in Part
I of this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated herein by reference to the "Executive Compensation" section of
the Company's Proxy Statement in connection with its annual meeting of
shareholders to be held on May 15, 2000.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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 15, 2000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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 15, 2000.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENTS SCHEDULES AND
REPORTS ON FORM 8-K

a.) 1. Financial Statements

The following documents are filed as a part of this report:

Report of Independent Accountants - Developers Diversified Realty
Corporation

Consolidated Balance Sheets as of December 31, 1999 and 1998.

Consolidated Statements of Operations for the three years ended
December 31, 1999.

Consolidated Statements of Shareholders' Equity for the three years
ended December 31, 1999.

Consolidated Statements of Cash Flows for the three years ended
December 31, 1999.

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 Reserves for the three years
ended December 31, 1999

III Real Estate and Accumulated Depreciation at December 31, 1999

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.

46
47

b.) Current Reports on Form 8-K were filed on January 29, 1999 and March 8,
1999 in which information regarding Items 2, 5 and 7 of Form 8-K was reported.

c.) Exhibits

The following exhibits are filed as part of, or incorporated by
reference into, this Report:

EXHIBIT NO.
UNDER REG. FILED HEREWITH OR
S-K FORM 10-K INCORPORATED HEREIN BY
ITEM 601 EXHIBIT NO. DESCRIPTION REFERENCE
- ----------- ----------- --------------------------------- ---------------------------------

2 2.1 Share Purchase Agreement between AIP's Current Report on Form 8-K
the Company and American (Filed with the SEC on August 5,
Industrial Properties REIT 1998, SEC file number 1-9016)
("AIP") 1998, SEC file number
1-9016) dated as of July 30, 1998
2 2.2 Amendment No. 1 to the Share Amendment No. 1 to Schedule 13D
Purchase Agreement between the (Filed with the SEC with respect
Company and AIP dated as of to AIP by the Company on
September 14, 1998 September 17, 1998, SEC file
number 1-9016)
3 3.1 Amended and Restated Articles of Quarterly Report on Form 10-Q
Incorporation of the Company (Filed with the SEC on August 16,
1999)
3 3.2 Code of Regulations of the Quarterly Report on Form 10-Q
Company (Filed with the SEC on August 16,
1999)
4 4.1 Specimen Certificate for Common Form S-11 Registration No.
Shares 33-54930 (Filed with the SEC on
November 23, 1992)
4 4.2 Specimen Certificate for Annual Report on Form 10-K (Filed
Depositary Shares Relating to with the SEC on March 30, 1996)
9.5% Class A Cumulative
Redeemable Preferred Shares
4 4.3 Specimen Certificate for 9.5% Annual Report on Form 10-K (Filed
Class A Cumulative Redeemable with the SEC on March 30, 1996)
Preferred Shares
4 4.4 Specimen Certificate for Annual Report on Form 10-K (Filed
Depositary Shares Relating to with the SEC on March 30, 1996)
9.44% Class B Cumulative
Redeemable Preferred Shares
4 4.5 Specimen Certificate for 9.44% Annual Report on Form 10-K (Filed
Class B Cumulative Redeemable with the SEC on March 30, 1996)
Preferred Shares
4 4.6 Form of Indemnification Agreement Form S-11 Registration No.
33-54930 (Filed with the SEC on
November 23, 1992)
4 4.7 Indenture dated as of May 1, 1994 Filed herewith
by and between the Company and
Chemical Bank, as Trustee
4 4.8 Indenture dated as of May 1, 1994 Filed herewith
by and between the Company and
National City Bank, as Trustee
(the "NCB Indenture")
4 4.9 First Supplement to NCB Indenture Filed herewith

47
48

EXHIBIT NO.
UNDER REG. FILED HEREWITH OR
S-K FORM 10-K INCORPORATED HEREIN BY
ITEM 601 EXHIBIT NO. DESCRIPTION REFERENCE
- ----------- ----------- --------------------------------- ---------------------------------

4 4.10 Shareholder Rights Agreement Quarterly Report on Form 10-Q
dated as of May 26, 1999 between (Filed with the SEC on August 16,
the Company and National City 1999)
Bank
4. 4.11 Specimen Senior Note due May 15, Annual Report on Form 10-K (Filed
2000 with the SEC on March 30, 1996)
4 4.12 Loan Agreement dated as of May Current Report on Form 8-K (Filed
15, 1997, between Community with the SEC on June 18, 1997)
Centers One L.L.C., Community
Centers Two L.L.C., Shoppers
World Community Center, L.P. and
Lehman Brothers Holdings Inc.,
d/b/a/ Lehman Capital, a Division
of Lehman Brothers Holdings, Inc.
4 4.13 Amended and Restated Promissory Current Report on Form 8-K (Filed
Note, dated as of May 15, 1997, with the SEC on June 18, 1997)
between Community Centers Two
L.L.C. and Shoppers World
Community Center L.P. and Lehman
Brothers Holdings Inc., d/b/a/
Lehman Capital, a Division of
Lehman Brothers Holdings, Inc.
4 4.14 Amended and Restated Promissory Current Report on Form 8-K (Filed
Note, dated as of May 15, 1997, with the SEC on June 18, 1997)
between Community Centers One
L.L.C. and Lehman Brothers
Holdings Inc., d/b/a/ Lehman
Capital, a Division, of Lehman
Brothers Holdings, Inc.
4 4.15 Amended and Restated Promissory Current Report on Form 8-K (Filed
Note, dated as of May 15, 1997, with the SEC on June 18, 1997)
between Community Centers One
L.L.C. and Lehman Brothers
Holdings Inc., d/b/a/ Lehman
Capital, a Division of Lehman
Brothers Holdings, Inc.
4 4.16 Second Amended and Restated Current Report on Form 8-K (Filed
Credit Agreement among the with the SEC on March 8, 1999)
Company and The First National
Bank of Chicago and other lenders
named therein
4 4.17 Form of Fixed Rate Senior Medium- Filed herewith
Term Note
4 4.18 Form of Floating Rate Senior Filed herewith
Medium-Term Note
4 4.19 Form of Fixed Rate Subordinated Filed herewith
Medium-Term Note
4 4.20 Form of Floating Rate Filed herewith
Subordinated Medium-Term Note

48
49

EXHIBIT NO.
UNDER REG. FILED HEREWITH OR
S-K FORM 10-K INCORPORATED HEREIN BY
ITEM 601 EXHIBIT NO. DESCRIPTION REFERENCE
- ----------- ----------- --------------------------------- ---------------------------------

4 4.21 First Amendment to the Second Filed herewith
Amended and Restated Credit
Agreement among the Company and
The First National Bank of
Chicago and other lenders named
therein
4 4.22 Specimen Certificate for Form 8-A Registration Statement
Depositary Shares Relating to 8 (Filed with the SEC July 2, 1998)
3/8% Class C Cumulative
Redeemable Preferred Shares
4 4.23 Specimen Certificate for 8 3/8% Form 8-A Registration Statement
Class C Cumulative Redeemable (Filed with the SEC July 2, 1998)
Preferred Shares
4 4.24 Specimen Certificate for Form 8-A Registration Statement
Depositary Shares Relating to (Filed with the SEC August 18,
8.68% Class D Cumulative 1998)
Redeemable Preferred Shares
4 4.25 Specimen Certificate for 8.68% Form 8-A Registration Statement
Class D Cumulative Redeemable (Filed with the SEC August
Preferred Shares 18,1998)
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 Employment Agreement dated as of Quarterly Report on Form 10-Q
April 2, 1999 between the Company (Filed with the SEC September 30,
and Scott A. Wolstein 1999)
10 10.4 Employment Agreement dated as of Quarterly Report on Form 10-Q
April 2, 1999 between the Company (Filed with the SEC September 30,
and James A. Schoff 1999)
10 10.5 Limited Partnership Agreement Annual Report on Form 10-K (filed
dated as of November 16, 1995 with the SEC on March 30, 1996)
among DD Community Centers Three,
Inc. and certain other parties
named therein
10 10.6 Amended and Restated Limited Annual Report on Form 10-K (Filed
Liability Company Agreement dated with the SEC on March 30, 1996)
as of November 17, 1995 among DD
Community Centers One, Inc. and
certain other parties named
therein
10 10.7 Amended and Restated Limited Annual Report on From 10-K (Filed
Liability Company Agreement dated with the SEC on March 30, 1996)
as of November 17, 1995 among DD
Community Centers Two, Inc. and
certain other parties named
therein

49
50

EXHIBIT NO.
UNDER REG. FILED HEREWITH OR
S-K FORM 10-K INCORPORATED HEREIN BY
ITEM 601 EXHIBIT NO. DESCRIPTION REFERENCE
- ----------- ----------- --------------------------------- ---------------------------------

10 10.8 Limited Liability Company Annual Report on Form 10-K (Filed
Agreement dated as of November with the SEC on March 30, 1996)
17, 1995 among the Company and
certain other parties named
therein
10 10.9 Purchase and Sale Agreement dated Annual Report on Form 10-K (Filed
as of October 16, 1995 among the with the SEC on March 30, 1996)
Company and certain other parties
named therein
10 10.10 Directors' Deferred Compensation Annual Report on Form 10-K (Filed
Plan with the SEC on April 1, 1995)
10 10.11 Elective Deferred Compensation Annual Report on Form 10-K (filed
Plan with the SEC on April 1, 1995)
10 10.12 Developers Diversified Realty Current Report on Form 8-K (Filed
Corporation Equity-Based Award with the SEC on January 14, 1997)
Plan
10 10.13 Restricted Shares Agreement, Current Report on Form 8-K (Filed
dated July 17, 1996, between the with the SEC on June 18, 1997)
Company and Scott A. Wolstein
10 10.14 Performance Units Agreement, Current Report on Form 8-K (Filed
dated July 17, 1996, between the with the SEC on June 18, 1997)
Company and Scott A. Wolstein
10 10.15 Program Agreement for Retail Annual Report on Form 10-K (Filed
Value Investment Program, dated with the SEC on March 31, 1998)
as of February 11, 1998, among
Retail Value Management, Ltd.,
the Company and The Prudential
Insurance Company of America
10 10.16 Share Option Agreement, dated Annual Report on Form 10-K (Filed
April 15, 1997, between the with the SEC on March 31, 1998)
Company and Scott A. Wolstein
10 10.17 Share Option Agreement, dated May Annual Report on Form 10-K (Filed
12, 1997, between the Company and with the SEC on March 31, 1998)
Scott A. Wolstein
10 10.18 Form of Medium-Term Note Filed herewith
Distribution Agreement
10 10.19 Amended and Restated 1998 Form S-8 Registration No.
Developers Diversified Realty 333-76537 (Filed with the SEC on
Corporation Equity-Based Award April 19, 1999)
Plan
10 10.20 Form of Change of Control Quarterly Report on Form 10-Q
Agreement dated as of March 24, (Filed with the SEC on May 17,
1999 between the Company and each 1999)
of Joan U. Allgood, Loren F.
Henry, John R. McGill and William
H. Schafer
10 10.21 Form of Change of Control Quarterly Report on Form 10-Q
Agreement dated as of March 24, (Filed with the SEC on May 17,
1999 between the Company and each 1999)
of Scott A. Wolstein and James A.
Schoff

50
51

EXHIBIT NO.
UNDER REG. FILED HEREWITH OR
S-K FORM 10-K INCORPORATED HEREIN BY
ITEM 601 EXHIBIT NO. DESCRIPTION REFERENCE
- ----------- ----------- --------------------------------- ---------------------------------

10 10.22 Agreement and Release between the Quarterly Report on Form 10-Q
Company and Richard J. Kaplan (Filed with the SEC on May 17,
dated as of March 9, 1999 1999)
10 10.23 Employment Agreement dated as of Quarterly Report on Form 10-Q
April 21, 1999 between the (Filed with the SEC on August 16,
Company and David M. Jacobstein 1999)
10 10.24 Change of Control Agreement as of Quarterly Report on Form 10-Q
May 17, 1999 between the Company (Filed with the SEC on August 16,
and David M. Jacobstein 1999)
10 10.25 Employment Agreement dated as of Quarterly Report on Form 10-Q
April 12, 1999 between the (Filed with the SEC on August 16,
Company and Eric M. Mallory 1999)
10 10.26 Change of Control Agreement dated Quarterly Report on Form 10-Q
as of April 12, 1999 between the (Filed with the SEC on August 16,
Company and Eric M. Mallory 1999)
10 10.27 Employment Agreement dated as of Quarterly Report on Form 10-Q
May 25, 1999 between the Company (Filed with the SEC on August 16,
and Daniel B. Hurwitz 1999)
10 10.28 Change of Control Agreement dated Quarterly Report on Form 10-Q
as of May 25, 1999 between the (Filed with the SEC on August 16,
Company and Daniel B. Hurwitz 1999)
12 12.1 Computation of Ratio of Earnings Form S-3 Registration No.
to Fixed Charges 333-72519 (Filed with the SEC on
March 2, 1999)
21 21.1 List of Subsidiaries Filed herewith
23 23.1 Consent of Price Waterhouse Filed herewith

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52

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: March 29, 2000
------------------------------------------

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 29TH DAY OF MARCH, 2000.

/s/ SCOTT A. WOLSTEIN Chairman, Chief Executive Officer and Director
- ------------------------------------------------ (Principal Executive Officer)
Scott A. Wolstein

/s/ JAMES A. SCHOFF Vice Chairman of the Board, Chief Investment
- ------------------------------------------------ Officer
James A. Schoff and Director

/s/ WILLIAM H. SCHAFER Vice President and Chief Financial Officer
- ------------------------------------------------ (Principal Financial and Accounting Officer)
William H. Schafer

Director
- ------------------------------------------------
William N. Hulett III

/s/ ALBERT T. ADAMS Director
- ------------------------------------------------
Albert T. Adams

/s/ DEAN S. ADLER Director
- ------------------------------------------------
Dean S. Adler

/s/ BARRY A. SHOLEM Director
- ------------------------------------------------
Barry A. Sholem

/s/ ETHAN PENNER Director
- ------------------------------------------------
Ethan Penner

52
53

DEVELOPERS DIVERSIFIED REALTY CORPORATION

INDEX TO FINANCIAL STATEMENTS

PAGE
----

Financial Statements:
Report of Independent Accountants...................... F-2
Consolidated Balance Sheets at December 31, 1999 and
1998.................................................. F-3
Consolidated Statements of Operations for the three
years ended December 31, 1999......................... F-4
Consolidated Statements of Shareholders' Equity for the
three years ended December 31, 1999................... F-5
Consolidated Statements of Cash Flows for the three
years ended December 31, 1999......................... F-6
Notes to Consolidated Financial Statements............. F-7

Financial Statement Schedules:
II -- Valuation and Qualifying Accounts and Reserves
for the three years ended December 31, 1999..... F-36
III -- Real Estate and Accumulated Depreciation at
December 31, 1999............................... F-37

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 each of the joint venture's proportionate
share of the income from continuing operations is less than 20% of the
respective consolidated amount, and the investment in and advances to each joint
venture is less than 20% of consolidated total assets.

F-1
54

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Developers Diversified Realty Corporation:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 46 present fairly, in all material
respects, the financial position of Developers Diversified Realty Corporation
and its subsidiaries (the "Company") at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. In addition, in our opinion, the
financial statement schedules listed in the index appearing under Item 14(a)(2)
on page 46 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
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit 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 the opinion expressed above.

PricewaterhouseCoopers LLP
Cleveland, Ohio
March 3, 2000

F-2
55

DEVELOPERS DIVERSIFIED REALTY CORPORATION

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

YEAR ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------

ASSETS
Real estate rental property:
Land...................................................... $ 342,859 $ 317,823
Buildings................................................. 1,542,333 1,404,734
Fixtures and tenant improvements.......................... 34,176 24,131
Land under development.................................... 27,830 34,534
Construction in progress.................................. 121,076 115,541
---------- ----------
2,068,274 1,896,763
Less accumulated depreciation............................. (249,912) (203,097)
---------- ----------
Real estate, net........................................ 1,818,362 1,693,666
Cash and cash equivalents................................... 5,992 2,260
Accounts receivable, net.................................... 39,262 24,022
Notes receivable............................................ 5,590 49,008
Advances to and investments in joint ventures............... 299,176 266,257
Minority equity investment.................................. 137,234 80,710
Deferred charges, net....................................... 3,916 5,230
Other assets................................................ 11,328 5,371
---------- ----------
$2,320,860 $2,126,524
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Unsecured indebtedness:
Fixed rate senior notes................................... $ 592,311 $ 592,154
Revolving credit facility................................. 272,000 132,000
Subordinated convertible debentures....................... -- 40,065
---------- ----------
864,311 764,219
Secured indebtedness:
Revolving credit facility................................. 18,775 --
Mortgage and other secured indebtedness................... 268,965 236,262
---------- ----------
Total indebtedness.......................................... 1,152,051 1,000,481
Accounts payable and accrued expenses....................... 49,860 50,380
Dividends payable........................................... 20,826 20,072
Other liabilities........................................... 29,867 11,878
---------- ----------
1,252,604 1,082,811
---------- ----------
Minority equity interests................................... 8,219 8,177
Preferred operating partnership minority interests.......... 104,736 32,101
Operating partnership minority interests.................... 102,956 100,650
Commitments and contingencies (Note 15)
Shareholders' equity:
Class A -- 9.5% cumulative redeemable preferred shares,
without par value, $250 liquidation value; 750,000
shares authorized; 421,500 shares issued and
outstanding at December 31, 1999 and 1998.............. 105,375 105,375
Class B -- 9.44% cumulative redeemable preferred shares,
without par value, $250 liquidation value; 750,000
shares authorized; 177,500 shares issued and
outstanding at December 31, 1999 and 1998.............. 44,375 44,375
Class C -- 8.375% cumulative redeemable preferred
shares, without par value, $250 liquidation value;
750,000 shares authorized; 400,000 shares issued and
outstanding at December 31, 1999 and 1998.............. 100,000 100,000
Class D -- 8.68% cumulative redeemable preferred shares,
without par value, $250 liquidation value; 750,000
shares authorized; 216,000 shares issued and
outstanding at December 31, 1999 and 1998.............. 54,000 54,000
Common shares, without par value, $.10 stated value;
100,000,000 shares authorized; 61,364,035 and
61,289,186 shares issued at December 31, 1999 and 1998,
respectively........................................... 6,136 6,129
Paid-in-capital......................................... 674,735 673,910
Accumulated dividends in excess of net income........... (105,757) (80,697)
---------- ----------
878,864 903,092
Less: Unearned compensation -- restricted stock......... (674) (307)
Common stock in treasury at cost: 1,860,300 shares
at December 31, 1999.............................. (25,845) --
---------- ----------
852,345 902,785
---------- ----------
$2,320,860 $2,126,524
========== ==========

The accompanying notes are an integral part of these financial statements.
F-3
56

DEVELOPERS DIVERSIFIED REALTY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------

Revenues from operations:
Minimum rents............................................ $189,613 $168,182 $123,998
Percentage and overage rents............................. 4,226 2,746 2,343
Recoveries from tenants.................................. 47,786 43,071 32,377
Management fee income.................................... 5,148 3,653 3,097
Interest................................................. 6,361 5,056 2,083
Other.................................................... 10,799 5,460 5,325
-------- -------- --------
263,933 228,168 169,223
-------- -------- --------
Rental operation expenses:
Operating and maintenance................................ 24,648 20,070 16,144
Real estate taxes........................................ 27,248 26,510 20,001
General and administrative............................... 17,774 12,918 11,055
Interest................................................. 68,023 57,196 35,558
Depreciation and amortization............................ 52,444 43,180 32,313
-------- -------- --------
190,137 159,874 115,071
-------- -------- --------
Income before equity in net income of joint ventures,
minority equity investment, (loss) gain on disposition of
real estate, minority interests and extraordinary item... 73,796 68,294 54,152
Equity in net income of joint ventures..................... 20,621 12,888 10,893
Equity in net income from minority equity investment....... 6,453 686 --
(Loss) gain on disposition of real estate.................. (1,664) 248 3,526
-------- -------- --------
Income before minority interests and extraordinary item.... 99,206 82,116 68,571
Minority interests:
Minority equity interests................................ (111) (244) (1,039)
Preferred operating partnership minority interests....... (5,157) (186) --
Operating partnership minority interests................. (6,541) (2,882) (10)
-------- -------- --------
(11,809) (3,312) (1,049)
-------- -------- --------
Income before extraordinary item........................... 87,397 78,804 67,522
Extraordinary item -- extinguishment of debt-deferred
finance costs written off................................ -- (882) --
-------- -------- --------
Net income................................................. $ 87,397 $ 77,922 $ 67,522
======== ======== ========
Net income applicable to common shareholders............... $ 60,135 $ 57,969 $ 53,322
======== ======== ========
Per share data:
Earnings per common share -- basic:
Income before extraordinary item...................... $ 0.99 $ 1.03 $ 1.03
Extraordinary item.................................... -- (0.01) --
-------- -------- --------
Net income............................................ $ 0.99 $ 1.02 $ 1.03
======== ======== ========
Earnings per common share -- diluted:
Income before extraordinary item...................... $ 0.95 $ 1.00 $ 1.03
Extraordinary item.................................... -- (0.02) --
-------- -------- --------
Net income............................................ $ 0.95 $ 0.98 $ 1.03
======== ======== ========

The accompanying notes are an integral part of these financial statements.
F-4
57

DEVELOPERS DIVERSIFIED REALTY CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

COMMON ACCUMULATED UNEARNED
PREFERRED SHARES DIVIDENDS IN COMPENSATION TREASURY
SHARES ($250 ($.10 STATED PAID-IN EXCESS OF RESTRICTED STOCK,
STATED VALUE) VALUE) CAPITAL NET INCOME STOCK AT COST TOTAL
------------- ------------ -------- ------------ ------------ -------- --------

Balance, December 31, 1996(1)........ $149,750 $2,168 $369,417 $ (51,384) $(615) $ -- $469,336
Issuance of 137,145 common shares for
cash related to exercise of stock
options, employee 401(k) plan,
executive stock purchase plan and
dividend reinvestment plan......... -- 14 3,495 -- -- -- 3,509
Issuance of 5,474,760 common shares
for cash -- underwritten
offerings.......................... -- 548 194,713 -- -- -- 195,261
Vesting of restricted stock.......... -- -- -- -- 154 -- 154
Conversion of debentures into 392,754
common shares...................... -- 39 12,884 -- -- -- 12,923
Net income........................... -- -- -- 67,522 -- -- 67,522
Dividends declared -- common
shares............................. -- -- -- (65,455) -- -- (65,455)
Dividends declared -- preferred
shares............................. -- -- -- (14,200) -- -- (14,200)
-------- ------ -------- --------- ----- -------- --------
Balance, December 31, 1997(1)........ 149,750 2,769 580,509 (63,517) (461) -- 669,050
Issuance of 1,077,994 shares(2) for
cash related to exercise of stock
options, employee 401(k) plan,
executive stock purchase plan and
dividend reinvestment plan......... -- 108 15,782 -- -- -- 15,890
Issuance of 3,669,639 common
shares(2) for cash -- underwritten
offerings.......................... -- 367 77,404 -- -- -- 77,771
Stated value of shares issued in
connection with a two-for-one stock
split.............................. -- 2,861 (2,861) -- -- -- --
Issuance of 616,000 Class C and Class
D preferred shares for
cash -- underwritten offerings..... 154,000 -- (5,720) -- -- -- 148,280
Vesting of restricted stock.......... -- -- -- -- 154 -- 154
Conversion of debentures into 236,779
common shares(2)................... -- 24 6,747 -- -- -- 6,771
Issuance of warrant.................. -- -- 2,049 -- -- -- 2,049
Net income........................... -- -- -- 77,922 -- -- 77,922
Dividends declared -- common
shares............................. -- -- -- (75,730) -- -- (75,730)
Dividends declared -- preferred
shares............................. -- -- -- (19,372) -- -- (19,372)
-------- ------ -------- --------- ----- -------- --------
Balance, December 31, 1998........... 303,750 6,129 673,910 (80,697) (307) -- 902,785
Issuance of 26,256 common shares for
cash related to exercise of stock
options, employee 401(k) plan and
dividend reinvestment plan......... -- 2 108 -- -- -- 110
Issuance of 47,095 common shares
related to restricted stock plan... -- 5 646 -- (521) -- 130
Vesting of restricted stock.......... -- -- -- -- 154 -- 154
Conversion of OP Units and debentures
into 1,498 common shares........... -- -- 71 -- -- -- 71
Purchases of 1,860,300 common
shares............................. -- -- -- -- -- (25,845) (25,845)
Net income........................... -- -- -- 87,397 -- -- 87,397
Dividends declared -- common
shares............................. -- -- -- (85,195) -- -- (85,195)
Dividends declared -- preferred
shares............................. -- -- -- (27,262) -- -- (27,262)
-------- ------ -------- --------- ----- -------- --------
Balance, December 31, 1999........... $303,750 $6,136 $674,735 $(105,757) $(674) $(25,845) $852,345
======== ====== ======== ========= ===== ======== ========

- ---------------

(1) Share amounts do not reflect the effect of the July 1998 stock split.

(2) Share amounts reflect issuances both pre and post the July 1998 stock split.

The accompanying notes are an integral part of these financial statements.
F-5
58

DEVELOPERS DIVERSIFIED REALTY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------

Cash flow operating activities:
Net income................................................ $ 87,397 $ 77,922 $ 67,522
Adjustments to reconcile net income to net cash flow
provided by operating activities net of contributions to
joint ventures:
Depreciation and amortization......................... 52,444 43,180 32,313
Amortization of deferred finance costs................ 1,524 1,474 1,399
Write-off of deferred finance costs................... -- 882 --
Equity in net income of joint ventures................ (20,621) (12,888) (10,893)
Equity in net income from minority equity
investment......................................... (6,453) (686) --
Cash distributions from joint ventures................ 20,277 19,643 10,185
Cash distributions from minority equity investment.... 7,209 442 --
Preferred operating partnership minority interest
expense............................................ 5,157 186 --
Operating partnership minority interest expense....... 6,541 2,882 10
Loss (gain) on disposition of real estate............. 1,664 (248) (3,526)
Net change in accounts receivable..................... (15,540) (7,743) (4,907)
Net change in accounts payable and accrued expenses... (165) 11,936 1,369
Net change in other operating assets and
liabilities........................................ 13,218 3,096 921
--------- --------- ---------
Total adjustments.................................. 65,255 62,156 26,871
--------- --------- ---------
Net cash flow provided by operating activities..... 152,652 140,078 94,393
--------- --------- ---------
Cash flow from investing activities:
Real estate developed or acquired......................... (182,496) (569,566) (391,798)
Equity contributions to joint ventures.................... (134,746) (130,592) (8,093)
Advances to joint ventures................................ (17,184) (17,559) (22,085)
Acquisition of minority equity interest................... -- (16,293) --
Repayment (issuance) of notes receivable, net............. 21,427 (44,928) (4,081)
Proceeds resulting from contribution of properties to
joint ventures and repayments of advances from
affiliates.............................................. 81,821 233,986 --
Joint venture distribution from refinancing proceeds...... 7,552 -- --
Proceeds from disposition of real estate.................. 13,918 6,663 9,837
--------- --------- ---------
Net cash flow used for investing activities:....... (209,708) (538,289) (416,220)
--------- --------- ---------
Cash flow from financing activities:
Proceeds from (repayment of) revolving credit facilities
and temporary bridge loans, net......................... 158,775 (7,700) 44,200
Proceeds from construction loans and other mortgage
debt.................................................... 60,332 29,732 --
Principle payments on rental property debt................ (45,630) (17,029) (17,764)
Repayment of convertible debentures....................... (40,040) -- --
Proceeds from issuance of Medium Term Notes, net of
underwriting commissions and $400 and $200 of offering
expenses paid in 1998 and 1997, respectively............ -- 198,012 101,234
Proceeds from issuance of Fixed Rate Senior Notes, net of
underwriting commissions and discounts and $500 of
offering expenses paid in 1997.......................... -- -- 74,147
Proceeds relating to premium on issuance Fixed Rate Senior
Notes................................................... -- -- 1,430
Payment of deferred finance costs (bank borrowings)....... (150) (1,193) (674)
Proceeds from issuance of common shares, net of
underwriting commissions and $400 and $900 of offering
expenses paid in 1998 and 1997, respectively............ -- 77,771 195,261
Proceeds from issuance of preferred shares, net of
underwriting commissions and $459 of offering expenses
paid in 1998............................................ -- 148,280 --
Proceeds from issuance of preferred operating partnership
units (and warrant in 1998) net of $450 and $850 of
offering expenses paid in 1999 and 1998, respectively... 72,675 34,150 --
Proceeds from issuance of common shares in conjunction
with exercise of stock options, 401(k) plan,
reinvestment plan and restricted stock plan............. 394 16,044 3,663
Purchase of treasury stock................................ (25,845) -- --
Payments of distributions to preferred and operating
partnership minority interests.......................... (8,020) (2,585) (10)
Dividends paid............................................ (111,703) (75,029) (79,655)
--------- --------- ---------
Net cash provided by financing activities............. 60,788 400,453 321,832
--------- --------- ---------
Increase in cash and cash equivalents.............. 3,732 2,242 5
Cash and cash equivalents, beginning of year.............. 2,260 18 13
--------- --------- ---------
Cash and cash equivalents, end of year.................... $ 5,992 $ 2,260 $ 18
========= ========= =========

The accompanying notes are an integral part of these financial statements.
F-6
59

DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Developers Diversified Realty Corporation, related real estate joint
ventures and its minority equity investment (the "Company" or "DDR"), are
engaged in the business of acquiring, expanding, owning, developing, managing
and operating neighborhood and community shopping centers, enclosed malls and
business centers. The Company's shopping centers are typically anchored by
discount department stores (Wal-Mart, Kmart, Target), off price department
stores (Kohl's, TJ Maxx/Marshall's), home improvement stores (Home Depot,
Lowes), supermarkets, book stores, office supply stores, electronic stores and
drug stores which usually offer day-to-day necessities. At December 31, 1999,
the Company owned shopping centers in 36 states. The tenant base includes
primarily national and regional retail chains and local retailers; consequently,
the Company's credit risk is concentrated in the retail industry.

Revenues derived from the Company's two largest tenants, Wal-Mart and
Kmart, aggregated 10.9%, 11.3% and 14.1% of total revenues for the years ended
December 31, 1999, 1998 and 1997, respectively, as follows:

YEAR WAL-MART KMART
- ---- -------- -----

1999...................................................... 7.6% 3.3%
1998...................................................... 6.6% 4.7%
1997...................................................... 8.8% 5.3%

The total percentage of Company owned gross leasable area ("GLA")
attributed to Wal-Mart and Kmart was 8.8% and 12.3%, respectively, at December
31, 1999. The Company's ten largest tenants comprised 22.6%, 24.4% and 27.3% of
total revenues for the years ended December 31, 1999, 1998 and 1997,
respectively. Management believes the Company's portfolio is diversified in
terms of 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 1999
and 1998, certain national and regional retailers experienced financial
difficulties and several filed for protection under bankruptcy laws. Although
the Company has experienced a number of tenants filing for protection under
bankruptcy laws, the Company has not incurred significant losses through March
3, 2000, with regard to the Company's portfolio of tenants.

Principles of Consolidation

All majority owned subsidiaries and affiliates where the Company has
financial and operating control are included in the consolidated financial
statements. All significant intercompany balances and transactions have been
eliminated in consolidation. Investments in real estate joint ventures and
companies for which the Company has the ability to exercise significant
influence over 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 of these joint ventures and companies is included in consolidated
net income. Other investments are accounted for using the cost method of
accounting.

Statement of Cash Flows and Supplemental Disclosure of Non-Cash Investing and
Financing Information

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

F-7
60
DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Non-cash investing and financing activities are summarized as follows (in
millions):

FOR THE YEAR ENDED
DECEMBER 31,
------------------------
1999 1998 1997
----- ------ -----

Minority interests and operating partnership units
issued relating to shopping center
acquisitions..................................... $ 2.7 $108.5 $16.6
Contribution of net assets to joint ventures....... 21.2 27.6 0.5
Acquisition of a minority equity investment........ -- 7.4 --
Mortgages assumed, shopping center acquisitions.... 18.0 133.9 --
Other liabilities assumed, shopping center
acquisitions..................................... -- 2.8 6.2
Accounts payable related to construction in
progress......................................... 0.2 6.6 0.2
Two-for-one stock split............................ -- 2.9 --
Conversion of debentures and related deferred
finance costs.................................... -- 6.7 12.9
Dividends declared, not paid....................... 20.8 20.1 --
Notes receivable exchanged for the purchase of a
shopping center and common shares of the minority
equity investment................................ 22.0 -- --

The foregoing transactions did not provide or use cash and, accordingly,
they are not reflected in the statements of cash flows.

Real Estate

Real estate assets 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 18 TO 31 YEARS
- --------- --------------

Furniture/Fixtures and Tenant Improvements..... Useful lives, which approximate
lease terms, where applicable

Depreciation expense was $52.4 million, $43.2 million and $32.3 million for
the years ended December 31, 1999, 1998 and 1997, respectively. Expenditures for
maintenance and repairs are charged to operations as incurred. Renovations which
improve or extend the life of the asset are capitalized. Included in land at
December 31, 1999 was undeveloped real estate, generally outlots or expansion
pads adjacent to the shopping centers owned by the Company (excluding shopping
centers owned through joint ventures) which aggregated approximately 110 acres.

Construction in progress includes shopping center developments and
significant expansions and re-developments. The Company capitalizes interest on
funds used for the construction, expansion or redevelopment of shopping centers,
including funds advanced to joint ventures with qualifying development
activities. Capitalization of interest ceases when construction activities are
completed and the property is available for occupancy by tenants. For the years
ended December 31, 1999, 1998 and 1997, the Company capitalized interest of
$13.5 million, $9.9 million, and $4.0 million, respectively. In addition, the
Company capitalized certain

F-8
61
DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

construction administration costs of $2.5 million, $1.8 million and $1.3 million
in 1999, 1998 and 1997, respectively.

Deferred Financing Costs

Costs incurred in obtaining long-term financing are included in deferred
charges in the accompanying balance sheets and are amortized over the terms of
the related debt agreements; such amortization is reflected as interest expense
in the consolidated statements of operations.

Revenue Recognition

Minimum rents from tenants are recognized monthly using the straight-line
method. Percentage and overage rents are recognized after the tenants reported
sales have exceeded the applicable sales breakpoint set forth in the applicable
lease. Revenues associated with tenant reimbursements are recognized in the
period in which the expenses are incurred based upon the tenant lease
provisions. Lease termination fees are included in other income and recognized
upon termination of a tenant's lease, which generally coincides with the receipt
of cash. Development fees are in other income and recognized when the related
services are performed and the earnings process is complete.

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 $2.1 million at December 31, 1999 and 1998. At December
31, 1999 and 1998, straight-line rent receivables, net of a provision for
uncollectible amounts, aggregated $8.3 million and $4.2 million, respectively.

Disposition of Real Estate

Disposition of real estate generally relates to the sale of outlots and
land adjacent to existing shopping centers and is recognized at closing when the
earnings process is deemed to be complete.

General and Administrative Expenses

General and administrative expenses include internal leasing and legal
salaries and related expenses which are charged to operations as incurred.

Interest and Real Estate Taxes

Interest and real estate taxes incurred during the development and
significant expansion of shopping centers are capitalized and depreciated over
the life of the building. Interest paid during the years ended December 31,
1999, 1998 and 1997 aggregated $79.4 million, $63.4 million and $36.2 million,
respectively.

Intangible Assets

Intangible assets consist primarily of the goodwill and property management
contracts and rights to certain development projects obtained through the
acquisitions of real estate management businesses, which are amortized on the
straight line basis over their estimated useful lives of 15 years. The carrying
value of intangible assets is periodically reviewed by the Company and
impairments are recognized when the expected future operating cash flows derived
from such intangible assets are less than their carrying value.

F-9
62
DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Derivative Financial Instruments

The Company may from time to time enter into interest rate swap contracts
as hedges against increasing rates on its variable rate debt. The Company does
not utilize these arrangements for trading or speculative purposes. To qualify
for hedge accounting, the contracts must meet defined correlation and
effectiveness criteria, be designated as a hedge and result in cash flows and
financial statement effects which substantially offset those of the position
being hedged. The Company records net amounts received or paid under these
contracts as adjustments to interest expense. At December 31, 1999 and 1998,
there were no interest rate swap contracts or other derivative instruments
outstanding. See Note 3 for a description of the Company's funding commitment
relating to its minority equity investment.

Federal Income Taxes

The Company has elected to be taxed as a qualified Real Estate Investment
Trust ("REIT") under the Internal Revenue Code of 1986, as amended. As a REIT,
the Company is entitled to a tax deduction for the amount of dividends paid to
its shareholders, thereby effectively subjecting the distributed net income of
the Company to taxation at the shareholder level only, provided it distributes
at least 95% of its taxable income and meets certain other REIT qualification
requirements. As the Company distributed sufficient taxable income for the years
ended December 31, 1999, 1998 and 1997, no U.S. Federal income or excise taxes
were incurred. The Company is subject to state and local income and franchise
taxes in certain states and municipalities which are reflected in operating and
maintenance expenses. The tax basis of assets and liabilities exceeds the
amounts reported in the accompanying financial statements by approximately $122
million, $110 million and $111 million at December 31, 1999, 1998 and 1997,
respectively.

Business Segment

The sole business of the Company and its consolidated affiliates is the
ownership, development and operation of retail shopping centers. The Company
evaluates operating results and allocates resources on a property-by-property
basis. The Company does not distinguish or group its operations on a geographic
basis. Accordingly, the Company believes it has a single reportable segment for
disclosure purposes in accordance with generally accepted accounting principles.
Further, all operations are within the United States and significant tenant
revenues have been previously disclosed.

Comprehensive Income

For the years ended December 31, 1999, 1998 and 1997, the Company had no
items of other comprehensive income requiring additional disclosure.

New Accounting Standards

In June 1998, the FASB issued Statement of Financial Accounting Standard
("SFAS") No. 133 -- Accounting for Derivative Instruments and Hedging
Activities. This statement requires fair value accounting for all derivatives
including recognizing all such instruments on the balance sheet with an
offsetting amount recorded in the income statement or as part of comprehensive
income. The new standard becomes effective for the Company for the year ending
December 31, 2001. (SFAS No. 137 deferred the effective date from December 31,
2000.) The Company does not expect this pronouncement to have a material impact
on the Company's financial position or cash flows.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements," which among other things provides
guidance on lessors' accounting for contingent rent. This bulletin clarifies
that contingent rental income should be recognized once the factors that trigger
payment actually

F-10
63
DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

occur. The Company does not anticipate this bulletin to have a material impact
on the Company's results of operations or financial position.

Treasury Stock

In February and August 1999, the Company's Board of Directors authorized
the repurchase, subject to certain requirements, of up to $200 million of the
Company's common shares. The Company's repurchases are reflected as treasury
stock utilizing the cost method of accounting and are presented as a reduction
to consolidated shareholders' equity.

Stock Split

The Board of Directors of the Company approved a two-for-one stock split to
shareholders of record on July 27, 1998. On August 3, 1998, each such
shareholder received one common share for each share held. This stock split was
effected in the form of a stock dividend. Accordingly, $2.9 million was
transferred from additional paid in capital to common stock, representing the
stated value of additional shares issued. All share and per share data and
Operating Partnership Units ("OP Units") included in these consolidated
financial statements including all such disclosures have been adjusted to
reflect this split, except as indicated.

Reclassification

Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the 1999 presentation.

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
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses during the year. Actual results could differ from those
estimates.

2. ADVANCES TO AND INVESTMENTS IN JOINT VENTURES

The Company's equity investments in joint ventures at December 31, 1999
consisted of the following:

- A 50% joint venture interest in 25 operating shopping centers (two of
which were acquired in 1999 and three of which were acquired in 1998);

- A 35% joint venture interest in one operating shopping center (1997);

- A 57% joint venture interest in one shopping center, a portion of which
is under development (1998);

- A 50% interest in seven joint ventures each of which is developing a
shopping center (1998 and 1999);

- An 80% joint venture interest in two operating shopping center properties
acquired in 1998;

- A 50% joint venture interest in a real estate management company and a
development company, both acquired in 1998;

- A 50% joint venture interest in a limited partnership acquired in 1998
which is developing six shopping centers;

- A 25% interest in one joint venture which is developing a shopping center
(1999);

- A 95% economic interest in a management service subsidiary formed in 1998
of which the Company owns 1% of the voting and 100% of the non-voting
common stock. This entity owns a 25% joint venture

F-11
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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

interest in an opportunity fund formed in 1998 which has acquired a
retail site in Long Beach, California (1998), which is being redeveloped,
6 operating retail shopping centers in Kansas City, Kansas and Kansas
City, Missouri (1999), a 75% joint venture interest which owns 13 retail
sites formerly occupied by Best Products (1998), and 12.5% interest in a
joint venture interest which is developing a shopping center (1998); and

- An 81% economic interest in a management service subsidiary formed in
1998 of which the Company owns 9% of the voting and 100% of the
non-voting common stock.

Combined condensed financial information of the Company's joint venture
investments is summarized as follows (in thousands):

FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
COMBINED STATEMENTS OF OPERATIONS 1999 1998
--------------------------------- ------------- -------------

Land.............................................. $ 262,485 $ 232,105
Buildings......................................... 917,507 826,521
Fixtures and tenant improvements.................. 5,010 2,467
Construction in progress.......................... 187,825 67,898
---------- ----------
1,372,827 1,128,991
Accumulated depreciation.......................... (82,481) (59,580)
---------- ----------
Real estate, net.................................. 1,290,346 1,069,411
Other assets...................................... 76,173 57,527
---------- ----------
$1,366,519 $1,126,938
========== ==========
Mortgage debt..................................... $ 887,650 $ 718,846
Amounts payable to DDR............................ 123,743 85,846
Other liabilities................................. 48,913 21,193
---------- ----------
1,060,306 825,885
Accumulated equity................................ 306,213 301,053
---------- ----------
$1,366,519 $1,126,938
========== ==========
Company's proportionate share of accumulated
equity.......................................... $ 153,745 $ 152,764
========== ==========

FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
COMBINED STATEMENTS OF OPERATIONS 1999 1998 1997
--------------------------------- -------- -------- -------

Revenues from operations.................... $170,714 $109,752 $82,434
-------- -------- -------
Rental operation expenses................... 51,170 28,045 20,189
Depreciation and amortization expense....... 22,949 16,009 11,658
Interest expense............................ 58,894 40,942 29,540
-------- -------- -------
133,013 84,996 61,387
-------- -------- -------
Income before gain on sale of real estate... 37,701 24,756 21,047
Gain on sales of real estate................ 344 314 1,085
-------- -------- -------
Net income.................................. $ 38,045 $ 25,070 $22,132
======== ======== =======
Company's proportionate share of net
income.................................... $ 20,621 $ 12,888 $10,893
======== ======== =======

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The Company has made advances to several partnerships in the form of notes
receivable which accrue interest at rates ranging from LIBOR plus 0.85% to fixed
rate loans of 12%. Maturity dates range from payment on demand to December 2008.
Notes aggregating approximately $20.2 million serve as collateral for a $22
million secured loan. In December 1999, one of the Company's joint ventures
refinanced its secured mortgage and entered into a ten year fixed rate mortgage
for $21.3 million with interest at 8.46%. Additional proceeds, aggregating $6.4
million, from this refinancing were used to partially repay a note payable to
the Company. Included in accounts receivable is approximately $1.4 million and
$0.8 million at December 31, 1999 and 1998, respectively, due from affiliates
related to construction receivables.

Advances to and investments in 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,
------------------
1999 1998
------- -------

Basis differential(a)...................................... $ 44.1 $ 50.0
Deferred development fees, net of portion relating to the
Company's interest....................................... (2.6) (2.1)
Basis differential upon transfer........................... (19.9) (20.3)

- ---------------

(a) Basis differentials occur primarily when the Company has purchased an
interest in existing joint ventures at fair market value which differs from
their proportionate share of the historical net assets of the joint venture.
In addition, acquisition, transaction and other costs, including capitalized
interest, are not reflected in the net assets at the joint venture level.
Certain basis differentials are assigned and amortized over the life of the
related assets.

Service fees earned by the Company through management, development and
financing activities performed related to the Company's joint ventures are as
follows (in millions):

FOR THE YEAR ENDED
DECEMBER 31,
--------------------
1999 1998 1997
---- ---- ----

Management fees and leasing commissions................ $5.7 $3.2 $2.7
Development fees....................................... 1.4 1.7 0.6
Interest income........................................ 4.4 2.4 1.5

In September 1999, the Company transferred its interest in a shopping
center under development in Coon Rapids, Minnesota, a suburb of Minneapolis, to
a joint venture in which the Company retained a 25% ownership interest. The
Company effectively sold a 75% interest in this project and was reimbursed $2.5
million relating to development costs previously incurred on this project. See
also Transactions with Related Parties (Note 14).

In April 1999, the Company acquired a 50% interest in a 206,000 square foot
shopping center in St. Louis, Missouri. The joint venture's aggregate purchase
price was $16.6 million. In November 1999, the Company acquired, through a 50%
owned joint venture, the fourth phase of a shopping center in Phoenix, Arizona
which aggregates 125,000 square feet. The total purchase price for the fourth
phase of this center aggregated approximately $15.6 million.

In January 1999, the Company repaid a third party mortgage of a 50% owned
joint venture partnership aggregating approximately $49.2 million. The joint
venture entered into a corresponding mortgage note payable to the Company
bearing an interest rate of LIBOR plus 2.75%. In addition, the Company received
a loan

F-13
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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

origination fee for this transaction of $0.4 million which is included in other
revenue in the consolidated statements of operations. In March 1999, the joint
venture obtained a bridge loan, which was converted into a permanent mortgage in
June 1999, and used the proceeds to repay the mortgage note to the Company.

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 ventures (Reciprocal Purchase Rights) or to initiate a purchase and 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.

In addition, several of the joint venture agreements include a provision
whereby the Company's joint venture partners may convert all, or a portion of,
their respective interests in such joint ventures into common shares of the
Company. The terms of the conversion are set forth in the governing documents of
such joint ventures. However, if the joint venture partners elect to convert
their respective interest into common shares, the Company will, in most cases,
have the option to pay cash instead of issuing common shares. If the Company
agrees to the issuance of common shares, the agreement provides that the
converting joint venture partner will execute a lock-up arrangement acceptable
to the Company.

Retail Value Fund

In February 1998, the Company entered into an agreement with Prudential
Real Estate Investors and formed the Retail Value Fund (the "Fund"). The Fund
invests in retail development projects and retail properties within the United
States that are in need of substantial retenanting 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 commercial
redevelopment opportunities. The Company maintains a 25.57% effective ownership
interest (which includes the Company's 82% share of a 1% general partner
interest which provides for a 33% profits interest once the limited partners
have received a 10% preferred return and return of capital). The Fund's general
partner has its own employees. The Company performs retail management
responsibilities including leasing, operating and maintenance, redevelopment and
accounting services and receives fees for these supervision services. The Fund
acquired a shopping center in Long Beach, CA in December 1998 which is being
redeveloped. In addition, the Fund acquired six operating retail shopping
centers in Kansas and Missouri in September 1999. In 1999, the Company entered
into separate agreements with the Fund to acquire the Company's 50% joint
venture interest relating to the development of six shopping centers. During
1999, the Company was reimbursed approximately $74.3 million, relating to
advances previously made to these joint ventures, associated with development
costs incurred on each of these projects.

DD Development Company

In June 1999, DD Development Company, a company in which DDR owns an equity
ownership interest, acquired the Fund's limited partnership interest in a joint
venture, Hendon/DDR/BP, LLC, which owned 15 sites formerly occupied by Best
Products at a cost of approximately $29.7 million. As a result, the Company's
aggregate investment in this joint venture increased to approximately $36
million. Eleven of the sites were leased as of December 31, 1999 and two were
sold as of December 31, 1999. In addition, in June 1999, Hendon/DDR/ BP, LLC
entered into a $25 million mortgage with a financial institution secured by the
leased sites. The net financing proceeds were used to repay advances made by the
Company to the joint venture.

Continental Real Estate

In March and April 1998, through transactions with Continental Real Estate
Companies of Columbus, Ohio, the Company acquired interests in four shopping
center joint ventures. The aggregate cost of these shopping centers, including
the assumption of approximately $82.0 million of debt, was approximately $114.1
million, of which the Company's proportionate share was $54.7 million and $76.2
million, respectively. The Company paid
F-14
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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

approximately $19.1 million in cash and issued $2.3 million of OP Units. The
Company manages these shopping centers pursuant to a management agreement.

OliverMcMillan

In May 1998, the Company formed DDR OliverMcMillan (DDROM) to develop,
acquire, operate and manage urban entertainment and retail projects throughout
the United States. At December 31, 1999, DDROM had six projects in various
stages of development. The investment and development activities of DDROM are
overseen by a four person Board of Directors. The Company's Chief Executive
Officer serves as Chairman of DDROM's Board of Directors, and its Vice Chairman
and Chief Investment Officer serves as a director together with two executives
from the joint venture partner. The majority of the projects are scheduled for
completion between 2000 and 2002.

Sansone Group

In July 1998, in connection with the acquisition of certain shopping center
properties from The Sansone Group, the Company acquired a 50% interest in The
Sansone Group's operating/management company which manages shopping centers and
other properties in the St. Louis, Missouri area. The Company is entitled to a
cumulative annual preferred return of the first $1.0 million in net operating
income up to the first $5 million. In addition, the Company acquired a 50%
interest in the Sansone Group Development Company.

DDRA Community Centers V

On September 10, 1998, the Company contributed six existing shopping center
properties valued at approximately $238 million to a joint venture and in
exchange received a 50% equity ownership interest in the joint venture and cash
of approximately $192 million, funded from debt and equity proceeds received as
described below. The $192 million was used to repay variable rate indebtedness
on the Company's revolving credit facilities. In conjunction with the Company's
contribution, the joint venture entered into a seven year, $156 million mortgage
with interest at a coupon rate of 6.64%, and the joint venture partner
contributed cash of approximately $42 million in exchange for a 50% equity
interest. Upon transfer of the properties, the Company did not recognize a gain.
In accordance with the joint venture agreement, the Company will continue to
manage the properties and receive management fees.

3. MINORITY EQUITY INVESTMENT

On August 4, 1998 the Company, in a joint release with American Industrial
Properties REIT [NYSE: IND] ("AIP"), announced the execution of a definitive
agreement providing for the strategic investment in AIP by the Company. Under
the terms of the Share Purchase Agreement dated to be effective as of July 30,
1998, the Company initially purchased 949,147 newly issued common shares of
beneficial interest at $15.50 per share for approximately $14.7 million. Under
the terms of a separate agreement, also dated to be effective as of July 30,
1998, the Company, in exchange for five industrial properties owned by the
Company with a net book value of approximately $7.4 million and valued at
approximately $19.5 million, acquired approximately 1.3 million additional newly
issued AIP shares of beneficial interest. Upon contribution, the Company did not
recognize a gain. Concurrent with entering into the Agreement, AIP increased its
Board of Trust Managers by four positions and appointed the Company's designees
to these positions.

On November 20, 1998, the shareholders of AIP approved additional purchases
by the Company of up to 5,226,583 newly issued shares of AIP for approximately
$81.0 million. In January 1999, the Company acquired 1,543,005 shares of AIP's
common stock at a price of $15.50 per share and 1,867,610 shares of AIP's common
stock at a price of $14.93 per common share. In August 1999, the Company
acquired 354,839 common shares of AIP at a price of $15.50 per share. At
December 31, 1999 and 1998, the Company owned 9,656,650 and

F-15
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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

5,891,196 common shares, in AIP, respectively, representing approximately 46.1%
and 34.5%, respectively, of AIP's total outstanding common shares.

The Company's investment is accounted for using the equity method of
accounting. The aggregate acquisition price for the shares exceeds the Company's
share of the historical underlying net assets of AIP by approximately $28.6
million which has been assigned principally to real estate with the remainder to
goodwill. The portion attributable to real estate is being amortized over 40
years and the amount associated with goodwill is being amortized over 15 years.
AIP's share price closed on the NYSE at $12.375 per share on December 31, 1999
resulting in an aggregate market investment of approximately $119.5 million.

Pursuant to the agreement, AIP may as of March 3, 2000, under certain
circumstances and subject to certain limitations, exercise a put right that
would require the Company to purchase additional common or convertible preferred
shares of AIP for a total amount not to exceed $166.6 million at a price not to
exceed $15.50 and $14.00 per share, respectively. AIP can only exercise its
right to put these additional shares for the purpose of financing property
acquisitions approved by AIP's Board of Trust Managers. Based on the terms of
the option, the Company has determined that the option approximates fair value.

Summarized financial information, as reflected on the accounts of AIP, as
of December 31, 1999 and 1998 and for the year ended December 31, 1999 and the
period July 30, 1998 to December 31, 1998 is as follows (in thousands):

FOR THE YEAR ENDED
DECEMBER 31,
--------------------
1999 1998
-------- --------

Balance sheet:
Land................................................. $159,566 $108,891
Buildings............................................ 482,620 396,241
-------- --------
642,186 505,132
Less accumulated depreciation........................ (46,931) (33,449)
-------- --------
Real estate, net..................................... 595,255 471,683
Other assets......................................... 25,427 28,647
-------- --------
$620,682 $500,330
======== ========
Mortgage debt........................................ $334,873 $252,481
Other liabilities and minority interests............. 27,321 42,270
-------- --------
362,194 294,751
Accumulated equity................................... 258,488 205,579
-------- --------
$620,682 $500,330
======== ========

F-16
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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

FOR THE FOR THE PERIOD
YEAR ENDED JULY 30, 1998 TO
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ----------------

Statement of operations:
Revenues from operations....................... $87,617 $ 25,460
------- --------
Rental operation expenses...................... 31,512 10,405
Depreciation and amortization expense.......... 14,535 4,219
Interest expense (1)........................... 26,562 7,766
Provisions for losses on real estate........... -- 10,060
------- --------
72,609 32,450
------- --------
Income (loss) from operations.................. 15,008 (6,990)
Minority interests............................. (313) 166
Equity in earnings of unconsolidated
subsidiaries................................ 624 --
Loss on sales of real estate................... (200) --
------- --------
Income (loss) before charge for change in
control and extraordinary item.............. 15,119 (6,824)
Charge for change in control................... -- (5,780)
------- --------
Income (loss) before extraordinary item........ 15,119 (12,604)
Extraordinary item............................. (513) --
------- --------
Net income (loss)........................... $14,606 $(12,604)
======= ========

- ---------------

(1) Interest expense includes $0.1 million and $0.7 million in 1999 and 1998,
respectively, paid to the Company on advances made at an interest rate of
10.25%.

For the period from July 30, 1998 to December 31, 1998, the Company has
recorded in equity in net income from minority equity investment, $0.7 million
representing the Company's equity in AIP's $3.2 million of income excluding
provisions for loss on real estate and change in control charges. The real
estate impairment and change in control charges detailed above are reconciling
items between the Company's proportionate share of AIP's reported results of
operations and the amount reflected in the Company's financial statements as
equity in net income from minority equity investment. These amounts were
considered in DDR's allocation of purchase price associated with its investment
in AIP as discussed above.

4. ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION

During the years ended December 31, 1999, 1998 and 1997, the Company
completed the acquisition of 45 shopping centers, excluding those acquired
through joint ventures as discussed in Note 2 (3 in 1999, 35 in 1998 and 7 in
1997), at a total purchase price of $1.0 billion. These acquisitions were
accounted for using the purchase method of accounting. Significant acquisitions
were as follows:

In 1998, in a single transaction with Continental Real Estate Companies of
Columbus, Ohio, the Company completed the acquisition of 13 shopping centers,
four of which were acquired through joint ventures. The 13 shopping centers
total 2.2 million gross square feet of Company-owned retail space. The aggregate
cost of these centers was $222.3 million of which the Company's share was $184.4
million. The Company's net investment was initially funded through its revolving
credit facilities, cash and liabilities assumed of approximately $92.7 million,
mortgages assumed of approximately $82.9 million (including $54.7 million of
joint venture mortgage debt) and the issuance of OP Units valued at
approximately $8.8 million. In certain circumstances and at the option of the
Company, these units are exchangeable into 438,561 shares of the Company's
common stock.

F-17
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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

In July 1998, the Company acquired from Hermes Associates of Salt Lake
City, Utah, nine shopping centers, one office building and eight additional
expansion, development or redevelopment projects. The nine shopping centers
aggregate 2.4 million square feet of total GLA. The total consideration for this
portfolio was approximately $309 million comprised of $30.6 million of debt
assumed, the issuance of OP Units, which are exchangeable, in certain
circumstances and at the option of the Company, into 3,630,668 shares of the
Company's common stock or cash, initially valued at $73.0 million, $194.2
million of cash and $11.2 million other liabilities assumed.

In July 1998, the Company also acquired 13 shopping centers aggregating
approximately 1.6 million square feet in the St. Louis, Missouri area, at an
aggregate cost of $152.5 million. Two of these centers were subsequently sold at
an aggregate price of approximately $4.4 million. The Company also acquired a
50% ownership interest in the Sansone Group's management and development
company. The Company's net investment in this portfolio aggregated $162.6
million comprised of $27.6 million of debt assumed and $135 million of cash.

The operating results of the acquired shopping centers are included in the
results of operations of the Company from the date of purchase, including the
acquisition of properties owned through joint ventures, discussed in Note 2. The
properties owned through joint ventures are included in equity in net income of
joint ventures in the statements of operations.

The following unaudited supplemental pro forma information is presented to
reflect the effects of the common share offerings, preferred share offerings,
debt offerings and the property acquisitions consummated through December 31,
1999, including the joint venture formations and acquisitions (Note 2), as if
all such transactions had occurred on January 1, 1998 with regard to the 1998
and 1999 acquisitions and as if all such transactions relating to the 1997 and
1998 acquisitions had occurred on January 1, 1997. Pro forma information is not
presented for the year ended December 31, 1999 as the shopping centers acquired
in 1999 were either under development or in the lease-up phase and, accordingly,
the related operating information for such centers does not exist or would not
be meaningful. 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,
--------------------
1998(a) 1997(b)
-------- --------
(UNAUDITED)

Pro forma revenues..................................... $229,678 $194,976
======== ========
Pro forma income before extraordinary item............. $ 80,994 $ 70,174
======== ========
Pro forma net income applicable to common
shareholders:........................................ $ 55,547 $ 55,974
======== ========
Pro forma net income applicable to common shareholders
(per share):
Basic................................................ $ 0.97 $ 1.03
======== ========
Diluted.............................................. $ 0.93 $ 1.01
======== ========

- ---------------

(a) Reflects revenues and expenses of the properties acquired in 1999 and 1998
for the period January 1, 1998 through the effective date of acquisition.
Operating results for the Company's acquired properties located in Columbus
(Easton Market), OH; Princeton, NJ; Portland, OR; St. Louis (American Plaza)
MO; St. Louis (Promenade at Brentwood), MO; Florence, KY; Fayetteville, AR;
Salisbury, MD and Phoenix, AZ are not reflected in the 1998 pro forma
information prior to their respective acquisition dates because these
shopping

F-18
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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

centers were either under development or in the lease-up phase and,
accordingly, the related operating information for such centers either does
not exist or would not be meaningful. In addition, the 1998 and 1997 pro
forma information does not include the results of shopping center expansions
occurring at five of the shopping centers acquired by the Company.

(b) Reflects revenues and expenses of the properties acquired in 1998 and 1997
for the period January 1, 1997 through the effective date of acquisition.
Operating results for the Company's acquired properties located in San
Antonio, TX; Ahwatukee, AZ; Eagan, MN; St. Paul, MN; Denver, CO; Columbus
(Easton Market), OH; Princeton, NJ; Portland, OR; St. Louis (American
Plaza), MO; St. Louis (Promenade at Brentwood), MO and Florence, KY are not
reflected in the 1997 pro forma information prior to their respective
acquisition dates because these shopping centers were either under
development or in the lease-up phase and, accordingly, the related operating
information for such centers either does not exist or would not be
meaningful. In addition, the 1997 pro forma information does not include the
results of shopping center expansions occurring at five of the shopping
centers acquired by the Company.

5. DISPOSITION OF REAL ESTATE

During 1999, the Company recorded a loss on disposition of real estate
aggregating $2.2 million relating to the sale of a shopping center and residual
land in Pensacola, Florida. The shopping center was sold to a major retailer. In
connection with this disposition, the Company developed a 17,000 square foot
shopping center adjacent to the site sold. In addition, the Company sold four
properties at an aggregate gain of approximately $0.5 million which offsets the
previously described loss within the consolidated statements of operations. Net
proceeds received in conjunction with the above sales aggregated $13.9 million.
During 1998, the Company sold various outlots adjacent to the Company's shopping
centers, recognized an aggregate gain of $0.2 million, and received net proceeds
of $6.7 million. During 1997, the Company sold two business centers and a
shopping center, recognized an aggregate gain of $3.5 million and received net
proceeds of $9.8 million.

6. NOTES RECEIVABLE

Notes receivable and related accrued interest are summarized as follows (in
thousands):

1999 1998
------ -------

Notes receivable.......................................... $5,590 $ 8,039
Construction mortgage receivable.......................... -- 6,559
Mortgage receivable....................................... -- 20,174
Notes receivable -- AIP................................... -- 14,236
------ -------
$5,590 $49,008
====== =======

The Company has provided advances, including accrued interest, aggregating
$5.6 million and $8.0 million at December 31, 1999 and 1998, respectively to
certain developers in accordance with certain partnership agreements. The notes
are secured by certain rights in future development projects, partnership
interests and personal guaranties. The notes bear interest ranging from 10.5% to
14.5% with maturity dates ranging from payment on demand to December 2002.

The Company entered into a 50% participating interest, together with Bank
of America National Trust, in a construction loan receivable secured by a first
mortgage on certain real estate relating to a shopping center development in
Phoenix, Arizona. The note, including accrued interest, aggregated approximately
$6.6 million at December 31, 1998. In July 1999, the Company purchased the
shopping center from the borrower and applied the note towards the purchase
price.

F-19
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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

In July 1998, the Company advanced $20.0 million to a real estate developer
which was evidenced by a mortgage note collateralized by six real estate
projects. The mortgage note was repaid in March 1999.

At December 31, 1998 the Company had advances of $14.2 million in the form
of a demand notes receivable from AIP with interest at 10.25%. The notes and
related interest were repaid in January 1999.

7. DEFERRED CHARGES

Deferred charges consist of the following (in thousands):

DECEMBER 31,
----------------
1999 1998
------ ------

Deferred financing costs................................... $7,298 $9,487
Less-accumulated amortization.............................. (3,382) (4,257)
------ ------
$3,916 $5,230
====== ======

The Company incurred deferred finance costs aggregating $0.2 million and
$2.9 million in 1999 and 1998, respectively, primarily relating to the Company's
issuance of Senior Notes (Note 9) and unsecured revolving credit agreements
(Note 8). Amortization of deferred charges was $1.5 million, $1.5 million and
$1.4 million for the years ended December 1999, 1998 and 1997, respectively.

During 1998, the Company wrote off $0.9 million (none in 1999 and 1997) of
unamortized deferred finance costs in conjunction with the amendment and
restructuring of its Unsecured Revolving Credit Facility (Note 8) and the
repayment of certain secured indebtedness.

8. REVOLVING CREDIT FACILITIES

Since May 1995, the Company had maintained a $150 million unsecured
revolving credit facility from a syndicate of financial institutions for which
Bank One, NA serves as agent (the "Unsecured Credit Facility"). During 1998, the
Company amended and restructured this facility to increase the facility to $375
million, reduce the specified spread over LIBOR from 1.1% to 0.85%, modify
certain covenants and extend the term for an additional year, through April
2001. The Unsecured Credit Facility includes a competitive bid option for up to
50% of the facility amount. During the first quarter of 1998, the Company
recognized a non-cash extraordinary charge of approximately $0.9 million ($0.01
per share), relating to the write-off of unamortized deferred finance costs
associated with the former revolving credit facility. Borrowings under this
facility bear interest at variable rates based on prime rate or LIBOR plus a
specified spread (0.85% at December 31, 1999). The spread 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, net
worth, maintenance of unencumbered real estate assets and debt service coverage.
The facility also provides for a facility fee of 0.15% on the entire facility.
The Unsecured Credit Facility is used to finance the acquisition and development
of real estate, to provide working capital and for general corporate purposes.
At December 31, 1999 and 1998, total borrowings under this facility aggregated
$272.0 million and $132.0 million, respectively, with a weighted average
interest rate of 7.3% and 6.5%, respectively.

In September 1996, the Company entered into a three year $10 million
unsecured revolving credit facility with National City Bank (together with the
$375 million Unsecured Credit Facility, the "Revolving Credit Facilities"). In
June 1998, the Company renegotiated the terms of this facility to increase the
facility to $20 million and reduce the interest rate by 15 basis points. In
March 1999, the Company amended this facility to increase the available
borrowings to $25 million, to convert it to a secured revolving credit facility
and to extend the agreement through November 2002. This credit facility is
secured by certain partnership investments. The

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Company maintains the right to reduce this facility to $20 million and to
convert the borrowings to an unsecured revolving credit facility. Borrowings
under this facility bear interest at variable rates based on the prime rate or
LIBOR plus a specified spread (0.85% at December 31, 1999). The spread is
dependent on the Company's long term senior unsecured debt rating from Standard
and Poors and Moody's Investors Service. The Company is required to comply with
certain covenants relating to total outstanding indebtedness, secured
indebtedness, net worth, maintenance of unencumbered real estate assets and debt
service coverage. The facility also provides for commitment fees of 0.15% on the
unused credit amount. At December 31, 1998, there were no borrowings outstanding
under this facility. At December 31, 1999, total borrowings under this facility
aggregated $18.8 million with a weighted average interest rate of 7.3%.

Total fees paid by the Company on its revolving credit facilities in 1999,
1998 and 1997 aggregated approximately $0.6 million, $0.5 million and $0.3
million, respectively.

9. FIXED RATE SENIOR NOTES

The following is a summary of the Company's outstanding unsecured fixed
rate senior notes:

DECEMBER 31,
--------------------
1999 1998
-------- --------

Unsecured Fixed Rate Senior Notes (1).................. $517,470 $517,383
Pass-Through Asset Trust Securities (2)................ 74,841 74,771
-------- --------
$592,311 $592,154
======== ========

- ---------------

(1) Two of the senior notes were issued at a discount. The unamortized discount
aggregated $0.2 million and $0.3 million at December 31, 1999 and 1998,
respectively. The effective interest rates of these notes range from 6.65%
to 7.67% per annum.

(2) In March 1997, the Company issued, through a grantor trust, $75 million of
Pass-Through Asset Trust Securities (PATS), due March 2002, at a discount to
99.53%. These certificates are secured by fifteen year notes maturing March
2012, issued by the Company to the trust. The trust sold an option which
enables the option holder to re-market the certificates upon maturity in
March 2002. Simultaneously with the sale of the certificates, the trust
purchased the notes from the Company for a premium in the amount of the
option payment. This premium, $1.2 and $1.3 million at December 31, 1999 and
1998, respectively, is being amortized over the fifteen year life of the
notes and is included in other liabilities. If the option holder does not
elect to remarket the certificates, then they become due and payable in
March 2002. Interest is paid semi-annually in arrears on March 15 and
September 15. These notes have a coupon interest rate of 7.13% per annum.

The above fixed rate senior notes have maturities ranging from May 2000 to
July 2018. Interest rates ranged from approximately 6.58% to 7.625% (averaging
7.2% at December 31, 1999 and 1998). These notes may not be redeemed by the
Company prior to maturity and will not be subject to any sinking fund. The fixed
rate senior notes were issued pursuant to an indenture dated May 1, 1994 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 on May 15 and November 15.

10. SUBORDINATED CONVERTIBLE DEBENTURES

In August 1994, the Company issued, through an underwritten offering, $60
million of unsecured subordinated convertible debentures ("Debentures"). At
their maturity, the remaining balance of $40.0 million was repaid on August 15,
1999. The Debentures bore interest at 7% per annum and interest was paid semi-

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

annually. The Debentures were convertible at anytime prior to maturity into
common shares at a conversion price of $16.6875 per share.

Debentures in the principal amount of $6.8 million were converted into
approximately 0.4 million common shares during 1998. In addition, upon
conversion of the debentures, approximately $0.1 of unamortized debenture issue
costs were charged to additional paid-in-capital during 1998 (none in 1999).

11. MORTGAGES PAYABLE AND SCHEDULED PRINCIPAL REPAYMENTS

At December 31, 1999, mortgages payable, collateralized by certain notes
receivable, investments and real estate with a net book value of approximately
$566.6 million and related tenants leases, are generally due in monthly
installments of principal and/or interest and mature at various dates through
2027. Interest rates ranged from approximately 5.25% to 9.75% (averaging 8.3% at
December 31, 1999 and 1998). Variable rate debt obligations, included in
mortgages payable at December 31, 1999 and 1998, totaled approximately $110.6
million and $32.2 million, respectively. Interest rates on the variable rate
debt averaged 7.3% and 6.3% at December 31, 1999 and 1998, respectively.

As of December 31, 1999, the scheduled principal payments of Revolving
Credit Facilities, fixed rate senior notes and mortgages payable for the next
five years and thereafter are as follows:

YEAR AMOUNT
---- ----------

2000 $ 183,218
2001 372,168
2002 135,308
2003 36,665
2004 70,883
Thereafter 353,809
----------
$1,152,051
==========

Principal payments in the year 2001 and 2002 include $272.0 million and
$18.8 million, respectively, associated with the maturing of the Revolving
Credit Facilities.

Principal payments in the year 2002 assume that the PATS option holder
(Note 9) will not exercise the option to re-market the certificates and the
trust will therefore put the certificates to the Company to finance the
reacquisition of the PATS at maturity.

12. 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 maturities. The
carrying amount of straight-line rents receivable does not materially differ
from their fair market value.

Notes receivable and advances to affiliates

The fair value is estimated by discounting the current rates at which
similar loans would be made. At December 31, 1999 and 1998, the carrying amounts
reported in the balance sheet approximate fair value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Debt

The carrying amounts of the Company's borrowings under its Revolving Credit
Facilities approximate fair value because such borrowings are at variable rates.
The fair value of the fixed rate senior notes was based on borrowings with a
similar remaining maturity based on the Company's estimated interest rate spread
over the applicable treasury rate. Fair value of the mortgages payable was
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. Fair value of the Debentures was determined based on
their closing price as of December 31, 1998, as reported by their New York Stock
Exchange.

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, 1999 and 1998, with carrying values
that are different than estimated fair values are summarized as follows (in
thousands):

1999 1998
----------------------------- -----------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
--------------- ---------- --------------- ----------

Fixed Rate Senior Notes............... $592,311 $565,871 $592,154 $568,624
Mortgages payable..................... 268,965 273,343 236,262 247,009
Debentures............................ -- -- 40,065 41,167
-------- -------- -------- --------
$861,276 $839,214 $868,481 $856,800
======== ======== ======== ========

See Note 3 for a description of the Company's funding commitment to its minority
equity investment. The Company intends to continuously monitor and actively
manage interest costs on its variable rate debt portfolio. The Company may, from
time to time, enter into interest rate hedge agreements to manage interest costs
and risks associated with changing interest rates. The Company did not enter
into any such agreements during 1998 or 1999.

13. MINORITY EQUITY INTERESTS, PREFERRED OPERATING PARTNERSHIP MINORITY
INTERESTS, OPERATING PARTNERSHIP MINORITY INTERESTS, PREFERRED SHARES AND
COMMON SHARES

Minority Equity Interests

In 1998, the Company acquired, in conjunction with the acquisition of the
Hermes Properties, through a subsidiary partnership a majority ownership
interest in a shopping center and development parcels in Utah. The minority
partners' equity interest in this partnership is $8.2 million at December 31,
1999 and 1998. Minority equity interest expense includes approximately $0.1
million for the year ended December 31, 1999 and 1998 related to the minority
partner's share of net income.

In 1997, the Company acquired, through a subsidiary partnership, a majority
ownership interest in two adjacent shopping centers located in North Olmsted,
Ohio. At the date of acquisition the shopping centers were valued at $56.7
million. The Company contributed cash and assumed liabilities aggregating $40.4
million and the balance of $16.3 million was retained by the seller as a
minority equity interest. The minority equity interest owners were entitled to a
priority cash return of 6.5% per annum on their partnership capital account
balance, as defined in the partnership agreement. The priority cash return
during 1998 and 1997 aggregated approximately $0.2 million and $1.0 million,
respectively, and has been reflected as a charge to minority equity interest in
the consolidated statements of operations. In March 1998, the Company acquired
the minority equity interest for $16.3 million.

F-23
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Preferred Operating Partnership Minority Interests

In December 1998, the Company completed a private placement of $35 million
with a private investment partnership. This private placement was a combination
of preferred equity securities and a warrant to purchase approximately 1.6
million common shares of the Company at a price of $21 5/8 per share or 1.4
million Class D cumulative redeemable preferred shares at a price of $25 per
share. The Company recorded $32.9 million as preferred operating partnership
minority interests and $2.1 million to additional paid in capital in respect of
the warrant. The proceeds from this private placement were used to repay amounts
outstanding on the Revolving Credit Facilities. The preferred equity securities
are structured as 8.5% cumulative redeemable preferred units of DDRC Great
Northern L.P., a wholly owned, consolidated partnership. The preferred units are
redeemable without restriction by the investment partnership, for cash or common
shares at the option of the Company, and redeemable after five years by DDRC
Great Northern L.P. for cash or common shares at the investment partnership's
option. In addition, if the warrant is exercised, the Company has the right to
redeem the preferred units. Generally, the warrant has a perpetual term, but
will expire upon redemption of the preferred units.

In September 1999, the Company completed through a consolidated partnership
a $75 million private placement of 0.3 million, 8.875% cumulative perpetual
preferred "down-REIT" preferred partnership units, together with the above
preferred units ("Preferred Units"), with an institutional investor. The units
may be exchanged, under certain circumstances, for Class K, 8.875% cumulative
preferred shares of the Company. The units may be exchangeable into common
shares if the Company fails to pay dividends for six consecutive quarters. The
net proceeds of approximately $73.1 million were effectively used to repay
approximately $25.8 million in mortgage indebtedness and $40.1 million in
Debentures which matured on August 15, 1999. The balance of the proceeds was
used to repay variable rate borrowings under the Company's Revolving Credit
Facilities.

The Company reflected $5.2 million and $0.2 million as a charge to
preferred operating partnership minority interest in the consolidated statements
of operations relating to the accrued return associated with these Preferred
Units at December 31, 1999 and 1998, respectively.

Operating Partnership Minority Interests

At December 31, 1999 and 1998, the Company had 4,702,282 and 4,581,104 OP
Units outstanding, respectively. During 1999 and 1998 the Company acquired,
through subsidiary partnerships, a majority ownership interest in several
shopping centers. In conjunction with these acquisitions, the Company issued
139,276 and 4,563,210 OP Units in 1999 and 1998, respectively, which are
exchangeable, under certain circumstances and at the option of the Company, into
an equivalent number of the Company's common shares or for the equivalent amount
of cash. In 1999, at the option of the OP Unit holder, 18,098 of these OP Units
were exchanged and redeemed for cash by the Company. In connection with the
Company's purchase of certain shopping centers during 1998 and the related
issuance of approximately 3.6 million of the above mentioned OP Units, the
Company provided a guarantee of the value of the OP Units, which includes the
aggregate value derived from both the value of the OP Units and the
distributions received pursuant to the terms of the OP Units. During 1999, the
agreement was amended to provide for the settlement of the guarantee, if
applicable, in cash, at the option of the Company. The Company intends to settle
this guarantee in cash. The purchase of the related shopping center was recorded
at the estimated fair value of the guaranteed amounts. Through the date of the
amendment, contingently issuable OP Units are considered in weighted average
shares outstanding for purposes of determining diluted earnings per share (Note
18).

The OP Unit holders are entitled to receive distributions, per OP Unit,
equal to the per share distributions on the Company's common shares. During
1999, 1998 and 1997, the unit holders received distributions aggregating $6.5
million, $2.9 million and $.01 million, respectively, which has been reflected
as a charge to operating partnership minority interest in the consolidated
statements of operations.

F-24
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Preferred Shares

In August and September 1998, the Company sold 2,160,000 depositary shares
of 8.68% Class D Cumulative Redeemable Preferred Stock at $25 per depositary
share. In July 1998, the Company sold 4,000,000 depositary shares of 8.375%
Class C Cumulative Redeemable Preferred Stock at $25 per depositary share. The
Class A, B, C and D depositary shares represent 1/10 of a share of their
respective preferred class of shares. The Class A, Class B, Class C and Class D
depositary shares are not redeemable by the Company prior to November 15, 2000,
December 26, 2000, July 7, 2003 and August 20, 2003, respectively, except in
certain circumstances relating to the preservation of the Company's status as a
REIT. The aggregate net proceeds from the sale of the Class C and Class D shares
in 1998 of approximately $148.3 million were used to retire variable rate
indebtedness.

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 Board of Directors of the Company approved a two-for-one stock split to
shareholders of record on July 27, 1998. On August 3, 1998, each such
shareholder received one share of common stock for each share of common stock
held. This stock split was effected in the form of a stock dividend.
Accordingly, $2.9 million was transferred from additional paid in capital to
common stock, representing the stated value of additional shares issued.

Common share issuances over the three year period ended December 31, 1999
are as follows:

ISSUANCE NUMBER OF PRICE PER NET PROCEEDS
DATE SHARES SHARE (IN MILLIONS)
- -------- --------- --------- -------------

January 1997............................ 6,700,000 $18.3125 $115.8
June 1997............................... 2,600,000 $19.0725 49.4
September 1997.......................... 1,015,920 $19.59375 18.8
December 1997........................... 633,600 $18.875 11.3
April 1998.............................. 1,339,278 $18.86115 25.2
December 1998........................... 3,000,000 $18.5625 52.6

F-25
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The aggregate net proceeds of $273.1 million from the above offerings were
primarily used to repay amounts outstanding on Revolving Credit Facilities and
for general corporate purposes.

Stock Repurchase Program

In February and August 1999, the Company's Board of Directors authorized
the Officers of the Company to implement a common share repurchase program in
response to what the Company believed was a distinct undervaluation of the
Company's common shares in the public market. At December 31, 1999, treasury
stock recorded on the Company's consolidated balance sheet consisted of
1,860,300 common shares at a cost of $25.8 million.

14. TRANSACTIONS WITH RELATED PARTIES

In September 1999, the Company transferred its interest in a shopping
center under development in Coon Rapids, MN, a suburb of Minneapolis, to a joint
venture and simultaneously sold a 75% interest; the Company retained a 25%
interest. The remaining 75% interest is held by an entity owned in part by a
director of the Company. The Company was reimbursed $2.5 million by the joint
venture partner relating to development costs previously incurred on this
development. In addition, the Company received a development fee of
approximately $0.5 million in 1999 from the entity's joint venture partner.

In September 1998, the Company sold two properties to a principal of one of
the Company's joint venture partners. These properties aggregated approximately
33,000 square feet and were sold for approximately $4.4 million.

In June 1998, the Company acquired, from a partnership owned by the
Company's Chairman Emeritus and an officer of the Company, approximately 18
acres of land, adjacent to a shopping center owned through one of the Company's
joint ventures, at a purchase price of approximately $4.4 million.

In February 1998, the Company acquired a shopping center located in Idaho
Falls, Idaho from a limited partnership in which the Company's Chairman
Emeritus, the Chairman of the Board, and the Vice-Chairman of the Board owned,
in the aggregate, through a separate partnership, a 1% general partnership
interest. The shopping center aggregates approximately 0.2 million square feet
of Company GLA. The initial purchase price of the property was approximately
$6.5 million. In accordance with the purchase agreement, the Company paid an
earnout of $0.6 million upon the leasing of vacant space in the center in
January 1999.

In addition, in 1998 the Company paid to a partnership owned by the
Chairman Emeritus approximately $0.1 million for leasing/sales commissions
associated with leasing or sale of certain shopping center outlots. Also, the
Company paid approximately $0.1 million and $0.7 million in 1999 and 1998,
respectively, to a company owned by the brother-in-law of the Chairman of the
Board relating to fees and commissions on the acquisition of several shopping
centers in 1998.

The Chairman of the Board and Chief Executive Officer of the Company
received 100,000 stock options in his role as a Chairman of AIP's Board of
Trustees. All benefits associated with these options were assigned to the
Company.

In conjunction with the establishment of DDR's equity investment in certain
entities (described in Note 2 as entities in which the Company has a 95% and 81%
economic interest), the Company's Chairman of the Board and Chief Executive
Officer received voting shares. These entities were structured to meet certain
REIT qualification requirements.

During 1999 and 1998, the Company periodically advanced funds to the
Chairman of the Board and Chief Executive Officer in amounts up to $0.4 million.
The advances, which were made to reduce the outstanding principal balance, and
to prevent the sale of common shares in the Company from a margin account loan,
were outstanding for periods ranging from five to forty days with an interest
rate of LIBOR plus 0.85%. In addition,
F-26
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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

the Company has advanced approximately $0.2 million to certain officers of the
Company in connection with payroll taxes and relocation costs.

In 1998, the eleven members of the Company's executive committee, either
through the exercise of previously granted stock options or through the direct
purchase of unissued shares had acquired 974,663 of the Company's common shares.
The purchase of such shares was financed by a five-year personal loan program
aggregating approximately $15 million (at market interest rates) from Bank One,
NA. These loans are guaranteed by the Company. Four of these executives have
subsequently resigned from the Company. The Company has agreed to maintain the
guarantee. The individuals participating in the program are responsible for
repayment of these personal loans and have fully indemnified the Company should
the Company's guarantee be called upon.

The Company entered into a lease for office space owned by one of its
principal partners/ shareholders. General and administrative rental expense
associated with this office space aggregated $0.7 million, $0.7 million, and
$0.6 million for the years ended December 31, 1999, 1998 and 1997, respectively.

The Company continues to have management agreements with various
partnerships and performs certain administrative functions on behalf of entities
owned in part by a related party, in which management fee and leasing fee income
of $0.2 million, $0.2 million and $0.1 million was earned in 1999, 1998 and
1997, respectively. Transactions with the Company's equity affiliates have been
described in Notes 2 and 3.

15. COMMITMENTS AND CONTINGENCIES

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 which expire at various dates through 2070, with renewal
options. Space in the shopping centers is leased to tenants pursuant to
agreements which provide for terms ranging generally from one to 30 years and,
in some cases, for annual rentals which are subject to upward adjustments based
on operating expense levels, sales volume, or contractual increases as defined
in the lease agreements.

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 (in thousands):

2000 $ 185,797
2001 176,694
2002 164,945
2003 151,905
2004 141,054
Thereafter 1,106,383
----------
$1,926,778
==========

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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Scheduled minimum rental payments under the terms of all 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 (in thousands):

2000 $ 1,859
2001 1,859
2002 1,861
2003 1,862
2004 1,862
Thereafter 23,326
-------
$32,629
=======

There were no capital leases in which the Company is the lessee at December
31, 1999 or 1998.

In conjunction with the development and expansion of various shopping
centers, the Company has entered into agreements for the construction of the
shopping centers and acquisition of land aggregating approximately $3.5 million
as of December 31, 1999.

As discussed in Note 2, the Company has entered into several joint ventures
with various third party developers. In conjunction with the joint venture
agreements, the Company has agreed to fund the required capital associated with
approved development projects. The Company is entitled to receive a priority
return on capital advances at rates ranging from 10.5% to 12%.

As discussed in Notes 13 and 14 the Company has provided certain guarantees
relating to OP Units and officer loans, respectively.

16. OTHER INCOME

Other income was comprised of the following (in thousands):

FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- -------- --------

Temporary tenant rentals (kiosks)............... $ 774 697 830
Lease termination fees.......................... 3,425 1,621 2,830
Development fees................................ 4,064 1,722 1,003
Other........................................... 2,536 1,420 662
------- ------ ------
$10,799 $5,460 $5,325
======= ====== ======

17. BENEFIT PLANS

Stock Option and Other Equity Based Plans

Effective January 31, 1993, the Company established an incentive and
non-qualified stock option plan under which 4,113,806 of the Company's common
shares at December 31, 1999 were reserved for issuance to eligible employees.
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 ten years thereof (or, with respect to options granted to certain
shareholders, within five years thereof). Options granted under the plan
generally become exercisable on the year after the date of grant as to one third
of the optioned shares, with the remaining options being exercisable over the
following two-year period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

In 1997, the Board of Directors approved the issuance of 900,000 stock
options to the Company's Chief Executive Officer which vested upon issuance of
the options granted. 700,000 options were issued outside of a qualified plan.

In addition to the stock option plan described above, the Company granted
options for a total of 970,000 shares to its directors and certain officers who
are not employees of the Company. Such options were granted at the fair market
value on the date of grant. Options with respect to 50,000 shares were
exercisable one year from the date of grant, and options with respect to the
remaining 920,000 shares become exercisable one year after the date of grant as
to one third of the 920,000 shares with the remaining options being exercisable
over the following two-year period.

The following table reflects the stock option activity described above (in
thousands):

NUMBER OF OPTIONS
----------------------------------- WEIGHTED-AVERAGE
EXECUTIVE ----------------------------
EMPLOYEES DIRECTORS OFFICER EXERCISE PRICE FAIR VALUE
--------- --------- --------- -------------- ----------

Balance December 31, 1996........... 2,530 880 -- $13.87
Granted........................... 1,202 50 700 19.74 $3.15
Exercised......................... (254) (10) -- 12.52
Canceled.......................... (62) -- -- 16.59
------ --- --- ------
Balance December 31, 1997........... 3,416 920 700 16.18
Granted........................... 540 10 -- 19.95 $1.43
Exercised......................... (1,093) -- -- 13.31
Canceled.......................... (72) -- -- 18.44
------ --- --- ------
Balance December 31, 1998........... 2,791 930 700 17.32
Granted........................... 1,083 20 -- 15.42 $1.42
Exercised......................... (13) -- -- 14.48
Canceled.......................... (385) -- -- 19.49
------ --- --- ------
Balance December 31, 1999........... 3,476 950 700 $16.75
====== === === ======

The following table summarizes the characteristics of the options
outstanding at December 31, 1998 (in thousands):

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------- ------------------------------
OUTSTANDING WEIGHTED-AVERAGE EXERCISABLE
RANGE OF AS OF REMAINING WEIGHTED-AVERAGE AS OF WEIGHTED-AVERAGE
EXERCISE PRICES 12/31/99 CONTRACTUAL LIFE EXERCISE PRICE 12/31/99 EXERCISE PRICE
- --------------- ----------- ---------------- ---------------- ----------- ----------------

$11.00-$16.50 2,789 6.7 $14.52 2,017 $14.37
$16.50-$24.00 2,337 8.5 $19.42 1,572 $19.67
----- --- ------ ----- ------
5,126 7.5 $16.75 3,589 $16.69

As of December 31, 1999, 1998 and 1997, 3,589, 2,848 and 3,097 options (in
thousands), respectively were exercisable. The weighted average exercise prices
of these exercisable options were $16.69, $16.36 and $15.03 at December 31,
1999, 1998 and 1997, respectively.

During 1998, the Company's executive committee purchased approximately 0.9
million of the shares exercised (See Note 14).

In April 1996 and May 1998, the shareholders approved equity-based award
plans ("Award Plan") which provide for the grant, to employees of the Company,
of options to purchase commons shares of the Company,

F-29
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DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

rights to receive the appreciation in value of common shares, award of common
shares subject to restrictions on transfer, awards of common shares issuable in
the future upon satisfaction of certain conditions, rights to purchase common
shares and other awards based on common shares. Under the terms of the Award
Plans, awards may be granted with the respect to an aggregate of not more than
3,200,000 common shares.

In 1996, the Board of Directors approved a grant of 50,000 restricted
shares of common stock and 30,000 Performance Units to the Company's Chief
Executive Officer. In 1999, the Board of Directors approved a grant of 47,095
restricted shares of common stock to several executives of the Company. The
restricted stock granted in 1996 and 1999 vests in equal annual amounts through
the years 2000 and 2003, respectively, and had a weighted average fair value at
the date of a grant of $15.3125 and $13.8125, respectively, which was equal to
the market value of the Company's stock at the date of grant. The 30,000
Performance Units will be converted into common shares, ranging from 30,000
common shares to 200,000 common shares at the end of the five year period
(December 31, 2000) depending upon achievement of performance objectives. The
actual number of shares issued will be based upon the average annual total
shareholder return during the five year period ending December 31, 2000. During
1999, the Company reduced its accrual relating to the performance unit awards by
approximately $1.3 million. Expenses associated with restricted shares
aggregated by $0.3 million in 1999. During 1998 and 1997 approximately $0.8
million and $1.3 million, respectively, was charged to expense associated with
awards under the equity based award plan relating to restricted stock and
performance units.

The Company applies APB 25, "Accounting for Stock Issued to Employees" in
accounting for its plans. Accordingly, the Company does not recognize
compensation cost for stock options when the option exercise price equals or
exceeds the market value on the date of the grant. The compensation cost which
is required to be charged against income for all of the above mentioned plans
was $1.8 million, $1.8 million and $5.8 million for 1999, 1998 and 1997,
respectively. Had compensation cost for the Company's stock-based compensation
plans been determined based on the fair values of the options granted at the
grant dates, consistent with the method set forth in the Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation," the
Company's net income and earnings per share would have been as follows (dollars
in thousands, except per share data):

1999 1998 1997
------- ------- -------

Net income applicable to As reported $60,135 $57,969 $53,322
common shareholders Pro forma $58,370 $56,168 $47,515
Basic earnings As reported $ 0.99 $ 1.02 $ 1.03
per share Pro forma $ 0.96 $ 0.99 $ 0.92
Diluted earnings As reported $ 0.95 $ 0.98 $ 1.03
per share Pro forma $ 0.92 $ 0.95 $ 0.91

For purposes of the pro forma presentation, the fair value of each option
grant was estimated on the date of grant using the Black-Scholes options pricing
model using the following assumptions:

FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------

Risk free interest rate or
(range)........................ 5.6%-6.4% 4.7%-5.8% 5.8%-7.9%
Dividend yield (range)........... 8.5%-10.9% 6.4%-7.5% 6.8%-7.1%
8.1-10
Expected life (range)............ 7-10 years 6-10 years years
Expected volatility (range)...... 20.2%-31.8% 13.2%-19.1% 22.5%-31.7%

F-30
83
DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

401(k) Plan

Effective July 1, 1994, the Company adopted a 401(k) defined contribution
plan covering substantially all of the officers and employees of the Company
which permits participants to defer up to a maximum of 15% of their
compensation. The Company will match 25% of the employee's contribution up to a
maximum of 6% of an employee's annual compensation. The Company may also make
additional discretionary contributions. Employees' contributions are fully
vested and the Company's matching contributions vest 20% per year, including
service prior to the plan's effective date. Once an employee has been with the
Company five years, all matching contributions are fully vested. The Company's
contributions to the plan for the years ended December 31, 1999, 1998 and 1997
were made by the issuance of Company stock with a market value of $0.06 million,
$0.05 million, and $0.04 million, respectively. The 401(k) plan is fully funded
at December 31, 1999.

Elective Deferred Compensation Plan

Effective October 15, 1994, the Company adopted a non-qualified elective
deferred compensation plan for certain key executives which permits eligible
employees to defer up to 25% of their compensation. The Company will match 25%
of an employee's contribution up to a maximum of 6% of an employee's annual
compensation, after deducting contributions, if any, made in conjunction with
the Company's 401(k) plan. Through March 31, 1998, both the deferred and
matching contributions were made in Company performance units as well as the
gains and losses resulting from the fluctuation in the Company's quoted share
price. In April 1998, the Company elected to amend the investment elections
available to employees such that election of the Company's stock is no longer
permitted. Deferred compensation charged to expense related to an employee
contribution is fully vested and the Company's matching contribution vests 20%
per year, including service prior to the plan's effective date. Once an employee
has been with the Company five years, all matching contributions are fully
vested. The Company's contribution for the years ended December 31, 1999, 1998
and 1997 was $0.02 million, $0.06 million and $0.04 million, respectively. For
the years ended December 31, 1998 and 1997, this contribution included earnings
attributable to the employees' accounts. At December 31, 1999, 1998 and 1997,
deferred compensation under this plan aggregated $0.9 million, $0.5 million and
$0.3 million, respectively. The plan is fully funded at December 31, 1999.

F-31
84
DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

18. EARNINGS AND DIVIDENDS PER SHARE

Earnings Per Share (EPS) have been computed pursuant to the provisions of
Statement of Financial Accounting Standards No. 128. Further, as discussed in
Note 1, in 1998, the Company effected a stock split in the form of a stock
dividend in which each shareholder received one share of common stock for each
share of common stock held. All years presented have been restated to reflect
this stock split.

The following table provides a reconciliation of both income before
extraordinary item and the number of common shares used in the computations of
"basic" EPS, which utilized 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,
--------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)

Income before extraordinary item.......................... $87,397 $78,804 $67,522
Less: Preferred stock dividend............................ (27,262) (19,953) (14,200)
------- ------- -------
Basic EPS-Income before extraordinary item applicable to
common shareholders.................................... 60,135 58,851 53,322
Effect of dilutive share securities:
Operating partnership minority interests............... -- -- 10
Joint Venture Partnerships............................. -- (632) --
------- ------- -------
Diluted EPS-Income before extraordinary item applicable to
common shareholders plus assumed conversions........... $60,135 $58,219 $53,332
======= ======= =======
Number of Shares:
Basic - average shares outstanding........................ 60,985 56,949 51,760
Effect of dilutive securities:
Operating partnership minority interests............... -- -- 6
Joint venture partnerships and minority interests...... 2,246 1,056 --
Stock options.......................................... 138 499 352
Performance Units...................................... 70 -- --
Restricted stock....................................... 29 5 6
------- ------- -------
Diluted - average shares outstanding...................... 63,468 58,509 52,124
======= ======= =======
Per share amount:
Income before extraordinary item
Basic.................................................. $ 0.99 $ 1.03 $ 1.03
Diluted................................................ $ 0.95 $ 1.00 $ 1.03

Options to purchase 5,125,764, 4,420,981 and 5,036,412 shares of common
stock were outstanding at December 31, 1999, 1998 and 1997, respectively (Note
17), a portion of which has been reflected above using the treasury stock
method.

The weighted average contingently issuable OP units which are exchangeable,
in certain circumstances into common shares aggregated 2.2 million and 0.7
million for the year ended December 31, 1999 and 1998, respectively. The Company
intends to settle these contingently issuable OP Units in cash (Note 13).

Restricted shares totaling 47,676, 20,000 and 30,000, respectively, were
unvested at December 31, 1999, 1998 and 1997 and consequently, were not included
in the computation of basic EPS for all years presented (Note 17).

F-32
85
DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Performance Units issued in 1996, convertible into 30,000 to 200,000 common
shares of the Company, were not included in the computation of diluted EPS for
1998 and 1997 because the effect was antidilutive (Note 17).

Debentures, which were convertible prior to their August 1999 maturity into
common shares of the Company at a price of $16.6875, were not included in the
computation of diluted EPS for all years presented because the effect was
antidilutive (Note 10).

The conversion of the Company's joint venture partners' interest in several
joint ventures were not included in the computation of diluted EPS because the
effect was antidilutive, for all years presented, where applicable (Note 2)
except for the joint venture in Merriam, Kansas which was dilutive in 1998.
Significant estimates were utilized by the Company in the determination of fair
value for certain of the Company's joint ventures where the joint venture
partner has the right to convert its interest in the partnership to common
shares of the Company or cash, at the election of the Company (Note 2). These
estimates were used to determine the number of common shares assumed to be
issued by the Company upon conversion, for purposes of determining dilution, if
any. In 1999, the Company made the determination that they will settle these
conversions in cash.

The exchange into common stock of the minority interests were not included
in the computation of diluted EPS in all years presented because the effect of
assuming conversion was antidilutive (Note 13).

The redemption of the Preferred Units, including those exercisable through
the exercise of the warrant into common shares, was not included in the
computation of diluted EPS in 1999 and 1998 because the effect was antidilutive
or they were considered contingently issuable (Note 13).

Dividends declared per share for the years ended December 31, 1999, 1998
and 1997 are summarized as follows:

GROSS ORDINARY NON-TAXABLE CAPITAL GAIN TOTAL
1999 DIVIDENDS DATE PAID INCOME RETURN OF CAPITAL DISTRIBUTIONS DIVIDENDS
-------------- --------- -------------- ----------------- ------------- ---------

4th quarter 1998* 01/04/99 $ 0.08 $ -- $ -- $ 0.08*
1st quarter 04/05/99 0.35 -- -- 0.35
2nd quarter 07/02/99 0.35 -- -- 0.35
3rd quarter 10/04/99 0.35 -- -- 0.35
4th quarter** 01/06/00 0.08 -- -- 0.08**
------- ------- ------- -------
$ 1.21 $ -- $ -- $ 1.21
======= ======= ======= =======

GROSS ORDINARY NON-TAXABLE CAPITAL GAIN TOTAL
1998 DIVIDENDS DATE PAID INCOME RETURN OF CAPITAL DISTRIBUTIONS DIVIDENDS
-------------- --------- -------------- ----------------- ------------- ---------

1st quarter 03/31/98 $0.3199 $ -- $0.0075 $ .3275
2nd quarter 06/30/98 0.3199 -- 0.0075 .3275
3rd quarter 10/01/98 0.3199 -- 0.0075 .3275
4th quarter* 01/04/99 0.2459 -- 0.0060 .2516*
------- ------- ------- -------
$1.2056 $ -- $0.0285 $1.2341
======= ======= ======= =======

F-33
86
DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

GROSS ORDINARY NON-TAXABLE CAPITAL GAIN TOTAL
1997 DIVIDENDS DATE PAID INCOME RETURN OF CAPITAL DISTRIBUTIONS DIVIDENDS
-------------- --------- -------------- ----------------- ------------- ---------

1st quarter 03/31/97 $ 0.25 $ 0.055 $ 0.01 $ .315
2nd quarter 06/30/97 0.26 0.055 -- .315
3rd quarter 09/30/97 0.26 0.055 -- .315
4th quarter 12/30/97 0.25 0.055 0.01 .315
------- ------- ------- -------
$ 1.02 $ 0.22 $ 0.02 $ 1.26
======= ======= ======= =======

- ---------------

* A portion of the fourth quarter 1998 dividend paid on January 4, 1999 was
reported to shareholders in 1999, of which $0.2459 per share was reported as
ordinary income and $0.006 per share was reflected as capital gain
distributions for the year ended December 31, 1998.

** A portion of the fourth quarter 1999 dividend paid on January 6, 2000 will be
reported to shareholders in 2000, of which $0.08 per share was reported as
ordinary income for the year ended December 31, 1999.

19. SUBSEQUENT EVENTS

In February and March 2000, the Company initiated the purchase of 1,163,700
of its common shares on the open market for an aggregate purchase price of
approximately $13.7 million. The purchase of these shares was made in accordance
with the Company's share repurchase program approved by the Company's Board of
Directors.

In February 2000, the Company sold a shopping center in Stone Mountain,
Georgia, a suburb of Atlanta, for approximately $1.8 million. The proceeds from
this sale were used to repay variable rate debt under the Company's revolving
credit facilities.

In February 2000, the Company formed a joint venture with DRA Advisors,
Inc. whereby the Company contributed a wholly owned property in Phoenix, Arizona
valued at approximately $26.7 million and related mortgage debt of $18.0 million
and in exchange received a 50% equity ownership interest in the joint venture.
The cash proceeds to the Company of approximately $4.0 million were used to
repay variable rate debt under the Company's revolving credit facilities. The
Company will continue to manage and operate the center and receive fees for such
services.

In February 2000, the Company entered into an agreement to sell 60% of its
50% joint venture interest in the Community Centers Joint Venture to DRA
Advisors, Inc. The first closing occurred in February 2000 with various closing
dates scheduled throughout March 2000. The Company's ownership in the joint
venture subsequent to this transaction will be 20% with funds advised by DRA
Advisors, Inc. owning 80%. The Company will continue to be responsible for the
day-to-day management of the shopping centers and receive fees for such
services.

F-34
87
DEVELOPERS DIVERSIFIED REALTY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

20. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table sets forth the quarterly results of operations for the
years ended December 31, 1999 and 1998 (in thousands, except per share amounts):

FIRST SECOND THIRD FOURTH TOTAL
------- ------- ------- ------- --------

1999:
Revenues from operations................ $65,138 $64,314 $66,226 $68,255 $263,933
Income before equity in net income of
joint ventures, minority equity
investment, loss on diposition of real
estate, minority interests and
extraordinary item.................... 18,027 18,738 19,488 17,543 73,796
Income before extraordinary item........ 21,868 21,142 22,636 21,751 87,397
Net income.............................. 21,868 21,142 22,636 21,751 87,397
Net income applicable to common
shareholders.......................... 15,053 14,326 15,821 14,935 60,135
Basic:
Income before extraordinary item per
common share....................... $ 0.25 $ 0.23 $ 0.26 $ 0.25 $ 0.99
Net income per common share........... $ 0.25 $ 0.23 $ 0.26 $ 0.25 $ 0.99
Weighted average number of shares..... 61,302 61,311 61,327 60,006 60,985
Diluted:
Income before extraordinary item per
common share....................... $ 0.24 $ 0.22 $ 0.25 $ 0.24 $ 0.95
Net income per common share........... $ 0.24 $ 0.22 $ 0.25 $ 0.24 $ 0.95
Weighted average number of shares..... 64,016 63,992 64,448 62,626 63,468

1998:
Revenues from operations................ $49,539 $52,981 $63,395 $62,253 $228,168
Income before equity in net income of
joint ventures and minority equity
investment, gain on disposition of
real estate, minority interests and
extraordinary item.................... 15,965 15,765 17,475 19,089 68,294
Income before extraordinary item........ 18,015 19,137 20,712 20,940 78,804
Net income.............................. 17,133 19,137 20,712 20,940 77,922
Net income applicable to common
shareholders.......................... 13,583 15,587 14,702 14,097 57,969
Basic:
Income before extraordinary item per
common share....................... $ 0.26 $ 0.27 $ 0.26 $ 0.24 $ 1.03
Net income per common share........... $ 0.25 $ 0.27 $ 0.26 $ 0.24 $ 1.02
Weighted average number of shares..... 55,500 56,703 57,257 58,302 56,949
Diluted:
Income before extraordinary item per
common share....................... $ 0.25 $ 0.27 $ 0.25 $ 0.23 $ 1.00
Net income per common share........... $ 0.24 $ 0.27 $ 0.25 $ 0.23 $ 0.98
Weighted average number of shares..... 56,732 58,003 58,765 60,286 58,509

F-35
88

SCHEDULE II

DEVELOPERS DIVERSIFIED REALTY CORPORATION

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)

BALANCE AT BALANCE AT
BEGINNING OF CHARGED END OF
YEAR TO EXPENSE DEDUCTIONS YEAR
------------ ---------- ---------- ----------

Year ended December 31, 1999
Allowance for uncollectible accounts......... $3,688 $2,923 $1,960 $4,651
====== ====== ====== ======
Year ended December 31, 1998
Allowance for uncollectible accounts......... $3,678 $2,196 $2,186 $3,688
====== ====== ====== ======
Year ended December 31, 1997
Allowance for uncollectible accounts......... $2,406 $1,433 $ 161 $3,678
====== ====== ====== ======

F-36
89

SCHEDULE III

DEVELOPERS DIVERSIFIED REALTY CORPORATION

REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 1999

INITIAL COST TOTAL COST(A)
----------------------------- ----------------------------------------------
BUILDINGS & BUILDINGS &
LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL
------------ -------------- ------------ ------------ -------------- --------------

Brandon, FL............ $ 0 $ 4,111,281 $ 0 $ 0 $ 4,124,943 $ 4,124,943
Stow, OH............... 1,035,856 9,028,257 0 992,520 20,536,731 21,529,251
Fern Park, FL
(Orlando)............ 445,852 302,755 97,300 445,852 409,103 854,955
Eastlake, OH........... 40,000 141,000 0 40,000 144,188 184,188
Highland Hts., OH...... 3,987,052 7,895,991 0 3,987,052 13,627,089 17,614,141
Westlake, OH........... 424,225 3,802,863 203,235 424,225 4,956,799 5,381,024
Waterbury, CT.......... 0 3,048,300 0 0 3,154,101 3,154,101
Zanesville, OH......... 0 619,023 0 0 619,023 619,023
E. Norriton, PA........ 80,408 4,697,718 233,380 80,408 8,121,365 8,201,773
Palm Harbor, FL........ 1,136,915 4,089,138 0 1,136,915 4,166,380 5,303,295
Tarpon Springs, FL..... 248,067 7,381,640 80,859 248,067 11,100,461 11,348,528
Bayonet Pt., FL........ 2,112,566 8,180,960 127,530 2,254,649 8,404,575 10,659,224
Starkville, MS......... 1,271,081 8,209,214 0 1,112,263 9,648,182 10,760,445
Tupelo, MS............. 2,282,000 14,978,722 0 2,282,000 15,634,922 17,916,922
Jacksonville, FL....... 3,005,420 9,425,063 0 3,027,805 9,468,332 12,496,137
Stone Mountain, GA..... 460,471 3,018,074 21,890 460,471 3,063,874 3,524,345
Brunswick, MA.......... 3,836,358 15,459,460 0 3,836,358 17,802,159 21,638,517
Salisbury, MD.......... 1,073,034 6,215,570 0 1,073,034 6,215,570 7,288,604
Atlanta, GA............ 475,360 9,373,552 0 475,360 9,604,732 10,080,092
Erie, PA............... 10,880,479 19,200,609 0 6,628,614 40,588,696 47,217,310
Erie, PA............... 1 2,563,770 12,990 1 3,094,286 3,094,287
Chillicothe, OH........ 42,857 2,549,287 2,200 1,266,066 11,799,780 13,065,846
Ocala, FL.............. 26,800 351,065 25,028 26,800 382,329 409,129
Tampa, FL (Waters)..... 4,105,230 6,640,240 324,071 3,905,230 7,253,317 11,158,547
Macedonia, OH.......... 4,391,693 10,885,124 0 4,391,693 10,885,124 15,276,817
Winchester, VA......... 618,075 13,903,078 0 618,075 18,805,820 19,423,895
Huber Heights, OH...... 757,422 14,468,512 1,000 757,422 14,584,437 15,341,859
Lebanon, OH............ 651,025 911,178 30,993 651,025 1,049,306 1,700,331
Wilmington, OH......... 156,975 1,615,646 50,575 156,975 1,751,709 1,908,684
Hillsboro, OH.......... 79,579 1,984,831 0 79,579 1,986,444 2,066,023
Canton, OH Phase II.... 5,672,187 18,389,505 0 6,393,685 18,389,505 24,783,190
Xenia, OH.............. 948,202 3,938,138 0 673,202 6,052,627 6,725,829
Boardman, OH........... 9,025,281 27,982,812 0 8,152,281 27,982,812 36,135,093
Solon, OH.............. 6,220,200 7,454,151 0 6,220,200 20,001,302 26,221,502
Cincinnati, OH......... 2,399,250 11,238,105 172,198 2,399,250 12,412,732 14,811,982

TOTAL COST, NET DEPRECIABLE DATE OF
ACCUMULATED OF ACCUMULATED LIVES CONSTRUCTION(C)
DEPRECIATION DEPRECIATION ENCUMBRANCES (YEARS)(1) ACQUISITION(A)
------------ --------------- ------------ ----------- ---------------

Brandon, FL............ $ 3,770,590 $ 354,353 $ 0 S/L 30 1972(C)
Stow, OH............... 3,022,034 18,507,217 0 S/L 30 1969(C)
Fern Park, FL
(Orlando)............ 278,698 576,257 0 S/L 30 1970(C)
Eastlake, OH........... 125,060 59,128 0 S/L 30 1971(C)
Highland Hts., OH...... 1,648,102 15,966,039 0 S/L 31.5 1995(C)
Westlake, OH........... 3,280,808 2,100,216 0 S/L30 1974(C)
Waterbury, CT.......... 2,704,229 449,872 0 S/L 30 1973(C)
Zanesville, OH......... 186,695 432,328 0 S/L 31.5 1990(C)
E. Norriton, PA........ 3,912,424 4,289,349 0 S/L 30 1975(C)
Palm Harbor, FL........ 647,220 4,656,075 0 S/L 31.5 1995(A)
Tarpon Springs, FL..... 6,353,074 4,995,454 0 S/L 30 1974(C)
Bayonet Pt., FL........ 4,044,102 6,615,122 5,327,208 S/L 30 1985(C)
Starkville, MS......... 1,537,199 9,223,246 0 S/L 31.5 1994(A)
Tupelo, MS............. 2,552,940 15,363,982 0 S/L 31.5 1994(A)
Jacksonville, FL....... 1,436,999 11,059,138 0 S/L 31.5 1995(A)
Stone Mountain, GA..... 2,719,972 804,373 0 S/L 30 1973(C)
Brunswick, MA.......... 1,345,335 20,293,182 0 S/L 30 1973(C)
Salisbury, MD.......... 49,615 7,238,989 0 S/L 31.5 1999(A)
Atlanta, GA............ 1,816,240 8,263,852 0 S/L 31.5 1994(A)
Erie, PA............... 4,323,324 42,893,986 0 S/L 31.5 1995(C)
Erie, PA............... 2,237,422 856,865 0 S/L 30 1973(C)
Chillicothe, OH........ 2,474,611 10,591,235 0 S/L 30 1974(C)
Ocala, FL.............. 327,594 81,535 0 S/L 30 1974(C)
Tampa, FL (Waters)..... 2,140,390 9,018,157 0 S/L 31.5 1990(C)
Macedonia, OH.......... 214,545 15,062,272 0 S/L 31.5 1998(C)
Winchester, VA......... 3,068,730 16,355,165 0 S/L 31.5 1993(A)
Huber Heights, OH...... 2,983,866 12,357,993 0 S/L 31.5 1993(A)
Lebanon, OH............ 303,208 1,397,123 0 S/L 31.5 1993(A)
Wilmington, OH......... 1,235,912 672,772 0 S/L 30 1977(C)
Hillsboro, OH.......... 1,356,786 709,237 0 S/L 30 1979(C)
Canton, OH Phase II.... 973,263 23,809,927 0 S/L 31.5 1995(A)
Xenia, OH.............. 918,242 5,807,587 0 S/L 31.5 1994(A)
Boardman, OH........... 2,148,843 33,986,250 0 S/L 31.5 1997(A)
Solon, OH.............. 429,063 25,792,439 0 S/L 31.5 1998(C)
Cincinnati, OH......... 2,595,297 12,216,685 0 S/L 31.5 1993(A)

F-37
90

INITIAL COST TOTAL COST(A)
----------------------------- ----------------------------------------------
BUILDINGS & BUILDINGS &
LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL
------------ -------------- ------------ ------------ -------------- --------------

Bedford, IN............ $ 706,282 $ 8,424,532 $ 5,750 $ 1,066,656 $ 10,015,954 $ 11,082,610
Watertown, SD.......... 62,712 6,442,712 441,927 62,712 8,658,718 8,721,430
Connersville, IN....... 539,720 6,457,710 0 539,720 6,551,043 7,090,763
Ashland, OH............ 209,500 2,272,624 0 209,500 2,388,684 2,598,184
Pensacola, FL.......... 1,804,641 4,010,290 273,372 608,640 3,508,964 4,117,604
W. 65th Cleveland,
OH................... 90,120 1,463,076 15,000 90,120 1,541,540 1,631,660
Los Alamos, NM......... 725,000 3,499,950 30,336 725,000 4,608,662 5,333,662
North Olmsted, OH...... 12,209,206 45,008,616 13,971 12,209,206 60,214,909 72,424,115
Tampa, FL (Dale)....... 4,268,673 5,368,147 204,666 4,268,673 6,067,386 10,336,059
Waynesville, NC........ 431,910 8,088,668 131,096 431,910 8,155,867 8,587,777
Ahoskie, NC............ 269,530 7,775,856 3,168 269,530 7,803,524 8,073,054
Pulaski, VA............ 528,075 6,395,809 2,000 528,075 6,405,435 6,933,510
St. Louis, MO
(Sunset)............. 10,496,401 31,530,669 0 10,742,955 32,401,313 43,144,268
St. Louis, MO
(Sunset)............. 2,294,428 6,873,734 0 2,461,466 7,377,270 9,838,736
St. Louis, MO
(Brentwood).......... 10,627,899 32,053,255 0 10,018,174 31,561,791 41,579,965
Cedar Rapids, IA....... 4,219,246 12,697,187 0 4,219,246 12,943,354 17,162,600
St. Louis, MO
(Olympic)............ 2,775,280 8,369,712 0 2,775,280 8,392,525 11,167,805
St. Louis, MO
(Gravois)............ 1,336,311 4,049,826 0 1,524,602 4,705,118 6,229,720
St. Louis, MO
(Morris)............. 0 2,048,384 0 0 2,050,805 2,050,805
St. Louis, MO
(Keller)............. 1,632,451 4,936,304 0 1,632,451 4,938,725 6,571,176
St. Louis, MO
(Southtowne)......... 6,048,127 0 0 6,050,548 0 6,050,548
St. Louis, MO.......... 1,405,214 4,254,663 0 1,405,214 4,282,206 5,687,420
St. Louis, MO
(American)........... 243,968 770,897 0 514,311 555,530 1,069,841
Aurora, OH............. 832,436 7,560,047 0 832,436 7,560,047 8,392,483
Worthington, MN........ 373,943 6,404,291 440,740 373,943 7,762,132 8,136,075
Harrisburg, IL......... 550,100 7,619,281 0 550,100 7,891,169 8,441,269
Idaho Falls, ID........ 1,301,527 5,703,375 0 1,418,042 5,703,375 7,121,417
Mt. Vernon, IL......... 1,789,009 9,398,696 111,000 1,789,009 13,790,757 15,579,766
Fenton, MO............. 413,993 4,243,854 475,714 430,168 6,678,868 7,109,036
Melbourne, FL.......... 1 3,084,819 116,638 1 3,202,449 3,202,450
Simpsonville, SC....... 430,800 6,563,154 0 430,800 6,562,404 6,993,204
Camden, SC............. 627,100 7,519,161 6,500 2,917,286 16,920,666 19,837,952
Union, SC.............. 684,750 7,629,275 500 684,750 7,648,975 8,333,725
N. Charleston, SC...... 910,840 11,346,348 1,000 1,081,462 14,921,446 16,002,908
S. Anderson, SC........ 1,365,600 6,117,482 13,170 1,365,600 6,150,152 7,515,752
Anderson, SC........... 204,094 939,733 0 204,094 939,733 1,143,827
Orangeburg, SC......... 317,934 1,692,836 0 317,934 3,373,051 3,690,985
Mt. Pleasant, SC....... 2,583,887 10,469,891 0 2,589,300 10,447,517 13,036,817
Columbia, SC........... 600,000 3,262,624 0 600,000 3,262,624 3,862,624
Sault Ste. Marie, MI... 1,826,454 13,709,705 0 1,826,454 15,029,388 16,855,842
Cheboygan, MI.......... 126,670 3,612,242 0 126,670 3,771,874 3,898,544
Grand Rapids, MI....... 1,926,389 8,039,411 0 1,926,389 8,218,211 10,144,600

TOTAL COST, NET DEPRECIABLE DATE OF
ACCUMULATED OF ACCUMULATED LIVES CONSTRUCTION(C)
DEPRECIATION DEPRECIATION ENCUMBRANCES (YEARS)(1) ACQUISITION(A)
------------ --------------- ------------ ----------- ---------------

Bedford, IN............ $ 1,795,692 $ 9,286,918 $ 0 S/L 31.5 1993(A)
Watertown, SD.......... 5,047,751 3,673,679 0 S/L 30 1977(C)
Connersville, IN....... 1,271,399 5,819,364 0 S/L 31.5 1993(A)
Ashland, OH............ 1,756,197 841,987 0 S/L 30 1977(C)
Pensacola, FL.......... 56,970 4,060,634 0 S/L 30 1988(C)
W. 65th Cleveland,
OH................... 1,121,389 510,271 0 S/L 30 1977(C)
Los Alamos, NM......... 1,607,212 3,726,450 0 S/L 30 1978(C)
North Olmsted, OH...... 4,806,468 67,617,647 0 S/L 31.5 1997(A)
Tampa, FL (Dale)....... 1,697,053 8,639,006 0 S/L 31.5 1990(C)
Waynesville, NC........ 1,774,358 6,813,419 0 S/L 31.5 1993(A)
Ahoskie, NC............ 1,459,105 6,613,949 0 S/L 31.5 1994(A)
Pulaski, VA............ 1,361,033 5,572,477 0 S/L 31.5 1993(A)
St. Louis, MO
(Sunset)............. 1,522,786 41,621,482 0 S/L 31.5 1998(A)
St. Louis, MO
(Sunset)............. 338,053 9,500,683 0 S/L 31.5 1998(A)
St. Louis, MO
(Brentwood).......... 1,543,623 40,036,342 0 S/L 31.5 1998(A)
Cedar Rapids, IA....... 613,301 16,549,299 11,268,121 S/L 31.5 1998(A)
St. Louis, MO
(Olympic)............ 401,770 10,766,035 4,814,955 S/L 31.5 1998(A)
St. Louis, MO
(Gravois)............ 206,016 6,023,704 2,927,061 S/L 31.5 1998(A)
St. Louis, MO
(Morris)............. 95,430 1,955,375 0 S/L 31.5 1998(A)
St. Louis, MO
(Keller)............. 234,745 6,336,431 2,650,554 S/L 31.5 1998(A)
St. Louis, MO
(Southtowne)......... 0 6,050,548 0 S/L 31.5 1998(A)
St. Louis, MO.......... 202,751 5,484,669 3,433,509 S/L 31.5 1998(A)
St. Louis, MO
(American)........... 31,608 1,038,233 0 S/L 31.5 1998(A)
Aurora, OH............. 582,482 7,810,001 0 S/L 31.5 1995(C)
Worthington, MN........ 4,581,038 3,555,037 0 S/L 30 1977(C)
Harrisburg, IL......... 1,440,315 7,000,954 0 S/L 31.5 1994(A)
Idaho Falls, ID........ 321,599 6,799,818 0 S/L 31.5 1998(A)
Mt. Vernon, IL......... 2,155,267 13,424,499 0 S/L 31.5 1993(A)
Fenton, MO............. 2,822,518 4,286,518 0 S/L 30 1983(A)
Melbourne, FL.......... 2,205,578 996,872 0 S/L 30 1978(C)
Simpsonville, SC....... 1,250,105 5,743,099 0 S/L 31.5 1994(A)
Camden, SC............. 1,673,826 18,164,126 0 S/L 31.5 1993(A)
Union, SC.............. 1,593,237 6,740,488 0 S/L 31.5 1993(A)
N. Charleston, SC...... 2,566,733 13,436,175 0 S/L 31.5 1993(A)
S. Anderson, SC........ 1,154,487 6,361,265 0 S/L 31.5 1994(A)
Anderson, SC........... 141,707 1,002,120 0 S/L 31.5 1995(A)
Orangeburg, SC......... 304,670 3,386,315 0 S/L 31.5 1995(A)
Mt. Pleasant, SC....... 1,578,047 11,458,770 6,542,612 S/L 31.5 1995(A)
Columbia, SC........... 431,564 3,431,060 0 S/L 31.5 1995(A)
Sault Ste. Marie, MI... 2,399,638 14,456,204 6,367,770 S/L 31.5 1994(A)
Cheboygan, MI.......... 700,893 3,197,651 0 S/L 31.5 1993(A)
Grand Rapids, MI....... 1,038,987 9,105,613 0 S/L 31.5 1995(A)

F-38
91

INITIAL COST TOTAL COST(A)
----------------------------- ----------------------------------------------
BUILDINGS & BUILDINGS &
LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL
------------ -------------- ------------ ------------ -------------- --------------

Detroit, MI............ $ 6,737,895 $ 26,988,238 $ 27,131 $ 6,737,895 $ 27,021,955 $ 33,759,850
Houghton, MI........... 439,589 7,300,952 1,820,772 439,589 9,752,476 10,192,065
Bad Axe, MI............ 183,850 3,647,330 0 183,850 4,040,030 4,223,880
Gaylord, MI............ 269,900 8,727,812 2,250 269,900 9,092,177 9,362,077
Howell, MI............. 331,500 11,938,263 750 331,500 12,166,940 12,498,440
Mt. Pleasant, MI....... 766,950 7,768,538 20,340 766,950 11,490,772 12,257,722
Elyria, OH............. 352,295 5,692,642 0 352,295 5,692,642 6,044,937
Midvalley, UT.......... 25,661,553 56,759,311 0 25,661,601 58,084,327 83,745,928
Taylorsville, UT....... 24,327,057 53,686,013 0 24,327,057 53,824,030 78,151,087
Orem, UT............... 5,428,428 12,258,654 0 5,428,428 12,711,290 18,139,718
Logan, UT.............. 773,540 1,651,355 0 773,540 1,652,339 2,425,879
Salt Lake City, UT..... 986,363 2,132,099 0 986,363 2,133,467 3,119,830
Riverdale, UT.......... 15,845,056 36,478,636 0 15,845,056 41,899,259 57,744,315
Bemidji, MN............ 442,031 8,228,731 500,161 442,031 9,130,201 9,572,232
The Hermes Building.... 2,801,326 5,996,621 0 2,801,326 5,997,605 8,798,931
Ogden, UT.............. 3,619,570 7,715,892 0 3,619,570 7,730,243 11,349,813
Las Vegas, NV.......... 2,142,168 4,561,986 0 2,142,168 4,574,348 6,716,516
Rapid City, SD......... 757,928 1,624,575 0 757,928 1,636,955 2,394,883
Cape Coral, FL......... 1,286,628 2,548,149 149,507 1,286,628 5,236,935 6,523,563
Trindad, CO............ 411,329 2,578,930 197,546 411,329 2,741,678 3,153,007
Hazard, KY............. 402,563 3,271,343 296,745 402,563 3,573,888 3,976,451
Florence, KY........... 490,797 1,967,928 0 490,797 1,974,053 2,464,850
Birmingham, AL......... 3,726,122 13,973,590 0 3,726,122 16,237,170 19,963,292
Birmingham, AL......... 10,572,916 26,002,258 0 11,434,040 33,820,726 45,254,766
Huntsville, AL......... 600,000 3,058,100 0 600,000 3,070,253 3,670,253
Jacksonville, NC....... 521,111 3,998,798 172,993 390,833 6,974,766 7,365,599
Ormond Beach, FL....... 1,048,380 15,812,069 3,875 1,048,380 16,182,990 17,231,370
Alamosa, CO............ 161,479 1,034,465 210,958 161,479 1,224,493 1,385,972
Wilmington, NC......... 4,785,052 16,851,571 1,182,775 4,286,616 24,075,483 28,362,099
Berlin, VT............. 858,667 10,948,064 23,935 866,217 13,710,093 14,576,310
Brainerd, MN........... 703,410 9,104,117 271,802 1,182,018 13,340,649 14,522,667
Spring Hill, FL........ 1,083,851 4,816,166 265,762 2,095,974 8,012,882 10,108,856
Tiffin, OH............. 432,292 5,907,856 434,761 432,292 6,805,978 7,238,270
Toledo, OH............. 2,490,543 10,582,588 0 2,490,543 10,583,789 13,074,332
Toledo, OH............. 6,201,887 11,644,513 0 6,201,887 11,644,513 17,846,400
Denver, CO............. 7,833,069 35,550,405 0 7,833,069 49,698,754 57,531,823
Dickinson, ND.......... 57,470 6,864,237 354,820 51,148 7,561,167 7,612,315
West Pasco, FL......... 1,422,383 6,552,470 8,500 1,357,699 6,408,848 7,766,547
Marianna, FL........... 1,496,347 3,499,835 129,855 1,496,347 3,641,490 5,137,837
Hutchinson, MN......... 401,502 5,510,326 656,937 426,502 6,331,797 6,758,299
New Bern, NC........... 780,029 8,204,036 71,587 1,049,710 12,928,223 13,977,933
Highland, IN........... 4,003,400 20,101,245 0 4,003,400 22,943,287 26,946,687

TOTAL COST, NET DEPRECIABLE DATE OF
ACCUMULATED OF ACCUMULATED LIVES CONSTRUCTION(C)
DEPRECIATION DEPRECIATION ENCUMBRANCES (YEARS)(1) ACQUISITION(A)
------------ --------------- ------------ ----------- ---------------

Detroit, MI............ $ 1,577,352 $ 32,182,498 $17,965,917 S/L 31.5 1998(A)
Houghton, MI........... 6,496,941 3,695,124 2,198,376 S/L 30 1980(C)
Bad Axe, MI............ 802,022 3,421,858 0 S/L 31.5 1993(A)
Gaylord, MI............ 1,837,924 7,524,153 0 S/L 31.5 1993(A)
Howell, MI............. 2,419,509 10,078,931 0 S/L 31.5 1993(A)
Mt. Pleasant, MI....... 2,066,930 10,190,792 0 S/L 31.5 1993(A)
Elyria, OH............. 2,596,055 3,448,882 0 S/L 30 1977(C)
Midvalley, UT.......... 2,710,259 81,035,669 0 S/L 31.5 1998(A)
Taylorsville, UT....... 2,531,016 75,620,071 0 S/L 31.5 1998(A)
Orem, UT............... 570,296 17,569,422 8,245,981 S/L 31.5 1998(A)
Logan, UT.............. 79,697 2,346,182 955,574 S/L 31.5 1998(A)
Salt Lake City, UT..... 106,088 3,013,742 0 S/L 31.5 1998(A)
Riverdale, UT.......... 1,703,017 56,041,298 9,978,095 S/L 31.5 1998(A)
Bemidji, MN............ 5,034,483 4,537,749 0 S/L 30 1977(C)
The Hermes Building.... 287,707 8,511,224 1,781,666 S/L 31.5 1998(A)
Ogden, UT.............. 365,402 10,984,411 0 S/L 31.5 1998(A)
Las Vegas, NV.......... 219,481 6,497,035 0 S/L 31.5 1998(A)
Rapid City, SD......... 81,388 2,313,495 539,480 S/L 31.5 1998(A)
Cape Coral, FL......... 1,515,063 5,008,500 0 S/L 30 1985(C)
Trindad, CO............ 1,229,894 1,923,113 0 S/L 30 1986(C)
Hazard, KY............. 2,360,961 1,615,490 0 S/L 30 1978(C)
Florence, KY........... 78,218 2,386,632 0 S/L 31.5 1998(A)
Birmingham, AL......... 1,985,736 17,977,556 0 S/L 31.5 1994(A)
Birmingham, AL......... 4,705,514 40,549,252 0 S/L 31.5 1995(A)
Huntsville, AL......... 394,564 3,275,689 0 S/L 31.5 1995(A)
Jacksonville, NC....... 1,042,921 6,322,678 0 S/L 31.5 1989(C)
Ormond Beach, FL....... 2,872,351 14,359,019 0 S/L 31.5 1994(A)
Alamosa, CO............ 634,810 751,162 0 S/L 30 1986(C)
Wilmington, NC......... 6,105,095 22,257,004 0 S/L 31.5 1989(C)
Berlin, VT............. 4,711,026 9,865,284 4,940,000 S/L 30 1986(C)
Brainerd, MN........... 2,662,977 11,859,690 695,000 S/L 31.5 1991(A)
Spring Hill, FL........ 2,090,316 8,018,540 5,953,433 S/L 30 1988(C)
Tiffin, OH............. 4,106,090 3,132,180 0 S/L 30 1980(C)
Toledo, OH............. 1,623,914 11,450,418 0 S/L 31.5 1995(A)
Toledo, OH............. 261,784 17,584,616 0 S/L 31.5 1997(C)
Denver, CO............. 2,864,948 54,666,875 0 S/L 31.5 1997(C)
Dickinson, ND.......... 5,375,859 2,236,456 0 S/L 30 1978(C)
West Pasco, FL......... 2,830,182 4,936,365 4,783,894 S/L 30 1986(C)
Marianna, FL........... 1,087,524 4,050,313 0 S/L 31.5 1990(C)
Hutchinson, MN......... 3,894,513 2,863,786 4,881,831 S/L 30 1981(C)
New Bern, NC........... 3,343,497 10,634,436 0 S/L 31.5 1989(C)
Highland, IN........... 2,312,820 24,633,867 0 S/L 31.5 1997(A)

F-39
92

INITIAL COST TOTAL COST(A)
----------------------------- ----------------------------------------------
BUILDINGS & BUILDINGS &
LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL
------------ -------------- ------------ ------------ -------------- --------------

Phoenix, AZ (Deer
Valley).............. $ 7,264,481 $ 18,728,365 $ 0 $ 7,264,481 $ 18,728,365 $ 25,992,846
Princeton, NJ.......... 7,121,176 29,782,565 0 7,121,176 30,028,655 37,149,831
St. Paul, MN........... 4,467,901 18,084,446 0 4,469,511 19,407,169 23,876,680
Russellville, AR....... 624,100 13,391,122 0 624,100 13,494,276 14,118,376
N. Little Rock, AR..... 907,083 17,159,794 0 907,083 17,224,283 18,131,366
Fayetteville, AK....... 2,365,974 9,503,285 0 6,677,162 16,958,663 23,635,825
Ottumwa, IA............ 338,125 8,564,280 102,680 276,186 8,862,192 9,138,378
Washington, NC......... 990,780 3,118,121 33,690 2,250,459 12,635,230 14,885,689
Ovideo, FL............. 6,010,173 6,438,718 0 6,010,173 6,438,718 12,448,891
Orlando, FL............ 4,792,146 11,673,702 84,343 4,792,146 12,463,231 17,255,377
Durham, NC............. 2,210,222 11,671,268 277,631 2,210,222 12,685,980 14,896,202
Crystal River, FL...... 1,216,709 5,795,643 364,531 1,219,142 5,967,085 7,186,227
Bellefontaine, OH...... 997,584 3,220,998 0 997,584 3,220,998 4,218,582
Dublin, OH............. 3,609,345 11,546,009 0 3,609,345 11,661,339 15,270,684
Grove City, OH......... 2,847,868 9,132,150 0 2,847,868 9,132,150 11,980,018
Hamilton, OH........... 494,659 1,618,302 0 494,659 1,618,302 2,112,961
Gahanna, OH............ 1,028,931 3,319,584 0 1,028,931 3,319,584 4,348,515
Pataskala, OH.......... 513,731 1,679,038 0 513,731 1,679,038 2,192,769
Pickerington, OH....... 1,896,406 6,085,926 0 1,896,406 6,085,926 7,982,332
Barboursville, OH...... 431,487 1,416,640 2,466 431,487 1,419,106 1,850,593
Colombus, OH........... 11,087,204 44,493,622 0 11,865,579 47,254,763 59,120,342
Portfolio Balance
(DDR)................ 11,573,773 127,922,608 9,235,425 11,573,773 137,158,033 148,731,806
------------ -------------- ----------- ------------ -------------- --------------
$364,108,226 $1,459,650,371 $20,574,325 $370,689,348 $1,697,584,963 $2,068,274,311
============ ============== =========== ============ ============== ==============

TOTAL COST, NET DEPRECIABLE DATE OF
ACCUMULATED OF ACCUMULATED LIVES CONSTRUCTION(C)
DEPRECIATION DEPRECIATION ENCUMBRANCES (YEARS)(1) ACQUISITION(A)
------------ --------------- ------------ ----------- ---------------

Phoenix, AZ (Deer
Valley).............. $ 309,263 $ 25,683,583 $18,000,000 S/L 31.5 1999(A)
Princeton, NJ.......... 1,664,034 35,485,797 27,450,298 S/L 31.5 1998(A)
St. Paul, MN........... 1,541,141 22,335,539 0 S/L 31.5 1997(A)
Russellville, AR....... 2,446,187 11,672,189 0 S/L 31.5 1994(A)
N. Little Rock, AR..... 3,139,095 14,992,271 0 S/L 31.5 1994(A)
Fayetteville, AK....... 822,349 22,813,476 0 S/L 31.5 1997(A)
Ottumwa, IA............ 3,061,750 6,076,628 0 S/L 31.5 1990(C)
Washington, NC......... 1,336,617 13,549,072 0 S/L 31.5 1990(C)
Ovideo, FL............. 50,347 12,398,544 0 S/L 31.5 1997(C)
Orlando, FL............ 4,240,137 13,015,240 0 S/L 31.5 1989(C)
Durham, NC............. 3,541,691 11,354,511 0 S/L 31.5 1990(C)
Crystal River, FL...... 2,670,704 4,515,523 0 S/L 30 1986(C)
Bellefontaine, OH...... 178,259 4,040,323 3,013,871 S/L 31.5 1998(A)
Dublin, OH............. 644,693 14,625,991 10,514,274 S/L 31.5 1998(A)
Grove City, OH......... 509,347 11,470,671 7,722,507 S/L 31.5 1998(A)
Hamilton, OH........... 89,215 2,023,746 0 S/L 31.5 1998(A)
Gahanna, OH............ 183,756 4,164,759 0 S/L 31.5 1998(A)
Pataskala, OH.......... 92,589 2,100,180 789,361 S/L 31.5 1998(A)
Pickerington, OH....... 337,425 7,644,907 5,159,713 S/L 31.5 1998(A)
Barboursville, OH...... 78,811 1,771,782 0 S/L 31.5 1998(A)
Colombus, OH........... 2,059,374 57,060,968 0 S/L 31.5 1998(A)
Portfolio Balance
(DDR)................ 2,289,063 146,442,743 38,063,720
------------ -------------- ------------
$249,911,824 $1,818,362,487 $216,964,781
============ ============== ============

- ---------------

(1) S/L refers to straight-line depreciation.

F-40
93

(A) The Aggregate Cost for Federal Income Tax purposes was approximately $2.1
billion at December 31, 1999.

The changes in Total Real Estate Assets for the three years ended December
31, 1999 are as follows:

1999 1998 1997
-------------- -------------- --------------

Balance, Beginning of Year.................. $1,896,763,215 $1,325,742,705 $ 991,646,960
Acquisitions................................ 78,317,980 688,431,449 267,868,208
Developments, Improvements and Expansions... 131,977,115 58,566,168 78,701,065
Changes in Land Under Development and
Construction in Progress.................. (1,168,869) 98,276,932 (3,871,141)
Sales and Retirements....................... (37,615,130) (274,254,039) (8,602,387)
-------------- -------------- --------------
Balance, End of Year........................ $2,068,274,311 $1,896,763,215 $1,325,742,705
============== ============== ==============

The changes in Accumulated Depreciation and Amortization for the three
years ended December 31, 1999 are as follows:

1999 1998 1997
-------------- -------------- --------------

Balance, Beginning of Year.................. $ 203,097,126 $ 171,737,359 $ 142,039,284
Depreciation for Year....................... 49,997,762 42,952,125 32,208,290
Sales and Retirements....................... (3,183,064) (11,592,358) (2,510,215)
-------------- -------------- --------------
Balance, End of Year........................ $ 249,911,824 $ 203,097,126 $ 171,737,359
============== ============== ==============

F-41