Event Brief of Q2 2004 DEVELOPERS DIVERSIFIED RLTY CO Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

CORPORATE PARTICIPANTS

. Michelle Mahue Dawson, Developers Diversified Realty Corporation,

VP, IR . Scott Wolstein, Developers Diversified Realty Corporation,

Chairman & CEO . Bill Schafer, Developers Diversified Realty Corporation, SVP & CFO . Dan Hurwitz, Developers Diversified Realty Corporation, EVP . David Jacobstein, Developers Diversified Realty Corporation, President & COO

OVERVIEW

DDR exceeded consensus estimates by $0.02 despite over $0.05 of dilution created by the early May equity issuance of approx. 15m shares. Later this fall, the Co. is scheduled to open Centerton Square in Mount Laurel, New Jersey. At Phoenix Spectrum in Arizona, the Co. recently purchased Dillard's 163,000 sq. ft. building, which the Co. intends to demolish. Q&A Focus: Proceeds, acquisitions, Benderson, Mervyn's, same-store growth, and MDT.

FINANCIAL DATA

A. Key Data From Call 1. 2Q04 FFO = $0.84 per share. 2. 2004 guidance reduction = $2.95. 3. 2Q04 G&A as a percent of revenues = 4.9%.

PRESENTATION SUMMARY

S1. 2Q04 Results (S.W.) 1. Highlights: 1. DDR exceeded consensus estimates by $0.02, despite over $0.05 of dilution created by the early May equity issuance of approx. 15m shares, which generated $492m in proceeds. 2. When DDR provided guidance on its 1Q04 conference call, it assumed that it would issue equity sometime around the end of 2Q04. 1. However, the Co. issued the equity approx. 60 days earlier than it had budgeted. 3. DDR's portfolio continues to generate strong and consistent cash flow, and continues to structure and execute transactions that will create substantial long-term shareholder value. 1. The Co. was very pleased with the execution of this transaction and the strong market demand for its equity, with respect to the Co.'s 15m share offering. 4. Although a $500m bridge loan was available to DDR, it pursued

the stock issuance in order to fully eliminate any equity overhead. 1. DDR issued the equity at a price in excess of the share price that existed at the time that it underwrote the Benderson acquisition and the accretion is that pricing remains highly compelling.

5. The market rapidly absorbed the new shares with no real

correction in stock price, vis-a-vis the performance of its

peers. 2. Joint Ventures: 1. DDR has agreements with Kuwait Financial Center to JV a $210m neighborhood grocery-anchored portfolio and with Prudential Real Estate Investors (PREI) to JV an additional $157m grocery-anchored portfolio. 2. Although the JVs are expected to close during 3Q04, it will be approx. $0.05 dilutive to the 2004 results, unless the Co. reinvests these funds in other opportunities. 1. These are very important in several ways: 1. These transactions will significantly reduce the Co.'s exposure to the neighborhood grocery-anchored property

type, thereby sharpening its focus on the community center products. 2. Better aligns the assets acquired from Benderson with its core product focus. 3. The original $2.3b Benderson acquisition was comprised of approx. 80% community shopping centers and 20% neighborhood grocery-anchored centers. 4. After the JV transaction, the remaining Benderson portfolio will be comprised of less than 12% neighborhood grocery-anchored centers and more than 88% community shopping centers. 5. In the Co.'s total portfolio, after the JVs, DDR will have fewer than 40 neighborhood grocery-anchored centers, which will represent less than 4% of its total portfolio.

6. The JVs are also important because they will significantly

reduce the annualized rent exposure to Royal Ahold, parent of

top supermarkets by approx. $8.8m or by approx. 150 bp as a

percent of total portfolio rent. 7. In addition, these transactions will strengthen the balance sheet, enhance the financial flexibility, and the Co.'s ability to pursue future high-yielding accretive transactions. 3. Properties: 1. The portfolio to be transferred to the KFC JV includes 13 propertiesm, totaling 1.7m sq. ft.

2. Ten of those properties were previously owned by Benderson and

three were previously owned by JDN. 3. KFC will acquire an 80% interest in these properties at 7.75% cap rate. 1. Although this cap rate is slightly higher than the Co. would have typically accepted, the overall structure of the transaction is highly profitable. 4. DDR will earn 50% promote, above and 11.5% leverage internal rate of return. 1. This compares favorably to the Co.'s first JV with KFC, which was priced at an 8.9% cap rate, in which the Co. earned 20% promote, above 12% leverage return.

5. DDR will also earn a deferred asset management fee of 6.5%

(Phonetic) of net operating income, which is 100 bp higher

than it were paid on its first JV, in addition to property

management, leasing, and redevelopment fees. 6. The PREI portfolio is comprised of 14 properties, totaling approx. 1.3m sq. ft.

7. Eight of those properties were previously owned by Benderson

and six were previously owned by JDN. 8. PREI will acquire 90% interest in these properties and 7.75% cap rate. 9. DDR will earn property management, leasing and redevelopment fees. 4. Benderson: 1. DDR closed on the Benderson assets in two large tranches. 1. The first tranche was closed May 14, included 31 properties acquired by DDR and 14 properties acquired by the Co.'s MDT JV. 1. As part of that transaction, MDT also purchased nine

properties from the existing portfolio. 2. DDR acquired a second tranche of 53 Benderson properties on May 21. 2. Including the four properties that it closed since then, the Co. has acquired 102 assets, aggregating 18m sq. ft. for total acquisition price of approx. $2.2b. 3. DDR will close on the remaining properties in the acquisition portfolio, as various closing conditions such as Letter of Consent relating to loan assumptions of partner approvals are satisfied. 4. DDR is pleased to announce that it has recently exercised its accordion option on its senior unsecured revolving credit facility, increasing its maximum capacity to $1b. 1. This increased facility coupled with the JV sales significantly enhances the Co.'s financial flexibility, and is gratified by the tremendous support it received from its line of credit banks.

S2. 2Q04 Financial Results (B.S.) 1. Highlights: 1. For 2Q04, DDR reported FFO of $0.84 per share on a diluted basis.

1. These figures reflect a per share increase of 31.3% over the adjusted 2Q03 results. 2. The Co. revised its 2003 FFO to include an impairment charge of $2.6m, which was added back to FFO in 2Q03 similar to losses on sales of operating properties.

1. This adjustment was done in response to a recent comment letter received from the SEC. 2. Excluding the effects of this impairment charge, the per share increase was 25.4%. 3. The Co. earned total FFO of $94.1m in 2Q04, which is 40% higher than $67.2m earned in 2Q03. 4. The increase in same-store NOI of 1.3%, which aggregated over $800,000 and the increase in FFO, is largely attributable to the sale of existing DDR assets to MDT, which generated

approx. $9.9m of merchant building gains, which were included

in FFO. 1. These gains were associated with the sale of a second phase of Riverdale Village in Coon Rapids, Minnesota; Erie

Marketplace in Erie, Pennsylvania; and Steele Crossing in Fayetteville, Arkansas. 2. Riverdale Village is wholly DDR development and Erie Marketplace and Steel Crossings were developments that the Co. assumed from JDN. 5. The Co. recognized approx. $2.5m of landfill gains in its 2Q04 FFO. 6. As a result of the Co.'s sale of wholly-owned assets to MDT, DDR recognized additional gains of approx. $28m, of which approx. 75% or $21m represents pure economic gains, which is reflective of its ability to create shareholder value. 1. These …