<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 16, 1997
-------------------
DEVELOPERS DIVERSIFIED REALTY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 1-11690 34-1723097
- --------------------------------------------------------------------------------
(State or other Jurisdiction (Commission (IRS Employer
or incorporation) File Number) Identification Number)
34555 Chagrin Boulevard, Moreland Hills, Ohio 44022
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code (216) 247-4700
----------------
N/A
- --------------------------------------------------------------------------------
(Former name of former address, if changed since last report)
<PAGE> 2
Item 5. Other Events
- ---------------------
During the period January 1, 1997 to June 16, 1997, through individual
transactions, the Company completed the acquisition of, or investment in, four
shopping centers, none of which individually constitutes a "significant
subsidiary". The shopping centers total 1,390,837 square feet of retail space,
all of which is Company-owned gross leasable area. The Company's net investment
in the four shopping centers aggregated $106.6 million. The Company's net
investment was funded through proceeds made available through revolving
credit facilities and cash. Information regarding the four acquired shopping
centers is attached as SCHEDULE A. This Form 8-K is being filed to update the
pro forma financial information reported in the May 31, 1996 Form 8-K, through
the year ended December 31, 1996. In addition, the pro forma financial
information reflects the Company's financing and acquisition activities during
the period January 1, 1997 to June 16, 1997. Such financing transactions
include the issuance of 3,350,000 Common Shares and $75 million of 7.125%
Pass-through Asset Trust Securities. The proceeds from these offerings were
primarily used to repay borrowings outstanding under the Company's revolving
credit facilities.
The acquisition of, or investment in, each shopping center was pursuant to
individual agreements for the sale and purchase of each property between each
selling entity and the Company. The factors considered by the Company in
determining the price to be paid for the properties included their historical
and/or expected cash flow, nature of the tenants and terms of leases in place,
occupancy rates, opportunities for alternative and/or new tenancies, current
operating costs and taxes on the properties and anticipated changes therein
under Company ownership, the outlots and expansion areas available, the physical
condition and locations of the properties, the anticipated effect on the
Company's financial results (including particularly Funds From Operations) and
the ability to sustain and potentially increase its distributions to Company
shareholders, and other factors. The Company took into consideration
capitalization rates at which it believes other shopping centers have recently
sold, but determined the price it was willing to pay primarily on the factors
discussed above related to the properties themselves and their fit with the
Company's operations. No separate independent appraisals were obtained in
connection with the acquisition of the properties by the Company. The Company,
after investigation of the properties, is not aware of any material factors,
other than those enumerated above, that would cause the financial information
reported, where available, to not be necessarily indicative of future operating
results.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- ---------------------------------------------------------------------------
Financial Statements
- --------------------
The statement of revenue and certain expenses included in this report relates
to Great Northern Shopping Center - Cleveland (North Olmsted), Ohio for the
year ended December 31, 1996, which was acquired in 1997. Financial information
for the five shopping centers acquired in 1996 and two shopping centers
acquired in 1997 are not presented because these properties 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.
Pro Forma Financial Information (unaudited)
- -------------------------------------------
Unaudited pro forma financial information is presented as follows:
- - Pro forma condensed consolidated balance sheet as of December 31, 1996.
<PAGE> 3
- - Pro forma condensed consolidated statement of operations for the twelve
month period ended December 31, 1996.
- - Estimated twelve-month pro forma statement of taxable net operating
income and operating funds available.
Exhibits
- --------
(23) Consent of Independent Accountants
<PAGE> 4
SCHEDULE A
DEVELOPERS DIVERSIFIED REALTY CORPORATION
<TABLE>
<CAPTION>
Effective Company
Date of Owned Percent Year
Shopping Center Acquisition Square Feet Occupied Completed Principal Tenants
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Great Northern
Shopping Center- North Regal Cinemas, Marc's, Comp USA and
Cleveland (North Olmstead), OH 01/01/97 468,484 90.8% 1958 Finast (not owned)
Great Northern
Shopping Center- South
Cleveland (North Olmstead), OH 01/01/97 145,080 95.8% 1987 Best Buy, Marshall's and Kronheim's
Plaza Del Norte Ross Dress For Less, DSW Warehouse,
San Antonio, TX (1) 01/23/97 286,388 87.9% 1996 Best Buy, Oshman's and HomePlace
Foothills Towne Center 02/21/97 & TJMaxx, Circuit City, Oshman's and
Phoenix (Ahwatukee), AZ 03/27/97 490,885 97.5% 1996 Linens 'N Things
<FN>
(1) Property acquired through a joint venture in which the Company owns a 35%
interest.
</TABLE>
<PAGE> 5
DEVELOPERS DIVERSIFIED REALTY CORPORATION
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GREAT NORTHERN SHOPPING CENTER
Report of Independent Accountants .................................... F-2
Combined Statement of Revenue and Certain Expenses for the year ended
December 31, 1996 ................................................. F-3
Notes to Combined Statement of Revenue and Certain Expenses .......... F-4
DEVELOPERS DIVERSIFIED REALTY CORPORATION
(PRO FORMA (UNAUDITED)):
Condensed Consolidated Balance Sheet as of December 31, 1996 ........ F-5
Condensed Consolidated Statement of Operations for the year ended
December 31, 1996 ................................................. F-8
Estimated Twelve Month Pro Forma Statement of Taxable Net Operating
Income and Operating Funds Available ............................. F-12
</TABLE>
F-1
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Developers Diversified Realty Corporation
We have audited the accompanying Combined Statement of Revenue and
Certain Expenses of Great Northern Shopping Center for the year ended December
31, 1996. This historical statement is the responsibility of management. Our
responsibility is to express an opinion on this historical statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the historical statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the historical statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the historical
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying historical statement is prepared on the basis
described in Note 2, for the purpose of complying with the rules and regulations
of the Securities and Exchange Commission (for inclusion in the Form 8-K of
Developers Diversified Realty Corporation) and is not intended to be a complete
presentation of the revenues and expenses of Great Northern Shopping Center.
In our opinion, the historical statement referred to above presents
fairly, in all material respects, the combined revenue and certain expenses of
Great Northern Shopping Center, on the basis described in Note 2, for the
year ended December 31, 1996, in conformity with generally accepted accounting
principles.
PRICE WATERHOUSE LLP
Cleveland, Ohio
January 15, 1997
F-2
<PAGE> 7
DEVELOPERS DIVERSIFIED REALTY CORPORATION
GREAT NORTHERN SHOPPING CENTER
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Revenue:
Minimum rents $4,950,828
Percentage and overage rents 186,088
Recoveries from tenants 1,784,369
Other income 6,446
----------
6,927,731
----------
Certain expenses:
Operating and maintenance 897,025
Real estate taxes 839,643
----------
1,736,668
----------
Revenue in excess of certain expenses $5,191,063
==========
</TABLE>
The accompanying notes are an integral part of this combined statement of
revenue and certain expenses.
F-3
<PAGE> 8
DEVELOPERS DIVERSIFIED REALTY CORPORATION
GREAT NORTHERN SHOPPING CENTER
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
1. OPERATION OF PROPERTY
---------------------
The accompanying combined statement of revenue and certain expenses,
relates to the operations of Great Northern Shopping Center - North and Great
Northern Shopping Center - South (together, the "Property"), located in North
Olmsted, Ohio. Great Northern Shopping Center - North opened in 1958 and Great
Northern Shopping Center - South opened in 1987.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
BASIS OF PRESENTATION
- ---------------------
The accompanying combined statement of revenue and certain expenses has
been prepared on the accrual basis of accounting.
The accompanying combined financial statement is not representative of
the actual operations for the period presented, as certain revenues and
expenses, which may not be comparable to the revenues and expenses expected to
be earned or incurred by the Company, in the future operations of the Property
have been excluded. Revenues excluded consist of interest, gains on sales of
land, and other revenues unrelated to the continuing operations of the Property.
Expenses excluded consist of depreciation on the building and improvements and
amortization of organization costs and other intangible assets, interest expense
and other general and administrative and leasing costs not directly related to
the future operations of the Property.
INCOME RECOGNITION
- ------------------
Rental income is recorded on the straight line basis.
3. SUBSEQUENT EVENT TO INDEPENDENT ACCOUNTANTS' REPORT:
----------------------------------------------------
(UNAUDITED)
Developers Diversified Realty Corporation acquired the property on
February 21, 1997.
F-4
<PAGE> 9
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
(Unaudited)
The following unaudited pro forma condensed consolidated balance sheet is
presented as if the following had occurred as of December 31, 1996: (i) the
acquisition by the Company of all properties subsequent to December 31, 1996,
(ii) the sale by the Company of 3,350,000 common shares in January 1997
resulting in net proceeds of approximately $116 million and (iii) the sale by
the Company of $75 million of 7.125% Pass-through Asset Trust Securities in
March 1997. This pro forma condensed consolidated balance sheet should be read
in conjunction with the pro forma condensed consolidated statement of
operations of the Company presented herein and the historical financial
statements and notes thereto of the Company included in the Developers
Diversified Realty Corporation Form 10-K for the year ended December 31, 1996.
The unaudited pro forma condensed consolidated balance sheet does not purport to
represent what the actual financial position of the Company would have been at
December 31, 1996, nor does it purport to represent the future financial
position of the Company.
F-5
<PAGE> 10
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(Dollars in Thousands)
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Company Pro Forma Company
Historical Adjustments Pro Forma
---------------------------------------
<S> <C> <C> <C>
Assets:
Real estate, net $ 849,608 $ 125,197 (a) $ 974,805
Cash and cash equivalents 12 -- 12
Other assets 18,710 500 (c) 19,210
Investment in and advances to
joint ventures 106,796 3,457 (a) 110,253
--------- --------- -----------
Total Assets $ 975,126 $ 129,154 $ 1,104,280
========= ========= ===========
Liabilities:
Indebtedness:
Senior notes $ 215,493 $ 76,077 (c) $ 291,570
Convertible debentures 60,000 -- 60,000
Revolving credit agreements 95,500 (84,774)(d) 10,726
Mortgages payable 107,439 -- 107,439
--------- --------- -----------
Total indebtedness 478,432 (8,697) 469,735
Other liabilities 27,358 5,726 (a) 33,084
--------- --------- -----------
Total Liabilities 505,790 (2,971) 502,819
--------- --------- -----------
Minority interest -- 16,293 (a) 16,293
Shareholders' equity:
Class A Preferred Shares 105,375 -- 105,375
Class B Preferred Shares 44,375 -- 44,375
Common shares 2,168 335 (b) 2,503
Paid-in-capital 369,417 115,497 (b) 484,914
Accumulated dividends in excess
of net income (51,384) -- (51,384)
--------- --------- -----------
469,951 115,832 585,783
Less: Unearned compensation -
restricted stock (615) -- (615)
--------- --------- -----------
469,336 115,832 585,168
--------- --------- -----------
Total Liabilities and
Shareholders' Equity $ 975,126 $ 129,154 $ 1,104,280
========= ========= ===========
</TABLE>
F-6
<PAGE> 11
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
(Unaudited)
(a) Represents the investment in four shopping centers purchased during the
period January 1, 1997 to June 16, 1997, which were funded through
cash, minority equity interest, other liabilities assumed and
borrowings from revolving credit facilities.
(b) Represents the sale by the Company of 3,350,000 common shares and the
use of proceeds thereof. The net proceeds to the Company, after
underwriting discounts and offering costs, were approximately $115.8
million and were primarily used to repay borrowings under the
revolving credit facilities.
(c) Represents the sale by the Company of $75 million of 7.125%
Pass-through Asset Trust Securities and the use of proceeds thereof.
The net proceeds to the Company, after call premiums, underwriting
discounts and offering costs were approximately $75.6 million and
were used to repay borrowings under the revolving credit facilities.
(d) The net reduction in the revolving credit facility debt is summarized
as follows (in thousands):
<TABLE>
<S> <C>
Acquisition of four shopping centers $ 106,635
Sale of common shares (115,832)
Sale of Pass - through Asset Trust Securities (75,577)
---------
$ (84,774)
=========
</TABLE>
F-7
<PAGE> 12
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
(Unaudited)
The unaudited pro forma condensed statement of operations for the year ended
December 31, 1996 is presented as if each of the following transactions had
occurred on January 1, 1996: (i) the acquisition by the Company of the two
properties which had operating history during 1996 purchased from January 1,
1997 through June 16, 1997, (ii) the sale by the Company of 175,000 Depositary
Shares representing 9.44% Class B Cumulative Redeemable Preferred Stock in
January 1996, (iii) the sale by the Company of 2,611,500 common shares in March
1996, (iv) the sale by the Company of $111.7 million of Medium Term Notes during
1996 (v) the sale by the Company of 3,350,000 common shares in January 1997, to
the extent the proceeds thereof were used to repay indebtedness assumed to be
outstanding during 1996, and (vi) the sale by the Company of $75 million of
7.125% Pass-through Asset Trust Securities in March 1997.
Such pro forma information is based upon the historical consolidated results of
operations of the Company for the year ended December 31, 1996, giving effect to
the transactions described above. The pro forma condensed consolidated statement
of operations should be read in conjunction with the pro forma condensed
consolidated balance sheet of the Company presented herein and the historical
financial statements and notes thereto of the Company included in the Developers
Diversified Realty Corporation Form 10-K for the year ended December 31, 1996.
The unaudited pro forma condensed consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming the transactions had been completed as set forth above,
nor does it purport to represent the Company's results of operations for future
periods.
F-8
<PAGE> 13
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------
Acquisitions,
Common
Adjustments Share and Company
Company Previously Debt Share Pro Forma
Historical Reported (a) Offerings (Unaudited)
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Revenues from rental properties $ 122,275 $ -- (b) $ 6,928 (f) $ 129,203
Management fees and other income 8,630 -- 8,630
--------- ----- ------- ---------
130,905 -- 6,928 137,833
--------- ----- ------- ---------
Operating and maintenance 12,098 -- 898 (f) 12,996
Real estate taxes 14,589 -- 839 (f) 15,428
Depreciation and amortization 25,062 -- 1,550 (f) 26,612
General and administrative expenses 8,436 -- 8,436
Interest expense 29,888 (884) (c),(d) 2,580 (e),(f) 27,627
(3,957)(g),(h)
--------- ----- ------- ---------
90,073 (884) 1,910 91,099
--------- ----- ------- ---------
Income (loss) before equity in net
income of joint ventures and minority
equity interest 40,832 884 5,018 46,734
Equity in net income of
joint ventures 8,710 -- -- 8,710
Minority equity interest -- -- (1,059)(f) (1,059)
--------- ----- ------- ---------
Net income $ 49,542 $ 884 $ 3,959 $ 54,385
========= ===== ======= =========
Per share data:
Income available to common shareholders:
Primary $ 1.67 $ 1.71 (i)
========= =========
Fully diluted $ 1.66 $ 1.71 (i)
========= =========
Weighted average number of common shares (in thousands):
Primary 21,142 23,441
========= =========
Fully diluted 21,262 23,561
========= =========
</TABLE>
F-9
<PAGE> 14
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
(Unaudited)
(a) Pro forma adjustments as previously reported represent adjustments for
those transactions enumerated in the Company's December 31, 1996 Form
10-K. Such adjustments are summarized in (b), (c), (d) and (e) below.
(b) No revenues or expenses have been included in the pro forma statement
of operations for the Properties acquired in 1996 because these
properties 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. The results of operations
from the date of acquisition are included in the Company's historical
results.
(c) Changes in interest expense relating to the use of proceeds from the
issuance of 175,000 Depositary Shares representing 9.44% Class B
Cumulative Redeemable Preferred stock in January 1996 to repay the
revolving credit facility borrowings is not reflected herein as the
effect is considered insignificant.
(d) Reflects the reduction of interest costs relating to variable rate
indebtedness effectively repaid with the proceeds from the sale of
2,611,500 common shares completed in March 1996.
(e) Changes in interest expense relating to the issuance of Medium Term
Notes completed in 1996 and the simultaneous repayment of the
revolving credit facility borrowings is not reflected herein as the
effect is considered insignificant.
(f) Reflects revenues and expenses for the year ended December 31, 1996, of
the properties acquired during 1997, as follows:
<TABLE>
<CAPTION>
Effective Real
Date of Estate Operating & Minority
Shopping Center Acquisition Revenues Taxes Maintenance Depreciation Interest Interest
--------------- ----------- -------- ----- ----------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Great Northern Shopping
Center - North, Cleveland,
(North Olmsted), OH 01/01/97 $5,125 $ 631 $ 676 $ 1,206 $ 1,903 $ 876
Great Northern Shopping
Center - South, Cleveland,
(North Olmsted) OH 01/01/97 1,803 208 222 344 677 183
Plaza Del Norte, San
Antonio, TX (1), (2) 01/23/97 - - - - - -
Foothills Towne Center
Awatukee, AZ (1) 02/21/97 - - - - - -
------ -------- ------- ------- -------- ----------
$6,928 $ 839 $ 898 $ 1,550 $ 2,580 $ 1,059
====== ======== ======= ======= ======== ==========
<FN>
(1) No revenues or expenses have been included in the pro forma statement
of operations since the center was either under development or in the
lease-up phase during 1996.
(2) Property acquired through a joint venture in which the Company owns a
35% interest.
</TABLE>
F-10
<PAGE> 15
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
(g) Reflects the reduction of interest costs relating to variable rate
indebtedness effectively repaid with the proceeds from the sale of
3,350,000 common shares completed in January 1997. See Note (i) with
regards to shares included in earnings per share calculation.
(h) Interest expense relating to the issuance of $75 million of 7.125%
Pass-through Asset Trust Securities completed in March of 1997 is not
reflected herein as the proceeds thereof were considered to be used to
acquire shopping centers with no previous operating history.
Accordingly, the Company would not have issued these securities until
the time of acquisition.
(i) Pro forma income per common share is based upon the weighted
average number of common shares assumed to be outstanding during 1996
and included 1,833,000 shares of the 3,350,000 common share offering
completed in January 1997. The remaining 1,517,000 shares are not
reflected in the calculation as the proceeds were not considered to be
received until the date the 1996 shopping centers were acquired since
no previous operating history existed with regard to such properties.
Accordingly, the Company would not have issued these securities until
the time of acquisition.
In accordance with the Accounting Principles Board Opinion No. 15,
primary earnings per share before extraordinary item is calculated as
follows:
<TABLE>
<S> <C>
Undistributed loss:
Income available to common shareholders .................. $ 40,185
Total dividends declared - $2.40 per common share ....... 56,258
--------
Undistributed loss ....................................... $(16,073)
========
Per share data
Dividends declared ..................................... $ 2.40
Undistributed loss ..................................... (0.69)
--------
Primary earnings per common share ...................... $ 1.71
========
Weighted average number of Common Shares:
Primary earnings per common share ...................... 23,441
========
Fully diluted .......................................... 23,561
========
</TABLE>
F-11
<PAGE> 16
DEVELOPERS DIVERSIFIED REALTY CORPORATION
ESTIMATED TWELVE MONTH PRO FORMA STATEMENT OF
TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE
- --------------------------------------------------------------------------------
(Unaudited)
The following unaudited statement is a pro forma estimate of taxable income and
funds available from operations of the Company for the year ended December 31,
1996. The pro forma statement is based on the Company's historical operating
results for the twelve-month period ended December 31, 1996 adjusted for the
effects of the Company's (i) historical operations of the properties acquired
during 1996 and for the period January 1, 1997 through the date of this report,
(vi) 175,000 depositary shares representing 9.44% Class B Cumulative Redeemable
Preferred Stock completed in January 1996, (vii) 2,611,500 common share offering
completed in March 1996, (viii) Medium Term Notes offerings completed in 1996
(v) 3,500,000 common share offering completed in January 1997, (vi) Pass-through
Asset Trust Securities issued in March 1997 and certain other items related to
operations which can be factually supported. This statement does not purport to
forecast actual operating results for any period in the future.
This statement should be read in conjunction with (i) the 1996 historical
financial statements included on the Company's Form 10-K for the year ended
December 31, 1996 and (ii) the pro forma condensed financial statements of the
Company included elsewhere herein.
<TABLE>
<S> <C>
ESTIMATE OF TAXABLE NET OPERATING INCOME (IN THOUSANDS):
DDRC historical net income, exclusive of property depreciation and amortization (Note 1) ........................... $ 74,604
Properties acquired during 1997 - historical earnings from operations, as adjusted, exclusive
of depreciation and amortization ................................................................................. 1,552
Pro forma adjustments reflecting the decrease in interest expense arising from the utilization of
the proceeds from the 175,000 Class B Depositary Shares .......................................................... --
Pro forma adjustments reflecting the decrease in interest expense arising from the utilization of the
proceeds from the 2,611,500 common share offering ................................................................ 884
Pro forma adjustments reflecting the decrease in interest expense arising from the utilization of
the proceeds from the issuance of Medium Term Notes to repay variable rate indebtedness .......................... --
Pro forma adjustments reflecting the decrease in interest expense arising from the utilization of
the proceeds from the 3,350,000 common share offering ............................................................ 3,957
Pro forma adjustments arising from the utilization of the proceeds from the issuance
of Pass-through Asset Trust Securities ........................................................................... --
Estimated tax depreciation and amortization (Note 3):
Estimated 1996 tax depreciation and amortization ................................................................... (19,295)
Pro forma tax depreciation for Properties acquired during 1996 ..................................................... --
Pro forma tax depreciation for Properties acquired during 1997 ..................................................... (1,221)
--------
Pro forma taxable income before dividends deduction ................................................................ 60,481
Estimated dividends deduction (Note 4) ......................................................................... (70,458)
--------
$ (9,977)
========
Pro forma taxable net operating income ............................................................................. $ --
========
ESTIMATE OF OPERATING FUNDS AVAILABLE (IN THOUSANDS):
Pro forma taxable operating income before dividends deduction ...................................................... $ 60,481
Add pro forma depreciation ..................................................................................... 20,516
Add non-cash loss on investment in joint venture ............................................................... 868
--------
Estimated pro forma operating funds available (Note 5) ............................................................. $ 81,865
========
</TABLE>
F-12
<PAGE> 17
DEVELOPERS DIVERSIFIED REALTY CORPORATION
ESTIMATED TWELVE MONTH PRO FORMA STATEMENT OF
TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE
- --------------------------------------------------------------------------------
(Unaudited)
Note 1 - The historical earnings from operations represents the Company's
earnings from operations for the twelve months ended December 31, 1996
as reflected in the Company's historical financial statements.
Note 2 - The historical earnings from operations for the properties acquired
during 1997 represent the revenues and certain expenses as referred to
in the pro forma condensed consolidated statement of operations for the
year ended December 31, 1996 included elsewhere herein.
Note 3 - Tax depreciation for the Company is based upon the Company's tax basis
in the properties which exceeds the historical cost basis, as reflected
in the Company's financial statements in accordance with generally
accepted accounting principles, by approximately $20 million before
accumulated depreciation. The costs are generally depreciated on a
straight-line method over a 40-year life for tax purposes.
Note 4 - Estimated dividends deduction is calculated as follows:
<TABLE>
<S> <C>
Common share dividend (23,441,000 x $2.40) $ 56,258
Class A Preferred Shares 10,011
Class B Preferred Shares 4,189
--------
$ 70,458
========
</TABLE>
Note 5 - Operating funds available does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available to fund
cash needs.
F-13
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
Date June 17, 1997 /s/ William H. Schafer
----------------------- ---------------------------------------
William H. Schafer
Vice President and Chief Financial Officer
F-14
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements On Forms S-3 (Nos. 33-94182 and
333-05565) of Developers Diversified Realty Corporation of our report dated
January 15, 1997 relating to the combined financial statements of Great
Northern Shopping Center, which apppears in the Current Report on Form 8-K of
Developers Diversified Realty Corporation dated June 16, 1997.
PRICE WATERHOUSE LLP
Cleveland, Ohio
June 16, 1997
F-15
