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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) February 25, 1998
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 1-11690 34-1723097
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(State or other Jurisdiction (Commission (IRS Employer
or incorporation) File Number) Identification Number)
34555 Chagrin Boulevard, Moreland Hills, Ohio 44022
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Registrant's telephone number, including area code (440) 247-4700
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N/A
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(Former name of former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
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During the period January 1, 1998 to March 23, 1998, through a single
transaction with Continental Real Estate Companies of Columbus, Ohio, the
Company completed the acquisition of 10 shopping centers, two of which were
acquired through joint ventures, (the "Acquisition Properties"). The shopping
centers total 1.2 million square feet of retail space, all of which is
Company-owned. The Company's net investment in the Acquisition Properties
aggregated approximately $87 million of assets including a $5.2 million equity
investment in a 50% owned joint venture, before any contingent consideration.
The Company's net investment was initially funded through proceeds made
available through revolving credit facilities and cash of approximately $30.4
million, mortgages assumed of approximately $51.8 million, a minority equity
interest valued at approximately $2.0 million, and the issuance of
approximately 70,000 Operating Partnership ("OP") Units valued at
approximately $2.8 million. The OP Units are convertible, on a one for one
basis, into shares of the Company's common stock. In addition, the Company
entered into an agreement, with the same entity mentioned above, to acquire
three additional shopping centers or interests therein located in the Columbus,
Ohio area. These shopping centers have approximately 1.0 million square feet of
total GLA and have an estimated purchase price of approximately $107 million of
which the Company's net investment will approximate $99 million. These
properties are referred to herein as the "Probable Acquisition Properties."
Although the Company believes it is probable that these properties will be
acquired, there can be no assurance that the purchase transaction will be
consummated. Information regarding the Acquisition Properties and the Probable
Acquisition Properties is attached as SCHEDULE A.
The acquisition of, or investment in, the Acquisition Properties, or with
respect to the Probable Acquisition Properties will be, pursuant to individual
agreements for the sale and purchase of each property or interests therein
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. Separate independent appraisals were not 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 5. Other Events
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During the period January 1, 1998 to March 23, 1998, through individual
transactions, the Company completed the acquisition of two shopping centers (Bel
Air Centre located in Detroit, MI and Country Club Mall located in Idaho Falls,
ID), neither of which individually constitutes a "significant subsidiary." The
shopping centers total 0.8 million square feet of retail space, of which
approximately 0.5 million square feet is Company-owned. The Company's net
investment in the two shopping centers aggregated approximately $40.2 million,
before any contingent consideration. The Company's net investment was initially
funded through proceeds made available through revolving credit facilities, cash
and liabilities assumed aggregating approximately $20.5 million and a mortgage
assumed of approximately $19.7 million. Country Club Mall was acquired 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 partner interest. Management believes that
the acquisition of this property was completed on terms at least as favorable to
the Company as could have been obtained from an unrelated third party. The
initial purchase price of the property was approximately $6.5
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million. In accordance with the purchase agreement, the Company may be required
to pay the seller an additional $0.8 million upon the leasing of vacant space
in the center. Information regarding these two properties is included on
SCHEDULE A.
The acquisition of, or investment in, these two properties, 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. Separate independent appraisals were not obtained in
connection with the acquisition of these 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
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The required financial statements and pro forma financial information
are not yet complete and will be filed as soon as practicable, and in any event
not later than June 6, 1998.
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SCHEDULE A
DEVELOPERS DIVERSIFIED REALTY CORPORATION
<TABLE>
<CAPTION>
Company
Date of Owned Percent Year
Shopping Center Acquisition Square Feet Occupied Completed Principal Tenants
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<S> <C> <C> <C> <C> <C>
Country Club Mall Fred Meyer (not owned), LaMont's, Payless
Idaho Falls, ID 02/25/98 148,593 90.0% 1976 Drug Store and OfficeMax
Bel Air Centre Target, AMC Theatres, Builders Square, Farmer
Detroit, MI 03/10/98 343,502 100.0% 1989 Jack Supermarket, Toys R Us and Kids R Us
Perimeter Shopping Center
Dublin, Ohio 03/23/98 137,610 97.6% 1996 Big Bear Supermarket and Revco
OfficeMax
Barboursville, West Virginia 03/23/98 70,900 100.0% 1985 OfficeMax and Discount Emporium
Big Bear
Bellefontaine, Ohio 03/28/98 54,780 100.0% 1995 Big Bear Supermarket
Roundy's
Hamilton, Ohio 03/23/98 30,110 100.0% 1986 Roundy's
Hoggy's Center
Gahanna, Ohio 03/23/98 39,285 100.0% 1995
Roundy's/Rite Aid
Pataskala, Ohio 03/23/98 33,270 100.0% 1980 Roundy's and Rite Aid
Shoppes at Turnberry
Pickerington, Ohio 03/23/98 59,495 97.3% 1990 Revco and Bank One
Derby Square Shopping Center
Grove City, Ohio 03/23/98 128,050 100.0% 1992 Big Bear Supermarket and Bank One
Lennox Town Center Target, AMC Theatres, Barnes & Noble,
Columbus, Ohio (1) 03/23/98 336,044 100.0% 1997 Staples and Old Navy
Sun Center Big Bear Supermarket, HomePlace, Babies R
Columbus, Ohio (2) 03/23/98 317,581 98.0% 1995 Us, Rhodes Furniture, SteinMart and Staples
Washington Plaza Probable
Dayton, Ohio (3) Acquisition 169,816 100.0% 1990 PharMor and Books a Million
Dublin Village Center Probable AMC Theater, PharMor, Michael's and
Columbus, Ohio (4) Acquisition 327,264 92.2% 1987 Designer Shoe Warehouse
Easton Market Probable Galyan's, Kittler Furniture, Bed Bath &
Columbus, Ohio Acquisition 508,334 94.5% 1998 Beyond, TJ Maxx and PETsMART
</TABLE>
(1) Property acquired through a joint venture in which the Company owns a 50%
interest.
(2) Property acquired through a joint venture in which the Company owns a 79.45%
interest.
(3) Property scheduled to be owned through a joint venture in which the Company
would own a 50% interest.
(4) Property scheduled to be owned through a joint venture in which the Company
would own approximately an 80% interest.
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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 April 7, 1998 /s/ William H. Schafer
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William H. Schafer
Vice President and Chief Financial Officer
