<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) April 23, 1999
-----------------
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)
3300 Enterprise Parkway, Beachwood, Ohio 44122
------------------------------------------------------------------------
Registrant's telephone number, including area code (216) 755-5500
----------------
N/A
------------------------------------------------------------------------
(Former name of former address, if changed since last report)
<PAGE> 2
Item 5. Other Events
- --------------------
During the period January 1, 1999 to August 18, 1999, through individual
transactions, the Company completed the acquisition of two shopping center
(Dieberg's Clocktower Place in St. Louis, Missouri and Deer Valley Towne Center
in Phoenix, Arizona), neither of which individually constitutes a "significant
subsidiary." The shopping center located in St. Louis, Missouri was acquired
through a joint venture with the institutional investment advisory firm DRA
Advisors, Inc., which is acting on behalf of institutional clients, in which the
Company owns a 50% interest. The shopping centers total 0.6 million square feet
of retail space, of which approximately 0.4 million square feet is
Company-owned. The Company's net investment in the two shopping centers
aggregated approximately $32.9 million. The Company's net investment was
initially funded through proceeds made available through revolving credit
facilities, cash and liabilities assumed aggregating approximately $0.4
million, repayment of notes receivable of $8.0 and a mortgage assumed of
approximately $24.5 million. Information regarding these two properties is
included on SCHEDULE A.
The acquisition of, or investment in, these two properties, was pursuant to
individual agreements for the sale and purchase of each property between each
selling entity and the Company, or the Company's joint venture. 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 acquisitions of
the properties by the Company.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- --------------------------------------------------------------------------
This Form 8-K is being filed to update the pro forma financial
information for the nine month period ended September 30, 1998 filed in the
Company's report on Form 8-K dated September 10, 1998 through the year ended
December 31, 1998.
Financial Statements
- --------------------
Financial information for the shopping center acquired in St. Louis,
Missouri is not presented as it is not considered material. Financial
information for the Phoenix, Arizona property is not presented because
the property was in the final development stage, and accordingly, the
related historical operating information would not be meaningful.
<PAGE> 3
SCHEDULE A
DEVELOPERS DIVERSIFIED REALTY CORPORATION
<TABLE>
<CAPTION>
Company
Date of Owned Percent Year
Shopping Center Acquisition Square Feet Occupied Completed Principal Tenants
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dierberg's Clocktower Place
St. Louis, Missouri (1) 04/23/99 206,365 92.5% 1998 Dierberg's Market, TJ Maxx, Office Depot
AMC Theatres, Target, Ross Stores, Petsmart,
Deer Valley Towne Center Michael's, Office Max, Fashion Q, Macaroni Grill,
Phoenix, Arizona 07/09/99 197,889 100.0% 1999 Chili's, Lane Bryant, Century Bank, Bath & Body
</TABLE>
(1) Property acquired through a joint venture in which the Company owns a 50%
interest.
<PAGE> 4
Pro Forma Financial Information (unaudited)
- -------------------------------------------
Unaudited pro forma financial information for the Company is presented as
follows:
- - Pro forma condensed consolidated statement of operations for the year
ended December 31, 1998.
- - Estimated twelve-month pro forma statement of taxable net operating
income and operating funds available for the year ended December 31,
1998.
A pro forma condensed consolidated balance sheet is not presented herein as
there are no adjustments for the aforementioned transactions to be made to the
December 31, 1998 balance sheet filed in the Company's annual report on Form
10-K as of that date.
<PAGE> 5
DEVELOPERS DIVERSIFIED REALTY CORPORATION
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEVELOPERS DIVERSIFIED REALTY CORPORATION
(PRO FORMA - UNAUDITED):
Condensed Consolidated Statement of Operations for the year ended
December 31, 1998 .................................................................... F-2
Estimated Twelve Month Pro Forma Statement of Taxable Net Operating
Income and Operating Funds Available for the year ended December 31, 1998 ............ F-8
</TABLE>
F-1
<PAGE> 6
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
(Unaudited)
The unaudited pro forma condensed statement of operations for the year ended
December 31, 1998 is presented as if each of the following transactions had
occurred on January 1, 1997; (i) the acquisition by the Company of those
acquired properties, including those acquired through a joint venture interest,
which had an operating history, purchased from January 1, 1998 through December
31, 1998; (ii) the acquisition of The Family Center Properties and The Sansone
Properties (Acquired Properties), which had an operating history, and the
purchase of a 50% interest in The Sansone's Group's operating/management
company; (iii) the sale by the Company of $200 million of Medium Term Notes in
January and July 1998; (iv) the purchase by the Company of a partner's minority
interest in one shopping center; (v) the sale by the Company of 669,639 common
shares (pre-split) in April 1998; (vi) the sale by the Company of 4,000,000
Class C Depositary Shares in July 1998; (vii) the sale by the Company of
2,160,000 Class D Depositary Shares in August and September 1998 (viii) the
transfer of six properties owned by the Company into a 50% owned joint venture
which occurred on September 10, 1998, (ix) the sale by the Company of 3,000,000
common shares in December 1998 and (x) the sale by the Company of $35 million of
Preferred Operating Partnership Units.
The following pro forma information is based upon the historical consolidated
results of operations of the Company for the year ended December 31, 1998,
giving effect to the transactions described above. The pro forma condensed
consolidated statement of operations should be read in conjunction with the
historical financial statements and notes thereto of the Company included in the
Developers Diversified Realty Corporation's Form 10-K for the year ended
December 31, 1998.
The unaudited pro forma condensed consolidated statements of operations are 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 do they purport to represent the Company's results of operations for future
periods.
F-2
<PAGE> 7
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
(Unaudited)
--------------------------------------------
Transfer of
Previously Common Share, Properties -
Reported Preferred DDRA V Company
Company Acquired Share and Debt Joint Pro Forma
Historical Properties Offerings Venture (k) (Unaudited)
---------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues from rental properties $ 213,998 $ 21,429(a) $ - ($20,487) $ 214,940
Management fees and other income 14,170 (126) 14,738
694
--------- -------- ------- -------- ---------
228,168 21,429 - (19,919) 229,678
--------- -------- ------- -------- ---------
Operating and maintenance 20,070 2,271(a) (1,383) 20,958
Real estate taxes 26,510 2,345(a) (3,691) 25,164
Depreciation and amortization 43,180 5,007(a) (3,766) 44,421
General and administrative expenses 12,918 250(d) 13,737
569(a)
Interest expense 57,196 10,342(a) 315(e) (7,850) 56,301
313(b) (548)(f)
190(c) (3,331)(g)
(326)(h)(i)
--------- -------- ------- -------- ---------
159,874 21,287 (3,890) (16,690) 160,581
--------- -------- ------- -------- ---------
Income (loss) before equity in net
income of joint ventures, allocation to
minority interests, loss on sales of
land and extraordinary item 68,294 142 3,890 (3,229) 69,097
Equity in net income of joint ventures 13,574 81(a) 3,115 17,252
482(b)
Minority equity interests (3,313) (2,419)(a) -(j) (5,603)
(49)(b)
178(c)
Loss on sales of land 248 248
--------- -------- ------- -------- ---------
Income (loss) before extraordinary
item 78,803 ($1,585) $ 3,890 ($114) 80,994
======== ======= ========
Less: preferred share dividends (19,952) (24,565)
--------- ---------
Income before extraordinary item
applicable to common shareholders $ 58,851 $ 56,429
========= =========
Per share data:
Earnings per common share before
extraordinary item:
Basic $ 1.03 $ 0.98(l)
========= =========
Diluted $ 1.00 $ 0.96(l)
========= =========
Weighted average number of common
shares (in thousands):
Basic 56,949 57,391
========= =========
Diluted 58,509 58,951
========= =========
</TABLE>
F-3
<PAGE> 8
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
(Unaudited)
(a) Reflects revenues and expenses through the date of acquisition for the
properties acquired from January 1, 1998 to August 18, 1999 as follows:
<TABLE>
<CAPTION>
Effective Real
Date of Estate Operating & Minority
Shopping Center Acquisition Revenues Taxes Maintenance Depreciation(1) Interest (1) Interest
--------------- ----------- -------- ----- ----------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Country Club Mall 02/25/98 $ 131 $ 19 $ 17 $ 25 $ 65 $ -
Belair Centre 03/10/98 875 65 162 159 445 -
The Columbus
Properties (2) 03/23/98 1,357 105 120 278 823 41
The Family Center
Properties (3), (4) 07/01/98 11,582 1,029 1,102 2,824 4,707 2,378
Tanasbourne Towne
Center (5) 07/02/98 - - - - - -
The Sansone
Properties (6) 07/16/98 7,484 1,127 870 1,721 4,302 -
Deer Valley Towne
Center (2) 07/09/99 - - - - - -
-------- ------- ------- ------- -------- -------
$ 21,429 $ 2,345 $ 2,271 $ 5,007 $ 10,342 $ 2,419
======== ======= ======= ======= ======== =======
</TABLE>
(1) Depreciation determined utilizing a 31.5 year life for buildings
with an operating history and calculated interest related to the
purchase of the operating properties with an estimated value of
approximately $222 million and $111 million for The Family Center
Properties and The Sansone Properties, respectively. Interest was
determined utilizing the Company's estimated interest under its
lines of credit and/or the effective interest rate associated with
the mortgage debt assumed. No interest expense was presented
relating to shopping centers under development and expansion as
related interest costs either would not have been incurred or would
have been capitalized.
(2) No revenues or expenses have been included in the pro forma
statement of operations for Easton Market, one of The Columbus
Properties, and Deer Valley Towne Center since the centers were
either under development or in lease-up prior to acquisition.
(3) General and administrative expenses reflect the operating expenses
of the Hermes Associates, LTD. management/operating company.
(4) Minority equity interest expense reflects the expense relating to
the operating partnership units issued in partial consideration for
the purchase of The Family Centers Properties. Operating
partnership units are, in certain circumstances and, at the option
of the Company, exchangeable into 3,630,668 common shares of the
Company. In addition, the Company has guaranteed the value of the
operating partnership units for the period two years from the date
of issuance. The guarantee is determined with reference to the
common shares of the Company. The final number of operating
partnership units issued as consideration will not be known until
after expiration of the guarantee period.
(5) Operating results for the Tanasbourne, Oregon shopping center are
not presented as this shopping center was under development during
the period presented.
(6) Equity in net income (loss) in joint ventures represents the
Company's equity in net income (loss) relating to its 50% joint
venture interest in the operating/management company acquired from
The Sansone Group.
F-4
<PAGE> 9
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
(Unaudited)
(b) Reflects revenues and expenses for four joint ventures acquired in 1998
through the date of acquisition as follows:
<TABLE>
<CAPTION>
Lennox Town Washington Dublin Village
Center Sun Center Park Plaza Center
Columbus, OH Columbus, OH Dayton, OH Columbus, OH Total
------------ ------------ ---------- ------------ -----
<S> <C> <C> <C> <C> <C>
Revenues $ 717 $ 889 $ 863 $ 1,456 $ 3,925
----- ------- ----- ------- -------
Operating and maintenance 49 48 116 107 320
Real estate taxes 96 76 102 178 452
Depreciation (1) 179 189 147 253 768
Interest (1) 380 442 347 551 1,720
----- ------- ----- ------- -------
704 755 712 1,089 3,260
----- ------- ----- ------- -------
Net Income 13 134 151 367 $ 665
=======
Ownership interest 50% 79.45% 50 80%
----- ------- ----- -------
Equity in net income of
joint venture $ 7 $ 106 $ 76 $ 293 $ 482
===== ======= ===== ======= =======
</TABLE>
(1) Based on the preliminary purchase price allocation, determined
depreciation utilizing a 31.5 year life for building and calculated
interest at the effective interest rate associated with the
mortgage debt assumed.
An aggregate interest cost of $313 associated with the purchase of
the Company's equity interest in the properties is calculated at
the Company's estimated interest rate under its lines of credit.
In addition to cash, the Company's purchase price was funded
through the issuance of operating partnership units (OP Units)
exchangeable, at the option of the Company and under certain
circumstances, into 116,892 of the Company's common shares. The
minority interest expense associated with the OP Units is estimated
to be $49 for the period prior to acquisition.
Operating results for the 50% interest in the St. Louis, Missouri
shopping center are not presented prior to the acquisition date as
this shopping center is not considered material.
(c) Represents the elimination of the minority interest expense and the related
interest expense incurred by the Company due to the purchase of the minority
interest in a shopping center located in North Olmsted, Ohio in March 1998.
(d) The general and administrative expenses of the Company have been adjusted by
$250 to reflect the estimated increased expenses expected to be incurred
associated with additional operating personnel and related costs
attributable to the increase in the Company's portfolio of properties
resulting from acquisitions and development activities.
(e) Reflects the net increase in interest cost of $315 relating to variable rate
indebtedness repaid with the proceeds from the sale of the Medium Term Notes
completed on July 15, 1998. Pro forma interest incurred through the date of
issuance on the Medium Term Notes is estimated at $4,055 and interest
savings on the variable rate indebtedness repaid is estimated at $3,740.
(f) Reflects the reduction of interest costs relating to variable rate
indebtedness effectively repaid with the proceeds from the sale of 669,639
common shares (pre-split) completed in April 1998.
F-5
<PAGE> 10
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
(Unaudited)
(g) Reflects the reduction of interest costs relating to unsecured variable rate
indebtedness repaid with the proceeds from the sale of 4,000,000 Class C
Depositary Shares in July 1998. The dividends assumed to be payable on the
Class C Depositary Shares are deducted from income to arrive at income
available to holders of Common Shares. (See (l)).
(h) Reflects the reduction of interest costs relating to unsecured variable rate
indebtedness repaid with the proceeds from the sale of 2,160,000 Class D
Depositary Shares in August and September 1998. The dividends assumed to be
payable on the Class D Depositary Shares are deducted from income to arrive
at income available to holders of Common Shares. (See (l)).
(i) The issuance of 3,000,000 common shares completed in December 1998, or
utilization of the proceeds derived from the sale thereof, are not reflected
herein prior to their issuance as the proceeds were considered to be used to
acquire shopping centers with no previous operating history and/or for
properties under development. Accordingly, the Company would not have issued
these securities until the earlier of the date of issuance or the date the
centers were acquired.
(j) The issuance of $35 million of preferred operating partnership units
completed in December 1998, or utilization of the proceeds derived from the
sale thereof, are not reflected herein prior to their issuance as the
proceeds were considered to be used to acquire shopping centers with no
previous operating history and/or for properties under development.
Accordingly, the Company would not have issued these securities until the
earlier of the date of issuance or the date the centers were acquired.
(k) Reflects the operating results of the six properties owned by the Company
and transferred into a 50% owned-joint venture for the period January 1,
1998 through September 9, 1998.
The equity in net income of the joint venture is as follows:
Revenues $20,613
-------
Operating and maintenance 1,383
Real estate taxes 3,691
Depreciation 3,019
Interest 6,289
-------
14,382
-------
Net income 6,231
Ownership interest 50%
-------
Equity in net income of joint venture $ 3,115
=======
Operating results for the Tanasbourne, Oregon shopping center are not
presented prior to the acquisition date as a portion of this shopping center
was under development during 1998.
Management fees of $694 represents the Company's fees earned through the
management of these properties.
Determined depreciation utilizing a 40 year life for buildings and
calculated interest related to the purchase of the operating centers.
Interest was determined based on the effective interest rate associated with
the mortgage debt incurred simultaneously with the transfer of these
properties.
F-6
<PAGE> 11
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
- --------------------------------------------------------------------------------
(Unaudited)
Reflects an aggregate interest savings of $7,850 associated with the
repayment of the Company's lines of credit with proceeds of $192 million
received by the Company simultaneously with the transfer of these properties
to a joint venture. The adjustment is calculated at the Company's estimated
interest rate incurred under its lines of credit.
(l) Pro forma income per common share is based upon the weighted average number
of common shares assumed to be outstanding for the year ended December 31,
1998. The 3,000,000 shares issued in December 1998, and a portion of the
Class D depositary shares issued in August and September 1998 were not
reflected either in the pro forma statement of operations or the earnings
per share calculation prior to their issuance as the proceeds were not
considered to be received until the date the developed shopping centers were
acquired in 1998 since such centers had no operating history.
Effective August 3, 1998, the Company executed a two-for-one stock split,
for shareholders of record on July 27, 1998. All per share information and
number of shares outstanding reflects the stock split.
In accordance with the SFAS 128, earnings per share before extraordinary
item is calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
Income before extraordinary item $ 80,994
Less: Preferred stock dividend (24,565)
--------
Basic EPS - Income before extraordinary item applicable to common
shareholders 56,429
Joint venture partnerships (632)
--------
Diluted EPS - Income before extraordinary item applicable to common
shareholders plus assumed conversions $ 55,797
========
NUMBER OF SHARES:
Basic - average shares outstanding 57,391
Effect of dilutive securities:
Stock options 499
Joint venture partnerships and minority interests 1,056
Restricted stock 5
--------
Diluted - average shares outstanding 58,951
========
PER SHARE AMOUNT:
Income before extraordinary item
Basic $ 0.98
========
Diluted $ 0.96
========
</TABLE>
F-7
<PAGE> 12
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
operating funds available for the year ended December 31, 1998. The pro forma
statement is based on the Company's historical operating results for the
twelve-month period ended December 31, 1998 adjusted for the effect of: (i)
historical operations of the Acquired Properties; (ii) Medium Term Notes
offerings completed in 1998; (iii) the purchase by the Company of a partner's
minority interest in one shopping center; (iv) 669,639 common share (pre-split)
offering completed in April 1998; (v) 4,000,000 Class C Depositary Shares
offering completed in July 1998; (vi) 2,160,000 Class D Depositary Shares
offering completed in August and September 1998 (vii) 3,000,000 common share
offering completed in December 1998; (viii) Preferred Operating Partnership
Units issued in December 1998 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 historical financial
statements included in the Company's Forms 10-K for the year ended December 31,
1998 and (ii) the pro forma condensed financial statements of the Company
included elsewhere herein.
ESTIMATE OF TAXABLE NET OPERATING INCOME (IN THOUSANDS):
<TABLE>
<CAPTION>
<S> <C>
DDRC historical income before extraordinary item, exclusive of property depreciation and amortization
(Note 1) ................................................................................................ $ 121,983
Acquired Properties - historical earnings from operations, as adjusted, exclusive of depreciation and
amortization (Note 2) ................................................................................... 3,433
Pro forma adjustments reflecting the purchase of minority interests ........................................ (11)
Pro forma adjustments reflecting the transfer of six properties to a joint venture ......................... (3,880)
Pro forma adjustments arising from the utilization of the proceeds from the issuance of Medium
Term Notes to repay variable rate indebtedness .......................................................... (315)
Pro forma adjustments arising from the utilization of the proceeds from the 669,639 common share offering .. 548
Pro forma adjustments arising from the utilization of the proceeds from the 3,000,000 common share offering
Pro forma adjustments arising from the utilization of the proceeds from the 4,000,000 Class C Depositary
Preferred Share offering ................................................................................ 3,331
Pro forma adjustments arising from the utilization of the proceeds from the 2,160,000 Class D Depositary
Preferred Share Offering ................................................................................ 326
Pro forma adjustments arising from the utilization of the proceeds from the issuance of Preferred
Operating Partnership Units ............................................................................. -
Estimated tax depreciation and amortization (Note 3):
Estimated 1998 tax depreciation and amortization ........................................................... (33,509)
Pro forma tax depreciation for Properties acquired during 1998 ............................................. (9,050)
---------
Pro forma taxable income before dividends deduction ........................................................ 82,856
Estimated dividends deduction (Note 4) .................................................................. (99,747)
---------
$ (16,891)
=========
Pro forma taxable net operating income ..................................................................... $ -
=========
</TABLE>
F-8
<PAGE> 13
DEVELOPERS DIVERSIFIED REALTY CORPORATION
ESTIMATED TWELVE MONTH PRO FORMA STATEMENT OF
TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE
- --------------------------------------------------------------------------------
(Unaudited)
ESTIMATE OF OPERATING FUNDS AVAILABLE (IN THOUSANDS):
Pro forma taxable operating income before dividend deduction ......... $ 82,856
Add pro forma depreciation ........................................... 42,559
---------
Estimated pro forma operating funds available (Note 5) ............... $ 125,415
=========
Note 1 - The historical earnings from operations represents the Company's
earnings from operations for the twelve months ended December 31, 1998
as reflected in the Company's historical financial statements.
Note 2 - The historical earnings from operations for the properties acquired in
1998 represent the revenues and certain expenses as referred to in the
pro forma condensed consolidated statement of operations for the year
ended December 31, 1998 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 $11 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:
Common share dividend (57,391,000 shares x $1.31 per share) $ 75,182
Class A Preferred Shares 10,011
Class B Preferred Shares 4,189
Class C Preferred Shares 8,375
Class D Preferred Shares 1,990
--------
$ 99,747
========
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-9
<PAGE> 14
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 August 19, 1999 /s/ William H. Schafer
---------------------- ----------------------------
William H. Schafer
Vice President and Chief Financial Officer
F-10
