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1
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 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from____________to__________
Commission file number 1-11690
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 34-1723097
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
34555 Chagrin Boulevard Moreland Hills, Ohio 44022
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(Address of principal executive offices - zip code)
(440) 247-4700
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Shares, Without Par Value New York Stock Exchange
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Depositary Shares Representing
Class A Cumulative Redeemable Preferred Shares New York Stock Exchange
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Depositary Shares Representing
Class B Cumulative Redeemable Preferred Shares New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
2
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
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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 16, 1998 was $991,953,728.
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.
27,819,716 common shares outstanding as of March 16, 1998
DOCUMENTS INCORPORATED BY REFERENCE.
The registrant incorporates by reference in Part III hereof portions of
its definitive Proxy Statement for its 1998 Annual Meeting of Shareholders.
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TABLE OF CONTENTS
Item No. Report Page
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PART I
1. Business ....................................................... 4
2. Properties...................................................... 10
3. Legal Proceedings............................................... 19
4. Submission of Matters to a Vote of Security Holders............. 19
PART II
5. Market for the Registrant's Common Equity and
Related Shareholder Matters ................................. 22
6. Selected Financial Data......................................... 23
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 25
8. Financial Statements and Supplementary Data..................... 33
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure........................ 33
PART III
10. Directors and Executive Officers of the Registrant.............. 34
11. Executive Compensation.......................................... 34
12. Security Ownership of Certain Beneficial Owners
and Management ............................................... 34
13. Certain Relationships and Related Transactions.................. 34
PART IV
14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K........................................... 35
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PART I
Item 1. BUSINESS
General Development of Business
Developers Diversified Realty Corporation (the "Company"), 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 include Developers Diversified Realty
Corporation, its wholly owned and majority owned subsidiaries and its joint
ventures.
From January 1, 1995 to March 16, 1998, the Company has acquired 35
shopping center properties, including those owned through joint ventures, two of
which were acquired in 1998, eight of which were acquired in 1997, five of which
were acquired in 1996, 20 of which were acquired in 1995.
The Company's executive offices are located at 34555 Chagrin Boulevard,
Moreland Hills, Ohio 44022, and its telephone number is (440) 247-4700.
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 239 shopping centers. The
Company's portfolio as of March 16, 1998 consisted of 125 shopping centers
(including 15 properties which are owned through joint ventures, 14 of which the
Company owns a 50% interest, and one of which the Company owns a 35% interest),
five business centers and 70 undeveloped parcels (5 of which are owned through
joint ventures) aggregating approximately 175 acres (the "Portfolio
Properties"). In addition, the Company owns a 42.5% ownership interest in a
shopping center located in Princeton, New Jersey and a 75% interest in a joint
venture which acquired 33 retail sites, formerly occupied by Best Products. From
January 1, 1995 to March 16, 1998, the Company has acquired 35 shopping centers
containing an aggregate of 10.4 million square feet of GLA owned by the Company
for an aggregate purchase price of approximately $1.0 billion. During 1995, 1996
and 1997, the Company completed expansions at 32 of its shopping centers. As of
March 16, 1998, the Company was expanding seven shopping centers and expects to
commence expansions at additional shopping centers in 1998. The Company has also
substantially completed the development of 11 additional shopping centers since
December 31, 1994, at an aggregate cost of approximately $231.4 million
aggregating approximately 3.9 million square feet. As of March 16, 1998, the
Company had five shopping centers under development.
The Company's shopping centers were approximately 96.1% leased as of
December 31, 1997, and the business centers were 98.6% leased as of that date.
At December 31, 1997, the Company had entered into additional leases with anchor
tenants aggregating in excess of 158,000 square feet of vacant space, scheduled
to commence in 1998, which brings the leased rate at the shopping centers to
96.7%. On December 31, 1997, the average annualized base rent per square foot
of Company-owned GLA of the shopping centers was $8.49 and the business centers
was $4.04.
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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, 1997, the Company owned and/or managed approximately
35.3 million total square feet of GLA, which included all of the Portfolio
Properties and 23 properties owned by third parties.
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 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, 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");
- 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 may periodically engage in
discussions with public and private real estate entities regarding possible
portfolio or asset acquisitions or business combinations.
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In addition, the Company intends to maintain a conservative debt
capitalization with a ratio of debt to total market capitalization (the sum of
the aggregate market value of the Company's common shares, the liquidation value
of preferred shares and the Company's total indebtedness) of less than .50 to
1.0. At December 31, 1997, the Company's debt to total market capitalization
ratio, excluding the Company's proportionate share of indebtedness of its
unconsolidated joint ventures, was approximately 0.36 to 1.0; and at March 16,
1998 this ratio was approximately 0.36 to 1.0 At December 31, 1997, the
Company's capitalization consisted of $668.5 million of debt (excluding the
Company's proportionate share of joint venture mortgage debt aggregating $190.3
million), $149.8 million of preferred stock and $1,059.0 million of market
equity. At December 31, 1997, the Company's total debt consisted of $526.0
million of fixed-rate debt and $142.5 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.
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
In January 1997, the Company completed a 3,350,000 common share
offering and received net proceeds of approximately $115.8 million. In June
1997, the Company completed a 1,300,000 common share offering and received net
proceeds of approximately $49.4 million. In September 1997, the Company
completed a 507,960 common share offering through a registered unit investment
trust and received net proceeds of approximately $18.8 million. In December
1997, the Company completed a 316,800 common share offering through a registered
unit investment trust and received net proceeds of approximately $11.3 million.
The proceeds from the four common share offerings mentioned above were primarily
used to retire variable rate debt. The common share offerings significantly
strengthened the Company's balance sheet and positioned the Company to continue
to take advantage of attractive acquisition, development and expansion
opportunities.
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 ("Notes") maturing
March 2012, issued by the Company to the trust. The trust sold an option which
enables the option holder to remarket the Notes upon maturity of the
certificates 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.
In March 1997, the Company extended its $150 million unsecured
revolving credit facility, agented by the First National Bank of Chicago and
Bank of America NT&SA, for an additional year, through May 2000, and reduced the
interest rate 15 basis points. The amendment also introduced a competitive bid
feature for up to $75 million of borrowings. In April 1997, the Company extended
its $10 million unsecured revolving credit facility with National City Bank
through November 2000, and reduced the interest rate 15 basis points.
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In March 1997, the Company sold two business centers in Highland
Heights, Ohio aggregating approximately 113,000 square feet for approximately
$5.7 million and recognized a gain of approximately $3.5 million. The net
proceeds of approximately $5.4 million were used to repay revolving credit debt.
In November 1995, the Company commenced a medium-term note program (the
"Medium Term Note Program"). The Medium Term Note Program enables the Company
(i) to issue on an ongoing basis discrete amounts of unsecured debt that will
closely match, both as to timing and amount, the Company's specific liquidity
requirements, including property acquisition, development and redevelopment
costs, and (ii) to better manage the Company's debt maturities, including its
mortgage debt maturities. As of March 16, 1998, the Company had issued Medium
Term Notes in the aggregate amount of $317.7 million ($100 million in 1998,
$102 million in 1997, and $115.7 million in 1996 and 1995). The net proceeds
from each issuance were used to repay line of credit borrowings and mortgage
debt. The Medium Term Note Program remains available for the Company to issue
additional Medium Term Notes when the Company considers market conditions
advantageous.
Equity Investments in Joint Venture
In January 1997, the Company formed 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 was 35%. The Company contributed
approximately $3.5 million of equity and manages the shopping center pursuant
to a management agreement.
Property Acquisitions, Developments and Expansions
During 1997, the Company acquired seven shopping centers aggregating
2.4 million square feet of Company-owned GLA (Gross Leasable Area) 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 OSTRS Joint Venture during 1997.
During 1997, the Company and its joint ventures completed expansions
and redevelopments at 13 of its shopping centers aggregating approximately 0.8
million square feet at an aggregate cost of approximately $39.0 million. The
Company is currently expanding seven shopping centers and will continue to
pursue additional expansion opportunities. The Company and its joint ventures
currently have approximately 175 acres of undeveloped land consisting of 70
parcels, primarily adjacent to its existing shopping centers, available for
development, expansion or sale.
During 1997, the Company substantially completed the construction of
four shopping centers which include: (i) a 235,000 square foot Phase II
development of the Canton, Ohio shopping center; (ii) a 500,000 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 community center in Aurora, Ohio.
Development activity was also 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.
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During 1997, the Company commenced construction on two additional
shopping centers which include a 200,000 square foot Phase II development of the
Erie, Pennsylvania center, and a 445,000 square foot shopping center in Merriam,
Kansas which is being developed through a joint venture formed in October 1996,
50% of which is owned by the Company. These shopping centers are scheduled for
completion during the last half of 1998. The Company has also commenced the
initial development of three additional shopping centers which include: (i) a
240,000 square foot shopping center in Toledo, Ohio; (ii) a 170,000 square foot
shopping center in Solon, Ohio and (iii) a 230,000 square foot shopping center
in Oviedo, Florida (a suburb of Orlando). All three centers are scheduled for
completion during the fourth quarter of 1998.
The Company is also involved with, or pursuing, joint venture
development opportunities on eight additional projects with various developers
throughout the country at a projected cost aggregating approximately $300
million. The majority of projects should commence development in 1998 and are
currently scheduled for completion in 1999.
In December 1997, the Company and Hendon Associates formed a joint
venture to acquire 33 retail sites, formerly occupied by Best Products, from
Metropolitan Life. Under the terms of the joint venture with Hendon Associates,
the Company advanced the capital to fund the purchase price of the assets and
it is expected that the Company will receive (i) a priority return of its
capital; (ii) a 15% compound annual return thereon and (iii) 75% of additional
available cash flow. The 33 retail sites, are located in 13 states with
concentrations in Ohio, California and New Jersey. These sites were acquired at
an initial cost of approximately $54.5 million. It is expected that a majority
of the 33 sites will be redeveloped and retenanted with a few sites being sold.
At the date of acquisition, it was anticipated that the Company's
ownership interest would be transferred to the "Retail Value Fund" ("Fund")
with Prudential Real Estate Investors upon finalization of the joint venture
documents which occurred on February 11, 1998. The Company contributed its
ownership interest in the joint venture formed with Hendon Associates to the
Fund, and in exchange for a 75% ownership interest in this joint venture, was
reimbursed approximately $41.5 million from Prudential Real Estate Investors.
The proceeds of $41.5 million were used to repay variable rate borrowings on
the Company's revolving credit facilities.
The Fund will invest in retail properties within the United States that
are in need of substantial retenanting and market repositioning. This Fund
may also make equity or 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 centers or other potential commercial
redevelopment opportunities. The Company is expected to maintain an ownership
interest of approximately 25% in the Fund. The Company will also own a majority
of the stock of the general partner of the Fund. The general partner will own a
1% interest in the Fund and will receive an incentive participation equal to
33% of cash flow, after the limited partners receive a return of invested
capital plus a cumulative return of 10% thereon. The Fund will have its own
employees and the Company will assume retail management and operating
responsibilities including leasing, redevelopment and accounting and will be
paid fees in consideration of the foregoing services.
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In late December 1997, the Company acquired a 42.5% ownership interest
in a 584,000 square foot shopping center located in Princeton, New Jersey at an
initial cost of approximately $7.7 million. During the first half of 1998, the
Company anticipates acquiring the balance of the ownership interest in the
property through the issuance of approximately 11,850 Operating Partnership
Units, which will be convertible to the Company's common shares, and the
assumption of debt. Upon completion of the transaction, the Company's aggregate
investment will be approximately $36.4 million, including assumption of debt of
approximately $27.7 million. The Company also acquired a 45.1% ownership
interest in an adjacent development site at an initial cost of approximately
$9.9 million. Upon completion of construction, the Company anticipates
acquiring the balance of the ownership interest in exchange for cash and
Operating Partnership Units.
Retail Environment
During 1997, 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
through March 16, 1998 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/or 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.
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Employees
As of March 16, 1998, the Company employed 198 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, 1997 the Portfolio Properties included 123 shopping
centers (13 of which are owned through joint ventures in which the Company and a
party otherwise unaffiliated with the Company owns a 50% interest and one of
which the Company owns a 35% interest), consisting of 106 community shopping
centers and power centers, 12 enclosed mini-malls, and five neighborhood
shopping centers. The Portfolio Properties also include five business centers
containing office and light industrial, warehouse and research space and 70
undeveloped parcels (aggregating approximately 175 acres) primarily located
adjacent to certain of the shopping centers. The shopping centers and business
centers aggregate approximately 25.2 million square feet of Company-owned GLA
(approximately 33.1 million square feet of total GLA) and are located in 30
states, principally in the East and Midwest, with significant concentrations in
Ohio, Florida, South Carolina, North Carolina, Michigan and Minnesota.
Neighborhood and community shopping centers and power centers make up
the largest portion of the Company's portfolio, comprising 21.8 million (86.6%)
square feet of Company-owned GLA. Enclosed mini-malls account for 2.9 million
(11.6%) square feet of Company-owned GLA, and business center space consists of
approximately 0.5 million (0.9%) square feet of Company-owned GLA. On December
31, 1997, the average annualized base rent per square foot of Company-owned GLA
of the shopping centers, including those owned through joint ventures, was $8.49
and of the business centers was $4.04.
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.
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The following table sets forth, as of December 31, 1997, 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
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Wal-Mart 7.2% 11.4%
Kmart 5.2 9.7
T. J. Maxx/Marshall's 2.8 2.6
Homeplace 2.6 1.9
Kohl's Dept. Store 2.4 2.6
Barnes & Noble/B. Dalton 2.2 1.1
Lowes Home Centers 2.1 2.8
Office Max 1.9 1.5
Best Buy 1.6 1.0
Fashion Bug 1.3 1.3
Kroger 1.2 1.3
JC Penny 1.2 2.5
Publix Supermarkets 1.1 1.3
General Cinema 1.1 0.3
AMC Theaters 1.0 0.6
In addition, as of December 31, 1997 unless otherwise indicated, with respect to
the 123 shopping centers:
- 49 of these properties were developed by DDG and seven were
developed by the Company;
- 90 of these properties are anchored by Wal-Mart, Kmart or
Target store;
- these properties range in size from just under 100,000 square
feet to approximately 900,000 square feet of GLA (with 32
properties exceeding 325,000 square feet of GLA);
- approximately 58.1% of the Company-owned GLA of these
properties is leased to national chains, including
subsidiaries, with approximately 32.2% of the Company-owned
GLA leased to regional chains and approximately 6.4% of the
Company-owned GLA leased to local tenants;
- approximately 96.1% of the aggregate Company-owned GLA of
these properties was leased as of December 31, 1997. The
Company has entered into additional leases with anchor tenants
aggregating in excess of 158,000 square feet of vacant space,
scheduled to commence in 1998, which brings the December 31,
1997 leased rate to 96.7% (and, with respect to the properties
owned by the Company at December 31, for each of the five
years beginning with 1993, between 94.8% and 97.1% of
aggregate Company-owned GLA of these properties was leased);
- Seven of the properties are currently being expanded by the
Company, and the Company is pursuing the expansion of
additional properties.
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TENANT LEASE EXPITATIONS AND RENEWALS
The following table show tenant lease expirations for the next ten years at the
Comany's shopping centers and business 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
- ---------- -------- ------------- -------------- ---------------- ------------- ---------------
1998...... 257 926,994 $ 7,133,437 $ 7.40 3.8% 3.5%
1999...... 289 989,966 $ 9,230,495 $ 9.32 4.1% 4.5%
2000...... 242 817,474 $ 8,368,004 $ 10.24 3.4% 4.1%
2001...... 220 874,478 $ 8,863,940 $ 10.14 3.6% 4.3%
2002...... 192 1,344,136 $ 9,492,605 $ 7.06 5.6% 4.6%
2003...... 77 906,135 $ 5,189,351 $ 5.73 3.7% 2.5%
2004...... 57 635,993 $ 5,207,037 $ 8.19 2.6% 2.5%
2005...... 65 964,253 $ 6,917,645 $ 7.17 4.0% 3.4%
2006...... 46 564,647 $ 6,621,302 $ 11.73 2.3% 3.2%
2007...... 49 596,702 $ 6,596,269 $ 11.05 2.5% 3.2%
----- --------- ----------- --------- ---- ----
1,494 8,620,778 $73,620,085 $ 8.54 35.6% 36.0%
The five business centers are located in Ohio and range in size from
approximately 36,000 to 236,000 square feet of Company-owned GLA. The business
centers contain office and light industrial, warehouse and research space. As of
December 31, 1997, the business centers were 98.6% leased. All of the five
business centers are triple net leased, four are leased to single tenants, and
one is leased to multiple users. Pursuant to the triple net leases, the tenants
are obligated to pay all maintenance and insurance expenses and real estate
taxes, and all or substantially all operating expenses, relating to the
applicable business centers. The leases for the business centers have terms
which are scheduled to expire between October 1998 and November 2003. These
leases generally have fixed or cost-of-living rental increases in their option,
but not in their base terms. Accordingly, the rental payments under 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 for the Company's business centers can be
obtained if not renewed.
The Company's 70 undeveloped parcels 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 or develop its undeveloped parcels.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST DECEMBER 31, 1997
- -------------------------------
Interest
(ground Company
lease Gross
termination/ Land Leaseable
Type of option Date Developed Area Area
Center/Property Location Property (1) termination) or Acquired (2) (Acres) (sq.ft.)
- --------------------- ---------------------- ------------ ----------- ----------------- ------ --------
Alabama
- -------
Birmingham (Brk), AL 5291 Highway 280 South PC Fee 12/01/94, 12/29/94(a) 64.46 479,859
Birmingham (East), AL 7001 Crestwood Blvd. PC Fee 03/01/89, 11/15/95(a) 45.49 284,475
Huntsville, AL 6140-A University Drive PC Fee 12/28/95, 12/28/95(a) 5.29 41,000
Arizona
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Ahwatukee, AZ 4711 East Ray Road PC 07/10/96, 02/21/97(a) 59.28 491,689
Phoenix, AZ 7553 West Bell Road PC Fee 10/01/95, 07/02/96(a) 24.12 346,680
Arkansas
- --------
Fayetteville, AR PC Fee 04/01/97, 11/20/97(a) 139,277
North Little Rock, AR 4124 East McCain Blvd PC Fee 07/01/91, 03/21/94(a) 27.76 294,357
Russellville, AR 3093 East Main Street PC Fee 02/01/92, 04/18/94(a) 31.20 272,245
California
- ----------
San Diego, CA 11610 Carmel Mntn. Rd. PC Fee(6) 04/01/93, 11/17/95(a) 50.00 439,939
Colorado
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Alamosa, CO 145 Craft Avenue PC Fee 01/01/86 13.10 19,875
Denver, CO 505 South Broadway PC Fee(6) 11/01/93, 11/17/95(a) 38.59 369,386
Denver, CO 9555 E. County Line Road PC Fee 09/01/97, 10/01/97(a) 46.07 336,944
Trinidad, CO Hwy 239 @ I25 Frontage PC Fee 05/01/86 17.88 63,836
Connecticut
- ----------
Waterbury, CT 899 Wolcott Street PC GL1 11/01/73 15.60 124,310
Florida
- -------
Bayonet Point, FL U.S. 19 & S.R. 52 PC Fee 09/01/85 58.67 203,760
Brandon, FL 1602 Brandon Blvd PC GL2 06/01/72 17.33 139,522
Cape Coral, FL 1420 Del Prado Blvd NC Fee 09/01/85 9.61 73,240
Crystal River, FL 420 Sun Coast Hwy PC Fee 10/01/86 21.18 146,954
Fern Park, FL 6735 U.S. #17-92 PC Fee 10/01/70 3.04 16,000
Jacksonville, FL 3000 Dunn Avenue PC Fee 12/01/88, 03/31/95(a) 30.82 219,073
Marianna, FL 2820 Highway 71 PC Fee 08/01/90 17.34 63,894
Melbourne, FL 750-850 Apollo Blvd PC GL3 11/01/78 15.52 121,913
Naples, FL 5010 Airport Road North PC Fee(6) 03/01/94, 11/17/95(a) 30.60 266,438
Ocala, FL 3711 Silver Sprgs, NE PC Fee 06/01/74 2.23 19,280
Mortgage
Obligation Average
as of Total Base
December 31, Annualized Rent per Percent
Center/Property 1997 Base Rent(3) sq.ft.(4) Leased(6) Anchor Tenants (Lease Expiration/Option Expiration)
-------------------- ----------- ------------ --------- -------- ---------------------------------------------------
Alabama
-------
Birmingham (Brk), AL $3,788,250 $7.96 99.2% Wal-Mart (2004/2024), Winn-Dixie (2014/2044),
Goody's (2004/2019), Stein Mart (2011/2021),
OfficeMax (2011/2026)
Birmingham (East), AL 1,949,251 8.75 78.3% Home Depot (not owned) Western Supermarkets
(not owned), Office Depot (1999/2014), Goody's
(2004/2019), Stein Mart (2003/2018), Cobb Theaters
(2006/2016)
Huntsville, AL 459,850 11.22 100.0% Wal-Mart (not owned)
Arizona
-------
Ahwatukee, AZ 6,351,820 13.07 98.9% HomePlace (2012/2027), Smith's (2021/2046),
Stein Mart (2011/2026)
Phoenix, AZ 3,637,795 10.49 100.0% Lil' Things (2009/2024), Barnes & Noble(2011/2026)
TJMaxx (2005/2020), Circuit City (2016/2036),
Oshman's (2017/2037), Linens 'N Things(2011/2026),
Fry's (not owned)
Arkansas
--------
Fayetteville, AR 1,304,437 9.37 100.0% T.J. Maxx (2005/2020) Service Merchandise
(2016/2031)
North Little Rock, AR 1,755,364 6.55 91.1% Kmart (2016/2066), Wards (2014/2034), TJMaxx
(2001/2011), Cinemark (2011/2031)
Russellville, AR 1,659,354 6.15 99.1% Wal-Mart (2011/2041), JCPenney (2012/2032),
Beall-Ladymon (2007/2022)
California
----------
San Diego, CA 6,018,390 13.68 100.0% 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 Music (1999/2014)
Colorado
--------
Alamosa, CO 155,158 7.81 100.0% Wal-Mart (not owned)
Denver, CO 3,559,127 9.64 100.0% Kmart (2019/2069), Albertson's (2019/2049),
Sam's (2018/2058), Office Max (2010/2035),
Pep Boys (2014/2035)
Denver, CO 4,394,117 13.04 100.0% 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)
Trinidad, CO 250,088 4.29 91.3% Wal-Mart (not owned), Super Save (1998)
Connecticut
Waterbury, CT 416,900 3.35 100.0% Kmart (1998/2048), Grand Union (1999/2024)
Florida
-------
Bayonet Point, FL 5,327,208 1,071,535 5.67 92.7% Publix (2005/2025), Beall's (2002/2017),
TJMaxx (2010/2030)*, Eckerd (2005/2025), Kmart
(1997/2047)
Brandon, FL 298,308 2.64 81.1% Kmart (1997/2047)
Cape Coral, FL 460,256 6.76 93.0% TJMaxx (2007/2017), Office Max (2012/2027)
Crystal River, FL 423,851 3.21 89.7% Beall's (2001/2016), Scotty's (2008/2038)
Fern Park, FL 80,363 7.18 70.0% Kmart (not owned)
Jacksonville, FL 7,904,705 1,357,080 6.42 96.5% Wal-Mart (not owned), J.C.Penney (2002/2022),
Winn Dixie (2009/2034), Walgreen's (2029/2029)
Marianna, FL 434,515 7.18 94.7% Wal-Mart (not owned), Beall's (2005/2020), Eckerd
(2010/2030)
Melbourne, FL 366,168 3.14 95.7% Kmart (2003/2048), Beall's (1997/2007)
Naples, FL 2,797,044 10.55 99.5% Winn Dixie (2014/2038), TJMaxx (2009/2024),
Service Merchandise (2015/2035), Ross Dress For
Less (2005/2025), Circuit City (2015/2035),
Office Max(2010/2025)
Ocala, FL 54,060 4.07 68.9% Kmart (not owned), Eckerd (1998/2018)
13
14
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST DECEMBER 31, 1997
- -------------------------------
Interest
(ground Company
lease Gross
termination/ Land Leaseable
Type of option Date Developed Area Area
Center/Property Location Property (1) termination) or Acquired (2) (Acres) (sq.ft.)
- --------------------- ---------------------- ------------ ----------- ----------------- ------ --------
Orlando, FL 5250 W.Colonial Dr PC Fee 08/01/89 30.57 177,215
Ormond Beach, FL 1458 West Granada Blvd PC Fee 07/01/93, 05/02/94(a) 32.09 234,045
Palm Harbor, FL 300 East Lake Road PC Fee 05/01/90, 05/12/95(a) 5.80 52,395
Pensacola, FL 8934 Pensacola Blvd PC Fee 12/01/88 21.00 75,736
Spring Hill, FL 13050 Cortez Blvd PC Fee 09/01/88 21.60 196,073
Tampa (NPt), FL 15233 No.Dale Mabry PC Fee 12/01/90 23.70 104,473
Tampa (T'nC), FL 7039 West Waters Ave PC Fee 07/01/90 30.61 134,166
Tarpon Springs, FL 41232 U.S. 19, North PC Fee 11/01/74 23.30 192,964
West Pasco, FL 7201 County Rd 54 PC Fee 09/01/86 24.40 135,421
Georgia
- -------
Atlanta, GA 1155 Mt. Vernon Highway PC Fee(6) 11/01/95, 11/17/95(a) 30.67 288,045
Duluth, GA 1630 Pleasant Hill Road PC Fee 04/01/90, 02/24/94(a) 8.70 99,025
Marietta, GA 2609 Bells Ferry Road PC Fee(6) 08/01/95, 11/17/95(a) 48.28 319,908
Stone Mountain, GA 5615 Memorial Drive PC Fee 11/01/73 16.60 143,860
Illinois
- --------
Harrisburg, IL 701 North Commercial PC Fee 01/01/91, 02/17/94(a) 24.46 168,424
Mount Vernon, IL 42nd and Broadway MM Fee 08/01/74, 08/13/93(a) 39.25 265,717
Schaumburg, IL 1430 East Golf Road PC Fee 11/01/93, 11/17/95(a) 62.80 501,092
Indiana
- -------
Bedford, IN 1320 James Avenue PC Fee 07/01/93, 10/21/93(a) 20.56 223,135
Connersville, IN 2100 Park Road PC Fee 01/01/91, 12/10/93(a) 21.99 141,791
Highland, IN Highway 41 & Main Street PC Fee 11/01/95, 07/02/96(a) 16.08 294,115
Iowa
- ----
Ottumwa, IA 1110 Quincy Avenue MM Fee 04/01/90 34.00 161,060
Kentucky
- --------
Hazard, KY Kentucky Highway 80 PC Fee 08/01/78 11.74 111,492
Maine
- -----
Brunswick, ME 172 Bath Road PC Fee(6) 05/01/65, 07/15/97(a) 28.46 290,784
Massachusetts
- ------------
Framingham, MA 1 Worcester Road PC Fee(6) 08/01/94, 11/17/95(a) 177.00 768,046
Michigan
- --------
Bad Axe, MI 850 No.Van Dyke Rd PC Fee 01/01/91, 08/12/93(a) 18.58 63,415
Cheboygan, MI 1109 East State PC Fee 01/01/88, 12/14/93(a) 16.75 95,094
Mortgage
Obligation Average
as of Total Base
December 31, Annualized Rent per Percent
Center/Property 1997 Base Rent(3) sq.ft.(4) Leased(6) Anchor Tenants (Lease Expiration/Option Expiration)
-------------------- ----------- ------------ --------- -------- ---------------------------------------------------
Orlando, FL 1,412,407 8.12 98.2% Wal-Mart (not owned), Publix (2009/2019),
Walgreens (2029/2029)
Ormond Beach, FL 1,776,321 7.74 98.0% Kmart (2018/2064), Publix (2013/2033), Bealls
(2004/2024)
Palm Harbor, FL 729,966 14.62 95.3% Target (not owned), Albertson's (not owned),
Eckerd (2010/2025)
Pensacola, FL 336,311 8.08 54.9% Wal-Mart (not owned), City Drug (1998/2003)
Spring Hill, FL 6,134,476 1,279,419 6.78 96.2% Wal-Mart (not owned), Publix (2008/2028), Walgreens
(2028/2028), Beall's (2006/2046)
Tampa (NPt), FL 1,157,564 11.08 100.0% Wal-Mart (not owned), Publix (2010/2030)
Tampa (T'nC), FL 1,046,996 8.34 93.6% Wal-Mart (not owned), Beall's (2005/2029),
Kash N Karry (2010/2040)
Tarpon Springs, FL 787,385 4.92 83.0% Kmart (1999/2049)
West Pasco, FL 4,783,894 1,017,079 7.79 96.4% Wal-Mart (not owned), Publix (2006/2026),
Bealls (2001/2016), Walgreens (2026/2026)
Georgia
-------
Atlanta, GA 4,163,570 14.63 98.8% SteinMart (2010/2025), HomePlace (2011/2026), United
Artists (2015/2035)
Duluth, GA 1,202,177 12.48 97.3% Wal-Mart (not owned), Office Depot (2000/2020),
Ethan Allen (2000/2010)
Marietta, GA 3,505,751 11.19 97.9% Publix (2015/2035), HomePlace (2011/2026), PetsMart
(2011/2021), Barnes & Noble (2011/2026)
Stone Mountain, GA 445,278 3.15 98.4% Kmart (1998/2048)
Illinois
--------
Harrisburg, IL 890,733 5.52 95.9% Wal-Mart (2011/2041), Roundy's Grocery (2011/2031)
Mount Vernon, IL 1,221,671 4.88 94.2% Wal-Mart (2008/2028),J.C.Penney (1997/2022),
Martin's(1999/2014), Stage (1999/2014)
Schaumburg, IL 7,225,919 14.49 99.5% 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)
Indiana
-------
Bedford, IN 1,280,755 5.81 98.7% Kmart (2018/2068), J.C.Penney (2008/2028), Goody's
(2003/2018), Buehler's (2010/2025)
Connersville, IN 806,151 5.69 100.0% Wal-Mart (2011/2041), Cox Supermarket (2011/2026)
Highland, IN 2,688,252 9.76 93.6% Marshall's (2011/2021), Circuit City (2016/2036),
Kohl's (2016/2036), OfficeMax (2012/2032), Jewel
(not owned), Target (not owned)
Iowa
----
Ottumwa, IA 1,110,173 7.13 96.6% Wal-Mart (not owned), J.C. Penney (2005/2035),
Herberger (2004/2019)
Kentucky
--------
Hazard, KY 414,959 3.72 100.0% Kmart (2003/2053)*, A&P (1998/2038)
Maine
-----
Brunswick, ME 1,933,341 6.67 99.7% Hoyt's Cinemas (2010/2025), TJMaxx (2004/2019),
Sears (2002/2027)
Massachusets
------------
Framingham, MA 12,008,557 15.86 98.6% 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), Ofice Max (2011/2026), Toys R Us
(2020/2070), Kids R Us (2020/2070), Bradlee's
(2005/2020)
Michigan
--------
Bad Axe, MI 524,530 8.27 100.0% Wal-Mart (not owned), Farmer Jack's (2012/2037)
Cheboygan, MI 397,950 4.60 91.1% Kmart (2005/2055), Carters Food Center (1999/2024)
14
15
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST DECEMBER 31, 1997
- -------------------------------
Interest
(ground Company
lease Gross
termination/ Land Leaseable
Type of option Date Developed Area Area
Center/Property Location Property (1) termination) or Acquired (2) (Acres) (sq.ft.)
- --------------------- ---------------------- ------------ ----------- ----------------- ------ --------
Gaylord, MI 1401 West Main Street PC Fee 02/01/91, 08/12/93(a) 19.49 190,482
Houghton, MI Highway M26 MM Fee 12/01/81 21.48 234,338
Howell, MI 3599 East Grand River PC Fee 11/01/91, 09/23/93(a) 26.52 215,137
Mt Pleasant, MI 4208 E.Blue Grass Rd PC Fee 07/01/90, 09/24/93(a) 51.13 248,963
Sault Ste Marie, MI 4516 I-75 Business Spur PC Fee 08/01/93, 09/02/94(a) 40.08 262,267
Walker, MI 3390-B Alpine Ave., N.W. PC Fee 09/01/89, 12/29/95(a) 16.40 133,981
Minnesota
- ---------
Bemidji, MN 1201 Paul Bunyan Dr MM Fee 11/01/77 31.55 295,611
Brainerd, MN 1200 Hwy 210 West MM Fee 08/01/85 17.19 256,722
Eagan, MN I299 Promenade Place PC Fee 04/01/97, 07/01/97(a) 45.70 243,282
Hutchinson, MN 1060 S.R. 15 MM Fee 12/01/81 36.88 121,001
Maple Grove, MN Weaver Lake Road & I-94 PC Fee 10/01/95, 07/02/96(a) 25.61 250,436
St. Paul, MN 1450 University Avenue PC Fee 10/01/95, 07/11/97(a) 20.27 313,781
Worthington, MN 1635 Oxford Street MM Fee 11/01/77 38.02 185,658
Mississippi
- -----------
Starkville, MS 882 Highway 12 West PC Fee 08/01/90, 11/16/94(a) 28.81 234,652
Tupelo, MS 3850 North Gloster PC Fee 08/01/92, 12/15/94(a) 41.91 348,236
Missouri
- --------
Fenton, MO Gravois Rd-Hwy 141 NC Fee 07/01/70 11.07 93,548
Independence, MO 900 East 39th Street PC Fee(6) 09/01/95, 11/17/95(a) 46.95 365,062
New Jersey
- ----------
Princeton, NJ Route 1 and Quaker Bridge Road PC Fee 06/06/95, 12/30/97(a) 202,104
New Mexico
- ----------
Los Alamos, NM 800 Trinity Drive NC Fee 07/01/78 8.72 98,050
North Carolina
- --------------
Ahoskie, NC 1400 East Memorial Drive PC Fee 12/01/92, 02/25/94(a) 26.95 187,257
Durham (Oxf), NC 3500 Oxford Road PC Fee 12/01/90 41.70 206,827
Durham (NHp), NC 5428-B New Hope Commons PC Fee(6) 07/01/95, 11/17/95(a) 39.53 408,292
Jacksonville, NC US Hwy 17-Western Ave PC Fee 08/01/89 27.51 79,200
New Bern, NC 3003 Claredon Blvd PC Fee 05/01/89 28.18 238,388
Washington, NC 536 Pamlico Plaza NC Fee 11/01/90 22.17 85,000
Waynesville, NC 201 Paragon Parkway PC Fee 06/01/90, 04/28/93(a) 28.40 181,894
Wilmington, NC S.College-New Centre Dr PC Fee 09/01/89 57.78 442,583
Mortgage
Obligation Average
as of Total Base
December 31, Annualized Rent per Percent
Center/Property 1997 Base Rent(3) sq.ft.(4) Leased(6) Anchor Tenants (Lease Expiration/Option Expiration)
-------------------- ----------- ------------ --------- -------- ---------------------------------------------------
Gaylord, MI 1,095,147 5.82 98.7% Wal-Mart (2010/2040), Buy-Low (2011/2031)
Houghton, MI 2,798,376 1,033,054 4.74 93.1% Kmart (2005/2055), J.C. Penney (2000/2020)
Howell, MI 7,462,728 1,294,826 6.10 98.7% Wal-Mart (2011/2041), Kroger (2012/2042)
Mt Pleasant, MI 1,485,846 5.97 100.0% Wal-Mart (2009/2039), Kroger (2011/2041), Odd Lots
(1998/2008)
Sault Ste Marie, MI 7,519,794 1,585,229 6.41 94.3% Wal-Mart (2012/2042), J.C. Penney (2008/2033),
Glen's Supermarket (2013/2033)
Walker, MI 1,325,120 9.89 100.0% Circuit City (not owned), Target (not owned),
Toys R Us (not owned), TJMaxx (2005/2020), Office
Depot (2005/2019)
Minnesota
---------
Bemidji, MN 1,156,005 4.26 91.8% Kmart (2002/2052), J.C. Penney (1998/2018),
Herberger's (2005/2030)
Brainerd, MN 935,000 1,631,482 6.91 92.0% Kmart (2004/2054), Herberger's (2008/2023)
Eagan, MN 2,834,289 11.65 100.0% HomePlace (2017/2037), Office Max (2013/2033),
TJMaxx (2007/2022), Byerly's (2016/2046)
Hutchinson, MN 5,134,849 769,702 7.00 90.8% Kmart (not owned), J.C. Penney (2001/2021)
Maple Grove, MN 2,437,102 9.73 100.0% Kohl's (2016/2036), Barnes & Noble (2011/2026),
Holiday Sports (2011/2027), HomePlace (2016/2036),
Cub Foods (not owned)
St. Paul, MN 2,474,380 7.89 100.0% Kmart (2022/2057), Cub Foods (2015/2045), PetsMart
(2011/2036),Mervyn's (2016/2046)
Worthington, MN 1,057,405 5.86 97.2% Kmart (2001/2051), J.C. Penney (2007/2032), Sterling
(2001/2021), Hy-Vee (2011/2031)
Mississippi
-----------
Starkville, MS 2,417,963 1,217,711 5.36 96.7% Wal-Mart (2015/2045), J.C. Penney (2010/2040),
Kroger (2012/2042)
Tupelo, MS 1,874,722 5.42 99.3% Wal-Mart (2012/2042), Sam's (2012/2042), Goody's
(2002/2017)
Missouri
--------
Fenton, MO 754,923 8.76 92.1%
Independence, MO 3,669,243 10.24 98.1% 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)
New Jersey
----------
Princeton, NJ 3,618,551 17.90 100.0% Wal-Mart (not owned), Sam's (not owned), Home Depot
(not owned), Border's Books and Music (2011/2026),
Best Buy (2012/2027), Linens N Things (2011/2026),
PetsMart (2011/2026)
New Mexico
----------
Los Alamos, NM 412,557 6.28 67.0% Furrs(1997/1997), Furrs Pharmacy (1998/2013),
TG&Y(2018/2033)
North Carolina
--------------
Ahoskie, NC 924,444 5.01 98.5% Wal-Mart (2013/2043), Belk (2008/2033), Food Lion
(2012/2032)
Durham (Oxf), NC 1,099,547 6.59 80.7% Wal-Mart (not owned), Food Lion (2010/2030), Lowes
(2011/2031)
Durham (NHp), NC 4,530,910 11.10 100.0% 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)
Jacksonville, NC 2,664,141 550,995 6.96 100.0% Wal-Mart (not owned), Wilson's (2009/2024)
New Bern, NC 5,392,642 1,399,143 6.08 96.6% Wal-Mart (2009/2034)
Washington, NC 391,019 4.65 98.8% Wal-Mart (2009/2034)
Waynesville, NC 1,101,277 6.05 100.0% Wal-Mart (2011/2041), Food Lion (2011/2031)
Wilmington, NC 10,075,323 3,086,032 7.00 99.6% Wal-Mart (2009/2034), Sam's (not owned), Lowes
(2009/2029), Hamrick's (2002/2007), Goody's
(2005/2015)
15
16
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST DECEMBER 31, 1997
Interest
(ground Company
lease Gross
termination/ Date Land Leaseable
Type of option Developed or Area Area
Center/Property Location Property (1) termination) Acquired (2) (Acres) (sq.ft.)
- --------------------- ---------------------- ------------ ----------- ----------------- ------ --------
North Dakota
- ------------
Dickinson, ND 1681 Third Avenue MM Fee 05/01/78 27.10 267,506
Ohio
- ----
Ashland, OH U.S. Route 42 PC Fee 11/01/77 6.26 110,656
Aurora (Barrgtn), OH 70-130 Barrington Town Square
Drive NC 04/01/96 37,876
Aurora, OH 180 Lena Drive BC Fee 09/01/88 20.00 236,225
Boardman, OH I-680 & US-224 PC Fee 02/01/97 57.04 385,355
Canton, OH 5496 Dressler Road PC Fee(6) 10/01/95 20.00 229,920
Canton (II), OH Dressler Road PC Fee 10/01/97 180,582
Chillicothe, OH 867 North Bridge Street PC Fee 09/01/74 16.70 236,105
Cincinnati, OH 5100 Glencrossing Way PC Fee 11/01/90 24.47 231,224
05/26/93 (a)
Clev.W.65th, OH 3250 West 65th Street PC Fee 10/01/77 4.18 49,420
Eastlake, OH 33752 Vine Street PC Fee 09/01/71 0.99 4,000
Elyria, OH 825 Cleveland PC Fee 09/01/77 16.30 150,200
Highland Hts., OH 6235 Wilson Mills Rd PC Fee 11/01/95 11.63 247,146
Hillsboro, OH 1100 North High St PC Fee 03/01/79 11.02 58,583
Huber Hts., OH 8280 Old Troy Pike PC Fee 06/01/90 17.39 163,741
08/12/93 (a)
Lebanon, OH 1879 Deerfield Road PC Fee 01/01/90 (a) 14.40 26,500
08/12/93 (a)
Macedonia, OH 8210 Macedonia Commons PC Fee(6) 05/01/94 19.94 234,789
07/05/94 (a)
Mentor, OH Pine Needle BC Fee 11/01/87 3.10 40,200
N.Olmsted, OH 5140-25877 Great Northern Blvd. PC 06/01/58 43.14 619,327
02/21/97 (a)
Solon, OH 6211 S.O.M. Center Rd PC Fee 05/01/78 0.64 2,560
Stow, OH Kent Road PC Fee 08/01/97 170,222
Stow (Kmart), OH 4332 Kent Road PC Fee 07/01/69 20.14 116,806
Streetsboro, OH 3000 Crane Drive BC Fee 03/01/89 5.00 66,200
Tiffin, OH 870 West Market St MM Fee 09/01/80 27.62 230,278
Toledo, OH 5245 Airport Highway PC Fee 10/01/93 22.87 187,674
02/24/95 (a)
Twinsburg (Her), OH 9177 Dutton Drive BC Fee 11/01/89 3.90 35,555
Twinsburg (VSA), OH 9300 Dutton Drive BC Fee 11/01/89 6.80 85,800
Westlake, OH 30100 Detroit Road PC Fee 10/01/74 12.71 162,420
Wilmington, OH 1025 S. South Street PC Fee 11/01/77 7.38 55,130
Xenia, OH 1700 West Park Square PC Fee 11/01/94 7.38 104,873
Zanesville, OH 3431 North Maple Ave PC Fee 04/01/90 3.28 13,283
Oregon
- ------
Portland, OR NW Evergreen Pkwy.& NW
Ring Road PC Fee 11/01/95 18.29 151,970
08/22/96 (a)
Pennsylvania
- ------------
Erie, PA 2301 West 38th Street PC GL8 08/01/73 13.27 95,000
Mortgage
Obligation Average
as of Total Base
December 31, Annualized Rent per Percent
Center / Property 1997 Base Rent(3) sq.ft.(4) Leased(6) Anchor Tenants (Lease Expiration/Option Expiration)
-------------------- ----------- ------------ --------- -------- ---------------------------------------------------
North Dakota
------------
Dickinson, ND 1,066,298 4.17 95.6% Kmart (2003/2053), J.C. Penney (1998/2018),
Herberger (2000/2020), Thrifty Drug (2001/2001)
Ohio
----
Ashland, OH 233,382 2.11 100.0% Kmart (2002/2052), N.J. Supermarkets (1997/2022)
Aurora (Barrgtn), OH 555,330 16.21 90.4% Heinens (not owned)
Aurora, OH 744,109 3.15 100.0% Hardline Services (2003/2013)
Boardman, OH 3,116,352 8.09 100.0% Lowe's (2016/2046), Staples (2012/2032), Dick's
Clothing & Sporting Goods (2012/2027), Wal-Mart
(2017/2047), PetsMart (2013/2038)
Canton, OH 2,519,104 11.10 98.7% Kohl's (2016/2046), Target (not owned), Media Play
(2011/2026), Dick's Clothing & Sporting Goods
(2010/2025)
Canton (II), OH 1,816,097 10.06 100.0% Service Merchandise, Homeplace, Jo-Ann ETC.
Chillicothe, OH 1,808,382 7.66 100.0% Lowes, (2015/2035), Kroger (2001/2031), Super X
(2001/2031)
Cincinnati, OH 2,208,518 9.56 99.9% Thriftway (2009/2029), Service Merchandise
(2006/2031)
Clev.W.65th, OH 229,630 4.91 94.6% Kmart (not owned), A&P (1997/2027), Revco
(1997/2007)
Eastlake, OH 68,400 17.10 100.0% Kmart (not owned),
Elyria, OH 761,970 5.07 100.0% Hill's (2003/2028), Finast (2010/2045)
Highland Hts., OH 2,563,263 10.37 100.0% Builders Square (2020/2070), Kohl's (2007/2047),
Dick's Clothing and Sporting Goods (2016/2036)
Hillsboro, OH 254,872 4.35 100.0% Kmart (2004/2054) *, Rite Aid (1999/2004),
Bob & Carls (not owned)
Huber Hts., OH 1,568,028 9.58 100.0% Wal-Mart (not owned), Cub Foods (2011/2031), Sears
(2002/2012)
Lebanon, OH 227,200 8.57 100.0% Wal-Mart (not owned), PK Lumber (not owned)
Macedonia, OH 2,230,843 9.50 100.0% Wal-Mart (not owned), Finast (2018/2049), Kohl's
(2016/2041)
Mentor, OH 227,130 5.65 100.0% Steris Corp (1999/2004)
N.Olmsted, OH 4,770,220 8.85 87.0% Regal Cinemas (2001/2001), Marc's (2002/2007),
CompUSA (2008/2023), Finast (not owned)
Solon, OH 64,792 25.31 100.0% Kmart (not owned)
Stow, OH 1,344,954 7.83 100.9% Target (NO), Giant Eagle, Stein Mart, OfficeMax
Stow (Kmart), OH 189,344 1.62 100.0% Kmart (1996/2006)
Streetsboro, OH 297,366 4.49 100.0% Alumax Alum (1997/2006)
Tiffin, OH 816,272 3.68 96.3% Kmart (2005/2055), J.C. Penney (2000/2010),
Heileg-Myers (2004/2014)
Toledo, OH 1,438,062 7.66 100.0% Best Buy (2009/2024),Office Depot (2009/2024),
Michaels (2004/2014) Sears (2002/2012)
Twinsburg (Her), OH 202,230 6.94 81.9%
Twinsburg (VSA), OH 377,424 4.40 100.0% VSA (1998)
Westlake, OH 937,483 6.04 95.5% Kmart (1999/2049), Marc's (2004/2019)
Wilmington, OH 181,854 3.99 82.6% Kmart (not owned), Super Valu (1998/2018)
Xenia, OH 790,484 7.54 100.0% Wal-Mart (not owned), Kroger (2019/2049)
Zanesville, OH 129,847 9.78 100.0% Kmart (not owned)
Oregon
------
Portland, OR 2,255,273 14.84 100.0% Office Depot (2010/2025), Haggan Supermarket
(2021/2046), Mervyn's (not owned), Target
(not owned)
Pennsylvania
------------
Erie, PA 209,655 2.37 93.3% Hill's (1998/2023)
16
17
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST DECEMBER 31, 1997
Interest
(ground Company
lease Gross
termination/ Land Leaseable
Type of option Date Developed Area Area
Center/Property Location Property (1) termination) or Acquired (2) (Acres) (sq.ft.)
- --------------------- ---------------------- ------------ ----------- ----------------- ------ --------
Erie, PA 1902 Keystone Drive PC Fee 07/31/95 65.69 483,305
East Norriton, PA 2700 DeKalb Pike PC Fee 11/01/75 24.22 174,109
South Carolina
- --------------
Anderson, SC 406 Highway 28 By-Pass PC Fee 06/01/90, 03/08/94(a) 20.90 163,809
Anderson, SC 3812 Liberty Highway PC Fee 10/01/93, 03/22/95(a) 2.13 14,250
Camden, SC 1671 Springdale Drive PC Fee 03/01/90, 06/24/93(a) 22.97 166,197
Columbia, SC 5420 Forest Drive PC Fee 08/01/95, 11/13/95(a) 7.04 46,700
Mt.Pleasant, SC 1500 Highway 17 North PC Fee 03/01/92, 03/30/95(a) 22.70 205,032
No Charleston, SC 7400 Rivers Avenue PC Fee 08/01/89, 11/07/93(a) 28.10 251,007
Orangeburg, SC 2795 North Road PC Fee 07/01/94, 03/22/95(a) 2.65 22,200
Simpsonville, SC 621 Fairview Road PC Fee 10/01/90, 01/03/94(a) 17.23 142,133
Union, SC Highway 176 By-Pass #1 PC Fee 06/01/90, 06/24/93(a) 45.65 184,331
South Dakota
- ------------
Watertown, SD 1300 9th Avenue, S.E. MM Fee 11/01/77 29.30 285,495
Texas
- -----
Ft. Worth, TX SWC Eastchase Pkwy. and I-30 PC Fee 12/01/95, 07/02/96(a) 17.00 205,027
San Antonio, TX 125 NE Loop 410 PC Fee(6) 12/30/96, 01/23/97(a) 26.45 286,394
Vermont
- -------
Berlin, VT Route 4 MM Fee 09/01/86 50.25 174,646
Virginia
- --------
Fairfax, VA 12210 Fairfax Towne Center PC Fee(6) 10/01/94, 11/17/95(a) 22.79 253,941
Martinsville, VA 240 Commonwealth Blvd MM Fee(6) 07/01/89 43.73 435,401
Pulaski, VA 1000 Memorial Dr PC Fee 09/01/90, 04/28/93(a) 21.93 143,299
Winchester, VA 2190 So Pleasant Valley PC Fee 01/01/90, 12/10/93(a) 26.42 230,940
- --------------------- ---------------------- ------------ ----------- ----------------- ------ ----------
25,189,531
Mortgage
Obligation Average
as of Total Base
December 31, Annualized Rent per Percent
Center / Property 1997 Base Rent(3) sq.ft.(4) Leased(6) Anchor Tenants (Lease Expiration/Option Expiration)
-------------------- ----------- ------------ --------- -------- ---------------------------------------------------
Erie, PA 3,936,534 8.15 100.0% Wal-Mart (2015/2045), Lowe's (2015/2045), Media Play
(2010/2025), Kohl's (2016/2046)
East Norriton, PA 1,115,547 6.41 100.0% Kmart (2000/2050), Acme (2002/2027), Thrift Drug
(2002/2022)
South Carolina
--------------
Anderson, SC 858,356 5.58 93.8% Wal-Mart (2010/2040), Ingles (2011/2066)
Anderson, SC 143,316 10.06 100.0% Wal-Mart (not owned), Sam's (not owned)
Camden, SC 988,097 5.95 100.0% Wal-Mart (2009/2039), Winn-Dixie (2011/2036),
Goody's (2001/2016)
Columbia, SC 487,750 10.44 100.0% Wal-Mart (not owned)
Mt.Pleasant, SC 6,889,913 1,478,295 7.28 99.1% Wal-Mart (not owned), Lowe's (2012/2032), Piggly
Wiggly (2012/2022), TJMaxx (2002/2012)
No Charleston, SC 1,792,159 7.38 96.8% Wal-Mart (2009/2039), Office Warehouse (2002/2012),
Service Merchandise (not owned)
Orangeburg, SC 227,175 10.23 100.0% Wal-Mart (not owned)
Simpsonville, SC 837,111 5.89 100.0% Kmart (2015/2065), Ingles (2011/2065)
Union, SC 1,006,394 5.46 100.0% Wal-Mart (2009/2039), Belk's (2010/2030), Winn-Dixie
(2010/2035)
South Dakota
------------
Watertown, SD 1,376,125 4.96 97.2% Kmart (2002/2052), J.C. Penney (1998/2018),
Herberger's (1999/2019), Osco (1998/2003)
Texas
-----
Ft. Worth, TX 2,280,923 11.12 100.0% PetsMart (2011/2036), MJ Designs (2011/2031),
Ross Dress For Less (2006/2026), Toys R Us (not
owned), Target (not owned)
San Antonio, TX 3,971,782 14.27 97.2% Ross Dress For Less (2007/2027), DSW Warehouse
(2007/2027) , Best Buy (2011/2026), Oshman's
(2017/2037), HomePlace (2012/2027)
Vermont
-------
Berlin, VT 4,940,000 816,547 4.90 95.5% J.C. Penney (2009/2034)
Virginia
--------
Fairfax, VA 4,012,280 16.05 98.4% United Artists (2014/2034), Safeway (2019/2054),
TJMaxx (2009/2024), Bed, Bath & Beyond (2010/2020),
Tower Records (2009/2019)
Martinsville, VA 2,907,527 7.16 93.2% J.C. Penney (2009/2034), Leggett (2009/2024), Sears
(2009/2029), Kroger (2017/2062), Goody's (2006/2016)
Pulaski, VA 837,449 6.10 95.8% Wal-Mart (2011/2041), Food Lion (2011/2031)
Winchester, VA 9,294,686 2,012,148 8.90 97.9% Office Max (2012/2027), Kohl's (2018/2048),
Giant Foods (2010/2040), Books-A-Million (2007/2017)
-------------------- ----------- ------------ --------- -------- ---------------------------------------------------
$89,675,698 $204,506,635 $8.48 96.8%
==================
Footnotes:
(1) "PC" indicates a power center or a community shopping center, "NC"
indicates a neighborhood shopping center, "MM" indicates an enclosed
mini-mall and "BC" indicates a business center.
17
18
(2) Indicates the date the center was developed. Dates denoted with (a),
indicate the date on which the property was acquired by the company
following completion of the IPO.
(3) Includes space leased as of December 31, 1997,for which rent was being paid
but which was not then occupied; also includes tenant leases signed as of
said date relating to approximately $800,000 in base revenue which has not
yet been fully billed.
(4) Calculated as total annualized base rentals divided by Company-owned GLA
actually leased as of December 31, 1997
(5) Includes space leased as of December 31, 1997,for which rent was being paid
but which was not then occupied; also includes tenant leases signed as of
said date relating to approximately 158,000 square feet which have not yet
been fully occupied.
(6) One of fourteen (14) properties owned through joint ventures which serve as
collateral for joint venture mortgage debt aggregating approximately $389.2
million (of which the Company's proportionate share is $190.3 million)
which is not reflected in the consolidated indebtedness.
* This anchor tenant has closed and sublet the space.
** This tenant-owned anchor store has closed.
*** This tenant-owned anchor store has closed and the space has been sublet.
**** This anchor tenant continues to pay rent to the Company but does not occupy
or sublet the space.
18
19
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 45 Chairman of the Board of Directors and Chief
Executive Officer
James A. Schoff 52 Executive Vice President, Chief Operating Officer
and a Director
John R. McGill 43 Vice President and Director of Development
Joan U. Allgood 45 Vice President and General Counsel
Loren F. Henry 50 Vice President and Director of Management
William H. Schafer 40 Vice President and Chief Financial Officer
Alan Bobman 37 Regional Vice President of Leasing
Steven M. Dorsky 40 Regional Vice President of Leasing
Robin R. Walker 41 Regional Vice President of Leasing
-19-
20
Scott A. Wolstein has been the President, Chief Executive Officer and a
Director of the Company since its organization and assumed the responsibilities
of Chairman of the Board of Directors in February 1997. Prior to the
organization of the Company, Mr. Wolstein was a principal and executive officer
of its predecessor entities since before 1992. Mr. Wolstein is a graduate of the
Wharton School at the University of Pennsylvania and of the University of
Michigan Law School. Following his graduation from the University of Michigan
Law School, Mr. Wolstein was associated with the Cleveland law firm of Thompson,
Hine & Flory. 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, Neighborhood Progress, Inc., The Park
Synagogue, Cleveland's Convention and Visitors Bureau of Greater Cleveland and
Bellefaire. He is currently a member of the Executive Committee of the Board of
Trustees of the National Association of Real Estate Investment Trusts and a
member of the Board of Trustees of the International Council of Shopping Centers
and serves as the General Co-Chairman of the Cleveland Campaign for the State of
Israel Bonds. He is also a member of the Young Presidents Organization, the
Urban Land Institute, the National Realty Committee, and the Wharton Real Estate
Center. Mr. Wolstein is the son of Bert L. Wolstein, Chairman Emeritus
James A. Schoff has been Executive Vice President, Chief Operating
Officer and a Director of the Company since its organization. After graduating
from Hamilton College and Cornell University Law School, Mr. Schoff practiced
law with the firm of Thompson, Hine and Flory where he specialized in the
acquisition and syndication of real estate properties. Mr. Schoff serves as a
member of the Board of Trustees of the Western Reserve Historical Society, the
Children's Aid Society and the Cleveland Ballet.
John R. McGill has been affiliated with the Company and its predecessor
entities since 1969. During his tenure with the Company he has been involved
with the coordination and development of in excess of 85 properties, including
land acquisition, major tenant lease negotiations, and the overall development
program. Mr. McGill has been a Vice President and Director of Development of the
Company since April 1993.
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.
Loren F. Henry has been a Vice President, Director of Management of the
Company since its organization as a public Company and served as President of
one of its predecessor entities from 1984-1993. Mr. Henry earned a Bachelor of
Arts degree in Business Administration and Mathematics from Winona State
College.
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.
-20-
21
Alan Bobman joined the Company in October 1995 as Regional Vice
President of Leasing. Mr. Bobman was previously Divisional Director of Real
Estate at Charming Shoppes, Inc. which operates the Fashion Bug and Fashion Bug
Plus stores nationwide. He was employed at Charming Shoppes since 1985, and is
an Insurance and Real Estate graduate of Penn State University.
Steven M. Dorsky has been a Regional Vice President of Leasing since
November 1995. Prior to joining the Company, he was an Assistant Vice President
and Senior Leasing Associate for the Cleveland based retail brokerage and
management firm, The Hausman Companies. Mr. Dorsky earned a Bachelor of Arts
degree in business from Macalester College and a Masters degree in Social
Administration from Case Western Reserve University - School of Applied Social
Science.
Robin R. Walker joined the Company in April 1995 and was appointed
Regional Vice President of leasing in November 1995. Prior to joining the
Company, Ms. Walker was president of Aroco, Inc., a retail brokerage and tenant
representation firm based in Alabama. Ms. Walker attended the University of
Alabama where she earned her degree in elementary education.
-21-
22
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") for each quarter in
1997 and 1996 and the dividends paid per common share with respect to each such
quarter:
Dividends
Paid per
1997 High Low Common Share
- ----------- -------- ------- ------------
1st quarter $ 38-5/8 $34-1/4 $ .63
2nd quarter 40 35-7/8 .63
3rd quarter 40-1/4 38-1/4 .63
4th quarter 41-1/4 37-5/16 .63
--------
$ 2.52
Dividends
Paid per
1996 High Low Common Share
- ----------- -------- ------- -------------
1st quarter $ 31-3/4 $28-1/8 $ .60
2nd quarter 32 28-1/8 .60
3rd quarter 33-1/8 30-1/2 .60
4th quarter 37-1/4 32-1/8 .60
--------
$ 2.40
The approximate number of record holders of the Company's common
shares, (the only class of common equity) at March 16, 1998 was 425, and the
approximate number of beneficial owners of such shares was 20,000.
In January 1998, the Company declared its 1998 first quarter dividend
to shareholders of record on February 13, 1998 of $.655 per share, a 4.0%
increase over the quarterly dividend rate of $.63 per share in 1997.
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.
-22-
23
Item 6. SELECTED FINANCIAL DATA
The financial data included in the following table has been selected by
the Company and has been derived from the financial statements for the last f