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, 1996
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
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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)
(216) 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
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 14, 1997 was $836,860,868.
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.
25,049,005 common shares outstanding as of March 14, 1997
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DOCUMENTS INCORPORATED BY REFERENCE.
The registrant incorporates by reference in Part III hereof portions of
its definitive Proxy Statement for its 1997 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.................................................... 9
3. Legal Proceedings............................................. 18
4. Submission of Matters to a Vote of Security Holders........... 18
PART II
5. Market for the Registrant's Common Equity and
Related Shareholder Matters .................................. 19
6. Selected Financial Data........................................ 20
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 22
8. Financial Statements and Supplementary Data.................... 30
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure........................ 30
PART III
10. Directors and Executive Officers of the Registrant............ 31
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"), was
formed in November 1992 by the principals of the affiliates comprising the
Developers Diversified Group ("DDG") to continue the business of DDG by
acquiring, developing, redeveloping, owning, leasing and managing shopping
centers and business centers. The Company completed the initial public offering
of its common shares in February 1993 (the "IPO"). Unless otherwise provided,
references herein to the Company include Developers Diversified Realty
Corporation, its wholly owned subsidiaries and its joint ventures.
Since the IPO, the Company has acquired 60 shopping center properties,
including those owned through joint ventures four of which were acquired in
1997, five of which were acquired in 1996, 20 of which were acquired in 1995, 14
of which were acquired in 1994 and 17 of which were acquired in 1993.
The Company's executive offices are located at 34555 Chagrin Boulevard,
Moreland Hills, Ohio 44022, and its telephone number is (216) 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 DDG, its predecessor, have owned and
managed approximately 230 shopping centers. The Company's portfolio as of March
14, 1997 consisted of 116 shopping centers (including 17 properties which are
owned through joint ventures, 14 of which the Company owns a 50% interest, two
of which the Company owns a majority interest and one of which the Company owns
a 35% interest), seven business centers and 76 undeveloped parcels (14 of which
are owned through joint ventures) aggregating approximately 211 acres (the
"Portfolio Properties"). Since the IPO the Company has acquired 60 shopping
centers containing an aggregate of 12.0 million square feet of GLA owned by the
Company for an aggregate purchase price of approximately $976.3 million. The
Company acquired from DDG the Company's initial portfolio of properties and
DDG's property management business prior to, or concurrently with the
consummation of, the IPO. During 1994, 1995 and 1996, the Company completed
expansions at one of its business centers and 24 of its shopping centers. As of
March 14, 1997, the Company was expanding seven of its shopping centers and
expects to commence expansions at additional shopping centers in 1997. The
Company has also completed the development of four additional shopping centers,
since the IPO, at an aggregate cost of $73 million aggregating approximately
850,000 square feet. As of March 14, 1997, the Company had shopping centers
under development at four sites.
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The Company's shopping centers were approximately 94.8% leased as of
December 31, 1996, and the business centers were 78.3% leased as of that date.
At December 31, 1996, the Company had entered into additional leases with anchor
tenants aggregating in excess of 240,000 square feet of vacant space, scheduled
to commence in 1997, which brings the current occupancy rate at the shopping
centers to 96.0%. On December 31, 1996, the average annualized base rent per
square foot of Company-owned GLA of the shopping centers, including those owned
through joint ventures, was $7.85 and the business centers was $3.76.
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, including those owned through joint ventures. At December 31, 1996,
the Company owned and/or managed approximately 30.7 million total square feet of
GLA, which included all of the Portfolio Properties and 27 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 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;
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- 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.
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.
At December 31, 1996, the Company's debt to total market capitalization ratio,
excluding the Company's proportionate share of indebtedness of its
unconsolidated joint ventures, was approximately 0.33 to 1; and at March 14,
1997 this ratio was approximately 0.28 to 1. At December 31, 1996, the Company's
capitalization consisted of $478.4 million of debt (excluding the Company's
proportionate share of joint venture mortgage debt aggregating $180.1 million),
$149.8 million of preferred stock and $805.0 million of market equity. At
December 31, 1996, the Company's total debt consisted of $379.8 million of
fixed-rate debt and $98.6 million of variable rate debt. Fluctuations in the
market price of the common shares may cause this ratio to vary from time to
time. The Company has elected to establish its financing policies based on the
total market capitalization of the Company and not on the value of the Company's
assets.
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 June 1996, the Company extended its $150 million unsecured revolving
credit facility for an additional year, through May 1999, and reduced the
current interest rate payable on such facility by 25 basis points to LIBOR plus
1.25%. In September 1996, the Company restructured its $25 million secured
revolving credit facility. This restructuring resulted in an $18.6 million ten
year non-recourse mortgage loan, which was transferred into the joint venture
with The Ohio State Teachers Retirement System ("OSTRS"), and a $10 million
unsecured revolving credit facility which matures in November 1999. This
restructuring resulted in the mortgage release of two of the three shopping
centers which served as collateral for the $25 million secured revolving credit
facility.
In January 1996, in conjunction with an overallotment option granted to
underwriters in connection with a December offering , an additional 175,000
Class B Depositary preferred shares were issued by the Company, which resulted
in additional net proceeds of approximately $4.2 million. In March 1996, the
Company issued 2.6 million common shares and received net proceeds of
approximately $75.4 million which was used to retire debt.
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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 December 31, 1996, the Company had issued Medium
Term Notes in the aggregate amount of $115.7 million. 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 pursuant thereto when the Company considers market conditions
advantageous.
On January 14, 1997, the Company issued 3.4 million common shares and
received net proceeds of approximately $116 million which were used to repay
revolving credit debt and for general corporate purposes.
Equity Investments in Joint Venture
On November 17, 1995, the Company, in conjunction with certain joint
venture partners described below, acquired the Homart Community Center Division
of Sears from an affiliate of General Growth Properties, Inc. General Growth
Properties, Inc. had contracted to purchase the Homart Community Center Division
as part of its acquisition of Homart Development Co., a subsidiary of Sears. The
Homart Community Center Division includes ten power centers which, when
completed, will aggregate in excess of four million square feet of GLA located
in major metropolitan areas throughout the United States and several outlots and
pad sites adjacent to the ten power centers and certain other power centers
previously sold by Sears (the "Community Center Properties"). At the date of the
acquisition, construction of seven of the ten power centers was complete or
substantially complete and three of the power centers were under construction.
Construction of the three centers was substantially completed during 1996.
The Community Center Properties are owned by four joint ventures
(collectively, the "Community Center Joint Ventures"). The Company or a wholly
owned subsidiary of the Company and its joint venture partners each purchased a
50% interest in each Community Center Joint Venture. The Company's joint venture
partners are a consortium of third party investors, including a private REIT,
owned by institutional investors advised by DRA Advisors, Inc. ("DRA"), three
limited partnerships whose respective limited partners are pension funds and
whose general partners are affiliates of DRA and one corporation whose owners
are affiliates of DRA. In addition to owning a 50% interest in each Community
Center Joint Venture, the Company manages the Community Center Properties and
related developments pursuant to management and development agreements with each
of the Community Center Joint Ventures.
The total purchase price of the Community Center Properties aggregated
approximately $449.2 million and was funded through $300.1 million of secured
indebtedness at the joint venture level, $3.1 million of assumed net liabilities
and $146.0 million of cash of which one-half was provided by each of the Company
and its joint venture partners. In addition, the Company paid cash of
approximately $1.3 million relating to the purchase of certain rights to several
development sites.
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In October 1996, the Company formed a joint venture with DD Merriam,
L.P., which is advised by DRA relating to the development of a shopping center
in Merriam, Kansas, which was one of the development sites acquired in
conjunction with the acquisition of the Homart Community Center Division. The
joint venture is 50% owned by the Company and 50% owned by DD Merriam, L.P. The
Company will manage the shopping center and related development pursuant to
management and development agreements. At December 31, 1996, the Company
advanced $1.1 million to pay for certain construction related costs. The
advances accrue interest at 8% per annum and are to be repaid from the proceeds
of construction financing which will be entered into in 1997.
The joint venture agreements provide, after November 17, 1999 or if
either party is in default of the joint venture agreements, each partner has the
right to trigger a purchase or sale of its interest in the joint venture
(Reciprocal Purchase Rights) or to initiate a purchase and sale of the
properties (Property Purchase Rights).
In addition, at any time after November 17, 1999, the Company's joint
venture partners may convert all or a portion of their respective interests in
such joint ventures into common shares of the Company in accordance with the
terms set forth in the governing documents of such joint ventures. However, if
the joint venture partners elect to convert their respective interests into
common shares, the Company will have the sole option to pay cash instead of
issuing common shares. If the Company agrees to the issuance of common shares,
the agreement provides that the converting joint venture partner will execute an
agreement restricting the transfer of such shares acceptable to the Company.
In September 1996, the Company entered into a joint venture with OSTRS.
In conjunction with the formation of the joint venture, the Company transferred
two shopping centers with a net book value of $41.6 million and non-recourse
mortgage debt aggregating $36.4 million in exchange for a 50% interest in the
joint venture. OSTRS funded an initial cash contribution of $11.6 million which
was used to repay a portion of the non-recourse mortgage debt. The Company
continues to manage the two properties pursuant to a management agreement.
Property Acquisitions, Developments and Expansions
During 1996, the Company acquired five shopping centers, aggregating
1.1 million square feet of Company-owned GLA, at an aggregate purchase price of
approximately $113.9 million.
During 1996, the Company also completed six developments, including
those acquired from the Homart Community Center Division of Sears, and seven
expansions with approximately 1.2 million square feet of GLA at an aggregate
cost of approximately $135.6 million.
Retail Environment
During 1996, 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 14, 1997 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.
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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.
Employees
As of March 14, 1997, the Company employed 173 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, 1996 the Portfolio Properties included 112 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), consisting
of 96 community shopping centers and power centers, 12 enclosed mini-malls, and
four neighborhood shopping centers. The Portfolio Properties also include seven
business centers containing office and light industrial, warehouse and research
space and 76 undeveloped parcels (aggregating approximately 211 acres) primarily
located adjacent to certain of the shopping centers. The shopping centers and
business centers aggregate approximately 21.1 million square feet of
Company-owned GLA (approximately 27.5 million square feet of total GLA) and are
located in 28 states, principally in the East and Midwest, with significant
concentrations in Florida, Ohio, 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 17,701,995 (83.8%)
square feet of Company-owned GLA. Enclosed mini-malls account for 2,855,256
(13.5%) square feet of Company-owned GLA, and business center space consists of
576,742 (2.7%) square feet of Company-owned GLA. On December 31, 1996, the
average annualized base rent per square foot of Company-owned GLA of the
shopping centers, including those owned through joint ventures, was $7.85 and of
the business centers was $3.76.
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 or Kmart,
and the power centers are anchored by two or more national
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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.
The following table sets forth, as of December 31, 1996, 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 8.7% 13.3%
Kmart 6.2 11.0
T. J. Maxx/Marshall's 3.1 2.6
Kohl's Dept. Store 3.1 3.2
Barnes & Noble/B. Dalton 2.5 1.1
Lowes Home Centers 2.1 2.6
Office Max 1.6 1.0
JC Penny 1.6 3.1
Publix Supermarkets 1.4 1.5
Kroger 1.3 1.4
Fashion Bug 1.3 1.5
General Cinema 1.2 0.4
Winn-Dixie Supermarkets 1.2 1.4
Circuit City 1.1 0.8
Ahold Supermarkets 1.0 0.9
In addition, as of December 31, 1996 unless otherwise indicated, with respect to
the 112 shopping centers:
- 49 of these properties were developed by DDG and four were
developed by the Company;
- 76 of these properties are anchored by Kmart or Wal-Mart store;
- these properties range in size from just under 100,000 square
feet to approximately 780,000 square feet of GLA (with 23
properties exceeding 325,000 square feet of GLA);
- approximately 58.2% of the Company-owned GLA of these properties
is leased to national chains, including subsidiaries, with
approximately 31.2% of the Company-owned GLA leased to regional
chains and approximately 6.6% of the Company-owned GLA leased to
local tenants;
- approximately 94.8% of the aggregate Company-owned GLA of these
properties was leased as of December 31, 1996. The Company has
entered into additional leases with anchor tenants aggregating in
excess of 240,000 square feet of vacant space, scheduled to
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- commence in 1997, which brings the existing occupancy rate to
96.0% (and, with respect to the properties owned by the Company
at December 31, of each of the five years beginning with 1992,
between 94.8% and 97.1% of aggregate Company-owned GLA of these
properties was leased);
- seven of these properties are currently being expanded by the
Company, and the Company is pursuing the expansion of additional
properties.
TENANT LEASE EXPIRATIONS AND RENEWALS
The following table shows tenant lease expirations for the next ten
years at the Company's shopping centers and business centers, 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 (1) Leases(1) Leases Leases(1)
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1997 . . . . . . 365 1,153,813 $ 8,818,795 $ 7.64 5.5% 5.6%
1998 . . . . . . 279 1,256,945 $ 8,692,504 $ 6.92 6.0% 5.6%
1999 . . . . . . 326 1,219,203 $10,466,847 $ 8.58 5.8% 6.7%
2000 . . . . . . 250 1,012,243 $ 9,651,379 $ 9.53 4.8% 6.2%
2001 . . . . . . 230 1,143,804 $ 9,405,516 $ 8.22 5.4% 6.0%
2002 . . . . . . 70 816,129 $ 4,637,157 $ 5.68 3.9% 3.0%
2003 . . . . . . 61 933,097 $ 4,785,642 $ 5.13 4.4% 3.1%
2004 . . . . . . 59 658,769 $ 5,200,633 $ 7.89 3.1% 3.3%
2005 . . . . . . 71 993,213 $ 7,032,101 $ 7.08 4.7% 4.5%
2006 . . . . . . 45 494,320 $ 5,874,111 $11.88 2.3% 3.8%
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1,756 9,681,536 $74,564,685 $ 7.70 45.9% 47.8%
The seven business centers are located in Ohio and range in size from
approximately 36,000 to 236,000 square feet of Company-owned GLA. During 1994,
the Company expanded, by approximately 100,000 square feet of Company-owned GLA,
its business center located in Aurora, Ohio. The business centers contain office
and light industrial, warehouse and research space. As of December 31, 1996, the
business centers were 78.3% leased. Five of the seven 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 76 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 AS OF DECEMBER 31, 1996
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Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Land Leasable Obligation as
Property termination Developed or Area Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) (Acres) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------- ------------- -------------
ALABAMA
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Birmingham, AL 5291 Highway 280 South PC Fee 12/01/94 64.46 431,561
12/29/94 (a)
Birmingham, AL 7001 Crestwood Blvd. PC Fee 03/01/89 45.49 284,475
11/15/95 (a)
Huntsville, AL 6140-A University Drive PC Fee 12/28/95 5.29 41,000
12/28/95 (a)
ARIZONA
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Phoenix, AZ 7553 West Bell Road PC Fee 10/01/95 24.12 340,094
07/02/96 (a)
ARKANSAS
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North Little Rock, AR 4124 East McCain Blvd PC Fee 07/01/91 27.76 294,357
03/21/94 (a)
Russellville, AR 3093 East Main Street PC Fee 02/01/92 31.20 272,245
04/18/94 (a)
CALIFORNIA
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San Diego, CA 11610 Carmel Mntn. Rd. PC Fee(7) 04/01/93 50.00 446,484
11/17/95 (a)
COLORADO
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Alamosa, CO 145 Craft Avenue PC Fee 01/01/86 13.10 20,164
Denver, CO 505 South Broadway PC Fee(7) 11/01/93 38.59 369,386
11/17/95 (a)
Trinidad, CO Hwy 239 @ 125 Frontage PC Fee 05/01/86 17.88 63,836
CONNETICUT
- ----------
Waterbury, CT 899 Wolcott Street PC GL1 11/01/73 15.60 124,310
FLORIDA
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Bayonet Point, FL U.S. 19 & S.R. 52 PC Fee 09/01/85 58.67 203,760 5,327,208
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 98,413
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 30.82 219,073 8,117,177
03/31/95 (a)
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(7) 03/01/94 30.60 266,438
11/17/95 (a)
Ocala, FL 3711 Silver Sprgs, NE PC Fee 06/01/74 2.23 19,280
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 32.09 231,445
05/02/94 (a)
Palm Harbor, FL 300 East Lake Road PC Fee 05/01/90 5.80 52,395
05/12/95(a)
Pensacola, FL 8934 Pensacola Blvd PC Fee 12/01/88 21.00 75.736
Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
------------- ----------- ---------- ---------- ---------------------------------------------------
ALABAMA
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Birmingham, AL $3,397,447 7.87 100.0% Wal-Mart (2004/2024), Winn-Dixie (2014/2044),
Goody's (2004/2019), Stein Mart (2011/2021).
Birmingham, AL 1,843,069 7.38 115,165 87.8% 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 458,350 11.18 100.0% Wal-Mart (not owned)
ARIZONA
- -------
Phoenix, AZ 3,616,799 10.63 100.0% Lil' Things (2009/2024), Barnes & Noble(2011/2026),
TJMaxx (2005/2020), Circuit City (2016/2036),
Oshman's (2017/2037), Linens 'N Things (2011/2026).
ARKANSAS
- --------
North Little Rock, AR 1,790,068 6.60 92.1% Kmart (2016/2066), Wards (2014/2034), TJMaxx
(2001/2011), Cinemark (2011/2031)
Russellville, AR 1,638,184 6.09 28,336 98.8% Wal-Mart (2011/2041), JCPenney (2012/2032), Beall-
Ladymon (2007/2022).
CALIFORNIA
- ----------
San Diego, CA 5,988,064 13.41 100.0% 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 155,086 7.80 13,587 98.6% Wal-Mart (not owned)
Denver, CO 3,553,362 9.62 100.0% Kmart (2019/2069), Albertson's (2019/2049), Sam's
(2018/2058), Office Max (2010/2035), Pep Boys (2014/
2035)
Trinidad, CO 292,581 4.83 343 95.0% Wal-Mart (not owned), Super Save (1998)
CONNETICUT
- ----------
Waterbury, CT 408,208 3.28 100.0% Kmart (1998/2048), Grand Union (1999/2024)
FLORIDA
- -------
Bayonet Point, FL 1,126,374 5.76 96.0% Publix (2005/2025), Beall's (2002/2017), TJMaxx
(2010/2030)*, Eckerd (2005/2025)
Brandon, FL 508,991 3.72 98.1% Kmart (1997/2047)
Cape Coral, FL 397,006 5.80 39,922 69.5% TJMaxx (2007/2017), Office Max (2012/2027)
Crystal River, FL 402,381 3.14 89,547 87.3% Beall's (2001/2016), Scotty's (2008/2038)
Fern Park, FL 97,700 6.43 95.0% Kmart (not owned)
Jacksonville, FL 1,385,737 6.41 45,115 98.7% Wal-Mart (not owned), J.C.Penney (2002/2022), Winn
Dixie (2009/2034), Walgreen's (2029/2029)
Marianna, FL 425,930 6.92 5,422 96.3% Wal-Mart (not owned), Beall's (2005/2020) , Eckerd
(2010/2030)
Melbourne, FL 364,464 3.12 31,376 95.7% Kmart (2003/2048), Beall's (1997/2007)
Naples, FL 2,674,090 10.47 95.8% Winn Dixie (2014/2038), TJMaxx (2009/2024), Service
Merchandise (2015/2035), Ross Dress For Less
(2005/2025), Circuit City (2015/2035), OfficeMax
(2010/2025)
Ocala, FL 72,060 4.72 10,811 79.3% Kmart (not owned), Eckerd (1998/2018)
Orlando, FL 1,016,984 8.83 25,349 65.0% Wal-Mart (not owned), Publix (2009/2019) , Walgreens
(2029/2029)
Ormond Beach, FL 1,719,873 7.96 93.4% Kmart (2018/2064), Publix (2013/2033), Bealls (2004/
2024)
Palm Harbor, FL 652,477 13.06 1,746 95.3% Target (not owned), Albertson's (not owned), Eckerd
(2010/2025)
Pensacola, FL 325,624 8.03 26,891 53.5% Wal-Mart (not owned), City Drug (1998/2003)
-12-
13
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
- -------------------------------------
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Land Leasable Obligation as
Property termination Developed or Area Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) (Acres) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------- ------------- -------------
Spring Hill, FL 13050 Cortez Blvd PC Fee 09/01/88 21.60 103,112 6,212,636
Tampa, FL 15233 No.Dale Mabry PC Fee 12/01/90 23.70 104,473
Tampa, 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 23.30 190,680
West Pasco, FL 7201 County Rd 54 PC Fee 09/01/86 24.40 135,421 4,783,894
GEORGIA
- -------
Atlanta, GA 1155 Mt. Vernon Highway PC Fee(7) 11/01/95 30.67 202,191
11/17/95 (a)
Duluth, GA 1630 Pleasant Hill Road PC Fee 04/01/90 8.70 99,025
02/24/94 (a)
Marietta, GA 2609 Bells Ferry Road PC Fee(7) 08/01/95 48.28 270,440
11/17/95 (a)
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 24.46 168,507
02/17/94 (a)
Mount Vernon, IL 42nd and Broadway MM Fee 08/01/74 39.25 266,601
08/13/93 (a)
Schaumburg, IL 1430 East Golf Road PC Fee 11/01/93 62.80 501,092
11/17/95 (a)
INDIANA
- -------
Bedford, IN 1320 James Avenue PC Fee 07/01/93 20.56 187,135
10/21/93 (a)
Connersville, IN 2100 Park Road PC Fee 01/01/91 21.99 139,087
12/10/93 (a)
Highland, IN Highway 41 & Main Street PC Fee 11/01/95 16.08 239,845
07/02/96 (a)
IOWA
- ----
Ottumwa, IA 1110 Quincy Avenue MM Fee 04/01/90 34.00 161,659
KENTUCKY
- --------
Hazard, KY Kentucky Highway 80 PC Fee 08/01/78 11.74 111,492
Murray, KY U.S. Highway 641 & PC Fee 10/01/77 15.18 149,028
Arcadia 02/18/94 (a)
MASSACHUSETS
- ------------
Framingham, MA 1 Worcester Road PC Fee(7) 08/01/94 177.00 716,393
11/17/95 (a)
MICHIGAN
- --------
Bad Axe, MI 850 No.Van Dyke Rd PC Fee 01/01/91 18.58 63,415
08/12/93 (a)
Cheboygan, MI 1109 East State PC Fee 01/01/88 16.75 95,094
12/14/93 (a)
Gaylord, MI 1401 West Main Street PC Fee 02/01/91 19.49 190,482
08/12/93 (a)
Houghton, MI Highway M26 MM Fee 12/01/81 21.48 234,338 3,098,376
Howell, MI 3599 East Grand River PC Fee 11/01/91 26.52 213,737 7,734,904
09/23/93 (a)
Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
------------- ----------- ---------- ---------- ---------------------------------------------------
ALABAMA
- -------
Spring Hill, FL 855,918 8.50 97.7% Wal-Mart (not owned), Publix (2008/2028), Walgreens
(2028/2028), Beall's (2006/2046)
Tampa, FL 944,152 9.64 5,825 93.8% Wal-Mart (not owned), Publix (2010/2030)
Tampa, FL 984,591 8.24 89.1% Wal-Mart (not owned), Beall's (2005/2029), Kash N
Karry (2010/2040)
Tarpon Springs, FL 677,344 5.15 69.0% Kmart (1999/2049)
West Pasco, FL 969,156 7.21 4,077 99.3% Wal-Mart (not owned), Publix (2006/2026), Beall's
(2001/2016), Walgreens (2026/2026)
GEORGIA
- -------
Atlanta, GA 2,567,985 12.70 100.0% SteinMart (2010/2025), HomePlace (2011/2026),
United Artists (2015/2035)
Duluth, GA 1,154,648 12.34 94.5% Wal-Mart (not owned), Office Depot (2000/2020),
Ethan Allen (2000/2010)
Marietta, GA 3,162,581 11.69 100.0% Publix (2015/2035), HomePlace (2011/2026),
PetsMart (2011/2021), Barnes & Noble (2011/2026)
Stone Mountain, GA 459,183 3.24 98.4% Kmart (1998/2048)
ILLINOIS
- --------
Harrisburg, IL 865,997 5.46 94.1% Wal-Mart (2011/2041), Roundy's Grocery (2011/2031)
Mount Vernon, IL 1,134,153 4.71 198,177 90.3% Wal-Mart (2008/2028), J.C.Penney (1997/2022),
Martin's(1999/2014), Stage (1999/2014)
Schaumburg, IL 7,179,165 14.33 100.0% 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 996,376 5.45 6,761 97.7% Kmart (2018/2068), J.C.Penney (2008/2028), Goody's
(2003/2018), Buehler's (2010/2025)
Connersville, IN 771,499 5.61 1,992 98.9% Wal-Mart (2011/2041), Cox Supermarket (2011/2026)
Highland, IN 2,086,989 8.70 100.0% Marshall's (2011/2021), Circuit City (2016/2036),
Kohl's (2016/2036), OfficeMax (2012/2032), Jewel
(not owned), Target (not owned)
IOWA
- ----
Ottumwa, IA 1,023,466 6.75 32,297 93.8% Wal-Mart (not owned), J.C. Penney (2005/2035),
Herberger (2004/2019)
KENTUCKY
- --------
Hazard, KY 404,189 3.96 12,647 91.7% Kmart (2003/2053)*, A&P (1998/2038)
Murray, KY 452,522 3.23 137,965 94.1% Wal-Mart (2010/2030), Kroger (1997/2022)
MASSACHUSETS
- ------------
Framingham, MA 11,129,737 15.54 100.0% 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), OfficeMax (2011/2026), Toys R Us (2020/2070),
Kids R Us (2020/2070), Bradlee's (2005/2020)
MICHIGAN
- --------
Bad Axe, MI 515,770 8.13 100.0% Wal-Mart (not owned), Farmer Jack's (2012/2037)
Cheboygan, MI 397,950 4.60 365 91.1% Kmart (2005/2055), Carters Food Center (1999/2024)
Gaylord, MI 1,070,620 5.71 2,340 98.4% Wal-Mart (2010/2040), Buy-Low (2011/2031)
Houghton, MI 963,196 4.39 67,537 93.5% Kmart (2005/2055), J.C. Penney (2000/2020)
Howell, MI 1,289,526 6.03 9,851 100.0% Wal-Mart (2011/2041), Kroger (2012/2042)
-13-
14
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
- -------------------------------------
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Land Leasable Obligation as
Property termination Developed or Area Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) (Acres) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------- ------------- -------------
Mt Pleasant, MI 4208 E.Blue Grass Rd PC Fee 07/01/90 51.13 248,963
09/24/93 (a)
Sault Ste Marie, MI 4516 I-75 Business Spur PC Fee 08/01/93 40.08 262,267 8,027,584
09/02/94 (a)
Walker, MI 3390-B Alpine Ave. N.W. PC Fee 09/01/89 16.40 133,981
12/29/95 (a)
MINNESOTA
- ---------
Bemidji, MN 1201 Paul Bunyan Dr MM Fee 11/01/77 31.55 285,166
Brainerd, MN 1200 Hwy 210 West MM Fee 08/01/85 17.19 230,129 1,020,000
Hutchinson, MN 1060 S.R. 15 MM Fee 12/01/81 36.88 121,273 5,242,849
Maple Grove, MN Weaver Lake Road & I-94 PC Fee 10/01/95 250,269
07/02/96 (a)
Worthington, MN 1635 Oxford Street MM Fee 11/01/77 38.02 185,348
MISSISSIPPI
- -----------
Starkville, MS 882 Highway 12 West PC Fee 08/01/90 28.81 234,652 2,438,320
11/16/94 (a)
Tupelo, MS 3850 North Gloster PC Fee 08/01/92 41.91 348,236 11,920,655
12/15/94 (a)
MISSOURI
- --------
Fenton, MO Gravois Rd-Hwy 141 NC Fee 07/01/70 11.07 100,548
Independence, MO 900 East 39th Street PC Fee(7) 09/01/95 46.95 365,062
11/17/95 (a)
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 26.95 187,257
02/25/94 (a)
Durham, NC 3500 Oxford Road PC Fee 12/01/90 41.70 206,827
Durham, NC 5428-B New Hope PC Fee(7) 07/01/95 39.53 408,292
Commons 11/17/95 (a)
Jacksonville, NC US Hwy 17-Western Avenue PC Fee 08/01/89 27.51 79,200 2,664,141
New Bern, NC 3003 Claredon Blvd PC Fee 05/01/89 28.18 238,388 5,392,642
Washington, NC 536 Pamlico Plaza NC Fee 11/01/90 22.17 85,000
Waynesville, NC 201 Paragon Parkway PC Fee 06/01/90 28.40 181,894
04/28/93 (a)
Wilmington, NC S. College-New Centre Dr PC Fee 09/01/89 57.78 442,583 10,075,323
NORTH DAKOTA
- ------------
Dickinson, ND 1681 Third Avenue MM Fee 05/01/78 27.10 267,676
OHIO
- ----
Ashland, OH U.S. Route 42 PC Fee 11/01/77 6.26 110,656
Aurora, OH 70-130 Barrington Town PC 04/01/96 37,876
Square Drive
Aurora, OH 180 Lena Drive BC Fee 09/01/88 20.00 236,225
Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
------------- ----------- ---------- ---------- ---------------------------------------------------
Mt Pleasant, MI 1,467,586 5.92 7,865 99.5% Wal-Mart (2009/2039), Kroger (2011/2041), Odd Lots
(1998/2008)
Sault Ste Marie, 1,575,229 6.37 94.3% Wal-Mart (2012/2042), J.C. Penney (2008/2033),
Glen's Supermarket (2013/2033)
Walker, MI 1,283,825 9.67 99.1% Circuit City (not owned), Target (not owned), Toys R
Us (not owned), TJMaxx (2005/2020), Office Depot
MINNESOTA
- ---------
Bemidji, MN 1,210,199 4.81 63,116 88.2% Kmart (2002/2052), J.C. Penney (1998/2018),
Herberger's (2005/2030)
Brainerd, MN 1,248,673 6.13 57,666 88.5% Kmart (2004/2054), Herberger's (2008/2023)
Hutchinson, MN 754,194 6.86 26,964 90.6% Kmart (not owned), J.C. Penney (2001/2021)
Maple Grove, MN 2,428,247 9.70 100.0% Kohl's (2016/2036), Barnes & Noble (2011/2026),
Holiday Sports (2011/2027), HomePlace (2016/2036),
Cub Foods (not owned)
Worthington, MN 980,469 5.45 15,708 97.1% Kmart (2001/2051), J.C. Penney (2007/2032), Sterling
(2001/2021), Hy-Vee (2011/2031)
MISSISSIPPI
- -----------
Starkville, MS 1,190,521 5.22 14,283 97.2% Wal-Mart (2015/2045), J.C. Penney (2010/2040),
Kroger (2012/2042)
Tupelo, MS 1,835,150 5.37 98.2% Wal-Mart (2012/2042), Sam's (2012/2042), Goody's
(2002/2017)
MISSOURI
- -------
Fenton, MO 725,846 8.07 694 89.4%
Independence, MO 3,521,749 9.74 99.0% 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 MEXICO
- ----------
Los Alamos, NM 504,764 5.15 54,461 100.0% Furrs(1997/1997), Furrs Pharmacy (1998/2013),
TG&Y (2018/2033)
NORTH CAROLINA
- --------------
Ahoskie, NC 939,468 5.02 15,903 100.0% Wal-Mart (2013/2043), Belk (2008/2033), Food Lion
(2012/2032)
Durham, NC 1,319,776 6.52 109,873 97.8% Wal-Mart (not owned), Food Lion (2010/2030),
Lowes (2011/2031)
Durham, NC 4,422,876 10.83 100.0% 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 546,189 6.90 6,384 100.0% Wal-Mart (not owned), Wilson's (2009/2024)
New Bern, NC 1,204,321 5.78 7,538 87.4% Wal-Mart (2009/2034)
Washington, NC 396,519 4.66 2,962 100.0% Wal-Mart (2009/2034)
Waynesville, NC 1,068,340 5.93 1,455 99.1% Wal-Mart (2011/2041), Food Lion (2011/2031)
Wilmington, NC 2,995,331 6.77 33,348 100.0% Wal-Mart (2009/2034), Sam's (not owned), Lowes
(2009/2029), Hamrick's (2002/2007), Goody's (2005/
2015)
NORTH DAKOTA
- ------------
Dickinson, ND 966,217 3.96 68,209 91.1% Kmart (2003/2053), J.C. Penney (1998/2018),
Herberger (2000/2020), Thrifty Drug (2001/2001)
OHIO
- ----
Ashland, OH 267,098 2.41 100.0% Kmart (2002/2052), N.J. Supermarkets (1997/2022)
Aurora, OH 341,387 10.72 84.1% Heinens (not owned)
Aurora, OH 744,109 3.15 100.0% Hardline Services (2003/2013)
-14-
15
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
- -------------------------------------
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Land Leasable Obligation as
Property termination Developed or Area Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) (Acres) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------- ------------- -------------
Canton, OH 5496 Dressler Road PC Fee(7) 10/01/95 20.00 229,809
Chillicothe, OH 867 North Bridge Street PC Fee 09/01/74 16.70 191,982
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 3,808,568
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 14.40 26,500
08/12/93 (a)
Macedonia, OH 8210 Macedonia Commons PC Fee(7) 05/01/94 19.94 234,789
07/05/94 (a)
Mayfield Hts, OH 624 Alpha Drive BC Fee 11/01/86 7.00 35,705
Mayfield Hts, OH 625 Alpha Drive BC Fee 07/01/84 5.90 77,110
Mentor, OH Pine Needle BC Fee 11/01/87 3.10 40,200
Solon, OH 6211 S.O.M. Center Rd PC Fee 05/01/78 0.64 2,560
Stow, 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, OH 9177 Dutton Drive BC Fee 11/01/89 3.90 35,502
Twinsburg, 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. & PC Fee 11/01/95 140,626
NW Ring Road 08/22/96 (a)
Pennsylvania
- ------------
Erie, PA 2301 West 38th Street PC GL8 08/01/73 13.27 95,000
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 24.22 157,309
South Carolina
- --------------
Anderson, SC 406 Highway 28 By-pass PC Fee 06/01/90 20.90 163,809
03/08/94 (a)
Anderson, SC 3812 Liberty Highway PC Fee 10/01/93 2.13 14,250
03/22/95 (a)
Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Center / Property Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
- ----------------- ------------- ----------- ---------- ---------- ---------------------------------------------------
Canton, OH 2,241,879 10.41 93.7% Kohl's (2016/2046), Target (not owned), Media Play
(2011/2026), Dick's Clothing & Sporting Goods (2010/
2025)
Chillicothe, OH 1,257,085 6.66 9,630 98.3% Lowes, (2015/2035), Kroger (2001/2031), Super X
(2001/2031)
Cincinnati, OH 2,131,845 9.23 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 7,281 100.0% 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 232,315 4.18 192 94.9% Kmart (2004/2054)*, Rite Aid (1999/2004), Bob &
Carls (not owned)
Huber Hts., OH 1,613,718 10.05 549 98.1% Wal-Mart (not owned), Cub Foods (2011/2031), Sears
(2002/2012)
Lebanon, OH 229,240 8.65 100.0% Wal-Mart (not owned), PK Lumber (not owned)
Macedonia, OH 2,221,812 9.46 100.0% Wal-Mart (not owned), Finast (2018/2049), Kohl's
(2016/2041)
Mayfield Hts, OH 0 0.0%
Mayfield Hts, OH 0 0.0%
Mentor, OH 217,080 5.40 100.0% Steris Corp (1999/2004)
Solon, OH 62,300 24.34 100.0% Kmart (not owned)
Stow, OH 189,344 1.62 39,772 100.0% Kmart (1996/2006)
Streetsboro, OH 211,840 3.20 100.0% Alumax Alum (1997/2006)
Tiffin, OH 744,908 3.57 57,287 90.5% Kmart (2005/2055), J.C. Penney (2000/2010), Heileg-
Myers (2004/2014)
Toledo, OH 1,428,882 7.61 15,244 100.0% Best Buy (2009/2024),Office Depot (2009/2024),
Michaels (2004/2014) Sears (2002/2012)
Twinsburg, OH 162,330 7.09 64.5%
Twinsburg, OH 359,460 4.19 100.0% VSA (1998)
Westlake, OH 932,683 6.01 40,086 95.5% Kmart (1999/2049), Marc's (2004/2019)
Wilmington, OH 179,454 3.94 17,817 82.6% Kmart (not owned), Super Valu (1998/2018)
Xenia, OH 814,659 7.77 2,971 100.0% Wal-Mart (not owned), Kroger (2019/2049)
Zanesville, OH 84,400 10.05 2,598 63.2% Kmart (not owned)
OREGON
- ------
Portland, OR 2,026,705 14.41 100.0% Office Depot (2010/2025), Haggan Supermarket (2021/
2046), Mervyn's (not owned), Target (not owned)
PENNSYLVANIA
- ------------
Erie, PA 209,415 2.36 36,736 93.3% Hill's (1998/2023),
Erie, PA 3,790,658 7.89 99.4% Wal-Mart (2015/2045), Lowe's (2015/2045), Media
Play (2010/2025), Kohl's (2016/2046)
East Norriton, PA 884,535 5.68 2,144 99.0% Kmart (2000/2050), Acme (2002/2027), Thrift Drug
(2002/2022)
SOUTH CAROLINA
- --------------
Anderson, SC 847,512 5.56 93.0% Wal-Mart (2010/2040), Ingles (2011/2066)
Anderson, SC 143,316 10.06 3,610 100.0% Wal-Mart (not owned), Sam's (not owned)
-15-
16
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
- -----------------------------------------
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Land Leasable Obligation as
Property termination Developed or Area Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) (Acres) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------- ------------- -------------
Camden, SC 1671 Springdale Drive PC Fee 03/01/90 22.97 166,197
06/24/93 (a)
Columbia, SC 5420 Forest Drive PC Fee 08/01/95 7.04 46,700
11/13/95 (a)
Mt.Pleasant, SC 1500 Highway 17 North PC Fee 03/01/92 22.70 187,496 7,043,274
03/30/95 (a)
No Charleston, SC 7400 Rivers Avenue PC Fee 08/01/89 28.10 211,288
11/07/93 (a)
Orangeburg, SC 2795 North Road PC Fee 07/01/94 2.65 22,200
03/22/95 (a)
Simpsonville, SC 621 Fairview Road PC Fee 10/01/90 17.23 142,133
01/03/94 (a)
Union, SC Highway 176 By-Pass #1 PC Fee 06/01/90 45.65 184,331
06/24/93 (a)
South Dakota
- ------------
Watertown, SD 1300 9th Avenue, S.E. MM Fee 11/01/77 29.30 286,165
Texas
- -----
Ft. Worth, TX SWC Eastchase Pkwy. PC Fee 12/01/95 17.00 117,109
and I-30 07/02/96 (a)
Vermont
- -------
Berlin, VT Route 4 MM Fee 09/01/86 50.25 174,646 4,940,000
Virginia
- ---------
Fairfax, VA 12210 Fairfax Town PC Fee(7) 10/01/94 22.79 253,941
Center 11/17/95 (a)
Martinsville, VA 240 Commonwealth Blvd. MM Fee(7) 07/01/89 43.73 411,977
Pulaski, VA 1000 Memorial Dr PC Fee 09/01/90 21.93 143,299
04/28/93 (a)
Winchester, VA 2190 So Pleasant Valley PC Fee 01/01/90 26.42 214,081 9,591,984
12/10/93 (a)
---------- ------------
21,103,838 $107,439,535
Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
------------- ----------- ---------- ---------- ---------------------------------------------------
Camden, SC 933,717 5.81 96.7% Wal-Mart (2009/2039), Winn-Dixie (2011/2036),
Goody's (2001/2016)
Columbia, SC 484,450 10.37 691 100.0% Wal-Mart (not owned)
Mt.Pleasant, SC 1,449,547 7.73 49,962 100.0% Wal-Mart (not owned), Lowe's (2012/2032), Piggly
Wiggly (2012/2022), TJMaxx (2002/2012)
No Charleston, SC 1,381,282 6.73 97.2% 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 795,669 5.71 98.0% Kmart (2015/2065), Ingles (2011/2065)
Union, SC 974,987 5.35 2,135 98.9% Wal-Mart (2009/2039), Belk's (2010/2030), Win-Dixie
(2010/2035)
South Dakota
- ------------
Watertown, SD 1,357,576 4.88 100,864 97.2% Kmart (2002/2052), J.C. Penney (1998/2018),
Herberger's (1999/2019), Osco (1998/2003)
Texas
- -----
Ft. Worth, TX 1,143,171 9.76 100.0% PetsMart (2011/2036), MJ Designs (2011/2031), Ross
Dress For Less (2006/2026), Toys R Us (not owned),
Vermont Target (not owned)
- ---------
Berlin, VT 1,172,187 6.84 44,744 98.2% Rich's (2012/2032), J.C. Penney (2009/2034)
Virginia
- --------
Fairfax, VA 3,999,815 15.75 100.0% United Artists (2014/2034), Safeway (2019/2054)
TJMaxx (2009/2024), Bed, Bath and Beyond (2010/2020)
Tower Records (2009/2019)
Martinsville, VA 2,766,593 7.18 93.5% J.C. Penney (2009/2034), Leggett (2009/2024), Sears
(2009/2029), Kroger (2017/2062), Goody's (2006/
Pulaski, VA 859,649 6.15 27,962 97.6% Wal-Mart (2011/2041), Food Lion (2011/2031)
Winchester, VA 1,871,147 9.13 95.7% Office Max (2012/2027), Kohl's (2018/2048), Giant
Foods (2010/2040), Books-A-Million (2007/2017)
------------ ----- ---------- ------
$156,563,307 $7.76 $1,862,144 95.5%
<FN>
- -----------------------
(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.
(2) Indicates the date developed or acquired by the Company or DDG, unless denoted with (a), which indicates the date on
which the property was acquired by the company following completion of the IPO.
(3) Total annualized base rentals as of December 31, 1996
(4) Calculated as total annualized base rentals divided by Company-owned GLA actually leased as of December 31, 1996
(5) Percentage and overage rentals paid for the twelve-month period ended December 31, 1996.
(6) Includes space leased as of December 31, 1996,for which rent was being paid but which was not then occupied; also
includes anchor tennant leases signed as of said date relating to approximately 240,000 square feet which have not yet
been fully occupied
(7) One of thirteen properties owned through joint ventures which serve as collateral for joint venture mortgage debt
aggregating approximately $360.1 million (of which the Company's proportionate share is $180.1 million) which is not
reflected in the consolidated indebtedness.
* This anchore 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.
-16-
17
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROPERTY LIST AS OF DECEMBER 31, 1996
- -------------------------------------
Ownership
Interest
(ground
lease Company
termination/ Gross Mortgage
Type of option Date Leasable Obligation as
Property termination Developed or Area (sq. ft. of December
Center / Property Location (1) ) Acquired (2) ) 31, 1996
- ----------------- -------- --------- ------------ ------------ ------------- -------------
1997 ACQUISITIONS
- -----------------
For the period January 1, 1997 through March 14, 1997 the Company acquired four (4) additional shopping centers at an aggregate
cost fo approximately $102.5 million summarized as follows:
ARIZONA
- -------
Ahwatukee, AZ 4711 East Ray Road PC Fee 07/10/96 245,400
02/21/97 (a)
OHIO
- ----
N.Olmsted, OH 25877 Great Northern Blvd. PC Fee 06/01/58 459,858
02/21/97 (a)
N.Olmsted, OH 5140 Great Northern Blvd. PC Fee 06/01/87 145,080
02/21/97 (a)
TEXAS
- -----
San Antonio, TX 125 NE Loop 410 PC Fee (8) 12/30/96 286,388(8)
02/21/97 (a)
Average
Total Base Annual Percentage
Annualized Rent per Percentage Leased
Base Rent (3) sq. ft. (4) Rent (5) (6) Anchor Tenants (Lease Expiration/Option Expiration)
------------- ----------- ---------- ---------- ---------------------------------------------------
ARIZONA
- -------
Ahwatukee, AZ 2,783,602 11.34 100.0% HomePlace (2012/2027), Smith's (2021/2046), Stein
Mart (2011/2026)
OHIO
- ----
N.Olmsted, OH 4,685,531 10.69 95.3% Regal Cinemas (2001/2001), Marc's (2002/2007)
CompUSA (2008/2023), Finast (not owned)
N.Olmsted, OH 1,297,077 9.33 95.9% Best Buy (2010/2025), Marshall's (2000/2005),
Kronheim's (1999/2004)
TEXAS
- -----
San Antonio, TX 3,516,406 13.97 87.9% Ross Dress For Less (2007/2027), DSW Warehouse
(2007/2027), Best Buy (2011/2026), Oshman's (2017/
2037), HomePlace (2012/2027)
(8) Owned through joint venture which serves as collateral for joint venture
mortgage debt aggregating approximately $26.7 million (of which the
Company's proportionate share is $9.3 million) which is not reflected in
the consolidated indebtedness.
-17-
18
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.
-18-
19
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
1996 and 1995 and the dividends paid per common share with respect to each such
quarter:
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
Dividends
Paid per
1995 High Low Common Share
----------- -------- ------- --------------
1st quarter $ 31 $27-5/8 $ .54
2nd quarter 30-3/8 26-1/8 .54
3rd quarter 32 27-3/4 .54
4th quarter 32-1/8 27-1/4 .54
------
$ 2.16
The approximate number of record holders of the Company's common
shares, (the only class of common equity) at March 14, 1997 was 400, and the
approximate number of beneficial owners of such shares was 17,000.
In January 1997, the Company declared its 1997 first quarter dividend
to shareholders of record on February 12, 1997 of $.63 per share, a 5.0%
increase over the quarterly dividend rate of $.60 per share in 1996.
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.
-19-
20
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 five
years and include the information required by Item 301 of Regulation S-K.
COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
(Amounts in thousands, except per share data)
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
OPERATING DATA: DDG Predecessor
----------------------
Pro forma Pro forma
1996(1) 1995(1) 1994(1) 1993(2) 1993(1) 1992(2) 1992
--------- --------- --------- --------- --------- --------- ---------
Revenues (primary real estate rentals) $ 130,906 $ 107,805 $ 81,974 $ 54,606 $ 54,531 $ 46,890 $ 46,180
--------- --------- --------- --------- --------- --------- ---------
Expenses:
Rental operation 35,124 28,069 22,802 16,963 16,863 15,530 14,980
Depreciation & amortization 25,062 21,865 16,211 10,393 10,393 9,115 9,256
Interest 29,888 29,595 21,423 13,407 15,060 11,936 25,509
--------- --------- --------- --------- --------- --------- ---------
90,074 79,529 60,436 40,763 42,316 36,581 49,745
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before equity in
net income (loss) from joint ventures,
gains on sales of land, non-recurring
charges and extraordinary items 40,832 28,276 21,538 13,843 12,215 10,309 (3,565)
Equity in net income (loss) of joint ventures 8,710 486 (186) (347) (347) (326) (526)
Gain on sales of land -- 300 -- 122 122 806 806
Non-recurring charges (3) -- -- -- -- (2,641) -- --
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary item 49,542 29,062 21,352 13,618 9,349 10,789 (3,285)
Extraordinary item(3) -- (3,557) (216) -- (731) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) $ 49,542 $ 25,505 $ 21,136 $ 13,618 $ 8,618 $ 10,789 $ (3,285)
========= ========= ========= ========= ========= ========= =========
Net income (loss) applicable to
applicable to common shareholders $ 35,342 $ 24,250 $ 21,136 $ 13,618 $ 8,618 $ 10,789 $ (3,285)
========= ========= ========= ========= ========= ========= =========
Per share data:
Income before extraordinary item $1.67 $1.48 $1.35 $ 1.10 $0.82 $0.93
Net income $1.67 $1.29 $1.34 $ 1.10 $0.76 $0.93
Cash dividends $2.40 $2.16 $1.92 $ 1.60(4) $1.42 --
AT DECEMBER 31,
---------------------------------------------------------------------
DDG
Predecessor
1996 1995 1994 1993 1992
--------- --------- --------- --------- -----------
BALANCE SHEET DATA:
Real estate (at cost) $ 991,647 $ 848,373 $ 686,890 $ 459,049 $ 307,745
Real estate, net of accumulated depreciation 849,608 728,333 586,839 375,183 232,519
Advances to and investments in joint ventures 106,796 83,190 8,710 9,078 (630)
Total assets 975,126 830,060 611,116 395,942 238,414
Total debt 478,432 405,726 394,435 184,534 299,789
Shareholders' equity (deficit) 469,336 404,161 203,508 197,118 (72,739)
-20-
21
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
DDG Predecessor
----------------
Pro forma Proforma
1996(1) 1995(1) 1994(1) 1993(2) 1993(1) 1992(2) 1992
-------- ------- ------- ------- ------ ------ -----
OTHER DATA:
Cash flow provided from (used in):
Operating activities $ 75,820 $ 49,039 $ 39,112 (5) $ 19,151 (5) $ 5,090
Investing activities (199,671) (217,198) (191,810) (5) (137,232) (5) (2,418)
Financing activities 123,851 167,252 150,373 (5) 120,417 (5) (3,324)
Funds from operations (6):
Net income (loss) applicable to
common shareholders $ 35,342 $ 24,250 $ 21,136 $ 13,618 $ 8,618 $ 10,789 $ (3,285)
Depreciation and amortization 24,832 21,706 16,211 10,393 10,393 9,115 9,256
Equity in net (income) loss of joint
ventures (8,710) (486) 186 347 347 326 526
Joint venture funds from operations 13,172 1,364 217 105 105 70 (130)
Gain on sales of land -- (300) -- (122) (122) (806) (806)
Non-recurring and extraordinary items (3) -- 3,557 216 -- 3,372 -- --
--------- --------- --------- --------- --------- --------- ---------
$ 64,636 $ 50,091 $ 37,966 $ 24,341 $ 22,713 $ 19,494 $ 5,561
========= ========= ========= ========= ========= ========= =========
Weighted average number of common
shares outstanding 21,142 18,780 15,806 12,391 11,383 11,618
<FN>
(1) As described in the consolidated financial statements, the Company acquired
5 properties, 20 properties (10 of which are owned through joint ventures),
14 properties and 17 properties in 1996, 1995, 1994 and 1993, respectively.
(2) Pro forma adjustments reflect only those adjustments associated with the
Company's IPO and do not include the pro forma adjustments associated with
the secondary offerings and acquisitions in 1994 and 1993.
(3) The non-recurring charges in 1993 relate to costs incurred in connection
with the transfer of the initial properties (primarily transfer taxes and
title insurance costs) and the 1993 extraordinary item relates to debt
prepayment fees and write-off of deferred finance costs. In 1995 and 1994,
the extraordinary charges relate primarily to the write-off of deferred
finance costs.
(4) Represents annualized dividend rate as declared by the Board of Directors.
(5) Pro forma information has not been presented.
(6) Industry analysts generally consider funds from operations (`FFO") to be an
appropriate measure of the performance of an equity REIT. FFO 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 and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity.
FFO is defined generally as net income applicable to common shareholder
excluding gains (losses) on sale of property, non-recurring charges and
extraordinary items, adjusting for certain noncash items, principally real
property depreciation and equity income (loss) from its joint ventures and
adding the Company's proportionate share of FFO of its unconsolidated joint
ventures, determined on a consistent basis. The Company calculates FFO in
accordance with the foregoing definition, which is currently used by
NAREIT. Certain other real estate companies may calculate FFO in a
different manner.
-21-
22
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements, the notes thereto and the comparative summary of selected
financial data appearing elsewhere in this report. Historical results and
percentage relationships set forth in the consolidated financial statements,
including trends which might appear, should not be taken as indicative of future
operations.
- --------------------------------------------------------------------------------
COMPARISON OF 1996 TO 1995 RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
REVENUES FROM OPERATIONS
Total revenues increased $23.1 million, or 21.4%, to $130.9 million for the year
ended December 31, 1996 as compared to $107.8 million for the year ended
December 31, 1995. Base and percentage rents for 1996 increased $13.8 million or
16.4% to $98.2 million as compared to $84.4 million in 1995. Approximately $2.5
million of the increase in base and percentage rental income is the result of
new leasing, re-tenanting and expansion of the Core Portfolio Properties
(shopping center properties owned as of January 1, 1995), an increase of 3.3%
over 1995 revenues from Core Portfolio Properties. The 15 shopping centers
acquired by the Company in 1996 and 1995 contributed $10.5 million of additional
revenue and the three new shopping center developments contributed $2.3 million.
The above increases were offset by the transfer of two properties to a joint
venture which reduced revenue by $0.8 million and a decrease in business center
base rents of $0.7 million. Included in the rental revenues is approximately
$0.7 million of revenue resulting from the recognition of straight line rents
primarily associated with recent acquisitions and developments. At December 31,
1996, the occupancy rate of the Company's shopping centers was at 94.8% as
compared to 96.3% at December 31, 1995. Contributing to the decrease in
occupancy was the Company's decision to terminate the leases of two Wal-Mart
stores in Winchester and Martinsville, Virginia at the end of June 1996. The
former Wal-Mart space in each center has been leased to a variety of tenants at
higher rents commencing in the fourth quarter of 1996 and first half of 1997.
The Company has entered into additional leases with anchor tenants aggregating
in excess of 240,000 square feet of vacant space including the above mentioned
Wal-Mart space which effectively adjusts the existing occupancy rate to 96.0%.
The average annualized base rent per leased square foot, including those
properties owned through joint ventures, was $7.85 at December 31, 1996 as
compared to $7.61 at December 31, 1995. During 1996, aggregate same store sales,
for tenants reporting sales, increased 3.9% to $225.18 per square foot as
compared to $216.70 per square foot in 1995.
The increase in recoveries from tenants of $4.9 million is directly related to
the increase in operating and maintenance expenses and real estate taxes
primarily associated with the 1996 and 1995 shopping center acquisitions and
developments. Recoveries were approximately 90.4% of operating expenses and real
estate taxes as compared to 88.8% in 1995.
Management fee income and other income increased by approximately $4.5 million
which generally relates to an increase in management fee income of approximately
$2.1 million, associated with the formation of the Community Center Joint
Ventures and the OSTRS Joint Venture and an increase in lease termination income
of approximately $2.4 million.
EXPENSES FROM OPERATIONS
Rental operating and maintenance expenses for the year ended December 31, 1996
increased $3.0 million, or 33.0% to $12.1 million as compared to $9.1 million
for the year ended December 31, 1995. An increase of $2.3 million is
attributable to the 18 shopping centers acquired and developed in 1996 and 1995
and an increase of $0.7 million in the Core Portfolio Properties, primarily
attributed to higher repair and maintenance costs and snow removal costs in 1996
as compared to 1995.
Real estate taxes increased $2.0 million, or 16.0%, to $14.5 million for the
year ended December 31, 1996 as compared to $12.5 million in 1995. This increase
is related to the 18 shopping centers acquired and developed in 1996 and 1995.
General and administrative expenses increased $2.0 million, or 32.3% to $8.4
million for the year ended December 31, 1996 as compared to $6.4 million in
1995. The increase is attributable to the growth of the Company primarily
related to the 1996 and 1995 acquisitions, joint ventures, expansions and
developments. During the fourth quarter of 1995, the Company expanded its
leasing staff and added three regional vice presidents of leasing and through-
22
23
out 1996 opened seven new regional leasing and operations offices in various
cities throughout the country. The Company continues to maintain a conservative
policy with regard to the expensing of all internal leasing salaries, legal
salaries and related expenses associated with the leasing and re-leasing of
existing space.
Depreciation and amortization expense increased $3.2 million, or 14.6%, to $25.1
million for the year ended December 31, 1996 as compared to $21.9 million in
1995. The increase is primarily attributable to the growth related to the 18
shopping centers acquired and developed in 1996 and 1995 which contributed $2.9
million of the increase. The remaining $0.3 million relates to the expansions
and improvements associated with the Core Portfolio Properties.
Interest expense increased $0.3 million, or 1.0%, to $29.9 million for the year
ended December 31, 1996 as compared to $29.6 million for the year ended December
31, 1995. The overall increase in interest expense is primarily related to the
acquisition and development of shopping centers during 1996. The weighted
average debt outstanding during 1996 and related weighted average interest rate
was $426.5 million and 7.8% respectively, compared to $394.8 million and 8.1%
respectively, during 1995. Interest capitalized in conjunction with development
and expansion projects, was $3.3 million for the year ended December 31, 1996,
as compared to $2.5 million in 1995.
Equity in net income of joint ventures increased $8.2 million to $8.7 million in
1996 as compared to $0.5 million in 1995. The increase is attributable to the
formation of the Community Center Joint Ventures during the fourth quarter of
1995 and a joint venture with Ohio State Teachers Retirement Systems ("OSTRS")
in the third quarter of 1996 which contributed $8.1 million and $0.3 million of
equity in net income of joint ventures, respectively. This increase was offset
by $0.2 million increase in the equity in net loss from the Martinsville,
Virginia joint venture. This temporary decrease was the result of the joint
venture's election to terminate its Wal-Mart lease. The former Wal-Mart space
has been released to two major tenants at higher rents commencing during the
fourth quarter of 1996 and the first half of 1997.
The extraordinary item which aggregated $3.6 million for the year ended December
31, 1995, is primarily related to the write-off of unamortized deferred finance
costs.
NET INCOME
Net income increased $24.0 million to $49.5 million for the year ended December
31, 1996 as compared to net income of $25.5 million for the year ended December
31, 1995. The increase in net income is attributable to increased net operating
revenues (total revenues less operating and maintenance, real estate taxes, rent
and general and administrative expense) aggregating $16.0 million, resulting
from new leasing, re-tenanting and expansion of Core Portfolio Properties, and
the 18 shopping centers acquired and developed in 1995 and 1996. An additional
increase of $8.2 million relates to the formation of the Community Center Joint
Ventures and the OSTRS Joint Venture and an increase of $3.6 million relates to
a decrease in extraordinary charges. The increase in net operating revenues and
equity income from joint ventures and reduction in extraordinary charges was
offset by increases in depreciation and interest expense of $3.2 million and
$0.3 million, respectively, and a decrease in gain on sales of land of $0.3
million.
- --------------------------------------------------------------------------------
COMPARISON OF 1995 TO 1994 RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
REVENUES FROM OPERATIONS
Total revenues increased $25.8 million, or 31.5%, to $107.8 million for the year
ended December 31, 1995 as compared to $82.0 million for the year ended December
31, 1994. Base and percentage rental revenues increased $20.0 million.
Approximately $2.3 million of the increase in base and percentage rental income
is the result of new leasing, re-tenanting and expansion of the Core Portfolio
Properties (properties owned as of January 1, 1994) and $0.7 million is
attributable to additional recoveries from tenants, primarily resulting from
increased real estate taxes. The 14 shopping centers acquired by the Company in
1994 contributed $12.5 million of additional revenue and the 10 shopping centers
acquired by the Company in 1995 and the three new shopping center developments
contributed $9.0 million.
The increase in management fee income of $0.1 million is primarily attributable
to the formation of the Community Center Joint Ventures. Other income increased
by approximately $1.4 million which primarily relates to an increase in lease
termination income of $0.5 million and other fee related income of $0.7 million,
primarily development fees, and $0.2 million is primarily related to increases
in interest income.
23
24
EXPENSES FROM OPERATIONS
Rental operating and maintenance expenses for the year ended December 31, 1995
increased $1.6 million, or 20.5% to $9.1 million as compared to $7.5 million for
the year ended December 31, 1994. An increase of $1.7 million is attributable to
the 27 shopping centers acquired and developed in 1995 and 1994 which was offset
by a reduction of $0.1 million in the Core Portfolio Properties, primarily
attributed to lower repair and maintenance costs and snow removal costs in 1995
as compared to 1994.
Real estate taxes increased $3.0 million, or 30.9%, to $12.5 million for the
year ended December 31, 1995 as compared to $9.5 million for the year ended
December 31, 1994. An increase of $2.1 million is related to the 27 shopping
centers acquired and developed in 1995 and 1994 and an increase of $0.9
million is related to the Core Portfolio Properties.
General and administrative expenses increased $0.8 million, or 13.8% to $6.4
million for the year ended December 31, 1995 as compared to $5.6 million in
1994. The increase is attributable to the growth of the Company primarily
related to the 1995 and 1994 acquisitions, expansions and developments.
Depreciation and amortization expense increased $5.7 million, or 34.9%, to $21.9
million for the year ended December 31, 1995 as compared to $16.2 million in
1994. The increase is primarily attributable to the growth related to the 27
shopping centers acquired and developed in 1994 and 1995 which contributed $4.4
million of the increase. The remaining $1.3 million relates to the expansions
and improvements associated with the Core Portfolio Properties and also includes
a charge in the first quarter of 1995 of $0.6 million resulting from the
demolition of an existing Kmart store, with a net book value of $0.6 million.
The Kmart store was replaced with a new Lowe's Home Improvement ("Lowe's") store
in the fourth quarter of 1995.
Interest expense increased $8.2 million, or 38.1%, to $29.6 million for the year
ended December 31, 1995 as compared to $21.4 million for the year ended December
31, 1994. An increase in interest expense of $2.6 million for the year ended
December 31, 1995 is attributable to the debt assumed in conjunction with the
Company's acquisitions in 1995 and 1994. An increase of $2.8 million, $7.1
million and $4.9 million is related to the Company's Debentures, Floating Rate
Senior Notes and Fixed Rate Senior Notes, respectively. The aforementioned
increases were offset by a decrease of $4.3 million in interest expense on the
revolving credit facilities, an increase in the capitalization of interest costs
aggregating $1.4 million relating to development projects and a decrease of $3.5
million which relates to principal amortization and retirement of mortgage debt
relating to the Core Portfolio Properties.
Equity in net income of joint ventures increased $0.7 million to $0.5 million in
1995 as compared to a net loss of $0.2 million in 1994. The increase is
attributable to the formation of Community Center Joint Ventures during the
fourth quarter of 1995 which contributed $0.7 million of equity in net income of
joint ventures.
The extraordinary item which aggregated $3.6 million for the year ended December
31, 1995, is primarily related to the write-off of unamortized deferred finance
costs. During 1995 the Company entered into a $150 million unsecured credit
facility and terminated its $150 million secured credit facility with Nomura
Asset Capital Corporation. The termination of the secured facility resulted in
the write-off of unamortized deferred finance costs aggregating $3.3 million. In
addition, the Company terminated a $25 million secured revolving credit facility
in January 1995, in conjunction with a 2,875,000 common share offering. The
termination of this facility also resulted in an extraordinary charge of $0.3
million primarily related to the write-off of unamortized deferred finance
costs.
NET INCOME
Net income increased $4.4 million to $25.5 million for the year ended December
31, 1995 as compared to net income of $21.1 million for the year ended December
31, 1994. The increase in net income is primarily attributable to increased net
operating revenues (total revenues less operating and maintenance, real estate
taxes and general and administrative expense) aggregating $20.6 million,
resulting from new leasing, re-tenanting and expansion of Core Portfolio
Properties, and the 27 shopping centers acquired and developed in 1995 and 1994.
In addition, the formation of the Community Center Joint Ventures resulted in an
increase of approximately $0.7 million and gains on sale of land aggregated $0.3
million. The aforementioned increases were offset by increases in depreciation,
interest expense and extraordinary charges aggregating $5.7 million, $8.2
million, and $3.3 million, respectively.
24
25
- --------------------------------------------------------------------------------
FUNDS FROM OPERATIONS
- --------------------------------------------------------------------------------
Management believes that funds from operations ("FFO") provides an additional
indicator of the financial performance of a Real Estate Investment Trust. FFO is
defined generally as net income applicable to common shareholders excluding
gains (losses) on sale of property, non-recurring charges and extraordinary
items, adjusting for certain non-cash items, principally real property
depreciation and equity income (loss) from its joint ventures and adding the
Company's proportionate share of FFO of its unconsolidated joint ventures,
determined on a consistent basis. The Company calculates FFO in accordance with
the foregoing definition, which is substantially the same as the definition
currently used by the National Association Of Real Estate Investment Trusts
("NAREIT"). Certain other real estate companies may calculate funds from
operations in a different manner. In 1996, FFO increased $14.5 million, or 28.9%
to $64.6 million as compared to $50.1 million in 1995 and $38.0 million in 1994.
The increases in each year are attributable to the continuing increases in
revenues from Core Portfolio Properties, acquisitions and developments. The
Company's calculation of FFO is as follows:
YEAR ENDED DECEMBER 31,
1996 1995 1994
- -------------------------------------------------------------------------------
Net income applicable to
common shareholders(1) $ 35,342 $ 24,250 $ 21,136
Depreciation of real property 24,832 21,706 16,211
Equity in net (income) loss of
joint ventures (8,710) (486) 186
Joint Ventures FFO(2) 13,172 1,364 217
Gain on sales of land -- (300) --
Extraordinary item -- 3,557 216
---------------------------------------
$ 64,636 $ 50,091 $ 37,966
=======================================
<FN>
(1) Includes straight line rental revenues of approximately $0.7 million in 1996
and $0.1 million in 1995 and none in 1994, primarily related to recent
acquisitions and new developments.
(2) Joint Venture Funds From Operations are summarized
as follows:
Net income (loss)(3) $ 17,419 $ 972 $ (372)
Depreciation of real property 8,924 1,756 805
---------------------------------------
26,343 2,728 433
Ownership interest 50% 50% 50%
---------------------------------------
$ 13,172 $ 1,364 $ 217
=======================================
<FN>
(3) Includes straight line rental revenue of approximately $2.3 million in 1996
and $0.4 million in 1995 and none in 1994. The Company's proportionate share of
straight line rental revenues was $1.1 million in 1996 and $0.2 million in 1995.
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
The Company anticipates that cash flow from operating activities will continue
to provide adequate capital for all principal payments, recurring tenant
improvements, as well as dividend payments in accordance with REIT requirements
and that cash on hand, borrowings under its existing revolving credit
facilities, as well as other debt and equity alternatives will provide the
necessary capital to achieve continued growth. Cash flow from operating
activities for 1996 increased to $75.8 million as compared to $49.0 million in
1995. The increase is attributable to the 28 acquisitions and developments
completed in 1996 and 1995, new leasing, expansion and re-tenanting of the core
portfolio properties and the equity offerings completed in 1996 and 1995.
The Company satisfied its REIT requirement of distributing at least 95% of
ordinary taxable income with declared common and preferred share dividends of
$66.0 million in 1996 as compared to $41.8 million in 1995 and $30.4 million in
1994. Accordingly, federal income taxes were not incurred at the corporate
level. The Company's common share dividend payout ratio for the year
approximated 80.3% of the actual 1996 FFO as compared to 81.5% and 80.0% in 1995
and 1994, respectively.
An increase in the 1997 quarterly dividend per common share to $.63 from $.60
was approved in December 1996 by the Company's Board of Directors. It is
anticipated that the new dividend level will result in a more conservative
payout ratio as compared to prior years. A lower payout ratio will enable the
Company to retain more capital which will be utilized toward attractive
investment opportunities in the development, acquisition and expansion of
portfolio properties.
25
26
- --------------------------------------------------------------------------------
ACQUISITIONS, DEVELOPMENTS AND EXPANSIONS
- --------------------------------------------------------------------------------
During the three year period ended December 31, 1996, the Company and its joint
ventures expended $1,077.6 million, net, to acquire, develop, expand, improve
and re-tenant its properties as follows (in millions):
1996 1995 1994
- ----------------------------------------------------------------------------
COMPANY:
Acquisitions $113.9 $ 81.6 $179.7
Completed Expansions 24.6 25.8 10.9
Developments and
Construction in Progress 48.2 58.6 34.7
Tenant Improvements and
Building Renovations 1.1 1.1 2.5
----------------------------------
187.8 167.1 227.8
Less Land Sales and Property
Transferred to Joint Ventures (44.5) (5.6) --
----------------------------------
Company Total 143.3 161.5 227.8
----------------------------------
JOINT VENTURES:
Acquisitions/Transfers 42.8 450.5 --
Developments and
Construction in Progress 47.1 4.5 --
Tenant Improvements and
Building Renovations -- -- .1
----------------------------------
Joint Venture Total 89.9 455.0 .1
----------------------------------
$233.2 $616.5 $227.9
===================================
During 1996, the Company acquired five shopping centers currently aggregating
1.1 million square feet of Company owned GLA (Gross Leasable Area) at an
aggregate purchase price of approximately $113.9 million.
In September 1996, the Company entered into a joint venture with OSTRS. In
conjunction with the formation of the joint venture, the Company transferred to
the joint venture two recently developed shopping centers with a net book value
of $41.6 million and non-recourse mortgage debt aggregating $36.4 million. OSTRS
funded initial cash contributions of $11.6 million, which was used to repay a
portion of the non-recourse mortgage debt. In addition to owning a 50% interest
in the joint venture, the Company continues to manage the two properties
pursuant to a management agreement.
During 1996, the Company completed the first phase of a 520,000 square foot
shopping center development in Canton, Ohio at an aggregate cost of $21.2
million. This property was transferred into the joint venture with OSTRS
discussed above. The Company also completed the development of the initial phase
of a shopping center in Aurora, Ohio aggregating approximately 90,000 square
feet at a total cost of $4.9 million. In addition, the Company completed the
development of the Independence, Missouri shopping center which is one of the
three Community Center Joint Venture properties acquired while under
development, in 1995, through the Homart transactions as described below. The
remaining two shopping centers under development, located in Framingham,
Massachusetts and Atlanta, Georgia, are in the final stages of construction. As
of December 31, 1996 the majority of tenants had opened at each of these
centers.
Construction has also commenced on the development of four additional shopping
centers aggregating approximately 1.7 million square feet with an aggregate
projected cost of approximately $117 million and include: (1) a 235,000 square
foot Phase II development of the Canton, Ohio center, (2) a 500,000 square foot
shopping center in Boardman, Ohio, (3) a 475,000 square foot shopping center in
Stow, Ohio and (4) a 443,000 square foot shopping center in Merriam, Kansas. The
Merriam, Kansas shopping center is being developed through a joint venture,
formed in October 1996, which is 50% owned by the Company. All of the above
shopping centers are scheduled for completion during the second half of 1997
with certain anchor tenants opening as early as the fourth quarter of 1996 and
the first half of 1997. The Company continues to pursue additional development
opportunities.
During 1996, the Company completed expansions aggregating approximately 375,000
square feet at an aggregate cost of approximately $24.6 million at the Company's
shopping centers located in Highland Heights, Ohio; Erie, Pennsylvania;
Birmingham, Alabama; North Charleston, South Carolina; Wilmington, North
Carolina; Brainerd, Minnesota and Watertown, South Dakota. 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 211 acres of undeveloped land consisting of 76 parcels,
primarily adjacent to its existing shopping centers, available for development,
expansion or sale.
26
27
During 1995, the Company acquired ten shopping centers aggregating 1.2 million
square feet of Company-owned GLA at an aggregate purchase price of approximately
$81.6 million.
On November 17, 1995, the Company, in conjunction with certain venture partners
described below, acquired the Homart Community Center Division of Sears, Roebuck
and Co. ("Sears") from an affiliate of General Growth Properties, Inc. The
Homart Community Center Division includes ten power centers which will aggregate
in excess of four million square feet of GLA located in major metropolitan areas
throughout the United States and several outlots and pad sites adjacent to the
ten power centers and certain other power centers previously sold by Sears (the
"Community Center Properties"). Construction of seven of the ten power centers
was complete or substantially complete at the time of acquisition and three of
the power centers were under construction.
The Company, or a wholly owned subsidiary of the Company, and its joint venture
partners each purchased a 50% interest in each Community Center Joint Venture.
The total purchase price for the Community Center Properties aggregated $449.2
million and was funded through $300.1 million of secured indebtedness at the
joint venture level, $3.1 million of assumed net liabilities and $146.0 million
of cash of which one-half each was provided by the Company and its joint venture
partners. In addition, the Company paid cash of approximately $1.3 million
relating to the purchase of certain rights to various development sites.
During 1995, the Company completed the first phase of a 480,000 square foot
shopping center development in Erie, Pennsylvania; and the first phase of a
245,000 square foot redevelopment in Highland Heights, Ohio. The Company also
completed the development of a 195,000 square foot shopping center in Xenia,
Ohio.
During 1995, the Company completed over 400,000 square feet of expansions at 12
shopping centers for a total cost of approximately $25.8 million.
During 1994, the Company acquired 14 shopping centers aggregating of 3.1 million
square feet of Company-owned GLA at an aggregate purchase price of approximately
$179.7 million.
During 1994, the Company completed expansions at seven shopping centers
aggregating approximately 258,000 square feet of GLA at an aggregate cost of
approximately $10.9 million.
- --------------------------------------------------------------------------------
FINANCING ACTIVITIES
- --------------------------------------------------------------------------------
The above acquisitions, developments and expansions were financed through cash
provided from operating activities, revolving credit facilities, mortgages
assumed, construction loans and debt and equity offerings. Total debt
outstanding at December 31, 1996 was $478.4 million compared to $405.7 million
at December 31, 1995 and $394.4 million at December 31, 1994. In 1996, the
Company increased total debt by $72.7 million primarily to fund acquisitions,
developments and expansions.
During 1996, the Company issued $111.7 million of senior unsecured fixed rate
notes through its Medium Term Note ("MTN") program with maturities ranging from
five to seven years and interest rates ranging from 6.58% to 7.42%. The Company
also repaid approximately $30 million of mortgage debt with a weighted average
interest rate of 8.8% which also unencumbered three shopping center properties.
In June 1996, the Company extended its $150 million unsecured revolving credit
facility for an additional year, through May 1999, and reduced the current
interest rate 25 basis points to LIBOR plus 1.25%. In September 1996, the
Company restructured its $25 million secured revolving credit facility. This
restructuring resulted in an $18.6 million ten year non-recourse mortgage loan,
which was transferred into the joint venture with OSTRS, and a $10 million
unsecured revolving credit facility which matures in November 1999. This
restructuring resulted in the mortgage release of two of the three shopping
centers which served as collateral for the $25 million secured revolving credit
facility.
In January 1996, an additional 175,000 Class B Depositary preferred shares were
issued, in conjunction with the underwriters over allotment option, which
resulted in additional net proceeds of approximately $4.2 million. In March
1996, the Company issued 2.6 million common shares and received net proceeds of
approximately $75.4 million which were used to retire debt.
27
28
A summary of the aggregate gross proceeds raised of $698.1 million through the
issuance of common shares, preferred shares, senior unsecured notes and
subordinated convertible debentures during the three year period ended December
31, 1996 is as follows (in millions):
1996 1995 1994
- -------------------------------------------------------------------------------
EQUITY:
Common Shares $ 75.6 $ 81.2 $ 15.8
Class A Preferred Shares -- 105.4 --
Class B Preferred Shares 4.4 40.0 --
----------------------------------------
Total Equity 80.0 226.6 15.8
----------------------------------------
DEBT:
Senior Fixed Rate Notes 111.7 104.0 --
Senior Variable Rate Notes -- -- 100.0
Subordinated Convertible Debentures -- -- 60.0
----------------------------------------
Total Debt 111.7 104.0 160.0
----------------------------------------
$191.7 $330.6 $175.8
========================================
In addition to the above financings, the Community Center Joint Ventures entered
into mortgage loans for up to $330 million during 1995. At December 31, 1996 and
1995 outstanding borrowings associated with the Community Center Joint Ventures
aggregated $319.5 and $303.3, respectively.
At December 31, 1996, the Company's capitalization consisted of $478.4 million
of debt (excluding the Company's proportionate share of joint venture mortgage
debt aggregating $180.1 million), $149.8 of preferred stock and $805.0 million
of market equity (market equity is defined as common shares outstanding
multiplied by the closing price of the common shares on the New York Stock
Exchange at December 31, 1996 of $37-1/8) resulting in a debt to total market
capitalization ratio of .33 to 1.0 compared to the ratios of .36 to 1.0 and .44
to 1.0 at December 31, 1995 and 1994, respectively. At December 31, 1996, the
Company's total debt consisted of $379.8 million of fixed rate debt, and $98.6
million of variable rate debt.
It is management's intention that the Company have access to the capital
resources necessary to expand and develop its business. Accordingly, the Company
may seek to obtain funds through additional equity offerings or debt financing
in a manner consistent with its intention to operate with a conservative debt
capitalization policy and maintain its investment grade ratings with Moody's
Investor Services and Standard and Poor's. In June 1996, the Company filed a
shelf registration statement with the Securities and Exchange Commission under
which $400 million of debt securities, preferred shares or common shares may be
issued. As of December 31, 1996, the Company had $341.3 million available under
its shelf registration statement. In addition as of December 31, 1996 the
Company had $64.5 million available under its $160 million of unsecured
revolving credit facilities. On December 31, 1996, the Company also had 90
operating properties with $97.7 million or 70.3% of the total revenue for the
year ended December 31, 1996 which were unencumbered thereby providing a
potential collateral base for future borrowings.
On January 14, 1997, the Company completed the sale of 3.4 million common shares
at an offering price of $36-5/8 which resulted in net proceeds of approximately
$116 million which were used to repay the $95.5 million of outstanding revolving
credit borrowings and for general corporate purposes. On January 14, 1997, the
Company's capitalization consisted of $382.8 million of debt (excluding the
Company's proportionate share of joint venture mortgage debt aggregating $180.1
million), $149.8 of preferred stock and $916.9 million of market equity (based
on the offering price of $36-5/8) resulting in a debt to total market
capitalization ratio of .26 to 1.0. As of January 14, 1997, the Company had
$218.6 million available under its shelf registration statement.
- --------------------------------------------------------------------------------
INFLATION
- --------------------------------------------------------------------------------
Substantially all of the Company's long-term leases contain provisions designed
to mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rentals based on tenants' gross
sales, which generally increase as prices rise, and/or escalation clauses, which
generally increase rental rates during the terms of the leases. Such escalation
clauses are often related to increases in the consumer price index or similar
inflation indices. In addition, many of the Company's leases are for terms of
less than ten years, which permits the Company to seek to increase rents upon
re-rental at market rates. Most of the Company's leases require the tenants to
pay their share of operating expenses, including common area maintenance,
28
29
real estate taxes, insurance and utilities, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
At December 31, 1996, approximately 79.4% of the Company's debt (excluding joint
venture debt) bore interest at fixed rates with a weighted average maturity of
approximately 4.8 years and a weighted average interest rate of approximately
7.8%. The remainder of the Company's debt bears interest at variable rates, with
a weighted average maturity of approximately 2.6 years and a weighted average
interest rate of approximately 6.9%. As of December 31, 1996, the Company's
Community Center Joint Ventures had variable rate debt aggregating approximately
$319.5 million in the form of bridge loans which are expected to be converted to
long-term fixed rate debt through securitizations during the second quarter of
1997. The Company's OSTRS Joint Venture had variable rate debt aggregating $24.8
million. The Company intends to utilize variable rate indebtedness available
under its revolving credit facilities in order to initially fund future
acquisitions of shopping centers. Thus, to the extent that the Company incurs
additional variable rate indebtedness, its exposure to increases in interest
rates in an inflationary period would increase. The Company believes, however,
that in no event would increases in interest expense as a result of inflation
significantly impact the Company's distributable cash flow.
The Community Center Joint Ventures have entered into swap agreements with major
financial institutions as a hedge against increasing interest rates associated
with the joint ventures' proposed upcoming securitization. The Company intends
to continuously monitor and actively manage interest costs on its variable rate
debt portfolio and may enter into swap positions based on market fluctuations.
In addition, the Company believes that it has the ability to obtain funds
through additional equity and/or debt offerings, including the issuance of
medium term notes. Accordingly, the cost of obtaining such protection agreements
in relation to the Company's access to capital markets will continue to be
evaluated.
- --------------------------------------------------------------------------------
ECONOMIC CONDITIONS
- --------------------------------------------------------------------------------
Many regions of the United States, including regions in which the Company owns
property, have experienced varying degrees of economic recession. A continuation
of the economic recession, or further adverse changes in general or local
economic conditions, could result in the inability of some existing tenants of
the Company to meet their lease obligations and could otherwise adversely affect
the Company's ability to attract or retain tenants. The shopping centers are
typically anchored by discount department stores (usually Wal-Mart, Kmart or
JCPenney), supermarkets and drug stores which usually offer day-to-day
necessities, rather than high-priced luxury items. Since these merchants
typically perform better in an economic recession than those who market high
priced luxury items, the percentage rents received by the Company have remained
relatively stable. In addition, the Company seeks to reduce its operating and
leasing risks through ownership of a portfolio of properties with a diverse
geographic and tenant base.
During 1996 and 1995, certain national and regional retailers have experienced
financial difficulties and several have filed for protection under bankruptcy
laws. Although the Company has experienced an increase in the number of tenants
filing for protection under bankruptcy laws, no significant bankruptcies have
occurred through February 21, 1997 with regard to the Company's portfolio of
tenants.
29
30
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is included in a separate section at the end
of this report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-30-
31
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Board of Directors of the Company consists of seven members. As
required by the Company's amended and restated Articles of Incorporation, four
of the Company's directors are "Independent', as defined therein. All directors
of the Company serve terms of one year or until the election of their respective
successors. Officers of the Company serve at the pleasure of the Board.
The Board of Directors has control of the management of the Company and
its property and the disposition thereof and is responsible for the general
policies of the Company and the general supervision of the Company's activities
conducted by its officers, agents, employees, advisors, managers or independent
contractors as may be necessary in the course of the Company's business.
The following table sets forth certain information with respect to the
directors, nominees for director and executive officers of the Company as of
March 14, 1997:
Name Age Position and Office with the Company
---- --- ------------------------------------
Scott A. Wolstein 44 Chairman of the Board of Directors and Chief
Executive Officer and a Director
James A. Schoff 51 Executive Vice President, Chief Operating Officer
and a Director
John R. McGill 42 Vice President and Director of Development
Joan U. Allgood 44 Vice President and General Counsel
Loren F. Henry 49 Vice President and Director of Management
William H. Schafer 39 Vice President and Chief Financial Officer
Walter H. Teninga 69 Director
William N. Hulett III 53 Director
Alan Bobman 36 Regional Vice President of Leasing
Steven M. Dorsky 39 Regional Vice President of Leasing
Robin R. Walker 40 Regional Vice President of Leasing
Ethan Penner 35 Director
Albert T. Adams 46 Director
Dean S. Adler 40 Nominee for Director
Messrs. Wolstein and Schoff have served as directors of the Company
since November of 1992, and Messrs. Teninga, and Hulett have served as directors
of the Company since the IPO in February 1993. Messrs. Penner and Adams have
served as directors of the Company since 1996. Mr. Adler is a nominee for
election as a director at the Company's 1997 annual meeting of shareholders
currently scheduled to be held on May 12, 1997.
-31-
32
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 Board of Trustees of the National
Association of Real Estate Investment Trusts and 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.
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 65 of their properties,
including land acquisition, major tenant leases, 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 since 1984. 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.
-32-
33
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.
Walter H. Teninga was the President and Chief Executive Officer of
American Club Stores, Inc., from January 1992 to September 1993. Mr. Teninga
founded the Warehouse Club, a wholesale cash-and-carry membership warehouse
business, the stock of which became publicly-traded during Mr. Teninga's 10-year
tenure as Chairman and Chief Executive Officer. Prior to forming the Warehouse
Club, Mr. Teninga served as Vice Chairman and Chief Financial and Development
Officer of Kmart Corporation, where he was employed from 1956 to 1979. He is a
past president and former director of the Boys and Girls Clubs of Southeastern
Michigan.
William N. Hulett III is the Co-Chairman and Chief Executive Officer of
the Rock & Roll Hall of Fame & Museum in Cleveland. From 1981 to 1993, Mr.
Hulett was the President of Stouffer Hotel Company, the owner of a national
hotel chain. Prior to that time, Mr. Hulett served as Vice President of
Operations for Westin Hotels, based in Seattle, Washington. In December 1991, he
completed a third consecutive term as chairman of the Convention and Visitors
Bureau of Greater Cleveland. He is a member of the Board of Trustees of the New
Cleveland Campaign, a director of the Greater Cleveland Growth Association, a
director of the Boykin Lodging Company and a member of the 1992 U.S. Savings
Bonds Volunteer Committee appointed by the Secretary of the U.S. Treasury. Mr.
Hulett was named Business Executive of the year for 1995 by the Sales and
Marketing Executives Association.
Ethan Penner has been the President of Nomura Asset Capital Corporation
(Nomura's real estate finance arm), as well as a member of Nomura's Operating
Committee since 1994. Mr. Penner has also been the Executive Managing Director
of Nomura Securities International, Inc. since 1994. From 1992 to 1994, Mr.
Penner was President of Magellan Financial Services, an investment banking firm
which he founded in 1992. Prior to founding Magellan Financial Services, Mr.
Penner was a Principal at Morgan Stanley & Co., Inc. from 1987 to 1992. Mr.
Penner serves as a member of the Executive Committee and Board of Directors of
the National Realty Committee, a director of Nomura Asset Securities Corp., a
director of Asset Securitization Corp. a member of the Urban Land Institute, a
member of the Board of Trustees of the Simon Wiesenthal Center, and is a member
of the Advisory Board for the Elton John Aids Foundation.
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34
Albert T. Adams has been a partner with the law firm of Baker &
Hostetler LLP in Cleveland, Ohio, since 1984, and has been affiliated with the
firm since 1977. Mr. Adams is a graduate of Harvard College, Harvard Business
School and Harvard Law School. He serves as a member of the Board of Trustees of
the Western Reserve Historical Society and is a Vice President of the Harvard
Business School Club of Northeastern Ohio. Mr. Adams also serves as a director
of Associated Estates Realty Corporation and the Boykin Lodging Company.
Dean S. Adler is currently a partner with Lubert-Adler Partners, L.P.
From 1987 through 1996 Mr. Adler was a principal and co-head of the private
equity group of CMS Companies, specializing in acquiring operating businesses
and real estate within the private equity market. He serves as a member of the
Board of Directors of The Lane Company and Trans World Entertainment
Corporation. Mr. Adler has served on such community boards as the UJA National
Young Leadership Cabinet and he is currently a member of the Alexis de
Tocqueville Society.
To the Company's knowledge, based solely on review of the copies of
reports required by Section 16(a) of the Securities Exchange Act of 1934
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 1996, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners were complied with, except that the following reports
were filed after the respective dates on which the reports were due to be filed:
(i) a report of change in ownership relating to the award of stock options to
Messrs. Adams, Henry, Hulett, McGill, Penner, Schafer, Schoff, Teninga, B.
Wolstein, S. Wolstein and Ms. Allgood, (ii) a report of change in ownership
relating to the acquisition of Common Shares by Mr. S. Wolstein and (iii) a
report of change in ownership relating to the exercise of stock options by Mr.
S. Dorsky and (iv) a report of change in ownership relating to the transfer of
Common Shares by Mr. B. Wolstein and (v) initial reports of beneficial ownership
following the election to the Board of Directors by Messrs. Adams and Penner.
Item 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the "Executive Compensation"
section of the Company's definitive proxy statement filed with respect to its
annual meeting of shareholders to be held on May 12, 1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the "Security Ownership of Certain
Beneficial Owners and Management" section of the Company's definitive proxy
statement filed with respect to its annual meeting of shareholders to be held on
May 12, 1997.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the "Certain Transactions" section
of the Company's definitive proxy statement filed with respect to its annual
meeting of shareholders to be held on May 12, 1997.
-34-
35
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENTS SCHEDULES AND
REPORTS ON FORM 8-K
a) Financial Statements
The following documents are filed as part of this report:
Report of Independent Accountants - Developers Diversified Realty
Corporation
Consolidated Balance Sheets as of December 31, 1996 and 1995.
Consolidated Statements of Operations for the three years ended
December 31, 1996, 1995 and 1994.
Consolidated Statements of Shareholders Equity for the years
ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Financial Statements
b) Reports on Form 8-K were filed on May 31, 1996 and July 2, 1996 in
which information regarding Items 2, 5 and 7 of Form 8-K was reported.
c) Exhibits
The following exhibits are filed as part of, or incorporated by
reference into, this Report:
-35-
36
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
2 2.1 Agreement of Current Report on
Purchase and Sale, Form 8-K (Filed with
dated July 2, 1996, the SEC on January 14,
between the Company 1997)
and Opus Corporation
for Maple Grove
Crossing Shopping
Center
2 2.2 Agreement of Current Report on
Purchase and Sale, Form 8-K (Filed with
dated July 2, 1996, the SEC on January 14,
between the Company 1997)
and Opus North
Corporation for
Highland Grove
Shopping Center
2 2.3 Agreement of Current Report on
Purchase and Sale, Form 8-K (Filed with
dated July 2, 1996, the SEC on January 14,
between the Company 1997)
and Opus South
Corporation for
Eastchase Market
Shopping Center
2 2.4 Agreement of Current Report on
Purchase and Sale, Form 8-K (Filed with
dated July 2, 1996, the SEC on January 14,
between the Company 1997)
and Opus Northwest,
L.L.C. for
Tanasbourne Town
Center Phase I
Shopping Center
-36-
37
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
2 2.5 Agreement of Current Report on
Purchase and Sale, Form 8-K (Filed with
dated July 2, 1996, the SEC on January 14,
between the Company 1997)
and Opus Southwest
Corporation for
Arrowhead Crossing
Shopping Center
3 3.1 Amended and Restated Form S-11 Registration
Articles of No. 33-54930 (Filed
Incorporation of the with SEC on November
Company 23, 1992; see Exhibit
3.1 therein)
3 3.2 Amendments to Annual Report on Form
Amended and Restated 10-K (Filed with the
Articles of SEC on March 30,
Incorporation of the 1996)
Company
3 3.3 Amendment to Current Report on
Amended and Restated Form 8-K (Filed with
Articles of the SEC on January 14,
Incorporation 1997)
3 3.4 Code of Regulations of Form S-11 Registration
the Company No. 33-54930 (Filed
with the SEC on
November 23, 1992;
see Exhibit 3.2 therein)
3 3.5 Amendment to Code Annual Report on Form
of Regulations of the 10-K (Filed with the
Company SEC on March 30,
1996)
3 3.6 Amendment to Code Current Report on
of Regulations of the Form 8-K (Filed with
Company the SEC on January 14,
1997)
-37-
38
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
4 4.1 Specimen Certificate Form S-11 Registration
for Common Shares No. 33-54930 (Filed
with the SEC on
November 23, 1992;
see Exhibit 4.1 therein)
4 4.2 Specimen Certificate Annual Report on Form
for Depositary Shares 10-K (Filed with the
Relating to 9.5% Class SEC on March 30,
A Cumulative 1996)
Redeemable Preferred
Shares
4 4.3 Specimen Certificate Annual Report on Form
for 9.5% Class A 10-K (Filed with the
Cumulative SEC on March 30,
Redeemable Preferred 1996)
Shares
4 4.4 Specimen Certificate Annual Report on Form
for Depositary Shares 10-K (Filed with the
Relating to 9.44% SEC on March 30,
Class B Cumulative 1996)
Redeemable Preferred
Shares
4 4.5 Specimen Certificate Annual Report on Form
for 9.44% Class B 10-K (Filed with the
Cumulative SEC on March 30,
Redeemable Preferred 1996)
Shares
4 4.6 Credit Agreement Form 10-QA (Filed
dated as of May 1, with the SEC on May
1995 among the 16, 1995; See Exhibit
Company, the First 4.2 therein)
National Bank of
Chicago and the First
National Bank of
Boston.
-38-
39
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
4 4.7 Form of Form S-11 Registration
Indemnification No. 33-54930 (Filed
Agreement with the SEC on
November 23, 1992;
see Exhibit 4.2 therein)
4 4.8 Indenture dated as of Current Report on
May 1, 1994 by and Form 8-K (Filed with
between the Company the SEC on May 27,
and Chemical Bank, as 1994)
Trustee
4 4.9 Indenture dated as of Current Report on
May 1, 1994 by and Form 8-K (Filed with
between the Company the SEC on December
and National City 5, 1994)
Bank, as Trustee (the
"NCB Indenture")
4 4.10 First Supplement to Annual Report on Form
NCB Indenture 10-K (Filed with the
SEC on March 30,
1996)
4 4.11 Specimen 7% Annual Report on Form
Convertible 10-K (Filed with the
Subordinated SEC on April 1, 1995)
Debentures due 1999
4 4.12 Specimen Senior Note Annual Report on Form
due 2000 10-K (Filed with the
SEC on March 30,
1996)
4 4.13 Building and Loan Annual Report on Form
Agreement dated as of 10-K (Filed with the
November 17, 1995 SEC on March 30,
among Community 1996)
Center Two L.L.C.
and certain other
parties named therein
-39-
40
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
4 4.14 Loan Agreement dated Annual Report on Form
as of November 17, 10-K (Filed with the
1995 among SEC on March 30,
Community Center 1996)
One L.L.C. and
certain other parties
named therein
4 4.15 Amendment dated Current Report on
June 18, 1996, to the Form 8-K (Filed with
Credit Agreement, the SEC on January 14,
dated as of May 1, 1997)
1995, among the
Company, the First
National Bank of
Chicago and the First
National Bank of
Boston
4 4.16 Revolving Credit Exhibit 4.16 filed herewith
Facility, dated as of
November 13, 1996,
among the Company
and National City
Bank
10 10.1 Registration Rights Form S-11 Registration
Agreement No. 33-54930 (Filed
with the SEC on
November 23, 1992;
see Exhibit 10.1
therein)
10 10.2 Stock Option Plan Form S-8 Registration
No. 33-74562 (Filed
with the SEC on
January 28, 1994; see
Exhibit 4(a) therein)
-40-
41
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
10 10.3 Employment Form S-11 Registration
Agreement between No. 33-54930 (Filed
the Company and Scott with the SEC on
A. Wolstein November 23, 1992;
see Exhibit 10.3
therein)
10 10.4 Employment Form S-11 Registration
Agreement between No. 33-54930 (Filed
the Company and with the SEC on
James A. Schoff November 23, 1992;
see Exhibit 10.4
therein)
10 10.5 Limited Partnership Annual Report on Form
Agreement dated as of 10-K (Filed with the
November 16, 1995 SEC on March 30,
among DD 1996)
Community Centers
Three, Inc. and certain
other parties named
therein
10 10.6 Amended and Restated Annual Report on Form
Limited Liability 10-K (Filed with the
Company Agreement SEC on March 30,
dated as of November 1996)
17, 1995 among DD
Community Centers
One, Inc. and certain
other parties named
therein
10 10.7 Amended and Restated Annual Report on Form
Limited Liability 10-K (Filed with the
Company Agreement SEC on March 30,
dated as of November 1996)
17, 1995 among DD
Community Centers
Two, Inc. and certain
other parties named
therein
-41-
42
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
10 10.8 Limited Liability Annual Report on Form
Company Agreement 10-K (Filed with the
dated as of November SEC on March 30,
17, 1995 among the 1996)
Company and certain
other parties named
therein
10 10.9 Purchase and Sale Annual Report on Form
Agreement dated as of 10-K (Filed with the
October 16, 1995 SEC on March 30,
among the Company 1996)
and certain other
parties named therein
10 10.10 Directors' Deferred Annual Report on Form
Compensation Plan 10-K (Filed with the
SEC on April 1, 1995)
10 10.11 Elective Deferred Annual Report on Form
Compensation Plan 10-K (Filed with the
SEC on April 1, 1995)
10 10.12 Developers Diversified Current Report on
Realty Corporation Form 8-K (Filed with
Equity-Based Award the SEC on January 14,
Plan 1997)
12 12.1 Computation of Ratio Form S-3 Registration
of Earnings to Fixed No. 33-94182 (Filed
Charges with the SEC on June
30, 1995; see Exhibit
12 therein)
-42-
43
Exhibit No. Filed Herewith or
Under Reg. S-K Form 10-K Incorporated Herein
Item 601 Exhibit No. Description by Reference
-------------- ----------- ----------- --------------------
21 21.1 List of subsidiaries Exhibit 21.1 filed herewith
23 23.1 Consent of Price Exhibit 23.1 filed herewith
Waterhouse
-43-
44
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
By: /s/ Scott A. Wolstein
-------------------------------------------------
Scott A. Wolstein, Chairman, President and Chief Executive Officer
Date: March 28, 1997
---------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated on the 28th day of March, 1996.
/s/ Scott A. Wolstein Chairman, President, Chief Executive Officer and Director
- --------------------------------- (principal executive officer)
Scott A. Wolstein
/s/ James A. Schoff Executive Vice President, Chief Operating
- --------------------------------- Officer and Director
James A. Schoff
/s/ William H. Schafer Vice President and Chief Financial Officer
- --------------------------------- (principal financial and accounting officer)
William H. Schafer
/s/ William N. Hulett III Director
- ---------------------------------
William N. Hulett III
/s/ Walter H. Teninga Director
- ---------------------------------
Walter H. Teninga
/s/ Albert T. Adams Director
- ---------------------------------
Albert T. Adams
/s/ Ethan Penner Director
- ---------------------------------
Ethan Penner
-44-
45
INDEX TO FINANCIAL STATEMENTS
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Page
----
Financial Statements:
Report of Independent Accountants ............................................. F-2
Balance Sheets at December 31, 1996 and 1995 .................................. F-3
Statements of Operations for the three years ended
December 31, 1996 .......................................................... F-4
Statement of Changes in Shareholders' Equity for the three
years ended December 31, 1996 ............................................... F-5
Statements of Cash Flows for the three years ended
December 31, 1996 .......................................................... F-6
Notes to Financial Statements ................................................. F-7
Financial Statement Schedules:
II - Valuation and Qualifying Accounts for the three
years ended December 31, 1996 .................................... F-23
III - Real Estate and Accumulated Depreciation at
December 31, 1996 ................................................ F-24
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
F-1
46
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Developers Diversified Realty Corporation
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Developers Diversified Realty Corporation ("Company") and its subsidiaries at
Decembers 31, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Cleveland, Ohio
February 21, 1997
F-2
47
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 1995
- -------------------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------------------
Real estate rental property:
Land $ 122,696,277 $ 109,325,006
Land under development 27,304,847 18,440,812
Buildings 798,476,568 688,122,876
Fixtures and tenant improvements 14,805,101 13,677,643
Construction in progress 28,364,167 18,806,999
- --------------------------------------------------------------------------------------------------------------
991,646,960 848,373,336
Less accumulated depreciation (142,039,284) (120,040,503)
- --------------------------------------------------------------------------------------------------------------
Real estate, net 849,607,676 728,332,833
Cash and cash equivalents 12,600 12,100
Accounts receivable, net 11,438,806 6,961,058
Advances to and investments in joint ventures 106,795,688 83,190,388
Deferred charges, net 4,296,042 4,950,470
Other assets 2,975,128 6,612,680
- --------------------------------------------------------------------------------------------------------------
$ 975,125,940 $ 830,059,529
LIABILITIES AND SHAREHOLDERS' EQUITY ============= =============
- --------------------------------------------------------------------------------------------------------------
Unsecured indebtedness:
Fixed rate senior notes $ 215,492,754 $ 103,731,362
Revolving credit facilities 95,500,000 65,000,000
Subordinated convertible debentures 60,000,000 60,000,000
- --------------------------------------------------------------------------------------------------------------
370,992,754 228,731,362
- --------------------------------------------------------------------------------------------------------------
Mortgage indebtedness:
Banks and other financial institutions 107,439,535 139,643,352
Revolving credit facilities -- 22,500,000
Construction loans -- 14,851,074
- --------------------------------------------------------------------------------------------------------------
107,439,535 176,994,426
- --------------------------------------------------------------------------------------------------------------
Total indebtedness 478,432,289 405,725,788
Accounts payable and accrued expenses 20,920,765 17,530,130
Other liabilities 6,436,667 2,642,148
- --------------------------------------------------------------------------------------------------------------
505,789,721 425,898,066
- --------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Class A 9.5% cumulative redeemable preferred
shares, without par value, $250 liquidation value;
1,500,000 shares authorized; 421,500 shares
issued and outstanding at December 31, 1996 and 1995 105,375,000 105,375,000
Class B 9.44% cumulative redeemable preferred shares,
without par value, $250 liquidation value; 1,500,000
shares authorized; 177,500 and 160,000 shares issued
and outstanding at December 31, 1996 and 1995, respectively 44,375,000 40,000,000
Common shares, without par value, $.10 stated value; 50,000,000
shares authorized; 21,682,917 and 18,968,943 shares issued and
outstanding at December 31, 1996 and 1995, respectively 2,168,292 1,896,894
Paid-in-capital 369,417,186 291,843,152
Accumulated dividends in excess of net income (51,384,259) (34,953,583)
- --------------------------------------------------------------------------------------------------------------
469,951,219 404,161,463
Less: Unearned compensation - restricted stock (615,000) --
- --------------------------------------------------------------------------------------------------------------
469,336,219 404,161,463
------------- -------------
$ 975,125,940 $ 830,059,529
============= =============
The accompanying notes are an integral part of these financial statements.
F-3
48
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
Revenues from operations:
Minimum rents $ 95,835,619 $ 82,721,794 $ 62,745,077
Percentage and overage rents 1,862,144 1,662,698 1,593,872
Recoveries from tenants 24,577,941 19,255,301 14,941,032
Management fee income 2,631,745 555,881 478,701
Other 5,998,349 3,609,588 2,214,955
- --------------------------------------------------------------------------------------------------------------
130,905,798 107,805,262 81,973,637
- --------------------------------------------------------------------------------------------------------------
Rental operation expenses:
Operating and maintenance 12,098,219 9,097,557 7,548,947
Real estate taxes 14,589,394 12,592,989 9,647,631
General and administrative 8,435,616 6,378,482 5,604,985
Interest 29,888,287 29,595,157 21,423,027
Depreciation and amortization 25,061,772 21,865,122 16,210,728
- --------------------------------------------------------------------------------------------------------------
90,073,288 79,529,307 60,435,318
- --------------------------------------------------------------------------------------------------------------
Income before equity in net income (loss)
of joint ventures, gain on sales of land and
extraordinary item 40,832,510 28,275,955 21,538,319
Equity in net income (loss) of joint ventures 8,709,725 486,098 (186,017)
Gain on sales of land -- 299,666 --
- --------------------------------------------------------------------------------------------------------------
Income before extraordinary item 49,542,235 29,061,719 21,352,302
- --------------------------------------------------------------------------------------------------------------
Extraordinary item - extinguishment of debt -
deferred finance costs written off -- (3,556,875) (216,244)
- --------------------------------------------------------------------------------------------------------------
Net income $ 49,542,235 $ 25,504,844 $ 21,136,058
==============================================================================================================
Net income applicable to common shareholders $ 35,342,610 $ 24,249,405 $ 21,136,058
=====================================================
Per share data:
Earnings per common share - primary
Income before extraordinary item $ 1.67 $ 1.48 $ 1.35
Extraordinary item -- (0.19) (0.01)
- --------------------------------------------------------------------------------------------------------------
Net income $ 1.67 $ 1.29 $ 1.34
==============================================================================================================
Earnings per common share - fully diluted
Income before extraordinary item $ 1.66 $ 1.47 $ 1.34
Extraordinary item -- (0.19) (0.01)
- --------------------------------------------------------------------------------------------------------------
Net income $ 1.66 $ 1.28 $ 1.33
==============================================================================================================
The accompanying notes are an integral part of these financial statements.
F-4
49
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON CLASS A CLASS B ACCUMULATED
SHARES PREFERRED PREFERRED DIVIDENDS IN
($.10 STATED SHARES ($250 SHARES ($250 PAID-IN EXCESS OF
VALUE STATED VALUE STATED VALUE) CAPITAL NET INCOME
- ------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 $1,556,806 $ -- $ -- $ 205,020,925 $ (9,460,113)
Issuance of 9,233 common shares
for cash - exercise of stock options 922 -- -- 201,984 --
Issuance of 808 common shares
related to employee 401(k) plan 81 -- -- 22,935 --
Issuance of 500,000 common shares
for cash - underwritten offering 50,000 -- -- 15,362,500 --
Net income -- -- -- -- 21,136,058
Dividends declared -- -- -- -- (30,383,729)
- ------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 1,607,809 -- -- 220,608,344 (18,707,784)
Issuance of 11,398 common shares for
cash - exercise of stock options 1,140 -- -- 249,617 --
Issuance of 1,744 common shares
related to employee 401(k) plan 174 -- -- 49,799 --
Issuance of 2,708 common shares
related to dividend reinvestment plan 271 -- -- 67,426 --
Issuance of 2,875,000 common shares
for cash - underwritten offering 287,500 -- -- 76,218,750 --
Issuance of 421,500 class A preferred shares
for cash - underwritten offering -- 105,375,000 -- (3,883,639) --
Issuance of 160,000 class B preferred shares
for cash - underwritten offering -- -- 40,000,000 (1,467,145) --
Net income -- -- -- -- 25,504,844
Dividends declared - common shares -- -- -- -- (40,959,043)
Dividends declared - preferred shares -- -- -- -- (791,600)
- ------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 1,896,894 105,375,000 40,000,000 291,843,152 (34,953,583)
Issuance of 71,378 common shares
for cash - exercise of stock options 7,138 -- -- 1,683,127 --
Issuance of 1,671 common shares
related to employee 401(k) plan 167 -- -- 52,151 --
Issuance of 4,425 common shares
related to dividend reinvestment plan 443 -- -- 137,299 --
Issuance of 25,000 common shares
related to restricted stock plan 2,500 -- -- 766,250 --
Issuance of 2,611,500 common shares
for cash - underwritten offering 261,150 -- -- 75,128,157 --
Issuance of 17,500 class B preferred
shares for cash - underwritten offering -- -- 4,375,000 (192,950) --
Net income -- -- -- -- 49,542,235
Dividends declared - common shares -- -- -- -- (51,889,724)
Dividends declared - preferred shares -- -- -- -- (14,083,187)
-------------------------------------------------------------------------
Balance, December 31, 1996 $2,168,292 $105,375,000 $ 44,375,000 $ 369,417,186 $(51,384,259)
=========================================================================
- ------------------------------------------------------------------------------------------------------------------------
RESTRICTED
STOCK TOTAL
- -----------------------------------------------------------------------------
Balance, December 31, 1993 $ -- $ 197,117,618
Issuance of 9,233 common shares
for cash - exercise of stock options -- 202,906
Issuance of 808 common shares
related to employee 401(k) plan -- 23,016
Issuance of 500,000 common shares
for cash - underwritten offering -- 15,412,500
Net income -- 21,136,058
Dividends declared -- (30,383,729)
- -----------------------------------------------------------------------------
Balance, December 31, 1994 -- 203,508,369
Issuance of 11,398 common shares for
cash - exercise of stock options -- 250,757
Issuance of 1,744 common shares
related to employee 401(k) plan -- 49,973
Issuance of 2,708 common shares
related to dividend reinvestment plan -- 67,697
Issuance of 2,875,000 common shares
for cash - underwritten offering -- 76,506,250
Issuance of 421,500 class A preferred shares
for cash - underwritten offering -- 101,491,361
Issuance of 160,000 class B preferred shares
for cash - underwritten offering -- 38,532,855
Net income -- 25,504,844
Dividends declared - common shares -- (40,959,043)
Dividends declared - preferred shares -- (791,600)
- -----------------------------------------------------------------------------
Balance, December 31, 1995 -- 404,161,463
Issuance of 71,378 common shares
for cash - exercise of stock options -- 1,690,265
Issuance of 1,671 common shares
related to employee 401(k) plan -- 52,318
Issuance of 4,425 common shares
related to dividend reinvestment plan -- 137,742
Issuance of 25,000 common shares
related to restricted stock plan (615,000) 153,750
Issuance of 2,611,500 common shares
for cash - underwritten offering -- 75,389,307
Issuance of 17,500 class B preferred
shares for cash - underwritten offering -- 4,182,050
Net income -- 49,542,235
Dividends declared - common shares -- (51,889,724)
Dividends declared - preferred shares -- (14,083,187)
------------------------------
Balance, December 31, 1996 $ (615,000) $ 469,336,219
==============================
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-5
50
CONSOLIDATED STATEMENTS OF CASH FLOWS
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities:
Net income $ 49,542,235 $ 25,504,844 $ 21,136,058
Adjustments to reconcile net income to net cash flow
provided by operating activities:
Depreciation and amortization 25,061,772 21,865,122 16,210,728
Amortization of deferred finance costs 1,685,657 1,749,155 1,202,928
Write-off of deferred finance costs -- 3,512,773 202,556
Equity in net (income) loss of joint ventures (8,709,725) (486,098) 186,017
Cash distributions from joint ventures 8,645,772 -- --
Gain on sales of land -- (299,666) --
Net change in accounts receivable (4,477,748) (2,835,037) (1,373,815)
Net change in accounts payable and accrued expenses 1,060,896 2,698,798 1,833,269
Net change in other operating assets and liabilities 3,011,331 (2,670,639) (285,852)
- ----------------------------------------------------------------------------------------------------------------------------------
Total adjustments 26,277,955 23,534,408 17,975,831
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash flow provided by operating activities 75,820,190 49,039,252 39,111,889
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flow from investing activities:
Real estate developed or acquired (185,667,846) (149,095,594) (190,221,498)
Equity contributions to joint ventures (14,869,948) (74,277,446) --
Repayments from (advances to) joint ventures, net (854,912) 283,248 181,563
Issuance of note receivable -- -- (1,770,000)
Proceeds from sale of land 1,721,843 5,891,541 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash flow used for investing activities (199,670,863) (217,198,251) (191,809,935)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
Proceeds from (repayment of) revolving credit facilities, net 26,600,000 (2,138,586) 62,387,160
Repayment of Floating Rate Senior Notes -- (100,000,000) --
Repayment of construction loans -- (14,682,049) --
Principal payments on rental property debt (32,203,817) (9,291,192) (59,214,615)
Proceeds from construction loans 2,923,926 17,938,197 11,594,926
Proceeds from issuance of Medium Term Notes, net of underwriting commissions
and offering expenses paid of $800,000 and $30,000
in 1996 and 1995, respectively 110,898,543 3,967,750 --
Proceeds from issuance of Fixed Rate Senior Notes, net of underwriting
commissions and discounts and $400,000 of offering expenses paid -- 98,543,000 --
Proceeds from issuance of Floating Rate Senior Notes, net of
underwriting commissions and $150,000 of offering expenses paid -- -- 99,600,000
Proceeds from issuance of Debentures, net of underwriting
commissions and $500,000 of offering expenses paid -- -- 57,700,000
Payment of deferred finance costs (bank borrowings) -- (2,233,311) (722,038)
Proceeds from issuance of common shares, net of underwriting
commissions and $300,000, $400,000 and $100,000 of offering
expenses paid in 1996, 1995 and 1994, respectively 75,389,307 76,506,250 15,412,500
Proceeds from issuance of Class A preferred shares, net of
underwriting commissions and $500,000 of offering expenses paid -- 101,491,361 --
Proceeds from issuance of Class B preferred shares, net of underwriting
commissions and $200,000 of offering expenses paid in 1996 and 1995 4,182,050 38,532,855 --
Proceeds from issuance of common shares in conjunction with exercise of stock
options, 401(k) plan, dividend investment plan and restricted stock plan 2,034,075 368,427 225,922
Dividends paid (65,972,911) (41,750,643) (36,610,954)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 123,851,173 167,252,059 150,372,901
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 500 (906,940) (2,325,145)
Cash and cash equivalents, beginning of year 12,100 919,040 3,244,185
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 12,600 $ 12,100 $ 919,040
==================================================================================================================================
The accompanying notes are an integral part of these financial statements.
F-6
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
NATURE OF BUSINESS
Developers Diversified Realty Corporation and related real estate joint ventures
(the "Company" or "DDR") are engaged in the business of acquiring, expanding,
owning, developing, managing and operating neighborhood and community shopping
centers, enclosed malls and business centers. The Company's centers, located in
28 states, are typically anchored by discount department stores (usually
Wal-Mart, Kmart or JCPenney), supermarkets and drug stores which usually offer
day-to-day necessities. The tenant base includes primarily national and regional
retail chains and local retailers; consequently, the Company's credit risk is
concentrated in the retail industry.
Revenues derived from the Company's two largest tenants, Wal-Mart and Kmart,
aggregated 15.6%, 19.7% and 19.3% of total revenues, including joint venture
revenues, for the years ended December 31, 1996, 1995 and 1994, respectively as
follows:
YEAR WAL-MART KMART
- --------------------------------------------------------------------------------
1996 9.3% 6.3%
1995 12.3% 7.4%
1994 10.1% 9.2%
The total percentage of Company owned gross leasable area attributed to Wal-Mart
and Kmart was 13.3% and 11.0%, respectively, at December 31, 1996. The Company's
ten largest tenants comprised 32.2%, 34.0% and 33.3% of total revenues for the
years ended December 31, 1996, 1995 and 1994, respectively. Management believes
the Company's portfolio is diversified in terms of location of its shopping
centers and its tenant profile. Adverse changes in general or local economic
conditions could result in the inability of some existing tenants to meet their
lease obligations and could otherwise adversely affect the Company's ability to
attract or retain tenants. During 1996 and 1995, certain national and regional
retailers experienced financial difficulties and several filed for protection
under bankruptcy laws. Although the Company has experienced an increase in the
number of tenants filing for protection under bankruptcy laws, no significant
bankruptcies have occurred affecting the Company's portfolio of tenants.
PRINCIPLES OF CONSOLIDATION
All subsidiaries are included in the consolidated financial statements and all
significant intercompany balances and transactions have been eliminated in
consolidation. At December 31, 1996, the Company owned a 50% interest in 13
shopping centers through various joint ventures and limited liability
corporations (11 in 1995 and one in 1994). These investments are presented
using the equity method of accounting and are discussed in Note 2.
STATEMENT OF CASH FLOWS AND SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND
FINANCING INFORMATION
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
The following transactions did not provide or use cash and, accordingly, they
are not reflected in the statements of cash flows.
During the year ended December 31, 1996, the Company assumed other liabilities
of approximately $1.1 million in conjunction with the acquisitions of certain
shopping centers. At December 31, 1996, accounts payable aggregating
approximately $5.3 million was related to construction in progress. In addition,
in conjunction with the formation of two joint ventures, the Company transferred
land and buildings with a net book value of $41.6 million and related mortgage
debt of $36.4 million into joint ventures accounted for under the equity method.
During the year ended December 31, 1995, the Company assumed mortgages payable
aggregating $15.7 million, and other liabilities aggregating approximately $0.8
million in conjunction with the acquisition of certain shopping centers. At
December 31, 1995 accounts payable aggregating approximately $2.8 million was
related to construction in progress. During 1995 the Company exchanged a note
receivable and related accrued interest aggregating $1.9 million for partial
consideration for the acquisition of a certain property in Birmingham, Alabama.
F-7
52
For the year ended December 31, 1994, the Company assumed mortgages payable
aggregating $35.1 million, and other liabilities aggregating approximately $1.8
million in conjunction with the acquisition of certain shopping centers. At
December 31, 1994 accounts payable aggregating approximately $0.3 million was
related to construction in progress.
REAL ESTATE
Real estate assets are stated at cost less accumulated depreciation,
which, in the opinion of management, is not in excess of the individual
property's estimated undiscounted future cash flows, including estimated
proceeds from disposition.
Depreciation and amortization are provided on a straight-line basis over the
estimated useful lives of the assets as follows:
- --------------------------------------------------------------------------------
Buildings 18 to 31 years
- --------------------------------------------------------------------------------
Furniture/Fixtures and Useful lives, which approximate
Tenant Improvements lease terms, where applicable
- --------------------------------------------------------------------------------
Depreciation expense was $25.1 million, $21.9 million and $16.2 million for the
years ended December 31, 1996, 1995 and 1994, respectively. Expenditures for
maintenance and repairs are charged to operations as incurred. Renovations which
improve or extend the life of the asset are capitalized.
Included in land is undeveloped real estate, generally outlots or expansion pads
adjacent to the shopping centers and enclosed malls owned by the Company. Land
under development at December 31, 1996 included approximately 208 acres at 11
sites.
Construction in progress includes shopping center developments and significant
expansions and re-developments. The Company capitalizes interest on funds used
for the construction or expansion of shopping centers. Capitalization of
interest ceases when construction activities are completed and the property is
available for occupancy by tenants. For the years ended December 31, 1996, 1995
and 1994, the Company capitalized interest of $3.3 million, $2.5 million and
$1.1 million, respectively. In addition, the Company capitalized certain
construction administration costs of $1.1 million, $0.6 million, and $0.2
million in 1996, 1995 and 1994, respectively.
DEFERRED FINANCING COSTS
Costs incurred in obtaining long-term financing are included in deferred charges
in the accompanying balance sheets and are amortized over the terms of the
related debt agreements; such amortization is reflected as interest expense in
the consolidated statements of operations.
REVENUE RECOGNITION
Minimum rents from tenants are recognized monthly using the straight-line
method. Percentage and overage rents are recognized after the tenants reported
sales have exceeded the applicable sales breakpoint. Revenues associated with
tenant reimbursements are recognized in the period in which the expenses are
incurred based upon the provision of tenant leases. Lease termination fees are
included in other income and recognized upon termination of a tenant's lease,
which generally coincides with the receipt of cash.
ACCOUNTS RECEIVABLE
Accounts receivable, other than straight line rents receivable, are expected to
be collected within one year and are net of estimated unrecoverable amounts of
approximately $1.8 million and $1.0 million at December 31, 1996 and 1995,
respectively. At December 31, 1996 and 1995, net straight line rent receivables
aggregated $0.8 million and $0.1 million, respectively.
GAIN ON SALES OF REAL ESTATE
Gain on sales of real estate generally relates to the sale of outlots and land
adjacent to existing shopping centers and is recognized at closing when the
earnings process is deemed to be complete.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses include internal leasing salaries, legal
salaries and related expenses associated with the leasing of space, which are
charged to operations as incurred.
INTEREST AND REAL ESTATE TAXES
Interest and real estate taxes incurred during the construction period are
capitalized and depreciated over the building life. Interest paid during the
years ended December 31, 1996, 1995 and 1994 aggregated $31.2 million, $29.6
million and $18.5 million, respectively, and is reflected net of capitalized
interest.
F-8
53
FEDERAL INCOME TAXES
The Company has elected to be taxed as a qualified Real Estate Investment Trust
("REIT") under the Internal Revenue Code of 1986, as amended. As a REIT, the
Company is entitled to a tax deduction for the amount of dividends paid its
shareholders, thereby effectively subjecting the distributed net income of the
Company to taxation at the shareholder level only, provided it distributes at
least 95% of its taxable income and meets certain other REIT qualification
requirements. As the Company distributed sufficient taxable income for the years
ended December 31, 1996, 1995 and 1994, no U.S. Federal income or excise taxes
were incurred.
The tax basis of assets and liabilities exceeds the amounts reported in the
accompanying financial statements by approximately $108 million, $104 million
and $101 million at December 31, 1996, 1995 and 1994, respectively.
Use of Estimates in Preparation of
Financial Statements.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the year. Actual results could differ from those
estimates.
- --------------------------------------------------------------------------------
2. EQUITY INVESTMENTS IN JOINT VENTURES
- --------------------------------------------------------------------------------
The Company's equity investments in joint ventures at December 31, 1996, as
described below, was comprised of: (i) a 50% joint venture interest in four
Community Center Joint Ventures, formed in November 1995 in conjunction with the
acquisition of the Homart Community Center Division of Sears, Roebuck and Co.
("Sears"), (ii) a 50% joint venture interest, formed in September 1996, with the
Ohio State Teachers Retirement System (OSTRS), (iii) a 50% joint venture
interest, formed in October 1996, in conjunction with the development of a
443,000 square foot shopping center in Merriam, Kansas, and (iv) a 50% joint
venture interest in a limited partnership that owns a 411,977 square foot
shopping center located in Martinsville, Virginia.
Combined condensed financial information of the Company's joint venture
investments is summarized as follows:
DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
Combined Balance Sheets
Real estate, net $ 561,624,478 $ 473,913,981
Other assets 16,012,336 18,606,231
-------------------------------------
$ 577,636,814 $ 492,520,212
=====================================
Mortgage debt $ 360,113,705 $ 317,142,199
Amounts payable to DDR 10,747,149 9,173,195
Other liabilities 7,782,117 16,927,381
-------------------------------------
378,642,971 343,242,775
Accumulated equity 198,993,843 149,277,437
-------------------------------------
$ 577,636,814 $ 492,520,212
=====================================
FOR THE YEAR ENDED DECEMBER 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
Combined Statements of Operations
Revenues from operations $ 63,681,840 $ 9,356,560 $ 3,314,210
-------------------------------------------------------------
Rental operation expenses 16,192,552 2,377,110 755,935
Depreciation and amortization expense 8,923,764 1,755,502 804,888
Interest expense 21,146,073 4,251,751 2,125,422
-------------------------------------------------------------
46,262,389 8,384,363 3,686,245
-------------------------------------------------------------
Net income (loss) $ 17,419,451 $ 972,197 $ (372,035)
=============================================================
F-9
54
The Company has guaranteed $25 million of joint venture indebtedness and related
interest associated with certain mortgage debt.
Advances to and investments in joint ventures include acquisition costs related
to the Community Center Joint Ventures and the Merriam Joint Venture of
approximately $2.7 million and $0.7 million respectively, and a deferred gain of
approximately $5.9 million related to the contribution of the real estate
property and mortgage debt to the OSTRS Joint Venture.
The Company provides property management services to the joint ventures.
Included in management fee income is $2.1 million, $0.2 million and $0.1 million
for the years ended December 31, 1996, 1995 and 1994, respectively, related to
these services. Other income includes development fee income from the Community
Center Joint Ventures of $0.7 million in 1996 and $0.5 million in 1995 (none in
1994). Cash distributions are made from the joint venture to the extent the
joint venture generates "net cash flows," as defined in the joint venture
agreements. During 1996 and 1995 the joint ventures distributed an aggregate of
$8.6 million and $0.2 million, respectively, to its joint venture partners.
On February 10, 1993, the Company advanced $9.0 million to the Martinsville,
Virginia Joint Venture which utilized these funds to repay a portion of its
first mortgage debt. The Company's advance is evidenced by a note receivable
requiring monthly payments of principal and interest at the rate of 9.25% per
annum. In addition, in 1996, the Company advanced $1.1 million to the joint
venture to pay for the construction and re-tenanting of vacant space. The
Company's advances are evidenced by notes receivable with interest calculated at
prime rate plus 1%. In accordance with the joint venture agreement, construction
or operating advances must be repaid before any capital distributions can be
made. The Company recorded interest income of $0.8 million for each of the years
ended December 31, 1996, 1995 and 1994, relating to these advances.
On November 17, 1995, the Company, in conjunction with certain joint venture
partners described below, acquired the Homart Community Center Division of Sears
from an affiliate of General Growth Properties, Inc. General Growth Properties,
Inc. had contracted to purchase the Homart Community Center Division as part of
its acquisition of Homart Development Co., a subsidiary of Sears. The Homart
Community Center Division included ten power centers, aggregating in excess of
four million square feet of Gross Leasable Area ("GLA"), located in major
metropolitan areas throughout the United States and several outlots and pad
sites adjacent to the ten power centers and certain other power centers
previously sold by Sears (the "Community Center Properties"). At the date of
acquisition, construction of seven of the ten power centers was complete or
substantially complete and three of the power centers were under construction.
Construction of the three centers was substantially completed during 1996. The
ten shopping center properties are summarized as follows:
ACQUISITION YEAR COMPANY
CENTER LOCATION BUILT GLA
- --------------------------------------------------------------
Carmel Mountain Plaza San Diego, CA 1993 446,484
Broadway Market Place Denver, CO 1993 369,386
Carillon Place Naples, FL 1994 266,438
Town Center, Prado Marietta, GA 1995 270,440
Woodfield Village Green Schaumburg, IL 1993 501,092
New Hope Commons Durham, NC 1995 408,292
Fairfax Town Center Fairfax, VA 1994 253,941
Perimeter Pointe Atlanta, GA 1995 202,191
Shoppers World Framingham, MA 1994 716,393
Independence Commons Independence, MO 1995 365,062
The Community Center Properties are owned by four joint ventures (collectively,
the "Community Center Joint Ventures"). The Company, or a wholly owned
subsidiary of the Company and its joint venture partners each purchased a 50%
interest in each Community Center Joint Venture. The Company's joint venture
partners are a consortium of third party investors, including a private REIT,
owned by institutional investors advised by DRA Advisors, Inc. ("DRA"), three
limited partnerships whose respective limited partners are pension funds and
whose general partners are affiliates of DRA and one corporation whose owners
are affiliates of DRA. In addition to owning a 50% interest in each Community
Center Joint Venture, the Company manages the Community Center Properties and
related developments pursuant to management and development agreements with each
of the Community Center Joint Ventures.
The total purchase price for the Community Center Properties aggregated $449.2
million and was funded through $300.1 million of secured indebtedness at the
joint venture level, $3.1 million of assumed net liabilities and $146.0 million
of cash of which one-half each was provided by the Company and its joint venture
partners. In addition, the Company paid cash of approximately $1.3 million
relating to the
F-10
55
purchase of certain rights to potential future development sites. The Company's
initial cash contribution was made available through proceeds from the issuance
of the 9.5% Class A depositary shares (Note 11). The purchase price for the
Community Center Properties was adjusted in 1996 to reflect development costs
incurred through the date of closing, as well as the finalization of certain
purchase price issues.
In October 1996, the Company formed a joint venture with DD Merriam, L.P., which
is advised by DRA, relating to the development of a shopping center in Merriam,
Kansas, which was one of the development sites acquired in conjunction with the
acquisition of the Homart Community Center Division. The joint venture is 50%
owned by the Company and 50% owned by DD Merriam, L.P. The Company will manage
the shopping center and related development pursuant to management and
development agreements. At December 31, 1996 the Company advanced $1.1 million
to pay for certain construction related costs. The advances accrue interest at
8% per annum and are to be repaid from the proceeds of construction financing
which will be entered into in 1997.
The joint venture agreements with DRA provide, after November 17, 1999 or if
either party is in default of the joint venture agreements, each partner has the
right to trigger a purchase or sale of its interest in the joint ventures
(Reciprocal Purchase Rights) or to initiate a purchase and sale of the
properties (Property Purchase Rights).
In addition, at any time after November 17, 1999, the Company's joint venture
partners may convert all or a portion of their respective interests in such
joint ventures into common shares of the Company in accordance with the terms
set forth in the governing documents of such joint ventures. However, if the
joint venture partners elect to convert their respective interest into common
shares, the Company will have the sole option to pay cash instead of issuing
common shares. If the Company agrees to the issuance of common shares, the
agreement provides that the converting joint venture partner will execute a
lock-up arrangement acceptable to the Company.
In September 1996, the Company entered into a joint venture with OSTRS. In
conjunction with the formation of the joint venture, the Company transferred two
shopping centers with a net book value of $41.6 million and non-recourse
mortgage debt aggregating $36.4 million in exchange for a 50% interest in the
joint venture. OSTRS funded an initial cash contribution of $11.6 million which
was used to repay a portion of the non-recourse mortgage debt. The Company
continues to manage the two properties pursuant to a management agreement. The
two shopping center properties are summarized as follows:
YEAR
CENTER LOCATION BUILT GLA
- ----------------------------------------------------------
Macedonia Commons Macedonia, OH 1994 234,789
Belden Parke Crossings Canton, OH 1995 229,809
F-11
56
- --------------------------------------------------------------------------------
3. ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
During the years ended December 31, 1996, 1995 and 1994, the Company completed
the acquisition of 29 shopping centers, excluding those acquired through joint
ventures as discussed in Note 2, (5 in 1996, 10 in 1995 and 14 in 1994) with an
aggregate of 5.4 million Company owned gross leasable square feet (GLA) at a
total purchase price of $375.2 million. These acquisitions were accounted for
using the purchase method of accounting. These properties are summarized as
follows:
CENTER ACQUISITION LOCATION DATE ACQUIRED YEAR BUILT COMPANY GLA
- -----------------------------------------------------------------------------------------------------------------------------
1996 ACQUISITIONS:
Arrowhead Crossing Phoenix (Peoria), AZ July, 1996 1995 340,094
Maple Grove Crossing Minneapolis (Maple Grove), MN July, 1996 1995 250,269
Highland Grove Highland, IN July, 1996 1995 239,845
Eastchase Market Fort Worth, TX July, 1996 1995 117,109
Tanasbourne Town Center Portland, OR August, 1996 1995 140,626
---------
Total 1996 Acquisitions 1,087,943
=========
- -----------------------------------------------------------------------------------------------------------------------------
1995 Acquisitions:
Airport Square Shopping Center Toledo, OH February, 1995 1993 187,674
North Road Plaza Orangeburg, SC March, 1995 1994 22,200
Northtowne Shopping Center Anderson, SC March, 1995 1993 14,250
Wando Crossing Shopping Center Mt. Pleasant, SC March, 1995 1992 187,496
Jacksonville Regional Shopping Center Jacksonville, FL March, 1995 1988 219,073
The Shoppes of Boot Ranch Palm Harbor, FL May, 1995 1990 52,395
East Forest Plaza Columbia, SC November, 1995 1995 46,700
Eastwood Festival Centre Birmingham, AL November, 1995 1989 284,500
Enterprise Plaza Huntsville, AL December, 1995 1995 41,000
Green Ridge Square Shopping Center Grand Rapids, MI December, 1995 1989 134,057
---------
Total 1995 Acquisitions 1,189,345
=========
- -----------------------------------------------------------------------------------------------------------------------------
1994 Acquisitions:
Fairview Station Simpsonville, SC January, 1994 1990 142,133
Arrowhead Point Harrisburg, IL February, 1994 1991 168,507
Central Shopping Center Murray, KY February, 1994 1977 149,028
Pleasant Hills Plaza Duluth, GA February, 1994 1990 99,025
Ahoskie Commons Ahoskie, NC February, 1994 1992 188,457
Crossroads Plaza Anderson, SC March, 1994 1990 163,809
McCain Plaza N. Little Rock, AR March, 1994 1991 294,357
Valley Park Centre Russellville, AR April, 1994 1992 272,245
Ormond Town Square Ormond Beach, FL May, 1994 1993 231,445
Macedonia Commons Macedonia, OH July, 1994 1994 158,205
Cascade Crossings Sault Ste. Marie, MI September, 1994 1993 262,267
Starkville Crossing Starkville, MS November, 1994 1990 221,152
Big Oak Crossing Tupelo, MS December, 1994 1992 348,236
Brook Highland Plaza Birmingham, AL December, 1994 1994 388,604
---------
Total 1994 Acquisitions 3,087,470
---------
Total Acquisitions 5,364,758
=========
The operating results of the acquired shopping centers are included in the
results of operations of the Company from the date of purchase including the
acquisition of the Community Center Properties, discussed in Note 2, which are
included in equity in net income of joint ventures in the statements of
operations for 1996 and 1995.
F-12
57
The following unaudited supplemental proforma information is presented to
reflect the effects of the common share offerings, preferred share offerings,
debt offerings and, pursuant to APB Opinion No. 16, the property acquisitions
consummated through December 31, 1995, including the Community Center
acquisition (Note 2), as if all such transactions had occurred on January 1,
1994. Pro forma information is not presented for 1996 because the acquired
properties were either under development or in the lease-up phase and,
accordingly, the related operating information for such centers either does not
exist or would not be meaningful. The pro forma financial information is
presented for information purposes only and may not be indicative of what actual
results of operations would have been had the acquisitions occurred on January
1, 1994 nor does it purport to represent the results of the operations for
future periods (in thousands, except per share data):
UNAUDITED
DECEMBER 31, 1995(a) 1994(b)
- --------------------------------------------------------------------------------
Pro forma revenues $114,016 $99,053
=========================
Pro forma income before
extraordinary item $ 47,106 $34,254
=========================
Pro forma net income applicable
to common shareholders $ 29,349 $20,467
=========================
Pro forma net income applicable
to common shareholders per
common share $ 1.37 $ 1.08
=========================
<FN>
(a) Reflects revenues and expenses of the properties acquired in 1995 for the
period January 1, 1995 through the dates of acquisition. Operating results for
the Company's 1995 acquired properties located in Orangeburg, South Carolina;
Anderson, South Carolina; Columbia, South Carolina; and Huntsville, Alabama and
with regard to the acquisition of the Community Center Properties the shopping
centers located in Durham, North Carolina; Marietta, Georgia; Independence,
Missouri; Atlanta, Georgia; and Phase II of Framingham, Massachusetts are not
reflected in the 1995 pro forma information prior to their respective
acquisition dates because these shopping centers were either under development
or in the lease-up phase and, accordingly, the related operating information for
such centers either does not exist or would not be meaningful.
(b) Reflects revenues and expenses of the properties acquired in 1995 and 1994
for the period January 1, 1994 through the dates of acquisition or December 31,
1994. Operating results for the Company's 1995 acquired properties located in
Orangeburg, South Carolina; Anderson, South Carolina; Columbia, South Carolina;
and Huntsville, Alabama and with regard to the acquisition of the Community
Center Properties the shopping centers located in Durham, North Carolina;
Marietta, Georgia; Independence, Missouri; Atlanta, Georgia; and Phase II of
Framingham, Massachusetts and 1994 acquired properties located in Macedonia,
Ohio and Birmingham, Alabama are not reflected in the 1994 pro forma information
prior to their respective acquisition dates because these shopping centers were
either under development or in the lease-up phase and, accordingly, the related
operating information for such centers either does not exist or would not be
meaningful.
- --------------------------------------------------------------------------------
4. DEFERRED CHARGES
- --------------------------------------------------------------------------------
Deferred charges consist of the following:
DECEMBER 31,
1996 1995
- --------------------------------------------------------------------------------
Deferred financing costs $ 7,300,756 $ 6,809,895
Organization costs 144,191 134,635
----------- -----------
7,444,947 6,944,530
Less - accumulated amortization (3,148,905) (1,994,060)
----------- -----------
$ 4,296,042 $ 4,950,470
=========== ===========
The Company incurred deferred finance costs aggregating $1.0 and $3.4 million,
in 1996 and 1995 primarily relating to the Company's issuance of Senior Notes
(Note 6) and unsecured revolving credit agreements (Note 5). Amortization of
deferred charges was $1.5 million, $1.7 million and $1.2 million for the years
ended December 1996, 1995 and 1994, respectively. During 1995 and 1994 the
Company wrote off $3.6 million and $0.2 million, respectively, (none in 1996) of
unamortized deferred finance costs in conjunction with the repayment of certain
secured indebtedness.
- --------------------------------------------------------------------------------
5. REVOLVING CREDIT FACILITIES
- --------------------------------------------------------------------------------
In May 1995, the Company obtained a three year $150 million unsecured revolving
credit facility from a syndicate of financial institutions for which the First
National Bank of Chicago and the First National Bank of Boston serve as agents
(the "Unsecured Credit Facility"). In June 1996, the Company renegotiated the
terms of this facility to extend the agreement one year, to May 1999, reduce the
specified spread over LIBOR and reduce the unused commitment fees. Borrowings
under this facility bear interest at variable rates based on LIBOR plus a
specified spread, currently at 1.25%, depending on the Company's long term
senior unsecured debt rating from Standard and Poor's and
F-13
58
Moody's Investors Service. The Company is required to comply with certain
covenants relating to total outstanding indebtedness, secured indebtedness, net
worth, maintenance of unencumbered real estate assets and debt service coverage.
The facility also provides for commitment fees of 0.25% on the unused credit
amounts. The Unsecured Credit Facility is used to initially finance the
acquisition of shopping centers, to provide working capital and for general
corporate purposes. At December 31, 1996 total borrowings under the unsecured
credit facility aggregated $88.5 million with a weighted average interest rate
of 6.9%.
In July 1995, the Company entered into a three year $25 million secured
revolving credit facility with National City Bank. In September 1996, the
Company restructured this facility. This restructuring resulted in an $18.6
million ten year non-recourse mortgage loan, which was transferred into the
OSTRS Joint Venture as discussed in Note 2, and a $10 million unsecured
revolving credit facility which matures in November 1999 and bears interest at
variable rates based on the prime rate, or LIBOR plus a specified spread,
currently at 1.25%, depending on the Company's long term senior unsecured debt
rating from Standard and Poors and Moody's Investors Service. The restructuring
resulted in the mortgage release of two of the three shopping centers which
served as collateral for the $25 million secured revolving credit facility. The
Company is required to comply with certain covenants relating to total
outstanding indebtedness, secured indebtedness, net worth, maintenance of
unencumbered real estate assets and debt service coverage. The facility also
provides for commitment fees of 0.25% on the unused credit amount. At December
31, 1996 total borrowings under this facility aggregated $7.0 million with a
weighted average interest rate of 6.8%.
In January 1995, the Company terminated a $25 million secured revolving credit
facility in conjunction with the successful completion of a 2,875,000 common
share offering and recognized an extraordinary charge of $0.3 million in the
first quarter of 1995 primarily relating to the write-off of unamortized
deferred finance costs. In the second quarter of 1995, the Company terminated a
$150 million secured revolving credit facility with Nomura Asset Capital
Corporation. As a result, the Company recognized a non-cash extraordinary charge
of $3.3 million relating to the write-off of unamortized deferred finance costs.
Total commitment fees paid by the Company on its revolving credit facilities in
1996, 1995 and 1994 aggregated approximately $0.3 million, $0.4 million, and
$0.1 million, respectively.
- --------------------------------------------------------------------------------
6. FIXED RATE SENIOR NOTES
- --------------------------------------------------------------------------------
In May 1995, the Company issued, through an underwritten offering, $100 million
of unsecured Fixed Rate Senior Notes at a discount to 99.693% which mature on
May 15, 2000. The Fixed Rate Senior Notes bear a coupon interest rate of 7-5/8%
per annum. Interest is paid semi-annually in arrears on May 15 and November 15.
In November and December 1995, through its Medium Term Note (MTN) program, the
Company issued $4 million of unsecured Fixed Rate Senior Notes at interest rates
of 7.15% and 7.28% and maturities of seven and ten years, respectively. In 1996,
the Company issued $111.7 million of MTN's at interest rates ranging from 6.58%
to 7.42% and maturities of five to seven years. The above Fixed Rate Senior
Notes may not be redeemed by the Company prior to maturity and will not be
subject to any sinking fund requirements. The Fixed Rate Senior Notes were
issued pursuant to an indenture dated as of May 1, 1994 which contains certain
covenants including limitation on incurrence of debt, maintenance of
unencumbered real estate assets and debt service coverage.
- --------------------------------------------------------------------------------
7. SUBORDINATED CONVERTIBLE DEBENTURES
- --------------------------------------------------------------------------------
In August 1994, the Company issued, through an underwritten offering, $60
million of unsecured subordinated convertible debentures ("Debentures") which
mature on August 15, 1999. The Debentures bear interest at 7% per annum.
Interest is paid semi-annually in arrears on February 15 and August 15. The
Debentures were issued pursuant to an indenture dated May 1, 1994 and are
non-callable and convertible at anytime prior to maturity into common shares at
a conversion price of $33-3/8 per share, subject to adjustment under certain
conditions. The Debentures are unsecured and subordinate to present and future
senior indebtedness, as defined in the indenture.
F-14
59
- --------------------------------------------------------------------------------
8. CONSTRUCTION LOANS
- --------------------------------------------------------------------------------
During 1995, the Company entered into a construction loan with a financial
institution relating to the Company's shopping center development in Canton,
Ohio. The Canton, Ohio construction loan provided for borrowings up to $17.8
million and was due June 1997. The construction loan bore interest at LIBOR plus
1.5% per annum. During 1996, the construction loan was restructured into a five
year mortgage loan and transferred to the OSTRS Joint Venture as discussed in
Note 2.
- --------------------------------------------------------------------------------
9. MORTGAGES PAYABLE AND SCHEDULED PRINCIPAL REPAYMENTS
- --------------------------------------------------------------------------------
At December 31, 1996, mortgages payable, collateralized by real estate with a
net book value of approximately $161.5 million and related tenants leases, are
generally due in monthly installments of principal and/or interest and mature at
various dates through 2023. Interest rates ranged from approximately 6.0% to
10.9% (averaging 8.6% and 8.7% at December 31, 1996 and 1995, respectively).
Variable rate debt obligations, reflected in mortgages payable at December 31,
1996 and 1995, totaled approximately $3.1 million and $3.4 million,
respectively. Interest rates on the variable rate debt averaged 6.1% at December
31, 1996 and 1995, respectively.
As of December 31, 1996, the scheduled principal payments of mortgages payable,
senior notes and debentures for the next five years and thereafter are as
follows:
YEAR AMOUNT
- --------------------------------------------------------------------------------
1997 $ 5,972,473
1998 13,976,590
1999 94,806,929
2000 101,709,247
2001 88,756,307
Thereafter 77,710,745
-------------
$ 382,932,291
=============
The revolving credit facility balances aggregating $95.5 million are not
reflected in the above amounts as these balances were repaid using the proceeds
from a 3,350,000 common share offering completed in January, 1997.
- --------------------------------------------------------------------------------
10. FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
The following methods and assumptions were used by the Company in estimating
fair value disclosures of financial instruments:
Cash and cash equivalents, accounts receivable, accounts payable, accruals and
other liabilities:
The carrying amounts reported in the balance sheet for these financial
instruments approximated fair value because of the short maturities.
Notes receivable and advance to affiliates:
Fair value is estimated by discounting the current rates at which similar loans
would be made. At December 31, 1996 and 1995, the carrying amounts reported in
the balance sheet approximates fair value.
Debt:
The carrying amounts of the Company's borrowings under its revolving credit
facilities and construction loans approximate fair value because such borrowings
are at variable rates. The fair value of Fixed Rate Senior Notes is based on the
Company's estimated interest rate spread over the applicable treasury rate with
a similar remaining maturity. Fair value of the mortgage debt is estimated using
a discounted cash flow analysis, based on the Company's incremental borrowing
rates for similar types of borrowing arrangements with the same remaining
maturities. Fair value of the Debentures is determined based on the closing
price as of December 31, 1996 and 1995, as reported by the New York Stock
Exchange.
Considerable judgement is necessary to develop estimated fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts the Company could realize on disposition of the financial
instruments.
F-15
60
Financial instruments at December 31, 1996 and 1995, with carrying values that
are different than estimated fair values are summarized as follows (in
thousands):
1996 1995
---------------------------------- ----------------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
- ----------------------------------------------------------------------------------------------------
Debentures $ 60,000 $ 63,000 $ 60,000 $ 59,550
Fixed Rate Senior Notes 215,493 218,828 103,731 107,859
Mortgage debt 107,440 112,085 139,643 144,756
- ----------------------------------------------------------------------------------------------------
$ 382,933 $ 393,913 $ 303,374 $ 312,165
==========================================================================
The Company may, from time to time, enter into interest rate hedge agreements to
manage interest costs and risks associated with changing interest rates. The
Company intends to monitor continuously and actively manage interest costs on
its variable rate debt portfolio and may increase or decrease its swap position
based on market fluctuations. In addition, the Company believes that it has the
ability to obtain funds through additional equity and/or debt offerings and the
cost of obtaining such protection agreements in relation to the Company's access
to capital markets will continue to be evaluated.
- --------------------------------------------------------------------------------
11. PREFERRED AND COMMON SHARES
- --------------------------------------------------------------------------------
PREFERRED SHARES:
In November and December 1995, the Company sold 4,215,000 depositary
shares of 9.5% Class A Cumulative Redeemable Preferred Stock at $25 per
depositary share. In December 1995, the Company sold 1,600,000 depositary shares
of 9.44% Class B Cumulative Redeemable Preferred Stock at $25 per share. An
additional 175,000 of Class B depositary shares were sold in January 1996, in
conjunction with the underwriters' over allotment option. Both the Class A and B
depositary shares represent 1/10 of a share of their respective preferred class.
The Class A and Class B depositary shares are not redeemable by the Company,
except in certain circumstances relating to the preservation of the Company's
status as a REIT, prior to November 15, 2000 and December 26, 2000,
respectively. The aggregate net proceeds of approximately $144 million were used
in part to fund the Company's equity investment relating to the acquisition of
the Community Center Properties (Note 2) and to retire variable rate
indebtedness, primarily Floating Rate Senior Notes.
On April 29, 1996, the Company's shareholders authorized (i) 1,500,000 Class C
Cumulative Preferred Shares, without par value, (ii) 1,500,000 Class D
Cumulative Preferred Shares, without par value; (iii) 1,500,000 Class E
Cumulative Preferred Shares, without par value and (iv) the reduction of the
number of authorized Class A Cumulative Preferred Shares, without par value,
Class B Cumulative Preferred Shares without par value, and Noncumulative
Preferred shares, without par value from 3,000,000 to 1,500,000 each. At
December 31, 1996 the Company's unissued preferred shares consisted of the
following:
Class C - Cumulative redeemable preferred shares, without par value;
1,500,000 shares authorized;
Class D - Cumulative redeemable preferred shares, without par value;
1,500,000 shares authorized;
Class E - Cumulative redeemable preferred shares, without part value;
1,500,000 shares authorized;
Noncumulative redeemable preferred shares, without par value; 1,500,000
shares authorized.
COMMON SHARES
In July 1994 the Company sold 500,000 shares of common stock, in an underwritten
offering, to a group of Institutional Investors at an offering price of $31-5/8
per share. In January 1995 the Company sold 2,875,000 shares of common stock, in
an underwritten offering at an offering price of $28.25 per share. In March
1996, the Company sold 2,611,500 shares of common stock in an underwritten
offering at an offering price of $28.95 per share. The aggregate net proceeds of
approximately $167.3 million from the above three offerings were primarily used
to retire variable rate debt. In January, 1997, as discussed in Note 17, the
Company sold 3,350,000 shares of common stock in an underwritten offering at an
offering price of $36-5/8. The proceeds were used to reduce outstanding
borrowings under the lines of credit and for general corporate purposes.
F-16
61
- --------------------------------------------------------------------------------
12. TRANSACTIONS WITH RELATED PARTIES
- --------------------------------------------------------------------------------
In July 1994, the Company acquired from a partnership owned by the chairman of
the board of directors and an officer of the Company, the first phase of a newly
constructed shopping center in Macedonia, Ohio. At the date of acquisition, the
shopping center contained an aggregate of approximately 276,000 total square
feet of GLA (158,205 of which is owned by the Company) and was acquired at a
cost of approximately $14.0 million (of which $10.8 million was comprised of
liabilities assumed and $3.2 million was paid in cash). In April 1995, the
Company acquired two outparcels and approximately eight acres of land adjacent
to the shopping center at a purchase price of approximately $3 million. The two
outparcels were pre-leased and an 81,000 square foot Kohl's Department Store was
constructed on the eight acres of land. During 1996 this shopping center was
transferred into a joint venture with OSTRS (Note 2) at a fair market value of
approximately $24.6 million. At the date of transfer, the net asset value of the
transferred property was $20.3 million.
In August 1994, the Company acquired, from a partnership owned by the chairman
of the board of directors and an officer of the Company, approximately 12 acres
of land adjacent to an existing Wal-Mart store in Xenia, Ohio for a purchase
price of $0.9 million. The Company completed the construction of a 100,000
square foot shopping center on the site, with a Kroger supermarket as an anchor
tenant.
In September 1994, the Company acquired, from a partnership owned by the
chairman of the board and three officers of the Company, approximately 9.75
acres of land in Aurora, Ohio for a purchase price of $1.2 million. The Company
recently completed the initial phase (approximately 90,000 square feet) of a
shopping center development with a Heinen's supermarket as an anchor tenant.
The Company has agreed to acquire, from the affiliates previously referred to,
additional land parcels and expansion areas which are located adjacent to the
properties previously acquired. The Company's purchase price has not yet been
determined since it is subject to the leasing and/or construction of vacant
space and resolution of various other contingencies.
The Company entered into a lease for office space owned by one of its principal
partners/shareholders. General and administrative rental expense associated with
this office space, for the years ended December 31, 1996, 1995 and 1994
aggregated $0.5 million, $0.3 million, and $0.2 million, respectively. The
increase in rental payments is primarily related to the leasing of additional
space to accomodate the Company's growth.
The Company also entered into a management agreement in 1993 with a partnership,
owned in part by a related party, in which management fee and leasing fee income
of $0.1 million was earned in 1996, 1995 and 1994.
The Company performs certain administrative functions on behalf of entities in
which the chairman of the board has an ownership interest and recorded
management fee income of $22,500 for the three years ended 1996, 1995, and 1994.
- --------------------------------------------------------------------------------
13. Commitments
- --------------------------------------------------------------------------------
The Company is engaged in the operation of shopping centers/malls and business
centers which are either owned or, with respect to six shopping centers,
operated under long-term ground leases which expire at various dates after 2048.
Space in the shopping centers is leased to tenants pursuant to agreements which
provide for terms ranging generally from one to 30 years and, in some cases, for
annual rentals which are subject to upward adjustments based on operating
expense levels, sales volume, or contractual increases as defined in the lease
agreements.
The scheduled future minimum revenues from rental property under the terms of
all noncancelable tenant leases, assuming no new or renegotiated leases or
option extensions for such premises, for the subsequent five years ending
December 31, were as follows:
1997 $ 98,139,684
1998 92,014,275
1999 84,060,542
2000 76,345,221
2001 69,187,656
Thereafter 574,542,908
------------
$994,290,286
============
F-17
62
Scheduled minimum rental payments under the terms of all non-cancelable
operating leases in which the Company is the lessee, principally for office
space and ground leases, for the subsequent five years ending December 31 and
thereafter are as follows:
1997 $ 892,640
1998 953,651
1999 1,013,465
2000 1,043,465
2001 1,043,465
Thereafter 16,290,321
--------------
$ 21,237,007
==============
In conjunction with the development and expansion of various shopping centers,
the Company has entered into agreements for the construction of the shopping
centers and acquisition of land aggregating approximately $17.3 million.
- --------------------------------------------------------------------------------
14. OTHER INCOME
- --------------------------------------------------------------------------------
Other income is comprised of the following:
- --------------------------------------------------------------------------------
1996 1995 1994
Interest $1,212,567 $1,227,541 $ 910,514
Temporary tenant
rentals (kiosks) 689,398 636,569 570,440
Lease termination fees 3,007,457 623,642 147,374
Development fees 671,622 803,842 93,054
Other 417,305 317,994 493,573
------------------------------------------
$5,998,349 $3,609,588 $2,214,955
==========================================
- --------------------------------------------------------------------------------
15. BENEFIT PLANS
- --------------------------------------------------------------------------------
STOCK OPTION PLANS
Effective January 31, 1993, the Company established an incentive and
non-qualified stock option plan under which 1,556,903 of the Company's Common
Shares at December 31, 1996 are reserved for issuance to eligible employees.
Options may be granted at per share prices not less than fair market value at
the date of grant, and in the case of incentive options, must be exercisable
within ten years thereof (or, with respect to options granted to certain
shareholders, within five years thereof). Options granted under the plan
generally become exercisable on the year after the date of grant as to one third
of the optioned shares, with the remaining options being exercisable over the
following two-year period.
As of December 31, 1996, 1995 and 1994, 555,057, 381,193 and 141,272 options,
respectively, were exercisable. Option prices range from $22 to $34 per share.
In addition to the stock option plan described above, the Company granted
options for a total of 445,000 shares to its directors and certain officers who
are not employees of the Company. Such options were granted at the fair market
value on the date of grant. Options with respect to 45,000 shares are
exercisable one year from the date of grant, and options with respect to the
remaining 400,000 shares become exercisable one year after the date of grant as
to one third of the 400,000 shares with the remaining options being exercisable
over the following two-year period. As of December 31, 1996, 1995 and 1994,
options aggregating 253,333, 158,334 and 58,333, respectively, were exercisable,
of which 5,000 were exercised during 1996. Option prices range from $22 to
$30.75 per share.
The following table reflects the stock option activity described above:
NUMBER OF OPTIONS
EMPLOYEES DIRECTORS
- --------------------------------------------------------------------------------
Balance December 31, 1993 423,815 125,000
Granted 295,950 200,000
Exercised (9,223) --
Canceled (10,036) --
---------------------------
Balance December 31, 1994 700,506 325,000
Granted 179,282 --
Exercised (11,398) --
Canceled (41,467) --
---------------------------
Balance December 31, 1995 826,923 325,000
Granted 533,619 120,000
Exercised (66,378) (5,000)
Canceled (29,530) --
---------------------------
Balance December 31, 1996 1,264,634 440,000
===========================
The options exercised during 1996, 1995 and 1994 ranged from $22.00 to $30.75
per share.
The Company does not recognize compensation cost for stock options when the
option exercise price equals or exceeds the market value on the date of the
grant. Had compensation cost for the Company's stock-based compensation plans
been determined based on the fair values of the options
F-18
63
granted at the grant dates, the Company's net income (in thousands) and earnings
per share would have been as follows:
1996 1995
NET INCOME AS REPORTED 35,343 24,250
PRO FORMA 34,025 22,640
PRIMARY EARNINGS AS REPORTED 1.67 1.29
PER SHARE PRO FORMA 1.61 1.21
FULLY DILUTED AS REPORTED 1.66 1.28
EARNINGS PER SHARE PRO FORMA 1.60 1.20
The fair value of the options at the date of grant was estimated using the
Black-Scholes model. The following assumptions were used for the grants in 1996
and 1995; risk-free interest rates ranging from 5.6% to 6.8%; expected
volatility ranging from 15.4% to 24.4%; expected life ranging from 8.3 years to
ten years; and dividend yield of 7.8%.
In April 1996, the shareholders approved an equity-based award Plan which
provides for the grant, to key employees of the Company, of options to purchase
common shares of the Company, rights to receive the appreciation in value of
common shares, awards of common shares subject to restrictions on transfer,
awards of common shares issuable in the future upon satisfaction of certain
conditions, rights to purchase common shares and other awards based on common
shares. Under the terms of the Award Plan, awards may be granted with respect to
an aggregate of not more than 600,000 common shares.
In 1996, the Board of Directors approved a grant of 25,000 restricted shares of
common stock and 15,000 Participation Units to the Company's Chief Executive
Officer. The 25,000 shares of restricted stock will vest in equal annual amounts
of 5,000 shares per year through the year 2000. The 15,000 Participation Units
will be converted into common shares, ranging from 15,000 common shares to
100,000 common shares, at the end of five years. The actual number of shares
issued will be based upon the average annual total shareholder return during the
five year period. During 1996, approximately $450,000 was charged to expense
relating to these awards.
ELECTIVE DEFERRED COMPENSATION PLAN
Effective October 15, 1994, the Company adopted a non-qualified elective
deferred compensation plan for certain key executives which permits eligible
employees to defer up to 25% of their compensation.
The Company will match 25% of the employees' contributions up to a maximum of 6%
of an employee's annual compensation, after deducting contributions, if any,
made in conjunction with the Company's 401(k) plan. Both the deferred and
matching contributions are made in Company performance units, with the gains and
losses being related to the Company's quoted share price. Deferred compensation
related to employee contributions is fully vested and the Company's matching
contribution vests 20% per year, including service prior to the plan's effective
date. Once an employee has been with the Company five years, all matching
contributions are fully vested. The Company's contribution, including plan
earnings for the years ended December 31, 1996, 1995 and 1994, was $53,354,
$22,053 and $2,700, respectively. At December 31, 1996, 1995 and 1994 deferred
compensation under this plan aggregated $183,921, $91,112 and $13,554,
respectively. The plan is not funded.
- --------------------------------------------------------------------------------
16. EARNINGS AND DIVIDENDS PER SHARE
- --------------------------------------------------------------------------------
Primary earnings per share for income before extraordinary item and net income
available to common shareholders were computed by dividing dividends paid or
declared for the period by the weighted average number of common shares
outstanding, plus the undistributed income before extraordinary item available
to common shareholders or undistributed net income (loss) available to common
shareholders, as appropriate, divided by the weighted average number of common
shares and common share equivalents outstanding. For all periods reported,
applicable dividends declared exceeded the amount of net income and,
accordingly, common share equivalents were excluded from the calculation of
primary earnings per share as they were antidilutive. The weighted average
number of shares outstanding utilized in the calculations was 21,141,653,
18,780,047 and 15,806,474 for the years ended December 31, 1996, 1995 and 1994,
respectively.
F-19
64
Fully diluted earnings per common share were calculated by dividing income
(loss) before extraordinary item available to common shareholders and net income
(loss) available to common shareholders by the weighted average number of common
shares and common share equivalents outstanding during the period. Common share
equivalents included stock options outstanding. The assumed conversion of the
Debentures would have been antidilutive on per share amounts, and was therefore
excluded from the calculation. The weighted average number of shares utilized in
the fully diluted calculation was 21,261,632 and 18,937,413 and 15,942,836 for
the years ended December 31, 1996, 1995 and 1994, respectively.
The extraordinary item recognized in 1995 had the effect of reducing both
primary and fully diluted earnings per share by $0.19, based on the weighted
average number of shares outstanding 18,780,047 and 18,937,413. The
extraordinary item recognized in 1994 had the effect of reducing both primary
and fully diluted earnings per share by $.01, based on the weighted average
number of shares outstanding of 15,806,474 and 15,942,836. Dividends declared
per share for the years ended December 31, 1996, 1995 and 1994 are summarized as
follows:
GROSS ORDINARY NON-TAXABLE CAPITAL GAIN TOTAL
1996 DIVIDENDS DATE PAID INCOME RETURN OF CAPITAL DISTRIBUTIONS DIVIDENDS
- -------------------------------------------------------------------------------------------------------------------
1st QUARTER 04/01/96 $ .475 $ .12 $ .005 $ .60
2nd QUARTER 07/01/96 .475 .12 .005 .60
3rd QUARTER 09/30/96 .475 .12 .005 .60
4th QUARTER 12/30/96 .475 .12 .005 .60
-----------------------------------------------------------------
$ 1.90 $ .48 $ .02 $ 2.40
=================================================================
GROSS ORDINARY NON-TAXABLE CAPITAL GAIN TOTAL
1995 DIVIDENDS DATE PAID INCOME RETURN OF CAPITAL DISTRIBUTIONS DIVIDENDS
- -------------------------------------------------------------------------------------------------------------------
1st quarter 03/31/95 $ .43 $ .11 $ - $ .54
2nd quarter 06/30/95 .43 .11 - .54
3rd quarter 09/29/95 .43 .11 - .54
4th quarter 12/29/95 .43 .11 - .54
-----------------------------------------------------------------
$ 1.72 $ .44 $ - $ 2.16
=================================================================
GROSS ORDINARY NON-TAXABLE CAPITAL GAIN TOTAL
1994 DIVIDENDS DATE PAID INCOME RETURN OF CAPITAL DISTRIBUTIONS DIVIDENDS
- -------------------------------------------------------------------------------------------------------------------
1st quarter 04/15/94 $ .35 $ .13 $ - $ .48
2nd quarter 07/15/94 .35 .13 - .48
3rd quarter 09/30/94 .35 .13 - .48
4th quarter 12/30/94 .35 .13 - .48
-----------------------------------------------------------------
$ 1.40 $ .52 $ - $ 1.92
=================================================================
F-20
65
- --------------------------------------------------------------------------------
17. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
On January 14, 1997, the Company sold 3,350,000 common shares at $36-5/8 per
share through an underwritten offering. The net proceeds of approximately $116
million were primarily used to repay revolving credit debt and for general
corporate purposes. Pro forma income before extraordinary item applicable to
common shareholders for the year ended December 31, 1996, would have been
approximately $39.4 million or $1.71 per share reflecting: i) the common share
offering completed in March, 1996 and if it had been consumated on January 1,
1996 (Note 11); and ii) this offering as if it had been completed on July 1,
1996, at which time the Company borrowed $105 million against its revolving
credit facilities for the properties acquired in 1996. The weighted average
shares used in this calculation were 23.1 million.
In January 1997, the Company acquired a 296,000 square foot shopping center in
San Antonio, Texas. The shopping center is owned through a joint venture in
which the Company owns a 35% interest. The remaining 65% interest is owned by
institutional investors advised by DRA Advisors. The Company will manage the
shopping center and will receive management fee income from the joint venture.
The purchase price for the shopping center approximated $38.3 million. The joint
venture obtained a bridge loan for approximately $26.7 million from a financial
institution.
In February 1997, the Company acquired a shopping center located in Phoenix,
Arizona aggregating 245,409 square feet of Company GLA. The purchase price for
this center approximated $ 26.5 million.
In February 1997, the Company made an initial capital contribution of
approximately $37.7 million to a joint venture relating to the ownership and
management of two adjacent shopping centers in Cleveland (North Olmsted), Ohio
aggregating approximately 600,000 square feet. The Company owns a majority
interest and is entitled to approximately 95% of the economic benefit.
In conjunction with the above acquisitions and investments, the Company borrowed
$50 million under its revolving credit facilities.
- --------------------------------------------------------------------------------
18. PRICE RANGE OF COMMON SHARES (UNAUDITED)
- --------------------------------------------------------------------------------
The high and low sale prices per share of the Company's common shares, as
reported on the New York Stock Exchange Composite tape, and declared dividends
per share for the periods indicated were as follows:
HIGH LOW DIVIDENDS
- --------------------------------------------------------------------------------------------------------------
1996:
FIRST $ 31-3/4 $ 28-1/8 $ .60
SECOND 32 28-1/8 .60
THIRD 33-1/8 30-1/2 .60
FOURTH 37-1/4 32-1/8 .60
- --------------------------------------------------------------------------------------------------------------
1995:
First $ 31 $ 27-5/8 $ .54
Second 30-3/8 26-1/8 .54
Third 32 27-3/4 .54
Fourth 32-1/8 27-1/4 .54
F-21
66
- --------------------------------------------------------------------------------
19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
The following table sets forth the quarterly results of operations for the years
ended December 31, 1996 and 1995.
(In thousands, except per share amounts)
FIRST SECOND THIRD FOURTH TOTAL
- ------------------------------------------------------------------------------------------------
1996:
REVENUES $30,635 $31,904 $34,535 $33,832 $130,906
INCOME BEFORE EQUITY IN NET INCOME (LOSS)
OF JOINT VENTURES, GAIN ON SALES OF LAND,
AND EXTRAORDINARY ITEM 9,204 11,242 10,788 9,599 40,833
INCOME BEFORE EXTRAORDINARY CHARGE 11,216 13,104 12,926 12,296 49,542
NET INCOME 11,216 13,104 12,926 12,296 49,542
NET INCOME APPLICABLE TO COMMON SHAREHOLDERS 7,666 9,554 9,377 8,746 35,343
- ------------------------------------------------------------------------------------------------
INCOME PER COMMON SHARE:
INCOME BEFORE EXTRAORDINARY CHARGE $ .39 $ .44 $ .43 $ .40 $ 1.67
NET INCOME $ .39 $ .44 $ .43 $ .40 $ 1.67
- ------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 19,705 21,591 21,619 21,642 21,142
FIRST SECOND THIRD FOURTH TOTAL
- ------------------------------------------------------------------------------------------------
1995:
Revenues $25,265 $26,313 $27,239 $28,988 $107,805
Income before equity in net income (loss)
of joint ventures, gain on sales of land,
and extraordinary item 6,376 6,971 7,222 7,707 28,276
Income before extraordinary charge 6,432 7,117 7,126 8,387 29,062
Net income 6,181 3,811 7,126 8,387 25,505
Net income applicable to common shareholders 6,181 3,811 7,126 7,132 24,250
- ------------------------------------------------------------------------------------------------
Income per common share:
Income before extraordinary charge $ .35 $ .38 $ .38 $ .37 $ 1.48
Net income $ .34 $ .20 $ .38 $ .37 $ 1.29
- ------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 18,253 18,960 18,964 18,965 18,780
F-22
67
SCHEDULE II
DEVELOPERS DIVERSIFIED REALTY CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Balance at Balance at
beginning of Charged end of
year to expense Deductions year
------------- ---------- ---------- -----------
Year ended December 31, 1996
Allowance for uncollectible accounts . . . . . $990,000 $1,292,000 $ 512,000 $1,770,000
========= ========== ========== ===========
Year ended December 31, 1995
Allowance for uncollectible accounts . . . . . $310,000 $ 721,000 $ 41,000 $ 990,000
========= ========== ========== ===========
Year ended December 31, 1994
Allowance for uncollectible accounts . . . . . $130,000 $ 217,000 $ 37,000 $ 310,000
========= ========== ========== ===========
F-23
68
SCHEDULE III
Continued
DEVELOPERS DIVERSIFIED REALTY CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 1996
Initial Cost Total Cost (A)
---------------------------- --------------------------------------------
Buildings & Buildings &
Land Improvements Improvements Land Improvements Total
---------------------------------------- ---------------------------------------------
BRANDON, FL ................ $0 $4,111,281 $0 $0 $4,111,281 $4,111,281
STOW, OH ................... 433,358 1,566,859 0 390,022 7,461,398 7,851,420
FERN PARK, FL(ORLANDO) ..... 445,852 302,755 97,300 445,852 400,055 845,907
EASTLAKE, OH ............... 40,000 141,000 0 40,000 141,000 181,000
HIGHLAND HTS., OH .......... 383,417 1,711,463 0 383,417 13,320,903 13,704,320
HIGHLAND HTS., OH (DEV) .... 3,603,635 6,184,528 0 3,603,635 0 3,603,635
WESTLAKE, OH ............... 424,225 3,802,863 203,235 424,225 4,046,349 4,470,574
WATERBURY, CT .............. 0 3,048,300 0 0 3,048,300 3,048,300
ZANESVILLE, OH ............. 0 619,023 0 0 619,023 619,023
E. NORRITON, PA ............ 80,408 4,697,718 233,380 80,408 4,941,098 5,021,506
PALM HARBOR, FL ............ 1,136,915 4,089,138 0 1,136,915 4,124,312 5,261,227
TARPON SPRINGS, FL ......... 248,067 7,381,640 80,859 248,067 7,462,499 7,710,566
BAYONET PT., FL ............ 2,112,566 8,180,960 127,530 2,124,621 8,308,490 10,433,111
STARKVILLE, MS ............. 819,323 5,253,897 0 819,323 6,606,664 7,425,987
STARKVILLE (KROGER) ........ 451,758 2,955,317 0 451,758 2,955,317 3,407,075
TUPELO, MS ................. 2,282,000 14,978,722 0 2,282,000 15,575,757 17,857,757
JACKSONVILLE, FL ........... 3,005,420 9,425,063 0 3,005,420 9,425,063 12,430,483
STONE MOUNTAIN, GA ......... 460,471 3,018,074 21,890 460,471 3,039,964 3,500,435
ATLANTA, GA ................ 475,360 9,373,552 0 475,360 9,435,586 9,910,946
ERIE, PA ................... 7,030,162 19,200,609 0 6,830,163 32,466,100 39,296,263
ERIE, PA ................... 3,850,317 0 0 3,850,317 0 3,850,317
ERIE, PA ................... 1 2,563,770 12,990 1 2,576,760 2,576,761
CHILLICOTHE, OH ............ 42,857 2,549,287 2,200 1,266,066 6,916,992 8,183,058
OCALA, FL .................. 26,800 351,065 25,028 26,800 376,093 402,893
TAMPA, FL (WATERS). ........ 4,105,230 6,640,240 324,071 3,905,230 7,003,417 10,908,647
WINCHESTER, VA ............. 618,075 13,903,078 0 618,075 13,905,278 14,523,353
HUBER HEIGHTS, OH .......... 757,422 14,468,512 1,000 757,422 14,470,362 15,227,784
LEBANON, OH ................ 651,025 911,178 30,993 651,025 1,026,666 1,677,691
WILMINGTON, OH ............. 156,975 1,615,646 50,575 156,975 1,676,221 1,833,196
HILLSBORO, OH .............. 79,579 1,984,831 0 79,579 1,984,831 2,064,410
CANTON, OH PHASE II ........ 5,523,122 0 0 6,233,482 0 6,233,482
XENIA, OH .................. 948,202 3,938,138 0 948,202 5,494,621 6,442,823
BOARDMAN, OH ............... 9,025,281 0 0 9,025,281 0 9,025,281
CINCINNATI, OH ............. 2,399,250 11,238,105 172,198 2,399,250 12,058,431 14,457,681
BEDFORD, IN ................ 706,282 8,424,532 5,750 706,282 8,455,285 9,161,567
WATERTOWN, SD .............. 62,712 6,442,712 441,927 62,712 7,997,434 8,060,146
CONNERSVILLE, IN ........... 539,720 6,457,710 0 539,720 6,457,710 6,997,430
ASHLAND, OH ................ 209,500 2,272,624 0 209,500 2,325,424 2,534,924
PENSACOLA, FL .............. 1,804,641 4,010,290 273,372 1,804,641 4,333,262 6,137,903
Total Cost,
Net of Depreciable Date of
Accumulated Accumulated Lives Construction (C)
Depreciation Depreciation Encumbrances (Years)(1) Acquisition (A)
------------------------------------------------------------------------
BRANDON, FL .............. $3,358,135 $753,146 $0 S/L 30 1972 (C)
STOW, OH ................. 1,487,243 6,364,177 0 S/L 30 1969 (C)
FERN PARK, FL(ORLANDO) ... 248,596 597,310 0 S/L 30 1970 (C)
EASTLAKE, OH ............. 109,685 71,315 0 S/L 30 1971 (C)
HIGHLAND HTS., OH ........ 333,899 13,370,421 0 S/L 30 1971 (C)
HIGHLAND HTS., OH (DEV)... 38,587 3,565,048 0 S/L 31.5 1995 (C)
WESTLAKE, OH ............. 2,867,557 1,603,017 0 S/L 30 1974 (C)
WATERBURY, CT ............ 2,395,873 652,427 0 S/L 30 1973 (C)
ZANESVILLE, OH ........... 127,742 491,280 0 S/L 31.5 1990 (C)
E. NORRITON, PA .......... 3,263,031 1,758,475 0 S/L 30 1975 (C)
PALM HARBOR, FL .......... 218,427 5,042,800 0 S/L 31.5 1995 (A)
TARPON SPRINGS, FL ....... 5,396,798 2,313,768 0 S/L 30 1974 (C)
BAYONET PT., FL .......... 3,184,962 7,248,148 5,327,208 S/L 30 1985 (C)
STARKVILLE, MS ........... 397,922 7,028,065 0 S/L 31.5 1994 (A)
STARKVILLE (KROGER) ...... 195,457 3,211,618 2,438,320 S/L 31.5 1994 (A)
TUPELO, MS ............... 983,767 16,873,990 11,920,655 S/L 31.5 1994 (A)
JACKSONVILLE, FL ......... 521,736 11,908,747 8,117,177 S/L 31.5 1995 (A)
STONE MOUNTAIN, GA ....... 2,408,271 1,092,164 0 S/L 30 1973 (C)
ATLANTA, GA .............. 857,890 9,053,056 0 S/L 31.5 1994 (A)
ERIE, PA ................. 1,225,796 38,070,467 0 S/L 31.5 1995 (C)
ERIE, PA ................. 0 3,850,317 0 S/L 31.5 1995 (C)
ERIE, PA ................. 1,950,816 625,945 0 S/L 30 1973 (C)
CHILLICOTHE, OH .......... 1,470,911 6,712,147 0 S/L 30 1974 (C)
OCALA, FL ................ 286,557 116,336 0 S/L 30 1974 (C)
TAMPA, FL (WATERS) ....... 1,437,300 9,471,346 0 S/L 31.5 1990 (C)
WINCHESTER, VA ........... 1,358,724 13,164,629 9,591,984 S/L 31.5 1993 (A)
HUBER HEIGHTS, OH ........ 1,569,565 13,658,219 0 S/L 31.5 1993 (A)
LEBANON, OH .............. 138,547 1,539,144 0 S/L 31.5 1993 (A)
WILMINGTON, OH ........... 1,054,458 778,738 0 S/L 30 1977 (C)
HILLSBORO, OH ............ 1,157,765 906,644 0 S/L 30 1979 (C)
CANTON, OH PHASE II ...... 0 6,233,482 0 S/L 31.5 1995 (A)
XENIA, OH ................ 343,936 6,098,887 0 S/L 31.5 1994 (A)
BOARDMAN, OH ............. 0 9,025,281 0 S/L 31.5 1997 (C)
CINCINNATI, OH ........... 1,391,695 13,065,986 0 S/L 31.5 1993 (A)
BEDFORD, IN .............. 839,529 8,322,038 0 S/L 31.5 1993 (A)
WATERTOWN, SD ............ 4,167,278 3,892,868 0 S/L 30 1977 (C)
CONNERSVILLE, IN ......... 631,577 6,365,853 0 S/L 31.5 1993 (A)
ASHLAND, OH .............. 1,483,137 1,051,787 0 S/L 30 1977 (C)
PENSACOLA, FL ............ 1,122,792 5,015,110 0 S/L 30 1988 (C)
F-24
69
SCHEDULE III
Continued
DEVELOPERS DIVERSIFIED REALTY CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 1996
Initial Cost Total Cost (A)
---------------------------- --------------------------------------------
Buildings & Buildings &
Land Improvements Improvements Land Improvements Total
---------------------------------------- ---------------------------------------------
W.65TH CLEVELAND, OH ....... 90,120 1,463,076 15,000 90,120 1,478,076 1,568,196
LOS ALAMOS, NM ............. 725,000 3,499,950 30,336 725,000 3,530,286 4,255,286
TAMPA, FL (DALE) ........... 4,268,673 5,368,147 204,666 4,268,672 6,064,385 10,333,057
WAYNESVILLE, NC ............ 431,910 8,088,668 131,096 431,910 8,232,657 8,664,567
AHOSKIE, NC ................ 269,530 7,775,856 3,168 269,530 7,804,724 8,074,254
PULASKI, VA ................ 528,075 6,395,809 2,000 528,075 6,402,247 6,930,322
TWINSBURG, OH (VSA) ........ 341,025 2,108,098 0 341,025 1,872,503 2,213,528
AURORA, OH ................. 832,436 0 0 832,436 5,305,367 6,137,803
WORTHINGTON, MN ............ 373,943 6,404,291 440,740 373,943 6,890,476 7,264,419
HARRISBURG, IL ............. 550,100 7,619,281 0 550,100 7,619,281 8,169,381
MT. VERNON, IL ............. 1,789,009 9,398,696 111,000 1,789,009 9,746,717 11,535,726
FENTON, MO ................. 413,993 4,243,854 475,714 413,993 5,047,909 5,461,902
MELBOURNE, FL .............. 1 3,084,819 116,638 1 3,201,457 3,201,458
SIMPSONVILLE, SC ........... 430,800 6,563,154 0 430,800 6,563,154 6,993,954
CAMDEN, SC ................. 627,100 7,519,161 6,500 627,100 7,831,400 8,458,500
UNION, SC .................. 684,750 7,629,275 500 684,750 7,648,975 8,333,725
N. CHARLESTON, SC .......... 910,840 11,346,348 1,000 1,081,461 14,908,724 15,990,185
S. ANDERSON, SC ............ 1,365,600 6,117,482 13,170 1,365,600 6,130,652 7,496,252
ANDERSON, SC ............... 204,094 939,733 0 204,094 939,733 1,143,827
ORANGEBURG, SC ............. 317,934 1,692,836 0 317,934 1,692,836 2,010,770
MT. PLEASANT, SC ........... 2,583,887 10,469,891 0 2,583,887 10,469,891 13,053,778
COLUMBIA, SC ............... 600,000 3,262,624 0 600,000 3,262,624 3,862,624
SAULT STE. MARIE, MI ....... 1,826,454 13,709,705 0 1,826,454 13,735,020 15,561,474
CHEBOYGAN, MI .............. 126,670 3,612,242 0 126,670 3,612,242 3,738,912
GRAND RAPIDS, MI ........... 1,926,389 8,039,411 0 1,926,389 8,048,942 9,975,331
HOUGHTON, MI ............... 439,589 7,300,952 1,820,772 439,589 9,222,349 9,661,938
BAD AXE, MI ................ 183,850 3,647,330 0 183,850 4,038,246 4,222,096
GAYLORD, MI ................ 269,900 8,727,812 2,250 269,900 9,060,182 9,330,082
HOWELL, MI ................. 331,500 11,938,263 750 331,500 11,949,361 12,280,861
MT. PLEASANT, MI ........... 766,950 7,768,538 20,340 766,950 11,483,267 12,250,217
ELYRIA, OH ................. 352,295 5,692,642 0 352,295 5,692,642 6,044,937
BEMIDJI, MN ................ 442,031 8,228,731 500,161 442,031 8,808,171 9,250,202
CAPE CORAL, FL ............. 1,286,628 2,548,149 149,507 1,286,628 2,697,656 3,984,284
TRINDAD, CO ................ 411,329 2,578,930 197,546 411,329 2,787,426 3,198,755
HAZARD, KY ................. 402,563 3,271,343 296,745 402,563 3,568,089 3,970,652
BIRMINGHAM, AL ............. 3,726,122 13,973,590 0 3,726,122 14,010,222 17,736,344
BIRMINGHAM, AL ............. 10,572,916 26,002,258 0 11,434,040 30,163,042 41,597,082
HUNTSVILLE, AL ............. 600,000 3,058,100 0 600,000 3,059,600 3,659,600
MURRAY, KY ................. 303,660 4,739,709 0 303,660 4,762,756 5,066,416
JACKSONVILLE, NC ........... 521,111 3,998,798 172,993 521,111 4,171,791 4,692,902
ORMOND BEACH, FL ........... 1,048,380 15,812,069 3,875 1,048,380 15,823,606 16,871,986
ALAMOSA, CO ................ 161,479 1,034,465 210,958 161,479 1,247,424 1,408,903
WILMINGTON, NC ............. 4,785,052 16,851,571 1,182,775 4,185,802 23,718,647 27,904,449
BERLIN, VT ................. 858,667 10,948,064 23,935 866,217 10,983,359 11,849,576
BRAINERD, MN ............... 703,410 9,104,117 271,802 1,182,018 9,470,585 10,652,603
SPRING HILL, FL ............ 1,083,851 4,816,166 265,762 2,121,843 5,081,998 7,203,841
TIFFIN, OH ................. 432,292 5,907,856 434,761 432,292 6,496,188 6,928,480
TOLEDO, OH ................. 2,490,543 10,582,588 0 2,490,543 10,583,789 13,074,332
Total Cost,
Net of Depreciable Date of
Accumulated Accumulated Lives Construction (C)
Depreciation Depreciation Encumbrances (Years)(1) Acquisition (A)
------------------------------------------------------------------------
W.65TH CLEVELAND, OH ....... 967,627 600,569 0 S/L 30 1977 (C)
LOS ALAMOS, NM ............. 1,138,593 3,116,693 0 S/L 30 1978 (C)
TAMPA, FL (DALE) ........... 1,102,327 9,230,730 0 S/L 31.5 1990 (C)
WAYNESVILLE, NC ............ 1,028,793 7,635,774 0 S/L 31.5 1993 (A)
AHOSKIE, NC ................ 704,625 7,369,629 0 S/L 31.5 1994 (A)
PULASKI, VA ................ 747,757 6,182,565 0 S/L 31.5 1993 (A)
TWINSBURG, OH (VSA) ........ 423,576 1,789,952 0 S/L 31.5 1989 (C)
AURORA, OH ................. 48,937 6,088,866 0 S/L 31.5 1995 (C)
WORTHINGTON, MN ............ 3,766,231 3,498,187 0 S/L 30 1977 (C)
HARRISBURG, IL ............. 685,332 7,484,049 0 S/L 31.5 1994 (A)
MT. VERNON, IL ............. 1,082,770 10,452,956 0 S/L 31.5 1993 (A)
FENTON, MO ................. 2,056,946 3,404,956 0 S/L 30 1983 (A)
MELBOURNE, FL .............. 1,887,999 1,313,459 0 S/L 30 1978 (C)
SIMPSONVILLE, SC ........... 625,064 6,368,890 0 S/L 31.5 1994 (A)
CAMDEN, SC ................. 858,336 7,600,164 0 S/L 31.5 1993 (A)
UNION, SC .................. 853,038 7,480,687 0 S/L 31.5 1993 (A)
N. CHARLESTON, SC .......... 1,140,912 14,849,273 0 S/L 31.5 1993 (A)
S. ANDERSON, SC ............ 560,859 6,935,393 0 S/L 31.5 1994 (A)
ANDERSON, SC ............... 52,208 1,091,619 0 S/L 31.5 1995 (A)
ORANGEBURG, SC ............. 94,046 1,916,723 0 S/L 31.5 1995 (A)
MT. PLEASANT, SC ........... 581,506 12,472,271 7,043,274 S/L 31.5 1995 (A)
COLUMBIA, SC ............... 120,838 3,741,786 0 S/L 31.5 1995 (A)
SAULT STE. MARIE, MI ....... 1,017,019 14,544,455 8,027,584 S/L 31.5 1994 (A)
CHEBOYGAN, MI .............. 352,750 3,386,161 0 S/L 31.5 1993 (A)
GRAND RAPIDS, MI ........... 255,463 9,719,868 0 S/L 31.5 1995 (A)
HOUGHTON, MI ............... 5,517,093 4,144,845 3,098,376 S/L 30 1980 (C)
BAD AXE, MI ................ 416,951 3,805,145 0 S/L 31.5 1993 (A)
GAYLORD, MI ................ 964,748 8,365,334 0 S/L 31.5 1993 (A)
HOWELL, MI ................. 1,204,180 11,076,681 7,734,904 S/L 31.5 1993 (A)
MT. PLEASANT, MI ........... 959,956 11,290,261 0 S/L 31.5 1993 (A)
ELYRIA, OH ................. 2,044,569 4,000,368 3,808,568 S/L 30 1977 (C)
BEMIDJI, MN ................ 4,057,033 5,193,168 0 S/L 30 1977 (C)
CAPE CORAL, FL ............. 1,064,340 2,919,944 0 S/L 30 1985 (C)
TRINDAD, CO ................ 980,751 2,218,004 0 S/L 30 1986 (C)
HAZARD, KY ................. 1,993,301 1,977,350 0 S/L 30 1978 (C)
BIRMINGHAM, AL ............. 519,844 17,216,500 0 S/L 31.5 1994 (A)
BIRMINGHAM, AL ............. 1,639,576 39,957,506 0 S/L 31.5 1995 (A)
HUNTSVILLE, AL ............. 97,118 3,562,482 0 S/L 31.5 1995 (A)
MURRAY, KY ................. 428,064 4,638,352 0 S/L 31.5 1994 (A)
JACKSONVILLE, NC ........... 989,608 3,703,294 2,664,141 S/L 31.5 1989 (C)
ORMOND BEACH, FL ........... 1,340,499 15,531,487 0 S/L 31.5 1994 (A)
ALAMOSA, CO ................ 534,299 874,604 0 S/L 30 1986 (C)
WILMINGTON, NC ............. 3,670,202 24,234,247 10,075,323 S/L 31.5 1989 (C)
BERLIN, VT ................. 3,488,331 8,361,245 4,940,000 S/L 30 1986 (C)
BRAINERD, MN ............... 1,399,624 9,252,979 1,020,000 S/L 31.5 1991 (A)
SPRING HILL, FL ............ 1,360,594 5,843,247 6,212,636 S/L 30 1988 (C)
TIFFIN, OH ................. 3,390,420 3,538,060 0 S/L 30 1980 (C)
TOLEDO, OH ................. 615,934 12,458,398 0 S/L 31.5 1995 (A)
F-25
70
SCHEDULE III
Continued
DEVELOPERS DIVERSIFIED REALTY CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 1996
Initial Cost Total Cost (A)
---------------------------- --------------------------------------------
Buildings & Buildings &
Land Improvements Improvements Land Improvements Total
---------------------------------------- ---------------------------------------------
DICKINSON, ND .............. 57,470 6,864,237 354,820 51,148 7,259,157 7,310,305
WEST PASCO, FL ............. 1,422,383 6,552,470 8,500 1,422,383 6,560,969 7,983,352
MARIANNA, FL ............... 1,496,347 3,499,835 129,855 1,496,347 3,630,489 5,126,836
HUTCHINSON, MN ............. 401,502 5,510,326 656,937 426,502 6,225,385 6,651,887
NEW BERN, NC ............... 780,029 8,204,036 71,587 780,029 11,266,277 12,046,306
MAYFIELD HTS., OH (624) .... 168,000 1,418,886 0 168,000 1,418,886 1,586,886
MAYFIELD HTS., OH (625) .... 235,000 1,701,843 0 235,000 1,701,843 1,936,843
MENTOR, OH ................. 184,420 1,148,523 0 184,420 1,148,523 1,332,943
STREETSBORO, OH ............ 50,000 1,298,398 0 50,000 1,298,398 1,348,398
AURORA, OH ................. 100,000 2,909,005 0 100,000 2,937,911 3,037,911
HIGHLAND, IN ............... 4,003,400 20,101,245 0 4,003,400 20,101,245 24,104,645
PHOENIX, AR ................ 1,733,400 6,979,713 0 1,733,400 6,979,713 8,713,113
PHOENIX, AR ................ 4,686,600 21,569,807 0 4,686,600 21,569,807 26,256,408
MAPLE GROVE, MN ............ 4,564,278 18,379,324 0 4,564,278 18,379,324 22,943,602
TANASBOURNE TWN CTR ........ 3,780,000 15,991,872 0 3,780,000 15,991,872 19,771,872
FORT WORTH, TX ............. 2,325,000 10,275,719 0 2,325,000 10,275,719 12,600,719
RUSSELLVILLE, AR ........... 624,100 13,391,122 0 624,100 13,397,796 14,021,896
N. LITTLE ROCK, AR ......... 907,083 17,159,794 0 907,083 17,187,763 18,094,846
OTTUMWA, IA ................ 338,126 8,564,281 102,680 321,628 8,680,148 9,001,776
WASHINGTON, NC ............. 990,780 3,118,121 33,690 990,780 3,182,676 4,173,456
ORLANDO, FL ................ 4,792,146 11,673,702 84,343 4,792,146 11,758,045 16,550,191
DURHAM, NC ................. 2,210,222 11,671,268 277,631 2,210,222 11,961,399 14,171,621
CRYSTAL RIVER, FL .......... 1,216,709 5,795,643 364,531 1,219,142 6,160,174 7,379,316
TWINSBURG, OH (HBC) ........ 138,204 833,311 692,706 138,204 1,505,884 1,644,088
Portfolio Balance (DDR) .... 0 18,807,001 749,489 0 29,597,812 29,597,813
---------------------------------------- ---------------------------------------------
$146,537,577 $756,118,408 $12,737,527 $150,001,124 $841,645,836 $991,646,960
============ ============ =========== ============ ============ ============
Total Cost,
Net of Depreciable Date of
Accumulated Accumulated Lives Construction (C)
Depreciation Depreciation Encumbrances (Years)(1) Acquisition (A)
------------------------------------------------------------------------
DICKINSON, ND .............. 4,545,373 2,764,932 0 S/L 30 1978 (C)
WEST PASCO, FL ............. 2,333,283 5,650,069 4,783,894 S/L 30 1986 (C)
MARIANNA, FL ............... 736,296 4,390,540 0 S/L 31.5 1990 (C)
HUTCHINSON, MN ............. 3,241,458 3,410,429 5,242,849 S/L 30 1981 (C)
NEW BERN, NC ............... 2,166,189 9,880,117 5,392,642 S/L 31.5 1989 (C)
MAYFIELD HTS., OH (624) .... 698,580 888,306 0 S/L 19 1986 (C)
MAYFIELD HTS., OH (625) .... 1,184,004 752,838 0 S/L 18 1984 (C)
MENTOR, OH ................. 449,687 883,256 0 S/L 31.5 1987 (C)
STREETSBORO, OH ............ 415,488 932,910 0 S/L 25 1989 (C)
AURORA, OH ................. 398,140 2,639,771 0 S/L 31.5 1988 (C)
HIGHLAND, IN ............... 171,711 23,932,934 0 S/L 31.5 1996 (A)
PHOENIX, AR ................ 110,703 8,602,410 0 S/L 31.5 1996 (A)
PHOENIX, AR ................ 320,645 25,935,763 0 S/L 31.5 1996 (A)
MAPLE GROVE, MN ............ 291,735 22,651,867 0 S/L 31.5 1996 (A)
TANASBOURNE TWN CTR ........ 161,290 19,610,583 0 S/L 31.5 1996 (A)
FORT WORTH, TX ............. 148,649 12,452,070 0 S/L 31.5 1996 (A)
RUSSELLVILLE, AR ........... 1,134,346 12,887,550 0 S/L 31.5 1994 (A)
N. LITTLE ROCK, AR ......... 1,491,059 16,603,787 0 S/L 31.5 1994 (A)
OTTUMWA, IA ................ 2,105,807 6,895,969 0 S/L 31.5 1990 (C)
WASHINGTON, NC ............. 755,449 3,418,007 0 S/L 31.5 1990 (C)
ORLANDO, FL ................ 2,948,699 13,601,492 0 S/L 31.5 1989 (C)
DURHAM, NC ................. 2,317,890 11,853,731 0 S/L 31.5 1990 (C)
CRYSTAL RIVER, FL .......... 2,225,352 5,153,965 0 S/L 30 1986 (C)
TWINSBURG, OH (HBC) ........ 361,333 1,282,755 0 S/L 31.5 1989 (C)
Portfolio Balance (DDR) .... 469,560 29,128,253 0
----------------------------------------
$142,039,284 $849,607,676 $107,439,535
============ ============ ============
- ------------------------------
(1) S/L refers to straight-line depreciation.
F-26
71
(A) The Aggregate Cost for Federal Income Tax purposes was approximately
$990.0 million at December 31, 1996.
The changes in Total Real Estate Assets for the three years ended
December 31, 1996 are as follows:
1996 1995 1994
------------------------------------------
BALANCE, BEGINNING OF YEAR $848,373,336 $686,890,098 $459,048,887
ACQUISITIONS INCLUDING CLOSING COSTS 114,390,359 81,634,342 179,684,535
IMPROVEMENTS AND EXPANSIONS 64,199,411 84,884,431 16,505,191
LAND UNDER DEVELOPMENT AND
CONSTRUCTION IN PROGRESS 9,557,168 2,405,064 31,651,485
SALES, TRANSFERS AND RETIREMENTS (44,873,314) (7,440,599) -
------------------------------------------
BALANCE, END OF YEAR $991,646,960 $848,373,336 $686,890,098
==========================================
The changes in Accumulated Depreciation and Amortization for the three
years ended December 31, 1995 are as follows:
1996 1995 1994
------------------------------------------
BALANCE, BEGINNING OF YEAR $120,040,503 $100,051,018 $83,866,081
DEPRECIATION FOR YEAR 24,872,181 21,838,209 16,184,937
RETIREMENTS AND TRANSFERS (2,873,400) (1,848,724) -
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BALANCE, END OF YEAR $142,039,284 $120,040,503 $100,051,018
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F-27