DDR Digests Deals, Posts 16.7% FFO Gain

CLEVELAND—Completing its $6.2 billion merger of one rival and a joint venture purchase of dozens of shopping centers, Developers Diversified Realty Corp. grew dramatically in the first quarter, but company officials made clear in releasing initial 2007 results that their expansion appetite has not been sated.

“It really is full-speed ahead,” one DDR official stressed during a conference call. CEO Scott Wolstein outlined a three-pronged approach of buying existing assets via partnerships and so-called “merchant building” initiatives, but a platform mostly reliant on new development, “where we get the highest returns and the greatest value creation.” The minimum goal will be $300 million to $400 million annually, says investment chief Dan Hurwitz, waving off fears that slower consumer spending could dampen the need for new space even as yields are depressed from rising prices for land and construction materials.

Tenants “need these projects to fuel external growth,” says CFO William Schafer, adding, “we seem to be developing right in their sweet spot.” Hurwitz says the company has 900 meetings lined up at the upcoming International Council of Shopping Centers convention in Las Vegas, further explaining that leasing and development staffers have already approached their most desired prospects to further pitch the expanding portfolio of space, one which now encompasses more than 800 shopping centers in 45 states. Hurwitz cited the swift integration of the Inland REIT merger—encompassing 300-plus assets throughout the southeast—as evidence that the REIT can handle the ambitious growth platform. The Inland deal was completed in February, while DDR also absorbed a large portfolio of shopping centers in a partnership with TIAA-CREF.