Undercapitalized local developers unable to complete thefinancing or leasing of their projects have approached DevelopersDiversified about investments and partnerships, said Daniel B.Hurwitz, president and COO. The results could be severalhundred-million dollars in investments.

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"We have not added any projects yet, but we have a number thatlook promising," Hurwitz said. "Pending retailer interest in theprojects [at the ICSC RECon meeting] in Las Vegas, we might addsome in the second quarter."

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But the moves would not be full joint ventures, and would bemore akin to an investment that could be exited at a latertime.

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"We essentially are a bridge between the private capital and thedeveloper," said Scott Wolstein, chairman and CEO. "We've done thisquite a lot in the past."

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Nor is the company look to acquire major portfolios, a la lastyear's acquisition of Inland Retail Real Estate Trust, as thecompany remains conservative, Wolstein said. Developers Diversifiedexpects to sell some projects in the second half.

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In addition, the slowdown has made the company's existingdevelopment pipeline even more attractive to the retailers thatcontinue to expand. Leasing agents have already booked more than800 meetings at the RECon meeting, largely with an eye to 2009leases.

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"While demand has decreased, supply has decreased more," Hurwitzsaid.

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And the consumer cutback in spending favors the value-orientedtenants typically found in the company's projects, Wolsteinadded.

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"Many of our tenants do well in tougher economies, and findopportunities to gain market share," Wolstein said.

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For the quarter, net income was $32.9 million, compared to $48.7million the previous year. FFO applicable to common shareholderswas $99.6 million, compared with $106.2 million last year. The coreportfolio leased percentage was 95.8%. Same-store net operatingincome increased 2.0% over the prior-year comparable period.

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Developers Diversified Realty Corporation currently owns andmanages over 740 retail operating and development properties in 45states, Puerto Rico, Brazil, Russia and Canada, totalingapproximately 162 million sf.

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