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BEACHWOOD, OH–Strong leasing activity and a major expansion fueled a 128% increase in net income during the first quarter for Developers Diversified Realty Services, (NYSE:DDR) bringing the Cleveland-based group $91.8 million in net income, more than double the $40.2 million generated during the same period one year earlier.

The strong income numbers for the quarter ending March 31 reflect a gain on the sale of real estate and the acquisition of 15 assets in Puerto Rico, company officials said.

“Asset sales have allowed us to grow the company by over $4 billion in about a year while raising less than $800 million in equity,” Scott Wolstein, the company’s chairman and chief executive officer announced in a conference call to investors on Tuesday.

The gains were the result of the firm’s $1.15 billion acquisition of 15 properties in Puerto Rico totaling 5 million sf and the sale of a majority or full interest in 12 other properties for $348 million.

The firm, which owns, develops and manages more than 450 shopping centers in 44 states and Puerto Rico, also took a major step toward expansion in the first quarter of 2005, completing three shopping centers in Kansas and adding square footage to four others in Georgia, Florida, North Carolina and Tennessee. Shopping centers in four other states also underwent expansion or redevelopment during the quarter as part of the company’s joint venture operations while work began on seven retail outelts throughout the East and Midwest. The seven new projects are scheduled to be completed by next year at a projected cost of approximately $285.2 million and will create an additional 2.8 million square feet of retail space. Meanwhile, company officials said the firm has 24 projects in the pipeline in 15 states totaling nine million sf to 10 million sf at a cumulative cost of more than $1 billion. In addition, 434.5 million sf of other projects have been identified for future construction.

While expansion was strong, leasing activity was also solid, continuing at a brisk pace throughout the firm’s portfolio. During the first quarter of the year, 303 leases were executed representing 1.63 million sf while occupancy rates remained strong at 95.5%. The company said a gift card program that it plans to introduce at its Puerto Rico shopping centers should generate an extra $6 million in revenues.

For investors, the company’s strong performance meant a first quarter net income of .84 cents per diluted share, nearly double the 46 cents per share earned during the first quarter of 2004. Despite the strong numbers, however, shares of the company’s stock declined 4 cents to $42.23 at the close of business Tuesday.

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