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CLEVELAND-Determined to operate more conservatively in the current environment, locally based Developers Diversified is suspending development in Russia and future building in Brazil and is continuing to pursue asset sales, as shown by an $890 million deal announced this morning. The company has reached an agreement to sell 13 stabilized assets, totaling 5.9 million (of which 5.1 million is company-owned) to a joint venture with an institutional investor. The joint venture is expected to close in mid-December, at which point DDR will own 20% and the partner 80%. The company also will receive property management and development/redevelopment fees, a promoted interest, and leasing and ancillary fees upon closing.

The firm also is in various stages of negotiations to sell some $163 million in assets to buyers ranging from private individuals to large REITs, said David J. Oakes, EVP and CIO, speaking at the company’s third quarter conference call.

“We have sold assets in the past and will continue to do so, as it’s one of the least expensive sources of capital,” said Oakes in a press release. The company also is suspending its fourth quarter dividend.

The funds will be used to decrease leverage (with a goal of reducing leverage by $500 million in 2009) and fund other possible capital expenditures, including a joint venture that will invest in challenged assets with significant upside. Other opportunities also are becoming available as private owners are selling to stave off personal bankruptcy, Oakes said.

The company also is looking to sell back stores to anchors such as Wal-Mart, which can raise up to $200 million in cash relatively inexpensively, In addition, the company will complete a soon-to-open project in Manaus, Brazil, but will suspend further activity there and in Russia until markets stabilize, said Scott Wolstein, chairman and CEO. “We continue to believe [in this area], but are rationing capital,” Wolstein said.

The company reported FFO per diluted share of 83 cents for the third quarter, up from 80 cents per share in the prior year. However, net earnings were 23 cents per share, down from 26 cents per share in the same quarter last year. Base rental rates rose 16.4% on new leases, 6.9% on renewals and 8.9% overall. During the quarter, the company sold six shopping centers and one business center. The company owns and manages approximately 720 retail operating and development properties in 45 states, plus Puerto Rico and Brazil, totaling approximately 159 million sf.

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