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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

For the transition period from                 to                

Commission file number 1-11690

DEVELOPERS DIVERSIFIED REALTY CORPORATION

3300 Enterprise Parkway, Beachwood, Ohio 44122

(216) 755-5500

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

     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 o

     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. o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x    No o

     The aggregate market value of the voting stock held by non-affiliates of the registrant at June 30, 2004 was $3.6 billion.

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.

108,436,991 common shares outstanding as of February 28, 2005

DOCUMENTS INCORPORATED BY REFERENCE.

     The registrant incorporates by reference in Part III hereof portions of its definitive Proxy Statement for its 2005 Annual Meeting of Shareholders.

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PART I

      Developers Diversified Realty Corporation, an Ohio Corporation (the “Company” or “DDR”), a self-administered and self-managed real estate investment trust (a “REIT”), is in the business of acquiring, developing, redeveloping, owning, leasing and managing shopping centers and business centers. Unless otherwise provided, references herein to the Company or DDR includes Developers Diversified Realty Corporation, its wholly-owned and majority-owned subsidiaries and its joint ventures.

      From January 1, 2000 to February 28, 2005, the Company and its joint ventures have acquired 273 shopping center properties. The Company acquired 15 properties in 2005 (all of which are located in Puerto Rico), 112 in 2004 (including 18 of which were acquired through joint ventures and one of which the Company acquired its joint venture partner’s interest), 124 in 2003 (including 117 shopping center and development properties acquired through the merger with JDN Realty Corporation (“JDN”) and three of which were joint ventures), 11 in 2002 (four of which the Company acquired its joint venture interest), eight in 2001 (all of which were joint ventures) and three in 2000 (two of which were acquired through joint ventures). In addition in 2002, a joint venture in which the Company owns an approximate 25% equity interest was awarded the asset designation rights of Service Merchandise retail real estate interests in approximately 200 properties. At December 31, 2004, 63 of these properties remained. Also, in connection with the AIP merger on May 14, 2001, the Company effectively purchased 37 business centers and two shopping centers.

      The Company’s executive offices are located at 3300 Enterprise Parkway, Beachwood, Ohio 44122, and its telephone number is (216) 755-5500. The Company’s website is located at http://www.ddr.com. On its Website, you can obtain a copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company files such material electronically with, or furnish it to, the Securities and Exchange Commission (the “SEC”). A copy of these filings is available to all interested parties upon written request to Michelle M. Dawson, Vice President of Investor Relations at the Company’s corporate offices.

      The Company files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document we file with the SEC at the SEC’s Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington D.C. 20549. You may obtain information about the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC (http://www.sec.gov). You can inspect reports and other information that we file at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

      The Company is in the business of acquiring, developing, redeveloping, owning, leasing and managing 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.

      The Company’s portfolio as of February 28, 2005, consisted of 451 shopping centers and 32 business centers (including 166 properties which are owned through joint ventures) and more than 550 acres of undeveloped land (of which approximately 60 acres are owned through joint ventures) (the “Portfolio Properties”). From January 1, 2002 to February 28, 2005, the Company has acquired 262 shopping centers (including 21 properties owned through joint ventures) containing an aggregate of approximately 32 million square feet of gross leasable area (“GLA”) owned by the Company for an aggregate purchase price of

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      As of February 28, 2005, the Company was expanding 11 wholly-owned properties and four of its joint venture properties, and expects to commence expansions at one additional wholly-owned shopping center and one additional joint venture shopping centers in 2005. The Company, including its joint ventures, has also substantially completed the development of 22 shopping centers since December 31, 2002, at an aggregate cost of approximately $582.4 million aggregating approximately 4.1 million square feet of GLA. As of February 28, 2005, the Company had seven wholly-owned shopping centers under development.

      At December 31, 2004, the aggregate occupancy of the Company’s shopping center portfolio was 94.7% as compared to 94.3% at December 31, 2003. The average annualized base rent per occupied square foot was $10.79 at December 31, 2004, as compared to $10.82 at December 31, 2003. The slight decrease is due to the change in the properties in the portfolio.

      At December 31, 2004, the aggregate occupancy of the Company’s wholly-owned shopping centers was 93.7%, as compared to 92.9% at December 31, 2003. The average annualized base rent per leased square foot at December 31, 2004 was $9.70 as compared to $9.53 at December 31, 2003.

      At December 31, 2004, the aggregate occupancy of the Company’s joint venture shopping centers was 97.1% as compared to 98.5% at December 31, 2003. The average annualized base rent per leased square foot was $12.15 at December 31, 2004, as compared to $13.74 at December 31, 2003. The decrease in the average annualized base rent per leased square foot is primarily attributable to the formation of two new joint ventures which acquired two grocery-anchored portfolios in the fourth quarter of 2004.

      At December 31, 2004, the aggregate occupancy of the Company’s business centers was 76.0%, as compared to 78.1% at December 31, 2003.

      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. At December 31, 2004, the Company owned and/or managed over 94 million total square feet of GLA, which included all of the Portfolio Properties and 13 properties owned by third parties.

      The Company’s investment objective is to increase cash flow and the value of its Portfolio 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 addition, the Company may also pursue the disposition of certain real estate assets and utilize the proceeds to repay debt, reinvest in other real estate assets and developments and for other corporate purposes. 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 and institutional investors, such as the Company. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” within Item 7.

      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

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		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”);
	•	Increase per share cash flows through the strategic disposition of low growth assets and utilizing the proceeds to repay debt, invest in other real estate assets and/or developments and for other corporate purposes;
	•	Selectively develop the Company’s undeveloped parcels or new sites in areas with attractive demographics;
	•	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 engages 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 ratio. At December 31, 2004, the Company’s debt to total market capitalization ratio, excluding the Company’s proportionate share of non-recourse indebtedness of its unconsolidated joint ventures, was approximately 0.33 to 1.0; and at February 28, 2005, this ratio was approximately 0.42 to 1.0, reflecting the Company’s $1.15 billion acquisition of 15 shopping centers in Puerto Rico in 2005. At December 31, 2004, the Company’s capitalization consisted of $2.7 billion of debt (excluding the Company’s proportionate share of joint venture mortgage debt aggregating $420.8 million as compared to $368.5 million in 2003), $705 million of preferred shares and $4.9 billion of market equity (market equity is defined as common shares and Operating Partnership Units (“OP Units”) outstanding multiplied by the closing price of the common shares on the New York Stock Exchange at December 31, 2004 of $44.37) resulting in a debt to total market capitalization ratio of .33 to 1.0 as compared to the ratios of .37 to 1.0 and .43 to 1.0 at December 31, 2003 and 2002, respectively. Fluctuations in the market price of the Company’s common shares may cause this ratio to vary from time to time. At December 31, 2004, the Company’s total debt (excluding the effect of the fair value hedge which was $2.3 million at December 31, 2004) consisted of $2,167.1 million of fixed rate debt, including $80 million of variable rate debt, which has been effectively swapped to a weighted average fixed rate of approximately 2.8%, and $549.3 million of variable rate debt, including $60 million of fixed rate debt which has been effectively swapped to a weighted average variable rate.

      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.

      The Company has historically demonstrated its access to capital through both the public and private markets. The acquisitions, developments and expansions were generally financed through cash provided from operating activities, revolving credit facilities, mortgages assumed, construction loans, secured debt, unsecured public debt, common and preferred equity offerings, joint venture capital, OP Units and asset sales. Total debt outstanding at December 31, 2004 was approximately $2.7 billion as compared to approximately $2.1 billion and $1.5 billion at December 31, 2003 and 2002, respectively. In 2004, the increase in the Company’s outstanding debt was due primarily to the acquisition of assets from Benderson Development Company, Inc., and related entities (“Benderson”).

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      A summary of the aggregate financings through the issuance of common shares, preferred shares, construction loans, medium term notes, term loans and OP Units (units issued by the Company’s partnerships) aggregated $4.5 billion during the three-year period ended December 31, 2004, is summarized as follows (in millions):

	(1)	Includes 15.0 million shares issued in May 2004 and 5.45 million shares in December 2004.
	(2)	Issuance of Class I 7.5% Preferred Shares.
	(3)	Includes $275 million five-year senior unsecured notes with a coupon rate of 3.875%. These notes are due January 30, 2009 and were offered at 99.584% of par. Also includes, $250 million seven-year senior unsecured notes with a coupon rate of 5.25%. These notes are due April 15, 2011 and were offered at 99.574% of par.
	(4)	This facility bears interest at LIBOR plus 0.75% and matures in May 2006. This facility has two one-year extension options to 2008.
	(5)	Issued as consideration in the merger with JDN.
	(6)	Includes issuance of $50 million of preferred voting shares in conjunction with the merger with JDN. Proceeds from the Class G 8.0% preferred shares issued were used to retire $180 million, Preferred OP Units with a weighted average rate of 8.95%. Proceeds from the Class H 7.375% preferred shares issued were used to retire the Company’s Class C 8.375% preferred shares, Class D 8.68% preferred shares and 9.375% preferred voting shares.
	(7)	Represents a $150 million secured financing for five years with interest at a coupon rate of 4.41%.
	(8)	Seven-year senior unsecured notes with a coupon rate of 4.625%. These notes are due August 1, 2010 and were offered at 99.843% of par.
	(9)	This facility bears interest at LIBOR plus 1.0% and had a one-year term. The Company exercised two six-month extension options and repaid this facility in March 2005. This facility has a balance of $150 million at December 31, 2004. The proceeds from this facility were primarily used to repay JDN’s revolving credit facility with outstanding principal of $229 million at the time of the merger and to repay $85 million of MOPPRS debt and a related call option prior to maturity on March 31, 2003.

	(10)	Approximately $50 million of common equity was issued in exchange for two shopping center assets and $35 million was issued in exchange for the replacement of $35 million of 8.5% Preferred OP Units.
	(11)	Proceeds from the Class F 8.6% preferred shares issued were used to retire the Company’s Class A 9.5% preferred shares and 9.44% Class B preferred shares aggregating $149.8 million.

     In September 2004, the Company was added to the S&P MidCap 400 Index.

      In September 2004, the Company had declared effective a $1.0 billion shelf registration statement with the SEC under which debt securities, preferred shares or common shares may be issued. At December 31, 2004, the

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      In July 2004, the Company expanded its unsecured revolving credit facility from $650 million to $1.0 billion.

      In 2004, the Company acquired the following shopping center assets:

(1)	Reflects the Company’s purchase price, net of debt assumed, associated with the acquisition of its partner’s 50% ownership interest.

      In 2004, the Company’s joint ventures acquired the following shopping center assets, not including those assets purchased from the Company or its joint ventures:

(1)	The Company purchased a 20% equity interest.
(2)	The Company purchased an effective 10% equity interest. Approximately 16 acres of land were sold to Target for $2.5 million subsequent to the purchase. This project is currently under development.
(3)	The MDT Joint Venture acquired an indirect ownership interest in 23 retail properties. Eight of the properties acquired by the MDT Joint Venture were owned by the Company and one of the properties was held by the Company through a joint venture. These nine properties were valued at approximately $239 million. Fourteen of the properties acquired by the MDT Joint Venture were owned by Benderson and valued at approximately $299 million. The Company owns a 14.5% equity interest in the MDT Joint Venture.

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      In 2005, the Company sold the following properties:

(1)	The Company sold these assets to the MDT Joint Venture. The Company retained an effective 14.5% equity ownership interest in the joint venture. The amount includes 100% of the selling price; the Company will eliminate that portion of the gain associated with its 14.5% ownership interest.

     In 2004, the Company sold the following properties:

(1)	Properties located in Trinidad, Colorado; Waterbury, Connecticut; Hazard, Kentucky; Las Vegas, Nevada and North Olmsted, Ohio. Property in North Olmsted, Ohio represents the sale of an asset through the merchant building program. This property was consolidated into the Company with the adoption of FIN 46 in 2004.
(2)	Properties located in Canton, Georgia; Cumming, Georgia; Marietta, Georgia; Peachtree City, Georgia; Suwanee, Georgia; Sumter, South Carolina; Franklin, Tennessee and Milwaukee, Wisconsin.
(3)	The Company contributed eleven wholly-owned assets of the Company to the MDT joint venture. The Company retained an effective 14.5% equity ownership interest in the joint venture. The amount includes 100% of the selling price; the Company eliminated that portion of the gain associated with its 14.5% ownership interest (See 2004 Strategic Real Estate Transactions).
(4)	The Company formed a new joint venture with PREI in 2004 and contributed 12 neighborhood grocery anchored retail properties of the Company. The Company retained a 10% equity ownership interest in the joint venture. The amount

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	includes 100% of the selling price; the Company eliminated that portion of the gain associated with its 10% ownership interest (See 2004 Strategic Real Estate Transactions).
(5)	The Company formed DDR Markaz II in 2004 and contributed 13 neighborhood grocery anchored retail properties of the Company. The Company retained a 20% equity ownership interest in the joint venture. The amount includes 100% of the selling price; the Company eliminated that portion of the gain associated with its 20% ownership interest (See 2004 Strategic Real Estate Transactions).
(6)	Properties located in Sorrento, California and Mentor, Ohio.

     In 2004, the Company’s joint ventures sold the following shopping center properties, excluding the one property purchased by the Company as described above:

(1)	The joint venture sold a significant portion of the shopping center.

Strategic Real Estate Transactions

Caribbean Property Group

      In January 2005, the Company purchased 15 Puerto Rican retail real estate assets, totaling nearly 5.0 million square feet, from Caribbean Property Group, LLC (“CPG”). The total purchase price was approximately $1.15 billion. The financing for the transaction was provided by the assumption of approximately $660 million of existing debt and line of credit borrowings of approximately $449.5 million on the Company’s $1.0 billion senior unsecured credit facility and the application of a $30 million deposit funded in 2004. The availability on the line of credit was created by the Company’s $250 million common equity issuance in December 2004, $332 million of proceeds generated by sales of neighborhood grocery anchored centers to joint ventures and other recent asset sales, including $96.6 million of sales to the Company’s MDT Joint Venture.

Benderson Transaction

      In 2004, the Company entered into an agreement to purchase interests in 110 retail real estate assets with approximately 18.8 million square feet of GLA from Benderson. The purchase price of the assets, including associated expenses, was approximately $2.3 billion, including assumed debt and the value of a 2% equity interest in certain assets valued at approximately $16.2 million that Benderson retained as set forth below.

      The Company completed the purchase of 107 properties (of which 93 were purchased by the Company and 14 were purchased directly by the MDT Joint Venture) at various dates commencing May 14, 2004 through December 21, 2004. The remaining three properties will not be acquired.

      In conjunction with the Company’s acquisition of assets from Benderson, the following capital transactions were entered into aggregating $1.1 billion in net proceeds, in addition to the MDT Joint Venture discussed above, were completed:

	•	In May 2004, the Company entered into an agreement with Bank One, Wachovia and Wells Fargo for a $200 million three-year term loan with two one-year extension options at an interest rate of LIBOR plus 75 basis points.

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	•	In May 2004, the Company issued and sold 15,000,000 of DDR common shares with net proceeds of approximately $491 million.
	•	In May 2004, the Company issued and sold 6,800,000 depository shares, each representing 1/20 of a share of 7.50% Class I Cumulative Redeemable Preferred Shares. Net proceeds from the sale of the depository shares were approximately $164.2 million.
	•	In April 2004, the Company issued $250 million, 5.25% seven-year notes through a private placement.

      With respect to this joint venture, Benderson will have the right to cause the joint venture to redeem its 2.0% interest for a price equal to the agreed upon value of the interest after 20 months from the initial acquisition, of approximately $16.2 million, adjusted to reflect changes in the price of the Company’s common shares during the period in which Benderson holds the 2.0% interest, less certain distributions Benderson receives from the joint venture. If Benderson exercises the foregoing right, the Company will have the right to satisfy the joint venture’s obligation by purchasing Benderson’s interest for cash or by issuing DDR common shares to Benderson. If Benderson does not elect to exercise its right to have its interest redeemed, the Company will have the right after 30 months from the initial acquisition to purchase that 2.0% interest for cash or common shares for a price determined in the same manner as if Benderson had elected to cause such redemption.

      The Company funded the transaction through a combination of new debt financing, the issuance of cumulative preferred shares and common shares (see Financings) and asset transfers to the MDT Joint Venture (see MDT Joint Venture), discussed above, lines of credit borrowings and assumed debt. With respect to assumed debt, the fair value of indebtedness assumed upon closing was approximately $400 million, which included an adjustment of approximately $30.0 million to fair value, based on rates for debt with similar terms and remaining maturities as of May 2004.

      The Benderson assets are located in eleven states, with over 80.0% of the GLA in New York and New Jersey. The Benderson assets were approximately 94.6% leased, including master lease units, at June 30, 2004, and the largest tenants, based on revenues, include Tops Markets (Ahold USA), Wal-Mart/ Sam’s Club, Home Depot and Dick’s Sporting Goods. Prior to the transaction, the Company owned less than 100,000 square feet of GLA in New York and approximately 2.7 million square feet of GLA in New Jersey.

      Benderson entered into a five-year master lease for certain vacant space that was either covered by a letter of intent as of the closing date or a new lease with respect to which the tenant had not begun to pay rent as of the closing date. During the five-year master lease, Benderson agreed to pay the rent for such vacant space until each applicable tenant’s rent commencement date. The Company recorded the master lease receivable as part of the purchase price allocation. Included in accounts receivable at December 31, 2004 is approximately $3.2 million related to a master lease obligation from Benderson.

MDT Joint Venture

      In November 2003, the Company closed a transaction pursuant to which the Company formed an Australian based Listed Property Trust, the Macquarie DDR Trust (“MDT”), with Macquarie Bank Limited (ASX: MBL), an international investment bank, advisor and manager of specialized real estate funds in Australia (“MDT Joint Venture”). MDT focuses on acquiring ownership interests in institutional-quality community center properties in the U.S. DDR remains responsible for all day-to-day operations of the properties and receives fees at prevailing rates for property management, leasing, construction management, acquisitions, due diligence, dispositions (including outparcel sales) and financing. Through their joint venture, DDR and MBL will also receive base asset management fees and incentive fees based on the performance of MDT. At December 31, 2004, MDT owned an approximate 83% interest in the portfolio. DDR retained an effective 14.5% ownership interest in the assets and MBL primarily owning the remaining 2.5%.

      In May 2004, the MDT Joint Venture acquired an indirect ownership interest in 23 retail properties, which consisted of over 4.0 million square feet of Company-owned GLA. The aggregate purchase price of the properties was approximately $538.0 million. Eight of the properties acquired by MDT Joint Venture were owned by the Company and one of the properties was held by the Company through a joint venture which aggregated

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      Through March 15, 2005, the Company sold an additional nine properties to the MDT Joint Venture for approximately $284.2 million.

      The MDT Joint Venture has a two-year right of first offer which expires in March 2005 on 20 pre-determined joint venture and wholly-owned assets in DDR’s portfolio. This right of first offer only applies if DDR determines that it will pursue the sale of these assets. The MDT Joint Venture also is expected to pursue acquisitions of additional stabilized, institutional-quality community center properties.

      MDT is governed by a board of directors, which includes three members selected by DDR, three members selected by MBL and three independent members.

Coventry II

      In 2003, the Company entered into joint ventures (Coventry II Joint Venture”) with Coventry Real Estate Fund II (the “Coventry II Fund”). The Coventry II Fund was formed with several institutional investors and Coventry Real Estate Advisors (“CREA”) as the investment manager. Neither the Company nor any of its officers, own a common interest in the Coventry II Fund or have any incentive compensation tied to this Coventry II Fund. The Coventry II Fund and DDR have agreed to jointly acquire value-added retail properties in the United States. CREA obtained $330 million of equity commitments to co-invest exclusively in joint ventures with DDR. The Coventry II Fund’s strategy is to invest in a variety of retail properties that present opportunities for value creation, such as retenanting, market repositioning, redevelopment or expansion.

      DDR expects, but is not obligated, to co-invest 20% in each joint venture and will be responsible for day-to-day management of the properties. Pursuant to the terms of the joint venture, DDR will earn fees for property management, leasing and construction management. DDR also will earn a promoted interest, along with CREA, above a 10% preferred return after return of capital to fund investors. The assets of the Coventry II Joint Venture at December 31, 2004 are as follows:

(1)	Expected to be completed in Fall 2005. A third party developer owns 50% of this investment.
(2)	Net of $2.5 million sale to Target.

Prudential Joint Venture

      In October 2004, the Company completed a $128 million joint venture transaction (“DPG Joint Venture”) with Prudential Real Estate Investors (“PREI”). The Company contributed 12 neighborhood grocery-anchored retail properties to the joint venture, eight of which were acquired by the Company from Benderson and four of which were acquired from JDN. The joint venture assumed approximately $12 million of secured, non-recourse

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Kuwait Financial Centre Joint Venture II

      In November 2004, the Company completed a $204 million joint venture transaction (“DDR Markaz II”) with an investor group led by Kuwait Financial Centre-Markaz (a Kuwaiti publicly traded company). The Company contributed 13 neighborhood grocery-anchored retail properties to the joint venture, nine of which were acquired by the Company from Benderson, three of which were acquired from JDN and one of which was owned by the Company. DDR Markaz II obtained approximately $150 million of seven-year secured non-recourse financing at a fixed rate of approximately 5.1%. The Company maintains a 20% equity ownership in the joint venture and continues day-to-day management of the assets. The Company earns fees at prevailing rates for property management, leasing and development. The Company recognized a gain of approximately $2.5 million relating to the sale of the 80% interest in these properties and deferred a gain of approximately $0.7 million relating to the Company’s 20% interest.

Service Merchandise Joint Venture

      In March 2002, the Company entered into a joint venture with Lubert-Adler Funds and Klaff Realty, L.P., which was awarded asset designation rights for all of the retail real estate interests of the bankrupt estate of Service Merchandise Corporation. The Company has an approximate 25% interest in the joint venture. In addition, the Company earns fees for the management, leasing, development and disposition of the real estate portfolio. The designation rights enable the joint venture to determine the ultimate use and disposition of the real estate interests held by the bankrupt estate. At December 31, 2004, the portfolio consisted of 63 Service Merchandise retail sites totaling approximately 3.4 million square feet, of which 69.6% is leased or in the process of being leased.

      During 2004, the joint venture sold 11 sites and received gross proceeds of approximately $20.7 million and recorded an aggregate gain of $2.0 million of which the Company’s proportionate share was approximately $0.5 million. In 2004, the Company earned an aggregate of $1.4 million including disposition, development, management and leasing fees and interest income of $1.2 million relating to this investment. This joint venture has total assets and total debt of approximately $177.5 million and $62.6 million, respectively, at December 31, 2004. The Company’s investment in this joint venture was $27.2 million at December 31, 2004.

      During the year ended December 31, 2004, the Company completed seven expansion and redevelopment projects located in North Little Rock, Arkansas; Brandon, Florida; Starkville, Mississippi; Aurora, Ohio; Tiffin, Ohio; Monaca, Pennsylvania and Chattanooga, Tennessee at an aggregate cost of approximately $25.2 million. The Company is currently expanding/redeveloping 11 shopping centers located in Gadsden, Alabama; Tallahassee, Florida; Suwanee, Georgia; Ottumwa, Iowa; Gaylord, Michigan; Princeton, New Jersey; Hendersonville, North Carolina; Allentown, Pennsylvania; Erie, Pennsylvania; Brentwood, Tennessee and Johnson City, Tennessee at a projected incremental cost of approximately $33.9 million. The Company is also scheduled to commence construction on an additional expansion project at its shopping center located in Amherst, New York.

      During the year ended December 31, 2004, the Company substantially completed the construction of seven shopping centers located in Long Beach, California; Fort Collins, Colorado; St. Louis, Missouri; Hamilton, New Jersey; Apex, North Carolina; Irving, Texas and Mesquite, Texas.

      The Company currently has seven shopping center projects under construction. These projects are located in Miami, Florida; Overland Park, Kansas; Chesterfield, Michigan; Lansing, Michigan; Freehold, New Jersey;

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      The Company anticipates commencing construction in 2005 on two additional shopping centers located in Norwood, Massachusetts and McKinney, Texas.

      The wholly-owned and consolidated development funding schedule as of December 31, 2004 is as follows (in millions):

(1)	Amount includes funding for assets previously placed in service.
(2)	Amount will be reduced by additional proceeds to be obtained through construction loans.

      The Company has joint venture development agreements for four shopping center projects. These projects have an aggregate projected cost of approximately $119 million. These projects are located in Jefferson County (St. Louis, Missouri); Apex, North Carolina (Phases III and IV), adjacent to a wholly-owned development project; and San Antonio, Texas. A portion of the project located in Jefferson County (St. Louis, Missouri) has been substantially completed. The remaining projects are scheduled for completion in 2005 and 2006. At December 31, 2004, approximately $24.5 million of costs were incurred in relation to these development projects.

      During 2003, certain national and regional retailers experienced financial difficulties and several have filed for protection under bankruptcy laws. However, the Company’s occupancy rates have remained stable and lease rates have increased and rental rates have continued to grow. At December 31, 2004, the Company’s occupancy rate, lease rate and average rent per square foot were 94.7%, 95.4% and $10.79, respectively, compared to 94.3%, 95.1% and $10.82 at December 31, 2003. The slight decrease is due to the change in the properties in the portfolio.

      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.

      As one of the nation’s largest owners and developers of shopping centers, the Company has established close relationships with a large number of major national and regional retailers. Management is associated with and 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.

      As of February 28, 2005, the Company employed 523 full-time individuals, including executive, administrative and field personnel. The Company considers its relations with its personnel to be good.

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      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, 2004, the Portfolio Properties included 436 shopping centers and 32 business centers (166 of which are owned through joint ventures). The shopping centers consist of 420 community shopping centers, 12 enclosed mini-malls and four lifestyle centers. The Portfolio Properties also include over 550 undeveloped acres primarily located adjacent to certain of the shopping centers. The shopping centers aggregate approximately 71 million square feet of Company-owned GLA (approximately 96 million square feet of total GLA) and are located in 44 states, principally in the East and Midwest, with significant concentrations in New York, Florida and Ohio. The business centers aggregate 4.0 million square feet of Company owned GLA and are located in 11 states, primarily in Texas.

      The Company’s shopping centers are designed to attract local area customers and are typically anchored by two or more national tenant anchors and often include a supermarket, drug store, junior department store and/or other major “category-killer” discount retailers as additional anchors. The shopping centers are typically anchored by a Wal-Mart, Kohl’s or Target. 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.

      Shopping centers make up the largest portion of the Company’s portfolio, comprising 66.7 million (94.0%) square feet of Company-owned GLA, enclosed mini-malls account for 2.9 million (4.0%) square feet of Company-owned GLA and the lifestyle centers account for 1.4 million (2.0%) square feet of the Company-owned GLA. On December 31, 2004, the average annualized base rent per square foot of Company-owned GLA of the Company’s wholly-owned shopping centers was $9.70, and those owned through joint ventures was $12.15. The average annualized base rent per square foot of the Company’s business centers was $9.23.

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      The following table sets forth, at December 31, 2004, information as to anchor and/or national retail tenants which individually accounted for at least 1.0% of total annualized base rent of the wholly-owned properties and the Company’s proportionate share of joint venture properties:

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      The following table sets forth, at December 31, 2004, information as to anchor and/or national retail tenants which individually accounted for at least 1.0% of total annualized base rent of the wholly-owned properties and the Company’s joint venture properties:

      In addition, as of December 31, 2004, unless otherwise indicated, with respect to the 436 shopping centers:

	•	119 of these properties are anchored by a Wal-Mart, Kohl’s or Target store;
	•	These properties range in size from 10,000 square feet to approximately 1,100,000 square feet of total GLA (with 61 properties exceeding 400,000 square feet of total GLA);
	•	Approximately 65.0% of the Company-owned GLA of these properties is leased to national chains, including subsidiaries, with approximately 20.1% of the Company-owned GLA leased to regional chains and approximately 9.6% of the Company-owned GLA leased to local tenants;

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	•	Approximately 94.7% of the aggregate Company-owned GLA of these properties was occupied as of December 31, 2004 (and, with respect to the properties owned by the Company at December 31, for each of the five years beginning with 2000, between 94.3% and 95.2% of aggregate Company-owned GLA of these properties was occupied);
	•	Eleven wholly-owned properties are currently being expanded by the Company and four properties are being expanded which are owned by joint ventures. The Company is pursuing the expansion of one additional wholly-owned property and one joint venture property and
	•	Seven wholly-owned properties are currently being developed by the Company.

Tenant Lease Expirations and Renewals

      The following table shows tenant lease expirations for the next ten years at the Company’s shopping centers, including joint ventures, and business centers assuming that none of the tenants exercise any of their renewal options:

      The rental payments under certain of 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 will be obtained if not renewed.

      The Company owns approximately 550 undeveloped acres which generally consist of outlots, retail pads and expansion pads primarily located adjacent to certain of the shopping centers. The Company is pursuing an active marketing program to lease, develop or sell its undeveloped acres.

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Developers Diversified Realty Corporation

[Additional columns below]

[Continued from above table, first column(s) repeated]

		Company
		Owned								Average
		Gross				Total				Base Rent
		Leasable				Annualized				(Per SF)				Percent
		Area (SF)				Base Rent				(2)				Leased				Anchor Tenants (Lease Expiration)
1			423,493			$	4,378,828			$	9.15				95.6	%		Winn Dixie Stores (2014), Rhodes/ Marks Fitzgerald (2004), Goody’s (2009), Regal Cinemas, Inc. (2014), Stein Mart (2011), OfficeMax (2011), Michaels (2009), Books-A-Million (2010), Ross Stores (2014), Lowes Home Centers (Not Owned)
2			301,074			$	1,894,282			$	7.51				83.7	%		Office Depot (2007), Dollar Tree (2009), Burlington Coat Factory (2008), Regal Cinemas, Inc. (2006), Home Depot (Not Owned), Western Supermarkets (Not Owned)
3			98,016			$	1,177,041			$	12.01				100	%		Marshall’s (2006), Goody’s (Not Owned), Toys R Us (Not Owned), Kids R Us (Not Owned)
4			85,196			$	279,165			$	4.90				66.8	%
5			190,127			$	1,166,584			$	6.51				94.2	%		Lowe’s (2012), Winn-Dixie (2013), Goody’s (2010)
6			40,560			$	438,012			$	10.80				100	%		Goody’s (2011), Wal-Mart (Not Owned)
7			647,904			$	9,565,394			$	14.60				97.5	%		Bassett Furniture (2010), Ashley Homestores (2011), Stein Mart (2011), AMC Theatre (2021), Barnes & Noble (2012), Babies R Us (2007), Ross Stores, Inc. (2007), OfficeMax (2012), Jo-Ann, Etc. (2010), Best Buy (2014)
8			223,207			$	3,995,177			$	16.71				95.2	%		Bed Bath & Beyond (2011), Ross (2007), PetsMart (2015), Staples (2005), Albertsons-Osco Drug (Not Owned)
9			197,009			$	3,054,609			$	15.50				100	%		Ross Stores (2009), OfficeMax (2013), PetsMart (2014), Michaels (2009), Target (Not Owned), AMC Theatres (Not Owned)