Business description of SITE-Centers-Corp

General Development of Business

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 owning, managing and developing a portfolio of shopping centers and, to a lesser extent, office properties. Unless otherwise provided, references herein to the Company or DDR include Developers Diversified Realty Corporation, its wholly-owned and majority-owned subsidiaries and its consolidated and unconsolidated joint ventures.

The Company’s acquisitions and dispositions from January 1, 2006, to February 11, 2011, are listed below:

The table above does not reflect the Company’s acquisition of its partner’s 50% interest in one shopping center asset in 2011. In 2010, property dispositions include assets for which control has been relinquished and the Company does not have any further significant economic interest. In 2007, 315 shopping centers were acquired through the merger with Inland Retail Real Estate Trust, Inc. (“IRRETI”), of which 66 were held by an unconsolidated joint venture of IRRETI. Of the 15 properties acquired through unconsolidated joint ventures in 2006, nine properties are located in Brazil.

The Company files annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). You may read and copy any document the Company files with the SEC at the SEC’s Public Reference Room at 100 F 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 website 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 the Company files with the New York Stock Exchange at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

The Company’s corporate office is 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. The Company uses its Investor Relations website, (http://www.ddr.com), as a channel for routine distribution of important information, including news releases, analyst presentations, and financial information. The Company posts filings as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC, including the Company’s annual, quarterly and current reports on Forms 10-K, 10-Q, and 8-K; the Company’s proxy statements; and any amendments to those reports or statements. All such postings and filings are available on the Company’s Investor Relations website free of charge. In addition, this website allows investors and other interested persons to sign up to automatically receive e-mail alerts when the Company posts news releases and financial information on its website. The SEC also maintains a website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The content on any website referred to in this Annual Report on Form 10-K for the fiscal year ended December 31, 2010, is not incorporated by reference into this Form 10-K unless expressly noted.

Financial Information About Industry Segments

The Company is in the business of owning, managing and developing a portfolio of shopping centers and, to a lesser extent, office properties. See the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report on Form 10-K for certain information regarding the Company’s reportable segments, which is incorporated herein by reference.

Narrative Description of Business

The Company’s portfolio as of February 11, 2011, consisted of 522 shopping centers and six office properties (including 233 centers owned through unconsolidated joint ventures and three centers that are otherwise consolidated by the Company) and more than 1,800 acres of undeveloped land (of which approximately 250 acres are owned through unconsolidated joint ventures) (collectively, the “Portfolio Properties”). The shopping center properties consist of shopping centers, enclosed malls and lifestyle centers. From January 1, 2008, to February 11, 2011, the Company sold 137 shopping centers (including 49 properties owned through unconsolidated joint ventures) containing an aggregate of approximately 16 million square feet of gross leasable area (“GLA”) owned by the Company for an aggregate sales price of approximately $1.4 billion. From January 1, 2008, to February 11, 2011, the Company acquired 15 shopping centers (including 11 properties owned through unconsolidated joint ventures) containing an aggregate of approximately 1.9 million square feet of GLA owned by the Company for an aggregate purchase price of approximately $0.3 billion. In addition, the Company manages 41 properties owned by a third party.

At December 31, 2010, the Company had three wholly-owned shopping centers under development and/or redevelopment.

The following tables present the operating statistics impacting base and percentage rental revenues summarized by the following portfolios: combined shopping center portfolio, office property portfolio, wholly-owned shopping center portfolio and joint venture shopping center portfolio:

Centers owned

Aggregate occupancy rate

Average annualized base rent per occupied square foot

Consolidated centers primarily owned through a joint venture previously occupied by Mervyns

The Company’s aggregate occupancy rates in 2010 and 2009 are low relative to historical rates due to the impact of the major tenant bankruptcies that occurred in 2008. However, the Company has been successful in 2010 in executing leases for numerous previously vacant anchor boxes resulting in the overall year-over-year improvement in the occupancy rate for the combined portfolio.

The Company is self-administered and self-managed and, therefore, does not engage or pay a REIT advisor. The Company manages substantially all of the Portfolio Properties. At December 31, 2010, the Company owned and/or managed more than 101.8 million square feet of Company-owned GLA, which included all of the Portfolio Properties and 41 properties owned by a third party (aggregating 10.2 million square feet of GLA).

Strategy and Philosophy

The Company’s mission is to enhance shareholder value by exceeding the expectations of its tenants, innovating to create new growth opportunities and fostering the talents of its employees while rewarding their successes. The Company’s vision is to be the most admired provider of retail destinations and the first consideration for tenants, investors, partners and employees.

The Company’s investment objective is to increase cash flow and the value of its Portfolio Properties. The Company may pursue the disposition of certain real estate assets and utilize the proceeds to repay debt, to reinvest in other real estate assets and developments or for other corporate purposes. The Company’s real estate strategy and philosophy has been to grow its business through a combination of leasing, expansion, acquisition, development and redevelopment. At the end of 2008, in response to the unprecedented events that had taken place within the economic environment and in the capital markets, the Company refined its strategies to mitigate risk and focus on core operating results. These strategies are, as described below, to highlight the quality of the core portfolio and dispose of those properties that are not likely to generate superior growth, to reduce leverage by utilizing strategic financial measures and to protect the Company’s long-term financial strength.

The Company’s strategies are summarized as follows:

At December 31, 2010, the Company’s capitalization, excluding the Company’s proportionate share of indebtedness of its unconsolidated joint ventures, aggregated $8.5 billion and consisted of $4.3 billion of debt,

$555.0 million of preferred shares and $3.6 billion of market equity (market equity is defined as common shares and Operating Partnership Units (“OP Units”) outstanding, multiplied by $14.09, the closing price of the common shares on the New York Stock Exchange at December 31, 2010), resulting in a debt to total market capitalization ratio of 0.51 to 1.0, as compared to the ratios of 0.68 to 1.0 and 0.83 to 1.0 at December 31, 2009 and 2008, respectively. The improvement in this ratio is primarily a result of the Company’s strategic initiative to delever its balance sheet. At December 31, 2010, the Company’s total debt, excluding the Company’s proportionate share of indebtedness of its unconsolidated joint ventures, consisted of $3.4 billion of fixed-rate debt and $0.9 billion of variable-rate debt, including $150 million of variable-rate debt that had been effectively swapped to a fixed rate. At December 31, 2009, the Company’s total debt, excluding the Company’s proportionate share of indebtedness of its unconsolidated joint ventures, consisted of $3.7 billion of fixed-rate debt and $1.5 billion of variable-rate debt, including $400 million of variable-rate debt that had been effectively swapped to a fixed 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, dividends, status as a REIT and operating policies, are determined by the Board of Directors. Although the Board of Directors has no present intention to amend or revise its policies, the Board of Directors may do so from time to time without a vote of the Company’s shareholders.

Recent Developments

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 the year ended December 31, 2010, for information on certain recent developments of the Company, which is incorporated herein by reference.

Competition

As one of the nation’s largest owners and developers of shopping centers (measured by total GLA), the Company has established close relationships with a large number of major national and regional retailers. The Company’s management is associated with and actively participates in many shopping center and REIT industry organizations.

Notwithstanding these relationships, numerous developers and real estate companies, private and public, compete with the Company in leasing space in shopping centers to tenants. In addition, tenants have been more selective in new store openings, which are expected to reduce the demand for new space.

Employees

As of January 31, 2011, the Company employed 682 full-time individuals, including executive, administrative and field personnel. The Company considers its relations with its personnel to be good.

Qualification as a Real Estate Investment Trust

As of December 31, 2010, the Company met 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, with the exception of its taxable REIT subsidiary (“TRS”), will not be subject to federal income tax to the extent it meets certain requirements of the Code.

The risks described below could materially and adversely affect the Company’s results of operations, financial condition, liquidity and cash flows. These risks are not the only risks that the Company faces. The Company’s business operations could also be affected by additional factors that are not presently known to it or that the Company currently considers to be immaterial to its operations.

The Economic Performance and Value of the Company’s Shopping Centers Depend on Many Factors, Each of Which Could Have an Adverse Impact on the Company’s Cash Flows and Operating Results

The economic performance and value of the Company’s real estate holdings can be affected by many factors, including the following:

Because the Company’s properties consist primarily of community shopping centers, the Company’s performance is linked to general economic conditions in the market for retail space. The market for retail space has been and may continue to be adversely affected by weakness in the national, regional and local economies, the adverse financial condition of some large retailing companies, the ongoing consolidation in the retail sector, the excess amount of retail space in a number of markets and increasing consumer purchases through catalogs and the Internet. To the extent that any of these conditions occur, they are likely to affect market rents for retail space. In addition, the Company may face challenges in the management and maintenance of its properties or incur increased operating costs, such as real estate taxes, insurance and utilities, which may make its properties unattractive to tenants. The loss of rental revenues from a number of the Company’s tenants and its inability to replace such tenants may adversely affect the Company’s profitability and ability to meet its debt and other financial obligations and make distributions to shareholders.

The Company’s Dependence on Rental Income May Adversely Affect Its Ability to Meet Its Debt Obligations and Make Distributions to Shareholders

Substantially all of the Company’s income is derived from rental income from real property. As a result, the Company’s performance depends on its ability to collect rent from tenants. The Company’s income and funds for distribution would be negatively affected if a significant number of its tenants, or any of its major tenants, were to do the following:

Any of these actions could result in the termination of tenants’ leases and the loss of rental income attributable to the terminated leases. Lease terminations by an anchor tenant or a failure by that anchor tenant to occupy the premises could also result in lease terminations or reductions in rent by other tenants in the same shopping centers under the terms of some leases. In addition, the Company cannot be certain that any tenant whose lease expires will renew that lease or that it will be able to re-lease space on economically advantageous terms. The loss of rental revenues from a number of the Company’s major tenants and its inability to replace such tenants may adversely affect the Company’s profitability and its ability to meet debt and other financial obligations and make distributions to shareholders.

The Company Relies on Major Tenants, Making It Vulnerable to Changes in the Business and Financial Condition of, or Demand for Its Space by, Such Tenants

As of December 31, 2010, the annualized base rental revenues of the Company’s tenants that are equal to or exceed 1.5% of the Company’s aggregate annualized shopping center base rental revenues, including its proportionate share of joint venture aggregate annualized shopping center base rental revenues, are as follows:

Walmart

T.J. Maxx

PetSmart

Bed Bath & Beyond

Kohl’s

Michaels

The retail shopping sector has been affected by economic conditions, as well as the competitive nature of the retail business and the competition for market share where stronger retailers have out-positioned some of the weaker retailers. These shifts have forced some market share away from weaker retailers and required them, in some cases, to declare bankruptcy and/or close stores. For example, in 2008, certain retailers filed for bankruptcy protection and other retailers announced store closings even though they did not file for bankruptcy protection.

As information becomes available regarding the status of the Company’s leases with tenants in financial distress or the future plans for their spaces change, the Company may be required to write off and/or accelerate depreciation and amortization expense associated with a significant portion of the tenant-related deferred charges in future periods. The Company’s income and ability to meet its financial obligations could also be adversely affected in the event of the bankruptcy, insolvency or significant downturn in the business of one of these tenants or any of the Company’s other major tenants. In addition, the Company’s results could be adversely affected if any of these tenants do not renew their leases as they expire.

The Company’s Acquisition Activities May Not Produce the Cash Flows That It Expects and May Be Limited by Competitive Pressures or Other Factors

The Company intends to acquire existing retail properties only to the extent that suitable acquisitions can be made on advantageous terms. Acquisitions of commercial properties entail risks, such as the following:

In addition, the Company may not be in a position or have the opportunity in the future to make suitable property acquisitions on advantageous terms due to competition for such properties with others engaged in real estate investment who may have greater financial resources than the Company. The Company’s inability to successfully acquire new properties may affect the Company’s ability to achieve its anticipated return on investment, which could have an adverse effect on its results of operations.

Real Estate Property Investments Are Illiquid; Therefore, the Company May Not Be Able to Dispose of Properties When Desired or on Favorable Terms

Real estate investments generally cannot be disposed of quickly. In addition, the federal income tax code imposes restrictions, which are not applicable to other types of real estate companies, on the ability of a REIT to dispose of properties. Therefore, the Company may not be able to diversify its portfolio in response to economic or other conditions promptly or on favorable terms, which could cause the Company to incur losses and reduce its cash flows and adversely affect distributions to shareholders.

The Company’s Development and Construction Activities Could Affect Its Operating Results

The Company intends to continue the selective development and construction of retail properties in accordance with its development underwriting policies as opportunities arise. The Company expects to phase in construction until sufficient pre-leasing is reached and financing is in place. The Company’s development and construction activities include the following risks:

Additionally, the time frame required for development, construction and lease-up of these properties means that the Company may wait several years for a significant cash return. If any of the above events occur, the development of properties may hinder the Company’s growth and have an adverse effect on its results of operations and cash flows. In addition, new development activities, regardless of whether or not they are ultimately successful, typically require substantial time and attention from management.

The Company Has Variable-Rate Debt and Is Subject to Interest Rate Risk

The Company has indebtedness with interest rates that vary depending upon the market index. In addition, the Company has revolving credit facilities that bear interest at a variable rate on any amounts drawn on the facilities. The Company may incur additional variable-rate debt in the future. Increases in interest rates on variable-rate debt would increase the Company’s interest expense, which would negatively affect net earnings and cash available for payment of its debt obligations and distributions to its shareholders.

The Company’s Ability to Increase Its Debt Could Adversely Affect Its Cash Flow

At December 31, 2010, the Company had outstanding debt of approximately $4.3 billion (excluding its proportionate share of unconsolidated joint venture mortgage debt aggregating $0.8 billion). The Company intends to maintain a conservative ratio of debt to total market capitalization (the sum of the aggregate market value of the Company’s common shares and operating partnership units, the liquidation preference on any preferred shares outstanding and its total indebtedness). The Company is subject to limitations under its credit facilities and indentures relating to its ability to incur additional debt; however, the Company’s organizational documents do not contain any limitation on the amount or percentage of indebtedness it may incur. If the Company were to become more highly leveraged, its cash needs to fund debt service would increase accordingly. Under such circumstances, the Company’s risk of decreases in cash flow, due to fluctuations in the real estate market, reliance on its major

tenants, acquisition and development costs and the other factors discussed above, could subject the Company to an even greater adverse impact on its financial condition and results of operations. In addition, increased leverage could increase the risk of default on the Company’s debt obligations, which could further reduce its cash available for distribution and adversely affect its ability to dispose of its portfolio on favorable terms, which could cause the Company to incur losses and reduce its cash flows.

Disruptions in the Financial Markets Could Affect the Company’s Ability to Obtain Financing on Reasonable Terms and Have Other Adverse Effects on the Company and the Market Price of the Company’s Common Shares

The U.S. and global equity and credit markets have experienced significant price volatility, dislocations and liquidity disruptions over the last few years, which caused market prices of many stocks to fluctuate substantially and the spreads on prospective debt financings to widen considerably. These circumstances materially impacted liquidity in the financial markets, making terms for certain financings less attractive and, in certain cases, resulting in the unavailability of certain types of financing. Continued uncertainty in the equity and credit markets may negatively impact the Company’s ability to access additional financing at reasonable terms or at all, which may negatively affect the Company’s ability to refinance its debt, obtain new financing or make acquisitions. These circumstances may also adversely affect the Company’s tenants, including their ability to enter into new leases, pay their rents when due and renew their leases at rates at least as favorable as their current rates.

A prolonged downturn in the equity or credit markets may cause the Company to seek alternative sources of potentially less attractive financing, and may require it to adjust its business plan accordingly. In addition, these factors may make it more difficult for the Company to sell properties or may adversely affect the price it receives for properties that it does sell, as prospective buyers may experience increased costs of financing or difficulties in obtaining financing. These events in the equity and credit markets may make it more difficult or costly for the Company to raise capital through the issuance of its common shares or debt securities. These disruptions in the financial markets also may have a material adverse effect on the market value of the Company’s common shares and other adverse effects on the Company or the economy in general. There can be no assurances that government responses to the disruptions in the financial markets will restore consumer confidence, stabilize the markets or increase liquidity and the availability of equity or credit financing.

Changes in the Company’s Credit Ratings or the Debt Markets, as well as Market Conditions in the Credit Markets, Could Adversely Affect the Company’s Publicly Traded Debt and Revolving Credit Facilities

The market value for the Company’s publicly traded debt depends on many factors, including the following:

The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. The U.S. credit markets and the sub-prime residential mortgage market have experienced severe dislocations and liquidity disruptions in the last few years. There has been a substantial widening of yield spreads generally, as buyers demand greater compensation for credit risk. In addition, there has been a reduction in the availability of capital for some issuers of debt due to the decrease in the number of available lenders and decreased willingness of lenders to offer capital at cost-efficient rates. Furthermore, current market conditions can be exacerbated by leverage. The continuation of these circumstances in the credit markets and/or additional fluctuations in the financial markets and prevailing interest rates could have an adverse effect on the Company’s ability to access capital and its cost of capital.

In addition, credit rating agencies continually review their ratings for the companies that they follow, including the Company. The credit rating agencies also evaluate the real estate industry as a whole and may change their credit rating for the Company based on their overall view of the industry. Any rating organization that rates the Company’s publicly traded debt may lower the rating or decide not to rate the publicly traded debt in its sole discretion. The ratings of the notes are based primarily on the rating organization’s assessment of the likelihood of timely payment of interest when due and the payment of principal on the maturity date. A negative change in the Company’s rating could have an adverse effect on the Company’s publicly traded debt and revolving credit facilities as well as the Company’s ability to access capital and its cost of capital.

The Company’s Cash Flows and Operating Results Could Be Adversely Affected by Required Payments of Debt or Related Interest and Other Risks of Its Debt Financing

The Company is generally subject to the risks associated with debt financing. These risks include the following:

If a property is mortgaged to secure payment of indebtedness and the Company cannot make the mortgage payments, it may have to surrender the property to the lender with a consequent loss of any prospective income and equity value from such property that may also adversely impact the Company’s credit ratings. Any of these risks can place strains on the Company’s cash flows, reduce its ability to grow and adversely affect its results of operations.

The Company’s Financial Condition Could Be Adversely Affected by Financial Covenants

The Company’s credit facilities and the indentures under which its senior and subordinated unsecured indebtedness is, or may be, issued contain certain financial and operating covenants, including, among other things, leverage ratios, certain coverage ratios, as well as limitations on the Company’s ability to incur secured and unsecured indebtedness, sell all or substantially all of its assets and engage in mergers and certain acquisitions. These credit facilities and indentures also contain customary default provisions including the failure to pay principal and interest issued thereunder in a timely manner, the failure to comply with the Company’s financial and operating covenants, the occurrence of a material adverse effect on the Company, and the failure of the Company or its majority — owned subsidiaries (i.e., entities in which the Company has a greater than 50% interest) to pay when due certain indebtedness in excess of certain thresholds beyond applicable grace and cure periods. These covenants could limit the Company’s ability to obtain additional funds needed to address cash shortfalls or pursue growth opportunities or transactions that would provide substantial return to its shareholders. In addition, a breach of these covenants could cause a default or accelerate some or all of the Company’s indebtedness, which could have a material adverse effect on its financial condition.

The Company’s Ability to Continue to Obtain Permanent Financing Cannot Be Assured

In the past, the Company has financed certain acquisition and development activities in part with proceeds from its credit facilities or offerings of its debt or equity securities. These financings have been, and may continue to be, replaced by other financings. However, the Company may not be able to obtain more permanent financing for future acquisitions or development activities on acceptable terms. If market interest rates were to increase or other

unfavorable market conditions were to exist at a time when amounts were outstanding under the Company’s credit facilities, or if other variable-rate debt was outstanding, the Company’s interest costs would increase, causing potentially adverse effects on its financial condition and results of operations.

If the Company Fails to Qualify as a REIT in Any Taxable Year, It Will Be Subject to U.S. Federal Income Tax as a Regular Corporation and Could Have Significant Tax Liability

The Company intends to operate in a manner that allows it to qualify as a REIT for U.S. federal income tax purposes. However, REIT qualification requires that the Company satisfy numerous requirements (some on an annual or quarterly basis) established under highly technical and complex provisions of the Code, for which there are a limited number of judicial or administrative interpretations. The Company’s status as a REIT requires an analysis of various factual matters and circumstances that are not entirely within its control. Accordingly, it is not certain that the Company will be able to qualify and remain qualified as a REIT for U.S. federal income tax purposes. Even a technical or inadvertent violation of the REIT requirements could jeopardize the Company’s REIT qualification. Furthermore, Congress or the Internal Revenue Service (“IRS”) might change the tax laws or regulations and the courts could issue new rulings, in each case potentially having retroactive effect that could make it more difficult or impossible for the Company to continue to qualify as a REIT. If the Company fails to qualify as a REIT in any tax year, the following would result:

Even if the Company remains qualified as a REIT, it may face other tax liabilities that reduce its cash flow. The Company may also be subject to certain federal, state and local taxes on its income and property either directly or at the level of its subsidiaries. Any of these taxes would decrease cash available for distribution to the Company’s shareholders.

Compliance with REIT Requirements May Negatively Affect the Company’s Operating Decisions

To maintain its status as a REIT for U.S. federal income tax purposes, the Company must meet certain requirements, on an ongoing basis, including requirements regarding its sources of income, the nature and diversification of its assets, the amounts the Company distributes to its shareholders and the ownership of its shares. The Company may also be required to make distributions to its shareholders when it does not have funds readily available for distribution or at times when the Company’s funds are otherwise needed to fund capital expenditures.

As a REIT, the Company must distribute at least 90% of its annual net taxable income (excluding net capital gains) to its shareholders. To the extent that the Company satisfies this distribution requirement, but distributes less than 100% of its net taxable income, the Company will be subject to U.S. federal corporate income tax on its undistributed taxable income. In addition, the Company will be subject to a 4% non-deductible excise tax if the actual amount paid to its shareholders in a calendar year is less than the minimum amount specified under U.S. federal tax laws. From time to time, the Company may generate taxable income greater than its income for financial reporting purposes, or its net taxable income may be greater than its cash flow available for distribution to its shareholders. If the Company does not have other funds available in these situations, it could be required to borrow funds, sell a portion of its securities or properties at unfavorable prices or find other sources of funds in order to meet the REIT distribution requirements and to avoid corporate income tax and the 4% excise tax.

In addition, the REIT provisions of the Code impose a 100% tax on income from “prohibited transactions.” Prohibited transactions generally include sales of assets that constitute inventory or other property held for sale to customers in the ordinary course of business, other than foreclosure property. This 100% tax could impact the Company’s decisions to sell property if it believes such sales could be treated as a prohibited transaction. However, the Company would not be subject to this tax if it were to sell assets through a taxable REIT subsidiary. The Company will also be subject to a 100% tax on certain amounts if the economic arrangements between the Company and a taxable REIT subsidiary are not comparable to similar arrangements among unrelated parties.

Dividends Paid by REITs Generally Do Not Qualify for Reduced Tax Rates

In general, the maximum U.S. federal income tax rate for dividends paid to individual U.S. shareholders is 15% (through 2012). Due to its REIT status, the Company’s distributions to individual shareholders generally are not eligible for the reduced rates.

Property Ownership Through Partnerships and Joint Ventures Could Limit the Company’s Control of Those Investments and Reduce Its Expected Return

Partnership or joint venture investments may involve risks not otherwise present for investments made solely by the Company, including the possibility that the Company’s partner or co-venturer might become bankrupt, that its partner or co-venturer might at any time have different interests or goals than the Company, and that its partner or co-venturer may take action contrary to the Company’s instructions, requests, policies or objectives, including the Company’s policy with respect to maintaining its qualification as a REIT. Other risks of joint venture investments include impasse on decisions, such as a sale, because neither the Company’s partner or co-venturer nor the Company would have full control over the partnership or joint venture. These factors could limit the return that the Company receives from such investments or cause its cash flows to be lower than its estimates. There is no limitation under the Company’s Articles of Incorporation, or its code of regulations, as to the amount of funds that the Company may invest in partnerships or joint ventures. In addition, a partner or co-venturer may not have access to sufficient capital to satisfy its funding obligations to the joint venture. Furthermore, if credit conditions in the capital markets deteriorate, the Company could be required to reduce the carrying value of its equity method investments if a loss in the carrying value of the investment is other than a temporary decline. As of December 31, 2010, the Company had approximately $417.2 million of investments in and advances to unconsolidated joint ventures holding 236 operating shopping centers.

The Company’s Real Estate Assets May Be Subject to Impairment Charges

On a periodic basis, the Company assesses whether there are any indicators that the value of its real estate properties and other investments may be impaired. A property’s value is impaired only if the estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. In the Company’s estimate of cash flows, it considers factors such as expected future operating income, trends and prospects, the effects of demand, competition and other factors. The Company is required to make subjective assessments as to whether there are impairments in the value of its real estate properties and other investments. These assessments have a direct impact on the Company’s earnings because recording an impairment charge results in an immediate negative adjustment to earnings. There can be no assurance that the Company will not take additional charges in the future related to the impairment of its assets. Any future impairment could have a material adverse effect on the Company’s results of operations in the period in which the charge is taken.

The Company’s Inability to Realize Anticipated Returns from Its Retail Real Estate Investments Outside the United States Could Adversely Affect Its Results of Operations

The Company may not realize the intended benefits of transactions outside the United States, as the Company may not have any prior experience with the local economies or culture. The assets may not perform as well as the Company anticipated or may not be successfully integrated, or the Company may not realize the improvements in occupancy and operating results that it anticipated. The Company could be subject to local laws governing these properties, with which it has no prior experience, and which may present new challenges for the management of the

Company’s operations. In addition, financing may not be available at acceptable rates and equity requirements may be different than the Company’s strategy in the United States. Each of these factors may adversely affect the Company’s ability to achieve anticipated return on investment, which could have an adverse effect on its results of operations.

The Company Is Subject to Litigation That Could Adversely Affect Its Results of Operations

The Company is a defendant from time to time in lawsuits and regulatory proceedings relating to its business. Due to the inherent uncertainties of litigation and regulatory proceedings, the Company cannot accurately predict the ultimate outcome of any such litigation or proceedings. An unfavorable outcome could adversely impact the Company’s business, financial condition or results of operations. Any such litigation could also lead to increased volatility of the trading price of the Company’s common shares. For a further discussion of litigation risks, see “Legal Matters” in Note 8 — Commitments and Contingencies to the Consolidated Financial Statements.

The Company’s Real Estate Investments May Contain Environmental Risks That Could Adversely Affect Its Results of Operations

The acquisition of properties may subject the Company to liabilities, including environmental liabilities. The Company’s operating expenses could be higher than anticipated due to the cost of complying with existing or future environmental laws and regulations. In addition, under various federal, state and local laws, ordinances and regulations, the Company may be considered an owner or operator of real property or to have arranged for the disposal or treatment of hazardous or toxic substances. As a result, the Company may become liable for the costs of removal or remediation of certain hazardous substances released on or in its property. The Company may also be liable for other potential costs that could relate to hazardous or toxic substances (including governmental fines and injuries to persons and property). The Company may incur such liability whether or not it knew of, or was responsible for, the presence of such hazardous or toxic substances. Such liability could be of substantial magnitude and divert management’s attention from other aspects of the Company’s business and, as a result, could have a material adverse effect on the Company’s operating results and financial condition, as well as its ability to make distributions to shareholders.

An Uninsured Loss on the Company’s Properties or a Loss That Exceeds the Limits of the Company’s Insurance Policies Could Subject the Company to Lost Capital or Revenue on Those Properties

Under the terms and conditions of the leases currently in effect on the Company’s properties, tenants generally are required to indemnify and hold the Company harmless from liabilities resulting from injury to persons, air, water, land or property, on or off the premises, due to activities conducted on the properties, except for claims arising from the negligence or intentional misconduct of the Company or its agents. Additionally, tenants are generally required, at the tenant’s expense, to obtain and keep in full force during the term of the lease, liability and full replacement value property damage insurance policies. The Company has obtained comprehensive liability, casualty, flood and rental loss insurance policies on its properties. All of these policies may involve substantial deductibles and certain exclusions. In addition, tenants could fail to properly maintain their insurance policies or be unable to pay the deductibles. Should a loss occur that is uninsured or is in an amount exceeding the combined aggregate limits for the policies noted above, or in the event of a loss that is subject to a substantial deductible under an insurance policy, the Company could lose all or part of its capital invested in, and anticipated revenue from, one or more of the properties, which could have a material adverse effect on the Company’s operating results and financial condition, as well as its ability to make distributions to shareholders.

Compliance with the Americans with Disabilities Act and Fire, Safety and Other Regulations May Require the Company to Make Unplanned Expenditures That Adversely Affect the Company’s Cash Flows

All of the Company’s properties are required to comply with the Americans with Disabilities Act, or ADA. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers, and non-compliance could result in imposition of fines by the U.S. government or

an award of damages to private litigants, or both. While the tenants to whom the Company leases properties are obligated by law to comply with the ADA provisions, and are typically obligated to cover costs of compliance, if required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these tenants to cover costs could be adversely affected. As a result, the Company could be required to expend funds to comply with the provisions of the ADA, which could adversely affect the results of operations and financial condition and its ability to make distributions to shareholders. In addition, the Company is required to operate the properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to the properties. The Company may be required to make substantial capital expenditures to comply with those requirements, and these expenditures could have a material adverse effect on its ability to meet its financial obligations and make distributions to shareholders.

The Company’s Properties Could be Subject to Damage from Weather-Related Factors

A number of the Company’s properties are located in areas that are subject to natural disasters. Certain of the Company’s properties are located in California and in other areas with higher risk of earthquakes. In addition, many of the Company’s properties are located in coastal regions, and would therefore be affected by any future increases in sea levels or in the frequency or severity of hurricanes and tropical storms, whether such increases are caused by global climate changes or other factors.

The Company’s Articles of Incorporation Contain Limitations on Acquisitions and Changes in Control

In order to maintain the Company’s status as a REIT, its Articles of Incorporation prohibit any person, except for certain shareholders as set forth in the Company’s Articles of Incorporation, from owning more than 5% of the Company’s outstanding common shares. This restriction is likely to discourage third parties from acquiring control of the Company without consent of its Board of Directors even if a change in control were in the best interests of shareholders.

The Company Has a Number of Shareholders Who Beneficially Own a Significant Portion of Its Outstanding Common Shares, and Their Interests May Differ from the Interests of Other Shareholders

The Company’s significant shareholders are in a position to influence any matters that are brought to a vote of the holders of the Company’s common shares, including, among others, the election of the Company’s Board of Directors and any amendments to its Articles of Incorporation and code of regulations. Without the support of the Company’s significant shareholders, certain transactions, such as mergers, tender offers, sales of assets and business combinations, that could give shareholders the opportunity to realize a premium over the then-prevailing market prices for common shares may be more difficult to consummate. The interests of the Company’s significant shareholders may differ from the interests of other shareholders. If the Company’s significant shareholders sell substantial amounts of the Company’s common shares in the public market, the trading price of the Company’s common shares could decline significantly.

Changes in Market Conditions Could Adversely Affect the Market Price of the Company’s Publicly Traded Securities

As with other publicly traded securities, the market price of the Company’s publicly traded securities depends on various market conditions, which may change from time to time. Among the market conditions that may affect the market price of the Company’s publicly traded securities are the following:

The Company May Issue Additional Securities Without Shareholder Approval

The Company can issue preferred shares and common shares without shareholder approval subject to certain limitations in the Company’s Articles of Incorporation. Holders of preferred shares have priority over holders of common shares, and the issuance of additional shares reduces the interest of existing holders in the Company.

The Company’s Executive Officers Have Agreements That Provide Them with Benefits in the Event of a Change in Control of the Company or if Their Employment Is Terminated Without Cause

The Company has entered into employment and other agreements with certain executive officers that provide them with severance benefits if their employment ends under certain circumstances following a change in control of the Company or if the Company terminates the executive officer “without cause” as defined in the employment agreements. These benefits could increase the cost to a potential acquirer of the Company and thereby prevent or deter a change in control of the Company that might involve a premium price for the common shares or otherwise affect the interests of shareholders.

None.

At December 31, 2010, the Portfolio Properties included 525 shopping centers (including 236 centers owned through unconsolidated joint ventures and three that are otherwise consolidated by the Company) and six office properties. The shopping centers consist of 495 community shopping centers, 22 enclosed malls and eight lifestyle centers. The Portfolio Properties also include more than 1,800 acres of undeveloped land, primarily development sites and parcels, located adjacent to certain of the shopping centers. The shopping centers aggregate approximately 91.5 million square feet of Company-owned GLA (approximately 129 million square feet of total GLA) and are located in 41 states, plus Puerto Rico and Brazil. These centers are principally in the Southeast and Midwest, with significant concentrations in Georgia, Florida, New York and Ohio. The Company owns land in Canada and Russia at which development was deferred. The office properties aggregate 0.5 million square feet of Company-owned GLA and are located in four states, primarily in Maryland.

The Company’s shopping centers are designed to attract local area customers and are typically anchored by two or more national tenant anchors (such as Walmart, Kohl’s or Target). The properties often include a supermarket, drug store, junior department store and/or other major “category-killer” discount retailers as additional anchors or tenants. 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, constituting 80.5 million (87.9%) square feet of Company-owned GLA. Enclosed malls account for 8.0 million square feet (8.8%) of Company-owned GLA, and lifestyle centers account for 3.0 million square feet (3.3%) of Company-owned GLA. At December 31, 2010, the average annualized base rent per square foot of Company-owned GLA of the Company’s 286 wholly-owned shopping centers was $12.23. For the 236 shopping centers owned through joint ventures and three of which are consolidated, annualized base rent per square foot was $14.74. The average annualized base rent per square foot of the Company’s office properties was $11.05.

Information as to the Company’s 10 largest tenants based on total annualized rental revenues and Company-owned GLA at December 31, 2010, is set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of this Annual Report on Form 10-K for the year ended December 31, 2010. In addition, as of December 31, 2010, unless otherwise indicated, with respect to the 525 shopping centers:

Tenant Lease Expirations and Renewals

The following table shows the impact of tenant lease expirations for the next 10 years at the Company’s 286 wholly-owned shopping centers and six office properties, assuming that none of the tenants exercise any of their renewal options:

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Total

The following table shows the impact of tenant lease expirations at the joint venture level for the next 10 years at the Company’s 236 unconsolidated joint venture shopping centers and three consolidated shopping 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 replacement tenants will be obtained if not renewed.

100

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Alabama

1 Huntsville, AL

Arizona

2 Mesa, AZ

Connecticut

3 Danbury, CT

4 Manchester, CT

Delaware

5 Dover, DE

Florida

6 Bradenton, FL

7 Ocala, FL

8 Orlando, FL

9 Pensacola, FL

Illinois

10 Crystal Lake, IL

11 Downers Grove, IL

Indiana

12 Evansville, IN

Kentucky

13 Lexington, KY

14 Louisville, KY

15 Paducah, KY

Louisiana

16 Bossier City, LA

17 Houma, LA

Massachusetts

18 Burlington, MA

19 Swansea, MA

Michigan

20 Westland, MI

Mississippi

21 Hattiesburg, MS

Nevada

22 Las Vegas, NV

New Hampshire

23 Salem, NH

New Jersey

24 Paramus, NJ

25 Wayne, NJ

New York

26 Middletown, NY

North Carolina

27 Raleigh, NC

Oklahoma

28 Warr Acres, OK

South Carolina

29 N. Charleston, SC

Tennessee

30 Antioch, TN

31 Franklin, TN

32 Knoxville, TN

Texas

33 Baytown, TX

34 Longview, TX

35 McAllen, TX

36 Richardson, TX

37 Sugar Land, TX

Virginia

38 Chesapeake, VA

Maryland

1 Silver Springs, MD (I)

2 Silver Springs, MD (II)

3 Silver Springs, MD (III)

Ohio

4 Twinsburg, OH

Pennsylvania

5 Erie, PA

Utah

6 Salt Lake City, UT

Other than routine litigation and administrative proceedings arising in the ordinary course of business, the Company is not presently involved in any litigation nor, to its knowledge, is any litigation threatened against the Company or its properties that is reasonably likely to have a material adverse effect on the liquidity or results of operations of the Company.

The Company is a party to various joint ventures with Coventry Real Estate Fund II, L.L.C. and Coventry Fund II Parallel Fund, L.L.C., which funds are advised and managed by Coventry Real Estate Advisors L.L.C. (collectively, the “Coventry II Fund”), through which 11 existing or proposed retail properties, along with a portfolio of former Service Merchandise locations, were acquired at various times from 2003 through 2006. The properties were acquired by the joint ventures as value-add investments, with major renovation and/or ground-up development contemplated for many of the properties. The Company is generally responsible for day-to-day management of the properties. On November 4, 2009, Coventry Real Estate Advisors L.L.C., Coventry Real Estate Fund II, L.L.C. and Coventry Fund II Parallel Fund, L.L.C. (collectively, “Coventry”) filed suit against the Company and certain of its affiliates and officers in the Supreme Court of the State of New York, County of New York. The complaint alleges that the Company: (i) breached contractual obligations under a co-investment agreement and various joint venture limited liability company agreements, project development agreements and management and leasing agreements; (ii) breached its fiduciary duties as a member of various limited liability companies; (iii) fraudulently induced the plaintiffs to enter into certain agreements; and (iv) made certain material misrepresentations. The complaint also requests that a general release made by Coventry in favor of the Company in connection with one of the joint venture properties be voided on the grounds of economic duress. The complaint seeks compensatory and consequential damages in an amount not less than $500 million, as well as punitive damages. In response, the Company filed a motion to dismiss the complaint or, in the alternative, to sever the plaintiffs’ claims. In June 2010, the court granted in part (regarding Coventry’s claim that the Company breached a fiduciary duty owed to Coventry) and denied in part (all other claims) the Company’s motion. Coventry has filed a notice of appeal regarding that portion of the motion granted by the court. The Company filed an answer to the complaint, and has asserted various counterclaims against Coventry.

The Company believes that the allegations in the lawsuit are without merit and that it has strong defenses against this lawsuit. The Company will vigorously defend itself against the allegations contained in the complaint. This lawsuit is subject to the uncertainties inherent in the litigation process and, therefore, no assurance can be given as to its ultimate outcome. However, based on the information presently available to the Company, the Company does not expect that the ultimate resolution of this lawsuit will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

On November 18, 2009, the Company filed a complaint against Coventry in the Court of Common Pleas, Cuyahoga County, Ohio, seeking, among other things, a temporary restraining order enjoining Coventry from terminating “for cause” the management agreements between the Company and the various joint ventures because the Company believes that the requisite conduct in a “for-cause” termination (i.e., fraud or willful misconduct committed by an executive of the Company at the level of at least senior vice president) did not occur. The court heard testimony in support of the Company’s motion (and Coventry’s opposition) and on December 4, 2009, issued a ruling in the Company’s favor. Specifically, the court issued a temporary restraining order enjoining Coventry from terminating the Company as property manager “for cause.” The court found that the Company was likely to succeed on the merits, that immediate and irreparable injury, loss or damage would result to the Company in the absence of such restraint, and that the balance of equities favored injunctive relief in the Company’s favor. The Company has filed a motion for summary judgment seeking a ruling by the Court that there was no basis for Coventry’s “for cause” termination as a matter of law. The Court has not yet ruled on the Company’s motion for summary judgment. A trial on the Company’s request for a permanent injunction has not yet been scheduled. The temporary restraining order will remain in effect until the trial. Due to the inherent uncertainties of the litigation process, no assurance can be given as to the ultimate outcome of this action.

EXECUTIVE OFFICERS

The executive officers of the Company are as follows:

Scott A. Wolstein

Daniel B. Hurwitz

David J. Oakes

Paul Freddo

John S. Kokinchak

Christa A. Vesy

Scott A. Wolstein was appointed Executive Chairman of the Board in January 2010. Mr. Wolstein had served as the Chief Executive Officer of the Company from its organization in 1992 until December 2009. Mr. Wolstein has been a Director of the Company since 1992 and served as Chairman of the Board of Directors of the Company from May 1997 through December 2009.

Daniel B. Hurwitz was appointed President and Chief Executive Officer in January 2010 and has served as a director of the Company since June 2009. Mr. Hurwitz had served as the President and Chief Operating Officer of the Company from May 2007 to January 2010, as Senior Executive Vice President and Chief Investment Officer from May 2005 through May 2007 and as Executive Vice President of the Company from June 1999 through April 2005. He was previously a member of the Company’s Board of Directors from May 2002 to May 2004.

David J. Oakes was appointed Senior Executive Vice President and Chief Financial Officer in February 2010. Mr. Oakes had served as Senior Executive Vice President of Finance and Chief Investment Officer from December 2008 to February 2010 and as Executive Vice President of Finance and Chief Investment Officer from April 2007 to December 2008. Prior to joining the Company, Mr. Oakes served as Senior Vice President and portfolio manager at Cohen & Steers Capital Management, an investment firm, from April 2002 through March 2007.

Paul Freddo was appointed Senior Executive Vice President of Leasing and Development in December 2008. Mr. Freddo joined the Company in August 2008 and served as Senior Vice President of Development-Western Region from August 2008 to December 2008. Prior to joining the Company, Mr. Freddo served as Vice President and Director of Real Estate for JCPenney, a retail department store, from January 2004 through August 2008.

John S. Kokinchak was appointed Senior Executive Vice President of Property Management in March 2010. Mr. Kokinchak was the Executive Vice President of Property Management from March 2008 to March 2010 and Senior Vice President of Property Management from March 2006 to March 2008. Mr. Kokinchak joined the Company in August 2004 and served as Vice President of Property Management, Specialty Centers from August 2004 to March 2006.

Christa A. Vesy was appointed Senior Vice President and Chief Accounting Officer in November 2006. From September 2004 to November 2006, Mrs. Vesy worked for The Lubrizol Corporation, a specialty chemicals company, where she served as manager of external financial reporting and then as controller for the lubricant additives business segment.

The high and low sale prices per share of the Company’s common shares, as reported on the New York Stock Exchange (the “NYSE”) composite tape, and declared dividends per share for the quarterly periods indicated were as follows:

2010

First

Second

Third

Fourth

2009:

As of February 11, 2011, there were 8,981 record holders and approximately 33,000 beneficial owners of the Company’s common shares.

The Company’s Board of Directors approved a 2011 dividend policy that it believes will increase the Company’s free cash flow, while still adhering to REIT payout requirements. It is expected this payout policy will result in a 2011 annual dividend at nearly the minimum distribution required to maintain REIT status, which will be determined and approved by the Board of Directors on a quarterly basis. The Company’s 2011 dividend policy should result in additional free cash flow, which is expected to be applied primarily to reduce leverage. In January 2011, the Company declared its first quarter 2011 dividend of $0.04 per common share, payable on April 5, 2011, to shareholders of record at the close of business on March 22, 2011.

The Company intends to continue to declare quarterly dividends on its common shares. The Company is required by the Internal Revenue Code of 1986, as amended, to distribute at least 90% of its REIT taxable income. The amount of cash available for dividends is impacted by capital expenditures and debt service requirements to the extent the Company was to fund such items out of cash flow from operations. However, no assurances can be made as to the amounts of future dividends, as the decision to declare and pay dividends on the common shares in 2011, as well as the timing, amount and composition of any such future dividends, will be at the discretion of the Company’s Board of Directors and will be subject to the Company’s cash flow from operations, earnings, financial condition, capital requirements and such other factors as the Board of Directors considers relevant.

An Internal Revenue Service (“IRS”) revenue procedure allows the Company to satisfy REIT distribution requirements by distributing up to 90% of the aggregate common share dividends utilizing the Company’s common shares in lieu of cash. The Company paid a portion of the 2009 common share dividend through the issuance of its common shares. Although the Company does not currently intend to distribute a portion of the dividends in shares, the Company may distribute a portion of its dividends in shares in the future.

The Company has a dividend reinvestment plan under which shareholders may elect to reinvest their dividends automatically in common shares. Under the plan, the Company may, from time to time, elect to purchase common shares in the open market on behalf of participating shareholders or may issue new common shares to such shareholders.

ISSUER PURCHASES OF EQUITY SECURITIES

October 1 — 31, 2010

November 1 — 30, 2010

December 1 — 31, 2010

Total

The consolidated financial data included in the following table has been derived from the financial statements for the last five years and includes the information required by Item 301 of Regulation S-K. The following selected consolidated financial data should be read in conjunction with the Company’s consolidated financial statements and related notes and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All consolidated financial data has been restated, as appropriate, to reflect the impact of activity classified as discontinued operations for all periods presented.

COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
(Amounts in thousands, except per share data)

Operating Data:

Revenues

Expenses:

Rental operations

General and administrative

Impairment charges

Depreciation and amortization

Interest income

Interest expense

Gain on debt retirement, net

Loss on equity derivative instruments

Other expense, net

(Loss) income before earnings from equity method investments and other items

Equity in net income (loss) of joint ventures

Impairment of joint venture investments

(Loss) gain on change in control of interests

Tax (expense) benefit of taxable REIT subsidiaries and state franchise and income taxes

(Loss) income from continuing operations

(Loss) income from discontinued operations

(Loss) income before gain on disposition of real estate

Gain on disposition of real estate, net of tax

Net (loss) income

Loss (income) attributable to non-controlling interests

Net (loss) income attributable to DDR

(Loss) earnings per share data — Basic:

(Loss) income from continuing operations attributable to DDR common shareholders

(Loss) income from discontinued operations attributable to DDR common shareholders

Net (loss) income attributable to DDR common shareholders

Weighted-average number of common shares

(Loss) earnings per share data — Diluted:

Dividends declared

Balance Sheet Data:

Real estate (at cost)

Real estate, net of accumulated depreciation

Investments in and advances to joint ventures

Total assets

Total debt

Equity

Cash Flow Data:

Cash flow provided by (used for):

Operating activities

Investing activities

Financing activities

Other Data:

Funds from operations^(B):

Net (loss) income applicable to common shareholders

Depreciation and amortization of real estate investments

Equity in net (income) loss from joint ventures

Joint ventures’ funds from operations^(B):

Non-controlling interests (OP Units)

Gain on disposition of depreciable real estate

Funds from operations applicable to DDR common shareholders^(B):

Preferred share dividends

FFO

Weighted-average shares and OP Units (Diluted)^(C):

2010

2009

2008

2007

2006

Executive Summary

The Company is a self-administered and self-managed Real Estate Investment Trust (“REIT”), in the business of owning, managing and developing a portfolio of shopping centers. As of December 31, 2010, the Company’s portfolio consisted of 525 shopping centers and six office properties (including 236 properties owned through unconsolidated joint ventures and three that are otherwise consolidated by the Company). These properties consist of shopping centers, lifestyle centers and enclosed malls owned in the United States, Puerto Rico and Brazil. At December 31, 2010, the Company owned and/or managed approximately 129.0 million total square feet of gross leasable area (“GLA”), which includes all of the aforementioned properties and 41 properties owned by a third party. The Company owns more than 1,800 acres of undeveloped land including an interest in land in Canada and Russia at which development was deferred. The Company believes that its portfolio of shopping center properties is one of the largest (measured by the amount of total GLA) currently held by any publicly-traded REIT. At December 31, 2010, the aggregate occupancy of the Company’s shopping center portfolio was 88.4%, as compared to 86.9% at December 31, 2009. The Company’s portfolio consisted of 525 shopping centers at December 31, 2010, as compared to 618 shopping centers at December 31, 2009. The average annualized base rent per occupied square foot was $13.36 at December 31, 2010, as compared to $12.75 at December 31, 2009.

Current Strategy

The Company seeks to continue to decrease leverage and focus on operational execution in order to improve the Company’s risk profile, portfolio quality and property-level operating results. The Company expects to decrease leverage and improve liquidity through retained cash flow enhanced by incremental leasing, new financings, asset sales and other means.

The Company’s portfolio and asset class have demonstrated limited volatility during prior economic downturns and continue to generate relatively consistent cash flows. The following set of core competencies is expected to continue to benefit the Company:

Balance Sheet

The Company took the following steps in 2010 to reduce leverage and enhance financial flexibility:

Currently, new debt and equity capital remains available and mortgages are being extended or refinanced at acceptable terms. The Company extended its average debt term to approximately 4.0 years, an increase of approximately one year from year-end 2009.

Operational Accomplishments

The Company accomplished the following in 2010 to improve the quality of its portfolio:

Retail Environment

The retail market in the United States continued to be challenged throughout 2010 by high unemployment and lagging consumer confidence. However, consumer spending improved marginally, and retailers formed optimistic store opening plans in order to meet their projected demand in 2011 and 2012. Retailers became more flexible with their design and prototype requirements, in some cases agreeing to take available space that they had previously rejected.

Due to continued consumer cautiousness, retailers that specialize in low-cost necessity goods and services are taking market share from high-end discretionary retailers that dominate traditional mall portfolios. The Company’s largest tenants, including Walmart/Sam’s Club, Target, T.J. Maxx/Marshalls and Kohl’s, appeal to value-oriented consumers, remain well-capitalized, and have outperformed other retail categories. Additionally, several retailers have been able to access capital this past year through equity and debt offerings, which was positive news for the retail industry.

Company Fundamentals

The following table lists the Company’s 10 largest tenants based on total annualized rental revenues and Company-owned GLA of the wholly-owned properties and the Company’s proportionate share of unconsolidated joint venture properties combined as of December 31, 2010:

10.

The following table lists the Company’s 10 largest tenants based on total annualized rental revenues and Company-owned GLA of both the wholly-owned properties and the Company’s 10 largest tenants for the unconsolidated joint venture properties as of December 31, 2010:

Walmart/Sam’s Club

T.J. Maxx/Marshalls/A.J.Wright/Homegoods

Bed, Bath & Beyond

Lowe’s

Rite Aid

OfficeMax

Dick’s Sporting Goods

Publix Supermarkets

Kroger

Ross Dress for Less

AMC Theatres

Tops Markets

The Company has shown relatively consistent occupancy historically. Despite the decrease in occupancy that occurred in 2009, occupancy improved throughout 2010 in the portfolio as a whole, and with year-end occupancy at 88.4%, overall occupancy remains healthy.

The Company continues to sign a large number of new leases as reflected below. Leasing spreads for the combined portfolio improved to approximately 3.7% in 2010.

As reflected below, the Company’s long-term performance shows strong rent growth and resilient occupancy throughout multiple economic cycles.

The Company’s innovative ancillary income platform produces value and mitigates risk. This program seeks to create cash flow streams from empty or underutilized space with a low cost of investment for the Company.

The Company’s value-oriented shopping center format is ideal for keeping maintenance costs and capital expenditures low, while still maintaining an attractive, high quality retail environment. The Company believes its capital expenditures as a percentage of net operating income are low relative to its industry peers which benefits the Company’s cash flow.

Year in Review — 2010

For the year ended December 31, 2010, the Company recorded a loss attributable to DDR of approximately $209.4 million, or $1.03 per share (diluted), compared to net loss attributable to DDR of $356.6 million, or $2.51 per share (diluted), for the prior year. Funds From Operations (“FFO”) applicable to common shareholders for the year ended December 31, 2010, was a loss of $11.3 million compared to a loss of $144.6 million for the year ended December 31, 2009. The decrease in reported loss and FFO applicable to common shareholders for the year ended December 31, 2010, is primarily the result of a decrease in impairment-related charges and lower expense associated with the equity derivative instruments, partially offset by the establishment of a reserve against certain deferred tax assets in 2010 and lower gain on debt retirement.

During 2010, the Company focused on its core competencies and internal growth. These core competencies include its stable relationships with national tenants and the lending and investment community, maintained by strong internal leasing, management and investment teams. The Company continued making progress on its balance sheet initiatives; strengthening the operations of its Prime Portfolio, including selling non-prime assets; and maintaining the strength and depth of the organization.

At December 31, 2010, total consolidated outstanding indebtedness was $4.3 billion as compared to $5.2 billion at December 31, 2009, representing a decrease of nearly $0.9 billion. In 2010, the Company opportunistically raised capital, reduced leverage and extended its debt maturities. The Company refinanced its unsecured revolving credit facilities and extended the term to February 2014. The Company issued $350 million aggregate principal amount of five-year convertible unsecured notes in November, $300 million aggregate principal amount of 10-year unsecured notes in August and $300 million aggregate principal amount of seven-year unsecured notes in March. The Company also repurchased $259.1 million aggregate principal amount of its senior unsecured notes due in 2010, 2011 and 2012 through open market purchases and through a tender offer. The Company issued approximately 53.0 million common shares, generating $454.4 million of gross proceeds.

These financing activities contributed to the Company’s extended maturity profile and assisted in lowering the Company’s corporate risk profile.

In 2010, the Company generated approximately $791 million of proceeds from the sale of wholly-owned and joint venture assets, of which the Company’s share was approximately $250 million. The Company continues to be focused on selling those assets that are not part of its Prime Portfolio, including non-income producing or negative income producing assets.

On the operational side, the Company executed a total of 1,798 leases during 2010 representing 11.3 million square feet. In addition, the spreads on new leases executed during 2010 were positive as compared to the negative spreads experienced in 2009. Portfolio occupancy of 88.4% at December 31, 2010, marks an improvement over the 2009 end-of-year rate of 86.9%. The Company’s accomplishments in the lease-up of large-box space (generally greater than 20,000 square feet of GLA) is expected to contribute to operating results in 2011 as tenants take possession of space and start paying rent.

As the Company looks forward to 2011 and its strategic plans, it is concentrating on generating and maintaining sustainable and consistent economic value that produces compelling total shareholder returns. The Company intends to be a disciplined investor, focused on cash flow growth and long-term goals, and to continue to respond to economic developments and operate in the best interest of its shareholders.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements of the Company include the accounts of the Company and all subsidiaries where the Company has financial or operating control. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has utilized available information, including the Company’s history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments of certain amounts included in the consolidated financial statements, giving due consideration to materiality. It is possible that the ultimate outcome as anticipated by management in formulating its estimates inherent in these financial statements might not materialize. Application of the critical accounting policies described below involves the exercise of judgment and the use of assumptions as to future uncertainties. As a result, actual results could differ from these estimates. In addition, other companies may utilize different estimates that may affect the comparability of the Company’s results of operations to those of companies in similar businesses.

Revenue Recognition and Accounts Receivable

Rental revenue is recognized on a straight-line basis that averages minimum rents over the current term of the leases. Certain of these leases provide for percentage and overage rents based upon the level of sales achieved by the tenant. Percentage and overage rents are recognized after a tenant’s reported sales have exceeded the applicable sales break point set forth in the applicable lease. The leases also typically provide for tenant reimbursements of common area maintenance and other operating expenses and real estate taxes. Accordingly, revenues associated with tenant reimbursements are recognized in the period in which the expenses are incurred based upon the tenant lease provision. Management fees are recorded in the period earned. Ancillary and other property-related income, which includes the leasing of vacant space to temporary tenants, is recognized in the period earned. Lease termination fees are included in other revenue and recognized and earned upon termination of a tenant’s lease and relinquishment of space in which the Company has no further obligation to the tenant. Acquisition and financing fees are earned and recognized at the completion of the respective transaction in accordance with the underlying agreements. Fee income derived from the Company’s unconsolidated joint venture investments is recognized to the extent attributable to the unaffiliated ownership interest.

The Company makes estimates of the collectibility of its accounts receivable related to base rents, including straight-line rentals, expense reimbursements and other revenue or income. The Company specifically analyzes accounts receivable and analyzes historical bad debts, customer credit worthiness, current economic trends and

changes in customer payment patterns when evaluating the adequacy of the allowance for doubtful accounts. In addition, with respect to tenants in bankruptcy, the Company makes estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectibility of the related receivable. In some cases, the timing of the ultimate resolution of these claims can exceed one year. These estimates have a direct impact on the Company’s earnings because a higher bad debt reserve results in reduced earnings.

Notes Receivable

Notes receivable include certain loans that are held for investment and are generally collateralized by real estate related investments. Loan receivables are recorded at stated principal amounts or at initial investment plus accretable yield for loans purchased at a discount. The Company defers certain loan origination and commitment fees, net of certain origination costs, and amortizes them over the term of the related loan. The Company considers notes receivable to be past-due or delinquent when a contractually required principal or interest payment is not remitted in accordance with the provisions of the underlying agreement. The Company evaluates the collectability of both interest and principal on each loan based on an assessment of the underlying collateral to determine whether it is impaired, and not by using internal risk ratings. A loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value of the underlying collateral. As the underlying collateral for a majority of the notes receivable are real estate related investments, the same valuation techniques are utilized to value the collateral as those used to determine the fair value of real estate investments for impairment purposes. Interest income on performing loans is accrued as earned. Interest income on non-performing loans is generally recognized on a cash basis.

Consolidation

The Company has a number of joint venture arrangements with varying structures. The Company consolidates entities in which it owns less than a 100% equity interest if it is determined that it is a variable interest entity (“VIE”) and the Company has a controlling financial interest in that VIE, or is the controlling general partner. The analysis to identify whether the Company is the primary beneficiary of a VIE is based upon which party has (a) the power to direct activities of the VIE that most significantly affect the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether it has the power to direct the activities of the VIE that most significantly affect the VIE’s performance, the Company is required to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed. This qualitative assessment has a direct impact on the Company’s financial statements as the detailed activity of off-balance sheet joint ventures are not presented within the Company’s consolidated financial statements.

Further, under its consolidation policy, the Company believes that it no longer has the contractual ability to direct the activities that most significantly affect the economic performance of entities that have been transferred to the control of a court-appointed receiver (“Receivership”). The Company’s accounting policy for evaluating Receivership transactions is based upon Accounting Standards Codification No. 810, Consolidation (“ASC 810”), whereas diversity in practice exists whereby others may apply the provisions of ASC 360-20, Property, Plant, and Equipment — Real Estate Sales (“Alternative View”). Under the Alternative View, the Company would likely not record a gain (or loss) upon deconsolidation and would continue to consolidate the entity (and its assets and non-recourse liabilities) until it legally transferred the title of the underlying assets and was relieved of its obligations. The Emerging Issues Task Force (“EITF”) of the FASB discussed this type of transaction during 2010 but did not reach a conclusion. The EITF determined that further research was necessary to more fully understand the scope and implications of the matter prior to issuing a consensus for exposure. If the EITF reaches a consensus in favor of the Alternative View, the Company will evaluate the impact of such conclusion on its financial statements.

Real Estate and Long-Lived Assets

Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The Company is required to make subjective assessments as to the useful lives of its properties for purposes of determining the amount of depreciation to reflect on an annual basis with respect to those properties. These assessments have a direct impact on

the Company’s net income. If the Company would lengthen the expected useful life of a particular asset, it would be depreciated over more years and result in less depreciation expense and higher annual net income.

On a periodic basis, management assesses whether there are any indicators that the value of real estate assets, including land held for development and construction in progress, may be impaired. A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. The determination of undiscounted cash flows requires significant estimates by management. In management’s estimate of cash flows, it considers factors such as expected future operating income (loss), trends and prospects, the effects of demand, competition and other factors. In addition, the undiscounted cash flows may consider a probability-weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or a range is estimated at the balance sheet date. Subsequent changes in estimated undiscounted cash flows arising from changes in anticipated actions could affect the determination of whether an impairment exists and whether the effects could have a material impact on the Company’s net income. If the Company is evaluating the potential sale of an asset or land held for development, the undiscounted future cash flows analysis is probability-weighted based upon management’s best estimate of the likelihood of the alternative courses of action. To the extent an impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the fair value of the property.

The Company is required to make subjective assessments as to whether there are impairments in the value of its real estate properties and other investments. These assessments have a direct impact on the Company’s net income because recording an impairment charge results in an immediate negative adjustment to net income.

Assessment of recoverability by the Company of certain other lease-related costs must be made when the Company has a reason to believe that the tenant may not be able to perform under the terms of the lease as originally expected. This requires management to make estimates as to the recoverability of such assets.

The Company allocates the purchase price to assets acquired and liabilities assumed on a gross basis based on their relative fair values at the date of acquisition. In estimating the fair value of the tangible and intangible assets and liabilities acquired, the Company considers information obtained about each property as a result of its due diligence, marketing and leasing activities. It applies various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation and available market information. The Company is required to make subjective estimates in connection with these valuations and allocations. These intangible assets are reviewed as part of the overall carrying basis of an asset for impairment.

Off-Balance Sheet Arrangements — Impairment Assessment

The Company has a number of off-balance sheet joint ventures and other unconsolidated arrangements with varying structures. On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment’s value is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment and such difference is deemed to be other than temporary. To the extent an impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.

Measurement of Fair Value

Real Estate and Unconsolidated Joint Venture Investments

The Company is required to assess the value of certain impaired consolidated and unconsolidated joint venture investments as well as the underlying collateral for certain financing notes receivable. The fair value of real estate investments utilized in the Company’s impairment calculations is estimated based on the price that would be received to sell an asset in an orderly transaction between marketplace participants at the measurement date. Investments without a public market are valued based on assumptions made and valuation techniques used by the Company. The decline in liquidity and prices of real estate and real estate related investments in the past several years, as well as the availability of observable transaction data and inputs, have made it more difficult and/or

subjective to determine the fair value of such investments. As a result, amounts ultimately realized by the Company from investments sold may differ from the fair values presented, and the differences could be material.

The valuation of impaired real estate assets, investments and real estate collateral is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each asset as well as the income capitalization approach considering prevailing market capitalization rates, analysis of recent comparable sales transactions, actual sales negotiations, bona fide purchase offers received from third parties and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence. In general, the Company considers multiple valuation techniques when measuring fair value of an investment. However, in certain circumstances, a single valuation technique may be appropriate.

For operational real estate assets, the significant assumptions included the capitalization rate used in the income capitalization valuation, as well as the projected property net operating income. For projects under development, the significant assumptions included the discount rate, the timing for the construction completion and project stabilization and the exit capitalization rate. For investments in unconsolidated joint ventures, the Company also considered the valuation of any underlying joint venture debt. Valuation of real estate assets are calculated based on market conditions and assumptions made by management at the measurement date, which may differ materially from actual results if market conditions or the underlying assumptions change.

Equity Derivative Instruments

The Company’s equity derivative instruments are recognized in the financial statements based on their fair value. The fair value is estimated at the end of each period based on a pricing model that includes all relevant assumptions including (but not limited to) expected volatility, expected term, dividend yield and risk-free interest rate. These assumptions are subjective and generally require significant analysis and judgment to develop.

Real Estate Held for Sale

Pursuant to the definition of a component of an entity, assuming no significant continuing involvement, the sale of a property is considered a discontinued operation. In addition, the operations from properties classified as held for sale are considered discontinued operations. The Company generally considers assets to be held for sale when the transaction has been approved by the appropriate level of management and there are no known significant contingencies relating to the sale such that the sale of the property within one year is considered probable. This generally occurs when a sales contract is executed with no contingencies and the prospective buyer has significant funds at risk to ensure performance. Accordingly, the results of operations of operating properties disposed of or classified as held for sale, for which the Company has no significant continuing involvement, are reflected in the current period and retrospectively as discontinued operations.

Deferred Tax Assets and Tax Liabilities

The Company accounts for income taxes related to its taxable REIT subsidiary under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. The Company records net deferred tax assets to the extent it believes it is more likely than not that these assets will be realized. In making such determination, the Company considers all available positive and negative evidence, including forecasts of future taxable income, the reversal of other existing temporary differences, available net operating loss carryforwards, tax planning strategies and recent results of operations. Several of these considerations require assumptions and significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that the Company is utilizing to manage the Company. Based on this assessment, management must evaluate the need for, and amount of, valuation allowances against the Company’s deferred tax assets. The Company would record a valuation allowance to reduce deferred tax assets when it has determined that an uncertainty exists regarding their realizability, which would increase the provision for income taxes. To the extent facts and circumstances change in the future, adjustments to the valuation allowances may be required. In the event the Company were to determine that it would be able to realize the deferred income tax assets in the future in excess of their net recorded amount, the Company would adjust the valuation allowance, which would reduce the provision for income taxes. The Company makes

certain estimates in the determination on the use of valuation reserves recorded for deferred tax assets. These estimates could have a direct impact on the Company’s earnings, as a difference in the tax provision would impact the Company’s earnings.

The Company has made estimates in assessing the impact of the uncertainty of income taxes. Accounting standards prescribe a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. These estimates have a direct impact on the Company’s net income because higher tax expense will result in reduced earnings.

Accrued Liabilities

The Company makes certain estimates for accrued liabilities and litigation reserves. These estimates are subjective and based on historical payments, executed agreements, anticipated trends and representations from service providers. These estimates are prepared based on information available at each balance sheet date and are reevaluated upon the receipt of any additional information. Many of these estimates are for payments that occur within one year. These estimates have a direct impact on the Company’s net income because a higher accrual will result in reduced earnings.

Stock-Based Employee Compensation

Stock-based compensation requires all share-based payments to employees, including grants of stock options, to be recognized in the financial statements based on their fair value. The fair value is estimated at the date of grant using a Black-Scholes option pricing model with weighted-average assumptions for the activity under stock plans. Option pricing model input assumptions, such as volatility, expected term and risk-free interest rate, impact the fair value estimate. Further, the forfeiture rate impacts the amount of aggregate compensation. These assumptions are subjective and generally require significant analysis and judgment to develop.

When estimating fair value, some of the assumptions will be based on or determined from external data, and other assumptions may be derived from experience with share-based payment arrangements. The appropriate weight to place on experience is a matter of judgment, based on relevant facts and circumstances.

The risk-free interest rate is based upon a U.S. Treasury Strip with a maturity date that approximates the expected term of the option. The expected life of an award is derived by referring to actual exercise experience. The expected volatility of the stock is derived by referring to changes in the Company’s historical share prices over a time frame similar to the expected life of the award.

Comparison of 2010 to 2009 Results of Operations

Continuing Operations

Shopping center properties owned as of January 1, 2009, but excluding acquisitions, properties under development/redevelopment and those classified in discontinued operations, are referred to herein as the “Core Portfolio Properties.”

Revenues from Operations (in thousands)

Base and percentage rental revenues^(A)

Recoveries from tenants^(B)

Other^(C)

Total Revenues

Core Portfolio Properties

Acquisition of real estate assets

Development/redevelopment of shopping center properties

Office properties

Straight-line rents

The decrease in the Core Portfolio Properties is due to net leasing activity across numerous shopping center assets. The Company acquired three assets in the fourth quarter of 2009 contributing to the increase above. The decrease in straight-line rents primarily is due to write-offs associated with the early termination of tenant leases.

The Company’s aggregate occupancy rates in 2010 and 2009 are low relative to historical rates due to the impact of the major tenant bankruptcies that occurred in 2008. However, the Company was successful in 2010 in executing leases for numerous previously vacant anchor boxes resulting in the overall year-over-year improvement in the occupancy rate for the combined portfolio.

Management fees

Development fees

Ancillary income

Other property related income

Lease termination fees

Financing fees

Other

The reduction in management fees was primarily attributed to asset sales by several of the Company’s unconsolidated joint ventures. During 2010, the Company executed lease terminations on three vacant Walmart spaces.

Expenses from Operations (in thousands)

Operating and maintenance^(A)

Real estate taxes^(A)

Impairment charges^(B)

General and administrative^(C)

Depreciation and amortization^(A)

Provision for bad debt expense

Personal property

The increase in real estate taxes primarily is due to an approximately $3.0 million real estate tax assessment received in 2010 that was retroactive to 2006 for one of the Company’s largest properties in California. The entire expense for the four-year supplemental tax bill is included in the 2010 results. In addition, the real estate taxes for the Puerto Rico assets increased $1.4 million due to a reassessment effective in the third quarter of 2009. The Company continues to aggressively appeal real estate tax valuations, as appropriate, particularly for those shopping centers impacted by major tenant bankruptcies. The fluctuations in depreciation expense are attributable to development assets placed in service and redevelopment activities partially offset by higher real estate assets written off in 2009 related to major tenant bankruptcies and early lease terminations within the Core Portfolio.

Land held for development⁽¹⁾

Undeveloped land and construction in progress⁽²⁾

Assets marketed for sale⁽³⁾

Sold assets

Assets formerly occupied by Mervyns⁽⁴⁾

Total discontinued operations

Total impairment charges

During 2010, the Company incurred $5.3 million in employee separation charges. In 2009, the Company recorded an accelerated non-cash charge of approximately $15.4 million related to certain equity awards as a result of the Company’s change in control provisions included in the Company’s equity-based award plans (see 2009 Strategic Transaction Activity). The Company continues to expense internal leasing salaries, legal salaries and related expenses associated with certain leasing and re-leasing of existing space.

Other Income and Expenses (in thousands)

Interest income^(A)

Interest expense^(B)

Gain on retirement of debt, net^(C)

Loss on equity derivative instruments^(D)

Other expense, net^(E)

Weighted-average debt outstanding (in billions)

Weighted-average interest rate

Litigation-related expenses

Lease liability

Debt extinguishment costs

Note receivable reserve

Sale of MDT units

Abandoned projects and other expenses

The year ended December 31, 2010, included a $5.1 million expense recorded in connection with a legal matter at a property in Long Beach, California (see discussion in Economic Conditions — Legal Matters). This reserve was partially offset by a tax benefit of approximately $2.4 million because the asset is owned through the Company’s TRS. Litigation-related expenses also include costs incurred by the Company to defend the litigation arising from joint venture assets that are owned through the Company’s investments with the Coventry Real Estate Fund II (“Coventry II Fund”) (see Economic Conditions — Legal Matters). Total litigation-related expenditures, net of the tax benefit, were $12.2 million for the year ended December 31, 2010.

The lease liability relates to a charge recorded on three operating leases as a result of an abandoned development project and two office closures.

Other items (in thousands)

Equity in net income (loss) of joint ventures^(A)

Impairment of joint venture investments^(B)

(Loss) gain on change in control of interests^(C)

Tax (expense) benefit of taxable REIT subsidiaries and state franchise and income taxes^(D)

At December 31, 2010, the Company had an approximate 48% interest in an unconsolidated joint venture, Sonae Sierra Brasil BV Sarl, which owns real estate in Brazil and is managed in San Paulo, Brazil. This entity utilizes the functional currency of Brazilian Reais. The Company has generally chosen not to mitigate any of the residual foreign currency risk through the use of hedging instruments for this entity. The operating cash flow generated by this investment has been retained by the joint venture and reinvested in ground up

developments and expansions in Brazil. The effects of foreign currency translation in the Company’s financial statements relating to this investment are as follows (in millions):

Net income of Sonae Sierra Brasil BV Sarl

Weighted-average exchange rate

Disproportionate partner income

Equity in net income of joint venture

Amortization of basis differential

DDR share of equity in net income

Various Coventry II Fund joint ventures

DDRTC Core Retail Fund

DDR-SAU Retail Fund

DPG Realty Holdings

Central Park Solon/RO & SW Realty

Total impairment of joint venture investments

Discontinued Operations (in thousands)

Loss from discontinued operations^(A)

Gain on deconsolidation of interests, net^(B)

Gain (loss) on disposition of real estate, net of tax^(A)

Gain on Disposition of Real Estate (in thousands)

Gain on disposition of real estate, net^(A)

Land sales

Previously deferred gains and other gains and losses on dispositions

The sales of land did not meet the criteria for discontinued operations because the land did not have any significant operations prior to disposition. The previously deferred gains are a result of assets that were contributed to joint ventures in prior years.

Non-controlling interests (in thousands)

Non-controlling interests^(A)

Mervyns Joint Venture — non-controlling interest

Other non-controlling interests

Decrease in the quarterly distribution to operating partnership unit investments

The Mervyns Joint Venture owns real estate formerly occupied by Mervyns, which declared bankruptcy in 2008 and vacated all sites as of December 31, 2008. The Company’s proportionate share of impairment losses of $18.8 million during the year ended December 31, 2010, was lower than the $35.1 million in 2009. This entity was deconsolidated in 2010, and the operating results are retrospectively reported as a component of discontinued operations. (See Mervyns Joint Venture discussion in Liquidity and Capital Resources.) Partially offsetting this decrease are losses associated with the impairment charges recorded in 2010 by one of the Company’s 75% owned consolidated investments, which owns land held for development in Togliatti and Yaroslavl, Russia.

Net Loss (in thousands)

Net loss attributable to DDR

The decrease in net loss attributable to DDR for the year ended December 31, 2010, as compared to 2009, is primarily the result of a decrease in impairment-related charges and lower expense associated with the equity derivative instruments partially offset by the establishment of a reserve against certain deferred tax assets in 2010 and lower gain on debt retirement. A summary of changes in 2010 as compared to 2009 is as follows (in millions):

Decrease in net operating revenues (total revenues in excess of operating and maintenance expenses and real estate taxes)

Increase in consolidated impairment charges

Decrease in general and administrative expenses

Increase in depreciation expense

Decrease in interest income

Increase in interest expense

Decrease in gain on retirement of debt, net

Decrease in loss on equity derivative instruments

Change in other expense

Increase in equity in net income of joint ventures

Decrease in impairment of joint venture investments

Reduction in gain on change in control of interests

Increase in income tax expense

Increase in income from discontinued operations^(A)

Decrease in gain on disposition of real estate

Change in non-controlling interests

Decrease in net loss attributable to DDR

Comparison of 2009 to 2008 Results of Operations

Shopping center properties owned as of January 1, 2008, but excluding properties under development/redevelopment and those classified in discontinued operations, are considered the “Core Portfolio Properties.”

Total revenues

The decrease in Core Portfolio Properties is due almost exclusively to the impact of the major tenant bankruptcies including Goody’s, Linens ‘N Things, Circuit City and Steve and Barry’s.

The decrease in occupancy is primarily a result of the tenant bankruptcies discussed above.

The decrease in occupancy and annualized base rent is primarily a result of the tenant bankruptcies discussed above. The joint venture shopping center portfolio was also affected by the vacancy of the Mervyns sites in 2009.

The reduction in management fees was primarily attributed to tenant bankruptcies at the unconsolidated joint ventures and joint venture asset dispositions. Development fee income decreased primarily as a result of the reduced construction and redevelopment activity of joint venture assets that are owned through the Coventry II Fund (see Off-Balance Sheet Arrangements).

Acquisitions of real estate assets

The majority of the increase in operating and maintenance expenses is related to increased landlord expenses primarily associated with tenant vacancies. The Company has aggressively appealed numerous real estate charges given the economic environment and increased vacancy resulting from tenant bankruptcies. The increase in depreciation expense primarily relates to additional assets placed in service.

Undeveloped land and construction in progress⁽¹⁾

Assets marketed for sale⁽¹⁾

Assets formerly occupied by Mervyns⁽²⁾

Weighted-average debt outstanding (billions)

The decrease in 2009 expense is primarily due to a reduction in outstanding debt and a decrease in short-term interest rates, partially offset by a decline in capitalized interest. The reduction in weighted-average interest rates in 2009 is primarily related to the decline in short-term interest rates. Interest costs capitalized in conjunction with development and expansion projects and unconsolidated development joint venture interests were $21.8 million for the year ended December 31, 2009, as compared to $41.1 million for the same period in 2008. Because the Company suspended certain construction activities, the amount of capitalized interest decreased in 2009.

Equity in net (loss) income of joint ventures^(A)

Gain on change in control of interests^(C)

Tax benefit of taxable REIT subsidiaries and state franchise and income taxes^(D)

Decrease in income from existing joint ventures

Decrease in income at certain joint ventures primarily attributable to loss on sales and impairment charges on unconsolidated assets

Newly acquired joint venture assets

Disposition of joint venture interests (see Off-Balance Sheet Arrangements)

The decrease in income from existing joint ventures is primarily due to lower occupancy levels and ceasing of the capitalization of interest and real estate taxes on joint ventures previously under development due to a reduction and/or cessation in construction activity.

At December 31, 2009, the Company had an approximate 48% interest in an unconsolidated joint venture, Sonae Sierra Brasil BV Sarl, which owns real estate in Brazil and is managed in San Paulo, Brazil. This entity utilizes the functional currency of Brazilian Reais. The Company has generally chosen not to mitigate any of the residual foreign currency risk through the use of hedging instruments for this entity. The operating cash flow generated by this investment has been retained by the joint venture and reinvested in ground up developments and expansions in Brazil. The effects of the foreign currency in the Company’s financial statements are as follows (in millions):

DDR’s share of equity in net income

MDT

Central Park Solon /RO & SW Realty

Total impairments of joint venture investments

Loss on disposition of real estate, net of tax^(B)

Gain on Disposition of Real Estate, net (in thousands)

The sales of land did not meet the criteria for discontinued operations because the land did not have any significant operations prior to disposition. The previously deferred gains are primarily a result of assets that were contributed to joint ventures in prior years.

Non-controlling interests ^(A)

Net loss from consolidated joint venture investments

Conversion of 0.5 million operating partnership units (“OP Units”) to common shares

There was a significant decrease in rental revenues reported by the Mervyns Joint Venture in 2009 due to the declaration of Mervyns’ bankruptcy in 2008. In addition, during the years ended December 31, 2009 and 2008, the joint venture recorded gross impairment charges of $70.3 million and $31.9 million, respectively, of which $35.1 million and $15.9 million in loss was allocated to non-controlling interests, respectively. This entity was deconsolidated in 2010 and the operating results are reported as a component of discontinued operations. (See discussion of Mervyns Joint Venture in Liquidity and Capital Resources.)

Net Loss attributable to DDR (in thousands)

The increase in net loss attributable to DDR for the year ended December 31, 2009, is primarily the result of higher impairment-related charges, loss on sales of assets and equity derivative related charges in addition to several major tenant bankruptcies that occurred in late 2008, offset by gains on debt retirements. Also contributing to the increase was a release of an approximate $16.0 million deferred tax valuation allowance in 2008 and the impact of asset sales associated with the Company’s deleveraging efforts. A summary of changes in 2009 as compared to 2008 is as follows (in millions):

Decrease in consolidated impairment charges

Increase in interest income

Decrease in interest expense

Increase in gain on retirement of debt, net

Decrease in equity in net income of joint ventures

Increase in impairment of joint venture investments

Gain on change in control of interests

Change in income tax benefit (expense)

Decrease in income from discontinued operations^(A)

Increase in net gain on disposition of real estate

Decrease in non-controlling interest expense

Decrease in net income attributable to DDR

FUNDS FROM OPERATIONS

The Company believes that FFO, which is a non-GAAP financial measure, provides an additional and useful means to assess the financial performance of REITs. FFO is frequently used by securities analysts, investors and other interested parties to evaluate the performance of REITs, most of which present FFO along with net income as calculated in accordance with GAAP.

FFO excludes GAAP historical cost depreciation and amortization of real estate and real estate investments, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions, and many companies utilize different depreciable lives and methods. Because FFO excludes depreciation and amortization unique to real estate, gains and certain losses from depreciable property dispositions, and extraordinary items, it can provide a performance measure that, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, acquisition and development activities and interest costs. This provides a perspective of the Company’s financial performance not immediately apparent from net income determined in accordance with GAAP.

FFO is generally defined and calculated by the Company as net income (loss), adjusted to exclude (i) preferred share dividends, (ii) gains from disposition of depreciable real estate property, except for gains generated from merchant build asset sales, which are presented net of taxes, and those gains that represent the recapture of a previously recognized impairment charge, (iii) extraordinary items and (iv) certain non-cash items. These non-cash items principally include real property depreciation, equity income (loss) from joint ventures and equity income (loss) from non-controlling interests, and adding the Company’s proportionate share of FFO from its unconsolidated joint ventures and non-controlling interests, determined on a consistent basis.

For the reasons described above, management believes that FFO and operating FFO (as described below) provide the Company and investors with an important indicator of the Company’s operating performance. It provides a recognized measure of performance other than GAAP net income, which may include non-cash items (often significant). Other real estate companies may calculate FFO and operating FFO in a different manner.

These measures of performance are used by the Company for several business purposes. The Company uses FFO and/or operating FFO in part (i) as a measure of a real estate asset’s performance, (ii) to influence acquisition, disposition and capital investment strategies, and (iii) to compare the Company’s performance to that of other publicly traded shopping center REITs.

Management recognizes FFO’s and operating FFO’s limitations when compared to GAAP’s income from continuing operations. FFO and operating FFO do not represent amounts available for needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties. Management does not use FFO or operating FFO (described below) as an indicator of the Company’s cash obligations and funding requirements for future commitments, acquisitions or development activities. Neither FFO nor operating FFO represents cash generated from operating activities in accordance with GAAP, and neither is necessarily indicative of cash available to fund cash needs, including the payment of dividends. Neither FFO nor operating FFO should be considered an alternative to net income (computed in accordance with GAAP) or as an alternative to cash flow as a measure of liquidity. FFO and operating FFO are simply used as additional indicators of the Company’s operating performance.

In 2010, FFO attributable to DDR common shareholders was a loss of $11.3 million, as compared to a loss of $144.6 million in 2009 and income of $169.7 million in 2008. The FFO loss for the year ended December 31, 2010, is primarily the result of impairment-related charges, the equity derivative adjustment associated with the Otto Family investment and the establishment of a reserve against certain deferred tax assets.

The Company’s calculation of FFO is as follows (in thousands):

Net loss applicable to common shareholders^(A)

Equity in net (income) loss of joint ventures

Joint ventures’ FFO^(B)

Gain on disposition of depreciable real estate^(C)

FFO applicable to common shareholders

Preferred dividends

Total FFO

Joint ventures’ FFO is summarized as follows (in thousands):

Net (loss) income⁽¹⁾

Loss on sale of real estate

FFO at DDR’s ownership interests⁽²⁾

DDR’s proportionate share

Operating FFO

FFO excluding the net non-operating charges detailed below, or operating FFO, is useful to investors as the Company removes these net charges to analyze the results of its operations and assess performance of the core operating real estate portfolio.

The Company incurred net non-operating charges for the years ended December 31, 2010, 2009 and 2008, aggregating $275.6 million, $442.8 million and $217.8 million, respectively, summarized as follows (in millions):

Impairment charges — consolidated assets^(A)

Employee separations and related compensation and benefit charges^(B)

Gain on debt retirement, net^(A)

Loss on equity derivative instruments^(A)

Other expense, net^(C)

Equity in net loss of joint ventures — loss on asset sales, impairment charges and MDT derivative losses

Impairment of joint venture interests^(A)

Loss (gain) on change in control of interests^(A)

Tax expense — deferred tax assets reserve^(D)

Discontinued operations — consolidated impairment charges and loss on sales

Discontinued operations — FFO associated with Mervyns Joint Venture, net of non-controlling interest

Discontinued operations — gain on deconsolidation of Mervyns Joint Venture

Gain on disposition of real estate (land)

Less non-controlling interests — portion of impairment charges allocated to outside partners

Total non — operating items

FFO applicable to DDR common shareholders

Operating FFO applicable to DDR common shareholders

Litigation-related expenses, net of tax

Sales of MDT units

During 2008, due to the volatility and volume of significant and unusual accounting charges and gains recorded in the Company’s operating results, management began computing operating FFO and discussing it with the users of the Company’s financial statements, in addition to other measures such as net loss determined in accordance with GAAP as well as FFO. The Company believes that FFO and operating FFO, along with reported GAAP measures, enable management to analyze the results of its operations and assess the performance of its operating real estate and also may be useful to investors. The Company will continue to evaluate the usefulness and relevance of the reported non-GAAP measures, and such reported measures could change. Additionally, the Company provides no assurances that these charges and gains are non-recurring. These charges and gains could be reasonably expected to recur in future results of operations.

Operating FFO is a non-GAAP financial measure, and, as described above, its use combined with the required primary GAAP presentations has been beneficial to management in improving the understanding of the Company’s operating results among the investing public and making comparisons of other REITs’ operating results to the Company’s more meaningful. The adjustments above may not be comparable to how other REITs or real estate companies calculate their results of operations, and the Company’s calculation of operating FFO differs from NAREIT’s definition of FFO.

Operating FFO has the same limitations as FFO as described above and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s performance. Operating FFO does not represent cash generated from operating activities determined in accordance with GAAP, and is not a measure of liquidity or an indicator of the Company’s ability to make cash distributions. The Company believes that to further understand its performance operating FFO should be compared with the Company’s reported net loss and considered in addition to cash flows in accordance with GAAP, as presented in its consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

The Company periodically evaluates opportunities to issue and sell debt or equity securities, obtain credit facilities from lenders, or repurchase, refinance or otherwise restructure long-term debt for strategic reasons or to further strengthen the financial position of the Company. In 2010, the Company strategically allocated cash flow from operating and financing activities. The Company utilized debt and equity offerings to strengthen the balance sheet, extend debt duration and improve its financial flexibility.

The Company’s and its unconsolidated debt obligations generally require monthly payments of principal and/or interest over the term of the obligation. No assurance can be provided that these obligations will be refinanced or repaid as currently anticipated. Also, additional financing may not be available at all or on terms favorable to the Company or its joint ventures (see Contractual Obligations and Other Commitments).

In October 2010, the Company refinanced its unsecured revolving credit facility with a syndicate of financial institutions arranged by JP Morgan Chase Bank, N.A. and Wells Fargo Bank, N.A. (“the Unsecured Credit Facility”). The syndicate of lenders in the Unsecured Credit Facility is substantially the same as the original facility. The size of the Unsecured Credit Facility was reduced from $1.25 billion to $950 million, with an accordion feature up to $1.2 billion (as compared to the previous ability to increase to up to $1.4 billion) upon the Company’s request, provided that new or existing lenders agree to the existing terms of the facility and certain financial covenants are maintained. In addition, the Company entered into a new $65 million unsecured credit facility with PNC Bank, N.A. (the “PNC Facility” and, together with the Unsecured Credit Facility, the “Revolving Credit Facilities”). The size of the PNC Facility was reduced from $75 million to $65 million. The Revolving Credit Facilities mature in February 2014 and currently bear interest at variable rates based on LIBOR plus 275 basis points, subject to adjustment based on the Company’s current corporate credit ratings from Moody’s Investors Service (“Moody’s”) and Standard and Poor’s (“S&P”).

The Revolving Credit Facilities and the indentures under which the Company’s senior and subordinated unsecured indebtedness is, or may be, issued contain certain financial and operating covenants and require the

Company to comply with certain covenants including, among other things, leverage ratios and debt service coverage and fixed charge coverage ratios, as well as limitations on the Company’s ability to incur secured and unsecured indebtedness, sell all or substantially all of the Company’s assets, and engage in mergers and certain acquisitions. These credit facilities and indentures also contain customary default provisions including the failure to make timely payments of principal and interest payable thereunder, the failure to comply with the Company’s financial and operating covenants, the occurrence of a material adverse effect on the Company, and the failure of the Company or its majority-owned subsidiaries (i.e., entities in which the Company has a greater than 50% interest) to pay when due certain indebtedness in excess of certain thresholds beyond applicable grace and cure periods. In the event the Company’s lenders or noteholders declare a default, as defined in the applicable debt documentation, this could result in the Company’s inability to obtain further funding and/or an acceleration of any outstanding borrowings. As of December 31, 2010, the Company was in compliance with all of its financial covenants. The Company’s current business plans indicate that it will continue to be able to operate in compliance with these covenants in 2011 and beyond.

Certain of the Company’s credit facilities and indentures permit the acceleration of the maturity of the underlying debt in the event certain other debt of the Company has been accelerated. Furthermore, a default under a loan to the Company or its affiliates, a foreclosure on a mortgaged property owned by the Company or its affiliates or the inability to refinance existing indebtedness may have a negative impact on the Company’s financial condition, cash flows and results of operations. These facts, and an inability to predict future economic conditions, have encouraged the Company to adopt a strict focus on lowering leverage and increasing financial flexibility.

The Company expects to fund its obligations from available cash, current operations and utilization of its Revolving Credit Facilities. The following information summarizes the availability of the Revolving Credit Facilities at December 31, 2010 (in millions):

Cash and cash equivalents

Revolving Credit Facilities

Less:

Amount outstanding

Letters of credit

Borrowing capacity available

As of December 31, 2010, the Company also had unencumbered consolidated operating properties generating income in excess of the amounts required by the Revolving Credit Facilities covenants, thereby providing a potential collateral base for future borrowings or to sell to generate cash proceeds, subject to consideration of the financial covenants on its unsecured borrowings.

The Company is committed to prudently managing and minimizing discretionary operating and capital expenditures and raising the necessary equity and debt capital to maximize liquidity, repay outstanding borrowings as they mature and comply with financial covenants in 2011 and beyond. Over the past 12 months, the Company has already implemented several steps integral to the successful execution of its capital raising plans through a combination of retained capital, the issuance of common shares, debt financing and refinancing and asset sales.

The Company intends to continue implementing a longer-term financing strategy and reduce its reliance on short-term debt. The Company believes its Revolving Credit Facilities should be appropriately sized for the Company’s liquidity strategy. The execution of these agreements was an integral part of the Company’s strategy to extend debt maturities and align the Revolving Credit Facilities with longer-term capital structure needs.

Part of the Company’s overall strategy includes addressing debt maturing in 2011 and years following well before the contractual maturity date. As part of this strategy in 2010, the Company purchased approximately $259.1 million aggregate principal amount of its outstanding senior unsecured notes, which includes the repurchase of $83.1 million aggregate principal amount of outstanding senior unsecured notes through a cash tender offer at par in March 2010.

In March 2010, the Company issued $300 million aggregate principal amount of its 7.5% senior unsecured notes due April 2017. In August 2010, the Company issued $300 million aggregate principal amount of its 7.875% senior unsecured notes due September 2020. In November 2010, the Company issued $350 million aggregate principal amount of its 1.75% convertible senior unsecured notes due November 2040. In addition, the Company issued 53.0 million of its common shares in 2010 for aggregate gross proceeds of $454.4 million. Substantially all of the net proceeds from these offerings were used to repay debt with shorter-term maturities, to repay amounts outstanding on the Revolving Credit Facilities and to invest in two loans aggregating $58.3 million that are secured by seven shopping centers, six of which are managed and leased by the Company.

The Company has been focused on balancing the amount and timing of its debt maturities. As a result of the debt repurchases, unsecured debt issuances and the refinancing of the Revolving Credit Facilities, all completed in 2010, the Company extended its weighted-average debt duration to four years. The Company is focused on the timing and deleveraging opportunities for the consolidated debt maturing in 2011. In October 2010, the Company repaid $200 million of the term loan and in February 2011, executed a one-year extension on the remaining $600.0 million of the term loan to February 2012. The Company is in discussion with certain banks and expects to refinance this term loan by the end of 2011, but there can be no assurance that the refinancing can be done on satisfactory terms or at all. The wholly-owned maturities for 2011 include the unsecured notes due in April and August 2011 aggregating $180.6 million and mortgage maturities of approximately $209.1 million, of which $24.4 million was extended for one-year in January 2011, $98.9 million was repaid in February 2011 and $35.3 million has a one-year extension option. The Company continually evaluates its debt maturities and, based on management’s current assessment, believes it has viable financing and refinancing alternatives.

The Company continues to look beyond 2011 to ensure that it executes its strategy to lower leverage, increase liquidity, improve the Company’s credit ratings and extend debt duration with the goal of lowering the Company’s risk profile and long-term cost of capital.

Unconsolidated Joint Ventures

At December 31, 2010, the Company’s unconsolidated joint venture mortgage debt that had matured and is now past due is as follows:

Coventry II^(A)

Other^(B)

At December 31, 2010, the Company’s unconsolidated joint venture mortgage debt maturing in 2011 was $891.6 million (of which the Company’s proportionate share is $275.5 million). Of this amount, $42.0 million (of which the Company’s proportionate share is $15.9 million) related to one loan that was refinanced in January 2011 and assumed by the Company in connection with its purchase of the asset and another loan that was repaid when the collateralized asset was sold.

Additionally, $264.4 million (of which the Company’s proportionate share was $52.9 million) was attributable to the Coventry II Fund assets (see Off-Balance Sheet Arrangements).

Deconsolidation of Mervyns Joint Venture

The Company’s joint venture with EDT, Mervyns Joint Venture, owns underlying real estate assets formerly occupied by Mervyns, which declared bankruptcy in 2008 and vacated all sites as of December 31, 2008. The

Company owns a 50% interest in the Mervyns Joint Venture, which was previously consolidated by the Company. During the second quarter of 2010, the Company changed its holding period assumptions for this primarily vacant portfolio as it was no longer committed to providing any additional capital. This triggered the recording of aggregated consolidated impairment charges of approximately $37.6 million on the remaining Mervyns Joint Venture assets, of which the Company’s proportionate share was $16.5 million after adjusting for the allocation of loss to the non-controlling interest. In June 2010, the Mervyns Joint Venture received a notice of default from the servicer for the non-recourse loan secured by all of the remaining former Mervyns stores due to the non-payment of required monthly debt service. In August 2010, a court appointed a third-party receiver to manage and liquidate the remaining former Mervyns sites. Due to the receiver appointment, the Company no longer has the contractual ability to direct the activities that most significantly impact the economic performance of the Mervyns Joint Venture, nor does it have the obligation to absorb losses or receive a benefit from the Mervyns Joint Venture that could potentially be significant to the entity. As a result, in September 2010, the Company deconsolidated the assets and obligations of the Mervyns Joint Venture. Upon deconsolidation, the Company recorded a gain of approximately $5.6 million because the carrying value of the non-recourse debt exceeded the carrying value of the collateralized assets of the joint venture. The amount outstanding under the mortgage note payable was $155.7 million upon deconsolidation. The revenues and expenses associated with the Mervyns Joint Venture for all of the periods presented, including the $5.6 million gain, are classified within discontinued operations in the consolidated statements of operations.

Cash Flow Activity

The Company’s core business of leasing space to well-capitalized retailers continues to generate consistent and predictable cash flow after expenses, interest payments and preferred share dividends. This cash flow is closely monitored by the Company to implement decisions for investment, debt repayment and the payment of dividends on the common shares.

The Company’s cash flow activities are summarized as follows (in thousands):

Cash flow provided by operating activities

Cash flow provided by (used for) investing activities

Cash flow (used for) provided by financing activities

Operating Activities: The increase in cash flow from operating activities in the year ended December 31, 2010, as compared to the year ended December 31, 2009, was due to the impact of the change in assets and liabilities, due in part to the collection of accounts receivable.

Investing Activities: The change in cash flow from investing activities for the year ended December 31, 2010, as compared to the year ended December 31, 2009, was primarily due to a reduction in proceeds from the disposition of real estate, a reduction in capital expenditure spending for redevelopment and ground-up development projects, as well as the release of restricted cash partially offset by the issuance of notes receivable.

Financing Activities: The change in cash flow used for financing activities for the year ended December 31, 2010, as compared to the year ended December 31, 2009, was primarily due to proceeds received from the issuance of common shares and senior notes in 2010 net of debt repayments.

The Company satisfied its REIT requirement of distributing at least 90% of ordinary taxable income with declared common and preferred share cash dividends of $62.5 million in 2010, as compared to $106.8 million of dividends paid in a combination of cash and the Company’s common shares in 2009 and $290.9 million cash dividends paid in 2008. Because actual distributions were greater than 100% of taxable income, federal income taxes were not incurred by the Company in 2010.

For each of the four quarters of 2010, the Company paid a quarterly cash dividend of $0.02 per common share. In January 2011, the Company declared its first quarter 2011 dividend of $0.04 per common share payable on April 5, 2011, to shareholders of record at the close of business on March 22, 2011. The Company will continue to

monitor the 2011 dividend policy and provide for adjustments as determined in the best interest of the Company and its shareholders to maximize the Company’s free cash flow, while still adhering to REIT payout requirements.

SOURCES AND USES OF CAPITAL

2010 Strategic Transaction Activity

Dispositions

As part of the Company’s deleveraging strategy, the Company has been marketing non-prime assets for sale. The Company is focusing on selling single-tenant assets and smaller shopping centers with limited opportunity for growth. For certain real estate assets for which the Company has entered into agreements that are subject to contingencies, including contracts executed subsequent to December 31, 2010, a loss of approximately $10 million could be recorded if all such sales were consummated on the terms currently being negotiated. Given the Company’s experience over the past few years, it is difficult for many buyers to complete these transactions in the timing contemplated or at all. The Company has not recorded an impairment charge on these assets at December 31, 2010, as the undiscounted cash flows, when considering and evaluating the various alternative courses of action that may occur, exceed the assets’ current carrying value. The Company evaluates all potential sale opportunities taking into account the long-term growth prospects of assets being sold, the use of proceeds and the impact to the Company’s balance sheet, in addition to the impact on operating results. As a result, if actual results differ from expectations, it is possible that additional assets could be sold in subsequent periods for a loss after taking into account the above considerations.

In 2010, the Company sold 31 shopping center properties in various states, aggregating 2.9 million square feet, at a sales price of $150.7 million. The Company recorded a net gain of $5.8 million, which excludes the impact of $77.3 million in related impairment charges.

In 2010, the Company’s unconsolidated joint ventures had the following sales transactions:

Retail Value Investment Program VII (two sites)

DDR — SAU Retail Fund (one site)

Service Holdings (four sites)

DDRTC Core Retail Fund (22 sites)

DPG Realty Holdings (seven sites)

Developments, Redevelopments and Expansions

During 2010, the Company expended an aggregate of approximately $102.7 million, net, after deducting sales proceeds from outlot sales, to develop, expand, improve and re-tenant various consolidated properties. The Company projects to expend approximately $21.6 million, net, for these activities in 2011.

The Company will continue to closely monitor its spending in 2011 for developments and redevelopments, both for consolidated and unconsolidated projects, as the Company considers this funding to be discretionary spending. The Company does not anticipate expending a significant amount of funds on joint venture development projects in 2011. One of the important benefits of the Company’s asset class is the ability to phase development projects over time until appropriate leasing levels can be achieved. To maximize the return on capital spending and

balance the Company’s de-leveraging strategy, the Company adheres to strict investment criteria thresholds. The revised underwriting criteria followed over the past two years includes a higher cash-on-cost project return threshold, a longer period before the leases commence and a higher stabilized vacancy rate. The Company applies this revised strategy to both its consolidated and certain unconsolidated joint ventures that own assets under development because the Company has significant influence and, in most cases, approval rights over decisions relating to significant capital expenditures.

The Company has two consolidated projects that are being developed in phases at a projected aggregate net cost of approximately $204.0 million. At December 31, 2010, approximately $188.1 million of costs had been incurred in relation to these projects. The Company is also currently expanding/redeveloping a wholly-owned shopping center in Miami (Plantation), Florida, at a projected aggregate net cost of approximately $51.4 million. At December 31, 2010, approximately $44.0 million of costs had been incurred in relation to this redevelopment project.

At December 31, 2010, the Company has approximately $537.5 million of recorded costs related to land and projects under development, for which active construction has temporarily ceased or not yet commenced. Based on the Company’s current intentions and business plans, the Company believes that the expected undiscounted cash flows exceed its current carrying value on each of these projects. However, if the Company were to dispose of certain of these assets in the current market, the Company would likely incur a loss, which may be material. The Company evaluates its intentions with respect to these assets each reporting period and records an impairment charge equal to the difference between the current carrying value and fair value when the expected undiscounted cash flows are less than the asset’s carrying value.

The Company and its joint venture partners intend to commence construction on various other developments, including several international projects only after substantial tenant leasing has occurred and acceptable construction financing is available.

2009 Strategic Transaction Activity

Otto Transaction

On February 23, 2009, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with the Investor to issue and sell 30.0 million common shares to the Investor and certain members of the Otto Family for aggregate gross proceeds of approximately $112.5 million. In addition, the Company issued warrants to purchase up to 10.0 million common shares with an exercise price of $6.00 per share to the Otto Family. Under the terms of the Stock Purchase Agreement, the Company issued additional common shares to the Otto Family in an amount equal to dividends payable in shares declared by the Company after February 23, 2009, and prior to the applicable closing.

On April 9, 2009, the Company’s shareholders approved the sale of the common shares and warrants to the Otto Family pursuant to the Otto Transaction. The transaction occurred in two closings. In May 2009, the Company issued and sold 15.0 million common shares and warrants to purchase 5.0 million common shares to the Otto Family for a purchase price of $52.5 million. In September 2009, the Company issued and sold 15.0 million common shares and warrants to purchase 5.0 million common shares to the Otto Family for a purchase price of $60.0 million. The Company also issued an additional 1,071,428 common shares as a result of the first quarter 2009 dividend to the Otto Family, associated with the initial 15.0 million common shares, and 1,787,304 common shares as a result of the first and second quarter 2009 dividends to the Otto Family, associated with the second 15.0 million common shares. As a result, the Company issued 32.8 million common shares and warrants to purchase 10.0 million common shares to the Otto Family in 2009.

The shareholders’ approval of the Otto Transaction in April 2009 resulted in a “potential change in control” as of that date under the Company’s equity-based award plans. In addition, in September 2009, as a result of the second closing in which the Otto Family acquired beneficial ownership of more than 20% of the Company’s outstanding common shares, a “change in control” was deemed to have occurred under the Company’s equity deferred compensation plans. In accordance with the equity-based award plans, all unvested stock options became fully exercisable and all restrictions on unvested shares lapsed, and, in accordance with the equity deferred compensation

plans, all unvested deferred stock units vested and were no longer subject to forfeiture. As such, the Company recorded charges for the year ended December 31, 2009, of $15.4 million.

The equity forward commitments and warrants are considered derivatives. However, the equity forward commitments and warrants did not qualify for equity treatment due to the existence of downward price protection provisions. As a result, both instruments were required to be recorded at fair value as of the shareholder approval date of April 9, 2009, and marked-to-market through earnings as of each balance sheet date thereafter until exercise or expiration.

DDR Macquarie Fund/EDT Retail Trust

In 2003, the Company formed a joint venture with Macquarie Bank to acquire ownership interests in institutional-quality community center properties in the United States (“DDR Macquarie Fund”). In 2010, Macquarie DDR Trust (“MDT”) was recapitalized with an investment by EPN GP, LLC and became known as EDT. The Company continues to be engaged to manage day-to-day operations of the properties and receives fees at prevailing rates for property management, leasing, construction management, acquisitions, dispositions (including outparcel dispositions) and financings.

During December 2008, the Company and MDT modified certain terms of their investment that provided for the redemption of the Company’s interest with properties in the DDR Macquarie Fund in lieu of cash or MDT shares. In October 2009, the MDT unitholders approved the redemption of the Company’s interest in the MDT US LLC joint venture. A 100% interest in three shopping center assets was transferred to the Company in October 2009 in exchange for its approximate 14.5% ownership interest and assumption of $65.3 million of non-recourse debt, and a cash payment of $1.6 million was made to the DDR Macquarie Fund. The redemption transaction was effectively considered a business combination. As a result, the real estate assets received were recorded at fair value, and a $23.5 million gain was recognized relating to the difference between the fair value of the net assets received as compared to the Company’s then-investment basis in the joint venture.

The Company believed this transaction simplified the ownership structure of the joint venture and enhanced flexibility for both DDR and EDT while lowering the Company’s leverage. As a result of this transaction, the Company’s proportionate share of unconsolidated joint venture debt was reduced by approximately $146 million, offset by the assumption of debt by the Company of approximately $65.3 million, resulting in an overall reduced leverage of approximately $80 million in 2009.

Macquarie DDR Trust Liquidation

In 2009, the Company liquidated its investment in MDT for aggregate proceeds of $6.4 million. The Company recorded a gain on sale of these units of approximately $2.7 million during the year ended December 31, 2009, which is included in other income on the consolidated statement of operations. During 2008, the Company recognized an other than temporary impairment charge of approximately $31.7 million on this investment.

In 2009, the Company sold 34 shopping center properties in various states, aggregating 3.9 million square feet, at a sales price of $332.7 million. The Company recorded a net gain of $24.5 million, which excludes the impact of $74.1 million in related impairment charges.

In 2009, the Company’s unconsolidated joint ventures had the following sales transactions, excluding those purchased by other unconsolidated joint venture interests:

Coventry II DDR Ward Parkway

Service Holdings (two sites)

DDR Macquarie Fund (eight sites)

DPG Realty Holding (two sites)

Acquisitions, Developments, Redevelopments and Expansions

During the year ended December 31, 2009, the Company and its unconsolidated joint ventures expended an aggregate of approximately $635.9 million, net ($331.8 million by the Company, (which includes the acquisition of assets that were generally in exchange for a partnership interest and did not involve the use of cash), and $304.1 million by its unconsolidated joint ventures), before deducting sales proceeds, to acquire, develop, expand, improve and re-tenant various properties.

At December 31, 2009, approximately $323.7 million of costs were incurred in relation to the Company’s three wholly-owned and consolidated joint venture development projects substantially completed and three projects under construction.

2008 Strategic Transaction Activity

DDR MDT Trust Investment

In February 2008, the Company began purchasing units of MDT, its then-joint venture partner in the DDR Macquarie Fund. Through the combination of its purchase of the units in MDT (8.3% ownership on a weighted-average basis for the year ended December 31, 2008, and 12.3% ownership as of December 31, 2008) and its 14.5% direct and indirect ownership of the DDR Macquarie Fund, DDR had an approximate 25.0% effective economic interest in the DDR Macquarie Fund as of December 31, 2008. Through December 31, 2008, as described in filings with the Australian Securities Exchange (“ASX Limited”), the Company had purchased an aggregate 115.7 million units of MDT in open market transactions at an aggregate cost of approximately $43.4 million. Because the Company’s direct and indirect investments in MDT and the DDR Macquarie Fund gave it the ability to exercise significant influence over operating and financial policies, the Company accounted for its interest in both MDT and the DDR Macquarie Fund using the equity method of accounting.

At December 31, 2008, the market price of the MDT shares as traded on the ASX Limited was $0.04 per share, as compared to $0.25 per share at September 30, 2008. This represented a decline of over 80% in value in the fourth quarter of 2008. Due to the significant decline in the unit value of this investment, as well as the then-continued deterioration of the global capital markets and the related impact on the real estate market and retail industry, the Company determined that the loss in value was other than temporary. Accordingly, the Company recorded an impairment charge of approximately $31.7 million related to this investment, reducing its investment in MDT to $4.8 million at December 31, 2008. This investment was liquidated in 2009 for a gain of $2.7 million (see 2009 Strategic Transaction Activity).

In 2008, the Company sold the following properties:

Shopping Center Properties^(A)

Office Property^(B)

OFF-BALANCE SHEET ARRANGEMENTS

The Company has a number of off-balance sheet joint ventures and other unconsolidated entities with varying economic structures. Through these interests, the Company has investments in operating properties, development properties and two management and development companies. Such arrangements are generally with institutional investors and various developers throughout the United States.

The unconsolidated joint ventures that have total assets greater than $250 million (based on the historical cost of acquisition by the unconsolidated joint venture) at December 31,2010, are as follows:

DDRTC Core Retail Fund LLC

DDR Domestic Retail Fund I

Sonae Sierra Brasil BV Sarl

DDR — SAU Retail Fund LLC

Funding for Joint Ventures

In connection with the development of shopping centers owned by certain affiliates, the Company and/or its equity affiliates have agreed to fund the required capital associated with approved development projects aggregating approximately $3.1 million at December 31, 2010. These obligations, composed principally of construction contracts, are generally due in 12 to 36 months, as the related construction costs are incurred, and are expected to be financed through new or existing construction loans, revolving credit facilities and retained capital.

The Company has provided loans and advances to certain unconsolidated entities and/or related partners in the amount of $71.1 million at December 31, 2010, for which the Company’s joint venture partners have not funded their proportionate share. Included in this amount, the Company advanced $66.9 million of financing to one of its unconsolidated joint ventures, which accrued interest at the greater of LIBOR plus 700 basis points or 12% and a default rate of 16%, and has an initial maturity of July 2011. The Company reserved this entire advance in 2009 (see Coventry II Fund discussion below). In addition, the Company guaranteed annual base rental income at certain centers held through Service Holdings, aggregating $2.2 million at December 31, 2010. The Company has not

recorded a liability for the guaranty, as the subtenants of Service Holdings are paying rent as due. The Company has recourse against the other parties in the joint venture for their pro rata share of any liability under this guaranty.

Coventry II Fund

At December 31, 2010, the Company maintains several investments with the Coventry II Fund. The Company co-invested approximately 20% in each joint venture and is generally responsible for day-to-day management of the properties. Pursuant to the terms of the joint venture, the Company earns fees for property management, leasing and construction management. The Company also could earn a promoted interest, along with Coventry Real Estate Advisors L.L.C., above a preferred return after return of capital to fund investors (see Legal Matters).

As of December 31, 2010, the aggregate carrying amount of the Company’s net investment in the Coventry II Fund joint ventures was approximately $10.4 million. This basis reflects impairment charges aggregating $0.2 million, $52.4 million and $14.1 million for the years ended December 31, 2010, 2009 and 2008, respectively. As discussed above, the Company has also advanced $66.9 million of financing to one of the Coventry II Fund joint ventures, Coventry II DDR Bloomfield, relating to the development of the project in Bloomfield Hills, Michigan (“Bloomfield Loan”). In addition to its existing equity and note receivable, the Company has provided partial payment guaranties to third-party lenders in connection with the financing for five of the Coventry II Fund projects. The amount of each such guaranty is not greater than the proportion to the Company’s investment percentage in the underlying projects, and the aggregate amount of the Company’s guaranties is approximately $39.5 million at December 31, 2010.

Although the Company will not acquire additional assets through the Coventry II Fund joint ventures, additional funds may be required to address ongoing operational needs and costs associated with the joint ventures undergoing development or redevelopment. The Coventry II Fund is exploring a variety of strategies to obtain such funds, including potential dispositions and financings. The Company continues to maintain the position that it does not intend to fund any of its joint venture partners’ capital contributions or their share of debt maturities. This position led to the Ward Parkway Center in Kansas City, Missouri being transferred to the lender in 2009. In addition, in 2009 the Company acquired its partner’s 80% interest in the Merriam Village project in Merriam, Kansas through the assumption and guaranty of $17.0 million face value of debt, of which the Company had previously guaranteed 20%. DDR did not expend any funds for this interest. In connection with DDR’s assumption of an additional guaranty, the lender agreed to modify and extend this secured mortgage.

A summary of the Coventry II Fund investments is as follows:

Coventry II DDR Bloomfield LLC

Coventry II DDR Buena Park LLC

Coventry II DDR Fairplain LLC

Coventry II DDR Phoenix Spectrum LLC

Coventry II DDR Marley Creek Square LLC

Coventry II DDR Montgomery Farm LLC

Coventry II DDR Totem Lakes LLC

Coventry II DDR Westover LLC

Coventry II DDR Tri-County LLC

Service Holdings LLC

Other Joint Ventures

The Company is involved with overseeing the development activities for several of its unconsolidated joint ventures that are constructing, redeveloping or expanding shopping centers. The Company earns a fee for its services commensurate with the level of services or oversight provided. The Company generally provides a completion guaranty to the third party lending institution(s) providing construction financing.

The Company’s unconsolidated joint ventures have aggregate outstanding indebtedness to third parties of approximately $3.9 billion and $4.5 billion at December 31, 2010 and 2009, respectively (see Item 7A. Quantitative and Qualitative Disclosures About Market Risk). Such mortgages and construction loans are generally non-recourse to the Company and its partners; however, certain mortgages may have recourse to the Company and its partners in certain limited situations, such as misuse of funds and material misrepresentations. In connection with certain of the Company’s unconsolidated joint ventures, the Company agreed to fund any amounts due to the joint venture’s lender if such amounts are not paid by the joint venture based on the Company’s pro rata share of such amount aggregating $41.3 million at December 31, 2010, including guaranties associated with the Coventry II Fund joint ventures.

The Company entered into an unconsolidated joint venture that owns real estate assets in Brazil and has generally chosen not to mitigate any of the residual foreign currency risk through the use of hedging instruments for this entity. The Company will continue to monitor and evaluate this risk and may enter into hedging agreements at a later date.

The Company entered into consolidated joint ventures that own real estate assets in Canada and Russia. The net assets of these subsidiaries are exposed to volatility in currency exchange rates. As such, the Company uses non-derivative financial instruments to hedge this exposure. The Company manages currency exposure related to the net assets of the Company’s Canadian and European subsidiaries primarily through foreign currency-denominated debt agreements that the Company enters into. Gains and losses in the parent company’s net investments in its subsidiaries are economically offset by losses and gains in the parent company’s foreign currency-denominated debt obligations.

For the year ended December 31, 2010, $3.0 million of net gains related to the foreign currency-denominated debt agreements was included in the Company’s cumulative translation adjustment. As the notional amount of the non-derivative instrument substantially matches the portion of the net investment designated as being hedged and the non-derivative instrument is denominated in the functional currency of the hedged net investment, the hedge ineffectiveness recognized in earnings was not material.

FINANCING ACTIVITIES

The Company has historically accessed capital sources through both the public and private markets. The Company’s acquisitions, developments, redevelopments and expansions are 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 and asset sales. Total debt outstanding at December 31, 2010, was $4.3 billion, as compared to $5.2 billion and $5.9 billion at December 31, 2009 and 2008, respectively.

In October 2010, the Company refinanced its Revolving Credit Facilities. The size of the Unsecured Credit Facility was reduced from $1.25 billion to $950 million with an accordion feature up to $1.2 billion. The size of the PNC Facility was reduced from $75 million to $65 million. The Revolving Credit Facilities mature in February 2014 and currently bear interest at variable rates based on LIBOR plus 275 basis points, subject to adjustment as determined by the Company’s current corporate credit ratings from Moody’s and S&P.

In October 2010, the Company amended its secured term loan with KeyBank National Association to conform the covenants to the Unsecured Credit Facility provisions and repaid $200 million of the outstanding balance.

For the year ended 2010, the Company purchased approximately $259.1 million aggregate principal amount of its outstanding senior unsecured notes (of which $140.6 million related to convertible notes) at a discount to par resulting in a gross gain of approximately $0.1 million, prior to the write-off of $4.9 million of unamortized convertible debt accretion, unamortized deferred financing costs and unamortized discount. Included in the purchase amount was approximately $83.1 million aggregate principal amount of near-term outstanding senior unsecured notes repurchased through a cash tender offer at par in March 2010. These purchases included debt maturities in 2010 and 2011 as well as convertible senior unsecured notes due in 2012.

Debt and equity financings aggregated $3.2 billion during the three years ended December 31, 2010, and are summarized as follows (in millions):

Equity:

Common shares

Debt:

Unsecured notes

Convertible unsecured notes

Construction

Mortgage financing

Mortgage debt assumed

Total debt

CAPITALIZATION

At December 31, 2010, the Company’s capitalization consisted of $4.3 billion of debt, $555 million of preferred shares and $3.6 billion of market equity (market equity is defined as common shares and OP Units outstanding multiplied by $14.09, the closing price of the common shares on the New York Stock Exchange at December 31, 2010), resulting in a debt to total market capitalization ratio of 0.51 to 1.0, as compared to the ratios of 0.68 to 1.0 and 0.83 to 1.0 at December 31, 2009 and 2008, respectively. The closing price of the common shares on the New York Stock Exchange was $9.26 and $4.88 at December 31, 2009 and 2008, respectively. At December 31, 2010, the Company’s total debt consisted of $3.4 billion of fixed-rate debt and $0.9 billion of variable-rate debt, including $150 million of variable-rate debt that had been effectively swapped to a fixed rate through the use of interest rate derivative contracts. At December 31, 2009, the Company’s total debt consisted of $3.7 billion of fixed-rate debt and $1.5 billion of variable-rate debt, including $400 million of variable-rate debt that had been effectively swapped to a fixed rate through the use of interest rate derivative contracts.

It is management’s strategy to have access to the capital resources necessary to manage its balance sheet, to repay upcoming maturities and to consider making prudent investments should such opportunities arise. Accordingly, the Company may seek to obtain funds through additional debt or equity financings and/or joint venture capital in a manner consistent with its intention to operate with a conservative debt capitalization policy and maintain an investment grade rating with Moody’s and re-establish an investment grade rating with S&P and Fitch. The security rating is not a recommendation to buy, sell or hold securities, as it may be subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating. The Company may not be able to obtain financing on favorable terms, or at all, which may negatively affect future ratings.

The Company’s credit facilities and the indentures under which the Company’s senior and subordinated unsecured indebtedness is, or may be, issued contain certain financial and operating covenants, including, among other things, debt service coverage and fixed charge coverage ratios, as well as limitations on the Company’s ability to incur secured and unsecured indebtedness, sell all or substantially all of the Company’s assets and engage in mergers and certain acquisitions. Although the Company intends to operate in compliance with these covenants, if the Company were to violate these covenants, the Company may be subject to higher finance costs and fees or accelerated maturities. In addition, certain of the Company’s credit facilities and indentures may permit the acceleration of maturity in the event certain other debt of the Company has been accelerated. Foreclosure on mortgaged properties or an inability to refinance existing indebtedness would have a negative impact on the Company’s financial condition and results of operations.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

The Company has debt obligations relating to its revolving credit facilities, term loan, fixed-rate senior notes and mortgages payable with maturities ranging from one to 27 years. In addition, the Company has non-cancelable operating leases, principally for office space and ground leases.

These obligations are summarized as follows for the subsequent five years ending December 31 (in thousands):

Thereafter

The Company has loans receivable, including accrued interest, that are collateralized by certain rights in development projects, partnership interests, sponsor guaranties and real estate assets.

The Company had eight and seven notes receivable outstanding, with total commitments of up to $117.0 million and $77.7 million, at December 31, 2010 and 2009, respectively. Of these loans, approximately $4.0 million and $8.2 million was unfunded in 2010 and 2009, respectively.

At December 31, 2010, the Company had letters of credit outstanding of approximately $36.3 million. The Company has not recorded any obligation associated with these letters of credit. The majority of the letters of credit are collateral for existing indebtedness and other obligations of the Company.

In conjunction with the development of shopping centers, the Company has entered into commitments aggregating approximately $24.7 million with general contractors for its wholly-owned and consolidated joint venture properties at December 31, 2010. These obligations, composed principally of construction contracts, are generally due in 12 to 18 months, as the related construction costs are incurred, and are expected to be financed through operating cash flow, new or existing construction loans and/or revolving credit facilities.

Related to one of the Company’s developments in Long Beach, California, an affiliate of the Company has agreed to make an annual payment of approximately $0.6 million to defray a portion of the operating expenses of a parking garage through the earlier of October 2032 or the date when the city’s parking garage bonds are repaid. There are no assets held as collateral or liabilities recorded related to these obligations.

The Company has guaranteed certain special assessment and revenue bonds issued by the Midtown Miami Community Development District. The bond proceeds were used to finance certain infrastructure and parking facility improvements. In the event of a debt service shortfall, the Company is responsible for satisfying the shortfall. There are no assets held as collateral or liabilities recorded related to these guaranties. To date, tax revenues have exceeded the debt service payments for these bonds.

The Company routinely enters into contracts for the maintenance of its properties, which typically can be canceled upon 30 to 60 days notice without penalty. At December 31, 2010, the Company had purchase order obligations, typically payable within one year, aggregating approximately $3.2 million related to the maintenance of its properties and general and administrative expenses.

The Company has entered into employment contracts with certain executive officers. These contracts generally provide for base salary, bonuses based on factors including the financial performance of the Company

and personal performance, participation in the Company’s equity plans, reimbursement of various expenses, and health and welfare benefits, and may also provide for certain perquisites (which may include insurance coverage, country or social club expenses, or reimbursement for certain business expenses). The contracts for the Company’s Executive Chairman of the Board and President and Chief Executive Officer extend through December 31, 2012. The contracts for the other executive officers currently contain a one-year “evergreen” term and are subject to cancellation without cause upon at least 90 days notice. The Company recently announced that the Executive Chairman of the Board was stepping down. The Executive Chairman’s separation from the Company will constitute a termination “without cause” in accordance with the terms of his employment agreement. As a result of the termination of the Company’s employment agreement with its Executive Chairman, the Company is obligated to pay approximately $8 million and provide certain other benefits to the Executive Chairman pursuant to the terms of his employment agreement. In addition, the Executive Chairman of the Board is entitled to receive all unvested retention shares and equity awards earned, but unvested, under the Company’s Value Sharing Equity Program, which are valued in the aggregate at approximately $8 million based on the closing price of the Company’s common shares on the New York Stock Exchange on February 15, 2011. Pursuant to the employment agreement, the Company may elect, at its option, to pay cash in lieu of these equity awards.

INFLATION

Most of the Company’s long-term leases contain provisions designed to partially mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive additional rental income from escalation clauses that generally increase rental rates during the terms of the leases and/or percentage rentals based on tenants’ gross sales. Such escalations are determined by negotiation, increases in the consumer price index or similar inflation indices. In addition, many of the Company’s leases are for terms of less than 10 years, permitting the Company to seek increased rents at market rates upon renewal. Most of the Company’s leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing the Company’s exposure to increases in costs and operating expenses resulting from inflation.

ECONOMIC CONDITIONS

The retail market in the United States significantly weakened in 2008 and continued to be challenged in 2009. Retail sales declined and tenants became more selective for new store openings. Some retailers closed existing locations, and, as a result, the Company experienced a loss in occupancy compared to its historic levels. The reduction in occupancy in 2009 has continued to have a negative impact on the Company’s consolidated cash flows, results of operations and financial position in 2010. However, the Company believes there is an improvement in the level of optimism within its tenant base. Many retailers executed contracts in 2010 to open new stores and have strong store opening plans for 2011 and 2012. The lack of new supply is causing retailers to reconsider opportunities to open new stores in quality locations in well-positioned shopping centers. The Company continues to see strong demand from a broad range of retailers, particularly in the off-price sector, which is a reflection on the general outlook of consumers who are responding to the broader economic uncertainty by demanding more value for their dollars. Offsetting some of the impact resulting from the reduced occupancy is the Company’s low occupancy cost relative to other retail formats and historic averages, as well as a diversified tenant base with only one tenant exceeding 2.5% of total consolidated and joint venture revenues (Walmart at 4.1%). Other significant tenants include Target, Lowe’s, Home Depot, Kohl’s, T.J. Maxx/Marshalls, Publix Supermarkets, PetSmart and Bed Bath & Beyond, all of which have relatively strong credit ratings, remain well-capitalized and have outperformed other retail categories on a relative basis. The Company believes these tenants should continue providing it with a stable revenue base for the foreseeable future given the long-term nature of these leases. Moreover, the majority of the tenants in the Company’s shopping centers provide day-to-day consumer necessities with a focus on value and convenience versus high-priced discretionary luxury items, which the Company believes will enable many of the tenants to continue operating within this challenging economic environment.

The Company consistently monitors potential credit issues of its tenants, and analyzes their possible impact on the financial statements of the Company and its unconsolidated joint ventures. In addition to the collectibility assessment of outstanding accounts receivable, the Company evaluates the related real estate for recoverability, as well as any tenant-related deferred charges for recoverability, which may include straight-line rents, deferred lease

costs, tenant improvements, tenant inducements and intangible assets (“Tenant-Related Deferred Charges”). The Company routinely evaluates its exposure relating to tenants in financial distress. Where appropriate, the Company has either written off the unamortized balance or accelerated depreciation and amortization expense associated with the Tenant-Related Deferred Charges for such tenants.

The retail shopping sector has been affected by the competitive nature of the retail business and the competition for market share as well as general economic conditions where stronger retailers have out-positioned some of the weaker retailers. These shifts have forced some market share away from weaker retailers and required them, in some cases, to declare bankruptcy and/or close stores. Certain retailers have announced store closings even though they have not filed for bankruptcy protection. However, these store closings often represent a relatively small percentage of the Company’s overall GLA and, therefore, the Company does not expect these closings to have a material adverse effect on the Company’s overall long-term performance. Overall, the Company’s portfolio remains stable. However, there can be no assurance that these events will not adversely affect the Company (see Item 1A. Risk Factors).

Historically, the Company’s portfolio has performed consistently throughout many economic cycles, including downward cycles. Broadly speaking, national retail sales have grown since World War II, including during several recessions and housing slowdowns. In the past, the Company has not experienced significant volatility in its long-term portfolio occupancy rate. The Company has experienced downward cycles before and has made the necessary adjustments to leasing and development strategies to accommodate the changes in the operating environment and mitigate risk. In many cases, the loss of a weaker tenant creates an opportunity to re-lease space at higher rents to a stronger retailer. More importantly, the quality of the property revenue stream is high, as it is generally derived from retailers with good credit profiles under long-term leases, with very little reliance on overage rents generated by tenant sales performance. The Company believes that the quality of its shopping center portfolio is strong, as evidenced by the high historical occupancy rates, which have previously ranged from 92% to 96% since the Company’s initial public offering in 1993. Although the Company experienced a significant decline in occupancy in 2009 due to the major tenant bankruptcies, the shopping center portfolio occupancy was at 88.4% at December 31, 2010. Notwithstanding the decline in occupancy compared to historic levels, the Company continues to sign a large number of new leases at rental rates that are returning to historic averages. Moreover, the Company has been able to achieve these results without above-normal capital investment in tenant improvements or leasing commissions. The Company is very conscious of, and sensitive to, the risks posed to the economy, but is currently comfortable that the position of its portfolio and the general diversity and credit quality of its tenant base should enable it to successfully navigate through these challenging economic times.

LEGAL MATTERS

The Company is a party to various joint ventures with the Coventry II Fund through which 11 existing or proposed retail properties, along with a portfolio of former Service Merchandise locations, were acquired at various times from 2003 through 2006. The properties were acquired by the joint ventures as value-add investments, with major renovation and/or ground-up development contemplated for many of the properties. The Company is generally responsible for day-to-day management of the properties. On November 4, 2009, Coventry Real Estate Advisors L.L.C., Coventry Real Estate Fund II, L.L.C. and Coventry Fund II Parallel Fund, L.L.C. (“Coventry”) filed suit against the Company and certain of its affiliates and officers in the Supreme Court of the State of New York, County of New York. The complaint alleges that the Company: (i) breached contractual obligations under a co-investment agreement and various joint venture limited liability company agreements, project development agreements and management and leasing agreements; (ii) breached its fiduciary duties as a member of various limited liability companies; (iii) fraudulently induced the plaintiffs to enter into certain agreements; and (iv) made certain material misrepresentations. The complaint also requests that a general release made by Coventry in favor of the Company in connection with one of the joint venture properties be voided on the grounds of economic duress. The complaint seeks compensatory and consequential damages in an amount not less than $500 million, as well as punitive damages. In response, the Company filed a motion to dismiss the complaint or, in the alternative, to sever the plaintiffs’ claims. In June 2010, the court granted in part (regarding Coventry’s claim that the Company breached a fiduciary duty owed to Coventry) and denied in part (all other claims) the Company’s motion. Coventry

has filed a notice of appeal regarding that portion of the motion granted by the court. The Company filed an answer to the complaint, and has asserted various counterclaims against Coventry.

The Company believes that the allegations in the lawsuit are without merit and that it has strong defenses against this lawsuit. The Company will vigorously defend itself against the allegations contained in the complaint. This lawsuit is subject to the uncertainties inherent in the litigation process and, therefore, no assurance can be given as to its ultimate outcome and no loss provision has been recorded in the accompanying financial statements because a loss contingency is not deemed probable or estimable. However, based on the information presently available to the Company, the Company does not expect that the ultimate resolution of this lawsuit will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

The Company was also a party to litigation filed in November 2006 by a tenant in a Company property located in Long Beach, California. The tenant filed suit against the Company and certain affiliates, claiming the Company and its affiliates failed to provide adequate valet parking at the property pursuant to the terms of the lease with the tenant. After a six-week trial, the jury returned a verdict in October 2008, finding the Company liable for compensatory damages in the amount of approximately $7.8 million. In addition, the trial court awarded the tenant attorneys’ fees and expenses in the amount of approximately $1.5 million. The Company filed motions for a new trial and for judgment notwithstanding the verdict, both of which were denied. The Company strongly disagreed with the verdict as well as the denial of the post-trial motions. As a result, the Company appealed the verdict. In July 2010, the California Court of Appeals entered an order affirming the jury verdict. The Company had a $6.0 million liability accrued for this matter as of December 31, 2009. A charge of approximately $2.7 million, net of $2.4 million in taxes, was recorded in the second quarter of 2010 relating to this matter. In November 2010, the Company made payment in full and final satisfaction of the judgment.

In addition to the litigation discussed above, the Company and its subsidiaries are subject to various legal proceedings, which, taken together, are not expected to have a material adverse effect on the Company. The Company is also subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of its business, most of which are covered by insurance. While the resolution of all matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Company’s liquidity, financial position or results of operations.

NEW ACCOUNTING STANDARDS

New Accounting Standards Implemented

Amendments to Consolidation of Variable Interest Entities

In June 2009, the Financial Accounting Standards Board (“FASB”) amended its guidance on VIEs and issued ASC 810, which introduced a more qualitative approach to evaluating VIEs for consolidation. The new accounting

guidance resulted in a change in the Company’s accounting policy effective January 1, 2010. This standard requires a company to perform an analysis to determine whether its variable interests give it a controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE as the entity that has (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether it has the power to direct the activities of the VIE that most significantly affect the VIE’s performance, this standard requires a company to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed. This standard requires continuous reassessment of primary beneficiary status, rather than periodic, event-driven reassessments as previously required, and incorporates expanded disclosure requirements. This new accounting guidance was effective for the Company on January 1, 2010, and is being applied prospectively.

At December 31, 2010, the Company’s investments in consolidated real estate joint ventures in which the Company is deemed to be the primary beneficiary have total real estate assets of $374.2 million, mortgages of $42.9 million and liabilities of $13.7 million.

The Company’s adoption of this standard resulted in the deconsolidation of one entity in which the Company has a 50% interest (the “Deconsolidated Land Entity”). The Deconsolidated Land Entity owns one real estate project, consisting primarily of land under development, which had $28.5 million of assets as of December 31, 2009. As a result of the initial application of ASC 810, the Company recorded its retained interest in the Deconsolidated Land Entity at its carrying amount. The difference between the net amount removed from the balance sheet of the Deconsolidated Land Entity and the amount reflected in investments in and advances to joint ventures of approximately $7.8 million was recognized as a cumulative effect adjustment to accumulated distributions in excess of net income. This difference was primarily due to the recognition of an other than temporary impairment charge that would have been recorded had ASC 810 been effective in 2008. The Company’s maximum exposure to loss at December 31, 2010, is equal to its investment in the Deconsolidated Entity of $12.6 million.

FORWARD-LOOKING STATEMENTS

Management’s discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto appearing elsewhere in this report. Historical results and percentage relationships set forth in the consolidated financial statements, including trends that might appear, should not be taken as indicative of future operations. The Company considers portions of this information to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company’s expectations for future periods. Forward-looking statements include, without limitation, statements related to acquisitions (including any related pro forma financial information) and other business development activities, future capital expenditures, financing sources and availability, and the effects of environmental and other regulations. Although the Company believes that the expectations reflected in these forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not statements of historical fact should be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates” and similar expressions are intended to identify forward-looking statements. Readers should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company’s control and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements and that could materially affect the Company’s actual results, performance or achievements.

Factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following:

The Company’s primary market risk exposure is interest rate risk. The Company’s debt, excluding unconsolidated joint venture debt, is summarized as follows:

Fixed-Rate Debt^(A)

Variable-Rate Debt^(A)

The Company’s unconsolidated joint ventures’ fixed-rate indebtedness is summarized as follows:

Fixed-Rate Debt

Variable-Rate Debt

The Company intends to utilize retained cash flow, including proceeds from asset sales, debt and equity financing, including variable-rate indebtedness available under its Revolving Credit Facilities, to initially fund future acquisitions, developments and expansions of shopping centers. Thus, to the extent the Company incurs additional variable-rate indebtedness, its exposure to increases in interest rates in an inflationary period would increase. The Company does not believe, however, that increases in interest expense as a result of inflation will significantly affect the Company’s distributable cash flow.

The interest rate risk on a portion of the Company’s variable-rate debt described above has been mitigated through the use of interest rate swap agreements (the “Swaps”) with major financial institutions. At December 31, 2010 and 2009, the interest rate on the Company’s $150 million and $400 million consolidated floating rate debt, respectively, was swapped to fixed rates. The Company is exposed to credit risk in the event of nonperformance by the counter-parties to the Swaps. The Company believes it mitigates its credit risk by entering into Swaps with major financial institutions.

The carrying value of the Company’s fixed-rate debt is adjusted to include the $150 million and $400 million that were swapped to a fixed rate at December 31, 2010 and 2009, respectively, The fair value of the Company’s fixed-rate debt is adjusted to (i) include the swaps reflected in the carrying value, and (ii) include the Company’s

proportionate share of the joint venture fixed-rate debt. An estimate of the effect of a 100-point increase at December 31, 2010, is summarized as follows (in millions):

Company’s fixed-rate debt

Company’s proportionate share of joint venture fixed-rate debt

The sensitivity to changes in interest rates of the Company’s fixed-rate debt was determined utilizing a valuation model based upon factors that measure the net present value of such obligations that arise from the hypothetical estimate as discussed above.

Further, a 100 basis-point increase in short-term market interest rates at December 31, 2010, would result in an increase in interest expense of approximately $8.7 million for the Company and $1.3 million representing the Company’s proportionate share of the joint ventures’ interest expense relating to variable-rate debt outstanding for the twelve-month period. The estimated increase in interest expense for the year does not give effect to possible changes in the daily balance for the Company’s or joint ventures’ outstanding variable-rate debt.

The Company and its joint ventures intend to continually monitor and actively manage interest costs on their variable-rate debt portfolio and may enter into swap positions based on market fluctuations. In addition, the Company believes that it has the ability to obtain funds through additional equity and/or debt offerings, including the issuance of unsecured notes and joint venture capital. Accordingly, the cost of obtaining such protection agreements in relation to the Company’s access to capital markets will continue to be evaluated. The Company has not, and does not plan to, enter into any derivative financial instruments for trading or speculative purposes. As of December 31, 2010, the Company had no other material exposure to market risk.

The response to this item is included in a separate section at the end of this report beginning on page F-1.

Disclosure Controls and Procedures

Based on their evaluation as required by Securities Exchange Act Rules 13a-15(b) and 15d-15(b), the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have concluded that the Company’s disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) are effective as of December 31, 2010, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and were effective as of December 31, 2010, to ensure that information required to be disclosed by the Company issuer in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to the Company’s management, including its CEO and CFO, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Securities Exchange Act Rule 13a-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of its internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on those criteria, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2010.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2010, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein and is incorporated in this Item 9A by reference.

Changes in Internal Control over Financial Reporting

During the three-month period ended December 31, 2010, there were no changes in the Company’s internal control over financial reporting that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

The Company’s Board of Directors has adopted the following corporate governance documents:

Copies of the Company’s corporate governance documents are available on the Company’s website, www.ddr.com, under “Investor Relations — Corporate Governance.”

Certain other information required by this Item 10 is incorporated herein by reference to the information under the headings “Proposal One: Election of Directors — Nominees for Director” and “— Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” contained in the Company’s Proxy Statement in connection with its annual meeting of shareholders to be held on May 10, 2011, and the information under the heading “Executive Officers” in Part I of this Annual Report on Form 10-K.

Information required by this Item 11 is incorporated herein by reference to the information under the headings “Proposal One: Election of Directors — Compensation of Directors” and “Executive Compensation” contained in the Company’s Proxy Statement in connection with its annual meeting of shareholders to be held on May 10, 2011.

Certain information required by this Item 12 is incorporated herein by reference to the “Security Ownership of Certain Beneficial Owners and Management” section of the Company’s Proxy Statement in connection with its annual meeting of shareholders to be held on May 10, 2011. The following table sets forth the number of securities issued and outstanding under the existing plans, as of December 31, 2010, as well as the weighted-average exercise price of outstanding options.

EQUITY COMPENSATION PLAN INFORMATION

Equity compensation plans approved by security holders⁽¹⁾

Equity compensation plans not approved by security holders⁽³⁾

Information required by this Item 13 is incorporated herein by reference to the “Certain Transactions” section of the Company’s Proxy Statement in connection with its annual meeting of shareholders to be held on May 10, 2011.

Incorporated herein by reference to the “Fees Paid to PricewaterhouseCoopers LLP” section of the Company’s Proxy Statement in connection with its annual meeting of shareholders to be held on May 10, 2011.

The following documents are filed as a part of this report:

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets at December 31, 2010 and 2009.

Consolidated Statements of Operations for the three years ended December 31, 2010.

Consolidated Statements of Equity for the three years ended December 31, 2010.

Consolidated Statements of Cash Flows for the three years ended December 31, 2010.

Notes to the Consolidated Financial Statements.

The following financial statement schedules are filed herewith as part of this Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements of the registrant:

Schedule

II — Valuation and Qualifying Accounts and Reserves for the three years ended December 31, 2010.

III — Real Estate and Accumulated Depreciation at December 31, 2010.

IV — Mortgage Loans on Real Estate at December 31, 2010.

Schedules not listed above have been omitted because they are not applicable or because the information required to be set forth therein is included in the Consolidated Financial Statements or notes thereto.

Financial statements of the Company’s unconsolidated joint venture companies have been omitted because they do not meet the significant subsidiary definition of S-X 210.1-02(w).


Exhibit
No.		Form
Under		10-K				Filed Herewith or
Reg.S-K		Exhibit				Incorporated Herein by
Item 601		No.			Description	Reference

	4		4	.3	Deposit Agreement, dated as of October 26, 2009, by and between the Company and Mellon Investor Services LLC Relating to Depositary Shares Representing 8.0% Class G Cumulative Redeemable Preferred Shares (including Specimen Certificate for Depositary Shares)	Annual Report on Form 10-K (Filed with the SEC on February 26, 2010; File No. 001-11690)
	4		4	.4	Specimen Certificate for 73/8% Class H Cumulative Redeemable Preferred Shares	Annual Report on Form 10-K (Filed with the SEC on February 26, 2010; File No. 001-11690)
	4		4	.5	Deposit Agreement, dated as of October 26, 2009, by and between the Company and Mellon Investor Services LLC Relating to Depositary Shares Representing 73/8% Class H Cumulative Redeemable Preferred Shares (including Specimen Certificate for Depositary Shares)	Annual Report on Form 10-K (Filed with the SEC on February 26, 2010; File No. 001-11690)
	4		4	.6	Specimen Certificate for 7.50% Class I Cumulative Redeemable Preferred Shares	Annual Report on Form 10-K (Filed with the SEC on February 26, 2010; File No. 001-11690)
	4		4	.7	Deposit Agreement, dated as of October 26, 2009, by and between the Company and Mellon Investor Services LLC Relating to Depositary Shares Representing 7.50% Class I Cumulative Redeemable Preferred Shares (including Specimen Certificate for Depositary Shares)	Annual Report on Form 10-K (Filed with the SEC on February 26, 2010; File No. 001-11690)
	4		4	.8	Indenture, dated as of May 1, 1994, by and between the Company and The Bank of New York (as successor to JP Morgan Chase Bank, N.A., successor to Chemical Bank), as Trustee	Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
	4		4	.9	Indenture, dated as of May 1, 1994, by and between the Company and U.S. Bank National Association (as successor to U.S. Bank Trust National Association (as successor to National City Bank)), as Trustee	Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
	4		4	.10	First Supplemental Indenture, dated as of May 10, 1995, by and between the Company and U.S. Bank National Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)

115


Exhibit
No.		Form
Under		10-K				Filed Herewith or
Reg.S-K		Exhibit				Incorporated Herein by
Item 601		No.			Description	Reference

	4		4	.11	Second Supplemental Indenture, dated as of July 18, 2003, by and between the Company and U.S. Bank National Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Form S-3 Registration No. 333-108361 (Filed with the SEC on August 29, 2003)
	4		4	.12	Third Supplemental Indenture, dated as of January 23, 2004, by and between the Company and U.S. Bank National Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Form S-4 Registration No. 333-117034 (Filed with the SEC on June 30, 2004)
	4		4	.13	Fourth Supplemental Indenture, dated as of April 22, 2004, by and between the Company and U.S. Bank National Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Form S-4 Registration No. 333-117034 (Filed with the SEC on June 30, 2004)
	4		4	.14	Fifth Supplemental Indenture, dated as of April 28, 2005, by and between the Company and U.S. Bank National Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Annual Report on Form 10-K (Filed with the SEC on February 21, 2007; File No. 001-11690)
	4		4	.15	Sixth Supplemental Indenture, dated as of October 7, 2005, by and between the Company and U.S. Bank National Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Annual Report on Form 10-K (Filed with the SEC on February 21, 2007; File No. 001-11690)
	4		4	.16	Seventh Supplemental Indenture, dated as of August 28, 2006, by and between the Company and U.S. Bank National Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Current Report on Form 8-K (Filed with the SEC on September 1, 2006; File No. 001-11690)
	4		4	.17	Eighth Supplemental Indenture, dated as of March 13, 2007, by and between the Company and U.S. Bank National Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Current Report on Form 8-K (Filed with the SEC on March 16, 2007; File No. 001-11690)
	4		4	.18	Ninth Supplemental Indenture, dated as of September 30, 2009, by and between the Company and U.S. Bank National, Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Form S-3 Registration No. 333-162451 (Filed on October 13, 2009)

116


Exhibit
No.		Form
Under		10-K				Filed Herewith or
Reg.S-K		Exhibit				Incorporated Herein by
Item 601		No.			Description	Reference

	4		4	.19	Tenth Supplemental Indenture, dated as of March 19, 2010, by and between the Company and U.S. Bank National, Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Quarterly Report on Form 10-Q (Filed with the SEC on May 7, 2010; File No. 001-11690)
	4		4	.20	Eleventh Supplemental Indenture, dated as of August 12, 2010, by and between the Company and U.S. Bank National, Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Quarterly Report on Form 10-Q (Filed with the SEC on November 11, 2010; File No. 001-11690)
	4		4	.21	Twelfth Supplemental Indenture, dated as of November 5, 2010, by and between the Company and U.S. Bank National, Association (as successor to U.S. Bank Trust National Association (successor to National City Bank)), as Trustee	Filed herewith
	4		4	.22	Form of Fixed Rate Senior Medium-Term Note	Annual Report on Form 10-K (Filed with the SEC on March 30, 2000; File No. 001-11690)
	4		4	.23	Form of Fixed Rate Subordinated Medium-Term Note	Annual Report on Form 10-K (Filed with the SEC on March 30, 2000; File No. 001-11690)
	4		4	.24	Form of Floating Rate Subordinated Medium-Term Note	Annual Report on Form 10-K (Filed with the SEC on March 30, 2000; File No. 001-11690)
	4		4	.25	Form of 5.25% Note due 2011	Form S-4 Registration No. 333-117034 (Filed with the SEC on June 30, 2004)
	4		4	.26	Form of 3.00% Convertible Senior Note due 2012	Current Report on Form 8-K (Filed with the SEC on March 16, 2007; File No. 001-11690)
	4		4	.27	Form of 3.50% Convertible Senior Note due 2011	Current Report on Form 8-K (Filed with the SEC on September 1, 2006; File No. 001-11690)
	4		4	.28	Eighth Amended and Restated Credit Agreement, dated as of October 20, 2010, by and among the Company, DDR PR Ventures LLC, S.E., the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent	Current Report on Form 8-K (Filed with the SEC on October 21, 2010; File No. 001-11690)
	4		4	.29	First Amended and Restated Secured Term Loan Agreement, dated June 29, 2006, by and among the Company and Keybanc Capital Markets and Banc of America Securities, LLC and other lenders named therein	Current Report on Form 8-K (Filed with the SEC on July 6, 2006; File No. 001-11690)

117


Exhibit
No.		Form
Under		10-K				Filed Herewith or
Reg.S-K		Exhibit				Incorporated Herein by
Item 601		No.			Description	Reference

	4		4	.30	Second Amendment to the First Amended and Restated Secured Term Loan Agreement, dated March 30, 2007, by and among the Company, Keybanc Capital Markets and Banc of America Securities, LLC and other lenders named therein	Quarterly Report on Form 10-Q (Filed with the SEC on May 10, 2007; File No. 001-11690)
	4		4	.31	Third Amendment to the First Amended and Restated Secured Term Loan Agreement, dated December 10, 2007, by and among the Company, Keybanc Capital Markets and Banc of America Securities, LLC and other lenders named therein	Current Report on Form 8-K (Filed with the SEC on December 12, 2007; File No. 001-11690)
	4		4	.32	Fourth Amendment to the First Amended and Restated Secured Term Loan Agreement, dated October 20, 2010, by and among the Company, DDR PR Ventures LLC, S.E., KeyBank National Association, as Administrative Agent, and the other several banks, financial institutions and other entities from time to time parties to such loan agreement	Current Report on Form 8-K (Filed with the SEC on October 21, 2010; File No. 001-11690)
	4		4	.33	Registration Rights Agreement, dated March 3, 2007, by and among the Company and the Initial Purchasers named therein	Current Report on Form 8-K (Filed with the SEC on March 16, 2007; File No. 001-11690)
	4		4	.34	Registration Rights Agreement, dated August 28, 2006, by and among the Company and the Initial Purchasers named therein	Current Report on Form 8-K (Filed with the SEC on September 1, 2006; File No. 001-11690)
	10		10	.1	Amended and Restated Directors’ Deferred Compensation Plan*	Form S-8 Registration No. 333-147270 (Filed with the SEC on November 9, 2007)
	10		10	.2	Elective Deferred Compensation Plan (Amended and Restated as of January 1, 2004)*	Annual Report on Form 10-K (Filed with the SEC on March 15, 2004; File No. 001-11690)
	10		10	.3	Developers Diversified Realty Corporation Equity Deferred Compensation Plan, restated as of January 1, 2009*	Annual Report on Form 10-K (Filed with the SEC on February 27, 2009; File No. 001-11690)
	10		10	.4	Developers Diversified Realty Corporation 2005 Directors’ Deferred Compensation Plan*	Form S-8 Registration No. 333-147270 (Filed with the SEC on November 9, 2007)
	10		10	.5	Amended and Restated 1998 Developers Diversified Realty Corporation Equity-Based Award Plan*	Form S-8 Registration No. 333-76537 (Filed with the SEC on April 19, 1999)
	10		10	.6	Amended and Restated 2002 Developers Diversified Realty Corporation Equity-Based Award Plan*	Annual Report on Form 10-K (Filed with the SEC on February 26, 2010; File No. 001-11690)
	10		10	.7	Amended and Restated 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*	Annual Report on Form 10-K (Filed with the SEC on February 26, 2010; File No. 001-11690)

118


Exhibit
No.		Form
Under		10-K				Filed Herewith or
Reg.S-K		Exhibit				Incorporated Herein by
Item 601		No.			Description	Reference

	10		10	.8	Amended and Restated 2008 Developers Diversified Realty Corporation Equity-Based Award Plan (Amended and Restated as of June 25, 2009)*	Quarterly Report on Form 10-Q (Filed with the SEC August 7, 2009; File No. 001-11690)
	10		10	.9	Form of Restricted Share Agreement under the 1996/1998/2002/2004 Developers Diversified Realty Corporation Equity-Based Award Plan*	Annual Report on Form 10-K (Filed with the SEC on March 16, 2005; File No. 001-11690)
	10		10	.10	Form of Restricted Share Agreement for Executive Officers under the 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*	Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006; File No. 001-11690)
	10		10	.11	Form Restricted Shares Agreement*	Quarterly Report on Form 10-Q (Filed with the SEC August 7, 2009; File No. 001-11690)
	10		10	.12	Form of Unrestricted Shares Agreement*	Quarterly Report on Form 10-Q (Filed with the SEC on May 11, 2009; File No. 001-11690)
	10		10	.13	Form of Incentive Stock Option Grant Agreement for Executive Officers under the 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*	Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006; File No. 001-11690)
	10		10	.14	Form of Incentive Stock Option Grant Agreement for Executive Officers (with accelerated vesting upon retirement) under the 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*	Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006; File No. 001-11690)
	10		10	.15	Form of Non-Qualified Stock Option Grant Agreement for Executive Officers under the 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*	Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006; File No. 001-11690)
	10		10	.16	Form of Non-Qualified Stock Option Grant Agreement for Executive Officers (with accelerated vesting upon retirement) under the 2004 Developers Diversified Realty Corporation Equity-Based Award Plan*	Quarterly Report on Form 10-Q (Filed with the SEC on November 9, 2006; File No. 001-11690)
	10		10	.17	Form Stock Option Agreement for Incentive Stock Options Grants to Executive Officers*	Quarterly Report on Form 10-Q (Filed with the SEC August 7, 2009; File No. 001-11690)
	10		10	.18	Form Stock Options Agreement for Non-Qualified Stock Option Grants to Executive Officers*	Quarterly Report on Form 10-Q (Filed with the SEC August 7, 2009; File No. 001-11690)
	10		10	.19	Form of Directors’ Restricted Shares Agreement, dated January 1, 2000*	Form S-11 Registration No. 333-76278 (Filed with SEC on January 4, 2002; see Exhibit 10(ff) therein)
	10		10	.20	Form 2009 Retention Award Agreement*	Quarterly Report on Form 10-Q (Filed with the SEC on November 6, 2009; File No. 001-11690)

119


Exhibit
No.		Form
Under		10-K				Filed Herewith or
Reg.S-K		Exhibit				Incorporated Herein by
Item 601		No.			Description	Reference

	10		10	.21	Promotion Grant Agreement, dated January 1, 2010, by and between the Company and Daniel B. Hurwitz*	Quarterly Report on Form 10-Q (Filed with the SEC on May 7, 2010; File No. 001-11690)
	10		10	.22	Developers Diversified Realty Corporation Value Sharing Equity Program*	Quarterly Report on Form 10-Q (Filed with the SEC on November 6, 2009; File No. 001-11690)
	10		10	.23	Amended and Restated Employment Agreement, dated July 29, 2009, by and between the Company and Daniel B. Hurwitz*	Quarterly Report on Form 10-Q (Filed with the SEC on November 6, 2009; File No. 001-11690)
	10		10	.24	Amended and Restated Employment Agreement, dated July 29, 2009, by and between the Company and Scott A. Wolstein*	Quarterly Report on Form 10-Q (Filed with the SEC on November 6, 2009; File No. 001-11690)
	10		10	.25	Amended and Restated Employment Agreement, dated December 29, 2008, by and between the Company and David J. Oakes*	Annual Report on Form 10-K (Filed with the SEC on February 27, 2009; File No. 001-11690)
	10		10	.26	Employment Agreement, dated December 29, 2008, by and between the Company and Paul Freddo*	Annual Report on Form 10-K (Filed with the SEC on February 27, 2009; File No. 001-11690)
	10		10	.27	Amended and Restated Employment Agreement, dated December 29, 2008, by and between the Company and John S. Kokinchak*	Annual Report on Form 10-K (Filed with the SEC on February 27, 2009; File No. 001-11690)
	10		10	.28	Amended and Restated Employment Agreement, dated December 29, 2008, by and between the Company and Robin R. Walker-Gibbons*	Annual Report on Form 10-K (Filed with the SEC on February 27, 2009; File No. 001-11690)
	10		10	.29	Amended and Restated Employment Agreement, dated December 29, 2008, by and between the Company and Richard E. Brown*	Annual Report on Form 10-K (Filed with the SEC on February 27, 2009; File No. 001-11690)
	10		10	.30	Letter Agreement, dated March 23, 2010, by and between the Company and Richard E. Brown*	Quarterly Report on Form 10-Q (Filed with the SEC on August 6, 2010; File No. 001-11690)
	10		10	.31	Amended and Restated Employment Agreement, dated December 29, 2008, by and between the Company and William H. Schafer*	Annual Report on Form 10-K (Filed with the SEC on February 27, 2009; File No. 001-11690)
	10		10	.32	Separation Agreement and Release, dated January 26, 2010, by and between the Company and William H. Schafer*	Current Report on Form 8-K (Filed with the SEC on January 26, 2010; File No. 001-11690)
	10		10	.33	Amended and Restated Employment Agreement, dated December 29, 2008, by and between the Company and Joan U. Allgood*	Annual Report on Form 10-K (Filed with the SEC on February 27, 2009; File No. 001-11690)

120


Exhibit
No.		Form
Under		10-K				Filed Herewith or
Reg.S-K		Exhibit				Incorporated Herein by
Item 601		No.			Description	Reference

	10		10	.34	Separation Agreement and Release, dated December 20, 2010, by and between the Company and Joan U. Allgood*	Filed herewith
	10		10	.35	Separation Agreement and Release, dated July 28, 2009, by and between the Company and Timothy J. Bruce*	Quarterly Report on Form 10-Q (Filed with the SEC on November 6, 2009; File No. 001-11690)
	10		10	.36	Form of Change in Control Agreement, entered into with certain officers of the Company*	Annual Report on Form 10-K (Filed with the SEC on February 27, 2009; File No. 001-11690)
	10		10	.37	Form of Indemnification Agreement for directors of the Company	Current Report on Form 8-K (Filed with the SEC on April 7, 2009; File No. 001-11690)
	10		10	.38	Form of Indemnification Agreement for executive officers of the Company	Current Report on Form 8-K (Filed with the SEC on April 7, 2009; File No. 001-11690)
	10		10	.39	Form of Medium-Term Note Distribution Agreement	Annual Report on Form 10-K (Filed with the SEC on March 30, 2000; File No. 001-11690)
	10		10	.40	Program Agreement for Retail Value Investment Program, dated February 11, 1998, by and among Retail Value Management, Ltd., the Company and The Prudential Insurance Company of America	Annual Report on Form 10-K (Filed with the SEC on March 15, 2004; File No. 001-11690)
	10		10	.41	Stock Purchase Agreement, dated as of February 23, 2009, between the Company and Alexander Otto (including the forms of Warrant, Investor Rights Agreement, Waiver Agreement, Tax Agreement and Voting Agreement)	Current Report on Form 8-K (Filed with the SEC on February 27, 2009; File No. 001-11690)
	10		10	.42	Investors’ Rights Agreement, dated as of May 11, 2009, by and between the Company and Alexander Otto	Current Report on Form 8-K (Filed with the SEC on May 11, 2009; File No. 001-11690)
	10		10	.43	Waiver Agreement, dated as of May 11, 2009, by and between the Company and Alexander Otto	Current Report on Form 8-K (Filed with the SEC on May 11, 2009; File No. 001-11690)
	10		10	.44	Purchase and Sale Agreement, dated July 9, 2008, by and between the Company and Wolstein Business Enterprises, L.P.	Current Report on Form 8-K (Filed with the SEC on July 15, 2008; File No. 001-11690)
	12		12	.1	Computation of Ratio of Earnings to Fixed Charges	Filed herewith
	12		12	.2	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends	Filed herewith
	21		21	.1	List of Subsidiaries	Filed herewith
	23		23	.1	Consent of PricewaterhouseCoopers LLP	Filed herewith
	31		31	.1	Certification of principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934	Filed herewith

121

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2010 and 2009, (ii) Consolidated Statements of Operations for the Three Years Ended December 31, 2010, (iii) Consolidated Statements of Equity for the Three Years Ended December 31, 2010, (iv) Consolidated Statements of Cash Flows for the Three Years Ended Decembers 31, 2010, and (v) Notes to the Consolidated Financial Statements.

In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

DEVELOPERS DIVERSIFIED REALTY CORPORATION

INDEX TO FINANCIAL STATEMENTS

Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2010 and 2009

Consolidated Statements of Operations for the three years ended December 31, 2010

Consolidated Statements of Equity for the three years ended December 31, 2010

Consolidated Statements of Cash Flows for the three years ended December 31, 2010

Notes to Consolidated Financial Statements

Financial Statement Schedules:

II — Valuation and Qualifying Accounts and Reserves for the three years ended December 31, 2010

III — Real Estate and Accumulated Depreciation at December 31, 2010

IV — Mortgage Loans on Real Estate at December 31, 2010

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

To the Board of Directors and Shareholders of

Developers Diversified Realty Corporation:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Developers Diversified Realty Corporation and its subsidiaries (the “Company”) at December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in “Management’s Report on Internal Control over Financial Reporting” appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it assesses consolidation principles for variable interest entities in 2010.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PRICEWATERHOUSECOOPERS LLP

Cleveland, Ohio

February 28, 2011

Assets

Land

Buildings

Fixtures and tenant improvements

Less: Accumulated depreciation

Land held for development and construction in progress

Real estate held for sale, net

Total real estate assets, net

Restricted cash

Accounts receivable, net

Notes receivable

Deferred charges, less accumulated amortization of $25,446 and $34,945, respectively

Other assets, net

Liabilities and Equity

Unsecured indebtedness:

Senior notes

Revolving credit facility

Secured indebtedness:

Term debt

Mortgage and other secured indebtedness

Total indebtedness

Accounts payable and accrued expenses

Dividends payable

Equity derivative liability - affiliate

Other liabilities

Commitments and contingencies (Note 8)

Developers Diversified Realty Corporation Equity:

Preferred shares (Note 9)

Common shares, with par value, $0.10 stated value; 500,000,000 shares authorized; 256,267,750 and 201,742,589 shares issued at December 31, 2010 and 2009, respectively

Paid-in capital

Accumulated distributions in excess of net income

Deferred compensation obligation

Accumulated other comprehensive income

Less: Common shares in treasury at cost: 712,310 and 657,012 shares at December 31, 2010 and 2009, respectively

Total DDR shareholders’ equity

Non-controlling interests

Total equity

The accompanying notes are an integral part of these consolidated financial statements.

Revenues from operations:

Minimum rents

Percentage and overage rents

Recoveries from tenants

Fee and other income

Rental operation expenses:

Operating and maintenance

Real estate taxes

Impairment charges

General and administrative

Depreciation and amortization

Other income (expense):

Interest income

Interest expense

Gain on debt retirement, net

Loss on equity derivative instruments

Other expense, net

(Loss) income before earnings from equity method investments and other items

Equity in net income (loss) of joint ventures

Impairment of joint venture investments

(Loss) gain on change in control of interests

Loss before tax (expense) benefit of taxable REIT subsidiaries and state franchise and income taxes

Tax (expense) benefit of taxable REIT subsidiaries and state franchise and income taxes

Loss from continuing operations

Loss from discontinued operations

Loss before gain on disposition of real estate

Gain on disposition of real estate, net of tax

Net loss

Non-controlling interests

Net loss attributable to DDR

Preferred dividends

Net loss attributable to DDR common shareholders

Per share data:

Basic earnings per share data:

Loss from continuing operations attributable to DDR common shareholders

Loss from discontinued operations attributable to DDR common shareholders

Diluted earnings per share data:

Balance, December 31, 2007

Issuance of 8,142 common shares related to exercise of stock options, dividend reinvestment plan, performance plan and director compensation

Issuance of 1,840,939 common shares for cash

Issuance of restricted stock

Vesting of restricted stock

Stock-based compensation

Redemption of 463,185 operating partnership units in exchange for common shares

Contributions from non-controlling interests

Distributions to non-controlling interests

Loss on sale of non-controlling interest

Adjustment to redeemable operating partnership units

Dividends declared-common shares

Dividends declared-preferred shares

Comprehensive loss (Note 13):

Allocation of net loss

Other comprehensive income:

Change in fair value of interest rate contracts

Amortization of interest rate contracts

Foreign currency translation

Comprehensive loss

Balance, December 31, 2008

Issuance of 261,580 common shares related to the exercise of stock options, dividend reinvestment plan and director compensation

Issuance of 56,630,606 common shares for cash

Equity derivative instruments

Balance, December 31, 2009

Cumulative effect of adoption of a new accounting standard (Note 1)

Deconsolidation of interests

Issuance of 212,349 common shares related to the exercise of stock options, dividend reinvestment plan and director compensation

Issuance of 52,792,716 common shares for cash

Convertible debt instruments

Cash flow from operating activities:

Net loss

Adjustments to reconcile net loss to net cash flow provided by operating activities:

Depreciation and amortization

Stock-based compensation

Amortization of deferred finance costs and settled interest rate protection agreements

Accretion of convertible debt discount

Gain on debt retirement, net

Loss on equity derivative instruments

Settlement of accreted debt discount on repurchase of convertible senior notes

Net cash paid from interest rate hedging contracts

Equity in net (income) loss of joint ventures

Impairment of joint venture investments

Net gain on change in control of interests

Gain on sale of joint venture stock

Cash distributions from joint ventures

(Gain) loss on disposition of real estate

Impairment charges

Change in notes receivable interest reserve

Net change in accounts receivable

Net change in accounts payable and accrued expenses

Net change in other operating assets and liabilities

Total adjustments

Net cash flow provided by operating activities

Cash flow from investing activities:

Proceeds from disposition of real estate

Real estate developed or acquired, net of liabilities assumed

Equity contributions to joint ventures

Repayment of (advances to) joint venture advances, net

Distributions of proceeds from sale and refinancing of joint venture interests

Return on investments in joint ventures

Issuance of notes receivable, net

Decrease (increase) in restricted cash

Net cash flow provided by (used for) investing activities

Cash flow from financing activities:

(Repayments of) proceeds from revolving credit facilities, net

Proceeds from term loan borrowings, mortgages and other secured debt

Repayment on term loans and mortgage debt

Repayment of senior notes

Proceeds from issuance of senior notes, net of underwriting commissions and offering expenses of $1,183 and $200 in 2010 and 2009, respectively

Payment of debt issuance costs

(Purchase of) proceeds from the issuance of common shares in conjunction with exercise of stock options and dividend reinvestment plan

Proceeds from issuance of common shares, net of underwriting commissions and offering expenses of $998 and $459 in 2010 and 2009, respectively

Contributions from non-controlling interests

Purchase of redeemable operating partnership units

Distributions to non-controlling interest and redeemable operating partnership units

Dividends paid

Net cash (used for) provided by financing activities

Cash and cash equivalents

Decrease in cash and cash equivalents

Effect of exchange rate changes on cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Nature of Business

Developers Diversified Realty Corporation and its related real estate joint ventures and subsidiaries (collectively, the “Company” or “DDR”) are primarily engaged in the business of acquiring, expanding, owning, developing, redeveloping, leasing, managing and operating shopping centers. Unless otherwise provided, references herein to the Company or DDR include Developers Diversified Realty Corporation, its wholly-owned and majority-owned subsidiaries and its consolidated and unconsolidated joint ventures. The tenant base primarily includes national and regional retail chains and local retailers. Consequently, the Company’s credit risk is concentrated in the retail industry.

Consolidated revenues, including those classified within discontinued operations, derived from the Company’s largest tenant, Walmart, aggregated approximately 5.3%, 4.9% and 4.3% of total revenues for the years ended December 31, 2010, 2009 and 2008, respectively. Adverse changes in general or local economic conditions could result in the inability of some existing tenants to meet their lease obligations and could adversely affect the Company’s ability to attract or retain tenants. During the three years ended December 31, 2010, 2009 and 2008, certain national and regional retailers experienced financial difficulties, and several filed for protection under bankruptcy laws.

Principles of Consolidation

In June 2009, the Financial Accounting Standards Board (“FASB”) amended its guidance on accounting for variable interest entities (“VIEs”) and issued Accounting Standards Codification No. 810, Consolidation (“ASC 810”), which introduced a more qualitative approach to evaluating VIEs for consolidation. The new accounting guidance resulted in a change in the Company’s accounting policy effective January 1, 2010. This standard requires a company to perform an analysis to determine whether its variable interests give it a controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE as the entity that has (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether it has the power to direct the activities of the VIE that most significantly affect the VIE’s performance, this standard requires a company to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed. This standard requires continuous reassessment of primary beneficiary status rather than periodic, event-driven reassessments as previously required and incorporates expanded disclosure requirements. This new accounting guidance was effective for the Company on January 1, 2010, and is being applied prospectively.

The Company’s adoption of ASC 810 resulted in the deconsolidation of one entity in which the Company has a 50% interest (the “Deconsolidated Land Entity”). The Deconsolidated Land Entity owns one real estate project, consisting primarily of land under development, which had $28.5 million of assets as of December 31, 2009. As a result of the initial application of ASC 810, the Company recorded its retained interest in the Deconsolidated Land Entity at its carrying amount. The difference between the net amount removed from the balance sheet of the Deconsolidated Land Entity and the amount reflected in investments in and advances to joint ventures of approximately $7.8 million was recognized as a cumulative effect adjustment to accumulated distributions in excess of net income. This difference was primarily due to the recognition of an other than temporary impairment charge that would have been recorded had ASC 810 been effective in 2008. The Company’s maximum exposure to loss at December 31, 2010 is equal to its investment in the Deconsolidated Land Entity of $12.6 million.

The Company has a 50% interest in a joint venture with EDT Retail Trust (formerly, Macquarie DDR Trust (“MDT”)), DDR MDT MV, that currently owns the underlying real estate formerly occupied by Mervyns, which declared bankruptcy in 2008 and vacated all sites as of December 31, 2008 (the “Mervyns Joint Venture”). In connection with the recapitalization of MDT in June 2010, EDT Retail Trust (ASX: EDT) (“EDT”) assumed

MDT’s 50% interest in the Mervyns Joint Venture. The Company held a 50% economic interest in the Mervyns Joint Venture, which was considered a VIE. DDR provided management, financing, expansion, re-tenanting and oversight services for this real estate investment through August 2010.

The Company was determined to be the primary beneficiary until August 2010 due to related party considerations, as well as being the member determined to have a greater exposure to variability in expected losses, as DDR was entitled to earn certain fees from the Mervyns Joint Venture. DDR earned aggregate fees of $0.9 million, $0.1 million and $1.4 million during 2010, 2009 and 2008, respectively. All fees earned from the joint venture were eliminated in consolidation prior to deconsolidation. The amounts related to this entity are aggregated with the Company’s other consolidated VIEs on the Company’s consolidated balance sheet at December 31, 2009.

In August 2010, the 25 assets owned by the Mervyns Joint Venture were transferred to the control of a court-appointed receiver. As a result, the Company no longer has a controlling financial interest in the entity. Consequently, the Mervyns Joint Venture was deconsolidated as the Company was no longer in control of the entity. Upon deconsolidation, the Company recorded a gain of approximately $5.6 million because the carrying value of the non-recourse debt exceeded the carrying value of the collateralized assets of the joint venture. Following the appointment of the receiver, the Company no longer has any effective economic rights or obligations in the Mervyns Joint Venture. The revenues and expenses associated with the Mervyns Joint Venture for all of the periods presented, including the $5.6 million gain, are classified within discontinued operations in the consolidated statements of operations (Note 12). Subsequent to the deconsolidation of this joint venture, the Company accounts for its retained interest in this joint venture investment, which approximates zero at December 31, 2010, under the cost method of accounting because the Company does not have the ability to exercise significant influence.

The Company’s consolidated balance sheet includes the following relating to the Mervyns Joint Venture (in millions):

Real estate, net

Mortgage debt

Statement of Cash Flows and Supplemental Disclosure of Non-Cash Investing and Financing Information

Non-cash investing and financing activities are summarized as follows (in millions):

Consolidation of the net assets (excluding mortgages as disclosed below) of previously unconsolidated joint ventures

Redemption of interest in a joint venture

Mortgages and liabilities assumed of previously unconsolidated joint ventures

Dividends declared, not paid

Dividends paid in common shares

Deconsolidation of net assets from the adoption of ASC 810

Reduction of non-controlling interests from the adoption of ASC 810

Deconsolidation of net assets of Mervyns Joint Venture

Reduction of non-controlling interests due to deconsolidation of Mervyns Joint Venture

Foreclosure of note receivable and transfer of collateral

Share issuance for operating partnership unit redemption

The transactions above did not provide or use cash in the years presented and, accordingly, are not reflected in the consolidated statements of cash flows.

Real Estate

Real estate assets, which includes construction in progress and land held for development, are stated at cost less accumulated depreciation.

Depreciation and amortization is recorded on a straight-line basis over the estimated useful lives of the assets as follows:

Building improvements

Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations that improve or extend the life of the asset are capitalized.

Land held for development and construction in progress includes land held for future development, shopping center developments and significant expansions and redevelopments. In addition, the Company capitalized certain direct and incremental internal construction and software development and implementation costs of $9.7 million, $11.7 million and $14.6 million in 2010, 2009 and 2008, respectively.

Purchase Price Accounting

Upon acquisition of properties, the Company estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and intangible assets generally consisting of: (i) above- and below-market leases; (ii) in-place leases; and (iii) tenant relationships. The Company allocates the purchase price to assets acquired and liabilities assumed on a gross basis based on their relative fair values at the date of acquisition. In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence, marketing and leasing activities and utilizes various valuation methods, such as estimated cash flow projections using appropriate discount and capitalization rates, estimates of replacement costs net of depreciation and available market information. Above- and below-market lease values are recorded based on the present value of the difference between the contractual amounts to be paid and management’s estimate of the fair market lease rates for each in-place lease and amortized over the remaining life of the respective leases (plus fixed-rate renewal periods for below market leases) as an adjustment to base rental revenue. The purchase price is further allocated to in-place lease values and tenant relationship values based on management’s evaluation of the specific characteristics of the acquired lease portfolio and the Company’s overall relationship with anchor tenants. Such amounts are amortized to depreciation and amortization expense over the weighted average remaining initial term (and expected renewal periods for tenant relationships). The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

Intangible assets associated with property acquisitions are included in other assets and other liabilities, as appropriate, in the Company’s consolidated balance sheets. In the event a tenant terminates its lease prior to the contractual expiration, the unamortized portion of the related intangible asset or liability is written off. At December 31, 2010 and 2009, below-market leases aggregated a liability of $22.8 million and $25.9 million, respectively. At December 31, 2010 and 2009, above-market leases aggregated an asset of $6.4 million and $8.7 million, respectively.

Real Estate Impairment Assessment

The Company reviews its real estate assets, including land held for development and construction in progress, for potential impairment indicators whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment indicators are assessed separately for each operating property and include, but are not limited to, significant decreases in real estate property net operating income and occupancy percentages, as well as projected losses on potential future sales. Impairment indicators for pre-development projects, which

typically include costs incurred during the beginning stages of a potential development, and developments in progress are assessed by project and include, but are not limited to, significant changes in projected completion dates, projected revenues or cash flows, development costs, market factors and sustainability of development projects. An asset is considered impaired when the undiscounted future cash flows are not sufficient to recover the asset’s carrying value. Estimates of future cash flows used to assess the recoverability of construction in progress and land held for development are based upon the expected service potential of the asset when development is substantially complete and include all cash flows associated with future expenditures necessary to develop the asset, including interest payments that will be capitalized as part of its cost. The determination of undiscounted cash flows requires significant estimates made by management and considers the most likely expected course of action at the balance sheet date based on current plans, intended holding periods and available market information. If the Company’s estimates of the projected future cash flows, anticipated holding periods or market conditions change, its evaluation of impairment losses may be different, and such differences could be material to the consolidated financial statements. The determination of anticipated cash flows is inherently subjective and is based, in part, on assumptions regarding holding periods, future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses. If the Company is evaluating the potential sale of an asset or land held for development, the undiscounted future cash flows analysis is probability weighted based upon management’s best estimate of the likelihood of the alternative courses of action as of the balance sheet date. If such impairment is present, an impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value. The Company recorded aggregate impairment charges, including those classified within discontinued operations, of approximately $171.9 million, $154.7 million and $79.9 million (Note 11) relating to consolidated real estate investments during the years ended December 31, 2010, 2009 and 2008, respectively.

Real Estate Held for Sale

The Company generally considers assets to be held for sale when the transaction has been approved by the appropriate level of management and there are no known significant contingencies relating to the sale such that the property sale within one year is considered probable. This generally occurs when a sales contract is executed with no contingencies and the prospective buyer has significant funds at risk to ensure performance. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value less cost to sell. If the Company is not expected to have any significant continuing involvement following the sale, the results of operations are reflected in the current period and retrospectively as discontinued operations.

Disposition of Real Estate and Real Estate Investments

Sales of real estate include the sale of outparcels, operating properties, investments in real estate joint ventures and partial sales to real estate joint ventures. Gains from dispositions are recognized using the full accrual or partial sale methods, provided that various criteria relating to the terms of sale and any subsequent involvement by the Company with the properties sold are met. If the criteria for sale recognition or gain recognition are not met because of a form of continuing involvement, the accounting for such transactions is dependent on the nature of the continuing involvement. In certain cases, a sale might not be recognized, and in others all or a portion of the gain might be deferred.

Pursuant to the definition of a component of an entity and, assuming no significant continuing involvement, the sale of a retail or industrial operating property is considered discontinued operations. Interest expense, which is specifically identifiable to the property, is included in the computation of interest expense attributable to discontinued operations. Consolidated interest at the corporate level is allocated to discontinued operations based on the proportion of net assets disposed.

Interest and Real Estate Taxes

Interest and real estate taxes incurred relating to the construction, expansion or redevelopment of shopping centers are capitalized and depreciated over the estimated useful life of the building. This includes interest incurred on funds invested in or advanced to unconsolidated joint ventures with qualifying development activities. The Company will cease the capitalization of these expenses when construction activities are substantially completed

and the property is available for occupancy by tenants. If the Company suspends substantially all activities related to development of a qualifying asset, the Company will cease capitalization of interest, insurance and taxes until activities are resumed.

Interest paid during the years ended December 31, 2010, 2009 and 2008, aggregated $221.5 million, $249.3 million and $281.4 million, respectively, of which $12.2 million, $21.8 million and $41.1 million, respectively, was capitalized.

Investments in and Advances to Joint Ventures

To the extent that the Company’s cost basis is different from the basis reflected at the unconsolidated joint venture level, the basis difference is amortized over the life of the related assets and included in the Company’s share of equity in net (loss) income of the joint venture. On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment’s value is impaired only if management’s estimate of the fair value of the investment is less than the carrying value of the investment and such difference is deemed to be other than temporary. The Company recorded aggregate impairment charges of approximately $0.2 million, $184.6 million and $107.0 million (Note 11) relating to its investments in unconsolidated joint ventures during the years ended December 31, 2010, 2009 and 2008, respectively. These impairment charges create a basis difference between the Company’s share of accumulated equity as compared to the investment balance of the respective unconsolidated joint venture. The Company allocates the aggregate impairment charge to each of the respective properties owned by the joint venture on a relative fair value basis and, where appropriate, amortizes this basis differential as an adjustment to the equity in net income (loss) recorded by the Company over the estimated remaining useful lives of the underlying assets.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash deposits with major financial institutions, which from time to time may exceed federally insured limits. The Company periodically assesses the financial condition of these institutions and believes that the risk of loss is minimal. Cash flows associated with items intended as hedges of identifiable transactions or events are classified in the same category as the cash flows from the items being hedged.

Restricted Cash

Restricted Cash is composed of the following (in thousands):

Bond fund^(A)

Mervyns Joint Venture^(B)

Total restricted cash

Accounts Receivable

The Company makes estimates of the amounts that will not be collected of its accounts receivable related to base rents, straight-line rents receivable, expense reimbursements and other revenues. The Company analyzes

accounts receivable and historical bad debt levels, tenant credit worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy are analyzed and estimates are made in connection with the expected recovery of pre-petition and post-petition claims.

Accounts receivable, other than straight-line rents receivable, are expected to be collected within one year and are net of estimated unrecoverable amounts of approximately $22.6 million and $29.4 million at December 31, 2010 and 2009, respectively. At December 31, 2010 and 2009, straight-line rents receivable, net of a provision for uncollectible amounts of $3.4 million and $3.5 million, respectively, aggregated $56.2 million and $54.9 million, respectively.

Notes Receivable

Deferred Charges

Costs incurred in obtaining indebtedness are included in deferred charges in the accompanying consolidated balance sheets and are amortized on a straight-line basis over the terms of the related debt agreements, which approximates the effective interest method. Such amortization is reflected as interest expense in the consolidated statements of operations.

Revenue Recognition

Minimum rents from tenants are recognized using the straight-line method over the lease term of the respective leases. Percentage and overage rents are recognized after a tenant’s reported sales have exceeded the applicable sales breakpoint set forth in the applicable lease. Revenues associated with tenant reimbursements are recognized in the period that the expenses are incurred based upon the tenant lease provision. Management fees are recorded in the period earned based on a percentage of collected rent at the properties under management. Ancillary and other property-related income, included in fee and other income, includes the leasing of vacant space to temporary tenants and kiosk income, is recognized in the period earned. Lease termination fees are included in fee and other income and recognized upon the effective termination of a tenant’s lease when the Company has no further obligations under the lease. Fee income derived from the Company’s unconsolidated joint venture investments is recognized to the extent attributable to the unaffiliated ownership interest.

General and Administrative Expenses

General and administrative expenses include certain internal leasing and legal salaries and related expenses associated with the re-leasing of existing space, which are charged to operations as incurred.

Stock Option and Other Equity-Based Plans

Compensation cost relating to stock-based payment transactions is recognized in the financial statements based upon the grant date fair value. Forfeitures are estimated at the time of grant in order to estimate the amount of share-based awards that will ultimately vest. The forfeiture rate is based on historical rates.

For the years ended December 31, 2010, 2009 and 2008, stock-based compensation cost recognized by the Company was $5.7 million (which includes accelerated vesting of awards due to employee severance charges of $0.4 million), $17.4 million (which includes a charge of $15.4 million related to a change in control as defined in the equity award plan) and $29.0 million (which includes a charge of $15.8 million related to the termination of an equity award plan), respectively. For the years ended December 31, 2010, 2009 and 2008, the Company capitalized $0.2 million, $0.1 million and $0.4 million of stock-based compensation, respectively related to certain direct and incremental internal construction costs.

Income Taxes

The Company has made an election to qualify, and believes it is operating so as to qualify, as a real estate investment trust (“REIT”) for federal income tax purposes. Accordingly, the Company generally will not be subject to federal income tax, provided that it makes distributions to its shareholders equal to at least the amount of its REIT taxable income as defined under Sections 856 through 860 of the Internal Revenue Code of 1986, as Amended (the “Code”) and continues to satisfy certain other requirements.

In connection with the REIT Modernization Act, which became effective January 1, 2001, the Company is permitted to participate in certain activities that it was previously precluded from in order to maintain its qualification as a REIT, so long as these activities are conducted in entities that elect to be treated as taxable subsidiaries under the Code. As such, the Company is subject to federal and state income taxes on the income from these activities.

Deferred Tax Assets

The Company accounts for income taxes related to its taxable REIT subsidiary (“TRS”) under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the income statement in the period that includes the enactment date.

The Company records net deferred tax assets to the extent it believes it is more likely than not that these assets will be realized. In making such determination, the Company considers all available positive and negative evidence, including forecasts of future taxable income, the reversal of other existing temporary differences, available net operating loss carryforwards, tax planning strategies and recent results of operations. Several of these considerations require assumptions and significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that the Company is utilizing to manage the Company. Based on this assessment, management must evaluate the need for, and amount of, valuation allowances against the Company’s deferred tax assets. To the extent facts and circumstances change in the future, adjustments to the valuation allowances may be required. In the event the Company were to determine that it would be able to realize the deferred income tax assets in the future in excess of their net recorded amount, the Company would adjust the valuation allowance, which would reduce the provision for income taxes. Accordingly, the Company would record a valuation allowance to reduce deferred tax assets when it has determined that an uncertainty exists regarding their realizability, which would increase the provision for income taxes. The Company recorded a valuation allowance of $58.3 million (Note 17) during the year ended December 31, 2010.

Foreign Currency Translation

The financial statements of several international consolidated and unconsolidated joint venture investments are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and an average exchange rate for each period for revenues, expenses, gains and losses, with the Company’s proportionate share of the resulting translation adjustments recorded as Accumulated Other Comprehensive Income (Loss). Gains or losses resulting from foreign currency transactions, translated to local currency, are included in income as incurred. Foreign currency gains or losses from changes in exchange rates were not material to the consolidated operating results.

Treasury Stock

The Company’s share repurchases are reflected as treasury stock utilizing the cost method of accounting and are presented as a reduction to consolidated shareholders’ equity. Reissuances of the Company’s treasury stock at an amount below cost are recorded as a charge to paid-in capital due to the Company’s cumulative distributions in excess of net loss.

Derivative and Hedging Activities

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even if hedge accounting does not apply or the Company elects not to apply hedge accounting.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the 2009 and 2008 financial statements to conform to the 2010 presentation.

The Company’s significant equity method joint ventures at December 31, 2010, are as follows:

Sun Center Limited

DDRA Community Centers Five LP

DOTRS LLC

Jefferson County Plaza LLC

Lennox Town Center Limited

Sansone Group/DDRC LLC

Retail Value Investment Program IIIB LP

Retail Value Investment Program VIII LP

RO & SW Realty LLC

DDR Markaz II LLC

Cole MT Independence Missouri JV LLC

DPG Realty Holdings LLC

TRT DDR Venture I

DDR MDT PS LLC

Combined condensed financial information of the Company’s unconsolidated joint venture investments is summarized as follows (in thousands):

Combined balance sheets

Less: Accumulated depreciation

Land held for development and construction in progress^(A)

Real estate, net

Receivables, net

Leasehold interests

Other assets

Amounts payable to DDR

Accumulated equity

Company’s share of accumulated equity

Combined statements of operations

Revenues from operations

Operating expenses

Impairment charges^(A)

Depreciation and amortization

(Loss) income before other items

Income tax expense (primarily Sonae Sierra Brasil), net

Other income (expense), net^(B)

Discontinued operations:

(Loss) income from discontinued operations^(C)

(Loss) gain on disposition of real estate, net of tax

(Loss) income before gain (loss) on disposition of real estate, net

Gain (loss) on disposition of real estate, net^(D)

Company’s share of equity in net income (loss) of joint ventures^(E)

(Loss) income, net

Investments in and advances to joint ventures include the following items, which represent the difference between the Company’s investment and its proportionate share of all of the unconsolidated joint ventures’ underlying net assets (in millions):

Basis differential upon transfer of assets^(A)

Basis differentials^(A)

Deferred development fees, net of portion relating to the Company’s interest

Notes receivable from investments

The Company has made advances to several joint ventures in the form of notes receivable and fixed-rate loans that bear annual interest at rates ranging from 10.5% to 12.0%. Maturity dates are all payment on demand. Included in the Company’s accounts receivables are approximately $1.7 million and $3.0 million at December 31, 2010 and 2009, respectively, due from affiliates primarily related to construction receivables.

Service fees earned by the Company through management, leasing, development and financing activities related to all of the Company’s unconsolidated joint ventures are as follows (in millions):

Management and other fees

Acquisition, financing and other fees

Development fees and leasing commissions

The Company’s joint venture agreements generally include provisions whereby each partner has the right to trigger a purchase or sale of its interest in the joint venture (Reciprocal Purchase Rights), to initiate a purchase or sale of the properties (Property Purchase Rights) after a certain number of years or if either party is in default of the joint venture agreements. Under these provisions, the Company is not obligated to purchase the interests of its outside joint venture partners.

The Company and Coventry Real Estate Advisors L.L.C. (“CREA”) formed Coventry Real Estate Fund II L.L.C. and Coventry Fund II Parallel Fund, L.L.C. (collectively, the “Coventry II Fund”) to invest in a variety of retail properties that presented opportunities for value creation, such as re-tenanting, market repositioning, resale, redevelopment or expansion. The Coventry II Fund was formed with several institutional investors and CREA as the investment manager.

At December 31, 2010, the aggregate carrying amount of the Company’s net investment in the Coventry II Fund joint ventures was approximately $10.4 million. This basis reflects the impact of impairment charges, as

discussed below, recorded during the years ended December 31, 2010, 2009 and 2008, aggregating $0.2 million, $52.4 million and $14.1 million, respectively. The Company also advanced financing of $66.9 million, which includes accrued interest of $8.8 million, to one of the Coventry II Fund joint ventures, Coventry II DDR Bloomfield, relating to a development project in Bloomfield Hills, Michigan. This loan accrues interest at a base rate of the greater of LIBOR plus 700 basis points or 12% and a default rate of 16% and has an initial maturity of July 2011 (“Bloomfield Loan”). The Bloomfield Loan is considered past due as of December 31, 2010 and 2009 due to the default status. In addition to its existing equity and note receivable, the Company provided payment guaranties to third-party lenders in connection with the financing for five of the joint ventures. The amount of each such guaranty is not greater than the proportion to the Company’s investment percentage in the underlying projects, and the aggregate amount of the Company’s guaranties was approximately $39.5 million at December 31, 2010.

For the Bloomfield Hills, Michigan, project, a $48.0 million land loan provided by a third party matured on December 31, 2008, and on February 24, 2009, the lender for the land loan sent to the borrower a formal notice of default (the Company provided a payment guaranty in the amount of $9.6 million with respect to such loan, and in July 2009, paid such guaranty in full in exchange for a complete release from the lender). The above referenced $66.9 million Bloomfield Loan from the Company relating to the Bloomfield Hills, Michigan, project is cross-defaulted with this third-party loan. As a result, on March 3, 2009, the Company sent the borrower a formal notice of default relating to its loan. The lender for the land loan subsequently filed a foreclosure action and initiated legal proceedings against the Coventry II Fund for its failure to fund its 80% payment guaranty. During the fourth quarter of 2009, the Company determined that, due to the status of the existing lender foreclosure action and other litigation related to the project as well as current market and economic conditions, management of the joint venture had not definitively or formally made a determination as to whether development of the project would be resumed. Consequently, the Company determined that the fair value of the joint venture assets, consisting of land and development costs, was insufficient to repay the Company’s note receivable. As a result, in December 2009, the Company recorded a charge of $66.9 million on the carrying value of the note receivable, including accrued interest, based upon the estimated fair value of the land and its improvements. This charge is reflected in the impairment of joint venture investments line item in the consolidated statement of operations for the year ended December 31, 2009. The Company also recorded an impairment charge on this investment in both the years ended December 31, 2009 and 2008.

In July 2009, the Company acquired the Coventry II Fund’s 80% interest in Coventry II DDR Merriam Village through the assumption of additional recourse relating to the $17.0 million aggregate principal amount of debt, of which the Company had previously guaranteed 20%. The Company did not expend any funds for this interest, which was consolidated upon acquisition. In connection with the Company’s assumption of such additional recourse, the lender agreed to release the Coventry II Fund’s 80% guaranty and modify and extend this secured mortgage.

See discussion of legal matters surrounding the Coventry II Fund (Note 8).

Discontinued Operations

Included in discontinued operations in the combined statements of operations for the unconsolidated joint ventures are the following properties sold subsequent to December 31, 2007:

In addition, a 50%-owned joint venture sold its interest in a vacant land parcel in 2009. This disposition did not meet the discontinued operations disclosure requirement.

Other than Temporary Impairment of Joint Venture Investments

Due to the then-deterioration of the U.S. capital markets that began in 2008, which continued in 2009, the lack of liquidity and the related impact on the real estate market and retail industry, the Company determined that several of its unconsolidated joint venture investments incurred an “other than temporary impairment.” The Company recorded impairment charges, which are separate and apart from the impairments recorded at the investee level, on the following unconsolidated joint venture investments during the years ended December 31, 2010, 2009 and 2008, respectively, (in millions):

Central Park Solon/RO & SW Realty (Note 14)

Loan loss reserve — Bloomfield Loan

The Company has notes receivable, including accrued interest, that are collateralized by certain rights in development projects, partnership interests, sponsor guaranties and real estate assets.

Notes receivable consist of the following (in millions):

Loans receivable^(A)

Other notes

Tax Increment Financing Bonds (“TIF Bonds”):^(B)

Chemung County Industrial Development Agency

City of Merriam, Kansas

City of St. Louis, Missouri

Town of Plainville, Connecticut

As of December 31, 2010 and 2009, the Company had eight and seven loans receivable, respectively, with total remaining non-discretionary commitments of $4.0 million and $8.2 million, respectively. The following table reconciles the loans receivable on real estate from January 1, 2009, to December 31, 2010 (in thousands):

Balance at January 1

Additions:

New loans

Interest

Accretion of discount

Deductions:

Loan foreclosure

Loan loss reserve^(A)

Balance at December 31

The Company identified a loan receivable with a carrying value of $10.8 million that was impaired resulting in a specific loan loss reserve of approximately $10.8 million. A charge to the loan loss reserve of $5.4 million was recorded in each of the years ended December 31, 2009 and 2008 relating to this loan resulting in a full reserve of the loan receivable at December 31, 2009. The impairment was driven by the then-deterioration of the economy and the dislocation of the credit markets. Interest is no longer being recorded on this loan. This is the only loan receivable in the Company’s portfolio that has a loan loss reserve or that is considered non-performing at December 31, 2010. The following table reconciles the loan loss reserve from January 1, 2009, to December 31, 2010 (in thousands):

Loan loss reserve

Write downs

In addition to the one loan that is fully reserved at December 31, 2010, the Company has one loan aggregating $11.5 million that is more than 90 days past due on interest payments. The Company has continued to record interest income as the Company anticipates the note (including accrued interest) to be collected in full based upon the underlying estimated fair value of the real estate collateral. A loan receivable in the amount of $19.0 million that was considered non-performing at December 31, 2009 was foreclosed in 2010. The foregoing transaction resulted in an increase in real estate assets and a decrease in notes receivable of $19.0 million in 2010, as the carrying value of the loan receivable approximated the fair value of the real estate assets acquired through foreclosure.

Other assets consist of the following (in thousands):

Intangible assets:

In-place leases (including lease origination costs and fair market value of leases), net

Tenant relations, net

Total intangible assets

Other assets:

Prepaids

Deposits

Other assets^(A)

Total other assets

The Company recorded amortization expense of approximately $6.6 million, $7.1 million and $8.8 million for the years ended December 31, 2010, 2009 and 2008, respectively. The estimated amortization expense associated with the Company’s intangible assets is $5.5 million, $5.3 million, $4.9 million, $2.8 million and $1.3 million for the years ending December 31, 2011, 2012, 2013, 2014 and 2015, respectively.

The following table discloses certain information regarding the Company’s revolving credit facilities, term loan and mortgages payable (in millions):

Unsecured indebtedness:

Unsecured Credit Facility

PNC Facility

Secured indebtedness:

Term debt

Mortgage and other secured indebtedness — Fixed Rate

Mortgage and other secured indebtedness — Variable Rate

Tax-exempt certificates — Fixed Rate

Revolving Credit Facilities

The Company maintains an unsecured revolving credit facility with a syndicate of financial institutions, arranged by JP Morgan Chase Bank, N.A. and Wells Fargo Bank, N.A. (the “Unsecured Credit Facility”). The Unsecured Credit Facility provides for borrowings of $950 million, if certain financial covenants are maintained,

and an accordion feature for expansion to $1.2 billion upon the Company’s request, provided that new or existing lenders agree to the existing terms of the facility and increase their commitment level. The Unsecured Credit Facility includes a competitive bid option on periodic interest rates for up to 50% of the facility. The Unsecured Credit Facility also provides for an annual facility fee, currently at 0.50% on the entire facility.

The Company also maintains a $65 million unsecured revolving credit facility with PNC Bank, N.A. (the “PNC Facility” and, together with the Unsecured Credit Facility, the “Revolving Credit Facilities”). The PNC Facility reflects terms consistent with those contained in the Unsecured Credit Facility.

The Company’s borrowings under the Revolving Credit Facilities bear interest at variable rates at the Company’s election, based on either (i) the prime rate plus a specified spread (2.75% at December 31, 2010), as defined in the facility, or (ii) LIBOR, plus a specified spread (2.75% at December 31, 2010). The specified spreads vary depending on the Company’s long-term senior unsecured debt rating from Standard and Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”). The Company is required to comply with certain covenants relating to total outstanding indebtedness, secured indebtedness, maintenance of unencumbered real estate assets, unencumbered debt yield and fixed charge coverage. The Company is in compliance with these covenants at December 31, 2010. The Revolving Credit Facilities are used to temporarily finance redevelopment, development and acquisition of shopping center properties, to provide working capital and for general corporate purposes.

Term Loan

The Company maintains a collateralized term loan with a syndicate of financial institutions, for which KeyBank, NA serves as the administrative agent (the “Term Loan”). The Term Loan had a one-year extension option which was exercised in February 2011 (Note 19). Borrowings under the Term Loan bear interest at variable rates based on LIBOR plus a specified spread based on the Company’s current credit rating (1.2% at December 31, 2010). The collateral for this Term Loan is assets, or investment interests in certain assets, that are already collateralized by first mortgage loans. The Company is required to comply with similar covenants as agreed upon in the Revolving Credit Facilities. The Company was in compliance with these covenants at December 31, 2010.

Mortgages Payable and other Secured Indebtedness

At December 31, 2010, mortgages payable, collateralized by investments and real estate with a net book value of approximately $2.8 billion and related tenant leases are generally due in monthly installments of principal and/or interest. Fixed interest rates on mortgage payables range from approximately 4.2% to 10.5%.

Scheduled Principal Repayments

As of December 31, 2010, the scheduled principal payments of the Revolving Credit Facilities, Term Loan, senior notes (Note 6) and mortgages payable, excluding extension options, for the next five years and thereafter are as follows (in thousands):

Included in principal payments is $600.0 million in 2011 associated with the maturing of the Term Loan, which had a one-year extension option through 2012. The extension option was exercised in February 2011 (Note 19).

Total gross fees paid by the Company for the Revolving Credit Facilities and Term Loan in 2010, 2009 and 2008 aggregated approximately $2.9 million, $2.3 million and $2.1 million, respectively. For the years ended

December 31, 2010 and 2009, the Company incurred debt extinguishment costs associated with the prepayment of mortgages payable of $4.2 million and $14.4 million, respectively, which are reflected in other expense in the Company’s consolidated statements of operations.

The following table discloses certain information regarding the Company’s Fixed-Rate Senior Notes (in millions):

Senior Notes

Discount

2006 Convertible Senior Notes, net

2007 Convertible Senior Notes, net

2010 Convertible Senior Notes, net^(A)

Total Senior Notes

In each of March and August 2010, the Company issued $300 million aggregate principal amount (aggregating $600 million) of 7.5% and 7.875% senior unsecured notes, due in April 2017 and September 2020, respectively. The notes were offered to investors at a discount to par. In November 2010, the Company issued $350 million aggregate principal amount of 1.75% convertible senior convertible notes due November 2040 (the “2010 Senior Convertible Notes”).

The 2006 Senior Convertible Notes, the 2007 Senior Convertible Notes and the 2010 Senior Convertible Notes are referred to as the “Senior Convertible Notes.” The Senior Convertible Notes are senior unsecured obligations and rank equally with all other senior unsecured indebtedness of the Company.

The following table summarizes the information related to the Senior Convertible Notes:

2006 Senior Convertible Notes^(A)

2007 Senior Convertible Notes^(A)

2010 Senior Convertible Notes^(B)

Concurrent with the issuance of the 2006 and 2007 Senior Convertible Notes, the Company purchased an option on its common shares in a private transaction in order to effectively increase the conversion price of the senior convertible notes to a specified option price (“Option Price”). This purchase option allows the Company to receive a number of the Company’s common shares (“Maximum Common Shares”) from counterparties equal to the number of common shares and/or cash related to the excess conversion value that it would pay to the holders of the senior convertible notes upon conversion. The options were recorded as a reduction of equity at issuance. No option was purchased related to the 2010 Senior Convertible Notes.

The Senior Convertible Notes are subject to net settlement based on conversion prices (“Conversion Price”) that are subject to adjustment based on increases in the Company’s quarterly stock dividend. If certain conditions are met, the incremental value can be settled in cash or in the Company’s common shares at the Company’s option. The Senior Convertible Notes may only be converted prior to maturity based on certain provisions in the governing note documents. In connection with the issuance of these notes, the Company entered into a registration rights agreement for the common shares that may be issuable upon conversion of the Senior Convertible Notes.

The Company’s carrying amounts of its debt and equity balances for the Senior Convertible Notes are as follows (in thousands):

Carrying value of equity component

Principal amount of convertible debt

Remaining unamortized debt discount

Net carrying value of convertible debt

As of December 31, 2010, the remaining amortization periods for the debt discount were approximately eight months, 15 months and 58 months for the 2006 Senior Convertible Notes, the 2007 Senior Convertible Notes and the 2010 Senior Convertible Notes, respectively.

The Company retrospectively adopted the FASB standard, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion, effective January 1, 2008. For the year ended December 31, 2008, the Company adjusted the consolidated statement of operations to reflect additional non-cash interest expense of $13.1 million net of the impact of capitalized interest, pursuant to the provisions of this standard. The following table reflects the Company’s previously reported amounts, along with the adjusted amounts as required by the adoption of the standard and as adjusted to reflect the impact of discontinued operations (Note 12) (in thousands, except per share):

Consolidated statement of operations

Loss from continuing operations

Net loss attributable to DDR per share, basic

Net loss attributable to DDR per share, diluted

The impact of this accounting standard required the Company to adjust its interest expense and record additional non-cash interest-related charges of $8.2 million, $12.2 million and $14.2 million for the years ended December 31, 2010, 2009 and 2008, respectively. The Company recorded contractual interest expense of $11.1 million, $19.6 million and $26.8 million for the years ended December 31, 2010, 2009 and 2008, respectively, relating to the Senior Convertible Notes.

During the years ended December 31, 2010, 2009 and 2008, the Company purchased approximately $259.1 million, $816.2 million and $66.9 million, respectively, aggregate principal amount of its outstanding senior unsecured notes (of which $140.6 million, $404.8 million and $17.0 million related to the 2006 and 2007 Senior Convertible Notes, respectively) at a discount to par resulting in net gains of approximately $0.1 million, $145.1 million and $10.5 million, respectively. The Company allocated the consideration paid for the 2006 and 2007 Senior Convertible Notes between the liability components and equity components based on the fair value of those components immediately prior to the purchases and recorded a gain based on the difference in the amount of consideration paid as compared to the carrying amount of the debt, net of the unamortized discount. The net gain for

the years ended December 31, 2010, 2009, and 2008, reflects a decrease of approximately $4.9 million, $20.9 million and $1.1 million, respectively, relating to the impact of the above accounting standard.

The Company’s various fixed-rate senior notes have interest coupon rates averaging 5.9% and 5.6% at December 31, 2010 and 2009, respectively. Notes issued prior to December 31, 2001, aggregating $82.2 million, may not be redeemed by the Company prior to maturity and will not be subject to any sinking fund requirements. Notes issued subsequent to 2001, aggregating $1.2 billion at December 31, 2010, may be redeemed based upon a yield maintenance calculation. The notes issued in October 2005 (aggregating $223.5 million) are redeemable prior to maturity at par value plus a make-whole premium. If the notes issued in October 2005 are redeemed within 90 days of the maturity date, no make-whole premium is required.

The Senior Convertible Notes, with outstanding aggregate principal amounts of $637.6 million and $428.2 million at December 31, 2010 and 2009, respectively, may be converted prior to maturity into cash equal to the lesser of the principal amount of the note or the conversion value and, to the extent the conversion value exceeds the principal amount of the note, the Company’s common shares.

The fixed-rate senior notes and Senior Convertible Notes were issued pursuant to indentures that contain certain covenants including limitation on incurrence of debt, maintenance of unencumbered real estate assets and debt service coverage. Interest is paid semi-annually in arrears. At December 31, 2010 and 2009, the Company was in compliance with all of the financial and other covenant requirements.

The following methods and assumptions were used by the Company in estimating fair value disclosures of financial instruments:

Fair Value Hierarchy

The standard Fair Value Measurements specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). The following summarizes the fair value hierarchy:

• Level 1

• Level 2

• Level 3

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Measurement of Fair Value

At December 31, 2010, the Company used pay-fixed interest rate swaps to manage its exposure to changes in benchmark interest rates. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative.

The Company transferred its interest rate swaps into Level 2 from Level 3 during 2010 due to changes in the significance on the Company’s derivative valuations as a result of changes in nonperformance risk associated with the Company’s credit standing. In the fourth quarter of 2008, the Company determined that its derivative valuations in their entirety were classified in Level 3 of the fair value hierarchy. During the second half of 2008, the credit

spreads on the Company and certain of its counterparties widened significantly and, as a result, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were significant to the overall valuation of all of its derivatives. The credit valuation adjustments associated with the Company’s counterparties and its own credit risk utilized Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. These inputs reflect the Company’s assumptions.

Items Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s financial assets and liabilities (in millions), which consists of interest rate swap agreements and securities included in the Company’s Elective Deferred Compensation Plan (Note 15) that are included in other liabilities at December 31, 2010 and 2009, measured at fair value on a recurring basis as of December 31, 2010 and 2009, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in millions):

December 31, 2010

Derivative Financial Instruments

Marketable Securities

December 31, 2009

As discussed above, the Company transferred its interest rate swaps into Level 2 from Level 3 during 2010 due to changes in the significance on the Company’s derivative’s valuation as a result of changes in nonperformance risk associated with the Company’s credit standing. The table presented below presents a reconciliation of the beginning and ending balances of interest rate swap agreements that are included in other liabilities having fair value measurements based on significant unobservable inputs (Level 3) (in millions):

Balance of Level 3 at December 31, 2007

Transfers into Level 3

Total losses included in other comprehensive (loss) income

Balance of Level 3 at December 31, 2008

Balance of Level 3 at December 31, 2009

Transfers into Level 2

Balance of Level 3 at December 31, 2010

The unrealized gain included in other comprehensive (loss) income is attributable to the change in unrealized gains or losses relating to derivative liabilities that were outstanding — none of which were reported in the Company’s consolidated statements of operations because they are documented and qualify as hedging instruments.

The Company calculates the fair value of its interest rate swaps based upon the amount of the expected future cash flows paid and received on each leg of the swap. The cash flows on the fixed leg of the swap are agreed to at inception, and the cash flows on the floating leg of the swap change over time as interest rates change. To estimate the floating cash flows at each valuation date, the Company utilizes a forward curve that is constructed using

LIBOR fixings, Eurodollar futures and swap rates, which are observable in the market. Both the fixed and floating legs’ cash flows are discounted at market discount factors. For purposes of adjusting its derivative values, the Company incorporates the non-performance risk for both the Company and its counterparties to these contracts based upon either credit default swap spreads (if available) or Moody’s KMV ratings in order to derive a curve that considers the term structure of credit.

Other Fair Value Instruments

Investments in unconsolidated joint ventures are considered financial assets. See discussion of equity derivative instruments in Note 9 and a discussion of fair value considerations in Note 11.

Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable, Accruals and Other Liabilities

The carrying amounts reported in the consolidated balance sheets for these financial instruments, excluding the liability associated with the equity derivative instruments, approximated fair value because of their short-term maturities.

Notes Receivable and Advances to Affiliates

The fair value is estimated by discounting the current rates at which management believes similar loans would be made. The fair value of these notes, excluding those that are fully reserved, was approximately $120.8 million and $74.6 million at December 31, 2010 and 2009, respectively, as compared to the carrying amounts of $122.6 million and $76.2 million, respectively. The carrying value of the tax increment financing bonds, which was $13.8 million and $15.2 million at December 31, 2010 and 2009, respectively, approximated its fair value at the respective dates. The fair value of loans to affiliates is not readily determinable and has been estimated by management based upon its assessment of the interest rate, credit risk and performance risk.

Debt

The fair market value of debt is determined using the trading price of public debt or a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality and risk profile including the Company’s non-performance risk.

Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize upon redemption.

Financial instruments at December 31, 2010 and 2009, with carrying values that are different than estimated fair values are summarized as follows (in thousands):

Senior notes

Revolving Credit Facilities and Term Debt

Mortgages payable and other indebtedness

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity

and credit risk, primarily by managing the amount, sources and duration of its debt funding and, from time to time, the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to manage its exposure to interest rate movements. To accomplish this objective, the Company generally uses interest rate swaps (“Swaps”) as part of its interest rate risk management strategy. Swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In 2010, the Company entered into one interest rate swap to hedge a portion of its interest rate risk associated with variable rate borrowings. As of December 31, 2010 and 2009, the aggregate fair value of the Company’s $150 million and $400 million of Swaps was a liability of $5.2 million and $15.4 million, respectively, which is included in other liabilities in the consolidated balance sheets.

$100

$50

All components of the Swaps were included in the assessment of hedge effectiveness. The Company expects that within the next 12 months it will reflect an increase to interest expense (and a corresponding decrease to earnings) of approximately $4.6 million.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive (Loss) Income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2010, such derivatives were used to hedge the variable cash flows associated with existing obligations. The ineffective portion of the change in the fair value of derivatives is recognized directly in earnings. During the three years ended December 31, 2010, the amount of hedge ineffectiveness recorded was not material.

Amounts reported in accumulated other comprehensive (loss) income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. As of December 31, 2010, the Company had the following outstanding interest rate swap derivatives that were designated as cash flow hedges of interest rate risk:

Interest rate swaps

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2010 and 2009 (in millions):

Interest rate products

The effect of the Company’s derivative instruments on net (loss) and income is as follows (in millions):

The Company is exposed to credit risk in the event of non-performance by the counterparties to the Swaps. The Company believes it mitigates its credit risk by entering into Swaps with major financial institutions. The Company continually monitors and actively manages interest costs on its variable-rate debt portfolio and may enter into additional interest rate swap positions or other derivative interest rate instruments based on market conditions. In addition, the Company continually assesses its ability to obtain funds through additional equity and/or debt offerings, including the issuance of medium-term notes and joint venture capital. Accordingly, the cost of obtaining interest rate protection agreements in relation to the Company’s access to capital markets will continue to be evaluated. The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes.

Credit-Risk-Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision whereby if the Company defaults on certain of its unsecured indebtedness the Company could also be declared in default on its derivative obligations, resulting in an acceleration of payment under those derivative obligations.

Net Investment Hedges

The Company is exposed to foreign exchange risk from its consolidated and unconsolidated international investments. The Company has foreign currency-denominated debt agreements, which exposes the Company to fluctuations in foreign exchange rates. The Company has designated these foreign currency borrowings as a hedge of its net investment in its Canadian and European subsidiaries. Changes in the spot rate are recorded as adjustments to the debt balance with offsetting unrealized gains and losses recorded in OCI. Because the notional amount of the non-derivative instrument substantially matches the portion of the net investment designated as being hedged, and the non-derivative instrument is denominated in the functional currency of the hedged net investment, the hedge ineffectiveness recognized in earnings was not material.

The effect of the Company’s net investment hedge derivative instruments on OCI is as follows (in millions):

Euro — denominated revolving credit facilities designated as a hedge of the Company’s net investment in its subsidiary

Canadian dollar — denominated revolving credit facilities designated as a hedge of the Company’s net investment in its subsidiary

Legal Matters

The Company is a party to various joint ventures with the Coventry II Fund, through which 11 existing or proposed retail properties, along with a portfolio of former Service Merchandise locations, were acquired at various times from 2003 through 2006. The properties were acquired by the joint ventures as value-add investments, with

major renovation and/or ground-up development contemplated for many of the properties. The Company is generally responsible for day-to-day management of the properties. On November 4, 2009, Coventry Real Estate Advisors L.L.C., Coventry Real Estate Fund II, L.L.C. and Coventry Fund II Parallel Fund, L.L.C. (collectively, “Coventry”) filed suit against the Company and certain of its affiliates and officers in the Supreme Court of the State of New York, County of New York. The complaint alleges that the Company: (i) breached contractual obligations under a co-investment agreement and various joint venture limited liability company agreements, project development agreements and management and leasing agreements; (ii) breached its fiduciary duties as a member of various limited liability companies; (iii) fraudulently induced the plaintiffs to enter into certain agreements; and (iv) made certain material misrepresentations. The complaint also requests that a general release made by Coventry in favor of the Company in connection with one of the joint venture properties be voided on the grounds of economic duress. The complaint seeks compensatory and consequential damages in an amount not less than $500 million, as well as punitive damages. In response, the Company filed a motion to dismiss the complaint or, in the alternative, to sever the plaintiffs’ claims. In June 2010, the court granted in part (regarding Coventry’s claim that the Company breached a fiduciary duty owed to Coventry) and denied in part (all other claims) the Company’s motion. Coventry has filed a notice of appeal regarding that portion of the motion granted by the court. The Company filed an answer to the complaint, and has asserted various counterclaims against Coventry.

The Company was also a party to litigation filed in November 2006 by a tenant in a Company property located in Long Beach, California. The tenant filed suit against the Company and certain affiliates, claiming the Company and its affiliates failed to provide adequate valet parking at the property pursuant to the terms of the lease with the tenant. After a six-week trial, the jury returned a verdict in October 2008, finding the Company liable for compensatory damages in the amount of approximately $7.8 million. In addition, the trial court awarded the tenant attorneys’ fees and expenses in the amount of approximately $1.5 million. The Company filed motions for a new trial and for judgment notwithstanding the verdict, both of which were denied. The Company strongly disagreed with the verdict, as well as the denial of the post-trial motions. As a result, the Company appealed the verdict. In July 2010, the California Court of Appeals entered an order affirming the jury verdict. The Company had a $6.0 million liability accrued for this matter as of December 31, 2009. An additional charge of approximately $2.7 million, net of $2.4 million in taxes, was recorded in the second quarter of 2010. In November 2010, the Company made payment in full and final satisfaction of the judgment.

Commitments and Guaranties

In conjunction with the development and expansion of various shopping centers, the Company has entered into agreements with general contractors for the construction of shopping centers aggregating approximately $24.7 million as of December 31, 2010.

At December 31, 2010, the Company had outstanding letters of credit of approximately $36.3 million. The Company has not recorded any obligation associated with these letters of credit. The majority of the letters of credit are collateral for existing indebtedness and other obligations of the Company.

In conjunction with certain unconsolidated joint venture agreements, the Company and/or its equity affiliates have agreed to fund the required capital associated with approved development projects, composed principally of outstanding construction contracts aggregating approximately $3.1 million as of December 31, 2010. The Company and/or its equity affiliates are entitled to receive a priority return on these capital advances at rates ranging from 10.5% to 12.0%.

In connection with certain of the Company’s unconsolidated joint ventures, the Company agreed to fund amounts due to the joint venture’s lender if such amounts are not paid by the joint venture based on the Company’s pro rata share of such amount, aggregating $41.3 million at December 31, 2010.

In connection with Service Holdings, the Company guaranteed the annual base rental income for various affiliates of Service Holdings in the aggregate amount of $2.2 million. The Company has not recorded a liability for the guaranty, as the subtenants of Service Holdings are paying rent as due. The Company has recourse against the other parties in the partnership in the event of default. No assets of the Company are currently held as collateral to pay this guaranty.

Related to one of the Company’s developments in Long Beach, California, an affiliate of the Company has agreed to make an annual payment of approximately $0.6 million to defray a portion of the operating expenses of a parking garage through the earlier of October 2032 or the date when the city’s parking garage bonds are repaid. No assets of the Company are currently held as collateral related to these obligations. The Company has not recorded a liability for the guaranty.

Leases

The Company is engaged in the operation of shopping centers that are either owned or, with respect to certain shopping centers, operated under long-term ground leases that expire at various dates through 2070, with renewal options. Space in the shopping centers is leased to tenants pursuant to agreements that provide for terms ranging generally from one month to 30 years and, in some cases, for annual rentals subject to upward adjustments based on operating expense levels, sales volume or contractual increases as defined in the lease agreements.

The scheduled future minimum rental revenues from rental properties under the terms of all non-cancelable tenant leases, assuming no new or renegotiated leases or option extensions for such premises for the subsequent five years ending December 31, are as follows for continuing operations (in thousands):

Scheduled minimum rental payments under the terms of all non-cancelable operating leases in which the Company is the lessee, principally for office space and ground leases, for the subsequent five years ending December 31, are as follows for continuing operations (in thousands):

Transfers from Non-Controlling Interest

Purchase of OP Units

Change from net loss attributable to DDR and decrease from the non-controlling interest

Non-Controlling Interests

Non-controlling interests consist of the following (in millions):

Mervyns Joint Venture^(A)

Shopping centers and development parcels in Arizona, Missouri, Utah and Wisconsin

Consolidated joint venture interests primarily outside the United States

Operating partnership units

At December 31, 2010 and 2009, the Company had 369,176 operating partnership units (“OP Units”) outstanding. These OP Units, issued to different partnerships, are exchangeable, at the election of the OP Unit

holder, and under certain circumstances at the option of the Company, into an equivalent number of the Company’s common shares or for the equivalent amount of cash. Most of these OP Units have registration rights agreements equivalent to the number of OP Units held by the holder if the Company elects to settle in its common shares. The OP Units are classified on the Company’s balance sheet as non-controlling interests.

The OP Unit holders are entitled to receive distributions, per OP Unit, generally equal to the per share distributions on the Company’s common shares. At December 31, 2010 and 2009, the Company had 29,525 redeemable OP Units outstanding. Redeemable OP Units are presented at the greater of their carrying amount (for all periods presented) or redemption value at the end of each reporting period. Changes in the value from period to period are recorded to paid-in capital in the Company’s consolidated balance sheets.

Preferred Shares

The Company’s preferred shares outstanding at December 31 are as follows (in thousands):

Class G — 8.0% cumulative redeemable preferred shares, without par value, $250 liquidation value; 750,000 shares authorized; 720,000 shares issued and outstanding at December 31, 2010 and 2009

Class H — 7.375% cumulative redeemable preferred shares, without par value, $500 liquidation value; 750,000 shares authorized; 410,000 shares issued and outstanding at December 31, 2010 and 2009

Class I — 7.5% cumulative redeemable preferred shares, without par value, $500 liquidation value; 750,000 shares authorized; 340,000 shares issued and outstanding at December 31, 2010 and 2009

The Class G depositary shares represent 1/10 of a preferred share and have a stated value of $250 per share. The Class H and I depositary shares represent 1/20 of a Class H and Class I preferred share and have a stated value of $500 per share. The Class G, Class H and Class I depositary shares are redeemable by the Company, except in certain circumstances relating to the preservation of the Company’s status as a REIT.

The Company’s authorized preferred shares consist of the following:

Common Shares

The Company’s common shares have a $0.10 per share par value. Dividends declared per share of common stock were $0.08, $0.44 and $2.07 for 2010, 2009 and 2008, respectively.

The Company declared a dividend payable for the first and second quarters of 2009 on its common shares of $0.20 per share that was paid in a combination of cash and the Company’s common shares. The aggregate amount of cash paid to shareholders was limited to 10% of the total dividend paid. In connection with the dividends in the first and second quarters of 2009, the Company issued approximately 8.3 million and 6.1 million common shares, respectively, based on the volume weighted-average trading price of $2.80 and $4.49 per share, respectively, and paid $2.6 million and $3.1 million, respectively, in cash. The Company declared an all-cash dividend of $0.02 per common share in each of the third and fourth quarters of 2009.

The Company issued common shares through open market sales, including through the use of its continuous equity programs, for the years ended December 31, 2010, 2009 and 2008, as follows (amounts in millions, except per share):

The Otto Transaction

On February 23, 2009, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Mr. Alexander Otto (the “Investor”) to issue and sell 30.0 million common shares for aggregate gross proceeds of approximately $112.5 million to the Investor and certain members of the Otto family (collectively with the Investor, the “Otto Family”). The Stock Purchase Agreement also provided for the issuance of warrants to purchase up to 10.0 million common shares with an exercise price of $6.00 per share to the Otto Family. No separate consideration was paid for the warrants. The share issuances, together with the warrant issuances, are collectively referred to as the “Otto Transaction.” Under the terms of the Stock Purchase Agreement, the Company also issued additional common shares to the Otto Family in an amount equal to any dividend payable in shares declared by the Company after February 23, 2009, and prior to the applicable closing. The exercise price of the warrants is also subject to downward adjustment if the weighted-average purchase price of all additional common shares sold, as defined, from the date of issuance of the applicable warrant is less than $6.00 per share (herein, along with the share issuances, referred to as “Downward Price Protection Provisions”). Each warrant may be exercised at any time on or after the issuance thereof for a five-year term.

On April 9, 2009, the Company’s shareholders approved the sale of the common shares and warrants to the Otto Family in connection with the Otto Transaction. The transaction was completed in two closings, May 2009 and September 2009. In May 2009, the Company issued and sold 15.0 million common shares and warrants to purchase 5.0 million common shares to the Otto Family for a purchase price of $52.5 million. The Company also issued an additional 1,071,428 common shares to the Otto Family as a result of the first quarter 2009 dividend associated with the initial 15.0 million common shares. In September 2009, the Company issued and sold 15.0 million common shares and warrants to purchase 5.0 million common shares to the Otto Family for a purchase price of $60.0 million. The Company also issued an additional 1,787,304 common shares to the Otto Family as a result of the first and second quarter 2009 dividends associated with the second 15.0 million shares. In total, the Company issued 32,858,732 common shares to the Otto Family.

Equity Derivative Instruments — Otto Transaction

The Downward Price Protection Provisions described above resulted in the equity forward commitments and warrants being required to be recorded at fair value as of the shareholder approval date of April 9, 2009, and marked-to-market through earnings as of each balance sheet date thereafter until exercise or expiration. None of the warrants had been exercised as of December 31, 2010.

These equity instruments were issued as part of the Company’s overall deleveraging strategy and were not issued in connection with any speculative trading activity or to mitigate any market risks.

The table below presents the fair value of the Company’s equity derivative instruments as well as their classification on the consolidated balance sheet as follows (in millions):

Warrants

The effect of the Company’s equity derivative instruments on net loss is as follows (in millions):

Equity forward — issued shares

The loss above for these contracts was derived principally from the increase of the Company’s stock price from April 9, 2009, the shareholder approval date, to the market price on the date of the respective closings, related to the equity issued, or December 31, 2010, related to the warrants.

Measurement of Fair Value — Equity Derivative Instruments Valued on a Recurring Basis

The valuation of these instruments is determined using an option pricing model that considers all relevant assumptions including the Downward Price Protection Provisions. The Company has determined that the significant inputs used to value its equity forwards fall within Level 2 of the fair value hierarchy. However, the Company has determined that the warrants fall within Level 3 of the fair value hierarchy due to the significance of the volatility and dividend yield assumptions in the overall valuation. The Company utilized historical volatility assumptions as it believes this better reflects the true valuation of the instruments. Although the Company considered using an implied volatility based upon certain short-term publicly traded options on its common shares, it instead utilized its historical share price volatility when determining an estimate of fair value of its five-year warrants. The Company believes that the historic volatility better represents long-term future volatility and is more consistent with how an investor would view the value of these securities. The Company will continually evaluate its significant assumptions to determine what it believes provides the most relevant measurements of fair value at each reporting date.

The following table presents information about the Company’s equity derivative instruments (in millions) at December 31, 2010 and 2009, measured at fair value on a recurring basis as of December 31, 2010 and 2009, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in millions).

The table presented below presents a reconciliation of the beginning and ending balances of the equity derivative instruments that are disclosed as an equity derivative liability having fair value measurements based on significant unobservable inputs (Level 3) (in millions).

Balance of Level 3 at January 1, 2009

Initial Valuation

Unrealized loss

Fee and other income from continuing operations was composed of the following (in thousands):

Management, development and other fee income

Ancillary and other property income

Total fee and other income

Due to the continued deterioration of the U.S. capital markets in 2008, the lack of liquidity and the related impact on the real estate market and retail industry that accelerated through the end of 2009, as well as changes in the Company’s hold period assumptions triggered by these factors, the Company determined that certain of its consolidated real estate investments and unconsolidated joint venture investments were impaired. As a result, the Company recorded impairment charges on the following consolidated assets and unconsolidated joint venture investments (in millions):

Land held for development^(A)

Undeveloped land and construction in progress^(B)

Assets marketed for sale^(C)

Impairments from continuing operations

Assets formerly occupied by Mervyns^(D)

Impairments from discontinued operations

Joint venture investments^(E)

Total impairment charges

The Company is required to assess the fair value of certain impaired consolidated and unconsolidated joint venture investments. The valuation of impaired real estate assets and investments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each asset as well as the income capitalization approach considering prevailing market capitalization rates, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence. In general, the Company considers multiple valuation techniques when measuring fair value of an investment. However, in certain circumstances, a single valuation technique may be appropriate.

For operational real estate assets, the significant assumptions included the capitalization rate used in the income capitalization valuation, as well as the projected property net operating income. For projects under development, the significant assumptions included the discount rate, the timing and the estimated costs for the construction completion and project stabilization, projected net operating income and the exit capitalization rate. For investments in unconsolidated joint ventures, the Company also considered the valuation of any underlying joint venture debt. These valuation adjustments were calculated based on market conditions and assumptions made by management at the time the valuation adjustments were recorded, which may differ materially from actual results if market conditions or the underlying assumptions change.

Items Measured at Fair Value on a Non-Recurring Basis

The following table presents information about the Company’s impairment charges on both financial and nonfinancial assets that were measured on a fair value basis for the years ended December 31, 2010 and 2009, and

for financial assets only for the year ended December 31, 2008. The table also indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in millions).

December 31, 2010

Long-lived assets held and used

Unconsolidated joint venture investments

December 31, 2009

Assets held for sale

December 31, 2008

During the year ended December 31, 2010, the Company sold 31 properties (including two properties held for sale at December 31, 2009) that were classified as discontinued operations for the years ended December 31, 2010, 2009 and 2008, aggregating 2.9 million square feet of Company-owned gross leasable area (“GLA”) (all references to GLA or square feet are unaudited). In addition, included in discontinued operations are 25 other properties that were deconsolidated for accounting purposes in the third quarter of 2010, aggregating 1.9 million square feet, which represents the activity associated with the Mervyns Joint Venture (Note 1).

Included in discontinued operations for the three years ended December 31, 2010, are 110 properties (including the 25 deconsolidated properties noted above) aggregating 9.8 million square feet of Company-owned GLA. Of these properties, 109 were previously included in the shopping center segment, and one of these properties was previously included in the other investments segment (Note 18). The operations of these properties have been reflected on a comparative basis as discontinued operations in the consolidated financial statements for the three years ended December 31, 2010, included herein.

The operating results relating to assets classified as discontinued operations at December 31, 2010, are summarized as follows (in thousands):

Operating expenses

Interest, net

Loss from discontinued operations

Gain on deconsolidation of interests

Gain (loss) on disposition of real estate, net of tax

Net loss

The Company recorded net gains on disposition of real estate and real estate investments as follows (in millions):

Land sales^(A)

Previously deferred gains and other gains and losses on dispositions^(B)

Comprehensive loss attributable to DDR is as follows (in thousands):

Other comprehensive (loss) income:

Change in fair value of interest-rate contracts

Amortization of interest-rate contracts

Foreign currency translation

Total other comprehensive income (loss)

Comprehensive loss

Comprehensive loss attributable to the non-controlling interests

Total comprehensive loss attributable to DDR

In September 2010, the Company funded a $31.7 million mezzanine loan to a subsidiary of EDT collateralized by equity interests in six shopping center assets owned by EDT and managed by the Company. The mezzanine loan bears interest at a fixed rate of 10% and matures in 2017. The Company recorded $0.9 million in interest income for the year ended December 31, 2010. Although the Company’s interest in EDT was redeemed in 2009, the Company retained two positions on EDT’s board of directors.

In 2009, the Company completed the Otto Transaction (Note 9). Mr. Otto is currently the Chairman of the Executive Board of ECE Projektmanagement G.m.b.H. & Co. KG (“ECE”) which is a fully integrated international developer, owner and manager of shopping centers. In May 2007, DDR and ECE formed a joint venture to fund investments in new retail developments to be located in western Russia and Ukraine. DDR contributed 75% of the equity of the joint venture, and ECE contributed the remaining 25% of the equity. The Company consolidates this entity. In addition, two of the Company’s directors hold various positions with affiliates of ECE, the Otto Family and/or the joint venture’s general partner.

In April 2009, the Company entered into a $60 million secured bridge loan with an affiliate of the Otto Family. The bridge loan was repaid in May 2009 with the proceeds of a $60 million collateralized loan also obtained from an affiliate of the Otto Family, which was included in Mortgage and other secured indebtedness on the Consolidated Balance Sheets. The loan had an interest rate of 9%, and was collateralized by a shopping center. The Company

repaid this loan, at par, in 2010 and paid a prepayment penalty of approximately $0.9 million. The Company paid interest of approximately $1.9 million and $3.9 million on these loans for the years ended December 31, 2010 and 2009, respectively.

In July 2008, the Company purchased a 25.2525% membership interest in RO & SW Realty (“ROSW”), a Delaware limited liability company, from Wolstein Business Enterprises, L.P. (“WBE”), a limited partnership established for the benefit of the children of Scott A. Wolstein, the Company’s Executive Chairman of the Board of Directors, and a 50% membership interest in Central Park Solon, an Ohio limited liability company (“Central Park”), from Mr. Wolstein, for $10.0 million. The acquired interests in both ROSW and Central Park are referred to herein as the “Membership Interests.” ROSW is a real estate company that owns 11 properties (the “Properties”). Central Park is a real estate company that owns the development rights relating to a large-scale mixed use project in Solon, Ohio (the “Project”). The Company had identified a number of development projects located near the Properties as well as several value-add opportunities relating to the Properties, including the Project. In October 2008, the Company assumed Mr. Wolstein’s obligation under a promissory note that funded the pre-development expenses of the Project. Mr. Wolstein and his 50% partner, who also holds the remaining membership interest in each of Central Park and ROSW, were jointly and severally liable for the obligations under the promissory note, and they agreed to indemnify each other for 50% of such obligations. The promissory note was repaid by the Company in 2009.

The purchase of the Membership Interests by the Company, including the assumption of the promissory note obligations, was approved by a special committee of disinterested directors of the Company who were appointed and authorized by the Nominating and Corporate Governance Committee of the Company’s Board of Directors to review and approve the terms of the acquisition and assumption.

The Company accounts for its interest in ROSW and Central Park under the equity method of accounting and recorded the aggregate $11.3 million acquisition of the Membership Interests as Investments in and Advances to Joint Ventures in the Company’s consolidated balance sheet. In the fourth quarter of 2008, due to deteriorating market conditions, the Company and its partner in Central Park decided not to pursue the Project. As a result, the Company recorded a charge of approximately $3.2 million, representing a write-off of the purchase price allocated to the Project and the 50% interest in Central Park. In addition, it was determined that approximately $1.9 million of the pre-development costs, assumed upon acquisition and subsequently incurred, should be written off as “dead-deal” costs, of which the Company has a 50% interest.

The Company leased office space owned by Mr. Wolstein’s mother. General and administrative rental expense associated with this office space aggregated $0.5 million and $0.6 million for the years ended December 31, 2009 and 2008, respectively. This office lease expired on December 31, 2009. The Company periodically utilized a conference center owned by the trust of Bert Wolstein, deceased founder of the Company, Mr. Wolstein’s father, and one of the Company’s principal shareholders, for Company-sponsored events and meetings. The Company paid $0.2 million in 2008 for the use of this facility.

Transactions with the Company’s equity affiliates are described in Note 2.

Stock-Based Compensation

The Company’s equity-based award plans provide for grants to Company employees and directors of incentive and non-qualified options to purchase common shares, rights to receive the appreciation in value of common shares, awards of common shares subject to restrictions on transfer, awards of common shares issuable in the future upon satisfaction of certain conditions, and rights to purchase common shares and other awards based on common shares. Under the terms of the plans, awards available for grant approximated 3.3 million common shares at December 31, 2010.

During 2010, 2009 and 2008, approximately $5.7 million, $17.4 million, and $29.0 million, respectively, was charged to expense associated with awards under the Company’s equity-based award plans. This charge is included in general and administrative expenses in the Company’s consolidated statements of operations.

Stock Options

Stock options may be granted at per-share prices not less than fair market value at the date of grant and must be exercised within the maximum contractual term of 10 years thereof (or, with respect to incentive options granted to certain employees, within five years thereof). Options granted under the plans generally vest over three years in one-third increments, beginning one year after the date of grant.

In previous years, the Company granted options to its directors. Options are no longer granted to the Company’s directors. Such options were granted at the fair market value of the Company’s common shares on the date of grant. All of the options granted to the directors are currently exercisable.

The fair values for stock-based awards granted in 2010, 2009 and 2008 were estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

Weighted-average fair value of grants

Risk-free interest rate (range)

Dividend yield (range)

Expected life (range)

Expected volatility (range)

The risk-free rate was based upon a U.S. Treasury Strip with a maturity date that approximates the expected term of the award. The expected life of the award was derived by referring to actual exercise experience. The expected volatility of the stock was derived by referring to changes in the Company’s historical stock prices over a time frame consistent with the expected life of the award.

The following table reflects the stock option activity described above (aggregate intrinsic value in thousands):

Balance December 31, 2007

Granted

Exercised

Forfeited

Balance December 31, 2008

Balance December 31, 2009

Balance December 31, 2010

Options exercisable at December 31,

2010

2009

2008

The following table summarizes the characteristics of the options outstanding at December 31, 2010 (in thousands):

$0.00-$6.50

$6.51-$12.50

$12.51-$29.50

$29.51-$49.50

$49.51-$69.50

The following table reflects the activity for unvested stock option awards for the year ended (in thousands):

Unvested at December 31, 2009

Unvested at December 31, 2010

As of December 31, 2010, total unrecognized stock option compensation cost granted under the plans was $1.3 million and is expected to be recognized over a weighted-average 2.2-year term.

Exercises of Employee Stock Options

The total intrinsic value of options exercised for the year ended December 31, 2010, was approximately $1.3 million. The total cash received from employees as a result of employee stock option exercises for the year ended December 31, 2010, was approximately $1.3 million. The Company settles employee stock option exercises primarily with newly issued common shares or with treasury shares, if available.

Restricted Stock Awards

In 2010, 2009 and 2008, the Board of Directors approved grants of 573,100; 2,109,798 and 132,394 restricted common shares, respectively, to certain executives of the Company. The restricted stock grants vest in equal annual amounts over a four-year period. Restricted stock awards have the same cash dividend and voting rights as other common stock and are considered to be currently issued and outstanding. These grants have a weighted-average fair value at the date of grant ranging from $5.08 to $11.41, which was equal to the market value of the Company’s common shares at the date of grant. In 2010, 2009 and 2008, grants of 72,901; 111,181 and 16,978 common shares, respectively, were issued as compensation to the Company’s outside directors. These grants were issued equal to the market value of the Company’s stock at the date of grant.

The following table reflects the activity for unvested restricted stock awards for the year ended December 31, 2010 (awards in thousands):

Vested

As of December 31, 2010, total unrecognized compensation of restricted stock award arrangements granted under the plans was $8.0 million and is expected to be recognized over a weighted-average 2.7-year term.

Value Sharing Equity Program

In July 2009, the Company’s Board of Directors approved and adopted the Value Sharing Equity Program (the “VSEP”) and the grant of awards to certain of the Company’s officers. The VSEP is designed to allow the Company to reward participants with a portion of “Value Created” (as described below).

On six specified measurement dates (July 31, 2010; January 31, 2011; July 31, 2011; January 31, 2012; July 31, 2012 and December 31, 2012), the Company will measure the Value Created during the period between the start of the VSEP and the applicable measurement date. Value Created is measured as the increase in the Company’s market capitalization (i.e., the product of the Company’s share price and the number of shares outstanding as of the measurement date), as adjusted for any equity issuances or equity repurchases between the start of the VSEP and the applicable measurement date.

Each participant was assigned a “percentage share” of the Value Created. After the first measurement date, each participant will receive a number of Company shares with an aggregate value equal to two-sevenths of the participant’s percentage share of the Value Created. After each of the next four measurement dates, each participant will receive a number of Company shares with an aggregate value equal to three-sevenths, then four-sevenths, then five-sevenths, and then six-sevenths of the participant’s percentage share of the Value Created. After the final measurement date, each participant will receive a number of Company shares with an aggregate value equal to the participant’s full percentage share of the Value Created. For each measurement date, however, the number of Company shares awarded to a participant will be reduced by the number of Company shares previously earned by the participant as of prior measurement dates. This will keep the participants from benefiting more than once for increases in the Company’s share price that occurred during earlier measurement periods.

The Company shares granted to a participant will then be subject to an additional time-based vesting period. During this period, Company shares will generally vest in 20% annual increments beginning on the date of grant and on each of the first four anniversaries of the date of grant.

The fair value of the VSEP grants was estimated on the date of grant using a Monte Carlo approach model based on the following assumptions:

Risk-free interest rate

Dividend yield

Expected life

Expected volatility

The following table reflects the activity for unvested VSEP awards for the year ended (in thousands):

As of December 31, 2010, $8.7 million of total unrecognized compensation costs were related to the two market metric components associated with the awards granted under the VSEP and is expected to be recognized over the remaining six-year term, which includes the vesting period.

Stock-Based Compensation — Change in Control

In April 2009, the Otto Transaction was approved by the Company’s shareholders, resulting in a “potential change in control” under the Company’s equity-based award plans. In addition, in September 2009, as a result of the second closing in which the Otto Family acquired beneficial ownership of more than 20% of the Company’s outstanding common shares, a “change in control” was deemed to have occurred under the Company’s equity deferred compensation plans. In accordance with the equity-based award plans, all unvested stock options that were not subject to deferral elections became fully exercisable, all restrictions on unvested restricted shares lapsed, and, in accordance with the equity deferred compensation plans, all unvested deferred stock units vested and were no longer subject to forfeiture. As such, the Company recorded accelerated non-cash charges aggregating approximately $15.4 million for the year ended December 31, 2009, related to these equity awards. This charge is included in general and administrative expenses in the Company’s consolidated statement of operations.

401(k) Plan

The Company has a 401(k) defined contribution plan covering substantially all of the officers and employees of the Company that permits participants to defer up to a maximum of 50% of their compensation subject to statutory limits. The Company matches the participant’s contribution in an amount equal to 50% of the participant’s elective deferral for the plan year up to a maximum of 6% of a participant’s base salary plus annual cash bonus, not to exceed the sum of 3% of the participant’s base salary plus annual cash bonus. The Company’s plan allows for the Company to make additional discretionary contributions. No discretionary contributions have been made. Employees’ contributions are fully vested, and the Company’s matching contributions vest 20% per year over five years. The Company funds all matching contributions with cash. The Company’s contributions for each of the three years ended December 31, 2010, 2009 and 2008, were $1.1 million, $1.0 million and $1.0 million, respectively. The 401(k) plan is fully funded at December 31, 2010.

Elective Deferred Compensation Plan

The Company has a non-qualified elective deferred compensation plan for certain officers that permits participants to defer up to 100% of their base salaries and annual performance-based cash bonuses, less applicable taxes and benefits deductions. The Company provides a matching contribution to any participant who has contributed the maximum permitted under the 401(k) plan. This matching contribution is equal to the difference between (a) 3% of the sum of the participant’s base salary and annual performance-based bonus deferred under the 401(k) plan and the deferred compensation combined and (b) the actual employer matching contribution under the 401(k) plan. Deferred compensation related to an employee contribution is charged to expense and is fully vested. Deferred compensation related to the Company’s matching contribution is charged to expense and vests 20% per year. Once an employee has been with the Company five years, all matching contributions are fully vested. The Company’s contributions were $0.1 million for both of the years ended December 31, 2010 and 2008 (not material in 2009). At December 31, 2010, 2009 and 2008, deferred compensation under this plan aggregated approximately $2.8 million, $2.4 million and $3.3 million, respectively. The plan is fully funded at December 31, 2010.

Equity Deferred Compensation Plan

The Company maintains the Developers Diversified Realty Corporation Equity Deferred Compensation Plan (the “Equity Deferred Compensation Plan”), a non-qualified compensation plan for certain officers and directors of the Company to defer the receipt of restricted shares. At December 31, 2010 and 2009, there were 0.4 million and 0.3 million common shares, respectively, of the Company in the Plan valued at $5.5 million and $3.0 million, respectively. The Plan is fully funded at December 31, 2010.

Vesting of restricted stock grants approximating 0.1 million, 0.2 million and 0.1 million common shares in 2010, 2009 and 2008, respectively, was deferred through the Equity Deferred Compensation Plan. The Company recorded $1.2 million, $6.7 million and $4.3 million in 2010, 2009 and 2008, respectively, in equity as deferred compensation obligations for the vested restricted stock deferred into the Company’s Equity Deferred Compensation Plan.

In 2010, certain officers elected to have their deferred compensation distributed, which resulted in a reduction of the deferred obligation of approximately $5.5 million. In 2009, in accordance with the transition rules under Section 409A of the Internal Revenue Code and the change in control that occurred in September 2009, certain officers and directors elected to have their deferrals distributed, which resulted in a reduction of the deferred obligation and a corresponding increase in paid-in capital of approximately $2.8 million. In 2008, deferred obligations aggregating $14.0 million were distributed from the Equity Deferred Compensation Plan to the current Executive Chairman of the Board of the Company resulting in a reduction of the deferred obligation and corresponding increase in paid-in capital.

Directors’ Deferred Compensation Plan

In 2000, the Company established the Directors’ Deferred Compensation Plan (the “Directors Plan”), a non-qualified compensation plan for the directors of the Company to defer the receipt of quarterly compensation. At December 31, 2010 and 2009, there were 0.3 million and 0.2 million common shares, respectively, of the Company in the Directors Plan valued at $3.7 million and $1.9 million, respectively. The Directors Plan is fully funded at December 31, 2010.

Effective January 1, 2009, the Company adopted, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. The Company’s unvested restricted share units contain rights to receive non-forfeitable dividends, and thus are participating securities requiring the two-class method of computing EPS. Under the two-class method, EPS is computed by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted-average number of commons shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted-average shares outstanding during the period. The following table provides a reconciliation of net (loss) income from continuing operations and the number of common shares used in the computations of “basic” EPS, which utilizes the weighted-average number of

common shares outstanding without regard to dilutive potential common shares, and “diluted” EPS, which includes all such shares (in thousands, except per share amounts):

Continuing Operations:

Plus: Gain on disposition of real estate

Plus: Loss (income) attributable to non-controlling interests

Loss from continuing operations attributable to DDR

Less: Preferred dividends

Basic and Diluted — Loss from continuing operations attributable to DDR common shareholders

Less: Earnings attributable to unvested shares and operating partnership units

Basic and Diluted — Loss from continuing operations

Discontinued Operations:

Loss from discontinued operations

Plus: Loss attributable to non-controlling interests

Basic and Diluted — Loss from discontinued operations

Net loss attributable to DDR common shareholders after allocation to participating securities

Number of Shares:

Basic and Diluted — Average shares outstanding

Basic Earnings Per Share:

Loss from continuing operations attributable to DDR common shareholders

Loss from discontinued operations attributable to DDR common shareholders

Net loss attributable to DDR common shareholders

Dilutive Earnings Per Share:

Basic average shares outstanding do not include restricted shares totaling 1,860,064; 1,143,000 and 192,984 that were not vested at December 31, 2010, 2009 and 2008, respectively, or performance units totaling 294,667 that were not vested at December 31, 2008.

Anti-dilutive Securities:

The Company elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 1993. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that the Company distribute at least 90% of its taxable income to its shareholders. It is management’s current intention to adhere to these requirements and maintain the Company’s REIT status. As a REIT, the Company generally will not be subject to corporate level federal income tax on taxable income it distributes to its shareholders. As the Company distributed sufficient taxable income for the three years ended December 31, 2010, no U.S. federal income or excise taxes were incurred.

If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property and to federal income and excise taxes on its undistributed taxable income. In addition, at December 31, 2010, the Company has taxable REIT subsidiaries that generate taxable income from non-REIT activities and is subject to federal, state and local income taxes.

At December 31, 2010, 2009 and 2008, the tax cost basis of assets was approximately $8.6 billion, $9.0 billion and $9.2 billion, respectively. For the year ended December 31, 2010, the Company recorded a net refund of approximately $2.1 million and for the years ended December 31, 2009 and 2008, the Company paid taxes of approximately $2.8 million and $1.7 million, respectively. These amounts reflect taxes paid to federal and state authorities for franchise and other taxes.

The following represents the combined activity of the Company’s TRS (in thousands):

Book loss before income taxes

Components of income tax (benefit) expense are as follows:

Current:

Federal

State and local

Deferred:

Total expense (benefit)

In order to maintain its REIT status, the Company must meet certain income tests to ensure that its gross income consists of passive income and not income from the active conduct of a trade or business. The Company utilizes its TRS to the extent certain fee and other miscellaneous non-real estate related income cannot be earned by the REIT. During the third quarter of 2008, the Company began recognizing certain fee and miscellaneous other non-real estate related income within its TRS.

Management regularly assesses established reserves and adjusts these reserves when facts and circumstances indicate that a change in estimate is necessary. During 2008, the Company recognized a $19.7 million income tax benefit. Approximately $15.6 million of this amount related to the release of the valuation allowance in the third quarter of 2008, associated with deferred tax assets that were established in prior years. This determination was based upon the increase in fee and miscellaneous other non-real estate related income that was projected to be recognized within the Company’s TRS. Additionally, the Company released a portion of the valuation allowance in 2007 based upon projections of gains recognized from the sale of merchant build assets and anticipated profit levels of the Company’s TRS. Based on the Company’s evaluation of the facts and circumstances, the Company determined at these times that the valuation allowance should be released, as it was more-likely-than-not that the deferred tax assets would be utilized in future years.

At December 31, 2010, the Company had net deferred tax assets of approximately $58.3 million, which included $26.5 million attributed to net operating loss carryforwards that expire in varying amounts between the years 2017 through 2030. Realization of the net deferred tax assets is dependent on the existence of significant positive evidence, such as the Company’s ability to generate sufficient income to utilize the deferred tax assets within the relevant carryforward periods. Over the past several years, the Company has initiated various tax actions within the TRS that generated income (“Tax Actions”). These Tax Actions were initiated based upon management’s expectations of the REIT’s future liquidity and cash flow strategies. Due to the Company’s continued progress in raising capital over the past several years and expected improvements within its core operating results, it discontinued initiating these actions during the second half of 2010 and expects that it is unlikely that these Tax Actions will be utilized in future periods. In addition, throughout 2010, the Company continued to experience adverse unexpected charges within its TRS, and during the fourth quarter of 2010, the TRS recorded an impairment charge of $19.3 million and a $3.0 million lease liability charge related to a development project that the Company no longer plans to pursue, resulting in a loss within the TRS for the year ended December 31, 2010. As a result, as of December 31, 2010, the Company has a three-year cumulative pre-tax book loss, adjusted for permanent differences. This, in conjunction with the historical and continued volatility of the activities within the TRS, is sufficient negative evidence that a future benefit of the deferred tax asset may not exist. As such, management believes that it is now more-likely-than-not that the deferred tax assets would not be utilized in future years, and, accordingly, a full valuation allowance of $58.3 million against those deferred tax assets was recorded at December 31, 2010.

The differences between total income tax expense or benefit and the amount computed by applying the statutory federal income tax rate to income before taxes were as follows (in thousands):

Statutory rate of 34% applied to pre-tax loss

Effect of state and local income taxes, net of federal tax benefit

Valuation allowance increase (decrease)

Effective tax rate

Deferred tax assets and liabilities of the Company’s TRS were as follows (in thousands):

Deferred tax assets

Deferred tax liabilities

Valuation allowance

Net deferred tax asset^(A)

Reconciliation of GAAP net loss attributable to DDR to taxable income is as follows (in thousands):

GAAP net loss attributable to DDR

Plus: Book depreciation and amortization^(A)

Less: Tax depreciation and amortization^(A)

Book/tax differences on gains/losses from capital transactions

Joint venture equity in earnings, net^(A)

Dividends from subsidiary REIT investments

Deferred income

Compensation expense

Otto shares and warrant valuation

Convertible debt interest expense

Miscellaneous book/tax differences, net

Taxable (loss) income before adjustments

Less: Capital gains

Less: Taxable loss carried forward

Taxable income subject to the 90% dividend requirement

Reconciliation between cash dividends paid and the dividends paid deduction is as follows (in thousands):

Dividends paid^(A)

Less: Dividends designated to prior year

Plus: Dividends designated from the following year

Less: Portion designated capital gain distribution

Less: Return of capital

Dividends paid deduction

The fourth quarter common share dividends for the years ended December 31, 2010 and 2009, have been allocated and reported to shareholders in the subsequent year. The tax characterization of common share dividends

per share as reported to shareholders for the years ended December 31, 2010, 2009 and 2008, are summarized as follows:

4th quarter 2009

1st quarter

2nd quarter

3rd quarter

4th quarter

4th quarter 2007

The Company did not pay a dividend in the fourth quarter of 2008.

The Company has three reportable operating segments, shopping centers, Brazil equity investment and other investments. Each consolidated shopping center is considered a separate operating segment and follows the accounting policies described in Note 1; however, each shopping center on a stand-alone basis represents less than 10% of the revenues, profit or loss, and assets of the combined reported operating segment and meets the majority of the aggregation criteria under the applicable standard. Effective October 1, 2010 the Company’s equity method investment in Sonae Sierra Brasil is also considered a reportable segment due to the increased level of income reported from the investment as well as how executive management analyzes this investment and allocates resources accordingly. The operating segment information for the years ended December 31, 2009 and 2008 has

been restated to conform to the current year presentation. The following table summarizes the Company’s shopping and office properties, including those located in Brazil:

Shopping centers owned

Unconsolidated joint ventures

Consolidated joint ventures

States^(A)

States

The table below presents information about the Company’s reportable operating segments reflecting the impact of discontinued operations (Note 12) (in thousands):

Total revenues

Operating expenses^(A)

Net operating income

Unallocated expenses^(B)

Equity in net income of joint ventures and impairment of joint venture interests^(C)

Total real estate assets

Equity in net loss of joint ventures and impairment of joint venture interests^(C)

Net operating income

In February 2011, the Company announced that Scott A. Wolstein would be stepping down as Executive Chairman of the Company’s Board of Directors. Mr. Wolstein’s separation from the Company as Executive Chairman will constitute a termination “without cause” in accordance with the terms of his Amended and Restated Employment Agreement with the Company, dated July 29, 2009.

In February 2011, the Company’s unconsolidated joint venture, Sonae Sierra Brasil, completed an initial public offering of its common shares on the Sao Paulo Stock Exchange. The Company received a distribution of US$22.4 million from a portion of the net proceeds. As a result of the initial public offering, the Company’s ownership interest in Sonae Sierra Brasil was reduced from approximately 48% to approximately 34%.

In February 2011, the Company executed the extension option of its Term Loan with KeyBank, N.A. to extend the maturity date to February 2012.

In January 2011, the Company acquired its partner’s 50% interest in an unconsolidated joint venture that owns one shopping center at a purchase price of $20.3 million, which was partially funded through the assumption of $10.5 million aggregate principal amount of debt.

The following table sets forth the quarterly results of operations, as restated for discontinued operations, for the years ended December 31, 2010 and 2009 (in thousands, except per share amounts):

Basic:

Net loss per common share attributable to DDR common shareholders

Weighted average number of shares

Diluted:

2009

Net income (loss) attributable to DDR

Net income (loss) attributable to DDR common shareholders

Net income (loss) per common share attributable to DDR common shareholders

SCHEDULE II

DEVELOPERS DIVERSIFIED REALTY CORPORATION

Year ended December 31, 2010

Allowance for uncollectible accounts

Valuation allowance for deferred tax assets

Year ended December 31, 2009

Year ended December 31, 2008

Brandon, FL

Stow, OH

Westlake, OH

E. Norrition, PA

Palm Harbor, FL

Tarpon Springs, FL

Bayonet Pt., FL

McHenry, IL

Miami, FL

San Antonio, TX (Village)

Starkville, MS

Gulfport, MS

Tupelo, MS

Jacksonville, FL

Long Beach, CA (Pike)

Brunswick, MA

Oceanside, CA

Reno, NV

Everett, MA

Pasadena, CA

Salisbury, MD

Atlanta, GA

Jackson, MS

Freehold, NJ

Opelika, AL

Scottsboro, AL

Gulf Breeze, FL

Apex, NC (South)

Ocala, FL

Tallahassee, FL

Chamblee, GA

Cumming, GA (Marketplace)

Douglasville, GA

Athens, GA

Griffin, GA

Columbus, GA

Newnan, GA

Warner Robins, GA

Woodstock, GA

Fayetteville, NC

Charleston, SC

Denver, CO

Chattanooga, TN

Hendersonville, TN

Johnson City, TN

Chester, VA

Brookfield, WI

Milwaukee, WI

Richmond, KY

Allentown, PA

St. John, MO

Suwanee, GA

West Allis, WI

Chesterfield, MI

Ft. Collins, CO

Lafayette, IN

Hamilton, NJ

Lansing, MI

Erie, PA (Peach)

Erie, PA (Hills)

Bedford, IN

San Francisco, CA

Chillicothe, OH

Phoenix, AZ

Martinsville, VA

Macedonia, OH (Phase II)

Huber Hts, OH

Xenia, OH

Boardman, OH

Solon, OH

Cincinnati, OH

St. Louis, MO (Sunset)

St. Louis, MO (Brentwood)

Cedar Rapids, IA

St. Louis, MO (Olympic)

St. Louis, MO (Morris)

St. Louis, MO (Southtowne)

Aurora, OH

Nampa, ID

Idaho Falls, ID

Mount Vernon, IL

Fenton, MO

Simpsonville, SC

Cambden, SC

N. Charleston, SC

Orangeburg, SC

Mt. Pleasant, SC

Sault St. Marie, MI

Cheboygan, MI

Walker, MI (Grand Rapids)

Houghton, MI

Bad Axe, MI

Gaylord, MI

Howell, MI

Mt. Pleasant, MI

Elyria, OH

Meridian, ID

Midvale, UT (Fort Union I, II, III, Wingers)

Taylorsville, UT (North)

Orem, UT

Riverdale, UT (North)

Bemidji, MN

Salt Lake City, UT (Hermes Bl)

Ogden, UT

Birmingham, AL Eastwood)

Birmingham, AL (Brook Highland)

West Seneca, NY

N. Tonawanda, NY

Amherst, NY

Ithaca, NY (Tops)

Hamburg, NY

Orland Park, IL

Tonawanda, NY

Columbus, OH (Consumer Square)

Louisville, KY (Outer Loop)

Olean, NY

N. Charleston, SC (N Charl Ctr)

Jacksonville, FL (Arlington Road)

West Long Branch, NJ (Monmouth)

Big Flats, NY (Big Flats I, II, III, IV)

Hanover, PA

Mays Landing, NJ (Wrangelboro)

Williamsville, NY

Greece, NY

Buffalo, NY (Elmwood)

Lakeland, FL (Highlands)

Lockport, NY

Buffalo, NY (Delaware)

Cheektowaga, NY (Thruway)

Walker, MI (Alpine Ave.)

Toledo, OH

New Hartford, NY

Mays Landing, NJ (Hamilton)

Gates, NY (Walmart)

Rome, NY (Freedom)

Englewood, FL

Hamburg, NY (Milestrip)

Mooresville, NC

Indian Trail, NC

Dewitt, NY

Chili, NY

Horseheads, NY

Ashtabula, OH

Niskayuna, NY

Victor, NY

Wilmington, NC

Brainerd, MN

Spring Hill, FL

Tiffin, OH

Broomfield, CO (FlatIron)

Denver, CO (Centennial)

New Bern, NC

Bayamon, PR (Plaza Del Sol)

Carolina, PR (Plaza Escorial)

Humacao, PR (Palma Real)

Isabela, PR (Plaza Isabela)

San German, PR (Camino Real)

Cayey, PR (Plaza Cayey)

Bayamon, PR (Rio Hondo)

San Juan, PR (Senorial Plaza)

Bayamon, PR (Rexville Plaza)

Arecibo, PR (Atlantico)

Hatillo, PR (Plaza Del Norte)

Vega Baja, PR (Plaza Vega Baja)

Guyama, PR (Plaza Walmart)

Fajardo, PR (Plaza Fajardo)

San German, PR (Del Oeste)

Princeton, NJ

Princeton, NJ (Pavilion)

Russellville, AR

N. Little Rock, AR

Ottumwa, IA

Washington, NC

Leawood, KS

Littleton, CO

Durham, NC

San Antonio, TX (N. Bandera)

Crystal River, FL

Dublin, OH (Perimeter Center)

Hamilton, OH

Barboursville, WV

Columbus, OH (Easton Market)

Denver, CO (Tamarac Square Mall)

Daytona Beach, FL (Volusia Point)

Twinsburg, OH (Heritage Business)

Silver Springs, MD (Tech Center 29-1)

San Antonio, TX (Center)

San Antonio, TX (Lifestyle)

San Antonio, TX (Terrell)

Kyle, TX (Kyle Crossing)

Marietta, GA

Macon, GA

Snellville, GA (Commons)

Union, NJ

Spartanburg, SC (Northpoint)

Taylors, SC (Hampton)

Dothan, AL (Shops)

Bradenton, FL (Cortez)

Clearwater, FL

New Tampa, FL

Tequesta, FL

Kennesaw, GA (Town)

Lawrenceville, GA (Springfield)

Roswell, GA (Village)

Hagerstown, MD

Greensboro, NC (Golden)

Greensboro, NC (Wendover)

East Hanover, NJ (Plaza)

East Hanover, NJ (Sony)

Camp Hill, PA

Middletown, RI

Lexington, SC

Newport News, VA (Denbigh)

Richmond, VA (Downtown)

Springfield, VA (Loisdale)

Springfield, VA (Spring Mall)

Sterling, VA

Windsor Court, CT

Atlanta, GA (Abernathy)

Norcross, GA

Bowie, MD

Ashville, NC (Oakley)

Cary, NC (Mill Pond)

Charlotte, NC (Camfield)

Cornelius, NC

Greensboro, NC (Capital)

Raleigh, NC (Capital)

Raleigh, NC (Wakefield)

Wilmington, NC (Oleander)

Wilson, NC

Morgantown, WV

Greenwood, SC

Edgewater, NJ

Dothan, AL

Highland Ranch, CO

Dania Beach, FL

Plantation, FL (Vision)

Vero Beach, FL

Duluth, GA (Sofa)

Lawrenceville, GA (Eckerd)

Marietta, GA (Eckerd)

Rome, GA

Snellville, GA (Eckerd)

Sylvania, GA

Worcester, MA

Dearborn Heights, MI

Livonia, MI

Port Huron, MI

Westland, MI

Cary, NC

Concord, NC (Eckerd)

Winston-Salem, NC (Walmart)

Buffalo, NY (Eckerd)

Cheektowaga, NY (Eckerd)

Dunkirk, NY

Alliance, OH

Cincinnati, OH (Kroger)

Oklahoma City, OK

Cheswick, PA

Connelsville, PA

Harborcreek, PA

Erie, PA (Eckerd)

Millcreek, PA (Eckerd)

Penn, PA

Monroeville, PA (Eckerd)

New Castle, PA

Pittsburgh, PA

Plum Borough, PA

Gaffney, SC

Greenville, SC (Eckerd)

Greenville, SC (Walmart)

Mt. Pleasant, SC (Bi-Lo)

Piedmont, SC

Spartanburg, SC (Blackstock)

Spartanburg, SC (Eckerd)

Woodruff, SC

Ft. Worth, TX (CVS)

Garland, TX

Grand Prairie, TX

Houston, TX

Richardson, TX (CVS)

Olympia, WA

Weirton, WV

Plantation, FL (Fountains)

Evansville, IN (East)

Portfolio Balance (DDR) – unencumbered

Portfolio Balance (DDR) – encumbered

F-66

The changes in Total Real Estate Assets, excluding real estate held for sale, for the three years ended December 31, 2010 are as follows:

Balance, beginning of year

Acquisitions and transfers from joint ventures

Developments, improvements and expansions

Changes in land under development and construction in progress

Real estate held for sale

Adjustment of property carrying values

Sales, transfers to joint ventures and retirements

Balance, end of year

The changes in Accumulated Depreciation and Amortization, excluding real estate held for sale, for the three years ended December 31, 2010 are as follows:

Depreciation for year

Sales and retirements

MEZZANINE
LOANS

MULTI-FAMILY

Borrower A

Borrower B

Borrower C

RETAIL

Borrower D

Borrower E

Borrower F

MIXED USE

Borrower G

Borrower H

INVESTMENTS IN
AND
ADVANCES
TO JOINT
VENTURES

Borrower I

Balance at beginning of period

Additions during period:

New mortgage loans

Interest

Accretion of discount

Deductions during period:

Provision for loan loss reserve

Collections of principal

Foreclosures

Balance at close of period

F-69

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DEVELOPERS DIVERSIFIED REALTY CORPORATION

/s/ Daniel B. Hurwitz

Daniel B. Hurwitz, President and Chief Executive Officer

Date: February 28, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated on the 28th day of February, 2011.

/s/ Scott A. Wolstein

Executive Chairman of the Board of Directors

President and Chief Executive Officer

/s/ David J. Oakes

Senior Executive Vice President & Chief Financial Officer (Principal Financial Officer)

/s/ Christa A. Vesy

Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)

/s/ Terrance R. Ahern

Director

/s/ James C. Boland

/s/ Thomas Finne

/s/ Robert H. Gidel

/s/ Volker Kraft

/s/ Victor B. MacFarlane

/s/ Craig Macnab

/s/ Scott D. Roulston

/s/ Barry A. Sholem

/s/ William B. Summers, Jr.

Business description of SITE-Centers-Corp from last 10-k form