Developers Diversified Realty and Macquarie DDR Trust Announce Acquisition of Mervyns Real Estate Portfolio

Market Wire, August, 2005

Developers Diversified Realty (NYSE: DDR) and Macquarie DDR Trust ("MDT") announced the formation of a new joint venture to purchase the real estate underlying 36 open and operating Mervyns stores. The joint venture will acquire the assets for $396.2 million and subsequently lease the assets to Mervyns for 15 years at an annual rent of $30.5 million, which equates to a weighted average rent of $11.12 per square foot. The pricing equates to a 7.7% initial cash cap rate and an 8.9% cap rate on a GAAP basis. The Purchase and Sale Agreement contains a contingent purchase price adjustment secured by a $25 million letter of credit from the seller payable in certain circumstances including a termination of all of the Mervyns leases. Individual, triple net leases will encumber each property and the tenant will be responsible for all property level maintenance. The leases will provide for 2% annual rent increases and will generally include four five-year renewal options. The leases will be cross-defaulted. The transaction is expected to close in mid-September.

MDT is an Australian Listed Property Trust jointly managed by Developers Diversified and Macquarie Bank Limited (ASX: MBL), an international investment bank and leading advisor and manager of specialized real estate funds. In previous transactions with MDT, Developers Diversified has owned a 14.5% ownership interest in the joint venture. In this joint venture, Developers Diversified and MDT each own a 50% interest.

Scott Wolstein, Developers Diversified's Chairman and Chief Executive Officer, commented, "I'm pleased to announce this transaction because it represents another example of our ability to identify and successfully execute creative and opportunistic acquisitions. The structure of the transaction provides us with a long-term, accretive income stream with limited operating risk. In addition, there will be virtually no G&A impact and no additional capital investment."

Mr. Wolstein continued, "We are particularly excited to have structured this transaction with MDT, providing additional diversity to its portfolio and investment strategy. MDT continues to be a highly beneficial joint venture partner, providing us with an efficient means of accessing capital."

Richard Sheppard, Chairman of Macquarie DDR Management Limited, the manager of MDT, noted, "This is an exciting transaction for MDT unitholders. The acquisition provides a diversified exposure to high quality real estate focused in California and a rental income profile with internal growth potential above that of our existing portfolio. The transaction underscores the value to MDT unitholders of the relationship with Developers Diversified."

The new joint venture agreement provides Developers Diversified with the same fee schedule that it receives from its MDT joint venture, including a one-time acquisition and advisory fee in relation to capital structuring and debt financing.

The joint venture expects to place cross-collateralized mortgage financing on the portfolio at a loan-to-value ratio of approximately 65%. The remaining equity contribution will be allocated on a 50% / 50% basis to Developers Diversified and MDT. Developers Diversified intends to fund its portion of the equity with proceeds generated from the sale of a substantial portion of its office and industrial portfolio, which was also announced today.

Daniel Hurwitz, Developers Diversified's Senior Executive Vice President and Chief Investment Officer, commented, "This transaction is an important step toward expanding our footprint in the West, adding nearly two million square feet of California real estate, which includes one million square feet in the Los Angeles metropolitan area."

Mr. Hurwitz added, "These assets are located in high quality market dominant community centers and enclosed regional malls where retail sites are extremely difficult to acquire at the pricing levels achieved."

The portfolio aggregates 2.74 million square feet and is 100% occupied by Mervyns. Approximately 70% of the assets (25) are based in California, including nearly 1.0 million square feet in the Los Angeles metropolitan area and over 500,000 square feet in the San Francisco area. Additional stores are located in Arizona (5), Nevada (5) and Texas (1).

Approximately 85% of the properties (31) are owned in fee. Of the remaining assets, four are subject to a groundlease and one is a leasehold interest. Over 70% of the assets (26) are located in open-air shopping centers, with the balance of the portfolio either attached to an enclosed mall or located as a freestanding building associated with an enclosed mall.

A powerpoint presentation providing additional details on the transaction is available on Developers Diversified's website at www.ddr.com, and a detailed property list is attached to this announcement.

Developers Diversified will conduct a conference call and an audio webcast on Tuesday, August 9, 2005 at 10:30 a.m. EDT. To access the conference call, dial 888-396-2356 at least ten minutes prior to the scheduled start of the call. When prompted, provide the access code: 16504431. The conference call will be recorded and available for replay beginning at 12:30 p.m., August 9, 2005 and will be available until 11:59 p.m., September 8, 2005. To access the conference call recording, please call 888-286-8010 and use the access code: 58450771. The conference call will be webcast by CCBN, www.ccbn.com , and can be accessed via the DDR web site, www.ddr.com.