The following discussion should be read in conjunction with the consolidated financial statements, the notes thereto and the comparative summary of selected financial data 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 those 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 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 is subject to general risks affecting the real estate industry, including the need to enter into new leases or renew leases on favorable terms to generate rental revenues, and the current economic downturn may adversely affect the ability of the Company's tenants, or new tenants, to enter into new leases or the ability of the Company's existing tenants' to renew their leases at rates at least as favorable as their current rates;

• The Company could be adversely affected by changes in the local markets where its properties are located, as well as by adverse changes in national economic and market conditions;

• The Company may fail to anticipate the effects on its properties of changes in consumer buying practices, including catalog sales and sales over the Internet and the resulting retailing practices and space needs of its tenants or a general downturn in its tenants' businesses, which may cause tenants to close stores;

• The Company is subject to competition for tenants from other owners of retail properties, and its tenants are subject to competition from other retailers and methods of distribution. The Company is dependent upon the successful operations and financial condition of its tenants, in particular of its major tenants, and could be adversely affected by the bankruptcy of those tenants;

• The Company relies on major tenants, which makes us vulnerable to changes in the business and financial condition of, or demand for our space, by such tenants;

• The Company may not realize the intended benefits of acquisition or merger transactions. The acquired assets may not perform as well as the Company anticipated, or the Company may not successfully integrate the assets and realize the improvements in occupancy and operating results that the Company anticipates. The acquisition of certain assets may subject the Company to liabilities, including environmental liabilities;

• The Company may fail to identify, acquire, construct or develop additional properties that produce a desired yield on invested capital, or may fail to effectively integrate acquisitions of properties or portfolios of properties. In addition, the Company may be limited in its acquisition opportunities due to competition, the inability to obtain financing on reasonable terms or any financing at all and other factors;

• The Company may fail to dispose of properties on favorable terms. In addition, real estate investments can be illiquid, particularly as prospective buyers may experience increased costs of financing or difficulties obtaining financing, and could limit the Company's ability to promptly make changes to its portfolio to respond to economic and other conditions;

• The Company may abandon a development opportunity after expending resources if it determines that the development opportunity is not feasible due to a variety of factors, including a lack of availability of construction financing on reasonable terms, the impact of the current economic environment on prospective tenants' ability to enter into new leases or pay contractual rent, or the inability by the Company to obtain all necessary zoning and other required governmental permits and authorizations;

• The Company may not complete development projects on schedule as a result of various factors, many of which are beyond the Company's control, such as weather, labor conditions, governmental approvals, material shortages or general economic downturn resulting in limited availability of capital, increased debt service expense and construction costs and decreases in revenue;

• The Company's financial condition may be affected by required debt service payments, the risk of default and restrictions on its ability to incur additional debt or enter into certain transactions under its credit facilities and other documents governing its debt obligations. In addition, the Company may encounter difficulties in obtaining permanent financing or refinancing existing debt. Borrowings under the Company's revolving credit facilities are subject to certain representations and warranties and customary events of default, including any event that has had or could reasonably be expected to have a material adverse effect on the Company's business or financial condition;

• Changes in interest rates could adversely affect the market price of the Company's common shares, as well as its performance and cash flow;

• Debt and/or equity financing necessary for the Company to continue to grow and operate its business may not be available or may not be available on favorable terms or at all;

• Recent disruptions in the financial markets could affect our ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of our common shares;

• The Company is subject to complex regulations related to its status as a real estate investment trust ("REIT"), and would be adversely affected if it failed to qualify as a REIT;

• The Company must make distributions to shareholders to continue to qualify as a REIT, and if the Company must borrow funds to make distributions, those borrowings may not be available on favorable terms or at all;

• Joint venture investments may involve risks not otherwise present for investments made solely by the Company, including the possibility that a partner or co-venturer may become bankrupt, may at any time have different interests or goals than those of the Company and 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. In addition, a partner or co-venturer may not have access to sufficient capital to satisfy its funding obligations to the joint venture. The partner could default on the loans outside of the Company's control. Furthermore, if the current constrained credit conditions in the capital markets persist or deteriorate further, 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 pursuant to Accounting Principles Board ("APB") No. 18, "The Equity Method of Accounting for Investments in Common Stock ("APB 18")";

• The Company may not realize anticipated returns from its real estate assets outside the United States. The Company expects to continue to pursue international opportunities that may subject the Company to different or greater risks than those associated with its domestic operations. The Company owns assets in Puerto Rico, an interest in an unconsolidated joint venture that owns properties in Brazil and an interest in consolidated joint ventures that will develop and own properties in Canada, Russia and Ukraine;

• International development and ownership activities carry risks that are different from those the Company faces with the Company's domestic properties and operations. These risks include:

• Adverse effects of changes in exchange rates for foreign currencies;

• Changes in foreign political or economic environments;

• Challenges of complying with a wide variety of foreign laws including tax laws and addressing different practices and customs relating to corporate governance, operations and litigation;

• Different lending practices;

• Cultural and consumer differences;

• Changes in applicable laws and regulations in the United States that affect foreign operations;

• Difficulties in managing international operations and

• Obstacles to the repatriation of earnings and cash;

• Although the Company's international activities are currently a relatively small portion of its business, to the extent the Company expands its international activities, these risks could significantly increase and adversely affect its results of operations and financial condition;

• The Company is subject to potential environmental liabilities;

• The Company may incur losses that are uninsured or exceed policy coverage due to its liability for certain injuries to persons, property or the environment occurring on its properties and

• The Company could incur additional expenses in order to comply with or respond to claims under the Americans with Disabilities Act or otherwise be adversely affected by changes in government regulations, including changes in environmental, zoning, tax and other regulations.

Executive Summary
The Company is a self-administered and self-managed REIT, in the business of owning, managing and developing an international portfolio of shopping centers. As of March 31, 2009, the Company's portfolio consisted of 694 shopping centers and six business centers (including 327 owned through unconsolidated joint ventures and 35 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 March 31, 2009, the Company owned and/or managed approximately 148 million total square feet of Gross Leasable Area ("GLA"), which includes all of the aforementioned properties and one property owned by a third party. The Company also has assets under development in Canada and Russia. 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 March 31, 2009, the aggregate occupancy of the Company's shopping center portfolio was 88.3%, as compared to 94.5% at March 31, 2008. Excluding the impact of the Mervyns vacancy, the aggregate occupancy of the Company's shopping center portfolio was 90.3% at March 31, 2009. The Company owned 710 shopping centers at March 31, 2008. The average annualized base rent per occupied square foot was $12.30 at March 31, 2009, as compared to $12.42 at March 31, 2008. The Company also owned seven business centers at March 31, 2008.

Net income applicable to DDR common shareholders for the three-month period ended March 31, 2009, was $76.8 million, or $0.59 per share (diluted and basic), compared to adjusted net income applicable to DDR common shareholders of $29.6 million, or $0.25 per share (diluted and basic), for the prior-year period. Funds from operations ("FFO") applicable to DDR common shareholders for the three-month period ended March 31, 2009, was $140.0 million compared to adjusted FFO of $96.3 million for the three-month period ended March 31, 2008, an increase of 45.4%. The increase in net income and FFO applicable to common shareholders for the three-month period ended March 31, 2009, is primarily related to the gains recorded on the repurchases of senior unsecured notes offset by non-cash impairment charges from consolidated and joint venture investments and a loss on disposition of a joint venture investment. First quarter 2009 operating results
In the first quarter of 2009, the Company continued to work on various de-leveraging initiatives. The Company made progress on initial steps of de-leveraging its balance sheet and improving liquidity by addressing operational items that are within its control. These initiatives include reducing the 2009 dividend payout, minimizing development spending in the near term, selling non-core assets and repurchasing near-term debt maturities at discounts. The Company's top priorities include continuing with these initiatives along with the expected closing of the transaction (the "Otto Transaction") with Mr. Alexander Otto and certain members of the Otto Family (the "Otto Family"), as discussed below, and raising new secured debt capital. The Company is also exploring numerous other capital raising activities to expand upon its current efforts such as selling core assets into joint ventures and other corporate capital raising initiatives.
Despite the challenging financing environment for buyers, asset sales are still occurring and are an important part of the Company's initiatives. In the first quarter of 2009, the Company sold seven assets for approximately $65.8 million. In the current environment, larger asset sales are not occurring as frequently, so the Company is also focusing on selling single tenant assets and smaller shopping centers. Buyers include well-capitalized retailers buying back their stores, local buyers with access to capital and those are who are completing 1031 tax exchanges. The Company is noticing that new buyers are returning to the market as capitalization rates appeared to have returned to the long-term average after years of historic lows.
Another important initiative by the Company is strategically repurchasing senior unsecured notes at discounts to par. The Company repurchased $163.5 million aggregate principal of senior unsecured notes at a cash discount to par of $81.4 million. In the remainder of 2009, the Company will continue to use free cash flow and new capital from asset sales and equity and debt financings to repay debt, and focus on near-term maturities. There can be no assurances that the Company will be able to complete such transactions at favorable pricing.
The Company closed on $125 million of new secured financing in May 2009. In addition, the Company expects to close on the first tranche of the equity component of the Otto Transaction in May 2009. The Company obtained a $60.0 million bridge loan from an affiliate of the Otto Family in March 2009 and the proceeds were used to repurchase senior unsecured notes at significant discounts to par, as

discussed above. In May 2009, the Company closed on a $60 million, five-year secured term loan with the Otto Family to replace the bridge loan obtained in March. The interest rate is reduced from 10% on the bridge loan to 9% on the term loan.
The Company believes that its recent capital markets activities substantially addressed its significant debt maturities through 2010 and to some extent 2011 and 2012. The Company is pleased with its progress through the first quarter of 2009 and expects to engage in additional activity in the balance of 2009 to proactively address the remaining maturities through 2012. The Company is actively pursuing capital raising initiatives through a broad range of potential opportunities and markets at both the asset and corporate level.
At this time, the Company's continued priority throughout 2009 and beyond is to focus on reducing leverage and enhancing financial flexibility to enable us to position ourselves to be able to capitalize on the numerous investment opportunities in the real estate markets. The Company is evaluating each option and pursuing what it believes to be viable. The Company believes that it will be able to meet its near-term debt maturities as a result of these initiatives, and emerge from this challenging cycle as a stronger, more focused and lower-leveraged company. There can be no assurances that such initiatives will be successful.

Results of Operations
Revenues from Operations (in thousands)

                                                 Three-Month Periods Ended
                                                         March 31,
                                                  2009                 2008           $ Change          % Change
Base and percentage rental revenues           $     147,955         $  159,317        $ (11,362 )            (7.1 )%
Recoveries from tenants                              49,050             52,388           (3,338 )            (6.4 )
Ancillary and other property income                   5,050              4,617              433               9.4
Management fees, development fees and
other fee income                                     14,461             16,287           (1,826 )           (11.2 )
Other                                                 3,250              3,487             (237 )            (6.8 )

Total revenues                                $     219,766         $  236,096        $ (16,330 )            (6.9 )%

Base and percentage rental revenues of the core portfolio properties (shopping center properties owned as of January 1, 2008, but excluding properties under development/redevelopment and those classified as discontinued operations) ("Core Portfolio Properties") decreased approximately $10.1 million, or 6.8%, for the three-month period ended March 31, 2009, as compared to the same period in 2008. The decrease in overall base and percentage rental revenues was due to the following (in millions):

                                                  Increase
                                                 (Decrease)
                     Core Portfolio Properties   $     (10.1 )
                     Straight-line rents                (1.3 )

                                                 $     (11.4 )

At March 31, 2009, the aggregate occupancy rate of the Company's shopping center portfolio was 88.3%, as compared to 94.5% at March 31, 2008. The Company owned 694 shopping centers at March 31, 2009, as compared to 710 shopping centers at March 31, 2008. The average annualized base rent per occupied square foot was $12.30 at March 31, 2009, as compared to $12.42 at March 31, 2008.
At March 31, 2009, the aggregate occupancy rate of the Company's wholly-owned shopping centers was 90.5%, as compared to 92.7% at March 31, 2008. The Company had 332 wholly-owned shopping centers at March 31, 2009, as compared to 353 shopping centers at March 31, 2008. The average annualized base rent per occupied square foot for wholly-owned shopping centers was $11.72 at March 31, 2009, as compared to $11.63 at March 31, 2008. The decrease in occupancy rate and revenues from operations includes the bankruptcies of Goody's, Linens 'N Things, Circuit City and Steve and Barry's placing the Company at a historic low. The Company expects occupancy of its shopping center portfolio to remain around 90% for the next few quarters.
At March 31, 2009, the aggregate occupancy rate of the Company's joint venture shopping centers was 86.2%, as compared to 96.1% at March 31, 2008. The Company's joint ventures owned 362 shopping centers including 35 consolidated centers primarily owned through a joint venture which owns sites previously occupied by Mervyns at March 31, 2009, as compared to 357 shopping centers including 40 consolidated centers primarily owned through the Mervyns Joint Venture at March 31, 2008. The average annualized base rent per occupied square foot was $12.83 at March 31, 2009, as compared to $13.12 at March 31, 2008. The decrease in occupancy rate is a result of the bankruptcies discussed above as well as the impact of the vacancy of the Mervyns sites in 2009.
At March 31, 2009, the aggregate occupancy rate of the Company's business centers was 72.4%, as compared to 70.5% at March 31, 2008. The increase in occupancy is primarily a result of the sale of the business center in Boston, Massachusetts in September 2008. The business centers consist of six assets in four states at March 31, 2009. The business centers consisted of seven assets in five states at March 31, 2008.
Recoveries from tenants decreased $3.3 million, or 6.4%, for the three-month period ended March 31, 2009, as compared to the same period in 2008. Recoveries were approximately 75.0% and 83.6% of operating expenses and real estate taxes including bad debt expense for the three months ended March 31, 2009 and 2008, respectively. This decrease in recoveries from tenants was primarily a result of the decrease in occupancy of the Company's portfolio as discussed above.
The increase in ancillary and other property income is a result of pursuing additional revenue opportunities in the Core Portfolio Properties. Ancillary revenue opportunities have in the past included short-term and seasonal leasing programs, outdoor advertising programs, wireless tower development programs, energy management programs, sponsorship programs and various other programs.

The decrease in management, development and other fee income for the three-month period ended March 31, 2009, is primarily due to the following (in millions):

                                                                                 Increase
                                                                                (Decrease)
Development fee income                                                          $      (1.0 )
Leasing commissions                                                                    (0.1 )
Decrease in management fee income at various unconsolidated joint ventures             (0.7 )

                                                                                $      (1.8 )

The decrease in development fee income was primarily the result of the reduced construction activity and the redevelopment of joint venture assets that are owned through the Company's investments with the Coventry II Fund discussed below. In light of current market conditions, development fees may decline if development or redevelopment projects are delayed.
Other revenue for the three-month periods ended March 31, 2009 and 2008, was comprised of the following (in millions):

                                           Three-Month Periods Ended
                                                   March 31,
                                           2009                 2008
              Lease termination fees   $        1.5         $        3.3
              Financing fees                    0.3                    -
              Other                             1.5                  0.2

                                       $        3.3         $        3.5

Expenses from Operations (in thousands)

                                   Three-Month Periods Ended
                                           March 31,
                                     2009               2008        $ Change       % Change
 Operating and maintenance       $      36,232       $   35,708     $     524            1.5 %
 Real estate taxes                      29,136           26,985         2,151            8.0
 Impairment charges                     10,905                -        10,905          100.0
 General and administrative             19,171           20,715        (1,544 )         (7.5 )
 Depreciation and amortization          62,941           55,462         7,479           13.5

                                 $     158,385       $  138,870     $  19,515           14.1 %

Operating and maintenance expenses include the Company's provision for bad debt expense, which approximated 1.3% and 1.4% of total revenues for the three-month periods ended March 31, 2009 and 2008, respectively (see Economic Conditions).

The increase in rental operation expenses, excluding general and administrative, for the three-month period ended March 31, 2009, compared to 2008, is due to the following (in millions):

                                                              Operating            Real          Depreciation
                                                                 and              Estate              and
                                                             Maintenance          Taxes          Amortization
Core Portfolio Properties                                    $        0.4        $    1.5        $         5.4 (1)
Development/redevelopment of shopping center properties               0.6             0.7                  2.0
Provision for bad debt expense                                       (0.5 )             -                    -
Personal property                                                       -               -                  0.1

                                                             $        0.5        $    2.2        $         7.5

(1) Primarily relates to accelerated depreciation due to vacancies and additional assets placed in service. The Company recorded impairment charges of $10.9 million for the three-month period ended March 31, 2009 on two wholly-owned operating shopping centers being marketed for sale as the book basis of the assets was in excess of the estimated fair market value less costs to sell as determined pursuant to the provisions of SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived . . .