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 it vulnerable to changes in the business and financial condition of, or demand for its 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 the Company's ability to obtain financing on reasonable terms and have other adverse effects on us and the market price of the Company's 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 an other than temporary;

• The outcome of pending or future litigation, including litigation with tenants or joint venture partners, may adversely effect the Company's results of operations and financial condition.

• 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 were formed for the purpose to 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:

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

o Changes in foreign political or economic environments;

o 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;

o Different lending practices;

o Cultural and consumer differences;

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

o Difficulties in managing international operations and

o 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 a portfolio of shopping centers. As of September 30, 2009, the Company's portfolio consisted of 664 shopping centers and six business centers (including 318 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 September 30, 2009, the Company owned and/or managed approximately 143.5 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 owns land in Canada and Russia at which the development was deferred. At September 30, 2009, the aggregate occupancy of the Company's shopping center portfolio was 87.1%, as compared to 94.5% at September 30, 2008. Excluding the impact of the Mervyns vacancy, the aggregate occupancy of the Company's shopping center portfolio was 89.1% at September 30, 2009. The Company owned 713 shopping centers and six business centers at September 30, 2008. The average annualized base rent per occupied square foot was $12.59 at September 30, 2009, as compared to $12.47 at September 30, 2008.
Net loss applicable to DDR common shareholders for the three-month period ended September 30, 2009 was $148.4 million, or $0.90 per share (diluted and basic), compared to revised net income applicable to DDR common shareholders of $24.7 million, or $0.20 per share (diluted and basic), for the prior-year comparable period. Net loss applicable to DDR common shareholders for the nine-month period ended September 30, 2009 was $308.7 million, or $2.11 per share (diluted and basic), as compared to revised net income applicable to DDR commons shareholders of $80.4 million, or $0.66 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 September 30, 2009 was a loss of $90.1 million compared to revised FFO income of $96.7 million for the three-month period ended September 30, 2008. FFO applicable to DDR common shareholders for the nine-month period ended September 30, 2009 was a loss of $116.6 million as compared to revised FFO income of $288.9 million for the nine-month period ended September 30, 2008. The decrease in net income and reported loss as well as FFO applicable to common shareholders for the three- and nine-month periods ended September 30, 2009 is primarily related to non-operating activity consisting of impairment charges, loss on sale of assets and equity derivative related charges in addition to several major tenant bankruptcies in late 2008 and early 2009, offset by gains on debt repurchases as well as lower interest rates on variable rate debt. Also contributing to the decrease was a release of an approximately $16 million deferred tax allowance in 2008 as well as the impact of asset sales associated with the Company's deleveraging efforts.
Third quarter 2009 operating results
The Company's 2009 goals included improving liquidity and lowering leverage. In the third quarter of 2009, the Company made great strides towards achievement of these goals as evidenced by the capital raised, which was applied to lower leverage, enhance liquidity and extend debt maturities.
• The Company reduced its consolidated debt by more than $700 million in the nine months ended September 30, 2009. On December 31, 2008, the Company had $5.9 billion of consolidated debt as compared to $5.2 billion at September 30, 2009. Additionally, the Company reduced its share of unconsolidated joint venture debt by approximately $140 million in the same period. In October 2009, the Company further reduced its proportionate share of unconsolidated joint venture debt by approximately $80 million with the redemption of its interest in the MDT US LLC joint venture, as discussed below.

• The Company took advantage of the opportunity that arose in the unsecured debt market by raising $300 million in new senior unsecured notes maturing in 2016. This offering of long-term debt to repay short-term debt extended the duration of the Company's overall debt maturities. The interest rate was higher than historic rates and, as such, the Company remains focused on executing upon the balance sheet improvements that should lower this cost over time.

• The Company has improved its debt maturity schedule by decreasing debt and by extending debt maturities. The Company does not have any remaining 2009 wholly-owned debt maturities, and all but six of the Company's wholly-owned 2010 mortgage maturities, aggregating approximately $59 million, have been addressed.

• The Company closed approximately $600 million in new mortgage loans.

• Through September 30, 2009, the Company purchased $250.1 million aggregate principal amount of unsecured senior notes through a tender offer, and an additional $423.5 million aggregate principal amount of unsecured senior notes through open market purchases, for a total cash discount to par of approximately $164.3 million. The tender offer achieved the Company's goal of retiring unsecured notes, especially those with near-dated maturities.

• The Company sold assets aggregating approximately $450 million in gross proceeds, of which the Company's share was more than $300 million. Almost all of these sales were non-prime assets (prime assets are considered those assets that the Company intends to hold for a long term and not offer for sale to a third party), and the sales contributed to the de-leveraging and liquidity enhancing efforts by reducing secured mortgage debt and unsecured note and revolver balances.

• The Company raised $157.6 million through the issuance of 18.6 million common shares at a weighted average price of nearly $8.50 per share in the nine months ended September 30, 2009 and, in addition, raised $112.5 million of cash as part of the transaction with Mr. Alexander Otto (the "Investor") and certain members of the Otto family (collectively with the Investor, the "Otto Family").

As a result of the transactions listed above and the Company's operating performance during the nine months of the year, the Company has significantly enhanced its liquidity position and remains in compliance with its debt covenants under its Revolving Credit Facilities, term debt and senior notes. The Company's continued execution on various de-leveraging initiatives, including asset sales, equity issuances and retained capital, is expected to continue to improve these ratios over time. In addition, as the Company continues to increase the portfolio occupancy, these ratios are expected to improve further.
In addition to the liquidity initiatives described above, the Company has had success in the execution of the following initiatives:
• The Company simplified its structure by redeeming its interest in the MDT US LLC joint venture in October 2009. This redemption eliminated approximately $1.0 billion of unconsolidated debt and the Company assumed debt of approximately $65.3 million. This simplified structure reduced the Company's proportionate share of unconsolidated joint venture debt by approximately $146 million offset by the assumption of debt by the Company of approximately $65.3 million resulting in an overall reduced leverage by approximately $80 million. In exchange for its interest, the Company owns three wholly-owned prime assets.

• The Company focused on the re-tenanting of space formerly occupied by bankrupt retailers. Activity was generated on a majority of the space in the form of signed leases, sales, leases pending signature or letters of intent, and, importantly, the Company remains focused on pursuing the retailers that are anticipating 2010 and 2011 openings. The Company continues to be prudent in evaluating deal terms and, while rents have moderated, the Company is pursuing economically efficient deals with lower than average capital expenditures.

• Maximizing rent spreads remains challenging, yet the Company achieved marginal improvement in blended rental rate spreads over the second quarter of 2009.

• The Company remains focused on tenant relationships and has strategically invested in human capital by reassigning responsibilities communicating with its tenants, conducting portfolio reviews, and discussing new store opportunities.

The Company continues to focus on its current strategy and various other initiatives, including the following:

• The Company intends to sell non-prime assets to third parties. However, due to the amount of the Company's capital raising initiatives completed thus far this year, the Company is not intending to sell its assets at significant discounts in order to raise capital. The Company continues to have non-prime assets under contract for sale or subject to letters of intent. The Company will continue to look at asset sales as an available source of capital only when pricing is acceptable and those assets do not fit the Company's focus on prime properties.

• The Company intends to continue to repurchase its unsecured notes if discounts continue to be available.

• The Company expects to commence a new common equity program pursuant to which the Company can sell equity into the open market from time to time at its discretion at other than fixed prices.

• The Company may complete several other secured financings at its discretion by year end. The Company does not believe that these transactions are required to be completed in order to meet its near-term maturities, but remain part of the Company's long-term strategy to provide for more liquidity.

• The Company is focused on improving its debt to EBITDA ratio (Earnings before interest, taxes, depreciation and amortization).

Despite the high level of transactional activity this year, the Company has not lost sight of the operational side of the business. Although the Company is pleased with its ability to execute on its strategic plan thus far, it acknowledges it has more to complete. The Company continues to prepare for a prudent strategy for 2010 and beyond.

Results of Operations
Revenues from Operations (in thousands)

                                                 Three-Month Periods Ended
                                                       September 30,
                                                  2009                 2008           $ Change          % Change
Base and percentage rental revenues           $     136,922         $  150,389        $ (13,467 )            (9.0 )%
Recoveries from tenants                              43,758             49,548           (5,790 )           (11.7 )
Ancillary and other property income                   5,698              4,889              809              16.6
Management fees, development fees and
other fee income                                     14,693             15,378             (685 )            (4.5 )
Other                                                 1,193              2,656           (1,463 )           (55.1 )

Total revenues                                $     202,264         $  222,860        $ (20,596 )            (9.2 )%




                                                 Nine-Month Periods Ended
                                                       September 30,
                                                  2009                2008           $ Change          % Change
Base and percentage rental revenues           $     413,698         $ 453,458        $ (39,760 )            (8.8 )%
Recoveries from tenants                             135,181           145,801          (10,620 )            (7.3 )
Ancillary and other property income                  15,696            15,748              (52 )            (0.3 )
Management fees, development fees and
other fee income                                     43,194            47,302           (4,108 )            (8.7 )
Other                                                 6,173             7,383           (1,210 )           (16.4 )

Total revenues                                $     613,942         $ 669,692        $ (55,750 )            (8.3 )%

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 in discontinued operations) ("Core Portfolio") decreased approximately $34.1 million, or 8.2%, for the nine-month period ended September 30, 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):

                                                                  Decrease
       Core Portfolio Properties                                 $    (34.1 )
       Development/redevelopment of shopping center properties         (1.6 )
       Business center properties                                      (0.3 )
       Straight-line rents                                             (3.8 )

                                                                 $    (39.8 )

At September 30, 2009, the aggregate occupancy rate of the Company's shopping center portfolio was 87.1%, as compared to 94.5% at September 30, 2008. The Company owned 664 shopping centers at September 30, 2009, as compared to 713 shopping centers at September 30, 2008. The average annualized base rent per occupied square foot was $12.59 at September 30, 2009, as compared to $12.47 at September 30, 2008. The base and percentage rental revenue decrease within the Core Portfolio is due almost exclusively to the impact of the major tenant bankruptcies including Mervyns, Goody's, Linens 'N Things, Circuit City and Steve and Barry's. These bankruptcies have also driven the Company's current lower occupancy level as compared to the Company's historical levels.
At September 30, 2009, the aggregate occupancy rate of the Company's wholly-owned shopping centers was 89.8%, as compared to 93.3% at September 30, 2008. The Company had 311 wholly-owned shopping centers at September 30, 2009, as compared to 344 shopping centers at September 30, 2008. The average annualized base rent per occupied square foot for wholly-owned shopping centers was $11.73 at September 30, 2009, as compared to $11.68 at September 30, 2008. The decrease in occupancy rate is primarily a result of the bankruptcies discussed above, excluding Mervyns.
At September 30, 2009, the aggregate occupancy rate of the Company's joint venture shopping centers was 84.8%, as compared to 94.0% at September 30, 2008. The Company's joint ventures owned 353 shopping centers including 35 consolidated centers primarily owned through a joint venture which owns sites previously occupied by Mervyns at September 30, 2009, as compared to 369 shopping centers including 40 consolidated centers primarily owned through a joint venture which owns sites previously occupied by Mervyns at September 30, 2008. The average annualized base rent per occupied square foot was $13.36 at September 30, 2009, as compared to $13.15 at September 30, 2008. The decrease in the occupancy rate and annualized base rent is primarily a result of the bankruptcies discussed above as well as the impact of the vacancy of the Mervyns sites in 2009.
At September 30, 2009, the aggregate occupancy rate of the Company's business centers was 71.4%, as compared to 80.9% at September 30, 2008. The business center portfolio includes six assets in four states at September 30, 2009 and 2008.
Recoveries from tenants decreased $10.6 million, or 7.3%, for the nine-month period ended September 30, 2009, as compared to the same period in 2008. Recoveries were approximately 71.1%

and 80.4% of operating expenses and real estate taxes including bad debt expense for the nine-months ended September 30, 2009 and 2008, respectively. The . . .