Colgate Real Estate Workshop

1. Colgate Real Estate Workshop Matt Lougee ‘07 Director of Finance Developers Diversified Realty September 25-26, 2009

2. What’s a REIT? A Real Estate Investment Trust is a corporation that uses the pooled capital of investors to purchase and manage income-producing property. To qualify as a REIT, the company must pay out at least 90% of its taxable income in the form of a dividend. REIT’s offer investors a liquid way to own real estate that combines the bond-like income stream from dividends with the price risk and growth potential found in traditional stocks. The Basics DDR at a Glance Assets Under Management $18.4 billion Properties Owned and Managed 703 Gross Leasable Area 153 million sq. ft. Leased Rate - IPO (1993) 95.7% Leased Rate – Current 90.7% Avg. Lease Term 7 years Employees 770

3. DDR’s Diverse Geographic Presence GLA by State 153 MSF in 45 states plus Puerto Rico, Brazil, and Canada +5.0 MSF +1.0 – 5.0 MSF Less than 1.0 MSF 13.6 msf 8.9% 5.8 msf 3.8% 10.2 msf 6.7% 5.2 msf 3.4% 9.4 msf 6.1% 5.0 msf 3.3% 16.6 msf 10.8% 7.4 msf 4.8% Brazil 15.2 msf 9.9% 5.0 msf 3.2% Puerto Rico

4. 1. Capital Markets effectively shut down – Risk Re-priced • - No access to equity and debt – Fear and Irrationality • - Inability to refinance upcoming debt maturities • - Inability to finance transactions • - No way to fuel growth / returns • 2. Declining Fundamentals - Consumer staying home • - Declining Occupancy – Weak tenants go bankrupt • - Linens N Things, Circuit City, Steve & Barry’s • - Declining NOI growth and Leasing spreads • = Declining • 1. Asset Values • 2. REIT Stock Prices The Downfall – What happened to REITs?

5. The Downfall

6. The Solution: Recapitalize the Balance Sheet

7. Investors borrow from the Fed, then lend to REITs • Lower borrowing rate than other sources of debt capital • Loan secured by first mortgage in a cross-collateralized pool of assets • Functions as a catalyst to restart the securitized lending market (CMBS) • More scrutinized standards for ratings • Conservative underwriting vs. Dominance of speculation ($600B ’05 – ’07) #1 – Term Asset-Backed Loan Facilities (TALF)

8. #2: Repurchase Bonds at Discounts to Par Note: $227 million of our January 2009 notes were repaid at par in January

9. Investors recognizing progress

10. The Future of Commercial Real Estate The “New Normal” – Deep Recession ≠ Strong Recovery - Unemployment: +/- 10% (CRE / Unemployment – Lagging Indicators) - Savings Rate: “Paradox of Thrift” = Saving $ generates less economic activity - Government: Privatize Profits, Socialize Losses, Printing Prosperity? - Rational Credit Markets / Subdued Risk Appetite REIT Recapitaliztion – “Re IPO” - Equity Raised - $17 billion - Debt Raised - $9 billion - REITs as Fixed Income or Total Return? Opportunity: “Dry Powder” - Money waiting on the sidelines for trough valuations and distressed operators Weed out bad retailers - Focus on credit quality and profit margin Fundamentals - New development at historic lows; opportunity for absorption of 2005-2007 supply - Long term leases - Resiliance of consumer Industry talent gap - Entry level jobs extremely difficult - Tangible product - Opportunity to work in multi-dimensional sector with little peer competition - Risk-perspective