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Concerns Begin to Mount at Developers Diversified

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Retail REIT Developers Diversified is now hitting a rough patch. The company briefed the market on the status of $1.7 billion in debt maturing the next two years. The company reported that it has $525 million of financing during the third quarter, leaving it with less than $50 million in maturing loans before the end of the year.

To insulate itself from further debt exposure, the company is slowing down on some of its international projects.

Wolstein expressed confidence that the company can meet its financial obligations, including nearly $1.7 billion in debt to be refinanced or repaid within two years. In addition to cutting development close to home, the company is delaying or dumping much-touted projects overseas until funding is available. The exception is a mostly-leased shopping center in Manaus, Brazil, which will open in April.

"I think the fact that they're shutting down Brazil and Russia can't be viewed as a good thing," said Rich Moore, an analyst with RBC Capital Markets in Solon.

The company will use cash from property sales to cover debts and could borrow against or sell some wholly-owned properties to raise additional money. Developers Diversified has sold more than $100 million worth of properties this year and believes it can sell more, even though many would-be real estate buyers cannot get financing.

The company took another hit because of Mervyns decision to liquidate. The company has Mervyns at 38 locations within its 730-property portfolio. It owns 37 of the locations.

Nevertheless, the company's stock fell yesterday by 14 percent and sits near its 52-week low.

The company will announce its third quarter results on Friday.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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