Moody's affirms Developers Diversified

Moody's Investors Service said it affirmed the Baa2 senior unsecured debt ratings of Developers Diversified Realty Corp. with a stable outlook following the announcement that the REIT is acquiring Inland Retail Real Estate Trust, Inc. Developers and a large institutional investor will enter into a joint venture that will acquire 67 of Inland's community center assets for $3 billion. The joint venture will be leveraged up to 60% loan to value, and Developers will hold 15% of the equity and will manage the joint venture.

In addition, Developers has received financing commitments in excess of $3 billion to help fund all or a portion of the transaction, which should close during the first quarter of 2007.

Moody's said the REIT's appetite for large acquisitions - as exemplified by this transaction - and its high usage of joint ventures continue to be rating concerns.

While credit metrics should deteriorate in the short term as the REIT finances this large acquisition, the agency said there are important strategic benefits stemming from the Inland transaction that provide a strong counterbalance: the properties are located in markets with strong and stable demographics, the transaction increases the REIT's footprint in southern markets and the transaction should strengthen its relationships with various national retailers such as Target, Wal-Mart, Lowe's, Home Depot and Kohl's.

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