UPDATE 2-Developers Diversified tops outlook, pares debt

* Q1 adjusted FFO of $0.66/shr vs consensus of $0.62/shr

* Maintains forecast of 2009 FFO of $2.10 to $2.25/shr

* Shares rise as much as 25.7 pct
(Recasts throughout, adds executive comments and share price,
other details)

By Ilaina Jonas

NEW YORK, April 24 (Reuters) - Shopping center owner
Developers Diversified Realty Corp (DDR.N) posted
better-than-expected quarterly results and kept its forecast,
despite a decline in occupancy and sluggish rent upticks,
sending its shares up nearly 26 percent.

The company, which owns more than 700 shopping centers, has
been hard hit by bankruptcies of tenants such as Goody's,
Circuit City Stores Inc (CCTYQ.PK), Linens 'N Things Inc
[LNNHDL.UL], and Steve & Barry's.

Investors have been highly concerned about its debt --
roughly $4.4 billion maturing through 2012.

Developers Diversified, which owns and builds shopping
centers anchored by big-box and discount department stores, said
it has addressed the $103 million of debt maturing for the
remainder of 2009 and $800 million maturing in 2010.

It has been trying to rehabilitate its balance sheet by
raising capital from new investments from the German real estate
owner Alexander Otto and his family, repurchasing debt at a
significant discount, selling assets, mortgaging property and
paring down the cash portion of its dividend.

"We are confident in stating we will be able to meet all of
our near-term debt maturities with these initiatives and look
forward to emerging from this challenging part of the cycle as a
stronger, more focused and lower leverage company," David Oakes,
chief investment officer, told analysts on a conference call.

For the first quarter, Developers Diversified reported funds
from operations of $140 million, or $1.08 per share, compared
with $96.3 million or $0.80 per share in the year-ago period.

FFO removes the profit-reducing effect of depreciation, a
noncash accounting item.

Excluding impairment-related charges and gains from
repurchasing debt at a discount and from property sales, FFO was
66 cents a share, well above the 62 cents a share analysts on
average had expected, according to Reuters Estimates.

Developers Diversified maintained its forecast for 2009 FFO
of $2.10 to $2.25 per share, excluding items, higher than the
$1.97 analysts had forecast.

Shares were up 46 cents or 13.1 percent at $3.96 on the New
York Stock Exchange on Friday afternoon, off an earlier high at
$4.40.

The retailing sector has been a major casualty of the U.S.
recession, as consumers have sharply curtailed spending. That
has forced several retailers out of business, leaving stores
empty. Other retailers have curbed their expansion plans and
played hardball while negotiating new leases.

During the first quarter, Cleveland, Ohio-based Developers
Diversified saw net operating income for centers open more than
a year fall for the first time in its history, off 2.2 percent.
Occupancy dropped to 88.4 percent from 95.8 a year ago, as
bankruptcies mounted.

New leases called for rents that were on average just
slightly more than a half percent higher than those that
expired.

Still, Developers Diversified was able to sign leases for 2
million square feet of space, of which 570,000 square feet were
for new leases.
(Reporting by Ilaina Jonas, additional reporting by Jennifer
Robin Raj in Bangalore; editing by Lincoln Feast and Matthew
Lewis)