-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W1HVYCFfs7EdUVdUHjtY4IMhsVBCzd1KNncBtieC7sHMqir9h0Q7gVGLmVGIcPEF hWDkRRn+kt4WnpU2NpLd8A== 0001144204-09-016764.txt : 20090330 0001144204-09-016764.hdr.sgml : 20090330 20090330085047 ACCESSION NUMBER: 0001144204-09-016764 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20090330 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20090330 DATE AS OF CHANGE: 20090330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREST CITY ENTERPRISES INC CENTRAL INDEX KEY: 0000038067 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 340863886 STATE OF INCORPORATION: OH FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04372 FILM NUMBER: 09712311 BUSINESS ADDRESS: STREET 1: 1100 TERMINAL TOWER STREET 2: 50 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44113 BUSINESS PHONE: 216-621-6060 MAIL ADDRESS: STREET 1: 1100 TERMINAL TOWER STREET 2: 50 PUBLIC SQUARE CITY: CLEVLAND STATE: OH ZIP: 44113 8-K 1 v144362_8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): March 30, 2009 Forest City Enterprises, Inc. ----------------------------- (Exact name of registrant as specified in its charter) Ohio 1-4372 34-0863886 - ----------------------------- ---------------- ------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) Terminal Tower, 50 Public Square Suite 1100, Cleveland, Ohio 44113 - ---------------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 216-621-6060 ------------------- Not Applicable ------------------------------------------------------------ (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. Results of Operations and Financial Condition. On March 30, 2009, Forest City Enterprises, Inc. issued a press release announcing financial results for the year ended January 31, 2009. A copy of this press release is attached hereto as Exhibit 99.1. The information in this Current Report on Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. Item 9.01. Financial Statements and Exhibits. (d) Exhibits The following exhibits are furnished herewith. Exhibit Number Description - -------------------------------------------------------------------------------- 99.1 - Press Release of Forest City Enterprises, Inc. Dated March 30, 2009 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FOREST CITY ENTERPRISES, INC. By: /s/ ROBERT G. O'BRIEN ----------------------------------------- Name: Robert G. O'Brien Title: Executive Vice President and Chief Financial Officer Date: March 30, 2009 EXHIBIT INDEX Exhibit Number Description - -------------------------------------------------------------------------------- 99.1 - Press Release of Forest City Enterprises, Inc. Dated March 30, 2009 EX-99.1 2 v144362_ex99-1.txt AT THE COMPANY ON THE WEB - -------------- ---------- Robert O'Brien www.forestcity.net Executive Vice President - Chief Financial Officer 216-621-6060 Tom Kmiecik Assistant Treasurer 216-621-6060 Jeff Linton Vice President - Corporate Communication 216-621-6060 FOR IMMEDIATE RELEASE - --------------------- Forest City Reports Fiscal 2008 Full-Year and Fourth-Quarter Results CLEVELAND - March 30, 2009 - Forest City Enterprises, Inc. (NYSE: FCEA and FCEB) today announced EBDT, net earnings and revenues for the fourth quarter and full year ended January 31, 2009. EBDT EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) for the full year ended January 31, 2009, was $218.9 million, or $2.05 per share, a 17.0 percent decrease on a per-share basis compared with last year's $265.7 million, or $2.47 per share. EBDT for the fourth quarter was $70.5 million, or $0.66 per share, a 22.4 percent decrease on a per-share basis compared with last year's fourth-quarter EBDT of $91.2 million, or $0.85 per share. For an explanation of the variances, see the section titled "Review and Discussion of Results" in this news release. EBDT and EBDT per share are non-Generally Accepted Accounting Principle (GAAP) measures. A reconciliation of net earnings (the most directly comparable GAAP measure to EBDT) to EBDT is provided in the Financial Highlights table in this news release. Net Earnings/Loss The net loss for the full year was $112.2 million, or $1.09 per share, compared with net earnings of $52.4 million, or $0.51 per share, in 2007. The net loss for the fourth quarter was $45.1 million, or $0.44 per share, compared with net earnings of $12.6 million, or $0.12 per share, in the prior year. In addition to the factors described in "Review and Discussion of Results," the net earnings variance was impacted by lower gain on disposition of consolidated and unconsolidated properties of $62.1 million (after tax) in 2008 compared with the prior year. 1 Revenues Revenues for the year ended January 31, 2009, were $1.29 billion, a 0.3 percent increase compared with prior year revenues. Fourth-quarter consolidated revenues were $323.0 million compared with $404.4 million last year. The revenue variance in the fourth quarter of fiscal 2008 compared with the fourth quarter of the prior year is primarily attributable to decreased land sales. Liquidity At January 31, 2009, the Company had more than $500 million in cash and credit available, including $181.6 million in cash and $318.6 million of available borrowings on the Company's revolving line of credit. Review and Discussion of Results Fourth-Quarter EBDT In the fourth quarter, total EBDT for the Company was $70.5 million. Pre-tax EBDT from the Company's Commercial and Residential segments decreased by $4.0 million compared with the fourth quarter of 2007. The portfolio of rental properties improved primarily from lower interest expense as a result of lower interest rates, while net operating income (NOI) was relatively flat due to the weakened economy in the fourth quarter. This improvement in the portfolio was offset by a decrease of $11.0 million related to the change in the fair market value of one of our 10-year forward swaps and a related interest rate floor. Additionally, EBDT in the Company's Land segment decreased $21.9 million (pre-tax), the company reported a larger share ($3.3 million pre-tax) of losses for the Nets basketball team compared with the prior year, and corporate activities were impacted by a severance charge of $8.7 million pre-tax. EBDT was favorably impacted by a larger tax benefit ($17.5 million) in the quarter compared with the fourth quarter of 2007. Full-year EBDT (An exhibit illustrating factors impacting the Company's full-year 2008 EBDT results is available on the investor relations page of the Company's website, www.forestcity.net.) For the year, total EBDT for the Company was $218.9 million. Pre-tax EBDT in the Company's combined Commercial and Residential segments decreased $7.6 million compared with the prior year. In these segments, full-year pre-tax EBDT from the operating portfolio increased $50.4 million, as both mature and new properties experienced EBDT growth from increased NOI and decreased interest expense. This increase in the portfolio was favorably impacted by increases of $18.3 million from Military Housing, $13.8 million of lower interest expense on our mature portfolio, and $12.2 million from lease termination fee income. 2 Unfavorable factors impacting full-year pre-tax EBDT for these segments included decreases of $9.2 million related to the change in the fair market value of one of our 10-year forward swaps and a related interest rate floor, a 2007 gain on the sale of the Sterling Glen of Roslyn assisted-living development project of $17.8 million which did not recur in 2008, and increased development project write-offs of $30.9 million. EBDT in the company's Land segment decreased $35.1 million pre-tax compared to 2007 and was unfavorably impacted by the third-quarter charge of $12.4 million pre-tax related to an uncollectable obligation from Lehman Brothers, Inc. Additionally, total EBDT was impacted by the previously mentioned fourth-quarter pre-tax severance charge of $8.7 million, reporting a larger share ($20.1 million pre-tax) of losses for the Nets basketball team compared with the prior year, and by a larger tax benefit of $16.3 million. The increased loss from the Nets stems from the Company advancing capital to fund the team's operating losses on behalf of both itself and certain non-funding partners. While these advances receive preferential capital treatment, Forest City reports losses, including significant non-cash losses resulting from amortization, in excess of its 23 percent legal ownership. The overall operating loss for the team is comparable to the prior year. Commentary Charles A. Ratner, Forest City president and chief executive officer, commented on both the full-year and fourth-quarter results. "As we have stated previously, our leadership is clearly focused on liquidity as the highest priority for the Company, given current economic and financial market conditions. We ended fiscal 2008 with more than $500 million in cash and credit available. During the year, we addressed all of our approximately $842 million ($900 million at the Company's pro-rata share) of 2008 loan maturities, with the exception of $13 million ($20 million at the Company's pro-rata share) in loans still in negotiation with lenders. In addition, we have already made progress on addressing 2009 maturities. "Turning to our operating results, our portfolio of commercial and residential rental properties continues to demonstrate that this base of high-quality assets in good markets is a source of significant cash flow and long-term value for the Company. For the full year, pre-tax EBDT from our portfolio grew by approximately $50 million, despite the softening of overall results in the fourth quarter. "We are also pleased with the performance of new property openings and acquisitions, which added approximately $9 million to pre-tax EBDT. We anticipate that they will continue to contribute to our results as they reach stabilization. In addition, our military housing business continues to be a consistent contributor, even as early-phase development fees taper off in the first few completed communities, and we move to an ongoing management and ownership role. 3 "As anticipated, results deteriorated in the fourth quarter as fundamentals in the general economy and financial markets impacted the entire real estate industry and our performance as well. Overall comparable property net operating income ended the year relatively flat, despite continued strength in our portfolio of office buildings. Results from our retail properties and, to a lesser degree, from our residential multifamily portfolio, softened as we experienced decreased consumer spending and recession-related stresses in our tenant base. As has been the case all year, our land business continues to be very soft. These results for the fourth quarter foreshadow what we expect will be continued challenging business conditions in 2009. "Clearly, our results for the year, and for the fourth quarter in particular, also included a number of atypical items. Some of these were the result of the turbulence in the external economic and financial market environment, including the third-quarter charge related to Lehman Brothers, increased lease-termination income and losses on forward swaps and hedges. "At the same time, a number of items arose from our strategic efforts to respond to external conditions. For example, increased project write-offs, in large measure, reflect our efforts to curtail development activity and slow our pipeline in order to preserve liquidity. The severance charge we took in the fourth quarter, and the additional charge we will take in the first quarter of 2009, are the result of workforce reductions that are one element of our efforts to reduce overhead and drive costs out of the business." NOI, Occupancies and Rent In the fourth quarter, comparable property net operating income (NOI) decreased 2.3 percent compared with the prior year. Comparable property NOI for the quarter increased in the office portfolio by 2.9 percent, while it decreased in the retail and residential portfolios by 5.3 percent and 2.1 percent, respectively. For the full year, overall comparable property NOI increased 0.4 percent, with increases of 1.2 percent in office, 0.3 in retail and 0.2 in residential. Comparable property NOI, defined as NOI from properties operated for the full year in both 2008 and 2007, is a non-GAAP financial measure and is based on the pro-rata consolidation method, also a non-GAAP financial measure. Included in this release is a schedule that presents comparable property NOI on the full consolidation method. Comparable retail occupancies were 90.4 percent at the end of 2008, while comparable office occupancies were 90.8 percent. In the residential portfolio, comparable average occupancies were 92.2 percent and comparable property net rental income ended the year at 89.4 percent. In our regional malls, leasing spreads were up 7.0 percent for the year. In the office portfolio, leasing spreads increased 18.1 percent in the New York market and 6.1 percent for the remainder of the office portfolio. Regional mall sales averaged $423 per square foot on a rolling 12-month basis, while comparable regional mall sales decreased 6.9 percent, a reflection of the economic downturn. 4 Strategy Update "During our fiscal third quarter, we implemented a five-part strategy to preserve liquidity and sustain and transform our Company in the face of difficult economic and financial market conditions," Ratner said. "Since that time, we have made progress on each element, including the following specific examples: o Significantly slowing development. During the last four years, Forest City has begun construction of more than $3.4 billion in new real estate, including $1.0 billion in 2008. In 2009, we do not anticipate commencing construction on any new projects, with the exception of the arena at our Atlantic Yards project in Brooklyn, and a fee-based development project in Las Vegas. At the same time, though, we remain committed to completing projects already under construction, as well as to actively pursuing and maintaining entitlements on long-term developments in key markets. o Driving costs out of the business. We have made meaningful progress on this initiative, including the difficult step of work force reductions. Through targeted reductions and through attrition over the last 12-18 months, we have reduced our work force by nearly 500, or approximately 30 percent of our non-property staff. This decrease, coupled with other overhead cost reductions has resulted in $70 million to $80 million of cost savings on an annualized basis, approximately 60 percent of which is associated with development. We have accomplished this while remaining committed to retaining a strong core of real estate talent. o Accessing the equity value in our portfolio. This is clearly a challenging time to sell real estate. Despite this, we believe the quality and diversity of our products and markets will yield attractive opportunities for selective sales, third-party equity investments or joint ventures. We are actively evaluating a variety of options in this area. During the fourth quarter, Forest City completed the sale of the Sterling Glen of Rye Brook supported-living community to Atria Senior Living Group. The selling price was $69.8 million and the transaction generated approximately $23 million in net proceeds. o Proactively managing debt maturities with a continued commitment to nonrecourse financing. As previously mentioned, we successfully addressed all of our $842 million ($900 million at the Company's pro-rata share) in 2008 debt maturities during the year, with the exception of $13 million ($20 million at the Company's pro-rata share) still in negotiation. In late January, 2009, the Company secured an extension on the financing for Two MetroTech Center, a 521,000-square-foot office building at the Company's MetroTech Center corporate campus in Brooklyn. In early February, we closed a $161.9 million refinancing from Gramercy Capital Corp. and certain co-lenders on a land loan associated with our Atlantic Yards project in Brooklyn. In mid-March, we announced an extension from JPMorgan Chase, N.A., of a credit facility related to the Nets. 5 Our continued ability to manage our financing needs demonstrate the strength of our lender relationships and the quality of our products and markets, and we believe current market conditions will continue to highlight the significant benefits of nonrecourse financing. o Selectively taking advantage of opportunities created by market conditions. We continue to believe that our track record and extensive relationships with tenants, financial institutions, communities and industry partners will bring us opportunities as a result of the dislocations in the real estate and capital markets. We are currently pursuing several opportunities in areas such as property management, development/redevelopment, and disposition management services. Such opportunities can maximize short-term resource utilization while also contributing to results without the need for any substantial equity investment. Debt Maturities and Financing Activity Update During 2008, Forest City closed on transactions totaling $2.3 billion in nonrecourse mortgage financings, including $580 million in refinancings, $1.1 billion in development projects and acquisitions, and $643 million in loan extensions and additional fundings. During the fourth quarter, the Company closed on nine loan transactions totaling $334 million. Since January 31, 2009, the Company has closed on financings totaling approximately $168 million in nonrecourse mortgage financings. As of January 31, 2009 the Company's weighted average cost of mortgage debt decreased to 5.00 percent from 5.87 percent at January 31, 2008 primarily due to a decrease in variable-rate mortgage debt. Fixed-rate mortgage debt, which represented 74 percent of the Company's total nonrecourse mortgage debt, and is inclusive of interest rate swaps, declined from 6.12 percent at January 31, 2008, to 6.04 percent at January 31, 2009. The variable-rate mortgage debt decreased from 5.06 percent at January 31, 2008, to 1.98 percent at January 31, 2009. Project Updates Openings During 2008, Forest City opened or acquired 14 projects, adding $893.8 million of cost at the Company's pro-rata share and $743.0 million on a full consolidation basis. Forest City opened three retail centers during the year: o White Oak Village, an 800,000-square-foot retail center near Richmond, Virginia, which is currently 85 percent leased and committed. o The Shops at Wiregrass, a 642,000-square-foot lifestyle center near Tampa, Florida, that is 90 percent leased and committed. o Orchard Town Center, a 980,000-square-foot open-air lifestyle center in Westminster, Colorado, which is 73 percent leased and committed. 6 In the office portfolio, 855 North Wolfe Street, a 279,000-square-foot, state-of-the-art research office building opened at the Science + Technology Park at Johns Hopkins in Baltimore during the first half of the year and is currently 53 percent leased and committed. Tenants include the Johns Hopkins Institute for Basic Biomedical Sciences, the Howard Hughes Medical Institute, and the Johns Hopkins Brain Science Institute. At Mesa del Sol, the Company completed phase one of a new, 210,000-square-foot office building for Fidelity Investments and announced an agreement with Sandia National Laboratories to partner on the development of solar technologies. Mesa del Sol is already home to solar industry companies SCHOTT Solar and Advent Solar. In addition, Mesa del Sol's 74,000-square-foot Town Center was completed in January, 2009, and is currently 63 percent leased. Forest City opened four residential properties: the 131-unit Lucky Strike Building at the Company's Tobacco Row adaptive reuse apartment community in Richmond, Virginia; the 366-unit Mercantile Place on Main redevelopment in Dallas; the 665-unit Uptown Apartments in center city Oakland; and the first building at Hamel Mill Lofts a collection of high-end, historically renovated rental apartment buildings in Haverhill, Massachusetts. Under Construction At the end of fiscal 2008, Forest City had eight projects under construction with a total project cost of $2.1 billion at the Company's pro-rata share. These include three large retail centers: the 1.2-million-square-foot Ridge Hill in Yonkers, New York; the 517,000-square-foot East River Plaza in Manhattan; and the 500,000-square-foot Village at Gulfstream in Hallandale Beach, Florida. Forest City recently reached an agreement with the City of Hallandale Beach for tax-increment financing, solidifying a public-private partnership to bring the Gulfstream project to fruition. The Company recently announced 32 upscale and luxury tenants for this center, which is scheduled to open in February, 2010. Also under construction is a 127,000-square-foot expansion of the Company's Promenade in Temecula retail center in Southern California. The expansion, which is set to open this month, is currently 61 percent leased with tenants including Coach, Pottery Barn, and Williams-Sonoma. In the residential portfolio, construction continues on 80 Dekalb, a 34-story 80/20 residential tower in Brooklyn, Presidio a 161-unit adaptive re-use apartment community at the foot of the Golden Gate Bridge in San Francisco, and Beekman, a Frank Gehry-designed residential high-rise in lower Manhattan that will have approximately 900 market-rate apartments as well as a pre-K through eighth-grade school, and an ambulatory care center. In light of economic and market conditions, including falling prices for construction, the Company has initiated a study of costs and timing for Beekman to identify possible options to achieve savings on completion of the project. Work continues at the site and both the school and ambulatory care center will open on time, as scheduled. 7 Among the Company's major mixed-use projects, the Waterfront Station redevelopment project in Southwest Washington, D.C., is under construction and on track for a spring 2010 opening. The first two buildings, which total 628,000 square feet of office and retail space, have already topped out at eight stories, are fully leased to the District of Columbia for governmental offices and have been designed to meet LEED Silver standards. The Company's Atlantic Yards project in Brooklyn has had two significant achievements since the end of the fiscal year. The first is the previously mentioned $161.9 million land loan refinancing. The second is a ruling in New York State Appellate Court that upheld a prior State Supreme Court finding that the state met all of its obligations in the public approvals and environmental review process associated with the project. The ruling marks the 22nd consecutive court ruling in favor of the project, with only one material lawsuit still pending. Forest City's Stapleton redevelopment project continues to demonstrate the value of the unique "sense of place" created there. Despite a slowdown in the Company's sales of lots to home builders, more than 500 homes were sold at Stapleton during 2008, including 314 new homes and 194 resales. The average selling price was approximately $430,000, consistent with average prices over the past several years. Notably, at the end of 2008, of the approximately 3,600 homes at Stapleton, only nine were under foreclosure action. Also at Stapleton, the Northfield retail center will benefit from an allocation of $12 million to the State of Colorado from the American Recovery and Reinvestment Act of 2009, also known as the Economic Stimulus Package, for a new highway interchange serving Northfield. The allocation brings the total project funding to $34 million and will allow construction of the interchange to begin, with an expected opening in late 2010. The interchange will not only provide easier access to Northfield, but is also an important step in achieving the long-term vision for Stapleton. Year-End Summary and Outlook "While it is impossible to predict the course of the economy or financial markets, we continue to position the Company to deal with the difficult environment," Ratner said. "We are cautious about current conditions, but we remain confident in the longer term. We believe strongly in the fundamentals of the real estate business, in the strength of our operating portfolio, our product and market strategies, and in the long-term value we can create through development. "We have built a strong portfolio of high-quality assets in good markets that represent real value and produce solid cash flow. We will continue to add to that portfolio as we complete projects already under construction, and we will identify and capitalize on additional opportunities created by current market conditions. "By taking steps today to shape our Company for the future - including preserving liquidity, focusing on operations, retaining core real estate talent, and maintaining a reservoir of entitled development opportunities - we are positioning the Company to take advantage of long-term growth and value-creation opportunities when conditions improve." 8 Corporate Description Forest City Enterprises, Inc. is a $11.4 billion NYSE-listed national real estate company. The Company is principally engaged in the ownership, development, management and acquisition of commercial and residential real estate and land throughout the United States. Supplemental Package Please refer to the Investor Relations section of the Company's website at www.forestcity.net for a Supplemental Package, which the Company will also furnish to the Securities and Exchange Commission on Form 8-K. This Supplemental Package includes operating and financial information for the year ended January 31, 2009, with reconciliations of non-GAAP financial measures, such as EBDT, comparable NOI and pro-rata financial statements, to their most directly comparable GAAP financial measures. EBDT The Company uses an additional measure, along with net earnings, to report its operating results. This non-GAAP measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results or cash flows from operations as defined by GAAP and may not be directly comparable to similarly titled measures reported by other companies. The Company believes that EBDT provides additional information about its core operations and, along with net earnings, is necessary to understand its operating results. EBDT is used by the chief operating decision maker and management in assessing operating performance and to consider capital requirements and allocation of resources by segment and on a consolidated basis. The Company believes EBDT is important to investors because it provides another method for the investor to measure its long-term operating performance, as net earnings can vary from year to year due to property dispositions, acquisitions and other factors that have a short-term impact. EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of rental properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) non-cash charges for real estate depreciation, amortization, amortization of mortgage procurement costs and deferred income taxes; iv) preferred payment classified as minority interest expense on the Company's Consolidated Statement of Operations; v) impairment of real estate (net of tax); vi) extraordinary items (net of tax); and vii) cumulative effect of change in accounting principle (net of tax). Unlike the real estate segments, EBDT for the Nets segment equals net earnings. EBDT is reconciled to net earnings, the most comparable financial measure calculated in accordance with GAAP, in the table titled Financial Highlights below and in the Company's Supplemental Package, which the Company will also furnish to the SEC on Form 8-K. The adjustment to recognize rental revenues and rental expenses on the straight-line method is excluded because it is management's opinion that rental revenues and expenses should be recognized when due from the tenants or due to the landlord. The Company excludes depreciation and amortization expense related to real estate operations from EBDT because it believes the values of its properties, in general, have appreciated over time in excess of their original cost. Deferred taxes from real estate operations, which are the result of timing differences of certain net expense items deducted in a future year for federal income tax purposes, are excluded until the year in which they are reflected in the Company's current tax provision. The impairment of real estate is excluded from EBDT because it varies from year to year based on factors unrelated to the Company's overall financial performance and is related to the ultimate gain on dispositions of operating properties. The Company's EBDT may not be directly comparable to similarly titled measures reported by other companies. 9 Pro-Rata Consolidation Method This press release contains certain financial measures prepared in accordance with GAAP under the full consolidation accounting method and certain financial measures prepared in accordance with the pro-rata consolidation method (non-GAAP). The Company presents certain financial amounts under the pro-rata method because it believes this information is useful to investors as this method reflects the manner in which the Company operates its business. In line with industry practice, the Company has made a large number of investments in which its economic ownership is less than 100 percent as a means of procuring opportunities and sharing risk. Under the pro-rata consolidation method, the Company presents its investments proportionate to its economic share of ownership. Under GAAP, the full consolidation method is used to report partnership assets and liabilities consolidated at 100 percent if deemed to be under its control or if the Company is deemed to be the primary beneficiary of the variable interest entities ("VIE"), even if its ownership is not 100 percent. The Company provides reconciliations from the full consolidation method to the pro-rata consolidation method, in the exhibits below and throughout its Supplemental Package, which the Company will also furnish to the SEC on Form 8-K. Safe Harbor Language Statements made in this news release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. The Company's actual results could differ materially from those expressed or implied in such forward-looking statements due to various risks, uncertainties and other factors. Risks and factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the impact of current market conditions on our liquidity, ability to finance or refinance projects and repay our debt, general real estate investment and development risks, vacancies in our properties, further downturns in the housing market, competition, illiquidity of real estate investments, bankruptcy or defaults of tenants, anchor store consolidations or closings, international activities, the impact of terrorist acts, risks associated with an investment in a professional sports team, our substantial debt leverage and the ability to obtain and service debt, the impact of restrictions imposed by our credit facility and senior debt, exposure to hedging agreements, the level and volatility of interest rates, the continued availability of tax-exempt government financing, the impact of credit rating downgrades, effects of uninsured or underinsured losses, environmental liabilities, conflicts of interest, risks associated with developing and managing properties in partnership with others, the ability to maintain effective internal controls, compliance with governmental regulations, volatility in the market price of our publicly traded securities, litigation risks, as well as other risks listed from time to time in the Company's SEC filings, including but not limited to, the Company's annual and quarterly reports. 10 Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2009 and 2008 (dollars in thousands, except per share data) Three Months Ended, Increase January 31, (Decrease) ------------------------ --------------- 2009 2008 Amount Percent ------------------------ --------------- Operating Results: Earnings (loss) from continuing operations $(48,901) $11,665 $(60,566) Discontinued operations, net of tax and minority interest (1) 3,816 940 2,876 ------------------------ ------- Net Earnings (loss) $(45,085) $12,605 $(57,690) ======================== ======= Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $70,502 $91,188 $(20,686)(22.7%) ======================== ======= Reconciliation of Net Earnings to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2): Net Earnings (loss) $(45,085) $12,605 $(57,690) Depreciation and amortization - Real Estate Groups (7) 75,511 65,393 10,118 Amortization of mortgage procurement costs - Real Estate Groups (7) 3,779 3,143 636 Deferred income tax expense - Real Estate Groups (8) (913) 11,283 (12,196) Deferred income tax expense - Non-Real Estate Groups: (8) Gain on disposition of other investments 428 404 24 Current income tax expense on non-operating earnings: (8) Gain on disposition of other investments - - - Gain on disposition included in discontinued operations 20,439 - 20,439 Gain on disposition of unconsolidated entities - 6,458 (6,458) Straight-line rent adjustment (3) 4,284 (7,263) 11,547 Preference payment (6) 585 936 (351) Preferred return on disposition 731 - 731 Impairment of real estate 1,262 92 1,170 Impairment of unconsolidated entities 15,259 11,469 3,790 Gain on disposition of unconsolidated entities - (12,286) 12,286 Gain on disposition of other investments - - - Discontinued operations: (1) Gain on disposition of rental properties (5,778) (1,046) (4,732) ------------------------ ------- Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $70,502 $91,188 $(20,686)(22.7%) ======================== ======= Diluted Earnings per Common Share: Earnings (loss) from continuing operations $(0.48) $0.11 $(0.59) Discontinued operations, net of tax and minority interest (1) 0.04 0.01 0.03 ------------------------ ------- Net earnings (loss) (5) $(0.44) $0.12 $(0.56) ======================== ======= Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) (4) $0.66 $0.85 $(0.19)(22.4%) ======================== ======= Operating earnings (loss), net of tax (a non-GAAP financial measure) $(0.34) $0.19 $(0.53) Impairment of real estate, net of tax (0.10) (0.07) (0.03) Gain on disposition of rental properties and other investments, net of tax 0.03 0.08 (0.05) Minority interest (0.03) (0.08) 0.05 ------------------------ ------- Net earnings (loss) (5) $(0.44) $0.12 $(0.56) ======================== ======= Basic weighted average shares outstanding (4) 102,876,107 102,477,234 398,873 ======================== ======= Diluted weighted average shares outstanding (4) 106,534,313 107,258,725 (724,412) ======================== ======= 11 Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2009 and 2008 (dollars in thousands, except per share data) Year Ended Increase January 31, (Decrease) ------------------------- ---------------- 2009 2008 Amount Percent ------------------------- ---------------- Operating Results: Earnings (loss) from continuing operations $(122,012) $(13,293) $(108,719) Discontinued operations, net of tax and minority interest (1) 9,812 65,718 (55,906) ------------------------ -------- Net Earnings (loss) $(112,200) $52,425 $(164,625) ======================== ======== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $218,937 $265,718 $(46,781)(17.6%) ======================== ======== Reconciliation of Net Earnings to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2): Net Earnings (loss) $(112,200) $52,425 $(164,625) Depreciation and amortization - Real Estate Groups (7) 290,768 250,951 39,817 Amortization of mortgage procurement costs - Real Estate Groups (7) 13,788 13,126 662 Deferred income tax expense - Real Estate Groups (8) (5,671) 32,864 (38,535) Deferred income tax expense - Non-Real Estate Groups: (8) Gain on disposition of other investments 486 347 139 Current income tax expense on non-operating earnings: (8) Gain on disposition of other investments - 290 (290) Gain on disposition included in discontinued operations 20,439 26,834 (6,395) Gain on disposition of unconsolidated entities 506 6,458 (5,952) Straight-line rent adjustment (3) (358) (16,551) 16,193 Preference payment (6) 3,329 3,707 (378) Preferred return on disposition 939 5,034 (4,095) Impairment of real estate 1,262 92 1,170 Impairment of unconsolidated entities 21,285 11,469 9,816 Gain on disposition of unconsolidated entities (1,081) (14,392) 13,311 Gain on disposition of other investments (150) (603) 453 Discontinued operations: (1) Gain on disposition of rental properties (14,405) (106,333) 91,928 ------------------------ -------- Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $218,937 $265,718 $(46,781)(17.6%) ======================== ======== Diluted Earnings per Common Share: Earnings (loss) from continuing operations $(1.19) $(0.13) $(1.06) Discontinued operations, net of tax and minority interest (1) 0.10 0.64 (0.54) ------------------------ -------- Net earnings (loss) (5) $(1.09) $0.51 $(1.60) ======================== ======== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) (4) $2.05 $2.47 $(0.42)(17.0%) ======================== ======== Operating earnings (loss), net of tax (a non-GAAP financial measure) $(0.92) $0.07 $(0.99) Impairment of real estate, net of tax (0.13) (0.07) (0.06) Gain on disposition of rental properties and other investments, net of tax 0.09 0.70 (0.61) Minority interest (0.13) (0.19) 0.06 ------------------------ -------- Net earnings (loss) (5) $(1.09) $0.51 $(1.60) ======================== ======== Basic weighted average shares outstanding (4) 102,755,315 102,261,740 493,575 ======================== ======== Diluted weighted average shares outstanding (4) 106,968,999 107,575,307 (606,308) ======================== ======== 12 Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2009 and 2008 (dollars in thousands) Three Months Ended, Increase January 31, (Decrease) ------------------- ---------------- 2009 2008 Amount Percent ------------------- ---------------- Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net Earnings: Revenues from real estate operations Commercial Group $251,704 $275,644 $(23,940) Residential Group 61,266 75,235 (13,969) Land Development Group 10,004 53,501 (43,497) Corporate Activities - - - ------------------- -------- Total Revenues 322,974 404,380 (81,406) (20.1%) Operating expenses (187,835) (240,551) 52,716 Interest expense (105,616) (90,133) (15,483) Loss on early extinguishment of debt (620) (52) (568) Amortization of mortgage procurement costs (7) (3,332) (2,573) (759) Depreciation and amortization (7) (68,835) (62,170) (6,665) Interest and other income 14,430 21,002 (6,572) Equity in earnings (loss), including impairment, of unconsolidated entities (16,798) 6,465 (23,263) Impairment of unconsolidated entities 15,259 11,469 3,790 Gain on disposition of unconsolidated entities - (12,286) 12,286 Preferred Return on Disposition 731 - 731 Revenues and interest income from discontinued operations (1) 1,651 2,557 (906) Expenses from Discontinued Operations (1) (1,209) (2,070) 861 ------------------- -------- Operating earnings (loss) (a non- GAAP financial measure) (29,200) 36,038 (65,238) ------------------- -------- Income tax expense (8) 1,486 (15,985) 17,471 Income tax expense from discontinued operations (1) (8) (2,404) (593) (1,811) Income tax expense on non-operating earnings items (see below) (4,468) 683 (5,151) ------------------- -------- Operating earnings (loss), net of tax (a non-GAAP financial measure) (34,586) 20,143 (54,729) ------------------- -------- Impairment of real estate (1,262) (102) (1,160) Impairment of unconsolidated entities (15,259) (11,469) (3,790) Gain on disposition of unconsolidated entities - 12,286 (12,286) Preferred Return on Disposition (731) - (731) Gain on disposition of other investments - - - Gain on disposition of rental properties included in discontinued operations (1) 5,778 1,046 4,732 Income tax benefit (expense) on non-operating earnings: (8) Impairment of real estate 488 36 452 Impairment of unconsolidated entities 5,930 4,431 1,499 Gain on disposition of other investments - - - Gain on disposition of unconsolidated entities 283 (4,746) 5,029 Gain on disposition of rental properties included in discontinued operations (2,233) (404) (1,829) ------------------- -------- Income tax expense on non-operating earnings (see above) 4,468 (683) 5,151 ------------------- -------- Minority interest in continuing operations (3,493) (8,616) 5,123 Minority interest in discontinued operations: (1) Operating earnings - - - Gain on disposition of rental properties - - - ------------------- -------- - - - ------------------- -------- Minority interest (3,493) (8,616) 5,123 ------------------- -------- Net earnings (loss) $(45,085) $12,605 $(57,690) =================== ======== 13 Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2009 and 2008 (dollars in thousands) Year Ended Increase January 31, (Decrease) -------------------- -------------- 2009 2008 Amount Percent -------------------- -------------- Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net Earnings: Revenues from real estate operations Commercial Group $970,653 $928,436 $42,217 Residential Group 285,889 265,777 20,112 Land Development Group 33,848 92,257 (58,409) Corporate Activities - - - -------------------- -------- Total Revenues 1,290,390 1,286,470 3,920 0.3% Operating expenses (782,266) (783,720) 1,454 Interest expense (367,882) (325,505) (42,377) Loss on early extinguishment of debt (1,670) (8,955) 7,285 Amortization of mortgage procurement costs (7) (12,145) (11,296) (849) Depreciation and amortization (7) (269,560) (230,637) (38,923) Interest and other income 42,481 73,282 (30,801) Equity in earnings (loss), including impairment, of unconsolidated entities (35,585) 9,073 (44,658) Impairment of unconsolidated entities 21,285 11,469 9,816 Gain on disposition of unconsolidated entities (1,081) (14,392) 13,311 Preferred Return on Disposition 939 5,034 (4,095) Revenues and interest income from discontinued operations (1) 7,417 36,482 (29,065) Expenses from Discontinued Operations (1) (5,831) (36,225) 30,394 -------------------- -------- Operating earnings (loss) (a non- GAAP financial measure) (113,508) 11,080 (124,588) -------------------- -------- Income tax expense (8) 29,154 (3,002) 32,156 Income tax expense from discontinued operations (1) (8) (6,179) (41,385) 35,206 Income tax expense on non-operating earnings items (see below) (3,067) 40,468 (43,535) -------------------- -------- Operating earnings (loss), net of tax (a non-GAAP financial measure) (93,600) 7,161 (100,761) -------------------- -------- Impairment of real estate (1,262) (102) (1,160) Impairment of unconsolidated entities (21,285) (11,469) (9,816) Gain on disposition of unconsolidated entities 1,081 14,392 (13,311) Preferred Return on Disposition (939) (5,034) 4,095 Gain on disposition of other investments 150 603 (453) Gain on disposition of rental properties included in discontinued operations (1) 14,405 106,333 (91,928) Income tax benefit (expense) on non- operating earnings: (8) Impairment of real estate 488 36 452 Impairment of unconsolidated entities 8,258 4,431 3,827 Gain on disposition of other investments (58) (233) 175 Gain on disposition of unconsolidated entities (55) (3,615) 3,560 Gain on disposition of rental properties included in discontinued operations (5,566) (41,087) 35,521 -------------------- -------- Income tax expense on non-operating earnings (see above) 3,067 (40,468) 43,535 -------------------- -------- Minority interest in continuing operations (13,817) (19,504) 5,687 -------------------- -------- Minority interest in discontinued operations: (1) Operating earnings - 513 (513) Gain on disposition of rental properties - - - -------------------- -------- - 513 (513) -------------------- -------- Minority interest (13,817) (18,991) 5,174 -------------------- -------- Net earnings (loss) $(112,200) $52,425 $(164,625) ==================== ======== 14 Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2009 and 2008 (in thousands) 1) Pursuant to the definition of a component of an entity of SFAS No. 144, assuming no significant continuing involvement, all earnings of properties that have been sold or are held for sale are reported as discontinued operations. 2) The Company uses an additional measure, along with net earnings, to report its operating results. This measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results as defined by generally accepted accounting principles and may not be directly comparable to similarly-titled measures reported by other companies. The Company believes that EBDT provides additional information about its operations, and along with net earnings, is necessary to understand its operating results. EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of operating properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) non-cash charges for real estate depreciation, amortization (including amortization of mortgage procurement costs) and deferred income taxes; iv) preferred payment classified as minority interest expense on the Company's Consolidated Statement of Earnings; v) impairment of real estate (net of tax); vi) extraordinary items (net of tax); and vii) cumulative effect of change in accounting principle (net of tax). See our discussion of EBDT in the news release. 3) The Company recognizes minimum rents on a straight-line basis over the term of the related lease pursuant to the provision of SFAS No. 13, "Accounting for Leases." The straight-line rent adjustment is recorded as an increase or decrease to revenue from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., with the applicable offset to either accounts receivable or accounts payable, as appropriate. 4) For the three and twelve months ended January 31, 2009, the effect of 3,658,206 and 4,213,684 shares, respectively, of dilutive securities were not included in the computation of diluted earnings per share because their effect is anti-dilutive to the loss from continuing operations. (Since these shares are dilutive for the computation of EBDT per share for the three and twelve months ended January 31, 2009, diluted weighted average shares outstanding were used to arrive at $0.66/share and $2.05/share, respectively.) For the year ended January 31, 2008, the effect of 5,313,567 shares of dilutive securities were not included in the computation of diluted earnings per share because their effect is anti-dilutive to the loss from continuing operations. (Since these shares are dilutive for the computation of EBDT per share for the year ended January 31, 2008, diluted weighted average shares outstanding of 107,575,307 were used to arrive at $2.47/share.) 5) For the year ended January 31, 2008, $754,000 of net earnings is allocated to participating securities under EITF 03-6 "Participating Securities and the Two-Class Method under FASB 128". As a result, the net earnings for purposes of calculating basic and diluted EPS is $51,671,000. 6) The preference payment represents the respective period's share of the annual preferred payment in connection with the issuance of Class A Common Units in exchange for Bruce C. Ratner's minority interests in the Forest City Ratner Company portfolio. 7) The following table provides detail of depreciation and amortization and amortization of mortgage procurement costs. The Company's Real Estate Groups are engaged in the ownership, development, acquisition and management of real estate projects, including apartment complexes, regional malls and retail centers, hotels, office buildings and mixed-use facilities, as well as large land development projects. 15 Depreciation and Depreciation and Amortization Amortization ------------------- ----------------- Three Months Ended Year Ended January 31, January 31, ------------------- ----------------- 2009 2008 2009 2008 ------------------- ----------------- Full Consolidation $68,835 $62,170 $269,560 $230,637 Non-Real Estate (3,416) (3,233) (13,356) (10,663) ------------------- ----------------- Real Estate Groups Full Consolidation 65,419 58,937 256,204 219,974 Real Estate Groups related to minority interest (787) (1,118) (3,142) (6,794) Real Estate Groups Unconsolidated 10,553 7,096 35,720 34,369 Real Estate Groups Discontinued Operations 326 478 1,986 3,402 ------------------- ----------------- Real Estate Groups Pro-Rata Consolidation $75,511 $65,393 $290,768 $250,951 =================== ================= Amortization of Amortization of Mortgage Mortgage Procurement Procurement Costs Costs ------------------- ----------------- Three Months Ended Year Ended January 31, January 31, ------------------- ----------------- 2009 2008 2009 2008 ------------------- ----------------- Full Consolidation $3,332 $2,573 $12,145 $11,296 Non-Real Estate - - - - ------------------- ----------------- Real Estate Groups Full Consolidation 3,332 2,573 12,145 11,296 Real Estate Groups related to minority interest (119) (114) (502) (619) Real Estate Groups Unconsolidated 513 594 1,843 2,142 Real Estate Groups Discontinued Operations 53 90 302 307 ------------------- ----------------- Real Estate Groups Pro-Rata Consolidation $3,779 $3,143 $13,788 $13,126 =================== ================= 16 Three Months Ended Year Ended January 31, January 31, ------------------- ----------------- 2009 2008 2009 2008 ------------------- ----------------- 8) The following table provides detail of Income Tax Expense (Benefit): (in thousands) (in thousands) (A) Operating earnings Current $(12,501) $(903) $(28,045) $(17,401) Deferred 17,716 16,609 7,524 21,022 ------------------- ----------------- 5,215 15,706 (20,521) 3,621 ------------------- ----------------- (B) Impairment of real estate Deferred (488) (36) (488) (36) Deferred - Unconsolidated entities (5,930) (4,431) (8,258) (4,431) ------------------- ----------------- Subtotal (6,418) (4,467) (8,746) (4,467) ------------------- ----------------- (C) Gain on disposition of other investments Current - Non-Real Estate Groups - - - 290 Deferred - Non-Real Estate Groups - - 58 (57) ------------------- ----------------- - - 58 233 ------------------- ----------------- (D) Gain on disposition of unconsolidated entities Current - 6,458 506 6,458 Deferred (283) (1,712) (451) (2,843) ------------------- ----------------- (283) 4,746 55 3,615 ------------------- ----------------- Subtotal (A) (B) (C) (D) Current (12,501) 5,555 (27,539) (10,653) Deferred 11,015 10,430 (1,615) 13,655 ------------------- ----------------- Income tax expense (1,486) 15,985 (29,154) 3,002 ------------------- ----------------- (E) Discontinued operations Operating earnings Current 194 93 (448) (1,540) Deferred (23) 96 1,061 1,838 ------------------- ----------------- 171 189 613 298 Gain on disposition of rental properties Current 20,439 - 20,439 26,834 Deferred (18,634) - (15,301) 13,849 ------------------- ----------------- 1,805 - 5,138 40,683 ------------------- ----------------- Gain on disposition of Lumber Group Current - - - - Deferred 428 404 428 404 ------------------- ----------------- 428 404 428 404 ------------------- ----------------- 2,404 593 6,179 41,385 ------------------- ----------------- Grand Total (A) (B) (C) (D) (E) Current 8,132 5,648 (7,548) 14,641 Deferred (7,214) 10,930 (15,427) 29,746 ------------------- ----------------- $918 $16,578 $(22,975) $44,387 ------------------- ----------------- Recap of Grand Total: Real Estate Groups Current 430 13,598 (140) 37,885 Deferred (913) 11,283 (5,671) 32,864 ------------------- ----------------- (483) 24,881 (5,811) 70,749 Non-Real Estate Groups Current 7,702 (7,950) (7,408) (23,244) Deferred (6,301) (353) (9,756) (3,118) ------------------- ----------------- 1,401 (8,303) (17,164) (26,362) ------------------- ----------------- Grand Total $918 $16,578 $(22,975) $44,387 =================== ================= 17 Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (Loss) (GAAP) (in thousands): Three Months Ended January 31, 2009 -------------------------------------------- Plus Unconsol- Plus idated Disconti- Full Less Invest- nued Pro-Rata Consol- Minority ments at Opera- Consol- idation Interest Pro-Rata tions idation (GAAP) (Non-GAAP) -------------------------------------------- Revenues from real estate operations $322,974 $8,437 $93,153 $1,651 $409,341 Exclude straight-line rent adjustment (1) 1,476 - - - 1,476 -------------------------------------------- Adjusted revenues 324,450 8,437 93,153 1,651 410,817 Operating expenses 187,835 3,093 60,698 452 245,892 Add back non-Real Estate depreciation and amortization (b) 3,416 - 5,876 - 9,292 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) - - 52 - 52 Exclude straight-line rent adjustment (2) (2,808) - - - (2,808) Exclude preference payment (585) - - - (585) -------------------------------------------- Adjusted operating expenses 187,858 3,093 66,626 452 251,843 Add interest and other income 14,430 387 1,442 - 15,485 Add equity in earnings (loss), including impairment of unconsolidated entities (16,798) (67) 16,437 - (294) Remove gain on disposition of unconsolidated entities - - - - - Add back impairment of unconsolidated entities 15,259 - (15,259) - - Add back depreciation and amortization of unconsolidated entities (see below) 11,066 - (11,066) - - -------------------------------------------- Net Operating Income 160,549 5,664 18,081 1,199 174,165 Interest expense (105,616) (1,265) (17,350) (378) (122,079) Loss on early extinguishment of debt (620) - - - (620) Equity in earnings (loss), including impairment of unconsolidated entities 16,798 67 (16,437) - 294 Gain on disposition of unconsolidated entities - - - - - Impairment of unconsolidated entities (15,259) - - - (15,259) Depreciation and amortization of unconsolidated entities (see above) (11,066) - 11,066 - - Gain on disposition of rental properties and other investments - - - 5,778 5,778 Preferred return on disposition - - (731) - (731) Impairment of real estate (1,262) - - - (1,262) Depreciation and amortization - Real Estate Groups (a) (65,419) (787) (10,553) (326) (75,511) Amortization of mortgage procurement costs - Real Estate Groups (c) (3,332) (119) (513) (53) (3,779) Straight-line rent adjustment (1) + (2) (4,284) - - - (4,284) Preference payment (585) - - - (585) -------------------------------------------- Earnings (loss) before income taxes (30,096) 3,560 (16,437) 6,220 (43,873) Income tax provision 1,486 - - (2,404) (918) Minority Interest (3,493) (3,493) - - - Equity in earnings (loss), including impairment of unconsolidated entities (16,798) (67) 16,437 - (294) -------------------------------------------- Earnings (loss) from continuing operations (48,901) - - 3,816 (45,085) Discontinued operations, net of tax 3,816 - - (3,816) - -------------------------------------------- Net earnings (loss) $(45,085) $- $- $- $(45,085) ============================================ (a) Depreciation and amortization - Real Estate Groups $65,419 $787 $10,553 $326 $75,511 (b) Depreciation and amortization - Non-Real Estate 3,416 - 5,876 - 9,292 -------------------------------------------- Total depreciation and amortization $68,835 $787 $16,429 $326 $84,803 ============================================ (c) Amortization of mortgage procurement costs - Real Estate Groups $3,332 $119 $513 $53 $3,779 (d) Amortization of mortgage procurement costs - Non-Real Estate - - 52 - 52 -------------------------------------------- Total amortization of mortgage procurement costs $3,332 $119 $565 $53 $3,831 ============================================ 18 Three Months Ended January 31, 2008 -------------------------------------------- Plus Unconsol- Plus idated Disconti Full Less Invest- nued Pro-Rata Consol- Minority ments at Opera- Consol- idation Interest Pro-Rata tions idation (GAAP) (Non-GAAP) -------------------------------------------- Revenues from real estate operations $404,380 $19,717 $87,410 $2,366 $474,439 Exclude straight-line rent adjustment (1) (9,018) - - - (9,018) -------------------------------------------- Adjusted revenues 395,362 19,717 87,410 2,366 465,421 Operating expenses 240,551 10,374 52,582 221 282,980 Add back non-Real Estate depreciation and amortization (b) 3,233 - 4,160 - 7,393 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) - - 20 - 20 Exclude straight-line rent adjustment (2) (1,755) - - - (1,755) Exclude preference payment (936) - - - (936) -------------------------------------------- Adjusted operating expenses 241,093 10,374 56,762 221 287,702 Add interest and other income 21,002 800 2,375 191 22,768 Add equity in earnings (loss), including impairment of unconsolidated entities 6,465 188 (6,837) - (560) Remove gain on disposition of unconsolidated entities (12,286) - 12,286 - - Add back impairment of unconsolidated entities 11,469 - (11,469) - - Add back depreciation and amortization of unconsolidated entities (see below) 7,690 - (7,690) - - -------------------------------------------- Net Operating Income 188,609 10,331 19,313 2,336 199,927 Interest expense (90,133) (440) (18,417) (1,281) (109,391) Loss on early extinguishment of debt (52) (33) (896) - (915) Equity in earnings (loss), including impairment of unconsolidated entities (6,465) (188) 6,837 - 560 Gain on disposition of unconsolidated entities 12,286 - - - 12,286 Impairment of unconsolidated entities (11,469) - - - (11,469) Depreciation and amortization of unconsolidated entities (see above) (7,690) - 7,690 - - Gain on disposition of rental properties and other investments - - - 1,046 1,046 Preferred return on disposition - - - - - Impairment of real estate (102) (10) - - (92) Depreciation and amortization - Real Estate Groups (a) (58,937) (1,118) (7,096) (478) (65,393) Amortization of mortgage procurement costs - Real Estate Groups (c) (2,573) (114) (594) (90) (3,143) Straight-line rent adjustment (1) + (2) 7,263 - - - 7,263 Preference payment (936) - - - (936) -------------------------------------------- Earnings (loss) before income taxes 29,801 8,428 6,837 1,533 29,743 Income tax provision (15,985) - - (593) (16,578) Minority Interest (8,616) (8,616) - - - Equity in earnings (loss), including impairment of unconsolidated entities 6,465 188 (6,837) - (560) -------------------------------------------- Earnings (loss) from continuing operations 11,665 - - 940 12,605 Discontinued operations, net of tax 940 - - (940) - -------------------------------------------- Net earnings (loss) $12,605 $- $- $- $12,605 ============================================ (a) Depreciation and amortization - Real Estate Groups $58,937 $1,118 $7,096 $478 $65,393 (b) Depreciation and amortization - Non-Real Estate 3,233 - 4,160 - 7,393 -------------------------------------------- Total depreciation and amortization $62,170 $1,118 $11,256 $478 $72,786 ============================================ (c) Amortization of mortgage procurement costs - Real Estate Groups $2,573 $114 $594 $90 $3,143 (d) Amortization of mortgage procurement costs - Non-Real Estate - - 20 - 20 -------------------------------------------- Total amortization of mortgage procurement costs $2,573 $114 $614 $90 $3,163 ============================================ 19 Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (Loss) (GAAP) (in thousands): Year Ended January 31, 2009 -------------------------------------------- Plus Unconsol- Plus idated Discon- Full Less Invest- tinued Pro-Rata Consol- Minority ments at Opera- Consol- idation Interest Pro-Rata tions idation (GAAP) (Non-GAAP) ------------------------------------------------- Revenues from real estate operations $1,290,390 $56,132 $380,297 $7,356 $1,621,911 Exclude straight-line rent adjustment (1) (6,726) - - - (6,726) ------------------------------------------------- Adjusted revenues 1,283,664 56,132 380,297 7,356 1,615,185 Operating expenses 782,266 28,651 272,305 931 1,026,851 Add back non-Real Estate depreciation and amortization (b) 13,356 - 20,641 - 33,997 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) - - 221 - 221 Exclude straight-line rent adjustment (2) (6,368) - - - (6,368) Exclude preference payment (3,329) - - - (3,329) ------------------------------------------------- Adjusted operating expenses 785,925 28,651 293,167 931 1,051,372 Add interest and other income 42,481 1,807 5,127 61 45,862 Add equity in earnings (loss), including impairment of unconsolidated entities (35,585) (84) 36,257 - 756 Remove gain on disposition of unconsolidated entities (1,081) - 1,081 - - Add back impairment of unconsolidated entities 21,285 - (21,285) - - Add back depreciation and amortization of unconsolidated entities (see below) 37,563 - (37,563) - - ------------------------------------------------- Net Operating Income 562,402 29,204 70,747 6,486 610,431 Interest expense (367,882) (11,624) (69,757) (2,612) (428,627) Loss on early extinguishment of debt (1,670) (119) (51) - (1,602) Equity in earnings (loss), including impairment of unconsolidated entities 35,585 84 (36,257) - (756) Gain on disposition of unconsolidated entities 1,081 - - - 1,081 Impairment of unconsolidated entities (21,285) - - - (21,285) Depreciation and amortization of unconsolidated entities (see above) (37,563) - 37,563 - - Gain on disposition of rental properties and other investments 150 - - 14,405 14,555 Preferred return on disposition - - (939) - (939) Impairment of real estate (1,262) - - - (1,262) Depreciation and amortization - Real Estate Groups (a) (256,204) (3,142) (35,720) (1,986) (290,768) Amortization of mortgage procurement costs - Real Estate Groups (c) (12,145) (502) (1,843) (302) (13,788) Straight-line rent adjustment (1) + (2) 358 - - - 358 Preference payment (3,329) - - - (3,329) ------------------------------------------------- Earnings (loss) before income taxes (101,764) 13,901 (36,257) 15,991 (135,931) Income tax provision 29,154 - - (6,179) 22,975 Minority Interest (13,817) (13,817) - - - Equity in earnings (loss), including impairment of unconsolidated entities (35,585) (84) 36,257 - 756 ------------------------------------------------- Earnings (loss) from continuing operations (122,012) - - 9,812 (112,200) Discontinued operations, net of tax 9,812 - - (9,812) - ------------------------------------------------- Net earnings (loss) $(112,200) $- $- $- $(112,200) ================================================= (a) Depreciation and amortization - Real Estate Groups $256,204 $3,142 $35,720 $1,986 $290,768 (b) Depreciation and amortization - Non- Real Estate 13,356 - 20,641 - 33,997 ------------------------------------------------- Total depreciation and amortization $269,560 $3,142 $56,361 $1,986 $324,765 ================================================= (c) Amortization of mortgage procurement costs - Real Estate Groups $12,145 $502 $1,843 $302 $13,788 (d) Amortization of mortgage procurement costs - Non-Real Estate - - 221 - 221 ------------------------------------------------- Total amortization of mortgage procurement costs $12,145 $502 $2,064 $302 $14,009 ================================================= 20 Year Ended January 31, 2008 Plus Unconsol- Plus idated Discon- Full Less Invest- tinued Pro-Rata Consol- Minority ments at Opera- Consol- idation Interest Pro-Rata tions idation (GAAP) (Non-GAAP) ------------------------------------------------- Revenues from real estate operations $1,286,470 $69,078 $344,638 $33,492 $1,595,522 Exclude straight- line rent adjustment (1) (25,166) - - - (25,166) ------------------------------------------------- Adjusted revenues 1,261,304 69,078 344,638 33,492 1,570,356 Operating expenses 783,720 33,204 224,833 22,732 998,081 Add back non-Real Estate depreciation and amortization (b) 10,663 - 10,431 - 21,094 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) - - 125 - 125 Exclude straight- line rent adjustment (2) (8,615) - - - (8,615) Exclude preference payment (3,707) - - - (3,707) ------------------------------------------------- Adjusted operating expenses 782,061 33,204 235,389 22,732 1,006,978 Add interest and other income 73,282 2,651 11,533 1,017 83,181 Add equity in earnings (loss), including impairment of unconsolidated entities 9,073 884 (9,949) - (1,760) Remove gain on disposition of unconsolidated entities (14,392) - 14,392 - - Add back impairment of unconsolidated entities 11,469 - (11,469) - - Add back depreciation and amortization of unconsolidated entities (see below) 36,511 - (36,511) - - ------------------------------------------------- Net Operating Income 595,186 39,409 77,245 11,777 644,799 Interest expense (325,505) (11,199) (70,851) (6,935) (392,092) Loss on early extinguishment of debt (8,955) (1,283) (1,360) (363) (9,395) Equity in earnings (loss), including impairment of unconsolidated entities (9,073) (884) 9,949 - 1,760 Gain on disposition of unconsolidated entities 14,392 - - - 14,392 Impairment of unconsolidated entities (11,469) - - - (11,469) Depreciation and amortization of unconsolidated entities (see above) (36,511) - 36,511 - - Gain on disposition of rental properties and other investments 603 - - 106,333 106,936 Preferred return on disposition - - (5,034) - (5,034) Impairment of real estate (102) (10) - - (92) Depreciation and amortization - Real Estate Groups (a) (219,974) (6,794) (34,369) (3,402) (250,951) Amortization of mortgage procurement costs - Real Estate Groups (c) (11,296) (619) (2,142) (307) (13,126) Straight-line rent adjustment (1) + (2) 16,551 - - - 16,551 Preference payment (3,707) - - - (3,707) ------------------------------------------------- Earnings (loss) before income taxes 140 18,620 9,949 107,103 98,572 Income tax provision (3,002) - - (41,385) (44,387) Minority Interest (19,504) (19,504) - - - Equity in earnings (loss), including impairment of unconsolidated entities 9,073 884 (9,949) - (1,760) ------------------------------------------------- Earnings (loss) from continuing operations (13,293) - - 65,718 52,425 Discontinued operations, net of tax 65,718 - - (65,718) - ------------------------------------------------- Net earnings (loss) $52,425 $- $- $- $52,425 ================================================= (a) Depreciation and amortization - Real Estate Groups $219,974 $6,794 $34,369 $3,402 $250,951 (b) Depreciation and amortization - Non-Real Estate 10,663 - 10,431 - 21,094 ------------------------------------------------- Total depreciation and amortization $230,637 $6,794 $44,800 $3,402 $272,045 ================================================= (c) Amortization of mortgage procurement costs - Real Estate Groups $11,296 $619 $2,142 $307 $13,126 (d) Amortization of mortgage procurement costs - Non-Real Estate - - 125 - 125 ------------------------------------------------- Total amortization of mortgage procurement costs $11,296 $619 $2,267 $307 $13,251 ================================================= 21 Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Net Operating Income (dollars in thousands) --------------------------------------------------- Three Months Ended January 31, 2009 --------------------------------------------------- Plus Unconsoli- dated Invest- Pro-Rata Full ments Plus Consoli- Consoli- Less at Discon- dation dation Minority Pro- tinued (Non- (GAAP) Interest Rata Operations GAAP) --------------------------------------------------- Commercial Group Retail Comparable $60,146 $2,017 $5,531 $- $63,660 ---------------------------------------------------------------------- Total 65,140 3,181 5,595 - 67,554 Office Buildings Comparable 46,044 2,482 2,915 - 46,477 ---------------------------------------------------------------------- Total 62,795 992 2,999 - 64,802 Hotels Comparable 2,029 - - - 2,029 ---------------------------------------------------------------------- Total 2,740 - - - 2,740 Earnings from Commercial Land Sales 11,318 6 - - 11,312 Other (1) (9,394) (149) (277) - (9,522) ---------------------------------------------------------------------- Total Commercial Group Comparable 108,219 4,499 8,446 - 112,166 ---------------------------------------------------------------------- Total 132,599 4,030 8,317 - 136,886 Residential Group Apartments Comparable 26,406 691 6,745 - 32,460 ---------------------------------------------------------------------- Total 29,936 934 8,532 1,199 38,733 Military Housing Comparable (2) - - - - - ---------------------------------------------------------------------- Total 10,520 (134) 196 - 10,850 Other (1) 3,040 83 (1) - 2,956 Total Residential Group Comparable 26,406 691 6,745 - 32,460 ---------------------------------------------------------------------- Total 43,496 883 8,727 1,199 52,539 Total Rental Properties Comparable 134,625 5,190 15,191 - 144,626 ---------------------------------------------------------------------- Total 176,095 4,913 17,044 1,199 189,425 Land Development Group 8,001 751 171 - 7,421 The Nets (9,109) - 866 - (8,243) Corporate Activities (14,438) - - - (14,438) - -------------------------------------------------------------------------- Grand Total $160,549 $5,664 $18,081 $1,199 $174,165 - -------------------------------------------------------------------------- 22 Three Months Ended January 31, 2008 --------------------------------------------------- Plus Unconsoli- dated Invest- Pro-Rata Full ments Plus Consoli- Consoli- Less at Discon- dation dation Minority Pro- tinued (Non- (GAAP) Interest Rata Operations GAAP) --------------------------------------------------- Commercial Group Retail Comparable $63,401 $2,286 $6,116 $- $67,231 ---------------------------------------------------------------------- Total 68,409 3,214 6,631 - 71,826 Office Buildings Comparable 45,906 2,528 1,784 - 45,162 ---------------------------------------------------------------------- Total 55,074 3,641 1,974 - 53,407 Hotels Comparable 2,162 - 268 - 2,430 ---------------------------------------------------------------------- Total 1,805 (23) 1,153 - 2,981 Earnings from Commercial Land Sales 15,096 879 - - 14,217 Other (1) (5,995) (2,777) (254) - (3,472) ---------------------------------------------------------------------- Total Commercial Group Comparable 111,469 4,814 8,168 - 114,823 ---------------------------------------------------------------------- Total 134,389 4,934 9,504 - 138,959 Residential Group Apartments Comparable 26,790 772 7,152 - 33,170 ---------------------------------------------------------------------- Total 30,487 825 8,069 2,336 40,067 Military Housing Comparable (2) - - - - - ---------------------------------------------------------------------- Total 12,285 - 730 - 13,015 Other (1) (6,800) 175 (1) - (6,976) ---------------------------------------------------------------------- Total Residential Group Comparable 26,790 772 7,152 - 33,170 ---------------------------------------------------------------------- Total 35,972 1,000 8,798 2,336 46,106 Total Rental Properties Comparable 138,259 5,586 15,320 - 147,993 ---------------------------------------------------------------------- Total 170,361 5,934 18,302 2,336 185,065 Land Development Group 31,018 4,397 273 - 26,894 The Nets (5,825) - 738 - (5,087) Corporate Activities (6,945) - - - (6,945) - -------------------------------------------------------------------------- Grand Total $188,609 $10,331 $19,313 $2,336 $199,927 - -------------------------------------------------------------------------- 23 % Change ----------------------------- Full Pro-Rata Consolidation Consolidation (GAAP) (Non-GAAP) ----------------------------- Commercial Group Retail Comparable (5.1%) (5.3%) ---------------------------------------------------------------------- Total Office Buildings Comparable 0.3% 2.9% ---------------------------------------------------------------------- Total Hotels Comparable (6.2%) (16.5%) ---------------------------------------------------------------------- Total Earnings from Commercial Land Sales Other (1) ---------------------------------------------------------------------- Total Commercial Group Comparable (2.9%) (2.3%) ---------------------------------------------------------------------- Total Residential Group Apartments Comparable (1.4%) (2.1%) ---------------------------------------------------------------------- Total Military Housing Comparable (2) ---------------------------------------------------------------------- Total Other (1) ---------------------------------------------------------------------- Total Residential Group Comparable (1.4%) (2.1%) ---------------------------------------------------------------------- Total Total Rental Properties Comparable (2.6%) (2.3%) ---------------------------------------------------------------------- Total Land Development Group The Nets Corporate Activities - -------------------------------------------------------------------------- Grand Total - -------------------------------------------------------------------------- (1) Includes write-offs of abandoned development projects, non- capitalizable development costs and unallocated management and service company overhead, net of historic and new market tax credit income. (2) Comparable NOI for Military Housing commences once the operating projects complete initial development phase. 24 Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Net Operating Income (dollars in thousands) ---------------------------------------------- Year Ended January 31, 2009 ---------------------------------------------- Plus Unconsoli- dated Invest- Pro-Rata Full ments Plus Consoli- Consoli- Less at Discon- dation dation Minority Pro- tinued (Non- (GAAP) Interest Rata Operations GAAP) ---------------------------------------------- Commercial Group Retail Comparable $229,009 $9,271 $22,052 $- $241,790 ---------------------------------------------------------------------- Total 250,043 12,511 22,300 - 259,832 Office Buildings Comparable 178,876 10,473 9,961 - 178,364 ---------------------------------------------------------------------- Total 251,931 7,385 10,461 - 255,007 Hotels Comparable 14,237 - 216 - 14,453 ---------------------------------------------------------------------- Total 14,543 - 216 - 14,759 Earnings from Commercial Land Sales 19,713 2,410 - - 17,303 Other (1) (44,478) (52) (1,828) - (46,254) ---------------------------------------------------------------------- Total Commercial Group Comparable 422,122 19,744 32,229 - 434,607 ---------------------------------------------------------------------- Total 491,752 22,254 31,149 - 500,647 Residential Group Apartments Comparable 106,288 2,716 26,577 - 130,149 ---------------------------------------------------------------------- Total 123,715 2,960 32,014 6,486 159,255 Military Housing Comparable (2) - - - - - ---------------------------------------------------------------------- Total 51,269 3,794 974 - 48,449 Other (1) (20,547) 375 (1) - (20,923) ---------------------------------------------------------------------- Sale of Residential Development Project - - - - - ---------------------------------------------------------------------- Total Residential Group Comparable 106,288 2,716 26,577 - 130,149 ---------------------------------------------------------------------- Total 154,437 7,129 32,987 6,486 186,781 Total Rental Properties Comparable 528,410 22,460 58,806 - 564,756 ---------------------------------------------------------------------- Total 646,189 29,383 64,136 6,486 687,428 Land Development Group (3) 2,914 (179) 538 - 3,631 The Nets (40,989) - 6,073 - (34,916) Corporate Activities (45,712) - - - (45,712) - -------------------------------------------------------------------------- Grand Total $562,402 $29,204 $70,747 $6,486 $610,431 - -------------------------------------------------------------------------- 25 ---------------------------------------------- Year Ended January 31, 2008 ---------------------------------------------- Plus Unconsoli- dated Invest- Pro-Rata Full ments Plus Consoli- Consoli- Less at Discon- dation dation Minority Pro- tinued (Non- (GAAP) Interest Rata Operations GAAP) ---------------------------------------------- Commercial Group Retail Comparable $226,952 $9,620 $23,788 $- $241,120 ---------------------------------------------------------------------- Total 248,438 13,126 24,359 - 259,671 Office Buildings Comparable 180,513 10,313 6,079 - 176,279 ---------------------------------------------------------------------- Total 199,624 12,537 6,677 - 193,764 Hotels Comparable 14,096 - 1,104 - 15,200 ---------------------------------------------------------------------- Total 15,013 118 2,610 - 17,505 Earnings from Commercial Land Sales 23,555 1,670 - - 21,885 Other (1) (17,470) 3,047 (402) - (20,919) ---------------------------------------------------------------------- Total Commercial Group Comparable 421,561 19,933 30,971 - 432,599 ---------------------------------------------------------------------- Total 469,160 30,498 33,244 - 471,906 Residential Group Apartments Comparable 103,283 2,865 29,429 - 129,847 ---------------------------------------------------------------------- Total 119,834 3,542 38,075 11,777 166,144 Military Housing Comparable (2) - - - - - ---------------------------------------------------------------------- Total 28,873 - 1,823 - 30,696 Other (1) (21,113) 175 - - (21,288) ---------------------------------------------------------------------- Sale of Residential Development Project 17,830 - - - 17,830 ---------------------------------------------------------------------- Total Residential Group Comparable 103,283 2,865 29,429 - 129,847 ---------------------------------------------------------------------- Total 145,424 3,717 39,898 11,777 193,382 Total Rental Properties Comparable 524,844 22,798 60,400 - 562,446 ---------------------------------------------------------------------- Total 614,584 34,215 73,142 11,777 665,288 Land Development Group (3) 43,396 5,194 676 - 38,878 The Nets (20,878) - 3,427 - (17,451) Corporate Activities (41,916) - - - (41,916) - -------------------------------------------------------------------------- Grand Total $595,186 $39,409 $77,245 $11,777 $644,799 - -------------------------------------------------------------------------- 26 -------------------------------- % Change -------------------------------- Full Pro-Rata Consolidation Consolidation (GAAP) (Non-GAAP) -------------------------------- Commercial Group Retail Comparable 0.9% 0.3% ---------------------------------------------------------------------- Total Office Buildings Comparable (0.9%) 1.2% ---------------------------------------------------------------------- Total Hotels Comparable 1.0% (4.9%) ---------------------------------------------------------------------- Total Earnings from Commercial Land Sales Other (1) Total Commercial Group Comparable 0.1% 0.5% ---------------------------------------------------------------------- Total Residential Group Apartments Comparable 2.9% 0.2% ---------------------------------------------------------------------- Total Military Housing Comparable (2) ---------------------------------------------------------------------- Total Other (1) ---------------------------------------------------------------------- Sale of Residential Development Project ---------------------------------------------------------------------- Total Residential Group Comparable 2.9% 0.2% ---------------------------------------------------------------------- Total Total Rental Properties Comparable 0.7% 0.4% ---------------------------------------------------------------------- Total Land Development Group (3) The Nets Corporate Activities - -------------------------------------------------------------------------- Grand Total - -------------------------------------------------------------------------- (1) Includes write-offs of abandoned development projects, non- capitalizable development costs and unallocated management and service company overhead, net of historic and new market tax credit income. (2) Comparable NOI for Military Housing commences once the operating projects complete initial development phase. (3) Includes a reduction in value during the year ended January 31, 2009 of a bond performance fee due from Lehman Brothers of $13,816 at full consolidation and $12,434 at pro-rata consolidation at our Stapleton project. 27 Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Development Pipeline - -------------------- January 31, 2009 2008 Openings and Acquisitions (14) FCE Pro- Date Legal Rata Dev (D) Opened / Ownership FCE % Property Location Acq (A) Acquired % (h) (h)(1) - -------- -------- ------- -------- --------- ------ Retail Centers: Orchard Town Center Westminster, CO D Q1-08 100.0% 100.0% Shops at Wiregrass Tampa, FL D Q3-08 50.0% 100.0% White Oak Village Richmond, VA D Q3-08 50.0% 100.0% Office: 818 Mission San Francisco, Street(c) CA A Q1-08 50.0% 50.0% Johns Hopkins - 855 North East Wolfe Street Baltimore, MD D Q1-08 76.6% 76.6% Mesa Del Sol Town Albuquerque, Center (c) NM D Q4-08 47.5% 47.5% Mesa Del Sol - Albuquerque, Fidelity (c)(e) NM D Q4-08/Q3-09 47.5% 47.5% Residential: Lucky Strike Richmond, VA D Q1-08 100.0% 100.0% Uptown Apartments (c) (e) Oakland, CA D Q1-08/Q4-08 50.0% 50.0% Mercantile Place on Main (e) Dallas, TX D Q1-08/Q4-08 100.0% 100.0% Barrington Place (c) Raleigh, NC A Q3-08 49.0% 49.0% Legacy Arboretum (c) Charlotte, NC A Q3-08 49.0% 49.0% Hamel Mill Lofts (e) Haverhill, MA D Q4-08/Q2-09 100.0% 100.0% Legacy Crossroads (c)(e) Cary, NC A/D Q4-08/Q3-09 50.0% 50.0% Total Openings and Acquisitions (d) - ------------------- Residential Phased-In Units (c)(e): Cobblestone Court Painesville, OH D 2006-08 50.0% 50.0% Sutton Landing Brimfield, OH D 2007-09 50.0% 50.0% Stratford Crossing Wadsworth, OH D 2007-10 50.0% 50.0% Total (g) - ------------------- See Attached Footnotes Cost at FCE Pro-Rata Total Share Cost at Full Cost (Non- Sq. ft./ Gross Consolidation at 100% GAAP)(b) No. of Leasable Property (GAAP) (a) (2) (1)X(2) Units Area - -------- ------------- ------- -------- ------- ------- (in millions) -------------------------- Retail Centers: Orchard Town Center $165.0 $165.0 $165.0 980,000 565,000 (f) Shops at Wiregrass 150.8 150.8 150.8 642,000 352,000 White Oak Village 67.4 67.4 67.4 800,000 294,000 ---- ---- ---- ------- ------- $383.2 $383.2 $383.2 2,422,000 1,211,000 ------ ------ ------ ========= ========= Office: 818 Mission Street (c) $0.0 $20.6 $10.3 28,000 Johns Hopkins - 855 North Wolfe Street 102.2 102.2 73.3 279,000 (i) Mesa Del Sol Town Center (c) 0.0 18.7 8.9 74,000 (j) Mesa Del Sol - Fidelity (c)(e) 0.0 26.7 12.7 210,000 --- ---- ---- ------- $102.2 $168.2 $105.2 591,000 ------ ------ ------ ======= Residential: Lucky Strike $37.9 $37.9 $37.9 131 Uptown Apartments (c)(e) 0.0 209.8 104.9 665 Mercantile Place on Main (e) 143.7 143.7 143.7 366 (k) Barrington Place (c) 0.0 23.2 11.4 274 Legacy Arboretum (c) 0.0 22.4 11.0 266 Hamel Mill Lofts (e) 76.0 76.0 76.0 305 Legacy Crossroads (c)(e) 0.0 41.0 20.5 344 --- ---- ---- --- $257.6 $554.0 $405.4 2,351 ------ ------ ------ ===== ------ -------- ------ Total Openings and Acquisitions (d) $743.0 $1,105.4 $893.8 ====== ======== ====== - ------------- Residential Phased-In Opened Units (c)(e): in '08 / Total -------------- Cobblestone Court $0.0 $24.6 $12.3 96/304 Sutton Landing 0.0 15.9 8.0 156/216 Stratford Crossing 0.0 25.3 12.7 108/348 --- ---- ---- ------- Total (g) $0.0 $65.8 $33.0 360/868 ==== ===== ===== ======= - ------------ See Attached Footnotes 28 Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Development Pipeline January 31, 2009 Under Construction (8) FCE Pro- Legal Rata Dev (D) Anticipated Owner- FCE % (h) Property Location Acq (A) Opening ship %(h) (1) - -------- -------- ------- ----------- --------- --------- Retail Centers: Promenade at Temecula Temecula, Expansion CA D Q1-09 75.0% 100.0% East River Manhattan, Plaza (c)(e) NY D Q4-09/Q1-10 35.0% 50.0% Village at Hallandale, Gulfstream FL D Q1-10 50.0% 50.0% Ridge Yonkers, Hill (e) NY D Q3-10/11 70.0% 100.0% Office: Waterfront Station - East 4th & West 4th Washington, Buildings D.C. D Q1-10 45.0% 45.0% Residential: 80 Dekalb Brooklyn, Avenue (e) NY D Q3-09/Q1-10 70.0% 100.0% Presidio San Francisco, CA D Q2-10 100.0% 100.0% Beekman (e) Manhattan, NY D Q2-10/11 49.0% 70.0% Total Under Construction (l) Residential Phased-In Units (c)(e): Sutton Brimfield, Landing OH D 2007-09 50.0% 50.0% Stratford Wadsworth, Crossing OH D 2007-10 50.0% 50.0% Total (m) January 31, 2009 Cost at Under Construction (8) FCE Total Pro-Rata Cost at Full Cost Share Sq. ft./ Gross Lease Consolidation at (Non-GAAP)(b) No. of Leasable Commit- Property (GAAP) (a) 100%(2) (1) X (2) Units Area ment % - -------- ------------- ------- ----------- -------- -------- ------- (in millions) ----------------------------- Retail Centers: Promenade at Temecula Expansion $106.5 $106.5 $106.5 127,000 127,000 61% East River 0.0 392.2 196.1 517,000 517,000 74% Plaza (c) (e) Village at 200.8 200.8 100.4 500,000 500,000(n) 50% Gulfstream Ridge Hill (e) 685.5 685.5 685.5 1,200,000 1,200,000(o) 21% ------ ------ ------ --------- --------- 992.8 $1,385.0 $1,088.5 2,344,000 2,344,000 ------ ------- ------- ========= ========= Office: Waterfront Station - East 4th & West 4th Buildings $330.6 $330.6 $148.8 628,000 (p) 98% ------ ------ ------ ======= Residential: 80 Dekalb Avenue (e) $163.3 $163.3 $163.3 365 Presidio 108.3 108.3 108.3 161 Beekman (e) 875.7 875.7 613.0 904 ----- ----- ----- --- $1,147.3 $1,147.3 $884.6 1,430 -------- -------- ------ ===== Total Under Construction -------- -------- -------- (l) $2,470.7 $2,862.9 $2,121.9 ======== ======== ======== Residential Under Const. / Total Phased-In -------------------- Units (c) (e): Sutton Landing $0.0 $15.9 $8.0 36/216 Stratford Crossing 0.0 25.3 12.7 132/348 ---- ---- ---- ------- Total (m) $0.0 $41.2 $20.7 168/564 ==== ===== ===== ======= See Attached Footnotes Military Housing - see Footnote q 29 2008 FOOTNOTES -------------- ( a ) Amounts are presented on the full consolidation method of accounting, a GAAP measure. Under full consolidation, costs are reported as consolidated at 100 percent if we are deemed to have control or to be the primary beneficiary of our investments in the variable interest entity ("VIE"). ( b ) Cost at pro-rata share represents Forest City's share of cost, based on the Company's pro-rata ownership of each property (a non-GAAP measure). Under the pro-rata consolidation method of accounting the Company determines its pro-rata share by multiplying its pro-rata ownership by the total cost of the applicable property. ( c ) Reported under the equity method of accounting. This method represents a GAAP measure for investments in which the Company is not deemed to have control or to be the primary beneficiary of our investments in a VIE. ( d ) The difference between the full consolidation cost amount (GAAP) of $743.0 million to the Company's pro-rata share (a non-GAAP measure) of $893.8 million consists of a reduction to full consolidation for minority interest of $28.9 million of cost and the addition of its share of cost for unconsolidated investments of $179.7 million. ( e ) Phased-in openings. Costs are representative of the total project. ( f ) Includes 177,000 square feet for Target and 97,000 square feet for JC Penney that opened in Q3-06, as well as 16,000 square feet of office space. ( g ) The difference between the full consolidation cost amount (GAAP) of $0.0 million to the Company's pro-rata share (a non-GAAP measure) of $33.0 million consists of the Company's share of cost for unconsolidated investments of $33.0 million. ( h ) As is customary within the real estate industry, the Company invests in certain real estate projects through joint ventures. For some of these projects, the Company provides funding at percentages that differ from the Company's legal ownership. ( i ) Includes 20,000 square feet of retail space. ( j ) Includes 22,000 square feet of retail space. ( k ) Includes 18,000 square feet of retail space. ( l ) The difference between the full consolidation cost amount (GAAP) of $2,470.7 million to the Company's pro-rata share (a non-GAAP measure) of $2,121.9 million consists of a reduction to full consolidation for minority interest of $544.9 million of cost and the addition of its share of cost for unconsolidated investments of $196.1 million. ( m ) The difference between the full consolidation cost amount (GAAP) of $0.0 million to the Company's pro-rata share (a non-GAAP measure) of $20.7 million consists of the Company's share of cost for unconsolidated investments of $20.7 million. ( n ) Includes 86,000 square feet of office space. ( o ) Includes 156,000 square feet of office space. ( p ) Includes 85,000 square feet of retail space. ( q ) Below is a summary of our equity method investments for Military Housing Development projects. The Company provides services for these projects including development, construction, and management and receives agreed upon fees for these services. 30 Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Development Pipeline Anticipated FCE Property Location Opening Pro-Rata % (h) - -------- -------- ----------- -------------- Military Housing: - - Openings (1) Ohana Military Communities, Hawaii Increment I Honolulu, HI 2005-Q2-08 * Military Housing Under Construction (7) Midwest Millington Memphis, TN 2008-2009 * Navy Midwest Chicago, IL 2006-2009 * Air Force Academy Colorado Springs, CO 2007-2009 50.0% Marines, Hawaii Honolulu, HI 2007-2010 * Increment II Navy, Hawaii Honolulu, HI 2007-2010 * Increment III Pacific Northwest Seattle, WA 2007-2010 * Communities Hawaii Phase IV Kaneohe, HI 2007-2014 * Total Under Construction Total Military Housing (8) Cost at Full Total Cost Sq.ft./ Property Consolidation (a) at 100% No. of Units - -------- ----------------- ---------- ------------ (in millions) -------------------- Military Housing: - - Openings (1) Ohana Military Communities, Hawaii Increment I $0.0 $316.5 1,952 ----------------------------------- Military Housing Under Construction (7) Midwest Millington 0.0 38.1 318 Navy Midwest 0.0 264.7 1,658 Air Force Academy 0.0 80.4 427 Marines, Hawaii Increment II 0.0 338.8 1,175 Navy, Hawaii Increment III 0.0 614.6 2,520 Pacific Northwest Communities 0.0 277.0 2,986 Hawaii Phase IV 0.0 394.3 917 ----------------------------------- Total Under Construction 0.0 2,007.9 10,001 ----------------------------------- Total Military Housing (8) $0.0 $2,324.4 11,953 =================================== * The Company's share of residual cash flow ranges from 0-20% during the life cycle of the project. 31 -----END PRIVACY-ENHANCED MESSAGE-----