-----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, PlmqCmR+/mW+Ye5X2Vj4Laoi84IwG38z0FQ8dBjZPk6/GBZ5CFPN5pj4kARVALjB euLZTcocmtA4494iIK+QHQ== 0001157523-06-011998.txt : 20061208 0001157523-06-011998.hdr.sgml : 20061208 20061207193805 ACCESSION NUMBER: 0001157523-06-011998 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061207 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061208 DATE AS OF CHANGE: 20061207 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: 061263912 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 a5288537.txt FOREST CITY ENTERPRISES, INC. 8-K 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): December 7, 2006 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 December 7, 2006, Forest City Enterprises, Inc. issued a press release announcing financial results for the three and nine months ended October 31, 2006. A copy of this press release is attached hereto as Exhibit 99.1. The information in this Current Report 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 December 7, 2006 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/ THOMAS G. SMITH ------------------------------------- Name: Thomas G. Smith Title: Executive Vice President, Chief Financial Officer and Secretary Date: December 7, 2006 EXHIBIT INDEX Exhibit Number Description - -------------------------------------------------------------------------------- 99.1 - Press Release of Forest City Enterprises, Inc. Dated December 7, 2006 EX-99.1 2 a5288537ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Forest City Reports Third-Quarter and Year-to-Date Financial Results CLEVELAND--(BUSINESS WIRE)--Dec. 7, 2006--Forest City Enterprises, Inc. (NYSE:FCEA) and (NYSE:FCEB) today announced revenues, net earnings and EBDT for the third quarter and nine months ended October 31, 2006. EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) for the third quarter was $57.4 million, or $0.56 per share, compared with last year's third-quarter EBDT of $64.3 million, or $0.63 per share. EBDT for the nine months ended October 31, 2006 was $177.4 million, or $1.72 per share, compared with last year's $196.8 million, or $1.92 per share. For an explanation of the variances, see "Discussion of Results" below. Fiscal third-quarter net earnings were $45.9 million, or $0.45 per share, compared with $12.9 million, or $0.13 per share, in the prior year. Net earnings for the nine months were $106.6 million, or $1.03 per share, compared with $55.3 million, or $0.54 per share, in 2005. The increase in net earnings for the quarter and nine months was primarily attributable to the gain on sale of rental properties. 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. Third-quarter consolidated revenues were $278.7 million compared with $261.0 million last year. Nine-month revenues were $821.4 million compared with $827.3 million for the nine months ended October 31, 2005. Discussion of Results Charles A. Ratner, president and chief executive officer of Forest City Enterprises, said, "Our third-quarter and year-to-date financial performance was moderately below our expectations primarily due to the timing of certain transactions and the softness in our land business, but we still expect our fourth quarter to be strong. Negatively impacting EBDT were the softness in land sales (down $6.6 million for the quarter and $23.8 million YTD), the consequences of our interest rate hedging transactions ($4.8 million for the quarter and $11.2 million YTD), and increased corporate interest expense ($1.6 million for the quarter and $2.8 million YTD). Land sales for the first three quarters were affected by both lower volume and delayed timing; however, we expect the fourth quarter for land sales to be comparable to, or greater than, last year's fourth quarter. Our decision to purchase forward swaps to hedge our interest rate exposure on certain upcoming financings impacted our EBDT, but it was the right business decision because it enabled us to lock in favorable, long-term fixed rates." Ratner continued, "We are encouraged by the strong performance of our commercial and residential operating portfolios, as evidenced by comparable NOI growth, improved occupancies, and NOI generated from new property openings. The 'lumpiness' inherent in our business quarter-to-quarter is not reflective of long-term financial results. We are confident that the strength in our operating portfolio will continue and, when combined with the timing of certain transactions and fourth-quarter land sales at or above last year, will result in a record year for EBDT." Comparable property net operating income (NOI) increased 5.3 percent during the third quarter compared with the same period a year ago. The retail and office portfolios were both up 4.4 percent, and comparable property NOI in the residential portfolio increased 7.4 percent. Comparable property NOI, defined as NOI from properties operated in both 2006 and 2005, 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. Year-to-date 2006 comparable occupancies were up overall compared with the same period a year ago. Comparable retail occupancies were 94.1 percent in 2006 compared with 93.0 percent in 2005. Office occupancies were 93.2 percent compared with 92.4 percent last year. Comparable occupancies in the residential business increased to 95.0 percent compared with 93.1 percent last year. The Company has a substantial inventory of land in good markets throughout the country. The Company's land sales were impacted by slowing demand from home buyers at Stapleton, Central Station and other core markets for the land business, reflecting conditions throughout the housing industry that are anticipated to continue into 2007. "We've been in the land business for 50 years and understand its volatility as compared to the rental real estate business. Our portfolio strategy focused on diverse products and markets enables us to use cyclical strengths in certain businesses to offset weaknesses in others. This portfolio diversification continues to allow us to consistently increase cash flow and enhance shareholder value," Ratner said. Milestones Capital Transactions and Financing Activity In the third quarter, the Company completed the sale of $287.5 million of Puttable Equity-Linked Senior Notes due 2011 to qualified institutional buyers and the concurrent repurchase of $25 million of Forest City Class A common stock. The notes will pay interest semiannually at a rate of 3.625 percent per annum and have a put value premium of 25 percent. In connection with the offering, Forest City entered into a puttable note hedge transaction and warrant transaction with several counterparties. These transactions are expected to increase the effective put exercise price, which represents a 40 percent premium. The Company used the net proceeds from the offering to repurchase Class A common stock, to pay the net cost of a puttable note hedge transaction and warrant transaction, to repay nonrecourse debt outstanding under the Company's $600 million revolving credit facility, and for general corporate purposes. During the first nine months of 2006, Forest City closed on transactions totaling $885.5 million in nonrecourse mortgage financings, including $465.6 million in refinancings, $207.4 million in development and acquisitions, and $212.5 million in loan extensions and additional fundings. As of October 31, 2006, the Company's weighted average cost of mortgage debt increased to 6.09 percent from 5.92 percent at October 31, 2005, primarily due to the general increase in short-term interest rates. Fixed-rate mortgage debt, which represented 71 percent of the Company's total nonrecourse mortgage debt, decreased from 6.33 percent at October 31, 2005 to 6.20 percent at October 31, 2006. The variable-rate mortgage debt increased from 5.02 percent at October 31, 2005 to 5.84 percent at October 31, 2006. Acquisitions In the fourth quarter, Forest City closed on the previously announced restructuring of the Forest City Ratner Companies (FCRC) portfolio that was initiated during the third quarter. As a result, FCRC President and CEO Bruce Ratner has contributed his ownership interests in 30 operating assets and certain service companies to a newly formed limited liability company, in exchange for cash and units in the new company which are convertible into an equal number of shares of Class A common stock or cash after one year. The two parties have agreed on a methodology to separately value seven projects that are currently under active development. Beyond these seven projects, Forest City Enterprises will own 100 percent of all future New York developments. On November 9, after obtaining approval from the National Basketball Association, Ratner transferred his interest in the Nets basketball franchise to the Company in a separate transaction. Ratner will continue to be Chairman of the Nets. The Company will conduct its New York operations in the same manner as it has for the past 20 years under the leadership of Bruce Ratner. The restructuring is expected to be slightly dilutive to Forest City's EBDT per share in 2006, but accretive overall. During the third quarter, Forest City completed the acquisition of ING Real Estate's interest in the 52-story, 1.5-million-square-foot New York Times Building. ING served as a financial partner and helped to share the risk during the development stage of the project, which is on schedule to open in 2007. Also during the quarter, the Company signed the building's largest tenant, the global asset management firm Legg Mason, which will lease approximately 200,000 of the 700,000 square feet that Forest City owns. As a result, more than 75 percent of the building space owned by Forest City has been leased. Also during the third quarter, Forest City acquired its partner's interest in Galleria at Sunset, a 1-million-square-foot retail center in Henderson, Nevada. The Company now owns 100 percent of this property, which is scheduled for an expansion to capitalize on the local market's favorable demographics and the center's strong sales of nearly $500 per square foot. Dispositions Forest City continues to take advantage of favorable market conditions and high valuations to dispose of properties. The most recent example is Battery Park City, which consists of a 463-room Embassy Suites Hotel and approximately 116,000 square feet of retail in Manhattan. Forest City sold the property for $295 million, including $486,000 per hotel room, all total generating a pre-tax gain of $82.6 million and $98.4 million in cash proceeds. During the first quarter, the Company sold the Hilton Times Square Hotel in New York City for $242 million, or $545,000 per room, generating a pre-tax gain of $79 million and $83 million in cash proceeds. Project Openings Through the first three fiscal quarters, Forest City has opened or acquired nine projects at a total cost of $660.1 million at the Company's pro-rata share and $327.5 million on a full consolidation basis. During the third quarter, the Company opened two large retail/mixed-use projects: the 1.5-million-square-foot Westfield San Francisco Centre retail/office project in downtown San Francisco; and the 1.2-million-square-foot Northfield open-air regional lifestyle center at the Company's Stapleton mixed-use project in Denver. Owned and developed in a 50/50 partnership with Westfield, the new San Francisco Centre is one of the largest urban retail centers west of the Mississippi. The new San Francisco Centre connects the redeveloped Emporium department store building to the original San Francisco Centre, adding 1 million square feet of new downtown retail and office space to the existing 500,000-square-foot center. The center opened more than 90 percent leased and includes a 338,000-square-foot Bloomingdale's store and 312,000-square-foot Nordstrom. The center also features some 170 specialty stores, 14 casual restaurants, a gourmet grocery store, a 16,000-square-foot spa and 235,000 square feet of Class A office space. Ratner said, "The new San Francisco Centre is a one-of-a-kind project that is destined to become known worldwide as a premier shopping and entertainment destination. Here, we have 1.5 million square feet of commercial space in the heart of a great American city. It combines the modern architecture of Bloomingdale's and a five-level upscale retail center with the restored historic gold dome, which has been a signature of the Emporium building since the early 1900s. This is clearly a case where the whole is greater than the sum of the parts. The center is experiencing heavy foot-traffic since its opening on September 25, and preliminary reports from tenants indicate that sales are above expectations." In Denver, the recently completed "main street" phase of Northfield Stapleton is anchored by a 140,000-square-foot Macy's, the first new Macy's store in Colorado. SuperTarget, Circuit City, Colorado's first Bass Pro Shops Outdoor World, and an 18-screen movie theatre previously opened as anchors. Northfield is 1.2 million square feet, bringing Stapleton's total retail space to 2 million square feet - - all of which has been developed within the last five years. During the October grand opening of Northfield, Stapleton received a Silver Certification from the U.S. Green Building Council, which recognized the environmentally sustainable construction and energy-saving aspects of the project. In addition, Forest City signed an agreement with the Fitzsimons Redevelopment Authority to develop the 160-acre Fitzsimons life sciences office park adjacent to Stapleton. Located on the site of a former Army medical center, the offices and research and development facilities for the life sciences industry will be built out over the next 20 years or more, with the first buildings expected to be completed by the end of 2008. Development Pipeline Highlights A schedule of the Company's project openings and acquisitions, and the pipeline of projects under construction, is included in this news release. The schedule includes comparable project costs on both a full consolidation and pro-rata share basis. Described below are several of the Company's projects under construction or under development. Projects Under Construction At the end of the third quarter, Forest City's pipeline included 19 projects under construction or to be acquired, representing a total cost of $1.8 billion at the Company's pro-rata share and $1.3 billion on a full consolidation basis. In the fourth quarter, Forest City expects to open the Edgeworth Building, a former tobacco factory that is being transformed into 142,000 square feet of Class A office space. Edgeworth will be Forest City's first office building at its Tobacco Row mixed-use development in the historic riverfront district of Richmond, Virginia. In California, Forest City recently received its certificate of occupancy at 1100 Wilshire and the first tenants have begun to move in during the fourth quarter. The 228-unit residential condominium project in downtown Los Angeles is a 37-story adaptive re-use of a 1980s-era office building. Forest City has three large open-air regional lifestyle centers currently under construction and scheduled to open during 2007 and 2008: -- Orchard Town Center, a Westminster, Colorado 970,000-square-foot shopping center where JCPenney and Target have already opened and Macy's and AMC Theatres will be part of next year's grand opening -- Promenade Bolingbrook, a 743,000-square-foot retail center in suburban Chicago where Bass Pro Shops and Marshall Field's will join IKEA as anchors -- East River Plaza, a 514,000-square-foot anchored retail center on the site of a former industrial plant in Manhattan Residential projects under construction and scheduled to open in 2007 include: -- Sterling Glen of Roslyn, a 158-unit supported-living project that brings to 15 the number of senior supported-living properties in the Company's portfolio -- Stratford Crossing, a 348-unit apartment community in Wadsworth, Ohio -- Mercury, a 238-unit, office-building-to-condominium conversion located in the Koreatown neighborhood of Los Angeles Projects Under Development At the end of the third quarter, Forest City had more than 25 projects under development, representing more than $2 billion of cost at the Company's pro-rata share and on a full consolidation basis. Among the projects under development and scheduled to begin construction within the next nine months are: -- The Shops at Wiregrass, a 525,000-square-foot anchored retail center in the Tampa area -- Summit at Lehigh Valley, a mixed-use project in eastern Pennsylvania, which includes a 492,000-square-foot lifestyle center -- Beekman, which will feature more than 800 residential units and an elementary school in Manhattan During the third quarter, Forest City received city approval to develop the mixed-use Village at Gulfstream Park project in Hallandale Beach, Florida, adjacent to an expanded and renovated horse racing track. Construction on the initial retail phase of the multi-year development is scheduled to begin in 2007. In Washington D.C., Forest City announced that two local government agencies have agreed to lease approximately 500,000 square feet in two new office buildings at the Company's Waterfront mixed-use redevelopment project. Occupancy by the two agencies - the District's Office of the Chief Financial Officer and the Department of Consumer and Regulatory Affairs - is expected to occur in 2009. Waterfront involves the redevelopment of the former Waterside Mall to create up to 2 million square feet of commercial space, as well as residential units. Military Housing Through the Company's Forest City Military Communities affiliate, Forest City's involvement in military family housing has continued to grow in 2006. In Hawaii, Forest City is working with both the Navy and the Marines. The Company is responsible for owning, developing and managing more than 1,900 homes for the Navy in Phase I and another 2,500 homes in the newly awarded Phase II at communities in and around Pearl Harbor. Forest City was also awarded a contract for the Marines to build and renovate more than 1,100 homes in Hawaii. In the North Shore suburbs of Chicago, the Company is responsible for the demolition, renovation, new construction and management of approximately 1,600 Navy Great Lakes homes for military families. During the third quarter, Forest City was awarded exclusive negotiation rights for military housing at the United States Air Force Academy. Forest City plans to team with Hunt Building Corporation to redevelop more than 400 family homes at the Academy's Pine Valley and Douglass Valley housing areas in Colorado Springs, Colorado. Forest City expects to take responsibility for owning and managing the communities in early 2007. In total, Forest City has committed to develop, own and manage more than 7,700 military family housing units. "Military housing is a great long-term value proposition for us and these transactions are indicative of this growing portfolio," said Ratner. Outlook Ratner said, "We remain on target for a record year, our 27th consecutive year of EBDT growth. We have a track record of past successes and a strong pipeline of future opportunities, with more than 40 projects under construction or under development. Once again, our portfolio strategy of diverse products and markets is paying off. Diversification enables us to use cyclical strengths in certain businesses to offset weaknesses in others. Looking ahead to 2007, we expect that land sales will continue to be soft. At the same time, our operating portfolio and recently completed projects will be significant growth drivers, resulting in another year of record EBDT in 2007." Corporate Description Forest City Enterprises, Inc. is an $8.5 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 quarter ended October 31, 2006, 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, 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 from real estate operations of Forest City Rental Properties Corporation, a wholly owned subsidiary of Forest City Enterprises, Inc., for depreciation, amortization, amortization of mortgage procurement costs and deferred income taxes; iv) provision for decline in real estate (net of tax); v) extraordinary items (net of tax); and vi) 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 provision for decline in 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. 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 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 or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, real estate development and investment risks, economic conditions in the Company's core markets, reliance on major tenants, the impact of terrorist acts, the Company's substantial leverage and the ability to service debt, guarantees under the Company's credit facility, changes in interest rates, continued availability of tax-exempt government financing, the sustainability of substantial operations at the subsidiary level, significant geographic concentration, illiquidity of real estate investments, dependence on rental income from real property, conflicts of interest, competition, potential liability from syndicated properties, effects of uninsured loss, environmental liabilities, partnership risks, litigation risks, risks associated with an investment in a professional sports franchise, and other risk factors as disclosed from time to time in the Company's SEC filings, including, but not limited to, the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2006. Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Nine Months Ended October 31, 2006 and 2005 (dollars in thousands, except per share data) Three Months Ended, Increase October 31, (Decrease) 2006 2005 Amount Percent ------------------------ ---------- ------- Operating Results: Earnings (loss) from continuing operations $ (6,836) $8,148 $ (14,984) Discontinued operations, net of tax and minority interest(1) 52,711 4,756 47,955 ------------------------ ---------- Net earnings $ 45,875 $12,904 $ 32,971 ======================== ========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2) $ 57,400 $64,250 $ (6,850) (10.7%) ======================== ========== Reconciliation of Net Earnings to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2): Net Earnings $ 45,875 $12,904 $ 32,971 Depreciation and amortization - Real Estate Groups(5) 47,222 46,276 946 Amortization of mortgage procurement costs - Real Estate Groups(5) 2,743 3,026 (283) Deferred income tax expense - Real Estate Groups (6) 29,739 12,906 16,833 Deferred income tax expense - Non-Real Estate Groups:(6) Gain on disposition of other investments - - - Current income tax expense on non- operating earnings:(6) Gain on disposition of other investments - - - Gain on disposition included in discontinued operations 17,227 - 17,227 Gain on disposition of equity method rental properties - 220 (220) Straight-line rent adjustment(3) (1,528) (1,200) (328) Provision for decline in real estate, net of minority interest - 2,120 (2,120) Provision for decline in real estate of equity method rental properties - - - Gain on disposition of equity method rental properties - (2,526) 2,526 Gain on disposition of other investments - - - Discontinued operations:(1) Gain on disposition of rental properties (143,494) (9,476) (134,018) Minority interest - Gain on disposition 59,616 - 59,616 ------------------------ ---------- Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2) $ 57,400 $64,250 $ (6,850) (10.7%) ======================== ========== Diluted Earnings per Common Share: Earnings (loss) from continuing operations $ (0.07) $0.08 $ (0.15) Discontinued operations, net of tax and minority interest(1) 0.52 0.05 0.47 ------------------------ ---------- Net earnings $ 0.45 $0.13 $ 0.32 ======================== ========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2)(4) $ 0.56 $0.63 $ (0.07) (11.1%) ======================== ========== Operating earnings, net of tax (a non-GAAP financial measure) $ (0.02) $0.09 $ (0.11) Provision for decline in real estate, net of tax - (0.02) 0.02 Gain on disposition of rental properties and other investments, net of tax 1.09 0.07 1.02 Minority interest (0.62) (0.01) (0.61) ------------------------ ---------- Net earnings $ 0.45 $0.13 $ 0.32 ======================== ========== Diluted weighted average shares outstanding(4) 101,680,649 102,675,753 (995,104) ======================== ========== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Nine Months Ended October 31, 2006 and 2005 (dollars in thousands, except per share data) Nine Months Ended Increase October 31, (Decrease) 2006 2005 Amount Percent ------------------------- ---------- ------- Operating Results: Earnings (loss) from continuing operations $ 1,056 $53,894 $ (52,838) Discontinued operations, net of tax and minority interest(1) 105,569 1,390 104,179 ------------------------- ---------- Net earnings $ 106,625 $55,284 $ 51,341 ========================= ========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2) $ 177,404 $196,839 $ (19,435) (9.9%) ========================= ========== Reconciliation of Net Earnings to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2): Net Earnings $ 106,625 $55,284 $ 51,341 Depreciation and amortization - Real Estate Groups(5) 148,807 138,513 10,294 Amortization of mortgage procurement costs - Real Estate Groups(5) 8,098 8,659 (561) Deferred income tax expense - Real Estate Groups (6) 73,128 17,892 55,236 Deferred income tax expense - Non-Real Estate Groups:(6) Gain on disposition of other investments - 174 (174) Current income tax expense on non- operating earnings:(6) Gain on disposition of other investments - 60 (60) Gain on disposition included in discontinued operations 17,198 - 17,198 Gain on disposition of equity method rental properties 2,657 8,147 (5,490) Straight-line rent adjustment(3) (4,559) (6,183) 1,624 Provision for decline in real estate, net of minority interest 1,923 4,694 (2,771) Provision for decline in real estate of equity method rental properties 400 704 (304) Gain on disposition of equity method rental properties (7,662) (21,023) 13,361 Gain on disposition of other investments - (606) 606 Discontinued operations:(1) Gain on disposition of rental properties (287,220) (9,476) (277,744) Minority interest - Gain on disposition 118,009 - 118,009 ------------------------- ---------- Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2) $ 177,404 $196,839 $ (19,435) (9.9%) ========================= ========== Diluted Earnings per Common Share: Earnings (loss) from continuing operations $ 0.01 $0.53 $ (0.52) Discontinued operations, net of tax and minority interest(1) 1.02 0.01 1.01 ------------------------- ---------- Net earnings $ 1.03 $0.54 $ 0.49 ========================= ========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2)(4) $ 1.72 $1.92 $ (0.20) (10.4%) ========================= ========== Operating earnings, net of tax (a non-GAAP financial measure) $ 0.10 $0.48 $ (0.38) Provision for decline in real estate, net of tax (0.01) (0.04) 0.03 Gain on disposition of rental properties and other investments, net of tax 2.19 0.18 2.01 Minority interest (1.25) (0.08) (1.17) ------------------------- ---------- Net earnings $ 1.03 $0.54 $ 0.49 ========================= ========== Diluted weighted average shares outstanding(4) 103,236,067 102,490,316 (820,187) ========================= ========== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Nine Months Ended October 31, 2006 and 2005 (dollars in thousands) Three Months Ended, Increase October 31, (Decrease) 2006 2005 Amount Percent ------------------- ---------------- Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net Earnings: Revenues from real estate operations Commercial Group $191,193 $189,993 $1,200 Residential Group 64,531 53,204 11,327 Land Development Group 22,934 17,767 5,167 Corporate Activities - - - ------------------- --------- Total Revenues 278,658 260,964 17,694 6.8% Operating expenses (172,111) (154,536) (17,575) Interest expense, including early extinguishment of debt (71,194) (64,950) (6,244) Amortization of mortgage procurement costs(5) (2,786) (2,621) (165) Depreciation and amortization(5) (45,115) (40,801) (4,314) Interest and other income 7,105 4,988 2,117 Equity in earnings of unconsolidated entities 9,122 16,113 (6,991) Provision for decline in real estate of equity method rental properties - - - Gain on disposition of equity method rental properties - (2,526) 2,526 Revenues and interest income from discontinued operations(1) 13,977 30,629 (16,652) Expenses from discontinued operations(1) (12,025) (31,727) 19,702 ------------------- --------- Operating earnings (loss) (a non-GAAP financial measure) 5,631 15,533 (9,902) ------------------- --------- Income tax expense(6) (6,927) (7,378) 451 Income tax expense from discontinued operations(1)(6) (33,194) (3,001) (30,193) Income tax expense on non- operating earnings items (see below) 32,410 3,818 28,592 ------------------- --------- Operating earnings, net of tax (a non-GAAP financial measure) (2,080) 8,972 (11,052) ------------------- --------- Provision for decline in real estate - (3,480) 3,480 Provision for decline in real estate of equity method rental properties - - - Gain on disposition of equity method rental properties - 2,526 (2,526) Gain on disposition of other investments - - - Gain on disposition of rental properties included in discontinued operations(1) 143,494 9,476 134,018 Income tax benefit (expense) on non-operating earnings:(6) Provision for decline in real estate - 819 (819) Provision for decline in real estate of equity method rental properties - - - Gain on disposition of other investments - - - Gain on disposition of equity method rental properties - (975) 975 Gain on disposition of rental properties included in discontinued operations (32,410) (3,662) (28,748) ------------------- --------- Income tax expense on non- operating earnings (see above) (32,410) (3,818) (28,592) ------------------- --------- Minority interest in continuing operations (3,588) (151) (3,437) Minority interest in discontinued operations:(1) Operating earnings 75 (621) 696 Gain on disposition of rental properties (59,616) - (59,616) ------------------- --------- (59,541) (621) (58,920) ------------------- --------- Minority interest (63,129) (772) (62,357) ------------------- --------- Net earnings $ 45,875 $12,904 $ 32,971 =================== ========= Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Nine Months Ended October 31, 2006 and 2005 (dollars in thousands) Nine Months Ended Increase October 31, (Decrease) 2006 2005 Amount Percent -------------------- ---------------- Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net Earnings: Revenues from real estate operations Commercial Group $568,674 $595,292 $(26,618) Residential Group 186,892 154,737 32,155 Land Development Group 65,844 77,241 (11,397) Corporate Activities - - - -------------------- --------- Total Revenues 821,410 827,270 (5,860) (0.7%) Operating expenses (488,443)(476,528) (11,915) Interest expense, including early extinguishment of debt (215,427)(198,698) (16,729) Amortization of mortgage procurement costs(5) (8,260) (7,497) (763) Depreciation and amortization(5) (130,902)(121,032) (9,870) Interest and other income 29,986 18,485 11,501 Equity in earnings of unconsolidated entities 15,811 46,029 (30,218) Provision for decline in real estate of equity method rental properties 400 704 (304) Gain on disposition of equity method rental properties (7,662) (21,023) 13,361 Revenues and interest income from discontinued operations(1) 51,074 87,923 (36,849) Expenses from discontinued operations(1) (47,641) (94,447) 46,806 -------------------- --------- Operating earnings (loss) (a non-GAAP financial measure) 20,346 61,186 (40,840) -------------------- --------- Income tax expense(6) (11,065) (21,161) 10,096 Income tax expense from discontinued operations(1)(6) (66,479) (879) (65,600) Income tax expense on non- operating earnings items (see below) 67,446 9,933 57,513 -------------------- --------- Operating earnings, net of tax (a non-GAAP financial measure) 10,248 49,079 (38,831) -------------------- --------- Provision for decline in real estate (1,923) (6,100) 4,177 Provision for decline in real estate of equity method rental properties (400) (704) 304 Gain on disposition of equity method rental properties 7,662 21,023 (13,361) Gain on disposition of other investments - 606 (606) Gain on disposition of rental properties included in discontinued operations(1) 287,220 9,476 277,744 Income tax benefit (expense) on non-operating earnings:(6) Provision for decline in real estate 743 1,814 (1,071) Provision for decline in real estate of equity method rental properties 155 272 (117) Gain on disposition of other investments - (234) 234 Gain on disposition of equity method rental properties (2,962) (8,123) 5,161 Gain on disposition of rental properties included in discontinued operations (65,382) (3,662) (61,720) -------------------- --------- Income tax expense on non- operating earnings (see above) (67,446) (9,933) (57,513) -------------------- --------- Minority interest in continuing operations (10,131) (7,480) (2,651) Minority interest in discontinued operations:(1) Operating earnings (596) (683) 87 Gain on disposition of rental properties (118,009) - (118,009) -------------------- --------- (118,605) (683) (117,922) -------------------- --------- Minority interest (128,736) (8,163) (120,573) -------------------- --------- Net earnings $ 106,625 $55,284 $ 51,341 ==================== ========= Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Nine Months Ended October 31, 2006 and 2005 (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 and a division which have been sold or 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) noncash charges from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., for depreciation, amortization (including amortization of mortgage procurement costs) and deferred income taxes; iv) provision for decline in real estate (net of tax); v) extraordinary items (net of tax); and vi) 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 months ended October 31, 2006 and the nine months ended October 31, 2006, the effect of 1,646,734 and 1,565,938 shares of dilutive securities respectively 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 months and nine months ended October 31, 2006, diluted weighted average shares outstanding of 103,327,383 and 103,236,067 respectively were used to arrive at $0.54/share and $1.70/share respectively.) 5) The following table provides detail of depreciation and amortization and amortization of mortgage procurement costs. The Company's Real Estate Groups are owned by Forest City Rental Properties Corporation, a wholly-owned subsidiary 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. Depreciation and Depreciation and Amortization Amortization -------------------- --------------------- Three Months Ended Nine Months Ended October 31, October 31, -------------------- --------------------- 2006 2005 2006 2005 -------------------- --------------------- Full Consolidation $45,115 $40,801 $130,902 $121,032 Non-Real Estate Groups (236) (198) (932) (736) -------------------- --------------------- Real Estate Groups Full Consolidation 44,879 40,603 129,970 120,296 Real Estate Groups related to minority interest (3,705) (4,228) (10,714) (13,108) Real Estate Groups Equity Method 5,710 6,294 25,912 19,825 Real Estate Groups Discontinued Operations 338 3,607 3,639 11,500 -------------------- --------------------- Real Estate Groups Pro-Rata Consolidation $47,222 $46,276 $148,807 $138,513 ==================== ===================== Amortization of Amortization of Mortgage Procurement Mortgage Procurement Costs Costs ------------------------------------------ Three Months Ended Nine Months Ended October 31, October 31, -------------------- --------------------- 2006 2005 2006 2005 -------------------- --------------------- Full Consolidation $2,786 $2,621 $8,260 $7,497 Non-Real Estate Groups (46) (84) (236) (286) -------------------- --------------------- Real Estate Groups Full Consolidation 2,740 2,537 8,024 7,211 Real Estate Groups related to minority interest (315) (317) (915) (982) Real Estate Groups Equity Method 293 303 860 906 Real Estate Groups Discontinued Operations 25 503 129 1,524 -------------------- --------------------- Real Estate Groups Pro-Rata Consolidation $2,743 $3,026 $8,098 $8,659 ==================== ===================== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Nine Months Ended October 31, 2006 and 2005 (in thousands) Three Months Ended Nine Months Ended October 31, October 31, -------------------- --------------------- 2006 2005 2006 2005 -------------------- --------------------- (6) The following table (in thousands) (in thousands) provides detail of Income Tax Expense (Benefit): (A) Operating earnings Current $(7,705) $(1,938) $(15,710) $(1,277) Deferred 14,632 9,160 24,711 16,167 -------------------- --------------------- 6,927 7,222 9,001 14,890 -------------------- --------------------- (B) Provision for decline in real estate Deferred - (819) (743) (1,814) Deferred - Equity method investment - - (155) (272) -------------------- --------------------- - (819) (898) (2,086) -------------------- --------------------- (C) Gain on disposition of other investments Current - Non- Real Estate Groups - - - 60 Deferred - Non- Real Estate Groups - - - 174 -------------------- --------------------- - - - 234 -------------------- --------------------- (D) Gain on disposition of equity method rental properties Current - 220 2,657 8,147 Deferred - 755 305 (24) -------------------- --------------------- - 975 2,962 8,123 -------------------- --------------------- Subtotal (A)(B)(C)(D) Current (7,705) (1,718) (13,053) 6,930 Deferred 14,632 9,096 24,118 14,231 -------------------- --------------------- Income tax expense 6,927 7,378 11,065 21,161 -------------------- --------------------- (E) Discontinued operations - Rental Properties Operating earnings Current 136 (383) (1) (4,359) Deferred 648 (278) 1,098 1,576 -------------------- --------------------- 784 (661) 1,097 (2,783) Gain on disposition of rental properties Current 17,227 - 17,198 - Deferred 15,183 3,662 48,184 3,662 -------------------- --------------------- 32,410 3,662 65,382 3,662 -------------------- --------------------- 33,194 3,001 66,479 879 -------------------- --------------------- Grand Total (A)(B)(C)(D)(E) Current 9,658 (2,101) 4,144 2,571 Deferred 30,463 12,480 73,400 19,469 -------------------- --------------------- $ 40,121 $10,379 $ 77,544 $22,040 -------------------- --------------------- Recap of Grand Total: Real Estate Groups Current 13,259 1,147 15,704 13,571 Deferred 29,739 12,906 73,128 17,892 -------------------- --------------------- 42,998 14,053 88,832 31,463 Non-Real Estate Groups Current (3,601) (3,248) (11,560) (11,000) Deferred (724) (426) (272) 1,577 -------------------- --------------------- (2,877) (3,674) (11,288) (9,423) -------------------- --------------------- Grand Total $ 40,121 $10,379 $ 77,544 $22,040 ==================== ===================== Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (GAAP) (in thousands): Three Months Ended October 31, 2006 ------------------------------------------------------ Plus Unconsol- idated Full Less Invest- Plus Pro-Rata Consol- Minority ments at Discontinued Consol- idation Interest Pro-Rata Operations idation ------------------------------------------------------ Revenues from real estate operations $278,658 $26,044 $ 65,075 $11,845 $ 329,534 Exclude straight-line rent adjustment(1) (2,884) - - (13) (2,897) ------------------------------------------------------ Adjusted revenues 275,774 26,044 65,075 11,832 326,637 Operating expenses 172,111 12,990 43,066 7,840 210,027 Add back depreciation and amortization for non-Real Estate Groups(b) 236 - (251) - (15) Add back amortization of mortgage procurement costs for non- Real Estate Groups(d) 46 1 293 - 338 Exclude straight-line rent adjustment(2) (1,149) - - (220) (1,369) ------------------------------------------------------ Adjusted operating expenses 171,244 12,991 43,108 7,620 208,981 Add interest and other income 7,105 802 442 74 6,819 Add equity in earnings of unconsolidated entities 9,122 - (3,446) - 5,676 Remove gain on disposition of equity method rental properties - - - - - Add back equity method depreciation and amortization expense (see below) 6,003 - (6,003) - - ------------------------------------------------------ Net Operating Income 126,760 13,855 12,960 4,286 130,151 Interest expense, including early extinguishment of debt (71,194) (6,247) (12,960) (1,689) (79,596) Gain on disposition of equity method rental properties(e) - - - - - Gain on disposition of rental properties - - - 83,878 83,878 Provision for decline in real estate - - - - - Provision for decline in real estate of equity method rental properties - - - - - Depreciation and amortization - Real Estate Groups(a) (44,879) (3,705) (5,710) (338) (47,222) Amortization of mortgage procurement costs - Real Estate Groups(c) (2,740) (315) (293) (25) (2,743) Straight-line rent adjustment (1) + (2) 1,735 - - (207) 1,528 Equity method depreciation and amortization expense (see above) (6,003) - 6,003 - - ------------------------------------------------------ Earnings before income taxes 3,679 3,588 - 85,905 85,996 Income tax expense (6,927) - - (33,194) (40,121) ------------------------------------------------------ Earnings (loss) before minority interest and discontinued operations (3,248) 3,588 - 52,711 45,875 Minority Interest (3,588) (3,588) - - - ------------------------------------------------------ Earnings (loss) from continuing operations (6,836) - - 52,711 45,875 Discontinued operations, net of tax and minority interest: Operating earnings (loss) from rental properties 1,243 - - (1,243) - Gain on disposition of rental properties 51,468 - - (51,468) - ------------------------------------------------------ 52,711 - - (52,711) - ------------------------------------------------------ Net earnings $ 45,875 $- $- $- $ 45,875 ====================================================== (a)Depreciation and amortization - Real Estate Groups $44,879 $3,705 $5,710 $338 $47,222 (b)Depreciation and amortization - Non-Real Estate Groups 236 - (251) - (15) ------------------------------------------------------ Total depreciation and amortization $45,115 $3,705 $ 5,459 $338 $ 47,207 ====================================================== (c)Amortization of mortgage procurement costs - Real Estate Groups $2,740 $315 $293 $25 $2,743 (d)Amortization of mortgage procurement costs - Non- Real Estate Groups 46 1 293 - 338 ------------------------------------------------------ Total amortization of mortgage procurement costs $2,786 $316 $ 586 $25 $ 3,081 ====================================================== (e) Properties accounted for on the equity method do not meet the definition of a component of an entity under SFAS No. 144 and therefore are reported in continuing operations when sold. For the three months ended October 31, 2006, no equity method properties were sold. For the three months ended October 31, 2005, one equity method property was sold, Flower Park Plaza, resulting in a pre-tax gain on disposition of $2,526. Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (GAAP) (in thousands): Three Months Ended October 31, 2005 ------------------------------------------------------ Plus Unconsol- idated Full Less Invest- Plus Pro-Rata Consol- Minority ments at Discontinued Consol- idation Interest Pro-Rata Operations idation ------------------------------------------------------ Revenues from real estate operations $260,964 $26,285 $81,644 $26,882 $343,205 Exclude straight-line rent adjustment(1) (3,214) - - (31) (3,245) ------------------------------------------------------ Adjusted revenues 257,750 26,285 81,644 26,851 339,960 Operating expenses 154,536 13,318 49,633 18,518 209,369 Add back depreciation and amortization for non-Real Estate Groups(b) 198 - 597 - 795 Add back amortization of mortgage procurement costs for non- Real Estate Groups(d) 84 - 385 - 469 Exclude straight-line rent adjustment(2) (1,481) - - (564) (2,045) ------------------------------------------------------ Adjusted operating expenses 153,337 13,318 50,615 17,954 208,588 Add interest and other income 4,988 502 58 158 4,702 Add equity in earnings of unconsolidated entities 16,113 - (14,733) - 1,380 Remove gain on disposition of equity method rental properties (2,526) - 2,526 - - Add back equity method depreciation and amortization expense (see below) 6,597 - (6,597) - - ------------------------------------------------------ Net Operating Income 129,585 13,469 12,283 9,055 137,454 Interest expense, including early extinguishment of debt (64,950) (7,413) (12,283) (6,131) (75,951) Gain on disposition of equity method rental properties(e) 2,526 - - - 2,526 Gain on disposition of rental properties - - - 9,476 9,476 Provision for decline in real estate (3,480) (1,360) - - (2,120) Provision for decline in real estate of equity method rental properties - - - - - Depreciation and amortization - Real Estate Groups(a) (40,603) (4,228) (6,294) (3,607) (46,276) Amortization of mortgage procurement costs - Real Estate Groups(c) (2,537) (317) (303) (503) (3,026) Straight-line rent adjustment (1) + (2) 1,733 - - (533) 1,200 Equity method depreciation and amortization expense (see above) (6,597) - 6,597 - - ------------------------------------------------------ Earnings before income taxes 15,677 151 - 7,757 23,283 Income tax expense (7,378) - - (3,001) (10,379) ------------------------------------------------------ Earnings (loss) before minority interest and discontinued operations 8,299 151 - 4,756 12,904 Minority Interest (151) (151) - - - ------------------------------------------------------ Earnings (loss) from continuing operations 8,148 - - 4,756 12,904 Discontinued operations, net of tax and minority interest: Operating earnings (loss) from rental properties (1,058) - - 1,058 - Gain on disposition of rental properties 5,814 - - (5,814) - ------------------------------------------------------ 4,756 - - (4,756) - ------------------------------------------------------ Net earnings $12,904 $- $- $- $12,904 ====================================================== (a)Depreciation and amortization - Real Estate Groups $40,603 $4,228 $6,294 $3,607 $46,276 (b)Depreciation and amortization - Non-Real Estate Groups 198 - 597 - 795 ------------------------------------------------------ Total depreciation and amortization $40,801 $4,228 $6,891 $3,607 $47,071 ====================================================== (c)Amortization of mortgage procurement costs - Real Estate Groups $2,537 $317 $303 $503 $3,026 (d)Amortization of mortgage procurement costs - Non- Real Estate Groups 84 - 385 - 469 ------------------------------------------------------ Total amortization of mortgage procurement costs $2,621 $317 $688 $503 $3,495 ====================================================== (e) Properties accounted for on the equity method do not meet the definition of a component of an entity under SFAS No. 144 and therefore are reported in continuing operations when sold. For the three months ended October 31, 2006, no equity method properties were sold. For the three months ended October 31, 2005, one equity method property was sold, Flower Park Plaza, resulting in a pre-tax gain on disposition of $2,526. Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (GAAP) (in thousands): Nine Months Ended October 31, 2006 ---------------------------------------------------- Plus Unconsol- idated Plus Full Less Invest- Discont- Pro-Rata Consol- Minority ments at inued Consol- idation Interest Pro-Rata Operations idation ---------------------------------------------------- Revenues from real estate operations $821,410 $77,612 $ 210,183 $43,125 $ 997,106 Exclude straight- line rent adjustment(1) (8,955) - - (44) (8,999) ---------------------------------------------------- Adjusted revenues 812,455 77,612 210,183 43,081 988,107 Operating expenses 488,443 38,617 140,702 31,532 622,060 Add back depreciation and amortization for non-Real Estate Groups(b) 932 - 7,273 - 8,205 Add back amortization of mortgage procurement costs for non- Real Estate Groups(d) 236 1 591 - 826 Exclude straight- line rent adjustment(2) (3,502) - - (938) (4,440) ---------------------------------------------------- Adjusted operating expenses 486,109 38,618 148,566 30,594 626,651 Add interest and other income 29,986 2,673 800 614 28,727 Add equity in earnings of unconsolidated entities 15,811 - (2,155) - 13,656 Remove gain on disposition of equity method rental properties (7,662) - 7,662 - - Add back provision for decline recorded on equity method 400 - (400) - - Add back equity method depreciation and amortization expense (see below) 26,772 - (26,772) - - ---------------------------------------------------- Net Operating Income 391,653 41,667 40,752 13,101 403,839 Interest expense, including early extinguishment of debt (215,427) (19,907) (40,752) (5,602) (241,874) Gain on disposition of equity method rental properties(e) 7,662 - - - 7,662 Gain on disposition of rental properties and other investments - - - 169,211 169,211 Provision for decline in real estate (1,923) - - - (1,923) Provision for decline in real estate of equity method rental properties (400) - - - (400) Depreciation and amortization - Real Estate Groups(a) (129,970) (10,714) (25,912) (3,639) (148,807) Amortization of mortgage procurement costs - Real Estate Groups(c) (8,024) (915) (860) (129) (8,098) Straight-line rent adjustment (1) + (2) 5,453 - - (894) 4,559 Equity method depreciation and amortization expense (see above) (26,772) - 26,772 - - ---------------------------------------------------- Earnings before income taxes 22,252 10,131 - 172,048 184,169 Income tax expense (11,065) - - (66,479) (77,544) ---------------------------------------------------- Earnings before minority interest and discontinued operations 11,187 10,131 - 105,569 106,625 Minority Interest (10,131) (10,131) - - - ---------------------------------------------------- Earnings (loss) from continuing operations 1,056 - - 105,569 106,625 Discontinued operations, net of tax and minority interest: Operating earnings (loss) from rental properties 1,740 - - (1,740) - Gain on disposition of rental properties 103,829 - - (103,829) - ---------------------------------------------------- 105,569 - - (105,569) - ---------------------------------------------------- Net earnings $ 106,625 $- $- $- $ 106,625 ==================================================== (a)Depreciation and amortization - Real Estate Groups $129,970 $10,714 $25,912 $3,639 $148,807 (b)Depreciation and amortization - Non-Real Estate Groups 932 - 7,273 - 8,205 ---------------------------------------------------- Total depreciation and amortization $130,902 $10,714 $ 33,185 $3,639 $ 157,012 ==================================================== (c)Amortization of mortgage procurement costs - Real Estate Groups $8,024 $915 $860 $129 $8,098 (d)Amortization of mortgage procurement costs - Non-Real Estate Groups 236 1 591 - 826 ---------------------------------------------------- Total amortization of mortgage procurement costs $8,260 $916 $ 1,451 $129 $ 8,924 ==================================================== (e) Properties accounted for on the equity method do not meet the definition of a component of an entity under SFAS No. 144 and therefore are reported in continuing operations when sold. For the nine months ended October 31, 2006, one equity method property was sold, Midtown Plaza, resulting in a pre-tax gain on disposition of $7,662. For the nine months ended October 31, 2005, three equity method investments were sold, including Flower Park Plaza, Showcase and Colony Place, resulting in a pre-tax gain on disposition of $21,023. Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (GAAP) (in thousands): Nine Months Ended October 31, 2005 ------------------------------------------------------ Plus Unconsol- idated Plus Full Less Invest- Discont- Pro-Rata Consol- Minority ments at inued Consol- idation Interest Pro-Rata Operations idation ------------------------------------------------------ Revenues from real estate operations $827,270 $85,026 $231,690 $78,252 $1,052,186 Exclude straight-line rent adjustment(1) (11,895) - - (94) (11,989) ------------------------------------------------------ Adjusted revenues 815,375 85,026 231,690 78,158 1,040,197 Operating expenses 476,528 41,516 142,648 56,297 633,957 Add back depreciation and amortization for non-Real Estate Groups(b) 736 - 9,858 - 10,594 Add back amortization of mortgage procurement costs for non- Real Estate Groups(d) 286 - 453 - 739 Exclude straight-line rent adjustment(2) (4,045) - - (1,761) (5,806) ------------------------------------------------------ Adjusted operating expenses 473,505 41,516 152,959 54,536 639,484 Add interest and other income 18,485 1,645 505 366 17,711 Add equity in earnings of unconsolidated entities 46,029 - (40,103) - 5,926 Remove gain on disposition of equity method rental properties (21,023) - 21,023 - - Add back provision for decline recorded on equity method 704 - (704) - - Add back equity method depreciation and amortization expense (see below) 20,731 - (20,731) - - ------------------------------------------------------ Net Operating Income 406,796 45,155 38,721 23,988 424,350 Interest expense, including early extinguishment of debt (198,698) (22,179) (38,721) (16,504) (231,744) Gain on disposition of equity method rental properties(e) 21,023 - - - 21,023 Gain on disposition of rental properties and other investments 606 - - 9,476 10,082 Provision for decline in real estate (6,100) (1,406) - - (4,694) Provision for decline in real estate of equity method rental properties (704) - - - (704) Depreciation and amortization - Real Estate Groups(a) (120,296) (13,108) (19,825) (11,500) (138,513) Amortization of mortgage procurement costs - Real Estate Groups(c) (7,211) (982) (906) (1,524) (8,659) Straight-line rent adjustment (1) + (2) 7,850 - - (1,667) 6,183 Equity method depreciation and amortization expense (see above) (20,731) - 20,731 - - ------------------------------------------------------ Earnings before income taxes 82,535 7,480 - 2,269 77,324 Income tax expense (21,161) - - (879) (22,040) ------------------------------------------------------ Earnings before minority interest and discontinued operations 61,374 7,480 - 1,390 55,284 Minority Interest (7,480) (7,480) - - - ------------------------------------------------------ Earnings (loss) from continuing operations 53,894 - - 1,390 55,284 Discontinued operations, net of tax and minority interest: Operating earnings (loss) from rental properties (4,424) - - 4,424 - Gain on disposition of rental properties 5,814 - - (5,814) - ------------------------------------------------------ 1,390 - - (1,390) - ------------------------------------------------------ Net earnings $55,284 $- $- $- $55,284 ====================================================== (a)Depreciation and amortization - Real Estate Groups $120,296 $13,108 $19,825 $11,500 $138,513 (b)Depreciation and amortization - Non-Real Estate Groups 736 - 9,858 - 10,594 ------------------------------------------------------ Total depreciation and amortization $121,032 $13,108 $29,683 $11,500 $149,107 ====================================================== (c)Amortization of mortgage procurement costs - Real Estate Groups $7,211 $982 $906 $1,524 $8,659 (d)Amortization of mortgage procurement costs - Non- Real Estate Groups 286 - 453 - 739 ------------------------------------------------------ Total amortization of mortgage procurement costs $7,497 $982 $1,359 $1,524 $9,398 ====================================================== (e) Properties accounted for on the equity method do not meet the definition of a component of an entity under SFAS No. 144 and therefore are reported in continuing operations when sold. For the nine months ended October 31, 2006, one equity method property was sold, Midtown Plaza, resulting in a pre-tax gain on disposition of $7,662. For the nine months ended October 31, 2005, three equity method investments were sold, including Flower Park Plaza, Showcase and Colony Place, resulting in a pre-tax gain on disposition of $21,023. Net Operating Income (dollars in thousands) ------------------------------------------------ Three Months Ended October 31, 2006 ------------------------------------------------ Plus Unconsol- idated Plus Full Less Investments Discont- Pro-Rata Consol- Minority at Pro- inued Consol- idation Interest Rata Operations idation ------------------------------------------------ Commercial Group Retail Comparable $44,478 $5,063 $2,892 $- $42,307 -------------------------------------------------------------- Total 47,125 4,797 2,924 460 45,712 Office Buildings Comparable 43,672 5,332 1,065 - 39,405 -------------------------------------------------------------- Total 43,959 5,150 1,010 - 39,819 Hotels Comparable 4,779 - 494 - 5,273 -------------------------------------------------------------- Total 4,779 - 494 3,891 9,164 Earnings from Commercial Land Sales 7,647 766 - - 6,881 Development Fees 258 103 - - 155 Other (7,294) 1,039 (14) - (8,347) -------------------------------------------------------------- Total Commercial Group Comparable 92,929 10,395 4,451 - 86,985 -------------------------------------------------------------- Total 96,474 11,855 4,414 4,351 93,384 Residential Group Apartments Comparable 25,859 613 5,954 - 31,200 -------------------------------------------------------------- Total 29,790 1,193 7,896 (65) 36,428 Total Real Estate Groups Comparable 118,788 11,008 10,405 - 118,185 -------------------------------------------------------------- Total 126,264 13,048 12,310 4,286 129,812 Land Development Group 14,302 807 171 - 13,666 The Nets (1,342) - 479 - (863) Corporate Activities (12,464) - - - (12,464) - ---------------------------------------------------------------------- Grand Total $126,760 $13,855 $ 12,960 $4,286 $130,151 ------------------------------------------------ Three Months Ended October 31, 2005 ------------------------------------------------ Plus Unconsol- idated Plus Full Less Investments Discont- Pro-Rata Consol- Minority at Pro- inued Consol- idation Interest Rata Operations idation ------------------------------------------------ Commercial Group Retail Comparable $42,320 $4,713 $2,912 $- $40,519 -------------------------------------------------------------- Total 41,315 3,627 2,966 415 41,069 Office Buildings Comparable 41,382 4,721 1,100 - 37,761 -------------------------------------------------------------- Total 41,148 4,693 983 - 37,438 Hotels Comparable 4,475 - 445 - 4,920 -------------------------------------------------------------- Total 4,475 - 445 7,186 12,106 Earnings from Commercial Land Sales 6,395 227 - - 6,168 Development Fees 1,052 421 - - 631 Other 2,140 2,290 24 - (126) -------------------------------------------------------------- Total Commercial Group Comparable 88,177 9,434 4,457 - 83,200 -------------------------------------------------------------- Total 96,525 11,258 4,418 7,601 97,286 Residential Group Apartments Comparable 23,475 594 6,160 - 29,041 -------------------------------------------------------------- Total 23,938 1,250 7,397 1,454 31,539 Total Real Estate Groups Comparable 111,652 10,028 10,617 - 112,241 -------------------------------------------------------------- Total 120,463 12,508 11,815 9,055 128,825 Land Development Group 22,323 961 (48) - 21,314 The Nets (3,781) - 516 - (3,265) Corporate Activities (9,420) - - - (9,420) - ---------------------------------------------------------------------- Grand Total $129,585 $13,469 $12,283 $9,055 $137,454 ----------------------- % Change ----------------------- Full Pro-Rata Consol- Consol- idation idation ---------------------- Commercial Group Retail Comparable 5.1% 4.4% --------------- Total Office Buildings Comparable 5.5% 4.4% --------------- Total Hotels Comparable 6.8% 7.2% --------------- Total Earnings from Commercial Land Sales Development Fees Other --------------- Total Commercial Group Comparable 5.4% 4.5% --------------- Total Residential Group Apartments Comparable 10.2% 7.4% --------------- Total Total Real Estate Groups Comparable 6.4% 5.3% --------------- Total Land Development Group The Nets Corporate Activities - ----------------------- Grand Total Net Operating Income (dollars in thousands) ----------------------------------------------- Nine Months Ended October 31, 2006 ----------------------------------------------- Plus Unconsol- idated Plus Full Less Investments Discont- Pro-Rata Consol- Minority at Pro- inued Consol- idation Interest Rata Operations idation ----------------------------------------------- Commercial Group Retail Comparable $136,101 $14,950 $8,256 $- $129,407 -------------------------------------------------------------- Total 144,160 13,391 9,065 1,808 141,642 Office Buildings Comparable 132,479 16,206 3,275 - 119,548 -------------------------------------------------------------- Total 132,841 16,417 3,105 - 119,529 Hotels Comparable 11,003 - 1,456 - 12,459 -------------------------------------------------------------- Total 11,003 - 1,456 11,120 23,579 Earnings from Commercial Land Sales 18,196 924 - - 17,272 Development Fees 719 288 - - 431 Other (15,524) 4,994 101 - (20,417) -------------------------------------------------------------- Total Commercial Group Comparable 279,583 31,156 12,987 - 261,414 -------------------------------------------------------------- Total 291,395 36,014 13,727 12,928 282,036 Residential Group Apartments Comparable 76,645 1,876 18,630 - 93,399 -------------------------------------------------------------- Total 92,823 2,867 23,554 173 113,683 Total Real Estate Groups Comparable 356,228 33,032 31,617 - 354,813 -------------------------------------------------------------- Total 384,218 38,881 37,281 13,101 395,719 Land Development Group 52,279 2,786 660 - 50,153 The Nets (14,084) - 2,811 - (11,273) Corporate Activities (30,760) - - - (30,760) - ---------------------------------------------------------------------- Grand Total $391,653 $41,667 $ 40,752 $13,101 $403,839 - ---------------------------------------------------------------------- ----------------------------------------------- Nine Months Ended October 31, 2005 ----------------------------------------------- Plus Unconsol- idated Plus Full Less Investments Discont- Pro-Rata Consol- Minority at Pro- inued Consol- idation Interest Rata Operations idation ----------------------------------------------- Commercial Group Retail Comparable $128,938 $14,654 $8,647 $- $122,931 -------------------------------------------------------------- Total 134,010 12,166 8,942 1,722 132,508 Office Buildings Comparable 128,856 15,446 3,139 - 116,549 -------------------------------------------------------------- Total 130,068 16,599 2,964 - 116,433 Hotels Comparable 9,713 - 1,432 - 11,145 -------------------------------------------------------------- Total 9,713 - 1,432 16,480 27,625 Earnings from Commercial Land Sales 37,975 2,331 - - 35,644 Development Fees 7,714 3,085 - - 4,629 Other (11,388) 3,788 108 - (15,068) -------------------------------------------------------------- Total Commercial Group Comparable 267,507 30,100 13,218 - 250,625 -------------------------------------------------------------- Total 308,092 37,969 13,446 18,202 301,771 Residential Group Apartments Comparable 70,376 1,690 18,421 - 87,107 -------------------------------------------------------------- Total 71,606 3,610 23,092 5,786 96,874 Total Real Estate Groups Comparable 337,883 31,790 31,639 - 337,732 -------------------------------------------------------------- Total 379,698 41,579 36,538 23,988 398,645 Land Development Group 69,818 3,576 191 - 66,433 The Nets (16,997) - 1,992 - (15,005) Corporate Activities (25,723) - - - (25,723) - ---------------------------------------------------------------------- Grand Total $406,796 $45,155 $38,721 $23,988 $424,350 - ---------------------------------------------------------------------- ------------------------------ % Change ------------------------------ Full Pro-Rata Consol- Consol- idation idation ----------------------------- Commercial Group Retail Comparable 5.6% 5.3% ----------------- Total Office Buildings Comparable 2.8% 2.6% ----------------- Total Hotels Comparable 13.3% 11.8% ----------------- Total Earnings from Commercial Land Sales Development Fees Other ----------------- Total Commercial Group Comparable 4.5% 4.3% ----------------- Total Residential Group Apartments Comparable 8.9% 7.2% ----------------- Total Total Real Estate Groups Comparable 5.4% 5.1% ----------------- Total Land Development Group The Nets Corporate Activities - ------------------------- Grand Total - ------------------------- Development Pipeline - ---------------------------------------------------------------------- October 31, 2006 2006 Openings and Acquisitions(9) FCE Pro- Dev Legal Rata (D) Date Ownership FCE% Acq Opened/ % (i) Property/Location (A) Acquired (i)(1) (2) - ---------------------------------------------------------------------- Retail Centers: Northfield at Stapleton/Denver, CO Q4-05/ Q1-06/ D Q3-06 95.0% 97.9% Metreon(c)/San Francisco, CA A/D Q1-06 50.0% 50.0% San Francisco Centre & Emporium(c)/San Francisco, CA A/D Q3-06 50.0% 50.0% Office: Resurrection Health Care/Skokie, IL A Q1-06 100.0% 100.0% Advent Solar(c)/ Albuquerque, NM D Q3-06 50.0% 50.0% Bulletin Building(c)/San Francisco, CA A/D Q3-06 50.0% 50.0% Stapleton Medical Office Building/Denver, CO D Q3-06 90.0% 90.0% Residential: Sky 55/Chicago, IL D Q1-06 100.0% 100.0% 1251 S. Michigan/Chicago, IL D Q1-06 100.0% 100.0% Total Openings (d) - ---------------------------------------------------------------------- Residential Phased-In Units (c)(e): Arbor Glenn/Twinsburg, OH D 2004-07 50.0% 50.0% Woodgate/Evergreen Farms/Olmsted Township, OH D 2004-07 33.0% 33.0% Pine Ridge Expansion/Willoughby Hills, OH D 2005-06 50.0% 50.0% Cobblestone Court/Painesville, OH D 2006-08 50.0% 50.0% Total (f) - ---------------------------------------------------------------------- See Attached 2006 Footnotes Development Pipeline - ---------------------------------------------------------------------- October 31, 2006 2006 Openings and Acquisitions(9) Cost at FCE Pro- Cost at Rata Full Share Consol- Total (Non- idation Cost GAAP) Sq. ft./ Gross (GAAP) at 100% (b) No. of Leasable Property/Location (a) (3) (2)X(3) Units Area - ---------------------------------------------------------------------- (in millions) ------------------------ Retail Centers: Northfield at Stapleton/Denver, CO $182.5 $182.5 $178.5 1,170,000 560,000(j) Metreon(c)/San Francisco, CA 0.0 40.0 20.0 290,000 290,000 San Francisco Centre & Emporium(c)/San Francisco, CA 0.0 598.0 299.0 1,462,000 812,000(k) -------------------------------------------- $182.5 $820.5 $497.5 2,922,000 1,662,000 ------------------------==================== Office: Resurrection Health Care/Skokie, IL $4.8 $4.8 $4.8 40,000 Advent Solar(c)/ Albuquerque, NM 0.0 10.2 5.1 88,000 Bulletin Building(c)/San Francisco, CA 0.0 27.0 13.5 87,000 Stapleton Medical Office Building/Denver, CO 10.3 10.3 9.3 45,000 ---------------------------------- $15.1 $52.3 $32.7 260,000 ------------------------========== Residential: Sky 55/Chicago, IL $113.2 $113.2 $113.2 411 1251 S. Michigan/Chicago, IL 16.7 16.7 16.7 91 ---------------------------------- $129.9 $129.9 $129.9 502 ------------------------========== ------------------------ Total Openings (d) $327.5 $1,002.7 $660.1 ======================== - ------------------------------------------------------------ Residential Phased-In Opened in Units (c)(e): '06/Total ---------- Arbor Glenn/Twinsburg, OH $0.0 $18.4 $9.2 48/288 Woodgate/Evergreen Farms/Olmsted Township, OH 0.0 22.9 7.6 132/348 Pine Ridge Expansion/Willoughby Hills, OH 0.0 16.4 8.2 36/162 Cobblestone Court/Painesville, OH 0.0 24.6 12.3 112/304 ---------------------------------- Total (f) $0.0 $82.3 $37.3 328/1,102 ================================= - ---------------------------------------------------------------------- See Attached 2006 Footnotes Development Pipeline - ---------------------------------------------------------------------- October 31, 2006 Under Construction or to be Acquired (19) FCE Pro- Dev Legal Rata (D) Ownership FCE% Acq Anticipated % (i) Property/Location (A) Opening (i)(1) (2) - ---------------------------------------------------------------------- Retail Centers: Promenade Bolingbrook/ Bolingbrook, IL D Q2-07 100.0% 100.0% Rancho Cucamonga Leggio/Rancho Cucamonga, CA D Q2-07 80.0% 80.0% Orchard Town Ctr./ 2006/ Westminster, CO D 2007 100.0% 100.0% East River Plaza(c)/ Manhattan, NY D Q3-08 35.0% 50.0% Office: Edgeworth Building/ Richmond, VA D Q4-06 100.0% 100.0% Illinois Science and Technology Park Building A(r)/Skokie, IL A/D Q4-06 100.0% 100.0% Illinois Science and Technology Park - Building Q(r)/Skokie, IL A/D Q4-07 100.0% 100.0% New York Times/Manhattan, NY D Q3-07 70.0% 100.0% Johns Hopkins - 855 North WolfeSt./East Baltimore, MD D Q1-08 77.5% 77.5% Residential: Cutters Ridge at Tobacco Row(s)/Richmond, VA D Q4-06 100.0% 100.0% Sterling Glen of Roslyn(g)/ Roslyn, NY D Q2-07 40.0% 100.0% Stapleton Town Center - Botanica Phase II(p)/Denver, CO D Q3-07 90.0% 90.0% Uptown Apartments(c)/ Oakland, CA D Q2-08 50.0% 50.0% Ohana Military Communities (c)(e)/ Honolulu, HI D 2005-2008 10.0% 10.0% Dallas Mercantile/ Dallas, TX D Q4-08 100.0% 100.0% Lucky Strike/Richmond, VA D Q1-08 100.0% 100.0% Military Housing - Navy Midwest(c)/ Chicago, IL D Q1-09 25.0% 25.0% Condominiums: 1100 Wilshire(c)/Los Angeles, CA D Q4-06 50.0% 50.0% Mercury(c)/Los Angeles, CA D Q3-07 50.0% 50.0% Total Under Construction (h) LESS: Above properties to be sold as condominiums Under Construction less Condominiums - ---------------------------------------------------------------------- Residential Phased-In Units(c)(e): Arbor Glenn/Twinsburg, OH D 2004-07 50.0% 50.0% Woodgate/ Evergreen Farms/Olmsted Township, OH D 2004-07 33.0% 33.0% Pine Ridge Expansion/ Willoughby Hills, OH D 2005-06 50.0% 50.0% Cobblestone Court/ Painesville, OH D 2006-08 50.0% 50.0% Stratford Crossing/ Wadsworth, OH D 2007-09 50.0% 50.0% Total (m) Development Pipeline - ---------------------------------------------------------------------- October 31, 2006 Under Construction or to be Acquired (19) Cost at FCE Cost at Pro-Rata Full Share Consol- Total (Non- Pre- idation Cost GAAP) Sq. ft./ Gross Lea- (GAAP) at 100% (b) No. of Leasable sed Property/Location (a) (3) (2)X(3) Units Area % - ---------------------------------------------------------------------- (in millions) ---------------------------- Retail Centers: Promenade Bolingbrook/ Bolingbrook, IL $134.8 $134.8 $134.8 743,000 417,000(l) 54% Rancho Cucamonga Leggio/Rancho Cucamonga, CA 41.2 41.2 33.0 180,000 180,000 100% Orchard Town Ctr./ Westminster, CO 137.1 137.1 137.1 970,000 556,000(q) 16% East River Plaza(c)/ Manhattan, NY 0.0 347.3 173.7 514,000 514,000 64% ------------------------------------------------- $ 313.1 $660.4 $478.6 2,407,000 1,667,000 ----------------------------===================== Office: Edgeworth Building/ Richmond, VA $35.0 $35.0 $35.0 142,000 60% Illinois Science and Technology Park Building A(r)/Skokie, IL 27.4 27.4 27.4 225,000 63% Illinois Science and Technology Park - Building Q(r)/Skokie, IL 45.6 45.6 45.6 160,000 0% New York Times/Manhattan, NY 507.3 507.3 507.3 734,000(o) 75% Johns Hopkins - 855 North WolfeSt./East Baltimore, MD 104.5 104.5 81.0 278,000 36% -------------------------------------- $719.8 $719.8 $696.3 1,539,000 ----------------------------========== Residential: Cutters Ridge at Tobacco Row(s)/Richmond, VA $4.8 $4.8 $4.8 12 Sterling Glen of Roslyn(g)/ Roslyn, NY 79.2 79.2 79.2 158 Stapleton Town Center - Botanica Phase II(p)/Denver, CO 26.3 26.3 23.7 154 Uptown Apartments(c)/ Oakland, CA 0.0 188.5 94.3 665 Ohana Military Communities (c)(e)/ Honolulu, HI 0.0 316.5 31.7 1,952 Dallas Mercantile/ Dallas, TX 123.2 123.2 123.2 366(n) Lucky Strike/Richmond, VA 37.3 37.3 37.3 131 Military Housing - Navy Midwest(c)/ Chicago, IL 0.0 264.9 66.2 1,658 -------------------------------------- $270.8 $1,040.7 $460.4 5,096 ----------------------------========== Condominiums: Pre-Sold% ----------- 1100 Wilshire(c)/Los Angeles, CA $0.0 $127.8 $63.9 228 66% Mercury(c)/Los Angeles, CA 0.0 145.0 72.5 238 29% -------------------------------------- $0.0 $272.8 $136.4 466 ----------------------------========== ---------------------------- Total Under Construction (h) $1,303.7 $2,693.7 $1,771.7 ============================ LESS: Above properties to be sold as condominiums $ 0.0 $272.8 $136.4 ---------------------------- Under Construction less Condominiums $1,303.7 $2,420.9 $1,635.3 ============================ - ------------------------------------------------------- Residential Under Phased-In Const./ Units(c)(e): Total ---------- Arbor Glenn/Twinsburg, OH $0.0 $18.4 $9.2 48/288 Woodgate/ Evergreen Farms/Olmsted Township, OH 0.0 22.9 7.6 12/348 Pine Ridge Expansion/ Willoughby Hills, OH 0.0 16.4 8.2 57/162 Cobblestone Court/ Painesville, OH 0.0 24.6 12.3 192/304 Stratford Crossing/ Wadsworth, OH 0.0 24.1 12.1 108/348 -------------------------------------- Total (m) $0.0 $106.4 $49.4 417/1,450 ----------------------------========== Development Pipeline 2006 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 amount (GAAP) of $327.5 million of cost to the Company's pro-rata share (a non- GAAP measure) of $660.1 million of cost consists of a reduction to full consolidation for minority interest of $5.0 million of cost and the addition of its share of cost for unconsolidated investments of $337.6 million. (e) Phased-in openings. Costs are representative of the total project. (f) The difference between the full consolidation amount (GAAP) of $0.0 million of cost to the Company's pro-rata share (a non-GAAP measure) of $37.3 million of cost consists of the Company's share of cost for unconsolidated investments of $37.3 million. (g) Supported-living property. (h) The difference between the full consolidation amount (GAAP) of $1,303.7 million of cost to the Company's pro-rata share (a non- GAAP measure) of $1,771.7 million of cost consists of a reduction to full consolidation for minority interest of $34.3 million of cost and the addition of its share of cost for unconsolidated investments of $502.3 million. (i) 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. The Company consolidates its investments in these projects in accordance with FIN No. 46(R) at a consolidation percentage that is reflected in the Pro-Rata FCE % column. (j) Includes all phases of Northfield at Stapleton including Phase I which opened in Q4-05. Also, includes 34,000 square feet of office space. (k) Includes San Francisco Centre and Emporium which were previously reported separately. Includes 235,000 square feet of office space. (l) Includes 39,000 square feet of office space. (m) The difference between the full consolidation amount (GAAP) of $0.0 million of cost to the Company's pro-rata share (a non-GAAP measure) of $49.4 million of cost consists of Forest City's share of cost for unconsolidated investments of $49.4 million. (n) Project includes 18,000 square feet of retail space. (o) Includes 23,000 square feet of retail space. (p) Phased opening: Phase I is scheduled to open Q1-07 and Phase II Q2-07. (q) 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. (r) As of October 31, 2006 the phases of Illinois Science and Technology Park have been broken out. Therefore, two phases are under construction and two phases are under development. (s) Formerly a condominium project. Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information We use NOI, along with EBDT as discussed on pages 2-3, to assess operating performance. Comparable NOI is defined as NOI from properties opened and operated in both three and nine months ended October 31, 2006 and 2005. The following schedules on pages 6-7 present comparable NOI for each of our major product lines, as well as strategic business unit under which these product lines operate. A reconciliation of NOI to the most comparable GAAP measure, net earnings, is presented on pages 8-9. A reconciliation of NOI to net earnings for each strategic business unit can be found on pages 35- 46. CONTACT: Forest City Enterprises, Inc. Thomas G. Smith, Executive Vice President, Chief Financial Officer, 216-621-6060 or Thomas T. Kmiecik, Assistant Treasurer, 216-621-6060 or On The Web: www.forestcity.net -----END PRIVACY-ENHANCED MESSAGE-----