EX-99.1 2 a5361890ex991.txt EXHIBIT 99.1 Exhibit 99.1 Forest City Reports Fiscal 2006 Full-Year and Fourth-Quarter Results CLEVELAND--(BUSINESS WIRE)--March 27, 2007--Forest City Enterprises, Inc. (NYSE:FCEA)(NYSE:FCEB) today announced EBDT, net earnings and revenues for the fiscal fourth quarter and full year ended January 31, 2007. In fiscal 2006, consolidated revenues grew to a record $1.2 billion, a 3.6 percent increase over last year's $1.1 billion. EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) was $285.0 million, or $2.73 per share, a 3.4 percent increase on a per share basis compared with last year's EBDT of $270.5 million, or $2.64 per share. Net earnings were $177.3 million, or $1.70 per share, compared with $83.5 million, or $0.81 per share, in the prior year. Fourth-quarter consolidated revenues were $360.4 million compared with $313.0 million last year. EBDT for the fourth quarter was $107.6 million, or $1.00 per share, compared with last year's fourth-quarter EBDT of $73.7 million, or $0.72 per share. Net earnings for the fourth quarter were $70.6 million, or $0.66 per share, compared with fourth-quarter 2005 net earnings of $28.2 million, or $0.27 per share. EBDT and EBDT per share are non-GAAP (Generally Accepted Accounting Principles) 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. All per share amounts are on a fully diluted basis Discussion of Results Charles A. Ratner, president and chief executive officer of Forest City Enterprises, said, "Fiscal 2006 was an outstanding year for Forest City - including our 27th consecutive year of EBDT growth, and record-high revenues of $1.2 billion, net earnings of $177.3 million, total assets of $9.0 billion, shareholders' equity of $1.0 billion, and liquidity of $644.1 million. We opened 14 projects representing a record $803.7 million of total cost at our share. Development has been, and will continue to be, the primary driver of our growth. Of particular significance in 2006, however, were our acquisitions and the New York portfolio transaction, which together added $854.0 million to our completed real estate. We also achieved a record-high level of property sales, totaling $461.3 million, and made significant progress on some of the largest projects in our development pipeline. "The increase in EBDT was primarily due to the strong performance of our commercial and residential operating portfolios. Comparable NOI, the primary driver of EBDT, grew because of consistently high occupancies, as well as increasing rents in all segments. Also, EBDT increased as a result of property additions, growth in our military housing business, and the ability of the Land Development Group to maintain its profitability despite overall weakness in the sector. Historic Tax Credit income in our Residential Group and recognition of a lower percentage of the Nets losses had a positive impact on EBDT, as well. "These increases were partially offset by decreases in outlot sales in our commercial business and the loss recognized on interest rate derivatives. We purchased $1.2 billion of 10-year forward swaps, at a weighted average rate of 5.76 percent, to hedge our interest rate exposure in anticipation of future financing transactions. This resulted in a $9.4 million decrease in 2006 EBDT, but it enabled us to lock in favorable, long-term fixed rates," Ratner said. Overall, comparable property net operating income (NOI) increased 4.9 percent during the year. Comparable property NOI increased in the retail, office and residential portfolios by 4.9 percent, 2.5 percent and 6.5 percent, respectively. These results represented the highest increases in the past five years. 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. Comparable retail occupancies were 94.6 percent in 2006 compared with 94.7 percent in 2005. Comparable office occupancies were 93.4 percent compared with 92.5 percent. Comparable average occupancies in the residential business increased to 95.1 percent from 93.4 percent last year. Retail and office experienced rent increases of 8.8 percent and 11.9 percent, respectively, while residential Net Rental Income increased to 92.8 percent, up 1.9 percent from a year ago. Regional mall sales averaged $473 per square foot and comparable mall sales increased 5.6 percent. Ratner concluded, "We had a very strong year of project openings and closed on two major acquisitions and the New York portfolio transaction. At January 31, 2007, we had $1.7 billion of projects under construction and more than $2.5 billion of projects under development (both at the Company's pro-rata share). Our capital strategy provided the equity for all of these investment opportunities. Progress on projects in our pipeline will ensure long-term value creation for shareholders." 2006 Milestones Openings and New York City Portfolio Transaction During fiscal 2006, Forest City opened or acquired 14 projects, representing a total of $803.7 million at the Company's pro-rata share and $417.8 million of cost on a full consolidation basis. In addition, the Company increased its ownership or acquired partnership interests that totaled $854.0 million. The Forest City Ratner Companies (FCRC) portfolio transaction is one of the most important achievements in the Company's recent history. This made FCRC a wholly owned subsidiary of Forest City Enterprises - strengthening the Company's commitment and position in its largest single market, New York City. As a result, Forest City has increased its interest in 30 operating properties in the greater New York City metropolitan area. The transaction was slightly dilutive to Forest City's EBDT per share in 2006, but we believe it will be accretive in the long term. The largest opening during the year was Westfield San Francisco Centre, which is one of the nation's premier retail centers. Developed and owned in partnership with Westfield, the multi-level, 1.5-million-square-foot center in downtown San Francisco is more than 90 percent leased. The center features the second-largest Nordstrom and Bloomingdale's stores in the country as well as a unique, high-end tenant lineup that is generating sales of more than $670 per square foot. Microsoft and San Francisco State University will occupy more than 75 percent of the 235,000-square-foot office component of the project. Ratner said, "Our partnership with Westfield has been so mutually beneficial that, together, we acquired two other buildings in downtown San Francisco for redevelopment - the 290,000-square-foot Metreon and the 87,000-square-foot Bulletin Building." At its Stapleton mixed-use project in Denver, Forest City opened the Main Street phase of The Shops at Northfield open-air regional lifestyle center. The Edgeworth Building, a former tobacco factory that has been transformed into an office building, opened at Tobacco Row in Richmond, Virginia. During 2006, Forest City opened its first rental apartment communities at Chicago's Central Station - the 411-unit Sky55 and 91-unit 1251 South Michigan - totaling $125.5 million of project costs. Dispositions Forest City continues to take advantage of favorable market conditions and high valuations to dispose of properties. In fiscal 2006, Forest City sold seven properties, including two New York City hotels. The aggregate price was approximately $461.3 million at the Company's pro-rata share, which generated $264.3 million in net proceeds - the highest level of dispositions in Company history. The properties were sold at an average cap rate of 6.6 percent. Dispositions remain an excellent source of liquidity and a meaningful part of the Company's long-term capital strategy. Over the last six years, the Company completed more than $1.2 billion (at the Company's pro-rata share) in property sales, which generated more than $560 million in cash proceeds. In the year prior to their sales, these properties were generating annual EBDT of $36.4 million, and yet EBDT still grew at an 11.1 percent compound annual growth rate over the last six years. Capital Transactions and Financing Activity During 2006, Forest City completed the sale of $287.5 million of Puttable Equity-Linked Senior Notes due 2011 at very favorable terms. This transaction evidences the Company's efforts to further diversify its layered capital structure and enhance financial flexibility. The Company also increased its corporate credit facility by $150 million to $600 million. During the year, Forest City closed on transactions totaling $1.3 billion in nonrecourse mortgage financings, including $658.0 million in refinancings, $319.3 million in development and acquisitions, and $318.6 million in loan extensions and additional fundings. As of January 31, 2007, the Company's weighted average cost of mortgage debt increased to 6.05 percent from 5.98 percent at January 31, 2006, primarily due to the general increase in short-term interest rates. Fixed-rate mortgage debt, which represented 70 percent of the Company's total nonrecourse mortgage debt, decreased from 6.26 percent at January 31, 2006, to 6.17 percent at January 31, 2007. The variable-rate mortgage debt increased from 5.34 percent at January 31, 2006 to 5.78 percent at January 31, 2007. Development Pipeline Highlights Just as important as any of the milestones achieved during the year, but more difficult to measure, is the progress the Company made on its development pipeline of high-quality projects. During the year, the Company successfully pursued the required entitlements on many of its large, complex projects, which are central to its development strategy. The pipeline is stronger because projects have moved closer to construction or opening, and toward the realization of their ultimate value. 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 pro-rata share and full consolidation basis. Projects Under Construction At the end of fiscal 2006, Forest City's pipeline included 18 projects under construction, representing a total cost of $1.7 billion at the Company's pro-rata share and $1.3 billion on a full consolidation basis. Despite opening projects representing $803.7 million of cost (at the Company's pro-rata share) in 2006, the Company's pipeline of projects under construction grew by nearly 32 percent from $1.3 billion (cost at the Company's pro-rata share) at last year-end. In New York City, Forest City's 52-story, 1.5-million-square-foot New York Times Building in Manhattan is on schedule for opening later in 2007. During the year, the Company achieved significant leasing and ownership milestones. When the year started, none of the space owned by Forest City had been preleased. At year's end, 80 percent of the 736,000 square feet of office space owned by Forest City had been preleased, at rents greater than the Company's pro-forma estimates. In addition, by acquiring its financial partner ING Real Estate's interest in this signature office building in 2006, Forest City increased its ownership in a building that will have tremendous value. Retail projects under construction at the end of fiscal 2006 include: -- Promenade Bolingbrook, a 736,000-square-foot retail center in suburban Chicago that is approximately 72 percent preleased and scheduled to open in April -- Orchard Town Center, a 970,000-square-foot open-air lifestyle center in the Denver suburb of Westminster that will open in 2008 -- The Shops at Wiregrass, a 530,000-square-foot anchored retail center in the Tampa area -- East River Plaza, a 514,000-square-foot anchored retail center in Manhattan, which is scheduled for a 2008 opening Forest City has five residential projects under construction, totaling 1,474 units and representing approximately $374.0 million of cost at the Company's pro-rata share and $276.4 million at full consolidation. These apartment communities include the 665-unit Uptown Apartments in center city Oakland; 366 units at the Company's Mercantile redevelopment project in Dallas; and 131 units at the Lucky Strike Building at Tobacco Row - adding to 329 loft apartment units the Company previously developed at the Tobacco Row project in Richmond. These three projects are scheduled to open in 2008. In addition, Forest City is managing and developing military housing projects, which have become an important part of the residential portfolio. Building on its U.S. Navy project near Hawaii's Pearl Harbor, the Company added more than 2,500 Navy units and more than 1,100 units for the Marines in Hawaii. Forest City also began management and construction of more than 1,600 Navy family homes in the Great Lakes region, primarily in the Chicago area. In total, Forest City has secured the opportunity to own, manage and develop military family communities representing 7,300 housing units. Given this level of commitment, the Company is well positioned to grow the military housing business. In 2006, military housing EBDT increased by $6.1 million and is anticipated to contribute significantly more EBDT in the future. Projects Under Development At the end of fiscal 2006, Forest City had more than 20 projects under development, representing approximately $2.5 billion of cost at the Company's pro-rata share and at full consolidation. Consistent with the Company's market strategy, 84 percent of the projects under development are located in Forest City's core markets. Projects under development and scheduled to begin construction within the next 12 to 18 months include: -- Beekman, featuring more than 800 residential units and an elementary school in Manhattan -- Bolingbrook South, 441,000 square feet of retail adjacent to the Company's Promenade Bolingbrook near Chicago -- Ridge Hill Village, a 1.2-million-square-foot retail center and more than 300 residential units in Yonkers, New York -- Summit at Lehigh Valley, a mixed-use project in Allentown, Pennsylvania, which includes a 492,000-square-foot lifestyle center -- Village at Gulfstream Park, 446,000 square feet of retail in Hallandale, Florida, adjacent to a newly expanded and renovated gaming and race track facility -- Waterfront, a mixed-use project in Washington, D.C., where two government agencies have agreed to lease approximately 500,000 square feet in two new office buildings -- White Oak Village, an 832,000-square-foot retail development in Richmond, Virginia Not yet included in the above pipeline are two large mixed-use projects on which Forest City made significant progress during 2006. Atlantic Yards in Brooklyn gained unanimous approval from the State of New York's Public Authorities Control Board, and the Company now owns or controls approximately 85 percent of the land necessary for the development. In addition, Barclays PLC, a U.K.-based global financial services provider, signed a 20-year naming rights agreement for the proposed 850,000-square-foot, Frank Gehry-designed arena that will be the centerpiece of the project. The arena, which is expected to become home to the NBA's Nets, in which Forest City is an investor, is anticipated to open in time for the 2009-2010 NBA season. In addition to Barclays Center, Atlantic Yards is expected to include new urban retail, office buildings, apartments, and parks and open space. At The Yards in Washington, D.C. (formerly known as the Southeast Federal Center military supply depot), Forest City made significant progress on this mixed-use redevelopment, including approval of the master plan by the General Services Administration. As a result, the Company expects to begin demolition in mid-2007 with building construction scheduled for early 2008. The Yards will blend adaptive reuse of several historically protected, former industrial buildings that were originally part of the neighboring Washington Navy Yard, as well as numerous buildings of new construction - all within walking distance of the new Washington Nationals baseball park. Land Development Update The Land Development Group had an excellent year in 2006, despite a challenging environment for residential land sales. The group's EBDT was $62.1 million, compared with $59.3 million a year ago. 2006 land sales were led by a strong performance at Stapleton. After several years of unprecedented demand, land sales at Stapleton moderated in 2006, with 595 lots being sold compared with 910 in the prior year. Since Stapleton's inception in 2000, 3,642 lots for residential development have been sold to homebuilders, with 93 percent of those lots being subsequently purchased by homeowners. All total, Forest City has purchased 1,274 acres of land, and Stapleton has a population of more than 7,000 residents. In addition to Stapleton, land sales were driven by the continued strength of the North Carolina and Texas markets. Results were favorably impacted by two large land transactions - the sale of the 1,307-acre Bal Gra Harbor in coastal North Carolina; and the sale of the 1,581-acre Sweetwater mixed-use community in Austin, Texas. During 2006, Forest City reached several milestones at its 9,000-acre Mesa del Sol mixed-use project in Albuquerque. The Company was instrumental in helping the state approve a tax increment financing district in Albuquerque, which will be used as a vehicle to finance the infrastructure of the project. In addition, the first 3,000 acres of land were purchased to begin development; a 50-acre site was sold to Culver Studios for a Hollywood film production campus, which recently opened; and the first office building was completed for a solar technology company, Advent Solar Inc. At year-end, Forest City had 12,090 acres of land inventory at 37 projects in 11 states. Of the total acres, 3,050 are located at Mesa del Sol, and 2,100 acres in Prosper, Texas. In addition, Forest City has options to purchase 11,114 acres, of which 6,580 acres are located in Albuquerque and 1,661 at Stapleton in Denver. Year-End Summary and Outlook Ratner said, "We are very pleased to report an excellent year of performance, both financially and strategically, and the execution of the New York City portfolio transaction. We are equally pleased that our shareholders were able to participate in our success, with a total return on our stock price of 54 percent. Over the past 10 fiscal years, our stock price has increased at a compound annual growth rate of 25 percent. It has been said that 'a rising tide lifts all boats' and 2006 was a great year for the entire real estate industry. Our share price not only performed well this past year, but has been consistently strong over the long term. "2006 was a year of many milestones. We continued to maintain, improve and add to our existing portfolio, while making significant progress on our development pipeline - the vast majority of which is located in our core markets. This should fuel our future growth for years to come. We are aware of the risks inherent in our business, and as in recent years, we believe having a diversified portfolio will enable us to grow throughout various economic cycles and continue to capitalize on our unique real estate franchise. We expect to deliver our 28th consecutive year of EBDT growth in fiscal 2007, and to continue to build shareholder value." Corporate Description Forest City Enterprises, Inc. is a $9.0 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, 2007, 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 and quarterly reports. Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2007 and 2006 (dollars in thousands, except per share data) Three Months Ended, Increase January 31, (Decrease) ------------------------ ------------------ 2007 2006 Amount Percent ------------------------ ---------- ------- Operating Results: Earnings from continuing operations $30,671 $10,700 $19,971 Discontinued operations, net of tax and minority interest(1) 39,955 17,535 22,420 ------------------------ ---------- Net earnings $70,626 $28,235 $42,391 ======================== ========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2) $107,550 $73,657 $33,893 46.0% ======================== ========== Reconciliation of Net Earnings to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2): Net Earnings $70,626 $28,235 $42,391 Depreciation and amortization - Real Estate Groups(4) 57,938 54,202 3,736 Amortization of mortgage procurement costs - Real Estate Groups(4) 2,900 2,919 (19) Deferred income tax expense - Real Estate Groups(5) 47,102 26,089 21,013 Deferred income tax expense - Non-Real Estate Groups:(5) Gain on disposition of other investments 294 (39) 333 Provision for decline in real estate recorded on equity method - - - Provision for decline in real estate - (587) 587 Current income tax expense on non- operating earnings:(5) Gain on disposition of other investments - - - Gain on disposition included in discontinued operations (3,369) (811) (2,558) Gain on disposition of equity method rental properties - - - Straight-line rent adjustment(3) (4,198) (4,477) 279 Preference payment 898 - 898 Provision for decline in real estate, net of minority interest - 1,748 (1,748) Provision for decline in real estate of equity method rental properties - - - Gain on disposition of equity method rental properties - - - Loss (gain) on disposition of other investments - 100 (100) Discontinued operations:(1) Gain on disposition of rental properties (64,641) (33,722) (30,919) Minority interest - Gain on disposition - - - ------------------------ ---------- Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2) $107,550 $73,657 $33,893 46.0% ======================== ========== Diluted Earnings per Common Share: Earnings (loss) from continuing operations $0.29 $0.10 $0.19 Discontinued operations, net of tax and minority interest(1) 0.37 0.17 0.20 ------------------------ ---------- Net earnings $0.66 $0.27 $0.39 ======================== ========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2) $1.00 $0.72 $0.28 38.9% ======================== ========== Operating earnings, net of tax (a non-GAAP financial measure) $0.33 $0.32 $0.01 Provision for decline in real estate, net of tax - (0.01) 0.01 Gain on disposition of rental properties and other investments, net of tax 0.37 0.20 0.17 Minority interest (0.04) (0.24) 0.20 ------------------------ ---------- Net earnings $0.66 $0.27 $0.39 ======================== ========== Diluted weighted average shares outstanding 107,074,472 102,924,564 4,149,908 ======================== ========== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2007 and 2006 (dollars in thousands, except per share data) Year Ended Increase January 31, (Decrease) ------------------------- ------------------ 2007 2006 Amount Percent ------------------------- ---------- ------- Operating Results: Earnings from continuing operations $30,239 $64,512 $(34,273) Discontinued operations, net of tax and minority interest(1) 147,012 19,007 128,005 ------------------------- ---------- Net earnings $177,251 $83,519 $93,732 ========================= ========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2) $284,954 $270,496 $14,458 5.3% ========================= ========== Reconciliation of Net Earnings to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2): Net Earnings $177,251 $83,519 $93,732 Depreciation and amortization - Real Estate Groups(4) 206,745 192,715 14,030 Amortization of mortgage procurement costs - Real Estate Groups(4) 10,998 11,578 (580) Deferred income tax expense - Real Estate Groups(5) 120,230 43,981 76,249 Deferred income tax expense - Non-Real Estate Groups:(5) Gain on disposition of other investments 294 135 159 Provision for decline in real estate recorded on equity method - - - Provision for decline in real estate - (587) 587 Current income tax expense on non- operating earnings:(5) Gain on disposition of other investments - 60 (60) Gain on disposition included in discontinued operations 13,829 (811) 14,640 Gain on disposition of equity method rental properties 2,657 8,147 (5,490) Straight-line rent adjustment(3) (8,757) (10,660) 1,903 Preference payment 898 - 898 Provision for decline in real estate, net of minority interest 1,923 6,442 (4,519) 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 Loss (gain) on disposition of other investments - (506) 506 Discontinued operations:(1) Gain on disposition of rental properties (351,861) (43,198) (308,663) Minority interest - Gain on disposition 118,009 - 118,009 ------------------------- ---------- Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2) $284,954 $270,496 $14,458 5.3% ========================= ========== Diluted Earnings per Common Share: Earnings (loss) from continuing operations $0.29 $0.63 $(0.34) Discontinued operations, net of tax and minority interest(1) 1.41 0.18 1.23 ------------------------- ---------- Net earnings $1.70 $0.81 $0.89 ========================= ========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)(2) $2.73 $2.64 $0.09 3.4% ========================= ========== Operating earnings, net of tax (a non-GAAP financial measure) $0.45 $0.81 $(0.36) Provision for decline in real estate, net of tax (0.01) (0.06) 0.05 Gain on disposition of rental properties and other investments, net of tax 2.54 0.38 2.16 Minority interest (1.28) (0.32) (0.96) ------------------------- ---------- Net earnings $1.70 $0.81 $0.89 ========================= ========== Diluted weighted average shares outstanding 104,454,898 102,603,932 1,850,966 ========================= ========== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2007 and 2006 (dollars in thousands) Three Months Ended, Increase January 31, (Decrease) ------------------ --------------- 2007 2006 Amount Percent ------------------ --------------- Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net Earnings: Revenues from real estate operations Commercial Group $242,641 $229,045 $13,596 Residential Group 66,352 53,297 13,055 Land Development Group 51,386 30,628 20,758 Corporate Activities - - - ------------------ -------- Total Revenues 360,379 312,970 47,409 15.1% Operating expenses (225,465)(173,246) (52,219) Interest expense, including early extinguishment of debt (83,909) (69,954) (13,955) Amortization of mortgage procurement costs(4) (2,695) (2,534) (161) Depreciation and amortization(4) (52,793) (46,124) (6,669) Interest and other income 31,763 9,292 22,471 Equity in earnings of unconsolidated entities 32,731 9,172 23,559 Provision for decline in real estate of equity method rental properties - - - Gain on disposition of equity method rental properties - - - Revenues and interest income from discontinued operations(1) 2,783 34,880 (32,097) Expenses from discontinued operations(1) (2,549) (38,139) 35,590 ------------------ -------- Operating earnings (loss) (a non- GAAP financial measure) 60,245 36,317 23,928 ------------------ -------- Income tax expense(5) (24,284) (4,455) (19,829) Income tax expense from discontinued operations(1)(5) (25,165) (11,049) (14,116) Income tax expense on non- operating earnings items (see below) 24,978 12,316 12,662 ------------------ -------- Operating earnings, net of tax (a non-GAAP financial measure) 35,774 33,129 2,645 ------------------ -------- Provision for decline in real estate - (1,774) 1,774 Provision for decline in real estate of equity method rental properties - - - Gain on disposition of equity method rental properties - - - Gain on disposition of other investments - (100) 100 Gain on disposition of rental properties included in discontinued operations(1) 64,641 33,722 30,919 Income tax benefit (expense) on non-operating earnings:(5) Provision for decline in real estate - 676 (676) Provision for decline in real estate of equity method rental properties - - - Gain on disposition of other investments (294) 39 (333) Gain on disposition of equity method rental properties - - - Gain on disposition of rental properties included in discontinued operations (24,684) (13,031) (11,653) ------------------ -------- Income tax expense on non- operating earnings (see above) (24,978) (12,316) (12,662) ------------------ -------- Minority interest in continuing operations (5,056) (22,547) 17,491 Minority interest in discontinued operations:(1) Operating earnings 245 (1,879) 2,124 Gain on disposition of rental properties - - - ------------------ -------- 245 (1,879) 2,124 ------------------ -------- Minority interest (4,811) (24,426) 19,615 ------------------ -------- Net earnings $70,626 $28,235 $42,391 ================== ======== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2007 and 2006 (dollars in thousands) Year Ended Increase January 31, (Decrease) --------------------- ---------------- 2007 2006 Amount Percent --------------------- ---------------- Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net Earnings: Revenues from real estate operations Commercial Group $811,315 $824,337 $(13,022) Residential Group 240,290 196,266 44,024 Land Development Group 117,230 107,869 9,361 Corporate Activities - - - --------------------- --------- Total Revenues 1,168,835 1,128,472 40,363 3.6% Operating expenses (709,343) (644,765) (64,578) Interest expense, including early extinguishment of debt (295,978) (264,834) (31,144) Amortization of mortgage procurement costs(4) (10,903) (9,979) (924) Depreciation and amortization(4) (181,129) (164,397) (16,732) Interest and other income 61,737 27,773 33,964 Equity in earnings of unconsolidated entities 48,542 55,201 (6,659) 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) 66,823 134,575 (67,752) Expenses from discontinued operations(1) (60,731) (144,224) 83,493 --------------------- --------- Operating earnings (loss) (a non-GAAP financial measure) 80,591 97,503 (16,912) --------------------- --------- Income tax expense(5) (34,412) (25,564) (8,848) Income tax expense from discontinued operations(1)(5) (92,581) (11,980) (80,601) Income tax expense on non- operating earnings items (see below) 92,424 22,249 70,175 --------------------- --------- Operating earnings, net of tax (a non-GAAP financial measure) 46,022 82,208 (36,186) --------------------- --------- Provision for decline in real estate (1,923) (7,874) 5,951 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 - 506 (506) Gain on disposition of rental properties included in discontinued operations(1) 351,861 43,198 308,663 Income tax benefit (expense) on non-operating earnings:(5) Provision for decline in real estate 743 2,490 (1,747) Provision for decline in real estate of equity method rental properties 155 272 (117) Gain on disposition of other investments (294) (195) (99) Gain on disposition of equity method rental properties (2,962) (8,123) 5,161 Gain on disposition of rental properties included in discontinued operations (90,066) (16,693) (73,373) --------------------- --------- Income tax expense on non- operating earnings (see above) (92,424) (22,249) (70,175) --------------------- --------- Minority interest in continuing operations (15,187) (30,027) 14,840 Minority interest in discontinued operations:(1) Operating earnings (351) (2,562) 2,211 Gain on disposition of rental properties (118,009) - (118,009) --------------------- --------- (118,360) (2,562) (115,798) --------------------- --------- Minority interest (133,547) (32,589) (100,958) --------------------- --------- Net earnings $177,251 $83,519 $93,732 ===================== ========= Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2007 and 2006 (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) 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 Year Ended January 31, January 31, --------------------- --------------------- 2007 2006 2007 2006 --------------------- --------------------- Full Consolidation $52,793 $46,124 $181,129 $164,397 Non-Real Estate Groups (639) (368) (1,571) (1,104) --------------------- --------------------- Real Estate Groups Full Consolidation 52,154 45,756 179,558 163,293 Real Estate Groups related to minority interest (3,097) (2,233) (13,811) (15,341) Real Estate Groups Equity Method 8,867 7,080 34,779 26,905 Real Estate Groups Discontinued Operations 14 3,599 6,219 17,858 --------------------- --------------------- Real Estate Groups Pro- Rata Consolidation $57,938 $54,202 $206,745 $192,715 ===================== ===================== Amortization of Amortization of Mortgage Procurement Mortgage Procurement Costs Costs ------------------------------------------- Three Months Ended Year Ended January 31, January 31, --------------------- --------------------- 2007 2006 2007 2006 --------------------- --------------------- Full Consolidation $2,695 $2,534 $10,903 $9,979 Non-Real Estate Groups (97) (83) (333) (369) --------------------- --------------------- Real Estate Groups Full Consolidation 2,598 2,451 10,570 9,610 Real Estate Groups related to minority interest (161) (84) (1,076) (1,066) Real Estate Groups Equity Method 452 338 1,312 1,244 Real Estate Groups Discontinued Operations 11 214 192 1,790 --------------------- --------------------- Real Estate Groups Pro- Rata Consolidation $2,900 $2,919 $10,998 $11,578 ===================== ===================== Three Months Ended Year Ended January 31, January 31, --------------------- --------------------- 2007 2006 2007 2006 --------------------- --------------------- (5) The following table (in thousands) (in thousands) provides detail of Income Tax Expense (Benefit): (A) Operating earnings Current $1,119 $(3,057) $(16,085) $(4,207) Deferred 23,165 8,227 48,433 24,215 --------------------- --------------------- 24,284 5,170 32,348 20,008 --------------------- --------------------- (B) Provision for decline in real estate Deferred - (676) (743) (2,490) Deferred - Equity method investment - - (155) (272) --------------------- --------------------- - (676) (898) (2,762) --------------------- --------------------- (C) Gain on disposition of other investments Current - Non-Real Estate Groups - - - 60 Deferred - Non-Real Estate Groups - (39) - 135 --------------------- --------------------- - (39) - 195 --------------------- --------------------- (D) Gain on disposition of equity method rental properties Current - - 2,657 8,147 Deferred - - 305 (24) --------------------- --------------------- - - 2,962 8,123 --------------------- --------------------- Subtotal (A) (B) (C) (D) Current 1,119 (3,057) (13,428) 4,000 Deferred 23,165 7,512 47,840 21,564 --------------------- --------------------- Income tax expense 24,284 4,455 34,412 25,564 --------------------- --------------------- (E) Discontinued operations - Rental Properties Operating earnings Current 49 (1,663) 1,542 (6,149) Deferred 138 (319) 679 1,436 --------------------- --------------------- 187 (1,982) 2,221 (4,713) Gain on disposition of rental properties Current (3,369) (811) 13,829 (811) Deferred 28,053 13,842 76,237 17,504 --------------------- --------------------- 24,684 13,031 90,066 16,693 --------------------- --------------------- 24,871 11,049 92,287 11,980 --------------------- --------------------- Deferred gain on disposition of Lumber Group Current - - - - Deferred 294 - 294 - --------------------- --------------------- 294 - 294 - --------------------- --------------------- Subtotal 25,165 11,049 92,581 11,980 --------------------- --------------------- Grand Total(A)(B)(C)(D)(E) Current (2,201) (5,531) 1,943 (2,960) Deferred 51,650 21,035 125,050 40,504 --------------------- --------------------- $49,449 $15,504 $126,993 $37,544 --------------------- --------------------- Recap of Grand Total: Real Estate Groups Current 98 (8,215) 15,802 5,356 Deferred 47,102 26,089 120,230 43,981 --------------------- --------------------- 47,200 17,874 136,032 49,337 Non-Real Estate Groups Current (2,299) 2,684 (13,859) (8,316) Deferred 4,548 (5,054) 4,820 (3,477) --------------------- --------------------- 2,249 (2,370) (9,039) (11,793) --------------------- --------------------- Grand Total $49,449 $15,504 $126,993 $37,544 ===================== ===================== Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (GAAP) (in thousands): Three Months Ended January 31, 2007 -------------------------------------------------- Plus Unconsol- idated Plus Full Less Invest- Discon- Pro-Rata Consol- Minority ments at tinued Consol- idation Interest Pro-Rata Operations idation -------------------------------------------------- Revenues from real estate operations $360,379 $20,389 $145,274 $2,119 $487,383 Exclude straight- line rent adjustment(1) (6,995) - - - (6,995) -------------------------------------------------- Adjusted revenues 353,384 20,389 145,274 2,119 480,388 Operating expenses 225,465 7,515 94,094 1,400 313,444 Add back depreciation and amortization for non-Real Estate Groups(b) 639 - (99) - 540 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) 97 - 228 - 325 Exclude straight- line rent adjustment(2) (2,797) - - - (2,797) Exclude preference payment (898) - - - (898) -------------------------------------------------- Adjusted operating expenses 222,506 7,515 94,223 1,400 310,614 Add interest and other income 31,763 90 2,501 878 35,052 Add equity in earnings of unconsolidated entities 32,731 - (29,123) - 3,608 Add back equity method depreciation and amortization expense (see below) 9,319 - (9,319) - - -------------------------------------------------- Net Operating Income 204,691 12,964 15,110 1,597 208,434 Interest expense, including early extinguishment of debt (83,909) (4,650) (15,110) (1,093) (95,462) Gain on disposition of rental properties and other investments - - - 64,641 64,641 Provision for decline in real estate - - - - - Depreciation and amortization - Real Estate Groups (a) (52,154) (3,097) (8,867) (14) (57,938) Amortization of mortgage procurement costs - Real Estate Groups(c) (2,598) (161) (452) (11) (2,900) Straight-line rent adjustment (1)+(2) 4,198 - - - 4,198 Preference payment (898) - - - (898) Equity method depreciation and amortization expense (see above) (9,319) - 9,319 - - -------------------------------------------------- Earnings before income taxes 60,011 5,056 - 65,120 120,075 Income tax expense (24,284) - - (25,165) (49,449) -------------------------------------------------- Earnings (loss) before minority interest and discontinued operations 35,727 5,056 - 39,955 70,626 Minority Interest (5,056) (5,056) - - - -------------------------------------------------- Earnings (loss) from continuing operations 30,671 - - 39,955 70,626 Discontinued operations, net of tax and minority interest: Operating earnings (loss) from rental properties 292 - - (292) - Gain on disposition of rental properties 39,663 - - (39,663) - -------------------------------------------------- 39,955 - - (39,955) - -------------------------------------------------- Net earnings $70,626 $- $- $- $70,626 ================================================== (a) Depreciation and amortization - Real Estate Groups $52,154 $3,097 $8,867 $14 $57,938 (b) Depreciation and amortization - Non- Real Estate Groups 639 - (99) - 540 -------------------------------------------------- Total depreciation and amortization $52,793 $3,097 $8,768 $14 $58,478 ================================================== (c) Amortization of mortgage procurement costs - Real Estate Groups $2,598 $161 $452 $11 $2,900 (d) Amortization of mortgage procurement costs - Non-Real Estate Groups 97 - 228 - 325 -------------------------------------------------- Total amortization of mortgage procurement costs $2,695 $161 $680 $11 $3,225 ================================================== (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 January 31, 2007, and the three months ended January 31, 2006, no equity method rental properties were sold. Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (GAAP) (in thousands): Three Months Ended January 31, 2006 -------------------------------------------------- Plus Unconsol- idated Plus Full Less Invest- Discon- Pro-Rata Consol- Minority ments at tinued Consol- idation Interest Pro-Rata Operations idation -------------------------------------------------- Revenues from real estate operations $312,970 $44,017 $86,592 $25,372 $380,917 Exclude straight- line rent adjustment(1) (6,334) - - (69) (6,403) -------------------------------------------------- Adjusted revenues 306,636 44,017 86,592 25,303 374,514 Operating expenses 173,246 13,598 52,252 17,130 229,030 Add back depreciation and amortization for non-Real Estate Groups(b) 368 - 3,228 - 3,596 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) 83 - 1,582 - 1,665 Exclude straight- line rent adjustment(2) (1,349) - - (577) (1,926) Exclude preference payment - - - - - -------------------------------------------------- Adjusted operating expenses 172,348 13,598 57,062 16,553 232,365 Add interest and other income 9,292 959 713 173 9,219 Add equity in earnings of unconsolidated entities 9,172 - (8,957) - 215 Add back equity method depreciation and amortization expense (see below) 7,418 - (7,418) - - -------------------------------------------------- Net Operating Income 160,170 31,378 13,868 8,923 151,583 Interest expense, including early extinguishment of debt (69,954) (6,488) (13,868) (9,740) (87,074) Gain on disposition of rental properties and other investments (100) - - 33,722 33,622 Provision for decline in real estate (1,774) (26) - - (1,748) Depreciation and amortization - Real Estate Groups (a) (45,756) (2,233) (7,080) (3,599) (54,202) Amortization of mortgage procurement costs - Real Estate Groups(c) (2,451) (84) (338) (214) (2,919) Straight-line rent adjustment (1)+(2) 4,985 - - (508) 4,477 Preference payment - - - - - Equity method depreciation and amortization expense (see above) (7,418) - 7,418 - - -------------------------------------------------- Earnings before income taxes 37,702 22,547 - 28,584 43,739 Income tax expense (4,455) - - (11,049) (15,504) -------------------------------------------------- Earnings (loss) before minority interest and discontinued operations 33,247 22,547 - 17,535 28,235 Minority Interest (22,547) (22,547) - - - -------------------------------------------------- Earnings (loss) from continuing operations 10,700 - - 17,535 28,235 Discontinued operations, net of tax and minority interest: Operating earnings (loss) from rental properties (3,156) - - 3,156 - Gain on disposition of rental properties 20,691 - - (20,691) - -------------------------------------------------- 17,535 - - (17,535) - -------------------------------------------------- Net earnings $28,235 $- $- $- $28,235 ================================================== (a) Depreciation and amortization - Real Estate Groups $45,756 $2,233 $7,080 $3,599 $54,202 (b) Depreciation and amortization - Non- Real Estate Groups 368 - 3,228 - 3,596 -------------------------------------------------- Total depreciation and amortization $46,124 $2,233 $10,308 $3,599 $57,798 ================================================== (c) Amortization of mortgage procurement costs - Real Estate Groups $2,451 $84 $338 $214 $2,919 (d) Amortization of mortgage procurement costs - Non-Real Estate Groups 83 - 1,582 - 1,665 -------------------------------------------------- Total amortization of mortgage procurement costs $2,534 $84 $1,920 $214 $4,584 ================================================== (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 January 31, 2007, and the three months ended January 31, 2006, no equity method rental properties were sold. Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (GAAP) (in thousands): Year Ended January 31, 2007 ----------------------------------------------------- Plus Unconsol- idated Plus Full Less Invest- Discon- Pro-Rata Consol- Minority ments at tinued Consol- idation Interest Pro-Rata Operations idation ----------------------------------------------------- Revenues from real estate operations $1,168,835 $98,001 $355,457 $58,198 $1,484,489 Exclude straight- line rent adjustment(1) (15,950) - - (44) (15,994) ----------------------------------------------------- Adjusted revenues 1,152,885 98,001 355,457 58,154 1,468,495 Operating expenses 709,343 46,132 234,796 37,497 935,504 Add back depreciation and amortization for non-Real Estate Groups(b) 1,571 - 7,174 - 8,745 Add back amortization of mortgage procurement costs for non- Real Estate Groups(d) 333 1 819 - 1,151 Exclude straight- line rent adjustment(2) (6,299) - - (938) (7,237) Exclude preference payment (898) - - - (898) ----------------------------------------------------- Adjusted operating expenses 704,050 46,133 242,789 36,559 937,265 Add interest and other income 61,737 2,763 3,301 1,504 63,779 Add equity in earnings of unconsolidated entities 48,542 - (31,278) - 17,264 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) 36,091 - (36,091) - - ----------------------------------------------------- Net Operating Income 587,943 54,631 55,862 23,099 612,273 Interest expense, including early extinguishment of debt (295,978) (24,557) (55,862) (10,053) (337,336) Gain on disposition of equity method rental properties(e) 7,662 - - - 7,662 Gain on disposition of rental properties and other investments - - - 233,852 233,852 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) (179,558) (13,811) (34,779) (6,219) (206,745) Amortization of mortgage procurement costs - Real Estate Groups(c) (10,570) (1,076) (1,312) (192) (10,998) Straight-line rent adjustment (1)+(2) 9,651 - - (894) 8,757 Preference payment (898) - - - (898) Equity method depreciation and amortization expense (see above) (36,091) - 36,091 - - ----------------------------------------------------- Earnings before income taxes 79,838 15,187 - 239,593 304,244 Income tax expense (34,412) - - (92,581) (126,993) ----------------------------------------------------- Earnings before minority interest and discontinued operations 45,426 15,187 - 147,012 177,251 Minority Interest (15,187) (15,187) - - - ----------------------------------------------------- Earnings from continuing operations 30,239 - - 147,012 177,251 Discontinued operations, net of tax and minority interest: Operating earnings (loss) from rental properties 3,520 - - (3,520) - Gain on disposition of rental properties 143,492 - - (143,492) - ----------------------------------------------------- 147,012 - - (147,012) - ----------------------------------------------------- Net earnings $177,251 $- $- $- $177,251 ===================================================== (a) Depreciation and amortization - Real Estate Groups $179,558 $13,811 $34,779 $6,219 $206,745 (b) Depreciation and amortization - Non-Real Estate Groups 1,571 - 7,174 - 8,745 ----------------------------------------------------- Total depreciation and amortization $181,129 $13,811 $41,953 $6,219 $215,490 ===================================================== (c) Amortization of mortgage procurement costs - Real Estate Groups $10,570 $1,076 $1,312 $192 $10,998 (d) Amortization of mortgage procurement costs - Non-Real Estate Groups 333 1 819 - 1,151 ----------------------------------------------------- Total amortization of mortgage procurement costs $10,903 $1,077 $2,131 $192 $12,149 ===================================================== (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 year ended January 31, 2007, one equity method property was sold, Midtown Plaza, resulting in a pre-tax gain on disposition of $7,662. For the year ended January 31, 2006, 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): Year Ended January 31, 2006 ----------------------------------------------------- Plus Unconsol- idated Plus Full Less Invest- Discon- Pro-Rata Consol- Minority ments at tinued Consol- idation Interest Pro-Rata Operations idation ----------------------------------------------------- Revenues from real estate operations $1,128,472 $129,043 $318,282 $115,392 $1,433,103 Exclude straight- line rent adjustment(1) (18,229) - - (163) (18,392) ----------------------------------------------------- Adjusted revenues 1,110,243 129,043 318,282 115,229 1,414,711 Operating expenses 644,765 55,114 194,900 78,436 862,987 Add back depreciation and amortization for non-Real Estate Groups(b) 1,104 - 13,086 - 14,190 Add back amortization of mortgage procurement costs for non- Real Estate Groups(d) 369 - 2,035 - 2,404 Exclude straight- line rent adjustment(2) (5,394) - - (2,338) (7,732) Exclude preference payment - - - - - ----------------------------------------------------- Adjusted operating expenses 640,844 55,114 210,021 76,098 871,849 Add interest and other income 27,773 2,604 1,218 543 26,930 Add equity in earnings of unconsolidated entities 55,201 - (49,060) - 6,141 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) 28,149 - (28,149) - - ----------------------------------------------------- Net Operating Income 560,203 76,533 52,589 39,674 575,933 Interest expense, including early extinguishment of debt (264,834) (28,667) (52,589) (30,062) (318,818) Gain on disposition of equity method rental properties(e) 21,023 - - - 21,023 Gain on disposition of rental properties and other investments 506 - - 43,198 43,704 Provision for decline in real estate (7,874) (1,432) - - (6,442) Provision for decline in real estate of equity method rental properties (704) - - - (704) Depreciation and amortization - Real Estate Groups(a) (163,293) (15,341) (26,905) (17,858) (192,715) Amortization of mortgage procurement costs - Real Estate Groups(c) (9,610) (1,066) (1,244) (1,790) (11,578) Straight-line rent adjustment (1)+(2) 12,835 - - (2,175) 10,660 Preference payment - - - - - Equity method depreciation and amortization expense (see above) (28,149) - 28,149 - - ----------------------------------------------------- Earnings before income taxes 120,103 30,027 - 30,987 121,063 Income tax expense (25,564) - - (11,980) (37,544) ----------------------------------------------------- Earnings before minority interest and discontinued operations 94,539 30,027 - 19,007 83,519 Minority Interest (30,027) (30,027) - - - ----------------------------------------------------- Earnings from continuing operations 64,512 - - 19,007 83,519 Discontinued operations, net of tax and minority interest: Operating earnings (loss) from rental properties (7,498) - - 7,498 - Gain on disposition of rental properties 26,505 - - (26,505) - ----------------------------------------------------- 19,007 - - (19,007) - ----------------------------------------------------- Net earnings $83,519 $- $- $- $83,519 ===================================================== (a) Depreciation and amortization - Real Estate Groups $163,293 $15,341 $26,905 $17,858 $192,715 (b) Depreciation and amortization - Non-Real Estate Groups 1,104 - 13,086 - 14,190 ----------------------------------------------------- Total depreciation and amortization $164,397 $15,341 $39,991 $17,858 $206,905 ===================================================== (c) Amortization of mortgage procurement costs - Real Estate Groups $9,610 $1,066 $1,244 $1,790 $11,578 (d) Amortization of mortgage procurement costs - Non-Real Estate Groups 369 - 2,035 - 2,404 ----------------------------------------------------- Total amortization of mortgage procurement costs $9,979 $1,066 $3,279 $1,790 $13,982 ===================================================== (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 year ended January 31, 2007, one equity method property was sold, Midtown Plaza, resulting in a pre-tax gain on disposition of $7,662. For the year ended January 31, 2006, 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 January 31, 2007 -------------------------------------------------- Plus Unconsol- Plus Full Less idated Discont- Pro-Rata Consol- Minority Investments inued Consol- idation Interest at Pro-Rata Operations idation -------------------------------------------------- Commercial Group Retail Comparable $52,403 $5,684 $806 $- $47,525 ------------------------------------------------------------------ Total 63,517 2,933 4,273 186 65,043 Office Buildings Comparable 43,612 4,868 1,334 - 40,078 ------------------------------------------------------------------ Total 43,651 2,348 1,261 - 42,564 Hotels Comparable 3,418 - 491 - 3,909 ------------------------------------------------------------------ Total 3,418 - 491 (405) 3,504 Earnings from Commercial Land Sales 18,989 1,556 395 - 17,828 Development Fees 160 64 - - 96 Other (9,584) 2,579 42 - (12,121) ------------------------------------------------------------------ Total Commercial Group Comparable 99,433 10,552 2,631 - 91,512 ------------------------------------------------------------------ Total 120,151 9,480 6,462 (219) 116,914 Residential Group Apartments Comparable 23,178 620 6,256 - 28,814 ------------------------------------------------------------------ Total 43,241 1,215 8,373 1,816 52,215 Military Housing Comparable - - - - - ------------------------------------------------------------------ Total 5,577 - 144 - 5,721 Total Real Estate Groups Comparable 122,611 11,172 8,887 - 120,326 ------------------------------------------------------------------ Total 168,969 10,695 14,979 1,597 174,850 Land Development Group 46,777 2,269 130 - 44,638 The Nets (619) - 1 - (618) Corporate Activities (10,436) - - - (10,436) ---------------------------------------------------------------------- Grand Total $204,691 $12,964 $15,110 $1,597 $208,434 ---------------------------------------------------------------------- --------------------------------------------------- Three Months Ended January 31, 2006 --------------------------------------------------- Plus Unconsol- Plus Full Less idated Discont- Pro-Rata Consol- Minority Investments inued Consol- idation Interest at Pro-Rata Operations idation -------------------------------------------------- Commercial Group Retail Comparable $48,307 $5,556 $2,943 $- $45,694 ----------------------------------------------------------------- Total 52,036 5,730 3,007 925 50,238 Office Buildings Comparable 43,319 5,366 1,201 - 39,154 ----------------------------------------------------------------- Total 43,251 5,095 1,061 - 39,217 Hotels Comparable 2,105 - 467 - 2,572 ----------------------------------------------------------------- Total 2,105 - 467 5,286 7,858 Earnings from Commercial Land Sales 30,241 16,285 - - 13,956 Development Fees 2,897 1,159 - - 1,738 Other (5,559) (459) (321) - (5,421) ----------------------------------------------------------------- Total Commercial Group Comparable 93,731 10,922 4,611 - 87,420 ----------------------------------------------------------------- Total 124,971 27,810 4,214 6,211 107,586 Residential Group Apartments Comparable 21,389 584 6,726 - 27,531 ----------------------------------------------------------------- Total 18,454 1,440 8,454 2,712 28,180 Military Housing Comparable - - - - - ----------------------------------------------------------------- Total 2,567 - 38 - 2,605 Total Real Estate Groups Comparable 115,120 11,506 11,337 - 114,951 ----------------------------------------------------------------- Total 145,992 29,250 12,706 8,923 138,371 Land Development Group 32,184 2,128 162 - 30,218 The Nets (7,537) - 1,000 - (6,537) Corporate Activities (10,469) - - - (10,469) --------------------------------------------------------------------- Grand Total $160,170 $31,378 $13,868 $8,923 $151,583 --------------------------------------------------------------------- ---------------------------- % Change ---------------------------- Full Pro-Rata Consolidation Consolidation ---------------------------- Commercial Group Retail Comparable 8.5% 4.0% -------------------------------------- Total Office Buildings Comparable 0.7% 2.4% -------------------------------------- Total Hotels Comparable 62.4% 52.0% -------------------------------------- Total Earnings from Commercial Land Sales Development Fees Other -------------------------------------- Total Commercial Group Comparable 6.1% 4.7% -------------------------------------- Total Residential Group Apartments Comparable 8.4% 4.7% -------------------------------------- Total Military Housing Comparable -------------------------------------- Total Total Real Estate Groups Comparable 6.5% 4.7% -------------------------------------- Total Land Development Group The Nets Corporate Activities ------------------------------------------ Grand Total ------------------------------------------ Net Operating Income (dollars in thousands) ------------------------------------------------------- Twelve Months Ended January 31, 2007 ------------------------------------------------------- Plus Unconsol- idated Full Less Invest- Plus Discont- Pro-Rata Consol- Minority ments at inued Consol- idation Interest Pro-Rata Operations idation ------------------------------------------------------- Commercial Group Retail Comparable $189,225 $20,745 $8,452 $- $176,932 ------------------------------------------------------------------- Total 213,220 16,926 13,091 1,994 211,379 Office Buildings Comparable 176,097 21,073 4,594 - 159,618 ------------------------------------------------------------------- Total 174,880 18,764 4,365 - 160,481 Hotels Comparable 14,421 - 1,947 - 16,368 ------------------------------------------------------------------- Total 14,421 - 1,947 10,715 27,083 Earnings from Commercial Land Sales 37,143 2,684 641 - 35,100 Development Fees 879 352 - - 527 Other (28,997) 6,768 145 - (35,620) ------------------------------------------------------------------- Total Commercial Group Comparable 379,743 41,818 14,993 - 352,918 ------------------------------------------------------------------- Total 411,546 45,494 20,189 12,709 398,950 Residential Group Apartments Comparable 91,990 2,501 25,411 - 114,900 ------------------------------------------------------------------- Total 121,188 4,082 31,766 10,390 159,262 Military Housing Comparable - - - - - ------------------------------------------------------------------- Total 12,052 - 305 - 12,357 Total Real Estate Groups Comparable 471,733 44,319 40,404 - 467,818 ------------------------------------------------------------------- Total 544,786 49,576 52,260 23,099 570,569 Land Development Group 99,056 5,055 790 - 94,791 The Nets (14,703) - 2,812 - (11,891) Corporate Activities (41,196) - - - (41,196) ---------------------------------------------------------------------- Grand Total $587,943 $54,631 $55,862 $23,099 $612,273 ---------------------------------------------------------------------- ------------------------------------------------- Twelve Months Ended January 31, 2006 ------------------------------------------------- Plus Unconsol- idated Plus Full Less Invest- Discont- Pro-Rata Consol- Minority ments at inued Consol- idation Interest Pro-Rata Operations idation ------------------------------------------------ Commercial Group Retail Comparable $177,580 $20,545 $11,590 $- $168,625 ------------------------------------------------------------------ Total 186,787 18,437 11,950 2,647 182,947 Office Buildings Comparable 172,071 20,811 4,413 - 155,673 ------------------------------------------------------------------ Total 173,319 21,694 4,025 - 155,650 Hotels Comparable 11,819 - 1,899 - 13,718 ------------------------------------------------------------------ Total 11,819 - 1,899 21,766 35,484 Earnings from Commercial Land Sales 67,990 18,390 - - 49,600 Development Fees 10,614 4,247 - - 6,367 Other (17,466) 3,011 (214) - (20,691) ------------------------------------------------------------------ Total Commercial Group Comparable 361,470 41,356 17,902 - 338,016 ------------------------------------------------------------------ Total 433,063 65,779 17,660 24,413 409,357 Residential Group Apartments Comparable 84,837 2,286 25,335 - 107,886 ------------------------------------------------------------------ Total 81,101 5,050 30,552 15,261 121,864 Military Housing Comparable - - - - - ------------------------------------------------------------------ Total 4,763 - 1,032 - 5,795 Total Real Estate Groups Comparable 446,307 43,642 43,237 - 445,902 ------------------------------------------------------------------ Total 518,927 70,829 49,244 39,674 537,016 Land Development Group 102,002 5,704 353 - 96,651 The Nets (24,534) - 2,992 - (21,542) Corporate Activities (36,192) - - - (36,192) --------------------------------------------------------------------- Grand Total $560,203 $76,533 $52,589 $39,674 $575,933 --------------------------------------------------------------------- ------------------------------- % Change ------------------------------- Full Pro-Rata Consolidation Consolidation ------------------------------- Commercial Group Retail Comparable 6.6% 4.9% ------------------------------------- Total Office Buildings Comparable 2.3% 2.5% ------------------------------------- Total Hotels Comparable 22.0% 19.3% ------------------------------------- Total Earnings from Commercial Land Sales Development Fees Other ------------------------------------- Total Commercial Group Comparable 5.1% 4.4% ------------------------------------- Total Residential Group Apartments Comparable 8.4% 6.5% ------------------------------------- Total Military Housing Comparable ------------------------------------- Total Total Real Estate Groups Comparable 5.7% 4.9% ------------------------------------- Total Land Development Group The Nets Corporate Activities ---------------------------------------- Grand Total ---------------------------------------- Development Pipeline ---------------------------------------------------------------------- January 31, 2007 2006 Openings and Acquisitions (14) FCE Pro- Dev Legal Rata (D) Date Ownership FCE% Acq Opened/ % (i) (i) Property/Location (A) Acquired (1) (2) Retail Centers: Northfield at Stapleton/ Denver, CO Q4-05/Q1- D 06/ Q3-06 95.0% 97.9% Metreon(c)/ San Francisco, CA A/D Q1-06 50.0% 50.0% San Francisco Centre(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 47.5% 47.5% 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% Illinois Science and Technology Park - Building A/ Skokie, IL A/D Q4-06 100.0%100.0% Illinois Science and Technology Park - Building P/ Skokie, IL A/D Q4-06 100.0%100.0% Edgeworth Building/ Richmond, VA D Q4-06 100.0%100.0% Residential: Sky55/ Chicago, IL D Q1-06 100.0%100.0% 1251 S. Michigan/ Chicago, IL D Q1-06 100.0%100.0% Cutters Ridge at Tobacco Row/ Richmond, VA D Q4-06 100.0%100.0% Condominiums: 1100 Wilshire(c)/ Los Angeles, CA D Q4-06 40.0% 40.0% Total Openings (d) LESS: Above properties to be sold as condominiums Total Openings 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 2004-06 33.0% 33.0% Pine Ridge Expansion/ Willoughby Hills, OH D 2005-07 50.0% 50.0% Cobblestone Court/ Painesville, OH D 2006-08 50.0% 50.0% Total (f) ---------------------------------------------------------------------- See Attached Footnotes Development Pipeline ------------------------------------------------------------------- January 31, 2007 2006 Openings and Acquisitions (14) 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 (g) Metreon(c)/ San Francisco, CA 0.0 40.0 20.0 290,000 290,000 San Francisco Centre(c)/ San Francisco, CA 0.0 598.0 299.0 1,462,000 812,000 (h) -------------------------------------- ---------- $182.5 $820.5 $497.5 2,922,000 1,662,000 ----------------------------========== ========== Office: Resurrection Health Care/Skokie, IL $5.1 $5.1 $5.1 40,000 Advent Solar(c)/ Albuquerque, NM 0.0 10.7 5.1 88,000 Bulletin Building(c)/ San Francisco, CA 0.0 28.0 14.0 87,000 Stapleton Medical Office Building/ Denver, CO 10.3 10.3 9.3 45,000 Illinois Science and Technology Park - Building A/ Skokie, IL 31.1 31.1 31.1 225,000 Illinois Science and Technology Park - Building P/ Skokie, IL 23.3 23.3 23.3 127,000 Edgeworth Building/ Richmond, VA 35.2 35.2 35.2 142,000 -------------------------------------- $105.0 $143.7 $123.1 754,000 ----------------------------========== Residential: Sky55/ Chicago, IL $109.5 $109.5 $109.5 411 1251 S. Michigan/ Chicago, IL 16.0 16.0 16.0 91 Cutters Ridge at Tobacco Row/ Richmond, VA 4.8 4.8 4.8 12 -------------------------------------- $130.3 $130.3 $130.3 514 ----------------------------========== Units Sold Condominiums: at 1/31/07 ---------- 1100 Wilshire(c)/ Los Angeles, CA $0.0 $132.0 $52.8 228 139 ----------------------------========== ---------------------------- Total Openings (d) $417.8 $1,226.5 $803.7 ============================ LESS: Above properties to be sold as condominiums $0.0 $132.0 $52.8 ---------------------------- Total Openings less Condominiums $417.8 $1,094.5 $750.9 ============================ -------------------------------------------------------- Residential Phased-In Units Opened in (c) (e): '06/Total ---------- Arbor Glenn/ Twinsburg, OH $0.0 $18.4 $9.2 48/288 Woodgate/Evergreen Farms/ Olmsted Township, OH 0.0 22.0 7.3 144/348 Pine Ridge Expansion/ Willoughby Hills, OH 0.0 16.4 8.2 53/162 Cobblestone Court/ Painesville, OH 0.0 24.6 12.3 112/304 -------------------------------------- Total (f) $0.0 $81.4 $37.0 357/1,102 ====================================== -------------------------------------------------------- See Attached Footnotes Development Pipeline ---------------------------------------------------------------------- January 31, 2007 Under Construction or to be Acquired (18) FCE Dev Legal Pro- (D) Ownership Rata Property/ Acq Anticipated % FCE% Location (A) Opening (i)(1) (i)(2) Retail Centers: Promenade Bolingbrook/ Bolingbrook, IL D Q1-07 100.0% 100.0% Rancho Cucamonga Leggio/ Rancho Cucamonga, CA D Q2-07 80.0% 80.0% Orchard Town Center/ Westminster, CO D 2008 100.0% 100.0% Shops at Wiregrass (c)/ Tampa, FL D Q3-08 50.0% 66.7% East River Plaza (c)/ Manhattan, NY D Q3-08 35.0% 50.0% Office: New York Times/ Manhattan, NY D Q3-07 70.0% 79.5% Illinois Science and Technology Park - Building Q/ Skokie, IL A/D Q3-07 100.0% 100.0% Johns Hopkins - 855 North Wolfe Street/ East Baltimore, MD D Q1-08 76.6% 76.6% Residential: Sterling Glen of Roslyn(o)/ Roslyn, NY D Q2-07 40.0% 100.0% Stapleton Town Center - Botanica Phase II/ Denver, CO D Q3-07 90.0% 90.0% Uptown Apartments (c)/ Oakland, CA D Q2-08 50.0% 50.0% Ohana Military Communities, Hawaii Increment I(c)(e)/ Honolulu, HI D 2005-2008 10.0% 10.0% Dallas Mercantile/ Dallas, TX D Q1-08/Q3-08 100.0% 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% Military Housing - Marines, Hawaii Increment II(c)/ Honolulu, HI D 2007-2010 10.0% 10.0% Military Housing - Navy, Hawaii Increment III (c)/ Honolulu, HI D 2007-2010 10.0% 10.0% Condominiums: Mercury (c)/ Los Angeles, CA D Q3-07 50.0% 50.0% Total Under Construction (j) 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% Pine Ridge Expansion/ Willoughby Hills, OH D 2005-07 50.0% 50.0% Cobblestone Court/ Painesville, OH D 2006-08 50.0% 50.0% Sutton Landing/ Brimfield, OH D 2007-08 50.0% 50.0% Stratford Crossing/ Wadsworth, OH D 2007-09 50.0% 50.0% Total (k) ---------------------------------------------------------------------- See Attached Footnotes Development Pipeline ---------------------------------------------------------------------- January 31, 2007 Under Construction or to be Acquired (18) Cost at FCE Cost at Pro-Rata Full Share Consol- Total (Non- idation Cost GAAP) Sq. ft./ Gross Pre- Property/ (GAAP) at 100% (b) No. of Leasable Leased Location (a) (3) (2)X(3) Units Area % (in millions) ---------------------------- Retail Centers: Promenade Bolingbrook/ Bolingbrook, IL $135.0 $135.0 $135.0 736,000 409,000 (l) 72% Rancho Cucamonga Leggio/ Rancho Cucamonga, CA 41.2 41.2 33.0 180,000 180,000 100% Orchard Town Center/ Westminster, CO 143.0 143.0 143.0 971,000 557,000 (m) 28% Shops at Wiregrass (c)/ Tampa, FL 0.0 123.7 82.5 530,000 380,000 50% East River Plaza (c)/ Manhattan, NY 0.0 347.0 173.5 514,000 514,000 64% ------------------------------------------------ $319.2 $789.9 $567.0 2,931,000 2,040,000 ----------------------------==================== Office: New York Times/ Manhattan, NY $517.5 $517.5 $411.4 736,000 (n) 80% Illinois Science and Technology Park - Building Q/ Skokie, IL 46.4 46.4 46.4 160,000 16% Johns Hopkins - 855 North Wolfe Street/ East Baltimore, MD 102.2 102.2 78.3 278,000 36% -------------------------------------- $666.1 $666.1 $536.1 1,174,000 ----------------------------========== Residential: Sterling Glen of Roslyn(o)/ Roslyn, NY $79.7 $79.7 $79.7 158 Stapleton Town Center - Botanica Phase II/ Denver, CO 26.3 26.3 23.7 154 Uptown Apartments (c)/ Oakland, CA 0.0 200.3 100.2 665 Ohana Military Communities, Hawaii Increment I(c)(e)/ Honolulu, HI 0.0 316.5 31.7 1,952 Dallas Mercantile/ Dallas, TX 132.6 132.6 132.6 366 (p) Lucky Strike/ Richmond, VA 37.8 37.8 37.8 131 Military Housing - Navy Midwest(c)/ Chicago, IL 0.0 264.9 66.2 1,658 Military Housing - Marines, Hawaii Increment II(c)/ Honolulu, HI 0.0 294.7 29.5 1,175 Military Housing - Navy, Hawaii Increment III (c)/ Honolulu, HI 0.0 547.8 54.8 2,519 -------------------------------------- -------------------------------------- $276.4 $1,900.6 $556.2 8,778 ----------------------------========== Units Sold Condominiums: at 1/31/07 ---------- Mercury (c)/ Los Angeles, CA $0.0 $150.6 $75.3 238 62 ----------------------------========== ---------------------------- Total Under Construction (j) $1,261.7 $3,507.2 $1,734.6 ============================ LESS: Above properties to be sold as condominiums $0.0 $150.6 $75.3 ---------------------------- Under Construction less Condominiums $1,261.7 $3,356.6 $1,659.3 ============================ --------------------------------------------------- Residential Under Phased-In Const./ Units(c)(e): Total ---------- Arbor Glenn/ Twinsburg, OH $0.0 $18.4 $9.2 48/288 Pine Ridge Expansion/ Willoughby Hills, OH 0.0 16.4 8.2 40/162 Cobblestone Court/ Painesville, OH 0.0 24.6 12.3 192/304 Sutton Landing/ Brimfield, OH 0.0 15.9 8.0 132/216 Stratford Crossing/ Wadsworth, OH 0.0 24.1 12.1 108/348 -------------------------------------- Total (k) $0.0 $99.4 $49.8 520/1,318 ----------------------------========== --------------------------------------------------- See Attached Footnotes *T -0- *T 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 $417.8 million of cost to the Company's pro-rata share (a non- GAAP measure) of $803.7 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 $390.9 million. (e) Phased-in openings. Costs are representative of the total project. (f) 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 $37.0 million consists of the Company's share of cost for unconsolidated investments of $37.0 million. (g) Includes all phases of Northfield at Stapleton including Phase I which opened in Q4-05. Also, includes 34,000 square feet of office space. (h) Includes San Francisco Centre and Emporium which were previously reported separately. Includes 235,000 square feet of office space. (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) The difference between the full consolidation cost amount (GAAP) of $1,261.7 million to the Company's pro-rata share (a non-GAAP measure) of $1,734.6 million of cost consists of a reduction to full consolidation for minority interest of $140.8 million of cost and the addition of its share of cost for unconsolidated investments of $613.7 million. (k) 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 $49.8 million consists of Forest City's share of cost for unconsolidated investments of $49.8 million. (l) Includes 39,000 square feet of office space. (m) 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. (n) Includes 23,000 square feet of retail space. (o) Supported-living property. (p) Project includes 18,000 square feet of retail space. CONTACT: Forest City Enterprises, Inc. At The Company 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