Segment Information

The Company operates through three strategic business units and five reportable segments. The three strategic business units/reportable segments are the Commercial Group, Residential Group and Land Development Group (“Real Estate Groups”). The Commercial Group, the Company’s largest strategic business unit, owns, develops, acquires and operates regional malls, specialty/urban retail centers, office and life science buildings, hotels and mixed-use projects. The Residential Group owns, develops, acquires and operates residential rental properties, including upscale and middle-market apartments and adaptive re-use developments. Additionally, the Residential Group develops for-sale condominium projects and also owns interests in entities that develop and manage military family housing. The Land Development Group acquires and sells both land and developed lots to residential, commercial and industrial customers. It also owns and develops land into master-planned communities and mixed-use projects. On January 31, 2012, the Board of Directors of the Company approved a strategic decision by senior management to reposition or divest significant portions of the Company’s Land Development Group. During the six months ended July 31, 2012, the Company established and began executing the land divestiture strategy (see Note I – Land Held for Divestiture). The remaining two reportable segments are Corporate Activities and The Nets, a member of the NBA in which the Company accounts for its investment on the equity method of accounting. The following tables summarize financial data for the Company’s five reportable segments. All amounts are presented in thousands.



					July 31, 2012			January 31, 2012
					Identifiable Assets
Commercial Group					$	8,133,880		$	7,970,069
Residential Group					2,035,196			2,022,135
Land Development Group					289,505			352,248
The Nets⁽¹⁾					(9,066		)	(3,836		)
Corporate Activities					283,338			163,667
					$	10,732,853		$	10,504,283

	Three Months Ended July 31,				Six Months Ended July 31,						Three Months Ended July 31,				Six Months Ended July 31,
	2012		2011		2012			2011			2012		2011		2012		2011
	Revenues from Real Estate Operations										Operating Expenses
Commercial Group	$	182,139	$	178,622	$	361,188		$	374,813		$	105,446	$	92,625	$	199,384	$	190,114
Commercial Group Land Sales	49		1,400		40,049			47,652			50		634		3,566		3,155
Residential Group	66,701		56,822		131,285			109,626			42,902		39,506		87,586		76,001
Land Development Group	12,484		7,862		24,640			15,952			11,271		10,193		22,948		19,418
The Nets	—		—		—			—			—		—		—		—
Corporate Activities	—		—		—			—			13,623		9,798		26,354		24,425
	$	261,373	$	244,706	$	557,162		$	548,043		$	173,292	$	152,756	$	339,838	$	313,113

	Depreciation and Amortization Expense										Interest Expense
Commercial Group	$	41,489	$	39,493	$	80,999		$	81,464		$	40,968	$	40,607	$	79,732	$	85,772
Residential Group	12,346		13,531		25,029			26,794			5,040		8,823		9,174		14,820
Land Development Group	139		54		246			114			2,475		776		4,226		1,600
The Nets	—		—		—			—			—		—		—		—
Corporate Activities	257		356		586			709			14,242		12,789		27,837		26,708
	$	54,231	$	53,434	$	106,860		$	109,081		$	62,725	$	62,995	$	120,969	$	128,900

	Interest and Other Income										Capital Expenditures
Commercial Group	$	6,299	$	7,714	$	10,098		$	14,455		$	217,758	$	151,872	$	387,897	$	266,497
Residential Group	4,837		4,998		9,312			10,874			27,648		40,523		53,585		93,563
Land Development Group	2,510		2,553		4,870			5,394			139		337		181		350
The Nets	—		—		—			—			—		—		—		—
Corporate Activities	32		50		77			99			199		150		435		170
	$	13,678	$	15,315	$	24,357		$	30,822		$	245,744	$	192,882	$	442,098	$	360,580


(1)	The identifiable assets represent losses in excess of the Company’s investment basis in The Nets.

The Company uses a measure defined as Earnings Before Depreciation, Amortization and Deferred Taxes (“EBDT”) to report its operating results. EBDT is a non-GAAP measure and is defined as net earnings excluding the following items at the Company’s proportional share: i) gain (loss) on disposition of rental properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) non-cash charges for real estate depreciation, amortization and amortization of mortgage procurement costs; iv) deferred income taxes; v) preferred payment which is classified as noncontrolling interest expense in the Consolidated Statements of Operations; vi) impairment of real estate (net of tax); vii) extraordinary items (net of tax); and viii) cumulative or retrospective effect of change in accounting principle (net of tax); and ix) revisions of prior period financial statements.

The Company believes that, although its business has many facets such as development, acquisitions, disposals, and property management, the core of its business is the recurring operations of its portfolio of real estate assets. The Company’s Chief Executive Officer, the chief operating decision maker, uses EBDT, as presented, to assess performance of its portfolio of real estate assets by operating segment because it provides information on the financial performance of the core real estate portfolio operations. EBDT measures the profitability of a real estate segment’s operations of collecting rent, paying operating expenses and servicing its debt. All amounts in the following tables are presented in thousands.

Reconciliation of EBDT to Net Earnings (Loss) by Segment:



Three Months Ended July 31, 2012	Commercial Group			Residential Group			Land Development Group			The Nets			Corporate Activities			Total
EBDT	$	55,769		$	32,523		$	3,274		$	(8,272	)	$	(26,683	)	$	56,611
Depreciation and amortization – Real Estate Groups	(51,248		)	(20,953		)	(101		)	—			—			(72,302		)
Amortization of mortgage procurement costs – Real Estate Groups	(3,513		)	(808		)	(28		)	—			—			(4,349		)
Straight-line rent adjustment	3,920			(145		)	—			—			—			3,775
Net loss on land held for divestiture activity	—			—			(9,965		)	—			—			(9,965		)
Net loss on land held for divestiture activity of unconsolidated entities	—			—			(41,887		)	—			—			(41,887		)
Gain on disposition of unconsolidated entities	16,107			—			—			—			—			16,107
Net gain on change in control of interests	4,064			—			—			—			—			4,064
Impairment of real estate	(2,908		)	—			—			—			—			(2,908		)
Impairment of unconsolidated real estate	—			—			(390		)	—			—			(390		)
Discontinued operations:
Depreciation and amortization – Real Estate Groups	(16		)	(175		)	—			—			—			(191		)
Amortization of mortgage procurement costs – Real Estate Groups	—			(4		)	—			—			—			(4		)
Impairment of real estate	(261		)	—			—			—			—			(261		)
Income tax benefit (expense):
Deferred income taxes	—			—			—			—			(11,430		)	(11,430		)
Current income taxes attributable to above dispositions	—			—			—			—			19,413			19,413
Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	21,914		$	10,438		$	(49,097	)	$	(8,272	)	$	(18,700	)	$	(43,717	)
Preferred dividends	—			—			—			—			(3,850		)	(3,850		)
Net earnings (loss) attributable to Forest City Enterprises, Inc. common shareholders	$	21,914		$	10,438		$	(49,097	)	$	(8,272	)	$	(22,550	)	$	(47,567	)



Three Months Ended July 31, 2011	Commercial Group			Residential Group			Land Development Group			The Nets			Corporate Activities			Total
EBDT	$	77,497		$	19,906		$	(214	)	$	(3,382	)	$	(23,101	)	$	70,706
Depreciation and amortization – Real Estate Groups	(48,570		)	(18,971		)	(67		)	—			—			(67,608		)
Amortization of mortgage procurement costs – Real Estate Groups	(2,349		)	(882		)	(85		)	—			—			(3,316		)
Straight-line rent adjustment	(3,001		)	288			—			—			—			(2,713		)
Preference payment	(586		)	—			—			—			—			(586		)
Impairment of real estate	—			(235		)	—			—			—			(235		)
Allowance for projects under development revision (See Note A)	1,400			600			—			—			—			2,000
Discontinued operations:
Depreciation and amortization – Real Estate Groups	(1,104		)	(217		)	—			—			—			(1,321		)
Amortization of mortgage procurement costs – Real Estate Groups	(95		)	(4		)	—			—			—			(99		)
Straight-line rent adjustment	216			—			—			—			—			216
Gain on disposition of rental properties	29,899			—			—			—			—			29,899
Income tax benefit (expense):
Deferred income taxes .	—			—			—			—			(7,129		)	(7,129		)
Current income taxes attributable to above dispositions	—			—			—			—			(10,456		)	(10,456		)
Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	53,307		$	485		$	(366	)	$	(3,382	)	$	(40,686	)	$	9,358
Preferred dividends	—			—			—			—			(3,850		)	(3,850		)
Net earnings (loss) attributable to Forest City Enterprises, Inc. common shareholders	$	53,307		$	485		$	(366	)	$	(3,382	)	$	(44,536	)	$	5,508

Reconciliation of EBDT to Net Earnings (Loss) by Segment (continued):



Six Months Ended July 31, 2012	Commercial Group			Residential Group			Land Development Group			The Nets			Corporate Activities			Total
EBDT	$	153,995		$	65,302		$	4,364		$	(15,230	)	$	(49,388	)	$	159,043
Depreciation and amortization – Real Estate Groups	(100,402		)	(41,904		)	(209		)	—			—			(142,515		)
Amortization of mortgage procurement costs – Real Estate Groups	(6,352		)	(1,562		)	(54		)	—			—			(7,968		)
Straight-line rent adjustment	8,834			(227		)	—			—			—			8,607
Net loss on land held for divestiture activity	—			—			(9,965		)	—			—			(9,965		)
Net loss on land held for divestiture activity of unconsolidated entities	—			—			(41,887		)	—			—			(41,887		)
Gain on disposition of unconsolidated entities	16,107			—			—			—			—			16,107
Net gain on change in control of interests	4,064			—			—			—			—			4,064
Impairment of real estate	(4,289		)	—			—			—			—			(4,289		)
Impairment of unconsolidated real estate	—			—			(390		)	—			—			(390		)
Discontinued operations:
Depreciation and amortization – Real Estate Groups	(40		)	(355		)	—			—			—			(395		)
Amortization of mortgage procurement costs – Real Estate Groups	—			(8		)	—			—			—			(8		)
Straight-line rent adjustment	3			—			—			—			—			3
Gain on disposition of rental properties	7,914			—			—			—			—			7,914
Impairment of real estate	(261		)	—			—			—			—			(261		)
Income tax benefit (expense):
Deferred income taxes	—			—			—			—			(22,893		)	(22,893		)
Current income taxes attributable to above dispositions	—			—			—			—			13,868			13,868
Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	79,573		$	21,246		$	(48,141	)	$	(15,230	)	$	(58,413	)	$	(20,965	)
Preferred dividends	—			—			—			—			(7,700		)	(7,700		)
Net earnings (loss) attributable to Forest City Enterprises, Inc. common shareholders	$	79,573		$	21,246		$	(48,141	)	$	(15,230	)	$	(66,113	)	$	(28,665	)



Six Months Ended July 31, 2011	Commercial Group			Residential Group			Land Development Group			The Nets			Corporate Activities			Total
EBDT	$	192,776		$	46,757		$	892		$	(3,686	)	$	(38,657	)	$	198,082
Depreciation and amortization – Real Estate Groups	(97,350		)	(37,102		)	(153		)	—			—			(134,605		)
Amortization of mortgage procurement costs – Real Estate Groups	(4,818		)	(1,718		)	(146		)	—			—			(6,682		)
Straight-line rent adjustment	(950		)	125			—			—			—			(825		)
Preference payment	(1,171		)	—			—			—			—			(1,171		)
Gain on disposition of partial interests in rental properties	9,561			—			—			—			—			9,561
Gain on disposition of unconsolidated entities	—			12,567			—			—			—			12,567
Impairment of real estate	(3,435		)	(235		)	(1,400		)	—			—			(5,070		)
Allowance for projects under development revision (See Note A)	—			—			—			—			—			—
Discontinued operations:
Depreciation and amortization – Real Estate Groups .	(2,754		)	(399		)	—			—			—			(3,153		)
Amortization of mortgage procurement costs – Real Estate Groups	(357		)	(8		)	—			—			—			(365		)
Straight-line rent adjustment	552			—			—			—			—			552
Gain on disposition of rental properties	39,937			—			—			—			—			39,937
Income tax benefit (expense):
Deferred income taxes .	—			—			—			—			(11,166		)	(11,166		)
Current income taxes attributable to above dispositions	—			—			—			—			(41,961		)	(41,961		)
Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	131,991		$	19,987		$	(807	)	$	(3,686	)	$	(91,784	)	$	55,701
Preferred dividends	—			—			—			—			(7,700		)	(7,700		)
Net earnings (loss) attributable to Forest City Enterprises, Inc. common shareholders	$	131,991		$	19,987		$	(807	)	$	(3,686	)	$	(99,484	)	$	48,001