Segment Information

6 Months Ended

Jul. 31, 2011

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 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. The remaining two reportable segments are The Nets, a member of the NBA, and Corporate Activities. The following tables summarize financial data for the Company’s five reportable segments. All amounts are presented in thousands.


					July 31,		January 31,		Three Months Ended July 31,				Six Months Ended July 31,
					2011		2011		2011		2010		2011		2010
					Identifiable Assets				Capital Expenditures
Commercial Group					$	7,864,524	$	8,617,287	$	151,872	$	121,414	$	266,497	$	282,720
Residential Group						1,982,305		2,825,527		40,523		51,924		93,563		117,349
Land Development Group						497,737		498,190		337		-		350		-
The Nets						4,614		-		-		-		-		-
Corporate Activities						316,999		118,697		150		16		170		16

					$	10,666,179	$	12,059,701	$	192,882	$	173,354	$	360,580	$	400,085


	Three Months Ended July 31,				Six Months Ended July 31,				Three Months Ended July 31,				Six Months Ended July 31,
	2011		2010		2011		2010		2011		2010		2011		2010
	Revenues from Real Estate Operations								Operating Expenses
Commercial Group	$	186,418	$	221,255	$	386,996	$	430,588	$	98,787	$	108,436	$	199,145	$	209,402
Commercial Group Land Sales		1,400		13,558		47,652		14,757		634		10,906		3,155		11,783
Residential Group		57,525		53,790		111,029		105,182		40,359		33,321		76,536		65,152
Land Development Group		7,862		5,618		15,952		12,476		10,193		7,423		19,418		17,871
The Nets		-		-		-		-		-		-		-		-
Corporate Activities		-		-		-		-		9,798		9,430		24,425		20,436

	$	253,205	$	294,221	$	561,629	$	563,003	$	159,771	$	169,516	$	322,679	$	324,644



	Depreciation and Amortization Expense								Interest Expense
Commercial Group	$	40,380	$	44,847	$	83,229	$	91,250	$	41,459	$	59,924	$	87,417	$	118,078
Residential Group		13,748		12,654		27,193		25,032		9,040		9,167		15,254		14,023
Land Development Group		54		100		114		199		776		25		1,600		1,333
The Nets		-		-		-		-		-		-		-		-
Corporate Activities		356		439		709		885		12,789		15,679		26,708		32,543

	$	54,538	$	58,040	$	111,245	$	117,366	$	64,064	$	84,795	$	130,979	$	165,977



	Interest and Other Income
Commercial Group	$	7,714	$	8,264	$	14,455	$	10,209
Residential Group		4,998		5,668		10,874		8,237
Land Development Group		2,553		2,231		5,394		4,425
The Nets		-		-		-		-
Corporate Activities		50		68		99		174

	$	15,315	$	16,231	$	30,822	$	23,045

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 proportionate 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 Company’s 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).

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. The Company’s segments adhere to the accounting policies described in Note A.

Effective during the six months ended July 31, 2011, under the direction of the Company’s chief operating decision maker, EBDT provided in order to assess performance for the Real Estate Groups and The Nets was on a pre-tax basis. The Corporate Activities segment controls tax strategies and evaluates results on a consolidated basis. As a result, beginning February 1, 2011, the Company will no longer allocate income tax expense (benefit) to the Real Estate Groups or The Nets. In addition, based on the consolidated evaluation of income taxes, it was determined that EBDT would exclude all deferred income taxes instead of just those attributable to the Real Estate Groups. All amounts in the following table are represented in thousands:

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


							Land
	Commercial			Residential			Development						Corporate
Three Months Ended July 31, 2011	Group			Group			Group			The Nets			Activities			Total

EBDT	$	77,497		$	19,906		$	(214	)	$	(3,382	)	$	(23,101	)	$	70,706
Depreciation and amortization – Real Estate Groups		(49,436	)		(19,188	)		(67	)		-			-			(68,691	)
Amortization of mortgage procurement costs – Real Estate Groups		(2,360	)		(886	)		(85	)		-			-			(3,331	)
Straight-line rent adjustment		(3,002	)		288			-			-			-			(2,714	)
Preference payment		(586	)		-			-			-			-			(586	)
Impairment of real estate		-			(235	)		-			-			-			(235	)
Discontinued operations:
Depreciation and amortization – Real Estate Groups		(238	)		-			-			-			-			(238	)
Amortization of mortgage procurement costs – Real Estate Groups		(84	)		-			-			-			-			(84	)
Straight-line rent adjustment		217			-			-			-			-			217
Gain on disposition of rental properties		29,899			-			-			-			-			29,899
Income tax expense:
Deferred income taxes		-			-			-			-			(6,353	)		(6,353	)
Current income taxes attributable to above dispositions		-			-			-			-			(10,456	)		(10,456	)

Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	51,907		$	(115	)	$	(366	)	$	(3,382	)	$	(39,910	)	$	8,134

Preferred dividends		-			-			-			-			(3,850	)		(3,850	)

Net earnings (loss) attributable to Forest City Enterprises, Inc. common shareholders	$	51,907		$	(115	)	$	(366	)	$	(3,382	)	$	(43,760	)	$	4,284


							Land
	Commercial			Residential			Development						Corporate
Three Months Ended July 31, 2010	Group			Group			Group			The Nets			Activities			Total

EBDT	$	72,020		$	25,166		$	2,858		$	14,745		$	(9,229	)	$	105,560
Depreciation and amortization – Real Estate Groups		(48,307	)		(18,162	)		(75	)		-			-			(66,544	)
Amortization of mortgage procurement costs – Real Estate Groups		(2,062	)		(601	)		(84	)		-			-			(2,747	)
Deferred taxes – Real Estate Groups		(27,808	)		26			(1,101	)		-			2,682			(26,201	)
Straight-line rent adjustment		5,201			319			(7	)		-			-			5,513
Preference payment		(586	)		-			-			-			-			(586	)
Gain on disposition of partial interests in rental properties, net of tax		125,047			121			-			-			-			125,168
Loss on disposition of unconsolidated entities, net of tax		(536	)		-			-			-			-			(536	)
Impairment of real estate, net of tax		(27,800	)		-			(672	)		-			-			(28,472	)
Impairment of unconsolidated entities, net of tax		-			-			(1,398	)		-			-			(1,398	)
Discontinued operations, net of tax:
Depreciation and amortization – Real Estate Groups		(2,991	)		(254	)		-			-			-			(3,245	)
Amortization of mortgage procurement costs – Real Estate Groups		(881	)		(5	)		-			-			-			(886	)
Deferred taxes – Real Estate Groups		17,383			(291	)		-			-			-			17,092
Straight-line rental adjustment		(971	)		-			-			-			-			(971	)
Gain on disposition of rental properties		-			1,099			-			-			-			1,099

Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	107,709		$	7,418		$	(479	)	$	14,745		$	(6,547	)	$	122,846

Preferred dividends		-			-			-			-			(4,107	)		(4,107	)

Net earnings (loss) attributable to Forest City Enterprises, Inc. common shareholders	$	107,709		$	7,418		$	(479	)	$	14,745		$	(10,654	)	$	118,739

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


							Land
	Commercial			Residential			Development						Corporate
Six Months Ended July 31, 2011	Group			Group			Group			The Nets			Activities			Total

EBDT	$	192,776		$	46,757		$	892		$	(3,686	)	$	(38,657	)	$	198,082
Depreciation and amortization - Real Estate Groups		(99,074	)		(37,501	)		(153	)		-			-			(136,728	)
Amortization of mortgage procurement costs - Real Estate Groups		(4,842	)		(1,726	)		(146	)		-			-			(6,714	)
Straight-line rent adjustment		(969	)		125			-			-			-			(844	)
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 consolidated and unconsolidated entities		(3,435	)		(235	)		(1,400	)		-			-			(5,070	)
Discontinued operations:
Depreciation and amortization - Real Estate Groups		(1,030	)		-			-			-			-			(1,030	)
Amortization of mortgage procurement costs - Real Estate Groups		(333	)		-			-			-			-			(333	)
Straight-line rental adjustment		571			-			-			-			-			571
Gain on disposition of rental properties		39,937			-			-			-			-			39,937
Income tax 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


							Land
	Commercial			Residential			Development						Corporate
Six Months Ended July 31, 2010	Group			Group			Group			The Nets			Activities			Total

EBDT	$	133,101		$	52,779		$	566		$	11,372		$	(21,791	)	$	176,027
Depreciation and amortization - Real Estate Groups		(98,260	)		(35,485	)		(154	)		-			-			(133,899	)
Amortization of mortgage procurement costs - Real Estate Groups		(4,447	)		(1,143	)		(164	)		-			-			(5,754	)
Deferred taxes - Real Estate Groups		(30,579	)		(6,613	)		(220	)		-			3,520			(33,892	)
Straight-line rent adjustment		7,946			772			(4	)		-			-			8,714
Preference payment		(1,171	)		-			-			-			-			(1,171	)
Gain on disposition of partial interests in rental properties, net of tax		107,615			17,731			-			-			-			125,346
Loss on disposition of unconsolidated entities, net of tax		(507	)		-			-			-			-			(507	)
Impairment of real estate, net of tax		(27,800	)		-			(672	)		-			-			(28,472	)
Impairment of unconsolidated entities, net of tax		(7,441	)		-			(1,853	)		-			-			(9,294	)
Discontinued operations, net of tax:
Depreciation and amortization - Real Estate Groups		(5,208	)		(636	)		-			-			-			(5,844	)
Amortization of mortgage procurement costs - Real Estate Groups		(928	)		(13	)		-			-			-			(941	)
Deferred taxes - Real Estate Groups		17,406			(400	)		-			-			-			17,006
Straight-line rental adjustment		(1,134	)		-			-			-			-			(1,134	)
Gain on disposition of rental properties		-			1,099			-			-			-			1,099

Net earnings (loss) attributable to Forest City Enterprises, Inc.	$	88,593		$	28,091		$	(2,501	)	$	11,372		$	(18,271	)	$	107,284

Preferred dividends														(4,107	)		(4,107	)

Net earnings (loss) attributable to Forest City Enterprises, Inc. common shareholders	$	88,593		$	28,091		$	(2,501	)	$	11,372		$	(22,378	)	$	103,177