EX-99.1 2 a5111735ex991.txt FOREST CITY ENTERPRISES, INC. EXHIBIT 99.1 Exhibit 99.1 Forest City Reports Fiscal 2005 Full-Year and Fourth-Quarter Results CLEVELAND--(BUSINESS WIRE)--March 28, 2006--Forest City Enterprises, Inc. (NYSE:FCEA)(NYSE:FCEB) today announced revenues, net earnings and EBDT for the fiscal fourth quarter and full year ended January 31, 2006. All per-share figures are adjusted for the Company's two-for-one stock split effective July 11, 2005. For the year ended January 31, 2006, consolidated revenues were $1.2 billion, a 21.8 percent increase over last year's $986 million. Net earnings for fiscal 2005 were $83.5 million, or $0.81 per share, compared with $85.2 million, or $0.84 per share, in the prior year. EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) was $270.5 million, or $2.64 per share, a 9.5 percent increase on a per share basis compared with last year's EBDT of $245.0 million, or $2.41 per share. Net earnings for the fourth quarter were $28.2 million, or $0.27 per share, compared with fourth-quarter 2004 net earnings of $5.8 million, or $0.06 per share. EBDT for the fourth quarter was $73.7 million, or $0.72 per share, compared with last year's fourth-quarter EBDT of $36.3 million, or $0.36 per share. EBDT and EBDT per share are non-Generally Accepted Accounting Principle (GAAP) measures. EBDT is reconciled to net earnings, the most comparable financial measure calculated in accordance with GAAP, in the table titled Financial Highlights in this news release. Discussion of Results Charles A. Ratner, president and chief executive officer of Forest City Enterprises, said, "Fiscal 2005 was an excellent year for Forest City. We reached a record-high $1.2 billion in consolidated revenues and reported our 26th consecutive year of EBDT growth. During the year, our balance sheet grew to record levels, with total assets of $8.0 billion and total real estate assets climbing 11.1 percent to $7.2 billion. Shareholders' equity reached $894.4 million, an increase of 11.2 percent compared with last year. We closed 2005 in a strong liquidity position with more than $540 million in cash and credit available." Ratner said, "The increases in EBDT for the year and fourth quarter were primarily due to the results generated by our Land Development Group, as well as sales of outlots adjacent to our retail projects reported in our Commercial segment." The increase in EBDT for the year was partially offset by the increased loss for The Nets (basketball team), which the Company did not own in the first half of 2004; and 2004 EBDT from the Lumber Trading Group, which was sold in the fourth quarter of last year. Ratner continued, "The real estate business, exclusive of the land activity, was strong in 2005. The Commercial Group's increases were a result of increased comparable property operations and new project openings. The Residential Group generated an increase in comparable property net operating income for the first time in four years." The overall 2005 results in the residential segment were down significantly primarily because of operating deficits resulting from initial lease-up of six newly opened projects; increased interest expense due to higher variable interest rates; and the short-term dilutive impact on earnings resulting from the disposition of five properties. "We have been an aggressive seller of real estate during the past several years and have taken advantage of the unprecedented market valuations by disposing of a significant amount of assets, which raised substantial equity capital. The short-term decline in earnings resulting from these dispositions will be more than offset by the long-term value of reinvesting the proceeds in future development projects at greater returns," Ratner added. Comparable Property NOI & Occupancy Comparable property net operating income (NOI) increased 2.9 percent in 2005. Comparable property NOI for the Commercial Group increased 2.3 percent - with the retail and hotel portfolios up 3.6 percent and 13.1 percent, respectively, and the office portfolio down 0.9 percent. In the residential portfolio, comparable NOI increased 4.6 percent. Comparable property NOI, defined as NOI from properties operated for full years in both 2005 and 2004, 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. During 2005, total comparable occupancies increased compared with the same period a year ago. Retail occupancies continued to build on the increases of previous years, rising to 94.7 percent in 2005 compared with 92.5 percent in 2004. Office occupancies declined modestly to 92.5 percent, from 93.1 percent last year. Comparable occupancies in the residential business increased to 93.4 percent, from 92.6 percent last year. Property Sales 2005 was another active year for property sales, particularly in the Residential Group. After selling seven apartment communities in 2004, Forest City sold five communities in 2005 at an aggregate price of $222.9 million at its share. The pricing on the 2005 residential sales represents a capitalization rate of approximately 4 percent. In addition, the Company sold the Showcase specialty retail center in Las Vegas. These sales transactions generated a combined $39 million after-tax gain and produced $88 million of cash proceeds. On March 17, 2006, the Company sold its investment in Hilton Times Square Hotel for $242 million, or $545,000 per room. This 444-room hotel opened in 2000 and is located in Manhattan, New York. The Company has taken the initial steps to structure this sale as a tax-deferred exchange. Portfolio and Development Highlights A schedule of the Company's project openings and acquisitions, and the pipeline of projects under construction, is included in this news release. The attached schedule includes comparable project costs on both a full consolidation and pro-rata share basis. Described below are several of the Company's recent and upcoming project openings, projects under construction, and projects under development. Consistent with the company's Core Market Strategy, Forest City's portfolio is concentrated in the New York City/Philadelphia metropolitan area, Boston, Greater Washington D.C./Baltimore, Denver, and California -- its core markets -- with high barriers to entry and where the Company has developed a unique franchise. During fiscal 2005, Forest City added Chicago as its sixth core market, in recognition of the Company's breadth of retail, life sciences and residential projects in that market. In addition, Forest City made significant strides in other growing markets such as Florida and Texas. In Florida, Forest City has two significant retail projects under development, as well as being very active in the land development business. In Texas, the Company has entered the Dallas market to redevelop several downtown buildings into an upscale residential community. Forest City continues to increase its property concentration, based on total property cost, in these core markets. At the close of fiscal 2005, the six core markets accounted for approximately 74 percent of the Company's current portfolio, 100 percent of the projects opened during the year, and 88 percent of the projects under construction. Project Openings During the year, Forest City opened 10 projects and acquired one, representing a total of $547.6 million of cost on a full consolidation basis and $579.5 million of cost at the Company's pro-rata share. Commercial Group openings consisted of four retail centers representing approximately 1.5 million square feet of retail space, and one 176,000-square-foot office building acquisition. The Residential Group's six openings during the year added a total of 1,088 apartment units to the portfolio. A detailed list of 2005 project openings is provided in the development pipeline schedule in this news release. Ratner said, "We are very pleased with the performance to date of our new project openings. Simi Valley Town Center has experienced strong traffic and is generating sales in excess of expectations, while Northfield at Stapleton opened its first phase and is looking forward to the 2006 opening of Macy's during its second phase. All of the residential projects are leasing well, especially our two apartment communities in downtown Los Angeles and two projects near Boston, and we are hitting or exceeding our pro-forma rent projections." Projects Under Construction At the end of fiscal 2005, there were 16 projects under construction. These projects, combined with one project to be acquired, represented a total cost of $702.2 million on a full consolidation basis and $1.3 billion of cost at the Company's pro-rata share. These projects include four retail centers, five office buildings, five residential communities and three condominium developments. Twelve projects, representing $468.3 million of cost on a full consolidation basis and $814.4 million of cost at the Company's pro-rata share, are expected to be completed in 2006. See attached exhibit, which includes comparable project costs on both a full consolidation and pro-rata share basis. Highlights of projects under construction and scheduled to open in 2006 are: -- San Francisco Centre - Emporium, a 1-million-square-foot retail project in downtown San Francisco (jointly owned with The Westfield Group) that will be anchored by Bloomingdale's and Nordstrom and will connect at all five levels to the existing San Francisco Centre. Not only was the pre-leasing activity at this project more than 70 percent at year-end, but also the quality and mix of the tenants are very strong. -- Northfield at Stapleton, where additional phases, including the project's main street, will open throughout 2006, at a cost of $142.5 million on a full consolidation basis and $138.8 million at the Company's pro-rata share. -- Sky55, a 411-unit apartment tower, and 1251 South Michigan, a 91-unit senior housing community, at the Company's Central Station land development project in Chicago. -- Sterling Glen of Roslyn, 158 units of senior housing in metropolitan New York City. -- 1100 Wilshire, a high-rise office building that is being converted into a 228-unit condominium community in downtown Los Angeles. Ninety percent of the condominium units had been sold and deliveries are expected to begin in the second quarter of 2006. -- Illinois Science + Technology Park, in the Chicago suburb of Skokie, Illinois, where Forest City is redeveloping the former Pfizer campus into a 22-acre technology and research park. The site currently includes 1 million square feet of office space in nine buildings. The Company is in the process of renovating or redeveloping four existing structures, and plans to replace others with new research and office facilities. Projects under construction at year-end and scheduled to open in 2007 are: -- Promenade Bolingbrook, a 731,000-square-foot retail center in suburban Chicago. IKEA has already opened at the site, and Bass Pro Shops and Marshall Field's will anchor the $117.7 million center opening next year. -- New York Times Headquarters, a 1.5-million-square-foot, 52-story office building in Manhattan that will become a signature building on the New York City skyline. The New York Times will own and occupy 800,000 square feet of office space, and Forest City and its partner will own and manage the remainder of the $166.0 million (cost at the Company's pro-rata share) building. -- Dallas Mercantile, the Company's first residential project in the Dallas market. The project involves the redevelopment of a vacant bank building and surrounding buildings into an upscale residential community. The initial building will completed at a cost $116.2 million. -- Mercury, a second condominium project in downtown Los Angeles where the Company is redeveloping a high-rise office building into 238 for-sale residential units. In addition, construction is continuing at the Company's first military family housing project, at five existing U.S. Navy communities at Hawaii's Pearl Harbor. During the year, Forest City opened 174 of the first new rental homes and acquired its partner's interest in Hawaii Military Communities. The plan is to build approximately 910 new homes and renovate 1,040 existing homes at this project. During the fourth quarter, the Company signed its second 50-year partnership agreement with the Navy, which will result in approximately 1,650 new or upgraded rental homes for Navy families stationed primarily in Chicago's North Shore suburbs. Construction will begin in 2006. Projects Under Development At the end of fiscal 2005, Forest City had more than 20 projects under development, representing more than $2 billion of cost on a full consolidation basis and at the Company's share - including several of the largest and most complex projects in Company history. These projects require patience and creativity, and represent opportunities that will fuel the Company's growth and further strengthen and diversify the portfolio. Among the projects under development during 2005, the Company achieved the following milestones: -- Furthered the progress in the entitlement process for the 510,000-square-foot East River Plaza retail center, the 455-unit Beekman residential tower, and the 1.2-million-square-foot Ridge Hill mixed-use project - which collectively represent more than $1 billion in total development cost in the Company's New York City core market. -- Acquired much of the land for the development of the Brooklyn Atlantic Yards mixed-use community, which is expected to include a new arena for the Nets basketball team. -- Secured the rights to redevelop Southeast Federal Center, a former military supply depot in Washington, D.C., into a mixed-use community. -- Prepared for phase-one construction in 2006 on an 80-acre mixed-use community adjacent to the Johns Hopkins University medical campus in East Baltimore, Maryland. Johns Hopkins has committed to occupy at least 100,000 square feet of the first 275,000-square-foot building. -- Won exclusive negotiating rights for two additional life science development opportunities: a 14-acre office campus, The West Quad at Case Western Reserve University School of Medicine, in Cleveland; and the 160-acre Fitzsimons life sciences office park adjacent to Denver Stapleton. -- Signed a joint venture partnership agreement with Magna Entertainment Corp. to develop Village at Gulfstream Park, a mixed-use project adjacent to a horse racing track in Hallandale, Florida. -- Announced a partnership with Harrah's Entertainment Inc. to make a significant investment in Forest City's Station Square project in Pittsburgh that, subject to approval from state officials, would include a casino. -- Secured $160 million in bonds to develop The Uptown Apartments, which will include 665 rental residential units in center city Oakland, California. Denver Stapleton and Land Development Update The transformation of Stapleton, Denver's former airport, into one of the premier new urban communities in the nation continued at a rapid pace throughout 2005. Milestones achieved during the year at Stapleton included: -- Sold 792 homes and closed on 791 homes, bringing the totals to 2,457 homes sold and 2,143 homes occupied since the project's inception in 2001. There are now more than 5,000 people living at Stapleton. -- Opened the first phase of the 1.1-million-square-foot Northfield at Stapleton regional lifestyle center. An 18-screen Harkins movie theatre complex, a Macy's store, and dozens of retailers and restaurants along Northfield's main street will open in phases during 2006 - which will give Stapleton approximately 2 million square feet of combined retail space. -- Began construction on Stapleton's first office building, a 45,000-square-foot medical facility. -- Opened three public schools, with a fourth school under construction and scheduled to open in 2006 along with additional public amenities. During the year, Forest City announced an agreement for the long-term development of 9,000 acres at Mesa Del Sol in Albuquerque, New Mexico. The project is expected to be developed over several decades with a mix of residential, commercial and mixed-use venues. The first building, an 88,000-square-foot office building for solar power technology company Advent Solar, is under construction and is expected to be completed later this year. In the core land business, 2005 land sales were strong at GrassFarms in Manatee County, Florida; Old Stone Crossing and Mill Creek Falls in the Charlotte, North Carolina, area; Gladden Farms in Tucson, Arizona; and developments in Denver and northeast Ohio. During the year, the Company added a net 357 acres to the core land portfolio, bringing the total to 7,757 acres of land involving 35 projects in 10 states. Portfolio additions during the year included three properties totaling nearly 1,200 acres in North Carolina; the addition of more than 600 acres for phase two of Gladden Farms; and the acquisition of a 120-acre parcel zoned for commercial development adjacent to the Company's Paseo del Este residential development in El Paso, Texas. Financing Activity Forest City continues to take advantage of current interest rates and attractive debt markets for its project financings, with primary emphasis on locking in fixed-rate nonrecourse mortgages. During fiscal 2005, Forest City closed on transactions totaling $1.7 billion in nonrecourse mortgage financings, including $622.7 million for new development projects and acquisitions, $891.3 million in refinancings, and $226.6 million in loan extensions and additional fundings. As of January 31, 2006, the Company's weighted average cost of mortgage debt increased to 5.98 percent from 5.75 percent at January 31, 2005, primarily due to the general increase in short-term interest rates. Fixed-rate mortgage debt, which represented 71 percent of the Company's total nonrecourse mortgage debt, decreased from 6.46 percent at January 31, 2005 to 6.25 percent at January 31, 2006. The variable-rate mortgage debt increased from 3.98 percent at January 31, 2005 to 5.33 percent at January 31, 2006. Year-End Summary and Outlook Ratner said, "We are very pleased to report an excellent year of performance with record highs achieved in revenues, EBDT, total assets, real estate assets and shareholders' equity. We are equally pleased that our shareholders were able to participate in our success, with a total return on our stock price of 32.7 percent. "2005 brought us additional excellent opportunities that will drive our business for years to come. Our development pipeline continued to expand, with approximately $1.2 billion under construction and another $2 billion under development. We are pleased with our momentum and optimistic about our future, despite the risks inherent in our business. Our focus is on projects that capitalize on our core competencies and match our development strategy to concentrate on large, complex projects in growing urban markets. We expect to deliver our 27th consecutive year of EBDT growth in fiscal 2006, and to continue to build shareholder value." Corporate Description Forest City Enterprises, Inc. is an $8.0 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 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, 2006, with reconciliations of non-GAAP financial measures, such as comparable net operating income 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 (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). Unlike the real estate segments, EBDT for the Nets segment equals net earnings of the equity method investment. 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 economic ownership. Under GAAP, the full consolidation method is used to report partnership assets and liabilities as 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. Stabilized Unleveraged Return When discussing development projects and acquisitions elsewhere in this news release, the Company discusses its expected stabilized unleveraged return for such projects and acquisitions. The Company calculates stabilized unleveraged return on a completed project or acquisition by dividing stabilized NOI (for which there is no comparable GAAP measure) by its total cost. The Company believes that the presentation of stabilized unleveraged return is useful to investors because it is an indicator of the expected profitability and value of the Company's projects and acquisitions in its development pipeline. Safe Harbor Language Statements made in this news release that state the Company or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, real estate development and investment risks, economic conditions in the Company's core markets, reliance on major tenants, the impact of terrorist acts, the Company's substantial leverage and the ability to service debt, guarantees under the Company's credit facility, changes in interest rates, continued availability of tax-exempt government financing, the sustainability of substantial operations at the subsidiary level, significant geographic concentration, illiquidity of real estate investments, dependence on rental income from real property, conflicts of interest, competition, potential liability from syndicated properties, effects of uninsured loss, environmental liabilities, partnership risks, litigation risks, risks associated with an investment in a professional sports franchise, and other risk factors as disclosed from time to time in the Company's SEC filings, including, but not limited to, the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2006. Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2006 and 2005 (dollars in thousands, except per share data) Three Months Ended, January 31, Increase (Decrease) ------------------------ ------------------- 2006 2005 Amount Percent ------------------------ ----------- ------- Operating Results: Earnings from continuing operations $9,211 $(11,761) $20,972 Discontinued operations, net of tax and minority interest (1) 19,024 17,601 1,423 Cumulative effect of change in accounting principle, net of tax - - - ------------------------ ----------- Net earnings $28,235 $5,840 $22,395 ======================== =========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $73,657 $36,331 $37,326 102.7% ======================== =========== Reconciliation of Net Earnings to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2): Net Earnings $28,235 $5,840 $22,395 Depreciation and amortization - Real Estate Groups (5) 54,202 50,923 3,279 Depreciation and amortization - equity method investments (3) - - - Amortization of mortgage procurement costs - Real Estate Groups (5) 2,919 2,415 504 Deferred income tax expense - Real Estate Groups (6) 26,089 (159) 26,248 Deferred income tax expense - Non-Real Estate Groups: (6) Gain on disposition of other investments (39) (151) 112 Gain on disposition of Lumber Group - 4,479 (4,479) Provision for decline in real estate (587) - (587) Current income tax expense on non- operating earnings: (6) Gain on disposition of other investments - 324 (324) Gain on disposition included in discontinued operations (811) 11,355 (12,166) Gain on disposition recorded on equity method - - - Straight-line rent adjustment (4) (4,477) (636) (3,841) Provision for decline in real estate, net of minority interest 1,748 - 1,748 Provision for decline in real estate recorded on equity method - - - Gain on disposition recorded on equity method - - - Loss (gain) on disposition of other investments 100 (438) 538 Discontinued operations: (1) Gain on disposition of rental properties (33,722) (18,394) (15,328) Gain on disposition of Lumber Group - (22,013) 22,013 Minority interest - Gain on sale - 2,786 (2,786) Cumulative effect of change in accounting principle, net of tax - - - ------------------------ ----------- Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $73,657 $36,331 $37,326 102.7% ======================== =========== Diluted Earnings per Common Share: Earnings from continuing operations $0.09 $(0.12) $0.21 Discontinued operations, net of tax and minority interest (1) 0.18 0.18 - Cumulative effect of change in accounting principle, net of tax - - - ------------------------ ----------- Net earnings $0.27 $0.06 $0.21 ======================== =========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $0.72 $0.36 $0.36 100.0% ======================== =========== Operating earnings, net of tax (a non-GAAP financial measure) $0.32 $(0.11) $0.43 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 0.20 0.24 (0.04) Minority interest (0.24) (0.07) (0.17) Cumulative effect of change in accounting principle, net of tax - - - ------------------------ ----------- Net earnings $0.27 $0.06 $0.21 ======================== =========== Diluted weighted average shares outstanding 102,924,564 100,581,234 2,343,330 ======================== =========== Year Ended, January 31, Increase (Decrease) ------------------------ ------------------- 2006 2005 Amount Percent ------------------------ ----------- ------- Operating Results: Earnings from continuing operations $60,804 $44,008 $16,796 Discontinued operations, net of tax and minority interest (1) 22,715 52,459 (29,744) Cumulative effect of change in accounting principle, net of tax - (11,261) 11,261 ------------------------ ----------- Net earnings $83,519 $85,206 $(1,687) ======================== =========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $270,496 $245,032 $25,464 10.4% ======================== =========== Reconciliation of Net Earnings to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2): Net Earnings $83,519 $85,206 $(1,687) Depreciation and amortization - Real Estate Groups (5) 192,715 178,972 13,743 Depreciation and amortization - equity method investments (3) - 237 (237) Amortization of mortgage procurement costs - Real Estate Groups (5) 11,578 12,100 (522) Deferred income tax expense - Real Estate Groups (6) 43,981 65,790 (21,809) Deferred income tax expense - Non-Real Estate Groups: (6) Gain on disposition of other investments 135 (151) 286 Gain on disposition of Lumber Group - 4,568 (4,568) Provision for decline in real estate (587) - (587) Current income tax expense on non- operating earnings: (6) Gain on disposition of other investments 60 324 (264) Gain on disposition included in discontinued operations (811) 11,215 (12,026) Gain on disposition recorded on equity method 8,147 (209) 8,356 Straight-line rent adjustment (4) (10,660) (3,282) (7,378) Provision for decline in real estate, net of minority interest 6,442 - 6,442 Provision for decline in real estate recorded on equity method 704 - 704 Gain on disposition recorded on equity method (21,023) (31,996) 10,973 Loss (gain) on disposition of other investments (506) (438) (68) Discontinued operations: (1) Gain on disposition of rental properties (43,198) (71,325) 28,127 Gain on disposition of Lumber Group - (20,920) 20,920 Minority interest - Gain on sale - 3,680 (3,680) Cumulative effect of change in accounting principle, net of tax - 11,261 (11,261) ------------------------ ----------- Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $270,496 $245,032 $25,464 10.4% ======================== =========== Diluted Earnings per Common Share: Earnings from continuing operations $0.59 $0.43 $0.16 Discontinued operations, net of tax and minority interest (1) 0.22 0.52 (0.30) Cumulative effect of change in accounting principle, net of tax - (0.11) 0.11 ------------------------ ----------- Net earnings $0.81 $0.84 $(0.03) ======================== =========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $2.64 $2.41 $0.23 9.5% ======================== =========== Operating earnings, net of tax (a non-GAAP financial measure) $0.81 $0.49 $0.32 Provision for decline in real estate, net of tax (0.06) - (0.06) Gain on disposition of rental properties and other investments, net of tax 0.38 0.74 (0.36) Minority interest (0.32) (0.28) (0.04) Cumulative effect of change in accounting principle, net of tax - (0.11) 0.11 ------------------------ ----------- Net earnings $0.81 $0.84 $(0.03) ======================== =========== Diluted weighted average shares outstanding 102,603,932 101,846,056 757,876 ======================== =========== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2006 and 2005 (dollars in thousands) Three Months Ended, January 31, Increase (Decrease) ------------------ ------------------- 2006 2005 Amount Percent ------------------ ------------------- Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net Earnings: Revenues from real estate operations Commercial Group $244,187 $199,268 $44,919 Residential Group 57,941 51,289 6,652 Land Development Group 30,628 21,575 9,053 Corporate Activities - - - ------------------ ------------ Total Revenues 332,756 272,132 60,624 22.3% Operating expenses (186,451)(163,014) (23,437) Interest expense, including early extinguishment of debt (75,228) (67,269) (7,959) Amortization of mortgage procurement costs (5) (2,811) (3,239) 428 Depreciation and amortization (5) (49,000) (45,939) (3,061) Interest income 9,351 8,484 867 Equity in earnings of unconsolidated entities 9,172 (6,279) 15,451 Provision for decline in real estate recorded on equity method - - - Gain on disposition recorded on equity method - - - Revenues and interest income from discontinued operations (1) 15,035 19,071 (4,036) Expenses from discontinued operations (1) (16,507) (24,044) 7,537 ------------------ ------------ Operating earnings (a non-GAAP financial measure) 36,317 (10,097) 46,414 ------------------ ------------ Income tax expense (6) (3,523) (1,916) (1,607) Income tax expense from discontinued operations (1) (6) (11,981) (15,061) 3,080 Income tax expense on non- operating earnings items (see below) 12,316 16,196 (3,880) ------------------ ------------ Operating earnings, net of tax (a non-GAAP financial measure) 33,129 (10,878) 44,007 ------------------ ------------ Provision for decline in real estate (1,774) - (1,774) Provision for decline in real estate recorded on equity method - - - Gain on disposition recorded on equity method - - - Gain on disposition of other investments (100) 438 (538) Gain on disposition of rental properties included in discontinued operations (1) 33,722 18,394 15,328 Gain on disposition of Lumber Group included in discontinued operations (1) - 22,013 (22,013) Income tax benefit (expense) on non-operating earnings: (6) Provision for decline in real estate 676 - 676 Provision for decline in real estate recorded on equity method - - - Gain on disposition of other investments 39 (173) 212 Gain on disposition recorded on equity method - - - Gain on disposition of rental properties included in discontinued operations (13,031) (6,172) (6,859) Gain on disposition of Lumber Group included in discontinued operations - (9,851) 9,851 ------------------ ------------ Income tax expense on non- operating earnings (see above) (12,316) (16,196) 3,880 ------------------ ------------ Minority interest in continuing operations (23,181) (5,159) (18,022) Minority interest in discontinued operations: (1) Operating earnings (1,245) 14 (1,259) Gain on disposition of rental properties - (2,786) 2,786 ------------------ ------------ (1,245) (2,772) 1,527 ------------------ ------------ Minority interest (24,426) (7,931) (16,495) ------------------ ------------ Cumulative effect of change in accounting principle, net of tax - - - ------------------ ------------ Net earnings $28,235 $5,840 $22,395 ================== ============ Year Ended, January 31, Increase (Decrease) ------------------- ------------------- 2006 2005 Amount Percent ------------------- ------------------- Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net Earnings: Revenues from real estate operations Commercial Group $878,648 $703,110 $175,538 Residential Group 214,258 190,283 23,975 Land Development Group 107,869 92,657 15,212 Corporate Activities - 4 (4) ------------------- ------------ Total Revenues 1,200,775 986,054 214,721 21.8% Operating expenses (694,296)(567,276) (127,020) Interest expense, including early extinguishment of debt (280,530)(243,316) (37,214) Amortization of mortgage procurement costs (5) (12,547) (13,427) 880 Depreciation and amortization (5) (174,792)(153,085) (21,707) Interest income 28,095 45,302 (17,207) Equity in earnings of unconsolidated entities 55,201 54,392 809 Provision for decline in real estate recorded on equity method 704 - 704 Gain on disposition recorded on equity method (21,023) (31,996) 10,973 Revenues and interest income from discontinued operations (1) 61,950 186,367 (124,417) Expenses from discontinued operations (1) (66,034)(184,306) 118,272 ------------------- ------------ Operating earnings (a non-GAAP financial measure) 97,503 78,709 18,794 ------------------- ------------ Income tax expense (6) (23,238) (39,913) 16,675 Income tax expense from discontinued operations (1) (6) (14,306) (38,079) 23,773 Income tax expense on non- operating earnings items (see below) 22,249 48,999 (26,750) ------------------- ------------ Operating earnings, net of tax (a non-GAAP financial measure) 82,208 49,716 32,492 ------------------- ------------ Provision for decline in real estate (7,874) - (7,874) Provision for decline in real estate recorded on equity method (704) - (704) Gain on disposition recorded on equity method 21,023 31,996 (10,973) Gain on disposition of other investments 506 438 68 Gain on disposition of rental properties included in discontinued operations (1) 43,198 71,325 (28,127) Gain on disposition of Lumber Group included in discontinued operations (1) - 20,920 (20,920) Income tax benefit (expense) on non-operating earnings: (6) Provision for decline in real estate 2,490 - 2,490 Provision for decline in real estate recorded on equity method 272 - 272 Gain on disposition of other investments (195) (173) (22) Gain on disposition recorded on equity method (8,123) (12,655) 4,532 Gain on disposition of rental properties included in discontinued operations (16,693) (26,752) 10,059 Gain on disposition of Lumber Group included in discontinued operations - (9,419) 9,419 ------------------- ------------ Income tax expense on non- operating earnings (see above) (22,249) (48,999) 26,750 ------------------- ------------ Minority interest in continuing operations (30,496) (25,161) (5,335) Minority interest in discontinued operations: (1) Operating earnings (2,093) (88) (2,005) Gain on disposition of rental properties - (3,680) 3,680 ------------------- ------------ (2,093) (3,768) 1,675 ------------------- ------------ Minority interest (32,589) (28,929) (3,660) ------------------- ------------ Cumulative effect of change in accounting principle, net of tax - (11,261) 11,261 ------------------- ------------ Net earnings $83,519 $85,206 $(1,687) =================== ============ Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2006 and 2005 (in thousands) 1) Pursuant to the definition of a component of an entity of SFAS No. 144, assuming no significant continuing involvement, all earnings of properties and a division which have been sold or held for sale are reported as discontinued operations. 2) The Company uses an additional measure, along with net earnings, to report its operating results. This measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results as defined by generally accepted accounting principles and may not be directly comparable to similarly-titled measures reported by other companies. The Company believes that EBDT provides additional information about its operations, and along with net earnings, is necessary to understand its operating results. EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of operating properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) noncash charges from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., for depreciation, amortization (including amortization of mortgage procurement costs) and deferred income taxes; iv) provision for decline in real estate (net of tax); v) extraordinary items (net of tax); and vi) cumulative effect of change in accounting principle (net of tax). See our discussion of EBDT in the news release. 3) Amount represents depreciation expense for certain syndicated properties accounted for on the equity method of accounting under both full consolidation and pro-rata consolidation (a non-GAAP financial measure). See our discussion of pro-rata consolidation in the news release. 4) 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. 5) The following table provides detail of depreciation and amortization and amortization of mortgage procurement costs. The Company's Real Estate Groups are owned by Forest City Rental Properties Corporation, a wholly-owned subsidiary engaged in the ownership, development, acquisition and management of real estate projects, including apartment complexes, regional malls and retail centers, hotels, office buildings and mixed-use facilities, as well as large land development projects. Depreciation and Depreciation and Amortization Amortization ------------------ ------------------- Three Months Ended Year Ended January 31, January 31, ------------------ ------------------- 2006 2005 2006 2005 ------------------ ------------------- Full Consolidation $49,000 $45,939 $174,792 $153,085 Non-Real Estate Groups (368) (217) (1,104) (1,086) ------------------ ------------------- Real Estate Groups Full Consolidation 48,632 45,722 173,688 151,999 Real Estate Groups related to minority interest (2,432) (4,365) (14,355) (10,870) Real Estate Groups Equity Method 7,080 7,165 26,905 27,163 Real Estate Groups Discontinued Operations 922 2,401 6,477 10,680 ------------------ ------------------- Real Estate Groups Pro-Rata Consolidation $54,202 $50,923 $192,715 $178,972 ================== =================== Amortization of Amortization of Mortgage Mortgage Procurement Costs Procurement Costs -------------------------------------- Three Months Ended Year Ended January 31, January 31, ------------------ ------------------- 2006 2005 2006 2005 ------------------ ------------------- Full Consolidation $2,811 $3,239 $12,547 $13,427 Non-Real Estate Groups (83) (103) (369) (243) ------------------ ------------------- Real Estate Groups Full Consolidation 2,728 3,136 12,178 13,184 Real Estate Groups related to minority interest (207) (1,070) (2,280) (2,825) Real Estate Groups Equity Method 338 219 1,244 1,064 Real Estate Groups Discontinued Operations 60 130 436 677 ------------------ ------------------- Real Estate Groups Pro-Rata Consolidation $2,919 $2,415 $11,578 $12,100 ================== =================== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Year Ended January 31, 2006 and 2005 (in thousands) Three Months Ended Year Ended January 31, January 31, -------------------- --------------------- 2006 2005 2006 2005 -------------------- --------------------- (6) The following table (in thousands) (in thousands) provides detail of Income Tax Expense (Benefit): (A) Operating earnings Current $(3,736) $(4,435) $(6,944) $(12,972) Deferred 7,974 6,178 24,626 40,057 -------------------- --------------------- 4,238 1,743 17,682 27,085 -------------------- --------------------- (B) Provision for decline in real estate Deferred (676) - (2,490) - Deferred - Equity method investment - - (272) - -------------------- --------------------- (676) - (2,762) - -------------------- --------------------- (C) Gain on disposition of other investments Current - Non-Real Estate Groups - 324 60 324 Deferred - Non-Real Estate Groups (39) (151) 135 (151) -------------------- --------------------- (39) 173 195 173 -------------------- --------------------- (D) Gain on disposition recorded on equity method Current - - 8,147 (209) Deferred - - (24) 12,864 -------------------- --------------------- - - 8,123 12,655 -------------------- --------------------- Subtotal (A) (B) (C) (D) Current (3,736) (4,111) 1,263 (12,857) Deferred 7,259 6,027 21,975 52,770 -------------------- --------------------- Income tax expense 3,523 1,916 23,238 39,913 -------------------- --------------------- (E) Discontinued operations - Rental Properties Operating earnings Current (984) (1,572) (3,412) (3,209) Deferred (66) (140) 1,025 272 -------------------- --------------------- (1,050) (1,712) (2,387) (2,937) Gain on disposition of rental properties Current (811) 5,983 (811) 6,364 Deferred 13,842 189 17,504 20,388 -------------------- --------------------- 13,031 6,172 16,693 26,752 -------------------- --------------------- 11,981 4,460 14,306 23,815 -------------------- --------------------- Subtotal (A) (B) (C) (D) (E) Current (5,531) 300 (2,960) (9,702) Deferred 21,035 6,076 40,504 73,430 -------------------- --------------------- 15,504 6,376 37,544 63,728 -------------------- --------------------- (F) Discontinued operations - Lumber Group Operating earnings Current - 640 - 4,852 Deferred - 110 - (7) -------------------- --------------------- - 750 - 4,845 Gain on disposition of Lumber Group Current - 5,372 - 4,851 Deferred - 4,479 - 4,568 -------------------- --------------------- - 9,851 - 9,419 -------------------- --------------------- - 10,601 - 14,264 -------------------- --------------------- Subtotal (E) (F) 11,981 15,061 14,306 38,079 -------------------- --------------------- Grand Total (A) (B) (C) (D) (E) (F) Current (5,531) 6,312 (2,960) 1 Deferred 21,035 10,665 40,504 77,991 -------------------- --------------------- $15,504 $16,977 $37,544 $77,992 -------------------- --------------------- Recap of Grand Total: Real Estate Groups Current (8,215) 14,038 5,356 10,847 Deferred 26,089 (159) 43,981 65,790 -------------------- --------------------- 17,874 13,879 49,337 76,637 Non-Real Estate Groups Current 2,684 (7,726) (8,316) (10,846) Deferred (5,054) 10,824 (3,477) 12,201 -------------------- --------------------- (2,370) 3,098 (11,793) 1,355 -------------------- --------------------- Grand Total $15,504 $16,977 $37,544 $77,992 ==================== ===================== Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (GAAP) (in thousands): Three Months Ended January 31, 2006 --------------------------------------------- Plus Unconsol- Plus Full idated Discon- Pro-Rata Consol- Less Invest- tinued Consol- idation Minority ments at Opera- idation (GAAP) Interest Pro-Rata tions (Non-GAAP) --------------------------------------------- Revenues from real estate operations $332,756 $48,949 $86,592 $10,518 $380,917 Exclude straight-line rent adjustment (1) (6,403) - - - (6,403) --------------------------------------------- Adjusted revenues 326,353 48,949 86,592 10,518 374,514 Operating expenses 186,451 17,824 52,252 8,151 229,030 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) (1,605) - - (321) (1,926) --------------------------------------------- Adjusted operating expenses 185,297 17,824 57,062 7,830 232,365 Add interest income 9,351 983 713 138 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 166,997 32,108 13,868 2,826 151,583 Interest expense, including early extinguishment of debt (75,228) (6,262) (13,868) (4,240) (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) (48,632) (2,432) (7,080) (922) (54,202) Amortization of mortgage procurement costs - Real Estate Groups (c) (2,728) (207) (338) (60) (2,919) Straight-line rent adjustment (1) + (2) 4,798 - - (321) 4,477 Equity method depreciation and amortization expense (see above) (7,418) - 7,418 - - --------------------------------------------- Earnings before income taxes 35,915 23,181 - 31,005 43,739 Income tax provision (3,523) - - (11,981) (15,504) --------------------------------------------- Earnings before minority interest and discontinued operations 32,392 23,181 - 19,024 28,235 Minority Interest (23,181) (23,181) - - - --------------------------------------------- Earnings from continuing operations 9,211 - - 19,024 28,235 Discontinued operations, net of tax and minority interest: Operating earnings from Lumber Group - - - - - Operating loss from rental properties (1,667) - - 1,667 - Loss on disposition of division of Lumber Group - - - - - Gain on disposition of rental properties 20,691 - - (20,691) - --------------------------------------------- 19,024 - - (19,024) - --------------------------------------------- --------------------------------------------- Net earnings $28,235 $- $- $- $28,235 ============================================= (a) Depreciation and amortization - Real Estate Groups $48,632 $2,432 $7,080 $922 $54,202 (b) Depreciation and amortization - Non-Real Estate Groups 368 - 3,228 - 3,596 --------------------------------------------- Total depreciation and amortization $49,000 $2,432 $10,308 $922 $57,798 ============================================= (c) Amortization of mortgage procurement costs - Real Estate Groups $2,728 $207 $338 $60 $2,919 (d) Amortization of mortgage procurement costs - Non-Real Estate Groups 83 - 1,582 - 1,665 --------------------------------------------- Total amortization of mortgage procurement costs $2,811 $207 $1,920 $60 $4,584 ============================================= Three Months Ended January 31, 2005 --------------------------------------------- Plus Unconsol- Plus Full idated Discon- Pro-Rata Consol- Less Invest- tinued Consol- idation Minority ments at Opera- idation (GAAP) Interest Pro-Rata tions (Non-GAAP) --------------------------------------------- Revenues from real estate operations $272,132 $35,600 $60,290 $14,672 $311,494 Exclude straight-line rent adjustment (1) (2,696) - - - (2,696) --------------------------------------------- Adjusted revenues 269,436 35,600 60,290 14,672 308,798 Operating expenses 163,014 17,449 37,801 11,073 194,439 Add back depreciation and amortization for non-Real Estate Groups (b) 217 - 3,687 - 3,904 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) 103 - 147 - 250 Exclude straight-line rent adjustment (2) (1,617) - - (443) (2,060) --------------------------------------------- Adjusted operating expenses 161,717 17,449 41,635 10,630 196,533 Add interest income 8,484 539 434 115 8,494 Add equity in earnings of unconsolidated entities (6,279) - 1,291 - (4,988) Add back equity method depreciation and amortization expense (see below) 7,384 - (7,384) - - --------------------------------------------- Net Operating Income 117,308 18,690 12,996 4,157 115,771 Interest expense, including early extinguishment of debt (67,269) (8,096) (12,996) (5,673) (77,842) Gain on disposition of rental properties and other investments 438 - - 15,608 16,046 Provision for decline in real estate - - - - - Depreciation and amortization - Real Estate Groups (a) (45,722) (4,365) (7,165) (2,401) (50,923) Amortization of mortgage procurement costs - Real Estate Groups (c) (3,136) (1,070) (219) (130) (2,415) Straight-line rent adjustment (1) + (2) 1,079 - - (443) 636 Equity method depreciation and amortization expense (see above) (7,384) - 7,384 - - --------------------------------------------- Earnings before income taxes (4,686) 5,159 - 11,118 1,273 Income tax provision (1,916) - - (4,460) (6,376) --------------------------------------------- Earnings before minority interest and discontinued operations (6,602) 5,159 - 6,658 (5,103) Minority Interest (5,159) (5,159) - - - --------------------------------------------- Earnings from continuing operations (11,761) - - 6,658 (5,103) Discontinued operations, net of tax and minority interest: Operating earnings from Lumber Group (1,219) - - - (1,219) Operating loss from rental properties (2,778) - - 2,778 - Loss on disposition of division of Lumber Group 12,162 - - - 12,162 Gain on disposition of rental properties 9,436 - - (9,436) - --------------------------------------------- 17,601 - - (6,658) 10,943 --------------------------------------------- --------------------------------------------- Net earnings $5,840 $- $- $- $5,840 ============================================= (a) Depreciation and amortization - Real Estate Groups $45,722 $4,365 $7,165 $2,401 $50,923 (b) Depreciation and amortization - Non-Real Estate Groups 217 - 3,687 - 3,904 --------------------------------------------- Total depreciation and amortization $45,939 $4,365 $10,852 $2,401 $54,827 ============================================= (c) Amortization of mortgage procurement costs - Real Estate Groups $3,136 $1,070 $219 $130 $2,415 (d) Amortization of mortgage procurement costs - Non-Real Estate Groups 103 - 147 - 250 --------------------------------------------- Total amortization of mortgage procurement costs $3,239 $1,070 $366 $130 $2,665 ============================================= Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (GAAP) (in thousands): Year Ended January 31, 2006 ------------------------------------------------- Plus Unconsol- Plus Full idated Discon- Pro-Rata Consol- Less Invest- tinued Consol- idation Minority ments at Opera- idation (GAAP) Interest Pro-Rata tions (Non-GAAP) ------------------------------------------------- Revenues from real estate operations $1,200,775 $140,603 $318,282 $54,649 $1,433,103 Exclude straight- line rent adjustment (1) (18,392) - - - (18,392) ------------------------------------------------- Adjusted revenues 1,182,383 140,603 318,282 54,649 1,414,711 Operating expenses 694,296 65,591 194,900 39,382 862,987 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) (6,159) - - (1,573) (7,732) ------------------------------------------------- Adjusted operating expenses 689,610 65,591 210,021 37,809 871,849 Add interest income 28,095 2,666 1,218 283 26,930 Add equity in earnings of unconsolidated entities 55,201 - (49,060) - 6,141 Remove gain on disposition recorded on equity method (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 583,899 77,678 52,589 17,123 575,933 Interest expense, including early extinguishment of debt (280,530) (29,115) (52,589)(14,814) (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) (173,688) (14,355) (26,905) (6,477) (192,715) Amortization of mortgage procurement costs - Real Estate Groups (c) (12,178) (2,280) (1,244) (436) (11,578) Straight-line rent adjustment (1) + (2) 12,233 - - (1,573) 10,660 Equity method depreciation and amortization expense (see above) (28,149) - 28,149 - - ------------------------------------------------- Earnings before income taxes 114,538 30,496 - 37,021 121,063 Income tax provision (23,238) - - (14,306) (37,544) ------------------------------------------------- Earnings before minority interest, discontinued operations and cumulative effect of change in accounting principle 91,300 30,496 - 22,715 83,519 Minority Interest (30,496) (30,496) - - - ------------------------------------------------- Earnings from continuing operations 60,804 - - 22,715 83,519 Discontinued operations, net of tax and minority interest: Operating earnings from Lumber Group - - - - - Operating earnings (loss) from rental properties (3,790) - - 3,790 - Loss on disposition of division of Lumber Group - - - - - Gain on disposition of rental properties 26,505 - - (26,505) - ------------------------------------------------- 22,715 - - (22,715) - ------------------------------------------------- Cumulative effect of change in accounting principle, net of tax - - - - - ------------------------------------------------- Net earnings $83,519 $- $- $- $83,519 ================================================= (a) Depreciation and amortization - Real Estate Groups $173,688 $14,355 $26,905 $6,477 $192,715 (b) Depreciation and amortization - Non-Real Estate Groups 1,104 - 13,086 - 14,190 ------------------------------------------------- Total depreciation and amortization $174,792 $14,355 $39,991 $6,477 $206,905 ================================================= (c) Amortization of mortgage procurement costs - Real Estate Groups $12,178 $2,280 $1,244 $436 $11,578 (d) Amortization of mortgage procurement costs - Non-Real Estate Groups 369 - 2,035 - 2,404 ------------------------------------------------- Total amortization of mortgage procurement costs $12,547 $2,280 $3,279 $436 $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, 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. For the year ended January 31, 2005, three equity method investments were sold including Chapel Hill Mall, Chapel Hill Suburban, and Manhattan Town Center Mall, resulting in a pre-tax gain of $31,996 which is included in Equity in Earnings of Unconsolidated Entities in the Company's Consolidated Statement of Earnings. Year Ended January 31, 2005 ----------------------------------------------- Plus Unconsol- Plus Full idated Discon- Pro-Rata Consol- Less Invest- tinued Consol- idation Minority ments at Opera- idation (GAAP) Interest Pro-Rata tions (Non-GAAP) ----------------------------------------------- Revenues from real estate operations $986,054 $133,886 $260,844 $63,015 $1,176,027 Exclude straight-line rent adjustment (1) (12,748) - - (849) (13,597) ----------------------------------------------- Adjusted revenues 973,306 133,886 260,844 62,166 1,162,430 Operating expenses 567,276 71,239 155,898 40,338 692,273 Add back depreciation and amortization for non-Real Estate Groups (b) 1,086 - 3,764 - 4,850 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) 243 - 413 - 656 Exclude straight-line rent adjustment (2) (8,757) - - (1,558) (10,315) ----------------------------------------------- Adjusted operating expenses 559,848 71,239 160,075 38,780 687,464 Add interest income 45,302 4,244 550 253 41,861 Add equity in earnings of unconsolidated entities 54,392 - (54,370) - 22 Remove gain on disposition recorded on equity method (31,996) - 31,996 - - Add back provision for decline recorded on equity method - - - - - Add back equity method depreciation and amortization expense (see below) 28,464 - (28,227) - 237 ----------------------------------------------- Net Operating Income 509,620 66,891 50,718 23,639 517,086 Interest expense, including early extinguishment of debt (243,316) (28,035) (50,718)(18,990) (284,989) Gain on disposition of equity method rental properties (e) 31,996 - - - 31,996 Gain on disposition of rental properties and other investments 438 - - 67,645 68,083 Provision for decline in real estate - - - - - Provision for decline in real estate of equity method rental properties - - - - - Depreciation and amortization - Real Estate Groups (a) (151,999) (10,870) (27,163)(10,680) (178,972) Amortization of mortgage procurement costs - Real Estate Groups (c) (13,184) (2,825) (1,064) (677) (12,100) Straight-line rent adjustment (1) + (2) 3,991 - - (709) 3,282 Equity method depreciation and amortization expense (see above) (28,464) - 28,227 - (237) ----------------------------------------------- Earnings before income taxes 109,082 25,161 - 60,228 144,149 Income tax provision (39,913) - - (23,815) (63,728) ----------------------------------------------- Earnings before minority interest, discontinued operations and cumulative effect of change in accounting principle 69,169 25,161 - 36,413 80,421 Minority Interest (25,161) (25,161) - - - ----------------------------------------------- Earnings from continuing operations 44,008 - - 36,413 80,421 Discontinued operations, net of tax and minority interest: Operating earnings from Lumber Group 4,545 - - - 4,545 Operating earnings (loss) from rental properties (4,480) - - 4,480 - Loss on disposition of division of Lumber Group 11,501 - - - 11,501 Gain on disposition of rental properties 40,893 - - (40,893) - ----------------------------------------------- 52,459 - - (36,413) 16,046 ----------------------------------------------- Cumulative effect of change in accounting principle, net of tax (11,261) - - - (11,261) ----------------------------------------------- Net earnings $85,206 $- $- $- $85,206 =============================================== (a) Depreciation and amortization - Real Estate Groups $151,999 $10,870 $27,163 $10,680 $178,972 (b) Depreciation and amortization - Non- Real Estate Groups 1,086 - 3,764 - 4,850 ----------------------------------------------- Total depreciation and amortization $153,085 $10,870 $30,927 $10,680 $183,822 =============================================== (c) Amortization of mortgage procurement costs - Real Estate Groups $13,184 $2,825 $1,064 $677 $12,100 (d) Amortization of mortgage procurement costs - Non-Real Estate Groups 243 - 413 - 656 ----------------------------------------------- Total amortization of mortgage procurement costs $13,427 $2,825 $1,477 $677 $12,756 =============================================== (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, 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. For the year ended January 31, 2005, three equity method investments were sold including Chapel Hill Mall, Chapel Hill Suburban, and Manhattan Town Center Mall, resulting in a pre-tax gain of $31,996 which is included in Equity in Earnings of Unconsolidated Entities in the Company's Consolidated Statement of Earnings. Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Net Operating Income (dollars in thousands) ------------------------------------------------- Three Months Ended January 31, 2006 ------------------------------------------------- Plus Unconsol- Plus Full idated Discon- Consoli- Less Invest- tinued Pro-Rata dation Minority ments at Opera- Consolidation (GAAP) Interest Pro-Rata tions (Non-GAAP) ------------------------------------------------- Commercial Group Retail Comparable $40,942 $4,952 $3,001 $- $38,991 -------------------------------------------------------------------- Total 53,481 6,605 3,007 - 49,883 Office Buildings Comparable 42,829 5,473 1,061 - 38,417 -------------------------------------------------------------------- Total 41,950 5,118 1,061 - 37,893 Hotels Comparable 8,017 2,474 467 - 6,010 -------------------------------------------------------------------- Total 4,367 585 467 2,513 6,762 Earnings from Commercial Land Sales 30,241 16,285 - - 13,956 Development Fees 2,897 1,159 - - 1,738 Other (3,540) (1,215) (321) - (2,646) Total Commercial Group Comparable 91,788 12,899 4,529 - 83,418 -------------------------------------------------------------------- Total 129,396 28,537 4,214 2,513 107,586 Residential Group Apartments Comparable 24,828 935 7,119 - 31,012 -------------------------------------------------------------------- Total 23,423 1,443 8,492 313 30,785 Total Real Estate Groups Comparable 116,616 13,834 11,648 - 114,430 -------------------------------------------------------------------- Total 152,819 29,980 12,706 2,826 138,371 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 $166,997 $32,108 $13,868 $2,826 $151,583 Net Operating Income (dollars in thousands) ---------------------------------------------------- Three Months Ended January 31, 2005 ---------------------------------------------------- Plus Plus Full Unconsol- Discont- Consol- Less idated inued Pro-Rata idation Minority Investments Opera- Consolidation (GAAP) Interest at Pro-Rata tions (Non-GAAP) ---------------------------------------------------- Commercial Group Retail Comparable $38,423 $4,647 $2,908 $- $36,684 -------------------------------------------------------------------- Total 47,781 5,652 3,193 (50) 45,272 Office Buildings Comparable 43,118 5,743 1,488 - 38,863 -------------------------------------------------------------------- Total 43,851 5,969 1,488 (61) 39,309 Hotels Comparable 7,136 1,941 611 - 5,806 -------------------------------------------------------------------- Total 4,405 (68) 611 2,712 7,796 Earnings from Commercial Land Sales 1,108 - - - 1,108 Development Fees 13,559 5,425 - - 8,134 Other (11,073) (803) 28 - (10,242) Total Commercial Group Comparable 88,677 12,331 5,007 - 81,353 -------------------------------------------------------------------- Total 99,631 16,175 5,320 2,601 91,377 Residential Group Apartments Comparable 24,003 936 6,436 - 29,503 -------------------------------------------------------------------- Total 24,101 1,029 7,437 1,556 32,065 Total Real Estate Groups Comparable 112,680 13,267 11,443 - 110,856 -------------------------------------------------------------------- Total 123,732 17,204 12,757 4,157 123,442 Land Development Group 14,071 1,486 (123) - 12,462 The Nets (9,259) - 362 - (8,897) Corporate Activities (11,236) - - - (11,236) ---------------------------------------------------------------------- Grand Total $117,308 $18,690 $12,996 $4,157 $115,771 ---------------------------- % Change ---------------------------- Full Pro-Rata Consolidation Consolidation (GAAP) (Non-GAAP) ---------------------------- Commercial Group Retail Comparable 6.6% 6.3% ---------------------------------------- Total Office Buildings Comparable -0.7% -1.1% ---------------------------------------- Total Hotels Comparable 12.3% 3.5% ---------------------------------------- Total Earnings from Commercial Land Sales Development Fees Other Total Commercial Group Comparable 3.5% 2.5% ---------------------------------------- Total Residential Group Apartments Comparable 3.4% 5.1% ---------------------------------------- Total Total Real Estate Groups Comparable 3.5% 3.2% ---------------------------------------- Total Land Development Group The Nets Corporate Activities ------------------------------------------ Grand Total Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Net Operating Income (dollars in thousands) ---------------------------------------------------------------------- Year Ended January 31, 2006 --------------------------------------------------- Plus Plus Full Unconsol- Discon- Consol- Less idated tinued Pro-Rata idation Minority Investments Opera- Consolidation (GAAP) Interest at Pro-Rata tions (Non-GAAP) --------------------------------------------------- Commercial Group Retail Comparable $154,675 $18,787 $11,812 $- $147,700 -------------------------------------------------------------------- Total 185,666 16,353 11,950 - 181,263 Office Buildings Comparable 161,624 21,207 4,025 - 144,442 -------------------------------------------------------------------- Total 170,424 21,475 4,025 - 152,974 Hotels Comparable 34,858 9,651 1,899 - 27,106 -------------------------------------------------------------------- Total 21,503 839 1,899 11,825 34,388 Earnings from Commercial Land Sales 67,989 18,389 - - 49,600 Development Fees 10,614 4,247 - - 6,367 Other (9,411) 5,610 (214) - (15,235) Total Commercial Group Comparable 351,157 49,645 17,736 - 319,248 -------------------------------------------------------------------- Total 446,785 66,913 17,660 11,825 409,357 Residential Group Apartments Comparable 100,461 4,006 26,835 - 123,290 -------------------------------------------------------------------- Total 95,838 5,061 31,584 5,298 127,659 Total Real Estate Groups Comparable 451,618 53,651 44,571 - 442,538 -------------------------------------------------------------------- Total 542,623 71,974 49,244 17,123 537,016 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 $583,899 $77,678 $52,589 $17,123 $575,933 --------------------------------------------------- Year Ended January 31, 2005 --------------------------------------------------- Plus Plus Full Unconsol- Discon- Consoli- Less idated tinued Pro-Rata dation Minority Investments Opera- Consolidation (GAAP) Interest at Pro-Rata tions (Non-GAAP) --------------------------------------------------- Commercial Group Retail Comparable $148,476 $17,694 $11,729 $- $142,511 -------------------------------------------------------------------- Total 164,632 15,558 13,397 1,214 163,685 Office Buildings Comparable 162,419 21,422 4,700 - 145,697 -------------------------------------------------------------------- Total 162,699 22,761 4,700 2,165 146,803 Hotels Comparable 28,183 6,690 2,473 - 23,966 -------------------------------------------------------------------- Total 19,274 512 2,473 8,692 29,927 Earnings from Commercial Land Sales 1,599 - - - 1,599 Development Fees 33,205 13,286 - - 19,919 Other (9,798) 3,999 164 - (13,633) Total Commercial Group Comparable 339,078 45,806 18,902 - 312,174 -------------------------------------------------------------------- Total 371,611 56,116 20,734 12,071 348,300 Residential Group Apartments Comparable 95,374 3,862 26,334 - 117,846 -------------------------------------------------------------------- Total 95,447 4,315 28,918 11,568 131,618 Total Real Estate Groups Comparable 434,452 49,668 45,236 - 430,020 -------------------------------------------------------------------- Total 467,058 60,431 49,652 23,639 479,918 Land Development Group 88,141 6,460 548 - 82,229 The Nets (10,889) - 518 - (10,371) Corporate Activities (34,690) - - - (34,690) ---------------------------------------------------------------------- Grand Total $509,620 $66,891 $50,718 $23,639 $517,086 ---------------------------- % Change ---------------------------- Full Pro-Rata Consolidation Consolidation (GAAP) (Non-GAAP) ---------------------------- Commercial Group Retail Comparable 4.2% 3.6% ---------------------------------------- Total Office Buildings Comparable -0.5% -0.9% ---------------------------------------- Total Hotels Comparable 23.7% 13.1% ---------------------------------------- Total Earnings from Commercial Land Sales Development Fees Other Total Commercial Group Comparable 3.6% 2.3% ---------------------------------------- Total Residential Group Apartments Comparable 5.3% 4.6% ---------------------------------------- Total Total Real Estate Groups Comparable 4.0% 2.9% ---------------------------------------- Total Land Development Group The Nets Corporate Activities ------------------------------------------ Grand Total Development Pipeline ---------------------------------------------------------------------- January 31, 2006 2005 Openings and Acquisitions (11) Cost at FCE Pro- Cost at Rata FCE Pro- Full Share Dev. Legal Rata Consol- Total (Non- (D) Date Owner- FCE % idation Cost GAAP) Sq. ft./ Property/ Acq. Opened/ ship% (i) (GAAP) at 100% (b) No. of Location (A) Acquired (i)(1) (2) (a) (3) (2)X(3) Units ---------------------------------------------------------------------- (in millions) --------------------- Retail Centers: Saddle Rock Village/ Q1-05/ Aurora, CO D Q3-06 80.0% 100.0% $33.8 $33.8 $33.8 354,000 Short Pump Town Center Expansion/ Richmond, VA D Q3-05 50.0% 100.0% 27.9 27.9 27.9 88,000 Simi Valley Town Center/ Simi Valley, CA D Q3-05 85.0% 100.0% 147.8 147.8 147.8 660,000 Northfield at Stapleton Phase I (l)/ Denver, CO D Q4-05 95.0% 97.4% 35.3 35.3 34.4 400,000 ------------------------------- $244.8 $244.8 $243.9 1,502,000 ---------------------========== Office: Ballston Common Office Center/ Arlington, VA A Q2-05 50.0% 100.0% $63.0 $63.0 $63.0 176,000 ---------------------========== Residential: 23 Sidney Street/ Cambridge, MA D Q1-05 100.0% 100.0% $18.0 $18.0 $18.0 51 Metro 417/Los Angeles, CA D Q2-05 75.0% 100.0% 78.5 78.5 78.5 277 100 Landsdowne Street/ Cambridge, MA D Q3-05 100.0% 100.0% 65.9 65.9 65.9 203 Ashton Mill/ Cumberland, RI D Q3-05 90.0% 100.0% 46.3 46.3 46.3 193 Sterling Glen of Lynbrook (g)/Lynbrook, NY D Q4-05 80.0% 100.0% 31.1 31.1 31.1 100 Met Lofts (c)/ Los Angeles, CA D Q4-05 50.0% 50.0% 0.0 65.7 32.8 264 ------------------------------- $239.8 $305.5 $272.6 1,088 ---------------------========== Total 2005 --------------------- Openings (d) $547.6 $613.3 $579.5 ===================== ---------------------------------------------------------------------- Residential Opened Phased-In in '05/ Units (c) (e): Total Newport ------- Landing/ Coventry, OH D 2002-05 50.0% 50.0% $0.0 $16.0 $8.0 60/336 Arbor Glen/ Twinsburg, OH D 2004-07 50.0% 50.0% 0.0 18.4 9.2 48/288 Woodgate/ Evergreen Farms/Olmsted Township, OH D 2004-07 33.0% 33.0% 0.0 22.9 7.6 84/348 Pine Ridge Expansion/ Willoughby Hills, OH D 2005-06 50.0% 50.0% 0.0 15.2 7.6 69/162 ------------------------------- Total (f) $0.0 $72.5 $32.4 261/1,134 =============================== ---------------------------------------------------------------------- See attached 2005 footnotes. Development Pipeline --------------------------------------------------------------------- January 31, 2006 Under Construction or to be Acquired (17) Cost at FCE Pro- Cost at Rata Anti- FCE Pro- Full Share Pro- Dev. cipat-Legal Rata Consol- Total (Non- Pre- perty/ (D) ed Owner- FCE% idation Cost GAAP) Sq. ft./ Lea- Loc- Acq. Open- ship% (i) (GAAP) at 100% (b) No. of sed ation (A) ing (i)(1) (2) (a) (3) (2)X(3) Units % ---------------------------------------------------------------------- (in millions) ------------------------- Retail Centers: Northfield at Stapleton Phase II & III (l)/ Denver, Q1-06/ CO D Q3-06 95.0% 97.4%$142.5 $142.5 $138.8 723,000(j) 49% San Francisco Centre - Emporium (c)/ San Francisco, CA D Q3-06 50.0% 50.0% 0.0 425.0 212.5 964,000(k) 74% San Francisco Centre (c)/ San Francisco, CA A Q3-06 50.0% 50.0% 0.0 151.8 75.9 508,000 100% Promenade Bolingbrook/ Bolingbrook, IL D Q1-07 100.0%100.0% 117.7 117.7 117.7 731,000(j) 43% ---------------------------------- $260.2 $837.0 $544.9 2,926,000 -------------------------========= Office: Advent Solar (c)/ Albuquerque, NM D Q2-06 50.0% 50.0% $0.0 $8.9 $4.5 88,000 100% Illinois Science and Technology Park/ Skokie, IL A/D Q3-06 100.0%100.0% 77.5 77.5 77.5 661,000 0% Edgeworth Building/ Richmond, VA D Q4-06 100.0%100.0% 35.2 35.2 35.2 187,000 54% Stapleton Medical Office Building/ Denver, CO D Q4-06 90.0% 90.0% 11.0 11.0 9.9 45,000 44% New York Times (c)/ Manhattan, NY D Q2-07 28.0% 40.0% 0.0 415.0 166.0 734,000 0% ---------------------------------- $123.7 $547.6 $293.1 1,715,000 -------------------------========= Residential: Sky55/ Chicago, IL D Q1-06 100.0%100.0%$110.7 $110.7 $110.7 411 1251 S. Michigan/ Chicago, IL D Q1-06 100.0%100.0% 12.0 12.0 12.0 91 Sterling Glen of Roslyn (g)/ Roslyn, NY D Q2-06 40.0%100.0% 74.9 74.9 74.9 158 Ohana Military Communities (c) (e)/ Honolulu 2005- HI D 2008 10.0% 10.0% 0.0 316.5 31.7 1,952 Dallas Mercantile/ Dallas, Q2-07/ TX D Q2-08 100.0%100.0% 116.2 116.2 116.2 362(n) ---------------------------------- $313.8 $630.3 $345.5 2,974 -------------------------========= Condominiums: Pre- Sold % ---- 1100 Wilshire (c)/ Los Angeles, CA D Q2-06 50.0% 50.0% $0.0 $115.9 $58.0 228 90% Cutters Ridge at Tobacco Row/ Richmond, VA D Q3-06 100.0%100.0% 4.5 4.5 4.5 12 0% Mercury (c)(o)/ Los Angeles, CA D Q1-07 50.0% 50.0% 0.0 138.0 69.0 238 0% ---------------------------------- $4.5 $258.4 $131.5 478 -------------------------========= Total Under Construction (h) $702.2 $2,273.3 $1,315.0 ========================= LESS: Above properties to be sold as condominiums 4.5 258.4 131.5 ------------------------- Under Construction less Condominiums $697.7 $2,014.9 $1,183.5 ========================= ---------------------------------------------------------------------- Residential Phased-In Units Under Under Construction Const./ (c)(e): Total ------- Arbor Glen/ Twinsburg, 2004- OH D 07 50.0% 50.0% $0.0 $18.4 $9.2 96/288 Woodgate/ Evergreen Farms/ Olmsted Township, 2004- OH D 07 33.0% 33.0% 0.0 22.9 7.6 144/348 Pine Ridge Expansion/ Willoughby Hills, 2005- OH D 06 50.0% 50.0% 0.0 15.2 7.6 93/162 Cobblestone Court/ Paines- ville, 2006- OH D 08 50.0% 50.0% 0.0 24.6 12.3 112/304 ---------------------------------- Total(m) $0.0 $81.1 $36.7 445/1,102 ================================== ---------------------------------------------------------------------- See attached 2005 footnotes. 2005 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 $547.6 million of cost to the Company's pro-rata share (a non-GAAP measure) of $579.5 million of cost consists of a reduction to full consolidation for minority interest of $0.9 million of cost and the addition of its share of cost for unconsolidated investments of $32.8 million. (e) Phased-in openings. Costs are representative of the total project. (f) The difference between the full consolidation amount (GAAP) of $0.0 million of cost to the Company's pro-rata share (a non-GAAP measure) of $32.4 million of cost consists of the Company's share of cost for unconsolidated investments of $32.4 million. (g) Supported-living property. (h) The difference between the full consolidation amount (GAAP) of $702.2 million of cost to the Company's pro-rata share (a non-GAAP measure) of $1,315.0 million of cost consists of a reduction to full consolidation for minority interest of $4.8 million of cost and the addition of its share of cost for unconsolidated investments of $617.6 million. (i) As is customary within the real estate industry, the Company invests in certain real estate projects through joint ventures. For some of these projects, the Company provides funding at percentages that differ from the Company's legal ownership. The Company consolidates its investments in these projects in accordance with FIN No. 46(R) at a consolidation percentage that is reflected in the Pro-Rata FCE % column. (j) Includes 39,000 square feet of office space. (k) Includes 235,000 square feet of office space. (l) Phased opening: Phase I opened Q4-05, Phase II opens Q1-06, Phase III opens Q3-06. (m) The difference between the full consolidation amount (GAAP) of $0.0 million of cost to the Company's pro-rata share (a non-GAAP measure) of $36.7 million of cost consists of Forest City's share of cost for unconsolidated investments of $36.7 million. (n) Project includes 18,000 square feet of retail space. (o) Formerly 3800 Wilshire. CONTACT: Forest City Enterprises, Inc. Thomas G. Smith, 216-621-6060 Thomas T. Kmiecik, 216-621-6060 On the Web: www.forestcity.net