-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J5Jh6TWt9skLmr8pMOucMw8Rt9V+lo484SNypy4Aq+0dz+1Nh0TG/SWWL/RhQVjm Gzv4eU3XpytYPXQPY96GRA== 0001157523-06-005897.txt : 20060607 0001157523-06-005897.hdr.sgml : 20060607 20060607092441 ACCESSION NUMBER: 0001157523-06-005897 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060606 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060607 DATE AS OF CHANGE: 20060607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREST CITY ENTERPRISES INC CENTRAL INDEX KEY: 0000038067 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 340863886 STATE OF INCORPORATION: OH FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04372 FILM NUMBER: 06890625 BUSINESS ADDRESS: STREET 1: 1100 TERMINAL TOWER STREET 2: 50 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44113 BUSINESS PHONE: 216-621-6060 MAIL ADDRESS: STREET 1: 1100 TERMINAL TOWER STREET 2: 50 PUBLIC SQUARE CITY: CLEVLAND STATE: OH ZIP: 44113 8-K 1 a5164238.txt FOREST CITY ENTERPRISES, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): June 6, 2006 Forest City Enterprises, Inc. ----------------------------- (Exact name of registrant as specified in its charter) Ohio 1-4372 34-0863886 - ---------------------------- ------------ ------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) Terminal Tower, 50 Public Square Suite 1100, Cleveland, Ohio 44113 - ---------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 216-621-6060 ------------------- Not Applicable ------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. Results of Operations and Financial Condition. On June 6, 2006, Forest City Enterprises, Inc. issued a press release announcing financial results for the three months ended April 30, 2006. A copy of this press release is attached hereto as Exhibit 99.1. This information in this Current Report shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or incorporated by reference in any filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. Item 9.01. Financial Statements and Exhibits. (d) Exhibits The following exhibits are furnished herewith. Exhibit Number Description - -------------------------------------------------------------------------------- 99.1 - Press Release of Forest City Enterprises, Inc. Dated June 6, 2006 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. FOREST CITY ENTERPRISES, INC. /s/ Thomas G. Smith ------------------------------------ Name: Thomas G. Smith Title: Executive Vice President, Chief Financial Officer and Secretary Date: June 7, 2006 EXHIBIT INDEX Exhibit Number Description - -------------------------------------------------------------------------------- 99.1 - Press Release of Forest City Enterprises, Inc. Dated June 6, 2006 EX-99.1 2 a5164238ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Forest City Reports Fiscal 2006 First-Quarter Results CLEVELAND--(BUSINESS WIRE)--June 6, 2006--Forest City Enterprises, Inc. (NYSE:FCEA)(NYSE:FCEB) today announced revenues, net earnings and EBDT for the fiscal first quarter ended April 30, 2006. EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) was $63.3 million, or $0.61 per share, a 7.6 percent decrease on a per share basis compared with last year's EBDT of $67.7 million, or $0.66 per share. This decline was primarily attributable to decreased EBDT from land sales in the Land Development Group. Fiscal first-quarter net earnings were $53.3 million, or $0.52 per share, compared with $22.2 million, or $0.22 per share, in the prior year. The increase in net earnings was primarily due to the gain on sale of operating properties in the first quarter of 2006. First-quarter consolidated revenues were $289.4 million compared with $294.6 million last year. All fiscal 2005 per-share figures are adjusted for the Company's two-for-one stock split effective July 11, 2005. EBDT and EBDT per share are non-Generally Accepted Accounting Principle (GAAP) measures. A reconciliation of net earnings (the most directly comparable GAAP measure to EBDT) to EBDT is provided in the Financial Highlights table in this news release. Discussion of Results Charles A. Ratner, president and chief executive officer of Forest City Enterprises, said, "Our real estate portfolio did very well, led by the continued strong performance of our retail properties, as well as the ongoing rebound in the rental residential market. In fact, two key performance measures - comparable net operating income and occupancies - were up overall, continuing the momentum that we built throughout 2005. In general, new project openings are performing at or above expectations and projects under construction are leasing well." Comparable property net operating income (NOI) increased 5.9 percent in 2006 from the prior year's first quarter. The retail and office portfolios were up 7.0 percent and 2.6 percent, respectively. In the residential portfolio, comparable property NOI increased 6.8 percent. Comparable property NOI, defined as NOI from properties operated in both 2006 and 2005, is a non-GAAP financial measure, and is based on the pro-rata consolidation method, also a non-GAAP financial measure. Included in this release is a schedule that presents comparable property NOI on the full consolidation method. Fiscal 2006 first-quarter comparable occupancies were up overall compared with the same period a year ago. Retail occupancies were 94.3 percent in 2006 compared with 93.9 percent in 2005. Office occupancies were 92.4 percent compared with 92.5 percent last year. Comparable occupancies in the residential business increased to 94.8 percent compared with 93.0 percent last year. Major Year-To-Date Milestones During the first quarter, the Company sold Hilton Times Square Hotel in New York City for $242 million, or $545,000 per room, generating a pre-tax gain of $75 million and $83 million in cash proceeds. In early June, the Company announced the buyout of its partner's interest in the New York Times headquarters project, which is currently under construction, and where the office building's first lease, for 100,000 square feet, was recently signed by a national law firm. Ratner said, "The sale of the Hilton Times Square Hotel and the acquisition of our partner's share of the New York Times building are the latest examples of our proactive disposition strategy. 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 multiple assets where we have achieved premium pricing, raising 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 higher returns." Chicago continues to grow as one of Forest City's core markets. During the first quarter, the Company took over management and began development of its Military Housing - Navy Midwest project, which includes a combination of demolition, renovation and new construction, resulting in approximately 1,650 Navy family homes located primarily in the North Shore suburbs of Chicago. At its Central Station project, Forest City opened two new residential communities, representing a total cost of $128.2 million. Sky55 is a 411-unit apartment tower that offers panoramic views of Lake Michigan and downtown Chicago, and 1251 South Michigan is an adjacent 91-unit senior-housing community. The buildings feature affordable-housing and senior-housing components that enabled Forest City to secure advantaged financing, including tax-exempt bonds and tax increment financing. The new openings bring the Company's rental units in the Chicago area to more than 1,600. In addition, Forest City continues to work with its partners to develop condominiums at Central Station. Forest City was honored to have recently received two Urban Land Institute Awards for Excellence - for its Denver Stapleton mixed-use urban redevelopment, and for its 1.2-million-square-foot Victoria Gardens open-air regional lifestyle center in Rancho Cucamonga, California. Development Pipeline Highlights A schedule of the Company's project openings and acquisitions, and the pipeline of projects under construction, is included in this news release. The schedule includes comparable project costs on both a full consolidation and pro-rata share basis. Described below are several of the Company's projects under construction or under development. Projects Under Construction At the end of the first quarter, Forest City's pipeline included 18 projects under construction or to be acquired, representing a total cost of $852.1 million on a full consolidation basis and $1.5 billion of cost at the Company's pro-rata share. Including the five projects opened or acquired in the first quarter, a total of 14 projects - four retail centers, five small office buildings, three apartment communities and two condominium buildings - are scheduled to open in fiscal 2006. These projects represent $513.3 million of cost on a full consolidation basis and $887.5 million of cost at the Company's pro-rata share. First-Quarter Groundbreakings: -- Science + Technology Park at Johns Hopkins University in East Baltimore, Maryland, where the Company broke ground on the first 279,000-square-foot building for life science office space. Johns Hopkins' Institute for Basic Biomedical Sciences has committed to occupy at least 100,000 square feet of the first building. -- Orchard Town Center, a 972,000-square-foot main street-style shopping village, to be anchored by Macy's, JCPenney, Target and AMC Theatres, in the Denver suburb of Westminster. Construction Milestones: -- San Francisco Centre - On September 28, Forest City will open the new San Francisco Centre on Market Street in downtown San Francisco. The center is jointly developed and owned with The Westfield Group. When combined with the existing San Francisco Centre, the new combined property will consist of 1.4 million square feet of retail/office space anchored by Nordstrom and Bloomingdale's. In addition, Forest City and Westfield acquired San Francisco's 290,000-square-foot Metreon retail and entertainment venue directly across the street from the new center. -- NorthField at Stapleton - An 18-screen Harkins movie theatre complex opened in the first quarter, and additional phases of the 1.1-million-square-foot retail center in Denver, including the project's main street featuring a 140,000-square-foot Macy's, will open later in the year. Super Target, Circuit City and Colorado's first Bass Pro Shops Outdoor World opened as anchors in 2005. -- 1100 Wilshire, a 228-unit condominium community in downtown Los Angeles that is 90 percent sold and will begin delivering units during the second quarter. The initial marketing event for the 238-unit Mercury, a second office-building-to-condominium conversion located in the Koreatown neighborhood of Los Angeles that is scheduled to open in early fiscal 2007, was well received with a significant amount of deposits taken. Projects Under Development At the end of the first quarter, Forest City had more than 25 projects under development, representing more than $2 billion of cost on a full consolidation basis and at the Company's share. Among the projects under development and scheduled to begin construction later this year are: the 547,000-square-foot East River Plaza retail center in Manhattan; 523,000-square-foot The Shops at Wiregrass retail center in Tampa; 665-unit Uptown Apartments in center city Oakland; the redevelopment of the Lucky Strike building at Richmond's Tobacco Row into 131 rental residential units; and the 154-unit Botanica Phase II, which will be the fifth apartment community at the Company's Denver Stapleton mixed-use project. Major projects under development, which represent long-term growth opportunities for Forest City, include three projects in the Company's New York City core market: the 1.2-million-square-foot Ridge Hill Village mixed-use project in Yonkers; 481-unit Beekman residential tower in Manhattan; and Brooklyn Atlantic Yards mixed-use community. In addition, Forest City is pursuing two long-term mixed-use developments in Washington, D.C. - the 42-acre Southeast Federal Center and the 2-million-square-foot Waterfront project. Other projects under development include: the 370,000-square-foot Village at Gulfstream Park retail center in Tampa; White Oak Village, an 862,000-square-foot power center/lifestyle center in Richmond; and Fitzsimons, a 160-acre private-sector bioscience park adjacent to the Company's Stapleton project. 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 the first fiscal quarter, Forest City closed on transactions totaling $186.0 million in nonrecourse mortgage financings, including $138.0 million in refinancings, and $48.0 million in loan extensions and additional fundings. As of April 30, 2006, the Company's weighted average cost of mortgage debt increased to 6.10 percent from 5.94 percent at April 30, 2005, primarily due to the general increase in short-term interest rates. Fixed-rate mortgage debt, which represented 73 percent of the Company's total nonrecourse mortgage debt, decreased from 6.43 percent at April 30, 2005 to 6.24 percent at April 30, 2006. The variable-rate mortgage debt increased from 4.86 percent at April 30, 2005 to 5.72 percent at April 30, 2006. In an effort to lock in historically low rates for known/planned financing activity over the next 24 months, the Company has executed $607.7 million of 10-year forward starting swaps at a weighted average rate of 5.69 percent with commencement dates ranging from December 2006 through April 2009. Outlook Ratner said, "The increases in our comparable property NOI and the projects we have opened in recent years continue to drive our near-term growth. Our current development pipeline contains more than 40 projects under construction and under development that will be an ongoing source of long-term growth. These developments represent some of the largest projects in Company history, which include mixed-use projects, open-air regional lifestyle centers, life science office parks, military family housing, and condominiums. "The attractive capital markets and historically high property valuations in the U.S. provide for a strong real estate environment. These fundamentals are somewhat tempered by rising interest rates and construction costs, which will put pressure on our profit spreads. We are cautiously optimistic about the future, but are well aware of the risks inherent in our business - which we will attempt to mitigate by operating with the strategic discipline we have been practicing for decades. With a strong first quarter and the momentum we expect to build throughout the year, we are confident in our ability 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 a $7.8 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 quarter ended April 30, 2006, with reconciliations of non-GAAP financial measures, such as EBDT, comparable NOI and pro-rata financial statements, to their most directly comparable GAAP financial measures. EBDT The Company uses an additional measure, along with net earnings, to report its operating results. This non-GAAP measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes, is not a measure of operating results or cash flows from operations as defined by GAAP and may not be directly comparable to similarly titled measures reported by other companies. The Company believes that EBDT provides additional information about its core operations and, along with net earnings, is necessary to understand its operating results. EBDT is used by the chief operating decision maker and management in assessing operating performance and to consider capital requirements and allocation of resources by segment and on a consolidated basis. The Company believes EBDT is important to investors because it provides another method for the investor to measure its long-term operating performance, as net earnings can vary from year to year due to property dispositions, acquisitions and other factors that have a short-term impact. EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of rental properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) non-cash charges from real estate operations of Forest City Rental Properties Corporation, a wholly owned subsidiary of Forest City Enterprises, Inc., for depreciation, amortization (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 economic ownership is not 100 percent. The Company provides reconciliations from the full consolidation method to the pro-rata consolidation method, in the exhibits below and throughout its Supplemental Package, which the Company will also furnish to the SEC on Form 8-K. Safe Harbor Language Statements made in this news release that state the Company or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, real estate development and investment risks, economic conditions in the Company's core markets, reliance on major tenants, the impact of terrorist acts, the Company's substantial leverage and the ability to service debt, guarantees under the Company's credit facility, changes in interest rates, continued availability of tax-exempt government financing, the sustainability of substantial operations at the subsidiary level, significant geographic concentration, illiquidity of real estate investments, dependence on rental income from real property, conflicts of interest, competition, potential liability from syndicated properties, effects of uninsured loss, environmental liabilities, partnership risks, litigation risks, risks associated with an investment in a professional sports franchise, and other risk factors as disclosed from time to time in the Company's SEC filings, including, but not limited to, the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2006. Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Three Months Ended April 30, 2006 and 2005 (dollars in thousands, except per share data) Three Months Ended April 30, Increase (Decrease) ------------------------ ------------------- 2006 2005 Amount Percent ------------------------ ----------- ------- Operating Results: Earnings from continuing operations $7,916 $23,350 $(15,434) Discontinued operations, net of tax and minority interest (1) 45,342 (1,134) 46,476 ------------------------ ----------- Net earnings $53,258 $22,216 $31,042 ======================== =========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $63,339 $67,662 $(4,323) (6.4%) ======================== =========== Reconciliation of Net Earnings to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2): Net Earnings $53,258 $22,216 $31,042 Depreciation and amortization - Real Estate Groups (4) 47,200 46,272 928 Amortization of mortgage procurement costs - Real Estate Groups (4) 2,909 2,731 178 Deferred income tax expense - Real Estate Groups (5) 36,430 7,984 28,446 Deferred income tax expense - Non-Real Estate Groups: (5) Gain on disposition of other investments - 178 (178) Current income tax expense on non- operating earnings: (5) Gain on disposition of other investments - 62 (62) Gain on disposition included in discontinued operations (29) - (29) Gain on disposition recorded on equity method - 8,114 (8,114) Straight-line rent adjustment (3) (1,131) (2,996) 1,865 Provision for decline in real estate, net of minority interest - 1,500 (1,500) Provision for decline in real estate recorded on equity method - 704 (704) Gain on disposition recorded on equity method - (18,497) 18,497 Loss (gain) on disposition of other investments - (606) 606 Discontinued operations: (1) Gain on disposition of rental properties (136,384) - (136,384) Minority interest - Gain on sale 61,086 - 61,086 ------------------------ ----------- Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $63,339 $67,662 $(4,323) (6.4%) ======================== =========== Diluted Earnings per Common Share: Earnings from continuing operations $0.08 $0.23 $(0.15) Discontinued operations, net of tax and minority interest (1) 0.44 (0.01) 0.45 ------------------------ ----------- Net earnings $0.52 $0.22 $0.30 ======================== =========== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $0.61 $0.66 $(0.05) (7.6%) ======================== =========== Operating earnings, net of tax (a non-GAAP financial measure) $0.11 $0.15 $(0.04) 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 1.04 0.11 0.93 Minority interest (0.63) (0.03) (0.60) ------------------------ ----------- Net earnings $0.52 $0.22 $0.30 ======================== =========== Diluted weighted average shares outstanding 102,997,002 102,296,678 700,324 ======================== =========== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Three Months Ended April 30, 2006 and 2005 (dollars in thousands) Three Months Ended April 30, 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 $209,216 $209,320 $(104) Residential Group 59,322 49,606 9,716 Land Development Group 20,816 35,654 (14,838) Corporate Activities - - - ------------------ ------------ Total Revenues 289,354 294,580 (5,226) (1.8%) Operating expenses (167,516)(165,461) (2,055) Interest expense, including early extinguishment of debt (71,220) (67,797) (3,423) Amortization of mortgage procurement costs (4) (3,019) (3,058) 39 Depreciation and amortization (4) (43,617) (41,975) (1,642) Interest and other income 14,962 6,902 8,060 Equity in earnings of unconsolidated entities 379 20,036 (19,657) Provision for decline in real estate recorded on equity method - 704 (704) Gain on disposition recorded on equity method - (18,497) 18,497 Revenues and interest income from discontinued operations (1) 6,268 14,790 (8,522) Expenses from discontinued operations (1) (7,876) (16,600) 8,724 ------------------ ------------ Operating earnings (a non-GAAP financial measure) 17,715 23,624 (5,909) ------------------ ------------ Income tax expense (5) (7,150) (16,151) 9,001 Income tax expense from discontinued operations (1)(5) (28,554) 714 (29,268) Income tax expense on non- operating earnings items (see below) 29,095 6,684 22,411 ------------------ ------------ Operating earnings, net of tax (a non-GAAP financial measure) 11,106 14,871 (3,765) ------------------ ------------ Provision for decline in real estate - (1,500) 1,500 Provision for decline in real estate recorded on equity method - (704) 704 Gain on disposition recorded on equity method - 18,497 (18,497) Gain on disposition of other investments - 606 (606) Gain on disposition of rental properties included in discontinued operations (1) 136,384 - 136,384 Income tax benefit (expense) on non-operating earnings: (5) Provision for decline in real estate - 872 (872) Provision for decline in real estate recorded on equity method - - - Gain on disposition of other investments - (240) 240 Gain on disposition recorded on equity method - (7,316) 7,316 Gain on disposition of rental properties included in discontinued operations (29,095) - (29,095) ------------------ ------------ Income tax expense on non- operating earnings (see above) (29,095) (6,684) (22,411) ------------------ ------------ Minority interest in continuing operations (4,257) (2,832) (1,425) Minority interest in discontinued operations: (1) Operating earnings 206 (38) 244 Gain on disposition of rental properties (61,086) - (61,086) ------------------ ------------ (60,880) (38) (60,842) ------------------ ------------ Minority interest (65,137) (2,870) (62,267) ------------------ ------------ Net earnings $53,258 $22,216 $31,042 ================== ============ Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Three Months Ended April 30, 2006 and 2005 (in thousands) 1) Pursuant to the definition of a component of an entity of SFAS No. 144, assuming no significant continuing involvement, all earnings of properties and a division which have been sold or held for sale are reported as discontinued operations. 2) The Company uses an additional measure, along with net earnings, to report its operating results. This measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results as defined by generally accepted accounting principles and may not be directly comparable to similarly-titled measures reported by other companies. The Company believes that EBDT provides additional information about its operations, and along with net earnings, is necessary to understand its operating results. EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of operating properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) noncash charges from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., for depreciation, amortization (including amortization of mortgage procurement costs) and deferred income taxes; iv) provision for decline in real estate (net of tax); v) extraordinary items (net of tax); and vi) cumulative effect of change in accounting principle (net of tax). See our discussion of EBDT in the news release. 3) The Company recognizes minimum rents on a straight-line basis over the term of the related lease pursuant to the provision of SFAS No. 13, "Accounting for Leases." The straight-line rent adjustment is recorded as an increase or decrease to revenue from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., with the applicable offset to either accounts receivable or accounts payable, as appropriate. 4) 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 Amortization ----------------------------- Three Months Ended April 30, ----------------------------- 2006 2005 ----------------------------- Full Consolidation $43,617 $41,975 Non-Real Estate Groups (349) (548) ----------------------------- Real Estate Groups Full Consolidation 43,268 41,427 Real Estate Groups related to minority interest (3,211) (4,569) Real Estate Groups Equity Method 6,818 7,175 Real Estate Groups Discontinued Operations 325 2,239 ----------------------------- Real Estate Groups Pro-Rata Consolidation $47,200 $46,272 ============================= Amortization of Mortgage Procurement Costs ----------------------------- Three Months Ended April 30, ----------------------------- 2006 2005 ----------------------------- Full Consolidation $3,019 $3,058 Non-Real Estate Groups (92) (68) ----------------------------- Real Estate Groups Full Consolidation 2,927 2,990 Real Estate Groups related to minority interest (331) (690) Real Estate Groups Equity Method 289 299 Real Estate Groups Discontinued Operations 24 132 ----------------------------- Real Estate Groups Pro-Rata Consolidation $2,909 $2,731 ============================= Three Months Ended April 30, -------------------- 2006 2005 -------------------- (5) The following table provides detail of Income (in thousands) Tax Expense (Benefit): (A) Operating earnings Current $(423) $(616) Deferred 7,573 10,083 -------------------- 7,150 9,467 -------------------- (B) Provision for decline in real estate Deferred - (593) Deferred - Equity method investment - (279) -------------------- - (872) -------------------- (C) Gain on disposition of other investments Current - Non-Real Estate Groups - 62 Deferred - Non-Real Estate Groups - 178 -------------------- - 240 -------------------- (D) Gain on disposition recorded on equity method Current - 8,114 Deferred - (798) -------------------- - 7,316 -------------------- Subtotal (A) (B) (C) (D) Current (423) 7,560 Deferred 7,573 8,591 -------------------- Income tax expense 7,150 16,151 -------------------- (E) Discontinued operations - Rental Properties Operating earnings Current (607) (1,282) Deferred 66 568 -------------------- (541) (714) Gain on disposition of rental properties Current (29) - Deferred 29,124 - -------------------- 29,095 - -------------------- 28,554 (714) -------------------- Grand Total (A) (B) (C) (D) (E) Current (1,059) 6,278 Deferred 36,763 9,159 -------------------- $35,704 $15,437 -------------------- Recap of Grand Total: Real Estate Groups Current 1,311 11,178 Deferred 36,430 7,984 -------------------- 37,741 19,162 Non-Real Estate Groups Current (2,370) (4,900) Deferred 333 1,175 -------------------- (2,037) (3,725) -------------------- Grand Total $35,704 $15,437 ==================== Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (GAAP) (in thousands): Three Months Ended April 30, 2006 --------------------------------------------- Plus Unconsol- Plus idated Discon- Full Less Invest- tinued Pro-Rata Consol- Minority ments at Opera- Consol- idation Interest Pro-Rata tions idation --------------------------------------------- Revenues from real estate operations $289,354 $28,400 $69,777 $5,608 $336,339 Exclude straight-line rent adjustment (1) (2,710) - - - (2,710) --------------------------------------------- Adjusted revenues 286,644 28,400 69,777 5,608 333,629 Operating expenses 167,516 14,371 48,415 6,415 207,975 Add back depreciation and amortization for non-Real Estate Groups (b) 349 - 6,190 - 6,539 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) 92 - 147 - 239 Exclude straight-line rent adjustment (2) (1,474) - - (105) (1,579) --------------------------------------------- Adjusted operating expenses 166,483 14,371 54,752 6,310 213,174 Add interest income and other income 14,962 666 93 414 14,803 Add equity in earnings of unconsolidated entities 379 - 5,680 - 6,059 Remove gain on disposition recorded on equity method - - - - - Add back provision for decline recorded on equity method - - - - - Add back equity method depreciation and amortization expense (see below) 7,107 - (7,107) - - --------------------------------------------- Net Operating Income 142,609 14,695 13,691 (288) 141,317 Interest expense, including early extinguishment of debt (71,220) (6,896) (13,691) (660) (78,675) Gain on disposition of equity method rental properties (e) - - - - - Gain on disposition of rental properties and other investments - - - 75,298 75,298 Provision for decline in real estate - - - - - Provision for decline in real estate of equity method rental properties - - - - - Depreciation and amortization - Real Estate Groups (a) (43,268) (3,211) (6,818) (325) (47,200) Amortization of mortgage procurement costs - Real Estate Groups (c) (2,927) (331) (289) (24) (2,909) Straight-line rent adjustment (1) + (2) 1,236 - - (105) 1,131 Equity method depreciation and amortization expense (see above) (7,107) - 7,107 - - --------------------------------------------- Earnings before income taxes 19,323 4,257 - 73,896 88,962 Income tax provision (7,150) - - (28,554) (35,704) --------------------------------------------- Earnings before minority interest and discontinued operations 12,173 4,257 - 45,342 53,258 Minority Interest (4,257) (4,257) - - - --------------------------------------------- Earnings from continuing operations 7,916 - - 45,342 53,258 Discontinued operations, net of tax and minority interest: Operating loss from rental properties (861) - - 861 - Gain on disposition of rental properties 46,203 - - (46,203) - --------------------------------------------- 45,342 - - (45,342) - --------------------------------------------- Net earnings $53,258 $- $- $- $53,258 ============================================= (a) Depreciation and amortization - Real Estate Groups $43,268 $3,211 $6,818 $325 $47,200 (b) Depreciation and amortization - Non-Real Estate Groups 349 - 6,190 - 6,539 --------------------------------------------- Total depreciation and amortization $43,617 $3,211 $13,008 $325 $53,739 ============================================= (c) Amortization of mortgage procurement costs - Real Estate Groups $2,927 $331 $289 $24 $2,909 (d) Amortization of mortgage procurement costs - Non-Real Estate Groups 92 - 147 - 239 --------------------------------------------- Total amortization of mortgage procurement costs $3,019 $331 $436 $24 $3,148 ============================================= (e) Properties accounted for on the equity method do not meet the definition of a component of an entity under SFAS No. 144 and therefore are reported in continuing operations when sold. For the three months ended April 30, 2005, two equity method investments were sold, Showcase and Colony Place, resulting in a pre-tax gain on disposition of $18,497. Three Months Ended April 30, 2005 --------------------------------------------- Plus Unconsol- Plus idated Discon- Full Less Invest- tinued Pro-Rata Consol- Minority ments at Opera- Consol- idation Interest Pro-Rata tions idation --------------------------------------------- Revenues from real estate operations $294,580 $32,154 $75,425 $14,191 $352,042 Exclude straight-line rent adjustment (1) (4,923) - - 1 (4,922) --------------------------------------------- Adjusted revenues 289,657 32,154 75,425 14,192 347,120 Operating expenses 165,461 16,751 47,278 10,350 206,338 Add back depreciation and amortization for non-Real Estate Groups (b) 548 - 7,578 - 8,126 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) 68 - 90 - 158 Exclude straight-line rent adjustment (2) (1,704) - - (222) (1,926) --------------------------------------------- Adjusted operating expenses 164,373 16,751 54,946 10,128 212,696 Add interest income and other income 6,902 571 120 60 6,511 Add equity in earnings of unconsolidated entities 20,036 - (17,987) - 2,049 Remove gain on disposition recorded on equity method (18,497) - 18,497 - - Add back provision for decline recorded on equity method 704 - (704) - - Add back equity method depreciation and amortization expense (see below) 7,474 - (7,474) - - --------------------------------------------- Net Operating Income 141,903 15,974 12,931 4,124 142,984 Interest expense, including early extinguishment of debt (67,797) (7,883) (12,931) (3,378) (76,223) Gain on disposition of equity method rental properties (e) 18,497 - - - 18,497 Gain on disposition of rental properties and other investments 606 - - - 606 Provision for decline in real estate (1,500) - - - (1,500) Provision for decline in real estate of equity method rental properties (704) - - - (704) Depreciation and amortization - Real Estate Groups (a) (41,427) (4,569) (7,175) (2,239) (46,272) Amortization of mortgage procurement costs - Real Estate Groups (c) (2,990) (690) (299) (132) (2,731) Straight-line rent adjustment (1) + (2) 3,219 - - (223) 2,996 Equity method depreciation and amortization expense (see above) (7,474) - 7,474 - - --------------------------------------------- Earnings before income taxes 42,333 2,832 - (1,848) 37,653 Income tax provision (16,151) - - 714 (15,437) --------------------------------------------- Earnings before minority interest and discontinued operations 26,182 2,832 - (1,134) 22,216 Minority Interest (2,832) (2,832) - - - --------------------------------------------- Earnings from continuing operations 23,350 - - (1,134) 22,216 Discontinued operations, net of tax and minority interest: Operating loss from rental properties (1,134) - - 1,134 - Gain on disposition of rental properties - - - - - --------------------------------------------- (1,134) - - 1,134 - --------------------------------------------- Net earnings $22,216 $- $- $- $22,216 ============================================= (a) Depreciation and amortization - Real Estate Groups $41,427 $4,569 $7,175 $2,239 $46,272 (b) Depreciation and amortization - Non-Real Estate Groups 548 - 7,578 - 8,126 --------------------------------------------- Total depreciation and amortization $41,975 $4,569 $14,753 $2,239 $54,398 ============================================= (c) Amortization of mortgage procurement costs - Real Estate Groups $2,990 $690 $299 $132 $2,731 (d) Amortization of mortgage procurement costs - Non-Real Estate Groups 68 - 90 - 158 --------------------------------------------- Total amortization of mortgage procurement costs $3,058 $690 $389 $132 $2,889 ============================================= (e) Properties accounted for on the equity method do not meet the definition of a component of an entity under SFAS No. 144 and therefore are reported in continuing operations when sold. For the three months ended April 30, 2005, two equity method investments were sold, Showcase and Colony Place, resulting in a pre-tax gain on disposition of $18,497. Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Net Operating Income (dollars in thousands) ---------------------------------------------- Three Months Ended April 30, 2006 ---------------------------------------------- Plus Unconsol- Plus idated Discon- Full Less Invest- tinued Pro-Rata Consol- Minority ments at Opera- Consol- idation Interest Pro-Rata tions idation ---------------------------------------------- Commercial Group Retail Comparable $46,490 $5,216 $2,949 $- $44,223 ------------------------------------------------------------------- Total 49,961 4,491 2,965 10 48,445 Office Buildings Comparable 45,304 5,740 1,124 - 40,688 ------------------------------------------------------------------- Total 44,638 5,737 1,005 - 39,906 Hotels Comparable 3,522 993 478 - 3,007 ------------------------------------------------------------------- Total 3,591 66 478 (481) 3,522 Earnings from Commercial Land Sales 9,635 - - - 9,635 Development Fees 276 - - - 276 Other (3,743) 2,963 61 - (6,645) ------------------------------------------------------------------- Total Commercial Group Comparable 95,316 11,949 4,551 - 87,918 ------------------------------------------------------------------- Total 104,358 13,257 4,509 (471) 95,139 Residential Group Apartments Comparable 24,848 635 6,443 - 30,656 ------------------------------------------------------------------- Total 36,368 893 7,762 183 43,420 Total Real Estate Groups Comparable 120,164 12,584 10,994 - 118,574 ------------------------------------------------------------------- Total 140,726 14,150 12,271 (288) 138,559 Land Development Group 18,185 545 384 - 18,024 The Nets (8,701) - 1,036 - (7,665) Corporate Activities (7,601) - - - (7,601) - ---------------------------------------------------------------------- Grand Total $142,609 $14,695 $13,691 $(288) $141,317 Net Operating Income (dollars in thousands) ---------------------------------------------------------- Three Months Ended April 30, 2005 % Change ---------------------------------------------------------- Plus Unconsol- Plus idated Discon- Full Less Invest- tinued Pro-Rata Full Pro-Rata Consol- Minority ments at Opera- Consol- Consol- Consol- idation Interest Pro-Rata tions idation idation idation ---------------------------------------------------------- Commercial Group Retail Comparable $43,761 $5,404 $2,968 $- $41,325 6.2% 7.0% ----------------------------------------------------- Total 45,073 4,226 3,002 32 43,881 Office Buildings Comparable 43,856 5,372 1,187 - 39,671 3.3% 2.6% ----------------------------------------------------- Total 43,073 5,919 1,054 - 38,208 Hotels Comparable 2,112 382 517 - 2,247 66.8% 33.8% ----------------------------------------------------- Total 2,139 (304) 517 2,018 4,978 Earnings from Commercial Land Sales 19,352 1,752 - - 17,600 Development Fees 645 - - - 645 Other (1,443) 1,899 22 - (3,320) ------------------------------------------------------ Total Commercial Group Comparable 89,729 11,158 4,672 - 83,243 6.2% 5.6% ----------------------------------------------------- Total 108,839 13,492 4,595 2,050 101,992 Residential Group Apartments Comparable 23,130 542 6,121 - 28,709 7.4% 6.8% ----------------------------------------------------- Total 24,411 1,038 7,562 2,074 33,009 Total Real Estate Groups Comparable 112,859 11,700 10,793 - 111,952 6.5% 5.9% ----------------------------------------------------- Total 133,250 14,530 12,157 4,124 135,001 Land Development Group 26,448 1,444 105 - 25,109 The Nets (8,596) - 669 - (7,927) Corporate Activities (9,199) - - - (9,199) - ------------------------------------------------------- Grand Total $141,903 $15,974 $12,931 $4,124 $142,984 Development Pipeline - ---------------------------------------------------------------------- April 30, 2006 2006 Openings and Acquisitions (5) Cost at FCE Cost at Pro- FCE Full Rata Legal Pro- Consol- Share Pro- Dev Owner- Rata ida- Total (Non- Gross perty/ (D) Date ship% FCE% tion Cost GAAP) Sq. ft./ Leas- Loca- Acq Opened/ (i) (i) (GAAP) at 100% (b) No. of able tion (A) Acquired (1) (2) (a) (3) (2)X(3) Units Area - --------------------------------- ------------------------------------ (in millions) --------------------- Retail Centers: Metreon (c)/ San Francisco, CA A Q1-06 50.0% 50.0% $0.0 $40.0 $20.0 290,000 290,000 Northfield at Staple- ton Phase II (l)/ Denver, CO D Q1-06 95.0% 97.4% 9.1 9.1 8.9 86,000 86,000 ------------------------------------ $9.1 $49.1 $28.9 376,000 376,000 ---------------------=============== Office: Resur- rection Health Care/ Skokie, ------------------------------------ IL A Q1-06 100.0% 100.0% $4.6 $4.6 $4.6 40,000 40,000 ---------------------=============== Residential: Sky55/ Chicago, IL D Q1-06 100.0% 100.0% $111.6 $111.6 $111.6 411 1251 S. Michigan/ Chicago, IL D Q1-06 100.0% 100.0% 16.6 16.6 16.6 91 ----------------------------- $128.2 $128.2 $128.2 502 ---------------------======== --------------------- Total Openings (d) $141.9 $181.9 $161.7 ===================== - --------------------------------------------------------------- Residential Opened in Phased-In '06/Total Units (c) (e): ------------ Woodgate/ Evergreen Farms/ Olmsted Township, OH D 2004-07 33.0% 33.0% $0.0 $22.9 $7.6 24/348 Pine Ridge Expansion/ Willoughby Hills, OH D 2005-06 50.0% 50.0% 0.0 16.4 8.2 9/162 Cobblestone Court/ Painesville, OH D 2006-08 50.0% 50.0% 0.0 24.6 12.3 24/304 ----------------------------- Total (f) $0.0 $63.9 $28.1 57/814 ============================= - --------------------------------------------------------------- See attached 2006 footnotes. Development Pipeline - ---------------------------------------------------------------------- April 30, 2006 Under Construction or to be Acquired (18) FCE Pro- Dev Legal Rata (D) Ownership FCE % Acq Anticipated % (i) Property/Location (A) Opening (i)(1) (2) - ---------------------------------------------------------------------- Retail Centers: San Francisco Centre - Emporium (c)/San Francisco, CA D Q3-06 50.0% 50.0% San Francisco Centre (c)/San Francisco, CA A Q3-06 50.0% 50.0% Northfield at Stapleton Phase III (l)/Denver, CO D Q3-06 95.0% 97.4% Promenade Bolingbrook/ Bolingbrook, IL D Q1-07 100.0% 100.0% Orchard Town Center (o)/Westminster, CO D 2006/2007/2008 100.0% 100.0% Office: Advent Solar (c)/Albuquerque, NM D Q2-06 50.0% 50.0% Illinois Science and Technology Park/Skokie, IL A/D Q3-06 100.0% 100.0% Edgeworth Building/Richmond, VA D Q4-06 100.0% 100.0% Stapleton Medical Office Building/Denver, CO D Q4-06 90.0% 90.0% New York Times (c)/Manhattan, NY D Q2-07 28.0% 40.0% Johns Hopkins - 855 North Wolfe Street/East Baltimore, MD D Q1-08 77.5% 77.5% Residential: Sterling Glen of Roslyn (g)/ Roslyn, NY D Q4-06 40.0% 100.0% Ohana Military Communities (c) (e)/Honolulu, HI D 2005-2008 10.0% 10.0% Dallas Mercantile/Dallas, TX D Q2-07/Q2-08 100.0% 100.0% Military Housing - Navy Midwest (c)/Chicago, IL D Q1-09 25.0% 25.0% Condominiums: 1100 Wilshire (c)/Los Angeles, CA D Q2-06 50.0% 50.0% Cutters Ridge at Tobacco Row/Richmond, VA D Q3-06 100.0% 100.0% Mercury (c)/Los Angeles, CA D Q1-07 50.0% 50.0% Total Under Construction (h) LESS: Above properties to be sold as condominiums Under Construction less Condominiums - ---------------------------------------------------------------------- Residential Phased-In Units Under Construction (c) (e): Arbor Glen/Twinsburg, OH D 2004-07 50.0% 50.0% Woodgate/Evergreen Farms/Olmsted Township, OH D 2004-07 33.0% 33.0% Pine Ridge Expansion/Willoughby Hills, OH D 2005-06 50.0% 50.0% Cobblestone Court/Painesville, OH D 2006-08 50.0% 50.0% Total (m) - ---------------------------------------------------------------------- See attached 2006 footnotes. April 30, 2006 Under Construction or to be Acquired (18) Cost at FCE Cost at Pro-Rata Full Share Consol- Total (Non- Total Pre- idation Cost GAAP) Sq. ft./ Gross Lea- (GAAP) at 100% (b) No. of Leasable sed Property/Location (a) (3) (2) X (3) Units Area % - ---------------------------------------------------------------------- (in millions) ------------------------- Retail Centers: San Francisco Centre - Emporium (c)/San Francisco, CA $0.0 $436.2 $218.1 964,000 626,000 (k) 80% San Francisco Centre (c)/San Francisco, CA 0.0 151.8 75.9 498,000 186,000 98% Northfield at Stapleton Phase III (l)/Denver, CO 136.3 136.3 132.8 637,000 532,000 (j) 44% Promenade Bolingbrook/ Bolingbrook, IL 129.5 129.5 129.5 743,000 417,000 (j) 43% Orchard Town Center (o)/ Westminster, CO 131.9 131.9 131.9 972,000 558,000 (p) 1% --------------------------------------------- $397.7 $985.7 $688.2 3,814,000 2,319,000 -------------------------==================== Office: Advent Solar (c)/Albuquerque, NM $0.0 $8.9 $4.5 88,000 88,000 100% Illinois Science and Technology Park/Skokie, IL 108.8 108.8 108.8 661,000 661,000 28% Edgeworth Building/ Richmond, VA 35.2 35.2 35.2 187,000 142,000 60% Stapleton Medical Office Building/Denver, CO 11.0 11.0 9.9 45,000 45,000 44% New York Times (c)/Manhattan, NY 0.0 426.5 170.6 732,000 732,000 (q) 13% Johns Hopkins - 855 North Wolfe Street/East Baltimore, MD 103.1 103.1 79.9 279,000 279,000 36% --------------------------------------------- $258.1 $693.5 $408.9 1,992,000 1,947,000 -------------------------==================== Residential: Sterling Glen of Roslyn (g)/ Roslyn, NY $75.6 $75.6 $75.6 158 Ohana Military Communities (c) (e)/ Honolulu, HI 0.0 316.5 31.7 1,952 Dallas Mercantile/ Dallas, TX 116.2 116.2 116.2 362 (n) Military Housing - Navy Midwest (c)/Chicago, IL 0.0 264.7 66.2 1,658 ----------------------------------- $191.8 $773.0 $289.7 4,130 -------------------------========== Condominiums: Pre-Sold % ---------- 1100 Wilshire (c)/Los Angeles, CA $0.0 $121.0 $60.5 228 90% Cutters Ridge at Tobacco Row/Richmond, VA 4.5 4.5 4.5 12 8% Mercury (c)/Los Angeles, CA 0.0 139.8 69.9 238 42% ----------------------------------- $4.5 $265.3 $134.9 478 -------------------------========== Total Under Construction (h) $852.1 $2,717.5 $1,521.7 ========================= LESS: Above properties to be sold as condominiums 4.5 265.3 134.9 ------------------------- Under Construction less Condominiums $847.6 $2,452.2 $1,386.8 ========================= - ----------------------------------------------------- Residential Phased-In Units Under Under Construction Const./ (c) (e): Total ---------- Arbor Glen/Twinsburg, OH $0.0 $18.4 $9.2 96/288 Woodgate/Evergreen Farms/Olmsted Township, OH 0.0 22.9 7.6 120/348 Pine Ridge Expansion/ Willoughby Hills, OH 0.0 16.4 8.2 84/162 Cobblestone Court/ Painesville, OH 0.0 24.6 12.3 280/304 ----------------------------------- Total (m) $0.0 $82.3 $37.3 580/1,102 =================================== - ----------------------------------------------------- See attached 2006 footnotes. Development Pipeline - ---------------------------------------------------------------------- 2006 FOOTNOTES - -------------- (a) Amounts are presented on the full consolidation method of accounting, a GAAP measure. Under full consolidation, costs are reported as consolidated at 100 percent if we are deemed to have control or to be the primary beneficiary of our investments in the variable interest entity ("VIE"). (b) Cost at pro-rata share represents Forest City's share of cost, based on the Company's pro-rata ownership of each property (a Non-GAAP measure). Under the pro-rata consolidation method of accounting the Company determines its pro-rata share by multiplying its pro-rata ownership by the total cost of the applicable property. (c) Reported under the equity method of accounting. This method represents a GAAP measure for investments in which the Company is not deemed to have control or to be the primary beneficiary of our investments in a VIE. (d) The difference between the full consolidation amount (GAAP) of $141.9 million of cost to the Company's pro-rata share (a non- GAAP measure) of $161.7 million of cost consists of a reduction to full consolidation for minority interest of $0.2 million of cost and the addition of its share of cost for unconsolidated investments of $20.0 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 $28.1 million of cost consists of the Company's share of cost for unconsolidated investments of $28.1 million. (g) Supported-living property. (h) The difference between the full consolidation amount (GAAP) of $852.1 million of cost to the Company's pro-rata share (a non- GAAP measure) of $1,521.7 million of cost consists of a reduction to full consolidation for minority interest of $27.8 million of cost and the addition of its share of cost for unconsolidated investments of $697.4 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 opened Q1-06, Phase III is scheduled to open 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 $37.3 million of cost consists of Forest City's share of cost for unconsolidated investments of $37.3 million. (n) Project includes 18,000 square feet of retail space. (o) Phased opening: Phase I opens Q3-06, Phase II opens Q3-07, and Phase III opens Q1-08. (p) Includes 177,000 square feet for Target and 97,000 square feet for JC Penney opening in 2006, and 140,000 square feet for Macy's opening in 2007. (q) Includes 24,000 square feet of retail space. CONTACT: Forest City Enterprises, Inc. Thomas G. Smith, 216-621-6060 Thomas T. Kmiecik, 216-621-6060 On the Web - www.forestcity.net -----END PRIVACY-ENHANCED MESSAGE-----