CLEVELAND, Sept. 8 /PRNewswire-FirstCall/ -- Forest City Enterprises, Inc. (NYSE: FCEA and FCEB), today announced EBDT, net earnings and revenues for the second quarter and six months ended July 31, 2010.

EBDT

Second-quarter EBDT (earnings before depreciation, amortization and deferred taxes) was $105.6 million, a 10.6 percent increase compared with 2009 second-quarter EBDT of $95.5 million.   On a fully diluted, per share basis, second-quarter 2010 EBDT was $0.54, compared with 2009 second-quarter EBDT per share of $0.64.  Total EBDT for the six-months ended July 31, 2010, was $176.0 million, or $0.91 per fully diluted share, compared with last year’s $137.1 million, or $1.07 per share.  

Per-share data for the second quarter and six months reflect the dilutive effect of new Class A common shares issued by the Company during the second quarter of 2009, and the “if-converted” effect of convertible debt and convertible preferred stock issued in 2009 and 2010.  For the three months ended July 31, 2010, diluted weighted average shares outstanding were 202.2 million, compared with 148.2 million in the second quarter of 2009.  For the six months ended July 31, 2010, diluted weighted average shares outstanding were 199.3 million, compared with 127.7 million for the first six months of 2009.  

For an explanation of EBDT variances, see the section titled "Review of Results" in this news release.  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.

Net Earnings

Second-quarter net earnings attributable to Forest City Enterprises, Inc. were $122.8 million, or $0.61 per share, compared with a net loss of $1.8 million, or $0.01 per share, in the second quarter of 2009.  Net earnings for the six months ended July 31, 2010, were $107.3 million, or $0.54 per share, compared with a net loss of $32.5 million, or $0.26 per share for the same period in 2009.  The positive year-over-year net earnings variance was primarily driven by a $125.7 million gain on disposition of rental properties from asset sales and joint ventures, net of tax and noncontrolling interest.  

For the second quarter, net earnings were negatively impacted by increased impairment charges of $35.4 million ($21.7 million, net of tax), primarily related to the write-down of Simi Valley Town Center, a California retail property.  Consolidation of the center’s two anchors, together with the economic downturn and other factors, led ultimately to the decision by the non-recourse mortgage lender, with the cooperation of the company and its partner, to begin actively marketing the note secured by the property. This caused the company to change the anticipated holding period of the asset.  As a result, it was determined that the company would not recover its costs through future undiscounted cash flows, necessitating the impairment.

Revenues

Second-quarter 2010 consolidated revenues were $309.2 million compared with $313.7 million last year. First half 2010 revenues were $589.4 million, compared with $623.7 million for the six months ended July 31, 2009.  

Liquidity

At July 31, 2010, the Company had $214.8 million ($186.7 million at full consolidation) in cash on its balance sheet, and $252.6 million of available capacity on its revolving line of credit.

Review of Results

(Exhibits illustrating factors impacting both second-quarter and year-to-date 2010 EBDT results, compared with results for the comparable periods in 2009, are available on the Investor Relations page of the Company’s web site: www.forestcity.net, and are included in the company’s second-quarter 2010 Supplemental Package filed with the Securities and Exchange Commission.)

Second- Quarter EBDT

Total EBDT for the three months ended July 31, 2010 increased by $10.1 million, to $105.6 million from $95.5 million for the three months ended July 31, 2009.

Second quarter results were impacted by several transactional items, the largest of which was the gain of $31.4 million, pre-tax, related to the disposition of a partial interest in the Nets basketball team.  During the quarter, entities controlled by Mikhail Prokhorov purchased an 80 percent interest in the Nets, generating a gain on disposition.

In Forest City’s combined Commercial and Residential Segments (also referred to as the Company’s rental properties portfolio) total comparable property net operating income in the second quarter increased $4.4 million, and pre-tax EBDT from new properties increased $2.2 million, compared with the same period in 2009.  In addition, EBDT increased by $10.2 million due to increased income from the sale of state and federal historic preservation, brownfield and new market tax credits.

These increases were offset by several factors, including reduced EBDT of $7.1 million from joint venture and property sale transactions; the comparative decrease in fair market value of derivatives which were marked to market through interest expense of $11.9 million; an anticipated decrease in military housing EBDT of $6.6 million; and increased interest expense on the mature portfolio of $3.7 million, primarily due to increased rates on recently completed financings.  As a result, total pre-tax EBDT from the Company’s rental properties portfolio decreased by $11.9 million in the second quarter, compared with the same quarter in 2009.

Second-quarter, pre-tax EBDT from the Company’s Land Segment decreased $8.8 million, compared with the same period in 2009, primarily due to a 2009 gain on early extinguishment of nonrecourse mortgage debt of $9.5 million, which did not recur in 2010.

Corporate pre-tax EBDT increased $1.6 million for the second quarter as a result of early extinguishment of debt related to the repurchase of Senior Notes of $1.9 million and decreased interest expense of $3.4 million, partially offset by increased company-wide severance and outplacement costs in 2010 compared with 2009 of $2.2 million.      

In addition EBDT between the comparable periods was adversely impacted by a lower tax benefit of $3.4 million.

Year-to-date EBDT

Total EBDT for the six months ended July 31, 2010 increased by $38.9 million, or 28.4 percent, to $176.0 million, compared with $137.1 million for the six months ended July 31, 2009.  

In addition to the factors described above under “Second-Quarter EBDT,” year-to-date results were favorably impacted by increased pre-tax EBDT of $15.0 million from lower project write-offs between the comparable periods, and increased pre-tax EBDT of $5.3 million due to lower company-wide severance and outplacement costs reported in the corporate segment in 2010 compared with 2009.

NOI, Occupancies and Rent

Overall comparable property net operating income (NOI) increased 2.9 percent during the second quarter compared with the same period a year ago.  Comp NOI increased across all of the company’s rental property types with increases of 3.2 percent in retail, 1.6 percent in office, and 3.8 percent in apartments.    

Comparable property NOI, defined as NOI from properties operated in the three months ended July 31, 2010 and 2009, 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.

At July 31, 2010, comparable retail occupancies were 90.9 percent, compared with 89.2 percent at July 31, 2009, and regional mall sales averaged $389 per square foot on a rolling 12-month basis.  Year-to-date comparable mall sales in the company’s retail portfolio increased 1.9 percent, compared with the same period in 2009.  

Comparable office occupancies increased to 90.0 percent, compared with 89.7 percent last year. In the residential portfolio, comparable average occupancies for the six months ended July 31, 2010, were 94.1 percent, compared with 90.8 percent last year. Year-to-date comparable residential net rental income (defined as gross rent less vacancies and concessions) increased to 90.7 percent, compared with 86.9 percent in the same period in 2009.

Commentary

“We’re pleased with our results for the second quarter and six months, which demonstrate the continued strength in our rental properties portfolio,” said Charles A. Ratner, Forest City president and chief executive officer.  “Our major portfolio operating metrics – comparable property net operating income and occupancies – were up across all major product types for the quarter.  Based on published industry data, our rental properties portfolio is performing on par with our peers in these key metrics on a year-to-date basis, and our multifamily residential portfolio, in particular, has shown strong year-over-year increases through the first six months of 2010.

“At the same time, the near-term tradeoff between liquidity and EBDT can be seen in our results for the quarter:  we achieved increased EBDT from comparable properties and new properties, offset by an expected EBDT decrease from property sales and joint ventures.  Nonetheless, we believe that the liquidity generated by our strategy of selective asset sales and joint ventures, along with our other strategic initiatives, have contributed to significantly strengthening our balance sheet, reducing risk, and better positioning Forest City for future growth and opportunity.

“In addition to strong portfolio fundamentals, the dominant driver of our second quarter and year-to-date results was the closing of the sale of an 80 percent interest in the Nets, a key milestone for Forest City, the Barclays Center arena, and the overall Atlantic Yards project in Brooklyn.  

“In the Land Segment, business remains very soft, though profitable, overall.  Notably, absent the impact of significant debt forgiveness in 2009 which did not recur this year, our EBDT results for land would have increased modestly for the second quarter, compared with the prior-year period.  In general, however, results in our land business continue to show a slow pace of turnaround as homebuilders exercise caution in acquiring new lots in most markets around the country.  

“We continue to respect the market as it relates to new development and project starts.  Over the past two years, we’ve started only two new projects: the long-awaited Barclays Center arena and, most recently, the first building at The Yards in Washington, D.C., financing for which closed early in the third quarter.  During that same two-year span, however, we continued to deliver on our pipeline of projects that were already under construction when the financial meltdown began in late 2008. Over that time period, we’ve completed approximately $800 million of new real estate at our pro-rata share ($650 million at full consolidation) in our core markets.  Overall, these high-quality projects have opened well leased and significantly accretive to our results.  

“Just as important, as these new properties have opened, we have significantly decreased remaining risk associated with our under-construction pipeline, reducing it by approximately one-third, at our share, from its peak. With the opening of Presidio Landmark in San Francisco at the beginning of this year’s third quarter, we have now completed all of our 2010 openings.  Our current under-construction pipeline consists of four projects in two of our strongest core markets, three in New York and one in Washington, D.C.  We have a high level of cost certainty for each of these, and while leasing challenges remain, we believe market fundamentals are improving at the right time to benefit all of these projects. The bottom line is that we’ve reduced development risk substantially while continuing to create real value.”  

Financing Activity

Since January 31, 2010, the Company has addressed, through closed loans and committed financings, $488.6 million at full consolidation ($605.0 million at its pro-rata share) of the $778.6 million ($868.9 million at pro-rata) of net maturities  (inclusive of notes payable) coming due in fiscal year 2010. Additionally, the Company addressed $787.5 million ($611.9 million at pro-rata) of loans maturing in future years, including borrowings that were outstanding at January 31, 2010, on the Company’s Senior Notes.

As of July 31, 2010, the Company's weighted-average cost of nonrecourse debt increased to 5.12 percent from 5.06 percent at July 31, 2009, primarily due to an increase in variable-rate mortgage debt. Fixed-rate mortgage debt, which represented 69 percent of the Company's total nonrecourse mortgage debt, and is inclusive of interest rate swaps, increased from 6.05 percent at July 31, 2009 to 6.09 percent at July 31, 2010. Variable-rate mortgage debt increased from 2.73 percent at July 31, 2009, to 2.97 percent at July 31, 2010.

Commenting on year-to-date financing activity, Ratner stated, “We continue to effectively manage debt maturities, addressing approximately 70 percent at our share of our 2010 net maturities since the beginning of the year, as well as a substantial amount of maturities due in future periods.  Our success in achieving extensions and refinancing is a testament to the quality of the real estate, the depth of our relationships with lenders and the skill and hard work of our financing teams.  These results also clearly show the benefit of our exclusive use of non-recourse financing for all of our individual property mortgages.”    

“In general, we find that access to credit markets is improving for operating properties in strong markets, with capital available at very attractive rates for the best properties.  Despite this, financing for land and construction loans is still very tight.”

Openings and Projects Under Construction

During the second quarter, Forest City held the grand opening for the 527,000-square-foot East River Plaza retail center in Manhattan, an equity-method property that added $195.3 million of cost.  This unique center, built on the site of a former wire factory in Harlem, is 95 percent leased and is the location of Manhattan’s first Costco and first Target, and also includes Marshall's, PetSmart, Best Buy, Old Navy, Bob's Furniture and GameStop.  Also in the second quarter, the company announced the closing of the conversion of the construction loan for the center to a $214.3 million ($107.2 million at Forest City’s pro-rata share) permanent loan.  The nine-year financing has an effective all-in fixed interest rate of less than 4.5 percent.

At the end of the second quarter, the company had four projects remaining under construction at a total project cost of $1.7 billion at Forest City’s pro-rata share ($2.6 billion at full consolidation).

At the beginning of the third quarter, Forest City opened and commenced active leasing for Presidio Landmark, a 161-unit adaptive-reuse apartment project in the Presidio National Park in San Francisco, adding $108.5 million at the Company’s pro-rata share and at full consolidation.  This unique project includes both luxury apartments in a redeveloped and historically significant former hospital building, and a small number of newly built, contemporary townhomes. Forest City is targeting LEED (Leadership in Energy and Environmental Design) Gold certification from the U.S. Green Building Council for the former hospital building, and LEED Platinum certification, the highest level attainable, for the townhomes.  

With the opening of Presidio Landmark, the following projects remain actively under construction.  

Barclays Center, the arena at the company’s Atlantic Yards project in Brooklyn, is well into the foundation stage of construction.  With the closing of Forest City’s agreement with interests controlled by Mikhail Prokhorov for the Nets and the arena, together with other in-place financing, construction for the arena is fully funded.  In addition, active marketing continues for sponsorships, food and beverage agreements and related revenue opportunities, as well as suite sales and event bookings.  To date, approximately 51 percent of forecast contractually obligated income for the arena is under contract.  Contractually obligated income, which includes revenue from naming rights, sponsorships, suite licenses, Nets minimum rent, and food concession agreements, accounts for 72 percent of total pro-forma revenues for the arena.  

At Beekman, Forest City’s luxury apartment high-rise in lower Manhattan, the stainless steel curtain wall enclosing the 76-story, Frank Gehry-designed tower in nearly complete.  Interior build-out is progressing on lower floors, and leasing of the building’s 904 market-rate units is expected to begin in phases during the first quarter of 2011, while interior build-out continues on upper floors.  The rental housing market in New York City continues to be strong and the Manhattan submarket particularly strong, with vacancies currently less than two percent.

Westchester’s Ridge Hill, Forest City’s mixed-use retail project in Yonkers, New York, continues to be a major focus for the company’s leasing teams.  At present, the center remains 31 percent leased, with committed tenants including National Amusements, Whole Foods, and Westchester Medical Group as an anchor office tenant.  The company is in advanced stages of discussion with several major tenants, including a number of restaurants, and expects to be in a position to announce additional tenants for the center in the near future as these and other negotiations progress to committed leases.  

Other Recent Highlights

Since the end of the third quarter, Forest City made the follow significant announcements:

• On August 19, the company announced agreements with Rock Gaming LLC for development of a casino in downtown Cleveland adjacent to Forest City’s Tower City Center mixed-use retail/office complex.  Under the agreements, Rock Gaming will acquire approximately 16 acres of land and air rights from Forest City to develop the casino. In addition, Rock Gaming also signed an agreement in principle for a multiyear lease in the Higbee Building at Tower City for potential construction and operation of a “Phase 1” casino.  The land and air rights transaction is expected to close in Forest City’s fiscal 2010 fourth quarter.  
• On August 20, Forest City announced that a subsidiary closed a $46.1 million HUD-insured mortgage loan for Foundry Lofts, a 170-unit, 80/20 multifamily apartment building at The Yards, Forest City’s mixed-use project in southeast Washington, D.C.  Foundry Lofts is the first building to begin construction at The Yards and demonstrates the strength of the D.C. market, which has held up very well during the downturn.  The 41-year financing, at a 4.66 percent interest rate (before mortgage insurance), was completed through the District of Columbia Housing Finance Agency and the U.S. Department of Housing and Urban Development.  In addition, on September 7, 2010, Forest City representatives, together with federal and district officials and community leaders, celebrated the opening of the Yards Park, a 5.5-acre, publicly funded riverfront park overlooking the Anacostia River. The park will be a community focal point and amenity for the entire Capital Riverfront district.
• On August 30, the company announced that its Forest City Military Communities subsidiary was selected by the U.S. Air Force to privatize military family housing at four bases in the southeastern United States. The project, which includes a three-year initial development period and a 50-year management and maintenance contract, expands Forest City’s military housing portfolio to include military family housing projects in nine states for the Navy, Marines, and Air Force, and a total of more than 14,100 housing units either existing, in design or under construction.
• On September 7, Forest City announced the closing of a 10-year, $85.0 million refinancing for the company’s 42^nd Street retail and entertainment complex in New York City.  The new financing is at an interest rate more than 325 basis points lower than the loan it replaces.

Outlook

“When we issued our first quarter earnings, we stated a renewed sense of optimism about our company, our industry and the economy in general,” Ratner said.  “With our second quarter results, that optimism – as it relates to our company – has been validated by solid performance and enhanced opportunity for future growth.  

“With this positive momentum, however, we are very mindful of indications of weakness in the U.S. and global economies, and our optimism at the end of the first six months of 2010 is tempered accordingly.  While some are suggesting that a renewed downturn (the so-called ‘double dip’) may be looming, our belief, based on what we see in our business, is that the general economy is at the bottom of U-shaped trough, with a recovery of unknown slope and timing ahead.  

“Even in the face of this uncertainty, Forest City’s retail and multifamily portfolios have improved in key metrics, year-to-date, and our office portfolio, which performed very well in 2009, continues to be a solid contributor.  We’ve continued to bring new properties to market that are well leased and accretive, while also reducing development risk.  We’ve taken advantage of improved conditions in the capital markets to strengthen our balance sheet.  We’ve accessed the gradually improving credit markets to manage our maturities through both extensions and new financings.  We’ve executed selective asset sales and joint-venture transactions at attractive cap rates that have generated significant liquidity.  All of these efforts have helped position the company for future growth and value creation.

“We believe that value creation has been demonstrated several times already in 2010, including with the opening of Waterfront Station in D.C. and its two, fully-leased office buildings; and with the grand opening of East River Plaza in Manhattan at 95 percent leased with nine-year, permanent financing at a long-term, low fixed rate.  Value creation is also illustrated in four recent, momentum-building announcements we’ve made just since the beginning of the third quarter: 41-year, fixed rate HUD financing and commencement of construction for Foundry Lofts in Washington, D.C.; the awarding of the U.S. Air Force’s Southern Group multi-base family housing project; our land and air rights sale and leasing agreement for a casino adjacent to our Tower City Center mixed-use retail/office complex in downtown Cleveland; and the closing of new financing, at a significantly lower interest rate versus the prior mortgage, for our 42^nd Street retail and entertainment complex in New York City.

“Clearly, the economic outlook remains uncertain, and, while we anticipate and plan for a recovery, we will, as always, act with caution.  Nonetheless, we are encouraged by the strength of our portfolio, by our successes in creating value during challenging times, and by the resilience, skill and dedication of our associates. As a result, we continue to be optimistic about the future for Forest City.”

Corporate Description

Forest City Enterprises, Inc. is an $11.8 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 and land throughout the United States.  For more information, visit www.forestcity.net.

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 ("SEC") on Form 8-K. This Supplemental Package includes operating and financial information for the three months and six months ended July 31, 2010, 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 (“EBDT”), 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 for real estate depreciation, amortization, amortization of mortgage procurement costs and deferred income taxes; iv) preferred payment classified as noncontrolling interest expense on the Company's Consolidated Statements of Operations; v) impairment of real estate (net of tax); vi) extraordinary items (net of tax); and vii) cumulative or retrospective effect of change in accounting principle (net of tax). Unlike the real estate segments, EBDT for the Nets segment equals net earnings.

EBDT is reconciled to net earnings (loss), 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 impairment of 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 economic share of ownership. Under GAAP, the full consolidation method is used to report partnership assets and liabilities consolidated at 100 percent if deemed to be under its control or if the Company is deemed to be the primary beneficiary of the variable interest entities ("VIE"), even if its ownership is not 100 percent. The Company provides reconciliations from the full consolidation method to the pro-rata consolidation method in the exhibits below and throughout its Supplemental Package, which the Company will also furnish to the SEC on Form 8-K.

Safe Harbor Language

Statements made in this news release that state the Company’s or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. The Company's actual results could differ materially from those expressed or implied in such forward-looking statements due to various risks, uncertainties and other factors. Risks and factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the impact of current lending and capital market conditions on its liquidity, ability to finance or refinance projects and repay its debt, the impact of the current economic environment on its ownership, development and management of its real estate portfolio, general real estate investment and development risks, vacancies in its properties, further downturns in the housing market, competition, illiquidity of real estate investments, bankruptcy or defaults of tenants, anchor store consolidations or closings, international activities, the impact of terrorist acts, risks associated with an investment in a professional sports team, its substantial debt leverage and the ability to obtain and service debt, the impact of restrictions imposed by its credit facility and senior debt, exposure to hedging agreements, the level and volatility of interest rates, the continued availability of tax-exempt government financing, the impact of credit rating downgrades, effects of uninsured or underinsured losses, environmental liabilities, conflicts of interest, risks associated with the sale of tax credits, risks associated with developing and managing properties in partnership with others, the ability to maintain effective internal controls, compliance with governmental regulations, increased legislative and regulatory scrutiny of the financial services industry, volatility in the market price of its publicly traded securities, litigation risks, as well as other risks listed from time to time in the Company’s SEC filings, including but not limited to, the Company’s annual and quarterly reports.  

Forest City Enterprises, Inc. and Subsidiaries

Financial Highlights

Six Months Ended July 31, 2010 and 2009

(in thousands)

1) All earnings of properties which have been sold or are held for sale are reported as discontinued operations assuming no significant continuing involvement.

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) non-cash charges for real estate depreciation, amortization (including amortization of mortgage procurement costs) and deferred income taxes; iv) preferred payment classified as noncontrolling interest expense on the Company's Consolidated Statement of Earnings; v) impairment of real estate (net of tax); vi) extraordinary items (net of tax); and  vii) cumulative or retrospective effect of change in accounting principle (net of tax).  See our discussion of EBDT in the news release.  

3)  For the three and six months ended July 31, 2010, the calculation of EBDT per share under the if-converted method requires an adjustment for interest of $2,640 and $5,280, respectively, related to the 3.625% Puttable Senior Notes and the 5% Convertible Senior Notes. Therefore EBDT for purposes of calculating per share data is $108,200 and $181,307 for the three and six months ended July 31, 2010, respectively.  

4) The Company recognizes minimum rents on a straight-line basis over the term of the related lease pursuant to accounting for leases.  The straight-line rent adjustment is recorded as an increase or decrease to revenue or operating expense 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)  For the six months ended July 31, 2009, the effect of 3,655,000 shares of dilutive securities were not included in the computation of diluted  earnings per share because their effect is anti-dilutive to the loss from continuing operations.  (Since these shares are dilutive for the computation of EBDT per share for the six months ended July 31, 2009, diluted weighted average shares outstanding of 127,729,311 were used to arrive at $1.07/share.)  

6) The preference payment represents the respective period's share of the annual preferred payment in connection with the issuance of Class A Common Units in exchange for Bruce C. Ratner's noncontrolling interest in the Forest City Ratner Companies portfolio.  

7) The following table provides detail of depreciation and amortization and amortization of mortgage procurement costs.