Forest City Reports Fiscal 2009 Full-Year and Fourth-Quarter Results
CLEVELAND, Ohio, March 30 /PRNewswire-FirstCall/ -- Forest City Enterprises, Inc. (NYSE: FCEA and FCEB) today announced EBDT, net earnings and revenues for the fourth quarter and full year ended January 31, 2010.
EBDT
EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) for the full year ended January 31, 2010, was $301.1 million, a 37.5 percent increase compared with last year’s $218.9 million. EBDT for the fourth quarter was $78.4 million, an 11.2 percent increase compared with last year’s fourth-quarter EBDT of $70.5 million.
On a per-share basis, full-year 2009 EBDT was $2.00, a 2.4 percent decrease from the prior year’s $2.05. Per-share EBDT for the fourth quarter of 2009 was $0.43, a 34.8 percent decrease from $0.66 per share in the fourth quarter of 2008. Per-share data for both the fourth quarter and full year of 2009 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 two convertible debt transactions executed during the third quarter. For an explanation of the EBDT and EBDT per share variances, see the section titled "Review and Discussion 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/Loss
For the full year, the net loss attributable to Forest City Enterprises, Inc. was $30.7 million, or $0.22 per share, compared with a net loss of $113.2 million, or $1.10 per share, in 2008. For the fourth quarter of 2009, net earnings attributable to Forest City Enterprises, Inc. were $6.2 million, or $0.04 per share, compared with a net loss of $45.3 million, or $0.44 in the fourth quarter of 2008.
Revenues
Revenues for the year ended January 31, 2010, were $1.26 billion, a 1.8 percent decrease compared with prior year revenues. Fourth-quarter consolidated revenues were $324.3 million compared with $320.6 million last year.
Liquidity
At January 31, 2010, the Company had $275.0 million ($251.4 million at full consolidation) in cash on its balance sheet and $220.5 million of available capacity on the Company’s revolving line of credit.
Review and Discussion of Results
Fourth-Quarter EBDT
In the fourth quarter, total EBDT for the Company was $78.4 million.
For the quarter, pre-tax EBDT from the Company's combined Commercial and Residential segments increased by $27.9 million compared with the same period in 2008. The variance was primarily due to the mark-to-market change in the fair market value of forward swaps of $18.7 million, increased income from the sale of tax credits of $17.3 million, income of $11.0 million as a result of changes in the treatment of Housing and Urban Development (HUD) replacement reserves, and decreased write-offs of abandoned development projects of $5.3 million, compared with the fourth quarter of 2008.
These increases were partially offset by decreases of $11.5 million in pre-tax EBDT from reduced commercial outlot sales, and $2.1 million in reduced EBDT from properties sold.
In addition, pre-tax EBDT in the Company’s Land segment decreased $7.3 million, primarily due to lower land sales. Pre-tax EBDT for the fourth quarter was also negatively impacted by a larger reported share of losses for the Nets basketball team of $4.5 million and by a smaller tax benefit of $8.4 million, compared with the fourth quarter of 2008.
Full-year EBDT
(An exhibit illustrating factors impacting the Company’s full-year 2009 EBDT results is available on the investor relations page of the Company’s website, www.forestcity.net.)
For the year, total EBDT for the Company was $301.1 million.
Pre-tax EBDT in the Company’s combined Commercial and Residential segments increased $92.0 million compared with the prior year, due to a combination of core portfolio factors as well as transactional items. Core portfolio factors included positive variances of $27.1 million from gain on early extinguishment of debt, $21.5 million in reduced interest expense on the mature portfolio, increased income from the sale of tax credits of $21.5 million, and $6.4 million in EBDT from newly opened properties, offset by a decrease of $12.4 million in commercial outlot sales, $8.6 million in reduced fee income from military housing as initial development and construction phases conclude at certain of the Company’s military family housing neighborhoods, and $4.0 million in reduced EBDT from properties sold.
Positive 2009 transactional variances related to the rental properties portfolio included decreased project write-offs of $23.1 million, lower losses due to mark-to-market changes in the fair market value of forward swaps of $19.5 million, and $11.0 million in income as a result of new HUD guidelines on the treatment of replacement reserves. These positive transactional items were offset by 2008 lease termination fee income of $12.2 million which did not recur in 2009.
EBDT in the company’s Land segment increased $6.2 million pre-tax compared with 2008 as a result of the 2008 write down of $12.4 million related to the Lehman Brothers, Inc. bankruptcy, which did not recur in 2009, and the gain on early extinguishment of debt of $11.3 million, primarily related to the repurchase of two land loans at a significant discount during the second quarter. These positive factors in the Land segment were offset by decreased EBDT from Land operations of $17.5 million, reflecting the continued deterioration of the traditional land business during 2009.
Finally, 2009 EBDT was impacted by decreased corporate expenses of $5.4 million compared to 2008 due primarily to reduced compensation expense and cost-control efforts. Corporate interest expense increased $16.8 million as a result of increased borrowings on the Company’s revolving credit facility, additional interest expense associated with new convertible debt issued in the third quarter, and the non-cash impact of the adoption of accounting guidance for convertible securities in 2009. Finally, the Company’s share of operating losses for the Nets basketball team increased by $2.5 million, and the Company had a smaller tax benefit of $2.1 million for 2009 compared with the prior year.
Commentary
Charles A. Ratner, Forest City president and chief executive officer, commented on both the full-year and fourth-quarter results.
“In the context of conditions impacting real estate and the broader economy, 2009 was a successful year for the Company. We overcame significant challenges to achieve record full-year total EBDT, an improved balance sheet, reduced recourse debt, substantive cost reductions, successful project openings, and major development project milestones. Along the way, we also addressed approximately $1.6 billion of property-level, non-recourse debt maturities. In addition, at the end of fiscal 2009 and continuing into early 2010, we executed a series of asset sales and joint ventures at attractive cap rates to take advantage of value in our portfolio, to further bolster our liquidity and to create new long-term strategic partnerships.
“These accomplishments were made possible by continued adherence to the five strategies we implemented in the third quarter of 2008 to address financial and economic turmoil in the market and the real estate industry. Since then, virtually every major action taken by our Company has been driven by these strategies: curtailing development and focusing on our portfolio; driving costs out of the business; generating liquidity from our portfolio and in the capital markets; proactively managing debt maturities; and selectively taking advantage of opportunities created by market dislocations.”
“One significant consequence of managing through the challenges of 2009 and early 2010 was dilution of our common stock through issuance of additional Class A common stock, convertible debt and convertible preferred stock. As a result, despite the fact that our total EBDT was up significantly over 2008, per-share EBDT was down. We certainly recognize the impact of this dilution on our shareholders, but we believe the steps taken during 2009 were vital to the Company’s future growth and success, and to the long-term interests of shareholders.
“Another accomplishment for the year was our successful and ongoing effort to drive costs out of the business with an emphasis on process improvement and efficiency gains. To date, we have achieved annualized cost savings of $70-$80 million. One painful aspect of this effort was the difficult, but necessary task of reducing our workforce in order to bring the organization into better balance with the near-term opportunity and outlook.
“Turning to our operating results, we were pleased overall with the performance of our portfolio given market and economic conditions in 2009. Overall comparable property net operating income (NOI) from the portfolio was down less than one percent for the year compared with 2008 results – a real success given conditions in the market and the economy. Our office portfolio showed strength throughout 2009, with increases in comparable property NOI for both the fourth quarter and full year. We continued to see areas of weakness in the retail and residential portfolios, although deterioration appears to have slowed. Despite the difficult environment, comparable property occupancies finished the year modestly above 2008 levels in all three major portfolio segments: retail, office and residential.
“Operating results for our Land segment were down meaningfully from 2008 results, reflecting the continued impact of the economy and credit market conditions on builders and consumers. On the positive side, stress in this segment is what allowed us to benefit when we acquired two land loans at a significant discount in the second quarter. It has also enabled us to look at a large number of opportunities to acquire or otherwise participate in deals involving land owners, builders or lenders in distressed situations. To date, only two small transactions in land have met our requirements for investing capital, but we continue to actively evaluate additional opportunities.
“Despite the challenges confronting the Land segment in the current economy, we remain bullish on the long-term viability and profit potential in this part of the business, based on long-term demographic trends in the country and on the severely limited supply of new single-family product coming on the market over the past several years.”
Capital Raising Activity
Capital market transactions – During 2009 and early 2010, the Company executed a series of strategic capital market and other financing transactions designed to improve liquidity and take advantage of the window of opportunity created by access to the public markets for real estate companies. These transactions, which total $965 million (before transaction-related fees), included the following:
- In May 2009, the Company raised $345.0 million through the issuance of 52.3 million Class A common shares. Investor demand for the shares was robust, and the underwriters exercised their full over-allotment option.
- In early October 2009, the Company executed privately negotiated exchanges for $167 million of 3.625% Puttable Equity-Linked Senior Notes due 2011, and issued $33 million of new notes for a total of $200 million of new 3.625% Puttable Equity-Linked Notes due 2014.
- In late October 2009, Forest City closed a $200 million offering of 5% Convertible Senior Notes due 2016.
- In early March 2010, the Company entered into privately negotiated exchanges with certain holders of three separate series of senior notes due 2011, 2015, and 2017. A total of $178.7 million aggregate principal amount of these notes was exchanged for $170.0 million of a new issue of 7% Series A Cumulative Perpetual Convertible Preferred Stock. An additional $50 million of the Convertible Preferred was also issued for cash through a privately negotiated purchase agreement, for a total of $220 million between the exchanges and cash sale.
In addition, in late January 2010, the Company closed a new, two-year, $500 million revolving credit facility with its 15-member bank group. Taken together, these efforts contributed significantly to improving Forest City’s balance sheet and enhancing liquidity – the Company’s highest priority.
Asset sales and joint ventures – During 2009, and particularly late in the year and continuing through early 2010, Forest City capitalized on firming asset pricing in key real estate segments to unlock value in its portfolio through selective asset sales and joint ventures. These included the following:
- In April 2009, the Company completed the sale of The Shops at Grand Avenue, a retail center in the Borough of Queens, to an affiliate of AEW Capital Management, for $33.5 million, representing a cap rate of approximately 7.75 percent on in-place income.
- In late January 2010, the Company closed the sale of its partnership interests in three supported-living apartment communities to CC Development Group, Inc. The transaction yielded proceeds of approximately $30 million.
- On February 19, 2010, the Company announced the creation of a joint venture with Bernstein Management Corporation for ownership of three residential multifamily properties in Forest City’s Washington, D.C. area apartment portfolio. Forest City realized proceeds of approximately $32 million from the creation of the joint venture, equating to a cap rate of 6.5 percent based on the properties’ 2009 net operating income.
- On February 22, 2010, the Company announced a $668 million joint venture with Health Care REIT, Inc. (NYSE: HCN) for ownership of seven life science office buildings at Forest City’s University Park at MIT project in Cambridge, Mass. The transaction’s implied valuation represents a 7.6 percent cap rate on projected 2010 net operating income for the properties.
NOI, Occupancies and Rent
For the full year, overall comparable property NOI decreased 0.8 percent, with an increase of 5.4 percent in office and decreases of 3.9 percent in retail and 2.8 percent in residential. In the fourth quarter, comparable property NOI decreased 0.5 percent compared with the prior year. Comparable property NOI for the quarter increased in the office portfolio by 4.3 percent, while it decreased in the retail and residential portfolios by 3.9 percent and 2.7 percent, respectively.
Comparable property NOI, defined as NOI from properties operated for the full year in both 2009 and 2008, 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.
Comparable retail occupancies were 90.1 percent at the end of 2009, while comparable office occupancies were 90.3 percent. In the residential portfolio, comparable average occupancies were 92.2 percent and comparable property net rental income ended the year at 90.2 percent. In our regional malls, leasing spreads were down 4.7 percent for the year. In the office portfolio, leasing spreads increased 7.1 percent. Regional mall sales averaged $386 per square foot on a rolling 12-month basis, while comparable regional mall sales decreased 8.8 percent, a reflection of the economic downturn.
Debt Maturities and Financing Activity
During 2009, Forest City closed on transactions totaling $1.7 at the Company’s pro-rata share ($1.6 billion at full consolidation) in nonrecourse mortgage financings, including $313 million at pro-rata ($278 million at full consolidation) in refinancings and $1.4 billion at pro-rata in loan extensions and additional fundings ($1.3 billion at full consolidation). During the fourth quarter, the Company closed 13 loan transactions totaling $287 million at pro-rata ($190 million at full consolidation).
Since January 31, 2010, the Company has addressed, through closed loans and committed financings, $156.2 million at its pro-rata share ($153.1 million at full consolidation) of the $868.9 million at pro-rata ($778.6 million at full consolidation) of net maturities (inclusive of notes payable) coming due in fiscal year 2010. Additionally, since the end of fiscal 2009, the Company’s overall reported maturities were further reduced by $388.6 million at pro-rata ($619.8 million at full consolidation) as a result of joint ventures announced with Bernstein Management Corporation and Healthcare REIT, Inc., and retirement of various of the Company’s Senior Notes through privately negotiated exchanges with certain holders for a new issue of Series A Cumulative Perpetual Convertible Preferred Stock.
As of January 31, 2010 the Company's weighted average cost of mortgage debt increased to 5.16 percent from 5.00 percent at January 31, 2009 primarily due to an increase in variable-rate mortgage debt. Fixed-rate mortgage debt, which represented 71 percent of the Company's total nonrecourse mortgage debt, and is inclusive of interest rate swaps, decreased from 6.04 percent at January 31, 2009, to 6.00 percent at January 31, 2010. The variable-rate mortgage debt increased from 1.98 percent at January 31, 2009, to 3.06 percent at January 31, 2010. (All interest rates are at full consolidation.)
Project Updates
Openings in 2009
During 2009, Forest City opened or acquired three projects, adding $276.7 million of cost at the Company's pro-rata share and on a full consolidation basis.
Major openings during the year included:
- Promenade at Temecula expansion, which added a 127,000-square-foot outdoor town center to this 1.1-million-square-foot regional mall. The expansion is currently 71 percent leased and committed, and the balance of the center is 98 percent leased, for a total of 92 percent leased and committed across the entire center.
- 80 DeKalb Avenue, a 365-unit residential rental community in Brooklyn, which opened for leasing and initial move-ins during the fourth quarter. Currently, signed or pending leases account for approximately half of the total units, and while competitive concessions are being offered, average rents are in line with forecasts for the property.
Under Construction and 2010 openings
At the end of fiscal 2009, Forest City had seven projects under construction with a total project cost of $2.2 billion at the Company’s pro-rata share ($2.3 billion at full consolidation).
During the fourth quarter of 2009, Costco at East River Plaza, opened in 110,000 square feet of space at this 527,000-square-foot big-box retail center – the first of its kind – in Manhattan. The balance of the center remains under construction with other committed tenants, including Target, Best Buy, Marshalls, PetSmart and Old Navy, expected to open during 2010. The center is currently 93 percent leased.
On February 11, 2010, Forest City celebrated the grand opening of the 510,000-square-foot Village at Gulfstream Park mixed-use retail center in Hallandale Beach, Florida. The center, which is anchored by Gulfstream Park Racetrack and Casino, is South Florida's newest outdoor shopping and entertainment destination, and will feature approximately 70 stores and 421,000 square feet of retail space, of which 85 percent is currently leased. A number of home furnishing and restaurant tenants were among the first to open and have reported good results to date. Additional tenants will open during the course of 2010. The project also includes 89,000 square feet of class A office space and the potential for future residential units.
In the office portfolio, the first phase of the Waterfront Station redevelopment project in Southwest Washington, D.C., is nearly complete. The first two office buildings, which have been designed to meet LEED Silver standards, total 631,000 square feet of office and ground-level retail space. The office component is fully leased to the District of Columbia for governmental offices, and move-ins are already well under way. The retail space is also substantially leased, and committed tenants are expected to occupy their spaces and open by this summer.
In the residential portfolio, the 161-unit Presidio Landmark, a project at the foot of the Golden Gate Bridge within the Presidio National Park in San Francisco continues under construction. The project has two components: the adaptive re-use of a former U.S. Health Service hospital to create a unique, historically significant apartment community, and a small number of new, three-story townhomes, all of which is being built to a high standard of sustainability. Initial leasing for Presidio Landmark will begin this summer, with first move-ins anticipated by late summer.
In late 2009, construction activity began on the Barclays Center arena at the Company’s Atlantic Yards mixed-use project in Brooklyn. It was a watershed year for Atlantic Yards in 2009. Early in the year, the Company secured a refinancing from Gramercy Capital on a key $161.9 million land loan for the project. Throughout the year, a series of lawsuits and appeals filed by project opponents were decided in favor of the project and the Company. The most important of these was a favorable ruling in the final lawsuit challenging the State of New York’s use of eminent domain to acquire property within the project footprint. This victory allowed three pivotal events to move forward before yearend: an agreement to sell interests in the NETS team and the Barclays Center arena to affiliates of Onexim Group, completion of the $511 million tax-exempt bond offering to finance a portion of construction for the arena, and execution of the Master Closing for the project.
As a result of these accomplishments, on March 11, 2010, Bruce Ratner, chairman and chief executive officer of Forest City Ratner Companies, the Company’s New York-based subsidiary, and other Forest City executives, were joined by New York Governor David Paterson, New York City Mayor Michael Bloomberg, Brooklyn Borough President Marty Markowitz, Barclays PLC President Robert E. Diamond, Jr., NETS President and CEO Brett Yormark, NETS investor and cultural icon Shawn “Jay-Z” Carter and many other community leaders and supporters for a ceremonial groundbreaking at the project site.
A second major residential project under construction is Beekman, a Frank Gehry-designed residential high-rise in lower Manhattan that will have 904 market-rate apartments. The lower floors of the building include space that will be owned and operated by a pre-K-through-eighth-grade public school and an ambulatory care center. In November, union workers and labor leaders, along with government and civic officials gathered to take part in a topping-out ceremony, marking another step toward completion of the 76-story, 1.1-million-square-foot tower. Beekman is already becoming a landmark in the lower Manhattan skyline, and leasing is expected to begin next year with first move-ins by spring 2011.
Also under construction is the 1.3-million-square-foot Westchester’s Ridge Hill retail/mixed-use project in Yonkers, New York. In August, the Company reached an agreement with a 13-member bank group on a two-year extension and modification of the $557 million construction financing for the project. The compelling location and demographics of Westchester County continue to make it a premier retail/mixed use project, and Forest City has commitments in place from a number of prominent retailers and is in active discussions with additional prospective tenants.
At The Yards mixed-use project in Washington, D.C., the Company broke ground in the second quarter on the riverfront park that is a key component of the overall development. Construction of the park is publicly funded, and the first phase is expected to open in the third quarter of 2010, adding a distinctive sense of place to this part of Southeast Washington.
Year-End Summary and Outlook
Ratner concluded: “As we reflect on where we were at this same time last year, our country, our industry and our company faced a bleak outlook. Financial markets were in free fall, unemployment was rising rapidly, consumer confidence had plummeted, and real estate fundamentals were deteriorating. Credit markets were essentially frozen solid, and we, along with nearly every other real estate company, were struggling to see our way through the fog of these exceedingly difficult conditions.
“One year ago this week, our stock was at a 10-year-plus low. We were already taking action on a set of strategies focused on generating liquidity by curtailing development, cutting costs, handling maturities one loan at a time, and looking for opportunities to create liquidity or take advantage of market dislocations. We acted conservatively and we made tough choices. And when the window of opportunity in the capital markets opened, we acted quickly and decisively.
“Today, we have reason not only to be grateful for having come through the worst of these conditions, but to take pride in an organization that made significant progress and achieved some remarkable things during the year – record full-year total EBDT, an improved balance sheet, significant cost reductions, successful project openings, and more.
“As we look ahead to the balance of 2010 and beyond, we recognize that there are still many challenges ahead. Markets remain volatile and unemployment continues to be a drag on the economy. Credit market conditions have begun to improve, but remain constrained for real estate, particular in project financing. At the same time, access to the public capital markets for real estate companies, and the firming of asset pricing in the private transaction market are both signs of improving conditions and a more positive outlook among investors.
“We remain cautious, but what we accomplished in 2009 and the signs of improvement we see give us renewed confidence about the future. And while we can’t predict the timing or extent of a turnaround, we have reason to be more optimistic. As conditions continue to improve, the actions we’ve taken in 2009 and early 2010 put our Company in a much better position to leverage the strength in our portfolio and, over the longer term, to take advantage of opportunities in the marketplace and in our development pipeline. I salute the entire management team and all of our associates for the hard work and perseverance that have made that possible.”
Corporate Description
Forest City Enterprises, Inc. is a $11.9 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.
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 year ended January 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 our liquidity, ability to finance or refinance projects and repay our debt, the impact of the current economic environment on our ownership, development and management of our real estate portfolio, general real estate investment and development risks, liquidity risks we could face if we do not close the transaction with Onexim Group to create a strategic partnership for our Brooklyn Atlantic Yards project, vacancies in our 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, our substantial debt leverage and the ability to obtain and service debt, the impact of restrictions imposed by our 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 our 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
Year Ended January 31, 2010 and 2009
(dollars in thousands, except per share data)
Three Months Ended
January 31, Increase (Decrease)
----------- -------------------
2010 2009 Amount Percent
---- ---- ------ -------
Operating
Results:
Earnings
(loss) from
continuing
operations $5,894 $(45,800) $51,694
Discontinued
operations,
net of tax 718 3,949 (3,231)
--- ----- ------
Net earnings
(loss) 6,612 (41,851) 48,463
Net earnings
attributable
to noncontrolling
interest (411) (3,493) 3,082
---- ------ -----
Net earnings
(loss)
attributable
to Forest City
Enterprises, Inc. $6,201 $(45,344) $51,545
====== ======== =======
Earnings
Before
Depreciation,
Amortization
and
Deferred
Taxes (EBDT)
(2) $78,407 $70,502 $7,905 11.2%
======= ======= ======
Reconciliation
of Net
Earnings
(Loss) to
Earnings
Before
Depreciation,
Amortization
and Deferred
Taxes (EBDT)(2):
Net earnings
(loss)
attributable
to Forest
City
Enterprises,
Inc. $6,201 $(45,344) $51,545
Depreciation
and
amortization
-Real
Estate
Groups (8) 75,433 75,556 (123)
Amortization
of mortgage
procurement
costs -Real
Estate
Groups (8) 3,850 3,779 71
Deferred
income tax
expense -
Real Estate
Groups (9) (10,558) (1,082) (9,476)
Deferred
income tax
expense -
Non-Real
Estate
Groups: (9)
Gain on
disposition
of other
investments 454 428 26
Current income tax
expense on non-
operating
earnings:(9)
Gain on
disposition
included in
discontinued
operations - 20,439 (20,439)
Gain on
disposition
of unconsolidated
entities 27,471 - 27,471
Straight-
line rent
adjustment
(4) (3,689) 4,284 (7,973)
Preference
payment (6) 585 585 -
Preferred
return on
disposition - 731 (731)
Impairment of
real estate 23,402 1,262 22,140
Impairment of
unconsolidated
entities 1,693 15,259 (13,566)
Gain on
disposition
of
unconsolidated
entities (45,263) - (45,263)
Gain on
disposition
of other
investments - - -
Discontinued
operations:
(1)
Gain on
disposition
of rental
properties (1,172) (5,778) 4,606
Impairment of
real estate - - -
Retrospective
adoption of
accounting
guidance for
convertible
debt instruments (7) - 383 (383)
--- --- -----
Earnings
Before
Depreciation,
Amortization
And Deferred
Taxes
(EBDT) (2) $78,407 $70,502 $7,905 11.2%
======= ======= ======
Diluted
Earnings per
Common
Share:
Earnings
(loss) from
continuing
operations $0.03 $(0.45) $0.48
Discontinued
operations,
net of tax 0.01 0.04 (0.03)
---- ---- -----
Net earnings
(loss) 0.04 (0.41) 0.45
Net earnings
attributable
to
noncontrolling
interest - (0.03) 0.03
--- ----- ----
Net earnings
(loss)
attributable
to Forest
City
Enterprises,
Inc. $0.04 $(0.44) $0.48
===== ====== =====
Earnings
Before
Depreciation,
Amortization
and Deferred
Taxes (EBDT)
(2) (3) (5) $0.43 $0.66 $(0.23) (34.8%)
===== ===== ======
Operating
earnings
(loss), net
of tax (a
non-GAAP
financial
measure) $(0.04) $(0.34) $0.30
Impairment of
real estate,
net of tax (0.10) (0.10) -
Gain on
disposition
of rental
properties
and other
investments,
net of tax 0.18 0.03 0.15
Net earnings
attributable
to
noncontrolling
interest - (0.03) 0.03
--- ----- ----
Net earnings
(loss)
attributable
to Forest
City
Enterprises,
Inc. $0.04 $(0.44) $0.48
===== ====== =====
Basic
weighted
average
shares
outstanding
(5) 155,324,478 102,876,107 52,448,371
=========== =========== ==========
Diluted
weighted
average
shares
outstanding
(5) 187,453,699 106,534,313 80,919,386
=========== =========== ==========
Year Ended January 31, Increase (Decrease)
---------------------- -------------------
2010 2009 Amount Percent
---- ---- ------ -------
Operating
Results:
Earnings
(loss) from
continuing
operations $(22,456) $(109,700) $87,244
Discontinued
operations,
net of tax (1,585) 10,270 (11,855)
------ ------ -------
Net earnings
(loss) (24,041) (99,430) 75,389
Net earnings
attributable
to
noncontrolling
interest (6,610) (13,817) 7,207
------ ------- -----
Net earnings
(loss)
attributable
to Forest
City
Enterprises,
Inc. $(30,651) $(113,247) $82,596
======== ========= =======
Earnings
Before
Depreciation,
Amortization
and
Deferred
Taxes (EBDT)
(2) $301,106 $218,937 $82,169 37.5%
======== ======== =======
Reconciliation
of Net
Earnings
(Loss) to
Earnings
Before
Depreciation,
Amortization
and Deferred
Taxes (EBDT)
(2):
Net earnings
(loss)
attributable
to Forest
City
Enterprises,
Inc. $(30,651) $(113,247) $82,596
Depreciation
and
amortization
-Real
Estate
Groups (8) 293,869 290,949 2,920
Amortization
of mortgage
procurement
costs -Real
Estate
Groups (8) 15,583 13,788 1,795
Deferred
income tax
expense -
Real Estate
Groups (9) (12,852) (6,348) (6,504)
Deferred
income tax
expense -
Non-Real
Estate
Groups: (9)
Gain on
disposition
of other
investments 454 486 (32)
Current
income tax
expense on
non-
operating
earnings:
(9)
Gain on
disposition
included in
discontinued
operations 754 20,439 (19,685)
Gain on
disposition
of
unconsolidated
entities 27,674 506 27,168
Straight-
line rent
adjustment
(4) (13,242) (358) (12,884)
Preference
payment (6) 2,341 3,329 (988)
Preferred
return on
disposition - 939 (939)
Impairment of
real estate 26,526 1,262 25,264
Impairment of
unconsolidated
entities 36,356 21,285 15,071
Gain on
disposition
of
unconsolidated
entities (49,761) (1,081) (48,680)
Gain on
disposition
of other
investments - (150) 150
Discontinued
operations:
(1)
Gain on
disposition
of rental
properties (5,720) (14,405) 8,685
Impairment of
real estate 9,775 - 9,775
Retrospective
adoption of
accounting
guidance for
convertible
debt
instruments
(7) - 1,543 (1,543)
--- ----- ------
Earnings
Before
Depreciation,
Amortization
and
Deferred
Taxes (EBDT)
(2) $301,106 $218,937 $82,169 37.5%
======== ======== =======
Diluted
Earnings per
Common
Share:
Earnings
(loss) from
continuing
operations $(0.16) $(1.07) $0.91
Discontinued
operations,
net of tax (0.01) 0.10 (0.11)
----- ---- -----
Net earnings
(loss) (0.17) (0.97) 0.80
Net earnings
attributable
to
noncontrolling
interest (0.05) (0.13) 0.08
----- ----- ----
Net earnings
(loss)
attributable
to Forest
City
Enterprises,
Inc. $(0.22) $(1.10) $0.88
====== ====== =====
Earnings
Before
Depreciation,
Amortization
and Deferred
Taxes (EBDT)
(2) (3) (5) $2.00 $2.05 $(0.05) (2.4%)
===== ===== ======
Operating
earnings
(loss), net
of tax (a
non-GAAP
financial
measure) $(0.09) $(0.93) $0.84
Impairment of
real estate,
net of tax (0.32) (0.13) (0.19)
Gain on
disposition
of rental
properties
and other
investments,
net of tax 0.24 0.09 0.15
Net earnings
attributable
to
noncontrolling
interest (0.05) (0.13) 0.08
----- ----- ----
Net earnings
(loss)
attributable
to Forest
City
Enterprises,
Inc. $(0.22) $(1.10) $0.88
====== ====== =====
Basic
weighted
average
shares
outstanding
(5) 139,825,349 102,755,315 37,070,034
=========== =========== ==========
Diluted
weighted
average
shares
outstanding
(5) 151,890,543 106,968,999 44,921,544
=========== =========== ==========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Year Ended January 31, 2010 and 2009
(dollars in thousands)
Three Months Ended January 31, Increase (Decrease)
------------------------------ -------------------
2010 2009 Amount Percent
---- ---- ------ -------
Operating
Earnings
(a non-
GAAP
financial
measure)
and
Reconciliation
to Net
Earnings:
Revenues
from real
estate
operations
Commercial
Group $252,983 $250,792 $2,191
Residential
Group 64,574 59,778 4,796
Land
Development
Group 6,776 10,004 (3,228)
Corporate
Activities - - -
--- --- ---
Total
Revenues 324,333 320,574 3,759 1.2%
Operating
expenses (184,571) (187,492) 2,921
Interest
expense (91,836) (104,888) 13,052
Gain (loss)
on early
extinguishment
of debt (1,396) (620) (776)
Amortization
of
mortgage
procurement
costs (8) (3,329) (3,306) (23)
Depreciation
and
amortization
(8) (67,749) (68,175) 426
Interest
and other
income 30,081 14,430 15,651
Equity in
earnings
(loss),
including
impairment,
of
unconsolidated
entities 30,087 (16,798) 46,885
Impairment
of
unconsolidated
entities 1,693 15,259 (13,566)
Gain on
disposition
of
unconsolidated
entities (45,263) - (45,263)
Preferred
return on
disposition - 731 (731)
Revenues
and
interest
income
from
discontinued
operations
(1) - 4,051 (4,051)
Expenses
from
discontinued
operations
(1) - (3,394) 3,394
--- ------ -----
Operating
loss (a
non-GAAP
financial
measure) (7,950) (29,628) 21,678
------ ------- ------
Income tax
expense
(9) (6,324) 1,737 (8,061)
Income tax
expense
from
discontinued
operations
(1) (9) (454) (2,486) 2,032
Income tax
expense on
non-
operating
earnings
items (see
below) 8,275 (4,468) 12,743
----- ------ ------
Operating
earnings
(loss),
net of tax
(a non-
GAAP
financial
measure) (6,453) (34,845) 28,392
------ ------- ------
Impairment
of real
estate (23,402) (1,262) (22,140)
Impairment
of
unconsolidated
entities (1,693) (15,259) 13,566
Gain on
disposition
of
unconsolidated
entities 45,263 - 45,263
Preferred
return on
disposition - (731) 731
Gain on
disposition
of other
investments - - -
Gain on
disposition
of rental
properties
included
in
discontinued
operations
(1) 1,172 5,778 (4,606)
Impairment
of real
estate
included
in
discontinued
operations
(1) - - -
Income tax
benefit
(expense)
on non-
operating
earnings:
(9)
Impairment
of real
estate 9,077 488 8,589
Impairment
of
unconsolidated
entities 656 5,930 (5,274)
Gain on
disposition
of other
investments - - -
Gain on
disposition
of
unconsolidated
entities (17,554) 283 (17,837)
Gain on
disposition
of rental
properties
included
in
discontinued
operations (454) (2,233) 1,779
Impairment
of real
estate
included
in
discontinued
operations - - -
--- --- ---
Income tax
expense on
non-
operating
earnings
(see
above) (8,275) 4,468 (12,743)
------ ----- -------
Net
earnings
(loss) 6,612 (41,851) 48,463
Net
earnings
attributable
to
noncontrolling
interest (411) (3,493) 3,082
---- ------ -----
Net
earnings
(loss)
attributable
to Forest
City
Enterprises,
Inc. $6,201 $(45,344) $51,545
====== ======== =======
Year Ended January 31, Increase (Decrease)
---------------------- -------------------
2010 2009 Amount Percent
---- ---- ------ -------
Operating
Earnings
(a non-
GAAP
financial
measure)
and
Reconciliation
to Net
Earnings:
Revenues
from real
estate
operations
Commercial
Group $973,738 $966,783 $6,955
Residential
Group 263,217 279,939 (16,722)
Land
Development
Group 20,267 33,848 (13,581)
Corporate
Activities - - -
--- --- ---
Total
Revenues 1,257,222 1,280,570 (23,348) (1.8%)
Operating
expenses (716,571) (780,798) 64,227
Interest
expense (350,270) (364,338) 14,068
Gain (loss)
on early
extinguishment
of debt 36,569 (2,159) 38,728
Amortization
of
mortgage
procurement
costs (8) (13,974) (12,029) (1,945)
Depreciation
and
amortization
(8) (267,408) (266,785) (623)
Interest
and other
income 54,005 42,417 11,588
Equity in
earnings
(loss),
including
impairment,
of
unconsolidated
entities (15,053) (35,585) 20,532
Impairment
of
unconsolidated
entities 36,356 21,285 15,071
Gain on
disposition
of
unconsolidated
entities (49,761) (1,081) (48,680)
Preferred
return on
disposition - 939 (939)
Revenues
and
interest
income
from
discontinued
operations
(1) 5,476 17,301 (11,825)
Expenses
from
discontinued
operations
(1) (4,011) (14,969) 10,958
------ ------- ------
Operating
loss (a
non-GAAP
financial
measure) (27,420) (115,232) 87,812
------- -------- ------
Income tax
expense
(9) 19,550 30,119 (10,569)
Income tax
expense
from
discontinued
operations
(1) (9) 1,005 (6,467) 7,472
Income tax
expense on
non-
operating
earnings
items (see
below) (6,662) (3,067) (3,595)
------ ------ ------
Operating
earnings
(loss),
net of tax
(a non-
GAAP
financial
measure) (13,527) (94,647) 81,120
------- ------- ------
Impairment
of real
estate (26,526) (1,262) (25,264)
Impairment
of
unconsolidated
entities (36,356) (21,285) (15,071)
Gain on
disposition
of
unconsolidated
entities 49,761 1,081 48,680
Preferred
return on
disposition - (939) 939
Gain on
disposition
of other
investments - 150 (150)
Gain on
disposition
of rental
properties
included
in
discontinued
operations
(1) 5,720 14,405 (8,685)
Impairment
of real
estate
included
in
discontinued
operations
(1) (9,775) - (9,775)
Income tax
benefit
(expense)
on non-
operating
earnings:
(9)
Impairment
of real
estate 10,288 488 9,800
Impairment
of
unconsolidated
entities 14,100 8,258 5,842
Gain on
disposition
of other
investments - (58) 58
Gain on
disposition
of
unconsolidated
entities (19,299) (55) (19,244)
Gain on
disposition
of rental
properties
included
in
discontinued
operations (2,218) (5,566) 3,348
Impairment
of real
estate
included
in
discontinued
operations 3,791 - 3,791
----- --- -----
Income tax
expense on
non-
operating
earnings
(see
above) 6,662 3,067 3,595
----- ----- -----
Net
earnings
(loss) (24,041) (99,430) 75,389
Net
earnings
attributable
to
noncontrolling
interest (6,610) (13,817) 7,207
------ ------- -----
Net
earnings
(loss)
attributable
to Forest
City
Enterprises,
Inc. $(30,651) $(113,247) $82,596
======== ========= =======
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Year Ended January 31, 2010 and 2009
(in thousands)
1) All earnings of properties that 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 twelve months ended January 31, 2010, the calculation
of EBDT per share requires an adjustment for interest of $2,641 and
$3,051, 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 $81,048 and $304,157 for the three and
twelve months ended January 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 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 three and twelve months ended January 31, 2010, the effect of
32,129,221 and 12,065,194 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
three and twelve months ended January 31, 2010, diluted weighted
average shares outstanding 187,453,699 and 151,890,543 were used to
arrive at $0.43/share and $2.00/share, respectively.)
For the three and twelve months ended January 31, 2009, the effect of
3,658,206 and 4,213,684 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
three and twelve months ended January 31, 2009, diluted weighted
average shares outstanding 106,534,313 and 106,968,999 were used to
arrive at $0.66/share and $2.05/share, respectively.)
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 Company portfolio.
7) Effective February 1, 2009, we were required to adopt new accounting
guidance on accounting for convertible debt instruments that may be
settled in cash upon conversion (including partial cash settlement).
These new accounting standards required us to adjust the prior year
financial statements to show retrospective application upon adoption.
8) The following table provides detail of depreciation and amortization
and amortization of mortgage procurement costs.
Depreciation and Amortization Depreciation and Amortization
----------------------------- -----------------------------
Three Months Ended January 31, Year Ended January 31,
----------------------------- ---------------------
2010 2009 2010 2009
---- ---- ---- ----
Full
Consolidation $67,749 68,175 $267,408 $266,785
Non-Real
Estate (3,108) (3,416) (13,480) (13,356)
------ ------ ------- -------
Real Estate
Groups Full
Consolidation 64,641 64,759 253,928 253,429
Real Estate
Groups
related to
noncontrolling
interest (1,862) (787) (5,274) (3,142)
Real Estate
Groups
Unconsolidated 12,654 10,553 43,868 35,720
Real Estate
Groups
Discontinued
Operations - 1,031 1,347 4,942
--- ----- ----- -----
Real Estate
Groups Pro-
Rata
Consolidation $75,433 $75,556 $293,869 $290,949
======= ======= ======== ========
Amortization of Amortization of
Mortgage Mortgage
Procurement Costs Procurement Costs
------------------ ------------------
Three Months Ended Year Ended January
January 31, 31,
------------------- -------------------
2010 2009 2010 2009
---- ---- ---- ----
Full
Consolidation $3,329 $3,306 $13,974 $12,029
Non-Real
Estate - - - -
--- --- --- ---
Real Estate
Groups Full
Consolidation 3,329 3,306 13,974 12,029
Real Estate
Groups
related to
noncontrolling
interest (118) (119) (567) (502)
Real Estate
Groups
Unconsolidated 639 513 2,126 1,843
Real Estate
Groups
Discontinued
Operations - 79 50 418
--- -- -- ---
Real Estate
Groups Pro-
Rata
Consolidation $3,850 $3,779 $15,583 $13,788
====== ====== ======= =======
Three Months Ended
January 31, Year Ended January 31,
------------------- ----------------------
2010 2009 2010 2009
---- ---- ---- ----
9) The following
table provides
detail of Income Tax
Expense (Benefit): (in thousands) (in thousands)
(A) Operating earnings
Current $(12,518) $(12,543) $(22,258) $(28,093)
Deferred 11,021 17,507 7,797 6,607
------ ------ ----- -----
(1,497) 4,964 (14,461) (21,486)
------ ----- ------- -------
(B) Impairment of real
estate
Deferred (9,077) (488) (10,288) (488)
Deferred -
Unconsolidated
entities (656) (5,930) (14,100) (8,258)
Subtotal (9,733) (6,418) (24,388) (8,746)
------ ------ ------- ------
(C) Gain on disposition
of other investments
Current -
Non-Real
Estate
Groups - - - -
Deferred -
Non-Real
Estate
Groups - - - 58
--- --- --- ---
- - - 58
--- --- --- ---
(D) Gain on disposition
of unconsolidated
entities
Current 27,471 - 27,674 506
Deferred (9,917) (283) (8,375) (451)
------ ---- ------ ----
17,554 (283) 19,299 55
------ ---- ------ ---
Subtotal
(A) (B) (C) (D)
Current 14,953 (12,543) 5,416 (27,587)
Deferred (8,629) 10,806 (24,966) (2,532)
------ ------ ------- ------
Income tax
expense 6,324 (1,737) (19,550) (30,119)
----- ------ ------- -------
(E) Discontinued operations
Operating earnings
Current - 236 94 (400)
Deferred - 17 474 1,301
--- --- --- -----
- 253 568 901
Gain on
disposition
of rental
properties
Current - 20,439 754 20,439
Deferred - (18,634) 1,010 (15,301)
--- ------- ----- -------
- 1,805 1,764 5,138
Gain on
disposition
of Lumber
Group
Current - - - -
Deferred 454 428 454 428
--- --- --- ---
454 428 454 428
--- --- --- ---
Impairment of
real estate
Current - - - -
Deferred - - (3,791) -
--- --- ------ ---
- - (3,791) -
--- --- ------ ---
454 2,486 (1,005) 6,467
--- ----- ------ -----
Grand Total
(A) (B) (C) (D) (E)
Current 14,953 8,132 6,264 (7,548)
Deferred (8,175) (7,383) (26,819) (16,104)
------ ------ ------- -------
$6,778 $749 $(20,555) $(23,652)
------ ---- -------- --------
Recap of Grand Total:
Real Estate Groups
Current 15,766 430 14,740 (140)
Deferred (10,558) (1,082) (12,852) (6,348)
------- ------ ------- ------
5,208 (652) 1,888 (6,488)
Non-Real Estate
Groups
Current (813) 7,702 (8,476) (7,408)
Deferred 2,383 (6,301) (13,967) (9,756)
----- ------ ------- ------
1,570 1,401 (22,443) (17,164)
----- ----- ------- -------
Grand Total $6,778 $749 $(20,555) $(23,652)
====== ==== ======== ========
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (Loss)
(GAAP) (in thousands):
Three Months Ended January 31, 2010
-----------------------------------
Plus
Unconsol- Pro-
Full Less idated Plus Rata
Consol- Noncontrolling Invest- Discontinued Consol-
idation Interest ments at Operations idation
(GAAP) Pro-Rata (Non-GAAP)
------- -------------- -------- ------------ ----------
Revenues
from
real
estate
operations $324,333 $12,731 $92,375 $- $403,977
Exclude
straight-
line
rent
adjustment
(1) (5,283) - - - (5,283)
------ --- --- --- ------
Adjusted
revenues 319,050 12,731 92,375 - 398,694
Add
interest
and
other
income 30,081 175 (556) - 29,350
Add
equity
in
earnings
(loss),
including
impairment
of
unconsolidated
entities 30,087 5 (30,338) - (256)
Exclude
gain on
disposition
of
unconsolidated
entities (45,263) - 45,263 - -
Exclude
impairment
of
unconsolidated
entities 1,693 - (1,693) - -
Exclude
depreciation
and
amortization
of
unconsolidated
entities
(see
below) 13,293 - (13,293) - -
------ --- ------- --- ---
Adjusted
total
income 348,941 12,911 91,758 - 427,788
Operating
expenses 184,571 6,591 71,105 - 249,085
Add back
non-
Real
Estate
depreciation
and
amortization
(b) 3,108 - 2,583 - 5,691
Add back
amortization
of
mortgage
procurement
costs
for non-
Real
Estate
Groups
(d) - - 161 - 161
Exclude
straight-
line
rent
adjustment
(2) (1,594) - - - (1,594)
Exclude
preference
payment (585) - - - (585)
---- --- --- --- ----
Adjusted
operating
expenses 185,500 6,591 73,849 - 252,758
Net
Operating
Income 163,441 6,320 17,909 - 175,030
Interest
expense (91,836) (3,929) (16,955) - (104,862)
Loss on
early
extinguishment
of debt (1,396) - (954) - (2,350)
Equity in
earnings
(loss),
including
impairment
of
unconsolidated
entities (30,087) (5) 30,338 - 256
Gain on
disposition
of
unconsolidated
entities 45,263 - - - 45,263
Impairment
of
unconsolidated
entities (1,693) - - - (1,693)
Depreciation
and
amortization
of
unconsolidated
entities
(see above) (13,293) - 13,293 - -
Gain on
disposition
of
rental
properties
and
other
investments - - - 1,172 1,172
Preferred
return on
disposition - - - - -
Impairment
of real
estate (23,402) - - - (23,402)
Depreciation
and
amortization
-Real
Estate
Groups
(a) (64,641) (1,862) (12,654) - (75,433)
Amortization
of
mortgage
procurement
costs -
Real
Estate
Groups
(c) (3,329) (118) (639) - (3,850)
Straight-
line rent
adjustment
(1) + (2) 3,689 - - - 3,689
Preference
payment (585) - - - (585)
---- --- --- --- ----
Earnings
(loss)
before
income
taxes (17,869) 406 30,338 1,172 13,235
Income
tax
provision (6,324) - - (454) (6,778)
Equity in
earnings
(loss),
including
impairment
of
unconsolidated
entities 30,087 5 (30,338) - (256)
------ --- ------- --- ----
Earnings
(loss)
from
continuing
operations 5,894 411 - 718 6,201
Discontinued
operations,
net of
tax 718 - - (718) -
--- --- --- ---- ---
Net
earnings
(loss) 6,612 411 - - 6,201
Net
earnings
attributable
to
noncontrolling
interest (411) (411) - - -
---- ---- --- --- ---
Net
earnings
(loss)
attributable
to
Forest
City
Enterprises,
Inc. $6,201 $- $- $- $6,201
====== === === === ======
(a) Depreciation
and amortization
-Real Estate
Groups $64,641 $1,862 $12,654 $- $75,433
(b) Depreciation
and amortization
- Non-Real
Estate 3,108 - 2,583 - 5,691
----- --- ----- --- -----
Total depreciation
and amort-
ization $67,749 $1,862 $15,237 $- $81,124
======= ====== ======= === =======
(c) Amortization
of mortgage
procurement
costs - Real
Estate
Groups $3,329 $118 $639 $- $3,850
(d) Amortization
of mortgage
procurement
costs - Non-
Real Estate - - 161 - 161
--- --- --- --- ---
Total
amortization
of
mortgage
procurement
costs $3,329 $118 $800 $- $4,011
====== ==== ==== === ======
Three Months Ended January 31, 2009
-----------------------------------
Plus
Unconsol- Pro-
Full Less idated Plus Rata
Consol- Noncontrolling Invest- Discontinued Consol-
idation Interest ments at Operations idation
(GAAP) Pro-Rata (Non-GAAP)
------- -------------- -------- ------------ ----------
Revenues
from real
estate
operations $320,574 $8,437 $93,153 $4,051 $409,341
Exclude
straight-
line rent
adjustment(1) 1,482 - - (6) 1,476
----- --- --- --- -----
Adjusted
revenues 322,056 8,437 93,153 4,045 410,817
Add
interest
and other
income 14,430 387 1,442 - 15,485
Add equity
in
earnings
(loss),
including
impairment
of
unconsolidated
entities (16,798) (67) 16,437 - (294)
Exclude
gain on
disposition
of
unconsolidated
entities - - - - -
Exclude
impairment
of
unconsolidated
entities 15,259 - (15,259) - -
Exclude
depreciation
and
amortization
of
unconsolidated
entities
(see
below) 11,066 - (11,066) - -
------ --- ------- --- ---
Adjusted
total
income 346,013 8,757 84,707 4,045 426,008
Operating
expenses 187,492 3,093 60,698 795 245,892
Add back
non-Real
Estate
depreciation
and
amortization
(b) 3,416 - 5,876 - 9,292
Add back
amortization
of
mortgage
procurement
costs for
non-Real
Estate
Groups (d) - - 52 - 52
Exclude
straight-
line rent
adjustment
(2) (2,808) - - - (2,808)
Exclude
preference
payment (585) - - - (585)
---- --- --- --- ----
Adjusted
operating
expenses 187,515 3,093 66,626 795 251,843
Net
Operating
Income 158,498 5,664 18,081 3,250 174,165
Interest
expense (104,888) (1,265) (17,350) (1,489) (122,462)
Loss on
early
extinguishment
of debt (620) - - - (620)
Equity in
earnings
(loss),
including
impairment
of
unconsolidated
entities 16,798 67 (16,437) - 294
Gain on
disposition
of
unconsolidated
entities - - - - -
Impairment
of
unconsolidated
entities (15,259) - - - (15,259)
Depreciation
and
amortization
of
unconsolidated
entities
(see
above) (11,066) - 11,066 - -
Gain on
disposition
of rental
properties
and other
investments - - - 5,778 5,778
Preferred
return on
disposition - - (731) - (731)
Impairment
of real
estate (1,262) - - - (1,262)
Depreciation
and
amortization
-Real
Estate
Groups (a) (64,759) (787) (10,553) (1,031) (75,556)
Amortization
of
mortgage
procurement
costs -
Real
Estate
Groups (c) (3,306) (119) (513) (79) (3,779)
Straight-
line rent
adjustment
(1) + (2) (4,290) - - 6 (4,284)
Preference
payment (585) - - - (585)
---- --- --- --- ----
Earnings
(loss)
before
income
taxes (30,739) 3,560 (16,437) 6,435 (44,301)
Income tax
provision 1,737 - - (2,486) (749)
Equity in
earnings
(loss),
including
impairment
of
unconsolidated
entities (16,798) (67) 16,437 - (294)
------- --- ------ --- ----
Earnings
(loss)
from
continuing
operations (45,800) 3,493 - 3,949 (45,344)
Discontinued
operations,
net of tax 3,949 - - (3,949) -
----- --- --- ------ ---
Net
earnings
(loss) (41,851) 3,493 - - (45,344)
Net
earnings
attributable
to
noncontrolling
interest (3,493) (3,493) - - -
------ ------ --- --- ---
Net
earnings
(loss)
attributable
to Forest
City
Enterprises,
Inc. $(45,344) $- $- $- $(45,344)
======== === === === ========
(a) Depreciation
and amortization
-Real Estate
Groups $64,759 $787 $10,553 $1,031 $75,556
(b) Depreciation
and amortization
- Non-Real
Estate 3,416 - 5,876 - 9,292
----- --- ----- --- -----
Total
depreciation
and
amortiz-
ation $68,175 $787 $16,429 $1,031 $84,848
======= ==== ======= ====== =======
(c) Amortization
of mortgage
procurement
costs -
Real
Estate
Groups $3,306 $119 $513 $79 $3,779
(d) Amortization
of mortgage
procurement
costs -
Non-Real
Estate - - 52 - 52
--- --- -- --- --
Total
amortization
of
mortgage
procurement
costs $3,306 $119 $565 $79 $3,831
====== ==== ==== === ======
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(Loss) (GAAP) (in thousands):
Year Ended January 31, 2010
---------------------------
Plus
Unconsol- Pro-
Full Less idated Plus Rata
Consol- Non- Invest- Dis- Consol-
idation controlling ments at continued idation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
------- ----------- -------- ---------- ---------
Revenues
from
real
estate
operations $1,257,222 $50,739 $355,195 $5,476 $1,567,154
Exclude
straight-
line
rent
adjustment
(1) (19,681) - - (12) (19,693)
------- --- --- --- -------
Adjusted
revenues 1,237,541 50,739 355,195 5,464 1,547,461
Add
interest
and
other
income 54,005 718 2,310 - 55,597
Add
equity
in
earnings
(loss),
including
impairment
of
unconsolidated
entities (15,053) (76) 15,769 - 792
Exclude
gain on
disposition
of
unconsolidated
entities (49,761) - 49,761 - -
Exclude
impairment
of
unconsolidated
entities 36,356 - (36,356) - -
Exclude
depreciation
and
amortization
of
unconsolidated
entities
(see
below) 45,994 - (45,994) - -
------ --- ------- --- ---
Adjusted
total
income 1,309,082 51,381 340,685 5,464 1,603,850
Operating
expenses 716,571 24,169 259,085 430 951,917
Add back
non-
Real
Estate
depreciation
and
amortization
(b) 13,480 - 14,931 - 28,411
Add back
amortization
of
mortgage
procurement
costs
for
non-
Real
Estate
Groups
(d) - - 563 - 563
Exclude
straight-
line
rent
adjustment
(2) (6,451) - - - (6,451)
Exclude
preference
payment (2,341) - - - (2,341)
------ --- --- --- ------
Adjusted
operating
expenses 721,259 24,169 274,579 430 972,099
Net
Operating
Income 587,823 27,212 66,106 5,034 631,751
Interest
expense (350,270) (14,761) (66,850) (2,184) (404,543)
Gain
(loss)
on
early
extinguishment
of debt 36,569 - 744 - 37,313
Equity
in
earnings
(loss),
including
impairment
of
unconsolidated
entities 15,053 76 (15,769) - (792)
Gain on
disposition
of
unconsolidated
entities 49,761 - - - 49,761
Impairment
of
unconsolidated
entities (36,356) - - - (36,356)
Depreciation
and
amortization
of
unconsolidated
entities
(see
above) (45,994) - 45,994 - -
Gain on
disposition
of
rental
properties
and
other
investments - - - 5,720 5,720
Preferred
return
on
disposition - - - - -
Impairment
of real
estate (26,526) - - (9,775) (36,301)
Depreciation
and
amortization
-Real
Estate
Groups
(a) (253,928) (5,274) (43,868) (1,347) (293,869)
Amortization
of
mortgage
procurement
costs -
Real
Estate
Groups
(c) (13,974) (567) (2,126) (50) (15,583)
Straight-
line
rent
adjustment
(1) +
(2) 13,230 - - 12 13,242
Preference
payment (2,341) - - - (2,341)
------ --- --- --- ------
Earnings
(loss)
before
income
taxes (26,953) 6,686 (15,769) (2,590) (51,998)
Income
tax
provision 19,550 - - 1,005 20,555
Equity
in
earnings
(loss),
including
impairment
of
unconsolidated
entities (15,053) (76) 15,769 - 792
------- --- ------ --- ---
Earnings
(loss)
from
continuing
operations (22,456) 6,610 - (1,585) (30,651)
Discontinued
operations,
net of
tax (1,585) - - 1,585 -
------ --- --- ----- ---
Net
earnings
(loss) (24,041) 6,610 - - (30,651)
Net
earnings
attributable
to
noncontrolling
interest (6,610) (6,610) - - -
------ ------ --- --- ---
Net loss
attributable
to
Forest
City
Enterprises,
Inc. $(30,651) $- $- $- $(30,651)
======== === === === ========
(a)
Depreciation
and
amortization
-Real
Estate
Groups $253,928 $5,274 $43,868 $1,347 $293,869
(b)
Depreciation
and
amortization
- Non-
Real
Estate 13,480 - 14,931 - 28,411
------ --- ------ --- ------
Total
depreciation
and
amortization $267,408 $5,274 $58,799 $1,347 $322,280
======== ====== ======= ====== ========
(c)
Amortization
of
mortgage
procurement
costs -
Real
Estate
Groups $13,974 $567 $2,126 $50 $15,583
(d)
Amortization
of
mortgage
procurement
costs -
Non-
Real
Estate - - 563 - 563
--- --- --- --- ---
Total
amortization
of
mortgage
procurement
costs $13,974 $567 $2,689 $50 $16,146
======= ==== ====== === =======
Year Ended January 31, 2009
---------------------------
Plus
Unconsol- Pro-
Full Less idated Plus Rata
Consol- Non- Invest- Dis- Consol-
idation controlling ments at continued idation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
------- ----------- -------- ---------- ----------
Revenues
from
real
estate
operations $1,280,570 $56,132 $380,297 $17,176 $1,621,911
Exclude
straight-
line
rent
adjustment
(1) (6,573) - - (153) (6,726)
------ --- --- ---- ------
Adjusted
revenues 1,273,997 56,132 380,297 17,023 1,615,185
Add
interest
and
other
income 42,417 1,807 5,127 125 45,862
Add
equity
in
earnings
(loss),
including
impairment
of
unconsolidated
entities (35,585) (84) 36,257 - 756
Exclude
gain on
disposition
of
unconsolidated
entities (1,081) - 1,081 - -
Exclude
impairment
of
unconsolidated
entities 21,285 - (21,285) - -
Exclude
depreciation
and
amortization
of
unconsolidated
entities
(see
below) 37,563 - (37,563) - -
------ --- ------- --- ---
Adjusted
total
income 1,338,596 57,855 363,914 17,148 1,661,803
Operating
expenses 780,798 28,651 272,305 2,399 1,026,851
Add back
non-
Real
Estate
depreciation
and
amortization
(b) 13,356 - 20,641 - 33,997
Add back
amortization
of
mortgage
procurement
costs
for
non-
Real
Estate
Groups
(d) - - 221 - 221
Exclude
straight-
line
rent
adjustment
(2) (6,368) - - - (6,368)
Exclude
preference
payment (3,329) - - - (3,329)
------ --- --- --- ------
Adjusted
operating
expenses 784,457 28,651 293,167 2,399 1,051,372
Net
Operating
Income 554,139 29,204 70,747 14,749 610,431
Interest
expense (364,338) (11,624) (69,757) (7,210) (429,681)
Gain
(loss)
on
early
extinguishment
of debt (2,159) (119) (51) - (2,091)
Equity
in
earnings
(loss),
including
impairment
of
unconsolidated
entities 35,585 84 (36,257) - (756)
Gain on
disposition
of
unconsolidated
entities 1,081 - - - 1,081
Impairment
of
unconsolidated
entities (21,285) - - - (21,285)
Depreciation
and
amortization
of
unconsolidated
entities
(see
above) (37,563) - 37,563 - -
Gain on
disposition
of
rental
properties
and
other
investments 150 - - 14,405 14,555
Preferred
return
on
disposition - - (939) - (939)
Impairment
of real
estate (1,262) - - - (1,262)
Depreciation
and
amortization
-Real
Estate
Groups
(a) (253,429) (3,142) (35,720) (4,942) (290,949)
Amortization
of
mortgage
procurement
costs -
Real
Estate
Groups
(c) (12,029) (502) (1,843) (418) (13,788)
Straight-
line
rent
adjustment
(1) +
(2) 205 - - 153 358
Preference
payment (3,329) - - - (3,329)
------ --- --- --- ------
Earnings
(loss)
before
income
taxes (104,234) 13,901 (36,257) 16,737 (137,655)
Income
tax
provision 30,119 - - (6,467) 23,652
Equity
in
earnings
(loss),
including
impairment
of
unconsolidated
entities (35,585) (84) 36,257 - 756
------- --- ------ --- ---
Earnings
(loss)
from
continuing
operations (109,700) 13,817 - 10,270 (113,247)
Discontinued
operations,
net of
tax 10,270 - - (10,270) -
------ --- --- ------- ---
Net
earnings
(loss) (99,430) 13,817 - - (113,247)
Net
earnings
attributable
to
noncontrolling
interest (13,817) (13,817) - - -
------- ------- --- --- ---
Net loss
attributable
to
Forest
City
Enterprises,
Inc. $(113,247) $- $- $- $(113,247)
========= === === === =========
(a)
Depreciation
and
amortization
-Real
Estate
Groups $253,429 $3,142 $35,720 $4,942 $290,949
(b)
Depreciation
and
amortization
- Non-
Real
Estate 13,356 - 20,641 - 33,997
------ --- ------ --- ------
Total
depreciation
and
amortization $266,785 $3,142 $56,361 $4,942 $324,946
======== ====== ======= ====== ========
(c)
Amortization
of
mortgage
procurement
costs -
Real
Estate
Groups $12,029 $502 $1,843 $418 $13,788
(d)
Amortization
of
mortgage
procurement
costs -
Non-
Real
Estate - - 221 - 221
--- --- --- --- ---
Total
amortization
of
mortgage
procurement
costs $12,029 $502 $2,064 $418 $14,009
======= ==== ====== ==== =======
Forest City Enterprises, Inc. and Subsidiaries
Supplemental Operating Information
Net Operating Income (dollars in thousands)
---------------------------------------------------------------
Three Months Ended January 31, 2010
---------------------------------------------------------------
Plus
Un-
Less consolidated Plus
Full Non- Investments Discont- Pro-Rata
Consolidation controlling at inued Consolidation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
------------- ----------- ------------ ---------- -------------
Commercial Group
Retail
Comparable $58,311 $2,559 $5,463 $- $61,215
---------- -------- -------- -------- -------- --------
Total 62,172 2,678 5,581 - 65,075
Office
Buildings
Comparable 62,600 2,692 2,026 - 61,934
---------- -------- -------- -------- -------- --------
Total 65,240 2,649 2,070 - 64,661
Hotels
Comparable 2,704 - - - 2,704
---------- -------- -------- -------- -------- --------
Total 2,704 - - - 2,704
Earnings from
Commercial
Land Sales (144) - - - (144)
Other (1) 3,469 315 (1,052) - 2,102
---------- -------- -------- -------- -------- --------
Total Commercial
Group
Comparable 123,615 5,251 7,489 - 125,853
---------- -------- -------- -------- -------- --------
Total 133,441 5,642 6,599 - 134,398
Residential Group
Apartments
Comparable 25,716 714 6,575 - 31,577
---------- -------- -------- -------- -------- --------
Total 37,977 880 8,706 - 45,803
Military
Housing
Comparable
(2) - - - - -
---------- -------- -------- -------- -------- --------
Total 8,522 (451) 311 - 9,284
Other (1) 6,250 5 - - 6,245
---------- -------- -------- -------- -------- --------
Total Residential
Group
Comparable 25,716 714 6,575 - 31,577
---------- -------- -------- -------- -------- --------
Total 52,749 434 9,017 - 61,332
Total Rental
Properties
Comparable 149,331 5,965 14,064 - 157,430
---------- -------- -------- -------- -------- --------
Total 186,190 6,076 15,616 - 195,730
Land Development
Group 365 244 (323) - (202)
The Nets (13,648) - 2,616 - (11,032)
Corporate
Activities (9,466) - - - (9,466)
----------- -------- -------- -------- -------- --------
Grand Total $163,441 $6,320 $17,909 $- $175,030
=========== ======== ======== ======== ======== ========
---------------------------------------------------------------
Three Months Ended January 31, 2009
---------------------------------------------------------------
Plus
Un-
Less consolidated Plus
Full Non- Investments Discont- Pro-Rata
Consolidation controlling at inued Consolidation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
------------- ----------- ------------ ---------- -------------
Commercial Group
Retail
Comparable $60,271 $ 2,091 $ 5,531 $ - $63,711
---------- -------- -------- -------- -------- --------
Total 64,696 3,182 5,579 560 67,653
Office Buildings
Comparable 58,803 2,441 2,999 - 59,361
---------- -------- -------- -------- -------- --------
Total 62,786 738 2,999 - 65,047
Hotels
Comparable 2,734 - - - 2,734
---------- -------- -------- -------- -------- --------
Total 2,734 - - - 2,734
Earnings from
Commercial
Land Sales 11,318 6 - - 11,312
Other (1) (9,495) 104 (261) - (9,860)
---------- -------- -------- -------- -------- --------
Total Commercial
Group
Comparable 121,808 4,532 8,530 - 125,806
---------- -------- -------- -------- -------- --------
Total 132,039 4,030 8,317 560 136,886
Residential Group
Apartments
Comparable 27,087 707 6,064 - 32,444
---------- -------- -------- -------- -------- --------
Total 28,451 934 8,531 2,690 38,738
Military Housing
Comparable
(2) - - - - -
---------- -------- -------- -------- -------- --------
Total 10,520 (134) 196 - 10,850
Other (1) 3,034 83 - - 2,951
--------- -------- -------- -------- -------- --------
Total Residential
Group
Comparable 27,087 707 6,064 - 32,444
---------- -------- -------- -------- -------- --------
Total 42,005 883 8,727 2,690 52,539
Total Rental
Properties
Comparable 148,895 5,239 14,594 - 158,250
---------- -------- -------- -------- -------- --------
Total 174,044 4,913 17,044 3,250 189,425
Land Development
Group 8,001 751 171 - 7,421
The Nets (9,109) - 866 - (8,243)
Corporate
Activities (14,438) - - - (14,438)
----------- -------- -------- -------- -------- --------
Grand Total $158,498 $ 5,664 $18,081 $3,250 $174,165
=========== ======== ======== ======== ======== ========
-------------------------------
% Change
-------------------------------
Full Pro-Rata
Consolidation Consolidation
(GAAP) (Non-GAAP)
------------- -------------
Commercial Group
Retail
Comparable (3.3%) (3.9%)
----------
Total
Office Buildings
Comparable 6.5% 4.3%
----------
Total
Hotels
Comparable (1.1%) (1.1%)
----------
Total
Earnings from Commercial
Land Sales
Other (1)
----------
Total Commercial Group
Comparable 1.5% 0.0%
----------
Total
Residential Group
Apartments
Comparable (5.1%) (2.7%)
----------
Total
Military Housing
Comparable (2)
----------
Total
Other (1)
Total Residential Group
Comparable (5.1%) (2.7%)
----------
Total
Total Rental Properties
Comparable 0.3% (0.5%)
----------
Total
Land Development Group
The Nets
Corporate Activities
--------------------
Grand Total
===========
(1) Includes write-offs of abandoned development projects, non-
capitalizable development costs and unallocated management and service
company overhead, net of historic and new market tax credit income.
Write-offs of abandoned development projects were $5,490 and $10,760
at both full and pro-rata consolidation for the three months ended
January 31, 2010 and 2009, respectively.
(2) Comparable NOI for Military Housing commences once the operating
projects complete initial development phase.
Forest City Enterprises, Inc. and Subsidiaries
Supplemental Operating Information
Net Operating Income (dollars in thousands)
---------------------------------------------------------------
Year Ended January 31, 2010
---------------------------------------------------------------
Plus
Un-
Less consolidated Plus
Full Non- Investments Discont- Pro-Rata
Consolidation controlling at inued Consolidation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
------------- ----------- ------------ ---------- -------------
Commercial
Group
Retail
Comparable $227,183 $11,292 $22,055 $- $237,946
---------- -------- -------- -------- -------- --------
Total 251,960 11,440 22,350 481 263,351
Office
Buildings
Comparable 202,343 9,967 9,064 - 201,440
---------- -------- -------- -------- -------- --------
Total 255,825 10,486 9,292 - 254,631
Hotels
Comparable 13,507 - - - 13,507
---------- -------- -------- -------- -------- --------
Total 13,507 - - - 13,507
Earnings from
Commercial
Land Sales 5,416 476 - - 4,940
Other (1) (7,861) 817 (2,561) - (11,239)
---------- -------- -------- -------- -------- --------
Total
Commercial Group
Comparable 443,033 21,259 31,119 - 452,893
---------- -------- -------- -------- -------- --------
Total 518,847 23,219 29,081 481 525,190
Residential Group
Apartments
Comparable 105,952 2,786 21,281 - 124,447
---------- -------- -------- -------- -------- --------
Total 129,632 3,781 29,842 4,553 160,246
Military Housing
Comparable
(2) - - - - -
---------- -------- -------- -------- -------- --------
Total 37,424 (303) 1,044 - 38,771
Other (1) (15,277) 94 - - (15,371)
---------- -------- -------- -------- -------- --------
Total
Residential
Group
Comparable 105,952 2,786 21,281 - 124,447
---------- -------- -------- -------- -------- --------
Total 151,779 3,572 30,886 4,553 183,646
Total Rental
Properties
Comparable 548,985 24,045 52,400 - 577,340
---------- -------- -------- -------- -------- --------
Total 670,626 26,791 59,967 5,034 708,836
Land Development
Group (3) 2,007 421 (1,925) - (339)
The Nets (43,489) - 8,064 - (35,425)
Corporate
Activities (41,321) - - - (41,321)
----------- -------- -------- -------- -------- --------
Grand Total $587,823 $27,212 $66,106 $5,034 $631,751
=========== ======== ======== ======== ======== ========
---------------------------------------------------------------
Year Ended January 31, 2009
---------------------------------------------------------------
Plus
Un-
Less consolidated Plus
Full Non- Investments Discont- Pro-Rata
Consolidation controlling at inued Consolidation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
------------- ----------- ------------ ---------- -------------
Commercial
Group
Retail
Comparable $237,608 $11,966 $22,052 $- $247,694
---------- -------- -------- -------- -------- --------
Total 248,737 12,511 22,298 2,433 260,957
Office
Buildings
Comparable 190,156 9,609 10,570 - 191,117
---------- -------- -------- -------- -------- --------
Total 251,653 7,384 10,677 - 254,946
Hotels
Comparable 14,990 - - - 14,990
---------- -------- -------- -------- -------- --------
Total 14,990 - - - 14,990
Earnings from
Commercial
Land Sales 19,713 2,410 - - 17,303
Other (1) (45,774) (51) (1,826) - (47,549)
--------- -------- -------- -------- -------- --------
Total Commercial
Group
Comparable 442,754 21,575 32,622 - 453,801
---------- -------- -------- -------- -------- --------
Total 489,319 22,254 31,149 2,433 500,647
Residential Group
Apartments
Comparable 107,965 2,895 22,974 - 128,044
---------- -------- -------- -------- -------- --------
Total 117,351 3,107 32,013 12,316 158,573
Military Housing
Comparable
(2) - - - - -
---------- -------- -------- -------- -------- --------
Total 51,269 3,794 974 - 48,449
Other (1) (20,013) 228 - - (20,241)
--------- -------- -------- -------- -------- --------
Total
Residential
Group
Comparable 107,965 2,895 22,974 - 128,044
---------- -------- -------- -------- -------- --------
Total 148,607 7,129 32,987 12,316 186,781
Total Rental
Properties
Comparable 550,719 24,470 55,596 - 581,845
---------- -------- -------- -------- -------- --------
Total 637,926 29,383 64,136 14,749 687,428
Land Development
Group (3) 2,914 (179) 538 - 3,631
The Nets (40,989) - 6,073 - (34,916)
Corporate
Activities (45,712) - - - (45,712)
----------- -------- -------- -------- -------- --------
Grand Total $554,139 $29,204 $70,747 $14,749 $610,431
=========== ======== ======== ======== ======== ========
-------------------------------
% Change
-------------------------------
Full Pro-Rata
Consolidation Consolidation
(GAAP) (Non-GAAP)
------------- -------------
Commercial Group
Retail
Comparable (4.4%) (3.9%)
----------
Total
Office Buildings
Comparable 6.4% 5.4%
----------
Total
Hotels
Comparable (9.9%) (9.9%)
----------
Total
Earnings from Commercial
Land Sales
Other (1)
----------
Total Commercial Group
Comparable 0.1% (0.2%)
----------
Total
Residential Group
Apartments
Comparable (1.9%) (2.8%)
----------
Total
Military Housing
Comparable (2)
--------------
Total
Other (1)
----------
Total Residential Group
Comparable (1.9%) (2.8%)
----------
Total
Total Rental Properties
Comparable (0.3%) (0.8%)
----------
Total
Land Development Group (3)
The Nets
Corporate Activities
--------------------
Grand Total
===========
(1) Includes write-offs of abandoned development projects, non-
capitalizable development costs and unallocated management and service
company overhead, net of historic and new market tax credit income.
Write-offs of abandoned development projects were $26,888 and $52,211
at full consolidation ($26,888 and $49,966 at pro-rata consolidation)
for the year ended January 31, 2010 and 2009, respectively.
(2) Comparable NOI for Military Housing commences once the operating
projects complete initial development phase.
(3) Includes reduction in fair value of the DURA purchase obligation and
fee in 2008 of $12,434,000.
Development Pipeline
January 31, 2010
2009 Openings and Acquisitions (3)
Pro-
Date FCE Legal Rata
Dev (D) Opened / Ownership % FCE %
Property Location Acq (A) Acquired (a) (a)(1)
-------- -------- ------- -------- ----------- ------
Retail Centers:
Promenade in Temecula
Expansion Temecula, CA D Q1-09 75.0% 100.0%
East River Plaza
(Costco) (f) (g) Manhattan, NY D Q4-09 35.0% 50.0%
Residential:
North Church
Towers (d) Parma Heights,
OH A Q3-09 100.0% 100.0%
80 DeKalb (e) Brooklyn, NY D Q4-09/10 80.0% 100.0%
Total Openings
and Acquisitions
Residential Phased-In
Units (e) (f):
Cobblestone Court Painesville, OH D 2006-09 50.0% 50.0%
Sutton Landing Brimfield, OH D 2007-09 50.0% 50.0%
Stratford Crossing Wadsworth, OH D 2007-10 50.0% 50.0%
Total (h)
Cost at FCE
Pro-Rata
Cost at Full Share Sq. ft./ Gross
Consolidation Total Cost (Non-GAAP)(c) No. of Leasable
Property (GAAP) (b) at 100% (2) (1) X (2) Units Area
-------- ---------- ----------- ------------ -------- --------
(in millions)
-------------------------------
Retail Centers:
Promenade in
Temecula Expansion $107.8 $107.8 $107.8 127,000 127,000
East River Plaza
(Costco) (f) (g) 0.0 0.0 0.0 110,000 110,000
--- --- --- ------- -------
$107.8 $107.8 $107.8 237,000 237,000
------ ------ ------ ======= =======
Residential:
North Church
Towers (d) $5.6 $5.6 $5.6 399
80 DeKalb (e) 163.3 163.3 163.3 365
----- ----- ----- ---
$168.9 $168.9 $168.9 764
------ ------ ------ ===
------ ------ ------
Total Openings
and Acquisitions $276.7 $276.7 $276.7
====== ====== ======
Residential
Phased-In
Units (e) (f): Opened in '09 /
Total
---------------
Cobblestone Court $0.0 $30.3 $15.2 96/400
Sutton Landing 0.0 15.9 8.0 36/216
Stratford Crossing 0.0 25.3 12.7 36/348
--- ---- ---- ------
Total (h) $0.0 $71.5 $35.9 168/964
==== ===== ===== =======
See attached footnotes.
Development Pipeline
January 31, 2010
Under Construction (7)
FCE Legal Pro-Rata
Dev (D) Anticipated Ownership % FCE %
Property Location Acq (A) Opening (a) (a) (1)
-------- -------- ------- ----------- ----------- --------
Retail Centers:
East River
Plaza (Total
including
Costco) (f) (i) Manhattan, NY D 2010 35.0% 50.0%
Village at
Gulfstream Park Hallandale D Q1-10 50.0% 50.0%
Beach, FL
Ridge Hill (e) Yonkers, NY D 2011/2012 70.0% 100.0%
Office:
Waterfront
Station - East
4th & West 4th
Buildings Washington, D.C. D Q1-10 45.0% 45.0%
Residential:
Presidio Landmark San Francisco, D Q3-10 100.0% 100.0%
CA
Beekman (e) Manhattan, NY D Q1-11/12 49.0% 70.0%
Arena:
Barclays Center
(f) (j) Brooklyn, NY D 2012 23.3% 23.3%
Total Under
Construction
(k)
Residential
Phased-In
Units (e) (f):
Stratford
Crossing (l) Wadsworth, OH D 2007-10 50.0% 50.0%
Fee Development:
Las Vegas City
Hall Las Vegas, NV D Q1-12 - (q) - (q)
Cost at FCE
Pro-Rata
Cost at Full Share Sq. ft./
Consolidation Total Cost (Non-GAAP)(c) No. of
Property (GAAP) (b) at 100% (2) (1) X (2) Units
-------- ------------- ----------- ------------ --------
(in millions)
----------------------------------
Retail Centers:
East River Plaza
(Total including
Costco) (f) (i) $0.0 $398.1 $199.1 527,000
Village at
Gulfstream Park 204.2 204.2 102.1 510,000
Ridge Hill (e) 798.7 798.7 798.7 1,336,000
----- ----- ----- ---------
$1,002.9 $1,401.0 $1,099.9 2,373,000
-------- -------- -------- =========
Office:
Waterfront
Station - East
4th & West 4th
Buildings $326.7 $326.7 $147.0 631,000 (o)
------ ------ ------ =======
Residential:
Presidio Landmark $110.9 $110.9 $110.9 161
Beekman (e) 875.7 875.7 613.0 904
----- ----- ----- ---
$986.6 $986.6 $723.9 1,065
------ ------ ------ =====
Arena:
Barclays Center (f) (j) $0.0 $911.1 $212.3 670,000
---- ------ ------ =======
-------- -------- --------
Total Under
Construction (k) $2,316.2 $3,625.4 $2,183.1
======== ======== ========
Residential
Phased-In Units Under Const. /
(e) (f): Total
--------------
Stratford
Crossing (l) $0.0 $25.3 $12.7 96/348
==== ===== ===== ======
Sq.ft
Fee Development: -----
Las Vegas City Hall $0.0 $146.2 $0.0 270,000
==== ====== ==== =======
Gross
Property Leasable Area Lease Commitment %
-------- ------------- ------------------
Retail Centers:
East River Plaza (Total including
Costco) (f) (i) 527,000 93%
Village at Gulfstream Park 510,000 (m) 70%
Ridge Hill (e) 1,336,000 (n) 28%
---------
2,373,000
=========
Office:
Waterfront Station - East 4th &
West 4th Buildings 97%
Residential:
Presidio Landmark
Beekman (e)
Arena:
Barclays Center (f) (j) 18,000 seats (p)
============
Total Under Construction (k)
Residential Phased-In Units (e) (f):
Stratford Crossing (l)
Fee Development:
Las Vegas City Hall
See attached footnotes.
Military Housing - see footnote r
Development Pipeline
January 31, 2010
Equity Requirements for Projects Under Construction (1)
Less
Unconsolidated Full Less
Investments Consolidation Noncontrolling
100% at 100% (GAAP) (b) Interest
---- -------------- ------------- --------------
(dollars in millions)
Total Cost Under
Construction $3,625.4 $1,309.2 $2,316.2 $544.5
Total Loan Draws
and Other Sources at
Completion (2) 2,313.2 646.2 1,667.0 381.6
------- ----- ------- -----
Net Equity at
Completion $1,312.2 $663.0 $649.2 $162.9
-------- ------ ------ ------
Net Costs Incurred to
Date $2,144.4 $543.2 $1,601.2 $423.4
Loan Draws and
Other Sources
to Date 987.4 (73.7) 1,061.1 274.2
----- ----- ------- -----
Net Equity to
Date $1,157.0 $616.9 $540.1 $149.2
-------- ------ ------ ------
% of Total Equity 88% 83%
Remaining Costs $1,481.0 $766.0 $715.0 $121.1
Remaining Loan
Draws and Other
Sources (3) 1,325.8 719.9 605.9 107.4
------- ----- ----- -----
Remaining Equity $155.2 $46.1 $109.1 $13.7
------ ----- ------ -----
% of Total Equity 12% 17%
Plus
Unconsolidated Pro-Rata
Investments Consolidation
at Pro-Rata (Non-GAAP)(c)
-------------- -------------
Total Cost Under Construction $411.4 $2,183.1
Total Loan Draws and Other Sources
at Completion (2) 226.6 1,512.0
----- -------
Net Equity at Completion $184.8 $671.1
------ ------
Net Costs Incurred to Date $233.9 $1,411.7
Loan Draws and Other Sources to
Date 49.1 836.0
---- -----
Net Equity to Date $184.8 $575.7
------ ------
% of Total Equity 86%
Remaining Costs $177.5 $771.4
Remaining Loan Draws and Other
Sources (3) 177.5 676.0
----- -----
Remaining Equity $- $95.4
--- -----
% of Total Equity 14%
(1) This schedule includes only the seven properties listed on page 31 of
the Supplemental Package. This does not include costs associated with
phased-in units, operating property renovations and military housing.
(2) "Other Sources" includes third party subsidies, tax credit proceeds
and outlot land sales.
(3) Three of the loan commitments require specific leasing hurdles to be
achieved prior to drawing the final amount of the loan. The Company
estimates that approximately $141.3 million at 100% and at full
consolidation and $76.9 million at pro-rata consolidation of loan
commitments are at risk should these leasing hurdles not be achieved.
Land Held for Development or Sale
Gross Saleable Option
Location Acres (4) Acres (5) Acres (6)
-------- --------- --------- ---------
Mesa del Sol - Albuquerque, NM 3,023 2,336 5,731
Florida 1,654 1,414 -
Carolinas 1,344 879 788
Ohio 1,119 713 470
Texas 1,054 796 -
Arizona 967 551 -
Stapleton - Denver, CO 200 136 1,474
Central Station - Chicago, IL 30 30 -
Other 1,152 901 -
----- --- ---
Total 10,543 7,756 8,463
====== ===== =====
(4) Represent all acres owned including those used for roadways, open
spaces and parks.
(5) Saleable acres represent the total of all acres owned and available
for sales. It might be the intent of the Land Group to further
develop some of the acres into completed sublots prior to sale.
(6) Option acres are those acres that the Land Development group has a
formal option to acquire the property. Typically these options are
in the form of purchase agreements with contingencies for the
satisfaction of due diligence reviews.
Development Pipeline
January 31, 2010 Footnotes
--------------------------
( a ) 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.
( b ) 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").
( c ) 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.
( d ) The Company exchanged its 50% ownership interest in Boulevard
Towers, an apartment community located in Amherst, New York, for
100%
ownership in North Church Towers, in a nonmonetary exchange.
( e ) Phased-in openings. Costs are representative of the total project.
( f ) 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.
( g ) See the Under Construction pipeline for cost details for the total
center.
( h ) The difference between the full consolidation cost amount (GAAP) of
$0.0 million to the Company's pro-rata share (a non-GAAP measure) of
$35.9 million consists of the Company's share of cost for
unconsolidated investments of $35.9 million.
( i ) Phased opening includes the total cost and square footage of the
center, including Costco which opened in the fourth quarter. The
cost of the property also includes construction of the 1,248-space
parking garage and structural upgrades to accommodate a possible
future residential project above the retail center.
( j ) Upon closing of the strategic partnership with an affiliate of
Onexim Group, the Company's legal and pro-rata ownership will
increase to approximately 27%.
( k ) The difference between the full consolidation cost amount (GAAP) of
$2,316.2 million to the Company's pro-rata share (a non-GAAP
measure) of $2,183.1 million consists of a reduction to full
consolidation for noncontrolling interest of $544.5 million of cost
and the addition of its share of cost for unconsolidated investments
of $411.4 million.
( l ) The difference between the full consolidation cost amount (GAAP) of
$0.0 million to the Company's pro-rata share (a non-GAAP measure) of
$12.7 million consists of the Company's share of cost for
unconsolidated investments of $12.7 million.
( m ) Includes 89,000 square feet of office space. Excluding this office
space from the calculation of the preleased percentage would result
in the retail space being 85% preleased. In addition, includes
35,000 square feet site for Crate & Barrel, which opened Q4-09. The
remainder of the center opened on February 11, 2010.
( n ) Includes 156,000 square feet of office space.
( o ) Includes 85,000 square feet of retail space.
( p ) The Nets, a member of the NBA, has a 37 year license agreement to
use the arena.
( q ) This is a fee development project, owned by the City of Las Vegas.
Therefore, these costs are not included on the Company's balance
sheet.
( r ) Below is a summary of our equity method investments for Military
Housing Development projects. The Company provides development,
construction, and management services for these projects and
receives agreed upon fees for these services. (See pages 14-15 of
the Supplemental Package for net fee revenue included in NOI.)
Anticipated FCE
Property Location Opening Pro-Rata %
-------- -------- ----------- ----------
Military Housing - Under
Construction (7)
Navy Midwest Chicago, IL 2006-2010 *
Pacific Northwest Communities Seattle, WA 2007-2010 *
Midwest Millington Memphis, TN 2008-2010 *
Marines, Hawaii Increment II Honolulu, HI 2007-2011 *
Navy, Hawaii Increment III Honolulu, HI 2007-2011 *
Air Force Academy Colorado 2007-2013 50.0%
Springs, CO
Hawaii Phase IV Kaneohe, HI 2007-2014 *
Total Military Housing - Under
Construction
Cost at Full Total Cost No. of
Property Consolidation at 100% Units
-------- ------------- ---------- ------
(in millions)
---------------
Military Housing - Under Construction (7)
Navy Midwest $0.0 $248.8 1,658
Pacific Northwest Communities 0.0 280.5 2,986
Midwest Millington 0.0 37.0 318
Marines, Hawaii Increment II 0.0 293.3 1,175
Navy, Hawaii Increment III 0.0 535.1 2,520
Air Force Academy 0.0 69.5 427
Hawaii Phase IV 0.0 364.0 917
--- ----- ---
Total Military Housing Under
Construction $0.0 $1,828.2 10,001
==== ======== ======
* The Company's share of residual cash flow ranges from 0-20% during
the life cycle of the project.
SOURCE Forest City Enterprises, Inc.
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