Forest City Reports Fiscal 2009 First-Quarter Results
CLEVELAND, June 8 /PRNewswire-FirstCall/ -- Forest City Enterprises, Inc. (NYSE:
FCEA; FCEB), today announced EBDT, net earnings and revenues for the fiscal
first quarter ended April 30, 2009.
(Logo: http://www.newscom.com/cgi-bin/prnh/20080515/FRSTCTYLOGO)
First-quarter EBDT (earnings before depreciation, amortization and deferred
taxes) was $41.6 million, or $0.39 per share, a 160.0 percent increase on a per
share basis, compared with last year's first-quarter EBDT of $16.0 million, or
$0.15 per share.
The increase in EBDT for the quarter ended April 30, 2009, compared with the
same period in 2008, was primarily attributable to increased EBDT of $8.3
million from the Company's rental properties portfolio; reduced development
project write-offs of $10.1 million; a larger current tax benefit of $7.8
million; and decreased losses on early extinguishment of debt of $4.9 million.
These favorable factors were partially offset by a first-quarter charge of $8.7
million for severance and outplacement costs related to workforce reductions.
(An exhibit illustrating factors impacting the Company's first-quarter 2009 EBDT
results, compared with results for the first quarter of 2008, is available on
the investor relations page of the Company's website, www.forestcity.net.)
The first-quarter net loss attributable to Forest City Enterprises, Inc. was
$30.7 million, or $0.30 per share, compared with a net loss of $40.4 million, or
$0.39 per share, in the first quarter of 2008. The reduction in net loss for the
quarter ended April 30, 2009, compared with the prior year, is attributable to
all of the factors that impacted EBDT for the period (with the exception of the
larger tax benefit of $7.8 million) and by a gain of $4.5 million on the
disposition in late April, 2009, of The Shops at Grand Avenue, a 100,000-square
foot retail center in Queens, New York. These reductions in net loss were
partially offset by an increase in impairment charges of $10.7 million, compared
with no impairment charges in the first quarter of 2008.
First-quarter consolidated revenues were $313.0 million, compared with $305.0
million for the quarter ended April 30, 2008.
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.
Per share data for the quarter ended April 30, 2009, is based on shares
outstanding as of that date and does not reflect shares outstanding following
the Company's May, 2009 equity offering.
Commentary
"We're pleased with the first-quarter performance of the rental properties
portfolio, which showed an $8.3 million increase in EBDT, largely from new
property ramp-up and lower interest expense on the mature portfolio, compared
with the first quarter of 2008," said Charles A. Ratner, Forest City president
and chief executive officer. "Overall comparable property net operating income
results were up 0.3 percent, a satisfactory result in light of overall economic
and market conditions. Our office portfolio showed solid gains - up 4.4 percent
compared with the prior year - driven primarily by favorable lease renewals in
life-science office buildings at our University Park at MIT project in
Cambridge, Massachusetts, and to lease-up of 12 MetroTech Center in Brooklyn,
New York. Our retail and residential portfolios showed year-over-year decreases
of 1.0 percent and 1.8 percent, respectively, reflecting the continued impact of
the recession on consumers."
Comparable property net operating income (NOI), defined as NOI from properties
operated in both the three months ended April 30, 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.
"Our land business, though profitable, continues to be very soft," Ratner added.
"Longer term, we anticipate that this segment of the business will be among the
first to benefit from an eventual economic recovery, but we do not see signs yet
that the overall market has reached the bottom in this recession.
"Several significant events occurred after the end of the first quarter.
Foremost among these was our successful offering of Class A common shares, which
closed May 19. Including over-allotments exercised by the underwriters, the
total offering was 52.3 million shares, and generated total net proceeds of
$330.4 million, after deducting underwriting discounts and commissions. The
proceeds have been used to repay borrowings on our corporate credit facility.
Despite the impact of dilution, we are very pleased with the response to the
offering among both existing and new shareholders, as well as with the
offering's significant positive impact on liquidity, which remains our highest
priority.
"In mid-May, a significant legal victory was achieved for the Company's Atlantic
Yards project in Brooklyn, when the Appellate Division, Second Department,
unanimously upheld New York State's right to use eminent domain to acquire
property at the site, given the significant public benefit associated with the
project. This was an important win and affirmation for Atlantic Yards, and
effectively removes one of the few remaining obstacles to moving forward with
this great project."
Occupancies and Rent
Fiscal 2009 first-quarter comparable average occupancies in the residential
business were 90.1 percent, compared with 92.5 percent in the first quarter last
year. Comparable residential net rental income (defined as gross rent less
vacancies and concessions) was 85.5 percent for the first quarter of 2009,
compared with 87.3 percent for the first quarter of 2008, and reflecting the
continued impact of rent concessions. Comparable retail occupancies were 90.0
percent, compared with 92.9 percent in 2008, and regional mall sales averaged
$412 per square foot on a rolling 12-month basis, a decrease of 8.6 percent from
the first quarter of 2008. Comparable office occupancies were 90.3 percent,
compared with 90.1 percent last year.
Liquidity and Financing Activity
At April 30, 2009, Forest City had $509 million in cash and credit available,
including $212 million ($204 million at full consolidation) in cash on its
balance sheet and $297 million of available capacity on its revolving line of
credit. In addition, as previously noted, after the end of the first quarter,
the Company received net proceeds of $330.4 million from the issuance of new
Class A common stock.
During the first quarter, the Company addressed $414.1 million at full
consolidation ($408.0 at its pro-rata share) of the $826.6 million ($917.8
million at pro-rata) of total debt (inclusive of notes payable but exclusive of
scheduled amortization payments) maturing in fiscal year 2009, through closed
loans, and committed financings. Additionally, the Company addressed $21.0
million ($30.3 million at pro-rata) of loans maturing in future years either
through asset disposition or refinancings.
As of April 30, 2009, the Company's weighted average cost of mortgage debt
decreased to 5.20 percent from 5.61 percent at April 30, 2008, primarily due to
a decrease 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 6.07 percent at April 30, 2008,
to 6.04 percent at April 30, 2009. Variable-rate mortgage debt decreased from
4.14 percent at April 30, 2008, to 3.16 percent at April 30, 2009.
Opening and Projects Under Construction
During the first quarter, Forest City opened a 127,000-square-foot, open-air
expansion of the Promenade in Temecula retail center in Southern California. The
expansion is currently 63 percent leased and committed, and the balance of the
1.1 million-square-foot center is 95 percent leased.
The Company ended the first quarter with seven projects under construction,
representing $2.0 billion of cost at the Company's pro-rata share ($2.4 billion
at full consolidation). Highlights from the first quarter related to some of
these projects included the following:
On May 21, the Company, together with union workers, civic leaders and state,
city and borough officials, celebrated the "topping out" of 80 Dekalb in
Brooklyn, a 34-story residential tower that is the first 80/20 rental building
in the borough to be financed with bonds issued by the State of New York Housing
Finance Agency. Initial leasing of units at 80 Dekalb is expected to begin later
this year.
At the 517,000-square-foot East River Plaza retail project in Manhattan, the
Company announced on March 31 that Costco, the international retail warehouse
club, will anchor the center, which is expected to open its first phase later
this year.
On March 2, the Company announced that it reached an agreement for tax-increment
financing of up to $900,000 per year for 15 years, related to The Village at
Gulfstream Park retail project in Hallandale Beach, Florida. Also announced were
32 luxury tenants for the center, which is expected to open in early 2010.
At Ridge Hill, our 1.2 million-square-foot retail/mixed-use project in Yonkers,
the Company announced on May 19 that it has a letter of intent from fashion
retailer Saks Fifth Avenue to anchor the project with what will be the first
Saks store in Westchester County.
In another noteworthy occurrence, the Company announced on May 29 that it will
move forward with completion of Beekman, a 76-story, Frank Gehry-designed
residential high-rise in lower Manhattan that will have approximately 900
market-rate apartments, a pre-K through eighth-grade school, and an ambulatory
care center. A recent study of costs and timing for the project yielded a
collaborative and beneficial agreement with key construction trade organizations
that will result in reduced project costs going forward, including lower
materials costs.
Other Milestones
During the first quarter of 2009, the Company achieved the following milestones:
o On February 16, the Company announced that it secured a $161.9 million
refinancing from Gramercy Capital Corp. and certain co-lenders on a key
land loan associated with the Atlantic Yards project in Brooklyn.
o On March 17, the Company announced that it secured an extension of a $65
million credit facility related to the Nets basketball team.
o On April 1, the Company announced that a subsidiary has been selected by
investment management firm Blackrock, Inc., for third-party management and
leasing of the 1.7 million-square-foot Southlands mixed-use/retail center,
which is owned by an investment client of Blackrock, near Denver.
o On April 28, the Company announced that it completed the sale of The Shops
at Grand Avenue, a retail center in Queens, New York, to an affiliate of
AEW Capital Management, LP, for $33.5 million in a transaction that
generated net proceeds of $9.0 million.
Outlook
"As we have stated now for several quarters, we continue to be cautious in our
outlook," Ratner said. "While we believe efforts to stimulate the economy will
have a beneficial impact over time, we see no measureable improvement in current
conditions, and we believe the recession will continue to deepen, particularly
for real estate, before the economy turns around. As a result, we expect to see
continued softness in fundamentals, particularly in retail and, to a lesser
degree, in residential.
"Nonetheless, our portfolio continues to perform competitively overall, with new
properties contributing to the bottom line. We have made significant progress on
2009 debt maturities, and our recent common equity raise has significantly
strengthened our balance sheet and liquidity. We are benefitting from lower
interest rates - particularly variable rates - and we continue to place a high
priority on reducing costs and improving efficiency. Finally, our high-quality
products in good markets and major long-term entitled opportunities, together
with the experience, creativity and drive of our dedicated associates, will
allow Forest City to return to a growth path quickly as conditions allow."
Corporate Description
Forest City Enterprises, Inc. is an $11.7 billion NYSE-listed national real
estate company. The Company is principally engaged in the ownership,
development, management and acquisition of commercial and residential real
estate and land throughout the United States. For more information, visit
www.forestcity.net.
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 non-controlling interest expense on
the Company's Consolidated Statement 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 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 market
conditions on our liquidity, ability to finance or refinance projects and repay
our debt, general real estate investment and development risks, 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 developing and
managing properties in partnership with others, the ability to maintain
effective internal controls, compliance with governmental regulations,
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
Three Months Ended April 30, 2009 and 2008 (dollars in
thousands, except per share data)
Three Months Ended Increase
April 30, (Decrease)
---------------- ----------------
2009 2008 Amount Percent
---- ---- ------ -------
Operating Results:
Loss from continuing operations $(31,566) $(40,096) $8,530
Discontinued operations, net
of tax 2,820 388 2,432
----- --- -----
Net loss (28,746) (39,708) 10,962
Net earnings attributable
to noncontrolling interest (1,933) (694) (1,239)
------ ---- ------
Net loss attributable to
Forest City Enterprises, Inc. $(30,679) $(40,402) $9,723
======== ======== ======
Earnings Before Depreciation,
Amortization and Deferred Taxes
(EBDT) (2) $41,604 $15,954 $25,650 160.8%
======= ======= =======
Reconciliation of Net Earnings
to Earnings Before Depreciation,
Amortization and Deferred Taxes
(EBDT) (2):
Net loss attributable to
Forest City Enterprises, Inc. $(30,679) $(40,402) $9,723
Depreciation and
amortization - Real Estate
Groups (7) 72,128 70,810 1,318
Amortization of mortgage
procurement costs - Real Estate
Groups (7) 4,022 3,343 679
Deferred income tax expense
- Real Estate Groups (8) (11,598) (15,419) 3,821
Deferred income tax expense -
Non-Real Estate Groups: (8)
Gain on disposition
of other investments - 58 (58)
Current income tax expense
on non-operating earnings: (8)
Gain on disposition
included in discontinued
operations 3,785 - 3,785
Gain on disposition of
unconsolidated entities - 632 (632)
Straight-line rent adjustment (3) (2,775) (3,147) 372
Preference payment (5) 585 936 (351)
Impairment of real estate 1,124 - 1,124
Impairment of unconsolidated
entities 9,560 - 9,560
Gain on disposition of
unconsolidated entities - (881) 881
Gain on disposition
of other investments - (150) 150
Discontinued operations: (1)
Gain on disposition
of rental properties (4,548) - (4,548)
Retrospective effect of FSP APB
14-1 (6) - 174 (174)
--- --- ----
Earnings Before Depreciation,
Amortization and Deferred Taxes
(EBDT) (2) $41,604 $15,954 $25,650 160.8%
======= ======= =======
Diluted Earnings per Common Share:
Loss from continuing operations $(0.31) $(0.38) $0.07
Discontinued operations, net of tax 0.03 - 0.03
---- --- ----
Net loss (0.28) (0.38) 0.10
Net earnings attributable
to noncontrolling interest (0.02) (0.01) (0.01)
----- ----- -----
Net loss attributable to
Forest City Enterprises, Inc. $(0.30) $(0.39) $0.09
====== ====== =====
Earnings Before Depreciation,
Amortization and Deferred Taxes
(EBDT) (2) (4) $0.39 $0.15 $0.24 160.0%
===== ===== =====
Operating loss, net of tax
(a non-GAAP financial measure) $(0.24) $(0.39) $0.15
Impairment of real estate, net
of tax (0.07) - (0.07)
Gain on disposition of rental
properties and other
investments, net of tax 0.03 0.01 0.02
Net earnings attributable
to noncontrolling interest (0.02) (0.01) (0.01)
------ ------ -----
Net loss attributable to
Forest City Enterprises, Inc. $(0.30) $(0.39) $0.09
====== ====== =====
Basic weighted average
shares outstanding (4) 102,911,485 102,613,817 297,668
=========== =========== =======
Diluted weighted average
shares outstanding (4) 106,573,729 107,230,646 (656,917)
=========== =========== ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Three Months Ended April 30, 2009 and 2008
(dollars in thousands)
Three Months Ended Increase
April 30, (Decrease)
-------------- ---------------
2009 2008 Amount Percent
---- ---- ------ -------
Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net
Earnings:
Revenues from real estate
operations
Commercial Group $235,627 $221,294 $14,333
Residential Group 74,932 77,294 (2,362)
Land Development Group 2,470 6,422 (3,952)
Corporate Activities - - -
---- ---- ----
Total Revenues 313,029 305,010 8,019 2.6%
Operating expenses (194,847) (207,356) 12,509
Interest expense (91,708) (82,473) (9,235)
Loss on early
extinguishment of debt - (5,179) 5,179
Amortization of mortgage
procurement costs (7) (3,671) (2,852) (819)
Depreciation and amortization (7) (66,458) (66,006) (452)
Interest and other income 6,808 8,398 (1,590)
Equity in earnings (loss),
including impairment, of
unconsolidated entities (15,866) (9,647) (6,219)
Impairment of unconsolidated
entities 9,560 - 9,560
Gain on disposition of
unconsolidated entities - (881) 881
Revenues and interest income from
discontinued operations (1) 813 3,187 (2,374)
Expenses from Discontinued
Operations (1) (754) (2,555) 1,801
---- ------ -----
Operating loss (a non-GAAP
financial measure) (43,094) (60,354) 17,260
------- ------- ------
Income tax expense (8) 22,271 19,859 2,412
Income tax expense from
discontinued operations (1)(8) (1,787) (244) (1,543)
Income tax expense on non-
operating earnings items (see
below) (2,379) 398 (2,777)
------ --- ------
Operating loss, net of tax (a
non-GAAP financial measure) (24,989) (40,341) 15,352
------- ------- ------
Impairment of real estate (1,124) - (1,124)
Impairment of unconsolidated
entities (9,560) - (9,560)
Gain on disposition of
unconsolidated entities - 881 (881)
Gain on disposition of other
investments - 150 (150)
Gain on disposition of rental
properties included in
discontinued operations (1) 4,548 - 4,548
Income tax benefit (expense) on
non-operating earnings: (8)
Impairment of real estate 436 - 436
Impairment of unconsolidated
entities 3,707 - 3,707
Gain on disposition of other
investments - (58) 58
Gain on disposition of
unconsolidated entities - (340) 340
Gain on disposition of rental
properties included in
discontinued operations (1,764) - (1,764)
------ ---- ------
Income tax expense on non-
operating earnings (see above) 2,379 (398) 2,777
----- ---- -----
Net loss (28,746) (39,708) 10,962
Net earnings attributable to
noncontrolling interest (1,933) (694) (1,239)
------ ---- ------
Net loss attributable to
Forest City Enterprises, Inc. $(30,679) $(40,402) $9,723
======== ======== ======
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Three Months Ended April 30, 2009 and 2008
(in thousands)
1) Pursuant to the definition of a component of an entity of SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," assuming
no significant continuing involvement, all earnings of properties that
have been sold or are held for sale are reported as discontinued
operations.
2) The Company uses an additional measure, along with net earnings, to report
its operating results. This measure, referred to as Earnings Before
Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure
of operating results as defined by generally accepted accounting
principles and may not be directly comparable to similarly- titled
measures reported by other companies. The Company believes that EBDT
provides additional information about its operations, and along with net
earnings, is necessary to understand its operating results. EBDT is
defined as net earnings excluding the following items: i) gain (loss) on
disposition of operating properties, divisions and other investments (net
of tax); ii) the adjustment to recognize rental revenues and rental
expense using the straight-line method; iii) non- cash charges for real
estate depreciation, amortization (including amortization of mortgage
procurement costs) and deferred income taxes; iv) preferred payment
classified as minority 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) The Company recognizes minimum rents on a straight-line basis over the
term of the related lease pursuant to the provision of SFAS No. 13,
"Accounting for Leases." The straight-line rent adjustment is recorded as
an increase or decrease to revenue from Forest City Rental Properties
Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc.,
with the applicable offset to either accounts receivable or accounts
payable, as appropriate.
4) For the three months ended April 30, 2009, the effect of 3,662,244 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 months ended April 30, 2009,
diluted weighted average shares outstanding of 106,573,729 were used to
arrive at $0.39/share.)
For the three months ended April 30, 2008, the effect of 4,616,829 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 months ended April 30, 2008,
diluted weighted average shares outstanding 107,230,646 were used to
arrive at $0.15/share.)
5) 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 minority interests in the Forest
City Ratner Company portfolio.
6) Effective February 1, 2009, we adopted Financial Accounting Standards
Board ("FASB") Staff Position ("FSP") No. APB 14-1, "Accounting for
Convertible Debt Instruments That May be Settled in Cash Upon Conversion
(Including Partial Cash Settlement)" ("FSP APB 14-1"). This standard
required us to restate the prior year financial statements to show
retrospective application upon adoption. See page 37 of our Form 10-Q for
the three months ended April 30, 2009 for further discussion.
7) The following table provides detail of depreciation and amortization and
amortization of mortgage procurement costs. The Company's Real Estate
Groups are engaged in the ownership, development, acquisition and
management of real estate projects, including apartment complexes,
regional malls and retail centers, hotels, office buildings and mixed- use
facilities, as well as large land development projects.
Depreciation and
Amortization
--------------------
Three Months
Ended April 30,
--------------------
2009 2008
---- ----
Full Consolidation $66,458 $66,006
Non-Real Estate (3,452) (3,319)
------ ------
Real Estate Groups Full Consolidation 63,006 62,687
Real Estate Groups related
to noncontrolling interest (1,407) (983)
Real Estate Groups Unconsolidated 10,422 8,443
Real Estate Groups Discontinued Operations 107 663
--- ---
Real Estate Groups Pro-Rata Consolidation $72,128 $70,810
======= =======
Amortization
of Mortgage
Procurement Costs
-------------------
Three Months
Ended April 30,
-------------------
2009 2008
---- ----
Full Consolidation $3,671 $2,852
Non-Real Estate - -
---- ----
Real Estate Groups Full Consolidation 3,671 2,852
Real Estate Groups related
to noncontrolling interest (160) (152)
Real Estate Groups Unconsolidated 506 546
Real Estate Groups Discontinued Operations 5 97
---- ---
Real Estate Groups Pro-Rata Consolidation $4,022 $3,343
====== ======
Three Months
Ended April 30,
------------------
2009 2008
---- ----
8) The following table provides detail of Income Tax Expense (Benefit): (in
thousands)
(A) Operating earnings
Current $(7,331) $(281)
Deferred (10,797) (19,976)
------- -------
(18,128) (20,257)
------- -------
(B) Impairment of real estate
Deferred (436) -
Deferred - Unconsolidated
entities (3,707) -
------ ---
Subtotal (4,143) -
------ ---
(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 - 632
Deferred - (292)
--- ----
- 340
--- ---
Subtotal (A) (B) (C) (D)
Current (7,331) 351
Deferred (14,940) (20,210)
------- -------
Income tax expense (22,271) (19,859)
------- -------
(E) Discontinued operations
Operating earnings
Current (8) 140
Deferred 31 104
-- ---
23 244
Gain on disposition of rental properties
Current 3,785 -
Deferred (2,021) -
------ ---
1,764 -
----- ---
1,787 244
----- ---
Grand Total (A) (B) (C) (D) (E)
Current (3,554) 491
Deferred (16,930) (20,106)
------- -------
$(20,484) $(19,615)
-------- --------
Recap of Grand Total:
Real Estate Groups
Current 81 2,401
Deferred (11,598) (15,419)
------- -------
(11,517) (13,018)
Non-Real Estate Groups
Current (3,635) (1,910)
Deferred (5,332) (4,687)
------ ------
(8,967) (6,597)
------ ------
Grand Total $(20,484) $(19,615)
======== ========
Reconciliation of Net Operating Income (non-GAAP) to Net Loss (GAAP) (in
thousands):
Three Months Ended April 30, 2009
--------------------------------------------------------
Plus
Unconsolidated Pro-Rata
Full Less Non- Invest- Plus Consoli-
Consolidation controlling ments at Discontinued dation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
------------ ----------- ---------- ---------- ----------
Revenues from real
estate operations $313,029 $12,419 $90,875 $813 $392,298
Exclude straight-
line rent
adjustment (1) (4,399) - - (12) (4,411)
------ --- --- --- ------
Adjusted revenues 308,630 12,419 90,875 801 387,887
Operating expenses 194,847 5,645 63,078 320 252,600
Add back non-Real
Estate
depreciation and
amortization (b) 3,452 - 7,158 - 10,610
Add back
amortization of
mortgage
procurement costs
for non-Real
Estate Groups (d) - - 120 - 120
Exclude straight-
line rent
adjustment (2) (1,636) - - - (1,636)
Exclude preference
payment (585) - - - (585)
---- --- --- --- ----
Adjusted operating
expenses 196,078 5,645 70,356 320 261,109
Add interest and
other income 6,808 140 473 - 7,141
Add equity in
earnings (loss),
including
impairment of
unconsolidated
entities (15,866) 18 15,952 - 68
Exclude gain on
disposition of
unconsolidated
entities - - - - -
Exclude
impairment of
unconsolidated
entities 9,560 - (9,560) - -
Exclude depreciation
and amortization of
unconsolidated
entities (see
below) 10,928 - (10,928) - -
------ --- ------- --- ---
Net Operating
Income 123,982 6,932 16,456 481 133,987
Interest expense (91,708) (3,432) (16,280) (322) (104,878)
Loss on early
extinguishment
of debt - - (176) - (176)
Equity in earnings
(loss), including
impairment of
unconsolidated
entities 15,866 (18) (15,952) - (68)
Gain on
disposition of
unconsolidated
entities - - - - -
Impairment of
unconsolidated
entities (9,560) - - - (9,560)
Depreciation and
amortization of
unconsolidated
entities (see
above) (10,928) - 10,928 - -
Gain on
disposition of
rental
properties and
other
investments - - - 4,548 4,548
Impairment of real
estate (1,124) - - - (1,124)
Depreciation and
amortization -Real
Estate Groups (a) (63,006) (1,407) (10,422) (107) (72,128)
Amortization of
mortgage
procurement costs
-Real Estate
Groups (c) (3,671) (160) (506) (5) (4,022)
Straight-line
rent
adjustment (1)
+ (2) 2,763 - - 12 2,775
Preference payment (585) - - - (585)
---- --- --- --- ----
Earnings (loss)
before income
taxes (37,971) 1,915 (15,952) 4,607 (51,231)
Income tax
provision 22,271 - - (1,787) 20,484
Equity in earnings
(loss), including
impairment of
unconsolidated
entities (15,866) 18 15,952 - 68
------- -- ------ --- --
Earnings (loss)
from continuing
operations (31,566) 1,933 - 2,820 (30,679)
Discontinued
operations, net
of tax 2,820 - - (2,820) -
------- --- --- ------ ---
Net earnings (loss) (28,746) 1,933 - - (30,679)
Net earnings
attributable to
noncontrolling
interest (1,933) (1,933) - - -
------ ------ --- --- ---
Net loss
attributable to
Forest City
Enterprises, Inc. $(30,679) $- $- $- $(30,679)
======== == == == ========
(a) Depreciation and amortization - Real Estate
Groups $63,006 $1,407 $10,422 $107 $72,128
(b) Depreciation
and
amortization
- Non-Real
Estate 3,452 - 7,158 - 10,610
----- --- ----- --- ------
Total
depreciation
and
amortization $66,458 $1,407 $17,580 $107 $82,738
======= ====== ======= ==== =======
(c) Amortization of mortgage procurement costs - Real
Estate Groups $3,671 $160 $506 $5 $4,022
(d) Amortization
of mortgage
procurement
costs -
Non-Real
Estate - - 120 - 120
--- --- --- --- ---
Total
amortization
of mortgage
procurement
costs $3,671 $160 $626 $5 $4,142
====== ==== ==== == ======
Three Months Ended April 30, 2008
--------------------------------------------------------
Plus
Unconsolidated Pro-Rata
Full Less Non- Invest- Plus Consoli-
Consolidation controlling ments at Discontinued dation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
------------ ----------- ---------- ---------- ----------
Revenues from
real estate
operations $305,010 $16,513 $91,146 $3,180 $382,823
Exclude straight-
line rent
adjustment (1) (4,720) - - (10) (4,730)
------ --- --- --- ------
Adjusted revenues 300,290 16,513 91,146 3,170 378,093
Operating
expenses 207,356 11,719 64,575 531 260,743
Add back non-
Real Estate
depreciation
and
amortization (b) 3,319 - 10,611 - 13,930
Add back
amortization of
mortgage
procurement costs
for non-Real
Estate Groups (d) - - 45 - 45
Exclude straight-
line rent
adjustment (2) (1,583) - - - (1,583)
Exclude
preference
payment (936) - - - (936)
---- --- --- --- ----
Adjusted operating
expenses 208,156 11,719 75,231 531 272,199
Add interest and
other income 8,398 475 1,601 7 9,531
Add equity in
earnings (loss),
including
impairment of
unconsolidated
entities (9,647) 19 9,027 - (639)
Exclude gain on
disposition of
unconsolidated
entities (881) - 881 - -
Exclude
impairment of
unconsolidated
entities - - - - -
Exclude
depreciation and
amortization of
unconsolidated
entities (see
below) 8,989 - (8,989) - -
----- --- ------ --- ---
Net Operating
Income 98,993 5,288 18,435 2,646 114,786
Interest expense (82,473) (3,340) (18,413) (1,264) (98,810)
Loss on early
extinguishment
of debt (5,179) (119) (22) - (5,082)
Equity in
earnings (loss),
including
impairment of
unconsolidated
entities 9,647 (19) (9,027) - 639
Gain on
disposition of
unconsolidated
entities 881 - - - 881
Impairment of
unconsolidated
entities - - - - -
Depreciation and
amortization of
unconsolidated
entities (see
above) (8,989) - 8,989 - -
Gain on
disposition
of rental
properties
and other
investments 150 - - - 150
Impairment of
real estate - - - - -
Depreciation
and
amortization -
Real Estate
Groups (a) (62,687) (983) (8,443) (663) (70,810)
Amortization
of mortgage
procurement
costs -Real
Estate Groups
(c) (2,852) (152) (546) (97) (3,343)
Straight-line
rent
adjustment
(1) + (2) 3,137 - - 10 3,147
Preference
payment (936) - - - (936)
---- --- --- --- ----
Earnings (loss)
before income
taxes (50,308) 675 (9,027) 632 (59,378)
Income tax
provision 19,859 - - (244) 19,615
Equity in
earnings (loss),
including
impairment of
unconsolidated
entities (9,647) 19 9,027 - (639)
------ -- ----- --- ----
Earnings (loss)
from
continuing
operations (40,096) 694 - 388 (40,402)
Discontinued
operations, net
of tax 388 - - (388) -
--- --- --- ---- ---
Net earnings
(loss) (39,708) 694 - - (40,402)
Net earnings
attributable to
noncontrolling
interest (694) (694) - - -
---- ---- --- --- ---
Net loss
attributable
to Forest
City
Enterprises,
Inc. $(40,402) $- $- $- $(40,402)
======== == == == ========
(a) Depreciation and amortization - Real Estate
Groups $62,687 $983 $8,443 $663 $70,810
(b) Depreciation
and
amortization -
Non-Real Estate 3,319 - 10,611 - 13,930
----- --- ------ --- ------
Total
depreciation
and
amortization $66,006 $983 $19,054 $663 $84,740
======= ==== ======= ==== =======
(c) Amortization of mortgage procurement costs -Real
Estate Groups $2,852 $152 $546 $97 $3,343
(d) Amortization
of mortgage
procurement
costs -Non-
Real Estate - - 45 - 45
--- --- -- --- --
Total
amortization
of mortgage
procurement
costs $2,852 $152 $591 $97 $3,388
====== ==== ==== === ======
Forest City Enterprises, Inc. and Subsidiaries
Supplemental Operating Information
Net Operating Income (dollars in thousands)
--------------------------------------------------------
Three Months Ended April 30, 2009
--------------------------------------------------------
Plus
Unconsolidated Pro-Rata
Full Less Non- Invest- Plus Consoli-
Consolidation controlling ments at Discontinued dation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
------------ ----------- ---------- ---------- ----------
Commercial Group
Retail
Comparable $59,792 $2,741 $5,455 $- $62,506
------- ------ ------ -- -------
Total 63,421 2,474 5,509 481 66,937
Office Buildings
Comparable 50,294 2,642 2,338 - 49,990
------ ----- ----- --- ------
Total 63,107 2,563 2,386 - 62,930
Hotels
Comparable 1,193 - - - 1,193
----- --- --- --- -----
Total 1,183 - - - 1,183
Earnings from
Commercial
Land Sales 2,736 591 - - 2,145
Other (1) (7,970) 364 (169) - (8,503)
------ --- ---- --- ------
Total Commercial Group
Comparable 111,279 5,383 7,793 - 113,689
------- ----- ----- --- -------
Total 122,477 5,992 7,726 481 124,692
Residential Group
Apartments
Comparable 27,199 792 6,087 - 32,494
------ --- ----- --- ------
Total 30,668 1,061 7,406 - 37,013
Military Housing
Comparable (2) - - - - -
--- --- --- --- ---
Total 7,698 (100) 211 - 8,009
Other (1) (10,347) 33 (1) - (10,381)
------- -- -- --- -------
Total Residential
Group
Comparable 27,199 792 6,087 - 32,494
------ --- ----- --- ------
Total 28,019 994 7,616 - 34,641
Total Rental
Properties
Comparable 138,478 6,175 13,880 - 146,183
------- ----- ------ --- -------
Total 150,496 6,986 15,342 481 159,333
Land Development Group 707 (54) 117 - 878
The Nets (10,681) - 997 - (9,684)
Corporate
Activities (16,540) - - - (16,540)
------- --- --- --- -------
Grand Total $123,982 $6,932 $16,456 $481 $133,987
Net Operating Income (dollars in thousands)
--------------------------------------------------------
Three Months Ended April 30, 2008
--------------------------------------------------------
Plus
Unconsolidated Pro-Rata
Full Less Non- Invest- Plus Consoli-
Consolidation controlling ments at Discontinued dation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
------------ ----------- ---------- ---------- ----------
Commercial Group
Retail
Comparable $60,222 $2,569 $5,454 $- $63,107
------- ------ ------ -- -------
Total 60,227 2,635 5,528 652 63,772
Office Buildings
Comparable 48,088 2,662 2,469 - 47,895
------ ----- ----- --- ------
Total 54,930 2,390 2,576 - 55,116
Hotels
Comparable 1,391 - 211 - 1,602
----- --- --- --- -----
Total 1,304 - 211 - 1,515
Earnings from
Commercial
Land Sales 1,361 574 - - 787
Other (1) (24,325) (1,068) (524) - (23,781)
------- ------ ---- --- -------
Total Commercial Group
Comparable 109,701 5,231 8,134 - 112,604
------- ----- ----- --- -------
Total 93,497 4,531 7,791 652 97,409
Residential Group
Apartments
Comparable 26,779 694 6,994 - 33,079
------ --- ----- --- ------
Total 30,715 698 7,777 1,994 39,788
Military Housing
Comparable (2) - - - - -
--- --- --- --- ---
Total 9,960 - 1,124 - 11,084
Other (1) (7,835) 41 - - (7,876)
------ -- --- --- ------
Total Residential Group
Comparable 26,779 694 6,994 - 33,079
------ --- ----- --- ------
Total 32,840 739 8,901 1,994 42,996
Total Rental Properties
Comparable 136,480 5,925 15,128 - 145,683
------- ----- ------ --- -------
Total 126,337 5,270 16,692 2,646 140,405
Land Development
Group (559) 18 130 - (447)
The Nets (13,473) - 1,613 - (11,860)
Corporate
Activities (13,312) - - - (13,312)
------- --- --- --- -------
Grand Total $98,993 $5,288 $18,435 $2,646 $114,786
Net Operating Income (dollars in thousands)
-------------------------------------------
% Change
------------------------------
Full Pro-Rata
Consolidation Consolidation
(GAAP) (Non-GAAP)
------------- -------------
Commercial Group
Retail
Comparable (0.7%) (1.0%)
Total
Office Buildings
Comparable 4.6% 4.4%
Total
Hotels
Comparable (14.2%) (25.5%)
Total
Earnings from Commercial Land Sales
Other (1)
Total Commercial Group
Comparable 1.4% 1.0%
Total
Residential Group
Apartments
Comparable 1.6% (1.8%)
Total
Military Housing
Comparable (2)
Total
Other (1)
Total Residential Group
Comparable 1.6% (1.8%)
Total
Total Rental Properties
Comparable 1.5% 0.3%
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.
(2) Comparable NOI for Military Housing commences once the operating projects
complete initial development phase.
Development Pipeline
- --------------------------
April 30, 2009
2009 Openings and Acquisitions (1)
FCE Pro-
Date Legal Rata
Dev (D) Opened / Owner- FCE %
Property Location Acq (A) Acquired ship %(f) (f)(1)
- -------- -------- ------- -------- --------- ------
Retail Centers:
Promenade at Temecula
Expansion Temecula, CA D Q1-09 75.0% 100.0%
Total Openings and
Acquisitions
Residential Phased-In
Units (c) (d):
Sutton Landing Brimfield, OH D 2007-09 50.0% 50.0%
Stratford Crossing Wadsworth, OH D 2007-10 50.0% 50.0%
Total (e)
Cost at FCE
Cost at Full Total Pro-Rata Gross
Consol- Cost Share (Non- Sq. ft./ Leas-
idation at 100% GAAP) (b) No. of able
Property (GAAP) (a) (2) (1) X (2) Units Area
- -------- ------------ ------- ----------- -------- -----
(in millions)
-----------------------------------
Retail Centers:
Promenade at Temecula
Expansion $106.5 $106.5 $106.5 127,000 127,000
------ ------ ------ ======= =======
Total Openings and
Acquisitions $106.5 $106.5 $106.5
====== ====== ======
Residential Phased-In Opened in '09/
Units (c) (d): Total
--------------
Sutton Landing $0.0 $15.9 $8.0 36/216
Stratford Crossing 0.0 25.3 12.7 24/348
--- ---- ---- ------
Total (e) $0.0 $41.2 $20.7 60/564
==== ===== ===== ======
See attached footnotes.
Development Pipeline
- --------------------
April 30, 2009
Under Construction (7)
FCE
Legal Pro-
Owner- Rata
Dev (D) Anticipated ship FCE %
Property Location Acq (A) Opening % (f) (f)(1)
- -------- -------- ------- ----------- ----- ------
Retail Centers:
East River Plaza (c) (d) Manhattan, NY D Q4-09/Q1-10 35.0% 50.0%
Village at Gulfstream Hallandale
Beach, FL D Q1-10 50.0% 50.0%
Ridge Hill (d) (k) Yonkers, NY D Q3-10/11 70.0% 100.0%
Office:
Waterfront Station
- East 4th & West 4th
Buildings Washington, D.C. D Q1-10 45.0% 45.0%
Residential:
80 Dekalb Avenue (d) Brooklyn, NY D Q3-09/Q1-10 70.0% 100.0%
Presidio San Francisco, CA D Q2-10 100.0% 100.0%
Beekman (d) Manhattan, NY D Q3-10/11 49.0% 70.0%
Total Under Construction
(g)
Residential Phased-In
Units (c) (d):
Stratford Crossing Wadsworth, OH D 2007-10 50.0% 50.0%
Total (h)
Cost Cost at FCE
at Full Total Pro-Rata Sq. Gross
Consoli- Cost Share (Non- ft./ Leas- Lease
dation at 100% GAAP) (b) No. of able Commit-
Property (GAAP)(a) (2) (1) X (2) Units Area ment %
- -------- --------- ------- ----------- ------ ----- -------
(in millions)
----------------------------------
Retail Centers:
East River
Plaza (c) (d) $0.0 $392.2 $196.1 517,000 517,000 74%
Village at
Gulfstream 207.0 207.0 103.5 500,000 500,000 (i) 56%
Ridge Hill
(d) (k) 685.5 685.5 685.5 1,200,000 1,200,000 (j) 21%
----- ----- ----- --------- ---------
$892.5 $1,284.7 $985.1 2,217,000 2,217,000
------ -------- ------ ========= =========
Office:
Waterfront
Station - East
4th & West 4th
Buildings $329.9 $329.9 $148.5 628,000 (l) 97%
------ ------ ------ =======
Residential:
80 Dekalb
Avenue (d) $163.3 $163.3 $163.3 365
Presidio 108.3 108.3 108.3 161
Beekman (d) 875.7 875.7 613.0 904
----- ----- ----- ---
$1,147.3 $1,147.3 $884.6 1,430
-------- -------- ------ =====
Total Under
Construction
(g) $2,369.7 $2,761.9 $2,018.2
======== ======== ========
Residential
Phased-In
Units (c) (d): Under Const./ Total
-------------------
Stratford
Crossing $0.0 $25.3 $12.7 108/348
---- ----- ----- -------
Total (h) $0.0 $25.3 $12.7 108/348
==== ===== ===== =======
See attached footnotes.
Military Housing - see footnote m
Development Pipeline
- --------------------------
2009 FOOTNOTES
- --------------
(a) Amounts are presented on the full consolidation method of accounting, a
GAAP measure. Under full consolidation, costs are reported as consolidated
at 100 percent if we are deemed to have control or to be the primary
beneficiary of our investments in the variable interest entity ("VIE").
(b) Cost at pro-rata share represents Forest City's share of cost, based on
the Company's pro-rata ownership of each property (a non-GAAP measure).
Under the pro-rata consolidation method of accounting the Company
determines its pro-rata share by multiplying its pro-rata ownership by the
total cost of the applicable property.
(c) Reported under the equity method of accounting. This method represents a
GAAP measure for investments in which the Company is not deemed to have
control or to be the primary beneficiary of our investments in a VIE.
(d) Phased-in openings. Costs are representative of the total project.
(e) 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 $20.7
million consists of the Company's share of cost for unconsolidated
investments of $20.7 million.
(f) 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.
(g) The difference between the full consolidation cost amount (GAAP) of
$2,369.7 million to the Company's pro-rata share (a non-GAAP measure) of
$2,018.2 million consists of a reduction to full consolidation for
noncontrolling interest of $547.6 million of cost and the addition of its
share of cost for unconsolidated investments of $196.1 million.
(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 $12.7
million consists of the Company's share of cost for unconsolidated
investments of $12.7 million.
(i) Includes 89,000 square feet of office space.
(j) Includes 156,000 square feet of office space.
(k) Subsequent to April 30, 2009, the Company announced that Saks Fifth Avenue
signed a letter of intent to anchor Ridge Hill.
(l) Includes 85,000 square feet of retail space.
(m) Below is a summary of our equity method investments for Military Housing
Development projects. The Company provides services for these projects
including development, construction, and management and receives agreed
upon fees for these services.
FCE Cost at
Antici- Pro- Full Total Sq.ft./
pated Rata Consoli- Cost No. of
Property Location Opening % (f) dation (a) at 100% Units
- -------- -------- ------- ----- ---------- ------- -------
(in millions)
------------------
Military Housing
Under Construction
(7)
Midwest Millington Memphis, TN 2008-2009 * 0.0 37.0 318
Navy Midwest Chicago, IL 2006-2009 * 0.0 236.9 1,658
Air Force Academy Colorado
Springs, CO 2007-2009 50.0% 0.0 71.9 427
Marines, Hawaii
Increment II Honolulu, HI 2007-2011 * 0.0 299.6 1,175
Navy, Hawaii
Increment III Honolulu, HI 2007-2011 * 0.0 560.6 2,520
Pacific Northwest
Communities Seattle, WA 2007-2010 * 0.0 280.5 2,986
Hawaii Phase IV Kaneohe, HI 2007-2014 * 0.0 382.6 917
--- ----- ---
Total Military Housing
Under Construction 0.0 $1,869.1 10,001
=== ======== ======
* The Company's share of residual cash flow ranges from 0-20% during the life
cycle of the project.
CONTACT: At The Company: Robert O'Brien, Executive Vice President - Chief
Financial Officer, +1-216-621-6060, Tom Kmiecik, Assistant Treasurer,
+1-216-621-6060, or Jeff Linton, Vice President - Corporate Communication,
+1-216-621-6060, all of Forest City Enterprises, Inc.; On The Web:
www.forestcity.net