Exhibit 99.1
Forest City Reports Increases in Net Earnings, Revenues and
EBDT for Fiscal 2004
CLEVELAND--(BUSINESS WIRE)--March 31, 2005--Forest City
Enterprises, Inc. (NYSE:FCEA) (NYSE:FCEB) today announced increases in
net earnings, revenues and EBDT for the fiscal year ended January 31,
2005.
Net earnings for fiscal year 2004 were $85.2 million, or $1.67 per
share, compared with $42.7 million, or $0.84 per share, for the prior
year. Consolidated revenues for the year were $1.0 billion, a 22.8
percent increase over last year's $848.1 million. For the year, EBDT
(Earnings Before Depreciation, Amortization and Deferred Taxes) was
$245.0 million, or $4.81 per share, a 14.5 percent increase on a per
share basis compared with last year's EBDT of $212.4 million, or $4.20
per share. 2004 was the Company's 25th consecutive year of EBDT
growth.
For the fourth quarter ended January 31, 2005, net earnings were
$5.8 million, or $0.12 per share, compared with a fourth-quarter 2003
net loss of $4.7 million, or ($0.09) per share. Consolidated revenues
were $286.9 million compared with $219.9 million in the prior year's
fourth quarter. EBDT for the fourth quarter was $36.3 million, or
$0.72 per share, compared to last year's fourth-quarter EBDT of $40.8
million, or $0.82 per share.
EBDT and EBDT per share are non-Generally Accepted Accounting
Principle (GAAP) measures provided as a supplement to net earnings and
net earnings per share prepared in accordance with GAAP. The Company
believes that EBDT provides additional information about its core
business operations and is necessary to understand its ongoing
financial position. 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. A more complete
discussion of EBDT is included at the end of this news release.
Please refer to the Investor Relations section of the Company's
website at www.forestcity.net for a Supplemental Package, which the
Company will also furnish to the Securities and Exchange Commission on
Form 8-K. This Supplemental Package includes operating and financial
information for the year ended January 31, 2005, with reconciliations
of non-GAAP financial measures, such as comparable net operating
income and pro-rata financial statements, to their most directly
comparable GAAP financial measures.
Discussion of Results
Charles A. Ratner, president and chief executive officer of Forest
City Enterprises, said, "We are very pleased with our results for 2004
- - it was a year with numerous financial accomplishments and
development milestones.
"We increased net earnings and revenues, and recorded our 25th
consecutive year of EBDT growth. Our strong performance during the
year was a direct result of our operating portfolio performance, as
well as our 10 openings and acquisitions in 2004 and 13 project
openings and acquisitions during 2003. EBDT for the year included a
$12.4 million, after-tax, realization of deferred financing income
accumulated in prior years at our Denver Stapleton mixed-use project.
"During the fiscal year, we completed two Senior Note offerings,
totaling $250 million, and increased availability under our bank line
to $450 million. Our balance sheet grew to record levels, with total
assets of $7.3 billion and total real estate assets climbing 28.4
percent to $6.5 billion. Shareholders' equity reached $804.5 million,
an increase of 7.4 percent compared with fiscal 2003. We closed the
fiscal year ended January 31, 2005 with more than $570 million in cash
and credit available."
Comparable real estate portfolio performance is a key driver of
Forest City's operating results. Comparable property net operating
income (NOI), a non-GAAP financial measure that is defined as NOI from
properties operated for full years in both 2004 and 2003, increased
2.1 percent in 2004 compared with the prior year. Comparable property
NOI for the retail and office portfolios was up 1.3 percent and 2.4
percent, respectively. In the residential portfolio, comparable
property NOI decreased 1.9 percent during the year.
Comparable property NOI, a non-GAAP financial measure, is based on
the pro-rata consolidation method, also a non-GAAP financial measure.
A more complete discussion of the pro-rata consolidation method is
included at the end of this news release. The Company presents
comparable NOI because it believes this information is useful to
investors as it more accurately reflects the manner in which the
Company operates its business. Also see exhibit included in this news
release, which presents comparable property NOI on the full
consolidation method.
Fiscal 2004 comparable occupancies were up portfolio-wide compared
with the same period a year ago. Retail occupancies were 93 percent
compared with 92 percent last year; office increased to 95 percent
from 92 percent; and residential increased to 91 percent from 90
percent.
Ratner said, "We are gratified that our accomplishments and growth
initiatives have been recognized by the market and have directly
resulted in increased shareholder value. Our stock price climbed 21.1
percent during the calendar year. The long-term value creation is
evident in the total return of our stock, which has averaged 15.1
percent over the last three years, 26.1 percent over the last five
years, and 24.9 percent over the past decade."
Portfolio and Development Highlights
A schedule of the Company's project openings and acquisitions, and
the pipeline of projects under construction is included in this news
release. Highlighted below are several of the Company's 2004 project
openings, projects under construction, and projects under development.
Consistent with Forest City's Core Market Strategy, the Company's
portfolio is concentrated in the following core markets: New York
City/Philadelphia metropolitan area, Boston, Greater Washington
D.C./Baltimore, Denver, and California. Forest City has made the
strategic decision to focus on these geographic areas because they
represent high-growth urban markets with high barriers to entry where
the Company has successfully gained access to large, complex
commercial, residential and mixed-use projects.
As a result, Forest City continues to increase its property
concentration, based on total property cost, in these core markets. At
the close of fiscal 2004, the core markets accounted for approximately
70 percent of the Company's current portfolio, 98 percent of the total
projects opened during the year, and 88 percent of the total projects
under construction.
Project Openings
Forest City opened or acquired 10 projects, representing a total
of $601.6 million of cost at the Company's share and $687.0 million of
cost on the full consolidation basis during fiscal 2004. Commercial
Group openings consisted of four retail centers representing
approximately 2.1 million square feet of retail space, and three
office buildings accounting for 699,000 square feet. Residential
Group's three openings during the year added a total of 396 apartment
units.
The 2004 project openings are expected to generate a 9.24 percent
stabilized unleveraged return. Of the 10 property additions, six have
been permanently financed at a weighted average interest rate of 5.88
percent, while the remaining were financed with variable-rate debt,
one of which is tax-exempt. Project costs are based on the pro-rata
consolidation method of accounting - see attached exhibit, which also
includes comparable project costs on the full consolidation method.
During 2004, Forest City held the grand opening of Victoria
Gardens, a $184 million open-air lifestyle center designed as a
pedestrian-friendly "new downtown" for Rancho Cucamonga in Southern
California. Macy's, JCPenney, Robinsons-May and AMC Theaters anchor
the 1.2-million-square-foot center. In the current phase, Victoria
Gardens opened more than 90 percent leased or committed. Construction
on phase two, which will include a community library and cultural arts
center, will begin in 2005.
In its core market of New York City, Forest City opened both the
retail and office components of Atlantic Terminal in Brooklyn. The
373,000-square-foot retail center opened 87 percent leased and is
anchored by a Super Target store. The retail center is located below
the new 399,000-square-foot office building, which is 100 percent
leased and is the new home of The Bank of New York.
At the end of fiscal 2004, construction was completed on Twelve
MetroTech Center, a 32-story, 1-million-square-foot office building
that will house new facilities for courts and government agencies.
Forest City completed the approximately $600 million project over a
four-year period on time and on budget, and owns a 177,000-square-foot
interest in this office condominium, which it is currently marketing
for leasing.
In Philadelphia, the Company completed, and subsequently exercised
its option to acquire, a 123,000-square-foot life sciences project at
the University of Pennsylvania. The new facility houses laboratory and
office space for the university's translational research program
funded by the National Institutes of Health. This project marks Forest
City's first biotechnology-related development opportunity outside of
the Boston market. Also in Philadelphia, Forest City opened
Quartermaster Plaza, a 459,000-square-foot retail center that features
anchor stores Home Depot and BJ's Wholesale Club. Located on the site
of a former military supply depot, Quartermaster Plaza is 88 percent
leased.
During the year, in the residential portfolio, Forest City opened
the 166-unit Sterling Glen of Rye Brook in Rye Brook, New York. Two
other senior living projects are currently under construction -
Sterling Glen of Lynbrook, a 100-unit community located next to a
nature preserve in Lynbrook, New York; and Sterling Glen of Roslyn,
158 units overlooking a harbor in Roslyn, New York. The two properties
are scheduled to open in 2005 and 2006, respectively.
Denver Stapleton
The transformation of Stapleton, Denver's former airport, into a
large, pedestrian-friendly community continued at a rapid pace
throughout 2004. During the fourth quarter, there were 142 homes sold
and 136 homes closed (occupied). During the fiscal year, 614 homes
sold and 576 homes closed. Since inception, 1,665 homes have sold and
1,352 have closed. The builders under contract to develop
single-family and multifamily homes have acquired or are under
contract to acquire 2,532 lots. Approximately 4,000 people are living
at Stapleton today.
Retail development also remains strong. With the 2004 opening of
East 29th Avenue Town Center combined with the 2002 opening of Quebec
Square, Stapleton currently has nearly 1 million square feet of retail
space. During the year, Forest City broke ground on Stapleton's second
regional retail center, the 1.1-million-square-foot Northfield at
Stapleton, the first phase of which is expected to open in fiscal
2005, with anchor Bass Pro Shops opening its first store in Colorado.
Forest City has signed a purchase agreement for all 2,935 acres of
developable land at Stapleton. As of the end of fiscal 2004, the
Company had purchased 1,090 acres, leaving a balance of 1,845 acres to
be acquired for additional development over the course of the next 10
to 15 years. Over and above the developable land to be purchased by
Forest City, 1,116 acres are reserved for regional parks and open
space.
Projects Under Construction - and Scheduled to Open in 2005
At the end of fiscal 2004, Forest City's development pipeline
included 17 projects under construction representing a total cost of
$742.0 million on a full consolidation basis and $1.2 billion of cost
at the Company's pro-rata share - including six retail projects, one
office building, nine apartment communities and one condominium
redevelopment. Of the projects under construction, 11 of them,
representing $387.2 million of cost on the full consolidation basis
and $461.7 million of cost at the Company's pro-rata share, are due to
be completed in 2005. See attached exhibit, which includes comparable
project costs on both a pro-rata share and full consolidation basis.
Among the projects under construction, and scheduled to open in
2005, is the final phase of one of Forest City's largest and most
successful projects - the University Park at MIT biotechnology, life
sciences mixed-use development in Cambridge, Massachusetts. The
Company will complete the development's final two apartment buildings,
23 Sidney and 100 Landsdowne, which will provide an additional 254
rental residential units, bringing the total residential space to
approximately 530 apartment units.
Openings planned for 2005 include three new retail centers - the
600,000-square-foot Simi Valley Town Center in Southern California;
the 359,000-square-foot Saddle Rock in Aurora, Colorado; and the first
phase of the 994,000-square-foot Bolingbrook Town Center near Chicago.
Forest City has identified Los Angeles as a strong market for
residential development, and has three projects under construction and
scheduled to open during 2005. These projects are the 277 loft
apartments at Metro 417 (formerly Subway Terminal), 264 loft units at
Metropolitan Lofts, and 228 condominium units at 1100 Wilshire.
Projects Under Development
At the end of fiscal 2004, Forest City had more than 25 projects
under development representing a total of more than $2 billion of cost
at the Company's share and on a full consolidation basis - including
several of the largest and most unique projects in Company history.
These projects represent opportunities that will continue to fuel the
Company's growth. They reflect continued adherence to the Company's
Core Market Strategy and its commitment to a diversified portfolio.
Forest City expects the majority of these projects to begin
construction between 2006 and 2008.
Among the projects under development during 2004 are: a
public/private partnership agreement to develop Brooklyn Atlantic
Yards, a mixed-use community whose main attraction is a new arena for
the Nets NBA basketball team; the 912,000-square-foot Westminster Mall
in Westminster, Colorado; and the right to convert the former United
States Marine Hospital at the Presidio of San Francisco into an
eight-story apartment community.
Based on the Company's experience at University Park at MIT,
Forest City was successful in securing two new life science
development opportunities during fiscal 2004. The Company purchased,
and will serve as the lead developer for, the $500 million first-phase
development of a mixed-use community adjacent to the Johns Hopkins
University medical campus in East Baltimore, Maryland. Additionally,
the Company acquired and will redevelop a high-technology business
campus in Skokie, Illinois, on the 22-acre site of a research park
formerly owned by Pfizer Inc.
Dispositions
As a way to continually strengthen the portfolio and raise equity
capital, Forest City constantly analyzes its assets to determine
optimal timing of dispositions, which enables the Company to redeploy
capital in a tax-efficient manner and reinvest in existing properties.
Dispositions usually fall into two categories - opportunistic sales
where Forest City can take advantage of market conditions and
relatively high valuations, or dispositions of non-strategic assets in
low-growth markets. The dispositions enable Forest City to tighten its
focus on large, complex projects in its core markets.
During fiscal 2004, Forest City completed 13 property
dispositions, representing approximately $273.5 million in aggregate
sales price, and generating net proceeds of approximately $115.6
million. Additionally, during the first quarter of 2005, the Company
announced the sale of the Showcase specialty retail center in Las
Vegas as well as the ground lease and expansion rights to the
property, which generated a pre-tax gain of approximately $15 million.
In line with the Company's strategy to focus exclusively on the
real estate business, Forest City Enterprises announced the sale of
the assets of one of its wholly owned subsidiaries, Forest City
Trading Group, Inc., a lumber wholesaler based in Portland, Oregon. Of
the approximate $39 million selling price, $35 million was paid in
cash at closing, with the remaining purchase price to be paid over the
next five years. As a result, Forest City Enterprises reported a
pre-tax gain of approximately $22 million and a pre-tax deferred gain
of approximately $4 million that will be recorded and recognized as
income over the next five years.
Public Offerings and Financing Summary
Forest City continues to access the financial markets to undertake
transactions that improve the Company's liquidity and long-term
financial flexibility. In February 2004, the Company completed a
public debt offering of $100 million of 7.375% Senior Notes due in
2034. In January 2005, the Company sold $150 million of 6.50% Senior
Notes due in 2017. The Company used the net proceeds from the
offerings to repay recourse debt outstanding under the Company's
credit facility and for general corporate and working capital
purposes. In March 2004, Forest City announced an expansion of its
corporate credit facility to $450 million, which was a $150 million
increase in availability under the Company's revolving credit line. In
March 2005, the Company's bank group committed to amend its credit
agreement to extend the maturity by one year to 2008, lower its
interest rate, and allow to further expand the availability under the
line by $100 million in the next 24 months through an accordion
provision.
Forest City continues to take advantage of current interest rates
and attractive debt markets for its project financings, with primary
emphasis on locking in fixed-rate nonrecourse mortgages. During fiscal
2004, Forest City closed on transactions totaling $1.4 billion in
nonrecourse mortgage financings, including $415.8 million for new
development projects and acquisitions, $757.5 million in refinancings,
and $243.4 million in loan extensions and other fundings.
As of January 31, 2005, the Company's weighted average cost of
mortgage debt decreased to 5.75 percent from 5.80 percent at January
31, 2004, primarily due to the increased proportion of lower cost
tax-exempt debt. Fixed-rate mortgage debt, which represented 71
percent of the Company's total nonrecourse mortgage debt, decreased
from 6.76 percent at January 31, 2004 to 6.46 percent at January 31,
2005. Due to the general increases in short-term interest rates, the
variable-rate mortgage debt increased from 3.52 percent at January 31,
2004 to 3.98 percent at January 31, 2005.
Outlook
Ratner said, "Fiscal 2004 was notable for the results we achieved
and the activities that will spur our future growth. Our development
pipeline has many high-impact opportunities, with approximately
$1 billion under construction and another $2 billion under
development. These are large, complex projects, which means the
investments of time and resources are significant, but so are the
potential returns. Furthermore, these projects will be built and
opened in phases, which will drive our growth over a number of years
similar to our long-term commitment and experience at MetroTech Center
and University Park at MIT.
"Overall, while we feel there is good momentum behind our efforts,
we remain cautious about the risks inherent in our business. We are
concentrating on delivering projects that capitalize on our core
competencies and are aligned with our development strategy, which is
focused on high-growth urban markets. That said, we are confident in
our ability to deliver our 26th consecutive year of EBDT growth in
fiscal 2005, and to continue to enhance shareholder value."
Corporate Description
Forest City Enterprises, Inc. is a $7.3 billion NYSE-listed real
estate company headquartered in Cleveland, Ohio. The Company is
principally engaged in the ownership, development, acquisition and
management of commercial and residential real estate throughout the
United States. The Company's portfolio includes interests in retail
centers, apartment communities, office buildings and hotels in 19
states and the District of Columbia.
EBDT
The Company uses an additional measure, along with net earnings,
to report its operating results. This non-GAAP measure, referred to as
Earnings Before Depreciation, Amortization and Deferred Taxes, is not
a measure of operating results or cash flows from operations as
defined by GAAP and may not be directly comparable to similarly titled
measures reported by other companies.
The Company believes that EBDT provides additional information
about its core operations and, along with net earnings, is necessary
to understand its operating results. EBDT is used by the chief
operating decision maker and management in assessing operating
performance and to consider capital requirements and allocation of
resources by segment and on a consolidated basis. The Company believes
EBDT is important to investors because it provides another method for
the investor to measure its long-term operating performance, as net
earnings can vary from year to year due to property dispositions,
acquisitions and other factors that have a short-term impact.
EBDT is defined as net earnings excluding the following items: i)
gain (loss) on disposition of rental properties, divisions and other
investments (net of tax); ii) the adjustment to recognize rental
revenues and rental expense using the straight-line method; iii)
non-cash charges from real estate operations of Forest City Rental
Properties Corporation, a wholly owned subsidiary of Forest City
Enterprises, Inc., for depreciation, amortization (including
amortization of mortgage procurement costs) and deferred income taxes;
iv) provision for decline in real estate (net of tax); v)
extraordinary items (net of tax); and vi) cumulative effect of change
in accounting principle (net of tax). Unlike the real estate segments,
EBDT for the Nets segment equals net earnings of the equity method
investment.
EBDT is reconciled to net earnings, the most comparable financial
measure calculated in accordance with GAAP, in the table titled
Financial Highlights below and in the Company's Supplemental Package,
which the Company will also furnish to the SEC on Form 8-K. The
adjustment to recognize rental revenues and rental expenses on the
straight-line method is excluded because it is management's opinion
that rental revenues and expenses should be recognized when due from
the tenants or due to the landlord. The Company excludes depreciation
and amortization expense related to real estate operations from EBDT
because it believes the values of its properties, in general, have
appreciated over time in excess of their original cost. Deferred taxes
from real estate operations, which are the result of timing
differences of certain net expense items deducted in a future year for
federal income tax purposes, are excluded until the year in which they
are reflected in our current tax provision. The provision for decline
in real estate is excluded from EBDT because it varies from year to
year based on factors unrelated to our overall financial performance
and is related to the ultimate gain on dispositions of operating
properties. Our EBDT may not be directly comparable to similarly
titled measures reported by other companies.
Pro-Rata Consolidation Method
This press release contains certain financial measures prepared in
accordance with GAAP under the full consolidation accounting method
and certain financial measures prepared in accordance with the
pro-rata consolidation method (non-GAAP). The Company presents certain
financial amounts under the pro-rata method because it believes this
information is useful to investors as this method reflects the manner
in which the Company operates its business. In line with industry
practice, the Company has made a large number of investments in which
its economic ownership is less than 100 percent as a means of
procuring opportunities and sharing risk. Under the pro-rata
consolidation method, the Company presents its investments
proportionate to its share of ownership. Under GAAP, the full
consolidation method is used to report partnership assets and
liabilities as consolidated at 100 percent if deemed to be under its
control or if the Company is deemed to be the primary beneficiary of
the variable interest entities ("VIE"), even if its ownership is not
100 percent. The Company provides reconciliations from the full
consolidation method to the pro-rata consolidation method, in the
exhibits below and throughout its Supplemental Package, which the
Company will also furnish to the SEC on Form 8-K.
Stabilized Unleveraged Return
When discussing development projects and acquisitions elsewhere in
this news release, the Company discusses its expected stabilized
unleveraged return for such projects and acquisitions. The Company
calculates stabilized unleveraged return on a completed project or
acquisition by dividing stabilized NOI (for which there is no
comparable GAAP measure) by its total cost. The Company believes that
the presentation of stabilized unleveraged return is useful to
investors because it is an indicator of the expected profitability and
value of the Company's projects and acquisitions in its development
pipeline.
Safe Harbor Language
Statements made in this news release that state the Company or
management's intentions, hopes, beliefs, expectations or predictions
of the future are forward-looking statements. It is important to note
that the Company's actual results could differ materially from those
projected in such forward-looking statements. Additional information
concerning factors that could cause actual results to differ
materially from those in the forward-looking statements include, but
are not limited to, real estate development and investment risks,
economic conditions in the Company's target markets, reliance on major
tenants, the impact of terrorist acts, the Company's substantial
leverage and the ability to service debt, guarantees under the
Company's credit facility, changes in interest rates, continued
availability of tax-exempt government financing, the sustainability of
substantial operations at the subsidiary level, significant geographic
concentration, illiquidity of real estate investments, dependence on
rental income from real property, conflicts of interest, competition,
potential liability from syndicated properties, effects of uninsured
loss, environmental liabilities, partnership risks, litigation risks,
risks associated with an investment in a professional sports
franchise, and other risk factors as disclosed from time to time in
the Company's SEC filings, including, but not limited to, the
Company's Annual Report on Form 10-K for the fiscal year ended January
31, 2005.
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Year Ended January 31, 2005 and 2004
(dollars in thousands, except per share data)
Three Months Ended Increase
January 31, (Decrease)
---------------------- ----------------
2005 2004 Amount Percent
---------------------- -------- -------
Operating Results:
Earnings (loss) from continuing
operations $(13,061) $(6,921) $(6,140)
Discontinued operations, net
of tax and minority
interest(1) 18,901 2,223 16,678
Cumulative effect of change in
accounting principle, net of
tax - - -
---------------------- --------
Net earnings $5,840 $(4,698) $10,538
====================== ========
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $36,331 $40,811 $(4,480) -11.0%
====================== ========
Reconciliation of Net Earnings
to Earnings Before
Depreciation, Amortization
and Deferred Taxes (EBDT)(2):
Net Earnings $5,840 $(4,698) $10,538
Depreciation and
amortization - Real Estate
Groups(5) 53,338 39,888 13,450
Depreciation and
amortization - equity
method investments(3) - 1,399 (1,399)
Deferred income tax expense
- Real Estate Groups(6) (159) 317 (476)
Deferred income tax
(benefit) expense - Non-
Real Estate Groups:(6)
Gain/loss on disposition
of other investments (151) (80) (71)
Gain on disposition of
Lumber Group 4,479 - 4,479
Provision for decline
in real estate
recorded on equity
method - (1,828) 1,828
Current income tax expense
(benefit) on non-operating
earnings:(6)
Gain/loss on disposition
of other investments 324 - 324
Gain on disposition
included in
discontinued
operations 11,355 824 10,531
Gain/loss on disposition
recorded on equity
method - (819) 819
Provision for decline
in real estate - (608) 608
Straight-line rent
adjustment(4) (636) (1,875) 1,239
Provision for decline in real
estate, net of minority
interest - 357 (357)
Provision for decline in real
estate recorded on equity
method - 4,621 (4,621)
Loss (gain) on disposition
recorded on equity method - 3,573 (3,573)
(Gain) loss on disposition of
other investments (438) (260) (178)
Discontinued operations:(1)
Gain on disposition of
rental properties (18,394) - (18,394)
Gain on disposition of
Lumber Group (22,013) - (22,013)
Provision for decline,
net of minority
interest - - -
Minority interest -
Gain on sale 2,786 - 2,786
Cumulative effect of change
in accounting principle,
net of tax - - -
---------------------- --------
Earnings Before
Depreciation, Amortization
and Deferred Taxes
(EBDT)(2) $36,331 $40,811 $(4,480) -11.0%
====================== ========
Diluted Earnings per Common
Share:
Earnings (loss) from continuing
operations $(0.26) $(0.14) $(0.12)
Discontinued operations, net
of tax and minority
interest(1) 0.38 0.05 0.33
Cumulative effect of change in
accounting principle, net of
tax - - -
---------------------- --------
Net earnings $0.12 $(0.09) $0.21
====================== ========
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $0.72 $0.82 $(0.10) -12.2%
====================== ========
Operating earnings, net of tax
(a non-GAAP financial
measure) $(0.21) $0.02 $(0.23)
Provision for decline in real
estate, net of tax - (0.06) 0.06
Gain on disposition of rental
properties, division and
other investments, net of tax 0.49 (0.04) 0.53
Minority interest (0.16) (0.01) (0.15)
Cumulative effect of change in
accounting principle, net of
tax - - -
---------------------- --------
Net earnings $0.12 $(0.09) $0.21
====================== ========
Diluted weighted average
shares outstanding 50,290,617 49,971,754 318,863
====================== ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Year Ended January 31, 2005 and 2004
(dollars in thousands, except per share data)
Year Ended Increase
January 31, (Decrease)
---------------------- ----------------
2005 2004 Amount Percent
---------------------- -------- -------
Operating Results:
Earnings (loss) from continuing
operations $40,056 $33,834 $6,222
Discontinued operations, net of
tax and minority interest(1) 56,411 8,835 47,576
Cumulative effect of change in
accounting principle, net of
tax (11,261) - (11,261)
---------------------- --------
Net earnings $85,206 $42,669 $42,537
====================== ========
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $245,032 $212,392 $32,640 15.4%
====================== ========
Reconciliation of Net Earnings
to Earnings Before
Depreciation, Amortization
and Deferred Taxes (EBDT)(2):
Net Earnings $85,206 $42,669 $42,537
Depreciation and amortization
- Real Estate Groups(5) 191,072 138,739 52,333
Depreciation and amortization
- equity method
investments(3) 237 1,779 (1,542)
Deferred income tax expense -
Real Estate Groups(6) 65,790 32,548 33,242
Deferred income tax (benefit)
expense - Non-Real Estate
Groups:(6)
Gain/loss on disposition
of other investments (151) (259) 108
Gain on disposition of
Lumber Group 4,568 - 4,568
Provision for decline
in real estate
recorded on equity
method - (1,828) 1,828
Current income tax expense
(benefit) on non-operating
earnings:(6)
Gain/loss on disposition
of other investments 324 9 315
Gain on disposition
included in
discontinued
operations 11,215 2,549 8,666
Gain/loss on disposition
recorded on equity
method (209) (819) 610
Provision for decline
in real estate - (608) 608
Straight-line rent
adjustment(4) (3,282) (7,060) 3,778
Provision for decline in real
estate, net of minority
interest - 1,981 (1,981)
Provision for decline in real
estate recorded on equity
method - 4,621 (4,621)
Loss (gain) on disposition
recorded on equity method (31,996) 3,573 (35,569)
(Gain) loss on disposition of
other investments (438) 171 (609)
Discontinued operations:(1)
Gain on disposition of
rental properties (71,325) (6,769) (64,556)
Gain on disposition of
Lumber Group (20,920) - (20,920)
Provision for decline,
net of minority
interest - 773 (773)
Minority interest -
Gain on sale 3,680 323 3,357
Cumulative effect of change
in accounting principle, net
of tax 11,261 - 11,261
---------------------- --------
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $245,032 $212,392 $32,640 15.4%
====================== ========
Diluted Earnings per Common
Share:
Earnings (loss) from continuing
operations $0.79 $0.67 $0.12
Discontinued operations, net of
tax and minority interest(1) 1.11 0.17 0.94
Cumulative effect of change in
accounting principle, net of
tax (0.23) - (0.23)
---------------------- --------
Net earnings $1.67 $0.84 $0.83
====================== ========
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $4.81 $4.20 $0.61 14.5%
====================== ========
Operating earnings, net of tax
(a non-GAAP financial measure) $0.98 $1.09 $(0.11)
Provision for decline in real
estate, net of tax - (0.10) 0.10
Gain on disposition of rental
properties, division and other
investments, net of tax 1.49 0.04 1.45
Minority interest (0.57) (0.19) (0.38)
Cumulative effect of change in
accounting principle, net of
tax (0.23) - (0.23)
---------------------- --------
Net earnings $1.67 $0.84 $0.83
====================== ========
Diluted weighted average shares
outstanding 50,923,028 50,572,173 350,855
====================== ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Year Ended January 31, 2005 and 2004
(dollars in thousands)
Three Months Ended Increase
January 31, (Decrease)
------------------- ---------------
2005 2004 Amount Percent
------------------- ---------------
Operating Earnings (a non-GAAP
financial measure) and
Reconciliation to Net Earnings:
Revenues from real estate
operations
Commercial Group $210,530 $162,129 $48,401
Residential Group 54,790 42,443 12,347
Land Development Group 21,575 15,370 6,205
Corporate Activities - (10) 10
------------------- --------
Total Revenues 286,895 219,932 66,963 30.4%
Operating expenses (173,861) (148,320) (25,541)
Interest expense, including early
extinguishment of debt (69,616) (52,596) (17,020)
Depreciation and amortization(5) (51,915) (34,475) (17,440)
Interest income 7,653 4,192 3,461
Equity in earnings of
unconsolidated entities (6,279) (1,352) (4,927)
Provision for decline in real
estate recorded on equity method - 4,621 (4,621)
(Gain) loss on disposition
recorded on equity method - 3,573 (3,573)
Revenues from discontinued
operations(1) 4,290 44,862 (40,572)
Expenses from discontinued
operations(1) (7,264) (40,449) 33,185
------------------- --------
Operating earnings (a non-GAAP
financial measure) (10,097) (12) (10,085)
------------------- --------
Income tax (expense) benefit(6) (1,064) 6,621 (7,685)
Income tax expense from
discontinued operations(1)(6) (15,913) (2,096) (13,817)
Income tax benefit (expense) on
non-operating earnings items (see
below) 16,196 (3,279) 19,475
------------------- --------
Operating earnings, net of tax (a
non-GAAP financial measure) (10,878) 1,234 (12,112)
------------------- --------
Provision for decline in real
estate - (510) 510
Provision for decline in real
estate included in discontinued
operations - - -
Provision for decline in real
estate recorded on equity method - (4,621) 4,621
Gain (loss) on disposition
recorded on equity method - (3,573) 3,573
Gain (loss) on disposition of
other investments 438 260 178
Gain on disposition of rental
properties included in
discontinued operations(1) 18,394 - 18,394
Gain on disposition of Lumber
Group included in discontinued
operations(1) 22,013 - 22,013
Income tax (benefit) expense on
non-operating earnings:(6)
Provision for decline in real
estate - 1,969 (1,969)
Provision for decline in real
estate included in
discontinued operations - - -
Gain/loss on disposition of
other investments (173) (103) (70)
Gain/loss on disposition
recorded on equity method - 1,413 (1,413)
Gain on disposition of rental
properties included in
discontinued operations (6,172) - (6,172)
Gain on disposition of Lumber
Group included in
discontinued operations (9,851) - (9,851)
------------------- --------
Income tax (benefit) expense on
non-operating earnings (see
above) (16,196) 3,279 (19,475)
------------------- --------
Minority interest in continuing
operations (5,312) (673) (4,639)
Minority interest in discontinued
operations:(1)
Operating earnings 167 (94) 261
Provision for decline in real
estate - - -
Gain on disposition of rental
properties (2,786) - (2,786)
------------------- --------
(2,619) (94) (2,525)
------------------- --------
Minority interest (7,931) (767) (7,164)
------------------- --------
Cumulative effect of change in
accounting principle, net of tax - - -
------------------- --------
Net earnings $5,840 $(4,698) $10,538
=================== ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Year Ended January 31, 2005 and 2004
(dollars in thousands)
Year Ended Increase
January 31, (Decrease)
------------------- ----------------
2005 2004 Amount Percent
------------------- ----------------
Operating Earnings (a non-GAAP
financial measure) and
Reconciliation to Net Earnings:
Revenues from real estate
operations
Commercial Group $744,764 $620,275 $124,489
Residential Group 204,426 138,397 66,029
Land Development Group 92,657 89,458 3,199
Corporate Activities 4 (9) 13
------------------- ---------
Total Revenues 1,041,851 848,121 193,730 22.8%
Operating expenses (608,565)(514,934) (93,631)
Interest expense, including early
extinguishment of debt (253,410)(196,870) (56,540)
Depreciation and amortization(5) (176,416)(121,428) (54,988)
Interest income 44,186 22,712 21,474
Equity in earnings of
unconsolidated entities 54,392 31,751 22,641
Provision for decline in real
estate recorded on equity method - 4,621 (4,621)
(Gain) loss on disposition
recorded on equity method (31,996) 3,573 (35,569)
Revenues from discontinued
operations(1) 130,527 156,804 (26,277)
Expenses from discontinued
operations(1) (121,860)(146,185) 24,325
------------------- ---------
Operating earnings (a non-GAAP
financial measure) 78,709 88,165 (9,456)
------------------- ---------
Income tax (expense) benefit(6) (37,326) (23,957) (13,369)
Income tax expense from
discontinued operations(1)(6) (40,666) (7,155) (33,511)
Income tax benefit (expense) on
non-operating earnings items (see
below) 48,999 (1,848) 50,847
------------------- ---------
Operating earnings, net of tax (a
non-GAAP financial measure) 49,716 55,205 (5,489)
------------------- ---------
Provision for decline in real
estate - (2,134) 2,134
Provision for decline in real
estate included in discontinued
operations - (1,104) 1,104
Provision for decline in real
estate recorded on equity method - (4,621) 4,621
Gain (loss) on disposition
recorded on equity method 31,996 (3,573) 35,569
Gain (loss) on disposition of
other investments 438 (171) 609
Gain on disposition of rental
properties included in
discontinued operations(1) 71,325 6,769 64,556
Gain on disposition of Lumber
Group included in discontinued
operations(1) 20,920 - 20,920
Income tax (benefit) expense on
non-operating earnings:(6)
Provision for decline in real
estate - 2,611 (2,611)
Provision for decline in real
estate included in
discontinued operations - 306 (306)
Gain/loss on disposition of
other investments (173) 67 (240)
Gain/loss on disposition
recorded on equity method (12,655) 1,413 (14,068)
Gain on disposition of rental
properties included in
discontinued operations (26,752) (2,549) (24,203)
Gain on disposition of Lumber
Group included in
discontinued operations (9,419) - (9,419)
------------------- ---------
Income tax (benefit) expense on
non-operating earnings (see
above) (48,999) 1,848 (50,847)
------------------- ---------
Minority interest in continuing
operations (25,094) (9,256) (15,838)
Minority interest in discontinued
operations:(1)
Operating earnings (155) (302) 147
Provision for decline in real
estate - 331 (331)
Gain on disposition of rental
properties (3,680) (323) (3,357)
------------------- ---------
(3,835) (294) (3,541)
------------------- ---------
Minority interest (28,929) (9,550) (19,379)
------------------- ---------
Cumulative effect of change in
accounting principle, net of tax (11,261) - (11,261)
------------------- ---------
Net earnings $85,206 $42,669 $42,537
=================== =========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Year Ended January 31, 2005 and 2004
(in thousands)
1) Pursuant to the definition of a component of an entity of SFAS No.
144, assuming no significant continuing involvement, all earnings
of properties and a division which have been sold or held for sale
are reported as discontinued operations.
2) The Company uses an additional measure, along with net earnings, to
report its operating results. This measure, referred to as
Earnings Before Depreciation, Amortization and Deferred Taxes
("EBDT"), is not a measure of operating results as defined by
generally accepted accounting principles and may not be directly
comparable to similarly-titled measures reported by other
companies. The Company believes that EBDT provides additional
information about its operations, and along with net earnings, is
necessary to understand its operating results. EBDT is defined as
net earnings excluding the following items: i) gain (loss) on
disposition of operating properties, divisions and other
investments (net of tax); ii) the adjustment to recognize rental
revenues and rental expense using the straight-line method; iii)
noncash charges from Forest City Rental Properties Corporation, a
wholly-owned subsidiary of Forest City Enterprises, Inc., for
depreciation, amortization (including amortization of mortgage
procurement costs) and deferred income taxes; iv) provision for
decline in real estate (net of tax); v) extraordinary items (net
of tax); and vi) cumulative effect of change in accounting
principle (net of tax). See our discussion of EBDT in the news
release.
3) Amount represents depreciation expense for certain syndicated
properties accounted for on the equity method of accounting under
both full consolidation and pro-rata consolidation (a non-GAAP
financial measure). See our discussion of pro-rata consolidation
in the news release.
4) The Company recognizes minimum rents on a straight-line basis over
the term of the related lease pursuant to the provision of SFAS
No. 13, "Accounting for Leases." The straight-line rent adjustment
is recorded as an increase or decrease to revenue from Forest City
Rental Properties Corporation, a wholly-owned subsidiary of Forest
City Enterprises, Inc., with the applicable offset to either
accounts receivable or accounts payable, as appropriate.
5) The following table provides detail of Depreciation and
Amortization. The Company's Real Estate Groups are owned by Forest
City Rental Properties Corporation, a wholly-owned subsidiary
engaged in the ownership, development, acquisition and management
of real estate projects, including apartment complexes, regional
malls and retail centers, hotels, office buildings and mixed-use
facilities, as well as large land development projects.
Three Months Ended Year Ended
January 31, January 31,
--------------------- -------------------
2005 2004 2005 2004
--------------------- -------------------
Full Consolidation $51,915 $34,475 $176,416 $121,428
Non-Real Estate Groups (528) (535) (2,142) (2,012)
--------------------- -------------------
Real Estate Groups Full
Consolidation 51,387 33,940 174,274 119,416
Real Estate Groups related
to minority interest (5,481) (5,406) (14,115) (18,951)
Real Estate Groups Equity
Method 7,384 10,080 28,227 33,596
Real Estate Groups
Discontinued Operations 48 1,274 2,686 4,678
--------------------- -------------------
Real Estate Groups Pro-Rata
Consolidation $53,338 $39,888 $191,072 $138,739
===================== ===================
Three Months Ended Year Ended
January 31, January 31,
--------------------- -------------------
2005 2004 2005 2004
--------------------- -------------------
(in thousands) (in thousands)
(6) The following table
provides detail of Income
Tax Expense (Benefit):
(A) Operating earnings
Current $(5,078) $(4,855) $(15,286) $(4,828)
Deferred 5,969 1,513 39,784 32,876
--------------------- -------------------
891 (3,342) 24,498 28,048
--------------------- -------------------
(B) Provision for decline in
real estate
Current - (608) - (608)
Deferred - 467 - (175)
--------------------- -------------------
Subtotal - (141) - (783)
--------------------- -------------------
Deferred - Equity
method investment -
Non-Real Estate
Groups - (1,828) - (1,828)
--------------------- -------------------
- (1,969) - (2,611)
--------------------- -------------------
(C) Gain/loss on disposition
of other investments
Current 324 - 324 9
Deferred - Non-Real
Estate Groups (151) (80) (151) (259)
Deferred - Real Estate
Groups - 183 - 183
--------------------- -------------------
173 103 173 (67)
--------------------- -------------------
(D) Gain/loss on disposition
recorded on equity method
Current - (819) (209) (819)
Deferred - (594) 12,864 (594)
--------------------- -------------------
- (1,413) 12,655 (1,413)
--------------------- -------------------
Subtotal(A)(B)(C)(D)
Current (4,754) (6,282) (15,171) (6,246)
Deferred 5,818 (339) 52,497 30,203
--------------------- -------------------
Income tax expense 1,064 (6,621) 37,326 23,957
--------------------- -------------------
(E) Discontinued operations
- Rental Properties
Operating earnings
Current (929) (140) (895) (116)
Deferred 69 169 545 812
--------------------- -------------------
(860) 29 (350) 696
Deferred tax on
provision for decline
in real estate - - - (306)
--------------------- -------------------
Gain on disposition
of rental properties
Current 5,983 824 6,364 2,549
Deferred 189 (824) 20,388 -
--------------------- -------------------
6,172 - 26,752 2,549
--------------------- -------------------
5,312 29 26,402 2,939
--------------------- -------------------
Subtotal(A)(B)(C)(D)(E)
Current 300 (5,598) (9,702) (3,813)
Deferred 6,076 (994) 73,430 30,709
--------------------- -------------------
$6,376 $(6,592) $63,728 $26,896
--------------------- -------------------
(F) Discontinued operations
- Lumber Group
Operating earnings
Current 640 2,420 4,852 3,798
Deferred 110 (353) (7) 418
--------------------- -------------------
750 2,067 4,845 4,216
Gain on disposition of
Lumber Group
Current 5,372 - 4,851 -
Deferred 4,479 - 4,568 -
--------------------- -------------------
9,851 - 9,419 -
--------------------- -------------------
10,601 2,067 14,264 4,216
--------------------- -------------------
Subtotal(E)(F) 15,913 2,096 40,666 7,155
--------------------- -------------------
Grand Total(A)(B)(C)(D)(E)(F)
Current 6,312 (3,178) 1 (15)
Deferred 10,665 (1,347) 77,991 31,127
--------------------- -------------------
16,977 (4,525) 77,992 31,112
--------------------- -------------------
Recap of Grand Total:
Real Estate Groups
Current 14,038 (5,308) 10,847 1,919
Deferred (159) 317 65,790 32,548
--------------------- -------------------
13,879 (4,991) 76,637 34,467
Non-Real Estate Groups
Current (7,726) 2,130 (10,846) (1,934)
Deferred 10,824 (1,664) 12,201 (1,421)
--------------------- -------------------
3,098 466 1,355 (3,355)
--------------------- -------------------
Grand Total $16,977 $(4,525) $77,992 $31,112
===================== ===================
Development Pipeline
January 31, 2005
2004 Openings / Acquisitions (10)
Cost at
Cost at Pro-
Full Rata
Pro- Con- Total Share
Dev Date Legal Rata solid- Cost (Non-
(D) Opened/ Owner- % ation at GAAP Square Feet/
Property/ Acq Ac- ship% (l) (GAAP) 100% (b) Number
Location (A) quired (l)(1) (2) (a) (3) (2)X(3) of Units
- ------------------------------------ ---------------------------------
(in millions)
---------------------
Retail
Centers:
Brooklyn
Commons/
Brooklyn,
NY D Q2-04 70.0% 100.0% $21.5 $21.5 $21.5 151,000
Atlantic
Terminal/
Brooklyn,
NY D Q2-04 70.0% 100.0% 90.1 90.1 90.1 373,000
Quartermaster
Plaza/
Phila-
delphia, PA D Q3-04 70.0% 100.0% 69.7 69.7 69.7 459,000
Victoria
Gardens/
Rancho
Cucamonga,
CA D Q3-04 80.0% 80.0% 183.6 183.6 146.9 1,156,000(t)
-------------------------------
$364.9 $364.9 $328.2 2,139,000
---------------------==========
Office:
2 Hanson
Place
(Atlantic
Terminal)/
Brooklyn,
NY D Q2-04 70.0% 100.0% $107.4 $107.4 $107.4 399,000
Twelve
MetroTech
Center (330
Jay Street)/
Brooklyn,
NY D Q4-04 80.0% 80.0% 52.1 52.1 41.7 177,000(g)
University
of Penn-
sylvania
(m)/
Phila-
delphia, PA A Q4-04 100.0% 100.0% 56.0 56.0 56.0 123,000
-------------------------------
$215.5 $215.5 $205.1 699,000
---------------------==========
Residential:
East 29th
Avenue Town
Center/
Botanica/
Denver, CO D Q1-04 90.0% 90.0% $40.3 $40.3 $36.3 144(h)
Sterling
Glen of Rye
Brook(i)
(o)/
Rye Brook,
NY D Q1-04 40.0% 40.0% 57.1 57.1 22.8 166
Emerald
Palms
Expansion/
Miami, FL D Q2-04 100.0% 100.0% 9.2 9.2 9.2 86
-------------------------------
$106.6 $106.6 $68.3 396
---------------------==========
Total 2004
Openings /
Acquisitions
(b)(d) $687.0 $687.0 $601.6
=====================
- ----------------------------------------------------------------------
Opened in '04/Total
-------------------
Residential
Phased-In
Units(c)(e):
Settler's
Landing at
Greentree/
Streets-
boro, OH D 2001-04 50.0% 50.0% $0.0 $26.6 $13.3 104/408
Eaton Ridge/
Sagamore
Hills, OH D 2002-04 50.0% 50.0% 0.0 14.4 7.2 36/260
Newport
Landing/
Coventry,
OH D 2002-05 50.0% 50.0% 0.0 16.0 8.0 48/336
Woodgate/
Evergreen
Farms/
Olmsted
Township,
OH D 2004-07 33.0% 33.0% 0.0 22.9 7.6 120/348
-------------------------------
Total(b)(k) $0.0 $79.9 $36.1 308/1,352
=================================
- --------------------------------------------------------------------
See attached 2004 footnotes.
Development Pipeline
January 31, 2005
Under Construction (17)
Cost at Cost at
Full Pro-Rata
Anti- Pro- Con- Share
Prop- Dev cipat- Legal Rata solid- Total (Non- Square Pre-
erty/ (D) ed Owner- % ation Cost GAAP) Feet/ Leased
Loca- Acq Open- ship% (l) (GAAP) at 100% (b) Number (Wtd.
tion (A) ing (l)(1) (2) (a) (3) (2)X(3) of Units Avg.)
- ----------------------------- --------------------------------- ------
(in millions)
------------------------
Retail
Centers:
Hispanic
Retail
Group-
Gigante
(c)/
Ingle-
wood,
CA D Q1-05 19.0% 19.0% $0.0 $9.6 $1.8 53,000 100%
Saddle
Rock/
Aurora,
CO D Q1-05 80.0% 100.0% 31.8 31.8 31.8 359,000 33%
Simi
Valley
Town
Center/
Simi
Valley,
CA D Q3-05 85.0% 100.0% 133.9 133.9 133.9 600,000 75%
Short Pump
Expansion/
Richmond,
VA D Q3-05 50.0% 100.0% 27.0 27.0 27.0 88,000 73%
Northfield
at
Stapleton/
Denver,
CO D Q3-06 90.0% 90.0% 164.9 164.9 148.4 1,142,000(s) 52%
San
Francisco
Centre
(c)(n)/
San
Francisco,
CA D Q3-06 50.0% 50.0% 0.0 416.2 208.1 964,000(u) 8%
----------------------------------
$357.6 $783.4 $551.0 3,206,000 42%
----------------------------------
Office:
New York
Times(c)/
Manhattan,
NY D Q2-07 28.0% 40.0% $0.0 $415.0 $166.0 734,000 0%
----------------------------------
$0.0 $415.0 $166.0 734,000 0%
-------------------------=========
Residential:
23 Sidney
Street/
Cambridge,
MA D Q1-05 100.0% 100.0% $17.9 $17.9 $17.9 51
Metro 417
(r)/ Los
Angeles,
CA D Q1-05 100.0% 100.0% 56.9 56.9 56.9 277
Metro-
politan
Lofts(c)/
Los
Angeles,
CA D Q1-05 50.0% 50.0% 0.0 62.8 31.4 264
Ashton
Mill/
Provi-
dence,
RI D Q1-05 100.0% 100.0% 28.4 28.4 28.4 193
Sterling
Glen of
Lynbrook
(i)(p)/
Lynbrook,
NY D Q2-05 80.0% 80.0% 27.4 27.4 21.9 100
100
Lands-
downe/
Cam-
bridge,
MA D Q3-05 100.0% 100.0% 63.9 63.9 63.9 203
Central
Station
Apartments/
Chicago,
IL D Q1-06 100.0% 100.0% 115.9 115.9 115.9 502
Sterling
Glen of
Roslyn
(q)(i)/
Roslyn,
NY D Q2-06 80.0% 80.0% 74.0 74.0 59.2 158
Ohana
Military
Commun-
ities
(c)/
Honolulu,
HI D Q1-08 7.0% 7.0% 0.0 316.5 22.2 1,952
----------------------------------
$384.4 $763.7 $417.7 3,700
-------------------------=========
Condominiums:
1100
Wilshire
Condo-
miniums
(c)/
Los
Angeles,
CA D Q2-05 40.0% 40.0% $0.0 $117.0 $46.8 228
----------------------------------
$0.0 $117.0 $46.8 228
-------------------------=========
Total Under
Construction
(b)(j) $742.0 $2,079.1 $1,181.5
========================
LESS: Above
Properties to
be sold as
condominiums $ 0.0 $ 117.0 $ 46.8
------------------------
Under Construction
less Condos $742.0 $1,962.1 $1,134.7
========================
- ----------------------------------------------------------------------
Residential Under
Phased-In Units Under Const./
Construction(c)(e): Total
-------
Arbor Glen/
Twinsburg,
OH 2004-07 50.0% 50.0% $0.0 $18.4 $9.2 144/288
Newport
Landing/
Coventry,
OH 2002-05 50.0% 50.0% 0.0 16.0 8.0 60/336
Woodgate/
Evergreen
Farms/
Olmsted
Township,
OH 2004-07 33.0% 33.0% 0.0 22.9 7.6 108/348
Pine Ridge
Expansion/
Willoughby,
OH 2005-06 50.0% 50.0% 0.0 16.4 8.2 162/162
----------------------------------
Total(b)(f) $0.0 $73.7 $33.0 474/1,134
==================================
- ----------------------------------------------------------------------
See attached 2004 footnotes.
Development Pipeline
2004 FOOTNOTES
- ----------------------------------------------------------------------
(a) Amounts are presented on the full consolidation method of
accounting, a GAAP measure. Under full consolidation, costs are
reported as consolidated at 100 percent if we are deemed to have
control or to be the primary beneficiary of our investments in the
variable interest entity ("VIE").
(b) Cost at Pro-rata Share represents Forest City's share of cost,
based on the Company's pro-rata ownership of each property (a
Non-GAAP measure). Under the pro-rata consolidation method of
accounting the Company determines its pro-rata share by
multiplying its pro-rata ownership by the total cost of the
applicable property.
(c) Reported under the equity method of accounting. This method
represents a GAAP measure for investments in which the Company
is not deemed to have control or to be the primary beneficiary of
our investments in a VIE.
(d) The difference between the full consolidation amount (GAAP) of
$687.0 million of cost to the Company's pro-rata share (a non-
GAAP measure) of $601.6 million of cost consists of a reduction
to full consolidation for minority interest of $85.4 million of
cost and the addition of its share of cost for unconsolidated
investments of $0.0 million.
(e) Phased-in openings. Costs are representative of the total project.
(f) The difference between the full consolidation amount (GAAP) of
$0.0 million of cost to the Company's pro-rata share (a non-GAAP
measure) of $33.0 million of cost consists of the Company's share
of cost for unconsolidated investments of $33.0 million.
(g) Represents the Company's portion of this 1.1 million square-foot
office condominium.
(h) Project also includes 141,000 total square feet (57,000 square
feet owned/managed by FCE) of retail and 34,000 square feet of
office space.
(i) Supported-living property.
(j) The difference between the full consolidation amount (GAAP) of
$742.0 million of cost to the Company's pro-rata share (a non-
GAAP measure) of $1,181.5 million of cost consists of a reduction
to full consolidation for minority interest of $36.8 million of
cost and the addition of its share of cost for unconsolidated
investments of $476.3 million.
(k) The difference between the full consolidation amount (GAAP) of
$0.0 million of cost to the Company's pro-rata share (a non-GAAP
measure) of $36.1 million of cost consists of its share of cost
for unconsolidated investments of $36.1 million.
(l) As is customary within the real estate industry, the Company
invests in certain real estate projects through joint ventures.
For these projects, the Company provides funding for certain of
its partners' equity contributions. The Company consolidates its
investments in these projects in accordance with FIN No. 46(R) at
a consolidation percentage that is reflected in the Pro-Rata %
column. These advances entitle the Company to a preferred return
on investment, which is payable from cash flows of each
respective property. At the point the Company is no longer
entitled to a preferred return on a particular joint venture
because the partner's advance has been repaid in full, the
Company's net assets will be adjusted to its intended ownership
percentage (reflected in the Legal Ownership % column) by
recording a minority interest to reflect the amount of the
partner's claim on those net assets.
(m) The Company exercised its option to acquire this property in the
fourth quarter.
(n) This project will also include the acquisition of an adjacent
retail center totaling 508,000 square feet.
(o) Formerly Stone Gate at Bellefair.
(p) Formerly Tanglewood Crest.
(q) Formerly Bryant Landing.
(r) Formerly Subway Terminal.
(s) Includes 30,000 square feet of office space.
(t) Includes 45,000 square feet of office space.
(u) Includes 235,000 square feet of office space.
Net Operating Income (in Thousands)
- ----------------------------------------------------------------------
Fiscal Year Ended January 31, 2005
----------------------------------------------------
Plus
Unconsol-
idated Plus
Less Invest- Discon- Pro-Rata
Full Minority ments at tinued Consol-
Consolidation Interest Pro-Rata Operations idation
----------------------------------------------------
Commercial Group
Retail
Comparable $121,528 $15,805 $8,894 $- $114,617
------------------------------------------------------------------
Total 161,093 15,436 12,592 1,214 159,463
Office Buildings
Comparable 136,256 20,436 2,010 - 117,830
------------------------------------------------------------------
Total 199,411 38,180 4,667 2,165 168,063
Hotels
Comparable 20,751 3,646 2,473 - 19,578
------------------------------------------------------------------
Total 24,201 2,708 2,473 - 23,966
Other (3,590) 604 1,002 - (3,192)
Total Commercial Group
Comparable 278,535 39,887 13,377 - 252,025
------------------------------------------------------------------
Total 381,115 56,928 20,734 3,379 348,300
Residential Group
Comparable 85,271 4,257 12,196 - 93,210
------------------------------------------------------------------
Total 102,038 4,516 28,918 5,178 131,618
Total Real Estate Groups
Comparable 363,806 44,144 25,573 - 345,235
------------------------------------------------------------------
Total 483,153 61,444 49,652 8,557 479,918
Land Development Group 86,982 6,344 548 - 81,186
Lumber Group - - - - -
The Nets (10,889) - 518 - (10,371)
Corporate Group (35,503) - - - (35,503)
- ----------------------------------------------------------------------
Grand Total $523,743 $67,788 $50,718 $8,557 $515,230
- ----------------------------------------------------------------------
Fiscal Year Ended January 31, 2004
----------------------------------------------------
Plus
Unconsol-
idated Plus
Less Invest- Discon- Pro-Rata
Full Minority ments at tinued Consol-
Consolidation Interest Pro-Rata Operations idation
----------------------------------------------------
Commercial Group
Retail
Comparable $123,220 $19,316 $9,228 $- $113,132
------------------------------------------------------------------
Total 133,109 22,790 21,047 2,398 133,764
Office Buildings
Comparable 133,652 20,569 1,981 - 115,064
------------------------------------------------------------------
Total 156,768 28,567 4,685 3,827 136,713
Hotels
Comparable 14,190 1,738 2,532 - 14,984
------------------------------------------------------------------
Total 23,075 5,471 2,532 - 20,136
Other (2,123) (315) 7,278 - 5,470
Total Commercial Group
Comparable 271,062 41,623 13,741 - 243,180
------------------------------------------------------------------
Total 310,829 56,513 35,542 6,225 296,083
Residential Group
Comparable 85,878 1,793 10,934 - 95,019
------------------------------------------------------------------
Total 91,572 2,025 22,169 9,175 120,891
Total Real Estate Groups
Comparable 356,940 43,416 24,675 - 338,199
------------------------------------------------------------------
Total 402,401 58,538 57,711 15,400 416,974
Land Development Group 41,862 2,151 5,388 - 45,099
Lumber Group - - - - -
The Nets - - - - -
Corporate Group (25,972) - - - (25,972)
- ----------------------------------------------------------------------
Grand Total $418,291 $60,689 $63,099 $15,400 $436,101
- ----------------------------------------------------------------------
-------------------------------------------
% Change
-------------------------------------------
Full Consolidation Pro-Rata Consolidation
-------------------------------------------
Commercial Group
Retail
Comparable -1.4% 1.3%
------------------------------------------------------------------
Total
Office Buildings
Comparable 1.9% 2.4%
------------------------------------------------------------------
Total
Hotels
Comparable 46.2% 30.7%
------------------------------------------------------------------
Total
Other
Total Commercial Group
Comparable 2.8% 3.6%
------------------------------------------------------------------
Total
Residential Group
Comparable -0.7% -1.9%
------------------------------------------------------------------
Total
Total Real Estate Groups
Comparable 1.9% 2.1%
------------------------------------------------------------------
Total
Land Development Group
Lumber Group
The Nets
Corporate Group
- ----------------------------------------------------------------------
Grand Total
- ----------------------------------------------------------------------
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(GAAP) (in thousands):
Year Ended January 31, 2005
------------------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Invest- Discont- Pro-Rata
Consol- Minority ments at inued Consol-
idation Interest Pro-Rata Operations idation
------------------------------------------------------
Revenues from
real estate
operations $1,041,851 $143,894 $260,844 $17,226 $1,176,027
Exclude
straight-line
rent
adjustment(1) (12,748) - - (849) (13,597)
------------------------------------------------------
Adjusted
revenues 1,029,103 143,894 260,844 16,377 1,162,430
Operating
expenses 608,565 80,252 155,898 8,062 692,273
Add back
depreciation
and
amortization
for non-Real
Estate
Groups(b) 2,142 - 4,177 - 6,319
Exclude
straight-line
rent
adjustment(2) (10,301) - - (14) (10,315)
------------------------------------------------------
Adjusted
operating
expenses 600,406 80,252 160,075 8,048 688,277
Add interest
income 44,186 4,146 550 228 40,818
Add equity in
earnings of
unconsolidated
entities 54,392 - (54,370) - 22
Remove (gain)
loss on
disposition
recorded on
equity method (31,996) - 31,996 - -
Add back equity
method
depreciation
and
amortization
expense (see
below) 28,464 - (28,227) - 237
------------------------------------------------------
Net Operating
Income 523,743 67,788 50,718 8,557 515,230
Interest
expense,
including
early
extinguishment
of debt (253,410) (28,579) (50,718) (7,584) (283,133)
Gain (loss) on
disposition of
equity method
rental
properties(c) 31,996 - - - 31,996
(Loss) gain on
disposition of
rental
properties and
other
investments 438 - - 67,645 68,083
Provision for
decline in
real estate - - - - -
Depreciation
and
amortization -
Real Estate
Groups(a) (174,274) (14,115) (28,227) (2,686) (191,072)
Straight-line
rent
adjustment(1)
+ (2) 2,447 - - 835 3,282
Equity method
depreciation
and
amortization
expense (see
above) (28,464) - 28,227 - (237)
------------------------------------------------------
Earnings before
income taxes 102,476 25,094 - 66,767 144,149
Income tax
provision (37,326) - - (26,402) (63,728)
------------------------------------------------------
Earnings before
minority
interest,
discontinued
operations and
cumulative
effect of
change in
accounting
principle 65,150 25,094 - 40,365 80,421
Minority
Interest (25,094) (25,094) - - -
------------------------------------------------------
Earnings from
continuing
operations 40,056 - - 40,365 80,421
Discontinued
operations,
net of tax and
minority
interest:
Operating
earnings
from Lumber
Group 4,545 - - - 4,545
Operating
(loss)
earnings
from rental
properties (528) - - 528 -
Gain on
disposition
of Lumber
Group 11,501 - - - 11,501
Gain on
disposition
of rental
properties 40,893 - - (40,893) -
------------------------------------------------------
56,411 - - (40,365) 16,046
------------------------------------------------------
Cumulative
effect of
change in
accounting
principle, net
of tax (11,261) - - - (11,261)
------------------------------------------------------
------------------------------------------------------
Net earnings $85,206 $- $- $- $85,206
======================================================
(a)Depreciation
and
amortization -
Real Estate
Groups $174,274 $14,115 $28,227 $2,686 $191,072
(b)Depreciation
and
amortization -
Non-Real
Estate Groups 2,142 - 4,177 - 6,319
------------------------------------------------------
Total
depreciation
and
amortization $176,416 $14,115 $32,404 $2,686 $197,391
======================================================
Note c) Properties accounted for on the equity method do not meet the
definition of a component of an entity under SFAS No. 144 and
therefore are reported in continuing operations when sold. For the
year ended January 31, 2005, three equity method investments were sold
including Chapel Hill Mall, Chapel Hill Suburban and Manhattan Town
Center Mall, resulting in a gain on disposition of $31,996. Also, for
the year ended January 31, 2004, one equity method investment,
Waterford Village, was sold resulting in a loss on disposition of
$3,573. These were included in equity in earnings of unconsolidated
real estate entities in the Consolidated Statement of Earnings, and
therefore, is included in Earnings from Continuing Operations.
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(GAAP) (in thousands):
Year Ended January 31, 2004
--------------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Invest- Discont- Pro-Rata
Consol- Minority ments at inued Consol-
idation Interest Pro-Rata Operations idation
--------------------------------------------------
Revenues from real
estate operations $848,121 $147,393 $260,215 $30,589 $991,532
Exclude straight-
line rent
adjustment(1) (11,891) - - (793) (12,684)
--------------------------------------------------
Adjusted revenues 836,230 147,393 260,215 29,796 978,848
Operating expenses 514,934 86,930 144,552 14,521 587,077
Add back
depreciation and
amortization for
non-Real Estate
Groups(b) 2,012 - 241 - 2,253
Exclude straight-
line rent
adjustment(2) (5,596) - - (28) (5,624)
--------------------------------------------------
Adjusted operating
expenses 511,350 86,930 144,793 14,493 583,706
Add interest income 22,712 226 274 97 22,857
Add equity in
earnings of
unconsolidated
entities 31,751 - (15,428) - 16,323
Remove (gain) loss
on disposition
recorded on equity
method 3,573 - (3,573) - -
Add back equity
method
depreciation and
amortization
expense (see
below) 35,375 - (33,596) - 1,779
--------------------------------------------------
Net Operating
Income 418,291 60,689 63,099 15,400 436,101
Interest expense,
including early
extinguishment of
debt (196,870) (32,329) (58,478) (9,087)(232,106)
Gain (loss) on
disposition
of equity method
rental
properties(c) (3,573) - - - (3,573)
(Loss) gain on
disposition of
rental properties
and other
investments (171) - - 6,446 6,275
Provision for
decline in real
estate (2,134) (153) (4,621) (773) (7,375)
Depreciation and
amortization -
Real Estate
Groups(a) (119,416) (18,951) (33,596) (4,678)(138,739)
Straight-line rent
adjustment(1) +
(2) 6,295 - - 765 7,060
Equity method
depreciation and
amortization
expense (see
above) (35,375) - 33,596 - (1,779)
--------------------------------------------------
Earnings before
income taxes 67,047 9,256 - 8,073 65,864
Income tax
provision (23,957) - - (2,939) (26,896)
--------------------------------------------------
Earnings before
minority interest,
discontinued
operations and
cumulative effect
of change in
accounting
principle 43,090 9,256 - 5,134 38,968
Minority Interest (9,256) (9,256) - - -
--------------------------------------------------
Earnings from
continuing
operations 33,834 - - 5,134 38,968
Discontinued
operations, net of
tax and minority
interest:
Operating
earnings from
Lumber Group 3,701 - - - 3,701
Operating
(loss)
earnings from
rental
properties 1,237 - - (1,237) -
Gain on
disposition
of Lumber
Group - - - - -
Gain on
disposition
of rental
properties 3,897 - - (3,897) -
--------------------------------------------------
8,835 - - (5,134) 3,701
--------------------------------------------------
Cumulative effect
of change in
accounting
principle, net of
tax - - - - -
--------------------------------------------------
--------------------------------------------------
Net earnings $42,669 $- $- $- $42,669
==================================================
(a) Depreciation
and amortization -
Real Estate
Groups $119,416 $18,951 $33,596 $4,678 $138,739
(b) Depreciation
and amortization -
Non-Real Estate
Groups 2,012 - 241 - 2,253
--------------------------------------------------
Total
depreciation
and
amortization $121,428 $18,951 $33,837 $4,678 $140,992
==================================================
Note c) Properties accounted for on the equity method do not meet the
definition of a component of an entity under SFAS No. 144 and
therefore are reported in continuing operations when sold. For the
year ended January 31, 2005, three equity method investments were sold
including Chapel Hill Mall, Chapel Hill Suburban and Manhattan Town
Center Mall, resulting in a gain on disposition of $31,996. Also, for
the year ended January 31, 2004, one equity method investment,
Waterford Village, was sold resulting in a loss on disposition of
$3,573. These were included in equity in earnings of unconsolidated
real estate entities in the Consolidated Statement of Earnings, and
therefore, is included in Earnings from Continuing Operations.
CONTACT: Forest City Enterprises, Inc.
Thomas G. Smith or Thomas T. Kmiecik, 216-621-6060
On the Web: www.forestcity.net