Exhibit 99.1
Forest City Reports Third-Quarter and Year-to-Date Financial Results
CLEVELAND--(BUSINESS WIRE)--Dec. 7, 2006--Forest City Enterprises,
Inc. (NYSE:FCEA) and (NYSE:FCEB) today announced revenues, net
earnings and EBDT for the third quarter and nine months ended October
31, 2006.
EBDT (Earnings Before Depreciation, Amortization and Deferred
Taxes) for the third quarter was $57.4 million, or $0.56 per share,
compared with last year's third-quarter EBDT of $64.3 million, or
$0.63 per share. EBDT for the nine months ended October 31, 2006 was
$177.4 million, or $1.72 per share, compared with last year's $196.8
million, or $1.92 per share. For an explanation of the variances, see
"Discussion of Results" below.
Fiscal third-quarter net earnings were $45.9 million, or $0.45 per
share, compared with $12.9 million, or $0.13 per share, in the prior
year. Net earnings for the nine months were $106.6 million, or $1.03
per share, compared with $55.3 million, or $0.54 per share, in 2005.
The increase in net earnings for the quarter and nine months was
primarily attributable to the gain on sale of rental properties.
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.
Third-quarter consolidated revenues were $278.7 million compared
with $261.0 million last year. Nine-month revenues were $821.4 million
compared with $827.3 million for the nine months ended October 31,
2005.
Discussion of Results
Charles A. Ratner, president and chief executive officer of Forest
City Enterprises, said, "Our third-quarter and year-to-date financial
performance was moderately below our expectations primarily due to the
timing of certain transactions and the softness in our land business,
but we still expect our fourth quarter to be strong. Negatively
impacting EBDT were the softness in land sales (down $6.6 million for
the quarter and $23.8 million YTD), the consequences of our interest
rate hedging transactions ($4.8 million for the quarter and $11.2
million YTD), and increased corporate interest expense ($1.6 million
for the quarter and $2.8 million YTD). Land sales for the first three
quarters were affected by both lower volume and delayed timing;
however, we expect the fourth quarter for land sales to be comparable
to, or greater than, last year's fourth quarter. Our decision to
purchase forward swaps to hedge our interest rate exposure on certain
upcoming financings impacted our EBDT, but it was the right business
decision because it enabled us to lock in favorable, long-term fixed
rates."
Ratner continued, "We are encouraged by the strong performance of
our commercial and residential operating portfolios, as evidenced by
comparable NOI growth, improved occupancies, and NOI generated from
new property openings. The 'lumpiness' inherent in our business
quarter-to-quarter is not reflective of long-term financial results.
We are confident that the strength in our operating portfolio will
continue and, when combined with the timing of certain transactions
and fourth-quarter land sales at or above last year, will result in a
record year for EBDT."
Comparable property net operating income (NOI) increased 5.3
percent during the third quarter compared with the same period a year
ago. The retail and office portfolios were both up 4.4 percent, and
comparable property NOI in the residential portfolio increased 7.4
percent.
Comparable property NOI, defined as NOI from properties operated
in both 2006 and 2005, is a non-GAAP financial measure, and is based
on the pro-rata consolidation method, also a non-GAAP financial
measure. Included in this release is a schedule that presents
comparable property NOI on the full consolidation method.
Year-to-date 2006 comparable occupancies were up overall compared
with the same period a year ago. Comparable retail occupancies were
94.1 percent in 2006 compared with 93.0 percent in 2005. Office
occupancies were 93.2 percent compared with 92.4 percent last year.
Comparable occupancies in the residential business increased to 95.0
percent compared with 93.1 percent last year.
The Company has a substantial inventory of land in good markets
throughout the country. The Company's land sales were impacted by
slowing demand from home buyers at Stapleton, Central Station and
other core markets for the land business, reflecting conditions
throughout the housing industry that are anticipated to continue into
2007. "We've been in the land business for 50 years and understand its
volatility as compared to the rental real estate business. Our
portfolio strategy focused on diverse products and markets enables us
to use cyclical strengths in certain businesses to offset weaknesses
in others. This portfolio diversification continues to allow us to
consistently increase cash flow and enhance shareholder value," Ratner
said.
Milestones
Capital Transactions and Financing Activity
In the third quarter, the Company completed the sale of $287.5
million of Puttable Equity-Linked Senior Notes due 2011 to qualified
institutional buyers and the concurrent repurchase of $25 million of
Forest City Class A common stock. The notes will pay interest
semiannually at a rate of 3.625 percent per annum and have a put value
premium of 25 percent. In connection with the offering, Forest City
entered into a puttable note hedge transaction and warrant transaction
with several counterparties. These transactions are expected to
increase the effective put exercise price, which represents a 40
percent premium. The Company used the net proceeds from the offering
to repurchase Class A common stock, to pay the net cost of a puttable
note hedge transaction and warrant transaction, to repay nonrecourse
debt outstanding under the Company's $600 million revolving credit
facility, and for general corporate purposes.
During the first nine months of 2006, Forest City closed on
transactions totaling $885.5 million in nonrecourse mortgage
financings, including $465.6 million in refinancings, $207.4 million
in development and acquisitions, and $212.5 million in loan extensions
and additional fundings.
As of October 31, 2006, the Company's weighted average cost of
mortgage debt increased to 6.09 percent from 5.92 percent at October
31, 2005, primarily due to the general increase in short-term interest
rates. Fixed-rate mortgage debt, which represented 71 percent of the
Company's total nonrecourse mortgage debt, decreased from 6.33 percent
at October 31, 2005 to 6.20 percent at October 31, 2006. The
variable-rate mortgage debt increased from 5.02 percent at October 31,
2005 to 5.84 percent at October 31, 2006.
Acquisitions
In the fourth quarter, Forest City closed on the previously
announced restructuring of the Forest City Ratner Companies (FCRC)
portfolio that was initiated during the third quarter. As a result,
FCRC President and CEO Bruce Ratner has contributed his ownership
interests in 30 operating assets and certain service companies to a
newly formed limited liability company, in exchange for cash and units
in the new company which are convertible into an equal number of
shares of Class A common stock or cash after one year. The two parties
have agreed on a methodology to separately value seven projects that
are currently under active development. Beyond these seven projects,
Forest City Enterprises will own 100 percent of all future New York
developments. On November 9, after obtaining approval from the
National Basketball Association, Ratner transferred his interest in
the Nets basketball franchise to the Company in a separate
transaction. Ratner will continue to be Chairman of the Nets. The
Company will conduct its New York operations in the same manner as it
has for the past 20 years under the leadership of Bruce Ratner. The
restructuring is expected to be slightly dilutive to Forest City's
EBDT per share in 2006, but accretive overall.
During the third quarter, Forest City completed the acquisition of
ING Real Estate's interest in the 52-story, 1.5-million-square-foot
New York Times Building. ING served as a financial partner and helped
to share the risk during the development stage of the project, which
is on schedule to open in 2007. Also during the quarter, the Company
signed the building's largest tenant, the global asset management firm
Legg Mason, which will lease approximately 200,000 of the 700,000
square feet that Forest City owns. As a result, more than 75 percent
of the building space owned by Forest City has been leased.
Also during the third quarter, Forest City acquired its partner's
interest in Galleria at Sunset, a 1-million-square-foot retail center
in Henderson, Nevada. The Company now owns 100 percent of this
property, which is scheduled for an expansion to capitalize on the
local market's favorable demographics and the center's strong sales of
nearly $500 per square foot.
Dispositions
Forest City continues to take advantage of favorable market
conditions and high valuations to dispose of properties. The most
recent example is Battery Park City, which consists of a 463-room
Embassy Suites Hotel and approximately 116,000 square feet of retail
in Manhattan. Forest City sold the property for $295 million,
including $486,000 per hotel room, all total generating a pre-tax gain
of $82.6 million and $98.4 million in cash proceeds. During the first
quarter, the Company sold the Hilton Times Square Hotel in New York
City for $242 million, or $545,000 per room, generating a pre-tax gain
of $79 million and $83 million in cash proceeds.
Project Openings
Through the first three fiscal quarters, Forest City has opened or
acquired nine projects at a total cost of $660.1 million at the
Company's pro-rata share and $327.5 million on a full consolidation
basis. During the third quarter, the Company opened two large
retail/mixed-use projects: the 1.5-million-square-foot Westfield San
Francisco Centre retail/office project in downtown San Francisco; and
the 1.2-million-square-foot Northfield open-air regional lifestyle
center at the Company's Stapleton mixed-use project in Denver.
Owned and developed in a 50/50 partnership with Westfield, the new
San Francisco Centre is one of the largest urban retail centers west
of the Mississippi. The new San Francisco Centre connects the
redeveloped Emporium department store building to the original San
Francisco Centre, adding 1 million square feet of new downtown retail
and office space to the existing 500,000-square-foot center. The
center opened more than 90 percent leased and includes a
338,000-square-foot Bloomingdale's store and 312,000-square-foot
Nordstrom. The center also features some 170 specialty stores, 14
casual restaurants, a gourmet grocery store, a 16,000-square-foot spa
and 235,000 square feet of Class A office space.
Ratner said, "The new San Francisco Centre is a one-of-a-kind
project that is destined to become known worldwide as a premier
shopping and entertainment destination. Here, we have 1.5 million
square feet of commercial space in the heart of a great American city.
It combines the modern architecture of Bloomingdale's and a five-level
upscale retail center with the restored historic gold dome, which has
been a signature of the Emporium building since the early 1900s. This
is clearly a case where the whole is greater than the sum of the
parts. The center is experiencing heavy foot-traffic since its opening
on September 25, and preliminary reports from tenants indicate that
sales are above expectations."
In Denver, the recently completed "main street" phase of
Northfield Stapleton is anchored by a 140,000-square-foot Macy's, the
first new Macy's store in Colorado. SuperTarget, Circuit City,
Colorado's first Bass Pro Shops Outdoor World, and an 18-screen movie
theatre previously opened as anchors. Northfield is 1.2 million square
feet, bringing Stapleton's total retail space to 2 million square feet
- - all of which has been developed within the last five years. During
the October grand opening of Northfield, Stapleton received a Silver
Certification from the U.S. Green Building Council, which recognized
the environmentally sustainable construction and energy-saving aspects
of the project.
In addition, Forest City signed an agreement with the Fitzsimons
Redevelopment Authority to develop the 160-acre Fitzsimons life
sciences office park adjacent to Stapleton. Located on the site of a
former Army medical center, the offices and research and development
facilities for the life sciences industry will be built out over the
next 20 years or more, with the first buildings expected to be
completed by the end of 2008.
Development Pipeline Highlights
A schedule of the Company's project openings and acquisitions, and
the pipeline of projects under construction, is included in this news
release. The schedule includes comparable project costs on both a full
consolidation and pro-rata share basis. Described below are several of
the Company's projects under construction or under development.
Projects Under Construction
At the end of the third quarter, Forest City's pipeline included
19 projects under construction or to be acquired, representing a total
cost of $1.8 billion at the Company's pro-rata share and $1.3 billion
on a full consolidation basis.
In the fourth quarter, Forest City expects to open the Edgeworth
Building, a former tobacco factory that is being transformed into
142,000 square feet of Class A office space. Edgeworth will be Forest
City's first office building at its Tobacco Row mixed-use development
in the historic riverfront district of Richmond, Virginia. In
California, Forest City recently received its certificate of occupancy
at 1100 Wilshire and the first tenants have begun to move in during
the fourth quarter. The 228-unit residential condominium project in
downtown Los Angeles is a 37-story adaptive re-use of a 1980s-era
office building.
Forest City has three large open-air regional lifestyle centers
currently under construction and scheduled to open during 2007 and
2008:
-- Orchard Town Center, a Westminster, Colorado
970,000-square-foot shopping center where JCPenney and Target
have already opened and Macy's and AMC Theatres will be part
of next year's grand opening
-- Promenade Bolingbrook, a 743,000-square-foot retail center in
suburban Chicago where Bass Pro Shops and Marshall Field's
will join IKEA as anchors
-- East River Plaza, a 514,000-square-foot anchored retail center
on the site of a former industrial plant in Manhattan
Residential projects under construction and scheduled to open in
2007 include:
-- Sterling Glen of Roslyn, a 158-unit supported-living project
that brings to 15 the number of senior supported-living
properties in the Company's portfolio
-- Stratford Crossing, a 348-unit apartment community in
Wadsworth, Ohio
-- Mercury, a 238-unit, office-building-to-condominium conversion
located in the Koreatown neighborhood of Los Angeles
Projects Under Development
At the end of the third quarter, Forest City had more than 25
projects under development, representing more than $2 billion of cost
at the Company's pro-rata share and on a full consolidation basis.
Among the projects under development and scheduled to begin
construction within the next nine months are:
-- The Shops at Wiregrass, a 525,000-square-foot anchored retail
center in the Tampa area
-- Summit at Lehigh Valley, a mixed-use project in eastern
Pennsylvania, which includes a 492,000-square-foot lifestyle
center
-- Beekman, which will feature more than 800 residential units
and an elementary school in Manhattan
During the third quarter, Forest City received city approval to
develop the mixed-use Village at Gulfstream Park project in Hallandale
Beach, Florida, adjacent to an expanded and renovated horse racing
track. Construction on the initial retail phase of the multi-year
development is scheduled to begin in 2007.
In Washington D.C., Forest City announced that two local
government agencies have agreed to lease approximately 500,000 square
feet in two new office buildings at the Company's Waterfront mixed-use
redevelopment project. Occupancy by the two agencies - the District's
Office of the Chief Financial Officer and the Department of Consumer
and Regulatory Affairs - is expected to occur in 2009. Waterfront
involves the redevelopment of the former Waterside Mall to create up
to 2 million square feet of commercial space, as well as residential
units.
Military Housing
Through the Company's Forest City Military Communities affiliate,
Forest City's involvement in military family housing has continued to
grow in 2006. In Hawaii, Forest City is working with both the Navy and
the Marines. The Company is responsible for owning, developing and
managing more than 1,900 homes for the Navy in Phase I and another
2,500 homes in the newly awarded Phase II at communities in and around
Pearl Harbor. Forest City was also awarded a contract for the Marines
to build and renovate more than 1,100 homes in Hawaii. In the North
Shore suburbs of Chicago, the Company is responsible for the
demolition, renovation, new construction and management of
approximately 1,600 Navy Great Lakes homes for military families.
During the third quarter, Forest City was awarded exclusive
negotiation rights for military housing at the United States Air Force
Academy. Forest City plans to team with Hunt Building Corporation to
redevelop more than 400 family homes at the Academy's Pine Valley and
Douglass Valley housing areas in Colorado Springs, Colorado. Forest
City expects to take responsibility for owning and managing the
communities in early 2007.
In total, Forest City has committed to develop, own and manage
more than 7,700 military family housing units. "Military housing is a
great long-term value proposition for us and these transactions are
indicative of this growing portfolio," said Ratner.
Outlook
Ratner said, "We remain on target for a record year, our 27th
consecutive year of EBDT growth. We have a track record of past
successes and a strong pipeline of future opportunities, with more
than 40 projects under construction or under development. Once again,
our portfolio strategy of diverse products and markets is paying off.
Diversification enables us to use cyclical strengths in certain
businesses to offset weaknesses in others. Looking ahead to 2007, we
expect that land sales will continue to be soft. At the same time, our
operating portfolio and recently completed projects will be
significant growth drivers, resulting in another year of record EBDT
in 2007."
Corporate Description
Forest City Enterprises, Inc. is an $8.5 billion NYSE-listed
national real estate company. The Company is principally engaged in
the ownership, development, management and acquisition of commercial
and residential real estate and land throughout the United States.
Supplemental Package
Please refer to the Investor Relations section of the Company's
website at www.forestcity.net for a Supplemental Package, which the
Company will also furnish to the Securities and Exchange Commission on
Form 8-K. This Supplemental Package includes operating and financial
information for the quarter ended October 31, 2006, with
reconciliations of non-GAAP financial measures, such as EBDT,
comparable NOI and pro-rata financial statements, to their most
directly comparable GAAP financial measures.
EBDT
The Company uses an additional measure, along with net earnings,
to report its operating results. This non-GAAP measure, referred to as
Earnings Before Depreciation, Amortization and Deferred Taxes, is not
a measure of operating results or cash flows from operations as
defined by GAAP and may not be directly comparable to similarly titled
measures reported by other companies.
The Company believes that EBDT provides additional information
about its core operations and, along with net earnings, is necessary
to understand its operating results. EBDT is used by the chief
operating decision maker and management in assessing operating
performance and to consider capital requirements and allocation of
resources by segment and on a consolidated basis. The Company believes
EBDT is important to investors because it provides another method for
the investor to measure its long-term operating performance, as net
earnings can vary from year to year due to property dispositions,
acquisitions and other factors that have a short-term impact.
EBDT is defined as net earnings excluding the following items: i)
gain (loss) on disposition of rental properties, divisions and other
investments (net of tax); ii) the adjustment to recognize rental
revenues and rental expense using the straight-line method; iii)
non-cash charges from real estate operations of Forest City Rental
Properties Corporation, a wholly owned subsidiary of Forest City
Enterprises, Inc., for depreciation, amortization, 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.
EBDT is reconciled to net earnings, the most comparable financial
measure calculated in accordance with GAAP, in the table titled
Financial Highlights below and in the Company's Supplemental Package,
which the Company will also furnish to the SEC on Form 8-K. The
adjustment to recognize rental revenues and rental expenses on the
straight-line method is excluded because it is management's opinion
that rental revenues and expenses should be recognized when due from
the tenants or due to the landlord. The Company excludes depreciation
and amortization expense related to real estate operations from EBDT
because it believes the values of its properties, in general, have
appreciated over time in excess of their original cost. Deferred taxes
from real estate operations, which are the result of timing
differences of certain net expense items deducted in a future year for
federal income tax purposes, are excluded until the year in which they
are reflected in the Company's current tax provision. The provision
for decline in real estate is excluded from EBDT because it varies
from year to year based on factors unrelated to the Company's overall
financial performance and is related to the ultimate gain on
dispositions of operating properties. The Company's EBDT may not be
directly comparable to similarly titled measures reported by other
companies.
Pro-Rata Consolidation Method
This press release contains certain financial measures prepared in
accordance with GAAP under the full consolidation accounting method
and certain financial measures prepared in accordance with the
pro-rata consolidation method (non-GAAP). The Company presents certain
financial amounts under the pro-rata method because it believes this
information is useful to investors as this method reflects the manner
in which the Company operates its business. In line with industry
practice, the Company has made a large number of investments in which
its economic ownership is less than 100 percent as a means of
procuring opportunities and sharing risk. Under the pro-rata
consolidation method, the Company presents its investments
proportionate to its share of 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 or
management's intentions, hopes, beliefs, expectations or predictions
of the future are forward-looking statements. It is important to note
that the Company's actual results could differ materially from those
projected in such forward-looking statements. Additional information
concerning factors that could cause actual results to differ
materially from those in the forward-looking statements include, but
are not limited to, real estate development and investment risks,
economic conditions in the Company's core markets, reliance on major
tenants, the impact of terrorist acts, the Company's substantial
leverage and the ability to service debt, guarantees under the
Company's credit facility, changes in interest rates, continued
availability of tax-exempt government financing, the sustainability of
substantial operations at the subsidiary level, significant geographic
concentration, illiquidity of real estate investments, dependence on
rental income from real property, conflicts of interest, competition,
potential liability from syndicated properties, effects of uninsured
loss, environmental liabilities, partnership risks, litigation risks,
risks associated with an investment in a professional sports
franchise, and other risk factors as disclosed from time to time in
the Company's SEC filings, including, but not limited to, the
Company's Annual Report on Form 10-K for the fiscal year ended January
31, 2006.
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Nine Months Ended October 31, 2006 and 2005
(dollars in thousands, except per share data)
Three Months Ended, Increase
October 31, (Decrease)
2006 2005 Amount Percent
------------------------ ---------- -------
Operating Results:
Earnings (loss) from
continuing operations $ (6,836) $8,148 $ (14,984)
Discontinued operations,
net of tax and minority
interest(1) 52,711 4,756 47,955
------------------------ ----------
Net earnings $ 45,875 $12,904 $ 32,971
======================== ==========
Earnings Before
Depreciation,
Amortization and
Deferred Taxes
(EBDT)(2) $ 57,400 $64,250 $ (6,850) (10.7%)
======================== ==========
Reconciliation of Net
Earnings to Earnings
Before Depreciation,
Amortization
and Deferred
Taxes (EBDT)
(2):
Net Earnings $ 45,875 $12,904 $ 32,971
Depreciation and
amortization - Real
Estate Groups(5) 47,222 46,276 946
Amortization of
mortgage procurement
costs - Real Estate
Groups(5) 2,743 3,026 (283)
Deferred income tax
expense - Real Estate
Groups (6) 29,739 12,906 16,833
Deferred income tax
expense - Non-Real
Estate Groups:(6)
Gain on
disposition of
other
investments - - -
Current income tax
expense on non-
operating
earnings:(6)
Gain on
disposition of
other
investments - - -
Gain on
disposition
included in
discontinued
operations 17,227 - 17,227
Gain on
disposition of
equity method
rental
properties - 220 (220)
Straight-line rent
adjustment(3) (1,528) (1,200) (328)
Provision for decline
in real estate, net of
minority interest - 2,120 (2,120)
Provision for decline
in real estate of
equity method rental
properties - - -
Gain on disposition of
equity method rental
properties - (2,526) 2,526
Gain on disposition of
other investments - - -
Discontinued
operations:(1)
Gain on
disposition of
rental
properties (143,494) (9,476) (134,018)
Minority
interest - Gain
on disposition 59,616 - 59,616
------------------------ ----------
Earnings Before
Depreciation,
Amortization and
Deferred Taxes
(EBDT)(2) $ 57,400 $64,250 $ (6,850) (10.7%)
======================== ==========
Diluted Earnings per
Common Share:
Earnings (loss) from
continuing operations $ (0.07) $0.08 $ (0.15)
Discontinued operations,
net of tax and minority
interest(1) 0.52 0.05 0.47
------------------------ ----------
Net earnings $ 0.45 $0.13 $ 0.32
======================== ==========
Earnings Before
Depreciation,
Amortization and
Deferred Taxes
(EBDT)(2)(4) $ 0.56 $0.63 $ (0.07) (11.1%)
======================== ==========
Operating earnings, net
of tax (a non-GAAP
financial measure) $ (0.02) $0.09 $ (0.11)
Provision for decline in
real estate, net of tax - (0.02) 0.02
Gain on disposition of
rental properties and
other investments, net
of tax 1.09 0.07 1.02
Minority interest (0.62) (0.01) (0.61)
------------------------ ----------
Net earnings $ 0.45 $0.13 $ 0.32
======================== ==========
Diluted weighted average
shares outstanding(4) 101,680,649 102,675,753 (995,104)
======================== ==========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Nine Months Ended October 31, 2006 and 2005
(dollars in thousands, except per share data)
Nine Months Ended Increase
October 31, (Decrease)
2006 2005 Amount Percent
------------------------- ---------- -------
Operating Results:
Earnings (loss) from
continuing operations $ 1,056 $53,894 $ (52,838)
Discontinued operations,
net of tax and minority
interest(1) 105,569 1,390 104,179
------------------------- ----------
Net earnings $ 106,625 $55,284 $ 51,341
========================= ==========
Earnings Before
Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $ 177,404 $196,839 $ (19,435) (9.9%)
========================= ==========
Reconciliation of Net
Earnings to Earnings
Before Depreciation,
Amortization and
Deferred Taxes
(EBDT) (2):
Net Earnings $ 106,625 $55,284 $ 51,341
Depreciation and
amortization - Real
Estate Groups(5) 148,807 138,513 10,294
Amortization of mortgage
procurement costs -
Real Estate Groups(5) 8,098 8,659 (561)
Deferred income tax
expense - Real Estate
Groups (6) 73,128 17,892 55,236
Deferred income tax
expense - Non-Real
Estate Groups:(6)
Gain on
disposition of
other investments - 174 (174)
Current income tax
expense on non-
operating earnings:(6)
Gain on
disposition of
other investments - 60 (60)
Gain on
disposition
included in
discontinued
operations 17,198 - 17,198
Gain on
disposition of
equity method
rental properties 2,657 8,147 (5,490)
Straight-line rent
adjustment(3) (4,559) (6,183) 1,624
Provision for decline in
real estate, net of
minority interest 1,923 4,694 (2,771)
Provision for decline in
real estate of equity
method rental properties 400 704 (304)
Gain on disposition of
equity method rental
properties (7,662) (21,023) 13,361
Gain on disposition of
other investments - (606) 606
Discontinued
operations:(1)
Gain on
disposition of
rental properties (287,220) (9,476) (277,744)
Minority interest
- Gain on
disposition 118,009 - 118,009
------------------------- ----------
Earnings Before
Depreciation,
Amortization and
Deferred Taxes
(EBDT)(2) $ 177,404 $196,839 $ (19,435) (9.9%)
========================= ==========
Diluted Earnings per
Common Share:
Earnings (loss) from
continuing operations $ 0.01 $0.53 $ (0.52)
Discontinued operations,
net of tax and minority
interest(1) 1.02 0.01 1.01
------------------------- ----------
Net earnings $ 1.03 $0.54 $ 0.49
========================= ==========
Earnings Before
Depreciation,
Amortization and Deferred
Taxes (EBDT)(2)(4) $ 1.72 $1.92 $ (0.20) (10.4%)
========================= ==========
Operating earnings, net of
tax (a non-GAAP financial
measure) $ 0.10 $0.48 $ (0.38)
Provision for decline in
real estate, net of tax (0.01) (0.04) 0.03
Gain on disposition of
rental properties and
other investments, net of
tax 2.19 0.18 2.01
Minority interest (1.25) (0.08) (1.17)
------------------------- ----------
Net earnings $ 1.03 $0.54 $ 0.49
========================= ==========
Diluted weighted average
shares outstanding(4) 103,236,067 102,490,316 (820,187)
========================= ==========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Nine Months Ended October 31, 2006 and 2005
(dollars in thousands)
Three Months Ended, Increase
October 31, (Decrease)
2006 2005 Amount Percent
------------------- ----------------
Operating Earnings (a non-GAAP
financial measure) and
Reconciliation to Net Earnings:
Revenues from real estate
operations
Commercial Group $191,193 $189,993 $1,200
Residential Group 64,531 53,204 11,327
Land Development Group 22,934 17,767 5,167
Corporate Activities - - -
------------------- ---------
Total Revenues 278,658 260,964 17,694 6.8%
Operating expenses (172,111) (154,536) (17,575)
Interest expense, including
early extinguishment of debt (71,194) (64,950) (6,244)
Amortization of mortgage
procurement costs(5) (2,786) (2,621) (165)
Depreciation and
amortization(5) (45,115) (40,801) (4,314)
Interest and other income 7,105 4,988 2,117
Equity in earnings of
unconsolidated entities 9,122 16,113 (6,991)
Provision for decline in real
estate of equity method rental
properties - - -
Gain on disposition of equity
method rental properties - (2,526) 2,526
Revenues and interest income
from discontinued
operations(1) 13,977 30,629 (16,652)
Expenses from discontinued
operations(1) (12,025) (31,727) 19,702
------------------- ---------
Operating earnings (loss) (a
non-GAAP financial measure) 5,631 15,533 (9,902)
------------------- ---------
Income tax expense(6) (6,927) (7,378) 451
Income tax expense from
discontinued operations(1)(6) (33,194) (3,001) (30,193)
Income tax expense on non-
operating earnings items (see
below) 32,410 3,818 28,592
------------------- ---------
Operating earnings, net of tax
(a non-GAAP financial measure) (2,080) 8,972 (11,052)
------------------- ---------
Provision for decline in real
estate - (3,480) 3,480
Provision for decline in real
estate of equity method rental
properties - - -
Gain on disposition of equity
method rental properties - 2,526 (2,526)
Gain on disposition of other
investments - - -
Gain on disposition of rental
properties included in
discontinued operations(1) 143,494 9,476 134,018
Income tax benefit (expense) on
non-operating earnings:(6)
Provision for decline in
real estate - 819 (819)
Provision for decline in
real estate of equity
method rental properties - - -
Gain on disposition of
other investments - - -
Gain on disposition of
equity method rental
properties - (975) 975
Gain on disposition of
rental properties included
in discontinued operations (32,410) (3,662) (28,748)
------------------- ---------
Income tax expense on non-
operating earnings (see above) (32,410) (3,818) (28,592)
------------------- ---------
Minority interest in continuing
operations (3,588) (151) (3,437)
Minority interest in
discontinued operations:(1)
Operating earnings 75 (621) 696
Gain on disposition of
rental properties (59,616) - (59,616)
------------------- ---------
(59,541) (621) (58,920)
------------------- ---------
Minority interest (63,129) (772) (62,357)
------------------- ---------
Net earnings $ 45,875 $12,904 $ 32,971
=================== =========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Nine Months Ended October 31, 2006 and 2005
(dollars in thousands)
Nine Months Ended Increase
October 31, (Decrease)
2006 2005 Amount Percent
-------------------- ----------------
Operating Earnings (a non-GAAP
financial measure) and
Reconciliation to Net Earnings:
Revenues from real estate
operations
Commercial Group $568,674 $595,292 $(26,618)
Residential Group 186,892 154,737 32,155
Land Development Group 65,844 77,241 (11,397)
Corporate Activities - - -
-------------------- ---------
Total Revenues 821,410 827,270 (5,860) (0.7%)
Operating expenses (488,443)(476,528) (11,915)
Interest expense, including
early extinguishment of debt (215,427)(198,698) (16,729)
Amortization of mortgage
procurement costs(5) (8,260) (7,497) (763)
Depreciation and amortization(5) (130,902)(121,032) (9,870)
Interest and other income 29,986 18,485 11,501
Equity in earnings of
unconsolidated entities 15,811 46,029 (30,218)
Provision for decline in real
estate of equity method rental
properties 400 704 (304)
Gain on disposition of equity
method rental properties (7,662) (21,023) 13,361
Revenues and interest income
from discontinued operations(1) 51,074 87,923 (36,849)
Expenses from discontinued
operations(1) (47,641) (94,447) 46,806
-------------------- ---------
Operating earnings (loss) (a
non-GAAP financial measure) 20,346 61,186 (40,840)
-------------------- ---------
Income tax expense(6) (11,065) (21,161) 10,096
Income tax expense from
discontinued operations(1)(6) (66,479) (879) (65,600)
Income tax expense on non-
operating earnings items (see
below) 67,446 9,933 57,513
-------------------- ---------
Operating earnings, net of tax
(a non-GAAP financial measure) 10,248 49,079 (38,831)
-------------------- ---------
Provision for decline in real
estate (1,923) (6,100) 4,177
Provision for decline in real
estate of equity method rental
properties (400) (704) 304
Gain on disposition of equity
method rental properties 7,662 21,023 (13,361)
Gain on disposition of other
investments - 606 (606)
Gain on disposition of rental
properties included in
discontinued operations(1) 287,220 9,476 277,744
Income tax benefit (expense) on
non-operating earnings:(6)
Provision for decline in
real estate 743 1,814 (1,071)
Provision for decline in
real estate of equity
method rental properties 155 272 (117)
Gain on disposition of
other investments - (234) 234
Gain on disposition of
equity method rental
properties (2,962) (8,123) 5,161
Gain on disposition of
rental properties included
in discontinued operations (65,382) (3,662) (61,720)
-------------------- ---------
Income tax expense on non-
operating earnings (see above) (67,446) (9,933) (57,513)
-------------------- ---------
Minority interest in continuing
operations (10,131) (7,480) (2,651)
Minority interest in
discontinued operations:(1)
Operating earnings (596) (683) 87
Gain on disposition of
rental properties (118,009) - (118,009)
-------------------- ---------
(118,605) (683) (117,922)
-------------------- ---------
Minority interest (128,736) (8,163) (120,573)
-------------------- ---------
Net earnings $ 106,625 $55,284 $ 51,341
==================== =========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Nine Months Ended October 31, 2006 and 2005
(in thousands)
1) Pursuant to the definition of a component of an entity of SFAS No.
144, assuming no significant continuing involvement, all earnings of
properties and a division which have been sold or held for sale are
reported as discontinued operations.
2) The Company uses an additional measure, along with net earnings, to
report its operating results. This measure, referred to as Earnings
Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not
a measure of operating results as defined by generally accepted
accounting principles and may not be directly comparable to
similarly-titled measures reported by other companies. The Company
believes that EBDT provides additional information about its
operations, and along with net earnings, is necessary to understand
its operating results. EBDT is defined as net earnings excluding the
following items: i) gain (loss) on disposition of operating
properties, divisions and other investments (net of tax); ii) the
adjustment to recognize rental revenues and rental expense using the
straight-line method; iii) noncash charges from Forest City Rental
Properties Corporation, a wholly-owned subsidiary of Forest City
Enterprises, Inc., for depreciation, amortization (including
amortization of mortgage procurement costs) and deferred income
taxes; iv) provision for decline in real estate (net of tax); v)
extraordinary items (net of tax); and vi) cumulative effect of change
in accounting principle (net of tax). See our discussion of EBDT in
the news release.
3) The Company recognizes minimum rents on a straight-line basis over
the term of the related lease pursuant to the provision of SFAS No.
13, "Accounting for Leases." The straight-line rent adjustment is
recorded as an increase or decrease to revenue from Forest City
Rental Properties Corporation, a wholly-owned subsidiary of Forest
City Enterprises, Inc., with the applicable offset to either accounts
receivable or accounts payable, as appropriate.
4) For the three months ended October 31, 2006 and the nine months
ended October 31, 2006, the effect of 1,646,734 and 1,565,938 shares
of dilutive securities respectively 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 and nine months ended October 31, 2006, diluted weighted
average shares outstanding of 103,327,383 and 103,236,067
respectively were used to arrive at $0.54/share and $1.70/share
respectively.)
5) The following table provides detail of depreciation and
amortization and amortization of mortgage procurement costs. The
Company's Real Estate Groups are owned by Forest City Rental
Properties Corporation, a wholly-owned subsidiary engaged in the
ownership, development, acquisition and management of real estate
projects, including apartment complexes, regional malls and retail
centers, hotels, office buildings and mixed-use facilities, as well
as large land development projects.
Depreciation and Depreciation and
Amortization Amortization
-------------------- ---------------------
Three Months Ended Nine Months Ended
October 31, October 31,
-------------------- ---------------------
2006 2005 2006 2005
-------------------- ---------------------
Full Consolidation $45,115 $40,801 $130,902 $121,032
Non-Real Estate Groups (236) (198) (932) (736)
-------------------- ---------------------
Real Estate Groups Full
Consolidation 44,879 40,603 129,970 120,296
Real Estate Groups related
to minority interest (3,705) (4,228) (10,714) (13,108)
Real Estate Groups Equity
Method 5,710 6,294 25,912 19,825
Real Estate Groups
Discontinued Operations 338 3,607 3,639 11,500
-------------------- ---------------------
Real Estate Groups Pro-Rata
Consolidation $47,222 $46,276 $148,807 $138,513
==================== =====================
Amortization of Amortization of
Mortgage Procurement Mortgage Procurement
Costs Costs
------------------------------------------
Three Months Ended Nine Months Ended
October 31, October 31,
-------------------- ---------------------
2006 2005 2006 2005
-------------------- ---------------------
Full Consolidation $2,786 $2,621 $8,260 $7,497
Non-Real Estate Groups (46) (84) (236) (286)
-------------------- ---------------------
Real Estate Groups Full
Consolidation 2,740 2,537 8,024 7,211
Real Estate Groups related
to minority interest (315) (317) (915) (982)
Real Estate Groups Equity
Method 293 303 860 906
Real Estate Groups
Discontinued Operations 25 503 129 1,524
-------------------- ---------------------
Real Estate Groups Pro-Rata
Consolidation $2,743 $3,026 $8,098 $8,659
==================== =====================
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Nine Months Ended October 31, 2006 and 2005
(in thousands)
Three Months Ended Nine Months Ended
October 31, October 31,
-------------------- ---------------------
2006 2005 2006 2005
-------------------- ---------------------
(6) The following table (in thousands) (in thousands)
provides detail of Income
Tax Expense (Benefit):
(A) Operating earnings
Current $(7,705) $(1,938) $(15,710) $(1,277)
Deferred 14,632 9,160 24,711 16,167
-------------------- ---------------------
6,927 7,222 9,001 14,890
-------------------- ---------------------
(B) Provision for decline in
real estate
Deferred - (819) (743) (1,814)
Deferred - Equity
method
investment - - (155) (272)
-------------------- ---------------------
- (819) (898) (2,086)
-------------------- ---------------------
(C) Gain on disposition of
other investments
Current - Non-
Real Estate
Groups - - - 60
Deferred - Non-
Real Estate
Groups - - - 174
-------------------- ---------------------
- - - 234
-------------------- ---------------------
(D) Gain on disposition of equity
method rental properties
Current - 220 2,657 8,147
Deferred - 755 305 (24)
-------------------- ---------------------
- 975 2,962 8,123
-------------------- ---------------------
Subtotal (A)(B)(C)(D)
Current (7,705) (1,718) (13,053) 6,930
Deferred 14,632 9,096 24,118 14,231
-------------------- ---------------------
Income tax expense 6,927 7,378 11,065 21,161
-------------------- ---------------------
(E) Discontinued operations
- Rental Properties
Operating earnings
Current 136 (383) (1) (4,359)
Deferred 648 (278) 1,098 1,576
-------------------- ---------------------
784 (661) 1,097 (2,783)
Gain on disposition
of rental
properties
Current 17,227 - 17,198 -
Deferred 15,183 3,662 48,184 3,662
-------------------- ---------------------
32,410 3,662 65,382 3,662
-------------------- ---------------------
33,194 3,001 66,479 879
-------------------- ---------------------
Grand
Total (A)(B)(C)(D)(E)
Current 9,658 (2,101) 4,144 2,571
Deferred 30,463 12,480 73,400 19,469
-------------------- ---------------------
$ 40,121 $10,379 $ 77,544 $22,040
-------------------- ---------------------
Recap of Grand Total:
Real Estate Groups
Current 13,259 1,147 15,704 13,571
Deferred 29,739 12,906 73,128 17,892
-------------------- ---------------------
42,998 14,053 88,832 31,463
Non-Real Estate
Groups
Current (3,601) (3,248) (11,560) (11,000)
Deferred (724) (426) (272) 1,577
-------------------- ---------------------
(2,877) (3,674) (11,288) (9,423)
-------------------- ---------------------
Grand Total $ 40,121 $10,379 $ 77,544 $22,040
==================== =====================
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(GAAP) (in thousands):
Three Months Ended October 31, 2006
------------------------------------------------------
Plus
Unconsol-
idated
Full Less Invest- Plus Pro-Rata
Consol- Minority ments at Discontinued Consol-
idation Interest Pro-Rata Operations idation
------------------------------------------------------
Revenues from
real estate
operations $278,658 $26,044 $ 65,075 $11,845 $ 329,534
Exclude
straight-line
rent
adjustment(1) (2,884) - - (13) (2,897)
------------------------------------------------------
Adjusted
revenues 275,774 26,044 65,075 11,832 326,637
Operating
expenses 172,111 12,990 43,066 7,840 210,027
Add back
depreciation
and
amortization
for non-Real
Estate
Groups(b) 236 - (251) - (15)
Add back
amortization
of mortgage
procurement
costs for non-
Real Estate
Groups(d) 46 1 293 - 338
Exclude
straight-line
rent
adjustment(2) (1,149) - - (220) (1,369)
------------------------------------------------------
Adjusted
operating
expenses 171,244 12,991 43,108 7,620 208,981
Add interest
and other
income 7,105 802 442 74 6,819
Add equity in
earnings of
unconsolidated
entities 9,122 - (3,446) - 5,676
Remove gain on
disposition of
equity method
rental
properties - - - - -
Add back equity
method
depreciation
and
amortization
expense (see
below) 6,003 - (6,003) - -
------------------------------------------------------
Net Operating
Income 126,760 13,855 12,960 4,286 130,151
Interest
expense,
including
early
extinguishment
of debt (71,194) (6,247) (12,960) (1,689) (79,596)
Gain on
disposition of
equity method
rental
properties(e) - - - - -
Gain on
disposition of
rental
properties - - - 83,878 83,878
Provision for
decline in
real estate - - - - -
Provision for
decline in
real estate of
equity method
rental
properties - - - - -
Depreciation
and
amortization -
Real Estate
Groups(a) (44,879) (3,705) (5,710) (338) (47,222)
Amortization of
mortgage
procurement
costs - Real
Estate
Groups(c) (2,740) (315) (293) (25) (2,743)
Straight-line
rent
adjustment (1)
+ (2) 1,735 - - (207) 1,528
Equity method
depreciation
and
amortization
expense (see
above) (6,003) - 6,003 - -
------------------------------------------------------
Earnings before
income taxes 3,679 3,588 - 85,905 85,996
Income tax
expense (6,927) - - (33,194) (40,121)
------------------------------------------------------
Earnings (loss)
before
minority
interest and
discontinued
operations (3,248) 3,588 - 52,711 45,875
Minority
Interest (3,588) (3,588) - - -
------------------------------------------------------
Earnings (loss)
from
continuing
operations (6,836) - - 52,711 45,875
Discontinued
operations,
net of tax and
minority
interest:
Operating
earnings
(loss) from
rental
properties 1,243 - - (1,243) -
Gain on
disposition
of rental
properties 51,468 - - (51,468) -
------------------------------------------------------
52,711 - - (52,711) -
------------------------------------------------------
Net earnings $ 45,875 $- $- $- $ 45,875
======================================================
(a)Depreciation
and
amortization -
Real Estate
Groups $44,879 $3,705 $5,710 $338 $47,222
(b)Depreciation
and
amortization -
Non-Real
Estate Groups 236 - (251) - (15)
------------------------------------------------------
Total
depreciation
and
amortization $45,115 $3,705 $ 5,459 $338 $ 47,207
======================================================
(c)Amortization
of mortgage
procurement
costs - Real
Estate Groups $2,740 $315 $293 $25 $2,743
(d)Amortization
of mortgage
procurement
costs - Non-
Real Estate
Groups 46 1 293 - 338
------------------------------------------------------
Total
amortization
of mortgage
procurement
costs $2,786 $316 $ 586 $25 $ 3,081
======================================================
(e) Properties accounted for on the equity method do not meet the
definition of a component of an entity under SFAS No. 144 and
therefore are reported in continuing operations when sold. For the
three months ended October 31, 2006, no equity method properties were
sold. For the three months ended October 31, 2005, one equity method
property was sold, Flower Park Plaza, resulting in a pre-tax gain on
disposition of $2,526.
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(GAAP) (in thousands):
Three Months Ended October 31, 2005
------------------------------------------------------
Plus
Unconsol-
idated
Full Less Invest- Plus Pro-Rata
Consol- Minority ments at Discontinued Consol-
idation Interest Pro-Rata Operations idation
------------------------------------------------------
Revenues from
real estate
operations $260,964 $26,285 $81,644 $26,882 $343,205
Exclude
straight-line
rent
adjustment(1) (3,214) - - (31) (3,245)
------------------------------------------------------
Adjusted
revenues 257,750 26,285 81,644 26,851 339,960
Operating
expenses 154,536 13,318 49,633 18,518 209,369
Add back
depreciation
and
amortization
for non-Real
Estate
Groups(b) 198 - 597 - 795
Add back
amortization
of mortgage
procurement
costs for non-
Real Estate
Groups(d) 84 - 385 - 469
Exclude
straight-line
rent
adjustment(2) (1,481) - - (564) (2,045)
------------------------------------------------------
Adjusted
operating
expenses 153,337 13,318 50,615 17,954 208,588
Add interest
and other
income 4,988 502 58 158 4,702
Add equity in
earnings of
unconsolidated
entities 16,113 - (14,733) - 1,380
Remove gain on
disposition of
equity method
rental
properties (2,526) - 2,526 - -
Add back equity
method
depreciation
and
amortization
expense (see
below) 6,597 - (6,597) - -
------------------------------------------------------
Net Operating
Income 129,585 13,469 12,283 9,055 137,454
Interest
expense,
including
early
extinguishment
of debt (64,950) (7,413) (12,283) (6,131) (75,951)
Gain on
disposition of
equity method
rental
properties(e) 2,526 - - - 2,526
Gain on
disposition of
rental
properties - - - 9,476 9,476
Provision for
decline in
real estate (3,480) (1,360) - - (2,120)
Provision for
decline in
real estate of
equity method
rental
properties - - - - -
Depreciation
and
amortization -
Real Estate
Groups(a) (40,603) (4,228) (6,294) (3,607) (46,276)
Amortization of
mortgage
procurement
costs - Real
Estate
Groups(c) (2,537) (317) (303) (503) (3,026)
Straight-line
rent
adjustment (1)
+ (2) 1,733 - - (533) 1,200
Equity method
depreciation
and
amortization
expense (see
above) (6,597) - 6,597 - -
------------------------------------------------------
Earnings before
income taxes 15,677 151 - 7,757 23,283
Income tax
expense (7,378) - - (3,001) (10,379)
------------------------------------------------------
Earnings (loss)
before
minority
interest and
discontinued
operations 8,299 151 - 4,756 12,904
Minority
Interest (151) (151) - - -
------------------------------------------------------
Earnings (loss)
from
continuing
operations 8,148 - - 4,756 12,904
Discontinued
operations,
net of tax and
minority
interest:
Operating
earnings
(loss) from
rental
properties (1,058) - - 1,058 -
Gain on
disposition
of rental
properties 5,814 - - (5,814) -
------------------------------------------------------
4,756 - - (4,756) -
------------------------------------------------------
Net earnings $12,904 $- $- $- $12,904
======================================================
(a)Depreciation
and
amortization -
Real Estate
Groups $40,603 $4,228 $6,294 $3,607 $46,276
(b)Depreciation
and
amortization -
Non-Real
Estate Groups 198 - 597 - 795
------------------------------------------------------
Total
depreciation
and
amortization $40,801 $4,228 $6,891 $3,607 $47,071
======================================================
(c)Amortization
of mortgage
procurement
costs - Real
Estate Groups $2,537 $317 $303 $503 $3,026
(d)Amortization
of mortgage
procurement
costs - Non-
Real Estate
Groups 84 - 385 - 469
------------------------------------------------------
Total
amortization
of mortgage
procurement
costs $2,621 $317 $688 $503 $3,495
======================================================
(e) Properties accounted for on the equity method do not meet the
definition of a component of an entity under SFAS No. 144 and
therefore are reported in continuing operations when sold. For the
three months ended October 31, 2006, no equity method properties were
sold. For the three months ended October 31, 2005, one equity method
property was sold, Flower Park Plaza, resulting in a pre-tax gain on
disposition of $2,526.
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(GAAP) (in thousands):
Nine Months Ended October 31, 2006
----------------------------------------------------
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 $821,410 $77,612 $ 210,183 $43,125 $ 997,106
Exclude straight-
line rent
adjustment(1) (8,955) - - (44) (8,999)
----------------------------------------------------
Adjusted revenues 812,455 77,612 210,183 43,081 988,107
Operating
expenses 488,443 38,617 140,702 31,532 622,060
Add back
depreciation and
amortization for
non-Real Estate
Groups(b) 932 - 7,273 - 8,205
Add back
amortization of
mortgage
procurement
costs for non-
Real Estate
Groups(d) 236 1 591 - 826
Exclude straight-
line rent
adjustment(2) (3,502) - - (938) (4,440)
----------------------------------------------------
Adjusted
operating
expenses 486,109 38,618 148,566 30,594 626,651
Add interest and
other income 29,986 2,673 800 614 28,727
Add equity in
earnings of
unconsolidated
entities 15,811 - (2,155) - 13,656
Remove gain on
disposition of
equity method
rental
properties (7,662) - 7,662 - -
Add back
provision for
decline recorded
on equity method 400 - (400) - -
Add back equity
method
depreciation and
amortization
expense (see
below) 26,772 - (26,772) - -
----------------------------------------------------
Net Operating
Income 391,653 41,667 40,752 13,101 403,839
Interest expense,
including early
extinguishment
of debt (215,427) (19,907) (40,752) (5,602) (241,874)
Gain on
disposition of
equity method
rental
properties(e) 7,662 - - - 7,662
Gain on
disposition of
rental
properties and
other
investments - - - 169,211 169,211
Provision for
decline in real
estate (1,923) - - - (1,923)
Provision for
decline in real
estate of equity
method rental
properties (400) - - - (400)
Depreciation and
amortization -
Real Estate
Groups(a) (129,970) (10,714) (25,912) (3,639) (148,807)
Amortization of
mortgage
procurement
costs - Real
Estate Groups(c) (8,024) (915) (860) (129) (8,098)
Straight-line
rent adjustment
(1) + (2) 5,453 - - (894) 4,559
Equity method
depreciation and
amortization
expense (see
above) (26,772) - 26,772 - -
----------------------------------------------------
Earnings before
income taxes 22,252 10,131 - 172,048 184,169
Income tax
expense (11,065) - - (66,479) (77,544)
----------------------------------------------------
Earnings before
minority
interest and
discontinued
operations 11,187 10,131 - 105,569 106,625
Minority Interest (10,131) (10,131) - - -
----------------------------------------------------
Earnings (loss)
from continuing
operations 1,056 - - 105,569 106,625
Discontinued
operations, net
of tax and
minority
interest:
Operating
earnings
(loss) from
rental
properties 1,740 - - (1,740) -
Gain on
disposition of
rental
properties 103,829 - - (103,829) -
----------------------------------------------------
105,569 - - (105,569) -
----------------------------------------------------
Net earnings $ 106,625 $- $- $- $ 106,625
====================================================
(a)Depreciation
and amortization
- Real Estate
Groups $129,970 $10,714 $25,912 $3,639 $148,807
(b)Depreciation
and amortization
- Non-Real
Estate Groups 932 - 7,273 - 8,205
----------------------------------------------------
Total
depreciation
and
amortization $130,902 $10,714 $ 33,185 $3,639 $ 157,012
====================================================
(c)Amortization
of mortgage
procurement
costs - Real
Estate Groups $8,024 $915 $860 $129 $8,098
(d)Amortization
of mortgage
procurement
costs - Non-Real
Estate Groups 236 1 591 - 826
----------------------------------------------------
Total
amortization
of mortgage
procurement
costs $8,260 $916 $ 1,451 $129 $ 8,924
====================================================
(e) Properties accounted for on the equity method do not meet the
definition of a component of an entity under SFAS No. 144 and
therefore are reported in continuing operations when sold. For the
nine months ended October 31, 2006, one equity method property was
sold, Midtown Plaza, resulting in a pre-tax gain on disposition of
$7,662. For the nine months ended October 31, 2005, three equity
method investments were sold, including Flower Park Plaza, Showcase
and Colony Place, resulting in a pre-tax gain on disposition of
$21,023.
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(GAAP) (in thousands):
Nine Months Ended October 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 $827,270 $85,026 $231,690 $78,252 $1,052,186
Exclude
straight-line
rent
adjustment(1) (11,895) - - (94) (11,989)
------------------------------------------------------
Adjusted
revenues 815,375 85,026 231,690 78,158 1,040,197
Operating
expenses 476,528 41,516 142,648 56,297 633,957
Add back
depreciation
and
amortization
for non-Real
Estate
Groups(b) 736 - 9,858 - 10,594
Add back
amortization
of mortgage
procurement
costs for non-
Real Estate
Groups(d) 286 - 453 - 739
Exclude
straight-line
rent
adjustment(2) (4,045) - - (1,761) (5,806)
------------------------------------------------------
Adjusted
operating
expenses 473,505 41,516 152,959 54,536 639,484
Add interest
and other
income 18,485 1,645 505 366 17,711
Add equity in
earnings of
unconsolidated
entities 46,029 - (40,103) - 5,926
Remove gain on
disposition of
equity method
rental
properties (21,023) - 21,023 - -
Add back
provision for
decline
recorded on
equity method 704 - (704) - -
Add back equity
method
depreciation
and
amortization
expense (see
below) 20,731 - (20,731) - -
------------------------------------------------------
Net Operating
Income 406,796 45,155 38,721 23,988 424,350
Interest
expense,
including
early
extinguishment
of debt (198,698) (22,179) (38,721) (16,504) (231,744)
Gain on
disposition of
equity method
rental
properties(e) 21,023 - - - 21,023
Gain on
disposition of
rental
properties and
other
investments 606 - - 9,476 10,082
Provision for
decline in
real estate (6,100) (1,406) - - (4,694)
Provision for
decline in
real estate of
equity method
rental
properties (704) - - - (704)
Depreciation
and
amortization -
Real Estate
Groups(a) (120,296) (13,108) (19,825) (11,500) (138,513)
Amortization of
mortgage
procurement
costs - Real
Estate
Groups(c) (7,211) (982) (906) (1,524) (8,659)
Straight-line
rent
adjustment (1)
+ (2) 7,850 - - (1,667) 6,183
Equity method
depreciation
and
amortization
expense (see
above) (20,731) - 20,731 - -
------------------------------------------------------
Earnings before
income taxes 82,535 7,480 - 2,269 77,324
Income tax
expense (21,161) - - (879) (22,040)
------------------------------------------------------
Earnings before
minority
interest and
discontinued
operations 61,374 7,480 - 1,390 55,284
Minority
Interest (7,480) (7,480) - - -
------------------------------------------------------
Earnings (loss)
from
continuing
operations 53,894 - - 1,390 55,284
Discontinued
operations,
net of tax and
minority
interest:
Operating
earnings
(loss) from
rental
properties (4,424) - - 4,424 -
Gain on
disposition
of rental
properties 5,814 - - (5,814) -
------------------------------------------------------
1,390 - - (1,390) -
------------------------------------------------------
Net earnings $55,284 $- $- $- $55,284
======================================================
(a)Depreciation
and
amortization -
Real Estate
Groups $120,296 $13,108 $19,825 $11,500 $138,513
(b)Depreciation
and
amortization -
Non-Real
Estate Groups 736 - 9,858 - 10,594
------------------------------------------------------
Total
depreciation
and
amortization $121,032 $13,108 $29,683 $11,500 $149,107
======================================================
(c)Amortization
of mortgage
procurement
costs - Real
Estate Groups $7,211 $982 $906 $1,524 $8,659
(d)Amortization
of mortgage
procurement
costs - Non-
Real Estate
Groups 286 - 453 - 739
------------------------------------------------------
Total
amortization
of mortgage
procurement
costs $7,497 $982 $1,359 $1,524 $9,398
======================================================
(e) Properties accounted for on the equity method do not meet the
definition of a component of an entity under SFAS No. 144 and
therefore are reported in continuing operations when sold. For the
nine months ended October 31, 2006, one equity method property was
sold, Midtown Plaza, resulting in a pre-tax gain on disposition of
$7,662. For the nine months ended October 31, 2005, three equity
method investments were sold, including Flower Park Plaza, Showcase
and Colony Place, resulting in a pre-tax gain on disposition of
$21,023.
Net Operating Income (dollars in thousands)
------------------------------------------------
Three Months Ended October 31, 2006
------------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Investments Discont- Pro-Rata
Consol- Minority at Pro- inued Consol-
idation Interest Rata Operations idation
------------------------------------------------
Commercial Group
Retail
Comparable $44,478 $5,063 $2,892 $- $42,307
--------------------------------------------------------------
Total 47,125 4,797 2,924 460 45,712
Office Buildings
Comparable 43,672 5,332 1,065 - 39,405
--------------------------------------------------------------
Total 43,959 5,150 1,010 - 39,819
Hotels
Comparable 4,779 - 494 - 5,273
--------------------------------------------------------------
Total 4,779 - 494 3,891 9,164
Earnings from
Commercial
Land Sales 7,647 766 - - 6,881
Development
Fees 258 103 - - 155
Other (7,294) 1,039 (14) - (8,347)
--------------------------------------------------------------
Total Commercial Group
Comparable 92,929 10,395 4,451 - 86,985
--------------------------------------------------------------
Total 96,474 11,855 4,414 4,351 93,384
Residential Group
Apartments
Comparable 25,859 613 5,954 - 31,200
--------------------------------------------------------------
Total 29,790 1,193 7,896 (65) 36,428
Total Real Estate
Groups
Comparable 118,788 11,008 10,405 - 118,185
--------------------------------------------------------------
Total 126,264 13,048 12,310 4,286 129,812
Land Development Group 14,302 807 171 - 13,666
The Nets (1,342) - 479 - (863)
Corporate Activities (12,464) - - - (12,464)
- ----------------------------------------------------------------------
Grand Total $126,760 $13,855 $ 12,960 $4,286 $130,151
------------------------------------------------
Three Months Ended October 31, 2005
------------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Investments Discont- Pro-Rata
Consol- Minority at Pro- inued Consol-
idation Interest Rata Operations idation
------------------------------------------------
Commercial Group
Retail
Comparable $42,320 $4,713 $2,912 $- $40,519
--------------------------------------------------------------
Total 41,315 3,627 2,966 415 41,069
Office Buildings
Comparable 41,382 4,721 1,100 - 37,761
--------------------------------------------------------------
Total 41,148 4,693 983 - 37,438
Hotels
Comparable 4,475 - 445 - 4,920
--------------------------------------------------------------
Total 4,475 - 445 7,186 12,106
Earnings from
Commercial
Land Sales 6,395 227 - - 6,168
Development
Fees 1,052 421 - - 631
Other 2,140 2,290 24 - (126)
--------------------------------------------------------------
Total Commercial Group
Comparable 88,177 9,434 4,457 - 83,200
--------------------------------------------------------------
Total 96,525 11,258 4,418 7,601 97,286
Residential Group
Apartments
Comparable 23,475 594 6,160 - 29,041
--------------------------------------------------------------
Total 23,938 1,250 7,397 1,454 31,539
Total Real Estate
Groups
Comparable 111,652 10,028 10,617 - 112,241
--------------------------------------------------------------
Total 120,463 12,508 11,815 9,055 128,825
Land Development Group 22,323 961 (48) - 21,314
The Nets (3,781) - 516 - (3,265)
Corporate Activities (9,420) - - - (9,420)
- ----------------------------------------------------------------------
Grand Total $129,585 $13,469 $12,283 $9,055 $137,454
-----------------------
% Change
-----------------------
Full Pro-Rata
Consol- Consol-
idation idation
----------------------
Commercial Group
Retail
Comparable 5.1% 4.4%
---------------
Total
Office Buildings
Comparable 5.5% 4.4%
---------------
Total
Hotels
Comparable 6.8% 7.2%
---------------
Total
Earnings from
Commercial
Land Sales
Development
Fees
Other
---------------
Total Commercial Group
Comparable 5.4% 4.5%
---------------
Total
Residential Group
Apartments
Comparable 10.2% 7.4%
---------------
Total
Total Real Estate
Groups
Comparable 6.4% 5.3%
---------------
Total
Land Development Group
The Nets
Corporate Activities
- -----------------------
Grand Total
Net Operating Income (dollars in thousands)
-----------------------------------------------
Nine Months Ended October 31, 2006
-----------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Investments Discont- Pro-Rata
Consol- Minority at Pro- inued Consol-
idation Interest Rata Operations idation
-----------------------------------------------
Commercial Group
Retail
Comparable $136,101 $14,950 $8,256 $- $129,407
--------------------------------------------------------------
Total 144,160 13,391 9,065 1,808 141,642
Office Buildings
Comparable 132,479 16,206 3,275 - 119,548
--------------------------------------------------------------
Total 132,841 16,417 3,105 - 119,529
Hotels
Comparable 11,003 - 1,456 - 12,459
--------------------------------------------------------------
Total 11,003 - 1,456 11,120 23,579
Earnings from
Commercial
Land Sales 18,196 924 - - 17,272
Development
Fees 719 288 - - 431
Other (15,524) 4,994 101 - (20,417)
--------------------------------------------------------------
Total Commercial Group
Comparable 279,583 31,156 12,987 - 261,414
--------------------------------------------------------------
Total 291,395 36,014 13,727 12,928 282,036
Residential Group
Apartments
Comparable 76,645 1,876 18,630 - 93,399
--------------------------------------------------------------
Total 92,823 2,867 23,554 173 113,683
Total Real Estate
Groups
Comparable 356,228 33,032 31,617 - 354,813
--------------------------------------------------------------
Total 384,218 38,881 37,281 13,101 395,719
Land Development Group 52,279 2,786 660 - 50,153
The Nets (14,084) - 2,811 - (11,273)
Corporate Activities (30,760) - - - (30,760)
- ----------------------------------------------------------------------
Grand Total $391,653 $41,667 $ 40,752 $13,101 $403,839
- ----------------------------------------------------------------------
-----------------------------------------------
Nine Months Ended October 31, 2005
-----------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Investments Discont- Pro-Rata
Consol- Minority at Pro- inued Consol-
idation Interest Rata Operations idation
-----------------------------------------------
Commercial Group
Retail
Comparable $128,938 $14,654 $8,647 $- $122,931
--------------------------------------------------------------
Total 134,010 12,166 8,942 1,722 132,508
Office Buildings
Comparable 128,856 15,446 3,139 - 116,549
--------------------------------------------------------------
Total 130,068 16,599 2,964 - 116,433
Hotels
Comparable 9,713 - 1,432 - 11,145
--------------------------------------------------------------
Total 9,713 - 1,432 16,480 27,625
Earnings from
Commercial
Land Sales 37,975 2,331 - - 35,644
Development
Fees 7,714 3,085 - - 4,629
Other (11,388) 3,788 108 - (15,068)
--------------------------------------------------------------
Total Commercial Group
Comparable 267,507 30,100 13,218 - 250,625
--------------------------------------------------------------
Total 308,092 37,969 13,446 18,202 301,771
Residential Group
Apartments
Comparable 70,376 1,690 18,421 - 87,107
--------------------------------------------------------------
Total 71,606 3,610 23,092 5,786 96,874
Total Real Estate
Groups
Comparable 337,883 31,790 31,639 - 337,732
--------------------------------------------------------------
Total 379,698 41,579 36,538 23,988 398,645
Land Development Group 69,818 3,576 191 - 66,433
The Nets (16,997) - 1,992 - (15,005)
Corporate Activities (25,723) - - - (25,723)
- ----------------------------------------------------------------------
Grand Total $406,796 $45,155 $38,721 $23,988 $424,350
- ----------------------------------------------------------------------
------------------------------
% Change
------------------------------
Full Pro-Rata
Consol- Consol-
idation idation
-----------------------------
Commercial Group
Retail
Comparable 5.6% 5.3%
-----------------
Total
Office Buildings
Comparable 2.8% 2.6%
-----------------
Total
Hotels
Comparable 13.3% 11.8%
-----------------
Total
Earnings from
Commercial Land
Sales
Development Fees
Other
-----------------
Total Commercial Group
Comparable 4.5% 4.3%
-----------------
Total
Residential Group
Apartments
Comparable 8.9% 7.2%
-----------------
Total
Total Real Estate Groups
Comparable 5.4% 5.1%
-----------------
Total
Land Development Group
The Nets
Corporate Activities
- -------------------------
Grand Total
- -------------------------
Development Pipeline
- ----------------------------------------------------------------------
October 31, 2006
2006 Openings and Acquisitions(9)
FCE Pro-
Dev Legal Rata
(D) Date Ownership FCE%
Acq Opened/ % (i)
Property/Location (A) Acquired (i)(1) (2)
- ----------------------------------------------------------------------
Retail Centers:
Northfield at Stapleton/Denver, CO Q4-05/
Q1-06/
D Q3-06 95.0% 97.9%
Metreon(c)/San Francisco, CA A/D Q1-06 50.0% 50.0%
San Francisco Centre & Emporium(c)/San
Francisco, CA A/D Q3-06 50.0% 50.0%
Office:
Resurrection Health Care/Skokie, IL A Q1-06 100.0% 100.0%
Advent Solar(c)/
Albuquerque, NM D Q3-06 50.0% 50.0%
Bulletin Building(c)/San Francisco, CA A/D Q3-06 50.0% 50.0%
Stapleton Medical Office Building/Denver,
CO D Q3-06 90.0% 90.0%
Residential:
Sky 55/Chicago, IL D Q1-06 100.0% 100.0%
1251 S. Michigan/Chicago, IL D Q1-06 100.0% 100.0%
Total Openings (d)
- ----------------------------------------------------------------------
Residential Phased-In Units (c)(e):
Arbor Glenn/Twinsburg, OH D 2004-07 50.0% 50.0%
Woodgate/Evergreen Farms/Olmsted
Township, OH D 2004-07 33.0% 33.0%
Pine Ridge Expansion/Willoughby Hills, OH D 2005-06 50.0% 50.0%
Cobblestone Court/Painesville, OH D 2006-08 50.0% 50.0%
Total (f)
- ----------------------------------------------------------------------
See Attached 2006 Footnotes
Development Pipeline
- ----------------------------------------------------------------------
October 31, 2006
2006 Openings and Acquisitions(9)
Cost at
FCE
Pro-
Cost at Rata
Full Share
Consol- Total (Non-
idation Cost GAAP) Sq. ft./ Gross
(GAAP) at 100% (b) No. of Leasable
Property/Location (a) (3) (2)X(3) Units Area
- ----------------------------------------------------------------------
(in millions)
------------------------
Retail Centers:
Northfield at
Stapleton/Denver, CO $182.5 $182.5 $178.5 1,170,000 560,000(j)
Metreon(c)/San Francisco,
CA 0.0 40.0 20.0 290,000 290,000
San Francisco Centre &
Emporium(c)/San
Francisco, CA 0.0 598.0 299.0 1,462,000 812,000(k)
--------------------------------------------
$182.5 $820.5 $497.5 2,922,000 1,662,000
------------------------====================
Office:
Resurrection Health
Care/Skokie, IL $4.8 $4.8 $4.8 40,000
Advent Solar(c)/
Albuquerque, NM 0.0 10.2 5.1 88,000
Bulletin Building(c)/San
Francisco, CA 0.0 27.0 13.5 87,000
Stapleton Medical Office
Building/Denver, CO 10.3 10.3 9.3 45,000
----------------------------------
$15.1 $52.3 $32.7 260,000
------------------------==========
Residential:
Sky 55/Chicago, IL $113.2 $113.2 $113.2 411
1251 S. Michigan/Chicago,
IL 16.7 16.7 16.7 91
----------------------------------
$129.9 $129.9 $129.9 502
------------------------==========
------------------------
Total Openings (d) $327.5 $1,002.7 $660.1
========================
- ------------------------------------------------------------
Residential Phased-In Opened in
Units (c)(e): '06/Total
----------
Arbor Glenn/Twinsburg, OH $0.0 $18.4 $9.2 48/288
Woodgate/Evergreen
Farms/Olmsted Township,
OH 0.0 22.9 7.6 132/348
Pine Ridge
Expansion/Willoughby
Hills, OH 0.0 16.4 8.2 36/162
Cobblestone
Court/Painesville, OH 0.0 24.6 12.3 112/304
----------------------------------
Total (f) $0.0 $82.3 $37.3 328/1,102
=================================
- ----------------------------------------------------------------------
See Attached 2006 Footnotes
Development Pipeline
- ----------------------------------------------------------------------
October 31, 2006
Under Construction or to be Acquired (19)
FCE Pro-
Dev Legal Rata
(D) Ownership FCE%
Acq Anticipated % (i)
Property/Location (A) Opening (i)(1) (2)
- ----------------------------------------------------------------------
Retail Centers:
Promenade
Bolingbrook/
Bolingbrook, IL D Q2-07 100.0% 100.0%
Rancho Cucamonga Leggio/Rancho
Cucamonga, CA D Q2-07 80.0% 80.0%
Orchard Town Ctr./ 2006/
Westminster, CO D 2007 100.0% 100.0%
East River Plaza(c)/
Manhattan, NY D Q3-08 35.0% 50.0%
Office:
Edgeworth Building/
Richmond, VA D Q4-06 100.0% 100.0%
Illinois Science and Technology Park
Building A(r)/Skokie, IL A/D Q4-06 100.0% 100.0%
Illinois Science and Technology Park -
Building Q(r)/Skokie, IL A/D Q4-07 100.0% 100.0%
New York Times/Manhattan, NY D Q3-07 70.0% 100.0%
Johns Hopkins - 855 North
WolfeSt./East Baltimore, MD D Q1-08 77.5% 77.5%
Residential:
Cutters Ridge at Tobacco
Row(s)/Richmond, VA D Q4-06 100.0% 100.0%
Sterling Glen of Roslyn(g)/
Roslyn, NY D Q2-07 40.0% 100.0%
Stapleton Town Center - Botanica Phase
II(p)/Denver, CO D Q3-07 90.0% 90.0%
Uptown Apartments(c)/
Oakland, CA D Q2-08 50.0% 50.0%
Ohana Military Communities
(c)(e)/
Honolulu, HI D 2005-2008 10.0% 10.0%
Dallas Mercantile/
Dallas, TX D Q4-08 100.0% 100.0%
Lucky Strike/Richmond, VA D Q1-08 100.0% 100.0%
Military Housing - Navy Midwest(c)/
Chicago, IL D Q1-09 25.0% 25.0%
Condominiums:
1100 Wilshire(c)/Los Angeles, CA D Q4-06 50.0% 50.0%
Mercury(c)/Los Angeles, CA D Q3-07 50.0% 50.0%
Total Under Construction (h)
LESS: Above properties to be sold as
condominiums
Under Construction less Condominiums
- ----------------------------------------------------------------------
Residential Phased-In Units(c)(e):
Arbor Glenn/Twinsburg, OH D 2004-07 50.0% 50.0%
Woodgate/
Evergreen
Farms/Olmsted
Township, OH D 2004-07 33.0% 33.0%
Pine Ridge Expansion/
Willoughby
Hills, OH D 2005-06 50.0% 50.0%
Cobblestone Court/
Painesville, OH D 2006-08 50.0% 50.0%
Stratford Crossing/
Wadsworth, OH D 2007-09 50.0% 50.0%
Total (m)
Development Pipeline
- ----------------------------------------------------------------------
October 31, 2006
Under Construction or to be Acquired (19)
Cost at
FCE
Cost at Pro-Rata
Full Share
Consol- Total (Non- Pre-
idation Cost GAAP) Sq. ft./ Gross Lea-
(GAAP) at 100% (b) No. of Leasable sed
Property/Location (a) (3) (2)X(3) Units Area %
- ----------------------------------------------------------------------
(in millions)
----------------------------
Retail Centers:
Promenade
Bolingbrook/
Bolingbrook, IL $134.8 $134.8 $134.8 743,000 417,000(l) 54%
Rancho Cucamonga
Leggio/Rancho
Cucamonga, CA 41.2 41.2 33.0 180,000 180,000 100%
Orchard Town
Ctr./
Westminster, CO 137.1 137.1 137.1 970,000 556,000(q) 16%
East River
Plaza(c)/
Manhattan, NY 0.0 347.3 173.7 514,000 514,000 64%
-------------------------------------------------
$ 313.1 $660.4 $478.6 2,407,000 1,667,000
----------------------------=====================
Office:
Edgeworth
Building/
Richmond, VA $35.0 $35.0 $35.0 142,000 60%
Illinois Science
and Technology
Park Building
A(r)/Skokie, IL 27.4 27.4 27.4 225,000 63%
Illinois Science
and Technology
Park - Building
Q(r)/Skokie, IL 45.6 45.6 45.6 160,000 0%
New York
Times/Manhattan,
NY 507.3 507.3 507.3 734,000(o) 75%
Johns Hopkins -
855 North
WolfeSt./East
Baltimore, MD 104.5 104.5 81.0 278,000 36%
--------------------------------------
$719.8 $719.8 $696.3 1,539,000
----------------------------==========
Residential:
Cutters Ridge at
Tobacco
Row(s)/Richmond,
VA $4.8 $4.8 $4.8 12
Sterling Glen of
Roslyn(g)/
Roslyn, NY 79.2 79.2 79.2 158
Stapleton Town
Center -
Botanica Phase
II(p)/Denver, CO 26.3 26.3 23.7 154
Uptown
Apartments(c)/
Oakland, CA 0.0 188.5 94.3 665
Ohana Military
Communities
(c)(e)/
Honolulu, HI 0.0 316.5 31.7 1,952
Dallas
Mercantile/
Dallas, TX 123.2 123.2 123.2 366(n)
Lucky
Strike/Richmond,
VA 37.3 37.3 37.3 131
Military Housing
- Navy
Midwest(c)/
Chicago, IL 0.0 264.9 66.2 1,658
--------------------------------------
$270.8 $1,040.7 $460.4 5,096
----------------------------==========
Condominiums: Pre-Sold%
-----------
1100
Wilshire(c)/Los
Angeles, CA $0.0 $127.8 $63.9 228 66%
Mercury(c)/Los
Angeles, CA 0.0 145.0 72.5 238 29%
--------------------------------------
$0.0 $272.8 $136.4 466
----------------------------==========
----------------------------
Total Under
Construction (h) $1,303.7 $2,693.7 $1,771.7
============================
LESS: Above
properties to be
sold as
condominiums $ 0.0 $272.8 $136.4
----------------------------
Under
Construction
less
Condominiums $1,303.7 $2,420.9 $1,635.3
============================
- -------------------------------------------------------
Residential Under
Phased-In Const./
Units(c)(e): Total
----------
Arbor
Glenn/Twinsburg,
OH $0.0 $18.4 $9.2 48/288
Woodgate/
Evergreen
Farms/Olmsted
Township, OH 0.0 22.9 7.6 12/348
Pine Ridge
Expansion/
Willoughby
Hills, OH 0.0 16.4 8.2 57/162
Cobblestone
Court/
Painesville, OH 0.0 24.6 12.3 192/304
Stratford
Crossing/
Wadsworth, OH 0.0 24.1 12.1 108/348
--------------------------------------
Total (m) $0.0 $106.4 $49.4 417/1,450
----------------------------==========
Development Pipeline
2006 FOOTNOTES
- ----------------------------------------------------------------------
(a) Amounts are presented on the full consolidation method of
accounting, a GAAP measure. Under full consolidation, costs are
reported as consolidated at 100 percent if we are deemed to have
control or to be the primary beneficiary of our investments in
the variable interest entity ("VIE").
(b) Cost at pro-rata share represents Forest City's share of cost,
based on the Company's pro-rata ownership of each property (a
non-GAAP measure). Under the pro-rata consolidation method of
accounting the Company determines its pro-rata share by
multiplying its pro-rata ownership by the total cost of the
applicable property.
(c) Reported under the equity method of accounting. This method
represents a GAAP measure for investments in which the Company is
not deemed to have control or to be the primary beneficiary of
our investments in a VIE.
(d) The difference between the full consolidation amount (GAAP) of
$327.5 million of cost to the Company's pro-rata share (a non-
GAAP measure) of $660.1 million of cost consists of a reduction
to full consolidation for minority interest of $5.0 million of
cost and the addition of its share of cost for unconsolidated
investments of $337.6 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 $37.3 million of cost consists of the Company's share
of cost for unconsolidated investments of $37.3 million.
(g) Supported-living property.
(h) The difference between the full consolidation amount (GAAP) of
$1,303.7 million of cost to the Company's pro-rata share (a non-
GAAP measure) of $1,771.7 million of cost consists of a reduction
to full consolidation for minority interest of $34.3 million of
cost and the addition of its share of cost for unconsolidated
investments of $502.3 million.
(i) As is customary within the real estate industry, the Company
invests in certain real estate projects through joint ventures.
For some of these projects, the Company provides funding at
percentages that differ from the Company's legal ownership. The
Company consolidates its investments in these projects in
accordance with FIN No. 46(R) at a consolidation percentage that
is reflected in the Pro-Rata FCE % column.
(j) Includes all phases of Northfield at Stapleton including Phase I
which opened in Q4-05. Also, includes 34,000 square feet of
office space.
(k) Includes San Francisco Centre and Emporium which were previously
reported separately. Includes 235,000 square feet of office
space.
(l) Includes 39,000 square feet of office space.
(m) The difference between the full consolidation amount (GAAP) of
$0.0 million of cost to the Company's pro-rata share (a non-GAAP
measure) of $49.4 million of cost consists of Forest City's share
of cost for unconsolidated investments of $49.4 million.
(n) Project includes 18,000 square feet of retail space.
(o) Includes 23,000 square feet of retail space.
(p) Phased opening: Phase I is scheduled to open Q1-07 and Phase II
Q2-07.
(q) Includes 177,000 square feet for Target and 97,000 square feet for
JC Penney that opened in Q3-06, as well as 16,000 square feet of
office.
(r) As of October 31, 2006 the phases of Illinois Science and
Technology Park have been broken out. Therefore, two phases are
under construction and two phases are under development.
(s) Formerly a condominium project.
Forest City Enterprises, Inc. and Subsidiaries
Supplemental Operating Information
We use NOI, along with EBDT as discussed on pages 2-3, to assess
operating performance. Comparable NOI is defined as NOI from
properties opened and operated in both three and nine months ended
October 31, 2006 and 2005. The following schedules on pages 6-7
present comparable NOI for each of our major product lines, as well
as strategic business unit under which these product lines operate. A
reconciliation of NOI to the most comparable GAAP measure, net
earnings, is presented on pages 8-9. A reconciliation of NOI to net
earnings for each strategic business unit can be found on pages 35-
46.
CONTACT: Forest City Enterprises, Inc.
Thomas G. Smith, Executive Vice President,
Chief Financial Officer, 216-621-6060
or
Thomas T. Kmiecik, Assistant Treasurer, 216-621-6060
or
On The Web: www.forestcity.net