Thursday, June 5, 2008
Forest City Reports Fiscal 2008 First-Quarter Results
(Logo: http://www.newscom.com/cgi-bin/prnh/20080515/FRSTCTYLOGO )
First-quarter EBDT (Earnings Before Depreciation, Amortization and
Deferred Taxes) was
The fiscal 2008 first-quarter net loss was
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.
Discussion of Results
"The write-off of the
Regarding the increased loss associated with the Nets, Ratner said, "The overall operating loss for the team is comparable to the prior year. Our reported share of the loss is higher because we advanced capital to fund the operating losses on behalf of both the Company and certain non-funding partners. While these advances receive preferential capital treatment, we report losses, including significant non-cash losses resulting from amortization, in excess of our legal ownership of approximately 22 percent."
NOI, Occupancies and Rent
Residential comparable property net operating income (NOI) increased 3.6 percent in 2008 from the prior year's first quarter. Retail and office portfolio comparable property NOI increased 3.4 percent and 3.0 percent, respectively. Overall comparable property NOI increased 2.8 percent, reflecting the impact of lower quarterly comparable property results from the Company's small hotel portfolio. Comparable property NOI, defined as NOI from properties operated in both 2008 and 2007, 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.
Fiscal 2008 first-quarter comparable occupancies remained solid, though
down modestly in some areas compared with the same period a year ago.
Comparable average occupancies in the residential business were 95.2 percent
compared with 95.1 percent last year. Comparable retail occupancies were 92.9
percent in 2008 compared with 94.0 percent in 2007, and regional mall sales
averaged
First-Quarter Milestones
Openings
During the first quarter,
Retail and office openings during the first quarter included:
-- The Orchard Town Center, a 983,000-square-foot open-air lifestyle
center in Westminster, Colorado, which is anchored by JCPenney, Macy's,
SuperTarget and a 12-screen AMC movie theater. The center has executed
leases or is in lease documentation for more than 60 percent of the
non-anchor space.
-- 855 North Wolfe Street, the first of five buildings planned for
The Science + Technology Park at Johns Hopkins in Baltimore. The
278,000-square-foot Class A office building, which is 45 percent leased
or in lease documentation, includes tenants BioMarker Strategies,
Cangen Biotechnologies, Inc., The Johns Hopkins Institute for Basic
Biomedical Sciences, and The Howard Hughes Medical Institute.
Three residential properties, all of which utilize some form of
tax-advantaged financing, also opened during the first quarter: the 131-unit
Lucky Strike Building at the Company's Tobacco Row adaptive reuse apartment
community in
Transactions
In
Also in
Development Pipeline
A schedule of the Company's 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. Highlighted below are several of the Company's projects under construction or under development.
Projects Under Construction
At the end of the first quarter, 12 projects (counting various military
housing initiatives as a single project) were under construction or to be
acquired, representing
-- The Shops at Wiregrass, located in Tampa, one of the fastest-growing
markets in Florida. The 646,000-square-foot open-air lifestyle center
recently announced 42 new tenant leases and is currently 78 percent
pre-leased.
-- White Oak Village, a 792,000-square-foot lifestyle/power center near
Richmond that is currently 88 percent pre-leased and will feature
anchors JCPenney, Lowe's, Target, and Sam's Club.
Also under construction, and expected to open in 2009, are two retail
projects in the Company's
Projects Under Development
At the end of the first quarter,
Residential projects under development include:
-- 80 DeKalb, a 365-unit apartment community in Brooklyn where
construction is expected to begin later this year.
-- Presidio, a 161-unit apartment community in San Francisco at the foot
of the Golden Gate Bridge, expected to begin construction in late 2008.
At the 9,000-acre mixed-use Mesa del Sol development in
In February,
During the quarter, construction began on the first two buildings,
totaling 628,000 square feet, at the Waterfront redevelopment in
At The Yards, also in
Financing Activity
During the first quarter,
As of
The Company began the year with approximately
Outlook
Ratner said, "Overall, we continue to be pleased by the strength evident in both our commercial and residential rental-property portfolios. In addition, our development pipeline remains invested in attractive, viable projects that will create significant new value as they are completed and stabilized.
"As previously mentioned, we are disappointed that we could not proceed
with the
"It is clear that the economy is slowing and that consumer confidence is very weak. We see no sign of a significant turnaround in the near term. Accordingly, we continue to have a cautious outlook.
"That said, our positive operating fundamentals, continued access to nonrecourse financing, and good liquidity, give us confidence in our position in the near term and as real estate markets recover and strengthen in the longer term. We expect these factors, together with new project openings and a positive contribution from our land business, to provide growth over the prior year in future quarters."
Corporate Description
Forest City Enterprises, Inc. is a
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
EBDT
The Company uses an additional measure, along with net earnings, to report its operating results. This non-GAAP measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results or cash flows from operations as defined by GAAP and may not be directly comparable to similarly-titled measures reported by other companies.
The Company believes that EBDT provides additional information about its core operations and, along with net earnings, is necessary to understand its operating results. EBDT is used by the chief operating decision maker and management in assessing operating performance and to consider capital requirements and allocation of resources by segment and on a consolidated basis. The Company believes EBDT is important to investors because it provides another method for the investor to measure its long-term operating performance as net earnings can vary from year to year due to property dispositions, acquisitions and other factors that have a short-term impact.
EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of rental properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) non-cash charges for real estate depreciation, amortization, amortization of mortgage procurement costs and deferred income taxes; iv) preferred payment which is classified as minority interest expense on the Company's Consolidated Statements of Operations; v) provision for decline in real estate (net of tax); vi) extraordinary items (net of tax); and vii) 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, even if its ownership is not 100 percent. The Company provides reconciliations from the full consolidation method to the pro-rata consolidation method in the exhibits below and throughout its Supplemental Package, which the Company will also furnish to the SEC on Form 8-K.
Safe Harbor Language
Statements made in this news release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. The Company's actual results could differ materially from those expressed or implied in such forward-looking statements due to various risks, uncertainties and other factors. Risks and factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, general real estate development and investment risks including lack of satisfactory financing, construction and lease-up delays and cost overruns, dependence on rental income from real property, reliance on major tenants, the effect of economic and market conditions on a nationwide basis as well as in our primary markets, vacancies in our properties, downturns in the housing market, competition, illiquidity of real estate investments, bankruptcy or defaults of tenants, department store consolidations, international activities, the impact of terrorist acts, risks associated with an investment in and operation of a professional sports team, conflicts of interests, our substantial debt leverage and the ability to obtain and service debt, the impact of restrictions imposed by our credit facility, the level and volatility of interest rates, the continued availability of tax-exempt government financing, effects of uninsured or underinsured losses, environmental liabilities, risks associated with developing and managing properties in partnership with others, the ability to maintain effective internal controls, compliance with governmental regulations, changes in market conditions, litigation risks, 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 and quarterly reports.
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Three Months Ended April 30, 2008 and 2007
(dollars in thousands, except share and per share data)
Three Months Ended Increase
April 30, (Decrease)
------------------------ ----------------
2008 2007 Amount Percent
------------------------ -------- -------
Operating Results:
Loss from continuing operations $(40,348) $(17,669) $(22,679)
Discontinued operations, net of
tax and minority interest (1) 79 488 (409)
------------------------ --------
Net loss $(40,269) $(17,181) $(23,088)
======================== ========
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) $15,954 $34,529 $(18,575)(53.8%)
======================== ========
Reconciliation of Net Loss to
Earnings Before Depreciation,
Amortization and Deferred Taxes
(EBDT) (2):
Net loss $(40,269) $(17,181) $(23,088)
Depreciation and amortization -
Real Estate Groups (6) 70,765 64,509 6,256
Amortization of mortgage
procurement costs - Real
Estate Groups (6) 3,343 2,919 424
Deferred income tax expense
(benefit) - Real Estate Groups
(7) (15,333) (10,360) (4,973)
Deferred Income tax expense -
Non-Real Estate Groups: (7)
Gain on disposition of
other investments 58 - 58
Current income tax expense on
non-operating earnings: (7)
Gain on disposition of
equity method rental
properties 632 - 632
Straight-line rent adjustment (3) (3,147) (4,150) 1,003
Preference payment (5) 936 898 38
Gain on disposition of equity
method rental properties (881) (2,106) 1,225
Gain on disposition of other
investments (150) - (150)
------------------------ --------
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) $15,954 $34,529 $(18,575)(53.8%)
======================== ========
Diluted Earnings per Common
Share:
Loss from continuing operations $(0.39) $(0.17) $(0.22)
Discontinued operations, net of
tax and minority interest (1) - - -
------------------------ --------
Net earnings (loss) $(0.39) $(0.17) $(0.22)
======================== ========
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) (4) $0.15 $0.32 $(0.17)(53.1%)
======================== ========
Operating loss, net of tax
(a non-GAAP financial measure) $(0.39) $(0.16) $(0.23)
Gain on disposition of rental
properties and other
investments, net of tax 0.01 0.01 -
Minority interest (0.01) (0.02) 0.01
------------------------ --------
Net earnings (loss) $(0.39) $(0.17) $(0.22)
======================== ========
Diluted weighted average shares
outstanding (4) 102,613,817 101,990,754 623,063
======================== ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Three Months Ended April 30, 2008 and 2007
(dollars in thousands)
Three Months Ended Increase
April 30, (Decrease)
-------------------- ----------------
2008 2007 Amount Percent
-------------------- ----------------
Operating Earnings (a non-GAAP
financial measure) and
Reconciliation to Net Earnings:
Revenues from real estate operations
Commercial Group $222,267 $203,027 $19,240
Residential Group 78,957 54,605 24,352
Land Development Group 6,422 10,733 (4,311)
Corporate Activities - - -
-------------------- --------
Total Revenues 307,646 268,365 39,281 14.6%
Operating expenses (207,676) (168,592) (39,084)
Interest expense, including early
extinguishment of debt (88,550) (79,343) (9,207)
Amortization of mortgage procurement
costs (6) (2,938) (2,564) (374)
Depreciation and amortization (6) (66,619) (59,787) (6,832)
Interest and other income 8,401 11,399 (2,998)
Equity in earnings of unconsolidated
entities (9,647) 1,361 (11,008)
Gain on disposition of equity method
rental properties (881) (2,106) 1,225
Revenues and interest income from
discontinued operations (1) 548 12,299 (11,751)
Expenses from discontinued operations
(1) (419) (11,503) 11,084
-------------------- --------
Operating loss (a non-GAAP financial
measure) (60,135) (30,471) (29,664)
-------------------- --------
Income tax expense (7) 19,579 14,040 5,539
Income tax expense from discontinued
operations (1) (7) (50) (308) 258
Income tax expense on non-operating
earnings items (see below) 398 814 (416)
-------------------- --------
Operating loss, net of tax (a non-
GAAP financial measure) (40,208) (15,925) (24,283)
-------------------- --------
Gain on disposition of equity method
rental properties 881 2,106 (1,225)
Gain on disposition of other
investments 150 - 150
Gain on disposition of rental
properties included in discontinued
operations (1) - - -
Income tax benefit (expense) on non-
operating earnings: (7)
Gain on disposition of other
investments (58) - (58)
Gain on disposition of equity
method rental properties (340) (814) 474
Gain on disposition of rental
properties included in
discontinued operations - - -
-------------------- --------
Income tax benefit (expense) on non-
operating earnings (see above) (398) (814) 416
-------------------- --------
Minority interest in continuing
operations (694) (2,548) 1,854
Minority interest in discontinued
operations: (1)
Operating earnings - - -
Gain on disposition of rental
properties - - -
-------------------- --------
- - -
-------------------- --------
Minority interest (694) (2,548) 1,854
-------------------- --------
Net earnings (loss) $(40,269) $(17,181) $(23,088)
==================== ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Three Months Ended April 30, 2008 and 2007
(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 which have been sold or are held for sale are reported
as discontinued operations.
2) The Company uses an additional measure, along with net earnings, to
report its operating results. This measure, referred to as Earnings
Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not
a measure of operating results as defined by generally accepted
accounting principles and may not be directly comparable to
similarly-titled measures reported by other companies. The Company
believes that EBDT provides additional information about its
operations, and along with net earnings, is necessary to understand
its operating results. EBDT is defined as net earnings excluding the
following items: i) gain (loss) on disposition of operating
properties, divisions and other investments (net of tax); ii) the
adjustment to recognize rental revenues and rental expense using the
straight-line method; iii) non-cash charges for real estate
depreciation, amortization (including amortization of mortgage
procurement costs) and deferred income taxes; iv) preferred payment
classified as minority interest expense on the Company's Consolidated
Statement of Earnings; v) provision for decline in real estate (net of
tax); vi) extraordinary items (net of tax); and vii) 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 April 30, 2008, the effect of 4,616,829
shares of dilutive securities were not included in the computation of
diluted earnings per share because their effect is anti-dilutive to
the loss from continuing operations. (Since 4,616,829 of these shares
are dilutive for the computation of EBDT per share for the three
months ended April 30, 2008, diluted weighted average shares
outstanding of 107,230,646 were used to arrive at $0.15/share.)
For the three months ended April 30, 2007, the effect of 6,746,140
shares of dilutive securities were not included in the computation of
diluted earnings per share because their effect is anti-dilutive to
the loss from continuing operations. (Since 5,678,540 of these shares
are dilutive for the computation of EBDT per share for the three
months ended April 30, 2007, diluted weighted average shares
outstanding of 107,669,294 were used to arrive at $0.32/share.)
5) The Forest City Ratner Companies portfolio became a wholly-owned
subsidiary of the Company November 8, 2006 upon the issuance of the
Class A Common Units in exchange for Bruce C. Ratner's minority
interests. For the first five years only, the Units that have not been
exchanged are entitled to their proportionate share of an annual
preferred payment of $2,500,000 plus an amount equal to the dividends
paid on the same number of shares of the Company's common stock. After
five years, the Units that have not been exchanged are entitled to a
payment equal to the dividends paid on an equivalent number of shares
of the Company's common stock. For the three months ended April 30,
2008 and 2007, the Company recorded one quarter's share of the annual
preferred payment which is classified as minority interest expense on
the Company's Consolidated Statement of Earnings of approximately
$936,000 and $898,000, respectively.
6) The following table provides detail of depreciation and amortization
and amortization of mortgage procurement costs. The Company's Real
Estate Groups are engaged in the ownership, development, acquisition
and management of real estate projects, including apartment complexes,
regional malls and retail centers, hotels, office buildings and mixed-
use facilities, as well as large land development projects.
Depreciation and Amortization
-----------------------------
Three Months Ended April 30,
-----------------------------
2008 2007
-----------------------------
Full Consolidation $66,619 $59,787
Non-Real Estate (3,319) (1,997)
-----------------------------
Real Estate Groups Full
Consolidation 63,300 57,790
Real Estate Groups related to
minority interest (983) (2,687)
Real Estate Groups Equity Method 8,443 8,393
Real Estate Groups Discontinued
Operations 5 1,013
-----------------------------
Real Estate Groups Pro-Rata
Consolidation $70,765 $64,509
=============================
Amortization of Mortgage
Procurement Costs
-----------------------------
Three Months Ended April 30,
-----------------------------
2008 2007
-----------------------------
Full Consolidation $2,938 $2,564
Non-Real Estate - -
-----------------------------
Real Estate Groups Full
Consolidation 2,938 2,564
Real Estate Groups related to
minority interest (152) (160)
Real Estate Groups Equity Method 546 480
Real Estate Groups Discontinued
Operations 11 35
-----------------------------
Real Estate Groups Pro-Rata
Consolidation $3,343 $2,919
=============================
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Three Months Ended April 30, 2008 and 2007
(in thousands)
Three Months Ended April 30,
-----------------------------
2008 2007
-----------------------------
(7) The following table provides
detail of Income Tax Expense
(Benefit): (in thousands)
(A) Operating earnings
Current $(77) $(1,692)
Deferred (19,900) (13,162)
-----------------------------
(19,977) (14,854)
-----------------------------
(B) Gain on disposition of equity
method rental properties
Current 632 -
Deferred (292) 814
-----------------------------
340 814
-----------------------------
(C) Gain on disposition of other
investments
Current - Non-Real
Estate Groups - -
Deferred - Non-Real
Estate Groups 58 -
-----------------------------
58 -
-----------------------------
Subtotal (A) (B) (C)
Current 555 (1,692)
Deferred (20,134) (12,348)
-----------------------------
Income tax expense (19,579) (14,040)
-----------------------------
(D) Discontinued operations
Operating earnings
Current (64) 58
Deferred 114 250
-----------------------------
50 308
Grand Total (A) (B) (C) (D)
Current 491 (1,634)
Deferred (20,020) (12,098)
-----------------------------
$(19,529) $(13,732)
=============================
Recap of Grand Total:
Real Estate Groups
Current $2,401 $2,246
Deferred (15,333) (10,360)
-----------------------------
(12,932) (8,114)
Non-Real Estate Groups
Current (1,910) (3,880)
Deferred (4,687) (1,738)
-----------------------------
(6,597) (5,618)
-----------------------------
Grand Total $(19,529) $(13,732)
=============================
Reconciliation of Net Operating Income (non-GAAP) to Net Loss (GAAP)
(in thousands):
Three Months Ended April 30, 2008
-------------------------------------------
Plus
Unconsol- Plus
idated Discon-
Full Less Invest- tinued Pro-Rata
Consoli- Minority ments at Opera- Consoli-
dation Interest Pro-Rata tions dation
(GAAP) (Non-GAAP)
-------------------------------------------
Revenues from real estate
operations $307,646 $16,513 $91,146 $544 $382,823
Exclude straight-line rent
adjustment (1) (4,730) - - - (4,730)
-------------------------------------------
Adjusted revenues 302,916 16,513 91,146 544 378,093
Operating expenses 207,676 11,719 64,575 211 260,743
Add back non-Real Estate
depreciation and
amortization (b) 3,319 - 10,611 - 13,930
Add back amortization of
mortgage procurement costs
for non-Real Estate Groups (d) - - 45 - 45
Exclude straight-line rent
adjustment (2) (1,583) - - - (1,583)
Exclude preference payment (936) - - - (936)
-------------------------------------------
Adjusted operating expenses 208,476 11,719 75,231 211 272,199
Add interest income and other
income 8,401 475 1,601 4 9,531
Add equity in (loss) earnings
of unconsolidated entities (9,647) 19 9,027 - (639)
Remove gain on disposition
recorded on equity method (e) (881) - 881 - -
Add back equity method
depreciation and
amortization expense (see
below) 8,989 - (8,989) - -
-------------------------------------------
Net Operating Income 101,302 5,288 18,435 337 114,786
Interest expense, including
early extinguishment of debt (88,550) (3,459) (18,435) (192) (103,718)
Equity in (loss) earnings of
unconsolidated entities 9,647 (19) (9,027) - 639
Gain on disposition of equity
method rental properties (e) 881 - - - 881
Equity method depreciation
and amortization expense
(see above) (8,989) - 8,989 - -
Gain on disposition of rental
properties and other
investments 150 - - - 150
Depreciation and amortization
- Real Estate Groups (a) (63,300) (983) (8,443) (5) (70,765)
Amortization of mortgage
procurement costs - Real
Estate Groups (c) (2,938) (152) (546) (11) (3,343)
Straight-line rent adjustment
(1) + (2) 3,147 - - - 3,147
Preference payment (936) - - - (936)
-------------------------------------------
Earnings (loss) before income
taxes (49,586) 675 (9,027) 129 (59,159)
Income tax provision 19,579 - - (50) 19,529
-------------------------------------------
Earnings (loss) before
minority interest and
discontinued operations (30,007) 675 (9,027) 79 (39,630)
Minority Interest (694) (694) - - -
Equity in (loss) earnings of
unconsolidated entities (9,647) 19 9,027 - (639)
-------------------------------------------
Earnings (loss) from
continuing operations (40,348) - - 79 (40,269)
Discontinued operations, net
of tax and minority
interest:
Operating earnings from
rental properties 79 - - (79) -
-------------------------------------------
Net loss $(40,269) $- $- $- $(40,269)
===========================================
(a) Depreciation and
amortization - Real
Estate Groups $63,300 $983 $8,443 $5 $70,765
(b) Depreciation and
amortization - Non-Real
Estate 3,319 - 10,611 - 13,930
-------------------------------------------
Total depreciation and
amortization $66,619 $983 $19,054 $5 $84,695
===========================================
(c) Amortization of mortgage
procurement costs - Real
Estate Groups $2,938 $152 $546 $11 $3,343
(d) Amortization of mortgage
procurement costs - Non-Real
Estate - - 45 - 45
-------------------------------------------
Total amortization of
mortgage procurement
costs $2,938 $152 $591 $11 $3,388
===========================================
(e) Properties accounted for on the equity method do not meet the
definition of a component of an entity under SFAS No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144")
and therefore are reported in continuing operations when sold. For
the three months ended April 30, 2008, one equity method property was
sold, One International Place, resulting in a pre-tax gain on
disposition of $881. For the three months ended April 30, 2007, one
equity method property was sold, White Acres, resulting in a pre-tax
gain on disposition of $2,106.
Three Months Ended April 30, 2007
----------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Invest- Discon- Pro-Rata
Consoli- Minority ments at tinued Consol-
dation Interest Pro-Rata Operations idation
(GAAP) (Non-GAAP)
----------------------------------------------
Revenues from real estate
operations $268,365 $15,316 $77,182 $12,202 $342,433
Exclude straight-line rent
adjustment (1) (5,842) - - - (5,842)
----------------------------------------------
Adjusted revenues 262,523 15,316 77,182 12,202 336,591
Operating expenses 168,592 5,795 50,554 8,847 222,198
Add back non-Real Estate
depreciation and
amortization (b) 1,997 - 1,879 - 3,876
Add back amortization of
mortgage procurement
costs for non-Real Estate
Groups (d) - - 23 - 23
Exclude straight-line rent
adjustment (2) (1,692) - - - (1,692)
Exclude preference payment (898) - - - (898)
----------------------------------------------
Adjusted operating
expenses 167,999 5,795 52,456 8,847 223,507
Add interest income and
other income 11,399 823 623 97 11,296
Add equity in (loss)
earnings of
unconsolidated entities 1,361 352 (1,308) - (299)
Remove gain on disposition
recorded on equity method
(e) (2,106) - 2,106 - -
Add back equity method
depreciation and
amortization expense (see
below) 8,873 - (8,873) - -
----------------------------------------------
Net Operating Income 114,051 10,696 17,274 3,452 124,081
Interest expense,
including early
extinguishment of debt (79,343) (5,301) (17,274) (1,608) (92,924)
Equity in (loss) earnings
of unconsolidated
entities (1,361) (352) 1,308 - 299
Gain on disposition of
equity method rental
properties (e) 2,106 - - - 2,106
Equity method depreciation
and amortization expense
(see above) (8,873) - 8,873 - -
Gain on disposition of
rental properties and
other investments - - - - -
Depreciation and
amortization - Real
Estate Groups (a) (57,790) (2,687) (8,393) (1,013) (64,509)
Amortization of mortgage
procurement costs - Real
Estate Groups (c) (2,564) (160) (480) (35) (2,919)
Straight-line rent
adjustment (1) + (2) 4,150 - - - 4,150
Preference payment (898) - - - (898)
----------------------------------------------
Earnings (loss) before
income taxes (30,522) 2,196 1,308 796 (30,614)
Income tax provision 14,040 - - (308) 13,732
----------------------------------------------
Earnings (loss) before
minority interest and
discontinued operations (16,482) 2,196 1,308 488 (16,882)
Minority Interest (2,548) (2,548) - - -
Equity in (loss) earnings
of unconsolidated
entities 1,361 352 (1,308) - (299)
----------------------------------------------
Earnings (loss) from
continuing operations (17,669) - - 488 (17,181)
Discontinued operations,
net of tax and minority
interest:
Operating earnings from
rental properties 488 - - (488) -
----------------------------------------------
Net loss $(17,181) $- $- $- $(17,181)
==============================================
(a) Depreciation and
amortization - Real
Estate Groups $57,790 $2,687 $8,393 $1,013 $64,509
(b) Depreciation and
amortization - Non-Real
Estate 1,997 - 1,879 - 3,876
----------------------------------------------
Total depreciation
and amortization $59,787 $2,687 $10,272 $1,013 $68,385
==============================================
(c) Amortization of
mortgage procurement
costs - Real Estate
Groups $2,564 $160 $480 $35 $2,919
(d) Amortization of
mortgage procurement
costs - Non-Real Estate - - 23 - 23
----------------------------------------------
Total amortization
of mortgage
procurement costs $2,564 $160 $503 $35 $2,942
==============================================
(e) Properties accounted for on the equity method do not meet the
definition of a component of an entity under SFAS No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144)
and therefore are reported in continuing operations when sold. For
the three months ended April 30, 2008, one equity method property was
sold, One International Place, resulting in a pre-tax gain on
disposition of $881. For the three months ended April 30, 2007, one
equity method property was sold, White Acres, resulting in a pre-tax
gain on disposition of $2,106.
Forest City Enterprises, Inc. and Subsidiaries
Supplemental Operating Information
Net Operating Income (dollars in thousands)
-------------------------------------------------
Three Months Ended April 30, 2008
-------------------------------------------------
Plus
Unconsol-
Full idated Plus Pro-Rata
Consoli- Less Invest- Discon- Consol-
dation Minority ments at tinued idation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
-------------------------------------------------
Commercial Group
Retail
Comparable $58,635 $2,692 $5,517 $- $61,460
--------------------------------------------------------------------
Total 60,802 2,634 5,586 - 63,754
Office Buildings
Comparable 44,857 2,825 2,666 - 44,698
--------------------------------------------------------------------
Total 53,688 2,822 3,817 - 54,683
Hotels
Comparable 1,255 - 210 - 1,465
--------------------------------------------------------------------
Total 3,084 533 209 - 2,760
Earnings from
Commercial Land
Sales 1,361 574 - - 787
Other (1) (24,786) (2,032) (1,821) - (24,575)
--------------------------------------------------------------------
Total Commercial Group
Comparable 104,747 5,517 8,393 - 107,623
--------------------------------------------------------------------
Total 94,149 4,531 7,791 - 97,409
Residential Group
Apartments
Comparable 27,048 708 6,589 - 32,929
--------------------------------------------------------------------
Total 32,605 693 7,394 337 39,643
Military Housing
Comparable - - - - -
--------------------------------------------------------------------
Total 9,958 - 1,124 - 11,082
Other (1) (8,066) 46 383 - (7,729)
--------------------------------------------------------------------
Total Residential Group
Comparable 27,048 708 6,589 - 32,929
--------------------------------------------------------------------
Total 34,497 739 8,901 337 42,996
Total Rental Properties
Comparable 131,795 6,225 14,982 - 140,552
--------------------------------------------------------------------
Total 128,646 5,270 16,692 337 140,405
Land Development Group (559) 18 130 - (447)
The Nets (13,473) - 1,613 - (11,860)
Corporate Activities (13,312) - - - (13,312)
-------------------------------------------------------------------------
Grand Total $101,302 $5,288 $18,435 $337 $114,786
-------------------------------------------------------------------------
(1) Includes write-offs of abandoned development projects, non-capitalized
development costs and unallocated management and service company
overhead, net of historic and new market tax credit income.
Forest City Enterprises, Inc. and Subsidiaries
Supplemental Operating Information
Net Operating Income (dollars in thousands)
-------------------------------------------------
Three Months Ended April 30, 2007
-------------------------------------------------
Plus
Unconsol-
Full idated Plus Pro-Rata
Consoli- Less Invest- Discon- Consol-
dation Minority ments at tinued idation
(GAAP) Interest Pro-Rata Operations (Non-GAAP)
-------------------------------------------------
Commercial Group
Retail
Comparable $56,464 $2,750 $5,742 $- $59,456
---------------------------------------------------------------------
Total 56,288 3,829 5,655 - 58,114
Office Buildings
Comparable 43,962 2,550 1,973 - 43,385
---------------------------------------------------------------------
Total 44,538 2,967 2,072 - 43,643
Hotels
Comparable 1,901 - 274 - 2,175
---------------------------------------------------------------------
Total 2,293 152 483 - 2,624
Earnings from
Commercial
Land Sales 2,425 479 - - 1,946
Other (1) (5,217) 1,526 (89) - (6,832)
---------------------------------------------------------------------
Total Commercial Group
Comparable 102,327 5,300 7,989 - 105,016
---------------------------------------------------------------------
Total 100,327 8,953 8,121 - 99,495
Residential Group
Apartments
Comparable 25,545 645 6,871 - 31,771
---------------------------------------------------------------------
Total 29,353 1,311 7,576 3,452 39,070
Military Housing
Comparable - - - - -
---------------------------------------------------------------------
Total 3,366 - 185 - 3,551
Other (1) (5,140) 1 943 - (4,198)
---------------------------------------------------------------------
Total Residential Group
Comparable 25,545 645 6,871 - 31,771
---------------------------------------------------------------------
Total 27,579 1,312 8,704 3,452 38,423
Total Rental Properties
Comparable 127,872 5,945 14,860 - 136,787
---------------------------------------------------------------------
Total 127,906 10,265 16,825 3,452 137,918
Land Development Group 3,223 431 116 - 2,908
The Nets (3,251) - 333 - (2,918)
Corporate Activities (13,827) - - - (13,827)
-------------------------------------------------------------------------
Grand Total $114,051 $10,696 $17,274 $3,452 $124,081
-------------------------------------------------------------------------
(1) Includes write-offs of abandoned development projects, non-capitalized
development costs and unallocated management and service company
overhead, net of historic and new market tax credit income.
Forest City Enterprises, Inc. and Subsidiaries
Supplemental Operating Information
Net Operating Income
(dollars in thousands)
-----------------------------
% Change
-----------------------------
Full Pro-Rata
Consolidation Consolidation
(GAAP) (Non-GAAP)
-----------------------------
Commercial Group
Retail
Comparable 3.8% 3.4%
Total
Office Buildings
Comparable 2.0% 3.0%
Total
Hotels
Comparable (34.0%) (32.6%)
Total
Earnings from Commercial
Land Sales
Other (1)
Total Commercial Group
Comparable 2.4% 2.5%
Total
Residential Group
Apartments
Comparable 5.9% 3.6%
Total
Military Housing
Comparable
Total
Other (1)
Total Residential Group
Comparable 5.9% 3.6%
Total
Total Rental Properties
Comparable 3.1% 2.8%
Total
Land Development Group
The Nets
Corporate Activities
Grand Total
(1) Includes write-offs of abandoned development projects, non-capitalized
development costs and unallocated management and service company
overhead, net of historic and new market tax credit income.
Development Pipeline
--------------------------------------------------------------------------
April 30, 2008
2008 Openings and
Acquisitions (6)
Dev FCE Legal Pro-
(D) Date Owner- Rata
Acq Opened / ship % FCE %
Property Location (A) Acquired (h) (h)(1)
--------------------------------------------------------------------------
Retail Centers:
Westminster,
Orchard Town Center CO D Q1-08 100.0% 100.0%
Office:
San Francisco,
818 Mission Street (c) CA A Q1-08 50.0% 50.0%
Johns Hopkins - East Baltimore,
855 North Wolfe Street MD D Q1-08 76.6% 76.6%
Residential:
Lucky Strike Richmond, VA D Q1-08 100.0% 100.0%
Uptown Apartments (c) (e) Oakland, CA D Q1-08/Q4-08 50.0% 50.0%
Mercantile Place on
Main (e) Dallas, TX D Q1-08/Q3-08 100.0% 100.0%
Total Openings and
Acquisitions (d)
--------------------------------------------------------------------------
Residential Phased-In Units
(c) (e):
Painesville,
Cobblestone Court OH D 2006-08 50.0% 50.0%
Wadsworth,
Stratford Crossing OH D 2007-09 50.0% 50.0%
Brimfield,
Sutton Landing OH D 2007-09 50.0% 50.0%
Total (g)
--------------------------------------------------------------------------
See Attached Footnotes
April 30, 2008
2008 Openings and Acquisitions (6)
Cost at Cost at FCE
Full Pro-Rata
Consoli- Total Share
dation Cost (Non-GAAP) Sq. ft./ Gross
Property (GAAP) at 100% (b) No. of Leasable
(a) (2) (1)X(2) Units Area
--------------------------------------------------------------------------
(in millions)
--------------------------
Retail Centers:
Orchard Town Center $164.1 $164.1 $164.1 983,000 569,000 (f)
--------------------------========= ============
Office:
818 Mission Street (c) $0.0 $20.6 $10.3 34,000
Johns Hopkins - 855 North
Wolfe Street 112.5 112.5 86.2 278,000 (i)
-----------------------------------
$112.5 $133.1 $96.5 312,000
--------------------------=========
Residential:
Lucky Strike $37.6 $37.6 $37.6 131
Uptown Apartments (c) (e) 0.0 202.4 101.2 665
Mercantile Place on
Main (e) 144.6 144.6 144.6 366 (j)
-----------------------------------
$182.2 $384.6 $283.4 1,162
--------------------------=========
Total Openings and --------------------------
Acquisitions (d) $458.8 $681.8 $544.0
==========================
-------------------------------------------------------------
Residential Phased-In Opened in '08 /
Units (c) (e): Total
---------------
Cobblestone Court $0.0 $24.6 $12.3 48/304
Stratford Crossing 0.0 25.3 12.7 12/348
Sutton Landing 0.0 15.9 8.0 60/216
-----------------------------------
Total (g) $0.0 $65.8 $33.0 120/868
===================================
-------------------------------------------------------------
See Attached Footnotes
Development Pipeline
--------------------------------------------------------------------------
April 30, 2008
Under Construction (19)
Dev FCE Pro-
(D) Antici- Legal Rata
Acq pated Ownership FCE %
Property Location (A) Opening % (h) (h)(1)
--------------------------------------------------------------------------
Retail Centers:
Shops at Wiregrass Tampa, FL D Q3-08 50.0% 100.0%
White Oak Village Richmond, VA D Q3-08 50.0% 100.0%
Village at Gulfstream (c) Hallandale, FL D Q3-09 50.0% 50.0%
Promenade at Temecula
Expansion Temecula, CA D Q1-09 75.0% 75.0%
East River Plaza (c) Manhattan, NY D Q3-09 35.0% 50.0%
Ridge Hill (e) Yonkers, NY D Q4-09/ 70.0% 100.0%
Q2-10
Office:
Mesa Del Sol Town Center (c) Albuquerque, NM D Q3-08 47.5% 47.5%
Mesa Del Sol - Fidelity (c) Albuquerque, NM D Q4-08 47.5% 47.5%
Waterfront - East 4th &
West 4th Buildings (c) Washington D.C. D Q1-10 45.0% 45.0%
Residential:
Haverhill Haverhill, MA D Q1-09 100.0% 100.0%
Beekman Manhattan, NY D Q2-10 49.0% 70.0%
Military Housing:
Ohana Military Communities,
Hawaii Increment I 2005-
(c) (e) Honolulu, HI D 2008 10.0% 10.0%
2008-
Midwest Millington (c) (e) Memphis, TN D 2009 25.0% 25.0%
Military Housing - Navy 2006-
Midwest (c) (e) Chicago, IL D 2009 25.0% 25.0%
Colorado 2007-
Air Force Academy (c) (e) Springs, CO D 2009 50.0% 50.0%
Military Housing - Marines, 2007-
Hawaii Increment II (c) (e) Honolulu, HI D 2010 10.0% 10.0%
Military Housing - Navy, 2007-
Hawaii Increment III (c) (e) Honolulu, HI D 2010 10.0% 10.0%
Pacific Northwest Communities 2007-
(c) (e) Seattle, WA A/D 2010 20.0% 20.0%
2007-
Hawaii Phase IV (c) (e) Kaneohe, HI D 2014 10.0% 10.0%
Total Under Construction (k)
--------------------------------------------------------------------------
Residential Phased-In Units (c) (e):
Cobblestone Court Painesville, OH D 2006-08 50.0% 50.0%
Stratford Crossing Wadsworth, OH D 2007-09 50.0% 50.0%
Sutton Landing Brimfield, OH D 2007-09 50.0% 50.0%
Total (g)
--------------------------------------------------------------------------
See Attached Footnotes
April 30, 2008
Under Construction (19)
Cost at Cost at FCE
Full Pro-Rata
Consoli- Total Share
dation Cost (Non-GAAP) Sq. ft./
Property (GAAP) at 100% (b) No. of
(a) (2) (1)X(2) Units
--------------------------------------------------------------------------
(in millions)
-----------------------------
Retail Centers:
Shops at Wiregrass $149.6 $149.6 $149.6 646,000
White Oak Village 68.3 68.3 68.3 792,000
Village at Gulfstream (c) 0.0 164.4 82.2 466,000
Promenade at Temecula Expansion 102.9 102.9 77.2 127,000
East River Plaza (c) 0.0 407.4 203.7 517,000
Ridge Hill (e) 670.7 670.7 670.7 1,200,000
----------------------------------------
$991.5 $1,563.3 $1,251.7 3,748,000
========================================
Office:
Mesa Del Sol Town Center (c) $0.0 $18.7 $8.9 74,000
Mesa Del Sol - Fidelity (c) 0.0 30.9 14.7 210,000
Waterfront - East 4th & West 4th
Buildings (c) 0.0 322.7 145.2 628,000
----------------------------------------
$0.0 $372.3 $168.8 912,000
========================================
Residential:
Haverhill $74.2 $74.2 $74.2 305
Beekman 875.7 875.7 613.0 904
----------------------------------------
$949.9 $949.9 $687.2 1,209
========================================
Military Housing:
Ohana Military Communities,
Hawaii Increment I (c) (e) $0.0 $316.5 $31.7 1,952
Midwest Millington (c) (e) 0.0 38.1 9.5 318
Military Housing - Navy Midwest
(c) (e) 0.0 264.7 66.2 1,658
Air Force Academy (c) (e) 0.0 82.5 41.3 427
Military Housing - Marines,
Hawaii Increment II (c) (e) 0.0 338.8 33.9 1,175
Military Housing - Navy, Hawaii
Increment III (c) (e) 0.0 614.6 61.5 2,519
Pacific Northwest Communities (c)
(e) 0.0 264.5 52.9 2,986
Hawaii Phase IV (c) (e) 0.0 257.9 25.8 917
----------------------------------------
$0.0 $2,177.6 $322.8 11,952
========================================
----------------------------
Total Under Construction (k) $1,941.4 $5,063.1 $2,430.5
============================
--------------------------------------------------------------------------
Residential Phased-In Units (c) (e):
Under Const. / Total
--------------------
Cobblestone Court $0.0 $24.6 $12.3 48/304
Stratford Crossing 0.0 25.3 12.7 228/348
Sutton Landing 0.0 15.9 8.0 132/216
----------------------------------------
Total (g) $0.0 $65.8 $33.0 408/868
========================================
--------------------------------------------------------------------------
See Attached Footnotes
April 30, 2008
Under Construction (19) Gross
Leasable Lease
Property Area Commitment%
Retail Centers:
Shops at Wiregrass 356,000 78%
White Oak Village 286,000 88%
Village at Gulfstream (c) 466,000 (l) 35%
Promenade at Temecula Expansion 127,000 45%
East River Plaza (c) 517,000 64%
Ridge Hill (e) 1,200,000 (m) 13%
---------
2,952,000
=========
Office:
Mesa Del Sol Town Center (c) 31%
Mesa Del Sol - Fidelity (c) 100%
Waterfront - East 4th & West 4th
Buildings (c) 98%
Development Pipeline
--------------------------------------------------------------------------
2008 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 cost amount (GAAP) of
$458.8 million to the Company's pro-rata share (a non-GAAP measure)
of $544.0 million consists of a reduction to full consolidation for
minority interest of $26.3 million of cost and the addition of its
share of cost for unconsolidated investments of $111.5 million.
(e) Phased-in openings. Costs are representative of the total project.
(f) 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 space.
(g) The difference between the full consolidation cost amount (GAAP) of
$0.0 million to the Company's pro-rata share (a non-GAAP measure)
of $33.0 million consists of the Company's share of cost for
unconsolidated investments of $33.0 million.
(h) 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.
(i) Includes 22,000 square feet of retail space.
(j) Property formerly known as Dallas Mercantile. Includes 18,000
square feet of retail space.
(k) The difference between the full consolidation cost amount (GAAP) of
$1,941.4 million to the Company's pro-rata share (a non-GAAP
measure) of $2,430.5 million consists of a reduction to full
consolidation for minority interest of $288.4 million of cost and
the addition of its share of cost for unconsolidated investments of
$777.5 million.
(l) Includes 67,000 square feet of office space.
(m) Includes 156,000 square feet of office space.
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