Published:
Forest City Reports Second-Quarter and Year-to-Date Financial Results
CLEVELAND, Sept. 4 /PRNewswire-FirstCall/ -- Forest City Enterprises, Inc.
(NYSE: FCEA and FCEB) today announced revenues, net earnings and EBDT for the
second quarter and six months ended July 31, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20080515/FRSTCTYLOGO )
EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) for
the second quarter was $88.3 million, or $0.82 per share, a 24.2 percent
increase on a per share basis compared with last year's second-quarter EBDT of
$71.2 million, or $0.66 per share. EBDT for the six months ended July 31, 2008
was $104.3 million, or $0.97 per share, compared with last year's $105.7
million, or $0.98 per share.
EBDT results for both the quarter and six months were driven by solid
operating performance in the Company's commercial and residential segments,
which increased pre-tax EBDT by $27.7 million for the six months ended July
31, 2008 compared to the prior year, including $16.4 million from military
family housing. Both the quarterly and year-to-date results were negatively
impacted by reporting a larger share of losses for the NBA Nets basketball
team compared with the prior year, decreasing pre-tax EBDT by $16.5 million
($11.0 million after tax) for the first half of 2008. The six-month EBDT
results were negatively impacted by increased development project write-offs
of $21.1 million ($12.9 million after tax) primarily due to the first quarter
write-off ofSummit atLehigh Valley, a Commercial development project with a
housing component located inAllentown, Pennsylvania.
The fiscal second-quarter net loss was $8.3 million, or $(0.08) per share,
compared with net earnings of $67.8 million, or $0.63 per share, in the prior
year. Net loss for the six months was $48.6 million, or $(0.47) per share,
compared with net earnings of $50.6 million, or $0.48 per share, in 2007. In
addition to being impacted by the factors affecting EBDT, the net earnings
variance was primarily due to significant gains recognized in the prior year
from the sale of the Company's supported-living portfolio, with no comparable
asset sales in 2008.
Second-quarter 2008 consolidated revenues were $330.2 million compared
with $287.6 million last year. First-half 2008 revenues were $637.9 million
compared with $556.0 million for the six months ended July 31, 2007.
EBDT and EBDT per share are non-Generally Accepted Accounting Principles
(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
Charles A. Ratner, president and chief executive officer of Forest City
Enterprises, said "We are pleased with our second-quarter results and with the
performance of our new property openings and mature portfolio. The progress
in the quarter has brought year-to-date results in line with last year, in
spite of a large first-quarter development project write off, and demonstrates
the solid foundation for the business represented by our core rental property
portfolio. In addition, our military family housing business contributed
solidly to our results, both in the second quarter and for the first six
months."
NOI, Occupancies and Rent
Overall comparable property net operating income (NOI) increased 1.3
percent during the second quarter compared with the same period a year ago.
The retail portfolio was up 4.5 percent, while the office portfolio was down
1.5 percent. In residential, comparable property NOI in the Company's
traditional multifamily apartment communities increased 3.0 percent, but was
offset by softness in the supported-living portion of the business, resulting
in an NOI increase of 0.6 percent for the total residential portfolio compared
with the second quarter of 2007. 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.
In addition, overall second-quarter 2008 NOI results included $8.3 million
of lease-cancellation fee income related to one of the Company'sNew York
office properties, while overall second-quarter 2007 NOI included $10.1
million from the sale of a supported-living residential development property.
At July 31, 2008, comparable retail occupancies were 92.5 percent compared
with 92.9 percent at July 31, 2007, and regional mall sales averaged $451 per
square foot. Comparable office occupancies increased to 92.7 percent compared
with 89.9 percent last year. Comparable average occupancies for the first half
of the year in the residential business were 92.5 percent compared with 93.9
percent last year. Comparable residential net rental income was down modestly
to 90.0 percent, compared with 91.5 percent in the same period in 2007.
Land Development
Commenting on results for the land business, Ratner said, "Our land
development business has not been a significant factor in year-to-date results
and continues to reflect the general nationwide softness in that segment of
our industry. We see no indications of an overall improvement in the near
term. Despite this ongoing softness, our inventory of land in quality markets
means we are well-positioned to capitalize when a broader recovery occurs,
just as we have during past real estate cycles. In addition, we continue to
view current market conditions as a potential opportunity to selectively
acquire additional land for future development in good markets and at
attractive prices."
Debt Maturities
"Given the continued stress in the credit markets, we have placed even
greater emphasis on monitoring and managing upcoming maturities, and we're
pleased with our progress to date," said Ratner.
Forest City began its fiscal 2008 with scheduled maturities for the year
of $903 million at the Company's pro-rata share ($842 million at full
consolidation). At the end of the second quarter, total remaining 2008
maturities were $253 million at the Company's pro-rata share ($179 million at
full consolidation), of which more than 70 percent have been addressed to date
through closed loans, scheduled amortization, committed refinancings or
available extensions. As of July 31, 2008, the Company's total scheduled
maturities for 2009 were $901 million at the Company's pro-rata share ($734
million at full consolidation), of which more than 50 percent have already
been addressed to date, either through closed loans, scheduled amortization or
available extensions.
Nets
The overall operating loss for the Nets as a stand-alone business is
comparable to the prior year. The Company's reported share of the loss is
higher because it advanced capital to fund the team's operating losses on
behalf of bothForest City and certain non-funding partners. While these
advances receive preferential capital treatment, the Company reports losses,
including significant non-cash losses resulting from amortization, in excess
of its legal ownership of approximately 23 percent.
Milestones
Current and Anticipated Openings
Through the first half of 2008,Forest City has opened five projects and
acquired one, representing $553.5 million of cost at the Company's pro-rata
share and $466.6 million at full consolidation.
During the first half, the Company opened Orchard Town Center, a 980,000-
square-foot open-air lifestyle center inWestminster, Colorado, and 855 North
Wolfe Street a 278,000-square-foot office building at the Science + Technology
Park at Johns Hopkins inBaltimore. In addition, three residential properties
were opened: the 131-unit Lucky Strike Building at the Company's Tobacco Row
adaptive reuse apartment community inRichmond, Virginia; the 366-unit
Mercantile Place onMain redevelopment inDallas; and the first phases of the
665-unit Uptown Apartments in center cityOakland. Uptown Apartments is the
first LEED (Leadership in Energy and Environmental Design) Silver-Certified
multifamily housing property inOakland.
Two large retail projects that are currently under construction are
scheduled to open in the third quarter of 2008.White Oak Village, an 800,000-
square-foot lifestyle/power center nearRichmond, is 89 percent pre-leased and
will feature anchors JCPenney, Lowe's, Target and Sam's Club. InTampa, Shops
at Wiregrass, a 646,000-square-foot open-air lifestyle center, is currently 78
percent pre-leased. Dillard's and Macy's will join previously opened JCPenney
in anchoring the project.
At the mixed-use Mesa del Sol inAlbuquerque, New Mexico,Forest City
expects to open a 210,000-square-foot operations center for a unit of Fidelity
Investments, and a 74,000-square-foot town center during the second half of
the year. Grading for the first residential neighborhood has begun with lot
sales anticipated to begin in summer 2009. To date, the Company has
purchased approximately 3,100 acres of land for this project and has a total
of approximately 1 million square feet of space built and occupied, under
construction, or under contract. Upon full build-out, the 9,000-acre Mesa del
Sol is expected to include up to 16 million square feet of commercial space
and 37,500 residential units.
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 second quarter,Forest City's pipeline included 13
projects under construction, representing a total cost of $2.3 billion at the
Company's pro-rata share ($2.2 billion on a full consolidation basis).
In addition to the two retail centers scheduled to open later this year,
Forest City has three new retail centers currently under construction,
including the 1.2-million-square-foot Ridge Hill inYonkers, New York; the
517,000-square-foot East River Plaza inManhattan; and the 466,000-square-foot
Village at Gulfstream inHallandale, Florida.
InWashington D.C., construction began earlier in the year on the first
two office buildings, totaling 628,000 square feet, at the Waterfront Station
redevelopment inSouthwest Washington, D.C. Approximately 543,000 square feet
of space in the buildings is pre-leased to theDistrict of Columbia for
government offices.
In the residential portfolio, the Company closed on $167 million in
financing and began construction on the 365-unit 80 DeKalb Avenue apartment
community, the Company's first residential tower inBrooklyn. InManhattan,
construction is underway on the 904-unitBeekman, with anticipated completion
in 2011. In addition to market-rate rental units,Beekman will feature a K-8
public school, an ambulatory center for New York Downtown Hospital, and
community-oriented retail space. North ofBoston, construction continues on
the 305-unitHaverhill adaptive reuse apartment community. All three of these
projects, as well as the three residential projects opened during the first
half of the year, utilize some form of tax-advantaged financing. Such
financing lowers the Company's total cost of capital on these projects and
enhances their long-term value.
Projects Under Development
At the end of the second quarter,Forest City had more than 15 projects
under development, representing more than $900 million of cost on a full
consolidation basis and at the Company's share. Among the projects under
development and scheduled to begin construction during the next year are four
projects totaling approximately $250 million of cost on a full consolidation
basis and at the Company's pro-rata share.
At The Yards, inWashington, D.C., the Company has begun construction on
the 170-unit Pattern Shop Lofts apartment community and expects to begin later
this year on the 44,000-square-foot Boilermaker retail project. These two
projects are the first vertical components of this $1.7 billion development
that is expected to include up to 2,800 residential units, 1.8 million square
feet of office space, and 400,000 square feet of retail and dining space - all
located in the neighborhood of the Washington Nationals baseball park.
On the West Coast, construction atPresidio, a 161-unit apartment
community that is part of the historic former military base - now a major
urban national park - at the foot of the Golden Gate Bridge inSan Francisco,
is expected to begin in late 2008. This adaptive re-use of a former public
health service hospital, together with the recently opened Uptown Apartments
inOakland, join a number of other properties that are part of a growing
presence forForest City in theBay Area.
Commenting on the Company's development activities, Ratner said, "The
start of construction at Waterfront Station and The Yards inWashington, D.C.,
represents the first fruit of a five-to-six year effort by ourWashington,
D.C. team, and reflects not only the long-term nature of these types of
complex projects, but also the Company's proven ability to bring them through
our pipeline successfully and to create value - even in challenging times -
forForest City, for our shareholders and for the communities in which we
operate.
"Similarly, the opening of the first phase of the Uptown Apartments in
Oakland and continuing construction at ThePresidio inSan Francisco, reflect
our long-term effort to grow strategically in attractive markets, particularly
in urban areas with high barriers to entry, and with opportunities for
additional future development for the Company.
"While we are proud of these recent accomplishments, we are acutely aware
that development is looked upon with a great deal of skepticism by many
investors, given current market conditions. We continue to believe strongly
in development as a core strength and primary lever to add value over the long
term, but we have pulled back from a number of projects in our pipeline,
eliminating some and slowing others. We have raised our risk-adjusted return
requirements to ensure that we pursue only those projects with the opportunity
to create significant value, even in this volatile environment."
Financing Activity
During the first six months of 2008,Forest City closed on transactions
totaling $1.7 billion in nonrecourse mortgage financings, including $562.0
million in refinancings, $949.1 million in development projects, and $254.6
million in loan extensions and additional fundings.
As of July 31, 2008, the Company's weighted average cost of mortgage debt
decreased to 5.50 percent from 6.04 percent at July 31, 2007, primarily due to
a decrease in variable interest rates. Fixed-rate mortgage debt, including
variable debt that is effectively fixed through interest rate swaps,
represented 75.1 percent of the Company's total nonrecourse mortgage debt, and
decreased from 6.13 percent at July 31, 2007 to 6.07 percent at July 31, 2008.
Variable-rate mortgage debt decreased from 5.77 percent at July 31, 2007 to
3.78 percent at July 31, 2008.
Ratner said, "We're gratified by our ongoing success in accessing non-
recourse financing to fund development and strategic acquisitions. The hard
work of our finance teams, our track record and long-term relationships with
lenders, combined with a focus on high-quality projects in good markets,
continue to serve us well."
Outlook
"To date in 2008, we have good reason to be pleased with the performance
of our core portfolio and, longer term, we remain committed to development as
the primary engine for future, additional value creation. Clearly, however,
these are times that demand a more cautious approach to our business. The
economy in general, and the real estate market in particular, remain highly
stressed. Credit, while available, remains tight and more challenging and
expensive to obtain. And at present, there are few, if any, signs of a
turnaround in the foreseeable future.
"In response to this reality, we have and will continue to adapt to
changes in the marketplace. This includes placing a high premium on
maintaining liquidity, applying stringent requirements on new development,
strategically capitalizing on opportunities presented by market dislocations
and distress, and managing our operations to an even higher standard of
efficiency.
"Our existing pipeline includes a number of long-term, multiphase projects
such as Mesa del Sol inAlbuquerque, Stapleton in Denver, and Waterfront
Station and The Yards inWashington, DC. These types of projects are a
hallmark ofForest City, and they provide a reservoir of ongoing development
and value-creation opportunities. By selectively bringing additional
opportunities through our pipeline, and effectively managing our mature
portfolio to maximize its contribution, we will continue to create long-term
value and ensure future growth, in spite of the challenges of the current
marketplace."
Corporate Description
Forest City Enterprises, Inc. is a $10.9 billion NYSE-listed national real
estate company. The Company is principally engaged in the ownership,
development, management and acquisition of commercial and residential real
estate and land throughoutthe 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 July 31, 2008, with reconciliations of non-GAAP financial
measures, such as EBDT, comparable NOI and pro-rata financial statements, to
their most directly comparable GAAP financial measures.
EBDT
The Company uses an additional measure, along with net earnings, to report
its operating results. This non-GAAP measure, referred to as Earnings Before
Depreciation, Amortization and Deferred Taxes (EBDT), is not a measure of
operating results or cash flows from operations as defined by GAAP and may not
be directly comparable to similarly titled measures reported by other
companies.
The Company believes that EBDT provides additional information about its
core operations and, along with net earnings, is necessary to understand its
operating results. EBDT is used by the chief operating decision maker and
management in assessing operating performance and to consider capital
requirements and allocation of resources by segment and on a consolidated
basis. The Company believes EBDT is important to investors because it provides
another method for the investor to measure its long-term operating
performance, as net earnings can vary from year to year due to property
dispositions, acquisitions and other factors that have a short-term impact.
EBDT is defined as net earnings excluding the following items: i) gain
(loss) on disposition of rental properties, divisions and other investments
(net of tax); ii) the adjustment to recognize rental revenues and rental
expense using the straight-line method; iii) non-cash charges for real estate
depreciation, amortization, amortization of mortgage procurement costs and
deferred income taxes; iv) preferred payment which is classified as minority
interest expense on the Company's Consolidated Statement 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 economic share of ownership. Under GAAP, the full consolidation method
is used to report partnership assets and liabilities consolidated at 100
percent if deemed to be under its control or if the Company is deemed to be
the primary beneficiary of the variable interest entities, 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
Six Months Ended July 31, 2008 and 2007
(dollars in thousands, except per share data)
Three Months Ended, Increase
July 31, (Decrease)
------------------------ ----------------
2008 2007 Amount Percent
======================== ================
Operating Results:
Earnings (loss) from continuing
operations $(13,596) $4,189 $(17,785)
Discontinued operations, net of
tax and minority interest (1) 5,284 63,586 (58,302)
------------------------ ----------------
Net Earnings (loss) $(8,312) $67,775 $(76,087)
======================== ================
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) $88,343 $71,206 $17,137 24.1%
======================== ================
Reconciliation of Net Earnings
to Earnings Before
Depreciation, Amortization and
Deferred Taxes (EBDT)(2):
Net Earnings (loss) $(8,312) $67,775 $(76,087)
Depreciation and amortization
- Real Estate Groups (7) 73,593 62,490 11,103
Amortization of mortgage
procurement costs - Real
Estate Groups (7) 3,448 3,538 (90)
Deferred income tax expense -
Real Estate Groups (8) 16,121 33,397 (17,276)
Deferred income tax expense
(benefit) - Non-Real Estate
Groups: (8)
Gain on disposition of
other investments - (57) 57
Current income tax expense on
non-operating earnings: (8)
Gain on disposition of
other investments - 224 (224)
Gain on disposition
included in
discontinued
operations - 8,088 (8,088)
Gain on disposition of
equity method rental
properties 707 - 707
Straight-line rent adjustment (3) 4,248 (3,470) 7,718
Preference payment (6) 931 936 (5)
Preferred return on disposition 208 5,034 (4,826)
Provision for decline in real
estate 365 - 365
Provision for decline in real
estate of equity method rental
properties 5,661 - 5,661
Gain on disposition of equity
method rental properties - - -
Gain on disposition of other
investments - (431) 431
Discontinued operations: (1)
Gain on disposition of
rental properties (8,627) (106,318) 97,691
------------------------ ----------------
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) $88,343 $71,206 $17,137 24.1%
======================== ================
Diluted Earnings per Common
Share:
Earnings (loss) from continuing
operations $(0.13) $0.04 $(0.17)
Discontinued operations, net of
tax and minority interest (1) $0.05 0.59 (0.54)
------------------------ ----------------
Net earnings (loss) (5) $(0.08) $0.63 $(0.71)
======================== ================
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) (4) $0.82 $0.66 $0.16 24.2%
======================== ================
Operating earnings (loss), net
of tax (a non-GAAP financial
measure) $(0.04) $0.05 $(0.09)
Provision for decline in real
estate, net of tax (0.04) - (0.04)
Gain on disposition of rental
properties and other
investments, net of tax 0.05 0.63 (0.58)
Minority interest (0.05) (0.05) -
------------------------ ----------------
Net earnings (loss) (5) $(0.08) $0.63 $(0.71)
======================== ================
Basic weighted average shares
outstanding (4) 102,682,825 102,239,962 442,863
======================== ================
Diluted weighted average shares
outstanding (4) 107,196,491 107,780,304 (583,813)
======================== ================
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 2008 and 2007
(dollars in thousands, except per share data)
Six Months Ended Increase
July 31, (Decrease)
------------------------ ----------------
2008 2007 Amount Percent
======================== ================
Operating Results:
Earnings (loss) from continuing
operations $(53,944) $(13,480) $(40,464)
Discontinued operations, net of
tax and minority interest (1) 5,363 64,074 (58,711)
------------------------ ----------------
Net Earnings (loss) $(48,581) $50,594 $(99,175)
======================== ================
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) $104,297 $105,735 $(1,438) (1.4%)
======================== ================
Reconciliation of Net Earnings
to Earnings Before
Depreciation, Amortization and
Deferred Taxes (EBDT) (2):
Net Earnings (loss) $(48,581) $50,594 $(99,175)
Depreciation and amortization
- Real Estate Groups (7) 144,358 126,999 17,359
Amortization of mortgage
procurement costs - Real
Estate Groups (7) 6,791 6,457 334
Deferred income tax expense -
Real Estate Groups (8) 788 23,037 (22,249)
Deferred income tax expense
(benefit) - Non-Real Estate
Groups: (8)
Gain on disposition of
other investments 58 (57) 115
Current income tax expense on
non-operating earnings: (8)
Gain on disposition of
other investments - 224 (224)
Gain on disposition
included in
discontinued
operations - 8,088 (8,088)
Gain on disposition of
equity method rental
properties 1,339 - 1,339
Straight-line rent adjustment (3) 1,101 (7,620) 8,721
Preference payment (6) 1,867 1,834 33
Preferred return on disposition 208 5,034 (4,826)
Provision for decline in real
estate 365 - 365
Provision for decline in real
estate of equity method rental
properties 5,661 - 5,661
Gain on disposition of equity
method rental properties (881) (2,106) 1,225
Gain on disposition of other
investments (150) (431) 281
Discontinued operations: (1)
Gain on disposition of
rental properties (8,627) (106,318) 97,691
------------------------ ----------------
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) $104,297 $105,735 $(1,438) (1.4%)
======================== ================
Diluted Earnings per Common
Share:
Earnings (loss) from continuing
operations $(0.52) $(0.13) $(0.39)
Discontinued operations, net of
tax and minority interest (1) 0.05 0.61 (0.56)
------------------------ ----------------
Net earnings (loss) (5) $(0.47) $0.48 $(0.95)
======================== ================
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) (4) $0.97 $0.98 $(0.01) (1.0%)
======================== ================
Operating earnings (loss), net
of tax (a non-GAAP financial
measure) $(0.43) $(0.05) $(0.38)
Provision for decline in real
estate, net of tax (0.04) - (0.04)
Gain on disposition of rental
properties and other
investments, net of tax 0.06 0.65 (0.59)
Minority interest (0.06) (0.07) 0.01
------------------------ ----------------
Net earnings (loss) (5) $(0.47) $0.53 $(1.00)
======================== ================
Basic weighted average shares
outstanding (4) 102,648,700 102,117,423 531,277
======================== ================
Diluted weighted average shares
outstanding (4) 107,213,800 107,725,238 (511,438)
======================== ================
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 2008 and 2007
(dollars in thousands)
Three Months Ended, Increase
July 31, (Decrease)
--------------------- ---------------
2008 2007 Amount Percent
===================== ===============
Operating Earnings (a non-GAAP
financial measure) and Reconciliation
to Net Earnings:
Revenues from real estate operations
Commercial Group $248,040 $210,726 $37,314
Residential Group 75,040 62,254 12,786
Land Development Group 7,159 14,606 (7,447)
Corporate Activities - - -
--------------------- ---------------
Total Revenues 330,239 287,586 42,653 14.8%
Operating expenses (186,090) (177,186) (8,904)
Interest expense (82,350) (72,708) (9,642)
Early extinguishment of debt (52) (1,640) 1,588
Amortization of mortgage procurement
costs (7) (3,169) (2,839) (330)
Depreciation and amortization (7) (70,228) (55,741) (14,487)
Interest and other income 12,887 23,423 (10,536)
Equity in earnings of unconsolidated
entities (5,577) 7,773 (13,350)
Provision for decline in real estate
of equity method rental properties 5,661 - 5,661
Gain on disposition of equity method
rental properties - - -
Preferred Return on Disposition 208 5,034 (4,826)
Revenues and interest income from
discontinued operations (1) 193 12,509 (12,316)
Deferred income tax expense
(benefit) - Non-Real Estate Groups:
(8) (209) (15,201) 14,992
--------------------- ---------------
Operating earnings (loss) (a non-GAAP
financial measure) 1,513 11,010 (9,497)
--------------------- ---------------
Income tax expense (8) (3,723) 609 (4,332)
Income tax expense from discontinued
operations (1) (8) (3,327) (40,040) 36,713
Income tax expense on non-operating
earnings items (see below) 925 39,303 (38,378)
--------------------- ---------------
Operating earnings (loss), net of tax
(a non-GAAP financial measure) (4,612) 10,882 (15,494)
--------------------- ---------------
Provision for decline in real estate (365) - (365)
Provision for decline in real estate
of equity method rental properties (5,661) - (5,661)
Gain on disposition of equity method
rental properties - - -
Preferred Return on Disposition (208) (5,034) 4,826
Gain on disposition of other
investments - 431 (431)
Gain on disposition of rental
properties included in discontinued
operations (1) 8,627 106,318 (97,691)
Income tax benefit (expense) on non-
operating earnings: (8)
Provision for decline in real
estate 141 - 141
Provision for decline in real
estate of equity method rental
properties 2,187 - 2,187
Gain on disposition of other
investments - (167) 167
Gain on disposition of equity
method rental properties 80 1,945 (1,865)
Gain on disposition of rental
properties included in
discontinued operations (3,333) (41,081) 37,748
--------------------- ---------------
Income tax expense on non-operating
earnings (see above) (925) (39,303) 38,378
--------------------- ---------------
Minority interest in continuing
operations (5,168) (5,519) 351
Minority interest in discontinued
operations: (1)
Operating earnings - - -
Gain on disposition of rental
properties - - -
--------------------- ---------------
- - -
--------------------- ---------------
Minority interest (5,168) (5,519) 351
--------------------- ---------------
Net earnings (loss) $(8,312) $67,775 $(76,087)
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 2008 and 2007
(dollars in thousands)
Six Months Ended Increase
July 31, (Decrease)
--------------------- ---------------
2008 2007 Amount Percent
===================== ===============
Operating Earnings (a non-GAAP
financial measure) and
Reconciliation to Net Earnings:
Revenues from real estate operations
Commercial Group $470,307 $413,753 $56,554
Residential Group 153,997 116,859 37,138
Land Development Group 13,581 25,339 (11,758)
Corporate Activities - - -
--------------------- ---------------
Total Revenues 637,885 555,951 81,934 14.7%
Operating expenses (393,766) (345,778) (47,988)
Interest expense (165,721) (149,507) (16,214)
Early extinguishment of debt (5,231) (4,184) (1,047)
Amortization of mortgage procurement
costs (7) (6,107) (5,403) (704)
Depreciation and amortization (7) (136,847) (115,528) (21,319)
Interest and other income 21,288 34,822 (13,534)
Equity in earnings of unconsolidated
entities (15,224) 9,134 (24,358)
Provision for decline in real estate
of equity method rental properties 5,661 - 5,661
Gain on disposition of equity method
rental properties (881) (2,106) 1,225
Preferred Return on Disposition 208 5,034 (4,826)
Revenues and interest income from
discontinued operations (1) 741 24,808 (24,067)
Deferred income tax expense
(benefit) - Non-Real Estate
Groups: (8) (628) (26,704) 26,076
--------------------- ---------------
Operating earnings (loss) (a non-
GAAP financial measure) (58,622) (19,461) (39,161)
--------------------- ---------------
Income tax expense (8) 15,856 14,649 1,207
Income tax expense from discontinued
operations (1) (8) (3,377) (40,348) 36,971
Income tax expense on non-operating
earnings items (see below) 1,323 40,117 (38,794)
--------------------- ---------------
Operating earnings (loss), net of
tax (a non-GAAP financial measure) (44,820) (5,043) (39,777)
--------------------- ---------------
Provision for decline in real estate (365) - (365)
Provision for decline in real estate
of equity method rental properties (5,661) - (5,661)
Gain on disposition of equity method
rental properties 881 2,106 (1,225)
Preferred Return on Disposition (208) (5,034) 4,826
Gain on disposition of other
investments 150 431 (281)
Gain on disposition of rental
properties included in discontinued
operations (1) 8,627 106,318 (97,691)
Income tax benefit (expense) on non-
operating earnings: (8)
Provision for decline in real
estate 141 - 141
Provision for decline in real
estate of equity method rental
properties 2,187 - 2,187
Gain on disposition of other
investments (58) (167) 109
Gain on disposition of equity
method rental properties (260) 1,131 (1,391)
Gain on disposition of rental
properties included in
discontinued operations (3,333) (41,081) 37,748
--------------------- ---------------
Income tax expense on non-operating
earnings (see above) (1,323) (40,117) 38,794
--------------------- ---------------
Minority interest in continuing
operations (5,862) (8,067) 2,205
Minority interest in discontinued
operations: (1)
Operating earnings - - -
Gain on disposition of rental
properties - - -
--------------------- ---------------
- - -
--------------------- ---------------
Minority interest (5,862) (8,067) 2,205
--------------------- ---------------
Net earnings (loss) $(48,581) $50,594 $(99,175)
===================== ===============
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 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 and six months ended July 31, 2008, the effect of
4,513,666 and 4,565,100 shares respectively of dilutive securities were
not included in the computation of diluted earnings per share because
their effect is anti-dilutive to the loss from continuing operations.
(Since these shares are dilutive for the computation of EBDT per share
for the three and six months ended July 31, 2008, diluted weighted
average shares outstanding were used to arrive at $0.82/share and
$0.97/share, respectively.)
For the six months ended July 31, 2007, the effect of 5,607,815 shares
of dilutive securities were not included in the computation of diluted
earnings per share because their effect is anti-dilutive to the loss
from continuing operations. (Since these shares are dilutive for the
computation of EBDT per share for the six months ended July 31, 2007,
diluted weighted average shares outstanding were used to arrive at
$0.98/share.)
5) For the six months ended July 31, 2007, $1,292,000 of net earnings is
allocated to participating securities under EITF 03-6 "Participating
Securities and the Two-Class Method under FASB 128". As a result, the
net earnings for purposes of calculating basic and diluted EPS is
$49,302,000.
6) The preference payment represents the respective period's share of the
annual preferred payment in connection with the issuance of Class A
Common Units in exchange for Bruce C. Ratner's minority interests in
the Forest City Ratner Company portfolio.
7) The following table provides detail of depreciation and amortization
and amortization of mortgage procurement costs. The Company's Real
Estate Groups are engaged in the ownership, development, acquisition
and management of real estate projects, including apartment complexes,
regional malls and retail centers, hotels, office buildings and mixed-
use facilities, as well as large land development projects.
Depreciation and Depreciation and
Amortization Amortization
------------------ -----------------
Three Months Ended Six Months Ended
July 31, July 31,
------------------ -----------------
2008 2007 2008 2007
================== =================
Full Consolidation $70,228 $55,741 $136,847 $115,528
Non-Real Estate (3,502) (2,022) (6,821) (4,019)
------------------ -----------------
Real Estate Groups Full
Consolidation 66,726 53,719 130,026 111,509
Real Estate Groups related to
minority interest (1,548) (1,138) (2,531) (3,825)
Real Estate Groups Equity
Method 8,325 8,988 16,768 17,381
Real Estate Groups Discontinued
Operations 90 921 95 1,934
------------------ -----------------
Real Estate Groups Pro-Rata
Consolidation $73,593 $62,490 $144,358 $126,999
================== =================
Amortization of Amortization of
Mortgage Mortgage
Procurement Costs Procurement Costs
------------------ -----------------
Three Months Ended Six Months Ended
July 31, July 31,
------------------ -----------------
2008 2007 2008 2007
================== =================
Full Consolidation $3,169 $2,839 $6,107 $5,403
Non-Real Estate - - - -
------------------ -----------------
Real Estate Groups Full
Consolidation 3,169 2,839 6,107 5,403
Real Estate Groups related to
minority interest (117) (261) (269) (421)
Real Estate Groups Equity
Method 396 926 942 1,406
Real Estate Groups Discontinued
Operations - 34 11 69
------------------ -----------------
Real Estate Groups Pro-Rata
Consolidation $3,448 $3,538 $6,791 $6,457
================== =================
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 2008 and 2007
(in thousands)
Three Months Ended Six Months Ended
July 31, July 31,
------------------- -------------------
2008 2007 2008 2007
=================== ===================
8) The following table provides (in thousands) (in thousands)
detail of Income Tax Expense
(Benefit):
(A) Operating earnings
Current $(11,434) $1,547 $(11,511) $(145)
Deferred 17,565 (378) (2,335) (13,540)
------------------- -------------------
6,131 1,169 (13,846) (13,685)
------------------- -------------------
(B) Provision for decline in
real estate
Deferred (141) - (141) -
Deferred - Equity
method investment (2,187) - (2,187) -
------------------- -------------------
Subtotal (2,328) - (2,328) -
------------------- -------------------
(C) Gain on disposition of
other investments
Current - Non-Real
Estate Groups - 224 - 224
Deferred - Non-Real
Estate Groups - (57) 58 (57)
------------------- -------------------
- 167 58 167
------------------- -------------------
(D) Gain on disposition of
equity method rental
properties
Current 707 - 1,339 -
Deferred (787) (1,945) (1,079) (1,131)
------------------- -------------------
(80) (1,945) 260 (1,131)
------------------- -------------------
Subtotal (A) (B) (C) (D)
Current (10,727) 1,771 (10,172) 79
Deferred 14,450 (2,380) (5,684) (14,728)
------------------- -------------------
Income tax expense 3,723 (609) (15,856) (14,649)
------------------- -------------------
(E) Discontinued operations
Operating earnings
Current (1,055) (2,406) (1,119) (2,348)
Deferred 1,049 1,365 1,163 1,615
------------------- -------------------
(6) (1,041) 44 (733)
------------------- -------------------
Gain on disposition of
rental properties
Current - 8,088 - 8,088
Deferred 3,333 32,993 3,333 32,993
------------------- -------------------
3,333 41,081 3,333 41,081
------------------- -------------------
3,327 40,040 3,377 40,348
------------------- -------------------
Grand Total (A) (B) (C)
(D) (E)
Current (11,782) 7,453 (11,291) 5,819
Deferred 18,832 31,978 (1,188) 19,880
------------------- -------------------
$7,050 $39,431 $(12,479) $25,699
------------------- -------------------
Recap of Grand Total:
Real Estate Groups
Current 7,671 10,728 10,072 12,974
Deferred 16,121 33,397 788 23,037
------------------- -------------------
23,792 44,125 10,860 36,011
Non-Real Estate Groups
Current (19,453) (3,275) (21,363) (7,155)
Deferred 2,711 (1,419) (1,976) (3,157)
------------------- -------------------
(16,742) (4,694) (23,339) (10,312)
------------------- -------------------
Grand Total $7,050 $39,431 $(12,479) $25,699
=================== ===================
ADD: /FIRST AND FINAL ADD -- CLTH011 -- Forest City Enterprises, Inc. Earnings/
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (Loss)
(GAAP) (in thousands):
Three Months Ended July 31, 2008
Plus
Unconsol- Plus
Full idated Discon- Pro-Rata
Consol- Less Invest- tinued Consol-
idation Minority ments at Opera- idation
(GAAP) Interest Pro-Rata tions (Non-GAAP)
------------------------------------------------
Revenues from real estate
operations $330,239 $15,053 $108,196 $162 $423,544
Exclude straight-line rent
adjustment (1) 2,638 - - - 2,638
--------------------------------------------
Adjusted revenues 332,877 15,053 108,196 162 426,182
Operating expenses 186,090 5,324 80,936 76 261,778
Add back non-Real Estate
depreciation and
amortization (b) 3,502 - 2,828 - 6,330
Add back amortization of
mortgage procurement
costs for non-Real Estate
Groups (d) - - 60 - 60
Exclude straight-line rent
adjustment (2) (1,610) - - - (1,610)
Exclude preference payment (931) - - - (931)
--------------------------------------------
Adjusted operating
expenses 187,051 5,324 83,824 76 265,627
Add interest and other
income 12,887 652 1,482 31 13,748
Add equity in earnings
(loss) of unconsolidated
entities (5,577) (146) 6,503 - 1,072
Add back provision for
decline in real estate of
equity method rental
properties 5,661 - (5,661) - -
Add back equity method
depreciation and
amortization expense (see
below) 8,721 - (8,721) - -
--------------------------------------------
Net Operating Income 167,518 10,235 17,975 117 175,375
Interest expense (82,350) (3,402) (17,767) (43) (96,758)
Loss on early
extinguishment of debt (52) - - - (52)
Equity in earnings (loss)
of unconsolidated
entities 5,577 146 (6,503) - (1,072)
Provision for decline in
real estate of equity
method properties (5,661) - - - (5,661)
Equity method depreciation
and amortization expense
(see above) (8,721) - 8,721 - -
Gain on disposition of
rental properties and
other investments - - - 8,627 8,627
Preferred return on
disposition - - (208) - (208)
Provision for decline in
real estate (365) - - - (365)
Depreciation and
amortization - Real
Estate Groups (a) (66,726) (1,548) (8,325) (90) (73,593)
Amortization of mortgage
procurement costs - Real
Estate Groups (c) (3,169) (117) (396) - (3,448)
Straight-line rent
adjustment (1) + (2) (4,248) - - - (4,248)
Preference payment (931) - - - (931)
--------------------------------------------
Earnings (loss) before
income taxes 872 5,314 (6,503) 8,611 (2,334)
Income tax provision (3,723) - - (3,327) (7,050)
Minority Interest (5,168) (5,168) - - -
Equity in earnings (loss)
of unconsolidated
entities (5,577) (146) 6,503 - 1,072
--------------------------------------------
Earnings (loss) from
continuing operations (13,596) - - 5,284 (8,312)
Discontinued operations,
net of tax 5,284 - - (5,284) -
--------------------------------------------
Net earnings (loss) $(8,312) $- $- $- $(8,312)
============================================
(a) Depreciation and
amortization - Real
Estate Groups $66,726 $1,548 $8,325 $90 $73,593
(b) Depreciation and
amortization - Non-Real
Estate 3,502 - 2,828 - 6,330
--------------------------------------------
Total depreciation
and amortization $70,228 $1,548 $11,153 $90 $79,923
============================================
(c) Amortization of
mortgage procurement
costs - Real Estate
Groups $3,169 $117 $396 $- $3,448
(d) Amortization of
mortgage procurement
costs - Non-Real Estate - - 60 - 60
--------------------------------------------
Total amortization
of mortgage
procurement costs $3,169 $117 $456 $- $3,508
============================================
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (Loss)
(GAAP) (in thousands):
Three Months Ended July 31, 2007
Plus
Unconsol- Plus
Full idated Discon- Pro-Rata
Consol- Less Invest- tinued Consol-
idation Minority ments at Opera- idation
(GAAP) Interest Pro-Rata tions (Non-GAAP)
------------------------------------------------
Revenues from real estate
operations $287,586 $15,329 $96,040 $12,397 $380,694
Exclude straight-line rent
adjustment (1) (7,158) - - - (7,158)
--------------------------------------------
Adjusted revenues 280,428 15,329 96,040 12,397 373,536
Operating expenses 177,186 4,853 62,399 11,883 246,615
Add back non-Real Estate
depreciation and
amortization (b) 2,022 - 638 - 2,660
Add back amortization of
mortgage procurement
costs for non-Real Estate
Groups (d) - - 10 - 10
Exclude straight-line rent
adjustment (2) (3,688) - - - (3,688)
Exclude preference payment (936) - - - (936)
--------------------------------------------
Adjusted operating
expenses 174,584 4,853 63,047 11,883 244,661
Add interest and other
income 23,423 601 6,228 112 29,162
Add equity in earnings
(loss) of unconsolidated
entities 7,773 232 (7,791) - (250)
Add back provision for
decline in real estate of
equity method rental
properties - - - - -
Add back equity method
depreciation and
amortization expense (see
below) 9,914 - (9,914) - -
--------------------------------------------
Net Operating Income 146,954 11,309 21,516 626 157,787
Interest expense (72,708) (4,391) (16,443) (2,000) (86,760)
Loss on early
extinguishment of debt (1,640) - (39) (363) (2,042)
Equity in earnings (loss)
of unconsolidated
entities (7,773) (232) 7,791 - 250
Provision for decline in
real estate of equity
method properties - - - - -
Equity method depreciation
and amortization expense
(see above) (9,914) - 9,914 - -
Gain on disposition of
rental properties and
other investments 431 - - 106,318 106,749
Preferred return on
disposition - - (5,034) - (5,034)
Provision for decline in
real estate - - - - -
Depreciation and
amortization - Real
Estate Groups (a) (53,719) (1,138) (8,988) (921) (62,490)
Amortization of mortgage
procurement costs - Real
Estate Groups (c) (2,839) (261) (926) (34) (3,538)
Straight-line rent
adjustment (1) + (2) 3,470 - - - 3,470
Preference payment (936) - - - (936)
--------------------------------------------
Earnings (loss) before
income taxes 1,326 5,287 7,791 103,626 107,456
Income tax provision 609 - - (40,040) (39,431)
Minority Interest (5,519) (5,519) - - -
Equity in earnings (loss)
of unconsolidated
entities 7,773 232 (7,791) - (250)
--------------------------------------------
Earnings (loss) from
continuing operations 4,189 - - 63,586 67,775
Discontinued operations,
net of tax 63,586 - - (63,586) -
--------------------------------------------
Net earnings (loss) $67,775 $- $- $- $67,775
============================================
(a) Depreciation and
amortization - Real
Estate Groups $53,719 $1,138 $8,988 $921 $62,490
(b) Depreciation and
amortization - Non-Real
Estate 2,022 - 638 - 2,660
--------------------------------------------
Total depreciation
and amortization $55,741 $1,138 $9,626 $921 $65,150
============================================
(c) Amortization of
mortgage procurement
costs - Real Estate
Groups $2,839 $261 $926 $34 $3,538
(d) Amortization of
mortgage procurement
costs - Non-Real Estate - - 10 - 10
--------------------------------------------
Total amortization
of mortgage
procurement costs $2,839 $261 $936 $34 $3,548
============================================
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (Loss)
(GAAP) (in thousands):
Six Months Ended July 31, 2008
Plus
Unconsol- Plus
Full idated Discon- Pro-Rata
Consol- Less Invest- tinued Consol-
idation Minority ments at Opera- idation
(GAAP) Interest Pro-Rata tions (Non-GAAP)
------------------------------------------------
Revenues from real estate
operations $637,885 $31,566 $199,342 $706 $806,367
Exclude straight-line rent
adjustment (1) (2,092) - - - (2,092)
--------------------------------------------
Adjusted revenues 635,793 31,566 199,342 706 804,275
Operating expenses 393,766 17,043 145,511 287 522,521
Add back non-Real Estate
depreciation and
amortization (b) 6,821 - 13,439 - 20,260
Add back amortization of
mortgage procurement
costs for non-Real Estate
Groups (d) - - 105 - 105
Exclude straight-line rent
adjustment (2) (3,193) - - - (3,193)
Exclude preference payment (1,867) - - - (1,867)
--------------------------------------------
Adjusted operating
expenses 395,527 17,043 159,055 287 537,826
Add interest and other
income 21,288 1,127 3,083 35 23,279
Add equity in earnings
(loss) of unconsolidated
entities (15,224) (127) 15,530 - 433
Remove gain on disposition
recorded on equity method (881) - 881 - -
Add back provision for
decline in real estate of
equity method rental
properties 5,661 - (5,661) - -
Add back equity method
depreciation and
amortization expense (see
below) 17,710 - (17,710) - -
--------------------------------------------
Net Operating Income 268,820 15,523 36,410 454 290,161
Interest expense (165,721) (6,742) (36,180) (235) (195,394)
Loss on early
extinguishment of debt (5,231) (119) (22) - (5,134)
Equity in earnings (loss)
of unconsolidated
entities 15,224 127 (15,530) - (433)
Gain on disposition of
equity method rental
properties 881 - - - 881
Provision for decline in
real estate of equity
method properties (5,661) - - - (5,661)
Equity method depreciation
and amortization expense
(see above) (17,710) - 17,710 - -
Gain on disposition of
rental properties and
other investments 150 - - 8,627 8,777
Preferred return on
disposition - - (208) - (208)
Provision for decline in
real estate (365) - - - (365)
Depreciation and
amortization - Real
Estate Groups (a) (130,026) (2,531) (16,768) (95) (144,358)
Amortization of mortgage
procurement costs - Real
Estate Groups (c) (6,107) (269) (942) (11) (6,791)
Straight-line rent
adjustment (1) + (2) (1,101) - - - (1,101)
Preference payment (1,867) - - - (1,867)
--------------------------------------------
Earnings (loss) before
income taxes (48,714) 5,989 (15,530) 8,740 (61,493)
Income tax provision 15,856 - - (3,377) 12,479
Minority Interest (5,862) (5,862) - - -
Equity in earnings (loss)
of unconsolidated
entities (15,224) (127) 15,530 - 433
--------------------------------------------
Earnings (loss) from
continuing operations (53,944) - - 5,363 (48,581)
Discontinued operations,
net of tax 5,363 - - (5,363) -
--------------------------------------------
Net earnings (loss) $(48,581) $- $- $- $(48,581)
============================================
(a) Depreciation and
amortization - Real
Estate Groups $130,026 $2,531 $16,768 $95 $144,358
(b) Depreciation and
amortization - Non-Real
Estate 6,821 - 13,439 - 20,260
--------------------------------------------
Total depreciation
and amortization $136,847 $2,531 $30,207 $95 $164,618
============================================
(c) Amortization of
mortgage procurement
costs - Real Estate
Groups $6,107 $269 $942 $11 $6,791
(d) Amortization of
mortgage procurement
costs - Non-Real Estate - - 105 - 105
--------------------------------------------
Total amortization
of mortgage
procurement costs $6,107 $269 $1,047 $11 $6,896
============================================
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (Loss)
(GAAP) (in thousands):
Six Months Ended July 31, 2007
Plus
Unconsol- Plus
Full idated Discon- Pro-Rata
Consol- Less Invest- tinued Consol-
idation Minority ments at Opera- idation
(GAAP) Interest Pro-Rata tions (Non-GAAP)
------------------------------------------------
Revenues from real estate
operations $555,951 $30,645 $173,222 $24,599 $723,127
Exclude straight-line
rent adjustment (1) (13,000) - - - (13,000)
--------------------------------------------
Adjusted revenues 542,951 30,645 173,222 24,599 710,127
Operating expenses 345,778 10,648 112,953 20,730 468,813
Add back non-Real Estate
depreciation and
amortization (b) 4,019 - 2,517 - 6,536
Add back amortization of
mortgage procurement
costs for non-Real
Estate Groups (d) - - 33 - 33
Exclude straight-line
rent adjustment (2) (5,380) - - - (5,380)
Exclude preference
payment (1,834) - - - (1,834)
--------------------------------------------
Adjusted operating
expenses 342,583 10,648 115,503 20,730 468,168
Add interest and other
income 34,822 1,424 6,851 209 40,458
Add equity in earnings
(loss) of unconsolidated
entities 9,134 584 (9,099) - (549)
Remove gain on
disposition recorded on
equity method (2,106) - 2,106 - -
Add back provision for
decline in real estate
of equity method rental
properties - - - - -
Add back equity method
depreciation and
amortization expense
(see below) 18,787 - (18,787) - -
--------------------------------------------
Net Operating Income 261,005 22,005 38,790 4,078 281,868
Interest expense (149,507) (8,871) (33,297) (3,608) (177,541)
Loss on early
extinguishment of debt (4,184) (821) (459) (363) (4,185)
Equity in earnings (loss)
of unconsolidated
entities (9,134) (584) 9,099 - 549
Gain on disposition of
equity method rental
properties 2,106 - - - 2,106
Provision for decline in
real estate of equity
method properties - - - - -
Equity method
depreciation and
amortization expense
(see above) (18,787) - 18,787 - -
Gain on disposition of
rental properties and
other investments 431 - - 106,318 106,749
Preferred return on
disposition - - (5,034) - (5,034)
Provision for decline in
real estate - - - - -
Depreciation and
amortization - Real
Estate Groups (a) (111,509) (3,825) (17,381) (1,934) (126,999)
Amortization of mortgage
procurement costs - Real
Estate Groups (c) (5,403) (421) (1,406) (69) (6,457)
Straight-line rent
adjustment (1) + (2) 7,620 - - - 7,620
Preference payment (1,834) - - - (1,834)
--------------------------------------------
Earnings (loss) before
income taxes (29,196) 7,483 9,099 104,422 76,842
Income tax provision 14,649 - - (40,348) (25,699)
Minority Interest (8,067) (8,067) - - -
Equity in earnings (loss)
of unconsolidated
entities 9,134 584 (9,099) - (549)
--------------------------------------------
Earnings (loss) from
continuing operations (13,480) - - 64,074 50,594
Discontinued operations,
net of tax 64,074 - - (64,074) -
--------------------------------------------
Net earnings (loss) $50,594 $- $- $- $50,594
============================================
(a) Depreciation and
amortization - Real
Estate Groups $111,509 $3,825 $17,381 $1,934 $126,999
(b) Depreciation and
amortization - Non-Real
Estate 4,019 - 2,517 - 6,536
--------------------------------------------
Total depreciation
and amortization $115,528 $3,825 $19,898 $1,934 $133,535
============================================
(c) Amortization of
mortgage procurement
costs - Real Estate
Groups $5,403 $421 $1,406 $69 $6,457
(d) Amortization of
mortgage procurement
costs - Non-Real Estate - - 33 - 33
--------------------------------------------
Total amortization
of mortgage
procurement costs $5,403 $421 $1,439 $69 $6,490
============================================
Forest City Enterprises, Inc. and Subsidiaries
Supplemental Operating Information
Net Operating Income (dollars in thousands)
-------------------------------------------
Three Months Ended July 31, 2008
--------------------------------
Plus
Unconsol- Plus
Full idated Discon- Pro-Rata
Consol- Less Invest- tinued Consol-
idation Minority ments at Opera- idation
(GAAP) Interest Pro-Rata tions (Non-GAAP)
------------------------------------------------
Commercial Group
Retail
Comparable $59,276 $2,652 $5,470 $- $62,094
--------------------------------------------------------------------
Total 61,535 3,342 5,515 - 63,708
Office Buildings
Comparable 44,489 1,670 2,326 - 45,145
--------------------------------------------------------------------
Total 70,339 2,589 2,445 - 70,195
Hotels
Comparable 5,511 - 6 - 5,517
--------------------------------------------------------------------
Total 5,996 143 6 - 5,859
Earnings from Commercial
Land Sales 4,855 2,005 - - 2,850
Other(1) (3,374) 598 (555) - (4,527)
--------------------------------------------------------------------
Total Commercial Group
Comparable 109,276 4,322 7,802 - 112,756
--------------------------------------------------------------------
Total 139,351 8,677 7,411 - 138,085
Residential Group
Apartments
Comparable 28,641 1,047 6,498 - 34,092
--------------------------------------------------------------------
Total 31,324 711 7,611 117 38,341
Military Housing
Comparable (2) - - - - -
--------------------------------------------------------------------
Total 15,661 396 936 - 16,201
Other (1) (6,716) 50 179 - (6,587)
--------------------------------------------------------------------
Sale of Residential
Development Project - - - - -
--------------------------------------------------------------------
Total Residential Group
Comparable 28,641 1,047 6,498 - 34,092
--------------------------------------------------------------------
Total 40,269 1,157 8,726 117 47,955
Total Rental Properties
Comparable 137,917 5,369 14,300 - 146,848
--------------------------------------------------------------------
Total 179,620 9,834 16,137 117 186,040
Land Development Group 6,717 401 148 - 6,464
The Nets (8,548) - 1,690 - (6,858)
Corporate Activities (10,271) - - - (10,271)
-------------------------------------------------------------------------
Grand Total $167,518 $10,235 $17,975 $117 $175,375
-------------------------------------------------------------------------
Net Operating Income (dollars in thousands)
-------------------------------------------
Three Months Ended July 31, 2007
--------------------------------
Plus
Unconsol- Plus
Full idated Discon- Pro-Rata
Consol- Less Invest- tinued Consol-
idation Minority ments at Opera- idation
(GAAP) Interest Pro-Rata tions (Non-GAAP)
------------------------------------------------
Commercial Group
Retail
Comparable $57,431 $2,674 $4,640 $- $59,397
--------------------------------------------------------------------
Total 62,586 4,588 4,955 - 62,953
Office Buildings
Comparable 46,734 2,613 1,707 - 45,828
--------------------------------------------------------------------
Total 48,298 4,266 1,847 - 45,879
Hotels
Comparable 5,525 - 278 - 5,803
--------------------------------------------------------------------
Total 5,993 (51) 486 - 6,530
Earnings from Commercial
Land Sales (316) - - - (316)
Other (1) (2,890) 944 (32) - (3,866)
--------------------------------------------------------------------
Total Commercial Group
Comparable 109,690 5,287 6,625 - 111,028
--------------------------------------------------------------------
Total 113,671 9,747 7,256 - 111,180
Residential Group
Apartments
Comparable 27,398 752 7,240 - 33,886
--------------------------------------------------------------------
Total 31,671 1,344 13,034 626 43,987
Military Housing
Comparable (2) - - - - -
--------------------------------------------------------------------
Total 1,493 (89) 375 - 1,957
Other (1) (5,103) 4 339 - (4,768)
--------------------------------------------------------------------
Sale of Residential
Development Project 10,090 - - - 10,090
--------------------------------------------------------------------
Total Residential Group
Comparable 27,398 752 7,240 - 33,886
--------------------------------------------------------------------
Total 38,151 1,259 13,748 626 51,266
Total Rental Properties
Comparable 137,088 6,039 13,865 - 144,914
--------------------------------------------------------------------
Total 151,822 11,006 21,004 626 162,446
Land Development Group 6,873 303 83 - 6,653
The Nets (2,226) - 429 - (1,797)
Corporate Activities (9,515) - - - (9,515)
-------------------------------------------------------------------------
Grand Total $146,954 $11,309 $21,516 $626 $157,787
-------------------------------------------------------------------------
Net Operating Income (dollars in thousands)
-------------------------------------------
% Change
---------------------------------
Pro-Rata
Full Consolidation Consolidation
(GAAP) (Non-GAAP)
---------------------------------
Commercial Group
Retail
Comparable 3.2% 4.5%
Total
Office Buildings
Comparable (4.8%) (1.5%)
Total
Hotels
Comparable (0.3%) (4.9%)
Total
Earnings from Commercial
Land Sales
Other (1)
Total Commercial Group
Comparable (0.4%) 1.6%
Total
Residential Group
Apartments
Comparable 4.5% 0.6%
Total
Military Housing
Comparable (2)
Total
Other (1)
Sale of Residential
Development Project
Total Residential Group
Comparable 4.5% 0.6%
Total
Total Rental Properties
Comparable 0.6% 1.3%
Total
Land Development Group
The Nets
Corporate Activities
Grand Total
(1) Includes write-offs of abandoned development projects,
non-capitalizable development costs and unallocated management and
service company overhead, net of historic and new market tax credit
income.
(2) Comparable NOI for Military Housing commences once the operating
projects complete initial development phase.
Forest City Enterprises, Inc. and Subsidiaries
Supplemental Operating Information
Net Operating Income (dollars in thousands)
-------------------------------------------
Six Months Ended July 31, 2008
------------------------------
Plus
Unconsol- Plus
Full idated Discon- Pro-Rata
Consol- Less Invest- tinued Consol-
idation Minority ments at Opera- idation
(GAAP) Interest Pro-Rata tions (Non-GAAP)
------------------------------------------------
Commercial Group
Retail
Comparable $116,143 $5,327 $10,924 $- $121,740
--------------------------------------------------------------------
Total 122,733 6,315 11,044 - 127,462
Office Buildings
Comparable 89,575 4,190 4,689 - 90,074
--------------------------------------------------------------------
Total 125,267 4,993 5,023 - 125,297
Hotels
Comparable 6,766 - 216 - 6,982
--------------------------------------------------------------------
Total 9,079 676 216 - 8,619
Earnings from Commercial
Land Sales 5,879 2,242 - - 3,637
Other (1) (29,458) (1,018) (1,081) - (29,521)
--------------------------------------------------------------------
Total Commercial Group
Comparable 212,484 9,517 15,829 - 218,796
--------------------------------------------------------------------
Total 233,500 13,208 15,202 - 235,494
Residential Group
Apartments
Comparable 55,371 1,431 13,250 - 67,190
--------------------------------------------------------------------
Total 64,464 1,405 15,598 454 79,111
Military Housing
Comparable (2) - - - - -
--------------------------------------------------------------------
Total 25,619 396 2,060 - 27,283
Other (1) (15,317) 95 (31) - (15,443)
--------------------------------------------------------------------
Sale of Residential
Development Project - - - - -
--------------------------------------------------------------------
Total Residential Group
Comparable 55,371 1,431 13,250 - 67,190
--------------------------------------------------------------------
Total 74,766 1,896 17,627 454 90,951
Total Rental Properties
Comparable 267,855 10,948 29,079 - 285,986
--------------------------------------------------------------------
Total 308,266 15,104 32,829 454 326,445
Land Development Group 6,158 419 278 - 6,017
The Nets (22,021) - 3,303 - (18,718)
Corporate Activities (23,583) - - - (23,583)
-------------------------------------------------------------------------
Grand Total $268,820 $15,523 $36,410 $454 $290,161
-------------------------------------------------------------------------
Net Operating Income (dollars in thousands)
-------------------------------------------
Six Months Ended July 31, 2007
------------------------------
Plus
Unconsol- Plus
Full idated Discon- Pro-Rata
Consol- Less Invest- tinued Consol-
idation Minority ments at Opera- idation
(GAAP) Interest Pro-Rata tions (Non-GAAP)
------------------------------------------------
Commercial Group
Retail
Comparable $112,509 $5,389 $10,877 $- $117,997
--------------------------------------------------------------------
Total 118,308 7,315 11,220 - 122,213
Office Buildings
Comparable 91,170 5,157 2,890 - 88,903
--------------------------------------------------------------------
Total 94,532 7,807 3,089 - 89,814
Hotels
Comparable 7,426 - 552 - 7,978
--------------------------------------------------------------------
Total 8,286 101 969 - 9,154
Earnings from Commercial
Land Sales 2,064 434 - - 1,630
Other (1) (9,192) 3,043 99 - (12,136)
--------------------------------------------------------------------
Total Commercial Group
Comparable 211,105 10,546 14,319 - 214,878
--------------------------------------------------------------------
Total 213,998 18,700 15,377 - 210,675
Residential Group
Apartments
Comparable 52,202 1,398 14,917 - 65,721
--------------------------------------------------------------------
Total 60,120 2,656 21,793 4,079 83,336
Military Housing
Comparable (2) - - - - -
--------------------------------------------------------------------
Total 4,859 (89) 560 - 5,508
Other(1) (9,339) 4 99 (1) (9,245)
--------------------------------------------------------------------
Sale of Residential
Development Project 10,090 - - - 10,090
--------------------------------------------------------------------
Total Residential Group
Comparable 52,202 1,398 14,917 - 65,721
--------------------------------------------------------------------
Total 65,730 2,571 22,452 4,078 89,689
Total Rental Properties
Comparable 263,307 11,944 29,236 - 280,599
--------------------------------------------------------------------
Total 279,728 21,271 37,829 4,078 300,364
Land Development Group 10,096 734 199 - 9,561
The Nets (5,477) - 762 - (4,715)
Corporate Activities (23,342) - - - (23,342)
-------------------------------------------------------------------------
Grand Total $261,005 $22,005 $38,790 $4,078 $281,868
-------------------------------------------------------------------------
Net Operating Income (dollars in thousands)
-------------------------------------------
% Change
-----------------------------------
Pro-Rata
Full Consolidation Consolidation
(GAAP) (Non-GAAP)
-----------------------------------
Commercial Group
Retail
Comparable 3.2% 3.2%
Total
Office Buildings
Comparable (1.7%) 1.3%
Total
Hotels
Comparable (8.9%) (12.5%)
Total
Earnings from Commercial
Land Sales
Other (1)
Total Commercial Group
Comparable 0.7% 1.8%
Total
Residential Group
Apartments
Comparable 6.1% 2.2%
Total
Military Housing
Comparable (2)
Total
Other (1)
Sale of Residential
Development Project
Total Residential Group
Comparable 6.1% 2.2%
Total
Total Rental Properties
Comparable 1.7% 1.9%
Total
Land Development Group
The Nets
Corporate Activities
Grand Total
(1) Includes write-offs of abandoned development projects,
non-capitalizable development costs and unallocated management and
service company overhead, net of historic and new market tax credit
income.
(2) Comparable NOI for Military Housing commences once the operating
projects complete initial development phase.
Development Pipeline
July 31, 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:
Orchard Town Center Westminster,
CO D Q1-08 100.0% 100.0%
Office:
818 Mission Street (c) San Francisco,
CA A Q1-08 50.0% 50.0%
Johns Hopkins
- 855 North Wolfe Street East Baltimore,
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/Q3-08 50.0% 50.0%
Mercantile Place on
Main (e) Dallas, TX D Q1-08/Q4-08 100.0% 100.0%
Total Openings and
Acquisitions (d)
--------------------------------------------------------------------------
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
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 $170.5 $170.5 $170.5 980,000 565,000 (f)
--------------------------========= ============
Office:
818 Mission Street (c) $0.0 $20.6 $10.3 34,000
Johns Hopkins - 855 North
Wolfe Street 111.5 111.5 85.4 278,000 (i)
------------------------------------
$111.5 $132.1 $95.7 312,000
--------------------------==========
Residential:
Lucky Strike $38.5 $38.5 $38.5 131
Uptown Apartments (c)(e) 0.0 205.4 102.7 665
Mercantile Place on
Main (e) 146.1 146.1 146.1 366 (j)
------------------------------------
$184.6 $390.0 $287.3 1,162
--------------------------==========
Total Openings and --------------------------
Acquisitions (d) $466.6 $692.6 $553.5
==========================
--------------------------------------------------------------
Residential Phased-In
Units (c) (e): Opened in '08 /
Total
---------------
Cobblestone Court $0.0 $24.6 $12.3 96/304
Stratford Crossing 0.0 25.3 12.7 72/348
Sutton Landing 0.0 15.9 8.0 84/216
------------------------------------
Total (g) $0.0 $65.8 $33.0 252/868
====================================
--------------------------------------------------------------
See Attached Footnotes
Development Pipeline
July 31, 2008
Under Construction (13)
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%
Promenade at Temecula Expansion Temecula, CA D Q1-09 75.0% 75.0%
Village at Gulfstream (c) Hallandale,
FL D Q3-09 50.0% 50.0%
East River Plaza (c) Manhattan,
NY D Q3-09 35.0% 50.0%
Ridge Hill (e) Yonkers, NY D Q4-09/Q2-10 70.0% 100.0%
Office:
Mesa Del Sol Town Center(c) Albuquerque,
NM D Q4-08 47.5% 47.5%
Mesa Del Sol - Fidelity (c) Albuquerque,
NM D Q4-08 47.5% 47.5%
Waterfront Station - East
4th & West 4th Buildings(c) Washington
DC D Q1-10 45.0% 45.0%
Residential:
Haverhill Haverhill,
MA D Q1-09 100.0% 100.0%
80 Dekalb Avenue (e) Brooklyn, NY D Q3-09/Q1-10 70.0% 100.0%
The Yards - Pattern Shop Lofts Washington
DC D Q4-09 90.0% 90.0%
Beekman (e) Manhattan,
NY D Q2-10/11 49.0% 70.0%
Total Under Construction (k)
--------------------------------------------------------------------------
Residential Phased-In
Units (c) (e):
Stratford Crossing Wadsworth,
OH D 2007-09 50.0% 50.0%
Sutton Landing Brimfield,
OH D 2007-09 50.0% 50.0%
Total (p)
--------------------------------------------------------------------------
See Attached Footnotes
Military Housing - see Footnote q
Development Pipeline
July 31, 2008
Under Construction (13)
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 $149.1 $149.1 $149.1 646,000
White Oak Village 70.6 70.6 70.6 800,000
Promenade at Temecula Expansion 102.9 102.9 77.2 126,000
Village at Gulfstream (c) 0.0 182.2 91.1 466,000
East River Plaza (c) 0.0 407.4 203.7 517,000
Ridge Hill (e) 670.7 670.7 670.7 1,200,000
----------------------------------------
$993.3 $1,582.9 $1,262.4 3,755,000
------------------------------==========
Office:
Mesa Del Sol Town Center (c) $0.0 $18.7 $8.9 74,000 (n)
Mesa Del Sol - Fidelity (c) 0.0 30.9 14.7 210,000
Waterfront Station - East 4th
& West 4th Buildings (c) 0.0 330.2 148.6 628,000 (o)
----------------------------------------
$0.0 $379.8 $172.2 912,000
------------------------------==========
Residential:
Haverhill $75.3 $75.3 $75.3 305
80 Dekalb Avenue (e) 152.0 152.0 152.0 365
The Yards - Pattern Shop Lofts 55.0 55.0 49.5 170
Beekman (e) 875.7 875.7 613.0 904
----------------------------------------
$1,158.0 $1,158.0 $889.8 1,744
------------------------------==========
-----------------------------
Total Under Construction (k) $2,151.3 $3,120.7 $2,324.4
=============================
--------------------------------------------------------------------------
Residential Phased-In
Units (c) (e): Under Const. / Total
--------------------
Stratford Crossing $0.0 $25.3 $12.7 168/348
Sutton Landing 0.0 15.9 8.0 108/216
----------------------------------------
Total (p) $0.0 $41.2 $20.7 276/564
========================================
--------------------------------------------------------------------------
See Attached Footnotes
Military Housing - see Footnote q
Development Pipeline
July 31, 2008
Under Construction (13) Gross
Leasable Lease
Property Area Commitment%
Retail Centers:
Shops at Wiregrass 356,000 78%
White Oak Village 294,000 89%
Promenade at Temecula Expansion 126,000 57%
Village at Gulfstream (c) 466,000 (l) 40%
East River Plaza (c) 517,000 70%
Ridge Hill (e) 1,200,000 (m) 14%
-----------
2,959,000
===========
Office:
Mesa Del Sol Town Center (c) 31%
Mesa Del Sol - Fidelity (c) 100%
Waterfront Station - East 4th & West
4th Buildings (c) 98%
Residential:
Haverhill
80 Dekalb Avenue (e)
The Yards - Pattern Shop Lofts
Beekman (e)
Total Under Construction (k)
--------------------------------------------------------------------------
Residential Phased-In Units (c) (e):
Stratford Crossing
Sutton Landing
Total (p)
--------------------------------------------------------------------------
See Attached Footnotes
Military Housing - see Footnote q
Development Pipeline
July 31, 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
$466.6 million to the Company's pro-rata share (a non-GAAP measure) of
$553.5 million consists of a reduction to full consolidation for
minority interest of $26.1 million of cost and the addition of its
share of cost for unconsolidated investments of $113.0 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) Includes 18,000 square feet of retail space.
(k) The difference between the full consolidation cost amount (GAAP) of
$2,151.3 million to the Company's pro-rata share (a non-GAAP measure)
of $2,324.4 million consists of a reduction to full consolidation for
minority interest of $293.9 million of cost and the addition of its
share of cost for unconsolidated investments of $467.0 million.
(l) Includes 86,000 square feet of office space.
(m) Includes 156,000 square feet of office space.
(n) Includes 22,000 square feet of retail space.
(o) Includes 85,000 square feet of retail space.
(p) The difference between the full consolidation cost amount (GAAP) of
$0.0 million to the Company's pro-rata share (a non-GAAP measure) of
$20.7 million consists of the Company's share of cost for
unconsolidated investments of $20.7 million.
(q) Below is a summary of our equity method investments for Military
Housing Development projects. The Company provides services for these
projects including development, construction, and management and
receives agreed upon fees for these services. (See pages 6-7 for net
fee revenue included in NOI.)
FCE Cost Total Sq.ft./
Antici- Pro- at Full Cost No. of
pated Rata% Consol- at 100% Units
Property Location Opening (h) idation(a)
--------------------------------------------------------------------------
(in millions)
-----------------------------
Military Housing: -
Openings (1)
Ohana Military
Communities,
Hawaii
Increment I Honolulu,
HI 2005-Q2-08 * $0.0 $316.5 1,952
----------------------------
Military Housing
Under
Construction (7)
Midwest Millington Memphis,
TN 2008-2009 * $0.0 $38.1 318
Navy Midwest Chicago,
IL 2006-2009 * 0.0 264.7 1,658
Air Force Academy Colorado
Springs,
CO 2007-2009 50.0% 0.0 82.5 427
Marines, Hawaii
Increment II Honolulu,
HI 2007-2010 * 0.0 338.8 1,175
Navy, Hawaii
Increment III Honolulu,
HI 2007-2010 * 0.0 614.6 2,519
Pacific Northwest
Communities Seattle,
WA 
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