CLEVELAND, June 5 /PRNewswire-FirstCall/ -- Forest City Enterprises, Inc. today announced EBDT, net earnings and revenues for the fiscal first quarter ended April 30, 2008.
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First-quarter EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) was $16.0 million, or $0.15 per share, compared with last year's EBDT of $34.5 million, or $0.32 per share. The Company's commercial and residential segments provided a pre-tax EBDT increase of $15.5 million as both mature properties and new properties performed well. This increase was offset by project write-offs, which increased $24.1 million pre-tax ($14.8 million after-tax) compared with last year, primarily as a result of the write-off of Summit at Lehigh Valley, a mixed-use development opportunity in Allentown, Pennsylvania. In addition, the Company's share of losses from its equity investment in the New Jersey Nets basketball team increased $10.2 million ($6.9 million after-tax) compared with last year.
The fiscal 2008 first-quarter net loss was $40.3 million, or $0.39 per share, compared with a net loss of $17.2 million, or $0.17 per share, in the 2007 first quarter. First-quarter consolidated revenues rose to $308 million, compared with $268 million last year. The net loss variance was driven primarily by the same factors affecting EBDT results for the quarter. The revenue increase resulted from new property openings, the largest of which was The New York Times Building in Manhattan, as well as increased fees from the Company's military family housing business.
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
Charles A. Ratner, president and chief executive officer of Forest City Enterprises, said, "The strong performance of our rental properties business was driven by growth in comparable net operating income in all major property types, and good occupancy results across the portfolio. In addition, military family housing continued to be an increasing contributor to EBDT. First-quarter results in our land development business were in line with the same period last year, and we expect the land business to be a positive contributor to EBDT for the year.
"The write-off of the Summit at Lehigh Valley mixed-use project is disappointing because we pursued the opportunity for six years and still believe the site is viable, long term, for both retail and housing. We faced delays in the public entitlement process to fund infrastructure, as well as challenges related to the overall slowdown in retail and housing markets. Recently, the land owner decided to sell to the adjacent hospital system which wanted the land for future expansion."
Summit at Lehigh Valley accounted for $21.5 million of the total $24.1 million increase in project write-offs for the quarter.
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 $452 per square foot. Comparable office occupancies were 91.2 percent compared with 93.0 percent last year. Comparable residential net rental income remained strong at 93.2 percent.
First-Quarter Milestones Openings
During the first quarter, Forest City opened six projects, representing $544.0 million of cost at the Company's pro-rata share and $458.8 million at full consolidation. Including the projects opened during the first quarter, a total of 10 projects are scheduled to open in fiscal 2008. Total planned openings for the year represent more than $785 million of cost at the Company's pro-rata share and approximately $677 million at full consolidation.
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 Richmond, Virginia; the initial phase of the 665-unit Uptown Apartments in center city Oakland; and the first phase of the 366-unit Mercantile Place on Main redevelopment in Dallas.
Transactions
In New York City, Forest City closed on $680 million in construction financing for the mixed-use Beekman development - the largest financing in the Company's history. The $680 million in bonds, of which approximately $204 million comes from the New York Liberty Bond Program, are being issued by the New York City Housing Development Corporation. In addition, in late May, Forest City and architect Frank Gehry unveiled the latest plans and design for the building, which recently received praise from a leading architecture critic. Beekman is under construction and expected to open in 2010 as one of New York City's tallest residential high-rises at 76 stories.
Also in New York, and as previously disclosed in a May 12, 2008 filing with the Securities and Exchange Commission, the Company acquired Bruce C. Ratner's interests in two properties, the New York Times Building and Twelve MetroTech Center, both of which recently stabilized. These transactions are part of the New York City portfolio restructuring agreement between Forest City Enterprises, Inc. and Bruce Ratner, which was previously announced on August 10, 2006. Five New York projects - Ridge Hill, East River Plaza, Beekman, 80 DeKalb, and Mill Basin - remain under construction or under development and are also covered by the same agreement.
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 $2.4 billion of cost at the Company's pro-rata share and $1.9 billion at full consolidation. The Company currently has six retail projects under construction and two are expected to open later in the year:
-- 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 New York City core market, Ridge Hill and East River Plaza, which represent a combined 1.7 million square feet of retail space, at a combined cost of approximately $874.4 million at the Company's pro-rata share and $670.7 million at full consolidation.
Projects Under Development
At the end of the first quarter, Forest City had more than 15 projects under development, representing approximately $1.2 billion of cost at the Company's pro-rata share and on a full consolidation basis.
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 Albuquerque, New Mexico, the Company has secured commitments for a total of more than 450,000 square feet of commercial space from Sony Pictures Imageworks, Fidelity Investments, and SCHOTT Solar, Inc. In addition, the Company recently began construction on Mesa del Sol's first, 74,000-square-foot town center, which is expected to be completed later in the year.
In February, Forest City received favorable decisions from the New York State Supreme Court and a federal appeals court regarding Atlantic Yards in Brooklyn. These rulings are key milestones in the Company's ability to move forward with the development. Site work continues and the Company now controls more than 85 percent of the land on the 22-acre site.
During the quarter, construction began on the first two buildings, totaling 628,000 square feet, at the Waterfront redevelopment in Southwest Washington, D.C. All of the approximately 543,000 square feet of office space in the buildings is pre-leased to the District of Columbia. In addition, approximately 71,400 square feet of retail space in the buildings is already committed to relocate existing tenants at the site. Waterfront is ultimately expected to feature up to 1.2 million square feet of office space, an estimated 1,000 residential units, and 110,000 square feet of stores and restaurants.
At The Yards, also in Washington, D.C., the Company expects to begin construction later this year on a 44,000-square-foot town center-type project and a 170-unit apartment building at the 42-acre site. The development 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 - in the neighborhood of the newly opened Washington Nationals baseball park.
Financing Activity
During the first quarter, Forest City closed on transactions totaling $1.5 billion in nonrecourse mortgage financings, including $480.0 million in refinancings, $812.1 million in development, and $209.7 million in loan extensions and additional fundings.
As of April 30, 2008, the Company's weighted average cost of mortgage debt decreased to 5.61 percent from 6.07 percent at April 30, 2007, primarily due to the decrease in variable interest rates. Fixed-rate mortgage debt including variable debt that is effectively fixed through interest rate swaps, which represented 76 percent of the Company's total nonrecourse mortgage debt, decreased from 6.18 percent at April 30, 2007 to 6.07 percent at April 30, 2008. Variable-rate mortgage debt decreased from 5.71 percent at April 30, 2007 to 4.14 percent at April 30, 2008.
The Company began the year with approximately $842 million of loans maturing in 2008, and has successfully refinanced or extended all but $257 million as of the end of the first quarter. At April 30, 2008, the Company has less than $720 million of loans scheduled to mature in 2009.
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 Summit at Lehigh Valley, but we prudently abandoned the project and have written off the related costs. We are well aware of the risks inherent in the real estate development business, even as we continue to seek new opportunities. As always, we will use a disciplined approach in evaluating new development. We closely monitor our operating portfolio, development pipeline and land development business, and are comfortable with the strength of our balance sheet.
"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 $10.5 billion NYSE-listed national real estate company. The Company is principally engaged in the ownership, development, management and acquisition of commercial and residential real estate and land throughout the United States.
Supplemental Package
Please refer to the Investor Relations section of the Company's website at http://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 April 30, 2008, with reconciliations of non-GAAP financial measures, such as EBDT, comparable property 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 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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