##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the
transition period from _________ to _________
 Commission file number 1-4372
 FOREST CITY ENTERPRISES, INC.
  Ohio
    
    34-0863886(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S.
Employer
Identification No.)Terminal Tower 
Suite 1100
    
    50 Public Square
Cleveland, Ohio
    
    44113(Address of principal executive offices)
    
    (Zip Code)Registrants telephone number, including area code
    
    216-621-6060
  þ o
  Large accelerated
filer þAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ
  Class
    

Outstanding
at June 3, 2008Class A Common Stock, $.33 1/3 par value
    
    79,253,885 sharesClass B Common Stock, $.33 1/3 par value
    
    23,698,349 shares




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##### 



Forest City Enterprises, Inc. and Subsidiaries
 Table of Contents
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsForest City Enterprises, Inc. and SubsidiariesConsolidated Balance Sheets April 30, 2008 and January 31, 2008
    
    
    2Consolidated Statements of Operations Three Months Ended April 30, 2008 and 2007
    
    
    3Consolidated Statements of Comprehensive Loss Three Months Ended April 30, 2008 and 2007
    
    
    4Consolidated Statements of Shareholders Equity Three Months Ended April 30, 2008 and 2007
    
    
    5Consolidated Statements of Cash Flows Three Months Ended April 30, 2008 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    30Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    53Item 4.
    
    Controls and Procedures
    
    
    57PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    57Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    57Item 6.
    
    Exhibits
    
    
    58Signatures
    
    
    63CertificationsEX-10.60EX-31.1EX-31.2EX-32.1
  i




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 Forest City Enterprises, Inc. and Subsidiaries
 
 Consolidated Balance Sheets
 April 30, 2008
    
    
    January 31, 2008(Unaudited)(in thousands)AssetsReal EstateCompleted rental properties
    
    $
    7,794,681
    
    
    $
    7,561,685Projects under development
    
    
    1,591,749
    
    
    
    1,499,495Land held for development or sale
    
    
    161,875
    
    
    
    155,524Total Real Estate
    
    
    9,548,305
    
    
    
    9,216,704Less accumulated depreciation
    
    
    (1,291,523
    )
    
    
    (1,244,391
    )Real Estate, net
    
    
    8,256,782
    
    
    
    7,972,313Cash and equivalents
    
    
    179,850
    
    
    
    254,434Restricted cash
    
    
    408,568
    
    
    
    248,262Notes and accounts receivable, net
    
    
    415,233
    
    
    
    419,090Investments in and advances to affiliates
    
    
    365,067
    
    
    
    495,828Other assets
    
    
    887,595
    
    
    
    829,998Operating property assets held for sale
    
    
    31,617
    
    
    
    31,672Total Assets
    
    $
    10,544,712
    
    
    $
    10,251,597Liabilities and Shareholders EquityLiabilitiesMortgage debt, nonrecourse
    
    $
    6,666,259
    
    
    $
    6,338,610Notes payable
    
    
    173,920
    
    
    
    143,874Bank revolving credit facility
    
    
    32,000
    
    
    
    39,000Senior and subordinated debt
    
    
    886,900
    
    
    
    886,900Accounts payable and accrued expenses
    
    
    978,559
    
    
    
    1,015,844Deferred income taxes
    
    
    460,420
    
    
    
    477,238Liabilities of operating property held for sale
    
    
    28,570
    
    
    
    28,498Total Liabilities
    
    
    9,226,628
    
    
    
    8,929,964Minority Interest
    
    
    389,108
    
    
    
    349,517Commitments and Contingencies
    
    
    -
    
    
    
    -Company-Obligated Trust Preferred Securities
    
    
    -
    
    
    
    -Shareholders EquityPreferred stock - without par value; 10,000,000 shares authorized; no shares issued
    
    
    -
    
    
    
    -Common stock - $.33 1/3 par valueClass A, 271,000,000 shares authorized, 78,834,468 and 78,237,993 shares
issued and 78,781,255 and 78,201,673 shares outstanding, respectively
    
    
    26,278
    
    
    
    26,079Class B, convertible, 56,000,000 shares authorized, 23,878,414 and 24,387,607 shares
issued and outstanding, respectively; 26,257,961 issuable
    
    
    7,960
    
    
    
    8,12934,238
    
    
    
    34,208Additional paid-in capital
    
    
    230,211
    
    
    
    229,358Retained earnings
    
    
    734,359
    
    
    
    782,871Less treasury stock, at cost; 53,213 and 36,320 Class A shares, respectively
    
    
    (2,307
    )
    
    
    (1,665
    )996,501
    
    
    
    1,044,772Accumulated other comprehensive loss
    
    
    (67,525
    )
    
    
    (72,656
    )Total Shareholders Equity
    
    
    928,976
    
    
    
    972,116Total Liabilities and Shareholders Equity
    
    $
    10,544,712
    
    
    $
    10,251,597
  2




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Operations
 Three Months Ended April 30,2008
    
    
    2007(in thousands, except per share data)Revenues from real estate operations
    
    $
    307,646
    
    
    $
    268,365ExpensesOperating expenses
    
    
    207,676
    
    
    
    168,592Depreciation and amortization
    
    
    66,619
    
    
    
    59,787274,295
    
    
    
    228,379Interest expense
    
    
    (83,371
    )
    
    
    (76,799
    )Amortization of mortgage procurement costs
    
    
    (2,938
    )
    
    
    (2,564
    )Loss on early extinguishment of debt
    
    
    (5,179
    )
    
    
    (2,544
    )Interest and other income
    
    
    8,401
    
    
    
    11,399Gain on disposition of other investments
    
    
    150
    
    
    
    -Loss before income taxes
    
    
    (49,586
    )
    
    
    (30,522
    )Income tax expense (benefit)Current
    
    
    555
    
    
    
    (1,692
    )Deferred
    
    
    (20,134
    )
    
    
    (12,348
    )(19,579
    )
    
    
    (14,040
    )Minority interest
    
    
    (694
    )
    
    
    (2,548
    )Equity in (loss) earnings of unconsolidated entities
    
    
    (9,647
    )
    
    
    1,361Loss from continuing operations
    
    
    (40,348
    )
    
    
    (17,669
    )Discontinued operations, net of tax:Operating earnings from rental properties
    
    
    79
    
    
    
    488Net loss
    
    $
    (40,269
    )
    
    $
    (17,181
    )Basic and diluted loss per common shareLoss from continuing operations
    
    $
    (0.39
    )
    
    $
    (0.17
    )Earnings from discontinued operations, net of tax
    
    
    -
    
    
    
    -Net loss
    
    $
    (0.39
    )
    
    $
    (0.17
    )
  3




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Loss
 Three Months Ended April 30,2008
    
    
    2007(in thousands)Net loss
    
    $
    (40,269
    )
    
    $
    (17,181
    )Other comprehensive income (loss), net of tax and minority interest:Unrealized net gains (losses) on investment securities
    
    
    51
    
    
    
    (41
    )Change in unrealized net gains (losses) on interest rate derivative contracts
    
    
    5,080
    
    
    
    (9,178
    )Other comprehensive income (loss), net of tax and minority interest
    
    $
    5,131
    
    
    $
    (9,219
    )Comprehensive loss
    
    $
    (35,138
    )
    
    $
    (26,400
    )
  4




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 
 Consolidated Statements of Shareholders Equity
 AccumulatedCommon Stock
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherClass A
    
    
    Class B
    
    
    Paid-In
    
    
    Retained
    
    
    Treasury Stock
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    (Loss) Income
    
    
    Total(in thousands)Three Months Ended April 30, 2008Balances at January 31, 2008
    
    
    78,238
    
    
    $
    26,079
    
    
    
    24,388
    
    
    $
    8,129
    
    
    $
    229,358
    
    
    $
    782,871
    
    
    
    36
    
    
    $
    (1,665
    )
    
    $
    (72,656
    )
    
    $
    972,116Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,269
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,269
    )Other comprehensive income, net of tax and minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,131
    
    
    
    5,131Dividends $.08 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,243
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,243
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    (642
    )
    
    
    
    
    
    
    (642
    )Conversion of Class B to Class A shares
    
    
    510
    
    
    
    169
    
    
    
    (510
    )
    
    
    (169
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Exercise of stock options
    
    
    12
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124Restricted stock vested
    
    
    74
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,469Distribution of accumulated equity to minority partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,710
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,710
    )Balances at April 30, 2008
    
    
    78,834
    
    
    $
    26,278
    
    
    
    23,878
    
    
    $
    7,960
    
    
    $
    230,211
    
    
    $
    734,359
    
    
    
    53
    
    
    $
    (2,307
    )
    
    $
    (67,525
    )
    
    $
    928,976Three Months Ended April 30, 2007Balances at January 31, 2007
    
    
    76,693
    
    
    $
    25,564
    
    
    
    25,254
    
    
    $
    8,418
    
    
    $
    247,884
    
    
    $
    762,062
    
    
    
    65
    
    
    $
    (3,449
    )
    
    $
    (14,668
    )
    
    $
    1,025,811Cumulative effect of change in accounting for uncertain tax positions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,181
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,181
    )Other comprehensive loss, net of tax and minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,219
    )
    
    
    (9,219
    )Dividends $.07 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,218
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,218
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    (3,138
    )
    
    
    
    
    
    
    (3,138
    )Conversion of Class B to Class A shares
    
    
    82
    
    
    
    27
    
    
    
    (82
    )
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Exercise of stock options
    
    
    212
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    3,347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,418Restricted stock granted out of treasury
    
    
    (107
    )
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    (6,020
    )
    
    
    
    
    
    
    (107
    )
    
    
    6,056
    
    
    
    
    
    
    
    -Restricted stock vested
    
    
    135
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,912
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,912Distribution of accumulated equity to minority partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,558
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,558
    )Balances at April 30, 2007
    
    
    77,015
    
    
    $
    25,671
    
    
    
    25,172
    
    
    $
    8,391
    
    
    $
    241,520
    
    
    $
    737,908
    
    
    
    8
    
    
    $
    (531
    )
    
    $
    (23,887
    )
    
    $
    989,072
  5




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows
 Three Months Ended April 30,2008
    
    2007(in thousands)Net Loss
    
    $
    (40,269
    )
    
    $
    (17,181
    )Depreciation and amortization
    
    
    66,619
    
    
    
    59,787Amortization of mortgage procurement costs
    
    
    2,938
    
    
    
    2,564(Gain) loss on early extinguishment of debt, net of cash prepayment penalties
    
    
    (305
    )
    
    
    2,544Gain on disposition of other investments
    
    
    (150
    )
    
    
    -Deferred income tax benefit
    
    
    (20,134
    )
    
    
    (12,348
    )Minority interest
    
    
    694
    
    
    
    2,548Equity in loss (earnings) of unconsolidated entities
    
    
    9,647
    
    
    
    (1,361
    )Stock-based compensation
    
    
    2,737
    
    
    
    4,225Amortization and mark-to-market adjustments of derivative instruments
    
    
    362
    
    
    
    941Cash distributions from operations of unconsolidated entities
    
    
    11,619
    
    
    
    6,358Write-off of abandoned development projects
    
    
    26,692
    
    
    
    2,570Discontinued operations:Depreciation and amortization
    
    
    5
    
    
    
    1,013Amortization of mortgage procurement costs
    
    
    11
    
    
    
    35Deferred income tax expense
    
    
    114
    
    
    
    250Cost of sales of land included in projects under development and completed rental properties
    
    
    2,862
    
    
    
    3,266Increase in land held for development or sale
    
    
    (10,533
    )
    
    
    (11,397
    )Decrease (increase) in notes and accounts receivable
    
    
    14,909
    
    
    
    (8,611
    )Increase in other assets
    
    
    (3,270
    )
    
    
    (6,514
    )Decrease (increase) in restricted cash used for operating purposes
    
    
    3,632
    
    
    
    (4,774
    )Decrease in accounts payable and accrued expenses
    
    
    (70,783
    )
    
    
    (33,113
    )Net cash used in operating activities
    
    
    (2,603
    )
    
    
    (9,198
    )Cash Flows from Investing ActivitiesCapital expenditures, including real estate acquisitions
    
    
    (236,535
    )
    
    
    (306,906
    )Payment of lease procurement costs and other assets
    
    
    (40,730
    )
    
    
    (12,047
    )(Increase) decrease in restricted cash used for capital expenditures
    
    
    (161,316
    )
    
    
    32,109Proceeds from disposition of other investments
    
    
    150
    
    
    
    -Decrease (increase) in investments in and advances to affiliates
    
    
    56,655
    
    
    
    (27,648
    )Net cash used in investing activities
    
    
    (381,776
    )
    
    
    (314,492
    )Cash Flows from Financing ActivitiesBorrowings on bank revolving credit facility
    
    
    80,000
    
    
    
    193,000Payments on bank revolving credit facility
    
    
    (87,000
    )
    
    
    (53,000
    )Proceeds from nonrecourse mortgage debt
    
    
    683,815
    
    
    
    215,418Principal payments on nonrecourse mortgage debt
    
    
    (404,259
    )
    
    
    (100,435
    )Proceeds from notes payable
    
    
    35,388
    
    
    
    151Payments on notes payable
    
    
    (5,342
    )
    
    
    (18,421
    )Change in restricted cash and book overdrafts
    
    
    5,697
    
    
    
    (6,919
    )Payment of deferred financing costs
    
    
    (22,694
    )
    
    
    (4,148
    )Purchase of treasury stock
    
    
    (642
    )
    
    
    (3,138
    )Exercise of stock options
    
    
    124
    
    
    
    3,418Distributions of accumulated equity to minority partners
    
    
    (3,710
    )
    
    
    (9,558
    )Dividends paid to shareholders
    
    
    (8,234
    )
    
    
    (7,160
    )Increase in minority interest
    
    
    36,652
    
    
    
    21,191Net cash provided by financing activities
    
    
    309,795
    
    
    
    230,399Net decrease in cash and equivalents
    
    
    (74,584
    )
    
    
    (93,291
    )Cash and equivalents at beginning of period
    
    
    254,434
    
    
    
    254,213Cash and equivalents at end of period
    
    $
    179,850
    
    
    $
    160,922
  6




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
 Supplemental Non-Cash Disclosures:
  Three Months Ended April 30,2008
    
    2007(in thousands)Operating ActivitiesDecrease (increase) in notes and accounts receivable (1)(2)
    
    $
    4,064
    
    
    $
    (9,251
    )Decrease (increase) in land held for development or sale(4)(5)
    
    
    1,320
    
    
    
    (2,537
    )Increase in other assets (1)(2)
    
    
    (19,909
    )
    
    
    (61,208
    )Increase in
restricted cash (1)
    
    
    (363
    )
    
    
    (2,307
    )Increase in accounts payable and accrued expenses
(1)(2)(4)(7)
    
    
    34,607
    
    
    
    58,801Total effect on operating activities
    
    $
    19,719
    
    
    $
    (16,502
    )Investing Activities(Increase) decrease in projects under development (1)(3)(4)(5)(7)
    
    $
    (100,878
    )
    
    $
    12,855Increase in completed rental properties(1)(2)(6)
    
    
    25
    
    
    
    (56,400
    )Increase in restricted cash (1)
    
    
    (244
    )
    
    
    -Decrease (increase) in investments in and advances to affiliates (1)
    
    
    27,685
    
    
    
    (5,534
    )Total effect on investing activities
    
    $
    (73,412
    )
    
    $
    (49,079
    )Financing ActivitiesIncrease in nonrecourse mortgage debt(1)(6)
    
    $
    51,970
    
    
    $
    65,364Increase in restricted cash (1)
    
    
    -
    
    
    
    (1,412
    )Increase in additional paid-in capital (3)
    
    
    1,732
    
    
    
    1,687Dividends declared but not yet paid
    
    
    (9
    )
    
    
    (58
    )Total effect on financing activities
    
    $
    53,693
    
    
    $
    65,581
 
 (1)
    
    Change to full consolidation method of accounting from equity method due to the
restructuring of the partnership agreement related to Shops at Wiregrass, a retail
development project in the Commercial Group, and acquisition of partners interest in
Village Centerapartment community in the Residential Group during the three months ended
April 30, 2008 and acquisition of partners interest in Midtown Towers, Sterling Glen of
Glen Coveand Sterling Glen of Great Neckapartments in the Residential Group during the
three months ended April 30, 2007.(2)
    
    Finalization of the preliminary purchase price allocation during the three months ended
April 30, 2008 for Commerce Courtand Colorado Studios, two office buildings in the
Commercial Group, and during the three months ended April 30, 2007 for the New York
portfolio transaction that closed in November 2006.(3)
    
    Capitalization of stock-based compensation granted to employees directly involved with
the acquisition, development and construction of real estate.(4)
    
    Increase or decrease in construction payables included in accounts payable and accrued
expenses.(5)
    
    Commercial Group outlots reclassified prior to sale from projects under development to
land held for sale.(6)
    
    Assumption of nonrecourse mortgage debt due to acquisition of properties in the
Commercial Group during the three months ended April 30, 2007.(7)
    
    Estimate for environmental liabilities in the Commercial Group as of April 30, 2007.  7




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies
 Basis of Presentation
  Use of Estimates
  Ten MetroTech Center 80 DeKalb Avenue
 Reclassification
  Restricted Cash
  Capitalized Software Costs
   8




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
 Historic and New Market Tax Credit Entities
   Distribution of Accumulated Equity to Minority Partners
 Nine MetroTech Center North Promenade in Temecula Columbia Park Center
 Accumulated Other Comprehensive Loss
  April 30, 2008
    
    

    January 31, 2008(in thousands)Unrealized gains on securities
    
    $
    168
    
    
    $
    91Unrealized losses on interest rate contracts
    
    
    (110,683
    )
    
    
    (119,953
    )(110,515
    )
    
    
    (119,862
    )Minority interest and income tax benefit
    
    
    (42,990
    )
    
    
    (47,206
    )Accumulated Other Comprehensive Loss
    
    $
    (67,525
    )
    
    $
    (72,656
    )
 9




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
 Accounting for Derivative Instruments and Hedging Activities
   Forward Swaps
 Property Accounted forFully Consolidated
    
    
    under the Equity MethodProperties(1)
    
    
    of Accounting(2)Expirations for Years Ending
    
    Notional
    
    
    
    
    
    
    NotionalJanuary 31,
    
    Amount
    
    
    Rate

    
    Amount
    
    
    Rate2009
    
    $
    -
    
    
    
    -
    
    
    $
    -
    
    
    
    -2010
    
    $
    91,625
    
    
    
    5.72
    %
    
    $
    120,000
    
    
    
    5.93
    %Thereafter
    
    $
    -
    
    
    
    -
    
    
    $
    -
    
    
    
    -
 
 (1)
    
    As these forward swaps have been designated and qualify as cash flow hedges under SFAS
No. 133, the Companys portion of unrealized gains and losses on the effective portion of
the hedges has been recorded in accumulated OCI. To the extent effective, the receipt or
payment of cash at termination on these forward swaps will be recorded in accumulated OCI
and will be amortized as either an increase or decrease to interest expense in the same
periods as the interest payments on the financing.(2)
    
    This forward swap does not qualify as a cash flow hedge under the provisions of SFAS
No. 133 because it relates to an unconsolidated property. Therefore, the change in the
fair value of this swap is marked to market through earnings on a quarterly basis.    10




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
  Variable Interest Entities
   New Accounting Standards
    11




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
     12




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Investments in and Advances to Affiliates
   April 30,
    
    
    January 31,2008
    
    
    2008(in thousands)Members and partners equity, as below
    
    $
    608,445
    
    
    $
    741,871Equity of other members and partners
    
    
    477,235
    
    
    
    553,842Companys investment in partnerships
    
    
    131,210
    
    
    
    188,029Advances to and on behalf of other affiliates
    
    
    233,857
    
    
    
    307,799Total Investments in and Advances to Affiliates
    
    $
    365,067
    
    
    $
    495,828
  (Combined 100%)April 30,
    
    
    January 31,2008
    
    
    2008(in thousands)Balance Sheet:Completed rental properties
    
    $
    3,029,984
    
    
    $
    2,989,525Projects under development
    
    
    1,352,943
    
    
    
    1,271,998Land held for development or sale
    
    
    281,395
    
    
    
    265,943Accumulated depreciation
    
    
    (619,452
    )
    
    
    (606,961
    )Restricted cash - military housing bond funds
    
    
    948,816
    
    
    
    1,029,503Other restricted cash
    
    
    544,055
    
    
    
    574,638Other assets
    
    
    425,737
    
    
    
    409,973Total Assets
    
    $
    5,963,478
    
    
    $
    5,934,619Mortgage debt, nonrecourse
    
    $
    4,526,885
    
    
    $
    4,486,786Other liabilities
    
    
    828,148
    
    
    
    705,962Members and partners equity
    
    
    608,445
    
    
    
    741,871Total Liabilities and Members/Partners Equity
    
    $
    5,963,478
    
    
    $
    5,934,619
 13




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Investments in and Advances to Affiliates (continued)
 (Combined 100%)Three Months Ended April 30,2008
    
    
    2007(in thousands)Operations:Revenues
    
    $
    240,838
    
    
    $
    216,949Operating expenses
    
    
    (168,886
    )
    
    
    (154,568
    )Interest expense
    
    
    (59,533
    )
    
    
    (53,925
    )Depreciation and amortization
    
    
    (48,235
    )
    
    
    (37,677
    )Interest and other income
    
    
    17,364
    
    
    
    19,187Loss from continuing operations
    
    
    (18,452
    )
    
    
    (10,034
    )Discontinued operations:Gain on disposition of rental properties (1)
    
    
    3,070
    
    
    
    4,212Operating earnings (loss) from rental properties
    
    
    (18
    )
    
    
    699Discontinued operations subtotal
    
    
    3,052
    
    
    
    4,911Net loss (pre-tax)
    
    $
    (15,400
    )
    
    $
    (5,123
    )Companys portion of net (loss) earnings (pre-tax)
    
    $
    (9,647
    )
    
    $
    1,361
 
 (1)
    
    The following table shows the detail of gain on disposition of rental properties that
were held by equity method investments: Three Months Ended April 30,2008
    
    
    2007One International Place (Office Building)
            
              
   (Cleveland, Ohio)
    
    $
    3,070
    
    
    $
    -White Acres (Apartments)
            
              
            
(Richmond Heights, Ohio)
    
    
    -
    
    
    
    4,212Total gain on disposition of equity method rental properties
    
    $
    3,070
    
    
    $
    4,212Companys portion of gain on disposition of equity method rental properties
    
    
    881
    
    
    
    2,106
  Three Months Ended April 30,2008
    
    
    2007(in thousands)Operations:Revenues and interest income
    
    $
    48,216
    
    
    $
    42,358Operating expenses
    
    
    (50,471
    )
    
    
    (48,017
    )Interest expense
    
    
    (1,857
    )
    
    
    (2,676
    )Depreciation and amortization
    
    
    (20,214
    )
    
    
    (20,528
    )Net loss (pre-tax)
    
    $
    (24,326
    )
    
    $
    (28,863
    )Companys portion of net loss (pre-tax)
    
    $
    (12,827
    )
    
    $
    (2,670
    )
 14




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Bank Revolving Credit Facility
   April 30, 2008
    
    January 31, 2008Outstanding balances:Borrowings
    
    $
    32,000
    
    
    $
    39,000Letters of credit
    
    $
    82,312
    
    
    $
    71,802Surety bonds
    
    $
    -
    
    
    $
    -
 Senior and Subordinated Debt
  Senior Notes:3.625% Puttable Equity-Linked Senior Notes due 2011
    
    $
    287,500Other Senior Notes:7.625% Senior Notes due 2015
    
    
    300,0006.500% Senior Notes due 2017
    
    
    150,0007.375% Senior Notes due 2034
    
    
    100,000Total Senior Notes
    
    
    837,500Subordinated Debt:Redevelopment Bonds due 2010
    
    
    20,400Subordinate Tax Revenue Bonds due 2013
    
    
    29,000Total Subordinated Debt
    
    
    49,400Total Senior and Subordinated Debt
    
    $
    886,900
 Puttable Equity-Linked Senior Notes
  15




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Senior and Subordinated Debt (continued)
      16




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Senior and Subordinated Debt (continued)
 Other Senior Notes
      Subordinated Debt
   17




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Financing Arrangements
 Collateralized Borrowings
    Other Structured Financing Arrangements
  18




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Financing Arrangements (continued)
    Fair Value Measurements
  Fair Value Hierarchy
  
    
    Level 1  Quoted prices in active markets that are unadjusted and accessible at the
measurement date for identical, unrestricted assets or liabilities;
    
    Level 2  Quoted prices for identical assets and liabilities in markets that are not
active, quoted prices for similar assets and liabilities in active markets or financial
instruments for which significant observable inputs are available, either directly or
indirectly such as interest rates and yield curves that are observable at commonly quoted
intervals; and
    
    Level 3  Prices or valuations that require inputs that are both significant to the
fair value measurement and unobservable.
  Measurement of Fair Value
  19




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Fair Value Measurements (continued)
    Items Measured at Fair Value on a Recurring Basis
  Fair Value Measurementsat April 30, 2008Level 1
    
    Level 2
    
    Level 3
    
    Total(in thousands)Interest rate caps and swaptions
    
    $
    -
    
    
    $
    4,515
    
    
    $
    -
    
    
    $
    4,515Interest rate swap agreements (positive fair value)
    
    
    -
    
    
    
    3,027
    
    
    
    -
    
    
    
    3,027TRS (positive fair value)
    
    
    -
    
    
    
    -
    
    
    
    1,542
    
    
    
    1,542DURA purchase obligation and related fee
    
    
    -
    
    
    
    -
    
    
    
    24,278
    
    
    
    24,278Interest rate swap agreements (negative fair value)
    
    
    -
    
    
    
    (98,813
    )
    
    
    -
    
    
    
    (98,813
    )TRS (negative fair value)
    
    
    -
    
    
    
    -
    
    
    
    (10,472
    )
    
    
    (10,472
    )Fair value adjustment to the borrowings subject to TRS
    
    
    -
    
    
    
    -
    
    
    
    4,983
    
    
    
    4,983Total
    
    $
    -
    
    
    $
    (91,271
    )
    
    $
    20,331
    
    
    $
    (70,940
    )
 20




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Fair Value Measurements (continued)
  Fair Value MeasurementsThree Months ended April 30, 2008(in thousands)Fair valueadjustment to the
    
    
    
    
    
    
    DURA purchaseNet
    
    
    borrowings
    
    
    Total TRS
    
    
    obligation andTRS
    
    

subject to TRS
    
    
    Related
    
    
    related feeBalance, February 1, 2008
    
    $
    (2,866
    )
    
    $
    (934
    )
    
    $
    (3,800
    )
    
    $
    23,108Total realized and unrealized gains (losses):Included in earnings
    
    
    (6,064
    )
    
    
    5,917
    
    
    
    (147
    )
    
    
    1,170Included in other comprehensive income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Purchases, issuances and settlements
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Balance, April 30, 2008
    
    $
    (8,930
    )
    
    $
    4,983
    
    
    $
    (3,947
    )
    
    $
    24,278
 Stock-Based Compensation
    Three Months Ended April 30,2008
    
    2007(in thousands)Stock option costs
    
    $
    2,576
    
    
    $
    4,215Restricted stock costs
    
    
    1,893
    
    
    
    1,697Total stock-based compensation costs
    
    
    4,469
    
    
    
    5,912Less amount capitalized into qualifying real estate projects
    
    
    (1,732
    )
    
    
    (1,687
    )Amount charged to operating expenses
    
    
    2,737
    
    
    
    4,225Depreciation expense on capitalized stock-based compensation
    
    
    61
    
    
    
    20Total stock-based compensation expense
    
    $
    2,798
    
    
    $
    4,245Deferred income tax benefit
    
    $
    921
    
    
    $
    1,450
 21




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Stock-Based Compensation (continued)
   Income Taxes
     FIN No. 48
  22




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Income Taxes (continued)
    I.
    
    Discontinued Operations, Gain on Disposition of Rental Properties and Provision for
Decline in Real Estate
 Discontinued Operations
  Sterling Glen of Lynbrook Sterling Glen of Lynbrooks
 April 30,
    
    
    January 31,2008
    
    
    2008(in thousands)AssetsReal estate
    
    $
    29,858
    
    
    $
    29,858Notes and accounts receivable, net
    
    
    83
    
    
    
    179Other assets
    
    
    1,676
    
    
    
    1,635Total Assets
    
    $
    31,617
    
    
    $
    31,672LiabilitiesMortgage debt, nonrecourse
    
    $
    27,700
    
    
    $
    27,700Accounts payable and accrued expenses
    
    
    870
    
    
    
    798Total Liabilities
    
    $
    28,570
    
    
    $
    28,498
 23




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Discontinued Operations, Gain on Disposition of Rental Properties and Provision for
Decline in Real Estate (continued)
  Number
    
    Period
    
    Three Months EndedProperty
    
    Location
    
    of Units
    
    Disposed
    
    4/30/2008
    
    4/30/2007Residential Group:Sterling Glen of Lynbrook
    
    Lynbrook, New York
    
    130 units
    
    Q2-2008
    
    Yes
    
    YesSterling Glen of Bayshore
    
    Bayshore, New York
    
    85 units
    
    Q2-2007
    
    -
    
    YesSterling Glen of Center City
    
    Philadelphia, Pennsylvania
    
    135 units
    
    Q2-2007
    
    -
    
    YesSterling Glen of Darien
    
    Darien, Connecticut
    
    80 units
    
    Q2-2007
    
    -
    
    YesSterling Glen of Forest Hills
    
    Forest Hills, New York
    
    83 units
    
    Q2-2007
    
    -
    
    YesSterling Glen of Plainview
    
    Plainview, New York
    
    79 units
    
    Q2-2007
    
    -
    
    YesSterling Glen of Stamford
    
    Stamford, Connecticut
    
    166 units
    
    Q2-2007
    
    -
    
    Yes
 Sterling Glen of Roslyn Sterling Glen of Lynbrook
   Three MonthsEnded April 30,2008
    
    
    2007(in thousands)Revenues
    
    $
    544
    
    
    $
    12,202ExpensesOperating expenses
    
    
    211
    
    
    
    8,847Depreciation and amortization
    
    
    5
    
    
    
    1,013216
    
    
    
    9,860Interest expense
    
    
    (192
    )
    
    
    (1,608
    )Amortization of mortgage procurement costs
    
    
    (11
    )
    
    
    (35
    )Interest income
    
    
    4
    
    
    
    97Earnings before income taxes
    
    
    129
    
    
    
    796Income tax expense (benefit)Current
    
    
    (64
    )
    
    
    58Deferred
    
    
    114
    
    
    
    25050
    
    
    
    308Net earnings from discontinued operations
    
    $
    79
    
    
    $
    488
 24




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Discontinued Operations, Gain on Disposition of Rental Properties and Provision for
Decline in Real Estate (continued)
 Gain on Disposition of Rental Properties
  Three MonthsEnded April 30,2008
    
    
    2007(in thousands)One International Place (Office Building)
    
    Cleveland, Ohio
    
    $
    881
    
    
    $
    -White Acres (Apartments) (1)
    
    Richmond Heights, Ohio
    
    
    -
    
    
    
    2,106Total
    
    
    
    
    
    $
    881
    
    
    $
    2,106
 
 (1)
    
    The Company disposed of its interest in White Acres in a non-monetary exchange for the
remaining outside interest in Midtown Towers, which was also an equity method investment.
The Company has accounted for the non-monetary transaction based upon the fair value of the
equity method investments exchanged, which resulted in the above gain of $2,106. Provision for Decline in Real Estate
   Dividends
  25




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Earnings per Share
    Three Months Ended April 30,2008
    
    
    2007NumeratorsLoss from continuing operations - basic and diluted
    
    $
    (40,348
    )
    
    $
    (17,669
    )Net loss - basic and diluted
    
    $
    (40,269
    )
    
    $
    (17,181
    )DenominatorsWeighted average shares outstanding - basic
    
    
    102,613,817
    
    
    
    101,990,754Effect of stock options and restricted stock (1)
    
    
    -
    
    
    
    -Effect of convertible Class A Common Units (1)
    
    
    -
    
    
    
    -Weighted average shares outstanding - diluted(2)
    
    
    102,613,817
    
    
    
    101,990,754Earnings Per ShareLoss from continuing operations - basic and diluted
    
    $
    (0.39
    )
    
    $
    (0.17
    )Net loss - basic and diluted
    
    $
    (0.39
    )
    
    $
    (0.17
    )
 
 (1)
    
    For the three months ended April 30, 2008 and 2007, the effect of 4,616,829 and
6,746,140 weighted average shares of dilutive securities, respectively, were not included
in the computation of diluted earnings per share because their effect is anti-dilutive due
to the loss from continuing operations.(2)
    
    The Puttable Equity-Linked Senior Notes issued in October 2006 can be put to the
Company by the holders under certain circumstances (see Note D  Senior and Subordinated
Debt). If the Company exercises its net share settlement option upon a put of the notes by
the holders, it will then issue shares of its Class A common stock. The effect of these
shares was not included in the computation of diluted earnings per share for the three
months ended April 30, 2008 and 2007 as the Companys average stock price did not exceed
the put value price of the Puttable Equity-Linked Senior Notes. Additionally, the Company
sold a warrant with an exercise price of $74.35, which has also been excluded from diluted
earnings per share for the three months ended April 30, 2008 and 2007 as the Companys
stock price did not exceed the exercise price. 26




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Segment Information
  April 30,
    
    
    January 31,
    
    
    
    Three Months Ended April 30,2008
    
    
    2008
    
    
    
    2008
    
    
    2007Expenditures for Additions to RealIdentifiable Assets
    
    
    
    EstateCommercial Group
    
    $
    7,420,859
    
    
    $
    7,345,283
    
    
    
    $
    166,256
    
    
    $
    241,825Residential Group
    
    
    2,588,457
    
    
    
    2,322,971
    
    
    
    
    69,352
    
    
    
    63,896Land Development Group
    
    
    423,541
    
    
    
    402,452
    
    
    
    
    869
    
    
    
    347The Nets
    
    
    7,706
    
    
    
    14,454
    
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    104,149
    
    
    
    166,437
    
    
    
    
    58
    
    
    
    838$
    10,544,712
    
    
    $
    10,251,597
    
    
    
    $
    236,535
    
    
    $
    306,906Three Months Ended April 30,
    
    
    
    Three Months Ended April 30,2008
    
    
    2007
    
    
    
    2008
    
    
    2007Revenues from Real EstateOperations
    
    
    
    Operating ExpensesCommercial Group
    
    $
    218,619
    
    
    $
    197,434
    
    
    
    $
    127,627
    
    
    $
    102,549Commercial Group Land Sales
    
    
    3,648
    
    
    
    5,593
    
    
    
    
    2,862
    
    
    
    3,266Residential Group
    
    
    78,957
    
    
    
    54,605
    
    
    
    
    54,907
    
    
    
    36,803Land Development Group
    
    
    6,422
    
    
    
    10,733
    
    
    
    
    9,530
    
    
    
    12,097The Nets
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    -
    
    
    
    -
    
    
    
    
    12,750
    
    
    
    13,877$
    307,646
    
    
    $
    268,365
    
    
    
    $
    207,676
    
    
    $
    168,592Three Months Ended April 30,
    
    
    
    Three Months Ended April 30,
    
    
    
    Three Months Ended April 30,2008
    
    
    2007
    
    
    
    2008
    
    
    2007
    
    
    
    2008
    
    
    2007Depreciation and Amortization
    
    
    
    Interest Expense
    
    
    
    Interest and Other IncomeCommercial Group
    
    $
    50,749
    
    
    $
    45,589
    
    
    
    $
    58,745
    
    
    $
    47,369
    
    
    
    $
    1,783
    
    
    $
    1,938Residential Group
    
    
    14,925
    
    
    
    13,463
    
    
    
    
    10,211
    
    
    
    13,282
    
    
    
    
    3,590
    
    
    
    3,844Land Development Group
    
    
    191
    
    
    
    178
    
    
    
    
    75
    
    
    
    2,306
    
    
    
    
    2,836
    
    
    
    5,010The Nets
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    754
    
    
    
    557
    
    
    
    
    14,340
    
    
    
    13,842
    
    
    
    
    192
    
    
    
    607$
    66,619
    
    
    $
    59,787
    
    
    
    $
    83,371
    
    
    $
    76,799
    
    
    
    $
    8,401
    
    
    $
    11,399
  27




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Segment Information (continued)
  Reconciliation of EBDT to Net Earnings by Segment:
 LandCommercial
    
    
    Residential
    
    
    DevelopmentThree Months Ended April 30, 2008
    
    Group
    
    
    Group
    
    
    Group
    
    
    The Nets
    
    
    Corporate
    
    
    TotalEBDT
    
    $
    33,031
    
    
    $
    17,227
    
    
    $
    (686
    )
    
    $
    (8,960
    )
    
    $
    (24,658
    )
    
    $
    15,954Depreciation and amortization - Real Estate Groups
    
    
    (52,088
    )
    
    
    (18,597
    )
    
    
    (75
    )
    
    
    -
    
    
    
    -
    
    
    
    (70,760
    )Amortization of mortgage
procurement costs - Real Estate Groups
    
    
    (2,482
    )
    
    
    (727
    )
    
    
    (123
    )
    
    
    -
    
    
    
    -
    
    
    
    (3,332
    )Deferred taxes - Real Estate Groups
    
    
    5,531
    
    
    
    3,890
    
    
    
    291
    
    
    
    -
    
    
    
    5,443
    
    
    
    15,155Straight-line rent adjustment
    
    
    3,144
    
    
    
    4
    
    
    
    (1
    )
    
    
    -
    
    
    
    -
    
    
    
    3,147Preference payment (1)
    
    
    (936
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (936
    )Gain on disposition of other investments, net of tax
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    92
    
    
    
    92Gain on disposition of equity method rental properties, net of tax
    
    
    541
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    541Discontinued operations, net of tax: (2)Depreciation and amortization - Real Estate Groups
    
    
    -
    
    
    
    (5
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (5
    )Amortization of mortgage procurement costs - Real Estate Groups
    
    
    -
    
    
    
    (11
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (11
    )Deferred taxes - Real Estate Groups
    
    
    -
    
    
    
    (114
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (114
    )Net earnings (loss)
    
    $
    (13,259
    )
    
    $
    1,667
    
    
    $
    (594
    )
    
    $
    (8,960
    )
    
    $
    (19,123
    )
    
    $
    (40,269
    )
 Three Months Ended April 30, 2007EBDT
    
    $
    44,801
    
    
    $
    12,490
    
    
    $
    (2,697
    )
    
    $
    (2,050
    )
    
    $
    (18,015
    )
    
    $
    34,529Depreciation and amortization - Real Estate Groups
    
    
    (46,426
    )
    
    
    (16,956
    )
    
    
    (114
    )
    
    
    -
    
    
    
    -
    
    
    
    (63,496
    )Amortization of mortgage procurement costs - Real Estate Groups
    
    
    (2,026
    )
    
    
    (717
    )
    
    
    (141
    )
    
    
    -
    
    
    
    -
    
    
    
    (2,884
    )Deferred taxes - Real Estate Groups
    
    
    470
    
    
    
    4,608
    
    
    
    3,185
    
    
    
    -
    
    
    
    3,161
    
    
    
    11,424Straight-line rent adjustment
    
    
    4,147
    
    
    
    4
    
    
    
    (1
    )
    
    
    -
    
    
    
    -
    
    
    
    4,150Preference payment (1)
    
    
    (898
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (898
    )Gain on disposition of equity method rental properties, net of tax
    
    
    -
    
    
    
    1,292
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,292Discontinued operations, net of tax: (2)Depreciation and amortization - Real Estate Groups
    
    
    -
    
    
    
    (1,013
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,013
    )Amortization of mortgage procurement costs - Real Estate Groups
    
    
    -
    
    
    
    (35
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (35
    )Deferred taxes - Real Estate Groups
    
    
    -
    
    
    
    (250
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (250
    )Net earnings (loss)
    
    $
    68
    
    
    $
    (577
    )
    
    $
    232
    
    
    $
    (2,050
    )
    
    $
    (14,854
    )
    
    $
    (17,181
    )
 
 (1)
    
    The preference payment of $936 and $898 for the three months ended April 30, 2008 and 2007,
respectively, represents one quarter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.(2)
    
    See Note I  Discontinued Operations for more information. 28




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Subsequent Events
  New York Times Twelve MetroTech Center
 29




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  RESULTS OF OPERATIONS
  Corporate Description
 Commercial Group Residential Group Land Development Group
 Corporate Activities The Nets
  Overview
  
    
    The opening of Orchard Town Center, an outdoor lifestyle village located in Westminster,
Colorado;
    
    The opening of John Hopkins  855 North Wolfe Street, the first office building at The
Science + Technology Park at Johns Hopkins in Baltimore, Maryland;
    
    The opening of three apartment communities  the 131-unit Lucky Strike, located in
Richmond, Virginia, and the first phases of the 665-unit Uptown Apartments, located in
Oakland, California and the 366-unit Mercantile Place on Main located in Dallas, Texas;
    
    Closing on a $680,000,000 nonrecourse mortgage financing for the mixed-use Beekman
residential project in lower Manhattan, the largest construction financing in our history;
and
    
    Closing $822,000,000 in other nonrecourse mortgage financing transactions.
  30




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##### Table of Contents



Net Loss 
 
    
    $14,801,000 ($24,122,000, pre-tax) related to increased write-offs of abandoned
development projects in 2008 compared to 2007, primarily at Summit at Lehigh Valley, a
Commercial development project with a housing component located in Allentown, Pennsylvania,
which represented $13,200,000 ($21,513,000 pre-tax) of the total increase. Due to delays
in the public entitlement process to fund infrastructure and overall slowdown in retail and
housing markets, we did not acquire the underlying land, which the land owner decided to
sell to a third party for an alternative use. As a result, we determined it was no longer
probable that the project would be completed resulting in the charge
for the three months
ended April 30, 2008;
    
    $6,910,000 ($10,222,000, pre-tax) related to the increased share of losses from our
equity investment in the New Jersey Nets basketball team (see The Nets section);
    
    $1,860,000 ($3,031,000, pre-tax) related to participation payments in 2008 on the
refinancing of 350 Massachusetts Avenue, an unconsolidated office building and Jackson
Building, a consolidated office building, both located in Cambridge, Massachusetts;
    
    $1,803,000 ($2,939,000, pre-tax) in 2008 of additional expenses related to the early
extinguishment of nonrecourse mortgage debt primarily at Galleria at Sunset, a regional
mall located in Henderson, Nevada and at 1251 S. Michiganand Sky 55, apartment communities
located in Chicago, Illinois, in order to secure more favorable financing terms. These
changes were offset, in part, by a gain on the early extinguishment of the Urban
Development Action Grant loan at M.K. Ferguson Plaza, an office building located in
Cleveland, Ohio;
    
    $1,481,000 ($2,414,000, pre-tax) related to a decrease in interest income earned on
financial instruments held by Stapleton Land, LLC;
    
    $752,000 ($1,225,000, pre-tax) related to the difference in gains on disposition of
equity method properties between years. The 2007 gain on the disposition of our
partnership interest in White Acres, an apartment community located in Richmond Heights,
Ohio was higher than the 2008 gain on the sale of our partnership interest in One
International Place, an office building located in Cleveland, Ohio; and
    
    $711,000 ($1,159,000, pre-tax) related to decreases in Commercial Group outlot land
sales in 2008 primarily at Victoria Gardens, a regional mall located in Rancho Cucamonga,
California.
  
    
    $4,809,000 ($7,837,000, pre-tax) of expense in 2007 that did not recur in 2008 related
to managements approved plan to demolish two buildings owned by us adjacent to Ten
MetroTech Center, an office building located in Brooklyn, New York, to clear the land for a
residential project named 80 DeKalb Avenue. Due to this new development plan, the
estimated useful lives of the two adjacent buildings were adjusted to expire at the
scheduled demolition date in April 2007 resulting in accelerated depreciation expense; and
    
    $3,511,000 ($6,033,000, pre-tax) primarily related to military housing fee income from
the management and development of units in Hawaii, Illinois, Washington and Colorado.
 31




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##### Table of Contents



Summary of Segment Operating Results
 Three Months Ended April 30,2008
    
    2007
    
    Variance(in thousands)Revenues from Real Estate OperationsCommercial Group
    
    $
    218,619
    
    
    $
    197,434
    
    
    $
    21,185Commercial Group Land Sales
    
    
    3,648
    
    
    
    5,593
    
    
    
    (1,945
    )Residential Group
    
    
    78,957
    
    
    
    54,605
    
    
    
    24,352Land Development Group
    
    
    6,422
    
    
    
    10,733
    
    
    
    (4,311
    )The Nets
    
    
    -
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    -
    
    
    
    -
    
    
    
    -Total Revenues from Real Estate Operations
    
    $
    307,646
    
    
    $
    268,365
    
    
    $
    39,281Operating ExpensesCommercial Group
    
    $
    127,627
    
    
    $
    102,549
    
    
    $
    25,078Cost of Commercial Group Land Sales
    
    
    2,862
    
    
    
    3,266
    
    
    
    (404
    )Residential Group
    
    
    54,907
    
    
    
    36,803
    
    
    
    18,104Land Development Group
    
    
    9,530
    
    
    
    12,097
    
    
    
    (2,567
    )The Nets
    
    
    -
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    12,750
    
    
    
    13,877
    
    
    
    (1,127
    )Total Operating Expenses
    
    $
    207,676
    
    
    $
    168,592
    
    
    $
    39,084Interest ExpenseCommercial Group
    
    $
    58,745
    
    
    $
    47,369
    
    
    $
    11,376Residential Group
    
    
    10,211
    
    
    
    13,282
    
    
    
    (3,071
    )Land Development Group
    
    
    75
    
    
    
    2,306
    
    
    
    (2,231
    )The Nets
    
    
    -
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    14,340
    
    
    
    13,842
    
    
    
    498Total Interest Expense
    
    $
    83,371
    
    
    $
    76,799
    
    
    $
    6,572Equity in Earnings (Loss) of Unconsolidated EntitiesCommercial Group
    
    $
    441
    
    
    $
    1,467
    
    
    $
    (1,026
    )Gain on sale of One International Place
    
    
    881
    
    
    
    -
    
    
    
    881Residential Group
    
    
    2,731
    
    
    
    1,466
    
    
    
    1,265Gain on sale of White Acres
    
    
    -
    
    
    
    2,106
    
    
    
    (2,106
    )Land Development Group
    
    
    (227
    )
    
    
    (427
    )
    
    
    200The Nets
    
    
    (13,473
    )
    
    
    (3,251
    )
    
    
    (10,222
    )Corporate Activities
    
    
    -
    
    
    
    -
    
    
    
    -Total Equity in Earnings (Loss) of Unconsolidated Entities
    
    $
    (9,647
    )
    
    $
    1,361
    
    
    $
    (11,008
    )
 32




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##### Table of Contents



Commercial Group
 Revenues from Real Estate Operations
 
    
    Increase of $20,930,000 related to new property openings, as noted in the table below;
and
    
    Increase of $1,204,000 related to an increase in rents primarily at the following
regional malls: Short Pump Town Centerin Richmond, Virginia, Northfield at Stapletonin
Denver, Colorado and Simi Valley Town Centerin Simi Valley, California.
  
    
    Decrease of $1,944,000 related to a decrease in commercial outlot land sales primarily
at Victoria Gardens, located in Rancho Cucamonga, California.
  Operating and Interest Expenses
 
    
    Increase of approximately $22,907,000 related to write-offs of abandoned development
projects, primarily at Summit at Lehigh Valley, which represented $21,513,000 of the total
increase;
    
    Increase of $5,786,000 related to new property openings, as noted in the table below;
and
    
    Increase of $1,571,000 primarily related to a participation payment on the refinancing
at Jackson Building, an office building located in Cambridge, Massachusetts.
  
    
    Decrease of $404,000 related to a decrease in commercial outlot land sales primarily at
Victoria Gardens.
    Revenuesfrom RealQuarter/Year
    
    Square
    
    
    Estate
    
    
    OperatingProperty
    
    Location
    
    Opened/Acquired
    
    Feet
    
    
    Operations
    
    
    ExpensesRetail
Centers:Orchard Town Center
    
    Westminster, Colorado
    
    Q1-2008
    
    
    983,000
    
    
    $
    461
    
    
    $
    843Victoria Gardens-Bass Pro
    
    Rancho Cucamonga, California
    
    Q2-2007
    
    
    180,000
    
    
    
    950
    
    
    
    147Promenade Bolingbrook
    
    Bolingbrook, Illinois
    
    Q1-2007
    
    
    750,000
    
    
    
    3,432
    
    
    
    801Office Buildings:Johns Hopkins - 855 North Wolfe Street
    
    East Baltimore, Maryland
    
    Q1-2008
    
    
    278,000
    
    
    
    30
    
    
    
    68New York Times
    
    Manhattan, New York
    
    Q3-2007
    
    
    737,000
    
    
    
    12,662
    
    
    
    2,464Richmond Office Park
    
    Richmond, Virginia
    
    Q2-2007 (1)
    
    
    570,000
    
    
    
    3,038
    
    
    
    903Illinois Science and Technology Park - Building Q
    
    Skokie, Illinois
    
    Q1-2007 (1)
    
    
    158,000
    
    
    
    343
    
    
    
    529Colorado Studios
    
    Denver, Colorado
    
    Q1-2007 (1)
    
    
    75,000
    
    
    
    14
    
    
    
    31Total
    
    
    
    
    
    
    
    
    
    
    
    $
    20,930
    
    
    $
    5,786
 
 (1)
    
    Acquired property. 33




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##### Table of Contents



University Park at MIT Hotel
  Residential Group
 Revenues from Real Estate Operations
 
    
    Increase of $23,741,000 related to military housing fee income from the management and
development of units located primarily on the islands of Oahu and Kauai, Hawaii; Chicago,
Illinois; Seattle, Washington; and Colorado Springs, Colorado;
    
    Increase of $2,497,000 related to the purchase of our partners interest in Sterling
Glen of Glen Covein Glen Cove, New York, Sterling Glen of Great Neckin Great Neck, New
York, Midtown Towersin Parma, Ohio, Easthaven at the Villagein Beachwood, Ohio and
Village Centerin Detroit, Michigan, all of which were previously accounted for on the
equity method of accounting; and
    
    Increase of $2,315,000 related to new property openings and acquired properties as noted
in the table on page 35.
  
    
    Decrease of $5,229,000 due to the leasing of certain supported-living apartment
properties (see the Discontinued Operations section of the MD&A).
  Operating and Interest Expenses 
 
    
    Increase of $19,397,000 related to management expenditures associated with military
housing fee income;
    
    Increase of $1,355,000 related to new property openings and acquired properties as noted
in the table on page 35;
    
    Increase of $1,214,000 in write-offs of abandoned development projects; and
    
    Increase of $755,000 related to the purchase of our partners interest in Sterling Glen
of Glen Cove, Sterling Glen of Great Neck, Midtown Towers, Easthaven at the Villageand
Village Center, all of which were previously accounted for on the equity method of
accounting.
  
    
    Decrease of $4,587,000 due to the leasing of certain supported-living apartment
properties (see the Discontinued Operations section of the MD&A).
   34




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##### Table of Contents



RevenuesfromQuarter/Year
    
    Number
    
    Real Estate
    
    
    OperatingProperty
    
    Location
    
    Opened/Acquired
    
    of Units
    
    Operations
    
    
    ExpensesLucky Strike
    
    Richmond, Virginia
    
    Q1-2008
    
    
    131
    
    
    $
    21
    
    
    $
    166Mercantile
Place on Main
    
    Dallas, Texas
    
    Q1-2008
    
    
    366
    
    
    
    14
    
    
    
    445Wilson Building
    
    Dallas, Texas
    
    Q4-2007 (1)
    
    
    143
    
    
    
    556
    
    
    
    245Tobacco Row - Cameron Kinney
    
    Richmond, Virginia
    
    Q2-2007 (1)
    
    
    259
    
    
    
    721
    
    
    
    349Stapleton Town Center - Botanica Phase II
    Denver, Colorado
    
    Q2-2007
    
    
    154
    
    
    
    331
    
    
    
    2151251 S. Michigan
    
    Chicago, Illinois
    
    Q1-2006
    
    
    91
    
    
    
    70
    
    
    
    (18
    )Sky55
    
    Chicago, Illinois
    
    Q1-2006
    
    
    411
    
    
    
    602
    
    
    
    (47
    )Total
    
    
    
    
    
    
    
    
    
    
    
    $
    2,315
    
    
    $
    1,355
 
 (1)
    
    Acquired property.   Land Development Group
 Revenues from Real Estate Operations 
 
    
    Decrease of $1,587,000 in land sales at Mill Creekin York County, South Carolina;
    
    Decrease of $1,423,000 in land sales at Stapletonin Denver, Colorado;
    
    Decrease of $812,000 in unit sales at Rockport Squarein Lakewood, Ohio; and
    
    Decrease $2,090,000 in land sales primarily at four major land development projects:
Tangerine Crossingin Tucson, Arizona; Waterburyin North Ridgeville, Ohio; Sunrise
Developmentin Cleveland, Ohio; and Creekstonein Copley, Ohio; combined with several
smaller sales decreases at other land development projects.
  
    
    Increase of $1,601,000 in land sales primarily at one major land development project,
Summers Walkin Davidson, North Carolina, combined with several smaller sales increases at
other land development projects.
 Operating and Interest Expenses
 
    
    Decrease of $1,307,000 at Mill Creekprimarily related to decreased land sales;
    
    Decrease of $938,000 at Rockport Squareprimarily related to decreased unit sales;
    
    Decrease of $555,000 at Stapletonprimarily related to decreased land sales; and
    
    Decrease of $1,358,000 primarily related to decreased land sales at Sunrise Development
and Creekstone, combined with several smaller expense decreases at other land development
projects.
 
 35




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##### Table of Contents




    
    Increase of $1,591,000 primarily related to increased land sales at Summers Walk,
combined with several smaller increases at various other land development projects.
  The Nets
   Corporate Activities
 Operating and Interest Expenses
  Other Activity
  Depreciation and Amortization
 Ten
MetroTech Center 80 DeKalb Avenue
 Provision for Decline in Real Estate
   36




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##### Table of Contents



Amortization of Mortgage Procurement Costs
  Loss on Early Extinguishment of Debt
 Galleria at Sunset 1251 S. Michigan Sky
55 M.K. Ferguson Plaza Columbia Park Center
 Interest and Other Income
  Income Taxes
     37




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##### Table of Contents



FIN No. 48
     Equity in (Loss) Earnings of Unconsolidated Entities
  -
    
    The Nets
 
    
    Decrease of $10,222,000 due to an increase in our share of the loss related to our
equity investment in The Nets (see The Nets section).
 -
    
    Residential Group
 
    
    Decrease of $2,106,000 related to the 2007 gain on disposition of our partnership
interest in White Acres, an apartment community located in Richmond Heights, Ohio; and
    
    Decrease of $1,101,000 due to a reduction in the sale of condominium units at 1100
Wilshireand Mercury, located in Los Angeles, California.
 -
    
    Commercial Group
 
    
    Decrease of $1,237,000, primarily related to a participation payment on the refinancing
during 2008, at 350 Massachusetts Avenue, an office building located in Cambridge,
Massachusetts.
  -
    
    Commercial Group
 
    
    Increase of $881,000 related to the 2008 gain on sale of partnership interest in One
International Place, an office building located in Cleveland, Ohio.
  38




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##### Table of Contents



Discontinued Operations
  Sterling Glen of Lynbrook Sterling Glen of Lynbrooks
 April 30,
    
    January 31,2008
    
    2008(in thousands)AssetsReal estate
    
    $
    29,858
    
    
    $
    29,858Notes and accounts receivable, net
    
    
    83
    
    
    
    179Other assets
    
    
    1,676
    
    
    
    1,635Total Assets
    
    $
    31,617
    
    
    $
    31,672LiabilitiesMortgage debt, nonrecourse
    
    $
    27,700
    
    
    $
    27,700Accounts payable and accrued expenses
    
    
    870
    
    
    
    798Total Liabilities
    
    $
    28,570
    
    
    $
    28,498
  Number
    
    
    Period
    
    Three Months EndedProperty
    
    Location
    
    
    of Units
    
    
    Disposed
    
    4/30/2008
    
    4/30/2007Residential Group:Sterling Glen of Lynbrook
    
    Lynbrook, New York
    
    130 units
    
    Q2-2008
    
    Yes
    
    YesSterling Glen of Bayshore
    
    Bayshore, New York
    
    85 units
    
    Q2-2007
    
    -
    
    YesSterling Glen of Center City
    
    Philadelphia, Pennsylvania
    
    135 units
    
    Q2-2007
    
    -
    
    YesSterling Glen of Darien
    
    Darien, Connecticut
    
    80 units
    
    Q2-2007
    
    -
    
    YesSterling Glen of Forest Hills
    
    Forest Hills, New York
    
    83 units
    
    Q2-2007
    
    -
    
    YesSterling Glen of Plainview
    
    Plainview, New York
    
    79 units
    
    Q2-2007
    
    -
    
    YesSterling Glen of Stamford
    
    Stamford, Connecticut
    
    166 units
    
    Q2-2007
    
    -
    
    Yes
 Sterling Glen of Roslyn Sterling Glen of Lynbrook
  39




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##### Table of Contents



Three MonthsEnded April 30,2008
    
    2007(in thousands)Revenues
    
    $
    544
    
    
    $
    12,202ExpensesOperating expenses
    
    
    211
    
    
    
    8,847Depreciation and amortization
    
    
    5
    
    
    
    1,013216
    
    
    
    9,860Interest expense
    
    
    (192
    )
    
    
    (1,608
    )Amortization of mortgage procurement costs
    
    
    (11
    )
    
    
    (35
    )Interest income
    
    
    4
    
    
    
    97Earnings before income taxes
    
    
    129
    
    
    
    796Income tax expense (benefit)Current
    
    
    (64
    )
    
    
    58Deferred
    
    
    114
    
    
    
    25050
    
    
    
    308Net earnings from discontinued operations
    
    $
    79
    
    
    $
    488
 Gain on Disposition of Rental Properties
  Three MonthsEnded April 30,2008
    
    2007(in thousands)One International Place (Office Building)
    Cleveland, Ohio
    $
    881
    
    
    $
    -White Acres (Apartments)
(1)
    Richmond Heights, Ohio
    
    -
    
    
    
    2,106Total
    
    $
    881
    
    
    $
    2,106
 
 (1)
    
    We disposed of our interest in White Acres in a non-monetary exchange for the remaining
outside interest in Midtown Towers, which was also an equity method investment. We have
accounted for the non-monetary transaction based upon the fair value of the equity method
investments exchanged, which resulted in the above gain of $2,106. FINANCIAL CONDITION AND LIQUIDITY
   40




---



##### Table of Contents



Bank Revolving Credit Facility
   April 30, 2008
    
    January 31, 2008Outstanding balances:Borrowings
    
    $
    32,000
    
    
    $
    39,000Letters of credit
    
    $
    82,312
    
    
    $
    71,802Surety bonds
    
    $
    -
    
    
    $
    -
 Senior and Subordinated Debt
  Senior Notes:3.625% Puttable Equity-Linked Senior Notes due 2011
    
    $
    287,500Other Senior Notes:7.625% Senior Notes due 2015
    
    
    300,0006.500% Senior Notes due 2017
    
    
    150,0007.375% Senior Notes due 2034
    
    
    100,000Total Senior Notes
    
    
    837,500Subordinated Debt:Redevelopment Bonds due 2010
    
    
    20,400Subordinate Tax Revenue Bonds due 2013
    
    
    29,000Total Subordinated Debt
    
    
    49,400Total Senior and Subordinated Debt
    
    $
    886,900
 Puttable Equity-Linked Senior Notes
  41




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##### Table of Contents



Other Senior Notes
  42




---



##### Table of Contents



Subordinated Debt
   Financing Arrangements
 Collateralized Borrowings
    43




---



##### Table of Contents



Other Structured Financing Arrangements
     Mortgage Financings
   Purpose of Financing
    
    Amount(in thousands)Refinancings
    
    $
    479,960Development projects (1)
    
    
    812,125Loan extensions/additional fundings
    
    
    209,732$
    1,501,817
 
 (1)
    
    Represents the full amount available to be drawn on the loans. 44




---



##### Table of Contents



Interest Rate Exposure
  TotalOperating
    
    Development and
    
    
    
    
    
    WeightedProperties
    
    Land Projects
    
    Total
    
    Average Rate(dollars in thousands)Fixed
    
    $
    4,135,724
    
    
    $
    4,645
    
    
    $
    4,140,369
    
    
    
    6.04
    %Variable (1)Taxable
    
    
    1,198,898
    
    
    
    407,279
    
    
    
    1,606,177
    
    
    
    5.66
    %Tax-Exempt
    
    
    608,813
    
    
    
    310,900
    
    
    
    919,713
    
    
    
    3.56
    %$
    5,943,435
    
    
    $
    722,824
    (2)
    
    $
    6,666,259
    
    
    
    5.61
    %Total commitment from lenders
    
    
    
    
    
    $
    1,931,982
 
 (1)
    
    Taxable variable-rate debt of $1,606,177 and tax-exempt variable-rate debt of $919,713
as of April 30, 2008 is protected with swaps and caps described in the tables below.(2)
    
    $192,317 of fully consolidated outstanding debt described above is listed as restricted
cash in our Consolidated Balance Sheet. For bonds issued in conjunction with development,
the local housing authority issued the full amount of the bonds at the beginning of
construction and, until costs are incurred, bond funds must remain in escrow held by a
financial institution affiliated with the bond issuance.  Taxable
 Caps
    
    Swaps(1)(3)Notional
    
    Average Base
    
    Notional
    
    Average BasePeriod Covered
    
    Amount
    
    Rate
    
    Amount
    
    Rate(dollars in thousands)05/01/08-02/01/09 (2)
    
    $
    1,308,517
    
    
    
    5.15
    %
    
    $
    929,379
    
    
    
    4.99
    %02/01/09-02/01/10
    
    
    1,241,237
    
    
    
    4.94
    
    
    
    1,028,432
    
    
    
    4.9802/01/10-02/01/11
    
    
    113,797
    
    
    
    5.03
    
    
    
    687,081
    
    
    
    5.4402/01/11-02/01/12
    
    
    -
    
    
    
    -
    
    
    
    685,656
    
    
    
    5.4402/01/12-02/01/13
    
    
    476,100
    
    
    
    5.50
    
    
    
    684,110
    
    
    
    5.4402/01/13-09/01/17
    
    
    -
    
    
    
    -
    
    
    
    640,000
    
    
    
    5.50
 
 (1)
    
    Excludes the forward swaps discussed on page 46.(2)
    
    These LIBOR-based hedges as of May 1, 2008 protect the debt currently outstanding as
well as the anticipated increase in debt outstanding for projects under development or
anticipated to be under development during the year ending January 31, 2009.(3)
    
    Includes $640,000 for New York Timesat 5.50% which expires in September 2017. Tax-Exempt
 CapsNotional
    
    Average BasePeriod Covered
    
    Amount
    
    Rate(dollars in thousands)05/01/08-02/01/09
    
    $
    232,025
    
    
    
    5.98
    %02/01/09-02/01/10
    
    
    203,625
    
    
    
    5.9702/01/10-02/01/11
    
    
    114,315
    
    
    
    5.8902/01/11-02/01/12
    
    
    12,715
    
    
    
    6.00
  45




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##### Table of Contents



Forward Swaps
 Property Accounted forFully Consolidated
    
    
    under the Equity MethodProperties (1)
    
    

of Accounting (2)Expirations for Years Ending
    
    Notional
    
    
    
    
    
    
    NotionalJanuary 31,
    
    Amount
    
    
    
    Rate
    
    Amount
    
    
    Rate2009
    
    $
    -
    
    
    
    -
    
    
    $
    -
    
    
    
    -2010
    
    $
    91,625
    
    
    
    5.72
    %
    
    $
    120,000
    
    
    
    5.93
    %Thereafter
    
    $
    -
    
    
    
    -
    
    
    $
    -
    
    
    
    -
 
 (1)
    
    As these forward swaps have been designated and qualify as cash flow hedges under SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133),
our portion of unrealized gains and losses on the effective portion of the hedges has been
recorded in accumulated OCI. To the extent effective, the receipt or payment of cash at
termination on these forward swaps will be recorded in accumulated OCI and will be
amortized as either an increase or decrease to interest expense in the same periods as the
interest payments on the financing.(2)
    
    This forward swap does not qualify as a cash flow hedge under the provisions of SFAS
No. 133 because it relates to an unconsolidated property. Therefore, the change in the
fair value of this swap is marked to market through earnings on a quarterly basis.    46




---



##### Table of Contents



Cash Flows
 Operating Activities
  Increase in rents and other revenues received
    
    $
    51,158Decrease in interest and other income received
    
    
    (5,216
    )Increase in cash distributions from unconsolidated entities
    
    
    5,261Increase in proceeds from land sales - Land Development Group
    
    
    4,362Increase in proceeds from land sales - Commercial Group
    
    
    935Increase in land development expenditures
    
    
    (1,893
    )Increase in operating expenditures
    
    
    (35,082
    )Increase in interest paid
    
    
    (12,930
    )Net decrease in cash used in operating activities
    
    $
    6,595
 47




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##### Table of Contents



Investing Activities
   Three Months Ended April 30,2008
    
    
    2007(in thousands)Capital expenditures, including real estate acquisitions*
    
    $
    (236,535
    )
    
    $
    (306,906
    )Payment of lease procurement costs and other assets
    
    
    (40,730
    )
    
    
    (12,047
    )Decrease (increase) in restricted cash used for capital expenditures:Beekman,a mixed-use residential development project located in Manhattan, New York
    
    
    (143,129
    )
    
    
    -Sterling Glen of Rye Brook,a supported-living community in Rye Brook, New York
    
    
    (12,500
    )
    
    
    -Promenade Bolingbrook,a regional mall in Bolingbrook, Illinois
    
    
    (5,040
    )
    
    
    -Victoria Gardens,a retail center in Rancho Cucamonga, California
    
    
    -
    
    
    
    13,112Atlantic Yards,a commercial development project in Brooklyn, New York
    
    
    (1,992
    )
    
    
    3,329Illinois Science and Technology Park - Building P,an office building in Skokie, Illinois
    
    
    -
    
    
    
    (5,062
    )Tobacco Row - Cameron Kinney,an apartment complex in Richmond, Virginia
    
    
    -
    
    
    
    (2,000
    )Sale proceeds released from escrow for current acquisitions:Battery Park City,a specialty retail center in Manhattan, New York
    
    
    -
    
    
    
    25,125Other
    
    
    1,345
    
    
    
    (2,395
    )Subtotal
    
    
    (161,316
    )
    
    
    32,109Proceeds from disposition of other investments
    
    
    150
    
    
    
    -Change in investments in and advances to affiliates - (Investment in) or return of investment:Dispositions:One International Place,an unconsolidated office building in Cleveland, Ohio
    
    
    1,589
    
    
    
    -Land Development:Mesa del Sol,an unconsolidated project in Covington, New Mexico
    
    
    2,130
    
    
    
    (2,342
    )Residential Projects:1100 Wilshire,an unconsolidated condominium development project in Los Angeles, California
    
    
    2,710
    
    
    
    -Mercury,an unconsolidated condominium development project in Los Angeles, California
    
    
    -
    
    
    
    (1,644
    )Met Lofts,an unconsolidated apartment complex in Los Angeles, California
    
    
    -
    
    
    
    (1,865
    )Uptown Apartments,an unconsolidated development project in Oakland, California
    
    
    -
    
    
    
    2,007New York City Projects:East River Plaza,an unconsolidated retail development project in Manhattan, New York
    
    
    (2,053
    )
    
    
    667Sports arena complex and related development projects in Brooklyn, New York currently in
pre-development; excess funds to be reinvested during the future construction phase
    
    
    30,098
    
    
    
    (7,554
    )The Nets,a National Basketball Association franchise
    
    
    (6,431
    )
    
    
    (5,495
    )Commercial Projects:Unconsolidated development activity in Las Vegas, Nevada
    
    
    (4,727
    )
    
    
    -Liberty Center,primarily refinancing proceeds from an unconsolidated office building in
Pittsburgh, Pennsylvania
    
    
    9,961
    
    
    
    -350 Massachusetts Avenue,primarily refinancing proceeds from an unconsolidated office building in
Cambridge, Massachusetts
    
    
    24,427
    
    
    
    -Bulletin Building,primarily refinancing proceeds from an unconsolidated office building in
San Francisco, California
    
    
    -
    
    
    
    8,648San Francisco Centre-Emporium,primarily refinancing proceeds from an unconsolidated regional mall
in San Francisco, California
    
    
    -
    
    
    
    15,804Village at Gulfstream,an unconsolidated development project in Hallendale, Florida
    
    
    6,306
    
    
    
    (2,393
    )Waterfront,an unconsolidated development project in Washington, D.C.
    
    
    -
    
    
    
    (25,200
    )Other net (advances) returns of investment of equity method investments and other advances to affiliates
    
    
    (7,355
    )
    
    
    (8,281
    )Subtotal
    
    
    56,655
    
    
    
    (27,648
    )Net cash used in investing activities
    
    $
    (381,776
    )
    
    $
    (314,492
    )*Capital expenditures were financed as follows:New nonrecourse mortgage indebtedness
    
    $
    198,555
    
    
    $
    155,695Release of investing escrows from sale proceeds (see above)
    
    
    -
    
    
    
    25,125Portion of cash on hand at the beginning of the year
    
    
    37,980
    
    
    
    126,086Total Capital Expenditures
    
    $
    236,535
    
    
    $
    306,906
 48




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##### Table of Contents



Financing Activities
   Three Months Ended April 30,2008
    
    
    2007(in thousands)Borrowings on bank revolving credit facility
    
    $
    80,000
    
    
    $
    193,000Payments on bank revolving credit facility
    
    
    (87,000
    )
    
    
    (53,000
    )Proceeds from nonrecourse mortgage debt
    
    
    683,815
    
    
    
    215,418Principal payments on nonrecourse mortgage debt
    
    
    (404,259
    )
    
    
    (100,435
    )Net increase (decrease) in notes payable
    
    
    30,046
    
    
    
    (18,270
    )(Increase) decrease in restricted cash:Galleria at Sunset,a regional mall in Henderson, Nevada
    
    
    (7,178
    )
    
    
    -Sky55,an apartment complex in Chicago, Illinois
    
    
    (1,644
    )
    
    
    2,750Promenade in Temecula,a regional mall in Temecula, California
    
    
    (1,525
    )
    
    
    -Easthaven at the Village(formerly Village Green),an apartment community in Beachwood, Ohio
    
    
    (1,200
    )
    
    
    -Legacy Lakes,a land development project in Aberdeen, North Carolina
    
    
    (1,000
    )
    
    
    -Lucky Strike,an apartment complex in Richmond, Virginia
    
    
    7,665
    
    
    
    (1,537
    )101 San Fernando,an apartment community in San Jose, California
    
    
    2,509
    
    
    
    -Promenade Bolingbrook,a regional mall in Bolingbrook, Illinois
    
    
    2,300
    
    
    
    -Edgeworth Building,an office building in Richmond, Virginia
    
    
    -
    
    
    
    (3,985
    )Sterling Glen of Roslyn,a development project in Roslyn, New York, sold in July 2007
    
    
    -
    
    
    
    2,273Other
    
    
    (442
    )
    
    
    (196
    )Subtotal
    
    
    (515
    )
    
    
    (695
    )Increase (decrease) in book overdrafts, representing checks issued but not yet paid
    
    
    6,212
    
    
    
    (6,224
    )Payment of deferred financing costs
    
    
    (22,694
    )
    
    
    (4,148
    )Purchase of other treasury stock
    
    
    (642
    )
    
    
    (3,138
    )Exercise of stock options
    
    
    124
    
    
    
    3,418Distribution of accumulated equity to minority partners
    
    
    (3,710
    )
    
    
    (9,558
    )Dividends paid to shareholders
    
    
    (8,234
    )
    
    
    (7,160
    )Increase in minority interest
    
    
    36,652
    
    
    
    21,191Net cash provided by financing activities
    
    $
    309,795
    
    
    $
    230,399
 49




---



##### Table of Contents



LEGAL PROCEEDINGS
  DIVIDENDS
  VARIABLE INTEREST ENTITIES
   NEW ACCOUNTING STANDARDS
     50




---



##### Table of Contents



SUBSEQUENT EVENTS
  New York Times Twelve MetroTech Center
 51




---



##### Table of Contents



INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS
  52




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   Taxable
 Caps
    
    Swaps(1)(3)Notional
    
    Average Base
    
    Notional
    
    Average BasePeriod Covered
    
    Amount
    
    Rate
    
    Amount
    
    Rate(dollars in thousands)05/01/08-02/01/09 (2)
    
    $
    1,308,517
    
    
    
    5.15
    %
    
    $
    929,379
    
    
    
    4.99
    %02/01/09-02/01/10
    
    
    1,241,237
    
    
    
    4.94
    
    
    
    1,028,432
    
    
    
    4.9802/01/10-02/01/11
    
    
    113,797
    
    
    
    5.03
    
    
    
    687,081
    
    
    
    5.4402/01/11-02/01/12
    
    
    -
    
    
    
    -
    
    
    
    685,656
    
    
    
    5.4402/01/12-02/01/13
    
    
    476,100
    
    
    
    5.50
    
    
    
    684,110
    
    
    
    5.4402/01/13-09/01/17
    
    
    -
    
    
    
    -
    
    
    
    640,000
    
    
    
    5.50
 
 (1)
    
    Excludes the forward swaps discussed on page 54.(2)
    
    These LIBOR-based hedges as of May 1, 2008 protect the debt currently outstanding as
well as the anticipated increase in debt outstanding for projects under development or
anticipated to be under development during the year ending January 31, 2009.(3)
    
    Includes $640,000 for New York Timesat 5.50%, which expires in September 2017. Tax-Exempt
 CapsNotional
    
    Average BasePeriod Covered
    
    Amount
    
    Rate(dollars in thousands)05/01/08-02/01/09
    
    $
    232,025
    
    
    
    5.98
    %02/01/09-02/01/10
    
    
    203,625
    
    
    
    5.9702/01/10-02/01/11
    
    
    114,315
    
    
    
    5.8902/01/11-02/01/12
    
    
    12,715
    
    
    
    6.00
  53




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##### Table of Contents



Forward Swaps
 Property Accounted forFully Consolidated
    
    under the Equity MethodProperties(1)
    

of Accounting(2)Expirations for Years Ending
    
    Notional
    
    
    
    
    
    NotionalJanuary 31,
    
    Amount
    
    Rate
    
    Amount
    
    Rate2009
    
    $
    -
    
    
    
    -
    
    
    $
    -
    
    
    
    -2010
    
    $
    91,625
    
    
    
    5.72
    %
    
    $
    120,000
    
    
    
    5.93
    %Thereafter
    
    $
    -
    
    
    
    -
    
    
    $
    -
    
    
    
    -
 
 (1)
    
    As these forward swaps have been designated and qualify as cash flow hedges under SFAS
No. 133, our portion of unrealized gains and losses on the effective portion of the hedges
has been recorded in accumulated OCI. To the extent effective, the receipt or payment of
cash at termination on these forward swaps will be recorded in accumulated OCI and will be
amortized as either an increase or decrease to interest expense in the same periods as the
interest payments on the financing.(2)
    
    This forward swap does not qualify as a cash flow hedge under the provisions of SFAS
No. 133 because it relates to an unconsolidated property. Therefore, the change in the
fair value of this swap is marked to market through earnings on a quarterly basis.     Fair Valuewith 100 bp DecreaseCarrying Value
    
    Fair Value
    
    in Market Rates(in thousands)Fixed
    
    $
    5,027,269
    
    
    $
    4,819,414
    
    
    $
    5,088,262VariableTaxable
    
    
    1,638,177
    
    
    
    1,557,354
    
    
    
    1,619,949Tax-Exempt
    
    
    919,713
    
    
    
    868,395
    
    
    
    899,404
  54




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk (continued)
 April 30, 2008
 Expected Maturity DateYear Ending January 31,TotalPeriod
    
    
    Outstanding
    
    
    Fair MarketLong-Term Debt
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    4/30/08
    
    
    Value 4/30/08(dollars in thousand)Fixed:Fixed-rate debt
    
    $
    54,409
    
    
    $
    247,798
    
    
    $
    167,475
    
    
    $
    377,825
    
    
    $
    322,869
    
    
    $
    2,969,993
    
    
    $
    4,140,369
    
    
    $
    4,013,596Weighted average interest rate
    
    
    6.39
    %
    
    
    6.77
    %
    
    
    7.11
    %
    
    
    7.01
    %
    
    
    5.96
    %
    
    
    5.80
    %
    
    
    6.04
    %Senior & subordinated debt (1)
    
    
    -
    
    
    
    -
    
    
    
    20,400
    
    
    
    287,500
    
    
    
    -
    
    
    
    579,000
    
    
    
    886,900
    
    
    
    805,818Weighted average interest rate
    
    
    -
    
    
    
    -
    
    
    
    8.25
    %
    
    
    3.63
    %
    
    
    -
    
    
    
    7.30
    %
    
    
    6.13
    %Total Fixed-Rate Debt
    
    
    54,409
    
    
    
    247,798
    
    
    
    187,875
    
    
    
    665,325
    
    
    
    322,869
    
    
    
    3,548,993
    
    
    
    5,027,269
    
    
    
    4,819,414Variable:Variable-rate debt
    
    
    196,944
    
    
    
    470,878
    
    
    
    215,990
    
    
    
    23,172
    
    
    
    45,366
    
    
    
    653,827
    
    
    
    1,606,177
    
    
    
    1,525,354Weighted average interest rate
    
    
    4.96
    %
    
    
    5.12
    %
    
    
    5.43
    %
    
    
    4.29
    %
    
    
    6.32
    %
    
    
    6.35
    %
    
    
    5.66
    %Tax-exempt
    
    
    5,743
    
    
    
    1,160
    
    
    
    1,516
    
    
    
    2,475
    
    
    
    206,559
    
    
    
    702,260
    
    
    
    919,713
    
    
    
    868,395Weighted average interest rate
    
    
    5.27
    %
    
    
    3.28
    %
    
    
    3.17
    %
    
    
    3.17
    %
    
    
    4.49
    %
    
    
    3.27
    %
    
    
    3.56
    %Bank revolving credit facility (1)
    
    
    -
    
    
    
    -
    
    
    
    32,000
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    32,000
    
    
    
    32,000Weighted average interest rate
    
    
    -
    
    
    
    -
    
    
    
    4.39
    %
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    4.39
    %Total Variable-Rate Debt
    
    
    202,687
    
    
    
    472,038
    
    
    
    249,506
    
    
    
    25,647
    
    
    
    251,925
    
    
    
    1,356,087
    
    
    
    2,557,890
    
    
    
    2,425,749Total Long-Term Debt
    
    $
    257,096
    
    
    $
    719,836
    
    
    $
    437,381
    
    
    $
    690,972
    
    
    $
    574,794
    
    
    $
    4,905,080
    
    
    $
    7,585,159
    
    
    $
    7,245,163Weighted average interest rate
    
    
    5.27
    %
    
    
    5.68
    %
    
    
    6.12
    %
    
    
    5.50
    %
    
    
    5.46
    %
    
    
    5.69
    %
    
    
    5.66
    %
 
 (1)
    
    Represents recourse debt. 55




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk (continued)
 January 31, 2008
 Expected Maturity DateYear Ending January 31,TotalPeriod
    
    
    Outstanding
    
    
    Fair MarketLong-Term Debt
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    1/31/08
    
    
    Value 1/31/08(dollars in thousands)Fixed:Fixed-rate debt
    
    $
    84,220
    
    
    $
    327,885
    
    
    $
    174,421
    
    
    $
    375,489
    
    
    $
    319,644
    
    
    $
    2,650,047
    
    
    $
    3,931,706
    
    
    $
    4,062,237Weighted average interest rate
    
    
    6.53
    %
    
    
    6.92
    %
    
    
    6.78
    %
    
    
    7.03
    %
    
    
    5.98
    %
    
    
    5.79
    %
    
    
    6.08
    %Senior & subordinated debt (1)
    
    
    -
    
    
    
    -
    
    
    
    20,400
    
    
    
    287,500
    
    
    
    -
    
    
    
    579,000
    
    
    
    886,900
    
    
    
    812,040Weighted average interest rate
    
    
    -
    
    
    
    -
    
    
    
    8.25
    %
    
    
    3.63
    %
    
    
    -
    
    
    
    7.30
    %
    
    
    6.13
    %Total Fixed-Rate Debt
    
    
    84,220
    
    
    
    327,885
    
    
    
    194,821
    
    
    
    662,989
    
    
    
    319,644
    
    
    
    3,229,047
    
    
    
    4,818,606
    
    
    
    4,874,277Variable:Variable-rate debt
    
    
    672,218
    
    
    
    152,872
    
    
    
    170,753
    
    
    
    10,056
    
    
    
    45,366
    
    
    
    653,826
    
    
    
    1,705,091
    
    
    
    1,705,091Weighted average interest rate
    
    
    6.68
    %
    
    
    6.78
    %
    
    
    6.28
    %
    
    
    5.61
    %
    
    
    6.37
    %
    
    
    6.39
    %
    
    
    6.52
    %Tax-exempt
    
    
    85,413
    
    
    
    1,160
    
    
    
    1,140
    
    
    
    505
    
    
    
    540
    
    
    
    613,055
    
    
    
    701,813
    
    
    
    701,813Weighted average interest rate
    
    
    3.12
    %
    
    
    2.81
    %
    
    
    3.00
    %
    
    
    3.36
    %
    
    
    3.36
    %
    
    
    3.11
    %
    
    
    3.11
    %Bank revolving credit facility (1)
    
    
    -
    
    
    
    -
    
    
    
    39,000
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    39,000
    
    
    
    39,000Weighted average interest rate
    
    
    -
    
    
    
    -
    
    
    
    4.89
    %
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    4.89
    %Total Variable-Rate Debt
    
    
    757,631
    
    
    
    154,032
    
    
    
    210,893
    
    
    
    10,561
    
    
    
    45,906
    
    
    
    1,266,881
    
    
    
    2,445,904
    
    
    
    2,445,904Total Long-Term Debt
    
    $
    841,851
    
    
    $
    481,917
    
    
    $
    405,714
    
    
    $
    673,550
    
    
    $
    365,550
    
    
    $
    4,495,928
    
    
    $
    7,264,510
    
    
    $
    7,320,181Weighted average interest rate
    
    
    6.30
    %
    
    
    6.86
    %
    
    
    6.45
    %
    
    
    5.55
    %
    
    
    6.02
    %
    
    
    5.71
    %
    
    
    5.89
    %
 
 (1)
    
    Represents recourse debt. 56




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##### Table of Contents



Item 4. Controls and Procedures
    
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Issuer Purchases of Equity SecuritiesTotal Number of
    
    
    Maximum NumberTotal
    
    
    
    
    
    
    Shares Purchased as
    
    
    of Shares that MayNumber of
    
    
    Average
    
    
    Part of Publicly
    
    
    Yet Be PurchasedShares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Under the PlansPeriod
    
    Purchased
    
    
    Per Share
    
    
    or Programs
    
    
    or ProgramsClass A Common StockFebruary 1 through February 29, 2008
    
    
    -
    
    
    $
    -
    
    
    
    -
    
    
    
    -March 1 through March 31, 2008
    
    
    -
    
    
    $
    -
    
    
    
    -
    
    
    
    -April 1 through April 30, 2008 (1)
    
    
    16,893
    
    
    $
    37.98
    
    
    
    -
    
    
    
    -Total
    
    
    16,893
    
    
    $
    37.98
    
    
    
    -
    
    
    
    -
 
 (1)
    
    During April 2008, the Company repurchased into treasury 16,893 shares of Class A
common stock to satisfy the minimum tax withholding requirements relating to restricted
stock vesting. These shares were not reacquired as part of a publicly announced repurchase
plan or program. 57




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    
    
    Description of Document3.1
    
    -
    
    Amended Articles of Incorporation adopted as of October 11, 1983, incorporated by reference to
Exhibit 3.1 to the Companys Form 10-Q for the quarter ended October 31, 1983 (File No. 1-4372).3.2
    
    -
    
    Certificate of Amendment by Shareholders to the Articles of Incorporation of Forest City Enterprises,
Inc. dated June 24, 1997, incorporated by reference to Exhibit 4.14 to the Companys Registration
Statement on Form S-3 (Registration No. 333-41437).3.3
    
    -
    
    Certificate of Amendment by Shareholders to the Articles of Incorporation of Forest City Enterprises,
Inc. dated June 16, 1998, incorporated by reference to Exhibit 4.3 to the Companys Registration
Statement on Form S-8 (Registration No. 333-61925).3.4
    
    -
    
    Certificate of Amendment by Shareholders to the Articles of Incorporation of Forest City Enterprises,
Inc., effective as of June 20, 2006, incorporated by reference to Exhibit 3.6 to the Companys Form
10-Q for the quarter ended July 31, 2006 (File No. 1-4372).3.5
    
    -
    
    Code of Regulations as amended June 15, 2006, incorporated by reference to Exhibit 3.5 to the
Companys Form 10-Q for the quarter ended July 31, 2006 (File No. 1-4372).4.1
    
    -
    
    Senior Note Indenture, dated as of May 19, 2003, between Forest City Enterprises, Inc., as issuer,
and The Bank of New York, as trustee, incorporated by reference to Exhibit 4.1 to the Companys Form
8-K filed on May 20, 2003 (File No. 1-4372).4.2
    
    -
    
    Form of 7.625% Senior Note due 2015, incorporated by reference to Exhibit 4.2 to the Companys
Registration Statement on Form 8-K filed on May 20, 2003 (File No. 1-4372).4.3
    
    -
    
    Form of 7.375% Senior Note due 2034, incorporated by reference to Exhibit 4.2 to the Companys
Registration Statement on Form 8-K filed on February 10, 2004 (File No. 1-4372).4.4
    
    -
    
    Form of 6.5% Senior Note due 2017, incorporated by reference to Exhibit 4.2 to the Companys
Registration Statement on Form 8-K filed on January 26, 2005 (File No. 1-4372).4.5
    
    -
    
    Indenture, dated as of October 10, 2006, between Forest City Enterprises, Inc., as issuer, and The
Bank of New York Trust Company, N.A., as trustee, including, as Exhibit A thereto, the Form of 3.625%
Puttable Equity-Linked Senior Note due 2011, incorporated by reference to Exhibit 4.1 to the
Companys Form 8-K filed on October 16, 2006 (File No. 1-4372).9.1
    
    -
    
    Voting Agreement, dated November 8, 2006, by and among Forest City Enterprises, Inc., RMS Limited
Partnership, Powell Partners, Limited, Joseph M. Shafran and Bruce C. Ratner, incorporated by
reference to Exhibit 9.1 to the Companys Form 10-K for the year ended January 31, 2007 (File No.
1-4372).+10.1
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between
Deborah Ratner-Salzberg and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and
Audrey Ratner, dated June 26, 1996, incorporated by reference to Exhibit 10.19 to the Companys Form
10-K for the year ended January 31, 1997 (File No. 1-4372).+10.2
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Brian
J. Ratner and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner,
dated June 26, 1996, incorporated by reference to Exhibit 10.20 to the Companys Form 10-K for the
year ended January 31, 1997 (File No. 1-4372).+10.3
    
    -
    
    Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as
Collateral between Brian J. Ratner and Forest City Enterprises, Inc., insuring the lives of Albert
Ratner and Audrey Ratner, effective June 26, 1996, incorporated by reference to Exhibit 10.21 to the
Companys Form 10-K for the year ended January 31, 1997 (File No. 1-4372).+10.4
    
    -
    
    Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as
Collateral between Deborah Ratner-Salzberg and Forest City Enterprises, Inc., insuring the lives of
Albert Ratner and Audrey Ratner, effective June 26, 1996, incorporated by reference to Exhibit 10.22
to the Companys Form 10-K for the year ended January 31, 1997 (File No. 1-4372).
 58




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##### Table of Contents



ExhibitNumber
    
    
    
    Description of Document+10.5
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Charles Ratner 1992 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the lives of Charles Ratner and Ilana Horowitz (Ratner),
dated November 2, 1996, incorporated by reference to Exhibit 10.23 to the Companys Form 10-K for the
year ended January 31, 1997 (File No. 1-4372).+10.6
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996,
incorporated by reference to Exhibit 10.24 to the Companys Form 10-K for the year ended January 31,
1997 (File No. 1-4372).+10.7
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildrens Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996,
incorporated by reference to Exhibit 10.25 to the Companys Form 10-K for the year ended January 31,
1997 (File No. 1-4372).+10.8
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildrens Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996,
incorporated by reference to Exhibit 10.26 to the Companys Form 10-K for the year ended January 31,
1997 (File No. 1-4372).+10.9
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildrens Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996,
incorporated by reference to Exhibit 10.27 to the Companys Form 10-K for the year ended January 31,
1997 (File No. 1-4372).+10.10
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildrens Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996,
incorporated by reference to Exhibit 10.28 to the Companys Form 10-K for the year ended January 31,
1997 (File No. 1-4372).+10.11
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996,
incorporated by reference to Exhibit 10.29 to the Companys Form 10-K for the year ended January 31,
1997 (File No. 1-4372).+10.12
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996,
incorporated by reference to Exhibit 10.30 to the Companys Form 10-K for the year ended January 31,
1997 (File No. 1-4372).+10.13
    
    -
    
    Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert
B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996,
incorporated by reference to Exhibit 10.31 to the Companys Form 10-K for the year ended January 31,
1997 (File No. 1-4372).+10.14
    
    -
    
    Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as
Collateral between James Ratner and Albert Ratner, Trustees under the Charles Ratner 1992 Irrevocable
Trust Agreement and Forest City Enterprises, Inc., insuring the lives of Charles Ratner and Ilana
Ratner, effective November 2, 1996, incorporated by reference to Exhibit 10.32 to the Companys Form
10-K for the year ended January 31, 1997 (File No. 1-4372).+10.15
    
    -
    
    Dividend Reinvestment and Stock Purchase Plan, incorporated by reference to Exhibit 10.42 to the
Companys Form 10-K for the year ended January 31, 1999 (File No. 1-4372).+10.16
    
    -
    
    Supplemental Unfunded Deferred Compensation Plan for Executives, incorporated by reference to Exhibit
10.9 to the Companys Form 10-K for the year ended January 31, 1997 (File No. 1-4372).+10.17
    
    -
    
    Deferred Compensation Plan for Executives, effective as of January 1, 1999, incorporated by reference
to Exhibit 10.43 to the Companys Form 10-K for the year ended January 31, 1999 (File No. 1-4372).
 59




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##### Table of Contents



ExhibitNumber
    
    
    
    Description of Document+10.18
    
    -
    
    First Amendment to the Deferred Compensation Plan for Executives, effective as of October 1, 1999,
incorporated by reference to Exhibit 10.45 to the Companys Form 10-Q for the quarter ended April 30,
2005 (File No. 1-4372).+10.19
    
    -
    
    Second Amendment to the Deferred Compensation Plan for Executives, effective as of December 31, 2004,
incorporated by reference to Exhibit 10.46 to the Companys Form 10-Q for the quarter ended April 30,
2005
(File No. 1-4372).+10.20
    
    -
    
    Forest City Enterprises, Inc. 2005 Deferred Compensation Plan for Executives (As Amended and Restated
Effective January 1, 2008), incorporated by reference to Exhibit 10.21 to the Companys Form 10-K for
the year ended January 31, 2008 (File No. 1-4372).+10.21
    
    -
    
    Deferred Compensation Plan for Nonemployee Directors, effective as of January 1, 1999, incorporated
by reference to Exhibit 10.44 to the Companys Form 10-K for the year ended January 31, 1999 (File
No. 1-4372).+10.22
    
    -
    
    First Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective October 1,
1999, incorporated by reference to Exhibit 4.6 to the Companys Registration Statement on Form S-8
(Registration
No. 333-38912).+10.23
    
    -
    
    Second Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective March 10,
2000, incorporated by reference to Exhibit 4.7 to the Companys Registration Statement on Form S-8
(Registration
No. 333-38912).+10.24
    
    -
    
    Third Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective March 12,
2004, incorporated by reference to Exhibit 10.39 to the Companys Form 10-Q for the quarter ended
July 31, 2004 (File No. 1-4372).+10.25
    
    -
    
    Fourth Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective as of
December 31, 2004, incorporated by reference to Exhibit 10.47 to the Companys Form 10-Q for the
quarter ended April 30, 2005 (File No. 1-4372).+10.26
    
    -
    
    Fifth Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective as of March
26, 2008, incorporated by reference to Exhibit 10.60 to the Companys Form 10-K for the year ended
January 31, 2008 (File No. 1-4372).+10.27
    
    -
    
    Forest City Enterprises, Inc. 2005 Deferred Compensation Plan for Nonemployee Directors (As Amended
and Restated Effective January 1, 2005), incorporated by reference to Exhibit 10.2 to the Companys
Form 8-K filed on December 16, 2005 (File No. 1-4372) (Replaced by Exhibit 10.60).+10.28
    
    -
    
    Summary of Forest City Enterprises, Inc. Management Incentive Plan as adopted in 1997, incorporated
by reference to Exhibit 10.51 to the Companys Form 10-Q for the quarter ended July 31, 2001 (File
No. 1-4372).+10.29
    
    -
    
    Summary of Forest City Enterprises, Inc. Long-Term Performance Plan as adopted in 2000, incorporated
by reference to Exhibit 10.52 to the Companys Form 10-Q for the quarter ended July 31, 2001 (File
No. 1-4372).+10.30
    
    -
    
    Forest City Enterprises, Inc. Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 to
the Companys Form 8-K filed on June 30, 2005 (File No. 1-4372).+10.31
    
    -
    
    Forest City Enterprises, Inc. Executive Bonus Plan, incorporated by reference to Exhibit 10.1 to the
Companys Form 8-K filed on March 30, 2005 (File No. 1-4372).+10.32
    
    -
    
    Forest City Enterprises, Inc. Amended Board of Directors Compensation Policy, effective February 1,
2008, incorporated by reference to Exhibit 10.33 to the Companys Form 10-K for the year ended
January 31, 2008 (File No. 1-4372).+10.33
    
    -
    
    Forest City Enterprises, Inc. Unfunded Nonqualified Supplemental Retirement Plan for Executives (As
Amended and Restated Effective January 1, 2008), incorporated by reference to Exhibit 10.59 to the
Companys Form 10-K for the year ended January 31, 2008 (File No. 1-4372).+10.34
    
    -
    
    Amended and Restated Form of Stock Option Agreement, effective as of June 8, 2004, incorporated by
reference to Exhibit 10.17 to the Companys Form 10-Q for the quarter ended April 30, 2005 (File No.
1-4372).
 60




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##### Table of Contents



ExhibitNumber
    
    
    
    Description of Document+10.35
    
    -
    
    Amended and Restated Form of Restricted Stock Agreement, effective as of June 8, 2004, incorporated
by reference to Exhibit 10.18 to the Companys Form 10-Q for the quarter ended April 30, 2005 (File
No. 1-4372).+10.36
    
    -
    
    Forest City Enterprises, Inc. 1994 Stock Plan, as Amended and Restated as of June 21, 2005,
incorporated by reference to Exhibit A to the Companys Proxy Statement for its Annual Meeting of
Shareholders held on June 21, 2005 (File No. 1-4372).+10.37
    
    -
    
    Amendment No. 1 to Forest City Enterprises, Inc. 1994 Stock Plan (As Amended and Restated as of June
21, 2005), incorporated by reference to Exhibit 10.53 to the Companys Form 10-K for the year ended
January 31, 2006 (File No. 1-4372).+10.38
    
    -
    
    Amendment No. 2 to Forest City Enterprises, Inc. 1994 Stock Plan (As Amended and Restated as of June
21, 2005), incorporated by reference to Exhibit 4.8 to the Companys Registration Statement on Form
S-8 filed on May 3, 2007 (Registration No. 333-122172).+10.39
    
    -
    
    Employment Agreement entered into on May 31, 1999, effective January 1, 1999, between Forest City
Enterprises, Inc. and Albert B. Ratner, incorporated by reference to Exhibit 10.47 to the Companys
Form 10-Q for the quarter ended July 31, 1999 (File No. 1-4372).+10.40
    
    -
    
    First Amendment to Employment Agreement effective as of February 28, 2000 between Forest City
Enterprises, Inc. and Albert B. Ratner, incorporated by reference to Exhibit 10.45 to the Companys
Form 10-K for the year ended January 31, 2000 (File No. 1-4372).+10.41
    
    -
    
    Employment Agreement entered into on May 31, 1999, effective January 1, 1999, between Forest City
Enterprises, Inc. and Samuel H. Miller, incorporated by reference to Exhibit 10.48 to the Companys
Form 10-Q for the quarter ended July 31, 1999 (File No. 1-4372).+10.42
    
    -
    
    Deferred Compensation Agreement between Forest City Enterprises, Inc. and Thomas G. Smith dated
December 27, 1995, incorporated by reference to Exhibit 10.33 to the Companys Form 10-K for the year
ended January 31, 1997 (File No. 1-4372).+10.43
    
    -
    
    Employment Agreement (re: death benefits) entered into on May 31, 1999, between Forest City
Enterprises, Inc. and Thomas G. Smith dated December 27, 1995, incorporated by reference to Exhibit
10.49 to the Companys Form 10-Q for the quarter ended October 31, 1999 (File No. 1-4372).+10.44
    
    -
    
    Employment Agreement entered into on July 20, 2005, effective February 1, 2005, between Forest City
Enterprises, Inc. and Charles A. Ratner, incorporated by reference to Exhibit 10.1 to the Companys
Form 8-K filed on July 26, 2005 (File No. 1-4372).+10.45
    
    -
    
    First Amendment to Employment Agreement, dated as of November 9, 2006, by and among Charles A. Ratner
and Forest City Enterprises, Inc., incorporated by reference to Exhibit 10.2 to the Companys Form
8-K filed on November 13, 2006 (File No. 1-4372).+10.46
    
    -
    
    Employment Agreement entered into on July 20, 2005, effective February 1, 2005, between Forest City
Enterprises, Inc. and James A. Ratner, incorporated by reference to Exhibit 10.2 to the Companys
Form 8-K filed on July 26, 2005 (File No. 1-4372).+10.47
    
    -
    
    First Amendment to Employment Agreement, dated as of November 9, 2006, by and among James A. Ratner
and Forest City Enterprises, Inc, incorporated by reference to Exhibit 10.3 to the Companys Form 8-K
filed on November 13, 2006 (File No. 1-4372).+10.48
    
    -
    
    Employment Agreement entered into on July 20, 2005, effective February 1, 2005, between Forest City
Enterprises, Inc. and Ronald A. Ratner, incorporated by reference to Exhibit 10.3 to the Companys
Form 8-K filed on July 26, 2005 (File No. 1-4372).+10.49
    
    -
    
    First Amendment to Employment Agreement, dated as of November 9, 2006, by and among Ronald A. Ratner
and Forest City Enterprises, Inc., incorporated by reference to Exhibit 10.4 to the Companys Form
8-K filed on November 13, 2006 (File No. 1-4372).+10.50
    
    -
    
    Employment Agreement, effective November 9, 2006, by and among Bruce C. Ratner and Forest City
Enterprises, Inc., incorporated by reference to Exhibit 10.1 to the Companys Form 8-K filed on
November 13, 2006 (File No. 1-4372).
 61




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##### Table of Contents



ExhibitNumber
    
    
    
    Description of Document10.51
    
    -
    
    Master Contribution and Sale Agreement, dated as of August 10, 2006, by and among Forest City
Enterprises, Inc., certain entities affiliated with Forest City Enterprises, Inc., Forest City Master
Associates III, LLC, certain entities affiliated with Forest City Master Associates III, LLC, certain
entities affiliated with Bruce C. Ratner and certain individuals affiliated with Bruce C. Ratner,
incorporated by reference to Exhibit 10.54 to the Companys Form 10-Q for the quarter ended July 31,
2006 (File No. 1-4372).10.52
    
    -
    
    Amended and Restated Credit Agreement by and among Forest City Rental Properties Corporation, KeyBank
National Association, as Administrative Agent, National City Bank, as Syndication Agent, Bank of
America, N.A. and LaSalle Bank National Association, as Co-Documentation Agents, and the banks named
therein, incorporated by reference to Exhibit 10.1 to the Companys Form 8-K filed on June 12, 2007
(File No. 1-4372).10.53
    
    -
    
    Additional Bank Assumption Agreement by and among The Bank of New York, Forest City Rental Properties
Corporation, and KeyBank in its capacity as administrative agent under the Credit Agreement,
incorporated by reference to Exhibit 10.2 to the Companys Form 8-K filed on December 20, 2007 (File
No. 1-4372).10.54
    
    -
    
    Additional Bank Assumption Agreement by and among Wachovia Bank, N.A., Forest City Rental Properties
Corporation, and KeyBank in its capacity as administrative agent under the Credit Agreement,
incorporated by reference to Exhibit 10.3 to the Companys Form 8-K filed on December 20, 2007 (File
No. 1-4372).10.55
    
    -
    
    Exhibit A to the Amended and Restated Credit Agreement by and among Forest City Rental Properties
Corporation, KeyBank National Association, as Administrative Agent, National City Bank, as
Syndication Agent, Bank of America, N.A. and LaSalle Bank National Association, as Co-Documentation
Agents, and the banks named therein, revised as of December 20, 2007, further revised as of February
4, 2008 and further revised as of February 19, 2008, incorporated by reference to Exhibit 10.56 to
the Companys Form 10-K for the year ended January 31, 2008 (File No. 1-4372).10.56
    
    -
    
    Amended and Restated Guaranty of Payment of Debt by Forest City Enterprises, Inc. for the benefit of
KeyBank National Association, as Administrative Agent, National City Bank, as Syndication Agent, Bank
of America, N.A. and LaSalle Bank National Association, as Co-Documentation Agents, and the banks
named therein, incorporated by reference to Exhibit 10.2 to the Companys Form 8-K filed on June 12,
2007 (File No. 1-4372).10.57
    
    -
    
    Registration Rights Agreement by and among Forest City Enterprises, Inc. and the holders of BCR Units
listed on Schedule A thereto dated November 8, 2006, incorporated by reference to Exhibit 10.1 to the
Companys Registration Statement on Form S-3 filed on November 7, 2007 (Registration No. 333-147201).+10.58
    
    -
    
    Separation Agreement, dated April 1, 2008, by and between Forest City Enterprises, Inc. and Thomas G.
Smith, incorporated by reference to Exhibit 10.1 to the Companys Form 8-K filed on April 7, 2008
(File No. 1-4372).+10.59
    
    -
    
    Consultant Agreement, dated May 12, 2008, by and between Forest City Enterprises, Inc. and Thomas G.
Smith, incorporated by reference to Exhibit 10.1 to the Companys Form 8-K filed on May 19, 2008
(File No. 1-4372).*+10.60
    
    -
    
    Forest City Enterprises, Inc. 2005 Deferred Compensation Plan for Nonemployee Directors (As Amended
and Restated effective January 1, 2008) (Replaces Exhibit 10.27).*31.1
    
    -
    
    Principal Executive Officers Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2
    
    -
    
    Principal Financial Officers Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1
    
    -
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 +
    
    Management contract or compensatory arrangement required to be filed as an exhibit to this Form
10-Q pursuant to Item 6.*
    
    Filed herewith. 62




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##### Table of Contents



SIGNATURES
  FOREST CITY ENTERPRISES, INC.
                              (Registrant)Date: June 5, 2008
    /S/ ROBERT G. OBRIENName:
    Robert G. OBrienTitle:
    Executive Vice President and
Chief Financial OfficerDate: June 5, 2008
    /S/ LINDA M. KANEName:
    Linda M. KaneTitle:
    Senior Vice President, Chief Accounting
and Administrative Officer 63




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    
    
    Description of Document10.60
    
    -
    
    Forest City Enterprises, Inc. 2005 Deferred Compensation Plan for Nonemployee Directors (As Amended
and Restated effective January 1, 2008).31.1
    
    -
    
    Principal Executive Officers Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    -
    
    Principal Financial Officers Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    -
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.