##### 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 October 31, 2007
 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
  þ o o
 o þ
  Class
    
    Outstanding at November 28, 2007Class A Common Stock, $.33 1/3 par value
    
    78,232,166 sharesClass B Common Stock, $.33 1/3 par value
    
    24,595,988 shares




---



##### 



Forest City Enterprises, Inc. and Subsidiaries
 Table of Contents
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Forest City Enterprises, Inc. and SubsidiariesConsolidated Balance Sheets
October 31, 2007 and January 31, 2007
    
    
    2Consolidated Statements of Earnings
Three and Nine Months Ended October 31, 2007 and 2006
    
    
    3Consolidated Statements of Comprehensive Income
Three and Nine Months Ended October 31, 2007 and 2006
    
    
    4Consolidated Statements of Shareholders Equity
Nine Months Ended October 31, 2007 and 2006
    
    
    5Consolidated Statements of Cash Flows
Nine Months Ended October 31, 2007 and 2006
    
    
    6-8Notes to Consolidated Financial Statements
    
    
    9-30Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    31-60Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    61-64Item 4.
    
    Controls and Procedures
    
    
    65PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    65Item 6.
    
    Exhibits
    
    
    66-70Signatures
    
    
    
    
    71CertificationsEX-31.1EX-31.2EX-32.1




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 Forest City Enterprises, Inc. and Subsidiaries
 
 Consolidated Balance Sheets
  October 31, 2007
    
    January 31, 2007(in thousands)AssetsReal EstateCompleted rental properties
    
    $
    7,497,549
    
    
    $
    6,659,054Projects under development
    
    
    1,352,958
    
    
    
    1,396,083Land held for development or sale
    
    
    168,108
    
    
    
    174,136Total Real Estate
    
    
    9,018,615
    
    
    
    8,229,273Less accumulated depreciation
    
    
    (1,202,305
    )
    
    
    (1,085,978
    )Real Estate, net
    
    
    7,816,310
    
    
    
    7,143,295Cash and equivalents
    
    
    337,435
    
    
    
    254,213Restricted cash
    
    
    217,352
    
    
    
    292,461Notes and accounts receivable, net
    
    
    348,019
    
    
    
    287,615Investments in and advances to affiliates
    
    
    394,500
    
    
    
    333,782Other assets
    
    
    792,095
    
    
    
    670,238Operating property assets held for sale
    
    
    31,592
    
    
    
    Total Assets
    
    $
    9,937,303
    
    
    $
    8,981,604Liabilities and Shareholders EquityLiabilitiesMortgage debt, nonrecourse
    
    $
    6,144,843
    
    
    $
    5,338,372Notes payable
    
    
    136,318
    
    
    
    96,127Bank revolving credit facility
    
    
    
    
    
    
    Senior and subordinated debt
    
    
    886,900
    
    
    
    886,900Accounts payable and accrued expenses
    
    
    897,190
    
    
    
    772,964Deferred income taxes
    
    
    495,446
    
    
    
    486,329Operating property liabilities held for sale
    
    
    28,580
    
    
    
    Total Liabilities
    
    
    8,589,277
    
    
    
    7,580,692Minority Interest
    
    
    347,455
    
    
    
    375,101Commitments 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; 77,811,531 and 76,692,955 shares issued
and 77,803,666 and 76,628,006 shares outstanding, respectively
    
    
    25,937
    
    
    
    25,564Class B, convertible, 56,000,000 shares authorized; 24,617,988 and 25,254,210 shares
issued and outstanding, respectively; 26,257,961 issuable
    
    
    8,206
    
    
    
    8,41834,143
    
    
    
    33,982Additional paid-in capital
    
    
    221,098
    
    
    
    247,884Retained earnings
    
    
    778,506
    
    
    
    762,062Less treasury stock, at cost; 7,865 and 64,949 Class A shares, respectively
    
    
    (531
    )
    
    
    (3,449
    )1,033,216
    
    
    
    1,040,479Accumulated other comprehensive loss
    
    
    (32,645
    )
    
    
    (14,668
    )Total Shareholders Equity
    
    
    1,000,571
    
    
    
    1,025,811Total Liabilities and Shareholders Equity
    
    $
    9,937,303
    
    
    $
    8,981,604
  2




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 
 Consolidated Statements of Earnings
  Three Months Ended October 31,
    
    Nine Months Ended October 31,2007
    
    2006
    
    2007
    
    2006(in thousands, except per share data)Revenues from real estate operations
    
    $
    333,626
    
    
    $
    262,533
    
    
    $
    889,577
    
    
    $
    775,097ExpensesOperating expenses
    
    
    201,274
    
    
    
    162,801
    
    
    
    547,052
    
    
    
    460,514Depreciation and amortization
    
    
    54,414
    
    
    
    43,173
    
    
    
    169,942
    
    
    
    125,032Provision for decline in real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,923255,688
    
    
    
    205,974
    
    
    
    716,994
    
    
    
    587,469Interest expense
    
    
    (88,241
    )
    
    
    (67,951
    )
    
    
    (237,748
    )
    
    
    (205,239
    )Amortization of mortgage procurement costs
    
    
    (3,568
    )
    
    
    (2,719
    )
    
    
    (8,971
    )
    
    
    (8,051
    )Loss on early extinguishment of debt
    
    
    (4,719
    )
    
    
    (116
    )
    
    
    (8,903
    )
    
    
    (919
    )Interest and other income
    
    
    17,544
    
    
    
    7,023
    
    
    
    52,366
    
    
    
    29,740Equity in earnings (loss) of unconsolidated entities
    
    
    (6,526
    )
    
    
    9,122
    
    
    
    2,608
    
    
    
    15,811Gain on disposition of other investments
    
    
    172
    
    
    
    
    
    
    
    603
    
    
    
    Earnings (loss) before income taxes
    
    
    (7,400
    )
    
    
    1,918
    
    
    
    (27,462
    )
    
    
    18,970Income tax expense (benefit)Current
    
    
    (16,353
    )
    
    
    (8,484
    )
    
    
    (16,274
    )
    
    
    (14,701
    )Deferred
    
    
    18,059
    
    
    
    14,711
    
    
    
    3,331
    
    
    
    24,3961,706
    
    
    
    6,227
    
    
    
    (12,943
    )
    
    
    9,695Earnings (loss) before minority interest and discontinued operations
    
    
    (9,106
    )
    
    
    (4,309
    )
    
    
    (14,519
    )
    
    
    9,275Minority interest
    
    
    (2,308
    )
    
    
    (3,638
    )
    
    
    (10,375
    )
    
    
    (10,395
    )Loss from continuing operations
    
    
    (11,414
    )
    
    
    (7,947
    )
    
    
    (24,894
    )
    
    
    (1,120
    )Discontinued operations, net of tax and minority interestOperating earnings from rental properties
    
    
    1,273
    
    
    
    2,354
    
    
    
    110
    
    
    
    3,916Gain (loss) on disposition of rental properties
    
    
    (633
    )
    
    
    51,468
    
    
    
    64,604
    
    
    
    103,829640
    
    
    
    53,822
    
    
    
    64,714
    
    
    
    107,745Net earnings (loss)
    
    $
    (10,774
    )
    
    $
    45,875
    
    
    $
    39,820
    
    
    $
    106,625Basic and diluted earnings (loss) per common shareLoss from continuing operations
    
    $
    (0.11
    )
    
    $
    (0.08
    )
    
    $
    (0.24
    )
    
    $
    (0.01
    )Earnings from discontinued operations, net of
tax and minority interest
    
    
    
    
    
    
    0.53
    
    
    
    0.62
    
    
    
    1.06Net earnings (loss)
    
    $
    (0.11
    )
    
    $
    0.45
    
    
    $
    0.38
    
    
    $
    1.05
  3




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 
 Consolidated Statements of Comprehensive Income
  Three Months Ended October 31,2007
    
    2006(in thousands)Net earnings (loss)
    
    $
    (10,774
    )
    
    $
    45,875Other comprehensive income (loss), net of tax and minority interest:Unrealized net gains on investment securities
    
    
    21
    
    
    
    31Change in unrealized net losses on interest rate derivative contracts
    
    
    (18,963
    )
    
    
    (19,009
    )Other comprehensive losses, net of tax and minority interest
    
    
    (18,942
    )
    
    
    (18,978
    )Comprehensive income (loss)
    
    $
    (29,716
    )
    
    $
    26,897
  Nine Months Ended October 31,2007
    
    2006(in thousands)Net earnings
    
    $
    39,820
    
    
    $
    106,625Other comprehensive income (loss), net of tax and minority interest:Unrealized net losses on investment securities
    
    
    (135
    )
    
    
    (51
    )Change in unrealized net losses on interest rate derivative contracts
    
    
    (17,842
    )
    
    
    (23,736
    )Other comprehensive losses, net of tax and minority interest
    
    
    (17,977
    )
    
    
    (23,787
    )Comprehensive income
    
    $
    21,843
    
    
    $
    82,838
  4




---



##### 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)Nine Months Ended October 31, 2007Balances at January 31, 2007
    
    
    76,693
    
    
    $
    25,564
    
    
    
    25,254
    
    
    $
    8,418
    
    
    $
    247,884
    
    
    $
    762,062
    
    
    
    65
    
    
    $
    (3,449
    )
    
    $
    (14,668
    )
    
    $
    1,025,811Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,820
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,820Cumulative effect of change in accounting for uncertain tax
positions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245Other
comprehensive loss, net of tax and minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,977
    )
    
    
    (17,977
    )Dividends $.23 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,621
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,621
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    (3,138
    )
    
    
    
    
    
    
    (3,138
    )Conversion of Class B to Class A shares
    
    
    636
    
    
    
    212
    
    
    
    (636
    )
    
    
    (212
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    455
    
    
    
    152
    
    
    
    
    
    
    
    
    
    
    
    6,910
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,062Restricted stock granted out of treasury
    
    
    (107
    )
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    (6,020
    )
    
    
    
    
    
    
    (107
    )
    
    
    6,056
    
    
    
    
    
    
    
    Restricted stock vested
    
    
    135
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,571
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,571Distribution of accumulated equity to minority partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,202
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,202
    )Balances at October 31, 2007
    
    
    77,812
    
    
    $
    25,937
    
    
    
    24,618
    
    
    $
    8,206
    
    
    $
    221,098
    
    
    $
    778,506
    
    
    
    8
    
    
    $
    (531
    )
    
    $
    (32,645
    )
    
    $
    1,000,571Nine Months Ended October 31, 2006Balances at January 31, 2006
    
    
    75,436
    
    
    $
    25,146
    
    
    
    26,149
    
    
    $
    8,716
    
    
    $
    247,926
    
    
    $
    612,371
    
    
    
    
    
    
    $
    
    
    
    $
    223
    
    
    $
    894,382Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,625
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,625Other comprehensive loss, net of tax and minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,787
    )
    
    
    (23,787
    )Dividends $.20 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,461
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,461
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    491
    
    
    
    (25,928
    )
    
    
    
    
    
    
    (25,928
    )Conversion of Class B to Class A shares
    
    
    495
    
    
    
    165
    
    
    
    (495
    )
    
    
    (165
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    180
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    453
    
    
    
    
    
    
    
    (45
    )
    
    
    2,257
    
    
    
    
    
    
    
    2,769Restricted stock vested
    
    
    56
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,058
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,058Purchased call option transaction, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,155
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,155
    )Warrant transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,923
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,923Balances at October 31, 2006
    
    
    76,167
    
    
    $
    25,389
    
    
    
    25,654
    
    
    $
    8,551
    
    
    $
    258,186
    
    
    $
    698,535
    
    
    
    446
    
    
    $
    (23,671
    )
    
    $
    (23,564
    )
    
    $
    943,426
  5




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows
  Nine Months Ended October 31,2007
    
    2006(in thousands)Net earnings
    
    $
    39,820
    
    
    $
    106,625Depreciation and amortization
    
    
    169,942
    
    
    
    125,032Provision for decline in real estate
    
    
    
    
    
    
    1,923Amortization of mortgage procurement costs
    
    
    8,971
    
    
    
    8,051Loss on early extinguishment of debt
    
    
    8,903
    
    
    
    919Equity in earnings of unconsolidated entities
    
    
    (2,608
    )
    
    
    (15,811
    )Other income  net gain on sale of a development project
    
    
    (17,830
    )
    
    
    Gain on disposition of other investments
    
    
    (603
    )
    
    
    Deferred income taxes
    
    
    3,331
    
    
    
    24,396Minority interest
    
    
    10,375
    
    
    
    10,395Stock-based compensation
    
    
    7,924
    
    
    
    6,249Amortization and mark to market adjustments of derivative instruments
    
    
    1,411
    
    
    
    10,016Cash distributions from operations of unconsolidated entities
    
    
    23,163
    
    
    
    34,141Non-cash operating expenses:Write-off of abandoned development projects
    
    
    9,419
    
    
    
    2,839Discontinued operations:Depreciation and amortization
    
    
    1,941
    
    
    
    8,870Amortization of mortgage procurement costs
    
    
    80
    
    
    
    430Loss on early extinguishment of debt
    
    
    363
    
    
    
    Gain on disposition of rental properties
    
    
    (105,287
    )
    
    
    (287,220
    )Deferred income taxes
    
    
    15,485
    
    
    
    49,004Minority interest  gain on disposition
    
    
    
    
    
    
    118,009Minority interest  operating earnings
    
    
    
    
    
    
    332Cost of sales of land included in projects under development and completed rental properties
    
    
    21,397
    
    
    
    20,571Increase in land held for development or sale
    
    
    (27,473
    )
    
    
    (42,270
    )Increase in notes and accounts receivable
    
    
    (12,916
    )
    
    
    (3,818
    )Decrease in other assets
    
    
    11,248
    
    
    
    10,158Increase in restricted cash used for operating purposes
    
    
    (13,089
    )
    
    
    (3,021
    )(Decrease) increase in accounts payable and accrued expenses
    
    
    (37,316
    )
    
    
    21,044Net cash provided by operating activities
    
    $
    116,651
    
    
    $
    206,864
  6




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
 Nine Months Ended October 31,2007
    
    2006(in thousands)Cash flows from investing activitiesCapital expenditures
    
    $
    (992,538
    )
    
    $
    (744,588
    )Payment of lease procurement costs and other assets
    
    
    (72,675
    )
    
    
    (42,372
    )Decrease (increase) in restricted cash used for capital expenditures
    
    
    89,927
    
    
    
    (96,921
    )Proceeds from disposition of rental properties and a development project
    
    
    290,692
    
    
    
    291,907Increase in investments in and advances to affiliates
    
    
    (68,461
    )
    
    
    (90,946
    )Net cash used in investing activities
    
    
    (753,055
    )
    
    
    (682,920
    )Cash flows from financing activitiesProceeds from issuance of Puttable Equity-Linked Senior Notes
    
    
    
    
    
    
    287,500Payment of Puttable Equity-Linked Senior Notes issuance costs
    
    
    
    
    
    
    (6,755
    )Payment of purchased call option transaction
    
    
    
    
    
    
    (45,885
    )Proceeds from warrant transaction
    
    
    
    
    
    
    28,923Borrowings on bank revolving credit facility
    
    
    465,000
    
    
    
    285,000Payments on bank revolving credit facility
    
    
    (465,000
    )
    
    
    (367,500
    )Proceeds from nonrecourse mortgage debt
    
    
    1,643,003
    
    
    
    684,532Principal payments on nonrecourse mortgage debt
    
    
    (784,271
    )
    
    
    (406,121
    )Proceeds from notes payable
    
    
    57,876
    
    
    
    8,567Payments on notes payable
    
    
    (65,913
    )
    
    
    (66,364
    )Change in restricted cash and book overdrafts
    
    
    (5,937
    )
    
    
    75,257Payment of deferred financing costs
    
    
    (32,033
    )
    
    
    (23,314
    )Purchase of treasury stock related to Puttable Equity-Linked Senior Notes
    
    
    
    
    
    
    (24,962
    )Purchase of other treasury stock
    
    
    (3,138
    )
    
    
    (966
    )Exercise of stock options
    
    
    7,062
    
    
    
    2,769Distributions of accumulated equity to minority partners
    
    
    (41,202
    )
    
    
    Dividends paid to shareholders
    
    
    (22,558
    )
    
    
    (19,385
    )Decrease in minority interest
    
    
    (33,263
    )
    
    
    (15,403
    )Net cash provided by financing activities
    
    
    719,626
    
    
    
    395,893Net increase (decrease) in cash and equivalents
    
    
    83,222
    
    
    
    (80,163
    )Cash and equivalents at beginning of period
    
    
    254,213
    
    
    
    254,734Cash and equivalents at end of period
    
    $
    337,435
    
    
    $
    174,571
  7




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
 Supplemental Non-Cash Disclosures:
  Nine Months Ended October 31,2007
    
    2006(in thousands)Operating activitiesDecrease (increase) in land held for development or sale(1)(6)(8)(10)
    
    $
    9,297
    
    
    $
    (24,106
    )Increase in notes and accounts receivable(1)(3)(4)(10)(11)
    
    
    (39,118
    )
    
    
    (13,938
    )Increase in other assets(1)(3)(4)(11)
    
    
    (66,777
    )
    
    
    (6,697
    )Increase in restricted cash(1)(4)
    
    
    (2,486
    )
    
    
    (423
    )Increase in accounts payable and accrued expenses(1)(3)(4)(6)(8)(9)(11)
    
    
    118,073
    
    
    
    32,157Total effect on operating activities
    
    $
    18,989
    
    
    $
    (13,007
    )Investing activitiesIncrease in projects under development(1)(7)(8)(9)(10)(11)
    
    $
    (29,687
    )
    
    $
    (163,067
    )Increase in completed rental properties(1)(3)(4)(5)(10)
    
    
    (56,662
    )
    
    
    (69,569
    )Increase in other assets (8)
    
    
    
    
    
    
    (4,250
    )Increase in restricted cash (4)
    
    
    (16
    )
    
    
    Non-cash proceeds from disposition of properties(2)
    
    
    77,960
    
    
    
    241,354(Increase) decrease in investments in and advances to affiliates(1)(4)
    
    
    (3,915
    )
    
    
    26,531Total effect on investing activities
    
    $
    (12,320
    )
    
    $
    30,999Financing activitiesDecrease in nonrecourse mortgage debt(1)(2)(3)(4)(5)(11)
    
    $
    (9,841
    )
    
    $
    (248,641
    )Increase in notes payable(1)
    
    
    
    
    
    
    105,600(Increase) decrease in restricted cash(1)(11)
    
    
    (1,412
    )
    
    
    150,418Decrease in net deferred tax liability(12)
    
    
    
    
    
    
    (17,730
    )Decrease in minority interest(2)
    
    
    
    
    
    
    (27,102
    )Increase in additional paid-in capital(7)(12)
    
    
    5,647
    
    
    
    20,539Dividends declared but not yet paid
    
    
    (1,063
    )
    
    
    (1,076
    )Total effect on financing activities
    
    $
    (6,669
    )
    
    $
    (17,992
    )
 
 (1)
    
    Change to full consolidation method of accounting from equity method due to acquisition
of partners interest in Midtown Towers, Sterling Glen of Glen Coveand Sterling Glen of
Great Neckapartments in the Residential Group during the nine months ended
October 31, 2007, New York Times Buildingand Galleria at Sunsetproperties in the
Commercial Group and Rockport Squarein the Land Development Group during the nine months
ended October 31, 2006.(2)
    
    Assumption of nonrecourse mortgage debt by the buyer upon sale of Sterling Glen of
Bayshoreand Sterling Glen of Roslyn, a development project, in the Residential Group
during the nine months ended October 31, 2007. Assumption of nonrecourse mortgage debt and
direct payment to partner by the buyer upon sale of Hilton Times Square Hotel, G Street,
Embassy Suites Hoteland Battery Park City Retailproperties in the Commercial Group and
Providence at Palm Harborin the Residential Group during the nine months ended
October 31, 2006.(3)
    
    Refinement of preliminary purchase price allocation during the nine months ended
October 31, 2007 for the Galleria at Sunsetmall in the Commercial Group and the New York
portfolio transaction that closed in November 2006.(4)
    
    Change to full consolidation method of accounting from equity method due to the
occurrence of a triggering event as described in FIN 46(R), Consolidation of Variable
Interest Entities, for Oceanpointe Towersapartments in the Residential Group during the
nine months ended October 31, 2007.(5)
    
    Assumption of nonrecourse mortgage debt due to the acquisition of properties in the
Commercial Group during the nine months ended October 31, 2007.(6)
    
    Exercise of the option to purchase a piece of land in Prosper, Texas during the nine
months ended October 31, 2007 that, in accordance with FIN 46(R), resulted in the Company
no longer being deemed to be the primary beneficiary and reversal of the amount of the
investment that was deemed to be at risk.(7)
    
    Capitalization of stock-based compensation granted to employees directly involved with
the acquisition, development and construction of real estate.(8)
    
    Change in construction payables included in accounts payable and accrued expenses.(9)
    
    Estimate for environmental liabilities for Higbee Building and Beekman during the nine months
ended October 31, 2007 and for Atlantic Yards during the nine months ended October 31, 2006,
all in the Commercial Group.(10)
    
    Commercial Group and Residential Group outlots reclassed from projects under
development or completed rental properties prior to sale.(11)
    
    Change to equity method of accounting from full consolidation due to admission of a 50%
partner in Uptown Apartments, a residential development project in Oakland, California
during the nine months ended October 31, 2006.(12)
    
    Recording of a deferred tax asset on the purchased call option in conjunction with the
issuance of the Companys 3.625% Puttable Equity-Linked Senior Notes (See Footnote E)
during the nine months ended October 31, 2006.  8




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 Accounting Policies
 Basis of Presentation
  New Accounting Standards
       9




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
  Variable Interest Entities
   Restricted Cash
  Use of Estimates
  Ten MetroTech Center 80 DeKalb Avenue
  10




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to consolidated Financial Statements
 Accounting Policies (continued)
 Historic Tax Credit Entities
  Capitalized Software Costs
  Accounting for Derivative Instruments and Hedging Activities
   11




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
 Forward Swaps
 Property Accounted forunder the Equity Method ofFully Consolidated Properties
    
    AccountingExpirations for Years Ending
    
    Notional(1)
    
    
    
    
    
    Notional(2)January 31,
    
    Amount
    
    Rate
    
    Amount
    
    Rate2008
    
    $
    97,050
    
    
    
    5.77
    %
    
    $
    
    
    
    
    2009
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    2010
    
    $
    91,625
    
    
    
    5.72
    %
    
    $
    120,000
    
    
    
    5.93
    %Thereafter
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
 
 (1)
    
    As these forward swaps have been designated and qualified 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 must be marked to market through earnings on a quarterly basis.     12




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
 Distribution of Accumulated Equity to Minority Partners
 New York Times Eleven MetroTech Center, , Fifteen
MetroTech Center Promenade in Temecula Columbia Park Center
 Other Comprehensive Income (Loss)
   October 31, 2007
    
    January 31, 2007(in thousands)Unrealized gains on securities
    
    $
    131
    
    
    $
    327Unrealized losses on interest rate contracts
    
    
    (53,994
    )
    
    
    (24,675
    )(53,863
    )
    
    
    (24,348
    )Minority interest
    
    $
    (660
    )
    
    $
    (443
    )Income tax benefit
    
    $
    (20,558
    )
    
    $
    (9,237
    )Accumulated Other Comprehensive Loss
    
    $
    (32,645
    )
    
    $
    (14,668
    )
 Reclassification
  Stock-Based Compensation
   13




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Stock-Based Compensation (continued)
  Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2006
    
    
    2007
    
    2006(in thousands)
    
    
    (in thousands)Stock option costs
    
    $
    2,308
    
    
    $
    1,815
    
    
    
    $
    8,837
    
    
    $
    5,873Restricted stock costs
    
    
    1,549
    
    
    
    1,192
    
    
    
    
    4,734
    
    
    
    3,185Total stock-based compensation costs
    
    
    3,857
    
    
    
    3,007
    
    
    
    
    13,571
    
    
    
    9,058Less amount capitalized into qualifying real estate projects
    
    
    (2,010
    )
    
    
    (1,480
    )
    
    
    
    (5,647
    )
    
    
    (2,809
    )Amount charged to operating expenses
    
    
    1,847
    
    
    
    1,527
    
    
    
    
    7,924
    
    
    
    6,249Depreciation expense on capitalized stock-based compensation
    
    
    19
    
    
    
    
    
    
    
    
    58
    
    
    
    Total stock-based compensation expense
    
    $
    1,866
    
    
    $
    1,527
    
    
    
    $
    7,982
    
    
    $
    6,249Deferred income tax benefit
    
    $
    583
    
    
    $
    448
    
    
    
    $
    2,624
    
    
    $
    1,993
   C.
    
    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
 October 31, 2007(in thousands)AssetsReal estate
    
    $
    29,858Notes and accounts receivable, net
    
    
    80Other assets
    
    
    1,654Total Assets
    
    $
    31,592LiabilitiesMortgage debt, nonrecourse
    
    $
    27,700Accounts payable and accrued expenses
    
    
    880Total Liabilities
    
    $
    28,580
 14




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 C.
    
    Discontinued Operations, Gain on Disposition of Rental Properties and Provision for
Decline in Real Estate (continued)
  Three
    
    Nine
    
    Three
    
    NineQuarter/
    
    Months
    
    Months
    
    Months
    
    MonthsSquare Feet/
    
    Year
    
    Ended
    
    Ended
    
    Ended
    
    EndedProperty
    
    Location
    
    
    Number of Units
    
    Disposed
    
    10/31/2007
    
    10/31/2007
    
    10/31/2006
    
    10/31/2006Commercial Group:Battery Park City Retail
    
    Manhattan, New York
    
    166,000 square feet
    
    Q3-2006
    
    
    
    
    
    Yes
    
    YesEmbassy Suites Hotel
    
    Manhattan, New York
    
    463 rooms
    
    Q3-2006
    
    
    
    
    
    Yes
    
    YesHilton Times Square
    
    Manhattan, New York
    
    444 rooms
    
    Q1-2006
    
    
    
    
    
    
    
    YesG Street Retail
    
    Philadelphia, Pennsylvania
    
    13,000 square feet
    
    Q1-2006
    
    
    
    
    
    
    
    YesResidential Group:Sterling Glen of Lynbrook
    
    Lynbrook, New York
    
    130 units
    
    Est. Q1-2008
    
    Yes
    
    Yes
    
    Yes
    
    YesSterling Glen of Bayshore
    
    Bayshore, New York
    
    85 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesSterling Glen of Center City
    
    Philadelphia, Pennsylvania
    
    135 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesSterling Glen of Darien
    
    Darien, Connecticut
    
    80 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesSterling Glen of Forest Hills
    
    Forest Hills, New York
    
    83 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesSterling Glen of Plainview
    
    Plainview, New York
    
    79 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesSterling Glen of Stamford
    
    Stamford, Connecticut
    
    166 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesLandings of Brentwood
    
    Nashville, Tennessee
    
    724 units
    
    Q2-2007
    
    
    
    Yes
    
    
    
    Mount Vernon Square
    
    Alexandria, Virginia
    
    1,387 units
    
    Q4-2006
    
    
    
    
    
    Yes
    
    YesProvidence at Palm Harbor
    
    Tampa, Florida
    
    236 units
    
    Q2-2006
    
    
    
    
    
    
    
    Yes
  Sterling Glen of Lynbrook Sterling Glen of Roslyn
  Landings of Brentwood
 15




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 C.
    
    Discontinued Operations, Gain on Disposition of Rental Properties and Provision for
Decline in Real Estate (continued)
  Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2006
   
    
    2007
    
    2006(in thousands)
    
    
    (in thousands)Revenues
    
    $
    1,002
    
    
    $
    29,965
    
    
    
    $
    25,601
    
    
    $
    96,410ExpensesOperating expenses
    
    
    (845
    )
    
    
    19,293
    
    
    
    
    19,885
    
    
    
    66,298Depreciation and amortization
    
    
    7
    
    
    
    1,956
    
    
    
    
    1,941
    
    
    
    8,870(838
    )
    
    
    21,249
    
    
    
    
    21,826
    
    
    
    75,168Interest expense
    
    
    (296
    )
    
    
    (5,110
    )
    
    
    
    (3,904
    )
    
    
    (15,320
    )Amortization of mortgage procurement costs
    
    
    (11
    )
    
    
    (112
    )
    
    
    
    (80
    )
    
    
    (430
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    (363
    )
    
    
    Interest income
    
    
    542
    
    
    
    219
    
    
    
    
    751
    
    
    
    1,223Gain (loss) on disposition of rental properties (1)
    
    
    (1,031
    )
    
    
    143,494
    
    
    
    
    105,287
    
    
    
    287,220Earnings before income taxes
    
    
    1,044
    
    
    
    147,207
    
    
    
    
    105,466
    
    
    
    293,935Income tax expense (benefit)Current
    
    
    19,527
    
    
    
    18,142
    
    
    
    
    25,267
    
    
    
    18,845Deferred
    
    
    (19,123
    )
    
    
    15,752
    
    
    
    
    15,485
    
    
    
    49,004404
    
    
    
    33,894
    
    
    
    
    40,752
    
    
    
    67,849Earnings before minority interest
    
    
    640
    
    
    
    113,313
    
    
    
    
    64,714
    
    
    
    226,086Minority interest, net of taxGain on disposition of rental properties
    
    
    
    
    
    
    59,616
    
    
    
    
    
    
    
    
    118,009Operating (loss) earnings from rental properties
    
    
    
    
    
    
    (125
    )
    
    
    
    
    
    
    
    332
    
    
    
    59,491
    
    
    
    
    
    
    
    
    118,341Net earnings from discontinued operations
    
    $
    640
    
    
    $
    53,822
    
    
    
    $
    64,714
    
    
    $
    107,745
 
 (1)
    
    For the three months ended October 31, 2007, the above loss on disposition of rental
properties represents an adjustment of the previously reported gain on disposition of the
six Sterling Glen properties due to a change in estimate of the cost of this transaction
upon settlement of final transaction costs. 16




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 C.
    
    Discontinued Operations, Gain on Disposition of Rental Properties and Provision for
Decline in Real Estate (continued)
 Gain on Disposition of Rental Properties
  Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2006
    
    
    2007
    
    2006(in thousands)
    
    
    (in thousands)Discontinued Operations:Six Sterling Glen properties (Supported-Living Apartments) (1)
    
    $
    (1,031
    )
    
    $
    
    
    
    
    $
    80,208
    
    
    $
    Landings of Brentwood (Apartments) (2)
    
    
    
    
    
    
    
    
    
    
    
    25,079
    
    
    
    Embassy Suites Hotel (2)
    
    
    
    
    
    
    117,606
    
    
    
    
    
    
    
    
    117,606Battery Park City (Retail) (2)
    
    
    
    
    
    
    25,888
    
    
    
    
    
    
    
    
    25,888Hilton Times Square Hotel (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135,945Providence at Palm Harbor (Apartments) (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,342G Street Retail (Specialty Retail Center)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    439Total
    
    $
    (1,031
    )
    
    $
    143,494
    
    
    
    $
    105,287
    
    
    $
    287,220
 
 (1)
    
    The six properties included in the gain on disposition are Sterling Glen of Bayshore,
Sterling Glen of Center City, Sterling Glen of Darien, Sterling Glen of Forest Hills,
Sterling Glen of Plainviewand Sterling Glen of Stamford. The Company elected to deposit
the sales proceeds with a qualified intermediary for the purposes of identifying
replacement assets under Section 1031 of the Internal Revenue Code for Sterling Glen of
Plainviewand Sterling Glen of Stamford. For the three months ended October 31, 2007, the
above loss on disposition of the six Sterling Glen properties represents an adjustment of
the previously reported gain due to a change in estimate of the cost of this transaction
upon settlement of final transaction costs.(2)
    
    The Company elected to deposit the sales proceeds with a qualified intermediary for
purposes of acquiring replacement assets under Section 1031 of the Internal Revenue Code.  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    2006
    
    
    2007
    
    2006(in thousands)
    
    
    (in thousands)White Acres (Apartments)(1)
    
    Richmond Heights, Ohio
    
    $
    
    
    
    $
    
    
    
    
    $
    2,106
    
    
    $
    Midtown Plaza (Specialty Retail Center)
    
    Parma, Ohio
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,662$
    
    
    
    $
    
    
    
    
    $
    2,106
    
    
    $
    7,662
 
 (1)
    
    The Company disposed of its interest in White Acresin a non-monetary exchange for the
remaining outside interest in Midtown Towers, an apartment community located in Parma,
Ohio, 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 on disposition of $2,106,000 for the nine
months ended October 31, 2007. Provision for Decline in Real Estate
  Saddle Rock Village
 17




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Bank Revolving Credit Facility
   October 31, 2007
   
    
    January 31, 2007Maximum borrowings (1)
    
    $
    600,000
    
    
    $
    600,000Accordion option
    
    $
    150,000
    
    
    $
    Outstanding:Borrowings
    
    $
    
    
    
    $
    Letters of credit
    
    $
    81,834
    
    
    $
    72,324Surety bonds
    
    $
    
    
    
    $
    Related Terms:LIBOR rate option (2)
    
    1.45% + LIBOR
    
   
    1.75% + LIBORPrime rate option
    
    1/2% + prime rate
   
    
    1/2% + prime rateDividend/stock repurchase limitation
    
    $
    40,000
    
    
    $
    40,000
 
 (1)
    
    $100,000,000 of the available borrowings may be used for letters of credit or surety bonds.(2)
    
    The Company has historically elected the LIBOR rate option over the prime rate option. 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
  18




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Senior and Subordinated Debt (continued)
   
   19




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Senior and Subordinated Debt (continued)
 Other Senior Notes
      Subordinated Debt
   20




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Financing Arrangements
 Collateralized Borrowings
    21




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Financing Arrangements (continued)
 Other Financing Arrangements
      Dividends
  22




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 H.
    
    Earnings per Share
    Three Months Ended October 31,
    
    Nine Months Ended October 31,2007
    
    2006
    
    2007
    
    2006Numerators(in thousands)Loss from continuing operations  Basic and Diluted
    
    $
    (11,414
    )
    
    $
    (7,947
    )
    
    $
    (24,894
    )
    
    $
    (1,120
    )Net earnings (loss)
    
    $
    (10,774
    )
    
    $
    45,875
    
    
    $
    39,820
    
    
    $
    106,625Undistributed earnings allocated to participating securities
    
    
    
    
    
    
    
    
    
    
    (595
    )
    
    
    Net earnings (loss)  Basic and diluted
    
    $
    (10,774
    )
    
    $
    45,875
    
    
    $
    39,225
    
    
    $
    106,625DenominatorsWeighted average shares outstanding  Basic
    
    
    102,330,172
    
    
    
    101,680,649
    
    
    
    102,189,119
    
    
    
    101,670,129Effect of stock options and restricted stock(1) (2) (3) (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Effect of convertible Class A Common Units (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average shares outstanding  Diluted (5)
    
    
    102,330,172
    
    
    
    101,680,649
    
    
    
    102,189,119
    
    
    
    101,670,129Earnings Per Share  Basic and DilutedLoss from continuing operations
    
    $
    (0.11
    )
    
    $
    (0.08
    )
    
    $
    (0.24
    )
    
    $
    (0.01
    )Net earnings (loss)
    
    $
    (0.11
    )
    
    $
    0.45
    
    
    $
    0.38
    
    
    $
    1.05
 
 (1)
    
    Options granted in March 2007 to purchase 1,067,600 shares of common stock were not
included in the computation of diluted earnings per share for the three and nine months
ended October 31, 2007 because they were anti-dilutive.(2)
    
    Options granted in April 2006 to purchase 960,100 shares of common stock were not
included in the computation of diluted earnings per share for the three and nine months
ended October 31, 2006 because they were anti-dilutive.(3)
    
    For the three and nine months ended October 31, 2007, the effect of 1,362,914 and
1,596,693 shares, respectively, of options and restricted stock and 3,894,232 Class A
Common Units were not included in the computation of diluted earnings per share because
their effect is anti-dilutive due to the loss from continuing operations.(4)
    
    For the three and nine months ended October 31, 2006, the effect of 1,646,734 and
1,565,938 shares, respectively, of options and restricted stock were not included in the
computation of diluted earnings per share because their effect is anti-dilutive due to the
loss from continuing operations.(5)
    
    The Puttable Equity-Linked Senior Notes issued in October 2006 can be put to the
Company by the holders under certain circumstances (see Note E  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 and
nine months ended October 31, 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 and nine months ended October 31, 2007 as the Companys
stock price did not exceed the exercise price. 23




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 I.
    
    Investments in and Advances to Affiliates
   October 31, 2007
    
    January 31, 2007(in thousands)Members and partners equity as below
    
    $
    614,249
    
    
    $
    592,681Equity of other members and partners
    
    
    490,507
    
    
    
    496,971Companys investment in partnerships
    
    $
    123,742
    
    
    $
    95,710Advances to and on behalf of other affiliates
    
    
    270,758
    
    
    
    238,072Total Investments in and Advances to Affiliates
    
    $
    394,500
    
    
    $
    333,782
  (Combined 100%)October 31, 2007
    
    January 31, 2007(in thousands)Balance Sheet:Completed rental properties
    
    $
    2,831,426
    
    
    $
    2,697,454Projects under development
    
    
    1,287,248
    
    
    
    777,419Land held for development or sale
    
    
    230,463
    
    
    
    160,296Accumulated depreciation
    
    
    (610,230
    )
    
    
    (554,910
    )Restricted cash  military housing bond funds
    
    
    662,301
    
    
    
    771,697Other restricted cash
    
    
    588,600
    
    
    
    660,939Other assets
    
    
    532,440
    
    
    
    526,142Total Assets
    
    $
    5,522,248
    
    
    $
    5,039,037Mortgage debt, nonrecourse
    
    $
    4,170,547
    
    
    $
    3,834,085Other liabilities
    
    
    737,452
    
    
    
    612,271Members and partners equity
    
    
    614,249
    
    
    
    592,681Total Liabilities and Members/Partners Equity
    
    $
    5,522,248
    
    
    $
    5,039,037
 24




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 I.
    
    Investments in and Advances to Affiliates (Continued)
 (Combined 100%)Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2006
    
    
    2007
    
    2006(in thousands)
    
    
    (in thousands)Operations:Revenues
    
    $
    192,218
    
    
    $
    132,358
    
    
    
    $
    644,382
    
    
    $
    463,982Operating expenses
    
    
    (135,632
    )
    
    
    (85,486
    )
    
    
    
    (447,066
    )
    
    
    (317,762
    )Interest expense
    
    
    (57,599
    )
    
    
    (33,965
    )
    
    
    
    (160,180
    )
    
    
    (99,444
    )Provision for decline in real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000
    )Depreciation and amortization
    
    
    (28,076
    )
    
    
    (16,089
    )
    
    
    
    (103,209
    )
    
    
    (77,084
    )Interest income
    
    
    16,888
    
    
    
    3,769
    
    
    
    
    45,440
    
    
    
    10,485Income
(loss) from continuing operations (pre-tax)(2)
    
    
    (12,201
    )
    
    
    587
    
    
    
    
    (20,633
    )
    
    
    (20,823
    )Discontinued operations:Gain on disposition of rental properties (1)
    
    
    
    
    
    
    
    
    
    
    
    4,212
    
    
    
    15,325Operating earnings from rental properties
    
    
    
    
    
    
    
    
    
    
    
    584
    
    
    
    103
    
    
    
    
    
    
    
    
    4,796
    
    
    
    15,428Net earnings (loss) (pre-tax) (2)
    
    $
    (12,201
    )
    
    $
    587
    
    
    
    $
    (15,837
    )
    
    $
    (5,395
    )Companys portion of net earnings (loss) (pre-tax) (2)
    
    $
    (6,526
    )
    
    $
    9,122
    
    
    
    $
    2,608
    
    
    $
    15,811
 
 (1)
    
    The following table shows the detail of gain on disposition of rental properties that
were held by equity method investments:
 Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2006
    
    
    2007
    
    2006(in thousands)
    
    
    (in thousands)White Acres (Apartments) (Richmond Hts., Ohio)
    
    $
    
    
    
    $
    
    
    
    
    $
    4,212
    
    
    $
    Midtown Plaza (Specialty Retail Center) (Parma, Ohio)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,325Total gain on dispostion of equity method rental properties
    
    $
    
    
    
    $
    
    
    
    
    $
    4,212
    
    
    $
    15,325Companys portion of gain on disposition of equity method rental properties
    
    $
    
    
    
    $
    
    
    
    
    $
    2,106
    
    
    $
    7,662
 (2)
    
    Included in the amounts above are the following amounts for the three and nine months
ended October 31, 2007 and 2006 related to the Companys investment in an entity that is
reported in the Nets segment. This entity primarily reports on the operations of the New
Jersey Nets basketball team, a franchise of the National Basketball Association, in which
the Company has been an equity method investor since August 16, 2004. Summarized financial
information for this equity method investment is as follows:
 Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2006
    
    
    2007
    
    2006(in thousands)
    
    
    (in thousands)Operations:Revenues and interest income
    
    $
    2,683
    
    
    $
    2,319
    
    
    
    $
    60,289
    
    
    $
    62,821Operating expenses
    
    
    (12,729
    )
    
    
    (11,419
    )
    
    
    
    (79,826
    )
    
    
    (76,649
    )Interest expense
    
    
    (2,830
    )
    
    
    (3,402
    )
    
    
    
    (7,294
    )
    
    
    (9,635
    )Depreciation and amortization
    
    
    (377
    )
    
    
    (1,734
    )
    
    
    
    (24,746
    )
    
    
    (26,329
    )Net loss (pre-tax)
    
    $
    (13,253
    )
    
    $
    (14,236
    )
    
    
    $
    (51,577
    )
    
    $
    (49,792
    )Companys portion of net loss (pre-tax)
    
    $
    (9,277
    )
    
    $
    (685
    )
    
    
    $
    (13,286
    )
    
    $
    (11,654
    )
 25




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 J.
    
    Segment Information
   26




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 J.
    
    Segment Information (continued)
  October 31,
    
    January 31,
    
    
    Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2007
    
    
    2007
    
    2006
    
    
    2007
    
    2006Identifiable Assets
    
    
    Expenditures for Additions to Real EstateCommercial Group
    
    $
    7,150,037
    
    
    $
    6,346,155
    
    
    
    $
    183,707
    
    
    $
    342,101
    
    
    
    $
    676,700
    
    
    $
    629,859Residential Group
    
    
    2,192,458
    
    
    
    2,032,617
    
    
    
    
    68,468
    
    
    
    36,945
    
    
    
    
    289,325
    
    
    
    106,681Land Development Group
    
    
    389,598
    
    
    
    371,729
    
    
    
    
    10,550
    
    
    
    1,444
    
    
    
    
    25,305
    
    
    
    7,771The Nets
    
    
    19,796
    
    
    
    7,999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Activities
    
    
    185,414
    
    
    
    223,104
    
    
    
    
    170
    
    
    
    146
    
    
    
    
    1,208
    
    
    
    277$
    9,937,303
    
    
    $
    8,981,604
    
    
    
    $
    262,895
    
    
    $
    380,636
    
    
    
    $
    992,538
    
    
    $
    744,588
 Three Months Ended October 31,
    
    
    Nine Months Ended October 31,
    
    
    Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2006
    
    
    2007
    
    2006
    
    
    2007
    
    2006
    
    
    2007
    
    2006Revenues from Real Estate Operations
    
    
    
    
    
    
    
    
    
    
    Operating ExpensesCommercial Group
    
    $
    216,760
    
    
    $
    181,131
    
    
    
    $
    623,356
    
    
    $
    533,416
    
    
    
    $
    105,365
    
    
    $
    96,649
    
    
    
    $
    315,089
    
    
    $
    273,878Commercial Group Land Sales
    
    
    22,279
    
    
    
    10,062
    
    
    
    
    29,436
    
    
    
    35,258
    
    
    
    
    16,226
    
    
    
    3,698
    
    
    
    
    21,397
    
    
    
    18,348Residential Group
    
    
    81,170
    
    
    
    48,406
    
    
    
    
    198,029
    
    
    
    140,579
    
    
    
    
    55,120
    
    
    
    33,273
    
    
    
    
    136,824
    
    
    
    95,310Land Development Group
    
    
    13,417
    
    
    
    22,934
    
    
    
    
    38,756
    
    
    
    65,844
    
    
    
    
    12,964
    
    
    
    16,645
    
    
    
    
    39,042
    
    
    
    42,165The Nets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,599
    
    
    
    12,536
    
    
    
    
    34,700
    
    
    
    30,813$
    333,626
    
    
    $
    262,533
    
    
    
    $
    889,577
    
    
    $
    775,097
    
    
    
    $
    201,274
    
    
    $
    162,801
    
    
    
    $
    547,052
    
    
    $
    460,514Interest and Other Income
    
    
    Interest ExpenseCommercial Group
    
    $
    4,888
    
    
    $
    1,178
    
    
    
    $
    15,121
    
    
    $
    4,437
    
    
    
    $
    59,352
    
    
    $
    42,403
    
    
    
    $
    150,454
    
    
    $
    130,500Residential Group
    
    
    9,941
    
    
    
    1,772
    
    
    
    
    25,570
    
    
    
    12,964
    
    
    
    
    10,886
    
    
    
    11,338
    
    
    
    
    36,117
    
    
    
    33,277Land Development Group
    
    
    2,109
    
    
    
    3,749
    
    
    
    
    10,087
    
    
    
    11,361
    
    
    
    
    371
    
    
    
    2,035
    
    
    
    
    2,745
    
    
    
    6,507The Nets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Activities
    
    
    606
    
    
    
    324
    
    
    
    
    1,588
    
    
    
    978
    
    
    
    
    17,632
    
    
    
    12,175
    
    
    
    
    48,432
    
    
    
    34,955$
    17,544
    
    
    $
    7,023
    
    
    
    $
    52,366
    
    
    $
    29,740
    
    
    
    $
    88,241
    
    
    $
    67,951
    
    
    
    $
    237,748
    
    
    $
    205,239Depreciation and Amortization ExpenseCommercial Group
    
    $
    42,793
    
    
    $
    32,148
    
    
    
    $
    128,399
    
    
    $
    91,644Residential Group
    
    
    10,819
    
    
    
    10,743
    
    
    
    
    39,197
    
    
    
    32,328Land Development Group
    
    
    166
    
    
    
    30
    
    
    
    
    487
    
    
    
    135The Nets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Activities
    
    
    636
    
    
    
    252
    
    
    
    
    1,859
    
    
    
    925$
    54,414
    
    
    $
    43,173
    
    
    
    $
    169,942
    
    
    $
    125,032Earnings Before Depreciation,Earnings Before Income Taxes (EBIT) (1)
    
    
    Amortization & Deferred Taxes (EBDT)Commercial Group
    
    $
    14,693
    
    
    $
    18,443
    
    
    
    $
    45,282
    
    
    $
    59,036
    
    
    
    $
    50,107
    
    
    $
    48,561
    
    
    
    $
    154,970
    
    
    $
    142,346Gain on disposition of equity
method property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,662
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provision for decline in real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,923
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provision for decline in real estate
recorded on equity method
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (400
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Residential Group
    
    
    14,722
    
    
    
    (2,764
    )
    
    
    
    14,024
    
    
    
    (11,248
    )
    
    
    
    36,094
    
    
    
    19,053
    
    
    
    
    74,661
    
    
    
    56,745Gain on disposition of equity
method property
    
    
    
    
    
    
    
    
    
    
    
    2,106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Land Development Group
    
    
    1,850
    
    
    
    12,220
    
    
    
    
    8,979
    
    
    
    45,642
    
    
    
    
    6,254
    
    
    
    7,877
    
    
    
    
    7,035
    
    
    
    25,308The Nets
    
    
    (9,576
    )
    
    
    (1,342
    )
    
    
    
    (15,053
    )
    
    
    (14,084
    )
    
    
    
    (5,904
    )
    
    
    (730
    )
    
    
    
    (9,373
    )
    
    
    (8,306
    )Corporate Activities
    
    
    (29,261
    )
    
    
    (24,639
    )
    
    
    
    (83,403
    )
    
    
    (65,715
    )
    
    
    
    (17,756
    )
    
    
    (17,361
    )
    
    
    
    (52,763
    )
    
    
    (38,689
    )Gain on disposition of other investments
    
    
    172
    
    
    
    
    
    
    
    
    603
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (7,400
    )
    
    $
    1,918
    
    
    
    $
    (27,462
    )
    
    $
    18,970
    
    
    
    $
    68,795
    
    
    $
    57,400
    
    
    
    $
    174,530
    
    
    $
    177,404
 27




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 J.
    
    Segment Information (continued)
 Reconciliation of Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) to Net
Earnings by Segment:
 LandCommercial
    
    Residential
    
    Development
    
    
    
    
    
    CorporateThree Months Ended October 31, 2007
    
    Group
    
    Group
    
    Group
    
    The Nets
    
    Activities
    
    TotalEBDT
    
    $
    50,107
    
    
    $
    36,094
    
    
    $
    6,254
    
    
    $
    (5,904
    )
    
    $
    (17,756
    )
    
    $
    68,795Depreciation and amortization  Real Estate Groups
    
    
    (43,465
    )
    
    
    (15,197
    )
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    (58,552
    )Amortization of mortgage procurement costs  Real Estate Groups
    
    
    (2,934
    )
    
    
    (416
    )
    
    
    (165
    )
    
    
    
    
    
    
    
    
    
    
    (3,515
    )Deferred taxes  Real Estate Groups
    
    
    (3,670
    )
    
    
    (7,246
    )
    
    
    (5,148
    )
    
    
    
    
    
    
    (3,548
    )
    
    
    (19,612
    )Straight-line rent adjustment
    
    
    6,674
    
    
    
    (5,005
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    1,668Preference payment (3)
    
    
    (937
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (937
    )Gain on disposition of other investments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    106Discontinued operations, net of tax and minority interest: (2)Depreciation and amortization  Real Estate Groups
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Amortization of mortgage procurement 
costs  Real Estate Groups
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )Deferred taxes  Real Estate Groups
    
    
    
    
    
    
    1,924
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,924Gain on disposition of rental properties
    
    
    
    
    
    
    (633
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (633
    )Net earnings (loss)
    
    $
    5,775
    
    
    $
    9,503
    
    
    $
    1,050
    
    
    $
    (5,904
    )
    
    $
    (21,198
    )
    
    $
    (10,774
    )
 Three Months Ended October 31, 2006EBDT
    
    $
    48,561
    
    
    $
    19,053
    
    
    $
    7,877
    
    
    $
    (730
    )
    
    $
    (17,361
    )
    
    $
    57,400Depreciation and amortization  Real Estate Groups
    
    
    (32,314
    )
    
    
    (12,642
    )
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    (44,997
    )Amortization of mortgage procurement 
costs  Real Estate Groups
    
    
    (2,058
    )
    
    
    (597
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,655
    )Deferred taxes  Real Estate Groups
    
    
    (5,966
    )
    
    
    (4,083
    )
    
    
    (792
    )
    
    
    
    
    
    
    (3,146
    )
    
    
    (13,987
    )Straight-line rent adjustment
    
    
    1,743
    
    
    
    (7
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    1,735Discontinued operations, net of tax and minority interest: (2)Depreciation and amortization  Real Estate Groups
    
    
    (338
    )
    
    
    (1,887
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,225
    )Amortization of mortgage procurement costs  Real Estate Groups
    
    
    (25
    )
    
    
    (63
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88
    )Deferred taxes  Real Estate Groups
    
    
    (648
    )
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (569
    )Straight-line rent adjustment
    
    
    (207
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (207
    )Gain on disposition of rental properties
    
    
    51,468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,468Net earnings (loss)
    
    $
    60,216
    
    
    $
    (147
    )
    
    $
    7,043
    
    
    $
    (730
    )
    
    $
    (20,507
    )
    
    $
    45,875
 Nine Months Ended October 31, 2007EBDT
    
    $
    154,970
    
    
    $
    74,661
    
    
    $
    7,035
    
    
    $
    (9,373
    )
    
    $
    (52,763
    )
    
    $
    174,530Depreciation and amortization  Real Estate Groups
    
    
    (131,811
    )
    
    
    (51,622
    )
    
    
    (184
    )
    
    
    
    
    
    
    
    
    
    
    (183,617
    )Amortization of mortgage procurement costs  Real Estate Groups
    
    
    (7,049
    )
    
    
    (2,402
    )
    
    
    (452
    )
    
    
    
    
    
    
    
    
    
    
    (9,903
    )Deferred taxes  Real Estate Groups
    
    
    (7,284
    )
    
    
    97
    
    
    
    (1,487
    )
    
    
    
    
    
    
    1,447
    
    
    
    (7,227
    )Straight-line rent adjustment
    
    
    14,273
    
    
    
    (4,983
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    9,288Preference payment (3)
    
    
    (2,771
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,771
    )Gain on disposition of other investments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    370
    
    
    
    370Gain on disposition of equity method rental properties, net of tax
    
    
    
    
    
    
    (1,797
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,797
    )Discontinued operations, net of tax and minority interest: (2)Depreciation and amortization  Real Estate Groups
    
    
    
    
    
    
    (1,941
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,941
    )Amortization of mortgage procurement costs  Real Estate Groups
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80
    )Deferred taxes  Real Estate Groups
    
    
    
    
    
    
    (1,636
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,636
    )Gain on disposition of rental properties
    
    
    
    
    
    
    64,604
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,604Net earnings (loss)
    
    $
    20,328
    
    
    $
    74,901
    
    
    $
    4,910
    
    
    $
    (9,373
    )
    
    $
    (50,946
    )
    
    $
    39,820
 Nine Months Ended October 31, 2006EBDT
    
    $
    142,346
    
    
    $
    56,745
    
    
    $
    25,308
    
    
    $
    (8,306
    )
    
    $
    (38,689
    )
    
    $
    177,404Depreciation and amortization  Real Estate Groups
    
    
    (92,158
    )
    
    
    (47,225
    )
    
    
    (115
    )
    
    
    
    
    
    
    
    
    
    
    (139,498
    )Amortization of mortgage procurement costs  Real Estate Groups
    
    
    (5,775
    )
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,775
    )Deferred taxes  Real Estate Groups
    
    
    (17,475
    )
    
    
    (5,279
    )
    
    
    1,277
    
    
    
    
    
    
    
    (3,240
    )
    
    
    (24,717
    )Straight-line rent adjustment
    
    
    5,443
    
    
    
    12
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    5,453Provision for decline in real estate, net of tax and minority interest
    
    
    (1,180
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,180
    )Gain on disposition of equity method rental properties, net of tax
    
    
    4,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,700Provision for decline in real estate of equity method rental properties, net of tax
    
    
    (245
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (245
    )Discontinued operations, net of tax and minority interest: (2)Depreciation and amortization  Real Estate Groups
    
    
    (3,497
    )
    
    
    (5,812
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,309
    )Amortization of mortgage procurement costs  Real Estate Groups
    
    
    (125
    )
    
    
    (198
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (323
    )Deferred taxes  Real Estate Groups
    
    
    (966
    )
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (820
    )Straight-line rent adjustment
    
    
    (894
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (894
    )Gain on disposition of rental properties
    
    
    99,323
    
    
    
    4,506
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103,829Net earnings (loss)
    
    $
    129,497
    
    
    $
    895
    
    
    $
    26,468
    
    
    $
    (8,306
    )
    
    $
    (41,929
    )
    
    $
    106,625
 
 (1)
    
    See Consolidated Statements of Earnings on page 3 for reconciliation of EBIT to net earnings.(2)
    
    See Note C  Discontinued Operations starting on page 14 for more information.(3)
    
    The preference payment of $937 and $2,771 for the three and nine months ended
October 31, 2007, respectively, represents the respective periods share of the annual
preferred payment in connection with the issuance of Class A Common Units in exchange for
Bruce C. Ratners minority interests in the Forest City Ratner Company portfolio. 28




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 K.
    
    Income Taxes
     FIN No. 48
   29




---



##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 K.
    
    Income Taxes (continued)
   October 31, 2007
    
    February 1, 2007Unrecognized tax benefits
    
    $
    4,400,000
    
    
    $
    4,892,000Portion that, if recognized, would impact the effective rate
    
    $
    886,000
    
    
    $
    844,000Accrued interest and penalties on unrecognized tax benefits
    
    $
    1,068,000
    
    
    $
    1,013,000Range of possible decrease in unrecognized tax benefits in next twelve months
    
    $
    0 to 3,419,000
    
    
    $
   0 to 3,900,000
 L.
    
    Subsequent Events
 University Park at MIT,
  30




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  RESULTS OF OPERATIONS
  Corporate Description
   Overview
   
    
    The opening of New York Times Building, an office building located in Manhattan, New
York City, and closing on a $640,000,000 loan with HSN Nordbank AG as permanent financing for
736,000 square feet of this 1.5 million square-foot building;
 
    
    Closing $630,000,000 in construction financing for Ridge Hill Retailregional lifestyle
center in Yonkers, New York. The financing marks the largest single construction loan in
our history and is being provided by Bank of America, ING Real Estate Finance and Key Bank
Real Estate Capital; and
 
    
    At the 2007 Superior Achievement in Design and Imaging Awards (SADI), San Francisco
Centrewas honored by the American Institute of Architects.
  Net Earnings 
 
    
    $51,468,000 ($83,878,000, pre-tax) primarily related to the 2006 gains on disposition of
two consolidated properties, Embassy Suites Hotel, a 463-room hotel located in Manhattan,
New York City, and Battery Park City, a retail center located
in Manhattan, New York City;
 31




---



##### Table of Contents




    
    $5,995,000 ($9,677,000, pre-tax) related to decreased earnings in 2007 reported in the
Land Development Group primarily due to a decrease in land sales at Stapleton, in Denver,
Colorado and Tangerine Crossingin Tucson, Arizona;
    
    $5,174,000 ($8,234,000, pre-tax) related to the increase in our allocation of losses
from our equity investment in the New Jersey Nets basketball team (see the Nets section);
    
    $4,482,000 ($6,830,000, pre-tax) primarily related to military housing fee income from
the management and development of units in Hawaii and Illinois;
    
    $2,564,000 ($4,179,000, pre-tax) in 2007 related to the early extinguishment of
nonrecourse mortgage debt primarily at Eleven MetroTech Center, an office building located
in Brooklyn, New York City, in order to secure more favorable financing terms and at New York
Times,an office building located in Manhattan, New York City, in order to obtain permanent
financing;
    
    $1,850,000 ($3,015,000, pre-tax) related to an increase in depreciation and amortization
for amounts recorded as tangible and intangible assets, which were a result of the purchase
price allocation for the acquisition, in November 2006, of 30 retail, office and
residential operating properties in New York City (New York portfolio transaction); and
    
    $1,201,000 ($1,956,000, pre-tax) related to increased write-offs of abandoned
development projects in 2007.
  
    
    $4,749,000 ($7,740,000, pre-tax) related to an additional net gain recognized
in other income on the sale of Sterling Glen of Roslyn,a consolidated supported-living
apartment community under construction in Roslyn, New York, due to
the realization of additional proceeds resulting from the resolution
of certain contingencies (see the Discontinued Operations section);
    
    $1,027,000 ($1,674,000, pre-tax) related to the amortization to straight-line rent of
above and below market leases, which were recorded as a component of the purchase price
allocation for the New York portfolio transaction; and
    
    $1,013,000 ($1,651,000, pre-tax) in 2007 related to the change in fair market value
between the comparable periods of certain of our 10-year forward swaps which were marked to
market through interest expense as a result of the derivatives not qualifying for hedge
accounting (see the Interest Rate Exposure section).
  
    
    $103,829,000 ($169,211,000, pre-tax) related to the 2006 gains on disposition of five
consolidated properties, Providence at Palm Harbor, an apartment community located in
Tampa, Florida, Hilton Times Square, a 444-room hotel located
in Manhattan, New York City, G
Street, a specialty retail center located in Philadelphia, Pennsylvania, Embassy Suites
Hotel, and Battery Park City;
    
    $21,560,000 ($34,913,000, pre-tax) related to decreased earnings in 2007 reported in the
Land Development Group primarily due to a decrease in land sales at Stapleton, Tangerine
Crossingand Waterburyin North Ridgeville, Ohio;
    
    $5,893,000 ($9,604,000, pre-tax) related to decreases in Commercial Group outlot land
sales in 2007 primarily at Simi Valleyin Simi Valley, California partially offset by the
2007 land sale and related site work construction at Ridge Hill Retail, in Yonkers, New
York which is accounted for under the percentage of completion method;
    
    $4,962,000 ($8,087,000, pre-tax) related to an increase in depreciation and amortization
for amounts recorded as tangible and intangible assets, which were a result of the purchase
price allocation for the New York portfolio transaction that closed in November 2006;
    
    $4,809,000 ($7,837,000, pre-tax) 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 City, 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;
    
    $4,700,000 ($7,662,000, pre-tax) related to the 2006 gain on disposition of one equity
method Commercial property, Midtown Plaza,a specialty retail center located in Parma,
Ohio;
 32




---



##### Table of Contents




    
    $4,453,000 ($7,257,000, pre-tax) in 2007 related to the early extinguishment of nonrecourse
mortgage debt primarily at Columbia Park Center, a specialty retail center located in North
Bergen, New Jersey and Eleven MetroTech Centerin order to secure more favorable financing
terms and at New York Timesin order to obtain permanent financing as well as the costs
associated with the disposition of Landings of Brentwood, a
consolidated apartment community in Nashville, Tennessee;
    
    $4,129,000 ($6,729,000, pre-tax) related to increased write-offs of abandoned
development projects in 2007;
    
    $3,788,000 ($6,174,000, pre-tax) related to income recognition on state and federal
Historic Preservation Tax Credits in 2006 that did not recur at the same level;
    
    $3,301,000 ($5,813,000, pre-tax) primarily related to military housing fee income from
the management and development of units in Hawaii and Illinois; and
    
    $1,067,000 ($969,000, pre-tax) related to the increase in our allocation of losses from
our equity investment in the New Jersey Nets basketball team (see the Nets section).
  
    
    $64,605,000 ($105,287,000, pre-tax) related to the 2007 gains on disposition of Landings
of Brentwood and the following
six consolidated supported-living apartment properties: Sterling Glen of Bayshore,
Sterling Glen of Center City, Sterling Glen of Darien, Sterling Glen of Forest Hills,
Sterling Glen of Plainview, and Sterling Glen of Stamford;
    
    $10,940,000 ($17,830,000, pre-tax) related to the 2007 net gain recognized in other
income on the sale of Sterling Glen of Roslyn;
    
    $5,811,000 ($9,471,000, pre-tax) in 2007 related to the change in fair market value
between the comparable periods of certain of our 10-year forward swaps which were marked to
market through interest expense as a result of the derivatives not qualifying for hedge
accounting (see the Interest Rate Exposure section);
    
    $3,194,000 ($5,205,000, pre-tax) related to the amortization to straight-line rent of
above and below market leases, which were recorded as a component of the purchase price
allocation for the New York portfolio transaction; and
    
    $1,292,000 ($2,106,000, pre-tax) related to the 2007 gain on disposition of one equity
method Residential property, White Acres, an apartment community located in Richmond
Heights, Ohio.
 33




---



##### Table of Contents



Summary of Segment Operating Results
 Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2006
    
    Variance
    
    
    2007
    
    2006
    
    Variance(in thousands)
    
    
    (in thousands)Revenues from Real Estate OperationsCommercial Group
    
    $
    216,760
    
    
    $
    181,131
    
    
    $
    35,629
    
    
    
    $
    623,356
    
    
    $
    533,416
    
    
    $
    89,940Commercial Group Land Sales
    
    
    22,279
    
    
    
    10,062
    
    
    
    12,217
    
    
    
    
    29,436
    
    
    
    35,258
    
    
    
    (5,822
    )Residential Group
    
    
    81,170
    
    
    
    48,406
    
    
    
    32,764
    
    
    
    
    198,029
    
    
    
    140,579
    
    
    
    57,450Land Development Group
    
    
    13,417
    
    
    
    22,934
    
    
    
    (9,517
    )
    
    
    
    38,756
    
    
    
    65,844
    
    
    
    (27,088
    )The Nets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Revenues from Real Estate Operations
    
    $
    333,626
    
    
    $
    262,533
    
    
    $
    71,093
    
    
    
    $
    889,577
    
    
    $
    775,097
    
    
    $
    114,480Interest and Other IncomeCommercial Group
    
    $
    4,888
    
    
    $
    1,178
    
    
    $
    3,710
    
    
    
    $
    15,121
    
    
    $
    4,437
    
    
    $
    10,684Residential Group
    
    
    9,941
    
    
    
    1,772
    
    
    
    8,169
    
    
    
    
    25,570
    
    
    
    12,964
    
    
    
    12,606Land Development Group
    
    
    2,109
    
    
    
    3,749
    
    
    
    (1,640
    )
    
    
    
    10,087
    
    
    
    11,361
    
    
    
    (1,274
    )The Nets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Activities
    
    
    606
    
    
    
    324
    
    
    
    282
    
    
    
    
    1,588
    
    
    
    978
    
    
    
    610Total Interest and Other Income
    
    $
    17,544
    
    
    $
    7,023
    
    
    $
    10,521
    
    
    
    $
    52,366
    
    
    $
    29,740
    
    
    $
    22,626Equity in Earnings (Loss) of Unconsolidated EntitiesCommercial Group
    
    $
    1,487
    
    
    $
    3,327
    
    
    $
    (1,840
    )
    
    
    $
    6,700
    
    
    $
    7,085
    
    
    $
    (385
    )Gain on disposition of Midtown
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,662
    
    
    
    (7,662
    )Residential Group
    
    
    1,643
    
    
    
    2,844
    
    
    
    (1,201
    )
    
    
    
    6,164
    
    
    
    (2,332
    )
    
    
    8,496Gain on disposition of White Acres
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,106
    
    
    
    
    
    
    
    2,106Land Development Group
    
    
    (80
    )
    
    
    4,293
    
    
    
    (4,373
    )
    
    
    
    2,691
    
    
    
    17,480
    
    
    
    (14,789
    )The Nets
    
    
    (9,576
    )
    
    
    (1,342
    )
    
    
    (8,234
    )
    
    
    
    (15,053
    )
    
    
    (14,084
    )
    
    
    (969
    )Corporate Activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Equity in Earnings (Loss) of Unconsolidated Entities
    
    $
    (6,526
    )
    
    $
    9,122
    
    
    $
    (15,648
    )
    
    
    $
    2,608
    
    
    $
    15,811
    
    
    $
    (13,203
    )Operating ExpensesCommercial Group
    
    $
    105,365
    
    
    $
    96,649
    
    
    $
    8,716
    
    
    
    $
    315,089
    
    
    $
    273,878
    
    
    $
    41,211Cost of Commercial Group Land Sales
    
    
    16,226
    
    
    
    3,698
    
    
    
    12,528
    
    
    
    
    21,397
    
    
    
    18,348
    
    
    
    3,049Residential Group
    
    
    55,120
    
    
    
    33,273
    
    
    
    21,847
    
    
    
    
    136,824
    
    
    
    95,310
    
    
    
    41,514Land Development Group
    
    
    12,964
    
    
    
    16,645
    
    
    
    (3,681
    )
    
    
    
    39,042
    
    
    
    42,165
    
    
    
    (3,123
    )The Nets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Activities
    
    
    11,599
    
    
    
    12,536
    
    
    
    (937
    )
    
    
    
    34,700
    
    
    
    30,813
    
    
    
    3,887Total Operating Expenses
    
    $
    201,274
    
    
    $
    162,801
    
    
    $
    38,473
    
    
    
    $
    547,052
    
    
    $
    460,514
    
    
    $
    86,538Interest ExpenseCommercial Group
    
    $
    59,352
    
    
    $
    42,403
    
    
    $
    16,949
    
    
    
    $
    150,454
    
    
    $
    130,500
    
    
    $
    19,954Residential Group
    
    
    10,886
    
    
    
    11,338
    
    
    
    (452
    )
    
    
    
    36,117
    
    
    
    33,277
    
    
    
    2,840Land Development Group
    
    
    371
    
    
    
    2,035
    
    
    
    (1,664
    )
    
    
    
    2,745
    
    
    
    6,507
    
    
    
    (3,762
    )The Nets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate Activities
    
    
    17,632
    
    
    
    12,175
    
    
    
    5,457
    
    
    
    
    48,432
    
    
    
    34,955
    
    
    
    13,477Total Interest Expense
    
    $
    88,241
    
    
    $
    67,951
    
    
    $
    20,290
    
    
    
    $
    237,748
    
    
    $
    205,239
    
    
    $
    32,509
 34




---



##### Table of Contents



Commercial Group
 Revenues from real estate operations
 
    
    Increase of $19,878,000 related to new property openings, as noted in the table on page
37;
    
    Increase of $13,562,000 ($13,562,000, net of minority interest) related to the 2007 land
sale and related site work construction at Ridge Hill Retail, located in Yonkers, New York
which is accounted for under the percentage of completion method;
    
    Increase of $3,589,000 related to the buyout of our partner in the third quarter of 2006
in Galleria at Sunset, a regional mall in Henderson, Nevada, previously accounted for on
the equity method of accounting;
    
    Increase of $1,987,000 primarily related to reduced vacancies at 42nd Street Retail, a
specialty retail center located in New York and Short Pump Town Centerlocated in Richmond,
Virginia;
    
    Increase of $1,674,000 related to the amortization to straight-line rent of above and
below market leases, which were recorded as a component of the purchase price allocation
for the New York portfolio transaction;
    
    Increase of $1,276,000 related to revenues earned on a construction contract with the
New York City School Construction Authority for the construction of a school at Beekman, a
development project in Manhattan, New York City; and
    
    Increase of $1,000,000 related to an increase in rents primarily at the following
regional malls: Victoria Gardens, Promenade in Temecula, South Bay Galleriaand Antelope
Valley, all of which are located in California.
  
    
    Decrease of $1,345,000 ($140,000, net of minority interest) related to a decrease in
commercial outlot land sales which did not recur in 2007 primarily at Orchard Town Center
in Westminster, Colorado and Victoria Gardenslocated in Rancho Cucamonga, California which
was partially offset by an increase at White Oak Villagein Richmond, Virginia.
   
    
    Increase of $36,312,000 related to new property openings, as noted in the table on page
37;
    
    Increase of $14,438,000 related to the buyout of our partner in the third quarter of
2006 in Galleria at Sunset, which was previously accounted for on the equity method of
accounting;
 
    
    Increase of $13,562,000 ($13,562,000, net of minority interest) related to the 2007 land
sale and related site work construction at Ridge Hill Retailwhich is accounted for under
the percentage of completion method;
    
    Increase of $6,370,000 related to an increase in rents primarily at the following
regional malls: Antelope Valley, Victoria Gardens, Promenade in Temecula, South Bay
Galleriaand Simi Valley Town Center located in Simi
Valley, California;
    
    Increase of $5,205,000 related to the amortization to straight-line rent of above and
below market leases, which were recorded as a component of the purchase price allocation
for the New York portfolio transaction;
    
    Increase of $3,901,000 primarily related to reduced vacancies at 42ndStreet
Retailand Short Pump Town Center;
    
    Increase of $3,366,000 related to revenues earned on a construction contract with the
New York City School Construction Authority for the construction of a school at Beekman;
and
    
    Increase of $1,474,000 primarily related to increases in occupancy and rates in our
hotel portfolio.
 35




---



##### Table of Contents




    
    Decrease of $19,384,000 ($18,836,000, net of minority interest) related to a decrease in
commercial outlot land sales which did not recur in 2007 primarily at Simi Valley,
Promenade Bolingbrooklocated in Bolingbrook, Illinois, Orchard Town Centerand Salt Lake
City which was partially offset by an increase at White Oak Village.
  Operating and Interest Expenses 
 
    
    Increase of $11,017,000 ($11,017,000, net of minority interest) related to the 2007
costs associated with the land sale and related site work construction at Ridge Hill Retail
which is accounted for under the percentage of completion method;
    
    Increase of $7,237,000 related to new property openings, as noted in the table on page
37;
    
    Increase of $1,612,000 related to write-offs of abandoned development projects that we
believed were no longer probable of occurring;
    
    Increase of $1,511,000 ($1,748,000, net of minority interest) related to an increase in
commercial outlot land sales primarily at White Oak Villageand partially offset by
decreases at Victoria Gardens Malland Orchard Town Center;
    
    Increase of $1,276,000 related to construction of a school at Beekman. These costs are
reimbursed by the New York City School Construction Authority, which is included in
revenues from real estate operations as discussed above;
    
    Increase of $856,000 related to the buyout of our partner in the third quarter of 2006
in Galleria at Sunset, which was previously accounted for on the equity method of
accounting; and
    
    Increase of $833,000 primarily related to increases in occupancy at Victoria Gardensand
Antelope Valley.
  
    
    Decrease of $2,690,000 related to Issue 3  Ohio Earn and Learn initiatives in the prior
year, in order to secure a gaming license in Ohio, which was not approved by voters.
   
    
    Increase of $19,149,000 related to new property openings, as noted in the table on page
37;
    
    Increase of $11,017,000 ($11,017,000, net of minority interest) related to the 2007
costs associated with the land sale and related site work construction at Ridge Hill Retail
which is accounted for under the percentage of completion method;
    
    Increase of $3,723,000 related to the buyout of our partner in Galleria at Sunset, which
was previously accounted for on the equity method of accounting;
    
    Increase of $3,649,000 related to write-offs of abandoned development projects that we
believed were no longer probable of occurring;
    
    Increase of $3,366,000 related to construction of a school at Beekman. These costs are
reimbursed by the New York City School Construction Authority, which is included in
revenues from real estate operations as discussed above;
    
    Increase of $2,043,000 primarily related to increases in occupancy at Victoria Gardens
and Antelope Valley;
    
    Increase of $1,081,000 related to the appeal of our application to secure a gaming
license in Pennsylvania;
    
    Increase of $774,000 related to straight-line rent resulting from the amortization of
above and below market ground leases, which were recorded as a component of the purchase
price allocation for the New York portfolio transaction; and
    
    Increase of $600,000 primarily related to the write-off of costs associated with a
potential acquisition in 2007, which is no longer being pursued.
 36




---



##### Table of Contents




    
    Decrease of $7,967,000 ($8,110,000, net of minority interest) related to a decrease in
commercial outlot sales primarily at Promenade Bolingbrook, Orchard Town Center, Simi
Valleyand Salt Lake Citywhich was partially offset by an increase at White Oak Village;
and
    
    Decrease of $3,145,000 related to Issue 3  Ohio Earn and Learn initiatives in the prior
year, in order to secure a gaming license in Ohio, which was not approved by the voters.
    Three Months Ended
    
    
    
    Nine Months EndedOctober 31, 2007Revenues
    
    
    
    
    
    
    
    RevenuesQuarter/Year
    
    
    
    
    
    from Real
    
    
    
    
    
    
    
    from RealOpened or
    
    
    
    
    
    Estate
    
    
    Operating
    
    
    
    Estate
    
    
    OperatingProperty
    
    Location
    
    
    Acquired
    
    Square Feet
    
    
    Operations
    
    
    Expenses
    
    
    
    Operations
    
    
    ExpensesRetail Centers:Victoria Gardens-Bass Pro
    
    Rancho Cucamonga, California
    
    Q2-2007
    
    
    180,000
    
    
    $
    841
    
    
    $
    7
    
    
    
    $
    1,621
    
    
    $
    7Promenade Bolingbrook
    
    Bolingbrook, Illinois
    
    Q1-2007
    
    
    755,000
    
    
    
    2,981
    
    
    
    1,261
    
    
    
    
    5,723
    
    
    
    3,945Northfield at Stapleton
    
    Denver, Colorado
    
    Q4-2005/Q1-2006/
    
    
    1,170,000
    
    
    
    1,616
    
    
    
    382
    
    
    
    
    5,607
    
    
    
    4,413Q3-2006Office Buildings:New York Times
    
    Manhattan, New York
    
    Q3-2007 (2)
    
    
    737,000
    
    
    
    7,936
    
    
    
    2,109
    
    
    
    
    10,124
    
    
    
    2,821Richmond Office Park
    
    Richmond, Virginia
    
    Q2-2007 (1)
    
    
    571,000
    
    
    
    2,960
    
    
    
    1,154
    
    
    
    
    3,170
    
    
    
    1,154Illinois Science and Technology Park-Building Q
    
    Skokie, Illinois
    
    Q1-2007
    
    
    160,000
    
    
    
    381
    
    
    
    332
    
    
    
    
    669
    
    
    
    666Colorado Studios
    
    Denver, Colorado
    
    Q1-2007 (1)
    
    
    75,000
    
    
    
    223
    
    
    
    42
    
    
    
    
    328
    
    
    
    89Commerce Court
    
    Pittsburgh, Pennsylvania
    
    Q1-2007 (1)
    
    
    378,000
    
    
    
    1,359
    
    
    
    1,046
    
    
    
    
    4,148
    
    
    
    2,596Illinois Science and Technology Park  Building A
    
    Skokie, Illinois
    
    Q4-2006
    
    
    225,000
    
    
    
    779
    
    
    
    347
    
    
    
    
    2,514
    
    
    
    1,436Illinois Science and Technology Park  Building P
    
    Skokie, Illinois
    
    Q4-2006
    
    
    127,000
    
    
    
    234
    
    
    
    366
    
    
    
    
    669
    
    
    
    1,070Edgeworth Building
    
    Richmond, Virginia
    
    Q4-2006
    
    
    142,000
    
    
    
    373
    
    
    
    131
    
    
    
    
    1,125
    
    
    
    708Stapleton Medical Office Building
    
    Denver, Colorado
    
    Q3-2006
    
    
    45,000
    
    
    
    195
    
    
    
    60
    
    
    
    
    614
    
    
    
    244Total
    
    
    
    
    
    
    
    
    
    
    
    $
    19,878
    
    
    $
    7,237
    
    
    
    $
    36,312
    
    
    $
    19,149
 
 (1)
    
    Acquired property.(2)
    
    Certain tenants in this property took control of their space during the
second quarter of 2007. However the property did not officially open for operations until
the third quarter of 2007. Residential Group
 Revenues from real estate operations 
 
    
    Increase of $27,181,000 related to military housing fee income from the management and
development of units in Hawaii and Illinois;
    
    Increase of $3,941,000 related to the buyout of our partners at Sterling Glen of Glen
Covein Glen Cove, New York, Sterling Glen of Great Neckin Great Neck, New York, Midtown
Towersin Parma, Ohio and Village Greenin Beachwood, Ohio previously accounted for on the
equity method of accounting; and
    
    Increase of $2,284,000 related to new property openings and an acquired property as
noted in the table on page 39.
  37




---



##### Table of Contents




    
    Increase of $37,526,000 related to military housing fee income from the management and
development of units in Hawaii and Illinois;
    
    Increase of $10,774,000 related to the buyout of our partners at Sterling Glen of Glen
Cove, Sterling Glen of Great Neck, Midtown Towersand Village Greenpreviously accounted
for on the equity method of accounting; and
    
    Increase of $5,886,000 related to new property openings and an acquired property as
noted in the table on page 39.
  
    
    Decrease of $2,100,000 related to the 2006 land sale at Bridgewaterin Hampton,
Virginia.
  Operating and Interest Expenses 
 
    
    Increase of $23,821,000 related to management expenditures associated with military
housing fee income;
    
    Increase of $1,623,000 related to the buyout of our partners at Sterling Glen of Glen
Cove, Sterling Glen of Great Neck, Midtown Towersand Village Green; and
    
    Increase of $164,000 related to new property openings and an acquired property as noted
in the table on page 39.
   
    
    Increase of $30,189,000 related to management expenditures associated with military
housing fee income;
    
    Increase of $6,082,000 related to the buyout of our partners at Sterling Glen of Glen
Cove, Sterling Glen of Great Neck, Midtown Towersand Village Green;
    
    Increase of $3,080,000 in write-offs of abandoned development projects; and
    
    Increase of $1,391,000 related to new property openings and an acquired property as
noted in the table on page 39.
  
    
    Decrease of approximately $2,000,000 related to the 2006 land sale at Bridgewater.
   38




---



##### Table of Contents



Three Months Ended
    
    
    
    Nine Months EndedOctober 31, 2007Revenues from
    
    
    
    
    
    
    
    Revenues fromQuarter/Year
    
    Number
    
    
    Real Estate
    
    
    Operating
    
    
    
    Real Estate
    
    
    OperatingProperty
    
    Location
    
    
    Opened
    
    of Units
    
    
    Operations
    
    
    Expenses
    
    
    
    Operations
    
    
    ExpensesCameron Kinney
    
    Richmond, Virginia
    
    Q2-2007 (1)
    
    
    259
    
    
    $
    740
    
    
    $
    351
    
    
    
    $
    1,444
    
    
    $
    609Botanica II
    
    Denver, Colorado
    
    Q2-2007
    
    
    154
    
    
    
    198
    
    
    
    84
    
    
    
    
    262
    
    
    
    1241251 S. Michigan
    
    Chicago, Illinois
    
    Q1-2006
    
    
    91
    
    
    
    156
    
    
    
    (71
    )
    
    
    
    484
    
    
    
    152Sky55
    
    Chicago, Illinois
    
    Q1-2006
    
    
    411
    
    
    
    1,190
    
    
    
    (200
    )
    
    
    
    3,696
    
    
    
    506Total
    
    
    
    
    
    
    
    
    
    
    
    $
    2,284
    
    
    $
    164
    
    
    
    $
    5,886
    
    
    $
    1,391
 
 (1)
    
    Acquired property Land Development Group
 Revenues from real estate operations 
 
    
    Decrease of $6,404,000 in land sales at Stapletonin Denver, Colorado;
    
    Decrease of $5,794,000 in land sales at Tangerine Crossingin Tucson, Arizona; and
    
    Decrease of $589,000 in land sales primarily at two land development projects, Central
Stationin Chicago, Illinois and Suncoast Lakesin Pasco County, Florida, combined with
several other sales decreases at various land development projects.
  
    
    Increase of $1,285,000 primarily related to land sales at Sunrise Developmentin
Cleveland, Ohio;
    
    Increase of $883,000 in land sales at Summers Walkin Davidson, North Carolina; and
    
    Increase of $1,102,000 in land sales primarily at three major land development projects,
Rockport Squarein Lakewood, Ohio, Legacy Lakesin Aberdeen, North Carolina and Mill Creek
in York County, South Carolina, combined with several other sales increases at various land
development projects.
  
    
    Decrease of $23,198,000 in land sales at Stapleton;
    
    Decrease of $6,563,000 in land sales at Tangerine Crossing;
    
    Decrease of $4,179,000 in land sales at Waterburyin North Ridgeville, Ohio;
    
    Decrease of $761,000 in land sales at Suncoast Lakes; and
    
    Decrease of $1,640,000 in land sales primarily at three major land development projects,
Creekstonein Copley, Ohio, New Havenin Barberton, Ohio and Chestnut Plaza, in Elyria,
Ohio, combined with several other sales decreases at various land development projects.
  
    
    Increase of $3,328,000 in land sales at Summers Walk;
    
    Increase of $2,095,000 primarily related to land sales at Sunrise Development;
 39




---



##### Table of Contents




    
    Increase of $2,081,000 in land sales at Rockport Square;
    
    Increase of $958,000 in land sales at Mill Creek; and
    
    Increase of $791,000 in land sales primarily at two land development projects, Mallard
Pointin Lorain, Ohio and Legacy Lakescombined with several other sales increases at
various land development projects.
 Operating and Interest Expenses 
 
    
    Decrease of $3,458,000 at Tangerine Crossingprimarily related to decreased land sales;
    
    Decrease of $2,108,000 at Stapletonprimarily related to decreased land sales; and
    
    Decrease of $960,000 primarily at Mill Creek, Central Station, Suncoast Lakesand
Creekstone, combined with several other expense decreases at various land development
projects.
  
    
    Increase of $578,000 at Summers Walkprimarily related to increased land sales;
    
    Increase of $443,000 primarily related to land sales at Sunrise Development; and
    
    Increase of $1,824,000 primarily related to increased sales
and expenditures at two major land
development projects, Prosper, in Prosper, Texas and Rockport Square,combined with several
other expense increases at various land development projects.
  
    
    Decrease of $6,438,000 at Stapletonprimarily related to decreased land sales;
    
    Decrease of $2,212,000 at Tangerine Crossingprimarily related to decreased land sales;
    
    Decrease of $1,208,000 at Waterburyprimarily related to decreased land sales;
    
    Decrease of $533,000 at Creekstoneprimarily related to decreased land sales; and
    
    Decrease of $1,999,000 primarily at Suncoast Lakes, New Haven, Wheatfield Lakein
Wheatfield, New York and Central Station, combined with several other expense decreases at
various land development projects.
  
    
    Increase of $2,561,000 at Rockport Squareprimarily related to increased land sales;
    
    Increase of $2,401,000 at Summers Walkprimarily related to increased land sales;
    
    Increase of $1,083,000 primarily related to land sales at Sunrise Development; and
    
    Increase of $3,222,000 primarily related to increased sales
and expenditures at two major land
development projects, Prosper and Mill Creek,combined with several other
expense increases at various land development projects.
  The Nets
  40




---



##### Table of Contents



Corporate Activities
 Operating and Interest Expenses
  Other Activity
  Provision for Decline in Real Estate
  Saddle Rock Village
 Depreciation and Amortization
  Ten MetroTech Center 80 DeKalb Avenue
 Amortization of Mortgage Procurement Costs
  41




---



##### Table of Contents



Loss on Early Extinguishment of Debt
 Sterling Glen of Great Neck, , Northern Boulevard Columbia Park Center Eleven MetroTech Center New York Times, Landings of Brentwood Simi Valley Town Center
 Interest and Other Income
  -
    
    Residential Group
 
    
    Increase of $7,740,000 related to an additional net gain
realized on the sale of Sterling Glen of Roslyn,a supported-living
apartment community under construction located in Roslyn, New York,
due to the realization of additional proceeds resulting from
the resolution of certain contingencies; and
    
    Increase of $888,000 related to the income recognition on the sale of federal Historic
Preservation Tax Credits.
 -

    
    Land Development Group
 
    
    Increase of $123,000 related to changes in the fair value of a derivative held by
Stapleton Land, LLC on the Denver Urban Renewal Authority (DURA) bonds (see Financing
Arrangements section).
  -
    
    Land Development Group
 
    
    Decrease of $1,848,000 related to interest income earned by Stapleton Land, LLC on an
interest rate swap related to the $75,000,000 Tax Increment Financing (TIF) bonds (see
Financing Arrangements section); and
    
    Decrease of $123,000 related to interest income earned by Stapleton Land II, LLC on the
collateral and the 1% fee related to an agreement on the $65,000,000 Senior Subordinate
Limited Property Tax Supported Revenue Refunding and Improvement Bonds (Senior Subordinate
Bonds) (see Financing Arrangements section).
   -
    
    Residential Group
 
    
    Increase of $17,830,000 related to the gain on sale of Sterling Glen of Roslyn.
 -
    
    Land Development Group
 
    
    Increase of $1,665,000 related to changes in the fair value of a derivative held by
Stapleton Land, LLC on the DURA bonds (see Financing Arrangements section).
 42




---



##### Table of Contents



-

    
    Residential Group
 
    
    Decrease of $6,174,000 related to the income recognition on the sale of state and
federal Historic Preservation Tax Credits that did not recur at the same level for the nine
months ended October 31, 2007.
 -

    
    Commercial Group
 
    
    Decrease of $1,341,000 related to interest income earned on cash proceeds from property
dispositions placed in escrow for future acquisitions.
 -

    
    Land Development Group
 
    
    Decrease of $3,635,000 related to interest income earned by Stapleton Land, LLC on an
interest rate swap related to the $75,000,000 TIF bonds (see Financing Arrangements
section); and
    
    Decrease of $235,000 related to interest income earned by Stapleton Land II, LLC on the
collateral and the 1% fee related to an agreement on the Senior Subordinate Bonds (see
Financing Arrangements section).
  Equity in Earnings (Loss) of Unconsolidated Entities
  -

    
    Commercial Group
 
    
    Decrease of $1,500,000 primarily related to decreased land sales at Victor Village,
located in Victorville, California and other sales of land development projects; and
    
    Decrease of $706,000 due to the consolidation of Galleria at Sunset, a regional mall in
Henderson, Nevada, in the third quarter of 2006 due to buy-out of our partner.
 -

    
    Land Development Group
 
    
    Decrease of $2,857,000 related to decreased sales at Central Station, located in Chicago, Illinois; and
    
    Decrease of $1,791,000 related to decreased land sales at Canterbury Crossing, located
in Parker, Colorado and decreased sales at Smith Family Homes, located in Tampa, Florida.
 -

    
    The Nets
 
    
    Decrease of $8,234,000 due to an increase in our proportionate share of the loss related
to our equity investment in the Nets.
  -

    
    Commercial Group
 
    
    Increase of $1,444,000 related to our proportionate share of earnings in our equity
investment in San Francisco Centre, located in San Francisco, California, which opened
during the third quarter of 2006.
  -

    
    Commercial Group
 
    
    Decrease of $7,662,000 related to the 2006 gain on disposition of Midtown Plaza, a
specialty retail center located in Parma, Ohio;
 43




---



##### Table of Contents




    
    Decrease of $2,580,000 due to the consolidation of Galleria at Sunset, in the third
quarter of 2006 due to buy-out of our partner; and
    
    Decrease of $1,423,000 primarily related to decreased land sales at Victor Villageand
other sales of land development projects.
 -

    
    Land Development Group
 
    
    Decrease of $5,858,000 related to decreased sales at Central Station;
    
    Decrease of $5,006,000 primarily related to decreased land sales at Canterbury Crossing
and decreased sales at Smith Family Homes;
    
    Decrease of $4,178,000 related to decreased land sales in Mayfield Village, Ohio; and
    
    Decrease of $3,366,000 related to decreased land sales at Gladden Forest, located in
Marana, Arizona and Chestnut Commons, located in Elyria, Ohio.
 -

    
    Residential Group
 
    
    Decrease of $702,000 due to the consolidation of Village Green, an apartment community
located in Beachwood, Ohio, in the fourth quarter of 2006 due to the buy-out of our
partner.
 -

    
    The Nets
 
    
    Decrease of $969,000 due to an increase in our proportionate share of the loss related
to our equity investment in the Nets.
  -

    
    Commercial Group
 
    
    Increase of $1,713,000 related to our proportionate share of earnings in our equity
investment in San Francisco Centre, which opened during the third quarter of 2006; and
    
    Increase of $1,046,000 related to increased occupancy at the Westin Convention Center
Hotellocated in Pittsburgh, Pennsylvania.
 -

    
    Land Development Group
 
    
    Increase of $2,614,000 related to increased land sales at Gladden Farms II, located in Marana, Arizona.
 -

    
    Residential Group
 
    
    Increase of $2,623,000 related to the sale of condominium units at 1100 Wilshireand
Mercury, both located in Los Angeles, California; and
    
    Increase of $2,106,000 related to the 2007 gain on disposition of White Acres, an
apartment community located in Richmond Heights, Ohio.
  Income Taxes
  44




---



##### Table of Contents



FIN No. 48
     October 31, 2007
    
    
    February 1, 2007Unrecognized tax benefits
    
    $
    4,400,000
    
    $
    4,892,000Portion that, if recognized, would impact the effective rate
    
    $
    886,000
    
    $
    844,000Accrued interest and penalties on unrecognized tax benefits
    
    $
    1,068,000

    
    $
    1,013,000Range of possible decrease in unrecognized tax benefits in next twelve months
    
    $
    0 to 3,419,000
     
    $
    0 to 3,900,000
 45




---



##### Table of Contents



Discontinued Operations
  Sterling Glen of Lynbrook Sterling Glen of Lynbrooks
 October 31, 2007(in thousands)AssetsReal estate
    
    $
    29,858Notes and accounts receivable, net
    
    
    80Other assets
    
    
    1,654Total Assets
    
    $
    31,592LiabilitiesMortgage debt, nonrecourse
    
    $
    27,700Accounts payable and accrued expenses
    
    
    880Total Liabilities
    
    $
    28,580
  Three
    
    Nine
    
    Three
    
    NineQuarter/
    
    Months
    
    Months
    
    Months
    
    MonthsSquare Feet/
    
    Year
    
    Ended
    
    Ended
    
    Ended
    
    EndedProperty
    
    Location
    
    
    Number of Units
    
    Disposed
    
    10/31/2007
    
    10/31/2007
    
    10/31/2006
    
    10/31/2006Commercial Group:Battery Park City Retail
    
    Manhattan, New York
    
    166,000 square feet
    
    Q3-2006
    
    
    
    
    
    Yes
    
    YesEmbassy Suites Hotel
    
    Manhattan, New York
    
    463 rooms
    
    Q3-2006
    
    
    
    
    
    Yes
    
    YesHilton Times Square
    
    Manhattan, New York
    
    444 rooms
    
    Q1-2006
    
    
    
    
    
    
    
    YesG Street Retail
    
    Philadelphia, Pennsylvania
    
    13,000 square feet
    
    Q1-2006
    
    
    
    
    
    
    
    YesResidential Group:Sterling Glen of Lynbrook
    
    Lynbrook, New York
    
    130 units
    
    Est. Q1-2008
    
    Yes
    
    Yes
    
    Yes
    
    YesSterling Glen of Bayshore
    
    Bayshore, New York
    
    85 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesSterling Glen of Center City
    
    Philadelphia, Pennsylvania
    
    135 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesSterling Glen of Darien
    
    Darien, Connecticut
    
    80 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesSterling Glen of Forest Hills
    
    Forest Hills, New York
    
    83 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesSterling Glen of Plainview
    
    Plainview, New York
    
    79 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesSterling Glen of Stamford
    
    Stamford, Connecticut
    
    166 units
    
    Q2-2007
    
    
    
    Yes
    
    Yes
    
    YesLandings of Brentwood
    
    Nashville, Tennessee
    
    724 units
    
    Q2-2007
    
    
    
    Yes
    
    
    
    Mount Vernon Square
    
    Alexandria, Virginia
    
    1,387 units
    
    Q4-2006
    
    
    
    
    
    Yes
    
    YesProvidence at Palm Harbor
    
    Tampa, Florida
    
    236 units
    
    Q2-2006
    
    
    
    
    
    
    
    Yes
  46




---



##### Table of Contents



Sterling Glen of Lynbrook Sterling Glen of Roslyn
  Landings of Brentwood
  Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2006
    
    
    2007
    
    2006(in thousands)
    
    
    (in thousands)Revenues
    
    $
    1,002
    
    
    $
    29,965
    
    
    
    $
    25,601
    
    
    $
    96,410ExpensesOperating expenses
    
    
    (845
    )
    
    
    19,293
    
    
    
    
    19,885
    
    
    
    66,298Depreciation and amortization
    
    
    7
    
    
    
    1,956
    
    
    
    
    1,941
    
    
    
    8,870(838
    )
    
    
    21,249
    
    
    
    
    21,826
    
    
    
    75,168Interest expense
    
    
    (296
    )
    
    
    (5,110
    )
    
    
    
    (3,904
    )
    
    
    (15,320
    )Amortization of mortgage procurement costs
    
    
    (11
    )
    
    
    (112
    )
    
    
    
    (80
    )
    
    
    (430
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    (363
    )
    
    
    Interest income
    
    
    542
    
    
    
    219
    
    
    
    
    751
    
    
    
    1,223Gain (loss) on disposition of rental properties (1)
    
    
    (1,031
    )
    
    
    143,494
    
    
    
    
    105,287
    
    
    
    287,220Earnings before income taxes
    
    
    1,044
    
    
    
    147,207
    
    
    
    
    105,466
    
    
    
    293,935Income tax expense (benefit)Current
    
    
    19,527
    
    
    
    18,142
    
    
    
    
    25,267
    
    
    
    18,845Deferred
    
    
    (19,123
    )
    
    
    15,752
    
    
    
    
    15,485
    
    
    
    49,004404
    
    
    
    33,894
    
    
    
    
    40,752
    
    
    
    67,849Earnings before minority interest
    
    
    640
    
    
    
    113,313
    
    
    
    
    64,714
    
    
    
    226,086Minority interest, net of taxGain on disposition of rental properties
    
    
    
    
    
    
    59,616
    
    
    
    
    
    
    
    
    118,009Operating (loss) earnings from rental properties
    
    
    
    
    
    
    (125
    )
    
    
    
    
    
    
    
    332
    
    
    
    59,491
    
    
    
    
    
    
    
    
    118,341Net earnings from discontinued operations
    
    $
    640
    
    
    $
    53,822
    
    
    
    $
    64,714
    
    
    $
    107,745
 
 (1)
    
    For the three months ended October 31, 2007, the above loss on disposition of rental
properties represents an adjustment of the previously reported gain on disposition of the
six Sterling Glen properties due to a change in estimate of the cost of this transaction
upon settlement of final transaction costs. 47




---



##### Table of Contents



Gain on Disposition of Rental Properties
  Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2007
    
    2006
    
    
    2007
    
    2006(in thousands)
    
    
    (in thousands)Discontinued Operations:Six Sterling Glen properties (Supported-Living Apartments) (1)
    
    $
    (1,031
    )
    
    $
    
    
    
    
    $
    80,208
    
    
    $
    Landings of Brentwood (Apartments) (2)
    
    
    
    
    
    
    
    
    
    
    
    25,079
    
    
    
    Embassy Suites Hotel (2)
    
    
    
    
    
    
    117,606
    
    
    
    
    
    
    
    
    117,606Battery Park City (Retail) (2)
    
    
    
    
    
    
    25,888
    
    
    
    
    
    
    
    
    25,888Hilton Times Square Hotel (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135,945Providence at Palm Harbor (Apartments) (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,342G Street Retail (Specialty Retail Center)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    439Total
    
    $
    (1,031
    )
    
    $
    143,494
    
    
    
    $
    105,287
    
    
    $
    287,220
 
 (1)
    
    The six properties included in the gain on disposition are Sterling Glen of Bayshore,
Sterling Glen of Center City, Sterling Glen of Darien, Sterling Glen of Forest Hills,
Sterling Glen of Plainviewand Sterling Glen of Stamford. We elected to deposit the sales
proceeds with a qualified intermediary for the purposes of identifying replacement assets
under Section 1031 of the Internal Revenue Code for Sterling Glen of Plainviewand Sterling
Glen of Stamford. For the three months ended October 31, 2007, the above loss on
disposition of the six Sterling Glen properties represents an adjustment of the previously
reported gain due to a change in estimate of the cost of this transaction upon settlement
of final transaction costs.(2)
    
    We elected to deposit the sales proceeds with a qualified intermediary for purposes of
acquiring replacement assets under Section 1031 of the Internal Revenue Code.  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    2006
    
    
    2007
    
    2006(in thousands)
    
    
    (in thousands)White Acres (Apartments)(1)
    
    Richmond Heights, Ohio
    
    $
    
    
    
    $
    
    
    
    
    $
    2,106
    
    
    $
    Midtown Plaza (Specialty Retail Center)
    
    Parma, Ohio
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,662$
    
    
    
    $
    
    
    
    
    $
    2,106
    
    
    $
    7,662
 
 (1)
    
    We disposed of our interest in White Acresin a non-monetary exchange for the remaining
outside interest in Midtown Towers, an apartment community located in Parma, Ohio, 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 on disposition of $2,106,000 for the nine months ended October 31, 2007. FINANCIAL CONDITION AND LIQUIDITY
   48




---



##### Table of Contents



Bank Revolving Credit Facility
   October 31, 2007
    
    January 31, 2007Maximum borrowings (1)
    
    $
    600,000
    
    
    $
    600,000Accordion option
    
    $
    150,000
    
    
    $
    Outstanding:Borrowings
    
    $
    
    
    
    $
    Letters of credit
    
    $
    81,834
    
    
    $
    72,324Surety bonds
    
    $
    
    
    
    $
    Related Terms:LIBOR rate option (2)
    
    1.45% + LIBOR
    
    1.75% + LIBORPrime rate option
    
    1/2% + prime rate
    
    1/2% + prime rateDividend/stock repurchase limitation
    
    $
    40,000
    
    
    $
    40,000
 
 (1)
    
    $100,000,000 of the available borrowings may be used for letters of credit or surety bonds.(2)
    
    We generally elect the LIBOR rate option over the prime rate option. 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
 49




---



##### Table of Contents



Puttable Equity-Linked Senior Notes
       50




---



##### Table of Contents



Other Senior Notes
      Subordinated Debt
   Financing Arrangements
 Collateralized Borrowings
   51




---



##### Table of Contents



Other Financing Arrangements
    52




---



##### Table of Contents



Mortgage Financings
   Purpose of Financing
    
    Amount(in thousands)Loan extensions/additional fundings
    
    $
    543,495Development projects and acquisitions (1)
    
    
    925,692Refinancings
    
    
    1,042,700$
    2,511,887
 
 (1)
    
    $860,175 of the $925,692 relates to development projects
and represents the full amount available to be drawn on the loan. Interest Rate Exposure
  TotalDevelopment
    
    
    
    
    
    WeightedOperating
    
    and Land
    
    
    
    
    
    AverageProperties
    
    Projects
    
    Total
    
    Rate(dollars in thousands)Fixed (1)
    
    $
    3,859,821
    
    
    $
    5,239
    
    
    $
    3,865,060
    
    
    
    6.08
    %Varianle
(2)Taxable
    
    
    1,176,134
    
    
    
    448,757
    
    
    
    1,624,891
    
    
    
    6.73
    %Tax-Exempt
    
    
    593,917
    
    
    
    60,975
    
    
    
    654,892
    
    
    
    4.25
    %$
    5,629,872
    
    
    $
    514,971
    
    
    $
    6,144,843
    
    
    
    6.06
    %Total commitment from lenders.
    
    
    
    
    
    $
    1,384,826
 
 (1)
    
    Fixed rate debt of $3,865,060 as of October 31, 2007 includes $94,939 of Urban
Development Action Grants (UDAGs) at 2.07%.(2)
    
    Taxable variable-rate debt of $1,624,891 and tax-exempt variable-rate debt of
$654,892 as of October 31, 2007 is protected with swaps and caps described below. 53




---



##### Table of Contents



Taxable
 Caps
    
    Swaps(1)Notional
    
    Average Base
    
    Notional
    
    Average BasePeriod Covered
    
    Amount
    
    Rate
    
    Amount
    
    Rate(dollars in thousands)11/01/07-02/01/08 (2)
    
    $
    736,626
    
    
    
    5.30
    %
    
    $
    989,988
    
    
    
    5.23
    %02/01/08-02/01/09
    
    
    771,053
    
    
    
    5.90
    
    
    
    689,690
    
    
    
    5.4302/01/09-02/01/10
    
    
    585,358
    
    
    
    5.53
    
    
    
    888,432
    
    
    
    5.2102/01/10-02/01/11
    
    
    73,500
    
    
    
    5.00
    
    
    
    687,081
    
    
    
    5.44
 
 (1)
    
    Excludes the 10-year forward swaps discussed below.(2)
    
    These LIBOR-based hedges as of November 1, 2007 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, 2008. Tax Exempt
 CapsNotional
    
    Average BasePeriod Covered
    
    Amount
    
    Rate(dollars in thousands)11/01/07-02/01/08
    
    $
    266,558
    
    
    
    5.83
    %02/01/08-02/01/09
    
    
    219,310
    
    
    
    5.9702/01/09-02/01/10
    
    
    190,310
    
    
    
    5.9702/01/10-02/01/11
    
    
    10,800
    
    
    
    6.96
   Forward Swaps
 Property Accounted for under theFully Consolidated Properties
    
    Equity Method of AccountingExpirations for Years Ending
    
    Notional(1)
    
    
    
    
    
    Notional(2)January 31,
    
    Amount
    
    Rate
    
    Amount
    
    Rate2008
    
    $
    97,050
    
    
    
    5.77
    %
    
    $
    
    
    
    
    2009
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    2010
    
    $
    91,625
    
    
    
    5.72
    %
    
    $
    120,000
    
    
    
    5.93
    %Thereafter
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
 
 (1)
    
    As these forward swaps have been designated and qualified 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 must be marked to market through earnings on a quarterly basis.  54




---



##### Table of Contents



Cash Flows
 Operating Activities
  Increase in rents and other revenues received
    
    $
    51,725Decrease in interest and other income received
    
    
    (1,934
    )Decrease in cash distributions from unconsolidated entities
    
    
    (10,978
    )Decrease in proceeds from land sales  Land Development Group
    
    
    (11,631
    )Decrease in proceeds from land sales  Commercial Group
    
    
    (113
    )Decrease in land development expenditures
    
    
    19,219Increase in operating expenditures
    
    
    (111,218
    )Increase in interest paid
    
    
    (25,283
    )Net decrease in cash provided by
operating activities
    
    $
    (90,213
    )
 55




---



##### Table of Contents



Investing Activities
   Nine Months Ended October 31,2007
    
    2006(in thousands)Capital expenditures*
    
    $
    (992,538
    )
    
    $
    (744,588
    )Payment of lease procurement costs and other assets
    
    
    (72,675
    )
    
    
    (42,372
    )(Increase) decrease in restricted cash used for capital expenditures and other investing activities:Victoria Gardens, a retail center in Rancho Cucamonga, California
    
    
    19,509
    
    
    
    (12,624
    )Investment in a development opportunity in Ardsley, New York
    
    
    15,000
    
    
    
    (15,000
    )Ridge Hill, a retail center in Yonkers, New York
    
    
    4,331
    
    
    
    (3,059
    )Tower City Infocom Center, an office building in Cleveland, Ohio
    
    
    3,492
    
    
    
    (6,851
    )Tangerine Crossing, a land development project in Tucson, Arizona
    
    
    3,269
    
    
    
    (5,063
    )Atlantic Yards, a commercial development project in Brooklyn, New York
    
    
    1,419
    
    
    
    7,590New York Times, an office building in Manhattan, New York
    
    
    (15,033
    )
    
    
    Knight Ridder Building at Fairmont Plaza, an office buildilng in San Jose, California
    
    
    (1,304
    )
    
    
    (250
    )Johns Hopkins - 855 North Wolfe Street, a commercial development project in East Baltimore, Maryland
    
    
    
    
    
    
    (5,788
    )Sale proceeds released from escrow for current acquisitions or (placed in) escrow for future acquisitions:Mount Vernon Square, an apartment complex in Alexandria, Virginia
    
    
    51,943
    
    
    
    (6,288
    )Battery Park City, a specialty retail center in Manhattan, New York
    
    
    25,125
    
    
    
    (29,994
    )Sterling Glenof Stamford, a supported-living community in Stamford, Connecticut
    
    
    (8,460
    )
    
    
    Embassy Suites, a hotel in Manhattan, New York, which were deposited in the third quarter of 2006
    
    
    610
    
    
    
    (13,052
    )Providence at Palm Harbor, an apartment complex in Tampa, Florida, which were released in the
fourth quarter of 2006
    
    
    
    
    
    
    (7,250
    )Other
    
    
    (9,974
    )
    
    
    708Subtotal
    
    $
    89,927
    
    
    $
    (96,921
    )Proceeds from disposition of rental properties and a development project:Six Sterling Glensupported-living communities
    
    $
    187,468
    
    
    $
    Landings of Brentwood, an apartment complex in Nashville, Tennessee
    
    
    67,756
    
    
    
    Sterling Glen of Roslyn,a development project in Roslyn, New York
    
    
    34,717
    
    
    
    Embassy Suites, a hotel in Manhattan, New York
    
    
    
    
    
    
    133,458Hilton Times Square, a hotel in Manhattan, New York
    
    
    
    
    
    
    120,400Battery Park City, a specialty retail center in Manhattan, New York
    
    
    
    
    
    
    29,994Providence at Palm Harbor, an apartment complex in Tampa, Florida
    
    
    
    
    
    
    7,250G Street, a retail center in Philadelphia, Pennsylvania
    
    
    
    
    
    
    805Other
    
    
    751
    
    
    
    Subtotal
    
    $
    290,692
    
    
    $
    291,907*Capital expenditures were financed as follows:New nonrecourse mortgage indebtedness
    
    $
    869,019
    
    
    $
    343,039Portion of proceeds from disposition of rental properties and a development project including release of investing escrows
    
    
    123,519
    
    
    
    241,611Cash provided by operating activities
    
    
    
    
    
    
    159,938Total Capital Expenditures
    
    $
    992,538
    
    
    $
    744,588
 56




---



##### Table of Contents



Investing Activities
 Nine Months Ended October 31,2007
    
    2006(in thousands)Land Development:Mesa De Sol, an unconsolidated project in Covington, New Mexico
    
    $
    (8,810
    )
    
    $
    (15,129
    )Central Station, an unconsolidated project in Chicago, Illinois
    
    
    
    
    
    
    (3,776
    )Residential Projects:Fort Lincoln III & IV, primarily refinancning proceeds from an unconsolidated apartment complex in
Washington, D.C.
    
    
    5,284
    
    
    
    Hamptons, primarily refinancing proceeds from an unconsolidated apartment complex in Beachwood, Ohio
    
    
    7,899
    
    
    
    Mercury, an unconsolidated condominium development project in Los Angeles, California
    
    
    (5,166
    )
    
    
    (2,765
    )Met Lofts, an unconsolidated apartment complex in Los Angeles, California
    
    
    (1,337
    )
    
    
    Air Force Academy, an unconsolidated military housing project in Colorado Springs, Colorado
    
    
    (1,817
    )
    
    
    Uptown Apartments,an unconsolidated apartment complex under construction in Oakland, California
    
    
    2,249
    
    
    
    (3,539
    )1100 Wilshire, an unconsolidated condominium development project in Los Angeles, California
    
    
    
    
    
    
    (1,567
    )New York City Projects:East River Plaza, an unconsolidated development project in Manhattan, New York
    
    
    (6,495
    )
    
    
    (9,614
    )The Nets, a National Basketball Association franchise
    
    
    (25,083
    )
    
    
    Commercial Projects:Bulletin Building, primarily refinancing proceeds from an unconsolidated office building in San Francisco,
California
    
    
    8,648
    
    
    
    Charleston Town Center, primarily refinancing proceeds from an unconsolidated regional mall in
Charleston, West Virginia
    
    
    21,676
    
    
    
    San Francisco Centre-Emporium, primarily refinancing proceeds for the nine months ended October 31, 2007 and
acquisition of the unconsolidated regional mall in San Francisco,
California, during the nine months ended October 31, 2006
    
    
    15,804
    
    
    
    (29,393
    )Summit at Lehigh Valley, an unconsolidated retail development project in Bethlehem Township, Pennsylvania
    
    
    (5,694
    )
    
    
    (4,785
    )Village at Gulfstream Park,an unconsolidated retail development project in Hallendale, Florida
    
    
    (9,841
    )
    
    
    (5,132
    )Waterfront,an unconsolidated mixed-use development project in Washington, D.C.
    
    
    (27,420
    )
    
    
    (1,535
    )Wiregrass Ranch, an unconsolidated retail development project in Tampa, Florida
    
    
    (11,761
    )
    
    
    (1,140
    )Metreon, an unconsolidated retail commercial acquisition in San Francisco, California
    
    
    
    
    
    
    (20,000
    )Dispositions:Midtown Plaza, an unconsolidated retail center in Parma, Ohio
    
    
    
    
    
    
    6,944Other net (advances) returns of investment of equity method investments and other advances to affiliates
    
    
    (26,597
    )
    
    
    485Subtotal
    
    
    (68,461
    )
    
    
    (90,946
    )Net cash used in investing activities
    
    $
    (753,055
    )
    
    $
    (682,920
    )
 57




---



##### Table of Contents



Financing Activities
   Nine Months Ended October 31,2007
    
    2006(in thousands)Proceeds from issuance of Puttable Equity-Linked Senior Notes
    
    $
    
    
    
    $
    287,500Payment of Puttable Equity-Linked Senior Notes issuance costs
    
    
    
    
    
    
    (6,755
    )Payment of purchased call option transaction
    
    
    
    
    
    
    (45,885
    )Proceeds from warrant transaction
    
    
    
    
    
    
    28,923Borrowings on bank revolving credit facility
    
    
    465,000
    
    
    
    285,000Payments on bank revolving credit facility
    
    
    (465,000
    )
    
    
    (367,500
    )Proceeds from nonrecourse mortgage debt
    
    
    1,643,003
    
    
    
    684,532Principal payments on nonrecourse mortgage debt
    
    
    (784,271
    )
    
    
    (406,121
    )Net increase (decrease) in notes payable
    
    
    (8,037
    )
    
    
    (57,797
    )(Increase) decrease in restricted cash:Uptown Apartments, a residential project under construction in Oakland, California
    
    
    
    
    
    
    19,562Stapleton, a mixed-use development project in Denver, Colorado
    
    
    6,000
    
    
    
    Sky55, an apartment complex in Chicago, Illinois
    
    
    4,280
    
    
    
    12,686Sterling Glen of Roslyn, a supported-living community under construction in Roslyn, New York, sold in July
2007
    
    
    2,781
    
    
    
    14,8101251 S. Michigan, an apartment complex in Chicago, Illinois
    
    
    1,642
    
    
    
    4,910Edgeworth Building, an office building in Richmond, Virginia
    
    
    1,015
    
    
    
    (4,707
    )Lenox Club, an apartment complex in Arlington, Virginia
    
    
    843
    
    
    
    5,066Lucky Strike, an apartment complex in Richmond, Virginia
    
    
    (5,295
    )
    
    
    (2,457
    )Metro 417, an apartment complex in Los Angeles, California
    
    
    (5,030
    )
    
    
    New York Times, an office building in Manhattan, New York
    
    
    (4,559
    )
    
    
    100 Landsdowne, an apartment complex in Cambridge, Massuchesetts
    
    
    (1,151
    )
    
    
    3,000Chase Financial Tower, an office building in Cleveland, Ohio
    
    
    (150
    )
    
    
    7,663Lenox Park, an apartment complex in Silver Spring, Maryland
    
    
    
    
    
    
    4,550Consolidated-Carolina, an apartment complex in Richmond, Virginia
    
    
    
    
    
    
    3,170Stapleton Medical Office Building, in Denver, Colorado
    
    
    
    
    
    
    (2,000
    )Other
    
    
    (430
    )
    
    
    (2,626
    )(Decrease) increase in book overdrafts, representing checks issued but not yet paid
    
    
    (5,883
    )
    
    
    11,630Payment of deferred financing costs
    
    
    (32,033
    )
    
    
    (23,314
    )Purchase of treasury stock related to Puttable Equity-Linked Senior Notes
    
    
    
    
    
    
    (24,962
    )Purchase of other treasury stock
    
    
    (3,138
    )
    
    
    (966
    )Exercise of stock options
    
    
    7,062
    
    
    
    2,769Distribution of accumulated equity to minority partners ($23,689 of which was paid to Bruce C. Ratner, Director)
    
    
    (41,202
    )
    
    
    Dividends paid to shareholders
    
    
    (22,558
    )
    
    
    (19,385
    )Decrease in minority interest ($21,972 of which was paid to Bruce C. Ratner, Director)
    
    
    (33,263
    )
    
    
    (15,403
    )Net cash provided by financing activities
    
    $
    719,626
    
    
    $
    395,893
 LEGAL PROCEEDINGS
  DIVIDENDS
  58




---



##### Table of Contents



NEW ACCOUNTING STANDARDS
         59




---



##### Table of Contents



VARIABLE INTEREST ENTITIES
  SUBSEQUENT EVENT
 University
Park at MIT
  INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS
  60




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   Taxable
 Caps
    
    Swaps(1)Notional
    
    Average Base
    
    Notional
    
    Average BasePeriod Covered
    
    Amount
    
    Rate
    
    Amount
    
    Rate(dollars in thousands)11/01/07-02/01/08 (2)
    
    $
    736,626
    
    
    
    5.30
    %
    
    $
    989,988
    
    
    
    5.23
    %02/01/08-02/01/09
    
    
    771,053
    
    
    
    5.90
    
    
    
    689,690
    
    
    
    5.4302/01/09-02/01/10
    
    
    585,358
    
    
    
    5.53
    
    
    
    888,432
    
    
    
    5.2102/01/10-02/01/11
    
    
    73,500
    
    
    
    5.00
    
    
    
    687,081
    
    
    
    5.44
 
 (1)
    
    Excludes the 10-year forward swaps discussed below.(2)
    
    These LIBOR-based hedges as of November 1, 2007 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, 2008. Tax Exempt
 CapsNotional
    
    Average BasePeriod Covered
    
    Amount
    
    Rate(dollars in thousands)11/01/07-02/01/08
    
    $
    266,558
    
    
    
    5.83
    %02/01/08-02/01/09
    
    
    219,310
    
    
    
    5.9702/01/09-02/01/10
    
    
    190,310
    
    
    
    5.9702/01/10-02/01/11
    
    
    10,800
    
    
    
    6.96
   Forward Swaps
 Property Accounted forunder the Equity Method ofFully Consolidated Properties
    
    AccountingExpirations for Years Ending
    
    Notional(1)
    
    
    
    
    
    Notional(2)January 31,
    
    Amount
    
    Rate
    
    Amount
    
    Rate2008
    
    $
    97,050
    
    
    
    5.77
    %
    
    $
    
    
    
    
    2009
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    2010
    
    $
    91,625
    
    
    
    5.72
    %
    
    $
    120,000
    
    
    
    5.93
    %Thereafter
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
 
 (1)
    
    As these forward swaps have been designated and qualified 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 must be marked to market through earnings on a quarterly basis. 
 61




---



##### Table of Contents



62




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk (continued)
 October 31, 2007
 Expected Maturity DateYear Ending January 31,FairTotal
    
    MarketPeriod
    
    Outstanding
    
    ValueLong-Term Debt
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Thereafter
    
    10/31/2007
    
    10/31/2007(dollars in thousands)Fixed:Fixed-rate debt
    
    $
    89,086
    
    
    $
    70,728
    
    
    $
    326,096
    
    
    $
    170,870
    
    
    $
    357,749
    
    
    $
    2,850,531
    
    
    $
    3,865,060
    
    
    $
    3,807,108Weighted average interest rate
    
    
    6.77
    %
    
    
    6.50
    %
    
    
    6.92
    %
    
    
    6.80
    %
    
    
    7.10
    %
    
    
    5.78
    %
    
    
    6.08
    %Senior & subordinated debt (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,400
    
    
    
    287,500
    
    
    
    579,000
    
    
    
    886,900
    
    
    
    893,581
    (2)Weighted average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.25
    %
    
    
    3.63
    %
    
    
    7.30
    %
    
    
    6.13
    %Total Fixed-Rate Debt
    
    
    89,086
    
    
    
    70,728
    
    
    
    326,096
    
    
    
    191,270
    
    
    
    645,249
    
    
    
    3,429,531
    
    
    
    4,751,960
    
    
    
    4,700,689Variable:Variable-rate debt
    
    
    417,043
    
    
    
    274,941
    
    
    
    103,800
    
    
    
    125,225
    
    
    
    4,691
    
    
    
    699,191
    
    
    
    1,624,891
    
    
    
    1,624,891Weighted average interest rate
    
    
    7.14
    %
    
    
    7.09
    %
    
    
    7.30
    %
    
    
    6.38
    %
    
    
    6.15
    %
    
    
    6.33
    %
    
    
    6.73
    %Tax-exempt
    
    
    86,489
    
    
    
    69,035
    
    
    
    134,765
    
    
    
    59,989
    
    
    
    72,590
    
    
    
    232,024
    
    
    
    654,892
    
    
    
    654,892Weighted average interest rate
    
    
    4.96
    %
    
    
    3.69
    %
    
    
    3.82
    %
    
    
    4.22
    %
    
    
    4.05
    %
    
    
    4.48
    %
    
    
    4.25
    %Bank revolving credit facility (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Variable-Rate Debt
    
    
    503,532
    
    
    
    343,976
    
    
    
    238,565
    
    
    
    185,214
    
    
    
    77,281
    
    
    
    931,215
    
    
    
    2,279,783
    
    
    
    2,279,783Total Long-Term Debt
    
    $
    592,618
    
    
    $
    414,704
    
    
    $
    564,661
    
    
    $
    376,484
    
    
    $
    722,530
    
    
    $
    4,360,746
    
    
    $
    7,031,743
    
    
    $
    6,980,472Weighted average interest rate
    
    
    6.76
    %
    
    
    6.42
    %
    
    
    6.25
    %
    
    
    6.33
    %
    
    
    5.41
    %
    
    
    6.00
    %
    
    
    6.07
    %
 
 (1)
    
    Represents recourse debt.(2)
    
    Includes the equity portion of the 3.625% puttable equity-linked senior notes that is
tied to our stock price. 
 63




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk (continued)
 January 31, 2007
 Expected Maturity DateYear Ending January 31,FairTotal
    
    MarketPeriod
    
    Outstanding
    
    ValueLong-Term Debt
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Thereafter
    
    1/31/2007
    

    1/31/2007(dollars in thousands)Fixed:Fixed-rate debt
    
    $
    161,725
    
    
    $
    104,983
    
    
    $
    371,240
    
    
    $
    207,294
    
    
    $
    360,269
    
    
    $
    2,524,856
    
    
    $
    3,730,367
    
    
    $
    3,702,515Weighted average interest rate
    
    
    6.78
    %
    
    
    6.65
    %
    
    
    7.09
    %
    
    
    7.03
    %
    
    
    7.12
    %
    
    
    5.77
    %
    
    
    6.17
    %Senior & subordinated debt (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287,500
    
    
    
    579,000
    
    
    
    866,500
    
    
    
    872,650Weighted average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.63
    %
    
    
    7.30
    %
    
    
    6.08
    %Total Fixed-Rate Debt
    
    
    161,725
    
    
    
    104,983
    
    
    
    371,240
    
    
    
    207,294
    
    
    
    647,769
    
    
    
    3,103,856
    
    
    
    4,596,867
    
    
    
    4,575,165Variable:Variable-rate debt
    
    
    448,545
    
    
    
    302,878
    
    
    
    8,184
    
    
    
    48,258
    
    
    
    3,123
    
    
    
    59,143
    
    
    
    870,131
    
    
    
    870,131Weighted average interest rate
    
    
    7.39
    %
    
    
    6.68
    %
    
    
    6.01
    %
    
    
    5.26
    %
    
    
    5.29
    %
    
    
    5.01
    %
    
    
    6.84
    %Tax-exempt
    
    
    191,609
    
    
    
    61,565
    
    
    
    206,335
    
    
    
    31,530
    
    
    
    14,810
    
    
    
    232,025
    
    
    
    737,874
    
    
    
    737,874Weighted average interest rate
    
    
    4.70
    %
    
    
    4.50
    %
    
    
    4.23
    %
    
    
    4.47
    %
    
    
    4.16
    %
    
    
    4.66
    %
    
    
    4.52
    %Bank revolving credit facility (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subordinated debt (1)
    
    
    
    
    
    
    20,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,400
    
    
    
    20,400Weighted average interest rate
    
    
    
    
    
    
    4.51
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.51
    %Total Variable-Rate Debt
    
    
    640,154
    
    
    
    384,843
    
    
    
    214,519
    
    
    
    79,788
    
    
    
    17,933
    
    
    
    291,168
    
    
    
    1,628,405
    
    
    
    1,628,405Total Long-Term Debt
    
    $
    801,879
    
    
    $
    489,826
    
    
    $
    585,759
    
    
    $
    287,082
    
    
    $
    665,702
    
    
    $
    3,395,024
    
    
    $
    6,225,272
    
    
    $
    6,203,570Weighted average interest rate
    
    
    6.62
    %
    
    
    6.31
    %
    
    
    6.07
    %
    
    
    6.45
    %
    
    
    5.54
    %
    
    
    5.95
    %
    
    
    6.05
    %
 
 (1)
    
    Represents recourse debt. 64




---



##### Table of Contents



Item 4. Controls and Procedures
    
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  65




---



##### 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 7.375% 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).4.3
    
    -
    
    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).4.4
    
    -
    
    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 Form10-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).
 66




---



##### 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
    
    -
    
    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).+10.16
    
    -
    
    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).+10.17
    
    -
    
    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).
 67




---



##### Table of Contents



ExhibitNumber
    
    
    
    Description of Document+10.18
    
    -
    
    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).+10.19
    
    -
    
    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).+10.20
    
    -
    
    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).+10.21
    
    -
    
    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).+10.22
    
    -
    
    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).+10.23
    
    -
    
    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).+10.24
    
    -
    
    Employment Agreement entered into on May 31, 1999, effective January 1, 1999, by the Company 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).+10.25
    
    -
    
    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).+10.26
    
    -
    
    Employment Agreement entered into on May 31, 1999, effective January 1, 1999, by the Company 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).+10.27
    
    -
    
    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).+10.28
    
    -
    
    Employment Agreement (re: death benefits) entered into on May 31, 1999, by the Company 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).+10.29
    
    -
    
    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).+10.30
    
    -
    
    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).+10.31
    
    -
    
    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. Board of Directors Compensation Policy, incorporated by reference to
Exhibit 10.2 to the Companys Form 8-K filed on March 30, 2005 (File No. 1-4372).+10.33
    
    -
    
    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 quarter ended April 30,
2005 (File No. 1-4372).
 68




---



##### Table of Contents



ExhibitNumber
    
    
    
    Description of Document+10.34
    
    -
    
    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 quarter ended April 30,
2005(File No. 1-4372).+10.35
    
    -
    
    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 quarter
ended April 30, 2005 (File No. 1-4372).+10.36
    
    -
    
    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).+10.37
    
    -
    
    Employment Agreement entered into on July 20, 2005, effective February 1, 2005, by the Company 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).+10.38
    
    -
    
    Employment Agreement entered into on July 20, 2005, effective February 1, 2005, by the Company 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).+10.39
    
    -
    
    Employment Agreement entered into on July 20, 2005, effective February 1, 2005, by the Company 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).+10.40
    
    -
    
    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).+10.41
    
    -
    
    Forest City Enterprises, Inc. 2005 Deferred Compensation Plan for Executives (As Amended and Restated
Effective January 1, 2005), incorporated by reference to Exhibit 10.1 to the Companys Form 8-K filed
on December 16, 2005 (File No. 1-4372).+10.42
    
    -
    
    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).+10.43
    
    -
    
    Forest City Enterprises, Inc. Unfunded Nonqualified Supplemental Pension Plan for Executives (As
Amended and Restated Effective January 1, 2005), incorporated by reference to Exhibit 10.3 to the
Companys Form 8-K filed on December 16, 2005 
(File No. 1-4372).+10.44
    
    -
    
    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).10.45
    
    -
    
    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).+10.46
    
    -
    
    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).+10.47
    
    -
    
    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).
 69




---



##### Table of Contents



ExhibitNumber
    
    
    
    Description of Document+10.48
    
    -
    
    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).+10.49
    
    -
    
    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
    
    -
    
    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).10.51
    
    -
    
    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).10.52
    
    -
    
    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).10.53
    
    -
    
    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).*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. 70




---



##### Table of Contents



SIGNATURES
  FOREST CITY ENTERPRISES, INC.(Registrant)Date:  December 6, 2007
    
    /s/ THOMAS G. SMITH

Thomas G. SmithExecutive Vice President,Chief Financial Officer and Secretary(Principal Financial Officer)Date:  December 6, 2007
    
    /s/ LINDA M. KANELinda M. KaneSenior Vice Presidentand Corporate Controller(Principal Accounting Officer)
 71




---



##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    
    
    Description of Document31.1
    
    -
    
    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.