##### Table of Contents



Form 10-Q
  ý
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended July 31, 2009o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
 1-4372
  
  Ohio
    
    34-0863886(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)Terminal Tower
    
    50 Public SquareSuite 1100
    
    Cleveland, Ohio
    
    44113(Address of principal executive offices)
    
    (Zip Code)Registrants telephone number, including area code
    
    216-621-6060
  ý o
 o o
  Large accelerated filer  ý
    
    Accelerated filer  o
    
    Non-accelerated filer   o(Do not check if a smaller reporting company)
    
    Smaller reporting company  o
 o ý
  Class
    

Outstanding
at September 3, 2009Class A Common Stock, $.33 1/3 par value
    
    133,736,796 sharesClass B Common Stock, $.33 1/3 par value
    
    22,662,512 shares




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##### 



Forest City Enterprises, Inc. and Subsidiaries
 Table of Contents
 PART I. FINANCIAL INFORMATIONPageItem 1.    Financial StatementsForest City Enterprises, Inc. and SubsidiariesConsolidated Balance Sheets
July 31, 2009 and January 31, 2009
    
    
    2Consolidated Statements of Operations 
Three and Six Months Ended July 31, 2009 and 2008
    
    
    3Consolidated Statements of Comprehensive Income (Loss) 
Three and Six Months Ended July 31, 2009 and 2008
    
    
    4Consolidated Statements of Equity 
Six Months Ended July 31, 2009 and 2008
    
    
    5Consolidated Statements of Cash Flows 
Six Months Ended July 31, 2009 and 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    8Item 2.    Managements Discussion and Analysis of FinancialCondition and Results of Operations
    
    
    40Item 3.    Quantitative and Qualitative Disclosures about Market Risk
    
    
    71Item 4.    Controls and Procedures
    
    
    75PART II. OTHER INFORMATIONItem 1.    Legal Proceedings
    
    
    75Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    75Item 4.    Submission of Matters to a Vote of Security-Holders
    
    
    76Item 6.    Exhibits
    
    
    77Signatures
    
    
    81CertificationsEX-10.37EX-10.39EX-10.44EX-31.1EX-31.2EX-32.1
  i




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Forest City Enterprises, Inc. and Subsidiaries
Consolidated Balance Sheets
 July 31, 2009
    
    
    January 31, 2009(Unaudited)
    
    
    (As Adjusted)(in thousands)AssetsReal EstateCompleted rental properties
    
    $
    8,389,218
    
    
    $
    8,212,144Projects under development
    
    
    2,487,369
    
    
    
    2,241,216Land held for development or sale
    
    
    219,676
    
    
    
    195,213Total Real Estate
    
    
    11,096,263
    
    
    
    10,648,573Less accumulated depreciation
    
    
    (1,510,177
    )
    
    
    (1,419,271
    )Real Estate, net
    
    
    9,586,086
    
    
    
    9,229,302Cash and equivalents
    
    
    192,416
    
    
    
    267,305Restricted cash
    
    
    405,361
    
    
    
    291,224Notes and accounts receivable, net
    
    
    393,311
    
    
    
    427,410Investments in and advances to affiliates
    
    
    207,471
    
    
    
    228,995Other assets
    
    
    898,156
    
    
    
    936,271Total Assets
    
    $
    11,682,801
    
    
    $
    11,380,507Liabilities and EquityLiabilitiesMortgage debt, nonrecourse
    
    $
    7,458,065
    
    
    $
    7,078,390Notes payable
    
    
    173,024
    
    
    
    181,919Bank revolving credit facility
    
    
    42,583
    
    
    
    365,500Senior and subordinated debt
    
    
    831,469
    
    
    
    846,064Accounts payable and accrued expenses
    
    
    1,194,262
    
    
    
    1,277,199Deferred income taxes
    
    
    458,378
    
    
    
    455,336Total Liabilities
    
    
    10,157,781
    
    
    
    10,204,408Commitments and Contingencies
    
    
    -
    
    
    
    -EquityShareholders 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, 132,672,134 and 80,082,126 shares
issued and 132,644,925 and 80,080,262 shares outstanding, respectively
    
    
    44,224
    
    
    
    26,694Class B, convertible, 56,000,000 shares authorized, 22,662,512 and 22,798,025
shares issued and outstanding, respectively; 26,257,961 issuable
    
    
    7,554
    
    
    
    7,59951,778
    
    
    
    34,293Additional paid-in capital
    
    
    590,658
    
    
    
    267,796Retained earnings
    
    
    611,256
    
    
    
    643,724Less treasury stock, at cost; 27,209 and 1,864 Class A shares, respectively
    
    
    (150
    )
    
    
    (21
    )Shareholders equity before accumulated other comprehensive loss
    
    
    1,253,542
    
    
    
    945,792Accumulated other comprehensive loss
    
    
    (88,199
    )
    
    
    (107,521
    )Total Shareholders Equity
    
    
    1,165,343
    
    
    
    838,271Noncontrolling interest
    
    
    359,677
    
    
    
    337,828Total Equity
    
    
    1,525,020
    
    
    
    1,176,099Total Liabilities and Equity
    
    $
    11,682,801
    
    
    $
    11,380,507
  2




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 
 Consolidated Statements of Operations
  Three Months Ended July 31,
    
    
    Six Months Ended July 31,2008
    
    
    
    
    
    
    20082009
    
    
    (As Adjusted)
    
    
    2009
    
    
    (As Adjusted)(in thousands, except per share data)Revenues from real estate operations
    
    $
    316,735
    
    
    $
    327,591
    
    
    $
    629,764
    
    
    $
    632,601ExpensesOperating expenses
    
    
    165,544
    
    
    
    185,658
    
    
    
    360,391
    
    
    
    393,014Depreciation and amortization
    
    
    67,853
    
    
    
    69,616
    
    
    
    134,311
    
    
    
    135,622Impairment of real estate
    
    
    1,451
    
    
    
    -
    
    
    
    2,575
    
    
    
    -234,848
    
    
    
    255,274
    
    
    
    497,277
    
    
    
    528,636Interest expense
    
    
    (80,223
    )
    
    
    (81,403
    )
    
    
    (171,931
    )
    
    
    (163,876
    )Amortization of mortgage procurement costs
    
    
    (3,450
    )
    
    
    (3,082
    )
    
    
    (7,121
    )
    
    
    (5,934
    )Gain (loss) on early extinguishment of debt
    
    
    9,063
    
    
    
    (52
    )
    
    
    9,063
    
    
    
    (5,231
    )Interest and other income
    
    
    11,594
    
    
    
    12,884
    
    
    
    18,402
    
    
    
    21,282Gain on disposition of other investments
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    150Earnings (loss) before income taxes
    
    
    18,871
    
    
    
    664
    
    
    
    (19,100
    )
    
    
    (49,644
    )Income tax expense (benefit)Current
    
    
    (6,107
    )
    
    
    (10,906
    )
    
    
    (13,438
    )
    
    
    (10,555
    )Deferred
    
    
    5,576
    
    
    
    14,407
    
    
    
    (9,364
    )
    
    
    (5,803
    )(531
    )
    
    
    3,501
    
    
    
    (22,802
    )
    
    
    (16,358
    )Equity in earnings (loss) of unconsolidated entities
    
    
    (5,535
    )
    
    
    84
    
    
    
    (11,841
    )
    
    
    (9,563
    )Impairment of unconsolidated entities
    
    
    (11,903
    )
    
    
    (6,026
    )
    
    
    (21,463
    )
    
    
    (6,026
    )Earnings (loss) from continuing operations
    
    
    1,964
    
    
    
    (8,779
    )
    
    
    (29,602
    )
    
    
    (48,875
    )Discontinued operations, net of tax:Operating earnings from rental properties
    
    
    -
    
    
    
    267
    
    
    
    36
    
    
    
    655Gain on disposition of rental properties
    
    
    -
    
    
    
    5,294
    
    
    
    2,784
    
    
    
    5,294-
    
    
    
    5,561
    
    
    
    2,820
    
    
    
    5,949Net earnings (loss)
    
    
    1,964
    
    
    
    (3,218
    )
    
    
    (26,782
    )
    
    
    (42,926
    )Net earnings attributable to noncontrolling interest
    
    
    (3,753
    )
    
    
    (5,168
    )
    
    
    (5,686
    )
    
    
    (5,862
    )Net loss attributable to Forest City Enterprises, Inc.
    
    $
    (1,789
    )
    
    $
    (8,386
    )
    
    $
    (32,468
    )
    
    $
    (48,788
    )Basic and diluted earnings (loss) per common shareLoss from continuing operations attributable to Forest City Enterprises, Inc.
    
    $
    (0.01
    )
    
    $
    (0.13
    )
    
    $
    (0.28
    )
    
    $
    (0.53
    )Earnings from discontinued operations attributable to Forest City
Enterprises, Inc.
    
    
    -
    
    
    
    0.05
    
    
    
    0.02
    
    
    
    0.06Net loss attributable to Forest City Enterprises, Inc.
    
    $
    (0.01
    )
    
    $
    (0.08
    )
    
    $
    (0.26
    )
    
    $
    (0.47
    )
  3




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 
 Consolidated Statements of Comprehensive Income (Loss)
  Three Months Ended July 31,20082009
    
    
    (As Adjusted)(in thousands)Net earnings (loss)
    
    $
    1,964
    
    
    $
    (3,218
    )Other comprehensive income, net of tax:Unrealized net gains (losses) on investment securities
    
    
    (206
    )
    
    
    106Foreign currency translation adjustments
    
    
    479
    
    
    
    -Unrealized net gains on interest rate derivative contracts
    
    
    16,888
    
    
    
    10,384Total other comprehensive income, net of tax
    
    
    17,161
    
    
    
    10,490Comprehensive income
    
    
    19,125
    
    
    
    7,272Comprehensive income attributable to noncontrolling interest
    
    
    (4,500
    )
    
    
    (5,078
    )Total comprehensive income attributable to Forest City Enterprises, Inc.
    
    $
    14,625
    
    
    $
    2,194Six Months Ended July 31,20082009
    
    
    (As Adjusted)(in thousands)Net loss
    
    $
    (26,782
    )
    
    $
    (42,926
    )Other comprehensive income, net of tax:Unrealized net gains (losses) on investment securities
    
    
    (113
    )
    
    
    151Foreign currency translation adjustments
    
    
    609
    
    
    
    -Unrealized net gains on interest rate derivative contracts
    
    
    19,569
    
    
    
    16,454Total other comprehensive income, net of tax
    
    
    20,065
    
    
    
    16,605Comprehensive loss
    
    
    (6,717
    )
    
    
    (26,321
    )Comprehensive income attributable to noncontrolling interest
    
    
    (6,429
    )
    
    
    (6,756
    )Total comprehensive loss attributable to Forest City Enterprises, Inc.
    
    $
    (13,146
    )
    
    $
    (33,077
    )
  4




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 
 Consolidated Statements of Equity
  AccumulatedCommon Stock
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherClass A
    
    
    Class B
    
    
    Paid-In
    
    
    Retained
    
    
    Treasury Stock
    
    
    Comprehensive
    
    
    NoncontrollingShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    Loss
    
    
    Interest
    
    
    Total(in thousands)Six Months Ended July 31, 2009Balances at January 31, 2009, as reported
    
    
    80,082
    
    
    $
    26,694
    
    
    
    22,798
    
    
    $
    7,599
    
    
    $
    241,539
    
    
    $
    645,852
    
    
    
    2
    
    
    $
    (21
    )
    
    $
    (107,521
    )
    
    $
    -
    
    
    $
    814,142Retrospective impact of adoption of FSP APB 14-1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,257
    
    
    
    (2,128
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,129Reclassification related to the adoption of SFAS No. 160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    337,828
    
    
    
    337,828Balances at January 31, 2009, as adjusted
    
    
    80,082
    
    
    $
    26,694
    
    
    
    22,798
    
    
    $
    7,599
    
    
    $
    267,796
    
    
    $
    643,724
    
    
    
    2
    
    
    $
    (21
    )
    
    $
    (107,521
    )
    
    $
    337,828
    
    
    $
    1,176,099Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,468
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,686
    
    
    
    (26,782
    )Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,322
    
    
    
    743
    
    
    
    20,065Issuance of Class A common shares in equity offering
    
    
    52,325
    
    
    
    17,442
    
    
    
    
    
    
    
    
    
    
    
    312,475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    329,917Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    (129
    )
    
    
    
    
    
    
    
    
    
    
    (129
    )Conversion of Class B to Class A shares
    
    
    135
    
    
    
    45
    
    
    
    (135
    )
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Restricted stock vested
    
    
    130
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    (43
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,023
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,023Excess income tax benefit (deficiency) from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,986
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,986
    )Acquistion of partners noncontrolling interest in consolidated subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,393
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,393
    )
    
    
    -Contributions from noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,111
    
    
    
    18,111Distributions to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,243
    )
    
    
    (4,243
    )Change in consolidation method of subsidiary under FIN No. 46(R)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,010
    
    
    
    5,010Other changes in noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    (65
    )Balances at July 31, 2009
    
    
    132,672
    
    
    $
    44,224
    
    
    
    22,663
    
    
    $
    7,554
    
    
    $
    590,658
    
    
    $
    611,256
    
    
    
    27
    
    
    $
    (150
    )
    
    $
    (88,199
    )
    
    $
    359,677
    
    
    $
    1,525,020Six Months Ended July 31, 2008Balances at January 31, 2008, as reported
    
    
    78,238
    
    
    $
    26,079
    
    
    
    24,388
    
    
    $
    8,129
    
    
    $
    229,358
    
    
    $
    782,871
    
    
    
    36
    
    
    $
    (1,665
    )
    
    $
    (72,656
    )
    
    $
    -
    
    
    $
    972,116Retrospective impact of adoption of FSP APB 14-1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,631
    
    
    
    (1,081
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,550Reclassification related to the adoption of SFAS No. 160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    281,689
    
    
    
    281,689Balances at January 31, 2008, as adjusted
    
    
    78,238
    
    
    $
    26,079
    
    
    
    24,388
    
    
    $
    8,129
    
    
    $
    255,989
    
    
    $
    781,790
    
    
    
    36
    
    
    $
    (1,665
    )
    
    $
    (72,656
    )
    
    $
    281,689
    
    
    $
    1,279,355Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,788
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,862
    
    
    
    (42,926
    )Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,711
    
    
    
    894
    
    
    
    16,605Dividends $.16 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,485
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,485
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    (642
    )
    
    
    
    
    
    
    
    
    
    
    (642
    )Conversion of Class B to Class A shares
    
    
    1,152
    
    
    
    384
    
    
    
    (1,152
    )
    
    
    (384
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Exercise of stock options
    
    
    13
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    (825
    )
    
    
    
    
    
    
    (36
    )
    
    
    1,553
    
    
    
    
    
    
    
    
    
    
    
    732Restricted stock vested
    
    
    74
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,067
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,067Conversion of Class A Common Units
    
    
    128
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    3,736
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,624
    )
    
    
    (8,846
    )Distribution of accumulated equity to noncontrolling partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,710
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,710
    )Contributions from noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,744
    
    
    
    41,744Distributions to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,522
    )
    
    
    (6,522
    )Other changes in noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,315
    
    
    
    12,315Balances at July 31, 2008
    
    
    79,605
    
    
    $
    26,535
    
    
    
    23,236
    
    
    $
    7,745
    
    
    $
    264,231
    
    
    $
    716,517
    
    
    
    17
    
    
    $
    (754
    )
    
    $
    (56,945
    )
    
    $
    323,358
    
    
    $
    1,280,687
  5




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 Consolidated Statements of Cash Flows
  Six Months Ended July 31,20082009
    
    
    (As Adjusted)(in thousands)Net Loss
    
    $
    (26,782
    )
    
    $
    (42,926
    )Depreciation and amortization
    
    
    134,311
    
    
    
    135,622Amortization of mortgage procurement costs
    
    
    7,121
    
    
    
    5,934Impairment of real estate
    
    
    2,575
    
    
    
    -Impairment of unconsolidated entities
    
    
    21,463
    
    
    
    6,026Write-off of abandoned development projects
    
    
    17,640
    
    
    
    28,951Gain on early extinguishment of debt, net of cash prepayment penalties
    
    
    (9,063
    )
    
    
    (253
    )Other income - gain on sale of an ownership interest in parking management company
    
    
    -
    
    
    
    (3,350
    )Gain on disposition of other investments
    
    
    -
    
    
    
    (150
    )Deferred income tax benefit
    
    
    (9,364
    )
    
    
    (5,803
    )Equity in loss of unconsolidated entities
    
    
    11,841
    
    
    
    9,563Stock-based compensation expense
    
    
    4,036
    
    
    
    4,948Amortization and mark-to-market adjustments of derivative instruments
    
    
    (380
    )
    
    
    (4,147
    )Non-cash interest expense related to Puttable Equity-Linked Senior Notes
    
    
    4,315
    
    
    
    4,433Cash distributions from operations of unconsolidated entities
    
    
    17,637
    
    
    
    32,435Discontinued operations:Depreciation and amortization
    
    
    107
    
    
    
    1,410Amortization of mortgage procurement costs
    
    
    5
    
    
    
    184Deferred income tax (benefit) expense
    
    
    (1,990
    )
    
    
    4,481Gain on disposition of rental properties
    
    
    (4,548
    )
    
    
    (8,627
    )Cost of sales of land included in projects under development and completed rental properties
    
    
    21,490
    
    
    
    8,889Increase in land held for development or sale
    
    
    (4,671
    )
    
    
    (12,082
    )Decrease in notes and accounts receivable
    
    
    17,555
    
    
    
    16,707Decrease (increase) in other assets
    
    
    5,063
    
    
    
    (5,313
    )(Increase) decrease in restricted cash used for operating purposes
    
    
    (5,700
    )
    
    
    7,948Decrease in accounts payable and accrued expenses
    
    
    (67,502
    )
    
    
    (69,933
    )Net cash provided by operating activities
    
    
    135,159
    
    
    
    114,947Cash Flows from Investing ActivitiesCapital expenditures, including real estate acquisitions
    
    
    (459,109
    )
    
    
    (554,365
    )Payment of lease procurement costs
    
    
    (4,581
    )
    
    
    (18,595
    )Decrease (increase) in other assets
    
    
    5,459
    
    
    
    (13,436
    )Increase in restricted cash used for investing purposes
    
    
    (125,649
    )
    
    
    (167,853
    )Proceeds from disposition of rental properties and other investments
    
    
    9,042
    
    
    
    15,309(Increase) decrease in investments in and advances to affiliates
    
    
    (32,202
    )
    
    
    3,581Net cash used in investing activities
    
    
    (607,040
    )
    
    
    (735,359
    )Cash Flows from Financing ActivitiesSale of common stock, net
    
    
    329,917
    
    
    
    -Proceeds from nonrecourse mortgage debt
    
    
    529,948
    
    
    
    936,213Principal payments on nonrecourse mortgage debt
    
    
    (121,011
    )
    
    
    (492,104
    )Proceeds from notes payable
    
    
    856
    
    
    
    46,074Payments on notes payable
    
    
    (9,751
    )
    
    
    (10,044
    )Borrowings on bank revolving credit facility
    
    
    173,000
    
    
    
    268,000Payments on bank revolving credit facility
    
    
    (495,917
    )
    
    
    (163,500
    )Payment of subordinated debt
    
    
    (20,400
    )
    
    
    -Change in restricted cash and book overdrafts
    
    
    6,750
    
    
    
    24,214Payment of deferred financing costs
    
    
    (10,139
    )
    
    
    (29,157
    )Purchase of treasury stock
    
    
    (129
    )
    
    
    (642
    )Exercise of stock options
    
    
    -
    
    
    
    732Distribution of accumulated equity to noncontrolling partners
    
    
    -
    
    
    
    (3,710
    )Contributions from noncontrolling interest
    
    
    18,111
    
    
    
    41,744Distributions to noncontrolling interest
    
    
    (4,243
    )
    
    
    (6,522
    )Payment in exchange for 119,000 Class A Common Units
    
    
    -
    
    
    
    (3,501
    )Dividends paid to shareholders
    
    
    -
    
    
    
    (16,470
    )Net cash provided by financing activities
    
    
    396,992
    
    
    
    591,327Net decrease in cash and equivalents
    
    
    (74,889
    )
    
    
    (29,085
    )Cash and equivalents at beginning of period
    
    
    267,305
    
    
    
    254,434Cash and equivalents at end of period
    
    $
    192,416
    
    
    $
    225,349
  6




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
 Supplemental Non-Cash Disclosures:
  Six Months Ended July 31,20082009
    
    
    (As Adjusted)(in thousands)Operating ActivitiesIncrease in land held for development or sale(1)(7)(8)
    
    $
    (40,623
    )
    
    $
    (5,136
    )Increase in notes and accounts receivable (1)(3)(4)(5)
    
    
    (686
    )
    
    
    (9,960
    )Decrease (increase) in other assets (1)(3)(4)(5)
    
    
    1,241
    
    
    
    (46,798
    )Increase in restricted cash(1)(4)
    
    
    (70
    )
    
    
    (363
    )Increase in accounts payable and accrued expenses(1)(3)(4)(5)(8)
    
    
    19,361
    
    
    
    117,434Total effect on operating activities
    
    $
    (20,777
    )
    
    $
    55,177Investing ActivitiesDecrease (increase) in projects under development (1)(7)(8)(9)
    
    $
    1,127
    
    
    $
    (101,158
    )Increase in completed rental properties(1)(4)(5)(6)(7)(8)
    
    
    (1,979
    )
    
    
    (27,974
    )Increase in restricted cash (4)
    
    
    -
    
    
    
    (244
    )Non-cash proceeds from disposition of a properties (3)
    
    
    20,853
    
    
    
    26,119Decrease in investments in and advances to affiliates (1)(4)
    
    
    12,789
    
    
    
    25,051Total effect on investing activities
    
    $
    32,790
    
    
    $
    (78,206
    )Financing Activities(Decrease) increase in nonrecourse mortgage debt(1)(3)(4)
    
    $
    (22,010
    )
    
    $
    24,270Increase in additional paid-in capital (2)(6)(9)
    
    
    8,380
    
    
    
    7,855Increase (decrease) in noncontrolling interest (1)(2)(6)
    
    
    1,617
    
    
    
    (9,123
    )Increase in Class A common stock (6)
    
    
    -
    
    
    
    42Dividends declared but not yet paid
    
    
    -
    
    
    
    (15
    )Total effect on financing activities
    
    $
    (12,013
    )
    
    $
    23,029
 (1)
    
    Change to full consolidation method of accounting from equity method due to the
occurrence of a triggering event as described in FIN No. 46(R), Consolidation of
Variable Interest Entities, for Gladden Farms IIin the Land Development Group during
the six months ended July 31, 2009 and Shops at Wiregrass,a retail center in the
Commercial Group, during the six months ended July 31, 2008.(2)
    
    Acquisition of partners noncontrolling interest in Gladden Farmsin the Land
Development Group during the six months ended July 31, 2009.(3)
    
    Disposition of Grand Avenue,a specialty retail center in the Commercial Group,
during the six months ended July 31, 2009, and Sterling Glen of Lynbrook,a
supported-living apartment community in the Residential Group, during the six months
ended July 31, 2008, including assumption of nonrecourse mortgage debt by the buyer.(4)
    
    Change to full consolidation method of accounting from equity method due to the
acquisition of a partners interest in Village Centerapartment community in the
Residential Group during the six months ended July 31, 2008.(5)
    
    Amounts related to purchase price allocations in the Commercial Group during the
six months ended July 31, 2008 for the following office buildings: New York Times,
Twelve MetroTech Center, Commerce Court, Colorado Studiosand Richmond Office Park.(6)
    
    Exchange of the Class A Common Units during the six months ended July 31, 2008 (see
Note P  Class A Common Units).(7)
    
    Commercial Group and Residential Group outlots reclassified prior to sale from
projects under development or completed rental properties to land held for sale.(8)
    
    Increase or decrease in construction payables included in accounts payable and accrued
expenses.(9)
    
    Capitalization of stock-based compensation granted to employees directly involved with
the acquisition, development and construction of real estate.
  7




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 Accounting Policies
 Basis of Presentation
  Adoption of FSP APB 14-1
   January 31, 2009As
    
    
    FSP APB 14-1
    
    
    AsReported
    
    
    Adjustments
    
    
    Adjusted(in thousands)Consolidated Balance SheetReal estate, net
    
    $
    9,212,834
    
    
    $
    16,468
    
    
    $
    9,229,302Other assets
    
    
    936,902
    
    
    
    (631
    )
    
    
    936,271Senior and subordinated debt
    
    
    870,410
    
    
    
    (24,346
    )
    
    
    846,064Deferred income taxes
    
    
    439,282
    
    
    
    16,054
    
    
    
    455,336Additional paid-in capital
    
    
    241,539
    
    
    
    26,257
    
    
    
    267,796Retained earnings
    
    
    645,852
    
    
    
    (2,128
    )
    
    
    643,724Three Months Ended July 31, 2008
    
    
    Six Months Ended July 31, 2008As
    
    
    FSP APB 14-1
    
    
    As
    
    
    As
    
    
    FSP APB 14-1
    
    
    AsReported
    
    
    Adjustments
    
    
    Adjusted
    
    
    Reported
    
    
    Adjustments
    
    
    Adjusted(in thousands, except per share data)Consolidated Statements of Operations(1)Depreciation and amortization
    
    $
    69,571
    
    
    $
    45
    
    
    $
    69,616
    
    
    $
    135,532
    
    
    $
    90
    
    
    $
    135,622Interest expense, net of capitalized interest
    
    
    81,326
    
    
    
    77
    
    
    
    81,403
    
    
    
    163,625
    
    
    
    251
    
    
    
    163,876Deferred income tax loss (benefit)
    
    
    14,455
    
    
    
    (48
    )
    
    
    14,407
    
    
    
    (5,669
    )
    
    
    (134
    )
    
    
    (5,803
    )Loss from continuing operations
    
    
    (8,705
    )
    
    
    (74
    )
    
    
    (8,779
    )
    
    
    (48,668
    )
    
    
    (207
    )
    
    
    (48,875
    )Net loss attributable to Forest City Enterprises, Inc.
    
    
    (8,312
    )
    
    
    (74
    )
    
    
    (8,386
    )
    
    
    (48,581
    )
    
    
    (207
    )
    
    
    (48,788
    )Net loss attributable to Forest City Enterprises, Inc.
per share - basic and diluted
    
    
    (0.08
    )
    
    
    0.00
    
    
    
    (0.08
    )
    
    
    (0.47
    )
    
    
    0.00
    
    
    
    (0.47
    )
 (1)
    
    Adjusted to reflect the impact of discontinued operations in accordance with SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144) (see
Note K).
 8




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
 Noncontrolling Interest
   Three Months Ended
    
    
    Six Months EndedJuly 31, 2009
    
    
    July 31, 2009Net loss attributable to Forest City Enterprises, Inc.
    
    $
    (1,789
    )
    
    $
    (32,468
    )Transfer from noncontrolling interest:Increase in Forest City Enterprises, Inc. additional paid-in capital due to
acquistion 
of a consolidated sudsidiarys noncontrolling interest
    
    
    3,393
    
    
    
    3,393Proforma net earnings (loss) attributable to Forest City Enterprises, Inc.
    
    $
    1,604
    
    
    $
    (29,075
    )
 Use of Estimates
  Reclassification
  Restricted Cash
  Capitalized Software Costs
  9




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
  Military Housing Fee Revenues
    Historic and New Market Tax Credit Entities
   Termination Benefits
  10




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
  Total(in thousands)Accrued severance balance at February 1, 2009
    
    $
    3,360Termination benefits expense
    
    
    8,720Payments
    
    
    (3,122
    )Accrued severance balance at April 30, 2009
    
    
    8,958Termination benefits expense
    
    
    -Payments
    
    
    (2,937
    )Accrued severance balance at July 31, 2009
    
    $
    6,021
 Accumulated Other Comprehensive Loss
  July 31, 2009
    
    January 31, 2009(in thousands)Unrealized losses on securities
    
    $
    334
    
    
    $
    170Unrealized losses on foreign currency translation
    
    
    1,246
    
    
    
    2,258Unrealized losses on interest rate contracts
    
    
    143,210
    
    
    
    174,838144,790
    
    
    
    177,266Noncontrolling interest and income tax benefit
    
    
    (56,591
    )
    
    
    (69,745
    )Accumulated Other Comprehensive Loss
    
    $
    88,199
    
    
    $
    107,521
 Fair Value of Financial Instruments
  July 31, 2009
    
    
    January 31, 2009Carrying Value
    
    
    Fair Value
    
    
    Carrying Value
    
    
    Fair Value(in thousands)
    
    
    (in thousands)Fixed
    
    $
    4,914,574
    
    
    $
    4,353,180
    
    
    $
    4,941,899
    
    
    $
    4,313,068Variable
    
    
    3,417,543
    
    
    
    3,188,067
    
    
    
    3,348,055
    
    
    
    3,043,161Total long-term debt
    
    $
    8,332,117
    
    
    $
    7,541,247
    
    
    $
    8,289,954
    
    
    $
    7,356,229
 11




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
 Derivative Instruments and Hedging Activities
   Variable Interest Entities
   Gladden Farms II Gladden Farms II Gladden Farms II
  12




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
   July 31, 2009
    
    
    January 31, 2009(in thousands)Real estate, net
    
    $
    1,835,000
    
    
    $
    1,602,000Nonrecourse mortgage debt
    
    $
    1,557,000
    
    
    $
    1,237,000Noncontrolling interest
    
    $
    89,000
    
    
    $
    63,000
  New Accounting Standards
      13




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
 (see Note J - Fair
Value
Measurements)
   non-forfeitable rights to
    14




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Accounting Policies (continued)
  FASB Accounting Standards
Codification TM FASB Accounting
Standards Codification TM
   15




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 B.
    
    Investments in and Advances to Affiliates
   January 31,July 31,
    
    
    20092009
    
    
    (As Adjusted)(in thousands)Members and partners equity, as below
    
    $
    535,585
    
    
    $
    595,163Equity of other members and partners
    
    
    484,499
    
    
    
    534,942Companys investment in partnerships
    
    
    51,086
    
    
    
    60,221Advances to and on behalf of other affiliates
    
    
    156,385
    
    
    
    168,774Total Investments in and Advances to Affiliates
    
    $
    207,471
    
    
    $
    228,995Summarized financial information for the equity method investments is as follows:(Combined 100%)July 31,
    
    
    January 31,2009
    
    
    2009(in thousands)Balance Sheet:Completed rental properties
    
    $
    4,236,641
    
    
    $
    3,967,896Projects under development
    
    
    866,112
    
    
    
    931,411Land held for development or sale
    
    
    263,988
    
    
    
    278,438Total Real Estate
    
    
    5,366,741
    
    
    
    5,177,745Less accumulated depreciation
    
    
    (741,282
    )
    
    
    (680,013
    )Real Estate, net
    
    
    4,625,459
    
    
    
    4,497,732Restricted
cash - military housing bond funds
    
    
    633,509
    
    
    
    795,616Other restricted cash
    
    
    201,456
    
    
    
    207,507Other assets
    
    
    443,156
    
    
    
    482,431Total Assets
    
    $
    5,903,580
    
    
    $
    5,983,286Mortgage debt, nonrecourse
    
    $
    4,564,633
    
    
    $
    4,571,375Other liabilities
    
    
    803,362
    
    
    
    816,748Members and partners equity
    
    
    535,585
    
    
    
    595,163Total Liabilities and Members/Partners Equity
    
    $
    5,903,580
    
    
    $
    5,983,286
 16




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 B.
    
    Investments in and Advances to Affiliates (continued)
 (Combined 100%)
    
    (Combined 100%)Three Months Ended July 31,
    
    Six Months Ended July 31,2009
    
    2008
    
    2009
    
    2008(in thousands)
    
    
    (in thousands)Operations:Revenues
    
    $
    242,917
    
    
    $
    253,310
    
    
    $
    487,631
    
    
    $
    494,148Operating expenses
    
    
    (167,540
    )
    
    
    (200,470
    )
    
    
    (332,070
    )
    
    
    (369,356
    )Interest expense including early extinguishment of debt
    
    
    (55,688
    )
    
    
    (55,629
    )
    
    
    (114,273
    )
    
    
    (115,162
    )Impairment of unconsolidated entities (1)
    
    
    (11,903
    )
    
    
    (45,713
    )
    
    
    (23,203
    )
    
    
    (45,713
    )Depreciation and amortization
    
    
    (43,022
    )
    
    
    (29,938
    )
    
    
    (92,928
    )
    
    
    (78,157
    )Interest and other income
    
    
    3,564
    
    
    
    14,446
    
    
    
    8,774
    
    
    
    31,810Loss from continuing operations
    
    
    (31,672
    )
    
    
    (63,994
    )
    
    
    (66,069
    )
    
    
    (82,430
    )Discontinued operations(2):Operating loss from rental properties
    
    
    -
    
    
    
    (81
    )
    
    
    -
    
    
    
    (99
    )Gain on disposition of rental properties
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    3,070Discontinued operations subtotal
    
    
    -
    
    
    
    (81
    )
    
    
    -
    
    
    
    2,971Net loss (pre-tax)
    
    $
    (31,672
    )
    
    $
    (64,075
    )
    
    $
    (66,069
    )
    
    $
    (79,459
    )Companys portion of net loss (pre-tax)
    
    $
    (17,438
    )
    
    $
    (5,942
    )
    
    $
    (33,304
    )
    
    $
    (15,589
    )
 (1)
    
    The following table shows the detail of the impairment of unconsolidated entities:
 Three Months Ended July 31,
    
    Six Months Ended July 31,2009
    
    2008
    
    2009
    
    2008(in thousands)
    
    (in thousands)Apartment Communities:Millender Center
    
    (Detroit, Michigan)
    
    $
    2,818
    
    
    $
    -
    
    
    $
    7,070
    
    
    $
    -Uptown Apartments
    
    (Oakland, California)
    
    
    6,781
    
    
    
    -
    
    
    
    6,781
    
    
    
    -Metropolitan Lofts
    
    (Los Angeles, California)
    
    
    -
    
    
    
    -
    
    
    
    1,039
    
    
    
    -Residences at University Park
    
    (Cambridge, Massachusetts)
    
    
    -
    
    
    
    -
    
    
    
    855
    
    
    
    -Fenimore Court
    
    (Detroit, Michigan)
    
    
    693
    
    
    
    -
    
    
    
    693
    
    
    
    -Classic Residence by Hyatt (Supported-Living Apartments)
    
    (Yonkers, New York)
    
    
    -
    
    
    
    30,000
    
    
    
    4,892
    
    
    
    -Navy Midwest (Military Housing Project)
    
    (Chicago, Illinois)
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    30,000Specialty Retail Centers:Southgate Mall
    
    (Yuma, Arizona)
    
    
    1,611
    
    
    
    -
    
    
    
    1,611
    
    
    
    -El Centro Mall
    
    (El Centro, California)
    
    
    -
    
    
    
    3,342
    
    
    
    -
    
    
    
    3,342Mercury (Condominium)
    
    (Los Angeles, California)
    
    
    -
    
    
    
    12,006
    
    
    
    -
    
    
    
    12,006Old Stone Crossing at Caldwell Creek (Land Development)
    
    (Charlotte, North Carolina)
    
    
    -
    
    
    
    365
    
    
    
    122
    
    
    
    365Other
    
    
    
    
    
    
    -
    
    
    
    -
    
    
    
    140
    
    
    
    -Total impairment of unconsolidated entities
    
    
    
    
    
    $
    11,903
    
    
    $
    45,713
    
    
    $
    23,203
    
    
    $
    45,713Companys portion of impairment of unconsolidated entities
    
    
    
    
    
    $
    11,903
    
    
    $
    6,026
    
    
    $
    21,463
    
    
    $
    6,026
 (2)
    
    Upon disposition, investments accounted for on the equity method are not classified as
discontinued operations under the provisions of SFAS No. 144; therefore, gains or losses on
the sale of equity method properties are reported in continuing operations when sold.
During the six months ended July 31, 2008, the Company recorded $881,000 related to its
share of gain on disposition in One International Place,an equity method investment
located in Cleveland, Ohio.
 17




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 B.
    
    Investments in and Advances to Affiliates (continued)
  Three Months Ended July 31,
    
    Six Months Ended July 31,2009
    
    2008
    
    2009
    
    2008(in thousands)
    
    (in thousands)Operations:Revenues
    
    $
    10,197
    
    
    $
    9,338
    
    
    $
    48,645
    
    
    $
    57,474Operating expenses
    
    
    (16,104
    )
    
    
    (16,852
    )
    
    
    (60,489
    )
    
    
    (67,336
    )Interest expense
    
    
    (4,830
    )
    
    
    (3,059
    )
    
    
    (7,676
    )
    
    
    (6,294
    )Depreciation and amortization
    
    
    (2,991
    )
    
    
    (3,572
    )
    
    
    (19,791
    )
    
    
    (23,697
    )Net loss (pre-tax)
    
    $
    (13,728
    )
    
    $
    (14,145
    )
    
    $
    (39,311
    )
    
    $
    (39,853
    )Companys portion of net loss (pre-tax)
    
    $
    (8,955
    )
    
    $
    (9,045
    )
    
    $
    (19,856
    )
    
    $
    (22,601
    )
 C.
    
    Mortgage Debt, Nonrecourse
  ScheduledTotal
    
    
    Scheduled

    
    
    BalloonFiscal Years Ending January 31,
    
    Maturities
    
    
    Amortization

    
    
    Payments(in thousands)2010
    
    $
    622,617
    
    
    $
    40,740
    
    
    
    $
    581,8772011
    
    $
    912,552
    
    
    $
    74,529
    
    
    
    $
    838,0232012
    
    $
    816,615
    
    
    $
    72,485
    
    
    
    $
    744,1302013
    
    $
    819,269
    
    
    $
    57,010
    
    
    
    $
    762,2592014
    
    $
    814,480
    
    
    $
    47,038
    
    
    
    $
    767,442
   D.
    
    Bank Revolving Credit Facility
  18




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 D.
    
    Bank Revolving Credit Facility (continued)
    July 31, 2009
    
    
    January 31, 2009(in thousands)Maximum borrowings
    
    $
    750,000
    
    
    $
    750,000Less outstanding balances:Borrowings
    
    
    42,583
    
    
    
    365,500Letters of credit
    
    
    66,666
    
    
    
    65,949Surety bonds
    
    
    -
    
    
    
    -Available credit
    
    $
    640,751
    
    
    $
    318,551
 E.
    
    Senior and Subordinated Debt
  January 31, 2009July 31, 2009
    
    
    (As Adjusted)(in thousands)Senior Notes:3.625% Puttable Equity-Linked Senior Notes due 2011
    
    $
    252,469
    
    
    $
    248,154Other Senior Notes:7.625% Senior Notes due 2015
    
    
    300,000
    
    
    
    300,0006.500% Senior Notes due 2017
    
    
    150,000
    
    
    
    150,0007.375% Senior Notes due 2034
    
    
    100,000
    
    
    
    100,000Total Senior Notes
    
    
    802,469
    
    
    
    798,154Subordinated Debt:Redevelopment Bonds due 2010
    
    
    -
    
    
    
    18,910Subordinate Tax Revenue Bonds due 2013
    
    
    29,000
    
    
    
    29,000Total Subordinated Debt
    
    
    29,000
    
    
    
    47,910Total Senior and Subordinated Debt
    
    $
    831,469
    
    
    $
    846,064
 Puttable Equity-Linked Senior Notes
  19




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 E.
    
    Senior and Subordinated Debt (continued)
     July 31, 2009
    
    
    January 31, 2009(in thousands)Carrying amount of the equity component
    
    $
    45,885
    
    
    $
    45,885Outstanding principal amount of the puttable equity-linked senior notes
    
    $
    272,500
    
    
    $
    272,500Unamortized discount
    
    
    (20,031
    )
    
    
    (24,346
    )Net carrying amount of the puttable equity-linked senior notes
    
    $
    252,469
    
    
    $
    248,154
  20




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 E.
    
    Senior and Subordinated Debt (continued)
 Other Senior Notes
     Subordinated Debt
   F.
    
    Financing Arrangements
 Collateralized Borrowings
  21




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




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 G.
    
    Derivative Instruments and Hedging Activities
 Risk Management Objective of Using Derivatives
  Cash Flow Hedges of Interest Rate Risk
   Fair Value Hedges of Interest Rate Risk
  Nondesignated Hedges of Interest Rate Risk
  23




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 G. Derivative Instruments and Hedging Activities (continued)
   Fair Value of Derivative InstrumentsJuly 31, 2009Liability DerivativesAsset Derivatives
    
    
    (included in Accounts Payable(included in Other Assets)
    
    
    and Accrued Expenses)Current
    
    
    
    
    
    
    CurrentNotional
    
    
    Fair Value
    
    
    Notional
    
    
    Fair Value(in thousands)Derivatives Designated as Hedging InstrumentsInterest rate caps and floors
    
    $
    567,149
    
    
    $
    2,918
    
    
    $
    -
    
    
    $
    -Interest rate swap agreements
    
    
    -
    
    
    
    -
    
    
    
    1,449,755
    
    
    
    102,600
    (1)TRS
    
    
    -
    
    
    
    -
    
    
    
    495,795
    
    
    
    52,187Total derivatives designated as hedging instruments
    
    $
    567,149
    
    
    $
    2,918
    
    
    $
    1,945,550
    
    
    $
    154,787Derivatives Not Designated as Hedging InstrumentsInterest rate caps and floors
    
    $
    1,383,149
    
    
    $
    940
    
    (2)

    $
    -
    
    
    $
    -Interest rate swap agreements
    
    
    21,176
    
    
    
    2,264
    
    
    
    189,325
    
    
    
    32,599TRS
    
    
    25,000
    
    
    
    69
    
    
    
    40,543
    
    
    
    12,113Total derivatives not designated as hedging instruments
    
    $
    1,429,325
    
    
    $
    3,273
    
    
    $
    229,868
    
    
    $
    44,712
 (1)
    
    $1,127 of the fair value applies to $300,000 of notional excluded from the associated
current notional amount that is covered by other interest rate swaps for the six months
ended July 31, 2009. These swaps are active as of July 31, 2009; however, their effective
periods are subsequent to this date.(2)
    
    $654 of the fair value applies to $1,447,334 of notional excluded from the associated
current notional amount that is covered by other interest rate caps for the six months
ended July 31, 2009. These caps are active as of July 31, 2009; however, their effective
periods are subsequent to this date.
 24




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 G. Derivative Instruments and Hedging Activities (continued)
  Loss Reclassified fromAccumulated OCIThree Months Ended July 31, 2009
    
    
    
    
    
    (Effective Portion)Loss Recognized inInterest Expense onGain
    
    
    Location on
    
    
    
    
    
    Derivatives (IneffectiveRecognized
    
    
    Consolidated
    
    
    
    
    
    Portion and AmountsDerivatives Designated as
    
    in OCI
    
    
    Statements of
    
    
    
    
    
    Excluded fromCash Flow Hedging Instruments(1)
    
    (Effective Portion)
    
    
    Operations
    
    Amount
    
    
    Effectiveness Testing)(in thousands)Interest
rate caps, interest rate swapsand Treasury options
    
    $
    11,156
    
    
    Interest expense
    
    $
    (14,331
    )
    
    $
    (691
    )Treasury options
    
    
    -
    
    
    Equity in loss of
unconsolidated entities
    
    
    (41
    )
    
    
    -Total
    
    $
    11,156
    
    
    
    
    $
    (14,372
    )
    
    $
    (691
    )Six Months Ended July 31, 2009(in thousands)Interest
rate caps, interest rate swapsand Treasury options
    
    $
    3,108
    
    
    Interest expense
    
    $
    (26,879
    )
    
    $
    (773
    )Treasury options
    
    
    -
    
    
    Equity in loss of
unconsolidated entities
    
    
    (82
    )
    
    
    -Total
    
    $
    3,108
    
    
    
    
    $
    (26,961
    )
    
    $
    (773
    )
 (1)
    
    Gains and losses on terminated hedges included in accumulated OCI are being
reclassified into interest expense over the original life of the hedged transactions as the
transactions are still more likely than not to occur and would not be reflected in the
previous table related to the fair value of designated derivatives
(see Note H  Fair Value
Measurements).
 25




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 G. Derivative Instruments and Hedging Activities (continued)
  Derivatives Designated asFair Value Hedging Instruments
    
    Net Gain (Loss) Recognized(1)Three Months Ended
    
    
    Six Months EndedJuly 31, 2009
    
    
    July 31, 2009(in thousands)TRS
    
    $
    (966
    )
    
    $
    7,153
 (1)
    
    The net gain (loss) recognized in interest expense in the Consolidated Statements of
Operations from the change in fair value of the underlying TRS borrowings for the three and
six months ended July 31, 2009 was $966 and $(7,153), respectively, offsetting the gain
recognized on the TRS (see Note H  Fair Value
Measurements).
  Derivatives Not Designated asHedging Instruments
    
    Net Gain (Loss) RecognizedThree Months Ended
    
    
    Six Months EndedJuly 31, 2009
    
    
    July 31, 2009(in thousands)Interest rate caps, interest rate swaps and floors
    
    $
    6,436
    
    
    $
    6,422TRS
    
    
    (654
    )
    
    
    (3,511
    )Total
    
    $
    5,782
    
    
    $
    2,911
 Credit-risk-related Contingent Features
    26




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 H. Fair Value Measurements
  Fair Value Hierarchy
  
    
    Level 1  Quoted prices in active markets that are unadjusted and accessible at the
measurement date for identical, unrestricted assets or
liabilities;
    
    Level 2  Quoted prices for identical assets and liabilities in markets that are not
active, quoted prices for similar assets and liabilities in active markets or financial
instruments for which significant observable inputs are available, either directly or
indirectly such as interest rates and yield curves that are observable at commonly quoted
intervals; and
    
    Level 3  Prices or valuations that
require inputs that are unobservable.
  Measurement of Fair Value
    27




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 H. Fair Value Measurements (continued)
 Items Measured at Fair Value on a Recurring Basis
  Fair Value Measurementsat July 31, 2009Level 1
    
    Level 2
    
    Level 3
    
    Total(in thousands)Interest rate caps and floors
    
    $
    -
    
    
    $
    3,858
    
    
    $
    -
    
    
    $
    3,858Interest rate swap agreements (positive fair value)
    
    
    -
    
    
    
    2,264
    
    
    
    -
    
    
    
    2,264TRS (positive fair value)
    
    
    -
    
    
    
    -
    
    
    
    69
    
    
    
    69Interest rate swap agreements (negative fair value)
    
    
    -
    
    
    
    (46,186
    )
    
    
    (89,013
    )
    
    
    (135,199
    )TRS (negative fair value)
    
    
    -
    
    
    
    -
    
    
    
    (64,300
    )
    
    
    (64,300
    )Fair value adjustment to the borrowings subject to TRS
    
    
    -
    
    
    
    -
    
    
    
    52,187
    
    
    
    52,187Total
    
    $
    -
    
    
    $
    (40,064
    )
    
    $
    (101,057
    )
    
    $
    (141,121
    )
  Fair Value MeasurementsSix Months Ended July 31, 2009(in thousands)Fair valueadjustmentto theInterest Rate
    
    Net
    
    borrowings
    
    Total TRSSwaps
    
    TRS
    
    subject to TRS
    
    Related
    
    TotalBalance, February 1, 2009
    
    $
    (113,109
    )
    
    $
    (67,873
    )
    
    $
    59,340
    
    
    $
    (8,533
    )
    
    $
    (121,642
    )Total realized and unrealized gains (losses):
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Included in interest expense
    
    
    -
    
    
    
    4,406
    
    
    
    (7,917
    )
    
    
    (3,511
    )
    
    
    (3,511
    )Included in other comprehensive income
    
    
    24,096
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    24,096Purchases, issuances and settlements
    
    
    -
    
    
    
    (764
    )
    
    
    764
    
    
    
    -
    
    
    
    -Balance, July 31, 2009
    
    $
    (89,013
    )
    
    $
    (64,231
    )
    
    $
    52,187
    
    
    $
    (12,044
    )
    
    $
    (101,057
    )
 I. Stock-Based Compensation
   28




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 I. Stock-Based Compensation (continued)
  Three Months Ended July 31,
    
    
    Six Months Ended July 31,2009
    
    
    2008
    
    
    
    2009
    
    
    2008(in thousands)
    
    
    
    (in thousands)Stock option costs
    
    $
    2,174
    
    
    $
    2,562
    
    
    
    $
    4,618
    
    
    $
    5,138Restricted stock costs
    
    
    2,166
    
    
    
    1,750
    
    
    
    
    4,405
    
    
    
    3,643Performance shares
    
    
    -
    
    
    
    286
    
    
    
    
    -
    
    
    
    286Total stock-based compensation costs
    
    
    4,340
    
    
    
    4,598
    
    
    
    
    9,023
    
    
    
    9,067Less amount capitalized into qualifying real estate projects
    
    
    (2,571
    )
    
    
    (2,387
    )
    
    
    
    (4,987
    )
    
    
    (4,119
    )Amount charged to operating expenses
    
    
    1,769
    
    
    
    2,211
    
    
    
    
    4,036
    
    
    
    4,948Depreciation expense on capitalized stock-based compensation
    
    
    104
    
    
    
    62
    
    
    
    
    208
    
    
    
    123Total stock-based compensation expense
    
    $
    1,873
    
    
    $
    2,273
    
    
    
    $
    4,244
    
    
    $
    5,071Deferred income tax benefit
    
    $
    629
    
    
    $
    742
    
    
    
    $
    1,416
    
    
    $
    1,663
   J. Income Taxes
    
 29




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 J. Income Taxes (continued)
 FIN No. 48
    K. Discontinued Operations and Gain on Disposition of Rental Properties
  Sterling Glen of Lynbrook
 Sterling Glen of Rye Brook
 pre-determined
 30




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 K. Discontinued Operations and Gain on Disposition of Rental Properties (continued)
  Three
    
    Six
    
    Three
    
    SixMonths
    
    Months
    
    Months
    
    MonthsSquare Feet/
    
    Period
    
    Ended
    
    Ended
    
    Ended
    
    EndedProperty
    
    Location
    
    
    Number of Units
    
    Disposed
    
    7/31/2009
    
    7/31/2009
    
    7/31/2008
    
    7/31/2008Commercial Group:Grand Avenue
    
    Queens, New York
    
    100,000 square feet
    
    Q1-2009
    
    -
    
    Yes
    
    Yes
    
    YesResidential Group:Sterling Glen of Rye Brook
    
    Rye Brook, New York
    
    168 units
    
    Q4-2008
    
    -
    
    -
    
    Yes
    
    YesSterling Glen of Lynbrook
    
    Lynbrook, New York
    
    130 units
    
    Q2-2008
    
    -
    
    -
    
    Yes
    
    Yes
  Three Months Ended July 31,
    
    Six Months Ended July 31,2009
    
    2008
    
    2009
    
    2008(in thousands)
    
    (in thousands)Revenues from real estate operations
    
    $
    -
    
    
    $
    2,810
    
    
    $
    813
    
    
    $
    5,990ExpensesOperating expenses
    
    
    -
    
    
    
    508
    
    
    
    320
    
    
    
    1,039Depreciation and amortization
    
    
    -
    
    
    
    747
    
    
    
    107
    
    
    
    1,410-
    
    
    
    1,255
    
    
    
    427
    
    
    
    2,449Interest expense
    
    
    -
    
    
    
    (1,067
    )
    
    
    (322
    )
    
    
    (2,331
    )Amortization of mortgage procurement costs
    
    
    -
    
    
    
    (87
    )
    
    
    (5
    )
    
    
    (184
    )Interest income
    
    
    -
    
    
    
    34
    
    
    
    -
    
    
    
    41Gain on disposition of rental properties
    
    
    -
    
    
    
    8,627
    
    
    
    4,548
    
    
    
    8,627Earnings before income taxes
    
    
    -
    
    
    
    9,062
    
    
    
    4,607
    
    
    
    9,694Income tax expense (benefit)Current
    
    
    -
    
    
    
    (876
    )
    
    
    3,777
    
    
    
    (736
    )Deferred
    
    
    -
    
    
    
    4,377
    
    
    
    (1,990
    )
    
    
    4,481-
    
    
    
    3,501
    
    
    
    1,787
    
    
    
    3,745Net earnings from discontinued operations
    
    $
    -
    
    
    $
    5,561
    
    
    $
    2,820
    
    
    $
    5,949
 
 31




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Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 L.
    Impairment of Real Estate, Impairment of Unconsolidated Entities, Write-Off of Abandoned
Development Projects and Gain (Loss) on Early Extinguishment of Debt
 Impairment of Real Estate
 Gladden Farms Tangerine Crossing ,
 Impairment of Unconsolidated Entities
   Three Months Ended July 31,
    
    Six Months Ended July 31,2009
    
    2008
    
    2009
    
    2008(in thousands)
    
    
    (in thousands)Apartment Communities:Millender Center
    
    (Detroit, Michigan)
    
    $
    2,818
    
    
    $
    -
    
    
    $
    7,070
    
    
    $
    -Uptown Apartments
    
    (Oakland, California)
    
    
    6,781
    
    
    
    -
    
    
    
    6,781
    
    
    
    -Metropolitan Lofts
    
    (Los Angeles, California)
    
    
    -
    
    
    
    -
    
    
    
    1,039
    
    
    
    -Residences at University Park
    
    (Cambridge, Massachusetts)
    
    
    -
    
    
    
    -
    
    
    
    855
    
    
    
    -Fenimore Court
    
    (Detroit, Michigan)
    
    
    693
    
    
    
    -
    
    
    
    693
    
    
    
    -Classic Residence by Hyatt (Supported-Living Apartments)
    
    (Yonkers, New York)
    
    
    -
    
    
    
    -
    
    
    
    3,152
    
    
    
    -Specialty Retail Centers:Southgate Mall
    
    (Yuma, Arizona)
    
    
    1,611
    
    
    
    -
    
    
    
    1,611
    
    
    
    -El Centro Mall
    
    (El Centro, California)
    
    
    -
    
    
    
    1,263
    
    
    
    -
    
    
    
    1,263Mercury (Condominium)
    
    (Los Angeles, California)
    
    
    -
    
    
    
    4,098
    
    
    
    -
    
    
    
    4,098Two land development projects
    
    
    
    
    
    
    -
    
    
    
    365
    
    
    
    262
    
    
    
    365Other
    
    
    
    
    
    
    -
    
    
    
    300
    
    
    
    -
    
    
    
    300Total Impairment of Unconsolidated Entities
    
    
    
    
    
    $
    11,903
    
    
    $
    6,026
    
    
    $
    21,463
    
    
    $
    6,026
 Write-Off of Abandoned Development Projects
  
 32




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 L.
    Impairment of Real Estate, Impairment of Unconsolidated Entities, Write-Off of Abandoned
Development Projects and Gain (Loss) on Early Extinguishment of Debt (continued)
 Gain (Loss) on Early Extinguishment of Debt
 Gladden Farms Galleria at Sunset 1251 S. Michigan Sky55 Post Office Plaza
 M.
    Common Stock Offering
  33




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Earnings Per Share
    Three Months Ended July 31,

    
    Six Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerators(in thousands)Loss from continuing operations attributable to Forest City Enterprises, Inc.
- basic and diluted
    
    $
    (1,789
    )
    
    $
    (13,947
    )
    
    $
    (35,288
    )
    
    $
    (54,737
    )Net loss
attributable to Forest City Enterprises, Inc. - basic and diluted
    
    $
    (1,789
    )
    
    $
    (8,386
    )
    
    $
    (32,468
    )
    
    $
    (48,788
    )DenominatorWeighted
average shares outstanding - basic and diluted(1)(2)(3)(4)
    
    
    144,547,045
    
    
    
    102,682,825
    
    
    
    124,074,311
    
    
    
    102,648,700Earnings Per ShareLoss from continuing operations attributable to Forest City Enterprises, Inc.
- basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.13
    )
    
    $
    (0.28
    )
    
    $
    (0.53
    )Net loss
attributable to Forest City Enterprises, Inc. - basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.08
    )
    
    $
    (0.26
    )
    
    $
    (0.47
    )
 (1)
    
    Incremental shares from dilutive securities of 3,647,755 and 3,655,000 for the three and
six months ended July 31, 2009, respectively, and 4,513,666 and 4,565,100 for the three and
six months ended July 31, 2008, respectively, were not included in the computation of
diluted earnings per share because their effect is anti-dilutive due to the loss from
continuing operations.(2)
    
    Weighted-average options and restricted stock of 5,147,039 and 4,796,384 for the three
and six months ended July 31, 2009, respectively, and 2,439,244 and 2,263,990 for the three
and six months ended July 31, 2008, respectively, were not included in the computation of
diluted earnings per share because their effect is anti-dilutive.(3)
    
    Weighted-average performance shares of 172,609 for both the three and six months ended
July 31, 2009, respectively, and 82,552 and 41,276 for the three and six months ended July
31, 2008, respectively, were not included in the computation of diluted earnings per share
because the performance criteria were not satisfied at the end of the respective periods.(4)
    
    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
six months ended July 31, 2009 and 2008 as the Companys average stock price did not exceed
the put value price of the Puttable Equity-Linked Senior Notes. These notes will be
dilutive when the average stock price for the period exceeds $66.39. 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 six months ended July 31, 2009 and 2008 as the
Companys stock price did not exceed the exercise price.
 34




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Segment Information
  July 31,
    
    
    January 31,
    
    
    
    Three Months Ended July 31,
    
    
    
    Six Months Ended July 31,2009
    
    
    2009
    
    
    
    2009
    
    
    2008
    
    
    
    2009
    
    
    2008Identifiable Assets
    
    
    
    Capital ExpendituresCommercial Group
    
    
    
    
    
    
    
    
    
    
    $
    8,282,604
    
    
    $
    8,251,407
    
    
    
    $
    139,871
    
    
    $
    238,730
    
    
    
    $
    272,274
    
    
    $
    406,580Residential Group
    
    
    
    
    
    
    
    
    
    
    
    2,770,542
    
    
    
    2,548,712
    
    

    
    
    85,024
    
    
    
    76,080
    
    
    
    
    186,605
    
    
    
    145,723Land Development Group
    
    
    
    
    
    
    
    
    
    
    
    456,653
    
    
    
    431,938
    
    
    
    
    -
    
    
    
    1,029
    
    
    
    
    -
    
    
    
    1,977The Nets(1)
    
    
    
    
    
    
    
    
    
    
    
    2,115
    
    
    
    (3,302
    )
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    
    
    
    
    
    
    
    
    
    170,887
    
    
    
    151,752
    
    
    
    
    80
    
    
    
    27
    
    
    
    
    230
    
    
    
    85$
    11,682,801
    
    
    $
    11,380,507
    
    
    
    $
    224,975
    
    
    $
    315,866
    
    
    
    $
    459,109
    
    
    $
    554,365Three Months Ended July 31,
    
    
    
    Six Months Ended July 31,
    
    
    
    Three Months Ended July 31,
    
    
    
    Six Months Ended July 31,2009
    
    
    2008
    
    
    
    2009
    
    
    2008
    
    
    
    2009
    
    
    2008
    
    
    
    2009
    
    
    2008Revenues from Real Estate Operations
    
    
    
    Operating ExpensesCommercial Group
    
    $
    238,425
    
    
    $
    236,452
    
    
    
    $
    467,424
    
    
    $
    454,098
    
    
    
    $
    108,176
    
    
    $
    116,660
    
    
    
    $
    219,099
    
    
    $
    243,973Commercial Group
Land Sales
    
    
    5,386
    
    
    
    10,602
    
    
    
    
    12,014
    
    
    
    14,250
    
    
    
    
    3,508
    
    
    
    5,510
    
    
    
    
    7,491
    
    
    
    8,372Residential Group
    
    
    68,023
    
    
    
    73,378
    
    
    
    
    142,955
    
    
    
    150,672
    
    
    
    
    40,907
    
    
    
    43,448
    
    
    
    
    99,075
    
    
    
    98,349Land Development Group
    
    
    4,901
    
    
    
    7,159
    
    
    
    
    7,371
    
    
    
    13,581
    
    
    
    
    6,873
    
    
    
    9,994
    
    
    
    
    12,825
    
    
    
    19,524The Nets
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    
    6,080
    
    
    
    10,046
    
    
    
    
    21,901
    
    
    
    22,796$
    316,735
    
    
    $
    327,591
    
    
    
    $
    629,764
    
    
    $
    632,601
    
    
    
    $
    165,544
    
    
    $
    185,658
    
    
    
    $
    360,391
    
    
    $
    393,014Depreciation and Amortization Expense
    
    
    
    Interest ExpenseCommercial Group
    
    $
    51,332
    
    
    $
    52,938
    
    
    
    $
    102,028
    
    
    $
    103,533
    
    
    
    $
    53,649
    
    
    $
    55,637
    
    
    
    $
    113,146
    
    
    $
    112,394Residential Group
    
    
    15,522
    
    
    
    15,681
    
    
    
    
    30,334
    
    
    
    30,146
    
    
    
    
    6,915
    
    
    
    8,213
    
    
    
    
    17,308
    
    
    
    17,455Land Development Group
    
    
    229
    
    
    
    240
    
    
    
    
    462
    
    
    
    432
    
    
    
    
    557
    
    
    
    (168
    )
    
    
    
    806
    
    
    
    (172
    )The Nets
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    770
    
    
    
    757
    
    
    
    
    1,487
    
    
    
    1,511
    
    
    
    
    19,102
    
    
    
    17,721
    
    
    
    
    40,671
    
    
    
    34,199$
    67,853
    
    
    $
    69,616
    
    
    
    $
    134,311
    
    
    $
    135,622
    
    
    
    $
    80,223
    
    
    $
    81,403
    
    
    
    $
    171,931
    
    
    $
    163,876Interest and Other Income
    
    
    
    Net Earnings (Loss) Attributable to Forest City Enterprises, Inc.Commercial Group
    
    $
    1,219
    
    
    $
    4,564
    
    
    
    $
    1,802
    
    
    $
    6,344
    
    
    
    $
    13,703
    
    
    $
    9,714
    
    
    
    $
    25,328
    
    
    $
    (1,988
    )Residential Group
    
    
    6,059
    
    
    
    2,586
    
    
    
    
    10,130
    
    
    
    6,176
    
    
    
    
    (499
    )
    
    
    8,457
    
    
    
    
    (8,171
    )
    
    
    10,408Land Development Group
    
    
    3,543
    
    
    
    5,202
    
    
    
    
    5,697
    
    
    
    8,038
    
    
    
    
    5,724
    
    
    
    3,603
    
    
    
    
    5,980
    
    
    
    3,087The Nets
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    
    (5,562
    )
    
    
    (5,472
    )
    
    
    
    (12,554
    )
    
    
    (14,432
    )Corporate Activities
    
    
    773
    
    
    
    532
    
    
    
    
    773
    
    
    
    724
    
    
    
    
    (15,155
    )
    
    
    (24,688
    )
    
    
    
    (43,051
    )
    
    
    (45,863
    )$
    11,594
    
    
    $
    12,884
    
    
    
    $
    18,402
    
    
    $
    21,282
    
    
    
    $
    (1,789
    )
    
    $
    (8,386
    )
    
    
    $
    (32,468
    )
    
    $
    (48,788
    )
 (1)
    
    The identifiable assets of ($3,302) at January 31, 2009 represent losses in excess of
the Companys investment basis in The Nets.
 35




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Segment Information (continued)
    36




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Segment Information (continued)
 Reconciliation of EBDT to Net Earnings (Loss) by Segment:
 LandCommercial
    
    
    Residential
    
    
    Development
    
    
    
    
    
    
    CorporateThree Months Ended July 31, 2009
    
    Group
    
    
    Group
    
    
    Group
    
    
    The Nets
    
    
    Activities
    
    
    TotalEBDT
    
    $
    74,287
    
    
    $
    37,793
    
    
    $
    10,778
    
    
    $
    (5,562
    )
    
    $
    (21,813
    )
    
    $
    95,483Depreciation and amortization  Real Estate Groups
    
    
    (53,788
    )
    
    
    (21,144
    )
    
    
    (92
    )
    
    
    -
    
    
    
    -
    
    
    
    (75,024
    )Amortization of mortgage procurement costs  Real Estate Groups
    
    
    (3,114
    )
    
    
    (501
    )
    
    
    (208
    )
    
    
    -
    
    
    
    -
    
    
    
    (3,823
    )Deferred taxes  Real Estate Groups
    
    
    (5,712
    )
    
    
    (10,150
    )
    
    
    (4,074
    )
    
    
    -
    
    
    
    6,658
    
    
    
    (13,278
    )Straight-line rent adjustment
    
    
    3,603
    
    
    
    11
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    3,614Preference payment (1)
    
    
    (586
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (586
    )Impairment of real estate, net of tax
    
    
    -
    
    
    
    (209
    )
    
    
    (680
    )
    
    
    -
    
    
    
    -
    
    
    
    (889
    )Impairment of unconsolidated entities, net of tax
    
    
    (987
    )
    
    
    (6,299
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (7,286
    )Net earnings (loss) attributable to Forest City Enterprises, Inc.
    
    $
    13,703
    
    
    $
    (499
    )
    
    $
    5,724
    
    
    $
    (5,562
    )
    
    $
    (15,155
    )
    
    $
    (1,789
    )Three Months Ended July 31, 2008EBDT
    
    $
    74,095
    
    
    $
    30,344
    
    
    $
    2,384
    
    
    $
    (5,472
    )
    
    $
    (13,008
    )
    
    $
    88,343Depreciation and amortization  Real Estate Groups
    
    
    (53,778
    )
    
    
    (19,038
    )
    
    
    (75
    )
    
    
    -
    
    
    
    -
    
    
    
    (72,891
    )Amortization of mortgage procurement costs  Real Estate Groups
    
    
    (2,556
    )
    
    
    (674
    )
    
    
    (131
    )
    
    
    -
    
    
    
    -
    
    
    
    (3,361
    )Deferred taxes  Real Estate Groups
    
    
    (3,536
    )
    
    
    (3,315
    )
    
    
    1,550
    
    
    
    -
    
    
    
    (9,510
    )
    
    
    (14,811
    )Straight-line rent adjustment
    
    
    (4,352
    )
    
    
    15
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,337
    )Preference payment (1)
    
    
    (931
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (931
    )Preferred return on disposition, net of tax
    
    
    -
    
    
    
    (128
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (128
    )Impairment of unconsolidated entities, net of tax
    
    
    (775
    )
    
    
    (2,699
    )
    
    
    (224
    )
    
    
    -
    
    
    
    -
    
    
    
    (3,698
    )Retrospective effect of FSP APB 14-1
    
    
    1,662
    
    
    
    332
    
    
    
    99
    
    
    
    -
    
    
    
    (2,170
    )
    
    
    (77
    )Discontinued operations, net of tax: (2)Depreciation
and amortization - Real Estate Groups
    
    
    (187
    )
    
    
    (560
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (747
    )Amortization
of mortgage procurement costs - Real
Estate Groups
    
    
    (8
    )
    
    
    (79
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (87
    )Deferred
taxes - Real Estate Groups
    
    
    (9
    )
    
    
    (1,035
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,044
    )Straight-line rent adjustment
    
    
    89
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    89Gain on disposition of rental properties
    
    
    -
    
    
    
    5,294
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    5,294Net earnings (loss) attributable to Forest City Enterprises, Inc.
    
    $
    9,714
    
    
    $
    8,457
    
    
    $
    3,603
    
    
    $
    (5,472
    )
    
    $
    (24,688
    )
    
    $
    (8,386
    )Six Months Ended July 31, 2009EBDT
    
    $
    132,660
    
    
    $
    55,325
    
    
    $
    10,839
    
    
    $
    (12,554
    )
    
    $
    (49,183
    )
    
    $
    137,087Depreciation and amortization  Real Estate Groups
    
    
    (105,688
    )
    
    
    (41,169
    )
    
    
    (188
    )
    
    
    -
    
    
    
    -
    
    
    
    (147,045
    )Amortization of mortgage procurement costs  Real Estate Groups
    
    
    (6,108
    )
    
    
    (1,387
    )
    
    
    (345
    )
    
    
    -
    
    
    
    -
    
    
    
    (7,840
    )Deferred taxes  Real Estate Groups
    
    
    (2,393
    )
    
    
    (8,066
    )
    
    
    (3,486
    )
    
    
    -
    
    
    
    6,132
    
    
    
    (7,813
    )Straight-line rent adjustment
    
    
    6,362
    
    
    
    15
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    6,377Preference payment (1)
    
    
    (1,171
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,171
    )Impairment of real estate, net of tax
    
    
    -
    
    
    
    (897
    )
    
    
    (680
    )
    
    
    -
    
    
    
    -
    
    
    
    (1,577
    )Impairment of unconsolidated entities, net of tax
    
    
    (987
    )
    
    
    (11,992
    )
    
    
    (160
    )
    
    
    -
    
    
    
    -
    
    
    
    (13,139
    )Discontinued operations, net of tax: (2)Depreciation
and amortization - Real Estate Groups
    
    
    (107
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (107
    )Amortization
of mortgage procurement costs - Real
Estate Groups
    
    
    (5
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (5
    )Deferred
taxes - Real Estate Groups
    
    
    (31
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (31
    )Straight-line rent adjustment
    
    
    12
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    12Gain on disposition of rental properties
    
    
    2,784
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    2,784Net earnings (loss) attributable to Forest City Enterprises, Inc.
    
    $
    25,328
    
    
    $
    (8,171
    )
    
    $
    5,980
    
    
    $
    (12,554
    )
    
    $
    (43,051
    )
    
    $
    (32,468
    )Six Months Ended July 31, 2008EBDT
    
    $
    107,126
    
    
    $
    47,571
    
    
    $
    1,698
    
    
    $
    (14,432
    )
    
    $
    (37,666
    )
    
    $
    104,297Depreciation and amortization  Real Estate Groups
    
    
    (105,712
    )
    
    
    (37,175
    )
    
    
    (151
    )
    
    
    -
    
    
    
    -
    
    
    
    (143,038
    )Amortization of mortgage procurement costs  Real Estate Groups
    
    
    (5,032
    )
    
    
    (1,321
    )
    
    
    (254
    )
    
    
    -
    
    
    
    -
    
    
    
    (6,607
    )Deferred taxes  Real Estate Groups
    
    
    2,003
    
    
    
    557
    
    
    
    1,841
    
    
    
    -
    
    
    
    (3,981
    )
    
    
    420Straight-line rent adjustment
    
    
    (1,218
    )
    
    
    19
    
    
    
    (1
    )
    
    
    -
    
    
    
    -
    
    
    
    (1,200
    )Preference payment (1)
    
    
    (1,867
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,867
    )Preferred return on disposition, net of tax
    
    
    -
    
    
    
    (128
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (128
    )Gain on disposition of other investments, net of tax
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    92
    
    
    
    92Gain on disposition of unconsolidated entities, net of tax
    
    
    541
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    541Impairment of unconsolidated entities, net of tax
    
    
    (775
    )
    
    
    (2,699
    )
    
    
    (224
    )
    
    
    -
    
    
    
    -
    
    
    
    (3,698
    )Retrospective effect of FSP APB 14-1
    
    
    3,256
    
    
    
    623
    
    
    
    178
    
    
    
    -
    
    
    
    (4,308
    )
    
    
    (251
    )Discontinued operations, net of tax: (2)Depreciation
and amortization - Real Estate Groups
    
    
    (378
    )
    
    
    (1,032
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,410
    )Amortization
of mortgage procurement costs - Real
Estate Groups
    
    
    (14
    )
    
    
    (170
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (184
    )Deferred
taxes -  Real Estate Groups
    
    
    (17
    )
    
    
    (1,131
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1,148
    )Straight-line rent adjustment
    
    
    99
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    99Gain on disposition of rental properties
    
    
    -
    
    
    
    5,294
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    5,294Net earnings (loss) attributable to Forest City Enterprises, Inc.
    
    $
    (1,988
    )
    
    $
    10,408
    
    
    $
    3,087
    
    
    $
    (14,432
    )
    
    $
    (45,863
    )
    
    $
    (48,788
    )
 (1)
    
    The preference payment represents the respective periods share of the annual preferred
payment in connection with the issuance of Class A Common Units in exchange for
Bruce C. Ratners noncontrolling interest in the Forest City Ratner Company portfolio. See
Note P  Class A Common Units for more information.(2)
    
    See Note K for discontinued operations information.
 37




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Class A Common Units
 Master Contribution Agreement
  New York Times and Twelve MetroTech Center
 New York Times Twelve MetroTech Center
   Completed rental properties (1)
    
    $
    102,378Notes and accounts receivable, net (2)
    
    
    132Other assets (3)
    
    
    12,513Accounts payable and accrued expenses (4)
    
    
    (9,279
    )Total purchase price allocated
    
    $
    105,744
 Represents allocation for:(1)
    
    Land, building and tenant improvements associated with the underlying real
estate(2)
    
    Above market leases(3)
    
    In-place leases, tenant relationships and leasing commissions(4)
    
    Below market leases
 38




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##### Table of Contents



Forest City Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 Class A Common Units (continued)
 Exchange of Units
  Reduction of completed rental properties
    
    $
    5,345Reduction of cash and equivalents
    
    
    3,501Increase in
Class A common stock - par value
    
    
    42Increase in additional paid-in capital
    
    
    3,736Total reduction of noncontrolling interest
    
    $
    12,624
 Other Related Party Transactions
  39




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  RESULTS OF OPERATIONS
  Corporate Description
 Commercial Group Residential Group Land Development Group
 Corporate Activities The Nets
   
    
    The completion of the sale of 52,325,000 shares of our Class A Common Stock in May 2009,
which included the underwriters exercise of their over-allotment option in full, in an
underwritten public offering pursuant to an effective registration statement at a public
offering price of $6.60 per share. We received net proceeds of $329,917,000 after deducting
underwriting discounts, commissions and other offering expenses;
 
    
    Being selected by the Washington D.C. Deputy Mayors Office for Planning and Economic
Development to provide fee-based development-advisory services related to the Poplar Point
project in Southeast Washington;
 
    
    The sale of the remaining units at our two condominium projects in Los Angeles,
California, 1100 Wilshire,through individual unit sales and Mercury,through a bulk sale
of the remaining units; and
 
    
    Closing $89,820,000 in nonrecourse mortgage financing transactions.
  
    
    Closing on an extension of $557,000,000 in construction financing for Ridge Hill, a
mixed-use regional lifestyle center in Yonkers, New York, currently under construction.
This closing extends the due date from its original maturity of August 2010 to August 2012;
 
    
    Closing $181,650,000 of nonrecourse
mortgage financing transactions that extend debt that would have
matured  during the remaining half of
our fiscal year ending January 31, 2010;
 
    
    Being selected by the Puerto Rico Department of Economic Development and Commerce and
the Puerto Rico Tourism Company to provide fee-based program management services for the
redevelopment of a 21-block area of San Juans waterfront district; and
 
    
    Adding 13 new retail, entertainment and restaurant tenants for Village at Gulfstream
Park,a 500,000-square-foot, high-end retail and entertainment destination currently under
construction in Hallandale Beach, Florida. With the new tenant announcements, available
retail space at the center is 79 percent leased with five months still remaining before the
planned opening on February 11, 2010.
 40




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##### Table of Contents



Retrospective Adoption of New Accounting Standard
 non-cash
  January 31, 2009As
    
    
    FSP APB 14-1
    
    
    AsReported
    
    
    Adjustments
    
    
    Adjusted(in thousands)Consolidated Balance SheetReal estate, net
    
    $
    9,212,834
    
    
    $
    16,468
    
    
    $
    9,229,302Other assets
    
    
    936,902
    
    
    
    (631
    )
    
    
    936,271Senior and subordinated debt
    
    
    870,410
    
    
    
    (24,346
    )
    
    
    846,064Deferred income taxes
    
    
    439,282
    
    
    
    16,054
    
    
    
    455,336Additional paid-in capital
    
    
    241,539
    
    
    
    26,257
    
    
    
    267,796Retained earnings
    
    
    645,852
    
    
    
    (2,128
    )
    
    
    643,724Three Months Ended July 31, 2008

    
    Six Months Ended July 31, 2008As
    
    
    FSP APB 14-1
    
    
    As
    
    
    As
    
    
    FSP APB 14-1
    
    
    AsReported
    
    
    Adjustments
    
    
    Adjusted
    
    
    Reported
    
    
    Adjustments
    
    
    Adjusted(in thousands, except per share data)Consolidated Statements of Operations(1)Depreciation and amortization
    
    $
    69,571
    
    
    $
    45
    
    
    $
    69,616
    
    
    $
    135,532
    
    
    $
    90
    
    
    $
    135,622Interest expense, net of capitalized interest
    
    
    81,326
    
    
    
    77
    
    
    
    81,403
    
    
    
    163,625
    
    
    
    251
    
    
    
    163,876Deferred income tax loss (benefit)
    
    
    14,455
    
    
    
    (48
    )
    
    
    14,407
    
    
    
    (5,669
    )
    
    
    (134
    )
    
    
    (5,803
    )Loss from continuing operations
    
    
    (8,705
    )
    
    
    (74
    )
    
    
    (8,779
    )
    
    
    (48,668
    )
    
    
    (207
    )
    
    
    (48,875
    )Net loss attributable to Forest
City Enterprises, Inc.
    
    
    (8,312
    )
    
    
    (74
    )
    
    
    (8,386
    )
    
    
    (48,581
    )
    
    
    (207
    )
    
    
    (48,788
    )Net loss attributable to Forest City 
Enterprises, Inc.
per share - basic and diluted
    
    
    (0.08
    )
    
    
    0.00
    
    
    
    (0.08
    )
    
    
    (0.47
    )
    
    
    0.00
    
    
    
    (0.47
    )
 (1)
    
    Adjusted to reflect the impact of discontinued operations in accordance with SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144) (see
the Discontinued Operations section of the MD&A).
 41




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##### Table of Contents



Net
Loss Attributable to Forest City Enterprises, Inc. 
 
    
    $5,580,000 ($9,115,000, pre-tax) related to the gain on early extinguishment of
nonrecourse mortgage debt in 2009 primarily at Gladden Farms, a land development project
located in Marana, Arizona. This gain was partially offset by a charge to early
extinguishment of debt as a result of the payment of $20,400,000 in redevelopment bonds by
one of our consolidated wholly-owned subsidiaries (see the Subordinated Debt section of
the MD&A);
 
    
    $4,032,000 related to increased income tax benefit on operating income as
calculated in accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes (SFAS No. 109);
 
    
    $2,428,000 ($3,966,000, pre-tax) related to a decrease in corporate operating
expenses primarily attributable to the impact of cost savings initiatives including
headcount reductions instituted in the fourth quarter of 2008 and the first quarter of 2009
that resulted in reductions in compensation and related benefits, charitable contributions
and general corporate expenses;
 
    
    $2,050,000 ($3,349,000, pre-tax) related to a gain recognized in 2009 for
insurance proceeds received related to fire damage of an apartment building in excess of
the net book value of the damaged asset; and
 
    
    $1,927,000 ($3,147,000, pre-tax) related to the change in fair market value of
derivatives between the comparable periods, which was marked to market through interest
expense as a result of the derivatives not qualifying for hedge accounting.
  
    
    $5,294,000 ($8,627,000, pre-tax) related to the 2008 gain on disposition of
Sterling Glen of Lynbrook,a supported-living apartment community in Lynbrook, New York;
 
    
    $3,589,000 ($5,877,000, pre-tax) related to the 2009 increase in impairment
charges of unconsolidated entities;
 
    
    $2,056,000 ($3,350,000, pre-tax) related to the 2008 gain on the sale of an
ownership interest in a parking management company; and
 
    
    $1,864,000 ($3,038,000, pre-tax) related to the income earned on the Denver Urban
Renewal Authority (DURA) purchase obligation and fee in 2008 that did not recur (see the
Other Structured Financing Arrangements section of the MD&A).
  
    
    $8,584,000 ($14,021,000, pre-tax) related to the gain on early extinguishment
of nonrecourse mortgage debt in 2009, primarily as a result of the gain on the early
extinguishment of nonrecourse mortgage debt at Gladden Farms. This gain was partially
offset by a charge to early extinguishment of debt as a result of the payment of
$20,400,000 in redevelopment bonds by one of our consolidated wholly-owned subsidiaries
(see the Subordinated Debt section of the MD&A). For the six months ended July 31, 2008,
the amounts represent the impact of early extinguishment of nonrecourse mortgage debt at
Galleria at Sunset, a regional mall located in Henderson, Nevada, and 1251 S. Michiganand
Sky55, apartment communities located in Chicago, Illinois, in order to secure more
favorable financing terms. These charges were partially offset by a gain on the early
extinguishment of the Urban Development Action Grant loan at Post Office Plaza, an office
building located in Cleveland, Ohio;
 
    
    $6,444,000 related to increased income tax benefit on operating income as
calculated in accordance with SFAS No. 109;
 
    
    $5,550,000 ($9,066,000, pre-tax) of decreased write-offs of abandoned
development projects in 2009 compared to 2008;
 
    
    $2,784,000 ($4,548,000, pre-tax) related to the 2009 gain on disposition of
Grand Avenue,a specialty retail center in Queens, New York;
 
    
    $2,050,000 ($3,349,000, pre-tax) related to a gain recognized in 2009 for
insurance proceeds received related to fire damage of an apartment building in excess of
the net book value of the damaged asset;
 42




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##### Table of Contents




    
    $1,878,000 ($3,033,000, pre-tax) related to the decreased share of losses from
our equity investment in the New Jersey Nets basketball team (see The Nets section of the
MD&A);
 
    
    $1,860,000 ($3,031,000, pre-tax) related to participation payments in 2008 on
the refinancing of 350 Massachusetts Avenue, an unconsolidated office building and Jackson
Building, a consolidated office building, both located in Cambridge, Massachusetts;
 
    
    $1,468,000 ($2,398,000, pre-tax) related to an increase in income recognized on
the sale of state and federal Historic Preservation Tax Credits and New Market Tax Credits;
and
 
    
    $1,467,000 ($2,396,000, pre-tax) related to the 2009 net gain on an industrial
land sale at Mesa del Solin Albuquerque, New Mexico.
  
    
    $9,442,000 ($15,437,000, pre-tax) related to the 2009 increase in impairment
charges of unconsolidated entities;
 
    
    $5,294,000 ($8,627,000, pre-tax) related to the 2008 gain on disposition of
Sterling Glen of Lynbrook;
 
    
    $2,510,000 ($4,091,000, pre-tax) related to the income earned on the DURA
purchase obligation and fee in 2008 that did not recur (see the Other Structured Financing
Arrangements section of the MD&A); and
 
    
    $2,056,000 ($3,350,000, pre-tax) related to the 2008 gain on the sale of an
ownership interest in a parking management company.
 43




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##### Table of Contents



Summary
of Segment Operating Results
 Three Months Ended July 31,
    
    
    
    Six Months Ended July 31,2008
    
    
    
    
    
    
    
    
    
    
    
    20082009
    
    
    (As Adjusted)
    
    
    Variance
    
    
    
    2009
    
    
    (As Adjusted)
    
    
    Variance(in thousands)
    
    
    
    (in thousands)Revenues from Real Estate OperationsCommercial Group
    
    $
    238,425
    
    
    $
    236,452
    
    
    $
    1,973
    
    
    
    $
    467,424
    
    
    $
    454,098
    
    
    $
    13,326Commercial Group Land Sales
    
    
    5,386
    
    
    
    10,602
    
    
    
    (5,216
    )
    
    
    
    12,014
    
    
    
    14,250
    
    
    
    (2,236
    )Residential Group
    
    
    68,023
    
    
    
    73,378
    
    
    
    (5,355
    )
    
    
    
    142,955
    
    
    
    150,672
    
    
    
    (7,717
    )Land Development Group
    
    
    4,901
    
    
    
    7,159
    
    
    
    (2,258
    )
    
    
    
    7,371
    
    
    
    13,581
    
    
    
    (6,210
    )The Nets
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    -Total Revenues from Real Estate Operations
    
    $
    316,735
    
    
    $
    327,591
    
    
    $
    (10,856
    )
    
    
    $
    629,764
    
    
    $
    632,601
    
    
    $
    (2,837
    )Operating ExpensesCommercial Group
    
    $
    108,176
    
    
    $
    116,660
    
    
    $
    (8,484
    )
    
    
    $
    219,099
    
    
    $
    243,973
    
    
    $
    (24,874
    )Cost of Commercial Group Land Sales
    
    
    3,508
    
    
    
    5,510
    
    
    
    (2,002
    )
    
    
    
    7,491
    
    
    
    8,372
    
    
    
    (881
    )Residential Group
    
    
    40,907
    
    
    
    43,448
    
    
    
    (2,541
    )
    
    
    
    99,075
    
    
    
    98,349
    
    
    
    726Land Development Group
    
    
    6,873
    
    
    
    9,994
    
    
    
    (3,121
    )
    
    
    
    12,825
    
    
    
    19,524
    
    
    
    (6,699
    )The Nets
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    6,080
    
    
    
    10,046
    
    
    
    (3,966
    )
    
    
    
    21,901
    
    
    
    22,796
    
    
    
    (895
    )Total Operating Expenses
    
    $
    165,544
    
    
    $
    185,658
    
    
    $
    (20,114
    )
    
    
    $
    360,391
    
    
    $
    393,014
    
    
    $
    (32,623
    )Interest ExpenseCommercial Group
    
    $
    53,649
    
    
    $
    55,637
    
    
    $
    (1,988
    )
    
    
    $
    113,146
    
    
    $
    112,394
    
    
    $
    752Residential Group
    
    
    6,915
    
    
    
    8,213
    
    
    
    (1,298
    )
    
    
    
    17,308
    
    
    
    17,455
    
    
    
    (147
    )Land Development Group
    
    
    557
    
    
    
    (168
    )
    
    
    725
    
    
    
    
    806
    
    
    
    (172
    )
    
    
    978The Nets
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    19,102
    
    
    
    17,721
    
    
    
    1,381
    
    
    
    
    40,671
    
    
    
    34,199
    
    
    
    6,472Total Interest Expense
    
    $
    80,223
    
    
    $
    81,403
    
    
    $
    (1,180
    )
    
    
    $
    171,931
    
    
    $
    163,876
    
    
    $
    8,055Equity in Earnings (Loss) of Unconsolidated EntitiesCommercial Group
    
    $
    743
    
    
    $
    1,806
    
    
    $
    (1,063
    )
    
    
    $
    1,579
    
    
    $
    2,247
    
    
    $
    (668
    )Gain on disposition of One International Place
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    881
    
    
    
    (881
    )Residential Group
    
    
    1,473
    
    
    
    2,379
    
    
    
    (906
    )
    
    
    
    2,920
    
    
    
    5,110
    
    
    
    (2,190
    )Land Development Group
    
    
    556
    
    
    
    4,447
    
    
    
    (3,891
    )
    
    
    
    2,648
    
    
    
    4,220
    
    
    
    (1,572
    )The Nets
    
    
    (8,307
    )
    
    
    (8,548
    )
    
    
    241
    
    
    
    
    (18,988
    )
    
    
    (22,021
    )
    
    
    3,033Corporate Activities
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    -Total Equity in Loss of Unconsolidated Entities
    
    $
    (5,535
    )
    
    $
    84
    
    
    $
    (5,619
    )
    
    
    $
    (11,841
    )
    
    $
    (9,563
    )
    
    $
    (2,278
    )Impairment of Unconsolidated EntitiesCommercial Group
    
    $
    1,611
    
    
    $
    1,263
    
    
    $
    348
    
    
    
    $
    1,611
    
    
    $
    1,263
    
    
    $
    348Residential Group
    
    
    10,292
    
    
    
    4,398
    
    
    
    5,894
    
    
    
    
    19,590
    
    
    
    4,398
    
    
    
    15,192Land Development Group
    
    
    -
    
    
    
    365
    
    
    
    (365
    )
    
    
    
    262
    
    
    
    365
    
    
    
    (103
    )The Nets
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    -Corporate Activities
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    -Total Impairment of Unconsolidated Entities
    
    $
    11,903
    
    
    $
    6,026
    
    
    $
    5,877
    
    
    
    $
    21,463
    
    
    $
    6,026
    
    
    $
    15,437
 44




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##### Table of Contents



Commercial Group
 Revenues from Real Estate Operations
 
    
    $5,216,000 related to decreases in commercial outlot land sales primarily at
Short Pump Town Centerin Richmond, Virginia and Orchard Town Centerin Westminster,
Colorado, which were partially offset by increases at Salt Lake Cityin Utah and Ridge Hill
in Yonkers, New York.
  
    
    $5,754,000 related to new property openings as noted in the table below.
   
    
    $13,960,000 related to new property openings as noted in the table below; and
 
    
    $2,831,000 related to increased 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. This represents a reimbursement of
costs that is included in operating expenses discussed below.
  
    
    $2,236,000 related to decreases in commercial outlot land sales primarily at
Short Pump Town Center, Saddle Rock Villagein Aurora, Colorado and Orchard Town Center
which were partially offset by increases in commercial outlot land sales at Victoria
Gardensin Rancho Cucamonga, California, Salt Lake Cityand Ridge Hill.
  Operating
and Interest Expenses 
 
    
    $2,002,000 related to decreases in commercial outlot land sales primarily at
Short Pump Town Centerand Orchard Town Center,which were partially offset by an increase
in commercial outlot land sales at Salt Lake Cityand Ridge Hill; and
 
    
    $632,000 related to decreased write-offs of abandoned development projects.
  
    
    $1,722,000 related to new property openings as noted in the table below.
   
    
    $18,529,000 related to decreased write-offs of abandoned development projects
in 2009 compared to 2008, which was primarily due to the 2008 write-off at Summit at Lehigh
Valley;
 
    
    $1,759,000 related to the 2008 participation payment on the refinancing at
Jackson Building, an office building in Cambridge, Massachusetts; and
 
    
    $881,000 related to decreases in commercial outlot land sales primarily at
Short Pump Town Center, Saddle Rock Villageand Orchard Town Center,which were partially
offset by an increase in commercial outlot land sales at Victoria Gardens, Salt Lake City
and Ridge Hill.
 45




---



##### Table of Contents




    
    $4,919,000 related to new property openings as noted in the table below; and
 
    
    $2,831,000 related to construction of a school at Beekman. These costs are
reimbursed by the New York City School Construction Authority and are included in revenues
from real estate operations discussed above.
    Three Months Ended
    
    
    
    Six Months EndedJuly 31, 2009 vs. 2008
    
    
    
    July 31, 2009 vs. 2008Revenues
    
    
    
    
    
    
    
    Revenuesfrom
    
    
    
    
    
    
    
    fromQuarter - Year
    
    Square
    
    Real Estate
    
    
    Operating
    
    
    
    Real Estate
    
    
    OperatingNewly - Opened Properties
    
    Location
    
    Opened
    
    Feet
    
    Operations
    
    
    Expenses
    
    
    
    Operations
    
    
    Expenses(in thousands)
    
    
    
    (in thousands)Retail Centers:Promenade at Temecula Expansion
    
    Temecula, California
    
    Q1-2009
    
    127,000
    
    $
    579
    
    
    $
    111
    
    
    
    $
    727
    
    
    $
    346White Oak Village
    
    Richmond, Virginia
    
    Q3-2008
    
    800,000
    
    
    1,876
    
    
    
    665
    
    
    
    
    3,675
    
    
    
    1,203Shops at Wiregrass
    
    Tampa, Florida
    
    Q3-2008
    
    642,000
    
    
    2,925
    
    
    
    1,330
    
    
    
    
    5,768
    
    
    
    2,889Orchard Town Center
    
    Westminster, Colorado
    
    Q1-2008
    
    980,000
    
    
    421
    
    
    
    (427
    )
    
    
    
    2,267
    
    
    
    (153
    )Office Building:Johns Hopkins - 855
North Wolfe Street
    
    East Baltimore, Maryland
    

    Q1-2008
    
    279,000
    
    
    (47
    )
    
    
    43
    
    
    
    
    1,523
    
    
    
    634Total
    
    
    
    
    
    
    
    $
    5,754
    
    
    $
    1,722
    
    
    
    $
    13,960
    
    
    $
    4,919
   46




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##### Table of Contents



Residential Group
 Revenues
from Real Estate Operations 
 
    
    $13,982,000 related to military housing fee income from development and management of
military housing units located primarily on the islands of Oahu and Kauai, Hawaii, Chicago,
Illinois, Seattle, Washington, and Colorado Springs, Colorado (see the Military Housing
Fee Revenues section below for further detail).
  
    
    $6,458,000 related to insurance premiums earned from an owners controlled insurance
program;
 
    
    $1,704,000 related to the cancellation of a net leasing arrangement whereby we assumed
the operations from the lessee at Forest Tracein Lauderhill, Florida; and
 
    
    $1,145,000 related to new property openings as noted in the table below.
   
    
    $33,415,000 related to military housing fee income from development and management of
military housing units located primarily on the islands of Oahu and Kauai, Hawaii, Chicago,
Illinois, Seattle, Washington, and Colorado Springs, Colorado (see the Military Housing
Fee Revenues section below for further detail); and
 
    
    $999,000 primarily related to decreases in occupancy at the following properties: Metro
417in Los Angeles, California, Grandin North Bethesda, Maryland, Heritagein San Diego,
California and Midtown Towersin Parma, Ohio.
  
    
    $14,000,000 related to the land sale and related development opportunity in Mamaroneck,
New York;
 
    
    $6,458,000 related to insurance premiums earned from an owners controlled insurance
program;
 
    
    $3,619,000 related to the cancellation of a net leasing arrangement whereby we assumed
the operations from the lessee at Forest Trace;
 
    
    $1,963,000 related to new property openings as noted in the table below; and
 
    
    $1,041,000 primarily related to increases in rents and occupancy at the following
properties: Metropolitanin Los Angeles, California, Easthaven at the Villagein Beachwood,
Ohio, One Franklintownin Philadelphia, Pennsylvania, and Botanica IIin Denver, Colorado.
  Operating
and Interest Expenses 
 
    
    $8,941,000 related to expenditures associated with military housing fee revenues.
  
    
    $3,107,000 related to insurance expenses associated with an owners controlled insurance
program;
 
    
    $2,658,000 related to the cancellation of the net lease arrangement at Forest Trace;
 47




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##### Table of Contents




    
    $1,620,000 related to increased write-offs of abandoned development projects; and
 
    
    $366,000 related to new property openings as noted in the table below.
   
    
    $14,000,000 related to the land sale and related development opportunity in Mamaroneck,
New York;
 
    
    $7,218,000 related to increased write-offs of abandoned development projects;
 
    
    $5,015,000 related to the cancellation of the net lease arrangement at Forest Trace;
 
    
    $3,107,000 related to insurance expenses associated with an owners controlled insurance
program; and
 
    
    $1,375,000 related to new property openings as noted in the table below.
  
    
    $26,114,000 related to expenditures associated with military housing fee revenues.
    Three Months Ended
    
    
    
    Six Months EndedJuly 31, 2009 vs. 2008
    
    
    
    July 31, 2009 vs. 2008Revenues
    
    
    
    
    
    
    
    Revenuesfrom
    
    
    
    
    
    
    
    fromQuarter - Year
    
    Leasable
    
    Real Estate
    
    
    Operating
    
    
    
    Real Estate
    
    
    OperatingNewly - Opened Properties
    
    Location
    
    Opened
    
    Units
    
    Operations
    
    
    Expenses
    
    
    
    Operations
    
    
    Expenses(in thousands)
    
    
    
    (in thousands)Hamel Mill Lofts
    
    Haverhill, Massachusetts
    
    Q4-2008 (1)
    
    305
    
    $
    190
    
    
    $
    324
    
    
    
    $
    213
    
    
    $
    826Lucky Strike
    
    Richmond, Virginia
    
    Q1-2008
    
    131
    
    
    233
    
    
    
    113
    
    
    
    
    500
    
    
    
    93Mercantile Place on Main
    
    Dallas, Texas
    
    Q1-2008/Q4-2008
    
    366
    
    
    722
    
    
    
    (71
    )
    
    
    
    1,250
    
    
    
    456Total
    
    
    
    
    
    
    
    $
    1,145
    
    
    $
    366
    
    
    
    $
    1,963
    
    
    $
    1,375
 (1)
    
    Property to open in phases.
   Military
Housing Fee Revenues 
 48




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##### Table of Contents



Land Development Group
 Revenues
from Real Estate Operations 
 
    
    $1,612,000 primarily related to reduced fee income and profit participation due
to lower home sales at Stapletonin Denver, Colorado;
 
    
    $1,158,000 related to lower land sales at Tangerine Crossingin Tucson, Arizona
and Mallard Pointin Lorain, Ohio and lower unit sales at Rockport Squarein Lakewood,
Ohio; and
 
    
    $342,000 related to a combination of smaller decreases in land sales at other
land development projects.
  
    
    $854,000 related to higher land sales primarily at Creekstonein Copley, Ohio
combined with several smaller increases in land sales at other land development projects.
  
    
    $4,377,000 related to lower land sales at Summers Walkin Davidson, North
Carolina, Tangerine Crossingand lower unit sales at Rockport Square;
 
    
    $2,235,000 primarily related to reduced fee income and profit participation due
to lower home sales at Stapleton; and
 
    
    $1,221,000 related to lower land sales primarily at Wheatfield Lakesin
Wheatfield, New York, and Mill Creekin York County, South Carolina, combined with several
smaller decreases in land sales at other land development projects.
  
    
    $1,623,000 related to higher land sales primarily at Creekstone, Gladden Farms
in Marana, Arizona and New Havenin Barberton, Ohio combined with several smaller increases
at other land development projects.
 49




---



##### Table of Contents



Operating
and Interest Expenses 
 
    
    $2,470,000 at Stapletonprimarily related to lower land sales along with
reduced payroll costs and specific cost reduction activities;
 
    
    $1,107,000 at Tangerine Crossing, Mallard Pointand Rockport Squaredue to
lower land/unit sales; and
 
    
    $918,000 primarily related to lower land sales at other land development
projects along with reduced payroll costs and specific cost reduction activities.
  
    
    $1,374,000 primarily related to higher land sales at Creekstonecombined with
several smaller increases in land sales at other land development projects.
  
    
    $3,738,000 at Stapletonprimarily related to lower land sales along with
reduced payroll costs and specific cost reduction activities;
 
    
    $3,403,000 at Summers Walk, Tangerine Crossingand Rockport Squareand due to
lower land/unit sales; and
 
    
    $1,768,000 primarily related to lower land sales at other land development
projects along with reduced payroll costs and specific cost reduction activities.
  
    
    $2,210,000 primarily related to higher land sales at Creekstone, Gladden Farms
and New Havencombined with several smaller increases in land sales at other land
development projects.
  The Nets
   50




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##### Table of Contents



Corporate Activities
 Operating and Interest Expenses
  Other Activity
  Depreciation and Amortization
  Impairment of Real Estate
 Gladden Farms Tangerine Crossing ,
 Impairment of Unconsolidated Entities
  51




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##### Table of Contents



Three Months Ended July 31,
    
    
    Six Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Apartment Communities:Millender Center
    
    (Detroit, Michigan)
    
    $
    2,818
    
    
    $
    -
    
    
    $
    7,070
    
    
    $
    -Uptown Apartments
    
    (Oakland, California)
    
    
    6,781
    
    
    
    -
    
    
    
    6,781
    
    
    
    -Metropolitan Lofts
    
    (Los Angeles, California)
    
    
    -
    
    
    
    -
    
    
    
    1,039
    
    
    
    -Residences at University Park
    
    (Cambridge, Massachusetts)
    
    
    -
    
    
    
    -
    
    
    
    855
    
    
    
    -Fenimore Court
    
    (Detroit, Michigan)
    
    
    693
    
    
    
    -
    
    
    
    693
    
    
    
    -Classic Residence by Hyatt (Supported-Living Apartments)
    
    (Yonkers, New York)
    
    
    -
    
    
    
    -
    
    
    
    3,152
    
    
    
    -Specialty Retail Centers:Southgate Mall
    
    (Yuma, Arizona)
    
    
    1,611
    
    
    
    -
    
    
    
    1,611
    
    
    
    -El Centro Mall
    
    (El Centro, California)
    
    
    -
    
    
    
    1,263
    
    
    
    -
    
    
    
    1,263Mercury (Condominium)
    
    (Los Angeles, California)
    
    
    -
    
    
    
    4,098
    
    
    
    -
    
    
    
    4,098Two land development projects
    
    
    
    
    
    
    -
    
    
    
    365
    
    
    
    262
    
    
    
    365Other
    
    
    
    
    
    
    -
    
    
    
    300
    
    
    
    -
    
    
    
    300Total Impairment of Unconsolidated Entities.
    
    
    
    
    
    $
    11,903
    
    
    $
    6,026
    
    
    $
    21,463
    
    
    $
    6,026
 Write-Off of Abandoned Development Projects
  Amortization of Mortgage Procurement Costs
  Gain (Loss) on Early Extinguishment of Debt
 Gladden Farms Galleria at Sunset 1251 S. Michigan Sky55 Post Office Plaza
 Interest and Other Income
  52




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##### Table of Contents



Income Taxes
    stock-based
 FIN No. 48
    53




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##### Table of Contents



Equity
in Earnings (Loss) of Unconsolidated Entities -
  -
    
    Land Development Group
 
    
    $4,545,000 related to decreased sales at Central Station,located in Chicago, Illinois.
 -
    
    Residential Group
 
    
    $2,005,000 primarily related to lease-up losses at Uptown Apartments,an apartment
community in Oakland, California, which had two phased-openings during 2008, combined with
smaller operating losses at three apartment complexes which were acquired during the second
half of 2008.
  -
    
    The Nets
 
    
    $241,000 related to a decrease in our share of the loss in The Nets (see The Nets section of the MD&A).
   -
    
    Land Development Group
 
    
    $4,240,000 related to decreased sales at Central Station.
 -
    
    Residential Group
 
    
    $3,544,000 primarily related to lease-up losses at Uptown Apartments, combined with
smaller operating losses at three apartment complexes which were acquired during the second
half of 2008.
 -
    
    Commercial Group
 
    
    $881,000 related to the 2008 gain on disposition of our partnership interest in One
International Place, an office building in Cleveland, Ohio.
  -
    
    The Nets
 
    
    $3,033,000 related to a decrease in our share of the loss in The Nets (see The Nets section of the MD&A).
 -
    
    Land Development Group
 
    
    $2,396,000 related to the net gain on a 2009 industrial land sale at Mesa Del Solin Albuquerque, New Mexico.
 -
    
    Commercial Group
 
    
    $1,272,000 related to the 2008 participation payment on the refinancing at 350
Massachusetts Avenue,an office building in Cambridge, Massachusetts.
  54




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##### Table of Contents



Discontinued Operations
  Sterling Glen of Lynbrook
 Sterling Glen of Rye Brook
 pre-determined
  Three
    
    Six
    
    Three
    
    SixMonths
    
    Months
    
    Months
    
    MonthsSquare Feet/
    
    Period
    
    Ended
    
    Ended
    
    Ended
    
    EndedProperty
    
    Location
    
    
    Number of Units
    
    Disposed
    
    7/31/2009
    
    7/31/2009
    
    7/31/2008
    
    7/31/2008Commercial Group:Grand Avenue
    
    Queens, New York
    
    100,000 square feet
    
    Q1-2009
    
    -
    
    Yes
    
    Yes
    
    YesResidential Group:Sterling Glen of Rye Brook
    
    Rye Brook, New York
    
    168 units
    
    Q4-2008
    
    -
    
    -
    
    Yes
    
    YesSterling Glen of Lynbrook
    
    Lynbrook, New York
    
    130 units
    
    Q2-2008
    
    -
    
    -
    
    Yes
    
    Yes
 55




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##### Table of Contents



Three Months Ended July 31,
    
    
    Six Months Ended July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Revenues from real estate operations
    
    $
    -
    
    
    $
    2,810
    
    
    $
    813
    
    
    $
    5,990ExpensesOperating expenses
    
    
    -
    
    
    
    508
    
    
    
    320
    
    
    
    1,039Depreciation and amortization
    
    
    -
    
    
    
    747
    
    
    
    107
    
    
    
    1,410-
    
    
    
    1,255
    
    
    
    427
    
    
    
    2,449Interest expense
    
    
    -
    
    
    
    (1,067
    )
    
    
    (322
    )
    
    
    (2,331
    )Amortization of mortgage procurement costs
    
    
    -
    
    
    
    (87
    )
    
    
    (5
    )
    
    
    (184
    )Interest income
    
    
    -
    
    
    
    34
    
    
    
    -
    
    
    
    41Gain on disposition of rental properties
    
    
    -
    
    
    
    8,627
    
    
    
    4,548
    
    
    
    8,627Earnings before income taxes
    
    
    -
    
    
    
    9,062
    
    
    
    4,607
    
    
    
    9,694Income tax expense (benefit)Current
    
    
    -
    
    
    
    (876
    )
    
    
    3,777
    
    
    
    (736
    )Deferred
    
    
    -
    
    
    
    4,377
    
    
    
    (1,990
    )
    
    
    4,481-
    
    
    
    3,501
    
    
    
    1,787
    
    
    
    3,745Net earnings from discontinued operations
    
    $
    -
    
    
    $
    5,561
    
    
    $
    2,820
    
    
    $
    5,949
 Gain on Disposition of Rental Properties
 Grand Avenue Sterling Glen of Lynbrook.
 One International Place
 56




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##### Table of Contents



FINANCIAL CONDITION AND LIQUIDITY
        Bank Revolving Credit Facility
  57




---



##### Table of Contents



July 31, 2009
    
    
    January 31, 2009(in thousands)Maximum borrowings
    
    $
    750,000
    
    
    $
    750,000Less outstanding balances:Borrowings
    
    
    42,583
    
    
    
    365,500Letters of credit
    
    
    66,666
    
    
    
    65,949Surety bonds
    
    
    -
    
    
    
    -Available credit
    
    $
    640,751
    
    
    $
    318,551Senior and Subordinated Debt


Our Senior and Subordinated Debt is comprised of the following at July 31 and January 31, 2009:January 31, 2009July 31, 2009
    
    
    (As Adjusted)(in thousands)Senior Notes:3.625% Puttable Equity-Linked Senior Notes due 2011
    
    $
    252,469
    
    
    $
    248,154Other Senior Notes:7.625% Senior Notes due 2015
    
    
    300,000
    
    
    
    300,0006.500% Senior Notes due 2017
    
    
    150,000
    
    
    
    150,0007.375% Senior Notes due 2034
    
    
    100,000
    
    
    
    100,000Total Senior Notes
    
    
    802,469
    
    
    
    798,154Subordinated Debt:Redevelopment Bonds due 2010
    
    
    -
    
    
    
    18,910Subordinate Tax Revenue Bonds due 2013
    
    
    29,000
    
    
    
    29,000Total Subordinated Debt
    
    
    29,000
    
    
    
    47,910Total Senior and Subordinated Debt
    
    $
    831,469
    
    
    $
    846,064
 Puttable Equity-Linked Senior Notes
   58




---



##### Table of Contents



July 31, 2009
    
    
    January 31, 2009(in thousands)Carrying amount of the equity component
    
    $
    45,885
    
    
    $
    45,885Outstanding principal amount of the puttable equity-linked senior notes
    
    $
    272,500
    
    
    $
    272,500Unamortized discount
    
    
    (20,031
    )
    
    
    (24,346
    )Net carrying amount of the puttable equity-linked senior notes
    
    $
    252,469
    
    
    $
    248,154
  Other Senior Notes
 semi-annually
   59




---



##### Table of Contents



Subordinated Debt
   Financing Arrangements
 Collateralized Borrowings
   60




---



##### Table of Contents



Other Structured Financing Arrangements
     Mortgage Financings
   Purpose of Financing
    
    Amount(in thousands)Refinancings
    
    $
    181,408Loan extensions/additional fundings
    
    
    193,202$
    374,610
 61




---



##### Table of Contents



Interest Rate Exposure
  TotalOperating
    
    
    Development
    
    
    Land
    
    
    
    
    
    
    WeightedProperties
    
    
    Projects
    
    
    Projects
    
    
    Total
    
    
    Average Rate(dollars in thousands)Fixed
    
    $
    4,072,516
    
    
    $
    -
    
    
    $
    10,589
    
    
    $
    4,083,105
    
    
    
    6.03
    %Variable (1)Taxable
    
    
    1,426,861
    
    
    
    1,017,944
    
    
    
    15,648
    
    
    
    2,460,453
    
    
    
    4.49
    %Tax-Exempt
    
    
    590,957
    
    
    
    280,550
    
    
    
    43,000
    
    
    
    914,507
    
    
    
    2.20
    %$
    6,090,334
    
    
    $
    1,298,494
    (2)
    
    $
    69,237
    
    
    $
    7,458,065
    
    
    
    5.05
    %Total commitment from lenders
    
    
    
    
    
    $
    2,007,189
    
    
    $
    73,745
 (1)
    
    Taxable variable-rate debt of $2,460,453 and tax-exempt variable-rate debt of $914,507
as of July 31, 2009 is protected with swaps and caps described in the tables below.(2)
    
    Proceeds from outstanding debt of $186,598 described above is recorded as restricted
cash in our Consolidated Balance Sheets. For bonds issued in conjunction with development,
the full amount of the bonds is issued at the beginning of construction and must remain in
escrow until costs are incurred.
  Taxable
 Caps
    
    
    Swaps(1)Notional
    
    
    Average Base
    
    Notional
    
    
    Average BasePeriod Covered
    
    Amount
    
    
    Rate
    
    Amount
    
    
    Rate(dollars in thousands)08/01/09-02/01/10
(2)
    
    $
    1,157,227
    
    
    
    4.86
    %
    
    $
    1,092,755
    
    
    
    4.88
    %02/01/10-02/01/11
    
    
    1,044,116
    
    
    
    4.65
    
    
    
    1,032,081
    
    
    
    4.2802/01/11-02/01/12
    
    
    16,192
    
    
    
    6.50
    
    
    
    730,656
    
    
    
    5.3702/01/12-02/01/13
    
    
    476,100
    
    
    
    5.50
    
    
    
    729,110
    
    
    
    5.3702/01/13-02/01/14
    
    
    476,100
    
    
    
    5.50
    
    
    
    685,000
    
    
    
    5.4302/01/14-09/01/17
    
    
    -
    
    
    
    -
    
    
    
    640,000
    
    
    
    5.50
 (1)
    
    Excludes the forward swaps discussed below.(2)
    
    These LIBOR-based hedges as of August 1, 2009 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, 2010.
 Tax-Exempt
 Caps
    
    
    SwapNotional
    
    
    Average Base
    
    Notional
    
    
    Average BasePeriod Covered
    
    Amount
    
    
    Rate
    
    Amount
    
    
    Rate(dollars in thousands)08/01/09-02/01/10
    
    $
    175,025
    
    
    
    5.68
    %
    
    $
    57,000
    
    
    
    3.21
    %02/01/10-02/01/11
    
    
    175,025
    
    
    
    5.84
    
    
    
    57,000
    
    
    
    3.2102/01/11-02/01/12
    
    
    131,915
    
    
    
    5.83
    
    
    
    57,000
    
    
    
    3.2102/01/12-02/01/13
    
    
    12,715
    
    
    
    6.00
    
    
    
    57,000
    
    
    
    3.21
  62




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##### Table of Contents



Forward Swaps
   Sensitivity Analysis to Changes in Interest Rates
   Cash Flows
 Operating Activities
  Increase in rents and other revenues received
    $
    
    1,407Increase in interest and other income received
    
    
    31,346Decrease in cash distributions from unconsolidated entities
    
    
    (14,798)Decrease in
proceeds from land sales - Land Development Group
    
    
    (6,552)Increase in
proceeds from land sales - Commercial Group
    
    
    2,009Decrease in land development
expenditures paid
    
    
    16,971Decrease in
operating expenditures paid
    
    
    7,401Increase in
termination costs paid
    
    
    (6,059)Increase in restricted cash
used for operating purposes
    
    
    (13,648)Decrease in interest paid
    
    
    2,135Net increase in cash provided
by operating activities
    $
    
    20,212
 63




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##### Table of Contents



Investing Activities
  Six Months Ended July 31,20082009
    
    
    (As Adjusted)(in thousands)Capital expenditures, including real estate acquisitions
    
    $
    (459,109
    )
    
    $
    (554,365
    )Payment of lease procurement costs
    
    
    (4,581
    )
    
    
    (18,595
    )Decrease (increase) in other assets
    
    
    5,459
    
    
    
    (13,436
    )(Increase) decrease in restricted cash used for investing purposes:Beekman, a mixed-use residential project under construction in Manhattan, New York
    
    
    (130,719
    )
    
    
    (94,435
    )Higbee Building, an office building in Cleveland, Ohio
    
    
    (8,466
    )
    
    
    -80 DeKalb Avenue, a residential project under construction in Brooklyn, New York
    
    
    (5,424
    )
    
    
    (44,202
    )Easthaven at the Village, an apartment community in Beachwood, Ohio
    
    
    (2,045
    )
    
    
    -Two MetroTech Center, an office building in Brooklyn, New York
    
    
    (1,562
    )
    
    
    -Return of collateral required for a forward swap on East River Plaza, an unconsolidated retail development project in Manhattan, New York
    
    
    9,625
    
    
    
    -One MetroTech Center, an office building in Brooklyn, New York
    
    
    6,210
    
    
    
    (8,791
    )Village at Gulfstream, a retail project under construction in Hallandale Beach, Florida
    
    
    2,992
    
    
    
    -Promenade Bolingbrook, a regional mall in Bolingbrook, Illinois
    
    
    2,882
    
    
    
    (5,040
    )Atlantic Yards, a mixed-use pre-development project in Brooklyn, New York
    
    
    2,320
    
    
    
    (1,303
    )One Pierrepont Plaza, an office building in Brooklyn, New York
    
    
    2,056
    
    
    
    -Skylight Office Tower, an office building in Cleveland, Ohio
    
    
    1,139
    
    
    
    (243
    )250 Huron, an office building in Cleveland, Ohio
    
    
    583
    
    
    
    (3,978
    )Collateral required for a TRS on Sterling Glen of Rye Brook, a supported-living community in Rye Brook, New York
    
    
    -
    
    
    
    (12,500
    )New York Times, an office building in Manhattan, New York
    
    
    732
    
    
    
    10,789Sale proceeds placed in escrow upon disposition of Sterling Glen of Lynbrook, a supported-living community in Lynbrook, New York
    
    
    -
    
    
    
    (6,349
    )Other
    
    
    (5,972
    )
    
    
    (1,801
    )Subtotal
    
    
    (125,649
    )
    
    
    (167,853
    )Proceeds from disposition of rental properties and other investments:Grand Avenue, a specialty retail center in Queens, New York
    
    
    9,042
    
    
    
    -Sterling Glen of Lynbrook, a supported-living community in Lynbrook, New York
    
    
    -
    
    
    
    11,159Ownership interest in a parking management company and other
    
    
    -
    
    
    
    4,150Subtotal
    
    
    9,042
    
    
    
    15,309Change in
investments in and advances to affiliates - (investment in) or return of investment:Acquisitions:818 Mission Street, an unconsolidated office building in San Francisco, California
    
    
    -
    
    
    
    (7,782
    )Dispositions:One International Place, an unconsolidated office building in Cleveland, Ohio
    
    
    -
    
    
    
    1,589Land Development:Gladden
Farms II, an unconsolidated project in Marana, Arizona
(1)
    
    
    (6,312
    )
    
    
    -Mesa del Sol, an unconsolidated project in Albuquerque, New Mexico
    
    
    (702
    )
    
    
    1,255San Antonio I & II, an unconsolidated project in San Antonio, Texas
    
    
    -
    
    
    
    3,810Residential Projects:St. Marys Villa, primarily refinancing proceeds from an unconsolidated project in Newark, New Jersey
    
    
    4,830
    
    
    
    -Uptown Apartments, an unconsolidated project in Oakland, California
    
    
    (4,171
    )
    
    
    (1,565
    )1100 Wilshire, an unconsolidated condominium project in Los Angeles, California
    
    
    -
    
    
    
    2,448New York City Projects:East River Plaza, an unconsolidated retail development project in Manhattan, New York
    
    
    (919
    )
    
    
    (16,176
    )Sports arena complex in Brooklyn, New York currently in pre-development;
excess funds from current year to be reinvested during the future construction phase
    
    
    11,382
    
    
    
    12,747The Nets, a National Basketball Association franchise
    
    
    (24,000
    )
    
    
    (19,782
    )Commercial Projects:Golden Gate, an unconsolidated retail project in Mayfield Heights, Ohio
    
    
    (607
    )
    
    
    -Mesa del Sol Fidelity, an unconsolidated office building in Albuquerque, New Mexico
    
    
    (1,524
    )
    
    
    -350 Massachusetts Avenue, primarily refinancing proceeds from an unconsolidated office building in Cambridge, Massachusetts
    
    
    -
    
    
    
    24,427Liberty Center, primarily refinancing proceeds from an unconsolidated office building in Pittsburgh, Pennsylvania
    
    
    -
    
    
    
    9,961Unconsolidated development activity in Las Vegas, Nevada
    
    
    -
    
    
    
    (5,148
    )Waterfront, an unconsolidated office development project in Washington, D.C.
    
    
    -
    
    
    
    (4,707
    )Other net (advances) returns of investment of equity method investments and other advances to affiliates
    
    
    (10,179
    )
    
    
    2,504Subtotal
    
    
    (32,202
    )
    
    
    3,581Net cash used in investing activities
    
    $
    (607,040
    )
    
    $
    (735,359
    )
 (1)
    
    During the six months ended July 31, 2009, this land development project changed from
the equity method of accounting to full consolidation. Amounts reflected above represent an
investment in the project prior to the change to full consolidation.
 64




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##### Table of Contents



Financing Activities
   Six Months Ended July 31,20082009
    
    
    (As Adjusted)(in thousands)Sale of common stock, net
    
    $
    329,917
    
    
    $
    -Proceeds from nonrecourse mortgage debt
    
    
    529,948
    
    
    
    936,213Principal payments on nonrecourse mortgage debt
    
    
    (121,011
    )
    
    
    (492,104
    )Net (decrease) increase in notes payable
    
    
    (8,895
    )
    
    
    36,030Borrowings on bank revolving credit facility
    
    
    173,000
    
    
    
    268,000Payments on bank revolving credit facility
    
    
    (495,917
    )
    
    
    (163,500
    )Payment of subordinated debt
    
    
    (20,400
    )
    
    
    -Decrease (increase) in restricted cash:Hamel Mill Lofts,an apartment complex in Haverhill, Massachusetts
    
    
    8,648
    
    
    
    9,484Sky 55,an apartment complex in Chicago, Illinois
    
    
    2,176
    
    
    
    (1,652
    )Easthaven at the Village,an apartment community in Beachwood, Ohio
    
    
    2,147
    
    
    
    (1,200
    )100 Landsdowne,an apartment complex in Cambridge, Massachusetts
    
    
    401
    
    
    
    2,151Lucky Strike,an apartment complex in Richmond, Virginia
    
    
    396
    
    
    
    7,665Metro 417,an apartment complex in Los Angeles, California
    
    
    -
    
    
    
    2,571101 San Fernando,an apartment complex in San Jose, California
    
    
    -
    
    
    
    2,509Promenade Bolingbrook,a regional mall in Bolingbrook, Illinois
    
    
    -
    
    
    
    2,300Sterling Glen of Great Neck,a supported-living community in Great Neck, New York
    
    
    -
    
    
    
    1,520Legacy Lakes,a land development project in Aberdeen, North Carolina
    
    
    -
    
    
    
    (1,000
    )Promenade in Temecula,a regional mall in Temecula, California
    
    
    -
    
    
    
    (1,525
    )Other
    
    
    787
    
    
    
    (224
    )Subtotal
    
    
    14,555
    
    
    
    22,599(Decrease) increase in book overdrafts, representing checks issued but not yet paid
    
    
    (7,805
    )
    
    
    1,615Payment of deferred financing costs
    
    
    (10,139
    )
    
    
    (29,157
    )Purchase of treasury stock
    
    
    (129
    )
    
    
    (642
    )Exercise of stock options
    
    
    -
    
    
    
    732Distribution of accumulated equity to noncontrolling partners
    
    
    -
    
    
    
    (3,710
    )Contributions from noncontrolling interest
    
    
    18,111
    
    
    
    41,744Distributions to noncontrolling interest
    
    
    (4,243
    )
    
    
    (6,522
    )Payment in exchange for 119,000 Class A Common Units
    
    
    -
    
    
    
    (3,501
    )Dividends paid to shareholders
    
    
    -
    
    
    
    (16,470
    )Net cash provided by financing activities
    
    $
    396,992
    
    
    $
    591,327
 65




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##### Table of Contents



LEGAL PROCEEDINGS
  COMMON STOCK OFFERING
  VARIABLE INTEREST ENTITIES
   Gladden Farms II Gladden Farms II Gladden Farms II
   July 31, 2009
    
    
    January 31, 2009(in thousands)Real estate, net
    
    $
    1,835,000
    
    
    $
    1,602,000Nonrecourse mortgage debt
    
    $
    1,557,000
    
    
    $
    1,237,000Noncontrolling interest
    
    $
    89,000
    
    
    $
    63,000
  66




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##### Table of Contents



NEW ACCOUNTING STANDARDS
        non-forfeitable
 EITF 07-5
is
 67




---



##### Table of Contents



FASB Accounting Standards
Codification TM FASB Accounting
Standards Codification TM
  68




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##### Table of Contents



CLASS A COMMON UNITS
 Master Contribution Agreement
  New York Times and Twelve MetroTech Center
 New York Times Twelve MetroTech Center
   Completed rental properties (1)
    
    $
    102,378Notes and
accounts receivable, net
(2)
    
    
    132Other assets
(3)
    
    
    12,513Accounts
payable and accrued expenses
(4)
    
    
    (9,279
    )Total purchase price allocated
    
    $
    105,744
 Represents allocation for:(1)
    
    Land, building and tenant improvements associated with the underlying real
estate(2)
    
    Above market leases(3)
    
    In-place leases, tenant relationships and leasing commissions(4)
    
    Below market leases
 69




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##### Table of Contents



Exchange of Units
  Reduction of completed rental properties
    
    $
    5,345Reduction of cash and equivalents
    
    
    3,501Increase in
Class A common stock - par value
    
    
    42Increase in additional paid-in capital
    
    
    3,736Total reduction of noncontrolling interest
    
    $
    12,624
 Other Related Party Transactions
  INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS
  70




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 variable-rate long-term fixed-rate
  Taxable
 Caps
    
    
    Swaps(1)Notional
    
    
    Average Base
    
    Notional
    
    
    Average BasePeriod Covered
    
    Amount
    
    
    Rate
    
    Amount
    
    
    Rate(dollars in thousands)08/01/09-02/01/10 (2)
    
    $
    1,157,227
    
    
    
    4.86
    %
    
    $
    1,092,755
    
    
    
    4.88
    %02/01/10-02/01/11
    
    
    1,044,116
    
    
    
    4.65
    
    
    
    1,032,081
    
    
    
    4.2802/01/11-02/01/12
    
    
    16,192
    
    
    
    6.50
    
    
    
    730,656
    
    
    
    5.3702/01/12-02/01/13
    
    
    476,100
    
    
    
    5.50
    
    
    
    729,110
    
    
    
    5.3702/01/13-02/01/14
    
    
    476,100
    
    
    
    5.50
    
    
    
    685,000
    
    
    
    5.4302/01/14-09/01/17
    
    
    -
    
    
    
    -
    
    
    
    640,000
    
    
    
    5.50
 (1)
    
    Excludes the forward swaps discussed below.(2)
    
    These LIBOR-based hedges as of August 1, 2009 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, 2010.
 Tax-Exempt
 Caps
    
    
    SwapNotional
    
    
    Average Base
    
    Notional
    
    
    Average BasePeriod Covered
    
    Amount
    
    
    Rate
    
    Amount
    
    
    Rate(dollars in thousands)08/01/09-02/01/10
    
    $
    175,025
    
    
    
    5.68
    %
    
    $
    57,000
    
    
    
    3.21
    %02/01/10-02/01/11
    
    
    175,025
    
    
    
    5.84
    
    
    
    57,000
    
    
    
    3.2102/01/11-02/01/12
    
    
    131,915
    
    
    
    5.83
    
    
    
    57,000
    
    
    
    3.2102/01/12-02/01/13
    
    
    12,715
    
    
    
    6.00
    
    
    
    57,000
    
    
    
    3.21
  Forward Swaps
   71




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##### Table of Contents



Sensitivity Analysis to Changes in Interest Rates
    Fair Valuewith 100 bp DecreaseCarrying Value
    
    
    Fair Value
    
    
    in Market Rates(in thousands)Fixed
    
    $
    4,914,574
    
    
    $
    4,353,180
    
    
    $
    4,555,178VariableTaxable
    
    
    2,503,036
    
    
    
    2,369,066
    
    
    
    2,431,595Tax-Exempt
    
    
    914,507
    
    
    
    819,001
    
    
    
    923,355
  72




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk (continued)
 July 31, 2009
 Expected Maturity DateYear Ending January 31,TotalPeriod
    
    
    Outstanding
    
    
    Fair MarketLong-Term Debt
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    7/31/09
    
    
    Value 7/31/09(dollars in thousands)Fixed:Fixed-rate debt
    
    $
    67,211
    
    
    $
    283,290
    
    
    $
    354,673
    
    
    $
    330,952
    
    
    $
    766,993
    
    
    $
    2,279,986
    
    
    $
    4,083,105
    
    
    $
    3,753,767Weighted average interest rate
    
    
    6.36
    %
    
    
    7.24
    %
    
    
    7.02
    %
    
    
    5.97
    %
    
    
    5.83
    %
    
    
    5.80
    %
    
    
    6.03
    %Senior
& subordinated debt (1)
    
    
    -
    
    
    
    -
    
    
    
    252,469
    (3)
    
    
    -
    
    
    
    -
    
    
    
    579,000
    
    
    
    831,469
    
    
    
    599,413Weighted average interest rate
    
    
    -
    %
    
    
    -
    %
    
    
    3.63
    %
    
    
    -
    %
    
    
    -
    %
    
    
    7.30
    %
    
    
    6.19
    %Total Fixed-Rate Debt
    
    
    67,211
    
    
    
    283,290
    
    
    
    607,142
    
    
    
    330,952
    
    
    
    766,993
    
    
    
    2,858,986
    
    
    
    4,914,574
    
    
    
    4,353,180Variable:Variable-rate debt
    
    
    464,606
    
    
    
    629,248
    
    
    
    384,357
    
    
    
    283,416
    
    
    
    46,412
    
    
    
    652,414
    
    
    
    2,460,453
    
    
    
    2,326,832Weighted average interest
rate (2)
    
    
    2.44
    %
    
    
    4.47
    %
    
    
    3.45
    %
    
    
    4.83
    %
    
    
    6.05
    %
    
    
    6.31
    %
    
    
    4.49
    %Tax-exempt
    
    
    90,800
    
    
    
    14
    
    
    
    77,585
    
    
    
    204,901
    
    
    
    1,075
    
    
    
    540,132
    
    
    
    914,507
    
    
    
    819,001Weighted average interest
rate (2)
    
    
    1.60
    %
    
    
    0.81
    %
    
    
    2.85
    %
    
    
    3.72
    %
    
    
    3.02
    %
    
    
    1.62
    %
    
    
    2.20
    %Bank revolving credit
facility (1)
    
    
    -
    
    
    
    42,583
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    42,583
    
    
    
    42,234Weighted average interest rate
    
    
    -
    %
    
    
    2.81
    %
    
    
    -
    %
    
    
    -
    %
    
    
    -
    %
    
    
    -
    %
    
    
    2.81
    %Total Variable-Rate Debt
    
    
    555,406
    
    
    
    671,845
    
    
    
    461,942
    
    
    
    488,317
    
    
    
    47,487
    
    
    
    1,192,546
    
    
    
    3,417,543
    
    
    
    3,188,067Total Long-Term Debt
    
    $
    622,617
    
    
    $
    955,135
    
    
    $
    1,069,084
    
    
    $
    819,269
    
    
    $
    814,480
    
    
    $
    4,051,532
    
    
    $
    8,332,117
    
    
    $
    7,541,247Weighted average interest rate
    
    
    2.74
    %
    
    
    5.22
    %
    
    
    4.63
    %
    
    
    5.01
    %
    
    
    5.83
    %
    
    
    5.54
    %
    
    
    5.15
    %
 (1)
    
    Represents recourse debt.(2)
    
    Weighted average interest rate is based on current market rates as of July 31, 2009.(3)
    
    As a result of the adoption of FSP APB 14-1, we recorded an unamortized discount of
$20,031, which reduced the principal of $272,500 of the puttable equity-linked senior notes
as of July 31, 2009. This unamortized discount is accreted through interest expense, which
resulted in an effective interest rate of 7.51% that is reflected in our Consolidated
Statements of Operations.
 73




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk (continued)
 January 31, 2009
 Expected Maturity DateYear Ending January 31,TotalPeriod
    
    
    Outstanding
    
    
    Fair MarketLong-Term Debt
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    1/31/09
    
    
    Value 1/31/09(dollars in thousands)Fixed:Fixed-rate debt
    
    $
    182,492
    
    
    $
    220,677
    
    
    $
    371,070
    
    
    $
    331,067
    
    
    $
    782,056
    
    
    $
    2,227,383
    
    
    $
    4,114,745
    
    
    $
    3,904,730Weighted average interest rate
    
    
    6.74
    %
    
    
    7.17
    %
    
    
    7.04
    %
    
    
    5.97
    %
    
    
    5.82
    %
    
    
    5.80
    %
    
    
    6.04
    %Senior
& subordinated debt (1)
    
    
    -
    
    
    
    -
    
    
    
    248,154
    (3)
    
    
    -
    
    
    
    -
    
    
    
    579,000
    
    
    
    827,154
    
    
    
    408,338Weighted average interest rate
    
    
    -
    %
    
    
    -
    %
    
    
    3.63
    %
    
    
    -
    %
    
    
    -
    %
    
    
    7.30
    %
    
    
    6.20
    %Total Fixed-Rate Debt
    
    
    182,492
    
    
    
    220,677
    
    
    
    619,224
    
    
    
    331,067
    
    
    
    782,056
    
    
    
    2,806,383
    
    
    
    4,941,899
    
    
    
    4,313,068Variable:Variable-rate debt
    
    
    700,224
    
    
    
    446,192
    
    
    
    185,413
    
    
    
    45,366
    
    
    
    46,412
    
    
    
    652,413
    
    
    
    2,076,020
    
    
    
    1,861,607Weighted average interest
rate (2)
    
    
    3.63
    %
    
    
    2.45
    %
    
    
    3.55
    %
    
    
    6.26
    %
    
    
    6.05
    %
    
    
    6.31
    %
    
    
    4.32
    %Tax-exempt
    
    
    -
    
    
    
    -
    
    
    
    33,520
    
    
    
    204,616
    
    
    
    765
    
    
    
    648,724
    
    
    
    887,625
    
    
    
    797,144Weighted average interest
rate (2)
    
    
    -
    %
    
    
    -
    %
    
    
    3.11
    %
    
    
    2.46
    %
    
    
    1.03
    %
    
    
    1.47
    %
    
    
    1.76
    %Bank revolving credit
facility (1)
    
    
    -
    
    
    
    365,500
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    365,500
    
    
    
    365,500Weighted average interest
rate(2)
    
    
    -
    %
    
    
    2.98
    %
    
    
    -
    %
    
    
    -
    %
    
    
    -
    %
    
    
    -
    %
    
    
    2.98
    %Subordinated
debt (1)
    
    
    -
    
    
    
    18,910
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    18,910
    
    
    
    18,910Weighted average interest rate
    
    
    -
    %
    
    
    1.43
    %
    
    
    -
    %
    
    
    -
    %
    
    
    -
    %
    
    
    -
    %
    
    
    1.43
    %Total Variable-Rate Debt
    
    
    700,224
    
    
    
    830,602
    
    
    
    218,933
    
    
    
    249,982
    
    
    
    47,177
    
    
    
    1,301,137
    
    
    
    3,348,055
    
    
    
    3,043,161Total Long-Term Debt
    
    $
    882,716
    
    
    $
    1,051,279
    
    
    $
    838,157
    
    
    $
    581,049
    
    
    $
    829,233
    
    
    $
    4,107,520
    
    
    $
    8,289,954
    
    
    $
    7,356,229Weighted average interest rate
    
    
    4.27
    %
    
    
    3.61
    %
    
    
    5.10
    %
    
    
    4.76
    %
    
    
    5.83
    %
    
    
    5.41
    %
    
    
    5.02
    %
 (1)
    
    Represents recourse debt.(2)
    
    Weighted average interest rate is based on current market rates as of January 31, 2009.(3)
    
    Represents the principal amount of the puttable equity-linked senior notes of $272,500
less the unamortized discount of $24,346 as of January 31, 2009, as adjusted for the
adoption of FSP APB 14-1.
 74




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##### Table of Contents



Item 4. Controls and Procedures
    
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Issuer Purchases of Equity SecuritiesTotal Number of
    
    
    Maximum NumberTotal
    
    
    
    
    
    
    Shares Purchased as
    
    
    of Shares that MayNumber of
    
    
    Average
    
    
    Part of Publicly
    
    
    Yet Be PurchasedShares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Under the PlansPeriod
    
    Purchased(1)
    
    
    Per Share
    
    
    or Programs
    
    
    or ProgramsClass A
Common StockMay 1 through May 31, 2009
    
    
    -
    
    
    $
    -
    
    
    -
    
    
    
    -June 1 through June 30, 2009
    
    
    1,264
    
    
    $
    7.10
    
    
    -
    
    
    
    -July 1 through July 31, 2009
    
    
    2,225
    
    
    $
    5.90
    
    
    -
    
    
    
    -Total
    
    
    3,489
    
    
    $
    6.33
    
    
    -
    
    
    
    -
 (1)
    
    In June and July 2009, the Company repurchased into treasury 3,489 shares of
Class A common stock to satisfy the minimum tax withholding requirements relating to
restricted stock vesting. These shares were not reacquired as part of a publicly
announced repurchase plan or program.
 75




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security-Holders
  For
    
    
    Withheld1.
    
    Election of the following
nominated directors
by Class A shareholders:Michael P. Esposito, Jr.
    
    
    63,605,369
    
    
    
    10,433,945Joan K. Shafran
    
    
    60,849,469
    
    
    
    13,189,845Louis Stokes
    
    
    59,356,159
    
    
    
    14,683,155Stan Ross
    
    
    73,141,758
    
    
    
    897,5562.
    
    Election of the following
nominated directors by
Class B shareholders:Albert B. Ratner
    
    
    221,180,801
    
    
    
    1,308,909Samuel H. Miller
    
    
    221,180,801
    
    
    
    1,308,909Charles A. Ratner
    
    
    221,257,301
    
    
    
    1,232,409James A. Ratner
    
    
    221,194,301
    
    
    
    1,295,409Jerry V. Jarrett
    
    
    221,771,480
    
    
    
    718,230Ronald A. Ratner
    
    
    221,194,301
    
    
    
    1,295,409Scott S. Cowen
    
    
    221,784,920
    
    
    
    704,790Brian J. Ratner
    
    
    221,194,301
    
    
    
    1,295,409Deborah Ratner Salzberg
    
    
    221,193,701
    
    
    
    1,296,009Bruce C. Ratner
    
    
    221,194,301
    
    
    
    1,295,409Deborah L. Harmon
    
    
    221,784,920
    
    
    
    704,790BrokerFor
    
    
    Against
    
    
    Abstentions(b)
    
    Non-Votes(c)3.
    
    Ratification of PricewaterhouseCoopers LLP as 
independent
registered public accounting firm for the 
Company for
the fiscal year ending January 31, 2010 (a)
    
    
    296,001,471
    
    
    
    175,918
    
    
    351,635
    
    -
 (a)
    
    The affirmative vote of a majority of the combined voting power of the outstanding shares of Class A common stock and Class B common stock
of the Company present or represented at the meeting was required for approval or ratification.(b)
    
    Abstentions were counted as cast with respect to such proposal and had the same effect as votes against the proposal.(c)
    
    Broker non-votes were not counted as cast for or against any proposal.
 76




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    
    
    Description of Document3.1
    
    
    -
    
    Amended Articles of Incorporation of Forest City Enterprises, Inc., restated effective
October 1, 2008, incorporated by reference to Exhibit 3.1 to the Companys Form 10-Q for the quarter
ended October 31, 2008 (File No. 1-4372).3.2
    
    
    -
    
    Code of Regulations as amended June 15, 2006, incorporated by reference to Exhibit 3.5 to the
Companys Form 10-Q for the quarter ended July 31, 2006 (File No. 1-4372).4.1
    
    
    -
    
    Senior Note Indenture, dated as of May 19, 2003, between Forest City Enterprises, Inc., as issuer,
and The Bank of New York, as trustee, incorporated by reference to Exhibit 4.1 to the Companys Form
8-K filed on May 20, 2003 (File No. 1-4372).4.2
    
    
    -
    
    Form of 7.625% Senior Note due 2015, incorporated by reference to Exhibit 4.2 to the Companys Form
8-K filed on May 20, 2003 (File No. 1-4372).4.3
    
    
    -
    
    Form of 7.375% Senior Note due 2034, incorporated by reference to Exhibit 4.2 to the Companys
Registration Statement on Form 8-A filed on February 10, 2004 (File No. 1-4372).4.4
    
    
    -
    
    Form of 6.5% Senior Note due 2017, incorporated by reference to Exhibit 4.2 to the Companys Form 8-K
filed on January 26, 2005 (File No. 1-4372).4.5
    
    
    -
    
    Indenture, dated as of October 10, 2006, between Forest City Enterprises, Inc., as issuer, and The
Bank of New York Trust Company, N.A., as trustee, including, as Exhibit A thereto, the Form of 3.625%
Puttable Equity-Linked Senior Note due 2011, incorporated by reference to Exhibit 4.1 to the
Companys Form 8-K filed on October 16, 2006 (File No. 1-4372).9.1
    
    
    -
    
    Voting Agreement, dated November 8, 2006, by and among Forest City Enterprises, Inc., RMS Limited
Partnership, Powell Partners, Limited, Joseph M. Shafran and Bruce C. Ratner, incorporated by
reference to Exhibit 9.1 to the Companys 
Form 10-K for the year ended January 31, 2007 (File
No. 1-4372).+10.1
    
    
    -
    
    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).+10.2
    
    
    -
    
    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).+10.3
    
    
    -
    
    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).+10.4
    
    
    -
    
    First Amendment to the Deferred Compensation Plan for Executives, effective as of October 1, 1999,
incorporated by reference to Exhibit 10.45 to the Companys Form 10-Q for the quarter ended
April 30, 2005 (File No. 1-4372).+10.5
    
    
    -
    
    Second Amendment to the Deferred Compensation Plan for Executives, effective as of December 31, 2004,
incorporated by reference to Exhibit 10.46 to the Companys Form 10-Q for the quarter ended
April 30, 2005 (File No. 1-4372).+10.6
    
    
    -
    
    Forest City Enterprises, Inc. 2005 Deferred Compensation Plan for Executives (As Amended and Restated
Effective January 1, 2008), incorporated by reference to Exhibit 10.21 to the Companys Form 10-K for
the year ended January 31, 2008 (File No. 1-4372).+10.7
    
    
    -
    
    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).+10.8
    
    
    -
    
    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).
 77




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##### Table of Contents



ExhibitNumber
    
    
    
    Description of Document+10.9
    
    
    -
    
    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).+10.10
    
    
    -
    
    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).+10.11
    
    
    -
    
    Fourth Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective as of
December 31, 2004, incorporated by reference to Exhibit 10.47 to the Companys Form 10-Q for the
quarter ended April 30, 2005 (File No. 
1-4372).+10.12
    
    
    -
    
    Fifth Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective as of
March 26, 2008, incorporated by reference to Exhibit 10.60 to the Companys Form 10-K for the year
ended January 31, 2008 (File No. 1-4372).+10.13
    
    
    -
    
    Forest City Enterprises, Inc. 2005 Deferred Compensation Plan for Nonemployee Directors (As Amended
and Restated effective January 1, 2008), incorporated by reference to Exhibit 10.60 to the Companys
Form 10-Q for the quarter ended April 30, 2008 (File No. 1-4372).+10.14
    
    
    -
    
    Forest City Enterprises, Inc. Executive Short-Term Incentive Plan (As Amended and Restated as of
June 19, 2008), incorporated by reference to Exhibit 10.2 to the Companys Form 8-K filed on
June 24, 2008 (File No. 1-4372).+10.15
    
    
    -
    
    Forest City Enterprises, Inc. Executive Long-Term Incentive Plan (As Amended and Restated as of
June 19, 2008), incorporated by reference to Exhibit 10.3 to the Companys Form 8-K filed on
June 24, 2008 (File No. 1-4372).+10.16
    
    
    -
    
    Forest City Enterprises, Inc. Senior Management Short-Term Incentive Plan (Effective February 1,
2008), incorporated by reference to Exhibit 10.4 to the Companys Form 8-K filed on June 24, 2008
(File No. 1-4372).+10.17
    
    
    -
    
    Forest City Enterprises, Inc. Senior Management Long-Term Incentive Plan (Effective February 1,
2008), incorporated by reference to Exhibit 10.5 to the Companys Form 8-K filed on June 24, 2008
(File No. 1-4372).+10.18
    
    
    -
    
    Forest City Enterprises, Inc. Amended Board of Directors Compensation Policy, effective
February 1, 2008, incorporated by reference to Exhibit 10.33 to the Companys Form 10-K for the year
ended January 31, 2008 (File No. 1-4372).+10.19
    
    
    -
    
    Forest City Enterprises, Inc. Unfunded Nonqualified Supplemental Retirement Plan for Executives
(As Amended and Restated Effective January 1, 2008), incorporated by reference to Exhibit 10.59 to
the Companys Form 10-K for the year ended January 31, 2008 (File No. 1-4372).+10.20
    
    
    -
    
    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).+10.21
    
    
    -
    
    Amended and Restated Form of Restricted Stock Agreement, effective as of June 8, 2004, incorporated
by reference to Exhibit 10.18 to the Companys Form 10-Q for the quarter ended April 30, 2005 (File
No. 1-4372).+10.22
    
    
    -
    
    Form of Forest City Enterprises, Inc. Performance Shares Agreement, incorporated by reference to
Exhibit 10.6 to the Companys Form 8-K filed on June 24, 2008 (File No. 1-4372).+10.23
    
    
    -
    
    Form of Forest City Enterprises, Inc. Nonqualified Stock Option Agreement for Nonemployee Directors,
incorporated by reference to Exhibit 10.66 to the Companys Form 10-Q for the quarter ended
July 31, 2008. (File No. 1-4372).+10.24
    
    
    -
    
    Form of Forest City Enterprises, Inc. Restricted Shares Agreement for Nonemployee Directors,
incorporated by reference to Exhibit 10.67 to the Companys Form 10-Q for the quarter ended
July 31, 2008 (File No. 1-4372).
 78




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##### Table of Contents



ExhibitNumber
    
    
    
    Description of Document+10.25
    
    
    -
    
    Forest City Enterprises, Inc. 1994 Stock Plan (As Amended and Restated as of June 19, 2008),
incorporated by reference to Exhibit 10.1 to the Companys Form 8-K filed on June 24, 2008 (File No.
1-4372).+10.26
    
    
    -
    
    Employment Agreement entered into on May 31, 1999, effective January 1, 1999, between Forest City
Enterprises, Inc. and Albert B. Ratner, incorporated by reference to Exhibit 10.47 to the Companys
Form 10-Q for the quarter ended July 31, 1999 (File No. 1-4372).+10.27
    
    
    -
    
    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).+10.28
    
    
    -
    
    Employment Agreement entered into on May 31, 1999, effective January 1, 1999, between Forest City
Enterprises, Inc. and Samuel H. Miller, incorporated by reference to Exhibit 10.48 to the Companys
Form 10-Q for the quarter ended July 31, 1999 (File No. 1-4372).+10.29
    
    
    -
    
    Agreement regarding death benefits entered into on May 31, 1999, between Forest City Enterprises,
Inc. and Robert G. OBrien, incorporated by reference to Exhibit 10.29 to the Companys Form 10-Q for
the quarter ended April 30, 2009 (File No. 1-4372).+10.30
    
    
    -
    
    Employment Agreement entered into on July 20, 2005, effective February 1, 2005, between Forest City
Enterprises, Inc. and Charles A. Ratner, incorporated by reference to Exhibit 10.1 to the Companys
Form 8-K filed on July 26, 2005 (File No. 
1-4372).+10.31
    
    
    -
    
    First Amendment to Employment Agreement, dated as of November 9, 2006, by and among Charles A. Ratner
and Forest City Enterprises, Inc., incorporated by reference to Exhibit 10.2 to the Companys Form
8-K filed on November 13, 2006 (File No. 1-4372).+10.32
    
    
    -
    
    Employment Agreement entered into on July 20, 2005, effective February 1, 2005, between Forest City
Enterprises, Inc. and James A. Ratner, incorporated by reference to Exhibit 10.2 to the Companys
Form 8-K filed on July 26, 2005 (File No. 
1-4372).+10.33
    
    
    -
    
    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).+10.34
    
    
    -
    
    Employment Agreement entered into on July 20, 2005, effective February 1, 2005, between Forest City
Enterprises, Inc. and Ronald A. Ratner, incorporated by reference to Exhibit 10.3 to the Companys
Form 8-K filed on July 26, 2005 (File No. 
1-4372).+10.35
    
    
    -
    
    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).+10.36
    
    
    -
    
    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).*10.37
    
    
    -
    
    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. **10.38
    
    
    -
    
    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).
 79




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##### Table of Contents



ExhibitNumber
    
    
    
    Description of Document*10.39
    
    
    -
    
    Amended and Restated Credit Agreement, dated as of June 6, 2007, 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. **10.40
    
    
    -
    
    Additional Bank Assumption Agreement by and among The Bank of New York, Forest City Rental Properties
Corporation, and KeyBank in its capacity as administrative agent under the Credit Agreement,
incorporated by reference to Exhibit 10.2 to the Companys Form 8-K filed on December 20, 2007 (File
No. 1-4372).10.41
    
    
    -
    
    Additional Bank Assumption Agreement by and among Wachovia Bank, N.A., Forest City Rental Properties
Corporation, and KeyBank in its capacity as administrative agent under the Credit Agreement,
incorporated by reference to Exhibit 10.3 to the Companys Form 8-K filed on December 20, 2007 (File
No. 1-4372).10.42
    
    
    -
    
    Exhibit A to the Amended and Restated Credit Agreement by and among Forest City Rental Properties
Corporation, KeyBank National Association, as Administrative Agent, National City Bank, as
Syndication Agent, Bank of America, N.A. and LaSalle Bank National Association, as Co-Documentation
Agents, and the banks named therein, revised as of December 20, 2007, further revised as of
February 4, 2008 and further revised as of February 19, 2008, incorporated by reference to Exhibit
10.56 to the Companys Form 10-K for the year ended January 31, 2008 (File No. 1-4372).10.43
    
    
    -
    
    First Amendment to Amended and Restated Credit Agreement, dated as of September 10, 2008, by and
among Forest City Rental Properties Corporation, Key Bank National Association, as Administrative
Agent, National City Bank, as Syndication Agent, Bank of America, N.A., as Documentation Agent, and
the banks named therein, incorporated by reference to Exhibit 10.44 to the Companys Form 10-Q for
the quarter ended October 31, 2008 (File No. 1-4372).*10.44
    
    
    -
    
    Amended and Restated Guaranty of Payment of Debt, dated as of June 6, 2007, 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.10.45
    
    
    -
    
    First Amendment to Amended and Restated Guaranty of Payment of Debt, dated as of September 10, 2008,
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., as Documentation Agent, and
the banks named therein, incorporated by reference to Exhibit 10.46 to the Companys Form 10-Q for
the quarter ended October 31, 2008 (File No. 1-4372).10.46
    
    
    -
    
    Second Amendment to Amended and Restated Credit Agreement and Amended and Restated Guaranty of
Payment of Debt, dated as of January 30, 2009, by and among Forest City Rental Properties
Corporation, Forest City Enterprises, Inc., KeyBank National Association, as Administrative Agent,
National City Bank, as Syndication Agent, Bank of America, N.A., as Documentation Agent, and the
banks named therein, incorporated by reference to Exhibit 10.1 to the Companys Form 8-K filed on
February 5, 2009 (File No. 1-4372).*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.**
    
    Portions of these exhibits have been omitted pursuant to a request for confidential treatment.
 80




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##### Table of Contents



SIGNATURES
  FOREST CITY ENTERPRISES, INC.
          (Registrant)Date: September 8, 2009
    
    /S/ ROBERT G. OBRIENName:
    
    Robert G. OBrienTitle: Executive Vice President andChief Financial OfficerDate: September 8, 2009
    
    /S/ LINDA M. KANEName:
    
    Linda M. KaneTitle:
 Senior Vice President, Chief Accountingand Administrative Officer
 81




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    
    
    Description of Document10.37
    
    
    -
    
    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. **10.39
    
    
    -
    
    Amended and Restated Credit Agreement, dated as of June 6, 2007, 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. **10.44
    
    
    -
    
    Amended and Restated Guaranty of Payment of Debt, dated as of June 6, 2007, 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.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.
 **
    
    Portions of these exhibits have been omitted pursuant to a request for confidential treatment.