Forest City Enterprises, Inc. 2000 Annual Report
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LEGEND Shopping Centers Hotels HIGHLIGHTS - JANUARY 31, 2001 Office Buildings Apartments Retail Square Feet Shopping Centers Including Anchors Under Construction Regional Offices 17,523,000 Land Development Lumber Trading Group Offices Office Buildings Leasable Square Feet NOTE: Numbers indicate properties in each market. 7,789,000 Tampa Hotels Rooms 3,040 Fort Lauderdale
(1) Apartments Units Miami 36,239
(1) Includes residual interest in 6,966 syndicated affordable housing units. Forest City Enterprises, Inc. 2000 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
Effective January 31, 2001, Forest City Enterprises, Inc. implemented a change in the presentation of its financial results from the pro-rata method of consolidation to the full consolidation method, in accordance with the Financial Accounting Standards Board’s Emerging Issues Task Force Issue No. 00-1. A discussion regarding this change is included in Note A -“Summary of Significant Accounting Policies”. Prior year amounts have been About the Cover re-presented under the full consolidation method. “If you’ve got a little time to spare, I want to take you there. January 31, Come and meet those dancing feet on the avenue I’m taking 2001 2000 (in thousands, except per share data) you to . . . 42nd Street.” Operating Results: - Al Dubin (lyricist) Revenues ...... $ 794,785 $ 698,788 Earnings before depreciation, amortization and deferred taxes (EBDT)(1) . . . . 147,809 132,639 The luster is back on one of New York City’s busiest Net earnings ...... 91,637 40,802 and most immortalized streets, thanks to the cooperative Per Share: redevelopment efforts of the public and private sectors. EBDT(1) ...... $ 4.87 $ 4.40 Forest City’s part in the dramatic renewal of 42nd Street Net earnings ...... $ 3.02 $ 1.35 Weighted average common shares outstanding ...... 30,333 30,153 stands midway between Seventh and Eighth Avenues in Share Price: Times Square, a few doors from Disney’s refurbished New Class A ...... $ 41.55 $ 26.06 Amsterdam Theater and half a block from where “The Ball” Class B ...... 42.05 30.38 drops on New Year’s Eve. Financial Position: Our exciting new mixed-use project combines new Consolidated assets ...... $ 4,030,470 $ 3,666,355 construction with historic elements of the renowned Harris, Real estate, at cost ...... 3,526,146 3,206,642 Liberty and Empire Theaters. 42nd Street even made the Guinness Book of World Nonrecourse mortgages ...... 2,439,912 2,188,594 Records when the landmark Empire Theater - all 37,000 tons of it - was moved 168 Long-term debt, including senior and subordinated debt ...... 409,900 367,000 feet down the street to house the spectacular lobby of the AMC Theaters. Sure to Consolidated shareholders’ equity ...... 456,636 386,506 be a destination for New Yorkers and tourists alike, the development is anchored (1) The Company uses an additional measure, along with net earnings, to report its operating results. This measure, referred to as Earnings Before Depreciation, by the 444-room Hilton Times Square and includes 305,000 square feet of retail Amortization and Deferred Taxes (“EBDT”), is not a measure of operating results or cash flows from operations as defined by generally accepted accounting principles and may not be directly comparable to similarly-titled measures reported by other companies. The Company believes that EBDT provides additional and entertainment space. We have already welcomed such top names as Madame information about its operations and, along with net earnings, is necessary to understand its operating results. The Company’s view is that EBDT is an indicator of the Company’s ability to generate cash to meet its funding requirements. EBDT is defined as net earnings before extraordinary gain, excluding Tussaud’s Wax Museum and HMV Records. the following items: i) provision for decline in real estate; ii) gain (loss) on disposition of properties and other investments; iii) beginning in the year ended January 31, 2001, the adjustment to recognize rental revenues and rental expenses using the straight-line method; and iv) noncash charges from Forest City Rental Properties Corporation for depreciation, amortization and deferred income taxes. With retail, office, hotel and residential projects in all five boroughs, Forest City is one of the most active developers in New York City. EBDT Real Estate, at Cost For the years ended January 31, (in millions) As of January 31, (in billions)
CONTENTS
Page 2...... Letter to Shareholders Page 6...... Strategic Business Unit Discussions Page 22 ...... Portfolio of Real Estate Page 26...... Selected Financial Data and Report of Independent Accountants Page 29 ...... Consolidated Financial Statements Page 34 ...... Notes to Consolidated Financial Statements ■ Pro-Rata ■ Full-Consolidation Page 59 ...... Quarterly Consolidated Financial Data Forest City Enterprises, Inc. is principally engaged in the ownership, development, acquisition and management of commercial Page 60 ...... Management’s Discussion and Analysis and residential real estate throughout the United States. The Company owns properties in 22 states and the District of Columbia. Forest City also conducts land development projects and is one of the nation’s largest lumber wholesalers. The Company’s Class A and Class B common shares are listed on the New York Stock Exchange – FCEA and FCEB. The Company’s primary markets include Boston, Chicago, Cleveland, Denver, Las Vegas, Los Angeles, New York, Philadelphia, Pittsburgh, Richmond (Virginia), San Francisco and Washington D.C.
Forest City Enterprises Inc. • 2000 Annual Report 1 Dear Fellow Shareholders
Forest City had an excellent year in 2000. Revenues, Earnings Before Depreciation, Amortization over” during the year, was 19.4 percent. Within the Commercial Group, sales in the retail portfolio and Deferred Taxes (EBDT), EBDT per share, and shareholders’ equity - all reached record levels. increased 1.8 percent from last year to $355 per square foot. Year-end occupancies were strong across EBDT increased 10.7 percent to $148 million, or $4.87 per share, marking the 21st consecutive all major business units with retail at 92 percent, office at 97 percent and residential at 95 percent. year of increases. Consolidated revenues increased 13.7 percent and real estate revenues were up In addition to managing occupancies, rents and expenses for NOI growth, we continually analyze our 24 percent compared with the prior year. During the past five years, our shareholders’ equity has grown portfolio to determine when properties reach the point where the majority of the value created has been to $456 million from $189 million, and increased 18.1 percent from the prior year. Our cumulative realized and we could better employ the proceeds elsewhere. In 2000, we remained true to this strategy EBDT was $595 million for the same five-year period. and disposed of five properties. For two of these assets, we believed we could no longer add value. The A primary objective at Forest City is to continually improve shareholder value. We believe consistent other three were high-quality assets where we realized exceptional value and were structured as tax-deferred performance over time will be rewarded in the marketplace. Our share price posted a 30.1 percent exchanges, enabling us to reinvest the proceeds into higher yielding projects. The sales of these five annualized total return over the last five years and is testimony to our focus on long-term value creation. properties resulted in a net gain, after tax, of $16.7 million and generated $45 million for reinvestment. In the short-term, our shares generated a 40.8 percent return for the calendar year 2000, outperforming the broad market, real estate stocks in general and our peer group. Dividends declared in 2000 totaled Targeted Markets With Select Products 23 cents per share, up 21 percent from last year, representing the sixth consecutive year of increases. Portfolio Additions As a real estate developer, our growth depends on continued improvement in our existing properties, We added 17 properties to our portfolio in 2000. Our 12 new developments and five acquisitions portfolio additions from new development and timely acquisitions. We had a very active year in 2000 furthered our strategy of concentrating on projects in targeted markets, particularly the New York City with the addition of 17 properties and five property dispositions. We added interests in 488,000 metropolitan area. We added interests in: (i) 3,245 residential units located primarily in New York, square feet of new commercial space, 907 hotel rooms in two projects and more than 3,000 residential California, Virginia and Florida, representing a cost of $332 million, (ii) 401,000 square feet of retail and supported-living units. Our estimated average stabilized unleveraged return on these property projects located in four different boroughs of New York City, at a cost of $67 million and (iii) 907 hotel additions was 10.9 percent on a total cost of $535 million at the Company’s share. rooms in Manhattan, representing a cost of $131 million. At year end, our development and construction program had 14 projects under construction totaling One of the big stories in 2000 occurred in the Residential Group, where we completed one of our $545 million at our share of the cost and more than 20 projects under development, ensuring our future most active years with 10 additions to our portfolio – five developments and five acquisitions. Six of growth. Total real estate, at Forest City’s pro-rata share of cost, grew to $3.8 billion. During the past five these were in the supported-living business, including five in the greater New York City metropolitan years, we opened or acquired 62 projects, representing a total cost of more than $1.5 billion at our share. area. With the addition of these 1,103 units, we more than doubled the size of our supported-living We have achieved all of these results by following a well-defined Total Assets portfolio, bringing the total number of units to 1,968. The density of the age-appropriate population January 31, 2001 ($4.0 billion) Full Consolidation Method strategy. Year-end 2000 marks the completion of the first year of our new and the low penetration by competitors, because of the difficulties associated with the entitlement four-year strategic plan, which focuses on increasing long-term value for Commercial process, make the greater New York City market one of the best in the country for this product. ■ Shopping Centers shareholders. Its major elements include: Four residential openings in 2000 were unique opportunities to pursue our strategy to expand 34% ■ Office Buildings • Continually enhancing the quality of our existing portfolio. into growth markets with our select products. This year’s opening of the 323-unit 101 San Fernando 28% ■ Hotels • Targeting high-growth, primarily urban, high “barrier-to-entry” markets apartment community represented our second residential project and our fourth property in San Jose, 3% ■ Residential for the select products in which we have developed expertise – our California. We continue to see the demand for our residential product in this market outstrip supply, ■ 3% 10% Land “city strategy.” 2% 20% ■ Lumber resulting in above-average returns. The opportunistic acquisition of the ■ Corporate • Utilizing a unique capital structure, which allows us to fund growth previously under-managed 1,387-unit Mount Vernon Square in Residential Group Highlights internally and increase return on equity. Alexandria, Virginia offered a great property in a strategic market with • 10 additions – five new developments, five acquisitions strong demand and limited availability. Two projects that opened in 2000 • Doubled the number of supported-living units to 1,968 • Increased total rental units by 3,245 Enhancing the Quality of Our Existing Portfolio were representative of our “adaptive re-use” product in our multifamily • Added two adaptive re-use projects – a warehouse rehab Our goal is to constantly improve the profitability of our investments. We do this by growing net business. Adaptive re-use involves restructuring existing buildings, in and a former military barracks operating income (NOI) and improving the quality of the properties in our portfolio. Forest City’s NOI our case converting them into high-end residential space. The former • Expanded presence in New York, San Jose, Virginia, Denver and Florida – operating income from our rental properties before debt service, capital expenditures and depreciation – American Cigar factory in our Tobacco Row project in Richmond, is a key driver of our real estate value. Virginia is one of several historic warehouse buildings we are rehabbing We maximize NOI by managing our properties aggressively, resulting in consistently high occupancies, into loft-style apartments. Together with Grand Lowry Lofts, a former Commercial Group Highlights increased rental rates and tight cost controls - all of which occurred in 2000. To increase our portfolio U.S. Air Force barracks in Denver, the two projects comprise 432 units. • Seven additions – all new developments value, we make appropriate capital improvements and expansions, meeting our tenants’ evolving needs The Commercial Group added seven new properties in 2000. The • Four retail centers, two hotels and one office building • Expanded presence in New York City while improving our properties’ competitive position. In 2000, we invested $42 million to expand or new portfolio additions were focused primarily in the New York City • Added nearly 500,000 square feet of retail and office space renovate existing properties and $18 million for normal recurring capital expenditures. During the past metropolitan area, where we opened four retail centers and two hotels. • Increased hotel portfolio by 907 rooms five years, we invested more than $200 million in capital expenditures to maintain and improve the These included the Hilton Times Square, a major component of our quality of our portfolio. 42nd Street mixed-use project that includes retail and entertainment space (featured on the cover of this NOI increased 3.2 percent in 2000 for properties we owned in both 2000 and 1999. This increase year’s annual report), and our Battery Park City retail/entertainment project in downtown Manhattan, was fueled by consistently high occupancy rates, rent increases and prudent expense management. At which is anchored by the Embassy Suites Hotel. In addition to these high profile hotel and retail projects, the business unit level, the Commercial Group’s property NOI increased 3.1 percent and the Residential we opened three other urban retail projects in New York City. Group’s increased 3.6 percent. In the Residential Group, rental rates increased 3.9 percent. In the Commercial Group, the average rent increase, on more than 850,000 square feet of space that “turned
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 2 3 Construction & Development Pipeline Our Unique Capital Strategy At year end, our development pipeline totaled 14 projects under construction, representing a total The use of a highly differentiated capital structure has significantly enhanced Forest City’s success cost of $545 million, and more than 20 projects under development. and growth and is the cornerstone of our strategic plan. The Company’s use of nonrecourse mortgage We continue to have a robust pipeline of residential projects under construction and development, debt and our status as a C-Corp allow us to grow through reinvesting our operating cash flow and raising following several years of record-setting activity. During the past five years, the Group opened or acquired capital by refinancing the value created in our portfolio. Forest City has one of the lowest costs of capital 8,960 units. The Residential Group had eight projects under construction and nine under development in our industry. We recycle capital efficiently and drive higher equity returns for our shareholders. at year end. Under-construction projects represented 1,625 apartment units in Cambridge, Philadelphia, We remain diligent in managing our interest rate exposure, with a weighted average interest rate San Diego, New York and Ohio totaling $175 million of cost – all at the Company’s share. Seven of the on our outstanding nonrecourse mortgage debt of 7.65 percent as of January 31, 2001. We continue to eight are expected to open in 2001. utilize LIBOR caps and Treasury Options to hedge the interest rate exposure on our variable rate debt. Commercial projects under construction included 2.5 million square feet of retail space in New The year 2000 included the largest volume of financings in our history. We closed on more than 60 York City, Atlanta and Pittsburgh, representing a total cost of $202 million, and 469,000 square feet transactions totaling in excess of $1.8 billion, including our partners’ share of the debt. This represents of office space in Cambridge, Massachusetts totaling $168 million of cost. the fifth consecutive year of procuring more than $1 billion in financings and evidences our ability We continue to believe the development of regional malls represents a high value-added business to consistently access nonrecourse mortgage debt. Additionally, we successfully increased our revolving for Forest City. The same is true for the development of urban retail centers in the underserved boroughs line of credit facility by $65 million to $265 million. of New York. These products – regional malls and urban retail – continue to perform extremely well when located in major markets with strong demographics such as San Francisco, New York, Atlanta, New Financial Reporting Presentation Pittsburgh and Richmond, Virginia. Effective January 31, 2001, we implemented a change in the presentation of our financial statements Construction is underway on the 856,000-square-foot Mall at Robinson near the Pittsburgh that has impacted their comparability. While a number of the line items on our consolidated financial International Airport and the 1.2 million-square-foot Mall at Stonecrest in Atlanta. Both are expected to statements have changed under the new full consolidation method, there is no impact on EBDT, net open in late October 2001 and are more than 80 percent pre-leased. Regional malls under development earnings or shareholders’ equity. In addition, this change will have no effect on how we operate or include the 1.1 million-square-foot Short Pump Town Center in Richmond, Virginia and the 974,000- manage our business. Historically, until January 31, 2001, we used the pro-rata method of consolidation square-foot Emporium in San Francisco. to present our partnership investments proportionate to our share of ownership - for each line item on We continue to pursue an aggressive urban retail strategy in the New York City metropolitan area our consolidated financial statements. with four major projects, one currently under construction – the 455,000-square-foot Queens Place – Now, in accordance with the Emerging Issues Task Force, we can no longer use the pro-rata and three to start later this year. Queens Place is slated to open in the third quarter of 2001. In total, consolidation method for our partnerships. Accordingly, partnership investments previously reported on these new projects represent 1.2 million square feet of additional space, bringing our New York urban the pro-rata method will now be reported in one of two ways – either as consolidated at 100 percent if retail portfolio to 3.6 million square feet, located in all five boroughs of New York City. Among the deemed under the Company’s “control” – or under the equity method of accounting. As an aid to help office buildings in our development pipeline is the 1.4 million-square-foot New York Times corporate the readers of our financial statements, we are providing a reconciliation from the new presentation to headquarters in Times Square. the historic pro-rata presentation in all future public reportings, including this year’s annual report. The success of University Park at MIT, our high-technology/biomedical office park in Cambridge, is a prime example of our strategy in action - developing a demand-driven product in a supply-constrained Outlook for 2001 market. We have been able to develop a highly differentiated product, which includes office and research, We expect 2001 to be another good year for Forest City. Stabilization of the properties we opened retail, residential and a hotel. during the past few years, together with the 14 projects currently under construction, will ensure our In 2000, we executed leases for 681,000 square feet of office space in four buildings. We began continued growth in profitability. We remain committed to increasing shareholder value by developing construction on three buildings and will start the fourth later in the year. All four office buildings are diverse products in growth markets with high barriers to entry. 100 percent pre-leased. Acceptance of University Park at MIT as a premier location in the market is We are fully aware of the softening of the retail industry and the uncertainties of the economy. evidenced by the signing of two leases with existing park tenants and other leases with high-quality new As we focus on implementing the next year of our strategic plan, we are cautiously optimistic, but also tenants. Complementing this activity was the commencement of construction on a 135-unit apartment mindful of the risks always inherent in our business. community and a 1,128-car parking garage. When complete, the Park will contain approximately As we move into the new millennium, we know our past success and strong financial position would 1.6 million square feet of biotech/office space, 100,000 square feet of retail, 400 residential units, not have been possible without the confidence and support of our customers, associates, partners structured parking for more than 2,700 cars, a 210-room hotel and four acres of park and green space. and investors. Thank you. The type of expertise we demonstrated at University Park at MIT is exactly what influenced the Stapleton Development Corporation to select Forest City as the master developer to transform Denver’s former international airport into a planned mixed-use urban community. Stapleton is one of the most ambitious urban redevelopments in the country. Progress to date includes obtaining commitments from major tenants for a 740,000-square-foot regional retail center scheduled to begin construction in 2001 and open in the summer of 2002. Concurrently, construction will begin on the first phase of the Samuel H. Miller Albert B. Ratner Charles A. Ratner residential development that includes 800 homes, 300 apartments and a neighborhood retail center Co-Chairman of the Board and Treasurer Co-Chairman of the Board President and Chief Executive Officer (see pages 20 & 21 for a separate discussion of Stapleton).
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 4 5 Commercial Group The right products in the right markets The Commercial Group is the largest demographics to support our ideal customer Strategic Business Unit in our Company. profile: educated office customers and It owns, develops, acquires and manages technology-driven businesses. regional malls, urban retail centers, office The Commercial Group’s growth buildings, hotels and mixed-use projects. depends on continued improvement in its Because of its success in developing large existing properties, portfolio additions from complex projects, the Commercial Group new development and timely acquisitions. has access to many opportunities. The ability The Group had an outstanding year in terms to manage the public/private entitlement of portfolio performance as illustrated in the process is central to our ability to create “2000 Performance at a Glance” statistical mixed-use projects. While these projects summary highlighted on this page. In 2000, the typically have high barriers to entry, the Commercial Group opened seven development Commercial Group is positioned to take projects – four shopping centers, two hotels and advantage of these opportunities and achieve one office building – totaling $202.6 million above-market returns. of cost at the Company’s share, yielding an Our future development program focuses estimated average stabilized unleveraged return on growing regions of the United States. of 11.3 percent. At the end of 2000, six These regions provide both high concentrations projects totaling $369 million of cost at the of “knowledge-based” Company’s share were under construction – 2000 Performance at a Glance employers and “quality four (of the six) are scheduled to open in 2001. EBDT $ 121.4 mil. EBDT Increase 14.7% of life” opportunities, Another 14 projects were under development Comparable NOI Increase 3.1% driving high growth and with projected opening dates ranging from Mall Sales Per Square Foot $ 355 rapidly rising incomes. 2002 to 2005. Comparable Mall Sales Increase 1.8% Comparable Rental Rate Increase 19.4% We are pursuing large- Another way we increase portfolio value is Retail Occupancy 92% scale, retail-anchored through capital improvements and expansions, Office Occupancy 97% developments in large meeting tenants’evolving needs while improving 2000 Portfolio at a Glance metropolitan areas our properties’ competitive positions. In 2000, Total Assets $ 2.8 bil. and underserved we invested $35 million to expand or renovate Total Retail Square Feet 17.5 mil. growth markets. The existing Commercial properties and $13 million Gross Leasable Area 10 mil. Commercial Group for normal recurring capital expenditures. Retail Centers 42 Office Square Feet 7.8 mil. is well positioned to Office Buildings 28 meet the needs of New York Hotel Rooms 3,040 Hotels 9 our retail customers, Over the past 10 years, Forest City has which include anchor established itself as a preeminent developer tenants, consumers and local communities. in New York City, the largest market in the Large urban markets also drive our office United States. Consistent with the Company’s strategy. These growth markets have the city strategy and our position as one of the
Hilton Times Square, Manhattan, New York
Forest City Enterprises Inc. • 2000 Annual Report 6 only real estate companies with experience Group is working to mitigate the exposure and expertise in all areas of development, the Company has to the theater industry. Forest City continues to focus on New York The majority of our theaters are located City for new opportunities. in good markets and are performing well. In June 2000, Forest City Ratner Theater revenues represent less than Companies (FCRC), an affiliate of Forest 1.5 percent of Forest City’s total revenues. City Enterprises, opened the 444-room FCRC continued its urban retail strategy Hilton Times Square. The 42nd Street project in the underserved New York boroughs with also includes 305,000 square feet of retail/ the recent ground breaking of Queens Place, entertainment space and is home to the a 455,000-square-foot retail/entertainment world-renowned Madame Tussaud’s Wax project featuring Target, TJ Maxx, Macy’s Museum, a 25-screen AMC Theater with Home Store and other prominent retailers. stadium-style seating, HMV Records and The project is expected to open in the third other retail/entertainment venues. quarter of 2001. In addition to Queens Place, The Battery Park City mixed-use project, three major projects will begin construction in featuring the 463-room Embassy Suites Hotel, 2001. In total, these four projects represent opened simultaneously with the Hilton Times $136 million of cost at the Company’s share Square. Battery Park City is located in and 1.2 million square feet.
Battery Park City mixed-use project, Manhattan, New York downtown Manhattan and includes 167,000 Among the projects under development, square feet of fully-leased retail space. In FCRC signed an agreement with the New addition to these high-profile projects, the York Times Company to develop its new Commercial Group opened three urban 1.4 million-square-foot headquarters building retail projects in New York – Court Street, in Times Square. FCRC was chosen after a Forest Avenue and Eastchester. rigorous review of numerous developers in Regal Cinemas is the major tenant in New York City. The project will include three of these retail projects. The Commercial approximately 700,000 square feet owned by
Embassy Suites Hotel lobby at Battery Park City, Manhattan, New York
Forest City Enterprises Inc. • 2000 Annual Report 9 Eastchester retail center, Bronx, New York the New York Times and 670,000 square feet Short Pump Town Center in Richmond, owned by Forest City, which will be leased Virginia and the 974,000-square-foot to office and retail tenants. Construction is Emporium in San Francisco. Short Pump will expected to begin in 2002, with occupancy be anchored by Nordstrom’s, Lord & Taylor, in 2005. Hecht’s and Dillard’s. Emporium will feature a 360,000-square-foot Bloomingdale’s, which Regional Malls will be the chain’s largest store outside New One of the Company’s most important York City. Both of these malls are involved products is regional malls – a business where in entitlement disputes, which are expected the Commercial Group has great opportunity to be resolved this year. to add value. Forest City currently has one of During 2000, Forest City announced the largest pipelines of retail projects under Macy’s as the fourth anchor at the Promenade construction in its history. in Temecula, our regional mall located just Construction is underway on the north of San Diego. The new 165,000- 856,000-square-foot Mall at Robinson, near square-foot Macy’s will join existing anchors, the Pittsburgh International Airport, which JC Penney, Robinson-May and Sears, and includes three department stores – Kaufmann’s, is expected to open in 2002. Sears and JC Penney. The Mall at Stonecrest Consistent with the strategy to continually in Atlanta is anchored by Rich’s, Dillard’s, prune our portfolio and dispose of properties JC Penney, Parisian and Sears.This 1.2 million- we believe have achieved maximum potential square-foot shopping center also contains more value for our Company, the Commercial Group than 120 specialty retail shops. Both malls disposed of three retail properties in 2000. represent strong market opportunities and are expected to open in October 2001. Demand Mixed-Use for these products is high, demonstrated by The Commercial Group’s experience in leasing commitments of more than 80 percent. retail, office and hotel development allows it Regional malls under development to develop projects with multiple uses. When include the 1.1 million-square-foot completed, these projects typically create
Under construction: Mall at Stonecrest, Atlanta, Georgia
Forest City Enterprises Inc. • 2000 Annual Report 10 significant value by positively changing signing of two leases totaling 558,000 square the perception of a larger market area. feet with current park tenants – Millennium Understanding the complexities of each Pharmaceuticals, Inc. and Alkermes, Inc. individual use, and the proper integration In August 2000, Forest City signed a of all these uses in one project, is a result of lease with Millennium Pharmaceuticals for the Commercial Group’s unique expertise approximately 413,000 square feet in two new in mixed-use development. buildings. The first building, with 201,000 square feet, is currently under construction and Station Square scheduled for occupancy in mid-2002. The During the year, Forest City broke ground second building is scheduled for completion on its Sheraton Hotel expansion at Station a year later with occupancy slated for the Square, our mixed-use project in Pittsburgh. third quarter of 2003. The $16 million, 95,000-square-foot expansion In October 2000, Forest City executed will include the addition of eight meeting a lease with Alkermes for a new 145,000- rooms and 104 guest rooms to the market’s square-foot corporate headquarters and best performing hotel, bringing the total biotechnology research facility. Construction number of guest rooms to 396. The project is began in 2000 with occupancy scheduled for scheduled to be completed in September 2001. the second quarter of 2002. Alkermes will also retain 50,000 square feet it currently University Park at MIT occupies in an adjacent building. Throughout 2000, development continued Partners HealthCare System- at Forest City’s mixed-use project at University 123,000 s.f. – Construction continued on Park at MIT. This high-technology/biomedical the 123,000-square-foot research facility office park in Cambridge, Massachusetts fully leased to the Partners HealthCare signed leases for 681,000 square feet of new System, with scheduled occupancy in the office space, of which 469,000 square feet is third quarter of 2001. Adjacent to this currently under construction. The balance building is a 1,128-space parking garage of construction will commence in 2001. currently under construction. Construction is also underway on a 135-unit This successful project represents the apartment community (discussed in our Commercial Group’s strategy in action – Residential Group’s feature section) and a developing a demand-driven product in a 1,128-car parking garage. high barrier-to-entry market. The four office buildings, totaling $233.5 million of cost, will increase University Park’s Stapleton office and biotech/research space to 1.6 million Forest City’s master plan for its mega square feet. In addition to the office buildings, mixed-use Stapleton project (discussed on University Park will contain 400 residential pages 20 and 21) in Denver will include 13 units, 100,000 square feet of retail space and million square feet of commercial space. Forest a 210-room hotel. City is actively pursuing the development of Millennium & Alkermes -558,000 s.f. – the first two office buildings in this project Acceptance of University Park as a premier and will start construction on a 740,000- location in the market and its endorsement square-foot retail center in mid-2001. by its current tenants is evidenced by the ❖❖❖
Under construction: Mall at Robinson, Pittsburgh, Pennsylvania
Forest City Enterprises Inc. • 2000 Annual Report 12 Residential Group Right at home in diverse markets
Located in 17 states and the District new development projects were opened totaling of Columbia, the Residential Group creates $153.3 million at the Company’s share of value within its diversified housing portfolio cost, and five properties were acquired totaling including planned-use developments, in-fill $178.8 million, yielding an estimated average apartment communities, luxury high-rises, stabilized return of 10.6 percent. At the end supported-living and “adaptive re-use” projects. of 2000, the Residential Group had eight The Group has extensive experience in: projects under construction totaling 1,625 property ownership, development, acquisition units at a cost of $175.6 million, and nine and management; working effectively with projects under development. government and municipal agencies; and structuring tax-advantaged debt and equity Supported-Living Housing Program transactions. From our historic roots as one of the The Residential Group has demonstrated nation’s largest HUD-financed affordable a dynamic understanding of specific markets senior community developers to the recent and products in a variety expansion in our supported-living portfolio, 2000 Performance at a Glance of geographic areas, each Forest City remains committed to the growing, EBDT $ 55.8 mil. EBDT Increase 20.2% of which is characterized aging population’s need for quality housing. Comparable NOI Increase 3.6% as a high barrier-to- Supported-living communities provide a full Total Assets $ 1 bil. Total Units 36,239 entry market. In order range of tenant needs, including a base product Apartment Communities 126 to successfully compete that includes an apartment, meal service, Rental Rate Increase 3.9% for development and social service, transportation and wellness Occupancy 95% acquisitions in these oversight, as well as a continuum of additional markets, the Group has developed a strategy services providing for assistance in other that allows it to identify and pursue unique activities of daily living. Certain properties opportunities. also provide for dementia care. In many cases, we are able to apply Historically, this sector of our portfolio favorable financing mechanisms, primarily has achieved excellent financial performance, through the use of tax-exempt bond financing, encouraging Forest City to grow its portfolio low-income or historic tax credits and/or of supported-living housing. As a result, public loans or grants. This combination Forest City Daly Housing (FCDH) was formed of strategies and skills has enabled us to to pursue opportunities in the New York City maintain a consistent stream of activity in metropolitan area. This market has favorable these high-barrier markets – our efforts have demographics, evidenced by a high density of been rewarded by positive responses to each age-appropriate and income-qualified senior of our new or repositioned properties. citizensand a low supply of competitive product. In 2000, we opened 10 residential The focus of our strategy has resulted projects – including new development and in a more than doubling of Forest City’s the acquisition of conventional multifamily, supported-living portfolio – from interests in adaptive re-use and supported living. Five 865 to 1,968 units. New developments and
Chestnut Grove supported-living community, Plainview, New York
Forest City Enterprises Inc. • 2000 Annual Report 14 acquisitions totaled 1,103 units representing City Strategy $141.6 million of cost, including 389 units The most recent addition to the Residential from two recently opened projects and 714 Group’s portfolio is the 323-unit 101 San from the acquisition of interests in four Fernando apartment community located in new communities. San Jose, California, which is important to In the development area, the Residential our city strategy. With the addition of “101,” Group opened Chestnut Grove on Long Forest City has approximately 1,000 units Island, a 79-unit supported-living development in the San Jose market, complementing the in Plainview, New York, which is the first Commercial Group’s 571,000 square feet of FCDH joint venture. Two additional projects office space in Silicon Valley. underway in the FCDH program are the 85- unit Pine Cove on Long Island and 84-unit Opportunistic Acquisition Willow Court in Queens. These developments In Alexandria, Virginia, Forest City will add to the critical mass of the Residential acquired its largest apartment community Group’s supported-living portfolio, and since 1986 with the purchase of the 1,387-unit establish Forest City Daly Housing as a leading Mount Vernon Square. This project is in a provider in the New York City metropolitan market with strong demand and limited area. Marketed under the trade name of availability, but was previously under-managed, Sterling Glen Communities, FCDH will also representing a great opportunity for our benefit from its exclusive affiliation with North management team to create value. With the Shore-Long Island Jewish Health System. purchase structured as a tax-deferred exchange, an additional $3 million in improvements The second supported-living development was invested shortly after acquisition, which project to open in 2000 was the 310-unit had an immediate impact on the property’s Classic Residence by Hyatt in Yonkers, New operating performance. The acquisition of York. This represents Forest City’s third joint Mount Vernon brings the Residential Group’s venture with Classic Residence by Hyatt, the Washington D.C. presence to eight properties others are located in Teaneck, New Jersey representing approximately 4,000 units. and Chevy Chase, Maryland. The Residential Group acquired interests Adaptive Re-Use in 714 units in four supported-living projects Two project openings in 2000 are perfect in 2000. Forest Trace in Lauderhill, Florida examples of the Residential Group’s adaptive is a fully-leased, 100 percent-owned, 324- re-use strategy. In Richmond, Virginia, the unit community. Two other interests are Group’s 171-unit residential building, the in Mayfair at Great Neck (144 units) and former American Cigar factory in the Mayfair at Glen Cove (79 units), both on Company’s Tobacco Row project, opened in Long Island, New York. The Group also February 2000. The community is 98 percent acquired the 167-unit Westfield Court in leased. Using historic tax credits and tax- Stamford, Connecticut. exempt bonds, Forest City is rehabilitating this group of historic warehouse buildings, Diversified Products in overlooking the James River, into loft-style Growth Markets apartments, retail space and parking. Grand Four of the 10 residential openings in Lowry Lofts in Denver opened in the third 2000 were unique opportunities to pursue quarter of 2000. Originally a World War II our strategy to expand into growth markets Air Force officers barracks and a former with diversified products. These communities vacation spot for President Eisenhower, the added 2,142 units to the Residential portfolio Lowry Lofts is now a 261-unit apartment at a cost to the Company of $190.5 million. community carefully preserved to maintain its historic integrity.
101 San Fernando, San Jose, California
Forest City Enterprises Inc. • 2000 Annual Report 17 Land and Lumber
Land Group Lumber Trading Group Forest City Land Group is a full-service Forest City Trading Group is a lumber real estate development unit capable of wholesaler to customers in all 50 states and handling every phase of land development, all Canadian provinces. Based in Portland, from planning and construction through Oregon, Trading Group consists of 10 trading marketing and sales. We work with major offices located throughout North America, corporations as well as individual landowners employing more than 320 traders, with sales to develop large parcels of land for residential, and administrative offices in six states and commercial and industrial use. Vancouver, British Columbia. The Land Group has developments in Earnings before income taxes were nine states, most recently focused in North $1.3 million on revenues of $105.4 million. Carolina, Florida, Nevada, Colorado and Revenues recorded by Forest City for Trading Northeast Ohio. Twenty-five projects are Group represent the gross margin on total currently active in the Group, which owns sales of wholesale forest products, which 5,500 acres of developable land. In 2000, were $2.7 billion in 2000. Trading Group’s the Land Group recorded earnings before financial performance was significantly Grand Lowry Lofts Apartment Homes, Denver, Colorado taxes of $2.9 million on gross revenues of impacted by the overall downturn in lumber $64.7 million. prices in 2000. Governmental regulations dealing with The Lumber Trading Group’s core business Dispositions Massachusetts. This project will be completed issues such as wetlands and endangered species, is supplying lumber for new home construction Consistent with our strategy to dispose of in the spring of 2002, with full occupancy combined with concerns about “urban sprawl” and home improvements. Approximately properties we believe have achieved maximum anticipated by the end of 2002. and traffic infrastructure, are making land 65 percent of the Group’s sales volume for potential value for our Company, the Residential Our commitment to preserving historic development increasingly difficult. We believe 2000 represented back-to-back trades in which Group disposed of two apartment communities buildings is further evidenced by the March we have the size, experience and expertise to lumber is purchased and sold simultaneously. in 2000 totaling 1,006 units –Studio Colony 2000 acquisition of the Bell Building in capitalize on the unique opportunities created In a minority of the trades, Trading Group and Highlands – for a combined price of Philadelphia for redevelopment. We are by this environment. took a short-term, at-risk ownership position. $83 million, resulting in a pre-tax gain of converting this high-rise office building into Beginning in 2000, the Central Station Trading daily in a wide variety of forest $26.3 million. We reinvested the cash proceeds the Lofts at 1835 Arch, a 191-unit luxury project in Chicago, which was previously products, the Group sold more than seven in a tax-efficient manner into new real estate apartment community. This is Forest City’s reported in the Commercial Group, and the billion board feet of lumber in 2000. opportunities, which will ultimately increase fourth residential project in Philadelphia, Stapleton project in Denver (see pages 20 shareholder value. bringing our total portfolio in this market and 21), which was previously reported in ❖❖❖ to more than 1,000 units. the Residential Group, are now both being Under Construction/Development Future development projects include reported in the Land Group. The Residential Group has an active both multifamily and supported living. development pipeline and had a total of The multifamily product will be located ❖❖❖ eight projects under construction at the end in selected markets consistent with our city of 2000 – a blend of conventional, adaptive strategy — primarily focused in New York re-use and supported living. City, Washington D.C., Denver and the Representative of the Company’s city San Francisco Bay area. The supported-living strategy and focus on strong markets with portfolio will be focused in the New York high barriers to entry, the Residential Group City metropolitan area. Nine projects were currently has under construction its 135-unit under development at year end – all of which Residences at University Park at the Company’s are expected to open in 2002 and 2003. mixed-use development in Cambridge, ❖❖❖
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 18 19 Stapleton: Our integrated approach at work
In 2000, Forest City laid the foundation Forest City signed Home Depot,Wal-Mart to transform Denver’s former Stapleton and Sam’s Club to anchor a 740,000-square- International Airport into a leading, mixed- foot regional retail center scheduled to begin use urban community. Its close proximity construction in the first half of 2001. Smaller to downtown and the new Denver International retail pads on surrounding street grids will Airport strategically positions Stapleton for flank this center, providing a distinctive future development. Stapleton is one of the urban atmosphere and pedestrian-friendly most complex and ambitious urban in-fill environment. Existing hotels, future office development projects in the country. For developments and the nearby United Airlines Forest City, it is the quintessential integrated Flight Training Center will be easily accessible development project, which will involve by foot or public transportation. three of our strategic business units: Land, Residential and Commercial. Looking Forward Stapleton is the largest and most exciting Anchored by a 60,000-square-foot grocery store, a150,000-square-foot town center will be project in Forest City’s history. The Stapleton located to the southwest of the former airport Development Corporation selected Forest terminal complex and is planned to open City as the master developer to transform in early 2003. The town center will feature the 7.5-square-mile, 4,200-acre parcel of Stapleton, Denver, Colorado 2 1⁄2 acres of green space and residences Rendering of neighborhood town center land into a planned community. Forest City’s above retail shops to encourage a close-knit master plan includes 12,000 homes and community, reminiscent of the pre-World apartments and the development of more than War II era. As part of this first development Stapleton – Legend 13 million square feet of commercial space, phase, 800 single-family residences and 300 ■ Mixed-Use ■ Community Facilities complemented by parks and open space. apartments are scheduled to be under ■ Retail ■ Open Space Parks construction by 2002. The first office building ■ Commercial Office ■ Residential-I Progress To Date in the town center development will open in ■ R & D/Industrial ■ Residential-II ■ Transit Oriented ■ Residential-III Redevelopment is already beginning the spring of 2003. Development to take shape. Forest City has executed a Forest City worked closely with the purchase agreement for the entire 2,935 Stapleton Development Corporation to ❖ To protect and preserve Colorado’s most acres of developable land and is committed preserve two key amenities of this new valuable natural resource – the environment to purchasing 1,000 acres every five years community – quality education and the – Forest City is working with the world- for the next 15 years. The property’s value environment – in each development phase renowned Rocky Mountain Institute to is enhanced by its central location, as well at Stapleton. produce a Sustainable Development Master as the conducive market conditions for ❖ A central feature of Stapleton’s first Plan. Forest City will adopt measures to residential, retail and office development. neighborhoods will be a unique educational protect air and water quality, promote Forest City partnered with the City of campus that combines a charter school, conservation and create an energy-efficient Denver, the non-profit Stapleton Development traditional elementary school and early community. Of Stapleton’s total 4,200 Corporation and the community to secure childhood learning center. Forest City acres, more than 1,100 acres of open approval to begin development in the first continues to collaborate with the Denver space will be preserved to enhance the half of 2001. Integrating more than $600 Public Schools and the community to value of the commercial and residential ILLUSTRATIVE PLAN million of infrastructure into the surrounding develop a master plan to address current development. Stapleton Districts I & II – 800 developable acres community was an important part of this and long-term educational needs and collaboration. opportunities. ❖❖❖
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 20 21 Forest City Rental Properties Corporation Portfolio of Real Estate Forest City Rental Properties Corporation Portfolio of Real Estate Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
Shopping Centers Office Buildings Date of Date of Leasable Opening/ % of Total Gross Opening/ % of Square Name Acquisition Ownership Location Major Tenants Square Feet Leasable Area Name Acquisition Ownership Location Major Tenants Feet CONSOLIDATED SHOPPING CENTERS CONSOLIDATED OFFICE BUILDINGS 42nd Street ...... 1999 70.00% Manhattan, NY AMC Theaters; Madame Tussaud’s Wax Museum; * 35 Landsdowne Street ...... 2002 100.00% Cambridge, MA Millennium Pharmaceuticals ...... 201,000 HMV Records ...... 305,000 305,000 45/75 Sidney Street ...... 1999 100.00% Cambridge, MA Millennium Pharmaceuticals; Cereon Genomics ...... 277,000 Antelope Valley Mall ...... 1990 78.00% Palmdale, CA Sears; J.C. Penney; Harris Gottschalks Mens-Kids-Home; * 65/80 Landsdowne Street ...... 2001 100.00% Cambridge, MA Partners HealthCare System...... 123,000 Harris Gottschalks Womens; Mervyn’s; Dillard’s . . . 1,001,000 304,000 * 88 Sidney Street ...... 2002 100.00% Cambridge, MA Alkermes...... 145,000 Atlantic Center ...... 1996 75.00% Brooklyn, NY Pathmark; OfficeMax; Old Navy; Marshall’s; Sterns . . . . 394,000 394,000 Chase Financial Tower ...... 1991 95.00% Cleveland, OH Chase Manhattan Mortgage ...... 119,000 Atlantic Center Site V ...... 1998 70.00% Brooklyn, NY Modell’s ...... 47,000 47,000 Eleven MetroTech Center...... 1995 65.00% Brooklyn, NY City of New York - CDCSA; E-911 ...... 216,000 Avenue at Tower City Center . . . 1990 100.00% Cleveland, OH Dillard’s; Hard Rock Café...... 790,000 282,000 Halle Building ...... 1986 75.00% Cleveland, OH North American Refractories Co.; Liggett-Stashower; Focal; Ballston Common Mall ...... 1986 100.00% Arlington, VA Hecht’s; Sport & Health; Regal Cinemas ...... 578,000 310,000 Nationwide Advertising; Climaco ...... 382,000 † Battery Park City ...... 2000 70.00% Manhattan, NY Regal Cinemas; New York Sports Club ...... 167,000 167,000 Jackson Building ...... 1987 100.00% Cambridge, MA Ariad Pharmaceuticals ...... 99,000 Bay Street ...... 1999 70.00% Staten Island, NY CVS/Pharmacy...... 16,000 16,000 Knight Ridder Building Knight Ridder; Merrill Lynch; PaineWebber; Bruckner Boulevard ...... 1996 70.00% Bronx, NY Pergament; Seaman’s; Old Navy ...... 113,000 113,000 at Fairmont Plaza ...... 1998 100.00% San Jose, CA Metromedia Fiber Network ...... 324,000 Columbia Park Center ...... 1999 52.50% North Bergen, NJ Regal Cinemas; Shop Rite; Old Navy; Nine MetroTech Center...... 1997 65.00% Brooklyn, NY City of New York - Fire Department ...... 317,000 Circuit City; Staples; Bally’s; Shopper’s World ...... 347,000 347,000 One MetroTech Center ...... 1991 65.00% Brooklyn, NY Keyspan; Bear Stearns ...... 933,000 † Court Street ...... 2000 70.00% Brooklyn, NY Regal Cinemas; Barnes & Noble...... 103,000 103,000 One Pierrepont Plaza ...... 1988 85.00% Brooklyn, NY Morgan Stanley; Goldman Sachs; U.S. Attorney ...... 656,000 Courtland Center...... 1968 100.00% Flint, MI J.C. Penney; Mervyn’s; Old Navy...... 458,000 290,000 Pavilion ...... 1998 99.00% San Jose,CA Metromedia Fiber Network ...... 247,000 † Eastchester ...... 2000 70.00% Bronx, NY Pathmark ...... 63,000 63,000 Richards Building ...... 1990 100.00% Cambridge, MA Genzyme Tissue Repair; Alkermes ...... 126,000 Flatbush Avenue ...... 1995/1998 80.00% Brooklyn, NY Stop & Shop; Old Navy; Staples; Bally’s ...... 142,000 142,000 Skylight Office Tower ...... 1991 92.50% Cleveland, OH Ernst & Young; Citigroup ...... 320,000 † Forest Avenue ...... 2000 70.00% Staten Island, NY Theater ...... 68,000 68,000 Ten MetroTech Center ...... 1992 80.00% Brooklyn, NY Internal Revenue Service ...... 409,000 Grand Avenue ...... 1997 70.00% Queens, NY Stop & Shop ...... 100,000 100,000 Terminal Tower ...... 1983 100.00% Cleveland, OH Forest City Enterprises; Weston Hurd; Walter & Haverfield ...... 582,000 Gun Hill Road ...... 1997 70.00% Bronx, NY Home Depot ...... 147,000 147,000 Hunting Park ...... 1996 70.00% Philadelphia, PA Ames; A.J. Wright...... 137,000 134,000 Kaufman Studios ...... 1999 70.00% Queens, NY Regal Cinemas ...... 84,000 84,000 Two MetroTech Center ...... 1990 65.00% Brooklyn, NY Securities Industry Automation Corp...... 521,000 Northern Boulevard ...... 1997 70.00% Queens, NY Stop & Shop; Marshall’s; Old Navy ...... 218,000 218,000 Consolidated Office Buildings Subtotal...... 5,997,000 Promenade in Temecula ...... 1999 75.00% Temecula,CA J.C. Penney; Sears; Robinsons-May; Edwards Cinema. . . 795,000 394,000 * Queens Place ...... 2001 70.00% Queens, NY Target; Macy’s Furniture; Designer Shoe Warehouse . . . . 455,000 221,000 UNCONSOLIDATED OFFICE BUILDINGS Richmond Avenue ...... 1998 70.00% Staten Island, NY Circuit City; Staples; Starbucks ...... 76,000 76,000 350 Massachusetts Avenue . . . . . 1998 50.00% Cambridge, MA Star Market; Tofias, Fleishman, Shapiro & Co.; CompUSA ...... 169,000 South Bay Southern Center . . . . 1978 100.00% Redondo Beach, CA CompUSA ...... 160,000 160,000 Chagrin Plaza I & II ...... 1969 66.67% Beachwood, OH National City Bank; Responsive Database Services...... 114,000 Station Square ...... 1994 100.00% Pittsburgh, PA Grand Concourse Restaurant; ASE Ltd.; Clark Building ...... 1989 50.00% Cambridge, MA Oravax ...... 122,000 LCI International; Houlihans; Cheese Cellar ...... 223,000 223,000 Emery-Richmond ...... 1991 50.00% Warrensville Hts., OH Allstate Insurance ...... 5,000 Tucson Mall ...... 1982 67.50% Tucson, AZ Macy’s; Robinsons-May; Dillard’s; Mervyn’s; Enterprise Place ...... 1998 50.00% Beachwood, OH Leaseway Transportation Group ...... 125,000 Liberty Center ...... 1986 50.00% Pittsburgh, PA Federated Investors ...... 527,000 M.K. Ferguson Plaza ...... 1990 1.00% Cleveland, OH Morrison Knudsen; Chase Manhattan Mortgage ...... 482,000 † One International Place ...... 2000 50.00% Cleveland, OH Battelle Memorial ...... 87,000 J.C. Penney; Sears...... 1,304,000 446,000 Signature Square I ...... 1986 50.00% Beachwood, OH Ciuni & Panichi ...... 79,000 Consolidated Shopping Centers Subtotal...... 8,291,000 5,154,000 Signature Square II ...... 1989 50.00% Beachwood, OH PaineWebber; Allen Telecom ...... 82,000 UNCONSOLIDATED SHOPPING CENTERS Unconsolidated Office Buildings Subtotal ...... 1,792,000 Boulevard Mall...... 1962 50.00% Amherst, NY J.C. Penney; Kaufmann’s; Sears ...... 904,000 331,000 Total Office Buildings at January 31, 2001 ...... 7,789,000 Bowling Green Mall ...... 1966 50.00% Bowling Green, KY Rose’s; Quality Big Lots...... 242,000 242,000 Total Office Buildings at January 31, 2000 ...... 7,233,000 Chapel Hill Mall ...... 1966 50.00% Akron, OH Kaufmann’s; J.C. Penney; Sears ...... 865,000 306,000 Chapel Hill Suburban ...... 1969 50.00% Akron, OH Value City...... 112,000 112,000 Charleston Town Center Mall . . 1983 50.00% Charleston, WV Kaufmann’s; J.C. Penney; Sears ...... 897,000 361,000 Hotels Date of Galleria at South Bay ...... 1985 50.00% Redondo Beach, CA Robinsons-May; Mervyn’s; Nordstrom; General Cinema. . . 955,000 387,000 Opening/ % of Galleria at Sunset ...... 1996 60.00% Henderson, NV Dillard’s; Robinsons-May; Mervyn’s; J.C. Penney ...... 891,000 294,000 Name Acquisition Ownership Location Rooms Golden Gate ...... 1958 50.00% Mayfield Hts., OH OfficeMax; Old Navy; Michael’s; Home Place; CONSOLIDATED HOTELS World Market; Golf Galaxy ...... 362,000 362,000 Charleston Marriott ...... 1983 95.00% Charleston, WV...... 352 * Mall at Robinson ...... 2001 56.67% Pittsburgh, PA Kaufmann’s; Sears; J.C. Penney ...... 856,000 321,000 † Embassy Suites Hotel ...... 2000 50.40% Manhattan, NY ...... 463 * Mall at Stonecrest...... 2001 66.67% Atlanta, GA Rich’s; Dillard’s; J.C. Penney; Parisian; Sears ...... 1,200,000 345,000 † Hilton Times Square ...... 2000 56.00% Manhattan, NY ...... 444 Manhattan Town Center Mall . . 1987 37.50% Manhattan, KS Dillard’s; J.C. Penney; Sears ...... 392,000 197,000 Ritz -Carlton ...... 1990 95.00% Cleveland, OH ...... 208 Marketplace at Riverpark ...... 1996 50.00% Fresno, CA J.C. Penney; Best Buy; Linens & Things; Marshall’s; Office Max ...... 466,000 466,000 * Sheraton Station Square . . . 1998/2001 100.00% Pittsburgh, PA ...... 396 Midtown Plaza ...... 1961 50.00% Parma, OH Ames; Office Max; Marc’s ...... 258,000 258,000 Consolidated Hotels Subtotal ...... 1,863 Newport Plaza ...... 1977 50.00% Newport, KY IGA; Sears ...... 157,000 157,000 Plaza at Robinson Town Center . . 1989 50.00% Pittsburgh, PA T.J. Maxx; Ames; Marshall’s; Sears ...... 489,000 489,000 UNCONSOLIDATED HOTELS Showcase ...... 1996 20.00% Las Vegas, NV Coca-Cola Baymont Inn ...... 1982 28.35% Mayfield Hts., OH ...... 101 Courtyard by Marriott ...... 1985 4.00% Detroit, MI ...... 250 ®; M&M’s World/Ethel M. Chocolates; Game University Park Hotel at MIT. . . 1998 50.00% Cambridge, MA...... 210 Works; United Artists; WWF Theme Restaurant...... 186,000 186,000 Westin Convention Center . . . . . 1986 50.00% Pittsburgh, PA ...... 616 Unconsolidated Shopping Centers Subtotal ...... 9,232,000 4,814,000 Unconsolidated Hotels Subtotal ...... 1,177
Total Shopping Centers at January 31, 2001 ...... 17,523,000 9,968,000 Total Hotel Rooms at January 31, 2001 ...... 3,040 Total Shopping Centers at January 31, 2000 ...... 16,003,000 9,777,000 Total Hotel Rooms at January 31, 2000 ...... 2,936
* Property under construction as of January 31, 2001. † Property opened or acquired in 2000.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 22 23 Forest City Rental Properties Corporation Portfolio of Real Estate Forest City Rental Properties Corporation Portfolio of Real Estate Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
Apartments Apartments Date of Date of Opening/ % of Leasable Opening/ % of Leasable Name Acquisition Ownership Location Units Name Acquisition Ownership Location Units CONSOLIDATED APARTMENTS UNCONSOLIDATED APARTMENTS (CONTINUED) Burton Place ...... 1999 90.00% Burton, MI ...... 200 Coppertree ...... 1998 50.00% Mayfield Hts., OH ...... 342 † Chestnut Grove...... 2000 80.00% Plainview, NY ...... 79 Deer Run ...... 1987-1989 43.03% Twinsburg, OH...... 562 Colony Woods ...... 1997 100.00% Bellevue, WA ...... 396 * Drake ...... 1998 1.99% Philadelphia, PA ...... 280 Emerald Palms ...... 1996 100.00% Miami, FL ...... 419 Enclave ...... 1997-1998 1.00% San Jose, CA ...... 637 † Forest Trace ...... 2000 100.00% Lauderhill, FL ...... 324 Fenimore Court ...... 1982 0.50% Detroit, MI ...... 144 * Heritage ...... 2001 100.00% San Diego, CA...... 230 Fort Lincoln II ...... 1979 45.00% Washington, D.C...... 176 Laurels ...... 1995 100.00% Justice, IL ...... 520 Fort Lincoln III & IV ...... 1981 24.90% Washington, D.C...... 306 Metropolitan ...... 1989 100.00% Los Angeles, CA ...... 270 Granada Gardens ...... 1966 50.00% Warrensville Hts., OH ...... 940 † Mount Vernon Square ...... 2000 99.00% Alexandria, VA ...... 1,387 Grand ...... 1999 0.90% North Bethesda, MD...... 546 Museum Towers ...... 1997 100.00% Philadelphia, PA ...... 286 † Grand Lowry Lofts ...... 2000 0.10% Denver, CO...... 261 Oaks ...... 1994 100.00% Bryan, TX ...... 248 Hamptons ...... 1969 50.00% Beachwood, OH ...... 649 One Franklintown ...... 1988 100.00% Philadelphia, PA ...... 335 Hunter’s Hollow ...... 1990 50.00% Strongsville, OH ...... 208 Palm Villas ...... 1991 100.00% Henderson, NV...... 350 Independence Place I ...... 1973 50.00% Parma Hts., OH ...... 202 Panorama Towers ...... 1978 99.00% Los Angeles, CA ...... 154 Kennedy Biscuit Lofts ...... 1990 2.90% Cambridge, MA...... 142 Parmatown Towers and Gardens ...... 1972-1973 100.00% Parma, OH ...... 412 Knolls ...... 1995 1.00% Orange, CA...... 260 Peppertree ...... 1993 100.00% College Station, TX ...... 208 Lakeland ...... 1998 1.98% Waterford, MI ...... 200 * Pine Cove ...... 2001 80.00% Bayshore, NY...... 85 Lenox Club ...... 1991 0.50% Arlington, VA ...... 385 Providence at Palm Harbor (formerly Boot Ranch) ...... 1991 99.00% Tampa, FL...... 236 Lenox Park ...... 1992 0.50% Silver Spring, MD ...... 406 Regency Towers ...... 1994 100.00% Jackson, NJ ...... 372 Liberty Hills ...... 1979-1986 50.00% Solon, OH...... 396 * Residences at University Park ...... 2001 100.00% Cambridge, MA...... 135 * Lofts at 1835 Arch ...... 2001 1.99% Philadelphia, PA ...... 191 Shippan Avenue ...... 1980 100.00% Stamford, CT ...... 148 † Mayfair at Glen Cove ...... 2000 40.00% Long Island, NY ...... 79 Trowbridge ...... 1988 53.25% Southfield, MI ...... 305 † Mayfair at Great Neck ...... 2000 40.00% Great Neck, NY...... 144 Vineyards ...... 1995 100.00% Broadview Hts., OH ...... 336 Midtown Towers ...... 1969 50.00% Parma, OH ...... 635 † Westfield Court ...... 2000 80.00% Stamford, CT ...... 167 Millender Center ...... 1985 4.00% Detroit, MI ...... 339 Whitehall Terrace ...... 1997 100.00% Kent, OH ...... 188 Noble Towers ...... 1979 50.00% Pittsburgh, PA ...... 133 * Parkwood Village ...... 2001 50.00% Brunswick, OH ...... 204 Pavilion ...... 1992 0.50% Chicago, IL...... 1,115 Pebble Creek ...... 1995-1996 50.00% Twinsburg, OH...... 148 Woodlake ...... 1998 100.00% Silver Spring, MD ...... 534 Perrytown ...... 1999 1.00% Pittsburgh, PA ...... 231 Consolidated Apartments Subtotal ...... 8,324 Pine Ridge Valley...... 1967-1974 50.00% Willoughby, OH...... 1,147 Queenswood ...... 1990 0.70% Corona, NY...... 296 * Settler’s Landing at Greentree ...... 2001 50.00% Streetsboro, OH ...... 96 UNCONSOLIDATED APARTMENTS Silver Hill ...... 1998 1.99% Newport News, VA ...... 153 † 101 San Fernando ...... 2000 0.70% San Jose, CA ...... 323 Surfside Towers ...... 1970 50.00% Eastlake, OH...... 246 † American Cigar Co. (formerly Philip Morris) ...... 2000 0.10% Richmond, VA...... 171 * Tamarac ...... 1990-2001 50.00% Willoughby, OH ...... 642 * Arbor Glen ...... 2001-2003 50.00% Twinsburg, OH...... 96 Trellis at Lee’s Mill ...... 1998 1.99% Newport News, VA ...... 176 Arboretum Place ...... 1998 1.99% Newport News, VA ...... 184 Twin Lake Towers ...... 1966 50.00% Denver, CO...... 254 Bayside Village ...... 1988-1989 50.00% San Francisco, CA ...... 862 Village Green ...... 1994-1995 25.00% Beachwood, OH ...... 360 * Big Creek ...... 1996-2001 50.00% Parma Hts., OH ...... 516 Waterford Village ...... 1994 1.00% Indianapolis, IN...... 576 Boulevard Towers ...... 1969 50.00% Amherst, NY ...... 402 White Acres ...... 1966 50.00% Richmond Hts., OH ...... 473 Bowin ...... 1998 1.99% Detroit, MI ...... 193 Bridgewater ...... 1998 1.99% Hampton, VA ...... 216 Camelot ...... 1967 50.00% Parma, OH ...... 151 Chapel Hill Towers ...... 1969 50.00% Akron, OH ...... 402 Cherry Tree ...... 1996-2000 50.00% Strongsville, OH ...... 442 * Willow Court ...... 2001 56.00% Forest Hills, NY...... 84 Chestnut Lake ...... 1969 50.00% Strongsville, OH ...... 789 Clarkwood ...... 1963 50.00% Warrensville Hts., OH ...... 568 Unconsolidated Apartments Subtotal ...... 20,949 Classic Residence by Hyatt ...... 1989 50.00% Teaneck, NJ...... 221 Combined Apartments Subtotal...... 29,273 Classic Residence by Hyatt ...... 1990 50.00% Chevy Chase, MD...... 339 Affordable Housing (Total of 42 Buildings) ...... 6,966 † Classic Residence by Hyatt...... 2000 50.00% Yonkers, NY ...... 310 Total Apartments at January 31, 2001...... 36,239 Total Apartments at January 31, 2000...... 34,263
* Property under construction as of January 31, 2001. † Property opened or acquired in 2000.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 24 25 Selected Financial Data Real Estate Activity Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
Effective January 31, 2001, the Company implemented a change in the presentation of its financial results from the pro-rata January 31, method of consolidation to the full consolidation method. A discussion regarding this change is included in Note A -Summary of Pro-Rata Consolidation Significant Accounting Policies. Certain prior year amounts have been re-presented under the full consolidation method. 2001 2000 1999 1998 1997 (in thousands) Years Ended January 31, Forest City Rental Properties Corporation – Real Estate Activity (1) Full Consolidation (1) Pro-Rata Consolidation (1) Real estate – end of year 2001 2000 1999 1998 1997 (in thousands, except per share data) Completed rental properties ...... $3,215,411 $ 2,866,913 $ 2,601,648 $ 2,387,569 $ 2,224,459 Operating Results: Projects under development ...... 500,358 478,766 412,072 251,416 215,960 Revenues ...... $ 794,785 $ 698,788 $ 609,700 $ 632,669 $ 610,449 Real estate, at cost ...... 3,715,769 3,345,679 3,013,720 2,638,985 2,440,419 Less accumulated depreciation ...... (569,604) (532,607) (477,253) (436,377) (387,733) Operating earnings, net of tax (2) ...... $ 43,959 $ 38,008 $ 29,761 $ 24,539 $ 6,986 Total real estate ...... $3,146,165 $ 2,813,072 $ 2,536,467 $ 2,202,608 $ 2,052,686 Minority interest ...... (3,399) (5,557) 1,227 – – Real Estate Activity during the year Provision for decline in real estate, net of tax ...... (744) (3,060) – – (7,413) Completed rental properties Gain (loss) on disposition of properties and other Capital additions ...... $ 326,169 $ 295,681 $ 127,065 $ 166,740 $ 160,690 investments, net of tax ...... 51,821 11,139 7,419 (23,356) 9,598 Acquisitions ...... 181,394 – 156,879 90,438 22,264 Earnings before extraordinary gain ...... 91,637 40,530 38,407 1,183 9,171 Total additions ...... 507,563 295,681 283,944 257,178 182,954 Extraordinary gain, net of tax ...... – 272 16,343 19,356 2,900 Dispositions ...... (159,065)(2) (30,416)(3) (69,865)(4) (94,068)(5) (40,379) Net earnings ...... $ 91,637 $ 40,802 $ 54,750 $ 20,539 $ 12,071 Completed rental properties, net additions . . . . . 348,498 265,265 214,079 163,110 142,575 Earnings before depreciation, amortization and Projects under development deferred taxes (EBDT)(2)(3)(4) ...... $ 147,809 $ 132,639 $ 117,854 $ 106,910 $ 90,404 New development ...... 303,209 324,553 243,106 154,746 98,403 Transferred to completed rental properties ...... (281,617) (257,859) (82,450) (119,290) (128,683) Diluted Earnings per Common Share: Projects under development, net additions . . . . . 21,592 66,694 160,656 35,456 (30,280) Earnings before extraordinary gain ...... $ 3.02 $ 1.34 $ 1.27 $ 0.04 $ 0.35 Increase in real estate, at cost ...... $ 370,090 $ 331,959 $ 374,735 $ 198,566 $ 112,295 Extraordinary gain, net of tax ...... – 0.01 0.54 0.67 0.11
Net earnings...... $ 3.02 $ 1.35 $ 1.81 $ 0.71 $ 0.46 (1) The table includes only the real estate activity for Forest City Rental Properties Corporation. (2) Primarily reflects the dispositions of Tucson Place, Canton Centre Mall, Gallery at Metrotech, Studio Colony and Highlands. Tucson Place has 276,000 square feet in Tucson, Arizona. Canton Centre Mall has 680,000 square feet in Canton, Ohio and Gallery at Metrotech has 163,000 square feet in Brooklyn, New York. Studio Colony and Cash Dividends Declared – Class A and Class B . . . . . $ 0.230 $ 0.190 $ 0.155 $ 0.125 $ 0.137 Highlands are apartment communities in California with 369 and 556 units, respectively. (3) Primarily reflects the disposition of Rolling Acres Mall, a 1,014,000-square-foot mall in Akron, Ohio. Cash Flows: (4) Primarily reflects the dispositions of Summit Park Mall, Trolley Plaza and San Vicente office building. Summit Park has 695,000 square feet in Wheatfield, New York. Trolley Plaza is a 351-unit apartment complex in Detroit, Michigan. San Vicente has 469,000 square feet in Brentwood, California. Net cash provided by operating activities ...... $ 206,313 $ 166,056 $ 112,385 $ 84,629 $ 48,278 (5) Reflects the sale of Toscana, a residential complex with 563 units in Irvine, California. Net cash used in investing activities ...... $ (519,021) $ (528,667) $ (537,994) $ (287,932) $ (139,609) Net cash provided by financing activities...... $ 292,891 $ 379,664 $ 450,781 $ 216,855 $ 93,488
January 31, Full Consolidation (1) Pro-Rata Consolidation (1) 2001 2000 1999 1998 1997 (in thousands) Financial Position: Consolidated assets ...... $4,030,470 $ 3,666,355 $ 3,417,320 $ 2,963,353 $ 2,760,673 Real estate portfolio, at cost ...... $3,526,146 $ 3,206,642 $ 3,087,498 $ 2,704,560 $ 2,520,179 Long-term debt, primarily nonrecourse mortgages . . . . $2,849,812 $ 2,555,594 $2,478,872 $ 2,132,931 $ 1,991,428
(1) Effective January 31, 2001, the Company implemented a change in the presentation of its financial results. Prior to January 31, 2001, the Company used the pro-rata method of consolidation to report its partnership investments proportionate to its share of ownership for each line item of its consolidated financial statements. In accordance with the FASB’s Emerging Issues Task Force Issue No. 00-1, “Investor Balance Sheet and Income Statement Display under the Equity Method for Investments in Certain Partnerships and Other Ventures,” the Company can no longer use the pro-rata consolidation method for partnerships. Accordingly, partnership investments that were previously reported on the pro-rata method are now reported as consolidated at 100%, if deemed under the Company’s control, or otherwise on the equity method of accounting. While a number of the line items on the Company’s consolidated financial statements have changed under the new full consolidation method, there is no impact on EBDT, net earnings or shareholders’ equity for all years presented. Certain data for the years ended January 31, 2000 and 1999 have been re-presented. (2) Excludes the provision for decline in real estate and gain (loss) on disposition of properties and other investments, net of tax. (3) The Company uses an additional measure, along with net earnings, to report its operating results. This measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes (“EBDT”), is not a measure of operating results or cash flows from operations as defined by generally accepted accounting principles and may not be directly comparable to similarly-titled measures reported by other companies. The Company believes that EBDT provides additional information about its operations and, along with net earnings, is necessary to understand its operating results. The Company’s view is that EBDT is also an indicator of the Company’s ability to generate cash to meet its funding requirements. EBDT is defined as net earnings before extraordinary gain, excluding the following items: i) provision for decline in real estate; ii) gain (loss) on disposition of properties and other investments; iii) beginning in the year ended January 31, 2001, the adjustment to recognize rental revenues and rental expenses using the straight-line method; and iv) noncash charges from Forest City Rental Properties Corporation for depreciation, amortization and deferred income taxes. (4) Includes $6,991,000 for the year ended January 31, 1998 related to the litigation settlement and sale of Toscana.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 26 27 Notes to Consolidated Financial Statements Consolidated Balance Sheets Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
Management’s Report Report of Independent Accountants January 31, 2001 2000 To the Shareholders and Board of Directors The management of Forest City Enterprises, Inc. is (in thousands) Forest City Enterprises, Inc. responsible for the accompanying consolidated financial Assets statements. These statements have been prepared by the In our opinion, the accompanying consolidated Real Estate Company in accordance with generally accepted accounting balance sheets and the related consolidated statements of Completed rental properties ...... $ 3,111,581 $ 2,685,448 principles and include amounts based on judgments of earnings, shareholders’ equity and cash flows present fairly, in Projects under development ...... 391,821 499,399 management. The financial information contained elsewhere all material respects, the financial position of Forest City Land held for development or sale ...... 22,744 21,795 in this annual report conforms with that in the consolidated Enterprises, Inc. and its Subsidiaries (the “Company”) at Real Estate, at cost ...... 3,526,146 3,206,642 financial statements. January 31, 2001 and 2000, and the results of their operations Less accumulated depreciation ...... (489,540) (458,235) The Company maintains a system of internal and their cash flows for each of the three years in the period Total Real Estate ...... 3,036,606 2,748,407 accounting control which provides reasonable assurance ended January 31, 2001, in conformity with accounting in all material respects that the assets are safeguarded and principles generally accepted in the United States of America. Cash and equivalents ...... 64,265 84,082 transactions are executed in accordance with management’s These financial statements are the responsibility of the Restricted cash ...... 68,243 68,127 authorization and accurately recorded in the Company’s Company’s management; our responsibility is to express an Notes and accounts receivable, net ...... 219,118 214,860 books and records. The concept of reasonable assurance opinion on these financial statements based on our audits. We Inventories ...... 39,234 57,444 recognizes that limitations exist in any system of internal conducted our audits of these statements in accordance with Investments in and advances to real estate affiliates ...... 436,248 338,465 accounting control based upon the premise that the cost auditing standards generally accepted in the United States Other assets ...... 166,756 154,970 of such controls should not exceed the benefits derived. of America, which require that we plan and perform the Total Assets ...... $ 4,030,470 $ 3,666,355 The Audit Committee, composed of three members of audit to obtain reasonable assurance about whether the the Board of Directors who are not employees of the Company, financial statements are free of material misstatement. An Liabilities and Shareholders’ Equity meets regularly with representatives of management, the audit includes examining, on a test basis, evidence supporting Liabilities independent accountants and the Company’s internal the amounts and disclosures in the financial statements, Mortgage debt, nonrecourse ...... $ 2,439,912 $ 2,188,594 auditors to monitor the functioning of the accounting and assessing the accounting principles used and significant Accounts payable and accrued expenses ...... 413,869 404,207 control systems and to review the results of the auditing estimates made by management, and evaluating the overall Notes payable ...... 55,392 72,780 activities. The Audit Committee recommends the independent financial statement presentation. We believe that our audits Long-term credit facility ...... 189,500 167,000 accountants to be appointed by the Board of Directors for provide a reasonable basis for our opinion. Senior and subordinated debt ...... 220,400 200,000 approval by the shareholders. The Committee reviews the Deferred income taxes ...... 176,671 174,661 scope of the audit and the fee arrangements. The independent Total Liabilities...... 3,495,744 3,207,242 accountants conduct an objective, independent examination of the consolidated financial statements. Minority Interest ...... 78,090 72,607 The Audit Committee reviews results of the audit effort with the independent accountants. The Audit Committee Shareholders’ Equity also meets with the independent accountants and the Cleveland, Ohio Preferred stock – convertible, without par value internal auditors without management present to ensure March 10, 2001 5,000,000 shares authorized; no shares issued ...... – – that they have open access to the Audit Committee. Common stock – $.33 1/3 par value Class A, 96,000,000 shares authorized; 20,361,932 and 19,946,756 shares issued, 19,820,507 and 19,372,406 outstanding, respectively ...... 6,787 6,649 Class B, convertible, 36,000,000 shares authorized; 10,522,020 and 10,937,196 shares issued, 10,243,920 and 10,659,096 outstanding, respectively...... 3,508 3,646 10,295 10,295 Additional paid-in capital ...... 114,010 113,764 Retained earnings ...... 338,792 254,063 463,097 378,122 Less treasury stock, at cost; 2001: 541,425 Class A and 278,100 Class B shares 2000: 574,350 Class A and 278,100 Class B shares ...... (10,330) (10,773) Accumulated other comprehensive income ...... 3,869 19,157 Total Shareholders’ Equity...... 456,636 386,506 Total Liabilities and Shareholders’ Equity ...... $ 4,030,470 $ 3,666,355
The accompanying notes are an integral part of these consolidated financial statements.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 28 29 Consolidated Statements of Earnings Consolidated Statements of Shareholders’ Equity Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
Years Ended January 31, Common Stock Additional Accumulated Other Comprehensive Class A Class B Paid-In Retained Treasury Stock Comprehensive 2001 2000 1999 Income Shares Amount Shares Amount Capital Earnings Shares Amount Income Total (in thousands, except per share data) (in thousands) Revenues Balances at January 31, 1998 ...... 19,813 $ 6,606 11,071 $ 3,691 $ 114,270 $ 168,864 905 $ (11,486) $ – $ 281,945 Rental properties ...... $ 658,369 $ 538,876 $ 453,946 Net earnings ...... $54,750 54,750 54,750 Lumber trading ...... 105,427 149,357 123,325 Dividends: $.035 per share (one quarter) ...... (1,049) (1,049) Equity in earnings of unconsolidated entities ...... 30,989 10,555 32,429 $.04 per share (three quarters) ...... (3,598) (3,598) 794,785 698,788 609,700 Conversion of Class B to Class A shares . . 92 30 (92) (30) – Expenses Exercise of stock options ...... (4) 60 60 Operating expenses ...... 443,707 415,811 355,937 Interest expense ...... 182,544 139,866 124,602 Balances at January 31, 1999...... 19,905 6,636 10,979 3,661 114,270 218,967 901 (11,426) – 332,108 Comprehensive income: Provision for decline in real estate ...... 1,231 5,062 – Net earnings ...... $40,802 40,802 40,802 Depreciation and amortization ...... 98,364 81,504 83,839 Other comprehensive income, net of tax 725,846 642,243 564,378 Unrealized gain on securities ...... 19,157 19,157 19,157 Total comprehensive income ...... $59,959 Gain on disposition of properties and other investments ...... 48,409 13,861 19,532 Dividends: $.04 per share (one quarter)...... (1,199) (1,199) $.05 per share (three quarters) ...... (4,507) (4,507) Earnings before income taxes ...... 117,348 70,406 64,854 Conversion of Class B to Class A shares . . 42 14 (42) (14) – Exercise of stock options ...... 4 (4) 48 52 Income tax expense Restricted stock issued ...... (605) (45) 605 – Amortization of unearned compensation . . 93 93 Current ...... 10,326 12,257 (86) Deferred ...... 11,986 12,062 27,760 Rounding adjustments ...... (1) (1) 2 – 22,312 24,319 27,674 Balances at January 31, 2000 ...... 19,947 6,649 10,937 3,646 113,764 254,063 852 (10,773) 19,157 386,506 Comprehensive income: Earnings before minority interest and extraordinary gain ...... 95,036 46,087 37,180 Net earnings...... $ 91,637 91,637 91,637 Other comprehensive income, net of tax Minority interest...... 3,399 5,557 (1,227) Unrealized loss on securities ...... (531) (531) (531) Less reclassification adjustment
Earnings before extraordinary gain ...... 91,637 40,530 38,407 for gain included in net earnings . . (14,757) (14,757) (14,757) Total comprehensive income ...... $ 76,349 Dividends: Extraordinary gain, net of tax ...... – 272 16,343 $.05 per share (one quarter) ...... (1,502) (1,502) $.06 per share (three quarters) ...... (5,406) (5,406) Net earnings ...... $ 91,637 $ 40,802 $ 54,750 Conversion of Class B to Class A shares . . 415 138 (415) (138) – Exercise of stock options ...... 107 (32) 443 550 Amortization of unearned compensation . . 139 139 Basic earnings per common share Balances at January 31, 2001 ...... 20,362 $ 6,787 10,522 $ 3,508 $ 114,010 $ 338,792 820 $(10,330) $ 3,869 $456,636 Earnings before extraordinary gain ...... $ 3.05 $ 1.35 $ 1.28 Extraordinary gain, net of tax ...... – .01 .55 The accompanying notes are an integral part of these consolidated financial statements.
Net earnings ...... $ 3.05 $ 1.36 $ 1.83
Diluted earnings per common share Earnings before extraordinary gain ...... $ 3.02 $ 1.34 $ 1.27 Extraordinary gain, net of tax ...... – .01 .54
Net earnings ...... $ 3.02 $ 1.35 $ 1.81
The accompanying notes are an integral part of these consolidated financial statements.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 30 31 Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
Years Ended January 31, Years Ended January 31, 2001 2000 1999 2001 2000 1999 (in thousands) (in thousands) Cash Flows from Operating Activities Reconciliation of Net Earnings to Cash Provided by Operating Activities Rents and other revenues received ...... $ 732,458 $ 669,304 $ 520,704 Net Earnings ...... $ 91,637 $ 40,802 $ 54,750 Cash distributions from operations of unconsolidated entities ...... 60,018 48,891 27,430 Minority interest ...... 3,399 5,557 (1,227) Proceeds from land sales ...... 24,979 17,529 11,194 Depreciation...... 75,546 63,560 55,614 Land development expenditures ...... (21,062) (12,226) (14,865) Amortization ...... 22,818 17,944 28,225 Operating expenditures ...... (402,962) (418,380) (310,083) Equity in earnings of unconsolidated entities...... (30,989) (10,555) (32,429) Interest paid ...... (187,118) (139,062) (121,995) Cash distributions from operations of unconsolidated entities ...... 60,018 48,891 27,430 Net cash provided by operating activities ...... 206,313 166,056 112,385 Deferred income taxes ...... 12,012 11,978 32,427 Cash Flows from Investing Activities Gain on disposition of properties and other investments ...... (48,409) (13,861) (19,532) Capital expenditures ...... (518,709) (465,137) (461,146) Provision for decline in real estate ...... 1,231 5,062 – Proceeds from disposition of properties and other investments ...... 130,751 – 1,145 Extraordinary gain...... – (450) (27,036) Changes in investments in and advances to real estate affiliates ...... (131,063) (63,530) (77,993) Decrease in commercial land included in projects under development . . . 655 13,906 19,627 Increase in land held for development or sale ...... (948) (4,281) (7,262) Net cash used in investing activities ...... (519,021) (528,667) (537,994) Decrease (increase) in notes and accounts receivable ...... (4,813) 146 (41,841) Cash Flows from Financing Activities Decrease (increase) in inventories ...... 18,210 (10,145) 11,397 Proceeds from issuance of senior and subordinated debt...... 20,400 – 200,000 Increase in other assets ...... (37,049) (2,129) (17,503) Payment of senior notes issuance costs ...... – – (6,297) Increase (decrease) in accounts payable and accrued expenses ...... 42,995 (369) 29,745 Increase in nonrecourse mortgage debt and long-term credit facility . . . 826,387 570,434 648,586 Net cash provided by operating activities ...... $ 206,313 $ 166,056 $ 112,385 Principal payments on nonrecourse mortgage debt on real estate . . . . . (471,062) (228,576) (316,833) Payments on long-term credit facility ...... – – (114,000) Supplemental Non-Cash Disclosure: Increase in notes payable ...... 20,630 96,585 38,524 The schedule below represents the effect of the following non-cash transactions for the years ended January 31: Payments on notes payable ...... (37,909) (52,150) (39,306) Change in restricted cash and book overdrafts ...... (30,899) (11,083) 34,500 2001 • Disposition of interest in Canton Centre Mall and Gallery at Metrotech Payment of deferred financing costs ...... (30,682) (6,575) (16,072) Increase in interest in Granite Development Partners, L.P., Providence at Palm Harbor and Museum Towers Exercise of stock options ...... 550 52 60 2000 • Disposition of interest in Rolling Acres Mall 1999 • Disposition of interest in Summit Park Mall and Trolley Plaza Dividends paid to shareholders ...... (6,608) (5,399) (4,497) Increase in minority interest ...... 2,084 16,376 26,116 Operating Activities Net cash provided by financing activities ...... 292,891 379,664 450,781 Notes and accounts receivable ...... $ 553 $ 123 $ 565 Net (decrease) increase in cash and equivalents ...... (19,817) 17,053 25,172 Other assets ...... 5,074 1,390 1,138 Cash and equivalents at beginning of year ...... 84,082 67,029 41,857 Accounts payable and accrued expenses ...... (2,652) (194) 2,760 Cash and equivalents at end of year ...... $ 64,265 $ 84,082 $ 67,029 Total effect on operating activities ...... $ 2,975 $ 1,319 $ 4,463
Investing Activities Disposition of completed rental properties ...... $ 78,640 $ 32,116 $ 42,312 Total effect on investing activities ...... $ 78,640 $ 32,116 $ 42,312
Financing Activities Disposition of nonrecourse mortgage debt ...... $ (81,505) $ (33,435) $ (46,775) Notes payable ...... (110) –– Total effect on financing activities ...... $ (81,615) $ (33,435) $ (46,775)
The accompanying notes are an integral part of these consolidated financial statements.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 32 33 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
A. Summary of Significant Accounting Policies A. Summary of Significant Accounting Policies (continued)
Nature of Business Significant intercompany balances and transactions are Investments in Unconsolidated Entities – The Major improvements and tenant improvements are Forest City Enterprises, Inc. is a major, vertically eliminated in consolidation. Company accounts for its investments in unconsolidated capitalized and expensed through depreciation charges. Repairs, integrated national real estate company with four strategic Earnings before minority interest is allocated to the entities (included in Investments in and Advances to Real maintenance and minor improvements are expensed as business units. The Commercial Group owns, develops, minority interest holders based on their respective ownership Estate Affiliates on the Consolidated Balance Sheets) using incurred. Costs and accumulated depreciation applicable acquires and operates shopping centers, office buildings and percentages of the Company’s contolled less-than-wholly- the equity method of accounting whereby the cost of an to assets retired or sold are eliminated from the respective mixed-use projects including hotels. The Residential Group owned real estate investments, as adjusted for any preferential investment is adjusted for the Company’s share of equity in accounts and any resulting gains or losses are reported in the owns, develops, acquires and operates the Company’s multi- returns or allocations contained in the related operating net income or loss from the date of acquisition and reduced Consolidated Statements of Earnings. family properties. Real Estate Groups are the combined agreements. Minority interest in the accompanying by distributions received. The income or loss for each The Company periodically reviews its properties to Commercial and Residential Groups. The Land Group owns Consolidated Balance Sheets represents the minority interest unconsolidated entity is allocated in accordance with the determine if its carrying costs will be recovered from future and develops raw land into master planned communities and holders’ proportionate share of the equity of the Company’s provisions of the applicable operating agreements. The operating cash flows. In cases where the Company does not other residential developments for resale. The Lumber Trading controlled less-than-wholly-owned real estate investments. allocation provisions in these agreements may differ from expect to recover its carrying costs, an impairment loss is Group operates the Company’s lumber wholesaling business. The Company does not necessarily own or hold any the ownership interest held by each investor. Differences recorded as a provision for decline in real estate. Forest City Enterprises, Inc. owns approximately $3.5 direct ownership interest in the various real estate assets between the Company’s carrying value of its investment in billion of real estate, at cost, in 22 states and Washington, D.C. consolidated in its financial statements but generally holds the unconsolidated entities and the Company’s share of the Cash and Equivalents The Company’s executive offices are in Cleveland, Ohio. this ownership through its direct or indirect subsidiaries, underlying equity of such unconsolidated entities are amortized The Company considers all highly liquid instruments Regional offices are located in New York, Los Angeles, Boston, except for certain parcels of land held for development or sale. over the respective lives of the underlying assets or liabilities, purchased with a maturity of three months or less to be Tucson, Denver, Washington, D.C. and San Francisco. as applicable. cash equivalents. Cash equivalents are stated at cost, which Use of Estimates Lumber Brokerage – The Lumber Trading Group approximates market value. Financial Statement Presentation The Company is required to make estimates and sells to a large number of customers across many regions of The Company maintains operating cash and reserve Effective January 31, 2001, the Company implemented assumptions when preparing its financial statements and the country. The Company fills customer orders either through for replacement balances in financial institutions which, from a change in the presentation of its financial results. While accompanying notes in conformity with generally accepted the simultaneous purchase of products from various third time to time, may exceed Federally-insured limits. The a number of the line items on the Company’s consolidated accounting principles. Actual results could differ from parties with delivery directly to the customer, or from relieving Company periodically assesses the financial condition of the financial statements have changed under the new full those estimates. its existing short-term inventory position of previously institutions and believes that the risk of loss is minimal. consolidation method, there is no impact on net earnings purchased lumber products. Revenue is recorded when title to or shareholders’ equity for all years presented. This required Reclassification the goods transfers to the customers. The Company recognizes Restricted Cash the gross margin on these sales as revenue. financial reporting presentation change will have no effect on Certain prior years’ amounts in the accompanying Restricted cash represents deposits with mortgage Construction – Revenue and profit on long-term the way the Company operates or manages its business. financial statements have been reclassified to conform to the lenders for taxes and insurance, security deposits, capital fixed-price contracts are recorded using the percentage-of- Prior to January 31, 2001, the Company used the current year’s presentation. replacement, improvement and operating reserves, bond pro-rata method of consolidation to report its partnerships. completion method. On reimbursable cost-plus fee contracts, funds and development and construction escrows. revenues are recorded in the amount of the accrued Under this method, the Company presented its partnership Fiscal Year investments proportionate to its share of ownership for each reimbursable costs plus proportionate fees at the time the The years 2000, 1999 and 1998 refer to the fiscal years Inventories line item of its consolidated financial statements. costs are incurred. ended January 31, 2001, 2000 and 1999, respectively. The lumber brokerage inventories are stated at the lower In accordance with the FASB’s Emerging Issues Task Other Comprehensive Income – Net unrealized gain or loss on securities, net of tax, is included in Other of cost or market. Inventory cost is determined by specific Force Issue No. 00-1, “Investor Balance Sheet and Income identification and average cost methods. Statement Display under the Equity Method for Investments Land Operations Comprehensive Income and represents the difference between Land held for sale is stated at the lower of carrying the market value of investments in unaffiliated companies in Certain Partnerships and Other Ventures” (effective for Other Assets years ending after June 15, 2000), the Company can no amount or fair market value less cost to sell. that are available for sale at the balance sheet date and the Included in other assets are costs incurred in connection longer use the pro-rata consolidation method for partnerships. Company’s cost. with obtaining financing which are deferred and amortized Accordingly, partnership investments that were previously Recognition of Revenue and Profit over the life of the related debt. Costs incurred in connection reported on the pro-rata method are now reported as Recognition of Costs and Expenses Real Estate Sales – The Company follows the with leasing space to tenants are also included in other assets consolidated at 100 percent, if deemed under the Company’s Operating expenses primarily represent the recognition provisions of Statement of Financial Accounting Standards and are deferred and amortized using the straight-line method control, or otherwise on the equity method of accounting. of operating costs, administrative expenses and taxes other than (SFAS) No. 66, “Accounting for Sales of Real Estate” for over the lives of the related leases. As an aid in adjusting to the new reporting presentation, the income taxes. Interest and real estate taxes during development reporting the disposition of properties. Investments in securities classified as available for sale Company has provided a reconciliation from the new full and construction are capitalized as a part of the project cost. Leasing Operations – The Company enters into leases are reflected in other assets at market value with the changes consolidation presentation to the historical pro-rata presentation The Company provides an allowance for doubtful with tenants in its rental properties. The lease terms of tenants in market value reflected as other comprehensive income in in Note B. accounts against the portion of accounts or notes receivable that occupying space in the shopping centers and office buildings shareholders’ equity. is estimated to be uncollectible. Such allowances are reviewed Principles of Consolidation range from 1 to 25 years, excluding leases with anchor tenants. Minimum rents are recognized on a straight-line basis over and updated periodically for changes in expected collectibility. The consolidated financial statements include the Fair Value of Financial Instruments the term of the related leases. Overage rents are recognized Depreciation is generally computed on a straight-line accounts of Forest City Enterprises, Inc., its wholly-owned The Company estimates the fair value of its debt as revenues when tenants’ sales exceed the applicable break method over the estimated useful asset lives. The estimated subsidiaries and entities in which it has a majority voting instruments by discounting future cash payments at interest points. Recoveries from tenants for taxes, insurance, and other useful lives of buildings are primarily 50 years. interest or otherwise controls. Entities which the Company rates that the Company believes approximates the current commercial property operating expenses are recognized as does not control are accounted for on the equity method. market. The carrying amount of the Company’s total fixed- revenues in the period the applicable costs are incurred. rate debt at January 31, 2001 was $2,000,000,000 compared to an estimated fair value of $1,940,000,000.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 34 35 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
A. Summary of Significant Accounting Policies (continued) B. Financial Statement Presentation A reconciliation of the Company ’s new financial statement presentation (full consolidation method) to its historical The Company estimates the fair value of its hedging Earnings Per Share presentation (pro-rata consolidation method) is as follows. instruments based on interest rate market pricing models. At Basic earnings per share is computed by dividing net January 31, 2001, the unamortized book value of the Company’s earnings by the weighted average number of common shares Consolidated Balance Sheet - January 31, 2001 hedging instruments was approximately $17,000,000 compared Plus outstanding during the period. Diluted earnings per share Unconsolidated to an estimated fair value of approximately $2,000,000. reflects the potential dilutive effect of the Company’s stock Less Minority Investments at Pro-Rata option plan by adjusting the denominator using the treasury Full Consolidation Interest Pro-Rata Consolidation (in thousands) Interest Rate Protection Agreements stock method. The sum of the four quarters’ earnings per Assets The Company follows a practice of hedging its variable share may not equal the annual earnings per share due to the Real Estate interest rate risk by purchasing LIBOR-based interest rate caps weighting of stock and option activity occurring during the Completed rental properties ...... $ 3,111,581 $ 574,575 $ 703,114 $ 3,240,120 and Treasury options. The LIBOR caps have typical durations year. All earnings per share disclosures appearing in these Projects under development ...... 391,821 54,947 163,484 500,358 ranging from one to three years while the Treasury options are financial statements were computed assuming dilution unless Land held for development or sale ...... 22,744 – 30,459 53,203 for periods of five to 10 years. The Company also enters into otherwise indicated. Real Estate, at cost ...... 3,526,146 629,522 897,057 3,793,681 interest rate swap agreements for hedging purposes for periods Less accumulated depreciation ...... (489,540) (76,301) (172,082) (585,321) of one to five years. The principal risk to the Company through New Accounting Standards Total Real Estate ...... 3,036,606 553,221 724,975 3,208,360 its interest rate hedging strategy is the potential inability of In May 2000, the Financial Accounting Standards the financial institution from which the interest rate protection Board’s (FASB) Emerging Issues Task Force (EITF) released Cash and equivalents ...... 64,265 8,653 26,351 81,963 was purchased to cover all of its obligations. To mitigate this Issue No. 00-1, “Investor Balance Sheet and Income Statement Restricted cash ...... 68,243 10,706 19,617 77,154 exposure, the Company purchases its interest rate protection Display under the Equity Method for Investments in Certain Notes and accounts receivable, net ...... 219,118 18,751 10,814 211,181 from either the institution that holds the debt or from Partnerships and Other Ventures.” The Company has adopted Inventories ...... 39,234 – – 39,234 institutions with a minimum A- credit rating. this EITF, as discussed further on page 34 under “Financial Investments in and advances to real estate affiliates . . 436,248 – (88,451) 347,797 The cost of interest rate protection is capitalized in Other Statement Presentation.” Other assets ...... 166,756 28,647 24,185 162,294 Assets in the Consolidated Balance Sheets and amortized over In June 1999, the FASB issued SFAS No. 137, which Total Assets...... $ 4,030,470 $ 619,978 $ 717,491 $ 4,127,983 the benefit period as interest expense in the Consolidated defers the effective date of SFAS No. 133, “Accounting for Liabilities and Shareholders’ Equity Statements of Earnings. Derivative Instruments and Hedging Activities,” to all fiscal Liabilities quarters of fiscal years beginning after June 15, 2000. The Mortgage debt, nonrecourse ...... $ 2,439,912 $ 488,014 $ 674,019 $ 2,625,917 Income Taxes Company implemented SFAS No. 133 on February 1, 2001. Accounts payable and accrued expenses ...... 413,869 39,180 42,055 416,744 Deferred tax assets and liabilities reflect the tax The effect of the adoption of SFAS No. 133 on the Company’s Notes payable ...... 55,392 14,694 1,417 42,115 consequences on future years of differences between the tax financial statements in the first quarter of 2001 will be a Long-term credit facility ...... 189,500 – – 189,500 and financial statement basis of assets and liabilities at year- reduction of net income and other comprehensive income of Senior and subordinated debt ...... 220,400 – – 220,400 end. The Company has recognized the benefits of its tax loss approximately $1,000,000 and $8,000,000, respectively, net Deferred income taxes ...... 176,671 – – 176,671 carryforward and general business tax credits which it expects of tax. Total Liabilities...... 3,495,744 541,888 717,491 3,671,347 to use as a reduction of the deferred tax expense. In December 1999, the SEC released Staff Accounting Bulletin No. 101 (SAB No. 101), “Revenue Recognition in Minority Interest ...... 78,090 78,090 – – Stock-Based Compensation Financial Statements,” which summarizes the staff’s views in applying generally accepted accounting principles to revenue Shareholders’ Equity The Company follows Accounting Principles Board recognition in financial statements. The Company adopted Preferred stock- convertible, without par value Opinion (APBO) No. 25, “Accounting for Stock Issued to SAB No. 101 in the fourth quarter of 2000, and such 5,000,000 shares authorized; no shares issued . . . –––– Employees”, and related Interpretations to account for stock- adoption did not have a material effect on the consolidated Common stock - $.33 1/3 par value based compensation. As such, compensation cost for stock financial statements. Class A, 96,000,000 shares authorized, options is measured as the excess, if any, of the quoted market In September 2000, SFAS No. 140, “Accounting for 20,361,932 shares issued, price of the Company’s stock at the date of grant over the Transfers and Servicing of Financial Assets and Extinguishments 19,820,507 outstanding ...... 6,787 – – 6,787 amount the employee is required to pay for the stock. of Liabilities,” was issued to amend the provisions of SFAS Class B, convertible, 36,000,000 shares No. 125. The new standard is generally effective for all periods authorized, 10,522,020 shares issued, Capital Stock after March 31, 2001. The Company believes the provisions of 10,243,920 outstanding ...... 3,508 – – 3,508 The 5,000,000 authorized shares of preferred stock SFAS No. 140 will have no material impact on the accounting 10,295 – – 10,295 without par value, none of which have been issued, are treatment and disclosures currently being applied under Additional paid-in capital ...... 114,010 – – 114,010 convertible into Class A common stock. SFAS No. 125. Retained earnings ...... 338,792 – – 338,792 Class A common shareholders elect 25% of the members In April 2000, FASB Interpretation No. 44 463,097 – – 463,097 of the Board of Directors and Class B common shareholders (FIN No. 44), “Accounting for Certain Transactions involving Less treasury stock, at cost; 541,425 Class A elect the remaining directors annually. The Company currently Stock Compensation,” was issued which addresses the and 278,100 Class B shares (10,330) – – (10,330) has 13 directors. Class B common stock is convertible into application of APB Opinion No. 25, “Accounting for Stock Accumulated other comprehensive income ...... 3,869 – – 3,869 Class A common stock on a share-for-share basis. Issued to Employees.” Based on the Company’s current stock Total Shareholders’ Equity ...... 456,636 – – 456,636 compensation plan and recent plan activity, the Company Total Liabilities and Shareholders’ Equity . . .$ 4,030,470 $ 619,978 $ 717,491 $ 4,127,983 believes that FIN No. 44 has no material impact on the consolidated financial statements.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 36 37 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
B. Financial Statement Presentation (continued) B. Financial Statement Presentation (continued)
Consolidated Balance Sheet - January 31, 2000 Consolidated Statement of Earnings - Year Ended January 31, 2001 Plus Plus Unconsolidated Unconsolidated Less Minority Investments at Pro-Rata Less Minority Investments at Pro-Rata Full Consolidation Interest Pro-Rata Consolidation Full Consolidation Interest Pro-Rata Consolidation (in thousands) (in thousands) Assets Revenues Real Estate Rental properties ...... $ 658,369 $ 114,247 $ 199,797 $ 743,919 Completed rental properties ...... $ 2,685,448 $ 430,376 $ 636,418 $ 2,891,490 Lumber trading ...... 105,427 – – 105,427 Projects under development ...... 499,399 126,273 105,640 478,766 Equity in earnings of unconsolidated entities . . . . 30,989 – (19,819) 11,170 Land held for development or sale ...... 21,795 – 31,057 52,852 794,785 114,247 179,978 860,516 Real Estate, at cost ...... 3,206,642 556,649 773,115 3,423,108 Expenses Less accumulated depreciation ...... (458,235) (66,690) (155,934) (547,479) Operating expenses ...... 443,707 56,093 118,747 506,361 Total Real Estate ...... 2,748,407 489,959 617,181 2,875,629 Interest expense ...... 182,544 35,488 43,368 190,424 Provision for decline in real estate ...... 1,231 – – 1,231 Cash and equivalents ...... 84,082 6,685 19,798 97,195 Depreciation and amortization ...... 98,364 19,017 20,222 99,569 Restricted cash ...... 68,127 8,243 16,778 76,662 725,846 110,598 182,337 797,585 Notes and accounts receivable, net ...... 214,860 4,906 10,843 220,797 Inventories ...... 57,444 – – 57,444 Gain (loss) on disposition of properties and Investments in and advances to real estate affiliates . . 338,465 – (30,595) 307,870 other investments ...... 48,409 (250) 2,359 51,018 Other assets ...... 154,970 19,981 24,098 159,087 Total Assets ...... $ 3,666,355 $ 529,774 $ 658,103 $ 3,794,684 Earnings before income taxes ...... 117,348 3,399 – 113,949
Liabilities and Shareholders’ Equity Income tax expense Liabilities Current...... 10,326 – – 10,326 Mortgage debt, nonrecourse ...... $ 2,188,594 $ 419,587 $ 613,373 $ 2,382,380 Deferred ...... 11,986 – – 11,986 Accounts payable and accrued expenses ...... 404,207 23,295 40,327 421,239 22,312 – – 22,312 Notes payable ...... 72,780 14,285 4,403 62,898 Long-term credit facility ...... 167,000 – – 167,000 Earnings before minority interest ...... 95,036 3,399 – 91,637 Senior and subordinated debt ...... 200,000 – – 200,000 Deferred income taxes ...... 174,661 – – 174,661 Minority interest ...... 3,399 3,399 – – Total Liabilities...... 3,207,242 457,167 658,103 3,408,178 Net earnings ...... $ 91,637 $ – $ – $ 91,637 Minority Interest ...... 72,607 72,607 – – Shareholders’ Equity Preferred stock - convertible, without par value 5,000,000 shares authorized; no shares issued . . . – – – – Common stock - $.33 1/3 par value Class A, 96,000,000 shares authorized, 19,946,756 shares issued, 19,372,406 outstanding ...... 6,649 – – 6,649 Class B, convertible, 36,000,000 shares authorized, 10,937,196 shares issued, 10,659,096 outstanding ...... 3,646 – – 3,646 10,295 – – 10,295 Additional paid-in capital ...... 113,764 – – 113,764 Retained earnings ...... 254,063 – – 254,063 378,122 – – 378,122 Less treasury stock, at cost; 574,350 Class A and 278,100 Class B shares . . . . (10,773) – – (10,773) Accumulated other comprehensive income ...... 19,157 – – 19,157 Total Shareholders’ Equity ...... 386,506 – – 386,506 Total Liabilities and Shareholders’ Equity . . $ 3,666,355 $ 529,774 $ 658,103 $ 3,794,684
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 38 39 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
B. Financial Statement Presentation (continued) B. Financial Statement Presentation (continued)
Consolidated Statement of Earnings - Year Ended January 31, 2000 Consolidated Statement of Earnings - Year Ended January 31, 1999 Plus Plus Unconsolidated Unconsolidated Less Minority Investments at Pro-Rata Less Minority Investments at Pro-Rata Full Consolidation Interest Pro-Rata Consolidation Full Consolidation Interest Pro-Rata Consolidation (in thousands) (in thousands) Revenues Revenues Rental properties ...... $ 538,876 $ 68,244 $ 170,907 $ 641,539 Rental properties ...... $ 453,946 $ 62,640 $ 174,604 $ 565,910 Lumber trading ...... 149,357 – – 149,357 Lumber trading ...... 123,325 – – 123,325 Equity in earnings of unconsolidated entities . . . 10,555 – (8,380) 2,175 Equity in earnings of unconsolidated entities. . . 32,429 – (25,015) 7,414 698,788 68,244 162,527 793,071 609,700 62,640 149,589 696,649 Expenses Expenses Operating expenses ...... 415,811 31,354 101,552 486,009 Operating expenses...... 355,937 28,787 96,947 424,097 Interest expense ...... 139,866 22,029 41,882 159,719 Interest expense ...... 124,602 21,296 46,654 149,960 Provision for decline in real estate ...... 5,062 – – 5,062 Depreciation and amortization ...... 83,839 13,784 17,013 87,068 Depreciation and amortization ...... 81,504 12,042 18,682 88,144 564,378 63,867 160,614 661,125 642,243 65,425 162,116 738,934 Gain on disposition of properties and other Gain (loss) on disposition of properties and investments ...... 19,532 – 11,025 30,557 other investments ...... 13,861 2,738 (411) 10,712 Earnings before income taxes ...... 64,854 (1,227) – 66,081 Earnings before income taxes ...... 70,406 5,557 – 64,849 Income tax expense Income tax expense Current...... (86) – – (86) Current...... 12,257 – – 12,257 Deferred...... 27,760 – – 27,760 Deferred ...... 12,062 – – 12,062 27,674 – – 27,674 24,319 – – 24,319 Earnings before minority interest Earnings before minority interest and extraordinary gain ...... 37,180 (1,227) – 38,407 and extraordinary gain ...... 46,087 5,557 – 40,530 Minority interest ...... (1,227) (1,227) – – Minority interest ...... 5,557 5,557 – – Earnings before extraordinary gain ...... 38,407 – – 38,407 Earnings before extraordinary gain ...... 40,530 – – 40,530 Extraordinary gain, net of tax ...... 16,343 – – 16,343 Extraordinary gain, net of tax ...... 272 – – 272 Net earnings ...... $ 54,750 $ – $ – $ 54,750 Net earnings ...... $ 40,802 $ – $ – $ 40,802
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 40 41 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
B. Financial Statement Presentation (continued) B. Financial Statement Presentation (continued)
Consolidated Statement of Cash Flows - Year Ended January 31, 2001 Consolidated Statement of Cash Flows - Year Ended January 31, 2000 Plus Plus Unconsolidated Unconsolidated Less Minority Investments at Pro-Rata Less Minority Investments at Pro-Rata Full Consolidation Interest Pro-Rata Consolidation Full Consolidation Interest Pro-Rata Consolidation (in thousands) (in thousands) Reconciliation of Net Earnings to Reconciliation of Net Earnings to Cash Provided by Operating Activities Cash Provided by Operating Activities Net Earnings ...... $ 91,637 $ – $ – $ 91,637 Net Earnings ...... $ 40,802 $ – $ – $ 40,802 Minority interest ...... 3,399 3,399 – – Minority interest ...... 5,557 5,557 – – Depreciation ...... 75,546 12,473 17,410 80,483 Depreciation ...... 63,560 9,020 16,075 70,615 Amortization ...... 22,818 6,544 2,812 19,086 Amortization ...... 17,944 3,022 2,607 17,529 Equity in earnings of unconsolidated entities ...... (30,989) – 19,819 (11,170) Cash distributions from operations of Equity in earnings of unconsolidated entities ...... (10,555) – 8,380 (2,175) unconsolidated entities ...... 60,018 – (60,018) – Cash distributions from operations of Deferred income taxes ...... 12,012 – – 12,012 unconsolidated entities ...... 48,891 – (48,891) – (Gain) loss on disposition of properties Deferred income taxes ...... 11,978 – – 11,978 and other investments ...... (48,409) 250 (2,359) (51,018) (Gain) loss on disposition of properties Provision for decline in real estate ...... 1,231 – – 1,231 and other investments ...... (13,861) (2,738) 411 (10,712) Decrease in commercial land included in Provision for decline in real estate ...... 5,062 – – 5,062 projects under development ...... 655 – – 655 Extraordinary gain ...... (450) – – (450) Increase in land held for development or sale ...... (948) – (171) (1,119) Decrease in commercial land included in Decrease (increase) in notes and accounts receivable . . (4,813) (13,949) (301) 8,835 projects under development...... 13,906 – 1,320 15,226 Decrease in inventories ...... 18,210 – – 18,210 (Increase) decrease in land held for development Increase in other assets ...... (37,049) (4,997) (2,859) (34,911) or sale ...... (4,281) – 1,266 (3,015) Increase in accounts payable and accrued expenses . . . 42,995 16,053 1,886 28,828 Decrease (increase) in notes and accounts receivable. . 146 (1,426) 1,295 2,867 Increase in inventories ...... (10,145) – – (10,145) Net cash provided by (used in) operating Increase in other assets ...... (2,129) (2,157) (5,425) (5,397) activities ...... $ 206,313 $ 19,773 $ (23,781) $ 162,759 (Decrease) increase in accounts payable and Cash Flows from Operating Activities accrued expenses...... (369) 10,029 2,828 (7,570) Rents and other revenues received ...... $ 732,458 $ 98,087 $ 165,099 $ 799,470 Net cash provided by (used in) operating Cash distributions from operations of activities ...... $ 166,056 $ 21,307 $ (20,134) $ 124,615 unconsolidated entities ...... 60,018 – (60,018) – Cash Flows from Operating Activities Proceeds from land sales ...... 24,979 – 34,214 59,193 Rents and other revenues received ...... $ 669,304 $ 66,947 $ 151,794 $ 754,151 Land development expenditures ...... (21,062) – (35,824) (56,886) Cash distributions from operations of Operating expenditures ...... (402,962) (42,826) (91,907) (452,043) unconsolidated entities ...... 48,891 – (48,891) – Interest paid ...... (187,118) (35,488) (35,345) (186,975) Proceeds from land sales ...... 17,529 – 20,171 37,700 Net cash provided by (used in) operating Land development expenditures ...... (12,226) – (25,406) (37,632) activities ...... 206,313 19,773 (23,781) 162,759 Operating expenditures ...... (418,380) (24,033) (75,348) (469,695) Interest paid ...... (139,062) (21,607) (42,454) (159,909) Cash Flows from Investing Activities Capital expenditures ...... (518,709) (81,819) (125,803) (562,693) Net cash provided by (used in) operating Proceeds from disposition of properties and other activities ...... 166,056 21,307 (20,134) 124,615 investments ...... 130,751 – 2,703 133,454 Cash Flows from Investing Activities Investments in and advances to real estate affiliates . . (131,063) – 88,656 (42,407) Capital expenditures ...... (465,137) (126,516) (45,516) (384,137) Net cash used in investing activities ...... (519,021) (81,819) (34,444) (471,646) Investments in and advances to real estate affiliates . . (63,530) – 41,987 (21,543) Net cash used in investing activities ...... (528,667) (126,516) (3,529) (405,680) Cash Flows from Financing Activities Proceeds from issuance of subordinated debt ...... 20,400 – – 20,400 Cash Flows from Financing Activities Increase in nonrecourse mortgage debt and Increase in nonrecourse mortgage debt and long-term credit facility ...... 826,387 205,733 79,812 700,466 long-term credit facility...... 570,434 144,230 65,651 491,855 Principal payments on nonrecourse mortgage debt Principal payments on nonrecourse mortgage debt on real estate ...... (471,062) (131,362) (10,729) (350,429) on real estate ...... (228,576) (60,516) (25,539) (193,599) Increase (decrease) in notes payable ...... 20,630 598 (656) 19,376 Increase in notes payable ...... 96,585 13,901 10,074 92,758 Payments on notes payable ...... (37,909) (190) (157) (37,876) Payments on notes payable ...... (52,150) (176) (21,815) (73,789) Change in restricted cash and book overdrafts . . . . . (30,899) (1,712) (1,202) (30,389) Change in restricted cash and book overdrafts . . . . . (11,083) (4,536) 321 (6,226) Payment of deferred financing costs ...... (30,682) (11,137) (2,290) (21,835) Payment of deferred financing costs ...... (6,575) (1,401) (847) (6,021) Exercise of stock options ...... 550 – – 550 Exercise of stock options ...... 52 – – 52 Dividends paid to shareholders ...... (6,608) – – (6,608) Dividends paid to shareholders ...... (5,399) – – (5,399) Increase in minority interest ...... 2,084 2,084 – – Increase in minority interest ...... 16,376 16,376 – – Net cash provided by financing activities . . . . . 292,891 64,014 64,778 293,655 Net cash provided by financing activities ...... 379,664 107,878 27,845 299,631 Net (decrease) increase in cash and equivalents. . . . . (19,817) 1,968 6,553 (15,232) Net increase in cash and equivalents ...... 17,053 2,669 4,182 18,566 Cash and equivalents at beginning of year ...... 84,082 6,685 19,798 97,195 Cash and equivalents at beginning of year ...... 67,029 4,016 15,616 78,629 Cash and equivalents at end of year ...... $ 64,265 $ 8,653 $ 26,351 $ 81,963 Cash and equivalents at end of year ...... $ 84,082 $ 6,685 $ 19,798 $ 97,195
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 42 43 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
Plus B. Financial Statement Presentation (continued) C. Real Estate and Related Nonrecourse Less Unconsolidated Full Minority Investments Pro-Rata Mortgage Debt Consolidation Interest at Pro-Rata Consolidation Consolidated Statement of Cash Flows - Year Ended January 31, 1999 The components of real estate cost and related (in thousands) Plus nonrecourse mortgage debt are presented below on the January 31, 2000 Unconsolidated Lumber brokerage . . . $ 144,364 $ – $ – $ 144,364 Less Minority Investments at Pro-Rata pro-rata consolidation method. Full Consolidation Interest Pro-Rata Consolidation Real estate sales . . . . . 18,695 – 5,356 24,051 January 31, 2001 Syndication activities . . 10,210 – 1,200 11,410 (in thousands) Less Nonrecourse Receivable from Accumulated Mortgage Reconciliation of Net Earnings to tenants ...... 14,361 2,906 4,845 16,300 Cash Provided by Operating Activities Total Cost Depreciation Net Cost Debt (in thousands) Other receivables . . . . 35,351 2,109 (37) 33,205 Net Earnings ...... $ 54,750 $ – $ – $ 54,750 Completed rental properties 222,981 5,015 11,364 229,330 Minority interest ...... (1,227) (1,227) – – Residential ...... $ 809,398 $ 140,364 $ 669,034 $ 663,739 Allowance for doubtful Depreciation ...... 55,614 8,038 14,332 61,908 Commercial accounts ...... (8,121) (109) (521) (8,533) Amortization ...... 28,225 5,746 2,681 25,160 Shopping centers . . . 1,125,190 174,320 950,870 876,290 Notes and Accounts Equity in earnings of unconsolidated entities ...... (32,429) – 25,015 (7,414) Office and other Receivable, Net . . $ 214,860 $ 4,906 $ 10,843 $ 220,797 Cash distributions from operations of buildings ...... 1,279,832 254,717 1,025,115 951,886 Weighted average unconsolidated entities ...... 27,430 – (27,430) – Land ...... 991 203 788 – interest rate . . . . . 8.80% 8.55% Deferred income taxes ...... 32,427 – – 32,427 Corporate and other Gain on disposition of properties equipment ...... 24,709 15,717 8,992 – In July 1999, the Lumber Trading Group entered into and other investments...... (19,532) – (11,025) (30,557) 3,240,120 585,321 2,654,799 2,491,915 a three-year agreement (The “Agreement”) under which it is Extraordinary gain ...... (27,036) – – (27,036) Projects under selling an undivided interest in a pool of receivables up to a Decrease in commercial land included in development maximum of $102,000,000 to a large financial institution (the projects under development ...... 19,627 – – 19,627 Residential ...... 124,739 – 124,739 23,655 Commercial “Financial Institution”). The agreement expires in July 2002. (Increase) decrease in land held for development The Company has recorded such transactions under the terms or sale ...... (7,262) – 691 (6,571) Shopping centers . . . 225,920 – 225,920 35,151 Office and other of SFAS No. 125, “Accounting for Transfers of Servicing of Decrease (increase) in notes and accounts receivable. . (41,841) (382) 2,899 (38,560) buildings ...... 103,997 – 103,997 30,933 Decrease in inventories ...... 11,397 – – 11,397 Financial Assets and Extinguishments of Liabilities.” Sales (Increase) decrease in other assets ...... (17,503) (2,850) 859 (13,794) Land ...... 45,702 – 45,702 6,543 under the Agreement are nonrecourse against the Company. Increase (decrease) in accounts payable and 500,358 – 500,358 96,282 The Company bears no risk regarding the collectibility of the accrued expenses ...... 29,745 1,695 (3,682) 24,368 Land held for accounts receivable once sold, and cannot modify the pool development or sale. 53,203 – 53,203 37,720 Net cash provided by operating activities ...... $ 112,385 $ 11,020 $ 4,340 $ 105,705 of receivables. Total real estate and At January 31, 2001 and 2000, the Financial Institution Cash Flows from Operating Activities mortgage debt. . . . $3,793,681 $ 585,321 $3,208,360 $2,625,917 held an interest of $43,000,000 and $55,000,000, respectively, Rents and other revenues received ...... $ 520,704 $ 62,258 $ 141,239 $ 599,685 in the pool of receivables. Sales of accounts receivable have Cash distributions from operations of averaged $57,900,000 and $63,400,000 per month during unconsolidated entities ...... 27,430 – (27,430) – Proceeds from land sales ...... 11,194 – 36,105 47,299 D. Notes and Accounts Receivable, Net the fiscal year ended January 31, 2001 and 2000, respectively. During the year ended January 31, 2001, the Company Land development expenditures ...... (14,865) – (30,919) (45,784) Plus Less Unconsolidated reversed a $10,775,000 reserve, representing a portion of the Operating expenditures ...... (310,083) (27,260) (67,086) (349,909) Full Minority Investments Pro-Rata Interest paid ...... (121,995) (23,978) (47,569) (145,586) Consolidation Interest at Pro-Rata Consolidation reserve recorded in 1995 against a Note Receivable (the Note) from Millender Center (the Project), a mixed-use apartment, Net cash provided by operating activities ...... 112,385 11,020 4,340 105,705 (in thousands) retail and hotel project located in downtown Detroit, Michigan. Cash Flows from Investing Activities January 31, 2001 Lumber brokerage . . . $ 87,422 $ – $ – $ 87,422 The Company had previously reversed $3,500,000 in the year Capital expenditures...... (461,146) (56,131) (55,328) (460,343) Real estate sales . . . . . 16,041 – 5,578 21,619 Proceeds from disposition of properties ...... 1,145 – 32,200 33,345 ended January 31, 1999 and $500,000 in the year ended Syndication activities . . 17,668 – – 17,668 January 31,2000 for a total reserve reversal of $14,775,000. Investments in and advances to real estate affiliates . . (77,993) – (13,919) (91,912) Receivable from tenants ...... 27,265 5,479 6,823 28,609 The Company owns a 1% general partner interest in the Net cash used in investing activities ...... (537,994) (56,131) (37,047) (518,910) Project and loaned $14,775,000 to the 99% limited partners Cash Flows from Financing Activities Other receivables . . . . 79,486 13,839 (1,195) 64,452 227,882 19,318 11,206 219,770 in 1985, as evidenced by the Note. A full reserve against the Proceeds from issuance of senior notes ...... 200,000 – – 200,000 Allowance for doubtful Note was recorded in 1995 when the Company determined Payment of senior notes issuance costs ...... (6,297) – – (6,297) accounts ...... (8,764) (567) (392) (8,589) that collection was doubtful, due to the operating performance Increase in nonrecourse mortgage and Notes and Accounts of the Project at that time. long-term credit facility ...... 648,586 103,093 159,229 704,722 Receivable, Net . . $ 219,118 $ 18,751 $ 10,814 $ 211,181 In October 1998, the Project entered into a lease Principal payments on nonrecourse mortgage debt Weighted average agreement with General Motors (GM) whereby the Project, on real estate ...... (316,833) (80,465) (134,602) (370,970) interest rate . . . . . 6.65% 7.00% except for the apartments, are being leased by GM through Payments on long-term credit facility...... (114,000) – – (114,000) Total Notes Receivable 2010, when it is expected that GM will exercise a purchase Increase in notes payable ...... 38,524 16 11,983 50,491 included above. . . . $ 59,939 $ 61,155 Payments on notes payable ...... (39,306) (1,096) (3,171) (41,381) Due within option. This lease arrangement, coupled with the recent Change in restricted cash and book overdrafts ...... 34,500 (736) 181 35,417 one year ...... $ 12,558 $ 15,362 resurgence of downtown Detroit’s economy as a result of GM’s Payment of deferred financing costs ...... (16,072) (1,309) (1,802) (16,565) relocation of its corporate headquarters to a location adjacent to Exercise of stock options ...... 60 – – 60 the Project and the entry of gaming during the second quarter Dividends paid to shareholders ...... (4,497) – – (4,497) of 2000, has significantly improved the operating performance Increase in minority interest ...... 26,116 26,116 – – of the Project. The Company believes that the current and Net cash provided by financing activities ...... 450,781 45,619 31,818 436,980 prospective improved performance of the Project supports its Net increase (decrease) in cash and equivalents . . . . . 25,172 508 (889) 23,775 assessment that the Note is now fully collectible. Cash and equivalents at beginning of year ...... 41,857 3,508 16,505 54,854 Cash and equivalents at end of year ...... $ 67,029 $ 4,016 $ 15,616 $ 78,629
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 44 45 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
E. Investments in and Advances to Real Estate Affiliates F. Other Assets H. Notes Payable Included in Investments in and Advances to Real Estate Affiliates are unconsolidated investments accounted for on the Included in other assets are costs incurred in connection The components of notes payable, which represent equity method. Summarized combined financial information for these investments, along with the Company’s pro-rata share, is with obtaining financing which are deferred and amortized indebtedness whose original maturity dates are within one as follows. over the life of the related debt. Costs incurred in connection year of issuance, are as follows. Combined Pro-Rata Share with leasing space to tenants are also included in other assets Plus Less Unconsolidated January 31, 2001 2000 2001 2000 and are deferred and amortized using the straight-line method Full Minority Investments Pro-Rata Consolidation Interest at Pro-Rata Consolidation (in thousands) over the lives of the related leases. Balance Sheet: Plus (dollars in thousands) Less Unconsolidated January 31, 2001 Completed rental properties ...... $ 2,014,182 $ 1,785,948 $ 703,114 $ 636,418 Full Minority Investments Pro-Rata Consolidation Interest at Pro-Rata Consolidation Payable to Projects under development ...... 335,093 267,279 163,484 105,640 Banks ...... $–$–$–$– Land held for development or sale . . . . . 66,063 79,201 30,459 31,057 (in thousands) January 31, 2001 Other ...... 55,392 14,694 1,417 42,115 $ 55,392 $ 14,694 $ 1,417 $ 42,115 Investment in and advances to Unamortized costs, Weighted average real estate affiliates ...... – – 101,935 87,264 net...... $ 96,338 $ 20,803 $ 19,645 $ 95,180 interest rate...... 7.85% 7.75% Accumulated depreciation ...... (411,605) (365,319) (172,082) (155,934) Prepaid expenses Other assets ...... 223,934 210,688 80,967 71,517 and other...... 70,418 7,844 4,540 67,114 January 31, 2000 Total Assets ...... $ 2,227,667 $ 1,977,797 $ 907,877 $ 775,962 $ 166,756 $ 28,647 $ 24,185 $ 162,294 Payable to Banks ...... $ 21,486 $ – $ – $ 21,486 Mortgage debt, nonrecourse ...... $ 1,870,170 $ 1,686,497 $ 674,019 $ 613,373 January 31, 2000 Other ...... 51,294 14,285 4,403 41,412 Advances from general partner ...... 43,550 36,131 – – Unamortized costs, $ 72,780 $ 14,285 $ 4,403 $ 62,898 Other liabilities ...... 161,624 176,375 43,472 44,730 net...... $ 86,478 $ 17,634 $ 17,009 $ 85,853 Weighted average Partners’ equity ...... 152,323 78,794 190,386 117,859 Prepaid expenses interest rate...... 8.11% 8.15% Total Liabilities and Partners’ Equity . . . $ 2,227,667 $ 1,977,797 $ 907,877 $ 775,962 and other...... 68,492 2,347 7,089 73,234 $ 154,970 $ 19,981 $ 24,098 $ 159,087 Notes payable to banks reflect borrowings on the Lumber Year Ended January 31, Trading Group’s $87,000,000 bank lines of credit. The bank Operations: lines of credit allow for up to $5,000,000 in outstanding Revenues ...... $ 500,566 $ 434,944 $ 199,797 $ 170,907 letters of credit (none was outstanding at January 31, 2001) Equity in earnings of unconsolidated G. Accounts Payable and Accrued Expenses which reduce the credit available to the Lumber Trading entities on a pro-rata basis ...... – – 11,170 2,175 Group. Borrowings under these bank lines of credit, which are Included in accounts payable and accrued expenses at nonrecourse to the Company, are collateralized by all the assets Operating expenses ...... (296,617) (273,233) (118,747) (101,552) January 31, 2001 and 2000 are book overdrafts of approximately of the Lumber Trading Group, bear interest at the lender’s Interest expense ...... (119,326) (111,618) (43,368) (41,882) $54,426,000 and $85,419,000 for full consolidation presentation prime rate or 1.5% over LIBOR, and have a fee of 0.2% per Depreciation and amortization ...... (57,906) (50,529) (20,222) (18,682) and $54,516,000 and $85,506,000 for pro-rata consolidation annum on the unused portion of the available commitment. Gain (loss) on disposition of properties presentation, respectively. The overdrafts are a result of the These bank lines of credit are subject to review and extension and other investments ...... 4,718 (1,645) 2,359 (411) Company’s cash management program and represent checks annually and expire June 30, 2001. Net Income (Loss) ...... $ 31,435 $ (2,081) $ 30,989 $ 10,555 issued but not yet presented to a bank for collection. Other notes payable relate to improvements and construction funded by tenants, property and liability Following is a reconciliation of partners’ equity to the Company’s carrying value. insurance premium financing and advances from affiliates and partnerships. Partners’ equity, as above...... $ 152,323 $ 78,794 The following table summarizes interest incurred and Equity (deficit) of other partners ...... 5,487 (2,934) paid on notes payable. Company’s investment in partnerships . . 146,836 81,728 Full Consolidation Pro-Rata Consolidation Advances to partnerships, as above ...... 43,550 36,131 Year Ended January 31, Incurred Paid Incurred Paid Advances to other real estate affiliates . . 245,862 220,606 (in thousands) Investments in and Advances 2001 ...... $ 8,113 $ 7,846 $ 7,372 $ 7,166 to Real Estate Affiliates ...... $ 436,248 $ 338,465 2000 ...... 5,965 5,743 6,199 5,901 1999 ...... 6,004 5,659 7,331 5,664
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 46 47 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
I. Mortgage Debt, Nonrecourse J. Long-Term Credit Facility Mortgage debt, which is collateralized by completed rental properties, projects under development and certain At January 31, 2001 and 2000, the Company had In November 2000, the Company issued $20,400,000 undeveloped land, is as follows: $189,500,000 and $167,000,000, respectively, outstanding of redevelopment bonds in a private placement. The proceeds Less Plus Unconsolidated Full Minority Investments Pro-Rata under its $265,000,000 revolving credit facility. The revolving were used to repay nonrecourse debt that was issued to finance Consolidation Rate(1) Interest at Pro-Rata Consolidation(1) Rate credit facility matures March 31, 2003, unless extended, and an apartment facility in Philadelphia, Pennsylvania. The bonds (dollars in thousands) January 31, 2001 allows for up to a combined amount of $30,000,000 in bear interest at 8.25% and are due September 15, 2010. Interest Fixed ...... $ 1,711,574 7.53% $ 343,626 $ 472,811 $ 1,840,759 7.57% outstanding letters of credit and surety bonds ($7,222,000 and is payable semi-annually on each March 15 and September 15 Variable $14,675,000, respectively, were outstanding at January 31, 2001). beginning March 15, 2001. This debt is unsecured and Taxable (2) ...... 605,796 8.73% 128,287 143,223 620,732 8.59% The outstanding letters of credit reduce the credit available to subordinated to the senior notes and the revolving credit Tax-Exempt ...... 54,150 6.20% 5,638 46,093 94,605 5.36% the Company. Annually, within 60 days after January 31, the facility. Financial convenants associated with this debt are UDAG ...... 68,392 1.61% 10,463 11,892 69,821 2.65% revolving credit facility may be extended by one year by similar to that of the senior notes. $ 2,439,912 7.65% $ 488,014 $ 674,019 $ 2,625,917 7.61% unanimous consent of the participating banks. At its maturity Interest incurred on the above debt was $17,234,000 in January 31, 2000 Fixed ...... $ 1,366,132 7.48% $ 259,560 $ 458,048 $ 1,564,620 7.52% date, the outstanding revolving credit loans, if any, may be 2000, $17,000,000 in 1999 and $14,922,000 in 1998. Interest Variable converted by the Company into a four-year term loan. The paid was $17,000,000 in 2000 and 1999 and $8,453,000 in 1998. Swapped ...... 205,615 7.34% 65,100 58,277 198,792 7.44% revolving credit available is reduced quarterly by $2,500,000, Taxable ...... 437,473 7.81% 79,612 38,791 396,652 7.86% which began October 1, 2000. At January 31, 2001, the Consolidated Interest Tax-Exempt ...... 110,899 4.44% 4,807 46,365 152,457 4.10% revolving credit line was $260,000,000. The following table summarizes interest incurred, UDAG ...... 68,475 1.53% 10,508 11,892 69,859 2.57% The revolving credit agreement provides, among other capitalized and paid on all forms of indebtedness (included $ 2,188,594 7.19% $ 419,587 $ 613,373 $ 2,382,380 7.21% things, for 1) interest rates of 2.125% over LIBOR or 0.5% in Notes H, I, J and K). (1) The weighted average interest rates shown above include both the base index and the lender margin. over the prime rate; 2) maintenance of debt service coverage Plus (2) As of January 31, 2001, $605,796 at full consolidation and $620,732 at pro-rata consolidation of taxable variable-rate debt is protected with LIBOR caps as described Less Unconsolidated ratios and specified levels of net worth and cash flow (as defined); Full Minority Investments Pro-Rata below. These caps protect the current debt outstanding as well as the anticipated increase in debt outstanding for projects currently under development or anticipated Years Ended January 31, Consolidation Interest at Pro-Rata Consolidation to be under development during the year ending January 31, 2002. and 3) restriction on dividend payments. At January 31, 2001, retained earnings of $8,198,000 were available for payment (in thousands) Debt related to projects under development at January 31, The Urban Development Action Grants and other of dividends. 2001 2001 are as follows: subsidized loans bear interest at rates which are below prevailing Interest incurred. . . . . $ 203,976 $ 36,605 $ 49,188 $ 216,559 Plus The Company has purchased LIBOR interest rate Less Unconsolidated commercial lending rates and are granted to the Company by caps at an average rate of 6.82% for 2001 and 7.75% for Interest capitalized . . . (21,432) (1,117) (5,820) (26,135) Full Minority Investments Pro-Rata Net interest expense . . $ 182,544 $ 35,488 $ 43,368 $ 190,424 Consolidation Interest at Pro-Rata Consolidation government agencies as an inducement to develop real estate in 2002 at notional amounts of $187,484,000 and $54,161,000, Interest paid...... $ 208,550 $ 213,110 (in thousands) targeted areas. A right to participate by the local government in respectively. the future cash flows of the project is generally a condition of Variable ...... $ 58,583 $ 14,656 $ 26,551 $ 70,478 Interest incurred on the long-term credit facility was 2000 Fixed ...... 26,498 1,924 1,230 25,804 these loans. Participation in annual cash flows generated from $16,163,000 in 2000, $10,897,000 in 1999 and $6,317,000 Interest incurred. . . . . $ 167,305 $ 24,485 $ 44,060 $ 186,880 Total ...... $ 85,081 $ 16,580 $ 27,781 $ 96,282 operations is recognized as an expense in the period earned. in 1998. Interest paid on the long-term credit facility was Commitment Participation in appreciation and cash flows resulting from a $15,162,000 in 2000, $9,984,000 in 1999 and $6,010,000 Interest capitalized . . . (27,439) (2,456) (2,178) (27,161) from lenders ...... $ 213,371 $ 24,926 $ 72,793 $ 261,238 sale or refinancing is recorded as an expense at the time of sale in 1998. Net interest expense . . $ 139,866 $ 22,029 $ 41,882 $ 159,719 or is capitalized as additional basis and amortized if amounts Interest paid...... $ 166,501 $ 187,070 The Company generally borrows funds for development are paid prior to the disposition of the property. and construction projects with maturities of two to five years Mortgage debt maturities for the next five years are K. Senior and Subordinated Debt 1999 utilizing variable-rate financing. Upon opening and achieving as follows: On March 16, 1998, the Company issued $200,000,000 Interest incurred. . . . . $ 147,059 $ 22,576 $ 48,977 $ 173,460 Full Pro-Rata stabilized operations, the Company generally pursues long- Years Ending January 31, Consolidation Consolidation of 8.50% senior notes, due March 15, 2008, in a public Interest capitalized . . . (22,457) (1,280) (2,323) (23,500) term fixed-rate financing. (in thousands) offering. Net proceeds in the amount of $195,500,000 were Net interest expense . . $ 124,602 $ 21,296 $ 46,654 $ 149,960 The Company has purchased London Interbank Offered 2002...... $ 572,511 $ 521,244 contributed to the capital of Forest City Rental Properties Interest paid...... $ 144,452 $ 169,086 Rate (“LIBOR”) interest rate caps for the mortgage debt 2003...... 163,165 225,192 Corporation, a wholly-owned subsidiary, and were then used portfolio as follows: 2004...... 525,449 491,053 to repay loans under its credit agreement with banks and to Full Consolidation Pro-Rata Consolidation 2005...... 60,392 80,856 finance acquisitions and development of real estate projects. Average Average 2006...... 119,059 181,417 L. Income Taxes Coverage Amount RateAmount Rate Accrued interest is payable semi-annually on March 15 and The income tax provision consists of the following (dollars in thousands) September 15. The senior notes are unsecured senior obligations The Company is engaged in discussions with its current components. 02/01/01 - 01/31/02 . . . . $605,780 7.11% $590,568 7.03% of the Company; however, they are subordinated to all existing lenders and is actively pursuing new lenders to extend and and future indebtedness and other liabilities of the Company’s Years Ended January 31, 02/01/02 - 01/31/03 . . . . 568,574 7.68% 586,210 7.76% refinance maturing mortgage debt. As of January 31, 2001, 02/01/03 - 01/31/04 . . . . 391,800 7.75% 389,699 7.87% subsidiaries, including the revolving credit facility. The 2001 2000 1999 02/01/04 - 01/31/05 . . . . 211,800 8.00% 285,337 8.00% the Company had refinancing commitments and extension indenture contains covenants providing, among other things, (in thousands) 02/01/05 - 01/31/06 . . . . 177,300 8.00% 177,300 8.00% options on upcoming maturities as follows: limitations on incurring additional debt and payment of Current Full Pro-Rata dividends. The dividend limitation is not as restrictive as that Federal ...... $ 7,991 $ 8,620 $ (570) Consolidation Consolidation Foreign...... 422 446 409 The interest rate caps listed above were purchased to (in thousands) imposed by the Company’s revolving credit facility mitigate short-term variable interest rate risk. The Company State...... 1,913 3,191 75 Refinancing commitments ...... $ 2,521 $ 14,767 (Note J). 10,326 12,257 (86) currently intends to convert a significant portion of its Extension options available ...... 196,518 252,710 The senior notes may be redeemed by the Company, in committed variable-rate debt to fixed-rate debt. In order to whole or in part, at any time on or after March 15, 2003 at Deferred protect against significant increases in long-term interest rates, The following table summarizes interest incurred and redemption prices beginning at 104.25% for the year Federal ...... 9,495 10,796 21,996 Foreign...... 40 28 16 the Company has purchased Treasury Options as follows: paid on mortgage debt, nonrecourse. beginning March 15, 2003 and systematically reduced to Full Consolidation Pro-Rata Consolidation 100% in the years thereafter. State...... 2,451 1,238 5,748 Full Consolidation Pro-Rata Consolidation 11,986 12,062 27,760 Weighted Remaining Weighted Remaining Year Ended January 31, Incurred Paid Incurred Paid Average Years at Average Years at Total provision ...... $ 22,312 $ 24,319 $ 27,674 Term Amount Rate 1/31/01 Amount Rate 1/31/01 (in thousands) (dollars in thousands) 2001 ...... $ 162,466 $ 168,542 $ 175,790 $ 173,782 10 years $123,100 7.00% 0.21 $ 86,890 7.00% 0.21 2000 ...... 133,443 133,774 152,784 154,185 10 years 321,800 6.92% 1.35 210,262 6.93% 1.38 1999 ...... 119,816 124,330 144,890 148,959
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 48 49 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
L. Income Taxes (continued) January 31, M. Segment Information (continued) Temporary Differences Deferred Tax The effective tax rate for income taxes varies from the The following tables summarize financial data for the Commercial, Residential, Land and Lumber Trading Groups and 2001 2000 2001 2000 federal statutory rate of 35% due to the following items. Corporate. The table is presented by using the pro-rata consolidation method, which is the method used by management for internal (in thousands) reporting. A reconciliation to the full consolidation method is included for certain information for the years ended January 31, 2001, Years Ended January 31, Depreciation...... $ 154,487 $ 169,817 $ 61,099 $ 67,163 Capitalized costs(1) . . . . . 322,482 221,539 127,542 87,619 2000 and 1999. All amounts, including footnotes, are presented in thousands. 2001 2000 1999 Net operating losses . . . . . (10,026) (41,513) (3,509) (14,530) (in thousands) Federal taxcredits ...... – – (32,871) (23,263) January 31, Years Ended January 31, Statement earnings Comprehensive income . . . 6,400 31,690 2,531 12,533 Identifiable Assets(3) Expenditures for Additions to Real Estate(3) Basis in unconsolidated before income taxes, entities ...... 110,977 89,133 43,892 35,252 2001 2000 1999 2001 2000 1999 after minority interest . . . . . $ 113,949 $ 64,849 $ 66,081 Other ...... (70,830) 12,154 (22,013) 9,887 Commercial Group ...... $ 2,758,969 $ 2,558,206 $ 2,290,100 $ 256,679 $ 272,814 $ 367,985 Income taxes computed at $ 513,490 $ 482,820 $ 176,671 $ 174,661 the statutory rate...... $ 39,882 $ 22,697 $ 23,129 Residential Group ...... 1,010,889 800,175 712,808 267,208 76,039 75,258 Increase (decrease) in tax (1) Included in capitalized costs at January 31, 2001 is $56,910 related to Land Group ...... 153,582 136,477 130,587 54,207 48,429 43,063 replacement property of tax-deferred exchanges. resulting from: Lumber Trading Group ...... 136,175 208,836 218,551 2,483 3,899 2,301 State taxes, net of Income taxes paid totaled $15,511,000, $7,176,000 and Corporate ...... 68,368 90,990 65,274 912 2,476 426 federal benefit ...... 7,834 3,016 3,452 Consolidated at pro-rata ...... 4,127,983 3,794,684 $ 3,417,320 $ 581,489 $ 403,657 $ 489,033 Contribution $3,740,000 in the years ended January 31, 2001, 2000 and Minority interest and unconsolidated entities ...... (97,513) (128,329) carryover ...... (361) (201) 1,113 1999, respectively. At January 31, 2001, the Company had a Consolidated ...... $ 4,030,470 $ 3,666,355 Adjustment of prior net operating loss carryforward for tax purposes of $10,026,000 estimated taxes ...... 190 64 (116) which will expire in the year ending January 31, 2011, general Valuation allowance ...... (2,262) (423) 165 business credit carryovers of $1,582,000 which will expire in Years Ended January 31, Cancellation of debt ...... (23,589) ––the years ending January 31, 2004 through January 31, 2015 Revenues Interest Expense Depreciation & Amortization Expense and alternative minimum tax carryforward of $31,289,000. 2001 2000 1999 2001 2000 1999 2001 2000 1999 Other items ...... 618 (834) (69) The Company’s net deferred tax liability at January 31, Total provision ...... $ 22,312 $ 24,319 $ 27,674 2001 is comprised of deferred liabilities of $309,072,000 Commercial Group ...... $ 522,841 $ 442,992 $ 374,106 $ 115,091 $ 94,356 $ 91,291 $ 75,564 $ 66,848 $ 65,527 Effective tax rate ...... 19.58% 37.50% 41.88% deferred assets of $134,340,000 and a valuation allowance related Residential Group ...... 167,052 158,768 139,003 32,534 26,447 27,342 19,837 17,808 18,128 to state taxes and general business credits of $1,939,000. Land Group ...... 64,656 41,356 58,769 4,726 7,370 6,814 382 240 562 An analysis of the deferred tax provision is as follows. Lumber Trading Group(1) . . . 105,427 149,357 123,325 5,584 5,288 5,262 2,340 2,125 2,045 Years Ended January 31, M. Segment Information Corporate ...... 540 598 1,446 32,489 26,258 19,251 1,446 1,123 806 2001 2000 1999 Strategic business units are determined by the type of Consolidated at pro-rata . . 860,516 793,071 696,649 190,424 159,719 149,960 99,569 88,144 87,068 (in thousands) customer served or the product sold. The Commercial Group Minority interest and Excess of tax over owns, develops, acquires and operates shopping centers, office unconsolidated entities . . (65,731) (94,283) (86,949) (7,880) (19,853) (25,358) (1,205) (6,640) (3,229) statement depreciation buildings and mixed-use projects, including hotels. The Consolidated ...... $ 794,785 $ 698,788 $ 609,700 $ 182,544 $ 139,866 $ 124,602 $ 98,364 $ 81,504 $ 83,839 and amortization ...... $ 5,389 $ 2,035 $ 3,040 Residential Group owns, develops, acquires and operates the Cancellation of debt ...... (23,589) –– Company’s multi-family properties. Real Estate Groups are Earnings Before Earnings Before Depreciation, Gains deferred for tax ...... 14,636 4,219 – the combined Commercial and Residential Groups.The Land Income Taxes (EBIT)(2) Amortization & Deferred Taxes (EBDT) Costs on land and rental Group owns and develops raw land into master planned Commercial Group ...... $ 65,033 $ 50,589 $ 27,480 $121,446 $ 105,877 $ 86,410 properties under communities and other residential developments for resale to Residential Group ...... 40,359 40,472 27,285 55,787 46,411 38,614 development expensed users principally in Arizona, Colorado, Florida, Illinois, Nevada, Land Group ...... 2,868 (5,746) 5,265 2,191 (3,489) 10,803 for tax purposes ...... 3,852 2,509 3,657 New York, North Carolina and Ohio. The Lumber Trading Revenues and expenses Lumber Trading Group ...... 1,310 12,258 6,066 283 7,070 3,227 Group operates the Company’s lumber wholesaling business. Corporate ...... (45,408) (38,374) (30,572) (31,898) (23,230) (21,200) recognized in different Corporate includes interest on corporate borrowings and periods for tax and Provision for decline in real estate ...... (1,231) (5,062) – – –– general corporate expenses. statement purposes ...... (412) (1,121) 9,294 The Company uses an additional measure, along with net Gain on disposition of properties and other investments ...... 51,018 10,712 30,557 – –– Difference between tax and Consolidated at pro-rata ...... 113,949 64,849 66,081 147,809 132,639 117,854 statement related to earnings, to report its operating results. This measure, referred Minority interest and unconsolidated entities ...... 3,399 5,557 (1,227) unconsolidated entities . . . . 4,792 (421) 6,519 to as Earnings Before Depreciation, Amortization and Deferred Provision for decline in Taxes (“EBDT”), is not a measure of operating results or cash Consolidated ...... $ 117,348 $ 70,406 $ 64,854 real estate ...... (431) (1,772) – flows from operations as defined by generally accepted Reconciliation of EBDT to net earnings: Deferred state taxes, net accounting principles and may not be directly comparable to Depreciation and amortization - Real Estate Groups ...... (95,763) (84,586) (83,655) of federal benefit ...... 4,817 1,188 3,019 similarly-titled measures reported by other companies. The Deferred taxes - Real Estate Groups ...... (23,518) (12,453) (14,236) Utilization of tax loss Company believes that EBDT provides additional information Straight-line rent adjustment ...... 9,423 –– carryforward ...... 13,221 15,577 5,423 about its operations and, along with net earnings, is necessary Provision for decline in real estate, net of tax ...... (744) (3,060) – Valuation allowance ...... (2,262) (423) 165 to understand its operating results. The Company’s view is that Gain on disposition of properties and other investments, net of tax ...... 51,821 11,139 7,419 Alternative minimum tax EBDT is an indicator of the Company’s ability to generate cash to meet its funding requirements. EBDT is defined as earnings Minority interest in gain on disposition ...... 250 (2,738) – Gain (loss) on disposition reported on equity method ...... 2,359 (411) 11,025 credits ...... (8,027) (9,729) (3,357) before extraordinary gain (loss), excluding the following items: Deferred provision ...... $ 11,986 $ 12,062 $ 27,760 i) provision for decline in real estate; ii) gain (loss) on disposition Extraordinary gain, net of tax ...... – 272 16,343 of properties and other investments; iii) beginning in the year Net earnings ...... $ 91,637 $ 40,802 $ 54,750 The types of differences that gave rise to significant ended January 31, 2001, the adjustment to recognize rental portions of the deferred income tax liability are presented in revenues and rental expenses using the straight-line method; (1) The Company recognizes the gross margin on lumber brokerage sales as Revenues. Sales invoiced for the years ended January 31, 2001, 2000 and 1999 were $2,674,000, $3,712,000 and $2,979,000, respectively. the following table. and iv) noncash charges from Forest City Rental Properties (2) See Consolidated Statements of Earnings on page 30 for reconciliation of EBIT to net earnings. Corporation for depreciation, amortization and deferred (3) Beginning in the year ended January 31, 2001, the Central Station project in Chicago, Illinois, which was previously reported in the Commercial Group, and the Stapleton project in Denver, Colorado, which was previously reported in the Residential Group, are now being reported in the Land Group. Prior years’ segment income taxes. information has been restated to reflect these changes.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 50 51 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
N. Leases O. Contingent Liabilities P. Stock-Based Compensation (continued) The Company as Lessor As of January 31, 2001, the Company has guaranteed The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the The following table summarizes the minimum future loans of $1,825,000, letters of credit outstanding of $7,222,000 following assumptions used for the grants in 2000, 1999 and 1998, respectively: dividend yield of .7%, .6% and .5%; expected rental income to be received on noncancelable operating and surety bonds outstanding of $14,675,000. volatility of 34.9%, 36.8% and 38.0%; risk-free interest rate of 6.0%, 5.2% and 5.7%; expected life of 8.7 years in all years; and leases of commercial properties that generally extend for The Company customarily guarantees lien-free completion turnover of 3.7%, 2.0% and 3.0%. periods of more than one year. of its construction. Upon completion, the guarantees are released. For certain limited partnerships in which the Company is a A summary of stock option activity is presented below. Plus general partner, it guarantees the funding of operating deficits Less Unconsolidated Years Ended January 31, Years Ending Full Minority Investments Pro-Rata of newly-opened apartment projects for periods averaging five January 31, Consolidation Interest at Pro-Rata Consolidation 2001 2000 1999 (in thousands) years. The Company is also involved in certain claims and litigation related to its operations. Based upon the facts known Weighted Weighted Weighted 2002 ...... $ 224,117 $ 48,066 $ 44,470 $ 220,521 Average Average Average at this time, management is of the opinion that the ultimate Options Exercise Price Options Exercise Price Options Exercise Price 2003 ...... 217,780 47,033 42,201 212,948 outcome of all such claims and litigation will not have a 2004 ...... 211,096 46,797 39,078 203,377 material adverse effect on the financial condition, results of 2005 ...... 192,853 44,267 35,446 184,032 operations or cash flows of the Company. Outstanding at beginning of year ...... 1,080,325 $ 22.06 723,950 $ 21.86 354,600 $ 14.38 2006 ...... 181,233 42,260 31,612 170,585 Granted ...... 15,000 $ 35.07 377,800 $ 22.42 390,800 $ 28.50 Exercised ...... (32,925) $ 16.69 (3,600) $ 14.38 (4,350) $ 14.38 Later years ...... 1,507,021 388,603 123,203 1,241,621 P. Stock-Based Compensation $2,534,100 $ 617,026 $ 316,010 $ 2,233,084 Forfeited...... –$– (17,825) $ 22.81 (17,100) $ 20.32 Class A fixed options in the form of either incentive stock Outstanding at end of year ...... 1,062,400 $ 22.41 1,080,325 $ 22.06 723,950 $ 21.86 Most of the commercial leases include provisions for options or non-qualified stock options may be awarded under reimbursements of other charges including real estate taxes the 1994 Stock Option Plan (“Plan”) to key employees and Options exercisable at end of year. . . . . 391,950 $ 17.56 163,275 $ 14.38 82,500 $ 14.38 non-employee members of the Company’s Board of Directors. and operating costs. The following table summarizes total Number of shares available for reimbursements. The maximum number of options that may be awarded under the Plan was increased to 2,250,000 by shareholder approval granting of options at end of year . . . . 1,146,725 1,161,725 1,521,700 Years Ended Full Pro-Rata January 31, Consolidation Consolidation in June 1998. The maximum award to a person during any Weighted average fair value of calendar year is 75,000 and the maximum term of an option (in thousands) options granted during the year . . . . . $ 17.61 $ 11.29 $ 15.12 is 10 years. The exercise price of all options must equal the 2001 ...... $ 86,827 $ 87,025 fair market value of the stock on the date of grant, except, if The following table summarizes information about fixed stock options outstanding at January 31, 2001. 2000 ...... 72,949 75,954 incentive stock options are granted to someone who owns more 1999 ...... 64,909 67,659 than 10% of the total combined voting power of all classes of Options Outstanding Options Exercisable stock of the Company, then the exercise price will be 110% of Range of Number Weighted Average Weighted Number Weighted the fair market value of the stock on the date of grant and the Exercise Outstanding at Remaining Average Exercisable at Average The Company as Lessee term of the option will be five years. The Plan is administered Prices January 31, 2001 Contractual Life Exercise Prices January 31, 2001 Exercise Prices The Company is a lessee under various operating leasing by the Compensation Committee of the Board of Directors. $ 14.38 303,600 5.6 years $ 14.38 303,600 $ 14.38 arrangements for real property and equipment having terms The Company granted 15,000 options in 2000, 377,800 $ 22.38 - 25.69 374,200 8.2 years $ 22.42 – $– expiring through 2095, excluding optional renewal periods. options in 1999 and 390,800 in 1998. All options granted $ 28.50 - 35.07 384,600 7.2 years $ 28.76 88,350 $ 28.50 Minimum fixed rental payments under long-term leases under the Plan to date have been for a term of 10 years and 1,062,400 391,950 (over one year) in effect at January 31, 2001 are as follows. vest over two to four years. The Company applies APBO 25 and related interpretations Plus During 1999 the Compensation Committee granted 45,000 shares of restricted Class A common stock to key employees. Less Unconsolidated in accounting for its Plan. The “intrinsic value” on the grant Years Ending Full Minority Investments Pro-Rata The restricted shares were awarded out of treasury stock, having a cost basis of $605,000, with rights to vote the shares and January 31, Consolidation Interest at Pro-Rata Consolidation dates have been zero, thus no compensation costs have been receive dividends while being subject to restrictions on disposition and transferability and risk of forfeiture. The shares become (in thousands) recognized for the Plan. nonforfeitable over a period of four years. In accordance with APBO 25, the market value on the date of grant of $1,114,000 Had compensation costs been determined in accordance 2002 ...... $ 15,532 $ 3,366 $ 1,160 $ 13,326 was initially recorded as unearned compensation to be charged to expense over the respective vesting periods. The unearned with SFAS 123 “Accounting for Stock-Based Compensation”, 2003 ...... 14,910 3,443 1,126 12,593 compensation is reported as a reduction of Additional Paid-In Capital in the accompanying consolidated financial statements. net earnings and earnings per share would have been reduced 2004 ...... 14,375 3,387 1,115 12,103 Unamortized unearned compensation amounted to $882,000 and $1,021,000 at January 31, 2001 and 2000, respectively. 2005 ...... 13,192 3,235 1,084 11,041 to the pro forma amounts indicated below. 2006 ...... 12,566 3,252 1,050 10,364 Years Ended January 31, Subsequent Event – In March 2001 the Compensation Committee approved grants to key employees of 417,200 Class A Later years ...... 552,349 164,593 46,625 434,381 2001 2000 1999 common stock options and 60,000 shares of restricted Class A common stock. $ 622,924 $ 181,276 $ 52,160 $ 493,808 Net earnings (in thousands) As reported ...... $ 91,637 $ 40,802 $ 54,750 The following table summarizes rent expense paid. Pro forma ...... $ 89,316 $ 38,502 $ 53,150 Basic earnings per share Years Ended Full Pro-Rata January 31, Consolidation Consolidation As reported ...... $ 3.05 $ 1.36 $ 1.83 Pro forma ...... $ 2.97 $ 1.28 $ 1.77 (in thousands) Diluted earnings per share 2001 ...... $ 16,621 $ 15,036 As reported ...... $ 3.02 $ 1.35 $ 1.81 2000 ...... 13,541 13,361 Pro forma ...... $ 2.95 $ 1.29 $ 1.77 1999 ...... 11,540 10,267
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 52 53 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
Q. Capital Stock R. Earnings Per Share S. Summarized Financial Information The Company paid a two-for-one common stock split on The following is a reconciliation of the numerators and Forest City Rental Properties Corporation (“Rental Properties”) is a wholly-owned subsidiary engaged in the development, July 16, 1998 effected as a stock dividend. The stock split was denominators of the basic and diluted earnings per share acquisition and management of real estate projects, including apartment complexes, regional malls and shopping centers, hotels, given retroactive effect to the beginning of the earliest period computations for “earnings before extraordinary gain”. office buildings and mixed-use facilities. Consolidated balance sheets and statements of earnings for Rental Properties and its presented in the accompanying Consolidated Statements of Earnings Weighted subsidiaries follow. Shareholders’ Equity. All share and per share data included in Before Average Extraordinary Common this annual report, including stock option plan information, Gain Shares Per Forest City Rental Properties Corporation and Subsidiaries (Numerator) Outstanding Common have been restated to reflect the stock split. Years Ended January 31, (in thousands) (Denominator) Share In June 1998 the shareholders approved an amendment Consolidated Balance Sheet - January 31, 2001 2001 Plus to the Company’s Articles of Incorporation to increase the Unconsolidated Company’s authorized shares of stock. Class A common Basic earnings per share . . . . $ 91,637 30,035,127 $ 3.05 Less Minority Investments at Pro-Rata shares were increased from 48,000,000 to 96,000,000 shares. Effect of dilutive securities- Full Consolidation Interest Pro-Rata Consolidation Class B common shares were increased from 18,000,000 stock options ...... – 298,315 (.03) (in thousands) to 36,000,000 shares. Diluted earnings per share . . $ 91,637 30,333,442 $ 3.02 Assets Class A common stock totaling 32,925, 3,600 and Real Estate 4,350 shares in 2000, 1999 and 1998, respectively, were 2000 Completed rental properties ...... $ 3,086,966 $ 574,575 $ 703,020 $ 3,215,411 issued out of treasury stock upon the exercise of stock Basic earnings per share . . . . $ 40,530 30,016,323 $ 1.35 Projects under development ...... 391,821 54,947 163,484 500,358 options (See Note P). Effect of dilutive securities- Real estate, at cost 3,478,787 629,522 866,504 3,715,769 stock options ...... – 136,734 (.01) Less accumulated depreciation ...... (473,843) (76,301) (172,062) (569,604) Diluted earnings per share . . $ 40,530 30,153,057 $ 1.34 Total Real Estate ...... 3,004,944 553,221 694,442 3,146,165
1999 Cash and equivalents ...... 24,770 8,653 20,422 36,539 Basic earnings per share . . . . $ 38,407 29,980,200 $ 1.28 Restricted cash ...... 67,951 10,706 18,125 75,370 Effect of dilutive securities - Notes and accounts receivable, net ...... 115,482 18,751 5,736 102,467 stock options ...... – 193,730 (.01) Investments in and advances to real estate affiliates . . 384,132 – (60,147) 323,985 Diluted earnings per share . . $ 38,407 30,173,930 $ 1.27 Other assets ...... 144,917 28,647 23,125 139,395 Total Assets ...... $ 3,742,196 $ 619,978 $ 701,703 $ 3,823,921
Liabilities and Shareholder’s Equity Liabilities Mortgage debt, nonrecourse ...... $ 2,433,649 $ 488,014 $ 642,562 $ 2,588,197 Accounts payable and accrued expenses ...... 320,376 39,180 57,919 339,115 Notes payable...... 50,860 14,694 1,222 37,388 Long-term credit facility ...... 189,500 – – 189,500 Subordinated debt ...... 20,400 – – 20,400 Deferred income taxes ...... 201,015 – – 201,015 Total Liabilities...... 3,215,800 541,888 701,703 3,375,615
Minority Interest ...... 78,090 78,090 – –
Shareholder’s Equity Common stock and additional paid-in capital . . . . . 200,878 – – 200,878 Retained earnings ...... 243,559 – – 243,559 444,437 – – 444,437 Accumulated other comprehensive income ...... 3,869 – – 3,869 Total Shareholder’s Equity ...... 448,306 – – 448,306 Total Liabilities and Shareholder’s Equity . . . $ 3,742,196 $ 619,978 $ 701,703 $ 3,823,921
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 54 55 Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
S. Summarized Financial Information (continued) S. Summarized Financial Information (continued) Forest City Rental Properties Corporation and Subsidiaries Forest City Rental Properties Corporation and Subsidiaries Consolidated Balance Sheet - January 31, 2000 Consolidated Statements of Earnings - Years Ended January 31, Plus Plus Unconsolidated Unconsolidated Less Minority Investments at Pro-Rata Less Minority Investments at Pro-Rata Full Consolidation Interest Pro-Rata Consolidation Full Consolidation Interest Pro-Rata Consolidation (in thousands) 2001 (in thousands) Assets Revenues Real Estate Real estate operations ...... $ 633,695 $ 114,247 $ 165,531 $ 684,979 Unconsolidated entities ...... 30,311 – (20,670) 9,641 Completed rental properties ...... $ 2,660,957 $ 430,376 $ 636,332 $ 2,866,913 664,006 114,247 144,861 694,620 Projects under development ...... 499,399 126,273 105,640 478,766 Operating expenses...... 318,761 56,093 86,715 349,383 Real estate, at cost 3,160,356 556,649 741,972 3,345,679 Interest expense ...... 173,964 35,488 40,544 179,020 Less accumulated depreciation ...... (443,381) (66,690) (155,916) (532,607) Provision for decline in real estate ...... 1,231 – – 1,231 Total Real Estate ...... 2,716,975 489,959 586,056 2,813,072 Depreciation and amortization ...... 94,496 19,017 19,961 95,440 588,452 110,598 147,220 625,074 Gain (loss) on disposition of properties Cash and equivalents ...... 17,707 6,685 14,298 25,320 and other investments ...... 49,609 (250) 2,359 52,218 Restricted cash ...... 67,765 8,243 16,167 75,689 Earnings before income taxes ...... 125,163 3,399 – 121,764 Notes and accounts receivable, net ...... 57,438 4,906 5,487 58,019 Income tax expense Investments in and advances to real estate affiliates . . 289,340 – (2,033) 287,307 Current ...... 11,990 – – 11,990 Deferred...... 11,200 – – 11,200 Other assets ...... 138,355 19,981 23,168 141,542 23,190 – – 23,190 Total Assets ...... $ 3,287,580 $ 529,774 $ 643,143 $ 3,400,949 Earnings before minority interest ...... 101,973 3,399 – 98,574 Minority interest ...... 3,399 3,399 – – Liabilities and Shareholder’s Equity Net earnings ...... $ 98,574 $ – $ – $ 98,574 Liabilities 2000 Mortgage debt, nonrecourse ...... $ 2,185,628 $ 419,587 $ 590,014 $ 2,356,055 Revenues Accounts payable and accrued expenses ...... 217,730 23,295 50,893 245,328 Real estate operations ...... $ 515,783 $ 68,244 $ 151,391 $ 598,930 Unconsolidated entities ...... 19,809 – (16,980) 2,829 Notes payable...... 46,504 14,285 2,236 34,455 535,592 68,244 134,411 601,759 Long-term credit facility ...... 167,000 – – 167,000 Operating expenses...... 264,208 31,354 73,761 306,615 Deferred income taxes ...... 199,791 – – 199,791 Interest expense ...... 127,433 22,029 41,657 147,061 Total Liabilities ...... 2,816,653 457,167 643,143 3,002,629 Depreciation and amortization ...... 78,044 12,042 18,583 84,585 469,685 65,425 134,001 538,261 Gain (loss) on disposition of properties Minority Interest ...... 72,607 72,607 – – and other investments ...... 13,861 2,738 (410) 10,713 Earnings before income taxes ...... 79,768 5,557 – 74,211 Shareholder’s Equity Income tax expense Common stock and additional paid-in capital . . . . 200,878 – – 200,878 Current ...... 12,446 – – 12,446 Deferred...... 15,139 – – 15,139 Retained earnings ...... 178,285 – – 178,285 27,585 – – 27,585 379,163 – – 379,163 Earnings before minority interest and Accumulated other comprehensive income ...... 19,157 – – 19,157 extraordinary gain ...... 52,183 5,557 – 46,626 Total Shareholder’s Equity...... 398,320 – – 398,320 Minority interest ...... 5,557 5,557 – – Total Liabilities and Shareholder’s Equity. . $ 3,287,580 $ 529,774 $ 643,143 $ 3,400,949 Extraordinary gain, net of tax ...... 272 – – 272 Net earnings ...... $ 46,898 $ – $ – $ 46,898 1999 Revenues Real estate operations ...... $ 438,855 $ 62,640 $ 138,421 $ 514,636 Unconsolidated entities ...... 27,859 – (23,213) 4,646 466,714 62,640 115,208 519,282 Operating expenses...... 224,498 28,787 68,785 264,496 Interest expense ...... 117,909 21,296 40,943 137,556 Depreciation and amortization ...... 80,934 13,784 16,505 83,655 423,341 63,867 126,233 485,707 Gain on disposition of properties and other investments ...... 19,865 – 11,025 30,890 Earnings before income taxes ...... 63,238 (1,227) – 64,465 Income tax expense Current ...... (705) – – (705) Deferred...... 26,389 – – 26,389 25,684 – – 25,684 Earnings before minority interest and extraordinary gain ...... 37,554 (1,227) – 38,781 Minority interest ...... (1,227) (1,227) – – Extraordinary gain, net of tax ...... 16,343 – – 16,343 Net earnings ...... $ 55,124 $ – $ – $ 55,124
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 56 57 Notes to Consolidated Financial Statements Quarterly Consolidated Financial Data (Unaudited) Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
T. Gain on Disposition of Properties and Other Investments, Extraordinary Gain and Quarter Ended Provision for Decline in Real Estate Jan. 31, Oct. 31, July 31, Apr. 30, 2001 2000 2000 2000 The following table summarizes the gain (loss) on disposition of properties and other investments by year. (in thousands, except per share data) Plus Revenues ...... $ 226,129 $211,526 $ 190,263 $166,867 Unconsolidated Less Minority Investments at Pro-Rata Earnings before income taxes ...... $ 9,446 $ 21,927 $ 41,703 $ 44,272 Years Ended January 31, Full Consolidation Interest Pro-Rata Consolidation Net earnings before extraordinary gain ...... $ 4,176 $ 13,079 $ 46,833 $ 27,549 (in thousands) Net earnings ...... $ 4,176 $ 13,079 $ 46,833 $ 27,549 2001 Basic earnings per share (2) Studio Colony*...... $ 25,726 $ – $ – $ 25,726 Net earnings before extraordinary gain ...... $ .14 $ .44 $ 1.56 $ .92 Net earnings(2) ...... $ .14 $ .44 $ 1.56 $ .92 Highlands...... 599 – – 599 Diluted earnings per share Tucson Place* ...... 8,734 – – 8,734 Net earnings before extraordinary gain (2) ...... $ .14 $ .43 $ 1.55 $ .91 Canton Centre Mall* ...... (436) – – (436) Net earnings (2) ...... $ .14 $ .43 $ 1.55 $ .91 Gallery at Metrotech ...... (6,868) (250) – (6,618) Dividends declared per common share(3) Available-for-sale equity securities ...... 20,654 – 2,359 23,013 Quarterly dividend Total ...... $ 48,409 $ (250) $ 2,359 $ 51,018 Class A ...... $ .06 $ .06 $ .06 $ .05 Class B ...... $ .06 $ .06 $ .06 $ .05 2000 Market price range of common stock Rolling Acres Mall* ...... $ 13,861 $ 2,738 $ – $ 11,123 Class A Other ...... – – (411) (411) High ...... $ 41.82 $ 37.05 $ 36.81 $ 30.38 Total ...... $ 13,861 $ 2,738 $ (411) $ 10,712 Low ...... $ 36.70 $ 33.50 $ 28.00 $ 24.69 Class B High ...... $ 42.30 $ 38.31 $ 37.25 $ 35.81 1999 Low ...... $ 37.05 $ 35.40 $ 29.75 $ 30.38 Summit Park Mall* ...... $ 13,897 $ – $ – $ 13,897 San Vicente* ...... – – 10,403 10,403 Quarter Ended Courtyard ...... – – 622 622 Jan. 31, Oct. 31, July 31, Apr. 30, Trolley Plaza*...... 4,941 – – 4,941 2000 1999 1999 1999 Other ...... 694 – – 694 (in thousands, except per share data) Total ...... $ 19,532 $ – $ 11,025 $ 30,557 Revenues ...... $ 197,925 $ 164,878 $ 174,062 $ 161,923 * Tax-deferred exchange Earnings before income taxes ...... $ 39,566 $ 12,697 $ 8,918 $ 9,225 Net earnings before extraordinary gain(1) ...... $ 23,463 $ 7,033 $ 4,740 $ 5,294 Net earnings ...... $ 23,521 $ 7,033 $ 4,740 $ 5,508 Basic earnings per share Studio Colony and Highlands are apartment communities Extraordinary Gain – There were no extraordinary gains Net earnings before extraordinary gain(1)(2) ...... $ .78 $ .23 $ .16 $ .17 in California. Tucson Place, Canton Centre Mall and Gallery during the year ended January 31, 2001. Extraordinary gain, Net earnings(2) ...... $ .78 $ .23 $ .16 $ .18 at Metrotech are shopping centers in Arizona, Ohio and New net of tax, totaled $272,000 and $16,343,000 in the years Diluted earnings per share York, respectively. Rolling Acres Mall is located in Ohio. ended January 31, 2000 and 1999, respectively, representing Net earnings before extraordinary gain (1)(2) ...... $ .78 $ .23 $ .16 $ .17 Summit Park Mall and Courtyard are shopping centers in extinguishment of nonrecourse debt and related accrued Net earnings (2) ...... $ .78 $ .23 $ .16 $ .18 New York and Michigan, respectively. San Vicente is an office interest. Dividends declared per common share(3) building in California and Trolley Plaza is an apartment Extraordinary gain for the year ended January 31, 2000 Quarterly dividend community in Michigan. represents extinguishment of $450,000 ($272,000 after tax) of Class A ...... $ .05 $ .05 $ .05 $ .04 Provision for Decline in Real Estate – During the year nonrecourse debt related to Plaza at Robinson Town Centre Class B ...... $ .05 $ .05 $ .05 $ .04 ended January 31, 2001, the Company recorded a Provision in Pittsburgh, Pennsylvania. Market price range of common stock for Decline in Real Estate of $1,231,000 related to the write- The extraordinary gain for the year ended January 31, Class A down to estimated fair value, less cost to sell, of Canton 1999 represents extinguishment of nonrecourse debt related High ...... $ 28.25 $ 26.50 $ 28.75 $ 25.88 Centre Mall. to Terminal Tower ($13,947,000 or $8,431,000 after tax) and Low ...... $ 23.82 $ 21.88 $ 24.75 $ 19.88 During the year ended January 31, 2000, the Company Skylight Office Tower ($3,619,000 or $2,188,000 after tax), Class B recorded a Provision for Decline in Real Estate of $5,062,000 both located in Cleveland, Ohio; Courtland ($7,381,000 or High ...... $ 31.44 $ 27.50 $ 28.63 $ 26.00 related to the write-down to estimated net realizable value of the $4,462,000 after tax), a regional mall in Flint, Michigan; One Low ...... $ 27.07 $ 25.00 $ 25.00 $ 20.69 Land Group’s investment in Granite Development Partners Franklintown ($1,350,000 or $816,000 after tax), an apartment complex in Philadelphia, Pennsylvania; Boot Ranch ($187,000 L.P. (Granite). The Company, at that time, owned a 43.75% Both classes of common stock are traded on the New York Stock Exchange under the symbols FCEA and FCEB. As of or $113,000 after tax), an apartment property in Tampa, interest in Granite as the result of a capital contribution of March 1, 2001, the number of registered holders of Class A and Class B common stock were 820 and 600, respectively. land, which was classified as Investments in and Advances to Florida; and Trolley Plaza ($552,000 or $333,000 after tax). Affiliates on the Company’s Consolidated Balance Sheets. (1) Excludes the extraordinary gain, net of tax of $272 ($.01 basic and diluted per share) in the year ended January 31, 2000. This item is explained in Note T in the Notes to Consolidated Financial Statements. Granite owns an interest in several raw land developments (2) The sum of quarterly earnings per share may not equal annual earnings per share due to the weighting of stock and option activity during the year. held for resale, the most significant of which is a one-third (3) Future dividends will depend upon such factors as earnings, capital requirements and financial condition of the Company. Retained earnings of $8,198 was available for interest in Seven Hills in Henderson, Nevada. The revised payment of dividends as of January 31, 2001, under the restrictions contained in the revolving credit agreement with a group of banks. projection of costs to complete the project indicated that the Company may not recover its capital investment in Granite.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 58 59 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
GENERAL Net Operating Income from Real Estate Groups – additional land sales of $11,276,000 in 1999 compared to 1998. 42nd Street, Battery Park City, Court Street, Forest Avenue, The Company owns, develops, acquires and operates Management analyzes property NOI using the pro-rata The remainder of the increase (approximately $6,500,000) Eastchester, and Kaufman Studios ($31,744,000), improved commercial and residential real estate properties in 22 states and consolidation method. NOI from the combined Commercial was due to improved operations as a result of rental rate and operations at Pavilion, an office tower in San Jose, California the District of Columbia. The Company owns a portfolio that Group and Residential Group (“Real Estate Groups”) for occupancy increases. ($4,910,000) and One Pierrepont Plaza in Brooklyn, New is diversified both geographically and by property types and 2000 was $339,321,000 compared to $296,521,000 in 1999, a Operating and Interest Expenses – During 2000, York ($3,679,000), the expansion of and sale of airrights at operates through four strategic business units: Commercial 14.4% increase. Comparable NOI for Real Estate Groups (NOI operating expenses for the Commercial Group increased Ballston Common Mall, a shopping center in Arlington, Group, Residential Group, Land Group and Lumber Trading for properties in operation throughout both years) increased $32,066,000, or 13.9%, to $263,264,000 from $231,198,000 Virginia ($5,366,000), increased land sales of $3,445,000 in Group. 3.2% from 1999 to 2000 and 4.9% from 1998 to 1999. in 1999. This increase was primarily attributable to costs 2000 as compared to 1999, and increased equity in earnings The Company uses an additional measure, along with Including the expected NOI for the twelve months following associated with the openings of Promenade in Temecula of unconsolidated entities of $3,567,000. Revenues also net earnings, to report its operating results. This measure, stabilization for the properties that were opened, expanded or ($3,291,000) and 45/75 Sidney Street ($1,615,000), One increased from the hotel portfolio ($50,426,000) including the referred to as Earnings Before Depreciation, Amortization and acquired in 2000, net of property disposals, NOI for Real Pierrepont Plaza ($2,420,000), the New York City urban retail newly-opened Embassy Suites Hotel and Hilton Times Square Deferred Taxes (“EBDT”), is not a measure of operating results Estate Groups would be approximately $374,000,000 for 2000. portfolio ($5,716,000) and openings in the hotel portfolio both in New York City, which were added to the existing ($23,649,000). These increases in expenses were partially portfolio which includes Sheraton Station Square located in or cash flows from operations as defined by generally accepted Commercial Group - Pro-Rata Consolidation accounting principles and may not be directly comparable to offset by the dispositions of Tucson Place and Rolling Acres Mall Pittsburgh, Pennsylvania and Ritz-Carlton Hotel in Cleveland, similarly-titled measures reported by other companies. The Revenues – Revenues for the Commercial Group ($3,032,000) and a net decrease in land sales for 2000 as Ohio. These increases were partially offset by the dispositions Company believes that EBDT provides additional information increased $66,538,000, or 15.0%, to $509,530,000 in 2000 compared to 1999 ($1,900,000). Interest expense for 2000 of Tucson Place ($1,918,000) in 2000 and Rolling Acres Mall about its operations and, along with net earnings, is necessary from $442,992,000 in 1999. This increase was primarily the increased by $20,735,000, or 22.0%, to $115,091,000 from ($4,877,000) in 1999. to understand its operating results. The Company’s view is result of the openings of 13 new properties during 1999 and $94,356,000 for 1999. The increase in interest expense is Revenues for the Commercial Group increased that EBDT is an indicator of the Company’s ability to generate 2000 and increased rents in existing properties. Revenues primarily attributable to the 1999 and 2000 additions to the $56,944,000, or 15.2%, to $431,753,000 in 1999 from cash to meet its funding requirements. EBDT is defined and increased from the openings of Promenade in Temecula, a Commercial Group portfolio. $374,809,000 in 1998. This increase is primarily the result discussed in detail under “Results of Operations - EBDT.” 795,000-square-foot regional mall in Temecula, California During 1999, operating expenses for the Commercial of the openings of 45/75 Sidney Street ($11,496,000) and The Company’s EBDT for 2000 grew by 11.4% to ($5,983,000), 45/75 Sidney Street, an office building atUniversity Group increased $35,232,000, or 18.0%, to $231,198,000 from Promenade in Temecula ($2,901,000). The 1998 acquisitions of $147,809,000 from $132,639,000. The increase in EBDT is Park at MIT in Cambridge, Massachusetts ($3,306,000), $195,966,000 in 1998. This increase was primarily attributable the Sheraton Station Square increased revenues by $4,866,000, primarily attributable to improved results from the opening several openings in the Company’s urban retail portfolio in the to costs associated with the 1999 openings of 45/75 Sidney the 324,000-square-foot Fairmont Plaza by $6,221,000 and the or acquisition of 24 new properties in 1999 and 2000 and boroughs of New York City including Columbia Park Center, Street ($3,136,000), Promenade in Temecula ($586,000), the adjacent 247,000-square-foot Pavilion retail center in San Jose, increasing rental rates at existing properties. 42nd Street, Battery Park City, Court Street, Forest Avenue, 1998 openings of 350 Massachusetts Avenue ($534,000) and California by $1,570,000. Revenues also increased as a result of Effective January 31, 2001, the Company implemented Eastchester, and Kaufman Studios ($20,732,000), improved University Park Hotel at MIT ($2,877,000), and the 1998 improved operations at Avenue at Tower City Center in Cleveland, a change in the presentation of its financial results. While a operations at Pavilion, an office tower in San Jose, California acquisitions of Sheraton Station Square ($2,674,000), Fairmont Ohio ($5,545,000), Ritz-Carlton Hotel ($1,298,000), Tucson number of the line items on the Company’s consolidated ($4,884,000) and One Pierrepont Plaza in Brooklyn, New York Plaza ($1,860,000) and Pavilion ($88,000). Operating expenses Mall ($2,885,000) in Tucson, Arizona, and openings in the financial statements have changed under the new full ($3,127,000), and the expansion and sale of airrights at Ballston also increased at Liberty Center ($1,266,000), Ritz-Carlton Company’s urban retail portfolio in the boroughs of New York consolidation method, there is no impact on EBDT, net Common Mall, a shopping center in Arlington, Virginia Hotel ($1,160,000), and Avenue at Tower City ($4,129,000) City ($6,790,000) including Columbia Park Center, Kaufman earnings or shareholders’ equity for all years presented. This ($5,366,000). Revenues also increased in the hotel portfolio in connection with improved operations, and also as a result Studios and Bay Street. These increases were partially offset by a required financial reporting presentation change will have no ($31,621,000) which includes the newly-opened Embassy of 1998 and 1999 openings in the New York City urban retail decrease in revenues due to the 1998 disposition of Summit Park impact on the way the Company operates or manages its Suites Hotel and Hilton Times Square, both in New York City, portfolio ($1,242,000). In addition, development expenses Mall ($2,229,000) and a decrease in the equity of unconsolidated business. Prior to January 31, 2001, the Company used the and existing portfolio assets of Westin Convention Center and increased $1,941,000 over 1998, cost of sales associated with entities ($9,215,000) primarily from the disposition of San pro-rata method of consolidation to report its partnerships. Sheraton Station Square both located in Pittsburgh, Pennsylvania, increased land sales activity were $5,916,000 over 1998 and Vicente, an office building in Brentwood, California. The Under this method, the Company presented its partnership Ritz-Carlton Hotel in Cleveland, Ohio, Charleston Marriott in operating expenses for mature properties increased approximately Commercial Group also recorded additional land sales of investments proportionate to its share of ownership for each Charleston, West Virginia and the University Park Hotel at MIT $5,000,000. Interest expense for 1999 increased by $3,065,000, $10,177,000 in 1999 compared to 1998. The remainder of line item of its consolidated financial statements. In accordance in Cambridge, Massachusetts. These increases were partially or 3.4%, to $94,356,000 from $91,291,000 for 1998. The the increase (approximately $14,000,000) was due to improved with the FASB’s Emerging Issues Task Force Issue No. 00-1, offset by the dispositions of Tucson Place ($1,918,000) in 2000 increase in interest expense is primarily attributable to the 1999 operations as a result of rental rate and occupancy increases. “Investor Balance Sheet and Income Statement Display under and Rolling Acres Mall ($3,902,000) in 1999 and decreased additions to the Commercial Group portfolio discussed above, Operating and Interest Expenses – During 2000, the Equity Method for Investments in Certain Partnerships land sales of $2,040,000 in 2000 as compared to 1999. and a full year of interest for 1998 openings. operating expenses for the Commercial Group increased and Other Ventures,” the Company can no longer use the Revenues for the Commercial Group increased Net Operating Income – Commercial Group NOI for $51,255,000, or 24.1%, to $264,049,000 from $212,794,000 in pro-rata consolidation method for partnerships. Accordingly, $62,728,000, or 16.5%, to $442,992,000 in 1999 from 2000 was $246,266,000 compared to $211,794,000 in 1999, 1999. This increase was primarily attributable to costs associated partnership investments that were previously reported on the $380,264,000 in 1998. This increase is primarily the result a 16.3% increase. NOI increased 3.1% from 1999 to 2000 and with the openings of Promenade in Temecula ($4,388,000) pro-rata method are now reported as consolidated at 100 of the openings of 45/75 Sidney Street ($11,496,000), 350 4.9% from 1998 to 1999 for Commercial Group properties in and 45/75 Sidney Street ($1,615,000), One Pierrepont Plaza percent, if deemed under the Company’s control, or otherwise Massachusetts Avenue at University Park at MIT ($1,029,000) a operation throughout both years. Including the expected NOI ($2,847,000), the New York City urban retail portfolio on the equity method of accounting. mixed-use facility that opened in 1998, University Park Hotel for the twelve months after stabilization for the Commercial ($8,538,000), a net increase in the cost of land sales for 2000 at MIT ($4,358,000) and Promenade in Temecula ($2,175,000). Group properties that were opened or acquired in 2000, NOI as compared to 1999 ($533,000) and openings in the hotel The 1998 acquisitions increased revenues as follows: Sheraton would be approximately $253,000,000 for 2000. portfolio ($36,676,000). These increases in expenses were RESULTS OF OPERATIONS Station Square ($4,866,000), the 324,000-square-foot Fairmont partially offset by the dispositions of Tucson Place and Rolling The Company reports its results of operations by each Plaza ($6,221,000) and the adjacent 247,000-square-foot Commercial Group - Full Consolidation Acres Mall ($3,424,000). Interest expense for 2000 increased by of its four strategic business units as it believes it provides the Pavilion retail center in San Jose, California ($1,555,000). Revenues – Revenues for the Commercial Group $31,251,000, or 35.6%, to $119,015,000 from $87,764,000 most meaningful understanding of the Company’s financial Revenues also increased as a result of improved operations at increased $105,598,000, or 24.5%, to $537,351,000 in 2000 for 1999. The increase in interest expense is primarily performance. Liberty Center ($1,832,000), Avenue at Tower City Center in from $431,753,000 in 1999. This increase was primarily the attributable to the 1999 and 2000 additions to the Commercial The major components of EBDT are Revenues, Operating Cleveland, Ohio ($5,545,000), Ritz-Carlton Hotel ($1,233,000), result of the openings of new properties during 1999 and 2000 Group portfolio. Expenses and Interest Expense, each of which is discussed below. Tucson Mall ($1,948,000) in Tucson, Arizona, and openings in and increased rents at existing properties. Revenues increased During 1999, operating expenses for the Commercial Net Operating Income (“NOI”) is defined as Revenues less the Company’s urban retail portfolio in the boroughs of New from the openings of Promenade in Temecula, a 795,000- Group increased $33,649,000, or 18.8%, to $212,794,000 from Operating Expenses. See the information in the table “Three York City ($4,669,000) including Columbia Park, Kaufman square-foot regional mall inTemecula, California ($8,237,000), $179,145,000 in 1998. This increase was attributable primarily Year Summary of Earnings before Depreciation, Amortization Studios and Bay Street. These increases were partially offset by 45/75 Sidney Street, an office building at University Park at to costs associated with the 1999 openings of 45/75 Sidney and Deferred Taxes” at the end of this Management’s Discussion a decrease in revenues due to the 1998 disposition of Summit MIT in Cambridge, Massachusetts ($3,306,000), several Street ($3,136,000), Promenade in Temecula ($781,000), and the and Analysis of Financial Condition and Results of Operations. Park Mall ($2,229,000). The Commercial Group also recorded openings in the Company’s urban retail portfolio in the 1998 acquisitions of Sheraton Station Square ($2,674,000), boroughs of New York City including Columbia Park Center, Fairmont Plaza ($1,860,000) and Pavilion ($89,000). Operating
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 60 61 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
expenses also increased at Ritz-Carlton Hotel ($1,221,000) offset by a decrease due to the sale of Trolley Plaza, a 351-unit Colony, a 450-unit building in Los Angeles, California Revenues – Revenues for the Land Group increased by and Avenue at Tower City ($4,129,000) as a result of increased apartment community in Detroit, Michigan ($1,504,000). The ($5,025,000) and Highlands, a 556-unit apartment building $23,300,000 to $64,656,000 in 2000 from $41,356,000 in 1999. revenues, and also as a result of 1998 and 1999 openings in balance of the increase in revenues ($2,300,000) within the in Grand Terrace, California ($3,961,000), and the Toscana This increase is a result of increases in land sales at Canterberry the New York City urban retail portfolio ($1,741,000). In Residential Group was generally due to improved operations. litigation settlement proceeds ($4,500,000) received in 1999 Crossing, a 470-acre residential golf course community in addition, development expenses increased $1,941,000 over Operating and Interest Expenses – Operating expenses which did not recur. Parker, Colorado ($2,147,000), Central Station, a mixed-use 1998 cost of sales associated with increased land sales activity for the Residential Group increased by $281,000, or .4%, in Revenues for the Residential Group increased by community in Chicago, Illinois ($4,726,000), Caldwell Road, a were $9,569,000 over 1998, and operating expenses for mature 2000, to $74,322,000 from $74,041,000 in 1999. The increase $20,183,000, or 19.7%, in 1999 to $122,421,000 from 418-acre mixed-use community in Charlotte, North Carolina properties increased approximately $6,000,000. Interest expense in operating expenses was primarily due to the acquisitions of $102,238,000 in 1998. This increase was primarily attributable ($4,946,000), Thornbury, a 250-acre residential community in for 1999 increased by $2,341,000, or 2.7%, to $87,764,000 Mount Vernon Square ($3,211,000), Forest Trace ($3,272,000), to proceeds from the Toscana litigation settlement ($4,500,000), Solon,Ohio ($2,044,000), Seven Hills, a 1,300-acre planned-unit from $85,423,000 for 1998. The increase in interest expense is Burton Place ($1,731,000), Mayfair at Great Neck ($739,000), the recognition of development and other fees ($5,722,000) development project in Henderson, Nevada ($6,306,000) and primarily attributable to the 1999 additions to the Commercial Mayfair at Glen Cove ($359,000), write off of development on several projects including: The Grand, a 546-unit luxury a land sale atQuincy Avenue in Cleveland, Ohio ($2,750,000). Group portfolio discussed above, and a full year of interest for project costs ($2,658,000), and the openings of Chestnut Grove high-rise apartment building in North Bethesda, Maryland; These increases were partially offset by decreases in land sale 1998 openings. ($789,000) and Classic Residence by Hyatt ($1,244,000). These The Drake, a 280-unit high-rise building in Philadelphia, activity at Silver Lakes, 2,400 acres and 5,108 units in Fort increases are partially offset by the dispositions of Studio Colony Pennsylvania; Enclave, a 637-unit apartment complex in San Lauderdale, Florida ($2,009,000), The Cascades in Brooklyn, Residential Group - Pro-Rata Consolidation ($1,937,000) andHighlands ($1,745,000) and the full restoration Jose, California; and 101 San Fernando, a 323-unit apartment Ohio ($1,254,000),The Ledges, a 133-acre residential community Revenues – Revenues for the Residential Group increased in 2000 of the reserved Millender Center note receivable complex also in San Jose, California, a full year of operations in Twinsburg, Ohio ($1,415,000) and Eaton Estate, a 22-acre by $8,609,000, or 5.4%, in 2000 to $167,377,000 from ($10,275,000). Interest expense increased by $6,087,000 in for the 1998 acquisitions of the 534-unit Woodlake Apartments apartment and cluster site in Sagamore Hills, Ohio ($525,000). $158,768,000 in 1999. This increase was primarily attributable 2000, or 23.0%, to $32,534,000 from $26,447,000 in 1999. in Silver Spring, Maryland ($2,663,000). In addition, revenues Included in 1999 is a forgiveness of interest income relating to the acquisitions of Mount Vernon Square, a 1,387-unit This increase is primarily due to property acquisitions partially increased at Trowbridge, the Company’s supported-living to Granite Development Partners L.P. (“Granite”) ($4,001,000) community in Alexandria, Virginia ($8,510,000), Forest Trace, offset by property dispositions. property in Southfield, Michigan ($1,181,000), Studio Colony that did not recur in 2000. a 324-unit supported-living community in Lauderhill, Florida Operating expenses for the Residential Group increased ($686,000), as a result of lease-up of Colony Woods ($1,872,000) During 1999, the Company was informed by the project ($6,006,000), Burton Place, a 200-unit apartment community by $7,793,000, or 11.8%, in 1999, to $74,041,000 from and the increased equity in unconsolidated entities ($3,091,000). manager/partner of costs that would be incurred in excess of in Southfield, Michigan ($895,000), Mayfair at Great Neck, a $66,248,000 in 1998. The increase in operating expenses was These increases were partially offset by a decrease due to the budget to complete Seven Hills. At that point in time, the 144-unit supported-living community on Long Island, New primarily due to the reduction in a reserve for collection of a sale in the second quarter of 1998 of Trolley Plaza, a 351-unit Company owned a 14.57% interest in Seven Hills through its York ($866,000), Mayfair at Glen Cove, a 79-unit supported- note receivable in 1998 from Millender Center ($3,000,000), apartment community in Detroit, Michigan ($1,504,000). investment in Granite (see “Other Transactions - Provision for living community on Long Island, New York ($579,000), additional costs associated with the generation of increased The balance of the increase in revenues ($2,000,000) within the Decline in Real Estate”). As a result of this deterioration in the openings of Chestnut Grove, a 79-unit supported-living development fees ($999,000), increased operating expenses Residential Group was generally due to improved operations. Seven Hills’ margins, the Company entered into an agreement community in Plainview, New York ($938,000) and Classic for mature properties (approximately $2,000,000), increased Operating and Interest Expenses – Operating expenses (“Agreement”) during 1999 with the project manager/partner Residence by Hyatt, a 310-unit supported-living community in expenses due to lease-up at Colony Woods ($353,000) and the for the Residential Group decreased by $1,950,000, or 3.9%, in to restructure the partnership agreement and reposition the Yonkers, New York ($475,000), the acquisition of an additional three Cleveland properties ($316,000), and the1998 acquisitions 2000, to $48,087,000 from $50,037,000 in 1999. The decrease project. In accordance with the Agreement, the Company has 49% interest in Providence at Palm Harbor (formerly Boot of Woodlake Apartments ($1,356,000) and Coppertree ($355,000). in operating expenses was primarily due to the dispositions of agreed to forgo its fee and interest income to which it was Ranch), a 236-unit apartment community in Tampa, Florida These increases were partially offset by a decrease due to the Studio Colony ($1,937,000) and Highlands ($1,745,000), and entitled in order to preserve cash flow available to meet the ($1,169,000), the lease-up of Colony Woods, an adaptive re-use sale in 1998 of Trolley Plaza ($1,135,000). Interest expense the full restoration in 2000 of the reserved Millender Center note project’s obligations. 396-unit project in Bellevue, Washington ($678,000) and the decreased by $895,000 in 1999, or 3.3%, to $26,447,000 from receivable ($10,275,000). These decreases are partially offset Revenues for the Land Group decreased by $11,255,000 collection of a fully-reserved note receivable from a syndicated $27,342,000 in 1998. This decrease is primarily the result of an by the acquisitions of Mount Vernon Square ($5,186,000), to $41,356,000 in 1999 from $52,611,000 in 1998. This affordable housing apartment property ($2,057,000). These increase in capitalized interest on funded development projects. Forest Trace ($3,272,000) and Burton Place ($1,924,000), and decrease is a result of forgiveness of interest income relating to increases were partially offset by the dispositions of Studio Colony, Net Operating Income – Residential Group NOI for the opening of Chestnut Grove ($986,000). Interest expense Granite ($4,001,000) discussed above and decreased revenues a 450-unit building in Los Angeles, California ($5,025,000), 2000 was $93,055,000, compared to $84,727,000 in 1999, a increased by $10,144,000 in 2000, or 75.6%, to $23,555,000 at: various other projects owned by Granite (approximately Highlands, a 556-unit apartment building in Grand Terrace, 9.8% increase. NOI increased 3.6% from 1999 to 2000 and from $13,411,000 in 1999. This increase is primarily due to $4,000,000); Greens at Birkdale Village, a 220-acre mixed-use California ($3,961,000) and the Toscana litigation settlement 5.0% from 1998 to 1999 for Residential Group properties in property acquisitions partially offset by property dispositions. community in Huntersville, North Carolina ($2,791,000); proceeds ($4,500,000) received in 1999 which did not recur. operation throughout both years. Including the expected NOI Operating expenses for the Residential Group increased Chestnut Lakes, an 85-acre planned-unit development in North Revenues for the Residential Group increased by for the twelve months after stabilization for Residential Group by $6,968,000, or 16.2%, in 1999, to $50,037,000 from Ridgeville, Ohio ($3,151,000); and Eaton Estate ($848,000). $19,765,000, or 14.2%, in 1999 to $158,768,000 from properties that were opened, expanded or acquired in 2000, $43,069,000 in 1998. The increase in operating expenses was Revenues also decreased approximately $10,000,000 in 1999 $139,003,000 in 1998.This increase was primarily attributable to NOI would be approximately $122,000,000 for 2000. primarily due to the reduction in a reserve for collection of a compared to 1998 as a result of a cumulative adjustment to proceeds from the Toscana litigation settlement ($4,500,000), the note receivable in 1998 from Millender Center ($3,000,000), properly reflect the Company’s share of the revenues of Seven recognition of development and other fees of $5,722,000 relating Residential Group - Full Consolidation additional costs associated with the generation of increased Hills pursuant to the Agreement discussed above. These decreases to several projects including: The Grand, a 546-unit luxury Revenues – Revenues for the Residential Group increased development fees ($999,000), increased operating expenses were partially offset by increases in revenues at Westwood Lakes, high-rise apartment building in North Bethesda, Maryland; by $11,695,000, or 9.6%, in 2000 to $134,116,000 from for mature properties (approximately $2,400,000), increased 475-acres, 657 lots located in Tampa, Florida ($5,960,000); The Drake, a 280-unit high-rise building in Philadelphia, $122,421,000 in1999. This increase was primarily attributable to expenses due to lease-up at Colony Woods ($353,000) and the Silver Lakes ($2,724,000); andCanterberry Crossing ($4,649,000). Pennsylvania; Enclave, a 637-unit apartment complex in San the acquisitions of MountVernon Square, a1,387-unit community 1998 acquisition of Woodlake Apartments ($1,356,000). These Sales of land and related gross margins vary from period Jose, California; and 101 San Fernando, a 323-unit apartment in Alexandria, Virginia ($15,222,000), Forest Trace, a 324-unit increases were partially offset by a decrease due to the sale in to period, depending on management’s decisions regarding the complex also in San Jose, California, a full year of operations supported-living community in Lauderhill, Florida ($6,006,000), 1998 of Trolley Plaza ($1,135,000). Interest expense decreased disposition of significant land holdings. for the 1998 acquisitions of the 534-unit Woodlake Apartments Burton Place, a 200-unit apartment community in Southfield, by $153,000 in 1999, or 1.1%, to $13,411,000 from Operating and Interest Expenses – The fluctuation in in Silver Spring, Maryland ($2,663,000), an additional 20% Michigan ($995,000), Providence at Palm Harbor (formerly Boot $13,564,000 in 1998. This decrease is primarily the result of an Land Group operating expenses primarily reflects costs associated ownership in Studio Colony, ($934,000) and a 50% interest in Ranch), a 236-unit apartment community in Tampa, Florida increase in capitalized interest on funded development projects. with land sales volume in each period. Operating expenses the 342-unit complex Coppertree in Mayfield Heights, Ohio ($281,000), the lease-up of Colony Woods, an adaptive re-use increased by $17,293,000 in 2000 to $57,025,000 from ($520,000). In addition, revenues increased at Bayside Village, 396-unit project in Bellevue, Washington ($678,000), the Land Group - Pro-Rata Consolidation $39,732,000 in 1999. This increase is primarily the result of an an 862-unit complex in San Francisco, California ($770,000), opening of Chestnut Grove, a 79-unit supported- living Beginning in 2000, the Central Station project in Chicago, increase in costs relating to increased land sales at: Canterberry the Company’s supported-living properties in Michigan, New community in Plainview, New York ($1,173,000) and the Illinois, which was previously reported in the Commercial Crossing ($1,228,000), Central Station ($6,342,000), Caldwell Jersey, and Maryland ($1,182,000), an increase in units in three collection of a fully-reserved note receivable from a syndicated Group, and the Stapleton project in Denver, Colorado, which Road ($3,090,000), and Quincy Avenue ($1,165,000). These Cleveland properties ($796,000) and as a result of the lease-up affordable housing apartment property ($2,057,000). These was previously reported in the Residential Group, are now increases were partially offset by a decrease at The Cascades of Colony Woods ($1,872,000). These increases were partially increases were partially offset by the dispositions of Studio both being reported in the Land Group. ($731,000). Operating expenses were also lower in 1999 by
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 62 63 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
$4,729,000 due to certain valuation allowances relating to and 657 lots located in Tampa, Florida ($5,960,000) and Senior Notes and the Revolving Credit Agreement that has of $450,000 of nonrecourse debt related to Plaza at Robinson Land Group investments that did not recur in 2000. These Silver Lakes ($2,839,000). not been allocated to a strategic business unit (see “Financial Town Centre in Pittsburgh, Pennsylvania. The 1998 accruals are reviewed periodically and adjusted to reflect Sales of land and related gross margins vary from period Condition and Liquidity”). extraordinary gain represents extinguishment of nonrecourse management’s estimated value of the Land Group’s portfolio. to period, depending on management’s decisions regarding debt related to Terminal Tower ($13,947,000) and Skylight Operating expenses decreased by $800,000 in 1999 to the disposition of significant land holdings. Other Transactions Office Tower ($3,619,000) both located in Cleveland, Ohio; $39,732,000 from $40,532,000 in 1998. This decrease is Operating and Interest Expenses – The fluctuation in Provision for Decline in Real Estate – During 2000, Courtland ($7,381,000), a regional mall in Flint, Michigan; primarily the result of a decrease in costs related to lower sales Land Group operating expenses primarily reflects costs associated the Company recorded a Provision for Decline in Real Estate One Franklintown ($1,350,000), an apartment complex in volume at various projects owned by Granite ($1,666,000), with land sales volume in each period. Operating expenses of $1,231,000 related to the write-down to estimated fair value Philadelphia, Pennsylvania; Providence at Palm Harbor Greens at Birkdale Village ($2,372,000), Chestnut Lakes increased by $7,717,000 in 2000 to $19,560,000 from less cost to sell of Commercial Group’s investment in Canton ($187,000); an apartment community in Tampa, Florida; ($2,575,000) and Eaton Estate ($696,000). Operating expenses $11,843,000 in 1999. This increase is primarily the result of an Centre Mall in Canton, Ohio. During 1999, the Company and Trolley Plaza ($552,000). also decreased approximately $3,500,000 in 1999 compared increase in cost of sales relating to increased land sales activity recorded a Provision for Decline in Real Estate of $5,062,000 Income Taxes – Income tax expense totaled $22,312,000, to 1998 as a result of a cumulative adjustment to properly at Caldwell Road ($2,273,000) and Quincy Avenue ($1,165,000). related to the write-down to estimated net realizable value of $24,319,000, and $27,674,000 in 2000, 1999, and 1998, reflect the Company’s share of the revenues of Seven Hills These increases were partially offset by a decrease at The the Land Group’s investment in Granite. The Company, at that respectively. pursuant to the Agreement discussed above. These decreases Cascades ($731,000). time, owned a 43.75% interest in Granite as a result of a capital The Company recorded a net deferred income tax were partially offset by increases in operating expenses related Operating expenses decreased by $21,000 in 1999 to contribution of land that was classified as Investments in and expense of $11,986,000 for the year ended January 31, 2001 to increased sales volume at Westwood Lakes ($4,157,000), $11,843,000 from $11,864,000 in 1998. Interest expense Advances to Real Estate Affiliates on the Company’s consolidated comprised of net deferred income tax expense of $35,575,000 Seven Hills ($3,500,000), Silver Lakes ($2,903,000) and decreased by $5,244,000 in 2000 to $1,901,000 from balance sheet. Granite owns an interest in several raw land incurred in the normal course of business offset by a deferred Canterberry Crossing ($4,155,000). Operating expenses also $7,145,000 in 1999. Interest expense increased by $6,043,000 developments held for resale, the most significant of which is income tax benefit of $23,589,000. This benefit represented a decreased for 1999 by $4,729,000 due to certain valuation in 1999 to $7,145,000 from $1,102,000 in 1998. Interest a one-third interest in Seven Hills in Henderson, Nevada. The reversal of a portion of a deferred tax liability recorded in 1994 allowances relating to Land Group investments. These accruals expense varies from year to year depending on the level of projection of costs to complete the project indicated that the relating to the cancellation of debt income of Park Labrea are reviewed periodically and adjusted to reflect management’s interest-bearing debt within the Land Group. Company may not recover its capital investment in Granite. Towers, a residential property which was sold that same year. estimated value of the Land Group’s portfolio. Gain on Disposition of Properties and Other In certain situations that applied to Park Labrea Towers Interest expense decreased by $2,644,000 in 2000 to Lumber Trading Group Investments – The following table summarizes the gain (loss) in 1994, the Internal Revenue Code allowed for the deferral $4,726,000 from $7,370,000 in 1999. Interest expense Revenues – Revenues for the Lumber Trading Group on disposition of properties and other investments by year. of cancellation of debt income. As a result of certain steps increased by $556,000 in 1999 to $7,370,000 from $6,814,000 decreased by $43,930,000 in 2000 to $105,427,000 from Plus taken by the Company in the respective periods above, the Less Unconsolidated in 1998. Interest expense varies from year to year depending $149,357,000 in 1999. The decrease was due primarily to Full Minority Investments Pro-Rata deferred income will never be recognized for tax purposes on the level of interest-bearing debt within the Land Group. lower volume and trading margins caused by a significant Years Ended January 31, Consolidation Interest at Pro-Rata Consolidationand, accordingly, the related deferred tax liability was reversed. decline in lumber prices due to overproduction and moderate (in thousands) At January 31, 2001, the Company had a net operating reductions of demand in the market. 2001 Land Group - Full Consolidation Studio Colony* . . . . . $ 25,726 $ – $ – $ 25,726loss carryforward for tax purposes of $10,026,000 (generated Revenues – Revenues for the Land Group increased by Revenues for the Lumber Trading Group increased by Highlands ...... 599 – – 599primarily from the impact of depreciation expense from real $11,084,000 to $24,326,000 in 2000 from $13,242,000 in $26,032,000 in 1999 to $149,357,000 from $123,325,000 Tucson Place*...... 8,734 – – 8,734estate properties on the Company’s net earnings) that will expire 1999. This increase is a result of increases at Caldwell Road, a in 1998. The increase was due primarily to increased lumber Canton Centre Mall*. . (436) – – (436)in the year ending January 31, 2011, general business credit 418-acre mixed-use community in Charlotte, North Carolina trading margins of $26,159,000 for 1999 compared to 1998. Gallery at Metrotech . . (6,868) (250) – (6,618) Available-for-sale carryovers of $1,582,000 which will expire in the years ending ($3,573,000), a land sale at Quincy Avenue in Cleveland, Ohio Operating and Interest Expenses – Operating expenses January 31, 2004 through January 31, 2015 and alternative ($2,750,000) and the increase in equity in unconsolidated for the Lumber Trading Group decreased by $33,277,000 in equity securities . . . 20,654 – 2,359 23,013minimum tax (“AMT”) carryforward of $31,289,000 that is entities ($9,819,000) primarily as a result of the 1999 loss at 2000 to $98,534,000 from $131,811,000 in 1999. The decrease Total ...... $ 48,409 $ (250) $ 2,359 $ 51,018available until used to reduce Federal tax to the AMT amount. Granite Development Partners L.P. (“Granite”) which did not reflected lower variable expenses due to decreased volume and The Company’s policy is to consider a variety of tax-saving trading margins. Interest expense increased $296,000 in 2000 2000 recur in 2000. These increases were partially offset by decreases Rolling Acres Mall* . . . $ 13,861 $ 2,738 $ – $ 11,123strategies when evaluating its future tax position. in land sale activity at The Cascades in Brooklyn, Ohio to $5,584,000 from $5,288,000 in 1999. EBDT – Earnings Before Depreciation, Amortization Operating expenses for the Lumber Trading Group Other...... – – (411) (411) ($1,254,000) and Silver Lakes ($2,839,000), 2,400 acres and Total ...... $ 13,861 $ 2,738 $ (411) $ 10,712and Deferred Taxes (“EBDT”) consists of earnings before 5,108 units located in Fort Lauderdale, Florida. increased by $19,813,000 in 1999 to $131,811,000 from extraordinary gain, excluding the following items: i) provision During 1999, the Company was informed by the project $111,998,000 in 1998. The increase reflected higher variable 1999 for decline in real estate; ii) gain (loss) on disposition of expenses due to increased lumber trading margins compared Summit Park Mall* . . . $ 13,897 $ – $ – $ 13,897 manager/partner of costs that would be incurred in excess of San Vicente* ...... – – 10,403 10,403properties and other investments; iii) beginning with the year budget to complete Seven Hills. At that point in time, the to 1998. Interest expense increased $26,000 in 1999 to ended January 31, 2001, the adjustment to recognize rental $5,288,000 from $5,262,000 in 1998. Courtyard ...... – – 622 622 Company owned a 14.57% interest in Seven Hills through its Trolley Plaza*...... 4,941 – – 4,941revenues using the straight-line method; and iv) noncash charges investment in Granite (see “Other Transactions - Provision for from Forest City Rental Properties Corporation for depreciation, Corporate Activities Other ...... 694 – – 694 Decline in Real Estate). As a result of this deterioration in amortization and deferred income taxes. The provision for Revenues – Corporate Activities’ revenues decreased Total...... $ 19,532 $ – $ 11,025 $ 30,557 Seven Hills’ margins, the Company entered into an agreement $58,000 in 2000 to $540,000 from $598,000 in 1999 and decline in real estate is excluded from EBDT because it is a (“Agreement”) during 1999 with the project manager/partner *Tax-deferred exchange decreased $848,000 in 1999 to $598,000 from $1,446,000 in non-cash item that varies from year to year based on factors to restructure the partnership agreement and reposition the 1998. Corporate Activities’ revenues consist primarily of interest unrelated to the Company’s overall financial performance. The project. In accordance with the Agreement, the Company has Studio Colony and Highlands are apartment communities income from investments and loans made by the Company Company excludes gain (loss) on the disposition of properties agreed to forgo its fee and interest income to which it was in California. Tucson Place, Canton Centre Mall and Gallery at and vary from year to year depending on interest rates and from EBDT because it develops and acquires properties for entitled in order to preserve cash flow available to meet the Metrotech are shopping centers in Arizona, Ohio and New York, the amount of loans outstanding. long-term investment, not short-term trading gains. As a result, project’s obligations. respectively. Rolling Acres Mall is located in Ohio. Summit Operating and Interest Expenses – Operating expenses the Company views dispositions of properties and other Revenues for the Land Group decreased by $11,145,000 Park Mall and Courtyard are shopping centers in New York for Corporate Activities increased $673,000 in 2000 to investments other than commercial land and airrights or land to $13,242,000 in 1999 from $24,387,000 in 1998. This and Michigan, respectively. San Vicente is an office building in held by the Land Group as nonrecurring items. Extraordinary $13,459,000 from $12,786,000 in 1999 and increased $20,000 California and Trolley Plaza is an apartment community in decrease is a result of decreases in land sale activity at Chestnut in 1999 to $12,786,000 from $12,766,000 in 1998. The items are generally the result of the restructuring of nonrecourse Lakes, an 85-acre planned-unit development in North Ridgeville, Michigan. debt obligations and are not considered to be a component of increases represent general corporate expenses. Interest expense Extraordinary Gain – There was no extraordinary gain Ohio ($3,151,000) and a decrease in equity in unconsolidated increased $6,231,000 in 2000 to $32,489,000 from $26,258,000 the Company’s operating results. The adjustment to recognized entities ($18,504,000) primarily from Granite ($11,166,000) in 2000. Extraordinary gain, net of tax, totaled $272,000 and rental revenues and rental expenses on the straight-line method in 1999 and increased $7,007,000 in 1999 to $26,258,000 $16,343,000 in 1999 and 1998, respectively, representing and Central Station ($6,157,000). These decreases were partially from $19,251,000 in 1998. Corporate Activities’ interest is excluded because it is management’s opinion that rental offset by increases in revenues at Westwood Lakes, 475-acres extinguishment of nonrecourse debt and related accrued interest. revenues and expenses should be recognized when due from expense consists primarily of interest expense on the 8.50% The 1999 extraordinary gain was the result of the extinguishment
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 64 65 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
the tenants or due to the landlord. The Company excludes The revolving credit facility provides, among other things, The Company has purchased London Interbank Offered In September 2000, SFAS No. 140, “Accounting for Transfers depreciation and amortization expense related to real estate for: 1) interest rates of 2.125% over LIBOR or 1/2% over the Rate (“LIBOR”) interest rate caps for the mortgage debt and Servicing of Financial Assets and Extinguishments of operations from EBDT because they are non-cash items and prime rate; 2) maintenance of debt service coverage ratios and portfolio as follows: Liabilities”,was issued to amend the provisions of SFAS No. 125. specified levels of net worth and cash flow (as defined); and the Company believes the values of its properties, in general, Full Consolidation Pro-Rata Consolidation The new standard is generally effective for all periods after have appreciated, over time, in excess of their original cost. 3) restriction on dividend payments. Prior to August 9, 2000, Average Average March 31, 2001. The Company believes the provisions of Deferred income taxes from real estate operations are excluded the revolving credit facility had similar terms and a December Coverage Amount RateAmount Rate SFAS No.140 will have no material impact on the accounting because they are non-cash items. The Company’s EBDT may 10, 2001 maturity date. (dollars in thousands) treatment and disclosures currently being applied under SFAS The Company has purchased LIBOR interest rate caps 02/01/01 - 01/31/02 . . . . $605,780 7.11% $ 590,568 7.03% not be directly comparable to similarly-titled measures reported 02/01/02 - 01/31/03 . . . . 568,574 7.68% 586,210 7.76% No. 125. At January 31, 2001 and 2000, the financial institution by other companies. at an average rate of 6.82% for 2001 and 7.75% for 2002 at 02/01/03 - 01/31/04 . . . . 391,800 7.75% 389,699 7.87% held an interest of $43,000,000 and $55,000,000, respectively, notional amounts of $187,484,000 and $54,161,000, respectively. 02/01/04 - 01/31/05 . . . . 211,800 8.00% 285,337 8.00% in the pool of receivables. Sales of accounts receivable have Senior Notes – On March 16, 1998, the Company issued 02/01/05 - 01/31/06 . . . . 177,300 8.00% 177,300 8.00% averaged $57,900,000 and $63,400,000 per month during FINANCIAL CONDITION AND LIQUIDITY $200,000,000 in 8.50% senior notes due March 15, 2008 in a the fiscal year ended January 31, 2001 and 2000, respectively. The Company believes that its sources of liquidity and public offering. Accrued interest on the senior notes is payable The interest rate caps highlighted in the previous table These credit facilities are without recourse to the capital are adequate. The Company’s principal sources of funds semiannually on March 15 and September 15. The senior notes were purchased to mitigate short-term variable interest rate Company. The Company believes that the amounts available are cash provided by operations, the revolving credit facility and are unsecured senior obligations of the Company; however, risk. The Company currently intends to convert a significant under these credit facilities will be sufficient to meet the Lumber refinancings of existing properties. The Company’s principal use they are subordinated to all existing and future indebtedness portion of its committed variable-rate debt to fixed-rate debt. Trading Group’s liquidity needs. of funds are the financing of development and acquisitions of and other liabilities of the Company’s subsidiaries including In order to protect against significant increases in long-term real estate projects, capital expenditures for its existing portfolio borrowings under the revolving credit facility. The indenture interest rates, the Company has purchased Treasury Options Cash Flows-Pro-Rata Consolidation and payments on nonrecourse mortgage debt on real estate. contains covenants providing, among other things, limitations as follows: Net cash provided by operating activities was Revolving Credit Facility – At January 31, 2001 and on incurring additional debt and payment of dividends. $162,759,000, $124,615,000 and $105,705,000 for 2000, Subordinated Debt – In November 2000, the Company Full Consolidation Pro-Rata Consolidation 2000, the Company had $189,500,000 and $167,000,000, Weighted Remaining Weighted Remaining 1999 and 1998, respectively. The increase in net cash provided respectively, outstanding under its revolving credit facility. On issued $20,400,000 of redevelopment bonds in a private Average Years at Average Years at Term Amount Rate 1/31/01 Amount Rate 1/31/01 by operating activities in 2000 from 1999 is the result of an August 9, 2000, the Company increased its revolving credit placement. The proceeds were used to repay nonrecourse debt (dollars in thousands) increase of $45,319,000 in rents and revenues received primarily facility to $265,000,000 from $200,000,000 with nine that was issued to finance an apartment facility in Philadelphia, attributable to an increase in operating revenues of $58,450,000 Pennsylvania. The 8.25% bonds are due September 15, 2010. 10 years $123,100 7.00% 0.21 $ 86,890 7.00% 0.21 participating banks. The Company’s revolving credit facility and a decrease in notes and accounts receivable of $11,702,000, Interest is payable semiannually on each March 15 and 10 years 321,800 6.92% 1.35 210,262 6.93% 1.38 matures March 31, 2003, unless extended, and allows for up a decrease of $17,652,000 in operating expenditures (primarily to a combined amount of $30,000,000 in outstanding letters September 15 beginning March 15, 2001. This debt is unsecured from the Lumber Trading Group) and an increase in land of credit or surety bonds ($7,222,000 and $14,675,000, and subordinated to the senior notes and the revolving credit At January 31, 2001, a 100 basis point increase in taxable sales of $21,493,000, partially offset by an increase in interest respectively, at January 31, 2001). The outstanding letters of facility. Financial covenants associated with this debt are similar interest rates would increase the annual pre-tax interest cost of paid of $27,066,000 and an increase of $19,254,000 in land credit reduce the credit available to the Company. Annually, to that of the senior notes. the Company’s taxable variable-rate debt by approximately within 60 days after January 31, the revolving credit facility Lumber Trading Group – The Lumber Trading Group $3,300,000. The effect of such an increase is reduced due to development expenditures. may be extended for one year with unanimous consent of the is financed separately from the rest of the Company’s strategic the average 7.11% LIBOR caps that are currently in place. The increase in net cash provided by operating activities participating banks. At its maturity date, the outstanding business units. The financing obligations of Lumber Trading Although tax-exempt rates generally increase in an amount in 1999 from 1998 is the result of an increase of $154,466,000 revolving credit loans, if any, may be converted by the Company Group are without recourse to the Company. Accordingly, the that is smaller than corresponding changes in taxable interest in rents and other revenues received principally comprised of an to a four-year term loan. The revolving credit available is liquidity of Lumber Trading Group is discussed separately below rates, a 100 basis point increase in tax-exempt interest rates increase in consolidated revenues of $96,422,000 and a decrease reduced quarterly by $2,500,000, beginning October 1, 2000. under “Lumber Trading Group Liquidity.” would increase the annual pre-tax interest cost of the Company’s in notes and accounts receivable of $41,427,000 (resulting tax-exempt variable-rate debt by approximately $500,000. from a decrease of $2,867,000 in 1999 versus an increase of The Company estimates the fair value of its hedging $38,560,000 in 1998) primarily from Lumber Trading Group, Mortgage Refinancings instruments based on interest rate market pricing models. At and a decrease of $8,152,000 in land development expenditures. The Company is actively working to extend the maturities and/or refinance the nonrecourse debt that is coming due in 2001 January 31, 2001, the carrying amount of the Company’s These increases were partially offset by a $119,786,000 increase and 2002, generally pursuing long-term fixed-rate debt. During the year ended January 31, 2001, the Company completed the hedging instruments was $17,000,000 compared to an in expenditures for operating expenses due to an increase in following financings: Full Pro-Rata estimated fair value of $2,000,000. accounts payable of $31,011,000, an increase in Lumber Purpose of Financing Consolidation Consolidation Trading Group’s inventory of $21,542,000 and a $62,217,000 (in thousands) Lumber Trading Group Liquidity increase in operating expenditures, an increase of $14,323,000 Acquisitions...... $ 138,919 $ 153,750 Lumber Trading Group is separately financed with two in interest paid, and a decrease of $9,599,000 in proceeds Refinancing ...... 376,765 312,549 revolving lines of credit and an asset securitization facility. from land sales. Loan extension ...... 273,476 210,114 At January 31, 2001, Lumber Trading Group’s two Net cash used in investing activities totaled $471,646,000, New development projects ...... 214,152 238,708 revolving lines of credit totaled $87,000,000, expiring June 30, $405,680,000, and $518,910,000 for 2000, 1999 and 1998, $ 1,003,312 $ 915,121 2001. These credit lines are secured by the assets of the Lumber respectively. Capital expenditures, other than development Reduction of mortgage debt due to property dispositions ...... $ 188,545 $ 173,120 Trading Group and are used to finance its working capital and acquisition activities, totaled $29,156,000, $37,822,000, Interest Rate Exposure needs. At January 31, 2001, no borrowings were outstanding and $44,615,000 (including both recurring and investment At January 31, 2001, the composition of nonrecourse mortgage debt was as follows: under these revolving lines of credit. capital expenditures) in 2000, 1999, and 1998, respectively, Less Plus Unconsolidated In July 1999, the Lumber Trading Group entered into a and were financed with cash provided from operating activities. Full Minority Investments Pro-Rata Consolidation Rate(1) Interest at Pro-Rata Consolidation(1) Rate three-year agreement (The “Agreement”) under which it is The Company invested $533,537,000, $346,315,000 and (dollars in thousands) selling an undivided interest in a pool of receivables up to a $415,728,000 in acquisition and development of real estate Fixed ...... $ 1,711,574 7.53% $ 343,626 $ 472,811 $ 1,840,759 7.57% maximum of $102,000,000 to a large financial institution (the projects in 2000, 1999 and 1998, respectively. These Variable “Financial Institution”). The agreement expires in July 2002. expenditures were financed with approximately $337,000,000, Taxable (2) ...... 605,796 8.73% 128,287 143,223 620,732 8.59% The Company has recorded such transactions under the terms $194,000,000, and $203,000,000 in new nonrecourse Tax-Exempt ...... 54,150 6.20% 5,638 46,093 94,605 5.36% of SFAS No. 125, “Accounting for Transfers of Servicing of mortgage indebtedness incurred in 2000, 1999 and 1998, UDAG ...... 68,392 1.61% 10,463 11,892 69,821 2.65% Financial Assets and Extinguishments of Liabilities.” Sales under respectively, cash provided from operations, borrowings under $ 2,439,912 7.65% $ 488,014 $ 674,019 $ 2,625,917 7.61% the agreement are nonrecourse to the Company. The Company the long-term credit facility and, in 2000, proceeds from the (1) The weighted average interest rates shown above include both the base index and the lender margin. bears no risk regarding the collectibility of the accounts disposition of properties and other investments. (2) The $605,796 at full consolidation and $620,732 at pro-rata consolidation of taxable variable rate debt is protected with LIBOR caps as described below. These caps receivable once sold, and cannot modify the pool of receivables. protect the current debt outstanding as well as the anticipated increase in debt outstanding for projects currently under development or anticipated to be under development during the year ending January 31, 2002.
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 66 67 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
In 2000, 1999, and 1998, $133,454,000, $-0- and increase in book overdrafts of $19,446,000 (representing checks Refinancings”). In 1998, proceeds were received from the Net cash provided by financing activities for 1998 $33,345,000 was collected in proceeds from the disposition of issued but not yet paid). In addition, the Company reported a disposition of the Company’s interest in three apartment reflected a reduction of $29,118,000 in restricted cash primarily real estate properties and other investments. In 2000, proceeds net increase of $18,969,000 in notes payable primarily from buildings in Houston, Texas. related to the financing of Enclave apartment project in San from the sale of Studio Colony, Highlands, Tucson Place, and two New York City hotels under construction payable to the The Company invested $131,063,000, $63,530,000 Jose, California and the sale of the mortgage servicing division the sale of available-for-sale equity securities were used to hotel management company, payment of deferred financing and $77,993,000 in investments in and advances to affiliates of Forest City Capital Corp., net proceeds from the issuance reduce total mortgage debt by $173,120,000 (see “Mortgage costs of $6,021,000 and payment of $5,399,000 of dividends. in 2000, 1999 and 1998, respectively. The 2000 investments of senior notes in March 1998 of $193,703,000, which were Refinancings”). In 1998, proceeds were received from the Net cash provided by financing activities for 1998 were primarily related to New York City area urban retail initially used to repay $114,000,000 of the long-term credit disposition of San Vicente, an office building in Brentwood, reflected a reduction of $26,579,000 in restricted cash development ($18,754,000), and two commercial shopping facility, and an increase in book overdrafts of $5,382,000 California,Courtyard, a strip shopping center in Flint, Michigan, primarily related to the financing of Enclave and the sale of centers: Mall at Stonecrest in Atlanta, Georgia ($8,648,000) and (representing checks issued but not yet paid). In addition, the and the Company’s interest in three apartment buildings in the mortgage servicing division of Forest City Capital Corp., Mall at Robinson in Pittsburgh, Pennsylvania ($6,896,000) and Company reported a net decrease of $782,000 in notes Houston, Texas. net proceeds from the issuance of senior notes in March unconsolidated entities of $88,656,000. The 1999 investments payable, payment of deferred financing costs of $16,072,000, The Company invested $42,407,000, $21,543,000, and 1998 of $193,703,000, which were initially used to repay were primarily in the following Residential Group projects: The minority interest of $26,116,000 and payment of $4,497,000 $91,912,000 in investments in and advances to affiliates in $114,000,000 of the long-term credit facility, and an increase Grand ($15,200,000), a 546-unit luxury high-rise apartment of dividends. 2000, 1999 and 1998, respectively. The 2000 investments were in book overdrafts of $8,838,000 (representing checks issued building in North Bethesda, Maryland; Grand Lowry Lofts primarily related to New York City area urban retail development but not yet paid). In addition, the Company reported a net ($9,600,000), 261 units under construction in Denver, Colorado; ($18,754,000), and two commercial shopping centers: Mall increase of $9,110,000 in notes payable primarily from the and American Cigar Co. (formerly Philip Morris -$10,300,000), a SHELF REGISTRATION at Stonecrest in Atlanta, Georgia ($8,648,000) and Mall at 101 San Fernando, payment of deferred financing costs of 171-unit apartment renovation project in Richmond, Virginia. On December 3, 1997, the Company filed a shelf Robinson in Pittsburgh, Pennsylvania ($6,896,000). The 1999 $16,565,000 and payment of $4,497,000 of dividends. In addition, investments of $10,000,000 were made on behalf registration statement with the Securities and Exchange investments were primarily in the following syndicated of the Company’s partners during 1999 for New York City area Commission for the potential offering on a delayed basis of Residential Group projects:The Grand ($15,200,000), a 546- Cash Flows - Full Consolidation urban development projects, and contributions were made to up to $250,000,000 in debt or equity securities. This unit luxury high-rise apartment building in North Bethesda, Net cash provided by operating activities was unconsolidated entities of $41,987,000. During 1999, a return registration was in addition to the shelf registration filed Maryland that opened in February 1999; Grand Lowry Lofts $206,313,000, $166,056,000 and $112,385,000 for 2000, on investment of $23,270,000 was received on 101 San March 4, 1997 of up to $250,000,000 in debt or equity ($9,600,000), 261 units under construction in Denver, 1999, and 1998, respectively. The increase in net cash provided Fernando in San Jose, California. The 1998 investments were securities. The Company has sold approximately $82,000,000 Colorado; and American Cigar Co. (formerly Philip Morris- by operating activities in 2000 from 1999 is the result of an primarily in the following syndicated Residential Group projects: through a common equity offering completed on May 20, $10,300,000), a 171-unit apartment renovation project in increase of $63,154,000 in rents and revenues received primarily 101 San Fernando ($31,100,000); Enclave ($16,300,000) in 1997 and $200,000,000 through a debt offering completed Richmond, Virginia. In addition, investments of $10,000,000 attributable to an increase in operating revenues of $75,563,000, San Jose, California; The Grand ($7,800,000); American Cigar on March 16, 1998. The Company currently has available were made on behalf of the Company’s partners during 1999 a decrease of $15,418,000 in operating expenditures (primarily Co. (formerly Philip Morris-$4,900,000) and The Drake approximately $218,000,000 on the second shelf registration for New York City area urban development projects. During from the Lumber Trading Group), an increase in land sales ($5,200,000). In addition, investments were made during 1998 statement of debt, equity or any combination thereof. 1999, a return on investment of $23,270,000 was received on of $7,450,000 and an increase in cash distributions from on behalf of the Company’s partner for the following projects: $11,772,000 for New York City area urban development; 101 San Fernando in San Jose, California. The 1998 investments operations of unconsolidated entities of $11,127,000, partially DIVIDENDS were primarily in the following syndicated Residential Group offset by an increase in interest paid of $48,056,000 and an $5,181,000 for Promenade in Temecula, a regional mall in projects:101 San Fernando ($31,100,000); Enclave ($16,300,000) increase of $8,836,000 in land development expenditures. Temecula, California; $5,400,000 for Mall at Robinson and On June 7, 2000, the Board of Directors voted to in San Jose, California; The Grand ($7,800,000); American The increase in net cash provided by operating activities $6,000,000 in Land Group joint ventures. increase the 2000 quarterly dividend to $.06 per share on Cigar Co. (formerly Philip Morris-$4,900,000) and The Drake in 1999 from 1998 is the result of an increase of $148,600,000 Net cash provided by financing activities totaled both Class A and Class B Common Stock, representing a ($5,200,000). In addition, investments were made during 1998 in rents and other revenues received principally comprised of $292,891,000, $379,664,000 and $450,781,000 in 2000, 1999 20% annual increase over the previous quarterly dividend. on behalf of the Company’s partner for the following projects: an increase in revenues of $89,088,000 and a decrease in notes and 1998, respectively. The Company’s refinancing of mortgage The first, second, third and fourth 2000 quarterly indebtedness is discussed above in “Mortgage Refinancings” $11,772,000 for New York City area urban development; and accounts receivable of $41,987,000 (resulting from a dividends of $.05, $.06, $.06 and $.06, respectively, per share and borrowings under new nonrecourse mortgage indebtedness $5,181,000 for Promenade in Temecula, a regional mall in decrease of $146,000 in 1999 versus an increase of $41,841,000 on shares of both Class A and Class B Common Stock were for acquisition and development activities is included in the Temecula, California; $5,400,000 for Mall at Robinson and in 1998) primarily from Lumber Trading Group, an increase paid June 15, 2000, September 15, 2000, December 15, 2000 preceding paragraph discussing net cash used in investing $6,000,000 in Land Group joint ventures. in land sales of $6,335,000, an increase in cash distributions and March 15, 2001, respectively. activities. Net cash provided by financing activities totaled from operations of unconsolidated entities of $21,461,000 and The first 2001 quarterly dividend of $.06 per share Net cash provided by financing activities for 2000 $293,655,000, $299,631,000 and $436,980,000 in 2000, a decrease of $2,639,000 in land development expenditures. on both Class A and Class B Common Stock was declared reflected a decrease in book overdrafts of $30,993,000 These increases were partially offset by a $108,297,000 on March 9, 2001 and will be paid on June 15, 2001 to 1999, and 1998, respectively. The Company’s refinancing of (representing checks issued but not yet paid), an increase in increase in expenditures for operating expenses (primarily due shareholders of record at the close of business on June 1, 2001. mortgage indebtedness is discussed above in “Mortgage minority interest of $2,084,000, an increase in borrowings to an increase in accounts payable of $30,114,000, an increase Refinancings” and borrowings under new nonrecourse mortgage of subordinated debt of $20,400,000, a net decrease of in Lumber Trading Group’s inventory of $21,542,000 and a indebtedness for acquisition and development activities is $17,279,000 in notes payable (primarily comprised of a LEGAL PROCEEDINGS $59,874,000 increase in operating expenses) and an increase included in the preceding paragraph discussing net cash used reduction in borrowings outstanding against the line of credit In September 1999, a complaint was filed in state court in investing activities. of $17,067,000 in interest paid. in the Lumber Trading Group), payment of deferred financing in Los Angeles County against Forest City Enterprises, Inc., Net cash provided by financing activities for 2000 Net cash used in investing activities totaled $519,021,000, costs of $30,682,000 and payments of $6,608,000 of dividends Forest City California Residential Development, Inc., Forest reflected a decrease in book overdrafts of $30,990,000 $528,667,000, and $537,994,000 for 2000, 1999, and 1998, to shareholders. City Residential West, Inc. and others. Plaintiffs were 63 (representing checks issued but not yet paid), an increase respectively. Capital expenditures totaled $518,709,000, Net cash provided by financing activities for 1999 construction workers who claim to have been exposed to in borrowings of subordinated debt of $20,400,000, a net $465,137,000 and $461,146,000 in 2000, 1999 and 1998, reflected an increase of $30,442,000 in net restricted cash asbestos and mold and mildew while engaged in renovation decrease of $18,500,000 in notes payable (primarily comprised respectively, and were financed with cash provided from primarily related to the financing of 45/75 Sidney Street work at a construction site in Washington. Three of the of a reduction in borrowings outstanding against the line of operating activities, new nonrecourse mortgage indebtedness, ($8,676,000), Columbia Park Center ($8,599,000) and a good plaintiffs also claimed to have been exposed to asbestos and credit in the Lumber Trading Group), payment of deferred borrowings on the long-term credit facility and, in 2000, faith deposit on Residential property to be acquired in the year lead paint at a construction site in California. Plaintiffs sought financing costs of $21,835,000 and payments of $6,608,000 proceeds from the disposition of properties and other 2000 ($11,514,000), net of an increase in book overdrafts of damages for unspecified personal injuries, lost income and of dividends to shareholders. investments. $19,359,000 (representing checks issued but not yet paid). In diminished earning capacity and also sought punitive and Net cash provided by financing activities for 1999 In 2000, 1999, and 1998, $130,751,000, $-0- and addition, the Company reported a net increase of $44,435,000 treble damages. reflected an increase of $25,672,000 in restricted cash primarily $1,145,000 was collected in proceeds from the disposition of in notes payable primarily from two New York City hotels The matter has been settled as of January 31, 2001 and related to the financing of 45/75 Sidney Street ($8,676,000), real estate properties and other investments. In 2000, proceeds under construction payable to the hotel management company, the cases have been dismissed. The settlement is reflected in an office building at University Park at MIT in Cambridge, from the sale of Studio Colony, Highlands, Tucson Place, and minority interest of $16,376,000, payment of deferred financing the accompanying consolidated financial statements and did Massachusetts, and a good faith deposit on Residential property the sale of available-for-sale equity securities were used to costs of $6,575,000 and payment of $5,399,000 of dividends. not have a material effect. to be acquired in the year 2000 ($11,514,000), net of an reduce total mortgage debt by $188,545,000 (see “Mortgage
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 68 69 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
NEW ACCOUNTING STANDARDS In September 2000, SFAS No. 140, “Accounting for Summary of Earnings Before Depreciation, Amortization and Deferred Taxes - Year Ended January 31, 2001 In May 2000, the Financial Accounting Standards Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, was issued to amend the provisions of SFAS Commercial Group Residential Group Board’s Emerging Issues Task force (the EITF) released Issue Plus Plus No. 125, “Accounting for Transfers and Servicing of Financial Less Unconsolidated Less Unconsolidated No. 00-1, “Investor Balance Sheet and Income Statement Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata Display under the Equity Method for Investments in Certain Assets and Extinguishments of Liabilities”. The new standard Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation Partnerships and Other Ventures” (effective for years ending is generally effective for all periods after March 31, 2001. The Revenues...... $ 538,034 $ 103,839 $ 88,646 $ 522,841 $ 126,458 $ 10,408 $ 51,002 $ 167,052 after June 15, 2000). Effective January 31, 2001, the Company Company believes the provisions of SFAS No. 140 will have no Exclude straight-line rent adjustment...... (13,311) – – (13,311) – – – – material impact on the accounting treatment and disclosures Add back equity method depreciation expense. . . 12,628 – (12,628) – 7,658 – (7,333) 325 adopted this EITF which precludes the further use of the Adjusted revenues ...... 537,351 103,839 76,018 509,530 134,116 10,408 43,669 167,377 pro-rata consolidation method for partnerships. Accordingly, currently being applied under SFAS No. 125. In April 2000, FASB Interpretation 44 (FIN No. 44), Operating expenses, including depreciation partnership investments that were previously reported on the and amortization for non-Real Estate Groups . . 267,937 51,325 50,540 267,152 48,087 4,728 30,963 74,322 pro-rata method will now be reported as consolidated at 100 “Accounting for Certain Transactions involving Stock Compensation”, was issued which addresses the application Exclude straight-line rent adjustment...... (3,888) – – (3,888) – – – – percent, if deemed under the Company’s control, or otherwise Operating expenses excluding on the equity method of accounting. Prior to January 31, 2001, of APB Opinion No. 25, “Accounting for Stock Issued to straight-line rent adjustment ...... 264,049 51,325 50,540 263,264 48,087 4,728 30,963 74,322 Employees”. Based on the Company’s current stock Gain on disposition recorded on equity method . . 2,359 – (2,359) – – – – – the Company used the pro-rata method of consolidation to Minority interest in earnings before report its partnerships. Under this method, the Company compensation plan and recent plan activity, FIN No. 44 has had no material impact on the consolidated financial statements. depreciation and amortization...... 20,753 20,753 – – 1,953 1,953 – – presented its partnership investments proportionate to its share Interest expense...... 119,015 31,761 27,837 115,091 23,555 3,727 12,706 32,534 of ownership for each line item of its consolidated financial Income tax provision ...... 9,729 – – 9,729 4,734 – – 4,734 statements. While a number of the line items on the Company’s INFORMATION RELATED TO FORWARD- 415,905 103,839 76,018 388,084 78,329 10,408 43,669 111,590 consolidated financial statements have changed under the new LOOKING STATEMENTS Earnings before depreciation, amortization full consolidation method, there is no impact on net earnings and deferred taxes (EBDT)...... $ 121,446 $ – $ – $ 121,446 $ 55,787 $ – $ – $ 55,787 This Annual Report, together with other statements and or shareholders’ equity for all years presented. This required information publicly disseminated by the Company, contains financial reporting presentation change will have no effect on Land Group Lumber Trading Group forward-looking statements within the meaning of Section 27A the way the Company operates or manages its business. Plus Plus of the Securities Act of 1933, as amended, and Section 21E Less Unconsolidated Less Unconsolidated SFAS No. 133, “Accounting for Derivative Instruments Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata of the Securities Exchange Act of 1934, as amended. Such Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation and Hedging Activities”, as amended, requires companies to statements reflect management’s current views with respect to Revenues...... $ 24,326 $ – $ 40,330 $ 64,656 $ 105,427 $ – $ – $ 105,427 record derivatives on the balance sheet as assets or liabilities financial results related to future events and are based on Operating expenses, including depreciation measured at fair value. Gains or losses resulting from changes and amortization for non-Real Estate Groups . . 19,560 40 37,505 57,025 98,534 – – 98,534 assumptions and expectations which may not be realized and in the values of those derivatives would be accounted for Minority interest in earnings before are inherently subject to risks and uncertainties, many of depending on the use of the derivative and whether it qualifies depreciation and amortization...... (40) (40) – – – – – – which cannot be predicted with accuracy and some of which Interest expense...... 1,901 – 2,825 4,726 5,584 – – 5,584 for hedge accounting. The Company uses derivative instruments might not even be anticipated. Future events and actual results, to protect against the risk of adverse price or interest rate Income tax provision ...... 714 – – 714 1,026 – – 1,026 financial or otherwise, may differ from the results discussed in movements on the value of certain firm commitments and 22,135 – 40,330 62,465 105,144 – – 105,144 the forward-looking statements. Risks and other factors that Earnings before depreciation, amortization liabilities or on future cash flows. On February 1, 2001, the might cause differences, some of which could be material, and deferred taxes (EBDT) ...... $ 2,191 $ – $ – $ 2,191 $ 283 $ – $ – $ 283 Company adopted SFAS No. 133 and, at that time, designated include, but are not limited to, the effect of economic and the derivative instruments in accordance with the requirements market conditions on a nationwide basis as well as regionally Corporate Activities Total of the new standard. On February 1, 2001, the after-tax impact Plus Plus in areas where the Company has a geographic concentration Less Unconsolidated Less Unconsolidated of the transition amounts of the derivative instruments resulted Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata of properties; failure to consummate financing arrangements; Interest Pro-Rata Consolidation in a reduction of net earnings and other comprehensive income Consolidation Interest Pro-Rata Consolidation Consolidation development risks, including lack of satisfactory financing, of approximately $1,000,000 and $8,000,000, respectively. Revenues...... $ 540 $ – $ – $ 540 $ 794,785 $114,247 $179,978 $ 860,516 construction and lease-up delays and cost overruns; the level and The transition adjustments will be presented as cumulative Exclude straight-line rent adjustment...... – – – – (13,311) – – (13,311) volatility of interest rates; financial stability of tenants within effect adjustments, as described in Accounting Principles Board Add back equity method depreciation expense. . . – – – – 20,286 – (19,961) 325 the retail industry, which may be impacted by competition Adjusted revenues ...... 540 – – 540 801,760 114,247 160,017 847,530 (APB) Opinion No. 20, “Accounting Changes”, in the 2001 and consumer spending; the rate of revenue increases versus Operating expenses, including depreciation consolidated financial statements. The transition amounts were and amortization for non-Real Estate Groups . . 13,459 – – 13,459 447,577 56,093 119,008 510,492 expense increases; the cyclical nature of the lumber wholesaling determined based on the interpretive guidance issued by the business; as well as other risks listed from time to time in the Exclude straight-line rent adjustment...... – – – – (3,888) – – (3,888) FASB to date. The FASB continues to issue interpretive Operating expenses excluding Company’s reports filed with the Securities and Exchange guidance that could require changes in the Company’s straight-line rent adjustment ...... 13,459 – – 13,459 443,689 56,093 119,008 506,604 Commission. The Company has no obligation to revise or application of the standard and adjustments to the transition Gain on disposition recorded on equity method . . – – – – 2,359 – (2,359) – update any forward-looking statements as a result of future Minority interest in earnings before amounts. SFAS No. 133 may increase or decrease reported events or new information. Readers are cautioned not to place depreciation and amortization...... – – – – 22,666 22,666 – – net earnings and shareholders' equity prospectively, depending Interest expense...... 32,489 – – 32,489 182,544 35,488 43,368 190,424 undue reliance on such forward-looking statements. on future levels of interest rates and other variables affecting Income tax provision (benefit) ...... (13,510) – – (13,510) 2,693 – – 2,693 the fair values of derivative instruments and hedged items, 32,438 – – 32,438 653,951 114,247 160,017 699,721 but will have no effect on cash flows. Earnings before depreciation, amortization In December 1999, the SEC released Staff Accounting and deferred taxes (EBDT)...... $ (31,898) $ – $ – $ (31,898) $ 147,809 $ – $ – $ 147,809 Bulletin No. 101 (SAB No. 101), “Revenue Recognition in Reconciliation to net earnings: Financial Statements”, which summarizes the staff’s views in Earnings before depreciation, amortization and deferred taxes (EBDT) ...... $ 147,809 $ – $ – $ 147,809 applying generally accepted accounting principles to revenue Depreciation and amortization – Real Estate Groups ...... (95,763) – – (95,763) Deferred taxes – Real Estate Groups ...... (23,518) – – (23,518) recognition in financial statements. The Company adopted Straight-line rent adjustment ...... 9,423 – – 9,423 SAB 101 in the fourth quarter of 2000, and such adoption Provision for decline in real estate, net of tax ...... (744) – – (744) did not have a material effect on the consolidated financial Gain on disposition of properties and other investments, net of tax ...... 51,821 (250) 2,359 54,430 statements. Minority interest in gain on disposition...... 250 250 – – Gain on disposition reported on equity method ...... 2,359 – (2,359) – Net earnings ...... $ 91,637 $ – $ – $ 91,637
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 70 71 Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
Summary of Earnings Before Depreciation, Amortization and Deferred Taxes - Year Ended January 31, 2000 Summary of Earnings Before Depreciation, Amortization and Deferred Taxes - Year Ended January 31, 1999
Commercial Group Residential Group Commercial Group Residential Group Plus Plus Plus Plus Less Unconsolidated Less Unconsolidated Less Unconsolidated Less Unconsolidated Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation Revenues ...... $ 419,910 $ 63,675 $ 86,757 $ 442,992 $ 115,681 $ 4,569 $ 47,656 $ 158,768 Revenues...... $ 364,576 $ 58,395 $ 67,925 $ 374,106 $ 95,966 $ 4,245 $ 47,282 $ 139,003 Add back equity method depreciation expense . . 11,843 – (11,843) – 6,740 – (6,740) – Add back equity method depreciation expense. . . 10,233 – (10,233) – 6,272 – (6,272) – Adjusted revenues ...... 431,753 63,675 74,914 442,992 122,421 4,569 40,916 158,768 Adjusted revenues ...... 374,809 58,395 57,692 374,106 102,238 4,245 41,010 139,003 Operating expenses, including depreciation Operating expenses, including depreciation and amortization for non-Real Estate Groups . . 179,145 26,014 42,833 195,964 43,069 2,773 25,952 66,248 and amortization for non-Real Estate Groups . . 212,794 28,606 47,010 231,198 50,037 2,748 26,752 74,041 Gain on disposition recorded on equity method . 11,025 – (11,025) – – – – – Loss on disposition recorded on equity method . (411) – 411 – – – – – Minority interest in earnings before Minority interest in earnings before depreciation and amortization...... 12,365 12,365 – – 192 192 – – depreciation and amortization...... 14,168 14,168 – – 693 693 – – Interest expense...... 85,423 20,016 25,884 91,291 13,564 1,280 15,058 27,342 Interest expense ...... 87,764 20,901 27,493 94,356 13,411 1,128 14,164 26,447 Income tax provision ...... 441 – – 441 6,799 – – 6,799 Income tax provision ...... 11,561 – – 11,561 11,869 – – 11,869 288,399 58,395 57,692 287,696 63,624 4,245 41,010 100,389 325,876 63,675 74,914 337,115 76,010 4,569 40,916 112,357 Earnings before depreciation, amortization Earnings before depreciation, amortization and deferred taxes (EBDT)...... $ 86,410 $ – $ – $ 86,410 $ 38,614 $ – $ – $ 38,614 and deferred taxes (EBDT)...... $ 105,877 $ – $ – $ 105,877 $ 46,411 $ – $ – $ 46,411
Land Group Lumber Trading Group Land Group Lumber Trading Group Plus Plus Plus Plus Less Unconsolidated Less Unconsolidated Less Unconsolidated Less Unconsolidated Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation Revenues...... $ 24,387 $ – $ 34,382 $ 58,769 $ 123,325 $ – $ – $ 123,325 Revenues ...... $ 13,242 $ – $ 28,114 $ 41,356 $ 149,357 $ – $ – $ 149,357 Operating expenses, including depreciation Operating expenses, including depreciation and amortization for non-Real Estate Groups . . 11,864 – 28,670 40,534 111,998 – – 111,998 and amortization for non-Real Estate Groups . . 11,843 – 27,889 39,732 131,811 – – 131,811 Interest expense...... 1,102 – 5,712 6,814 5,262 – – 5,262 Interest expense ...... 7,145 – 225 7,370 5,288 – – 5,288 Income tax provision ...... 618 – – 618 2,838 – – 2,838 Income tax provision (benefit) ...... (2,257) – – (2,257) 5,188 – – 5,188 13,584 – 34,382 47,966 120,098 – – 120,098 16,731 – 28,114 44,845 142,287 – – 142,287 Earnings before depreciation, amortization Earnings before depreciation, amortization and deferred taxes (EBDT)...... $ 10,803 $ – $ – $ 10,803 $ 3,227 $ – $ – $ 3,227 and deferred taxes (EBDT)...... $ (3,489) $ – $ – $ (3,489) $ 7,070 $ – $ – $ 7,070
Corporate Activities Total Corporate Activities Total Plus Plus Plus Plus Less Unconsolidated Less Unconsolidated Less Unconsolidated Less Unconsolidated Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata Full Minority Investments at Pro-Rata Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation Consolidation Interest Pro-Rata Consolidation Revenues...... $ 1,446 $ – $ – $ 1,446 $ 609,700 $ 62,640 $149,589 $ 696,649 Revenues ...... $ 598 $ – $ – $ 598 $ 698,788 $ 68,244 $162,527 $ 793,071 Add back equity method depreciation expense. . . – – – – 16,505 – (16,505) – Add back equity method depreciation expense . . – – – – 18,583 – (18,583) – Adjusted revenues ...... 1,446 – – 1,446 626,205 62,640 133,084 696,649 Adjusted revenues ...... 598 – – 598 717,371 68,244 143,944 793,071 Operating expenses, including depreciation Operating expenses, including depreciation and amortization for non-Real Estate Groups . . 12,766 – – 12,766 358,842 28,787 97,455 427,510 and amortization for non-Real Estate Groups . . 12,786 – – 12,786 419,271 31,354 101,651 489,568 Gain on disposition recorded on equity method . – – – – 11,025 – (11,025) – Loss on disposition recorded on equity method . – – – – (411) – 411 – Minority interest in earnings before Minority interest in earnings before depreciation and amortization...... – – – – 12,557 12,557 – – depreciation and amortization...... – – – – 14,861 14,861 – – Interest expense...... 19,251 – – 19,251 124,602 21,296 46,654 149,960 Interest expense ...... 26,258 – – 26,258 139,866 22,029 41,882 159,719 Income tax provision (benefit) ...... (9,371) – – (9,371) 1,325 – – 1,325 Income tax provision (benefit) ...... (15,216) – – (15,216) 11,145 – – 11,145 22,646 – – 22,646 508,351 62,640 133,084 578,795 23,828 – – 23,828 584,732 68,244 143,944 660,432 Earnings before depreciation, amortization Earnings before depreciation, amortization and deferred taxes (EBDT)...... $ (21,200) $ – $ – $ (21,200) $ 117,854 $ – $ – $ 117,854 and deferred taxes (EBDT)...... $ (23,230) $ – $ – $ (23,230) $ 132,639 $ – $ – $ 132,639 Reconciliation to net earnings: Reconciliation to net earnings: Earnings before depreciation, amortization and deferred taxes (EBDT) ...... $ 117,854 $ – $ – $ 117,854 Earnings before depreciation, amortization and deferred taxes (EBDT) ...... $132,639 $ – $ – $ 132,639 Depreciation and amortization – Real Estate Groups ...... (83,655) – – (83,655) Depreciation and amortization – Real Estate Groups ...... (84,586) – – (84,586) Deferred taxes – Real Estate Groups ...... (14,236) – – (14,236) Deferred taxes – Real Estate Groups ...... (12,453) – – (12,453) Gain on disposition of properties and other investments, net of tax ...... 7,419 – 11,025 18,444 Provision for decline in real estate, net of tax ...... (3,060) – – (3,060) Gain on disposition reported on equity method...... 11,025 – (11,025) – Gain on disposition of properties and other investments, net of tax...... 11,139 2,738 (411) 7,990 Minority interest in gain on disposition ...... (2,738) (2,738) – – Extraordinary gain, net of tax ...... 16,343 – – 16,343 Loss on disposition reported on equity method ...... (411) – 411 – Net earnings ...... $ 54,750 $ – $ – $ 54,750 Extraordinary gain, net of tax ...... 272 – – 272 Net earnings ...... $ 40,802 $ – $ – $ 40,802
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 72 73 Strategic Business Units Corporate Directory Forest City Enterprises, Inc. and Subsidiaries Forest City Enterprises, Inc. and Subsidiaries
Forest City Commercial Group, Inc. Forest City Residential Group, Inc. Board of Directors Corporate Officers – Cleveland, Ohio – Cleveland, Ohio Scott S. Cowen, President-Tulane University Samuel H. Miller, Co-Chairman of the Board and Treasurer James A. Ratner, President and Chief Executive Officer Ronald A. Ratner, President and Chief Executive Officer Michael P. Esposito, Jr., Chairman - XL Capital Ltd.; Albert B. Ratner, Co-Chairman of the Board David J. LaRue, Executive Vice President and Chief Operating Officer James J. Prohaska, Executive Vice President and Chief Operating Officer Retired Executive Vice President/Chief Control Compliance and Charles A. Ratner, President and Chief Executive Officer D. Layton McCown, Senior Vice President and Chief Financial Officer James T. Brady, Vice President and Chief Financial Officer Administrative Officer - The Chase Manhattan Bank, N.A. James A. Ratner, Executive Vice President John D. Brocklehurst, Vice President Jerry V. Jarrett, Retired Chairman and Chief Executive Officer - Ronald A. Ratner, Executive Vice President Portfolio Management Division Michael D. Daly, President and Chief Executive Officer - Ameritrust Corporation Brian J. Ratner, Executive Vice President - East Coast Development Samuel H. Miller, Co-Chairman of the Board and Treasurer Thomas G. Smith, Executive Vice President, Duane F. Bishop, Jr., Senior Vice President Forest City Daly Housing LLC Albert B. Ratner, Co-Chairman of the Board Chief Financial Officer and Secretary Joseph J. Boehm, III, Vice President - Retail Leasing David J. Levey, Executive Vice President - East Coast Development Brian J. Ratner, Executive Vice President - East Coast Development William M. Warren, Senior Vice President, Edward A. Chanatry, Vice President - Hotel Operations Jay W. Magee, Vice President Charles A. Ratner, President and Chief Executive Officer General Counsel and Assistant Secretary James P. Crosby, Vice President - Office Leasing Deborah Ratner Salzberg, Vice President James A. Ratner, Executive Vice President Linda M. Kane, Vice President and Corporate Controller David J. Favorite, Vice President - Shopping Center Operations Ronald A. Ratner, Executive Vice President Thomas T. Kmiecik, Assistant Treasurer William P. Hewitt, Senior Vice President - West Coast Retail Leasing Forest City Capital Corporation Deborah Ratner Salzberg,Vice President- Forest City Residential Group, Inc. Allan C. Krulak, Vice President - Director of Community Affairs John L. Hyclak,Vice President - Accounting and Information Systems Edward Pelavin, President Stan Ross, Retired Vice Chairman/Special Consultant - Ernst & Young LLP; Nancy W. McCann, Vice President - Marketing Jack R. Kuhn, Vice President - Office and Parking Operations Chairman of the Board - USC Lusk Center for Real Estate Minta A. Monchein, Vice President - Human Resources Patrick M. Lott, SeniorVice President - Office Development and Leasing Forest City Residential Management, Inc. Joan K. Shafran, Executive Managing Partner - The Berimore Company Rod H. Marques, Vice President - Business Development George M. Cvijovic, Co-President, Chief Operations Officer Louis Stokes, Attorney - Squire, Sanders & Dempsey, Michael R. May, Vice President Angelo N. Pimpas, Co-President, Chief Administrative Officer Retired Member of The United States Congress Mark C. Siegel, Senior Vice President - Portfolio Strategy Joseph S. Bridgforth, Vice President - Conventional Properties Michael E. Stevens, Senior Vice President - Retail Leasing Oscar A. Crowder, Vice President - Federally Assisted Housing Cynthia R. Hale, Vice President - Controller Development Division Peter B. Calkins, Vice President - Boston Division Forest City Residential West, Inc. - Los Angeles, California Emerick J. Corsi, Senior Vice President and Denver, Colorado Gayle Blakeley Farris, President - Boston Division Gregory M. Vilkin, President Brian M. Jones, President - West Coast Division John S. Lehigh, ExecutiveVice President and Douglas Lund, Senior Vice President - East Coast Development Chief Operating Officer - Stapleton Colm W. Macken, Vice President - West Coast Division Stanley V. Michota, Jr., Executive Vice President - Development Glenn G. Moenich, President - Forest City Commercial Construction Brian J. Ratner, Executive Vice President - East Coast Development Joginder Singh, Executive Vice President - Forest City Commercial Construction, Inc. Forest City Land Group, Inc. – Cleveland, Ohio Robert F. Monchein, President Forest City Finance Corporation Mark A. Ternes, Vice President Dean F. Wingert, Vice President Judith A. Wolfe, President Frank J. Stringer, Vice President SEC Form 10-K Transfer Agent and Registrar Annual Meeting Website Liane M. Simonetti, Senior Vice President National City Bank The annual meeting of www.fceinc.com Steven H. Kurland, Senior Vice President A copy of the annual report on Stock Transfer Department Forest City Enterprises’ Sally A. Ingberg, Vice President Form 10-K as filed with the Securities and Exchange P.O. Box 92301 shareholders will be held on Stock Exchange Listing Douglas J. Brooks, Vice President Forest City Trading Group, Inc. Commission may be obtained with- Cleveland, Ohio 44193-0900 June 6, 2001 at 2 p.m. at: New York Stock Exchange (800) 622-6757 New York, New York – Portland, Oregon out charge upon written request to: Ritz-Carlton Hotel Symbols: FCEA and FCEB 6th Floor Ballroom Forest City Ratner Companies – New York, New York John W. Judy, President Thomas T. Kmiecik Tower City Center Lois Tonning, Vice President Assistant Treasurer Dividend Reinvestment and Bruce C. Ratner, President and Chief Executive Officer 1515 W. Third Street Forest City Enterprises, Inc. Stock Purchase Plan Executive Offices Joanne M. Minieri, Executive Vice President and Chief Operating Officer Cleveland, Ohio 44113 David L. Berliner, Executive Vice President and General Counsel Terminal Tower Forest City Enterprises, Inc. 50 Public Square Suite 1100 Sandeep Mathrani, Executive Vice President and General and Associate General Counsel The Company offers its stockholders Terminal Tower Cleveland, Ohio 44113 Director of Retail Development William M. Warren, General Counsel the opportunity to purchase additional Number of Holders of Common Stock 50 Public Square Suite 1100 [email protected] Robert P. Sanna, Executive Vice President and Geralyn M. Presti, Deputy General Counsel shares of common stock through the The number of shareholders of record as Cleveland, Ohio 44113 (216) 621-6060 Lawrence Fishman, Associate General Counsel Forest City Enterprises, Inc. Dividend of March 1, 2001 for Class A and Director of Construction and Design Development Class B common stock were 820 and James P. Stuckey, Executive Vice President and David J. Gordon, Associate General Counsel Reinvestment and Stock Purchase Plan at 97% of current market value. 600, respectively, as certified by Director of Commercial Development Warren K. Ornstein, Associate General Counsel National City Bank, Agent. A copy of the Plan prospectus and an Andrew P. Silberfein, Senior Vice President - Finance Charles L. Pitcock, Associate General Counsel enrollment card may be obtained by contacting National City Bank at First New York Management Forest City Rental Properties Corporation (800) 622-6757. Terence M. Whalen, President (Officers not otherwise listed in other positions within the Company) Donna C. Singleton, Senior Vice President - Controller Robert G. O’Brien, Executive Vice President - Finance and Investment Vincent G. Crowley, Vice President - Chief Technology Officer Thomas A. Michaels, Vice President - Director of Taxes Brad E. Snyder, Vice President - Director of Corporate Strategic Planning and Reporting
Forest City Enterprises Inc. • 2000 Annual Report Forest City Enterprises Inc. • 2000 Annual Report 74 75