CLEVELAND, March 30, 2011 /PRNewswire via COMTEX/ --

Forest City Enterprises, Inc. (NYSE: FCEA and FCEB) today announced EBDT, net earnings and revenues for the fourth quarter and full year ended January31,2011.

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EBDT

EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) for the full year ended January 31, 2011, was $309.9 million, a new record for the company and a 2.9 percent increase compared with last year's $301.1 million. EBDT for the fourth quarter was $43.1 million, a 45 percent decrease compared with last year's fourth-quarter EBDT of $78.4 million.

EBDT for the fourth quarter and full year 2010 were impacted by a loss on early extinguishment of debt of $31.7 million ($0.16 on a fully diluted, per-share basis), related to inducement payments for the early exchange of a portion of the company's 2016 Senior Notes for Class A common stock, which occurred in the final week of the fiscal year.

On a fully diluted, per-share basis, full-year 2010 EBDT was $1.59, a 20.5 percent decrease from the prior year's $2.00 per share. Per-share EBDT for the fourth quarter of 2010 was $0.23, compared with $0.43 per share in the fourth quarter of 2009. Per-share data reflects new Class A common shares and the "if-converted" effect of convertible debt and convertible preferred stock issued in 2009 and 2010.

For an explanation of the EBDT and EBDT per share variances, see the section titled "Review and Discussion of Results" in this news release. EBDT and EBDT per share are non-Generally Accepted Accounting Principle (GAAP) measures. A reconciliation of net earnings (the most directly comparable GAAP measure to EBDT) to EBDT is provided in the Financial Highlights table in this news release.

Net Earnings/Loss

For the full year, net earnings attributable to Forest City Enterprises, Inc., were $58.7 million, or $0.34 per share, compared with a net loss of $30.7 million, or $0.22 per share, in 2009. For the fourth quarter of 2010, net loss attributable to Forest City Enterprises, Inc. was $1.8 million, or $0.01 per share, compared with net earnings of $6.2 million, or $0.04 per share in the fourth quarter of 2009.

Net earnings in the fourth quarter were negatively impacted by impairment charges of $35.7 million ($21.4 million, net of tax), primarily related to the Village at Gulfstream Park, an unconsolidated specialty retail center in Hallandale Beach, Florida, that opened in February, 2010. The property, in which a Forest City subsidiary is 50 percent owner, is carried on the company's books under the equity method of accounting. Due to a slower than anticipated ramp-up of the operations of the property caused by the severe recessionary environment at the time of opening, it was determined that the company was required under GAAP to recognize an impairment of its equity investment in the property. Despite this, Forest City believes strongly in the long-term viability of the center, the market area it serves, and the value proposition of both the existing property and the additional future entitlements at the site.

Revenues

Revenues for the year ended January 31, 2011, were $1.18 billion, a 4.4 percent decrease compared with prior year revenues of $1.23 billion. Fourth-quarter consolidated revenues were $297.8 million compared with $318.5 million last year.

Liquidity

At January 31, 2011, the Company had $228.0 million ($193.4 million at full consolidation) in cash on its balance sheet and $222.9 million of available capacity on the Company's revolving line of credit.

Review and Discussion of Results

Exhibits illustrating factors impacting both fourth-quarter and full year 2010 EBDT results, compared with results for the comparable periods in 2009, are available on the Investor Relations page of the Company's web site: www.forestcity.net, and are included in the company's year-end 2010 Supplemental Package furnished to the Securities and Exchange Commission.

Fourth-Quarter EBDT

In the fourth quarter, total EBDT for the company was $43.1 million, down from $78.4 million in the fourth quarter of 2009.

The largest impact on fourth quarter EBDT was the previously referenced loss on early extinguishment of debt of $31.7 million ($0.16 on a per-share basis), related to inducement payments for the early exchange of a portion of the company's 2016 Senior Notes for Class A common stock. The exchange, which occurred in the final week of Forest City's 2010 fiscal year, moved $110 million from debt to equity on the company's balance sheet.

In operating results, EBDT from the Commercial and Residential Segments combined (also referred to as the rental properties portfolio) decreased by $11.5 million pre-tax. The portfolio was positively impacted by increased hedging and other financial income of $8.4 million, increased gain on early extinguishment of nonrecourse mortgage debt of $5.1 million and the ramp up of new properties of $3.0 million. These increases were offset by decreased income recognized on the sale of state and federal Historic Preservation, Brownfield and New Market tax credits of $12.1 million, the 2009 income from Housing and Urban Development (HUD) replacement reserve of $11.0 million, and reduced pre-tax EBDT from properties sold of $6.2 million.

The Nets provided a fourth quarter pre-tax EBDT increase of $13.3 million due to the decrease in the company's allocated losses.

Full-year EBDT

For the year, total EBDT was $309.9 million, a new record for the company, and up from $301.1 million in 2009.

As with EBDT results for the fourth quarter, EBDT for the year was impacted by increased loss on early extinguishment of corporate debt of $28.2 million (pre-tax), primarily related to the previously mentioned inducement payments for the early exchange of a portion of the company's 2016 Senior Notes for Class A common stock.

For fiscal 2010, pre-tax EBDT from the Commercial and Residential Segments combined decreased $16.7million pre-tax. Results from the portfolio were favorably impacted by lower write-offs of abandoned development projects of $16.3 million, increased NOI on the mature portfolio of $12.9million, and the ramp up of new properties of $12.0 million. These increases were offset by reduced pre-tax EBDT from properties sold of $24.2 million, reduced gain on early extinguishment of nonrecourse mortgage debt of $16.3 million primarily due to fewer opportunities to buy back nonrecourse mortgage debt at a discount, decreased income from the HUD replacement reserve of $7.7million, decreased EBDT from military housing of $10.7 million due to lower construction and development fee income as anticipated, and increased interest expense on the mature portfolio of $10.7 million.

Pre-tax EBDT from the Land Segment decreased $7.4 million, primarily due to the 2009 gain on early extinguishment of nonrecourse mortgage debt of $11.3 million, partially offset by increased sales.

The Nets provided a pre-tax EBDT increase of $62.9 million, primarily due to the gain on disposition of partial interest in the Nets of $31.4 million and decreased losses of $31.5 million due to a decrease in Forest City's share of allocated losses as a result of new operating agreements entered into upon sale of the controlling interest of the team on May 12, 2010.

Corporate interest expense decreased by $17.0 million, primarily as a result of the reduction in the strike rate for corporate interest rate swaps and the retirement of various senior notes in exchange for preferred stock. Finally, EBDT was impacted by a smaller tax benefit of $11.8 million compared to prior year.

Commentary

"We're pleased with our fiscal 2010 results overall," said Charles A. Ratner, Forest City president and chief executive officer. "Total EBDT reached a new record level as our portfolio of rental properties continued to perform well throughout the year. We opened new signature properties, primarily in core markets, which collectively are achieving more than 175 basis points of spread to their anticipated cost of permanent debt, creating real value for the company and shareholders. We also achieved major milestones in our under-construction pipeline. In addition, we took advantage of capital market conditions to further de-leverage our balance sheet, and selectively monetized assets in our portfolio to capture value and generate liquidity. Notably, with the start of construction at Foundry Lofts at The Yards in Washington, D.C., we also began the process of unlocking embedded entitlement opportunities to fuel future growth.

"Absent the impact of our debt-for-stock exchange transaction in the last week of the 2010 fiscal year, our fourth quarter and full-year EBDT results would have been significantly higher. Despite this, our decision to take advantage of the opportunity for early conversion of $110 million of debt to equity was the right one, and we will continue to make improving our balance sheet a high priority going forward.

"Just this week, we made a significant announcement that continues our efforts to further strengthen our balance sheet and position the company for future growth. On Tuesday, we announced new joint ventures with investor Madison International Realty for ownership of a portfolio of 15 of our mature New York City metropolitan area specialty retail and entertainment centers. The transaction equates to a 6.9 percent cap rate and speaks to the quality of these assets and the significant value embedded in our portfolio.

"On March 1, 2011, we announced our senior-leadership succession plan, under which I will become chairman of the board, and David LaRue will become president and chief executive officer, effective with our annual meeting of shareholder in June of this year. Current co-chairmen of the board, Albert Ratner and Sam Miller, will become co-chairmen emeritus at that time, and will remain active with the company, but will no longer serve on the board. The succession plan has been very well received by our shareholders, associates, lenders, business partners and other constituencies."

NOI, Occupancies and Rent

For the full year 2010, overall comparable property net operating income (NOI) increased 2.1 percent, with increases of 2.1 percent in office, 2.2 percent in retail and 2.7 percent in apartments. In the fourth quarter of 2010, comparable property NOI increased 1.1 percent compared with the prior year, with increases of 0.2 percent in office and 3.4 percent in retail, and a decrease of 0.8 percent in apartments. The fourth quarter decline in apartments was primarily due to a decrease in comparable property NOI in the senior-housing component of the portfolio as a result of the timing of receipt of government subsidies, which offset an increase in conventional apartments.

Comparable property NOI, defined as NOI from properties operated for the full year in both 2010 and 2009, is a non-GAAP financial measure and is based on the pro-rata consolidation method, also a non-GAAP financial measure. Included in this release is a schedule that presents comparable property NOI on the full consolidation method.

Comparable occupancies at the end of 2010 were 91.2 percent in the retail portfolio, an increase of 1.1percentage points compared with 2009. In the office portfolio, comparable occupancies decreased to 88.4 percent from 90.0 percent in 2009. The decrease in the office portfolio was due primarily to lease expirations at two office buildings in New York, partially offset by occupancy gains at the Science + Technology Park at Johns Hopkins in Baltimore.

In the residential portfolio, comparable average occupancies were 94.7 percent, compared with 92.1 percent in 2009, and comparable property net rental income (defined as total potential rent, less vacancies and concessions) ended the year at 91.6 percent, up 1.9 percentage points from 2009. In the company's regional malls, leasing spreads decreased 5.8 percent for the year, primarily related to the company's strategic decision to prioritize occupancy and co-tenancy in exchange for short-term rent concessions in selected lease rollovers. In the office portfolio, leasing spreads increased 13.8 percent, reflecting strength in lease renewals in the life-science segment of company's office portfolio. Regional mall sales averaged $399 per square foot on a rolling 12-month basis, while comparable regional mall sales increased 2.7 percent, compared with results for 2009.

Debt Maturities and Financing Activity

During 2010, Forest City closed on transactions totaling $1.2 billion at the Company's pro-rata share ($1.3 billion at full consolidation) in nonrecourse mortgage financings, including $272 million at pro-rata ($231 million at full consolidation) in refinancing, $196 million of development projects ($593 million at full consolidation)and $683 million ($521 million at full consolidation) in loan extensions and additional fundings. During the fourth quarter, the Company closed 12 loan transactions totaling $132 million at pro-rata ($107 million at full consolidation).

Since January 31, 2011, the Company has addressed, through closed loans and committed financings, $276.6 million at its pro-rata share ($296.7 million at full consolidation) of the $1.1 billion at pro-rata and full consolidation of net maturities (inclusive of notes payable) coming due in fiscal year 2011.

As of January 31, 2011 the Company's weighted average cost of mortgage debt decreased to5.07 percent from 5.17 percent at January 31, 2010, primarily due to a decrease in both fixed-rate and variable-rate mortgage debt. Fixed-rate mortgage debt, which represented71 percent of the Company's total nonrecourse mortgage debt, and is inclusive of interest rate swaps,decreased from 6.05 percent at January 31, 2010, to5.97 percent at January 31, 2011. Variable-rate mortgage debt decreased from 3.02percent at January 31, 2010, to 2.87 percent at January 31, 2011. (All interest rates are at full consolidation.)

"We continue to see gradual improvement in credit market conditions and availability of capital at attractive rates to finance operating properties," Ratner said. "Throughout the recession and into the recovery, we have consistently demonstrated our ability to meet the financing needs of the portfolio, while retaining the exclusive use of non-recourse mortgage debt at the property level. This is a testament to the quality of our real estate portfolio, the long-term relationships we've built with lenders and the skill and perseverance of our finance teams."

Project Updates

Openings in 2010

During 2010, Forest City opened four projects, adding $512.3 million of cost at the Company's pro-rata share ($339.7 million on a full-consolidation basis). Openings included:

• East River Plaza, a 527,000-square-foot big-box retail center - the first of its kind - in Manhattan. The center, which is currently 90 percent leased, includes the first Costco and Target stores in Manhattan, as well as Best Buy, Marshalls, PetSmart, Old Navy, Bob's Discount Furniture and others. The center has brought a new type of shopping experience to many New Yorkers, and the majority of tenants report strong sales and customer traffic.

• The East 4th and West 4th office buildings at the mixed-use Waterfront Station project in Southwest Washington, D.C. The two buildings total 631,000 square feet of office and ground-level retail space. The office component is fully leased to the District of Columbia for governmental offices, and 89 percent of the retail space is also leased.

• The Village at Gulfstream Park, a 511,000-square-foot mixed-use retail center in Hallandale Beach, Florida. The center, which is anchored by Gulfstream Park Racetrack and Casino, includes 422,000square feet of retail space and 89,000 square feet of Class A office space. Currently, 80 percent of the center is leased. Restaurant and home furnishings tenants have consistently reported strong sales since opening, while results for soft goods tenants have been weaker. As previously referenced, as a result of the recession and a slower than anticipated ramp-up for the property, the company recognized a fourth quarter impairment of its equity investment. Forest City is committed to the market, to the long-term value proposition of the center and to the additional future entitlements at the site.

• Presidio Landmark, a 161-unit apartment project in the Presidio National Park in San Francisco. Theproject's two components are a 154-unit adaptive re-use of a historically significant former U.S. Health Service hospital, and a small number of new, three-story townhomes, all built to a high standard of sustainability. Lease-up began in September, 2010 and the project is currently 38 percent leased.

Under Construction and 2011 openings

At the end of fiscal 2010, Forest City had four projects under construction with a total project cost of $1.7 billion at the Company's pro-rata share ($2.7 billion at full consolidation). Three of the projects are in New York: 8 Spruce Street (formerly Beekman), a 903-unit residential tower in Manhattan, Westchester's Ridge Hill, a mixed-use retail center in Yonkers, New York, and the Barclays Center arena, the future home of the NBA Nets in Brooklyn. The fourth is Foundry Lofts at The Yards in Washington,D.C.

At 8 Spruce Street, the Frank Gehry-designed apartment high rise in lower Manhattan, leasing activity and initial tenant move-ins are underway for the lower floors, while interior build-out continues on the upper floors. The property has received a tremendous reception from New Yorkers as well as national and international media, including praise from prominent architecture critics. Leasing activity began on February 18, 2011, and leases have already been executed for more than 50 units with 17 units already occupied. Full lease-up of the 76-story building, which has a total of 903 market-rate units, is expected to extend well into 2012. Project costs are in line with the company's budget and the rental market in the Lower Manhattan submarket continues to be very strong.

Leasing efforts and construction continue at Westchester's Ridge Hill, the company's mixed-use retail project in Yonkers, New York, with commitments currently for 45 percent of the retail space. In December, 2010, Forest City's announcement that that Lord & Taylor would anchor the center with a new, 80,000-square-foot store generated considerable interest from retailers and has added momentum to leasing efforts. The center is expected to open in phases beginning in the second quarter of this year, culminating in the Lord & Taylor opening in February, 2012. Other committed tenants include National Amusements, Whole Foods, Dick's Sporting Goods, REI, and Cheesecake Factory, among others, as well as WESTMED Medical Group as an anchor office tenant. The market area served by Westchester's Ridge Hill has among the most attractive retail demographics of any market in the nation.

Work continues at the Barclays Center arena at Atlantic Yards, with steel now rising several stories above ground level at the site. With the building taking shape, the reality of major league sports returning to Brooklyn has helped generate additional momentum and enthusiasm for the project. Approximately 55 percent of forecasted contractually obligated revenues are currently under contract for the arena, which is expected to open in late summer 2012.

Construction continues on Foundry Lofts, the initial residential building at The Yards mixed-use project in Washington, D.C. The apartment building is on track to be completed and commence lease-up in the third quarter of 2011. This adaptive reuse of a former Navy Yard industrial building will offer 170 loft-style apartments, including 34 two-level penthouse units, together with a small amount of street-level retail space. The Washington, D.C. real estate market continues to be one of the strongest in the country.

Year-End Summary and Outlook

"With our fiscal 2010 results, we mark the end of our second full year of successfully navigating the worst economic and real estate market conditions most of us have ever experienced," Ratner said. "As a result, we believe Forest City is a stronger company today, with a much-improved balance sheet, dramatically reduced development risk, and a fresh sense of optimism about the future.

"Our strong operating portfolio and additional high-quality projects under construction, together with our strategic focus on core urban centers and substantial in-place entitlement in large projects in New York, Washington, Denver and other key markets, positions us well to take advantage of future growth opportunities. Though we retain an appropriate measure of caution in our outlook, we are confident in our ability to continue to build long-term value for our shareholders, associates, business partners and the communities where we live and work."

Corporate Description

Forest City Enterprises, Inc. is a NYSE-listed national real estate company with $11.8 billion in total assets. The Company is principally engaged in the ownership, development, management and acquisition of commercial and residential real estate and land throughout the United States. For more information, visit www.forestcity.net.

Supplemental Package

Please refer to the Investor Relations section of the Company's website at www.forestcity.net for a Supplemental Package, which the Company will also furnish to the Securities and Exchange Commission ("SEC") on Form 8-K. This Supplemental Package includes operating and financial information for the year ended January 31, 2011, with reconciliations of non-GAAP financial measures, such as EBDT, comparable NOI and pro-rata financial statements, to their most directly comparable GAAP financial measures.

EBDT

The Company uses an additional measure, along with net earnings, to report its operating results. This non-GAAP measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results or cash flows from operations as defined by GAAP and may not be directly comparable to similarly titled measures reported by other companies.

The Company believes that EBDT provides additional information about its core operations and, along with net earnings, is necessary to understand its operating results. EBDT is used by the chief operating decision maker and management in assessing operating performance and to consider capital requirements and allocation of resources by segment and on a consolidated basis. The Company believes EBDT is important to investors because it provides another method for the investor to measure its long-term operating performance, as net earnings can vary from year to year due to property dispositions, acquisitions and other factors that have a short-term impact.

EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of rental properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) non-cash charges for real estate depreciation, amortization, amortization of mortgage procurement costs and deferred income taxes; iv) preferred payment which is classified as non-controlling interest expense on the Company's Consolidated Statements of Operations; v) impairment of real estate (net of tax); vi) extraordinary items (net of tax); and vii) cumulative or retrospective effect of change in accounting principle (net of tax). Unlike the real estate segments, EBDT for the Nets segment equals net earnings.

EBDT is reconciled to net earnings (loss), the most comparable financial measure calculated in accordance with GAAP, in the table titled Financial Highlights below and in the Company's Supplemental Package, which the Company will also furnish to the SEC on Form 8-K. The adjustment to recognize rental revenues and rental expenses on the straight-line method is excluded because it is management's opinion that rental revenues and expenses should be recognized when due from the tenants or due to the landlord. The Company excludes depreciation and amortization expense related to real estate operations from EBDT because it believes the values of its properties, in general, have appreciated over time in excess of their original cost. Deferred taxes from real estate operations, which are the result of timing differences of certain net expense items deducted in a future year for federal income tax purposes, are excluded until the year in which they are reflected in the Company's current tax provision. The impairment of real estate is excluded from EBDT because it varies from year to year based on factors unrelated to the Company's overall financial performance and is related to the ultimate gain on dispositions of operating properties. The Company's EBDT may not be directly comparable to similarly titled measures reported by other companies.

Pro-Rata Consolidation Method

This press release contains certain financial measures prepared in accordance with GAAP under the full consolidation accounting method and certain financial measures prepared in accordance with the pro-rata consolidation method (non-GAAP). The Company presents certain financial amounts under the pro-rata method because it believes this information is useful to investors as this method reflects the manner in which the Company operates its business. In line with industry practice, the Company has made a large number of investments in which its economic ownership is less than 100 percent as a means of procuring opportunities and sharing risk. Under the pro-rata consolidation method, the Company generally presents its investments proportionate to its economic share of ownership. Under GAAP, the full consolidation method is used to report partnership assets and liabilities consolidated at 100 percent if deemed to be under its control or if the Company is deemed to be the primary beneficiary of the variable interest entities ("VIE"), even if its ownership is not 100 percent. The Company provides reconciliations from the full consolidation method to the pro-rata consolidation method in the exhibits below and throughout its Supplemental Package, which the Company will also furnish to the SEC on Form 8-K.

Safe Harbor Language

Statements made in this news release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. The Company's actual results could differ materially from those expressed or implied in such forward-looking statements due to various risks, uncertainties and other factors. Risks and factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the impact of current lending and capital market conditions on our liquidity, ability to finance or refinance projects and repay our debt, the impact of the current economic environment on our ownership, development and management of our real estate portfolio, general real estate investment and development risks, vacancies in our properties, further downturns in the housing market, competition, illiquidity of real estate investments, bankruptcy or defaults of tenants, anchor store consolidations or closings, international activities, the impact of terrorist acts, risks associated with an investment in a professional sports team, our substantial debt leverage and the ability to obtain and service debt, the impact of restrictions imposed by our credit facility and senior debt, exposure to hedging agreements, the level and volatility of interest rates, the continued availability of tax-exempt government financing, the impact of credit rating downgrades, effects of uninsured or underinsured losses, effects of a downgrade or failure of our insurance carriers, environmental liabilities, conflicts of interest, risks associated with the sale of tax credits, risks associated with developing and managing properties in partnership with others, the ability to maintain effective internal controls, compliance with governmental regulations, increased legislative and regulatory scrutiny of the financial services industry, volatility in the market price of our publicly traded securities, inflation risks, litigation risks, as well as other risks listed from time to time in the Company's SEC filings, including but not limited to, the Company's annual and quarterly reports.