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Forest City Reports Fiscal 2012 Third-Quarter and Year-to-Date Results

Date : 12/07/2012 @ 2:35AM
Source : PR Newswire (US)
Stock : Forest City Enterprises CL A (FCE.A)
Quote : 19.82  0.06 (0.30%) @ 7:53PM
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Forest City Reports Fiscal 2012 Third-Quarter and Year-to-Date Results

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Forest City Reports Fiscal 2012 Third-Quarter and Year-to-Date Results

CLEVELAND, Dec. 6, 2012 /PRNewswire/ -- Forest City Enterprises, Inc. (NYSE: FCEA and FCEB) today announced FFO, Operating FFO, net earnings/loss and revenues for the year to date and the third quarter ended October 31, 2012.

FFO

Third-quarter FFO (funds from operations) was $79.6 million, compared with $61.2 million in the third quarter of 2011. On a fully diluted, per-share basis, third-quarter 2012 FFO was $0.37, compared with $0.29 in 2011.

Year-to-date FFO was $189.9 million, or $0.91 per share, compared with $218.9 million, or $1.07 per share, for the first nine months of 2011. A full description of factors impacting FFO and FFO per share for the third quarter and first nine months of 2012 is included in the company's third-quarter 2012 Supplemental Package furnished to the SEC and available on the company's website.

FFO and FFO per share are non-GAAP measures commonly used by publicly traded real estate companies. Included with this press release is a table reconciling FFO to net earnings (loss), the most comparable GAAP measure.

Operating FFO

In an effort to provide investors with additional information about its core operations, the company initiated reporting Operating FFO in the second quarter of 2012. Operating FFO is a non-GAAP measure derived from FFO. Included with this press release are tables reconciling Operating FFO to FFO, and then to net earnings (loss).

Third-quarter Operating FFO was $65.0 million, a 19.8 percent increase over third-quarter 2011 Operating FFO of $54.3 million. Year-to-date Operating FFO was $192.9 million, a 10.2 percent increase compared with $175.1 million for the first nine months of 2011. For additional explanation of factors impacting Operating FFO variances, see the section titled "Review of Results" in this news release.

Net Earnings/Loss

The third-quarter net loss attributable to Forest City Enterprises, Inc. was $1.1 million, compared with a net loss of $36.8 million in the third quarter of 2011. The net loss for the nine months ended October 31, 2012, was $22.0 million, compared with net earnings of $18.9 million for the same period in 2011. The company's reported net earnings/loss are impacted by a variety of factors, including transactions, which can create substantial variances in net earnings/loss between reporting periods. A full description of these factors is included in the company's third quarter 2012 Supplemental Package furnished to the SEC and available on the company's website, www.forestcity.net.

After preferred stock dividends and inducements related to a preferred stock conversion during the quarter, the third-quarter net loss attributable to Forest City Enterprises, Inc. common shareholders was $18.8 million, or $0.11 per share, compared with a net loss of $40.7 million, or $0.24 per share, for the third quarter of 2011. For the first nine months of 2012, the net loss attributable to common shareholders was $47.5 million, or $0.28 per share, compared with net earnings of $7.4 million, or $0.04 per share, in 2011. Per-share amounts are on a fully diluted basis.

In addition to factors that also impacted Operating FFO, as mentioned under "Review of Results" later in this press release, net earnings/loss was negatively impacted by a third-quarter impairment of $30.2 million on an office building in Cleveland.  The company made the decision to reposition the asset after evaluating a number of potential long-term strategies for the property.  That decision changed the probable holding period for the asset and required the company to adjust the carrying value of the asset to its estimated fair market value.

Revenues

Third-quarter 2012 consolidated revenues from real estate operations increased to $291.4 million, from $252.6 million in the third quarter of 2011. For the first nine months of 2012, consolidated revenues from real estate operations were $843.1 million, compared with $794.2 million for the first nine months of 2011.

Commentary

"Our results for the third quarter and year to date continued to reflect solid overall performance from our portfolio, particularly multifamily," said David J. LaRue, Forest City president and chief executive officer. "Third-quarter FFO was up over last year, and Operating FFO showed double-digit increases over the prior year for both the quarter and year to date. These results also reflect continued execution on the key drivers of our strategic plan.

"In residential multifamily, growth in comparable property net operating income was in line with peers, following four consecutive quarters of double-digit gains. Comp NOI in both retail and office was up modestly, and leasing spreads were up 10.7 percent in our regional malls and 2.6 percent in office, on a rolling 12-month basis.  Our regional mall sales averaged $465 per square foot on a rolling 12-month basis, the eighth consecutive quarter of increases, and our year-to-date comparable mall sales increased 5.2 percent, compared with the same period in 2011, demonstrating solid fundamentals in our retail portfolio.

"We continued to focus on strengthening our capital structure during the quarter, executing privately negotiated exchanges for $133.7 million of our 7 percent convertible preferred stock for common stock and a cash inducement. The transaction substantially reduced the outstanding preferred, was non-dilutive and eliminated approximately $9.4 million in future annual fixed charges. 

"The widely celebrated opening of the Barclays Center arena in Brooklyn was a highlight of the quarter.  The state-of-the-art arena has performed very well and day-of-event revenues have been in line with our expectations to date. The opening also marks the delivery of the last of our "Big 3" New York projects – 8 Spruce Street, Westchester's Ridge Hill and now Barclays Center.  Our under-construction pipeline now consists of seven projects with total costs of $257 million, at full consolidation, down from $1.9 billion at this same time last year, and down from $2.7 billion at its peak in 2010.  It has been a remarkable journey through very difficult conditions, and one that some doubted we would be able to complete.  Today we are a much stronger company with a dramatically reduced risk profile, a focused strategy, and substantial future opportunity.

"We continue to demonstrate our value-creation model as we take advantage of existing entitlement in our core markets to drive future growth.  The latest example is B2, the first apartment building at Atlantic Yards in Brooklyn, where we expect to break ground December 18.  The project will be built using state-of-the-art modular technology that is expected to reduce costs over time, while also speeding delivery and improving quality and sustainability.

"We continue to make progress in executing our strategy of focusing on core rental properties by exiting our land development business. To date, we have closed the sale of approximately three quarters of the land projects targeted for disposition, and we continue to market the balance.

"As we first announced at our October 22 Investor Day at Barclays Center, we are in the process of finalizing a partnership with a large institutional investor to create a $400 million multifamily development fund to invest in five of our core markets. The fund will target activation of our existing entitlement as well as select new opportunities.  We expect to complete the partnership agreement before the end of the year and to provide investors with more detail at that time.

"We are also in the final stages of closing the previously announced effort to bring a partner into to the ownership of 8 Spruce Street, our apartment high rise in lower Manhattan, and to monetize some of the substantial value created by the development of this iconic property.  The transaction values the property at approximately $1 billion, and we expect to close by the end of the year.

"Finally, earlier this week, we announced the addition of a new independent director to our board, achieving our goal of moving to a majority independent board. Kenneth J. Bacon is a seasoned executive who has held senior positions with Fannie Mae, Resolution Trust and Morgan Stanley, among others, and who also has outstanding board experience, having served as a director for Comcast Corporation since 2002.  We are thrilled that he has joined our board."

Review of Results

Third-quarter Operating FFO was $65.0 million, a 19.8 percent increase over third-quarter 2011 Operating FFO of $54.3 million. Year-to-date Operating FFO was $192.9 million, a 10.2 percent increase compared with $175.1 million for the first nine months of 2011.

The increase in Operating FFO for the first nine months of 2012, compared with the same period in 2011, is attributable to a variety of factors.  Overall Operating FFO from the company's Commercial, Residential and Land portfolio increased $24.2 million.  The largest components of this increase were higher NOI from mature properties of $16.4 million, decreased interest expense of $12.9 million, increased income from the change in fair market value of derivatives of $10.9 million, and increased residential lot sales, primarily at Stapleton in Denver, of $6.7 million.  These increases were offset by a number of factors, the most significant of which were reduced capitalized interest on projects under construction and development, including land development, of $18.5 million, reduced Operating FFO from properties sold of $6.6 million, and non-recurring 2011 lease cancellation fee income of $6.5 million.

Corporate Operating FFO decreased $6.4 million, primarily due to increased severance, outplacement and general corporate expenses of $3.9 million, and increased interest expense of $2.5 million, primarily related to certain senior notes, offset by lower average borrowings on the company's bank revolving credit facility.

A full description of factors impacting Operating FFO for the third quarter and first nine months of 2012 is included in the company's third quarter 2012 Supplemental Package furnished to the SEC and available on the company's website.

NOI, Occupancies and Rent

Overall comparable property NOI increased 1.8 percent during the third quarter, compared with the same period in 2011, with increases of 6.0 percent in apartments, 0.6 percent in office, and 0.5 percent in retail.

Comparable property NOI, defined as NOI from properties operated in the three months ended October 31, 2012 and 2011, 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 are schedules that present comparable property NOI on the full-consolidation method and a reconciliation of NOI to net earnings (loss).

Comparable office occupancies were 90.4 percent as of October 31, 2012, compared with 90.6 percent at the same point last year. On a rolling 12-month basis, rent per square foot in new office leases increased 2.6 percent over expiring leases.

At October 31, 2012, comparable retail occupancies were 91.6 percent, compared with 91.9 percent at the end of the third quarter of 2011. Sales in the company's regional malls averaged $465 per square foot on a rolling 12-month basis, up from $434 per square foot for the same period in 2011, and up from $461 per square foot at the end of the second quarter of 2012. Year-to-date comparable sales in the company's regional malls increased 5.2 percent, compared with results for the first nine months of 2011. On a rolling 12-month basis, new, same-space leases in the company's regional malls increased 10.7 percent over prior rents.

In the residential portfolio, comparable average occupancies for the nine months ended October 31, 2012, were 94.7 percent, up from 94.6 percent last year. Average monthly residential rents for the company's comparable apartments rose to $1,194 year-to-date, a 4.6 percent increase compared with $1,141 at October 31, 2011. Average rents in the company's comparable apartments in its core markets were $1,585 year-to-date, a 5.4 percent increase from $1,504 for the first nine months of 2011.

Debt Maturities, Financing Activity and Liquidity

Since January 31, 2012, the company has addressed, through closed loans and committed financings, $1.1 billion at full consolidation ($1.3 billion at its pro-rata share) of the $1.2 billion ($1.4 billion at pro-rata) of long-term debt maturities coming due in fiscal year 2012. Additionally, inclusive of Senior and Subordinated Debt, the company addressed $260.3 million ($279.3 million at pro-rata) of loans maturing in future years.

In financing its real estate assets, the company uses nonrecourse mortgage debt at the property level and seeks to fix its mortgage debt through long-term financings.  This allows the company to benefit from historically low interest rates in the current environment. For the first nine months of 2012, the company's overall weighted-average cost of debt decreased to 5.10 percent, compared with 5.21 percent at October 31, 2011. Fixed-rate debt represented 84 percent of total debt at October 31, 2012. The company's weighted-average life of its debt increased to 6.90 years at October 31, 2012, from 5.40 years for the same period in 2011.

At October 31, 2012, the company had $268.8 million ($238.6 million at full consolidation) in cash on its balance sheet and $213.8 million of available capacity on its revolving bank line of credit.

Recent Openings and Projects Under Construction

At the end of the third quarter, Forest City had seven projects under construction at a total cost of $323.9 million, at the company's pro-rata share ($257.2 million at full consolidation). This compares with $1.3 billion at pro-rata ($1.9 billion at full consolidation) at the end of the third quarter of 2011.

As previously mentioned, the September 28 opening of the Barclays Center arena in Brooklyn was a highlight of the third quarter and an event that drew international attention to the property and to Brooklyn.  In just its first two months of operations, the facility has already hosted dozens of major events. Initial event-day revenues have met the company's expectations, and the quality of the customer experience and venue operations have exceeded expectations.

At the beginning of the third quarter, the company opened the first phase of Botanica Eastbridge at Stapleton in Denver, and the 118-unit apartment community is 27 percent leased.  Also at Stapleton, lease-up continues for Aster Town Center, which opened its 85-unit first phase in the first quarter of this year.  Aster is already 97 percent leased.

In Washington, D.C., three separate projects are underway at The Yards, our mixed-use development in the rapidly growing Capitol Riverfront District.  At Boilermaker Shops, a 40,000-square-foot, adaptive reuse project with ground level retail and mezzanine office space, initial tenants move-ins are underway with openings expected to begin during the fourth quarter.  Construction continues at Lumber Shed, a 32,000-square-foot, adaptive-reuse office building with street-level retail, and at Twelve12, a mixed-use project with 218 rental apartments above a 50,000-square-foot Harris Teeter grocery store and a 28,000-square-foot Vida Fitness facility.  Lumber Shed is expected to open in the third quarter of 2013, with Twelve12 following in the third quarter of 2014.

Construction continues on the Continental Building, a 203-unit, adaptive-reuse apartment community in downtown Dallas at the company's Mercantile Place on Main development. Completion is expected in the first quarter of 2013.

In Boston, construction continues on 120 Kingston, a 240-unit apartment building. The project is located on the Rose Kennedy Greenway near the border of the city's financial district and Chinatown neighborhoods, and is expected to be completed in the second quarter of 2014.

Finally, during the third quarter the company activated an existing entitlement and commenced construction of Stratford Avenue Apartments, a 128-unit multifamily project in Fairfield, Connecticut.

Outlook

"Overall, our third quarter and nine month results met our expectations, as evidenced by strong Operating FFO results in both periods," said LaRue. "As we have since the beginning of the year, we continue to execute on our key strategies: focusing on core markets and products, building a strong capital structure and improving our balance sheet, and pursuing operational excellence to drive growth from the mature portfolio, newly opened projects, and new development.

"While we remain alert to changing conditions and cautious regarding macroeconomic factors, we are confident in our strategy and in our ability to deliver enhanced value for our shareholders and other stakeholders."

Corporate Description

Forest City Enterprises, Inc. is an NYSE-listed national real estate company with $10.7 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 SEC on Form 8-K. This Supplemental Package includes operating and financial information for the three months and nine months ended October 31, 2012, with reconciliations of non-GAAP financial measures, such as FFO, Operating FFO, EBDT, comparable NOI and results prepared using the pro-rata consolidation method, to their most directly comparable GAAP financial measures.

FFO

The company uses FFO, along with EBDT and net earnings (loss) to report its operating results. The majority of the company's peers in the publically traded real estate industry are Real Estate Investment Trusts ("REITs") and report operations using FFO as defined by the National Association of Real Estate Investment Trusts ("NAREIT"). FFO provides supplemental information about the company's operations. Although FFO is not presented in accordance with GAAP, the company believes it is necessary to understand its business and operating results, along with net earnings, the most comparable GAAP measure. The company believes its presentation of FFO provides important supplemental information to its investors.

FFO is defined by NAREIT as net earnings excluding the following items: i) gain (loss) on disposition of rental properties, divisions and other investments (net of tax); ii) non-cash charges for real estate depreciation and amortization; iii) impairment of depreciable real estate (net of tax); iv) extraordinary items (net of tax); and v) cumulative or retrospective effect of change in accounting principle (net of tax). FFO is reconciled to net earnings (loss), the most comparable financial measure calculated in accordance with GAAP, in the table titled Reconciliation of FFO and EBDT to Net Earnings/Loss below and in the company's Supplemental Package, which the company will also furnish to the SEC on Form 8-K.

Operating FFO

Operating FFO is defined as FFO, as defined by NAREIT, adjusted to exclude: i) activity related to our land held for divestiture (including impairment charges); ii) impairment of Land Group projects; iii) write-offs of abandoned development projects; iv) income recognized on state and federal historic and other tax credits; v) gains or losses from extinguishment of debt; vi) gains or losses on change in control of interests; vii) the adjustment to recognize rental revenues and rental expense using the straight-line method; viii) other non-recurring items such as income generated from the casino land sale; ix) the Nets pre-tax FFO; and x) income taxes on FFO.

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 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.

NOI

NOI, a non-GAAP measure, is defined as revenues (excluding straight-line rent adjustments) less operating expenses (including depreciation and amortization and amortization of mortgage procurement costs for non-real estate groups) plus interest income plus equity in earnings (loss) of unconsolidated entities (excluding gain on disposition and impairment of unconsolidated entities) plus interest expense, gain (loss) on extinguishment of debt, depreciation and amortization of unconsolidated entities.  We believe NOI provides us, as well as our investors, additional information about our core business operations and, along with earnings, is necessary to understand our business and operating results.

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 its liquidity, ability to finance or refinance projects and repay its debt, the impact of the current economic environment on its ownership, development and management of its real estate portfolio, general real estate investment and development risks, vacancies in its properties, the strategic decision to reposition or divest portions of the company's land business, 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, its substantial debt leverage and the ability to obtain and service debt, the impact of restrictions imposed by its 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 its 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 its publicly traded securities, inflation risks, litigation risks, cybersecurity risks and cyber incidents, 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.

 

Reconciliation of FFO and EBDT to Net Earnings (Loss)

Three Months Ended


Three Months Ended


Nine Months Ended


Nine Months Ended


October 31, 2012


October 31, 2011


October 31, 2012


October 31, 2011


FFO

EBDT


FFO

EBDT


FFO

EBDT


FFO

EBDT


(in thousands)

Net earnings (loss) attributable to Forest City Enterprises, Inc.

$       (1,078)

$       (1,078)


$     (36,801)

$     (36,801)


$     (22,043)

$     (22,043)


$       18,900

$       18,900

Depreciation and Amortization—Real Estate Groups

73,526

73,526


71,304

71,304


216,436

216,436


209,062

209,062

Impairment of depreciable rental properties

30,364

30,364


49,446

49,446


35,304

35,304


53,116

53,116

Gain on disposition of rental properties and partial interests in rental properties

(19,299)

(19,299)


(5,849)

(5,849)


(43,320)

(43,320)


(67,914)

(67,914)

Income tax expense (benefit) adjustments — current and deferred (1)












  Gain on disposition of rental properties and partial interests in rental properties

7,893

7,893


2,275

2,275


17,174

17,174


26,339

26,339

  Impairment of depreciable rental properties

(11,776)

(11,776)


(19,177)

(19,177)


(13,692)

(13,692)


(20,600)

(20,600)

Straight-line rent adjustments

-

(3,107)


-

(3,268)


-

(11,717)


-

(2,995)

Net gain on change in control of interests

-

-


-

-


-

(4,064)


-

-

Net (gain) loss on land held for divestiture activity

-

(277)


-

-


-

51,575


-

-

Impairment of Land Group projects

-

-


-

2,550


-

-


-

3,950

Amortization of mortgage procurement costs—Real Estate Groups

-

3,364


-

4,052


-

11,340


-

11,099

Preference payment

-

-


-

585


-

-


-

1,756

Allowance for projects under development revision

-

-


-

(2,000)


-

-


-

(2,000)

Income tax expense (benefit) adjustments — current and deferred (1)












  Deferred income tax expense (benefit) on operating earnings

-

(2,547)


-

15,349


-

17,655


-

46,378

  Impairment of Land Group projects

-

-


-

(989)


-

-


-

(1,532)

  Net gain (loss) on land held for divestiture activity

-

115


-

-


-

(20,003)


-

-

  Net gain on change in control of interests

-

-


-

-


-

1,576


-

-

FFO/EBDT

$       79,630

$       77,178


$       61,198

$       77,477


$     189,859

$     236,221


$     218,903

$     275,559













(1)  The following table provides detail of Income Tax Expense (Benefit) in thousands:














Three Months Ended October 31,




Nine Months Ended October 31,





2012

2011





2012

2011




Current taxes












Operating earnings

$       (3,575)

$     (13,357)





$       (8,941)

$     (37,501)




Gain on disposition of rental properties and partial interests in rental properties

(565)

10





(21,732)

39,179




Net gain (loss) on land held for divestiture activity

(17,967)

-





(16,299)

-




Subtotal

(22,107)

(13,347)





(46,972)

1,678




Discontinued operations












Operating earnings

7

(543)





61

(285)




Gain on disposition of rental properties and partial interests in rental properties

15,961

-





21,592

2,792




Subtotal

15,968

(543)





21,653

2,507




Total Current taxes

(6,139)

(13,890)





(25,319)

4,185




Deferred taxes












Operating earnings

(2,545)

15,210





17,478

45,721




Gain on disposition of rental properties and partial interests in rental properties

(252)

2,265





26,966

(29,729)




Impairment of depreciable rental properties

(11,712)

(15,199)





(12,042)

(15,290)




Impairment of Land Group projects

-

(989)





-

(1,532)




Net gain (loss) on land held for divestiture activity

18,082

-





(3,704)

-




Net gain on change in control of interests

-

-





1,576

-




Subtotal

3,573

1,287





30,274

(830)




Discontinued operations












Operating earnings

(2)

139





177

657




Gain on disposition of rental properties and partial interests in rental properties

(7,251)

-





(9,652)

14,097




Impairment of real estate

(64)

(3,978)





(1,650)

(5,310)




Subtotal

(7,317)

(3,839)





(11,125)

9,444




Total Deferred taxes

(3,744)

(2,552)





19,149

8,614




Grand Total

$       (9,883)

$     (16,442)





$       (6,170)

$       12,799
















 

Reconciliation of Operating FFO to FFO


















Pro-Rata Consolidation


Three Months Ended October 31,



Nine Months Ended October 31,




2012

2011

% Change


2012

2011

% Change



(in thousands)



(in thousands)


Portfolio Pre-tax FFO:









Commercial Group


$            79,614

$            74,531



$          240,158

$          260,563


Residential Group


33,042

25,791



96,547

70,947


Land Group


615

523



(46,927)

(131)











Adjustments to Portfolio Pre-Tax FFO:









Net loss (gain) on land held for divestiture activity


(277)

-



51,575

-


Impairment of Land Group project


-

2,550



-

3,950


Abandoned development project write-offs


401

2,686



13,754

7,931


Tax credit income


(4,851)

(5,144)



(16,732)

(24,784)


(Gain) loss on extinguishment of portfolio debt


(9,019)

(15,465)



(7,175)

(18,147)


Net gain on change in control of interests


-

-



(4,064)

-


Straight-line rent adjustments


(3,107)

(3,268)



(11,717)

(2,995)


Casino land sale


-

-



(36,484)

(42,622)


Adjustments to Portfolio Pre-Tax FFO subtotal


(16,853)

(18,641)



(10,843)

(76,667)


Portfolio Pre-tax Operating FFO


96,418

82,204

17.3 %


278,935

254,712

9.5 %

Corporate Group Pre-tax FFO


(32,164)

(27,904)



(86,864)

(90,447)


Loss on extinguishment of debt - Corporate Group


789

-



789

10,800


Operating FFO


65,043

54,300

19.8 %


192,860

175,065

10.2 %

Nets Pre-tax FFO


(7,477)

(11,283)



(22,707)

(14,969)


Add back adjustments to Portfolio Pre-Tax FFO above


16,853

18,641



10,843

76,667


Add back loss on extinguishment of debt - Corporate Group


(789)

-



(789)

(10,800)


Income tax benefit (expense) on FFO


6,000

(460)



9,652

(7,060)


FFO


$            79,630

$            61,198

30.1 %


$          189,859

$          218,903

(13.3)%










 

Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (Loss) (GAAP) (in thousands)



















Three Months Ended October 31, 2012


Three Months Ended October 31, 2011


Full
Consolidation
(GAAP)

Less
Noncontrolling
Interest

Plus
Unconsolidated
Investments at
Pro-Rata

Plus
Discontinued
Operations

Pro-Rata
Consolidation
(Non-GAAP)


Full
Consolidation
(GAAP)

Less
Noncontrolling
Interest

Plus
Unconsolidated
Investments at
Pro-Rata

Plus
Discontinued
Operations

Pro-Rata
Consolidation
(Non-GAAP)

Net operating income

$   162,922

$     6,507

$             -

$          349

$   156,764


$     143,387

$         4,218

$              -

$        2,643

$     141,812

Interest expense

(69,300)

(4,007)

(25,932)

(159)

(91,384)


(65,334)

(1,710)

(26,211)

(1,865)

(91,700)

Interest expense of unconsolidated entities

(25,932)

-

25,932

-

-


(26,211)

-

26,211

-

-

Gain (loss) on extinguishment of debt

8,007

(415)

-

(192)

8,230


15,101

1,511

1,875

-

15,465

Gain on extinguishment of debt of unconsolidated entities

-

-

-

-

-


1,875

-

(1,875)

-

-

Equity in (earnings) loss of unconsolidated entities, including impairment

(3,906)

(61)

11,187

-

7,342


40,016

(38)

(28,967)

-

11,087

Net gain (loss) on land held for divestiture activity

807

247

(283)

-

277


-

-

-

-

-

Net loss on land held for divestiture activity of unconsolidated entities

(283)

-

283

-

-


-

-

-

-

-

Net gain on disposition of rental properties and partial interests in rental properties

-

-

-

19,299

19,299


5,849

-

-

-

5,849

Impairment of consolidated real estate

(30,200)

-

-

(164)

(30,364)


(450)

-

(41,289)

(10,257)

(51,996)

Impairment of unconsolidated real estate

-

-

-

-

-


(41,289)

-

41,289

-

-

Depreciation and amortization—Real Estate Groups (a)

(57,044)

(2,699)

(19,145)

(36)

(73,526)


(52,568)

(1,174)

(18,024)

(1,886)

(71,304)

Amortization of mortgage procurement costs—Real Estate Groups (b)

(2,665)

(74)

(773)

-

(3,364)


(3,371)

(166)

(805)

(42)

(4,052)

Depreciation and amortization of unconsolidated entities

(19,918)

-

19,918

-

-


(18,829)

-

18,829

-

-

Straight-line rent adjustment

3,055

-

-

52

3,107


3,167

-

-

101

3,268

Preference payment

-

-

-

-

-


(585)

-

-

-

(585)

Earnings (loss) before income taxes

(34,457)

(502)

11,187

19,149

(3,619)


758

2,641

(28,967)

(11,306)

(42,156)

Income tax benefit (expense)

18,534

-

-

(8,651)

9,883


12,060

-

-

4,382

16,442













Equity in earnings (loss) of unconsolidated entities, including impairment

4,189

61

(11,470)

-

(7,342)


(40,016)

38

28,967

-

(11,087)

Net loss on land held for divestiture activity of unconsolidated entities

(283)

-

283

-

-


-

-

-

-

-


3,906

61

(11,187)

-

(7,342)


(40,016)

38

28,967

-

(11,087)

Earnings (loss) from continuing operations

(12,017)

(441)

-

10,498

(1,078)


(27,198)

2,679

-

(6,924)

(36,801)

Discontinued operations, net of tax

10,370

(128)

-

(10,498)

-


(6,860)

64

-

6,924

-

Net earnings (loss)

(1,647)

(569)

-

-

(1,078)


(34,058)

2,743

-

-

(36,801)

Noncontrolling interests












(Earnings) loss from continuing operations attributable to noncontrolling interests

441

441

-

-

-


(2,679)

(2,679)

-

-

-

(Earnings) loss from discontinued operations attributable to noncontrolling interests

128

128

-

-

-


(64)

(64)

-

-

-


569

569

-

-

-


(2,743)

(2,743)

-

-

-

Net loss attributable to Forest City Enterprises, Inc.

$      (1,078)

$             -

$              -

$             -

$       (1,078)


$     (36,801)

$              -

$              -

$              -

$     (36,801)

Preferred dividends and inducements of preferred stock conversion

(17,731)

-

-

-

(17,731)


(3,850)

-

-

-

(3,850)

Net loss attributable to Forest City Enterprises, Inc. common shareholders

$    (18,809)

$             -

$              -

$             -

$     (18,809)


$     (40,651)

$              -

$              -

$              -

$     (40,651)

(a) Depreciation and amortization - Real Estate Groups

$      57,044

$     2,699

$    19,145

$           36

$       73,526


$       52,568

$       1,174

$     18,024

$      1,886

$       71,304

      Depreciation and amortization—Non-Real Estate

1,037

-

-

-

1,037


1,012

-

-

-

1,012

      Total depreciation and amortization

$      58,081

$     2,699

$    19,145

$           36

$       74,563


$       53,580

$       1,174

$     18,024

$      1,886

$       72,316

(b) Amortization of mortgage procurement costs - Real Estate Groups

$        2,665

$          74

$         773

$              -

$         3,364


$         3,371

$          166

$          805

$           42

$         4,052













 

Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (Loss) (GAAP) (in thousands)


















Nine Months Ended October 31, 2012


Nine Months Ended October 31, 2011


Full
Consolidation
(GAAP)

Less
Noncontrolling
Interest

Plus
Unconsolidated
Investments at
Pro-Rata

Plus
Discontinued
Operations

Pro-Rata
Consolidation
(Non-GAAP)


Full
Consolidation
(GAAP)

Less
Noncontrolling
Interest

Plus
Unconsolidated
Investments at
Pro-Rata

Plus
Discontinued
Operations

Pro-Rata
Consolidation
(Non-GAAP)

Net operating income

$     487,481

$    13,380

$             -

$     4,729

$    478,830


$    496,804

$    14,224

$              -

$      14,107

$     496,687

Interest expense

(188,640)

(9,408)

(76,230)

(2,413)

(257,875)


(192,545)

(9,065)

(74,501)

(6,280)

(264,261)

Interest expense of unconsolidated entities

(76,230)

-

76,230

-

-


(74,501)

-

74,501

-

-

Gain (loss) on extinguishment of debt

7,288

(603)

(1,313)

(192)

6,386


9,334

1,507

(480)

-

7,347

Loss on extinguishment of debt of unconsolidated entities

(1,313)

-

1,313

-

-


(480)

-

480

-

-

Equity in (earnings) loss of unconsolidated entities, including impairment

17,933

(260)

1,413

-

19,606


17,637

(228)

(3,076)

-

14,789

Net gain (loss) on land held for divestiture activity

(5,651)

3,754

(42,170)

-

(51,575)


-

-

-

-

-

Net loss on land held for divestiture activity of unconsolidated entities

(42,170)

-

42,170

-

-


-

-

-

-

-

Net gain on disposition of rental properties and partial interests in rental properties

-

-

16,107

27,213

43,320


15,410

-

12,567

39,937

67,914

Gain on disposition of unconsolidated entities

16,107

-

(16,107)

-

-


12,567

-

(12,567)

-

-

Impairment of consolidated real estate

(30,660)

-

(390)

(4,254)

(35,304)


(2,085)

-

(41,289)

(13,692)

(57,066)

Impairment of unconsolidated real estate

(390)

-

390

-

-


(41,289)

-

41,289

-

-

Depreciation and amortization—Real Estate Groups (a)

(161,414)

(4,695)

(57,992)

(1,725)

(216,436)


(158,488)

(4,370)

(47,724)

(7,220)

(209,062)

Amortization of mortgage procurement costs—Real Estate Groups (b)

(9,054)

(303)

(2,423)

(166)

(11,340)


(8,791)

(425)

(2,157)

(576)

(11,099)

Depreciation and amortization of unconsolidated entities

(60,415)

-

60,415

-

-


(49,881)

-

49,881

-

-

Straight-line rent adjustment

11,338

-

-

379

11,717


2,070

-

-

925

2,995

Preference payment

-

-

-

-

-


(1,756)

-

-

-

(1,756)

Earnings (loss) before income taxes

(35,790)

1,865

1,413

23,571

(12,671)


24,006

1,643

(3,076)

27,201

46,488

Income tax benefit (expense)

16,698

-

-

(10,528)

6,170


(848)

-

-

(11,951)

(12,799)

Net gain on change in control of interests

6,766

2,702

-

-

4,064


-

-

-

-

-













Equity in earnings (loss) of unconsolidated entities, including impairment

24,237

260

(43,583)

-

(19,606)


(17,637)

228

3,076

-

(14,789)

Net loss on land held for divestiture activity of unconsolidated entities

(42,170)

-

42,170

-

-


-

-

-

-

-


(17,933)

260

(1,413)

-

(19,606)


(17,637)

228

3,076

-

(14,789)

Earnings (loss) from continuing operations

(30,259)

4,827

-

13,043

(22,043)


5,521

1,871

-

15,250

18,900

Discontinued operations, net of tax

14,501

1,458

-

(13,043)

-


99,475

84,225

-

(15,250)

-

Net earnings (loss)

(15,758)

6,285

-

-

(22,043)


104,996

86,096

-

-

18,900

Noncontrolling interests












Earnings from continuing operations attributable to noncontrolling interests

(4,827)

(4,827)

-

-

-


(1,871)

(1,871)

-

-

-

Earnings from discontinued operations attributable to noncontrolling interests

(1,458)

(1,458)

-

-

-


(84,225)

(84,225)

-

-

-


(6,285)

(6,285)

-

-

-


(86,096)

(86,096)

-

-

-

Net earnings (loss) attributable to Forest City Enterprises, Inc.

$     (22,043)

$                -

$              -

$           -

$    (22,043)


$     18,900

$              -

$              -

$              -

$      18,900

Preferred dividends and inducements of preferred stock conversion

(25,431)

-

-

-

(25,431)


(11,550)

-

-

-

(11,550)

Net earnings (loss) attributable to Forest City Enterprises, Inc. common shareholders

$     (47,474)

$               -

$              -

$           -

$    (47,474)


$       7,350

$              -

$              -

$              -

$        7,350

(a) Depreciation and amortization—Real Estate Groups

$     161,414

$        4,695

$     57,992

$   1,725

$    216,436


$   158,488

$      4,370

$     47,724

$      7,220

$    209,062

      Depreciation and amortization—Non-Real Estate

2,233

-

-

-

2,233


2,400

-

-

-

2,400

      Total depreciation and amortization

$     163,647

$        4,695

$     57,992

$   1,725

$    218,669


$   160,888

$      4,370

$     47,724

$      7,220

$    211,462

(b) Amortization of mortgage procurement costs—Real Estate Groups

$         9,054

$           303

$       2,423

$      166

$      11,340


$       8,791

$         425

$       2,157

$         576

$      11,099













 


Net Operating Income (in thousands)


Three Months Ended October 31, 2012


Three Months Ended October 31, 2011

% Change


Full
Consolidation
(GAAP)

Less
Noncontrolling
Interest

Plus
Discontinued
Operations

Pro-Rata
Consolidation
(Non-GAAP)


Full
Consolidation
(GAAP)

Less
Noncontrolling
Interest

Plus
Discontinued
Operations

Pro-Rata
Consolidation
(Non-GAAP)

Full
Consolidation
(GAAP)

Pro-Rata
Consolidation
(Non-GAAP)

Commercial Group












Retail












Comparable

$        58,212

$           1,569

$               -

$        56,643


$        58,067

$           1,700

$               -

$        56,367

0.2 %

0.5 %

Total

62,012

2,106

590

60,496


58,046

2,031

1,823

57,838



Office Buildings












Comparable

61,843

1,822

-

60,021


61,388

1,718

-

59,670

0.7 %

0.6 %

Total

62,383

1,798

-

60,585


61,932

1,230

(49)

60,653



Arena

1,278

802

-

476


(2,210)

(974)

-

(1,236)



Hotels

4,200

-

-

4,200


3,217

-

(88)

3,129



Land Sales

3,703

-

-

3,703


128

-

-

128



Other (1)

(259)

(7)

(183)

(435)


(2,151)

665

522

(2,294)



Total Commercial Group












Comparable

120,055

3,391

-

116,664


119,455

3,418

-

116,037

0.5 %

0.5 %

Total

133,317

4,699

407

129,025


118,962

2,952

2,208

118,218



Residential Group












Apartments












Comparable

36,463

635

-

35,828


34,475

672

-

33,803

5.8 %

6.0 %

Total

39,051

852

(58)

38,141


35,428

600

435

35,263



Subsidized Senior Housing

6,471

55

-

6,416


4,437

101

-

4,336



Military Housing

6,770

285

-

6,485


8,626

97

-

8,529



Land Sales

-

-

-

-


46

-

-

46



Other (1)

(1,569)

131

-

(1,700)


(2,745)

148

-

(2,893)



Total Residential Group












Comparable

36,463

635

-

35,828


34,475

672

-

33,803

5.8 %

6.0 %

Total

50,723

1,323

(58)

49,342


45,792

946

435

45,281



Total Rental Properties












Comparable

156,518

4,026

-

152,492


153,930

4,090

-

149,840

1.7 %

1.8 %

Total

184,040

6,022

349

178,367


164,754

3,898

2,643

163,499



Land Development Group

886

485

-

401


2,333

320

-

2,013



The Nets

(7,477)

-

-

(7,477)


(11,283)

-

-

(11,283)



Corporate Activities

(14,527)

-

-

(14,527)


(12,417)

-

-

(12,417)



Grand Total

$      162,922

$           6,507

$             349

$      156,764


$      143,387

$           4,218

$          2,643

$      141,812















(1)  Includes write-offs of abandoned development projects, non-capitalizable development costs and unallocated management and service company overhead, net of tax credit income.













 


Net Operating Income (in thousands)


Nine Months Ended October 31, 2012


Nine Months Ended October 31, 2011

% Change


Full
Consolidation
(GAAP)

Less
Noncontrolling
Interest

Plus
Discontinued
Operations

Pro-Rata
Consolidation
(Non-GAAP)


Full
Consolidation
(GAAP)

Less
Noncontrolling
Interest

Plus
Discontinued
Operations

Pro-Rata
Consolidation
(Non-GAAP)

Full
Consolidation
(GAAP)

Pro-Rata
Consolidation
(Non-GAAP)

Commercial Group












Retail












Comparable

$     172,557

$           5,011

$               -

$     167,546


$     169,492

$           5,064

$               -

$     164,428

1.8 %

1.9 %

Total

180,932

5,645

3,021

178,308


181,487

7,320

5,699

179,866



Office Buildings












Comparable

190,958

6,132

-

184,826


184,404

4,982

-

179,422

3.6 %

3.0 %

Total

193,054

6,229

-

186,825


190,757

4,900

2,823

188,680



Arena

(9,231)

(3,507)

-

(5,724)


(6,561)

(2,852)

-

(3,709)



Hotels

9,009

-

-

9,009


7,844

-

2,054

9,898



Land Sales (1)

40,201

-

-

40,201


42,801

(782)

684

44,267



Other (2)

(17,457)

(184)

822

(16,451)


(215)

1,959

1,545

(629)



Total Commercial Group












Comparable

363,515

11,143

-

352,372


353,896

10,046

-

343,850

2.7 %

2.5 %

Total

396,508

8,183

3,843

392,168


416,113

10,545

12,805

418,373



Residential Group












Apartments












Comparable

107,137

1,992

-

105,145


99,129

1,832

-

97,297

8.1 %

8.1 %

Total

113,348

2,450

886

111,784


98,250

1,798

1,302

97,754



Subsidized Senior Housing

15,582

259

-

15,323


12,418

351

-

12,067



Military Housing

21,433

529

-

20,904


19,793

335

-

19,458



Land Sales

-

-

-

-


204

16

-

188



Other (2)

(5,648)

416

-

(6,064)


(2,780)

425

-

(3,205)



Total Residential Group












Comparable

107,137

1,992

-

105,145


99,129

1,832

-

97,297

8.1 %

8.1 %

Total

144,715

3,654

886

141,947


127,885

2,925

1,302

126,262



Total Rental Properties












Comparable

470,652

13,135

-

457,517


453,025

11,878

-

441,147

3.9 %

3.7 %

Total

541,223

11,837

4,729

534,115


543,998

13,470

14,107

544,635



Land Development Group

10,355

1,543

-

8,812


5,227

754

-

4,473



The Nets

(22,707)

-

-

(22,707)


(14,969)

-

-

(14,969)



Corporate Activities

(41,390)

-

-

(41,390)


(37,452)

-

-

(37,452)



Grand Total

$     487,481

$         13,380

$         4,729

$     478,830


$     496,804

$         14,224

$       14,107

$     496,687















(1)  Includes $36,484 and $42,622 of NOI generated from the casino land sale at full and pro-rata consolidation for the nine months ended October 31, 2012 and 2011, respectively.

(2)  Includes write-offs of abandoned development projects, non-capitalizable development costs and unallocated management and service company overhead, net of tax credit income.  













 

SOURCE Forest City Enterprises, Inc.

Copyright 2012 PR Newswire



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