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EX-23 - EX-23 - FOREST CITY ENTERPRISES INCl39221exv23.htm
EX-21 - EX-21 - FOREST CITY ENTERPRISES INCl39221exv21.htm
EX-24.C - EX-24C - FOREST CITY ENTERPRISES INCl39221exv24wc.htm
EX-24.H - EX-24H - FOREST CITY ENTERPRISES INCl39221exv24wh.htm
EX-31.1 - EX-31.1 - FOREST CITY ENTERPRISES INCl39221exv31w1.htm
EX-24.M - EX-24M - FOREST CITY ENTERPRISES INCl39221exv24wm.htm
EX-24.F - EX-24F - FOREST CITY ENTERPRISES INCl39221exv24wf.htm
EX-24.K - EX-24K - FOREST CITY ENTERPRISES INCl39221exv24wk.htm
EX-24.N - EX-24.N - FOREST CITY ENTERPRISES INCl39221exv24wn.htm
EX-24.E - EX-24E - FOREST CITY ENTERPRISES INCl39221exv24we.htm
EX-24.J - EX-24J - FOREST CITY ENTERPRISES INCl39221exv24wj.htm
EX-24.L - EX-24L - FOREST CITY ENTERPRISES INCl39221exv24wl.htm
EX-10.7 - EX-10.7 - FOREST CITY ENTERPRISES INCl39221exv10w7.htm
EX-24.A - EX-24A - FOREST CITY ENTERPRISES INCl39221exv24wa.htm
EX-24.I - EX-24I - FOREST CITY ENTERPRISES INCl39221exv24wi.htm
EX-24.G - EX-24G - FOREST CITY ENTERPRISES INCl39221exv24wg.htm
EX-24.B - EX-24B - FOREST CITY ENTERPRISES INCl39221exv24wb.htm
EX-10.16 - EX-10.16 - FOREST CITY ENTERPRISES INCl39221exv10w16.htm
EX-10.23 - EX-10.23 - FOREST CITY ENTERPRISES INCl39221exv10w23.htm
EX-10.24 - EX-10.24 - FOREST CITY ENTERPRISES INCl39221exv10w24.htm
EX-10.14 - EX-10.14 - FOREST CITY ENTERPRISES INCl39221exv10w14.htm
EX-32.1 - EX-32.1 - FOREST CITY ENTERPRISES INCl39221exv32w1.htm
EX-31.2 - EX-31.2 - FOREST CITY ENTERPRISES INCl39221exv31w2.htm
EX-24.D - EX-24D - FOREST CITY ENTERPRISES INCl39221exv24wd.htm
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
     
ý   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2010
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 1-4372
FOREST CITY ENTERPRISES, INC.
 
(Exact name of registrant as specified in its charter)
         
Ohio   34-0863886
         
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
         
Terminal Tower   50 Public Square    
Suite 1100   Cleveland, Ohio   44113
         
(Address of principal executive offices)   (Zip Code)
         
  Registrant’s telephone number, including area code   216-621-6060
 
Securities registered pursuant to Section 12(b) of the Act:
         
 
  Name of each exchange on
Title of each class
  which registered
 
   
 
  Class A Common Stock ($.33 1/3 par value)
    New York Stock Exchange
  Class B Common Stock ($.33 1/3 par value)
    New York Stock Exchange
  $100,000,000 Aggregate Principal Amount of 7.375% Senior Notes Due 2034
    New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES  ý    NO o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES  o    NO ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES  ý    NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES  o    NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act: (Check one):
             
Large accelerated filer   ý   Accelerated filer   o   Non-accelerated filer   o   Smaller Reporting Company   o
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES  o    NO ý
The aggregate market value of the outstanding common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter was $874,712,205.
The number of shares of registrant’s common stock outstanding on March 23, 2010 was 134,805,397 and 21,607,568 for Class A and Class B common stock, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on June 16, 2010 are incorporated by reference into Part III to the extent described herein.


 

Forest City Enterprises, Inc. and Subsidiaries
Annual Report on Form 10-K
For The Year Ended January 31, 2010
Table of Contents
                 
PART I            
       
 
       
       
 
  Page
       
 
       
    Item 1.       2  
    Item 1A.       7  
    Item 1B.       20  
    Item 2.       20  
    Item 3.       36  
    Item 4.       36  
            36  
       
 
       
PART II            
       
 
       
    Item 5.       37  
    Item 6.       39  
    Item 7.       40  
    Item 7A.       88  
    Item 8.       92  
    Item 9.       159  
    Item 9A.       159  
    Item 9B.       161  
       
 
       
PART III            
       
 
       
    Item 10.       161  
    Item 11.       161  
    Item 12.       161  
    Item 13.       161  
    Item 14.       161  
       
 
       
PART IV            
       
 
       
    Item 15.       162  
            170  
 EX-10.7
 EX-10.14
 EX-10.16
 EX-10.23
 EX-10.24
 EX-21
 EX-23
 EX-24A
 EX-24B
 EX-24C
 EX-24D
 EX-24E
 EX-24F
 EX-24G
 EX-24H
 EX-24I
 EX-24J
 EX-24K
 EX-24L
 EX-24M
 EX-24.N
 EX-31.1
 EX-31.2
 EX-32.1

 


Table of Contents

PART I
Item 1. Business
Founded in 1920 and publicly traded since 1960, Forest City Enterprises, Inc. (with its subsidiaries, the “Company” or “Forest City”) is principally engaged in the ownership, development, management and acquisition of commercial and residential real estate properties in 27 states and the District of Columbia. At January 31, 2010, the Company had approximately $11.9 billion in consolidated assets, of which approximately $11.3 billion was invested in real estate, at cost. The Company’s core markets include Boston, the state of California, Chicago, Denver, the New York City/Philadelphia metropolitan area and the Greater Washington D.C./Baltimore metropolitan area. The Company has offices in Albuquerque, Boston, Chicago, Denver, London (England), Los Angeles, New York City, San Francisco, Washington, D.C. and the Company’s corporate headquarters in Cleveland, Ohio. The Company’s portfolio of real estate assets is diversified both geographically and among property types.
The Company operates through three primary strategic business units:
   
Commercial Group, the Company’s largest strategic business unit, owns, develops, acquires and operates regional malls, specialty/urban retail centers, office and life science buildings, hotels and mixed-use projects.
 
   
Residential Group owns, develops, acquires and operates residential rental properties, including upscale and middle-market apartments and adaptive re-use developments. Additionally, it develops for-sale condominium projects and also owns interests in entities that develop and manage military family housing.
 
   
Land Development Group acquires and sells both land and developed lots to residential, commercial and industrial customers. It also owns and develops land into master-planned communities and mixed-use projects.
The Company has centralized the capital management, financial reporting and certain administrative functions of its business units. In most other respects, the strategic business units operate autonomously, with the Commercial Group and Residential Group each having their own development, acquisition, leasing, property and financial management functions. The Company believes this structure enables its employees to focus their expertise and to exercise the independent leadership, creativity and entrepreneurial skills appropriate for their particular business segment.
Segments of Business
The Company currently has five segments:
   
Commercial Group
 
   
Residential Group
 
   
Land Development Group
 
   
The New Jersey Nets (“The Nets”)
 
   
Corporate Activities
Financial information about industry segments required by this item is included in Item 8 - Financial Statements and Supplementary Data and Note M - Segment Information.
Commercial Group
The Company has developed and/or acquired retail projects for more than 50 years and office and mixed-use projects for more than 30 years. The Commercial Group owns a diverse portfolio in both urban and suburban locations in 16 states and the District of Columbia. The Commercial Group targets densely populated markets where it uses its expertise to develop complex projects, often employing public and/or private partnerships. As of January 31, 2010, the Commercial Group owned interests in 98 completed properties, including 46 retail properties (approximately 15 million gross leasable square feet), 47 office properties (approximately 13.5 million gross leasable square feet) and 5 hotels (1,833 rooms).
The Company opened its first community retail center in 1948 and its first enclosed regional mall in 1962. Since then, it has developed regional malls and specialty retail centers. The specialty retail centers include urban retail centers, entertainment-based centers, community centers and power centers (collectively, “specialty retail centers”). As of January 31, 2010, the Commercial Group’s retail portfolio consisted of 17 regional malls with gross leasable area (“GLA”) of 8.1 million square feet and 29 specialty retail centers with a total GLA of 6.5 million square feet. The Commercial Group has two specialty retail centers under construction with GLA of 1.0 million square feet, one of which had a partial opening during the three months ended January 31, 2010 and the other had a grand opening in February 2010. The Commercial Group also had one regional mall under construction with GLA of 1.3 million square feet.

2


Table of Contents

Regional malls are developed in collaboration with anchor stores that typically own their facilities as an integral part of the mall structure and environment but do not generate significant direct payments to the Company. In contrast, anchor stores at specialty retail centers generally are tenants under long-term leases that contribute significant rental payments to the Company.
While the Company continues to develop regional malls in strong markets, it has also pioneered the concept of bringing specialty retailing to urban locations previously ignored by major retailers. With high population densities and disposable income levels at or near those of the suburbs, urban development is proving to be economically advantageous for the Company, for the tenants who realize high sales per square foot and for the cities that benefit from the new jobs and taxes created in the urban locations.
In its office development activities, the Company is primarily a build-to-suit developer that works with tenants to meet their requirements. The Company’s office development has focused primarily on mixed-use projects in urban developments, often built in conjunction with hotels and/or retail centers or as part of a major office or life science campus. As a result of this focus on urban developments, the Company continues to concentrate future office and mixed-use developments largely in the New York City, Boston, Chicago, Washington, D.C., Albuquerque and Denver metropolitan areas.
The following tables provide lease expiration and significant tenant information as of January 31, 2010 relating to the Commercial Group’s retail properties.
Retail Lease Expirations as of January 31, 2010
                                                 
 
                                            AVERAGE
                                            BASE
    NUMBER OF   SQUARE FEET     PERCENTAGE   NET     PERCENTAGE   RENT PER
EXPIRATION   EXPIRING   OF EXPIRING     OF TOTAL   BASE RENT     OF TOTAL   SQUARE FEET
YEAR   LEASES   LEASES (3)     LEASED GLA (1)   EXPIRING (2)     BASE RENT   EXPIRING (3)
 
 
                                               
2010
    262       645,973       5.08   %   $ 16,112,035       5.75   %   $ 31.34  
2011
    343       1,205,116       9.48       28,533,272       10.19       28.70  
2012
    247       927,210       7.29       22,617,851       8.08       28.26  
2013
    236       1,024,225       8.05       25,244,672       9.01       27.71  
2014
    233       1,078,570       8.48       22,539,251       8.05       27.14  
2015
    170       770,188       6.06       18,011,467       6.43       27.33  
2016
    224       1,197,226       9.42       32,648,867       11.66       37.23  
2017
    149       1,014,189       7.98       22,302,602       7.96       25.85  
2018
    166       848,368       6.67       18,481,659       6.60       23.89  
2019
    111       984,031       7.74       21,270,318       7.59       23.35  
Thereafter
    100       3,020,665       23.75       52,308,693       18.68       20.55  
             
Total
    2,241       12,715,761       100.00   %   $ 280,070,687       100.00   %   $ 26.41  
             
(1)  
GLA = Gross Leasable Area.
 
(2)  
Net base rent expiring is an operating statistic and is not comparable to rental revenue, a Generally Accepted Accounting Principles (“GAAP”) financial measure. The primary differences arise because net base rent is determined using the tenant’s contractual rental agreements at the Company’s ownership share of the base rental income from expiring leases as determined within the rent agreement and it does not include adjustments such as the impact of straight-line rent, amortization of above and below market in-place lease values and contingent rental payments (which are not reasonably estimable).
 
(3)  
Square feet of expiring leases and average base rent per square feet are operating statistics that represent 100% of the square footage and base rental income per square foot from expiring leases.

3


Table of Contents

Schedule of Significant Retail Tenants as of January 31, 2010
(Based on net base rent 1% or greater of the Company’s ownership share)
                         
    NUMBER   LEASED   PERCENTAGE OF
    OF   SQUARE   TOTAL RETAIL
TENANT   LEASES   FEET   SQUARE FEET
 
 
                       
AMC Entertainment, Inc.
    6       515,097       4.05   %
Bass Pro Shops, Inc.
    3       510,855       4.02  
Regal Entertainment Group
    5       381,461       3.00  
TJX Companies
    10       313,861       2.47  
The Gap
    24       305,756       2.40  
The Home Depot
    2       282,000       2.22  
Dick’s Sporting Goods
    5       257,486       2.02  
Abercrombie & Fitch Stores, Inc.
    30       223,567       1.76  
The Limited
    36       221,684       1.74  
Footlocker, Inc.
    37       142,848       1.12  
Pathmark Stores, Inc.
    2       123,500       0.97  
American Eagle Outfitters
    18       104,067       0.83  
     
 
                       
Subtotal
    178       3,382,182       26.60  
     
 
                       
All Others
    2,063       9,333,579       73.40  
     
 
                       
Total
    2,241       12,715,761       100.00   %
     
The following tables provide lease expiration and significant tenant information as of January 31, 2010 relating to the Commercial Group’s office properties.
Office Lease Expirations as of January 31, 2010
                                                 
 
                                            AVERAGE
                                            BASE
    NUMBER OF   SQUARE FEET     PERCENTAGE   NET     PERCENTAGE   RENT PER
EXPIRATION   EXPIRING   OF EXPIRING     OF TOTAL   BASE RENT     OF TOTAL   SQUARE FEET
YEAR   LEASES   LEASES (3)     LEASED GLA (1)   EXPIRING (2)     BASE RENT   EXPIRING (3)
 
 
                                               
2010
    99       1,209,822       10.76 %   $ 24,285,735       7.59 %   $ 23.76  
2011
    69       734,187       6.53       17,207,639       5.37       26.25  
2012
    81       1,128,482       10.04       32,087,579       10.02       30.20  
2013
    75       1,179,469       10.49       27,184,470       8.49       24.52  
2014
    44       888,349       7.90       22,791,675       7.12       30.13  
2015
    12       258,801       2.30       4,693,752       1.47       19.17  
2016
    19       401,476       3.57       9,084,751       2.84       24.85  
2017
    18       265,156       2.36       7,953,622       2.48       32.43  
2018
    17       1,060,998       9.44       30,255,361       9.45       32.42  
2019
    17       689,141       6.13       16,450,908       5.14       25.77  
Thereafter
    36       3,427,531       30.48       128,174,483       40.03       39.18  
             
Total
    487       11,243,412       100.00 %   $ 320,169,975       100.00 %   $ 30.93  
             
 
(1)
 
GLA = Gross Leasable Area.
 
(2)
 
Net base rent expiring is an operating statistic and is not comparable to rental revenue, a GAAP financial measure. The primary differences arise because net base rent is determined using the tenant’s contractual rental agreements at the Company’s ownership share of the base rental income from expiring leases as determined within the rent agreement and it does not include adjustments such as the impact of straight-line rent, amortization of above and below market in-place lease values and contingent rental payments (which are not reasonably estimable).
 
(3)
 
Square feet of expiring leases and average base rent per square feet are operating statistics that represent 100% of the square footage and base rental income per square foot from expiring leases.

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Table of Contents

Schedule of Significant Office Tenants as of January 31, 2010
(Based on net base rent 2% or greater of the Company’s ownership share)
                 
    LEASED     PERCENTAGE OF
    SQUARE     TOTAL OFFICE
TENANT   FEET     SQUARE FEET
 
 
               
City of New York
    890,185       7.92   %
Millennium Pharmaceuticals, Inc.
    628,934       5.59  
U.S. Government
    620,402       5.52  
Morgan Stanley & Co.
    444,685       3.96  
Securities Industry Automation Corp.
    433,971       3.86  
Wellchoice, Inc.
    392,514       3.49  
JP Morgan Chase & Co.
    385,254       3.43  
Forest City Enterprises, Inc.(1)
    366,786       3.26  
Bank of New York
    323,043       2.87  
National Grid
    254,034       2.26  
Alkermes, Inc.
    210,248       1.87  
Clearbridge Advisors, LLC, a Legg Mason Company
    193,249       1.72  
Covington & Burling, LLP
    160,565       1.43  
Seyfarth Shaw, LLP
    96,909       0.86  
     
 
               
Subtotal
    5,400,779       48.04  
     
 
               
All Others
    5,842,633       51.96  
     
 
               
Total
    11,243,412       100.00   %
     
 
(1)
 
All intercompany rental income is eliminated in consolidation.

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Table of Contents

Residential Group
The Company’s Residential Group owns, develops, acquires, leases and manages residential rental properties in 21 states and the District of Columbia. The Company has been engaged in apartment community development for over 50 years beginning in Northeast Ohio and gradually expanding nationally. Its residential portfolio includes middle-market apartments, upscale urban properties and adaptive re-use developments. The Residential Group develops for-sale condominium projects and also owns, develops and manages military family housing.
At January 31, 2010, the Residential Group’s operating portfolio consisted of 34,707 units in 119 properties in which Forest City has an ownership interest. In addition, the Company owns a residual interest in and manages 5 properties containing 741 units of syndicated senior citizen subsidized housing.
Land Development Group
The Company has been in the land development business since the 1930s. The Land Development Group acquires and sells raw land and sells fully-entitled developed lots to residential, commercial and industrial customers. The Land Development Group also owns and develops raw land into master-planned communities, mixed-use projects and other residential developments. As of January 31, 2010, the Company owned approximately 10,543 acres of undeveloped land (including 7,756 of saleable acres) for these commercial and residential development purposes. The Company has an option to purchase 1,474 acres of developable land at its Stapleton project in Denver, Colorado, and 5,731 acres of developable land at its Mesa del Sol project in Albuquerque, New Mexico. The Company has land development projects in 12 states.
Historically, the Land Development Group’s activities focused on land development projects in Northeast Ohio. Over time, the Land Development Group’s activities expanded to larger, more complex projects. The Land Development Group has extended its activities on a national basis, first in Arizona, and more recently in Illinois, North Carolina, Florida, Colorado, Texas, New Mexico, South Carolina, New York, Missouri and Washington. Land development and sales activities at the Company’s Stapleton project in Denver, Mesa del Sol project in Albuquerque and Central Station project in downtown Chicago are reported in the Land Development Group.
As of the end of fiscal 2009, the Company had purchased 1,461 acres at Stapleton, leaving a balance of 1,474 acres that may be acquired through an option held by the Company for additional development over the course of the next 8 years. Over and above the developable land that may be purchased through an option held by the Company, 1,116 acres of Stapleton are reserved for regional parks and open space, of which 683 acres are under development or have been completed. Aside from land development and sales activities, Stapleton currently has over 2 million square feet of retail space, approximately 350,000 square feet of office space, over 1.2 million of other commercial space and 484 apartment units in place.
Additionally, as of the end of fiscal 2009, the Company had purchased 3,175 acres at Mesa del Sol, of which 2,336 saleable acres are on hand as of January 31, 2010. This leaves a balance of 5,731 acres to be acquired for additional development over the course of the next 25 to 50 years. Aside from land development and sales activities, Mesa del Sol currently has 375,000 square feet of office space in place, which is included in the Commercial Group segment.
In addition to sales activities of the Land Development Group, the Company also sells land acquired by its Commercial Group and Residential Group adjacent to their respective projects. Proceeds and related costs from such land sales are included in the revenues and expenses of such groups.
The Nets
On August 16, 2004 the Company purchased an ownership interest in The Nets, a member of the National Basketball Association (“NBA”). The Company accounts for its investment on the equity method of accounting. Although the Company has a legal ownership interest of approximately 23% in The Nets, the Company recognized approximately 68%, 54% and 25% of the net loss for the years ended January 31, 2010, 2009 and 2008, respectively, because profits and losses are allocated to each member based on an analysis of the respective member’s claim on the net book equity assuming a liquidation at book value at the end of the accounting period without regard to unrealized appreciation (if any) in the fair value of The Nets.
The purchase of the interest in The Nets was the first step in the Company’s efforts to pursue development projects, which include a new entertainment arena complex and adjacent urban developments combining housing, offices, shops and public open space. The Nets segment is primarily comprised of and reports on the sports operations of the basketball team.
On December 15, 2009, the Company entered into a purchase agreement with an affiliate of Onexim Group, an international private investment fund, to create a strategic partnership. Pursuant to the terms of the agreement, entities to be formed by Onexim Group will invest $200,000,000 and make certain contingent funding commitments to acquire 80% of The Nets, 45% of the Arena project and the right to purchase up to 20% of the Atlantic Yards Development Company. The Company will retain a noncontrolling ownership interest in The Nets under the agreement. The closing of the strategic partnership requires certain consents and is subject to the satisfaction of various conditions. While the parties are proceeding in good faith to obtain the consents and satisfy the conditions, the Company cannot assure you that it will be successful.

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Table of Contents

Competition
The real estate industry is highly competitive in many of the markets in which the Company operates. There are numerous other developers, managers and owners of commercial and residential real estate and undeveloped land that compete with the Company nationally, regionally and/or locally, some of whom may have greater financial resources and market share than the Company. They compete with the Company for management and leasing opportunities, land for development, properties for acquisition and disposition, and for anchor stores and tenants for properties. The Company may not be able to successfully compete in these areas. In addition, competition could over-saturate any market; as a result, the Company may not have sufficient cash to meet the nonrecourse debt service requirements on certain of its properties. Although the Company may attempt to negotiate a restructuring with the mortgagee, it may not be successful, particularly in light of current credit markets, which could cause a property to be transferred to the mortgagee.
Tenants at the Company’s retail properties face continual competition in attracting customers from retailers at other shopping centers, catalogue companies, online merchants, warehouse stores, large discounters, outlet malls, wholesale clubs, direct mail and telemarketers. The Company’s competitors and those of its tenants could have a material adverse effect on the Company’s ability to lease space in its properties and on the rents it can charge or the concessions it can grant. This in turn could materially and adversely affect the Company’s results of operations and cash flows, and could affect the realizable value of its assets upon sale.
In addition to real estate competition, the Company faces competition related to the operation of The Nets. Specifically, The Nets are in competition with other major league sports, college athletics and other sports-related and non-sports related entertainment. If The Nets are not able to successfully manage this risk, they may incur additional losses resulting in an increase of the Company’s share of the total losses, which are allocated to each member based on an analysis of the respective member’s claim on the net book equity assuming a liquidation at book value at the end of the accounting period without regard to unrealized appreciation (if any) in the fair value of The Nets.
Number of Employees
The Company had 3,019 employees as of January 31, 2010, of which 2,706 were full-time and 313 were part-time.
Available Information
Forest City Enterprises, Inc. is an Ohio corporation and its executive offices are located at Suite 1100, 50 Public Square, Cleveland, Ohio 44113. The Company makes available, free of charge, on its website at www.forestcity.net, its annual, quarterly and current reports, including amendments to such reports, as soon as reasonably practicable after the Company electronically files such material with, or furnishes such material to, the Securities and Exchange Commission (“SEC”). The Company’s SEC filings can also be obtained from the SEC website at www.sec.gov.
The Company’s corporate governance guidelines including the Company’s Code of Ethical and Legal Conduct and committee charters are also available on the Company’s website at www.forestcity.net or in print to any stockholder upon written request addressed to Corporate Secretary, Forest City Enterprises, Inc., Suite 1360, 50 Public Square, Cleveland, Ohio 44113.
The information found on the Company’s website or the SEC website is not part of this Annual Report on Form 10-K.
Item 1A. Risk Factors
Lending and Capital Market Conditions May Negatively Impact Our Liquidity and Our Ability to Finance or Refinance Projects or Repay Our Debt
Ongoing economic conditions have negatively impacted the lending and capital markets, particularly for real estate. The capital markets have witnessed significant adverse conditions, including a substantial reduction in the availability of and access to capital. Financial institutions have significantly reduced their lending with an emphasis on lessening their exposure to real estate. Originations of new loans for commercial mortgage backed securities are extremely limited. Underwriting standards are being tightened with lenders requiring lower loan-to-values, increased debt service coverage levels and higher lender spreads. These market conditions, combined with the volatility in the financial markets, have made our ability to access capital challenging. We may not be able to obtain financings on terms comparable to those we secured prior to the economic downturn, and our financing costs may be significantly higher. These conditions have required us to curtail our investment in new development projects, which will negatively impact the future growth of our business. If these conditions do not improve, we may be required to further curtail our development, redevelopment or expansion projects and potentially write down our investments in some projects.

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The adverse market conditions also impact our ability to, and the cost at which we, refinance our debt and obtain renewals or replacement of credit enhancement devices, such as letters of credit. While some of our current financings have extension options, some of those are contingent upon pre-determined underwriting qualifications. We cannot assure you that a given project will meet the required conditions to qualify for such extensions. Our inability to extend, repay or refinance our debt when it becomes due, including upon a default or acceleration event, could result in foreclosure on the properties pledged as collateral thereof, which could result in a loss of our full investment in such properties. While we are actively working to refinance or extend our maturing debt obligations, we cannot assure you that we will be able to do so on a timely basis. Moreover, we expect refinancing to occur on less favorable terms. Lenders in these market conditions will typically require a higher rate of interest, repayment of a portion of the outstanding principal or additional equity infusions to the project.
Of our total outstanding long-term debt of approximately $8.6 billion at January 31, 2010, approximately $850.1 million becomes due in fiscal 2010, approximately $1.1 billion becomes due in fiscal 2011 and approximately $1.3 billion becomes due in fiscal 2012. If these amounts cannot be refinanced, extended or repaid from other sources, such as sales of properties or new equity, our cash flow may not be sufficient to repay all maturing debt. This risk is heightened with respect to our revolving credit facility, which is due February 1, 2012, and our senior debt, as we have limited sources to fund such repayment.
Our total outstanding debt listed above is inclusive of credit enhanced mortgage debt we have obtained for a number of our properties to back the bonds that are issued by a government authority and then remarketed to the public. Generally, the credit enhancement, such as a letter of credit, expires prior to the terms of the underlying mortgage debt and must be renewed or replaced to prevent acceleration of the underlying mortgage debt. We treat credit enhanced debt as maturing in the year the credit enhancement expires. However, if the credit enhancement is called upon due to the inability to remarket the bonds due to reasons including but not limited to market dislocation or a downgrade in the credit rating of the credit enhancer, the bonds would not only incur additional interest expense, but it could accelerate the debt maturity to as early as 90 days after the advancement occurs.
With the turmoil in the lending and capital markets, an increasing number of financial institutions have sought federal assistance or failed. The failure of these financial institutions has further reduced the number of lenders willing to lend to commercial real estate entities and may further hinder our ability to access capital. In the event of a failure of a lender or counterparty to a financial contract, obligations under the financial contract might not be honored and many forms of assets may be at risk and may not be fully returned to us. Should a financial institution, particularly a construction lender, fail to fund its committed amounts when contractually obligated to do so, our ability to meet our obligations and complete projects could be adversely impacted.
Finally, while we recently extended our revolving credit facility, giving us access to liquidity through February 1, 2012, it was with reduced maximum borrowing levels, increased restrictions on our use of cash and requirements for the permanent reductions of borrowings available under the credit facility as we generate net proceeds from specified transactions. As a result, our access to liquidity has decreased as it relates to borrowing available under the credit facility, which may adversely affect the future growth of our business and our ability to continue our development activities.
The Ownership, Development and Management of Real Estate is Exceptionally Challenging in the Current Economic Environment and We Do Not Anticipate Meaningful Improvement in the Near Term
The current economic environment has significantly impacted the real estate industry in which we operate. Unemployment continues to remain at historically high levels and consumer confidence is low, putting downward pressure on retail sales. Commercial and residential tenants are experiencing financial pressure and are placing increasing demands on landlords to provide rent concessions. The financial hardships on some tenants are so severe that they are leaving the market entirely or declaring bankruptcy, creating increased vacancy rates in residential and commercial properties. The tenants with good financial condition are considering offers from the many competing projects in the real estate industry and are waiting for the best possible deal before committing.
The stress currently experienced by the real estate industry is particularly evident in our development projects. Projects that had good demographics and strong retailer interest to support a retail development when we began construction are experiencing leasing difficulty. When the financial markets began experiencing volatility in the second half of 2008 and the economy entered a recession, we experienced a corresponding volatility in retailer interest for our projects. Retailers continue to express interest in the projects, but are reluctant to commit to any new stores in the current economic environment. As a result of this difficult environment, we have delayed anticipated openings, reduced anticipated rents and incurred additional carrying costs, all resulting in an adverse impact on our business. If we are unable to or decide not to proceed with certain projects, we could incur write-offs, some of which could be substantial, which would have an adverse affect on our results of operations.
Until the economy, in general, and the real estate industry in particular, experience sustained improvement, fundamentals for the development and management of real estate will remain weak and we will continue to operate in a difficult environment with no near-term expectation of improvement.

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We Are Subject to Risks Associated with Investments in Real Estate
The value of, and our income from, our properties may decline due to developments that adversely affect real estate generally and those developments that are specific to our properties. General factors that may adversely affect our real estate portfolios if they were to occur or continue include:
   
Increases in interest rates;
 
   
The availability of financing, including refinancings or extensions of our nonrecourse mortgage debt maturities, on acceptable terms, or at all;
 
   
A decline in the economic conditions at the national, regional or local levels, particularly a decline in one or more of our primary markets;
 
   
Decreases in rental rates;
 
   
An increase in competition for tenants and customers or a decrease in demand by tenants and customers;
 
   
The financial condition of tenants, including the extent of bankruptcies and defaults;
 
   
An increase in supply or decrease in demand of our property types in our primary markets;
 
   
Declines in consumer confidence and spending during an economic recession that adversely affect our revenue from our retail centers;
 
   
Lingering declines in housing markets that adversely affect our revenue from our land segment;
 
   
The adoption on the national, state or local level of more restrictive laws and governmental regulations, including more restrictive zoning, land use or environmental regulations and increased real estate taxes.; and
 
   
Opposition from local community or political groups with respect to the development, construction or operations at a particular site.
In addition, there are factors that may adversely affect the value of specific operating properties or result in reduced income or unexpected expenses. As a result, we may not achieve our projected returns on the properties and we could lose some or all of our investments in those properties. Those operational factors include:
   
Adverse changes in the perceptions of prospective tenants or purchasers of the attractiveness of the property;
 
   
Our inability to provide adequate management and maintenance;
 
   
The investigation, removal or remediation of hazardous materials or toxic substances at a site;
 
   
Our inability to collect rent or other receivables;
 
   
Vacancies and other changes in rental rates;
 
   
An increase in operating costs that cannot be passed through to tenants;
 
   
Introduction of a competitor’s property in or in close proximity to one of our current markets;
 
   
Underinsured or uninsured natural disasters, such as earthquakes, floods or hurricanes; and
 
   
Our inability to obtain adequate insurance.

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We Are Subject to Real Estate Development Risks
In addition to the risks described above, which could also adversely impact our development projects, our development projects are subject to significant risks relating to our ability to complete our projects on time and on budget. Factors that may result in a development project exceeding budget, being delayed or being prevented from completion include:
   
An inability to secure sufficient financing on favorable terms, or at all, including an inability to refinance or extend construction loans;
 
   
Construction delays or cost overruns, either of which may increase project development costs;
 
   
An increase in commodity costs;
 
   
An inability to obtain zoning, occupancy and other required governmental permits and authorizations;
 
   
An inability to secure tenants or anchors necessary to support the project;
 
   
Failure to achieve or sustain anticipated occupancy or sales levels; and
 
   
Threatened or pending litigation.
Some of these development risks have been magnified given current adverse industry and market conditions. See also “Lending and Capital Market Conditions May Negatively Impact Our Liquidity and Our Ability to Finance or Refinance Projects or Repay Our Debt” and “The Ownership, Development and Management of Real Estate is Exceptionally Challenging in the Current Economic Environment and We Do Not Anticipate Meaningful Improvement in the Near Term” above. If any of these events occur, we may not achieve our projected returns on properties under development and we could lose some or all of our investments in those properties. In addition, the lead time required to develop, construct and lease-up a development property has substantially increased, which could adversely impact our projected returns or result in a termination of the development project.
In the past, we have elected not to proceed, or have been prevented from proceeding, with certain development projects, and we anticipate that this may occur again from time to time in the future. In addition, development projects may be delayed or terminated because a project partner or prospective anchor withdraws or a third party challenges our entitlements or public financing.
We periodically serve as either the construction manager or the general contractor for our development projects. The construction of real estate projects entails unique risks, including risks that the project will fail to conform to building plans, specifications and timetables. These failures could be caused by labor strikes, weather, government regulations and other conditions beyond our control. In addition, we may become liable for injuries and accidents occurring during the construction process that are underinsured.
In the construction of new projects, we generally guarantee the lender of the construction loan the lien-free completion of the project. This guaranty is recourse to us and places the risk of construction delays and cost overruns on us. In addition, from time to time, we guarantee our construction obligations to major tenants and public agencies. These types of guarantees are released upon completion of the project, as defined. We may have significant expenditures in the future in order to comply with our lien-free completion obligations which could have an adverse impact on our cash flows.
Examples of projects that face these and other development risks include the following:
   
Brooklyn Atlantic Yards. We are in the process of developing Brooklyn Atlantic Yards, which will cost approximately $4.9 billion over the anticipated construction and development period. This long-term mixed-use project in downtown Brooklyn is expected to feature a state of the art sports and entertainment arena for The Nets basketball team, a member of the NBA. The acquisition and development of Brooklyn Atlantic Yards has been formally approved by the required state governmental authorities and final documentation of the transactions was executed on December 23, 2009. Tax exempt financing for the arena also closed on December 23, 2009, the proceeds of which will become available upon the satisfaction of certain conditions, including vacant possession of the project site. In the event these conditions are not satisfied by December 17, 2010, the bonds that were issued for the arena financing will be subject to mandatory redemption. Construction activities have commenced for (i) the potential removal, remediation or other activities to address environmental contamination at, on, under or emanating to or from the land, (ii) demolition of existing structures on the developments site, and (iii) infrastructure and other work necessary for the development of the arena and other elements of the greater Atlantic Yards development project. As a result of prior litigation, this project has experienced delays and may continue to experience further delays.

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There is also the potential for increased costs and further delays to the project as a result of (i) increasing construction costs, (ii) scarcity of labor and supplies, (iii) a delay in satisfying the conditions of the tax-exempt financing and the potential mandatory redemption of the bonds issued for the arena financing, or the availability of additional needed financing, (iv) our or our partners’ inability or failure to meet required equity contributions, (v) increasing rates for financing, (vi) loss of arena sponsorships and related revenues, (vii) our inability to meet certain agreed upon deadlines for the development of the project and (viii) other potential litigation seeking to enjoin or prevent the project or litigation for which there may not be insurance coverage. The development of Brooklyn Atlantic Yards is being done in connection with the proposed move of The Nets to the planned arena. The arena itself (and its plans) along with any movement of the team is subject to approval by the NBA, which we may not receive. In addition, as applicable contractual and other deadlines and decision points approach, we could have less time and flexibility to plan and implement our responses to these or other risks to the extent that any of them may actually arise.
 
     
If any of the foregoing risks were to occur we may: (i) not be able to develop Brooklyn Atlantic Yards to the extent intended or at all resulting in a potential write-off of our investment, (ii) be required to repay the City and/or State of New York amounts previously advanced under public subsidies, plus penalties if applicable, and (iii) be in default of our non-recourse mortgages on the project. Together, costs associated with the risks outlined in (i) through (iii) in this paragraph, are approximately $590 million and could have a significant, material adverse effect on our business, cash flows and results of operations. Even if we were able to continue with the development, or a portion thereof, we would likely not be able to do so as quickly as originally planned, would be likely to incur additional costs and may need to write-off a portion of the development.
 
   
Ridge Hill. Retail leasing at our Ridge Hill development project in Westchester County, New York has progressed slowly. Currently, the center is 28% leased and, recently, Saks Fifth Avenue cancelled their non-binding letter of intent and informed us that they no longer intend to lease space in this center. The retail center is under construction and subject to a completion guaranty to the lender. As of January 31, 2010, we have $164,000,000 invested in Ridge Hill. The projected phased opening dates may be impacted by the final outcome of our continuous leasing effort which in turn could increase our equity requirements into this project.
 
   
Military Family Housing. We have formed various partnerships, primarily with the United States Department of the Navy, to engage in the ownership, redevelopment and operation of United States Navy and United States Marine Corps military family housing communities. We have also formed a joint venture partnership to redevelop and operate, under a ground lease, United States Air Force military family communities. These military family communities, comprising approximately 12,000 housing units, are located primarily on the islands of Oahu and Kauai, Hawaii; Chicago, Illinois; Seattle, Washington; and Colorado Springs, Colorado. The number of military personnel stationed in these areas could be affected by future Defense Base Closure and Realignment Commission decisions. In addition, our partnerships are at risk that future federal appropriations for Basic Allowance for Housing (“BAH”) and local market adjustments to BAH do not keep pace with increases in property taxes, utilities and other operating expenses for the partnerships. We are also subject to the risk of competition from other local housing options available to the military personnel.
The Proposed Transaction With an Affiliate of Onexim Group to Create a Strategic Partnership for our Brooklyn Atlantic Yards Project May Not Close, Which Could Subject Us to Liquidity Risks.
The purchase agreement that we executed with an affiliate of Onexim Group requires certain consents and is subject to the satisfaction of various conditions. Both parties continue to negotiate reasonably and in good faith to obtain the consents, including consent from the NBA, and satisfy the conditions. However, the proposed transaction may not close and the strategic partnership for the Brooklyn Atlantic Yards project may not be realized. If the strategic partnership is not formed and the $200 million investment is not received, we could have heightened exposure to the development risks associated with the Brooklyn Atlantic Yards project. See “We Are Subject to Real Estate Development Risks” above for a more thorough discussion of the risks associated with the Brooklyn Atlantic Yards project and the impact those risks may pose to us.
In addition, if the proposed transaction does not close, we could also have heightened exposure to the risks associated with our investment in the Nets. See “The Investment in a Professional Sports Franchise Involves Certain Risks and Future Losses Are Expected for The Nets” below for a more thorough discussion of the risks associated with that investment and the impact those risks may pose to us.
Vacancies in Our Properties May Adversely Affect Our Results of Operations and Cash Flows
Our results of operations and cash flows may be adversely affected if we are unable to continue leasing a significant portion of our commercial and residential real estate portfolio. We depend on commercial and residential tenants in order to collect rents and other charges. The current economic downturn has impacted our tenants on many levels. The downturn has been particularly hard on commercial retail tenants, many of whom have announced store closings and scaled backed growth plans. If we are unable to sustain historical occupancy levels in our real estate portfolio, our cash flows and results of operations could be adversely affected. Our ability to sustain our current and historical occupancy levels also depends on many other factors that are discussed elsewhere in this section.

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The Downturn in the Housing Market May Continue to Adversely Affect Our Results of Operations and Cash Flows
The United States has experienced a sustained downturn in the residential real estate markets, resulting in a decline in both the demand for, and price of, housing. We depend on homebuilders and condominium builders and buyers, which have been significantly and adversely impacted by the housing downturn, to continue buying our land held for sale. We do not know how long the downturn in the housing market will last or if we will ever see a return to previous conditions. Our ability to sustain our historical sales levels of land depends in part on the strength of the housing market and will continue to suffer until conditions improve. Our failure to successfully sell our land held for sale on favorable terms would adversely affect our results of operations and cash flows and could result in a write-down in the value of our land due to impairment.
Our Properties and Businesses Face Significant Competition
The real estate industry is highly competitive in many of the markets in which we operate. Competition could over-saturate any market, as a result of which we may not have sufficient cash to meet the nonrecourse debt service requirements on certain of our properties. Although we may attempt to negotiate a restructuring with the mortgagee, we may not be successful, particularly in light of current credit markets, which could cause a property to be transferred to the mortgagee.
There are numerous other developers, managers and owners of commercial and residential real estate and undeveloped land that compete with us nationally, regionally and/or locally, some of whom have greater financial resources and market share than us. They compete with us for management and leasing opportunities, land for development, properties for acquisition and disposition, and for anchor stores and tenants for properties. We may not be able to successfully compete in these areas.
Tenants at our retail properties face continual competition in attracting customers from retailers at other shopping centers, catalogue companies, online merchants, warehouse stores, large discounters, outlet malls, wholesale clubs, direct mail and telemarketers. Our competitors and those of our tenants could have a material adverse effect on our ability to lease space in our properties and on the rents we can charge or the concessions we can grant. This in turn could materially and adversely affect our results of operations and cash flows, and could affect the realizable value of our assets upon sale.
We May Be Unable to Sell Properties to Avoid Losses or to Reposition Our Portfolio
Because real estate investments are relatively illiquid, we may be unable to dispose of underperforming properties and may be unable to reposition our portfolio in response to changes in national, regional or local real estate markets. As a result, we may incur operating losses from some of our properties and may have to write-down the value of some properties due to impairment.
Our Results of Operations and Cash Flows May Be Adversely Affected by Tenant Defaults or Bankruptcy
Our results of operations and cash flows may be adversely affected if a significant number of our tenants are unable to meet their obligations or do not renew their leases, or if we are unable to lease a significant amount of space on economically favorable terms. In the event of a default by a tenant, we may experience delays in payments and incur substantial costs in recovering our losses.
Based on tenants with net base rent of greater than 2% of total net base rent as of January 31, 2010, our five largest office tenants by leased square feet are the City of New York, Millennium Pharmaceuticals, Inc., U.S. Government, Morgan Stanley & Co and Securities Industry Automation, Corp. Given our large concentration of office space in New York City, we may be adversely affected by the consolidation or failure of certain financial institutions. Based on tenants with net base rent of greater than 1% of total net base rent as of January 31, 2010, our five largest retail tenants by leased square feet are AMC Entertainment, Inc., Bass Pro Shops, Inc., Regal Entertainment Group, TJX Companies and The Gap.
Our ability to collect rents and other charges will be even more difficult if the tenant is bankrupt or insolvent. While our tenants have from time to time filed for bankruptcy or been involved in insolvency proceedings, there has been an increased number of bankruptcies with the current recession. We may be required to expense costs associated with leases of bankrupt tenants and may not be able to replace future rents for tenant space rejected in bankruptcy proceedings which could adversely affect our properties. The current bankruptcies of some of our tenants, and the potential bankruptcies of other tenants in the future could make it difficult for us to enforce our rights as lessor and protect our investment.
We May Be Negatively Impacted by the Consolidation or Closing of Anchor Stores
Our retail centers are generally anchored by department stores or other “big box” tenants. We could be adversely affected if one or more of these anchor stores were to consolidate, close or enter into bankruptcy. Given the current economic environment for retailers, we are at a heightened risk that an anchor store could close or enter into bankruptcy. Although non-tenant anchors generally do not pay us rent, they typically contribute towards common area maintenance and other expenses. Even if we own the anchor space, we may be unable to re-lease this area or to re-lease it on comparable terms. The loss of these revenues could adversely affect our results

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of operations and cash flows. Further, the temporary or permanent loss of any anchor likely would reduce customer traffic in the retail center, which could lead to decreased sales at other retail stores. Rents obtained from other tenants may be adversely impacted as a result of co-tenancy clauses in their leases. One or more of these factors could cause the retail center to fail to meet its debt service requirements. The consolidation of anchor stores may also negatively affect current and future development and redevelopment projects.
We May Be Negatively Impacted by International Activities
While our international activities are currently limited in scope and generally focused on evaluating various international opportunities, we may expand our international efforts subjecting us to risks that could have an adverse effect on the projected returns on the international projects or our overall results of operations. We have limited experience in dealing with foreign economies or cultures, changes in political environments or changes in exchange rates for foreign currencies. In addition, international activities would subject us to a wide variety of local laws and regulations governing these foreign properties with which we have no prior experience. We may experience difficulties in managing international properties, including the ability to successfully integrate these properties into our business operations and the ambiguities that arise when dealing with foreign cultures. Each of these factors may adversely affect our projected returns on foreign investments, which could in turn have an adverse effect on our results of operations.
Terrorist Attacks and Other Armed Conflicts May Adversely Affect Our Business
We have significant investments in large metropolitan areas, including New York City/Philadelphia, Boston, Washington D.C./Baltimore, Denver, Chicago, Los Angeles and San Francisco, which face a heightened risk related to terrorism. Some tenants in these areas may choose to relocate their business to less populated, lower-profile areas of the United States that are not as likely to be targets of terrorist activity. This could result in a decrease in the demand for space in these areas, which could increase vacancies in our properties and force us to lease our properties on less favorable terms. In addition, properties in our real estate portfolio could be directly impacted by future terrorist attacks which could cause the value of our property and the level of our revenues to significantly decline.
Future terrorist activity, related armed conflicts or prolonged or increased tensions in the Middle East could cause consumer confidence and spending to decrease and adversely affect mall traffic. Additionally, future terrorist attacks could increase volatility in the United States and worldwide financial markets. Any of these occurrences could have a significant impact on our revenues, costs and operating results.
The Investment in a Professional Sports Franchise Involves Certain Risks and Future Losses Are Expected for The Nets
On August 16, 2004, we purchased a legal ownership interest in The Nets. This interest is reported on the equity method of accounting and as a separate segment. The purchase of the interest in The Nets was the first step in our efforts to pursue development projects at Brooklyn Atlantic Yards. For a more thorough discussion of the risks associated with the Brooklyn Atlantic Yards project see “We Are Subject to Real Estate Developments Risks.”
The Nets are currently operating at a loss and are projected to continue to operate at a loss at least as long as they remain in New Jersey. Such operating losses will need to be funded by the contribution of equity. Even if we are able to relocate The Nets to Brooklyn, there can be no assurance that The Nets will be profitable in the future. Losses are currently allocated to each member of the limited liability company that owns The Nets based on an analysis of the respective member’s claim on the net book equity assuming a liquidation at book value at the end of each accounting period without regard to unrealized appreciation (if any) in the fair value of The Nets. Therefore, losses allocated to us have exceeded our legal ownership interest and may become significant. While the allocation of losses would be reduced in future periods if our proposed transaction with an affiliate of Onexim Group closes, we cannot assure you that the proposed transaction will occur. See “The Proposed Transaction With an Affiliate of Onexim Group to Create a Strategic Partnership for Our Brooklyn Atlantic Yards Project May Not Close, Which Could Subject Us to Liquidity Risks.”
Our investment in The Nets is subject to a number of operational risks, including risks associated with operating conditions, competitive factors, economic conditions and industry conditions. If The Nets are not able to successfully manage the following operational risks, The Nets may incur additional operating losses:
   
Competition with other major league sports, college athletics and other sports-related and non sports-related entertainment;
 
   
Dependence on competitive success of The Nets;
 
   
Fluctuations in the amount of revenues from advertising, sponsorships, concessions, merchandise, parking and season and other ticket sales, which are tied to the popularity and success of The Nets and general economic conditions;
 
   
Uncertainties of increases in players’ salaries;

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Dependence on talented players;
 
   
Risk of injuries to key players;
 
   
Uncertainties relating to labor relations in professional sports, including the expiration of the NBA’s current collective bargaining agreement, or a player or management initiated stoppage after such expiration; and
 
   
Dependence on television and cable network, radio and other media contracts.
Our High Debt Leverage May Prevent Us from Responding to Changing Business and Economic Conditions
Our high degree of debt leverage could limit our ability to obtain additional financing or adversely affect our liquidity and financial condition. We have a high ratio of debt (consisting of nonrecourse mortgage debt, a revolving credit facility and senior and subordinated debt) to total market capitalization. This ratio was approximately 83.1% and 92.2% at January 31, 2010 and January 31, 2009, respectively, based on our long-term debt outstanding at that date and the market value of our outstanding Class A common stock and Class B common stock. Our high leverage may adversely affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, development or other general corporate purposes and may make us more vulnerable to a prolonged downturn in the economy.
Nonrecourse mortgage debt is collateralized by individual completed rental properties, projects under development and undeveloped land. We do not expect to repay a substantial amount of the principal of our outstanding debt prior to maturity or to have available funds from operations sufficient to repay this debt at maturity. As a result, it will be necessary for us to refinance our debt through new debt financings or through equity offerings. If interest rates are higher at the time of refinancing, our interest expense would increase, which would adversely affect our results of operations and cash flows. Cash flows and our liquidity would also be adversely affected if we are required to repay a portion of the outstanding principal or contribute additional equity to obtain the refinancing. In addition, in the event we were unable to secure refinancing on acceptable terms, we might be forced to sell properties on unfavorable terms, which could result in the recognition of losses and could adversely affect our financial position, results of operations and cash flows. If we were unable to make the required payments on any debt collateralized by a mortgage on one of our properties or to refinance that debt when it comes due, the mortgage lender could take that property through foreclosure and, as a result, we could lose income and asset value as well harm our Company reputation. See also “Market Conditions May Negatively Impact Our Liquidity and Our Ability to Finance or Refinance Projects or Repay Our Debt” above.
Our Corporate Debt Covenants Could Adversely Affect Our Financial Condition
We have guaranteed the obligations of our wholly-owned subsidiary, Forest City Rental Properties Corporation, or FCRPC, under the FCRPC Second Amended and Restated Credit Agreement entered into on January 29, 2010, among FCRPC and the banks named therein, and amended on March 4, 2010. This credit agreement and related guaranty (collectively “Credit Agreement”) impose a number of restrictive covenants on us, including a prohibition on certain consolidations and mergers, limitations on the amount of debt, guarantees and property liens that we may incur, restrictions on the pledging of ownership interests in subsidiaries, limitations on the use of cash sources, a prohibition on our common stock dividends through the maturity date and limitations on our ability to pay dividends on our preferred stock. The Credit Agreement also requires us to maintain a specified minimum liquidity, debt service and cash flow coverage ratios and consolidated shareholders’ equity.
The Indentures under which our senior and subordinated debt is issued also contain certain restrictive covenants, including, among other things, limitations on our ability to incur debt, pay dividends, acquire our common or preferred stock, permit liens on our properties or dispose of assets.
While we are in compliance with all of our covenants at January 31, 2010, we cannot guarantee our future compliance with any of the covenants. The failure to comply with any of our financial or non-financial covenants could result in an event of default and accelerate some or all of our indebtedness, which could have a material adverse effect on our financial condition. Our ability to comply with these covenants will depend upon our future economic performance. These covenants may adversely affect our ability to finance our future operations or capital needs or to engage in other business activities that may be desirable or advantageous to us.
We Are Subject to Risks Associated With Hedging Agreements
We will often enter into interest rate swap agreements and other interest rate hedging contracts, including caps and floors to manage our exposure to interest rate volatility or to satisfy lender requirements. While these agreements may help reduce our exposure to interest rate volatility, they also expose us to additional risks, including a risk that the counterparties will not perform. Moreover, there can be no assurance that the hedging agreement will qualify for hedge accounting or that our hedging activities will have the desired beneficial impact on our results of operations. Should we desire to terminate a hedging agreement there could be significant costs and cash requirements involved to fulfill our initial obligation under the hedging agreement.

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When a hedging agreement is required under the terms of a mortgage loan it is often a condition that the hedge counterparty agree to certain conditions which include, but are not limited to, maintaining a specified credit rating. With the current volatility in the financial markets there is a reduced pool of eligible counterparties that can meet or are willing to agree to the required conditions which has resulted in an increased cost for hedging agreements. This could make it difficult to enter into hedging agreements in the future. Additionally, if the counterparty failed to satisfy any of the required conditions and we were unable to renegotiate the required conditions with the lender or find an alternative counterparty for such hedging agreements, we could be in default under the loan and the lender could take that property through foreclosure.
Our bonds that are structured in a total rate of return swap arrangement (“TRS”) have maturities reflected in the year the bond matures as opposed to the TRS maturity date, which is likely to be earlier. Throughout the life of the TRS, if the property is not performing at designated levels or due to changes in market conditions, the property may be obligated to make collateral deposits with the counterparty. At expiration of the TRS arrangement, the property must pay or is entitled to the difference, if any, between the fair market value of the bond and par. If the property does not post collateral or make the counterparty whole at expiration, the counterparty could foreclose on the property.
Any Rise in Interest Rates Will Increase Our Interest Costs
Including the effect of the protection provided by the interest rate swaps, caps and long-term contracts in place as of January 31, 2010, a 100 basis point increase in taxable interest rates (including properties accounted for under the equity method and corporate debt and the effect of interest rate floors) would increase the annual pre-tax interest cost for the next 12 months of our variable-rate debt by approximately $9,407,000 at January 31, 2010. Although tax-exempt rates generally move in an amount that is smaller than corresponding changes in taxable interest rates, a 100 basis point increase in tax-exempt rates (including properties accounted for under the equity method) would increase the annual pre-tax interest cost for the next 12 months of our tax-exempt variable-rate debt by approximately $9,890,000 at January 31, 2010. The analysis above includes a portion of our taxable and tax-exempt variable-rate debt related to construction loans for which the interest expense is capitalized. For variable rate bonds, during times of market illiquidity, a premium interest rate could be charged on the bonds to successfully market them which would result in even higher interest rates.
If We Are Unable to Obtain Tax-Exempt Financings, Our Interest Costs Would Rise
We regularly utilize tax-exempt financings and tax increment financings, which generally bear interest at rates below prevailing rates available through conventional taxable financing. We cannot assure you that tax-exempt bonds or similar government subsidized financing will continue to be available to us in the future, either for new development or acquisitions, or for the refinancing of outstanding debt. Our ability to obtain these financings or to refinance outstanding debt on favorable terms could significantly affect our ability to develop or acquire properties and could have a material adverse effect on our results of operations, cash flows and financial position.
Downgrades in Our Credit Rating Could Adversely Affect Our Performance
We are periodically rated by nationally recognized rating agencies. Any downgrades in our credit rating could impact our ability to borrow by increasing borrowing costs as well as limiting our access to capital. In addition, a downgrade could require us to post cash collateral and/or letters of credit to cover our self-insured property and liability insurance deductibles, surety bonds, energy contracts and hedge contracts which would adversely affect our cash flow and liquidity.
Our Business Will Be Adversely Impacted Should an Uninsured Loss or a Loss in Excess of Insurance Limits Occur
We carry comprehensive insurance coverage for general liability, property, flood, earthquake and rental loss (and environmental insurance on certain locations) with respect to our properties within insured limits and policy specifications that we believe are customary for similar properties. There are, however, specific types of potential losses, including environmental loss or losses of a catastrophic nature, such as losses from wars, terrorism, hurricanes, earthquakes or other natural disasters, that in our judgment, cannot be purchased at a commercially viable cost or whereby such losses, if incurred, would exceed the insurance limits procured. In the event of an uninsured loss or a loss in excess of our insurance limits, or a failure by an insurer to meet its obligations under a policy, we could lose both our invested capital in, and anticipated profits from, the affected property and could be exposed to liabilities with respect to that which we thought we had adequate insurance to cover. Any such uninsured loss could materially and adversely affect our results of operations, cash flows and financial position. Under our current policies, which expire October 31, 2010, our properties are insured against acts of terrorism, subject to various limits, deductibles and exclusions for acts of war and terrorist acts involving biological, chemical and nuclear damage. Once these policies expire, we may not be able to obtain adequate terrorism coverage at a commercially reasonable cost. In addition, our insurers may not be able to maintain reinsurance sufficient to cover any losses we may incur as a result of terrorist acts. As a result, our insurers’ ability to provide future insurance for any damages that we sustain as a result of a terrorist attack may be reduced.

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Additionally, most of our current project mortgages require special all-risk/special form property insurance, and we cannot assure you that we will be able to obtain policies that will satisfy lender requirements. We are self-insured as to the first $500,000 of commercial general liability coverage per occurrence. The first $250,000 of property damage per occurrence is self-insured through our wholly-owned captive insurance company that is licensed, regulated and capitalized in accordance with state of Arizona statutes. While we believe that our self-insurance reserves are adequate, we cannot assure you that we will not incur losses that exceed these self insurance reserves.
We May Be Adversely Impacted by Environmental Matters
We are subject to various foreign, federal, state and local environmental protection and health and safety laws and regulations governing, among other things: the generation, storage, handling, use and transportation of hazardous materials; the emission and discharge of hazardous materials into the ground, air or water; and the health and safety of our employees. In some instances, federal, state and local laws require abatement or removal of specific hazardous materials such as asbestos-containing materials or lead-based paint, in the event of demolition, renovations, remodeling, damage or decay. Laws and regulations also impose specific worker protection and notification requirements and govern emissions of and exposure to hazardous or toxic substances, such as asbestos fibers in the air. We incur costs to comply with such laws and regulations, but we cannot assure you that we have been or will be at all times in complete compliance with such laws and regulations.
Under certain environmental laws, an owner or operator of real property may become liable for the costs of the investigation, removal and remediation of hazardous or toxic substances at that property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of the hazardous or toxic substances. Certain contamination is difficult to remediate fully and can lead to more costly design specifications, such as a requirement to install vapor barrier systems, or a limitation on the use of the property and could preclude development of a site at all. The presence of hazardous substances on a property could also result in personal injury, contribution or other claims by private parties. In addition, persons who arrange for the disposal or treatment of hazardous or toxic wastes may also be liable for the costs of the investigation, removal and remediation of those wastes at the disposal or treatment facility, regardless of whether that facility is owned or operated by that person.
We have invested, and will in the future, invest in properties that are or have been used for or are near properties that have had industrial purposes in the past. As a result, our properties are or may become contaminated with hazardous or toxic substances. We will incur costs to investigate and possibly to remediate those conditions and it is possible that some contamination will remain in or under the properties even after such remediation. While we investigate these sites and work with all relevant governmental authorities to meet their standards given our intended use of the property, it is possible that there will be new information identified in the future that indicates there are additional unaddressed environmental impacts, there could be technical developments that will require new or different remedies to be undertaken in the future, and the regulatory standards imposed by governmental authorities could change in the future.
As a result of the above, the value of our properties could decrease, our income from developed properties could decrease, our projects could be delayed, we could become obligated to third parties pursuant to indemnification agreements or guarantees, our expense to remediate or maintain the properties could increase, and our ability to successfully sell, rent or finance our properties could be adversely affected by environmental matters in a manner that could have a material adverse effect on our financial position, cash flows or results of operation. While we maintain insurance for certain environmental matters, we cannot assure you that we will not incur losses related to environmental matters, including losses that may materially exceed any available insurance. See “Our Business Will Be Adversely Impacted Should an Uninsured Loss or a Loss in Excess of Insurance Limits Occur.”
We Are Controlled by the Ratner, Miller and Shafran Families, Whose Interests May Differ from Those of Other Shareholders
Our authorized common stock consists of Class A common stock and Class B common stock. The economic rights of each Class of common stock are identical, but the voting rights differ. The Class A common stock, voting as a separate Class, is entitled to elect 25% of the members of our board of directors, while the Class B common stock, voting as a separate Class, is entitled to elect the remaining 75% of our board of directors. On all other matters, the Class A common stock and Class B common stock vote together as a single Class, with each share of our Class A common stock entitled to one vote per share and each share of Class B common stock entitled to ten votes per share. At February 26, 2010, members of the Ratner, Miller and Shafran families, which include members of our current board of directors and executive officers, owned 84.4% of the Class B common stock. RMS, Limited Partnership (“RMS LP”), which owned 83.9% of the Class B common stock, is a limited partnership, comprised of interests of these families, with seven individual general partners, currently consisting of:
   
Samuel H. Miller, Treasurer of Forest City and Co-Chairman of our Board of Directors;
 
   
Charles A. Ratner, President and Chief Executive Officer of Forest City and a Director;
 
   
Ronald A. Ratner, Executive Vice President of Forest City and a Director;

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Brian J. Ratner, Executive Vice President of Forest City and a Director;
 
   
Deborah Ratner Salzberg, President of Forest City Washington, Inc., a subsidiary of Forest City, and a Director;
 
   
Joan K. Shafran, a Director; and
 
   
Abraham Miller.
Charles A. Ratner, James A. Ratner, Executive Vice President of Forest City and a Director, and Ronald A. Ratner are brothers. Albert B. Ratner, Co-Chairman of our Board of Directors, is the father of Brian J. Ratner and Deborah Ratner Salzberg and is first cousin to Charles A. Ratner, James A. Ratner, Ronald A. Ratner, Joan K. Shafran, and Bruce C. Ratner, Executive Vice President of Forest City and a Director. Samuel H. Miller was married to Ruth Ratner Miller (now deceased), a sister of Albert B. Ratner, and is the father of Abraham Miller. General partners holding 60% of the total voting power of RMS LP determine how to vote the Class B common stock held by RMS LP. No person may transfer his or her interest in the Class B common stock held by RMS LP without complying with various rights of first refusal.
In addition, at February 26, 2010, members of these families collectively owned 10.8% of the Class A common stock. As a result of their ownership in Forest City, these family members and RMS LP have the ability to elect a majority of our board of directors and to control the management and policies of Forest City. Generally, they may also determine, without the consent of our other shareholders, the outcome of any corporate transaction or other matters submitted to our shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets and prevent or cause a change in control of Forest City.
Even if these families or RMS LP reduce their level of ownership of Class B common stock below the level necessary to maintain a majority of the voting power, specific provisions of Ohio law and our Amended Articles of Incorporation may have the effect of discouraging a third party from making a proposal to acquire us or delaying or preventing a change in control or management of Forest City without the approval of these families or RMS LP.
RMS Investment Corp. Provides Property Management and Leasing Services to Us and Is Controlled By Some of Our Affiliates
We paid approximately $423,000 and $307,000 as total compensation during the years ended January 31, 2010 and 2009, respectively, to RMS Investment Corp. for property management and leasing services. RMS Investment Corp. is controlled by members of the Ratner, Miller and Shafran families, some of whom are our directors and executive officers.
RMS Investment Corp. manages and provides leasing services to our Cleveland-area specialty retail center, Golden Gate, which has 361,000 square feet. The current rate of compensation for this management service is 4% of all rental income, plus a leasing fee of generally 3% to 4% of rental income of all new or renewed leases. Management believes these fees are comparable to those other management companies would charge to non-affiliated third parties.
Our Directors and Executive Officers May Have Interests in Competing Properties, and We Do Not Have Non-Compete Agreements with Certain of Our Directors and Executive Officers
Under our current policy, no director or executive officer, including any member of the Ratner, Miller and Shafran families, is allowed to invest in a competing real estate opportunity without first obtaining the approval of the audit committee of our board of directors. We do not have non-compete agreements with any director, officer or employee, other than Charles Ratner, James Ratner, Ronald Ratner and Bruce Ratner who entered into non-compete agreements on November 9, 2006. Upon leaving Forest City, any other director, officer or employee could compete with us. Notwithstanding our policy, we permit our principal shareholders who are officers and employees to develop, expand, operate or sell, independent of our business, certain commercial, industrial and residential properties that they owned prior to the implementation of our policy. As a result of their ownership of these properties, a conflict of interest may arise between them and Forest City, which may not be resolved in our favor. The conflict may involve the development or expansion of properties that may compete with our properties and the solicitation of tenants to lease these properties.
We are Subject to Recapture Risks Associated with Sale of Tax Credits
As part of our financing strategy, we have financed several real estate projects through limited partnerships with investment partners. The investment partner, typically a large, sophisticated institution or corporate investor, invests cash in exchange for a limited partnership interest and special allocations of expenses and the majority of tax losses and credits associated with the project. These partnerships typically require us to indemnify, on an after-tax or “grossed up” basis, the investment partner against the failure to receive or the loss of allocated tax credits and tax losses. Due to the economic structure and related economic substance, we have consolidated each of these entities in our consolidated financial statements.

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We believe that all the necessary requirements for qualification for such tax credits have been and will be met and that our investment partners will be able to receive expense allocations associated with these properties. However, we cannot assure you that this will, in fact, be the case or that we will not be required to indemnify our investment partners on an after-tax basis for these amounts. Any indemnification payment could have a material adverse effect on our results of operations and cash flows.
We Face Risks Associated with Developing and Managing Properties in Partnership with Others
We use partnerships and limited liability companies, or LLCs, to finance, develop or manage some of our real estate investments. Acting through our wholly-owned subsidiaries, we typically are a general partner or managing member in these partnerships or LLCs. There are, however, instances in which we do not control or even participate in management or day-to-day operations of these properties. The use of partnerships and LLCs involve special risks associated with the possibility that:
   
Another partner or member may have interests or goals that are inconsistent with ours;
 
   
A general partner or managing member may take actions contrary to our instructions, requests, policies or objectives with respect to our real estate investments; or
 
   
A partner or a member could experience financial difficulties that prevent it from fulfilling its financial or other responsibilities to the project or its lender or the other partners or members.
In the event any of our partners or members files for bankruptcy, we could be precluded from taking certain actions affecting our project without bankruptcy court approval, which could diminish our control over the project even if we were the general partner or managing member. In addition, if the bankruptcy court were to discharge the obligations of our partner or member, it could result in our ultimate liability for the project being greater than we would have otherwise been obligated for.
To the extent we are a general partner, we may be exposed to unlimited liability, which may exceed our investment or equity in the partnership. If one of our subsidiaries is a general partner of a particular partnership it may be exposed to the same kind of unlimited liability.
Failure to Continue to Maintain Effective Internal Controls in Accordance with Section 404 of the Sarbanes-Oxley Act of 2002 Could Have a Material Adverse Effect on Our Ability to Ensure Timely and Reliable Financial Reporting
Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires our management to evaluate the effectiveness of, and our independent registered public accounting firm to attest to, our internal control over financial reporting. We will continue our ongoing process of testing and evaluating the effectiveness of, and remediating any issues identified related to, our internal control over financial reporting. The process of documenting, testing and evaluating our internal control over financial reporting is complex and time consuming. Due to this complexity and the time-consuming nature of the process and because currently unforeseen events or circumstances beyond our control could arise, we cannot assure you that we ultimately will be able to continue to comply fully in subsequent fiscal periods with Section 404 in our Annual Report on Form 10-K. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404, which could adversely affect public confidence in our ability to record, process, summarize and report financial data to ensure timely and reliable external financial reporting.
Compliance or Failure to Comply with the Americans with Disabilities Act and Other Similar Laws Could Result in Substantial Costs
The Americans with Disabilities Act generally requires that public buildings, including office buildings and hotels, be made accessible to disabled persons. In the event that we are not in compliance with the Americans with Disabilities Act, the federal government could fine us or private parties could be awarded damages against us. If we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affect our results of operations and cash flows.
We may also incur significant costs complying with other regulations. Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We believe that our properties are currently in material compliance with all of these regulatory requirements. However, existing requirements may change and compliance with future requirements may require significant unanticipated expenditures that could adversely affect our cash flows and results of operations.

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Legislative and regulatory actions taken now or in the future could adversely affect our business.
Current economic conditions have resulted in governmental regulatory agencies and political bodies placing increased focus and scrutiny on the financial services industry. This increased scrutiny has resulted in unprecedented programs and actions targeted at restoring stability in the financial markets. There is increasing pressure on the U.S. Congress to finalize a financial regulatory reform plan that would, if enacted, represent a sweeping reform of the current financial services regulation. While we do not operate in the financial services industry, the proposed legislation, as well as other legislation that could be proposed in the future, if enacted, could have an adverse impact on our financial condition and results of operations, perhaps materially, by increasing our costs for financial instruments, such as non-recourse mortgage loans and interest rate swaps, requiring additional cash collateral deposits and further reducing our access to capital.
Changes in Market Conditions Could Continue to Hurt the Market Price of Our Publicly Traded Securities
The market price of our publicly traded securities has been volatile and will continue to fluctuate with various market conditions, which may change from time to time. The market conditions that may affect the market price of our publicly traded securities include the following:
   
Investor perception of us and the industry in which we operate;
 
   
The extent of institutional investor interest in us;
 
   
The reputation of the real estate industry generally;
 
   
The appeal of other real estate securities in comparison to securities issued by other entities (including securities issued by real estate investment trusts);
 
   
Our financial condition and performance; and
 
   
General market volatility and economic conditions.
The stock market has experienced volatile conditions resulting in substantial price and volume fluctuations that are often unrelated or disproportionate to the financial performance of companies. Negative market volatility may cause the market price of our publicly traded securities to decline. Further declines in the price of our Class A common stock could have an adverse effect on our business by reducing our ability to generate capital through sales of our Class A common stock, subjecting us to further credit rating downgrades and increasing the risk of not satisfying the New York Stock Exchange’s continued listing standards.

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Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Corporate headquarters of Forest City Enterprises, Inc. are located in Cleveland, Ohio and are owned by the Company. The Company’s core markets include Boston, the state of California, Chicago, Denver, the New York City/Philadelphia metropolitan area and the Greater Washington D.C./Baltimore metropolitan area.
The following tables present information on properties opened in 2009 and those that are under construction as of January 31, 2010.

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Forest City Enterprises, Inc.
Development Pipeline
January 31, 2010
2009 Openings and Acquisitions
                                             
            Date       Consolidated (C)           Sq. ft./     Gross  
        Dev (D)   Opened /   FCE Legal   Unconsolidated (U)   Total     No. of     Leasable  
Property   Location   Acq (A)   Acquired   Ownership %   (c)   Cost     Units     Area  
 
                       
 
(in millions)
 
                 
Retail Centers:
                                           
Promenade in Temecula Expansion
  Temecula, CA   D   Q1-09   75.0%        C     $ 107.8       127,000       127,000  
East River Plaza (Costco) (d)
  Manhattan, NY   D   Q4-09   35.0%        U     0.0       110,000       110,000  
                             
 
                        $ 107.8       237,000       237,000  
                             
 
                                           
Residential:
                                           
North Church Towers (a)
  Parma Heights, OH   A   Q3-09   100.0%        C     $ 5.6       399          
80 DeKalb (b)
  Brooklyn, NY   D   Q4-09/10   80.0%        C     163.3       365          
                                 
 
                        $ 168.9       764          
                                 
 
                                           
 
                                       
Total Openings and Acquisitions
                        $ 276.7                  
 
                                       
 
     
Residential Phased-In Units (b):                               Opened in ’09 / Total  
                                             
Cobblestone Court   Painesville, OH   D   2006-09   50.0%        U    $ 30.3     96/400
Sutton Landing   Brimfield, OH   D   2007-09   50.0%        U     15.9     36/216
Stratford Crossing   Wadsworth, OH   D   2007-10   50.0%        U     25.3     36/348
                           
Total                        $ 71.5     168/964
                           
                           
     
See attached footnotes.

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Forest City Enterprises, Inc.
Development Pipeline
January 31, 2010
Under Construction
                                                               
                        Consolidated (C)           Sq. ft./         Gross            
        Dev (D)   Anticipated     FCE Legal     Unconsolidated (U)   Total     No. of         Leasable         Lease  
Property   Location   Acq (A)   Opening     Ownership %     (c)   Cost     Units         Area         Commitment %  
 
                            (in millions)                                
Retail Centers:
                                                             
East River Plaza (Total including Costco) (e)
  Manhattan, NY   D   2010     35.0%          U     $ 398.1       527,000           527,000         93%  
Village at Gulfstream Park
  Hallandale Beach, FL   D   February 2010     50.0%          C     204.2       510,000           510,000     (f)   70%  
Ridge Hill (b)
  Yonkers, NY   D   2011/2012     70.0%          C     798.7       1,336,000           1,336,000     (g)   28%  
                                       
 
                            $ 1,401.0       2,373,000           2,373,000            
                                       
Office:
                                                             
Waterfront Station - East 4th & West 4th Buildings
  Washington, D.C.   D   Q1-10     45.0%          C     $ 326.7       631,000     (h)               97%  
                                                   
Residential:
                                                             
Presidio Landmark
  San Francisco, CA   D   Q3-10     100.0%          C     $ 110.9       161                        
Beekman (b)
  Manhattan, NY   D   Q1-11/12     49.0%          C     875.7       904                        
                                                   
 
                            $ 986.6       1,065                        
                                                   
 
                                                             
Arena:
                                                             
Barclays Center
  Brooklyn, NY   D   2012     23.3%(j)    U     $ 911.1       670,000                     18,000 seats   (i)
                                                 
 
                                                             
 
                                                           
Total Under Construction
                            $ 3,625.4                                
 
                                                           
   
Residential Phased-In Units (b):                                   Under Const./Total
 
         
Stratford Crossing   Wadsworth, OH   D   2007-10     50.0%        U   $ 25.3     96/348          
                                       
                                       
   
 
   
           
Fee Development:
                                    Sq.ft.         
Las Vegas City Hall (k)
  Las Vegas, NV   D   Q1-12     -            U   $ 146.2       270,000        
   
See attached footnotes.
Military Housing – see footnote l.

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Development Pipeline
 
January 31, 2010 Footnotes
(a)  
The Company exchanged its 50% ownership interest in Boulevard Towers, an apartment community located in Amherst, New York, for 100% ownership in North Church Towers, in a nonmonetary exchange.
 
(b)  
Phased-in openings. Costs are representative of the total project.
 
(c)  
Unconsolidated entities are reported under the equity method of accounting. This method represents a measure for investments in which the Company is not deemed to have control or to be the primary beneficiary of our investments in a variable interest entity.
 
(d)  
Phased-In opening. See the Under Construction pipeline for total cost details.
 
(e)  
Includes the total cost and square footage of the center, including Costco which opened in Q4-2009. The cost of the property also includes construction of the 1,248-space parking garage and structural upgrades to accommodate a possible future residential project above the retail center.
 
(f)  
Includes 89,000 square feet of office space. Excluding this office space from the calculation of the preleased percentage would result in the retail space being 85% preleased. In addition, includes 35,000 square feet site for Crate & Barrel which opened in Q4-2009. The remainder of the center opened on February 11, 2010.
 
(g)  
Includes 156,000 square feet of office space.
 
(h)  
Includes 85,000 square feet of retail space.
 
(i)  
The Nets, a member of the NBA, has a 37 year license agreement to use the arena.
 
(j)  
Upon closing of the strategic partnership with an affiliate of Onexim Group, the Company’s legal ownership will increase to approximately 27%.
 
(k)  
This is a fee development project, owned by the City of Las Vegas. Therefore, these costs are not included on the Company’s balance sheet.
 
(l)  
Below is a summary of the Company’s equity method investments for Military Housing Development projects. The Company provides development, construction, and management services for these projects and receives agreed upon fees for these services.
                         
        Anticipated   Completed        
Property   Location   Opening   Cost     No. of Units  
 
            (in millions)          
 
                       
Military Housing - Under Construction (c)
                       
Navy Midwest
  Chicago, IL   2006-2010     $ 248.8       1,658  
Pacific Northwest Communities
  Seattle, WA   2007-2010     280.5       2,986  
Midwest Millington
  Memphis, TN   2008-2010     37.0       318  
Marines, Hawaii Increment II
  Honolulu, HI   2007-2011     293.3       1,175  
Navy, Hawaii Increment III
  Honolulu, HI   2007-2011     535.1       2,520  
Air Force Academy
  Colorado Springs, CO   2007-2013     69.5       427  
Hawaii Phase IV
  Kaneohe, HI   2007-2014     364.0       917  
             
Total Military Housing Under Construction
            $ 1,828.2       10,001  
             

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Table of Contents

The following table provides summary information concerning the Company’s real estate portfolio as of January 31, 2010. Consolidated properties are properties that we control and/or hold a variable interest in and are deemed to be the primary beneficiary. Unconsolidated properties are properties that we do not control and/or are not deemed to be the primary beneficiary and are accounted for under the equity method.

24


Table of Contents

     
Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
COMMERCIAL GROUP
OFFICE BUILDINGS
                                                 
    Date of                                   Leasable  
    Opening/                           Leasable     Square  
    Acquisition/   Legal   Pro-Rata           Square     Feet at Pro-  
Name   Expansion   Ownership(1)   Ownership(2)   Location   Major Tenants   Feet   Rata %  
 
Consolidated Office Buildings
                                               
2 Hanson Place
    2004       100.00 %     100.00 %   Brooklyn, NY   Bank of New York, HSBC     399,000       399,000  
250 Huron
    1991       100.00 %     100.00 %   Cleveland, OH   Leasing in progress     119,000       119,000  
3055 Roslyn (formerly Stapleton Medical Office
Building)
    2006       90.00 %     90.00 %   Denver, CO   University of Colorado Hospital     45,000       41,000  
35 Landsdowne Street
    2002       100.00 %     100.00 %   Cambridge, MA   Millennium Pharmaceuticals     202,000       202,000  
40 Landsdowne Street
    2003       100.00 %     100.00 %   Cambridge, MA   Millennium Pharmaceuticals     215,000       215,000  
45/75 Sidney Street
    1999       100.00 %     100.00 %   Cambridge, MA   Millennium Pharmaceuticals; Novartis     277,000       277,000  
4930 Oakton
    2006       100.00 %     100.00 %   Skokie, IL   Sanford Brown College     40,000       40,000  
65/80 Landsdowne Street
    2001       100.00 %     100.00 %   Cambridge, MA   Partners HealthCare System     122,000       122,000  
88 Sidney Street
    2002       100.00 %     100.00 %   Cambridge, MA   Alkermes, Inc.     145,000       145,000  
Ballston Common Office Center
    2005       100.00 %     100.00 %   Arlington, VA   US Coast Guard     174,000       174,000  
Colorado Studios
    2007       90.00 %     90.00 %   Denver, CO   Colorado Studios     75,000       68,000  
Commerce Court
    2007       100.00 %     100.00 %   Pittsburgh, PA   US Bank; Wesco Distributors; Cardworks Services; Marc USA     379,000       379,000  
Edgeworth Building
    2006       100.00 %     100.00 %   Richmond, VA   Hirschler Fleischer; Ernst and Young     137,000       137,000  
Eleven MetroTech Center
    1995       85.00 %     85.00 %   Brooklyn, NY   City of New York - DoITT; E-911     216,000       184,000  
Fairmont Plaza
    1998       85.00 %     85.00 %   San Jose, CA   Littler Mendelson; Merrill Lynch; UBS Financial;
Camera 12 Cinemas; Accenture
    405,000       344,000  
Fifteen MetroTech Center
    2003       95.00 %     95.00 %   Brooklyn, NY   Wellchoice, Inc.; City of New York - HRA     650,000       618,000  
Halle Building
    1986       100.00 %     100.00 %   Cleveland, OH   Case Western Reserve University; Grant Thornton; CEOGC     409,000       409,000  
Harlem Center
    2003       100.00 %     100.00 %   Manhattan, NY   Office of General Services-Temporary Disability & Assistance; State
Liquor Authority
    147,000       147,000  
(3) Higbee Building
    1990       100.00 %     100.00 %   Cleveland, OH   Greater Cleveland Partnership; Key Bank     815,000       815,000  
Illinois Science and Technology Park
                                               
- 4901 Searle (A)
    2006       100.00 %     100.00 %   Skokie, IL   Northshore University Health System     224,000       224,000  
- 8025 Lamon (P)
    2006       100.00 %     100.00 %   Skokie, IL   NanoInk, Inc.; Midwest Bio Research; Vetter Development Services     128,000       128,000  
- 8045 Lamon (Q)
    2007       100.00 %     100.00 %   Skokie, IL   Astellas; Polyera     161,000       161,000  
Jackson Building
    1987       100.00 %     100.00 %   Cambridge, MA   Ariad Pharmaceuticals     99,000       99,000  
Johns Hopkins - 855 North Wolfe Street
    2008       76.60 %     76.60 %   East Baltimore, MD   Johns Hopkins; Brain Institute; Howard Hughes Institute     279,000       214,000  
New York Times
    2007       100.00 %     100.00 %   Manhattan, NY   ClearBridge Advisors, LLC, a Legg Mason Co.; Covington & Burling; Osler Hoskin; Seyfarth Shaw     738,000       738,000  
Nine MetroTech Center North
    1997       85.00 %     85.00 %   Brooklyn, NY   City of New York - Fire Department     317,000       269,000  
One MetroTech Center
    1991       82.50 %     82.50 %   Brooklyn, NY   JP Morgan Chase; National Grid     937,000       773,000  
One Pierrepont Plaza
    1988       100.00 %     100.00 %   Brooklyn, NY   Morgan Stanley; Goldman Sachs; U.S. Probation     659,000       659,000  

25


Table of Contents

     
Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
COMMERCIAL GROUP
OFFICE BUILDINGS (continued)
                                                 
    Date of                                   Leasable  
    Opening/                           Leasable     Square  
    Acquisition/   Legal   Pro-Rata           Square     Feet at Pro-  
Name   Expansion   Ownership (1)   Ownership (2)   Location   Major Tenants   Feet     Rata %  
 
Consolidated Office Buildings (continued)
                                               
Post Office Plaza
    1990       100.00 %     100.00 %   Cleveland, OH   Washington Group; Chase Manhattan Mortgage Corp; Educational Loan Servicing Corp; Quicken Loans     476,000       476,000  
Richards Building
    1990       100.00 %     100.00 %   Cambridge, MA   Genzyme Biosurgery; Alkermes, Inc.     126,000       126,000  
Richmond Office Park
    2007       100.00 %     100.00 %   Richmond, VA   The Brinks Co.; Wachovia Bank     568,000       568,000  
Skylight Office Tower
    1991       92.50 %     100.00 %   Cleveland, OH   Cap Gemini; Ulmer & Berne, LLP     321,000       321,000  
Ten MetroTech Center
    1992       100.00 %     100.00 %   Brooklyn, NY   Internal Revenue Service     365,000       365,000  
Terminal Tower
    1983       100.00 %     100.00 %   Cleveland, OH   Forest City Enterprises, Inc.; Cuyahoga Community College     589,000       589,000  
Twelve MetroTech Center
    2004       100.00 %     100.00 %   Brooklyn, NY   National Union Fire Insurance Co.     177,000       177,000  
Two MetroTech Center
    1990       82.50 %     82.50 %   Brooklyn, NY   Securities Industry Automation Corp.; City of New York - Board of Education     522,000       431,000  
University of Pennsylvania
    2004       100.00 %     100.00 %   Philadelphia, PA   University of Pennsylvania     122,000       122,000  
*  Waterfront Station - East 4th & West 4th Bldgs
    2010       45.00 %     45.00 %   Washington, D.C.   Washington, D.C. Government     631,000       284,000  
                                       
Consolidated Office Buildings Subtotal
                12,410,000       11,559,000  
                                     
 
                                               
Unconsolidated Office Buildings
                                               
350 Massachusetts Ave
    1998       50.00 %     50.00 %   Cambridge, MA   Star Market; Tofias; Novartis     169,000       85,000  
(3) 818 Mission Street
    2008       50.00 %     50.00 %   San Francisco, CA   Denny’s     28,000       14,000  
Bulletin Building
    2006       50.00 %     50.00 %   San Francisco, CA   Great West Life and Annuity; Corinthian School     78,000       39,000  
Chagrin Plaza I & II
    1969       66.67 %     66.67 %   Beachwood, OH   Nine Sigma; Benihana; H&R Block     113,000       75,000  
Clark Building
    1989       50.00 %     50.00 %   Cambridge, MA   Sanofi Pasteur Acambis     122,000       61,000  
Enterprise Place
    1998       50.00 %     50.00 %   Beachwood, OH   University of Phoenix; Advance Payroll; PS Executive Centers     132,000       66,000  
Liberty Center
    1986       50.00 %     50.00 %   Pittsburgh, PA   Federated Investors; Direct Energy Business     526,000       263,000  
Mesa del Sol - 5600 University SE
(formerly Advent Solar)
    2006       47.50 %     47.50 %   Albuquerque, NM   Applied Materials     87,000       41,000  
Mesa del Sol - Aperture Center (Town Center)
    2008       47.50 %     47.50 %   Albuquerque, NM   Leasing in progress     76,000       36,000  
Mesa del Sol - Fidelity
    2008/2009       47.50 %     47.50 %   Albuquerque, NM   Fidelity Investments     210,000       100,000  
Signature Square I
    1986       50.00 %     50.00 %   Beachwood, OH   Ciuni & Panichi; PCC Airfoils; Liberty Bank     79,000       40,000  
Signature Square II
    1989       50.00 %     50.00 %   Beachwood, OH   Pro Ed Communications; Goldberg Co.; Resillience Mgt.     82,000       41,000  
 
                                     
Unconsolidated Office Buildings Subtotal
                1,702,000       861,000  
                                     
 
                                               
Total Office Buildings at January 31, 2010
                                    14,112,000       12,420,000  
                                     
Total Office Buildings at January 31, 2009
                                    14,093,000       12,404,000  
                                     

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Table of Contents

     
Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
COMMERCIAL GROUP
RETAIL CENTERS
                                                                 
    Date of                                   Total           Gross
    Opening/                           Total     Square     Gross     Leasable  
    Acquisition/   Legal   Pro-Rata           Square     Feet at Pro-     Leasable     Area at Pro-  
Name   Expansion   Ownership (1)   Ownership (2)   Location   Major Tenants   Feet     Rata %     Area     Rata %  
 
Consolidated Regional Malls
Antelope Valley Mall
    1990/1999       78.00 %     78.00 %   Palmdale, CA   Sears; JCPenney; Harris Gottschalks; Dillard’s; Forever 21; Cinemark Theatre     1,196,000       933,000       363,000       283,000  
Ballston Common Mall
    1986/1999       100.00 %     100.00 %   Arlington, VA   Macy’s; Sport & Health; Regal Cinemas     579,000       579,000       311,000       311,000  
Galleria at Sunset
    1996/2002       100.00 %     100.00 %   Henderson, NV   Dillard’s; Macy’s; JCPenney; Dick’s Sporting Goods; Kohl’s     1,048,000       1,048,000       412,000       412,000  
Mall at Robinson
    2001       56.67 %     100.00 %   Pittsburgh, PA   Macy’s; Sears; JCPenney; Dick’s Sporting Goods     880,000       880,000       384,000       384,000  
Mall at Stonecrest
    2001       66.67 %     66.67 %   Atlanta, GA   Kohl’s; Sears; JCPenney; Dillard’s; AMC Theatre; Macy’s     1,226,000       817,000       397,000       265,000  
Northfield at Stapleton
    2005/2006       95.00 %     100.00 %   Denver, CO   Bass Pro; Target; Harkins Theatre; JCPenney; Macy’s     1,127,000       1,127,000       664,000       664,000  
Orchard Town Center
    2008       100.00 %     100.00 %   Westminster, CO   JCPenney; Macy’s; Target; AMC Theatre     1,018,000       1,018,000       482,000       482,000  
Promenade Bolingbrook
    2007       100.00 %     100.00 %   Bolingbrook, IL   Bass Pro; Macy’s; Village Roadshow     771,000       771,000       575,000       575,000  
++ Promenade in Temecula
    1999/2002/2009       75.00 %     100.00 %   Temecula, CA   JCPenney; Sears; Macy’s; Edwards Cinema     1,275,000       1,275,000       540,000       540,000  
^* Ridge Hill
    2011/2012       70.00 %     100.00 %   Yonkers, NY   National Amusements; Whole Foods; LL Bean; Cheesecake Factory     1,336,000       1,336,000       1,336,000       1,336,000  
Shops at Wiregrass
    2008       50.00 %     100.00 %   Tampa, FL   JCPenney; Dillard’s; Macy’s     734,000       734,000       349,000       349,000  
Short Pump Town Center
    2003/2005       50.00 %     100.00 %   Richmond, VA   Nordstrom; Macy’s; Dillard’s; Dick’s Sporting Goods     1,303,000       1,303,000       591,000       591,000  
Simi Valley Town Center
    2005       85.00 %     100.00 %   Simi Valley, CA   Macy’s     612,000       612,000       351,000       351,000  
South Bay Galleria
    1985/2001       100.00 %     100.00 %   Redondo Beach, CA   Macy’s; Nordstrom; Kohl’s     956,000       956,000       389,000       389,000  
Victoria Gardens
    2004/2007       80.00 %     80.00 %   Rancho Cucamonga, CA   Bass Pro; Macy’s; JCPenney; AMC Theater     1,401,000       1,121,000       829,000       663,000  
                                     
 
                                                               
Consolidated Regional Malls Subtotal
        15,462,000       14,510,000       7,973,000       7,595,000  
                                     

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Table of Contents

     
Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
COMMERCIAL GROUP
RETAIL CENTERS (continued)
                                                             
    Date of                                   Total             Gross  
    Opening/                           Total     Square     Gross     Leasable  
    Acquisition/   Legal   Pro-Rata           Square     Feet at Pro-     Leasable     Area at Pro-  
Name   Expansion   Ownership (1)   Ownership (2)   Location   Major Tenants   Feet     Rata %     Area     Rata %  
 
Consolidated Specialty Retail Centers
                                                           
42nd Street
  1999     100.00%       100.00%     Manhattan, NY   AMC Theatres; Madame Tussaud’s Wax Museum; Modell’s; Dave & Buster’s     312,000       312,000       312,000       312,000  
Atlantic Center
  1996     100.00%       100.00%     Brooklyn, NY   Pathmark; OfficeMax; Old Navy; Marshall’s; Sterns; NYC -
Dept of Motor Vehicles
    393,000       393,000       393,000       393,000  
Atlantic Center Site V
  1998     100.00%       100.00%     Brooklyn, NY   Modell’s     17,000       17,000       17,000       17,000  
Atlantic Terminal
  2004     100.00%       100.00%     Brooklyn, NY   Target; Designer Shoe Warehouse; Chuck E. Cheese’s; Daffy’s; Guitar Center     371,000       371,000       371,000       371,000  
Avenue at Tower City Center
  1990     100.00%       100.00%     Cleveland, OH   Hard Rock Café; Morton’s of Chicago; Cleveland Cinemas     365,000       365,000       365,000       365,000  
Brooklyn Commons
  2004     100.00%       100.00%     Brooklyn, NY   Lowe’s     151,000       151,000       151,000       151,000  
Bruckner Boulevard
  1996     100.00%       100.00%     Bronx, NY   Conway; Old Navy; Marshall’s     113,000       113,000       113,000       113,000  
Columbia Park Center
  1999     75.00%       75.00%     North Bergen, NJ   Shop Rite; Old Navy; Staples; Bally’s; Shopper’s World;
Phoenix Theatres; Sixth Avenue Electronics
    347,000       260,000       347,000       260,000  
Court Street
  2000     100.00%       100.00%     Brooklyn, NY   United Artists; Barnes & Noble     102,000       102,000       102,000       102,000  
Eastchester
  2000     100.00%       100.00%     Bronx, NY   Pathmark     63,000       63,000       63,000       63,000  
Forest Avenue
  2000     100.00%       100.00%     Staten Island, NY   United Artists     70,000       70,000       70,000       70,000  
Gun Hill Road
  1997     100.00%       100.00%     Bronx, NY   Home Depot; Chuck E. Cheese’s     147,000       147,000       147,000       147,000  
Harlem Center
  2002     100.00%       100.00%     Manhattan, NY   Marshall’s; CVS/Pharmacy; Staples; H&M; Planet Fitness     126,000       126,000       126,000       126,000  
Kaufman Studios
  1999     100.00%       100.00%     Queens, NY   United Artists Theatres     84,000       84,000       84,000       84,000  
Market at Tobacco Row
  2002     100.00%       100.00%     Richmond, VA   Rich Foods; CVS/Pharmacy     43,000       43,000       43,000       43,000  
Northern Boulevard
  1997     100.00%       100.00%     Queens, NY   Stop & Shop; Marshall’s; Old Navy; AJ Wright; Guitar Center     218,000       218,000       218,000       218,000  
Quartermaster Plaza
  2004     100.00%       100.00%     Philadelphia, PA   Home Depot; BJ’s Wholesale; Staples; PetSmart; Walgreen’s     456,000       456,000       456,000       456,000  
Quebec Square
  2002     90.00%       90.00%     Denver, CO   Wal-Mart; Home Depot; Sam’s Club; Ross Dress for Less;
Office Depot; PetSmart
    739,000       665,000       217,000       195,000  
Queens Place
  2001     100.00%       100.00%     Queens, NY   Target; Best Buy; Macy’s Furniture; Designer Shoe Warehouse     455,000       455,000       221,000       221,000  
Richmond Avenue
  1998     100.00%       100.00%     Staten Island, NY   Staples     76,000       76,000       76,000       76,000  
Saddle Rock Village
  2005     80.00%       100.00%     Aurora, CO   Target; JoAnn Fabrics; PetSmart; OfficeMax     294,000       294,000       97,000       97,000  
(3)  South Bay Southern Center
  1978     100.00%       100.00%     Redondo Beach, CA   Leasing in progress     78,000       78,000       78,000       78,000  
Station Square
  1994/2002     100.00%       100.00%     Pittsburgh, PA   Hard Rock Café; Grand Concourse Restaurant; Buca Di Beppo     291,000       291,000       291,000       291,000  
*   Village at Gulfstream
  2010     50.00%       50.00%     Hallandale Beach, FL   Crate & Barrel; The Container Store; Texas de Brazil; Cadillac Ranch     510,000       255,000       510,000       255,000  
White Oak Village
  2008     50.00%       100.00%     Richmond, VA   Target; Lowe’s; Sam’s Club; JCPenney; OfficeMax; PetSmart; Ukrops     843,000       843,000       295,000       295,000  
Woodbridge Crossing
  2002     100.00%       100.00%     Woodbridge, NJ   Modell’s; Thomasville Furniture; Party City     284,000       284,000       284,000       284,000  
                               
 
Consolidated Specialty Retail Centers Subtotal
            6,948,000       6,532,000       5,447,000       5,083,000  
                               
 
Consolidated Retail Centers Total
            22,410,000       21,042,000       13,420,000       12,678,000  
                               

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Table of Contents

     
Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
COMMERCIAL GROUP
RETAIL CENTERS (continued)
                                                             
    Date of                                   Total             Gross  
    Opening/                           Total     Square     Gross     Leasable  
    Acquisition/   Legal   Pro-Rata           Square     Feet at Pro-     Leasable     Area at Pro-  
Name   Expansion   Ownership (1)   Ownership (2)   Location   Major Tenants   Feet     Rata %     Area     Rata %  
 
Unconsolidated Regional Malls
                                                           
Boulevard Mall
  1996/2000     50.00%       50.00%     Amherst, NY   JCPenney; Macy’s; Sears; Michael’s     912,000       456,000       336,000       168,000  
Charleston Town Center
  1983     50.00%       50.00%     Charleston, WV   Macy’s; JCPenney; Sears; Brickstreet Insurance     897,000       449,000       363,000       182,000  
San Francisco Centre
  2006     50.00%       50.00%     San Francisco, CA   Nordstrom; Bloomingdale’s; Century Theaters; San Francisco State University; Microsoft     1,462,000       731,000       788,000       394,000  
                               
Unconsolidated Regional Malls Subtotal
            3,271,000       1,636,000       1,487,000       744,000  
                               
 
                                                           
Unconsolidated Specialty Retail Centers
                                                           
*  East River Plaza
  2009/2010     35.00%       50.00%     Manhattan, NY   Costco; Target; Best Buy; Marshall’s; PetsMart; Bob’s Furniture; Old Navy     527,000       264,000       527,000       264,000  
Golden Gate
  1958     50.00%       50.00%     Mayfield Hts., OH   OfficeMax; Old Navy; Marshall’s; Cost Plus; HH Gregg;
PetSmart
    361,000       181,000       361,000       181,000  
Marketplace at Riverpark
  1996     50.00%       50.00%     Fresno, CA   JCPenney; Best Buy; Marshall’s; OfficeMax; Old Navy;
Target; Sports Authority
    471,000       236,000       296,000       148,000  
(3)  Metreon
  2006     50.00%       50.00%     San Francisco, CA   AMC Loews     279,000       140,000       279,000       140,000  
Plaza at Robinson Town Center
  1989     50.00%       50.00%     Pittsburgh, PA   T.J. Maxx; Marshall’s; IKEA; Value City; JoAnn Fabrics; OfficeMax     507,000       254,000       507,000       254,000  
                               
Unconsolidated Specialty Retail Centers Subtotal
            2,145,000       1,075,000       1,970,000       987,000  
                               
 
Unconsolidated Retail Centers Total
            5,416,000       2,711,000       3,457,000       1,731,000  
                               
 
Total Retail Centers at January 31, 2010
            27,826,000       23,753,000       16,877,000       14,409,000  
                               
Total Retail Centers at January 31, 2009
            27,007,000       23,409,000       16,913,000       14,587,000  
                               

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Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
COMMERCIAL GROUP
HOTELS
                                         
    Date of                              
    Opening/                              
    Acquisition/   Legal   Pro-Rata               Hotel Rooms at  
Name   Expansion   Ownership (1)   Ownership (2)   Location   Rooms     Pro-Rata %  
 
Consolidated Hotels
                                       
Charleston Marriott
  1983     95.00%       100.00%     Charleston, WV     352       352  
Ritz-Carlton, Cleveland
  1990     100.00%       100.00%     Cleveland, OH     206       206  
Sheraton Station Square
  1998/2001     100.00%       100.00%     Pittsburgh, PA     399       399  
                             
Consolidated Hotels Subtotal
                            957       957  
                             
 
                                       
Unconsolidated Hotels
                                       
Courtyard by Marriott
  1985     3.97%       3.97%     Detroit, MI     260       10  
Westin Convention Center
  1986     50.00%       50.00%     Pittsburgh, PA     616       308  
                             
Unconsolidated Hotels Subtotal
                            876       318  
                             
 
                                       
Total Hotel Rooms at January 31, 2010
                            1,833       1,275  
                             
Total Hotel Rooms at January 31, 2009
                            1,833       1,275  
                             
                                                             
                                                        Est. Seating  
                                                Est. Seating     Capacity for  
                                                Capacity for     NBA  
                                Total     Total Square     NBA     Basketball  
                                Square     Feet at     Basketball     Event at  
ARENA                           Major Tenants   Feet     Pro-Rata %     Event     Pro-Rata %  
 
*  Barclays Center
  2012     23.28%       23.28%     Brooklyn, NY   The Nets NBA Team     670,000       156,000       18,000       4,190  
                                 

30


Table of Contents

     
Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
RESIDENTIAL GROUP
APARTMENTS
                                         
    Date of                            
    Opening/                            
    Acquisition/   Legal   Pro-Rata       Leasable   Leasable Units  
Name   Expansion   Ownership (1)   Ownership (2)   Location   Units   at Pro-Rata %  
 
Consolidated Apartment Communities
                                       
100 Landsdowne Street
  2005     100.00%       100.00%     Cambridge, MA     203       203  
101 San Fernando
  2000     100.00%       95.00%     San Jose, CA     323       307  
1251 S. Michigan
  2006     0.01%       100.00%     Chicago, IL     91       91  
^+  80 DeKalb
  2009/2010     80.00%       100.00%     Brooklyn, NY     365       365  
American Cigar Company
  2000     100.00%       100.00%     Richmond, VA     171       171  
Ashton Mill
  2005     90.00%       100.00%     Cumberland, RI     193       193  
Autumn Ridge
  2002     100.00%       100.00%     Sterling Heights, MI     251       251  
^*  Beekman
  2011/2012     49.00%       70.00%     Manhattan, NY     904       633  
Botanica on the Green (East 29th Avenue Town Center)
  2004     90.00%       90.00%     Denver, CO     78       70  
Botanica II
  2007     90.00%       90.00%     Denver, CO     154       139  
Bowin
  1998     95.05%       95.05%     Detroit, MI     193       183  
Cambridge Towers
  2002     100.00%       100.00%     Detroit, MI     250       250  
Cameron Kinney
  2007     100.00%       100.00%     Richmond, VA     259       259  
Consolidated-Carolina
  2003     89.99%       100.00%     Richmond, VA     158       158  
Coraopolis Towers
  2002     80.00%       80.00%     Coraopolis, PA     200       160  
Crescent Flats (East 29th Avenue Town Center)
  2004     90.00%       90.00%     Denver, CO     66       59  
Cutter’s Ridge at Tobacco Row
  2006     100.00%       100.00%     Richmond, VA     12       12  
Donora Towers
  2002     100.00%       100.00%     Donora, PA     103       103  
Drake
  1998     95.05%       95.05%     Philadelphia, PA     284       270  
Easthaven at the Village
  1994/1995     100.00%       100.00%     Beachwood, OH     360       360  
Emerald Palms
  1996/2004     100.00%       100.00%     Miami, FL     505       505  
Grand
  1999     85.50%       85.50%     North Bethesda, MD     549       469  
Grand Lowry Lofts
  2000     100.00%       100.00%     Denver, CO     261       261  
Grove
  2003     100.00%       100.00%     Ontario, CA     101       101  
^  Hamel Mill Lofts
  2008/2010     90.00%       100.00%     Haverhill, MA     305       305  
Heritage
  2002     100.00%       100.00%     San Diego, CA     230       230  
Independence Place I
  1973     50.00%       50.00%     Parma Heights, OH     202       101  
Independence Place II
  2003     100.00%       100.00%     Parma Heights, OH     201       201  
Kennedy Biscuit Lofts
  1990     98.90%       100.00%     Cambridge, MA     142       142  

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Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
RESIDENTIAL GROUP
APARTMENTS (continued)
                                         
    Date of                            
    Opening/                            
    Acquisition/   Legal   Pro-Rata       Leasable   Leasable Units  
Name   Expansion   Ownership (1)   Ownership (2)   Location   Units   at Pro-Rata %  
 
Consolidated Apartment Communities (continued)
                                       
Knolls
  1995     1.00%       95.00%     Orange, CA     260       247  
Lakeland
  1998     95.10%       95.10%     Waterford, MI     200       190  
Lenox Club
  1991     95.00%       95.00%     Arlington, VA     385       366  
Lenox Park
  1992     95.00%       95.00%     Silver Spring, MD     406       386  
Lofts 23
  2005     100.00%       100.00%     Cambridge, MA     51       51  
Lofts at 1835 Arch
  2001     95.05%       95.05%     Philadelphia, PA     191       182  
Lucky Strike
  2008     88.98%       100.00%     Richmond, VA     131       131  
Mercantile Place on Main
  2008     100.00%       100.00%     Dallas, TX     366       366  
Metro 417
  2005     75.00%       100.00%     Los Angeles, CA     277       277  
Metropolitan
  1989     100.00%       100.00%     Los Angeles, CA     270       270  
Midtown Towers
  1969     100.00%       100.00%     Parma, OH     635       635  
Museum Towers
  1997     100.00%       100.00%     Philadelphia, PA     286       286  
+  North Church Towers
  2009     100.00%       100.00%     Parma Heights, OH     399       399  
Oceanpointe Towers
  1980     6.35%       100.00%     Long Branch, NJ     151       151  
One Franklintown
  1988     100.00%       100.00%     Philadelphia, PA     335       335  
Parmatown Towers and Gardens
  1972-1973     100.00%       100.00%     Parma, OH     412       412  
Pavilion
  1992     95.00%       95.00%     Chicago, IL     1,114       1,058  
Plymouth Square
  2003     100.00%       100.00%     Detroit, MI     280       280  
*  Presidio Landmark
  2010     100.00%       100.00%     San Francisco, CA     161       161  
Queenswood
  1990     93.36%       93.36%     Corona, NY     296       276  
Sky55
  2006     100.00%       100.00%     Chicago, IL     411       411  
Southfield
  2002     100.00%       100.00%     Whitemarsh, MD     212       212  
Village Center
  1983     100.00%       100.00%     Detroit, MI     254       254  
Wilson Building
  2007     100.00%       100.00%     Dallas, TX     143       143  
                             
Consolidated Apartment Communities Subtotal
                            14,740       14,031  
                             
 
Consolidated Supported-Living Apartments
                                       
Forest Trace
  2000     100.00%       100.00%     Lauderhill, FL     322       322  
                             
Consolidated Supported-Living Apartments Subtotal
                            322       322  
                             
 
Consolidated Apartments Total
                            15,062       14,353  
                             

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Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
RESIDENTIAL GROUP
APARTMENTS (continued)
                                         
    Date of                            
    Opening/                            
    Acquisition/   Legal   Pro-Rata       Leasable   Leasable Units  
Name   Expansion   Ownership (1)   Ownership (2)   Location   Units   at Pro-Rata %  
 
Unconsolidated Apartment Communities
                                       
Arbor Glen
  2001-2007     50.00%       50.00%     Twinsburg, OH     288       144  
Barrington Place
  2008     49.00%       49.00%     Raleigh, NC     274       134  
Bayside Village
  1988-1989     50.00%       50.00%     San Francisco, CA     862       431  
Big Creek
  1996-2001     50.00%       50.00%     Parma Heights, OH     516       258  
Brookpark Place
  1976     100.00%       100.00%     Wheeling, WV     152       152  
Brookview Place
  1979     3.00%       3.00%     Dayton, OH     232       7  
Buckeye Towers
  1976     10.91%       5.95%     New Boston, OH     120       7  
Burton Place
  2000     90.00%       90.00%     Burton, MI     200       180  
Camelot
  1967     50.00%       50.00%     Parma Heights, OH     151       76  
Canton Towers
  1978     10.91%       4.30%     Canton, OH     199       9  
Carl D. Perkins
  2002     100.00%       100.00%     Pikeville, KY     150       150  
Cedar Place
  1974     2.98%       100.00%     Lansing, MI     220       220  
Cherry Tree
  1996-2000     50.00%       50.00%     Strongsville, OH     442       221  
Chestnut Lake
  1969     50.00%       50.00%     Strongsville, OH     789       395  
^+  Cobblestone Court Apartments
  2006-2009     50.00%       50.00%     Painesville, OH     400       200  
Colonial Grand
  2003     50.00%       50.00%     Tampa, FL     176       88  
Connellsville Towers
  1981     9.59%       9.59%     Connellsville, PA     111       11  
Coppertree
  1998     50.00%       50.00%     Mayfield Heights, OH     342       171  
Deer Run
  1987-1990     43.03%       43.03%     Twinsburg, OH     562       242  
Eaton Ridge
  2002-2004     50.00%       50.00%     Sagamore Hills, OH     260       130  
Farmington Place
  1980     100.00%       100.00%     Farmington, MI     153       153  
Fenimore Court
  1982     7.06%       50.00%     Detroit, MI     144       72  
Fort Lincoln II
  1979     45.00%       45.00%     Washington, D.C.     176       79  
Fort Lincoln III & IV
  1981     24.90%       24.90%     Washington, D.C.     306       76  
Frenchtown Place
  1975     8.24%       100.00%     Monroe, MI     151       151  
Glendora Gardens
  1983     1.99%       99.00%     Glendora, CA     105       104  
Hamptons
  1969     50.00%       50.00%     Beachwood, OH     651       326  
Hunter’s Hollow
  1990     50.00%       50.00%     Strongsville, OH     208       104  
Legacy Arboretum
  2008     49.00%       49.00%     Charlotte, NC     266       130  

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Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
RESIDENTIAL GROUP
APARTMENTS (continued)
                                         
    Date of                            
    Opening/                            
    Acquisition/   Legal   Pro-Rata       Leasable   Leasable Units  
Name   Expansion   Ownership (1)   Ownership (2)   Location   Units   at Pro-Rata %  
 
Unconsolidated Apartment Communities (continued)
                                       
Legacy Crossroads
  2008-2009     50.00%       50.00%     Cary, NC     344       172  
Liberty Hills
  1979-1986     50.00%       50.00%     Solon, OH     396       198  
Lima Towers
  1977     10.91%       6.94%     Lima, OH     200       14  
Metropolitan Lofts
  2005     50.00%       50.00%     Los Angeles, CA     264       132  
Millender Center
  1985     4.29%       100.00%     Detroit, MI     339       339  
Miramar Towers
  1980     6.35%       100.00%     Los Angeles, CA     157       157  
Newport Landing
  2002-2005     50.00%       50.00%     Coventry Township, OH     336       168  
Noble Towers
  1979     50.00%       50.00%     Pittsburgh, PA     133       67  
North Port Village
  1981     27.00%       27.00%     Port Huron, MI     251       68  
Nu Ken Tower (Citizen’s Plaza)
  1981     8.84%       50.00%     New Kensington, PA     101       51  
Panorama Towers
  1978     99.00%       99.00%     Panorama City, CA     154       152  
Park Place Towers
  1975     15.11%       100.00%     Mt. Clemens, MI     187       187  
Parkwood Village
  2001-2002     50.00%       50.00%     Brunswick, OH     204       102  
Pebble Creek
  1995-1996     50.00%       50.00%     Twinsburg, OH     148       74  
Perrytown
  1973     8.24%       100.00%     Pittsburgh, PA     231       231  
Pine Grove Manor
  1973     10.26%       100.00%     Muskegon Township, MI     172       172  
Pine Ridge Valley
  1967-1974,     50.00%       50.00%     Willoughby Hills, OH     1,309       655  
 
  2005-2007                                    
Potomac Heights Village
  1981     6.35%       100.00%     Keyser, WV     141       141  
Residences at University Park
  2002     40.00%       40.00%     Cambridge, MA     135       54  
Riverside Towers
  1977     8.30%       100.00%     Coshocton, OH     100       100  
Settler’s Landing at Greentree
  2000-2004     50.00%       50.00%     Streetsboro, OH     408       204  
Shippan Avenue
  1980     100.00%       100.00%     Stamford, CT     148       148  
St. Mary’s Villa
  2002     40.07%       40.07%     Newark, NJ     360       144  
^*  Stratford Crossing
  2007-2010     50.00%       50.00%     Wadsworth, OH     348       174  
Surfside Towers
  1970     50.00%       50.00%     Eastlake, OH     246       123  
^+  Sutton Landing
  2007-2009     50.00%       50.00%     Brimfield, OH     216       108  
Tamarac
  1990-2001     50.00%       50.00%     Willoughby, OH     642       321  
The Springs
  1981     6.35%       100.00%     La Mesa, CA     129       129  
Tower 43
  2002     100.00%       100.00%     Kent, OH     101       101  

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Table of Contents

     
Forest City Enterprises, Inc. Portfolio of Real Estate as of January 31, 2010
RESIDENTIAL GROUP
APARTMENTS (continued)
                                         
    Date of                            
    Opening/                            
    Acquisition/   Legal   Pro-Rata       Leasable   Leasable Units  
Name   Expansion   Ownership (1)   Ownership (2)   Location   Units   at Pro-Rata %  
 
Unconsolidated Apartment Communities (continued)
                                       
Towne Centre Place
  1975     6.86%       100.00%     Ypsilanti, MI     170       170  
Twin Lake Towers
  1966     50.00%       50.00%     Denver, CO     254       127  
Uptown Apartments
  2008     50.00%       50.00%     Oakland, CA     665       333  
Village Square
  1978     100.00%       100.00%     Williamsville, NY     100       100  
Westwood Reserve
  2002     50.00%       50.00%     Tampa, FL     340       170  
Woodgate / Evergreen Farms
  2004-2006     33.33%       33.33%     Olmsted Township, OH     348       116  
Worth Street
  2003     50.00%       50.00%     Manhattan, NY     330       165  
Ziegler Place
  1978     100.00%       100.00%     Livonia, MI     141       141  
                             
Unconsolidated Apartment Communities Subtotal
                            18,854       10,429  
                             
 
                                       
Unconsolidated Military Housing
                                       
^*  Air Force Academy
  2007-2013     50.00%       50.00%     Colorado Springs, CO     427       214  
^*  Midwest Millington
  2008-2010     1.00%       ^^     Memphis, TN     318       ^^  
^*  Navy Midwest
  2006-2010     1.00%       ^^     Chicago, IL     1,658       ^^  
Ohana Military Communities, Hawaii Increment I
  2005-2008     1.00%       ^^     Honolulu, HI     1,952       ^^  
^*  Ohana Military Communities, Hawaii Increment II
  2007-2011     1.00%       ^^     Honolulu, HI     1,175       ^^  
^*  Ohana Military Communities, Hawaii Increment III
  2007-2011     1.00%       ^^     Honolulu, HI     2,520       ^^  
^*  Ohana Military Communities, Hawaii Increment IV
  2007-2014     1.00%       ^^     Kaneohe, HI     917       ^^  
^*  Pacific Northwest Communities
  2007-2010     20.00%       ^^     Seattle, WA     2,986       ^^  
                             
Unconsolidated Military Housing Subtotal
                            11,953       214  
                             
 
Unconsolidated Apartments Total
                            30,807       10,643  
                             
 
Combined Apartments Total
                            45,869       24,996  
                             
 
Federally Subsidized Housing (Total of 5 Buildings)
                            741          
 
                                   
 
Total Apartment Units at January 31, 2010
                            46,610          
 
                                   
Total Apartment Units at January 31, 2009
                            49,116          
 
                                   
 
*   Property under construction as of January 31, 2010.
 
+   Property opened or acquired in 2009.
 
++   Expansion of property opened in 2009.
 
^   Property to open in phases.
 
^^   The Company’s share of residual cash flow ranges from 0-20% during the life cycle of the project.
 
(1)   Represents our share of a property’s profits and losses upon settlement of any preferred returns to which we or our partner(s) may be entitled.
 
(2)   Represents our share of a property’s profits and losses adjusted for any preferred returns to which we or our partner(s) may be entitled.
 
(3)   Operating properties identified for redevelopment.

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Item 3. Legal Proceedings
The Company is involved in various claims and lawsuits incidental to its business, and management and legal counsel believe that these claims and lawsuits will not have a material adverse effect on the Company’s consolidated financial statements.
Item 4. Reserved
Pursuant to General Instruction G of Form 10-K, the following is included as an unnumbered item to Part I of the Form 10-K.
Executive Officers of the Registrant
The following list is included in Part I of this Report in lieu of being included in the Proxy Statement for the Annual Meeting of Shareholders to be held on June 16, 2010. The names and ages of and positions held by the executive officers of the Company are presented in the following list. Each individual has been appointed to serve for the period which ends with the Annual Meeting of Shareholders to be held on June 16, 2010.
         
Name(2)
  Age   Current Position
 
       
Albert B. Ratner (1)
  82   Co-Chairman of the Board of Directors
Samuel H. Miller
  88   Co-Chairman of the Board of Directors and Treasurer
Charles A. Ratner (1)
  68   Chief Executive Officer, President and Director
Bruce C. Ratner (1)
  65   Executive Vice President and Director
James A. Ratner (1)
  65   Executive Vice President and Director
Ronald A. Ratner (1)
  62   Executive Vice President and Director
Brian J. Ratner (1)
  52   Executive Vice President and Director
Robert G. O’Brien
  52   Executive Vice President and Chief Financial Officer
Linda M. Kane
  52   Senior Vice President, Chief Accounting and Administrative Officer
Geralyn M. Presti
  54   Senior Vice President, General Counsel and Secretary
   
Albert B. Ratner has been Co-Chairman of the Board of Directors since June 1995. He previously served as Chief Executive Officer and Vice Chairman of the Board from June 1993 to June 1995 and President prior to July 1993.
 
   
Samuel H. Miller has been Co-Chairman of the Board of Directors since June 1995 and Treasurer of the Company since December 1992. He previously served as Chairman of the Board from June 1993 to June 1995, and Vice Chairman of the Board and Chief Operating Officer prior to June 1993.
 
   
Charles A. Ratner has been Chief Executive Officer since June 1995 and President since June 1993. He previously served as Chief Operating Officer from June 1993 to June 1995, and Executive Vice President prior to June 1993.
 
   
Bruce C. Ratner has been Executive Vice President since November 2006. He has been Chief Executive Officer of Forest City Ratner Companies, a subsidiary of the Company, since 1987.
 
   
James A. Ratner has been Executive Vice President since March 1988.
 
   
Ronald A. Ratner has been Executive Vice President since March 1988.
 
   
Brian J. Ratner has been Executive Vice President since June 2001.
 
   
Robert G. O’Brien has been Executive Vice President and Chief Financial Officer since April 2008. He previously served as Vice President, Finance and Investment from February 2008 to April 2008 and Executive Vice President, Strategy and Investment, of Forest City Rental Properties Corporation, a subsidiary of the Company, from October 2000 to January 2008.
 
   
Linda M. Kane has been Chief Accounting and Administrative Officer since December 2007 and Senior Vice President since June 2002. She previously served as Corporate Controller from March 1995 to December 2007 and Vice President from March 1995 to June 2002.
 
   
Geralyn M. Presti has been Senior Vice President and General Counsel since July 2002 and Secretary since April 2008. She previously served as Assistant Secretary from July 2002 to April 2008, Deputy General Counsel from January 2000 to June 2002, and Associate General Counsel from December 1996 to January 2000.
 
  (1)  
Charles A. Ratner, James A. Ratner and Ronald A. Ratner are brothers. Albert B. Ratner and Bruce C. Ratner are first cousins to each other as well as first cousins to Charles A. Ratner, James A. Ratner and Ronald A. Ratner. Brian J. Ratner is the son of Albert B. Ratner.
 
  (2)  
As previously disclosed in the Company’s Form 8-K filed March 25, 2010, the Company announced the appointment of David J. LaRue to the newly created position of Executive Vice President and Chief Operating Officer effective immediately. Mr LaRue joined the Company in 1986 and has served as President and Chief Operating Officer of Forest City’s Commercial Group since 2003.

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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s Class A and Class B common stock are traded on the New York Stock Exchange (“NYSE”) under the symbols FCEA and FCEB, respectively. At January 31, 2010 and 2009, the market price of the Company’s Class A common stock was $11.31 and $6.76, respectively, and the market price of the Company’s Class B common stock was $11.27 and $6.92, respectively. As of February 26, 2010, the numbers of registered holders of Class A and Class B common stock were 819 and 485, respectively. The following tables summarize the quarterly high and low sales prices per share of the Company’s Class A and Class B common stock as reported by the NYSE and the dividends declared per common share:
                                 
    Quarter Ended  
    January 31,     October 31,     July 31,     April 30,  
    2010     2009     2009     2009  
 
 
                               
Market price range of common stock
                               
Class A
                               
High
    $ 12.96       $ 13.76       $ 8.94       $ 8.57  
Low
    $ 8.89       $ 7.06       $ 4.86       $ 3.41  
Class B
                               
High
    $ 12.88       $ 13.91       $ 8.80       $ 8.52  
Low
    $ 8.86       $ 7.22       $ 4.89       $ 3.60  
Quarterly dividends declared per common share Class A and Class B (1)
    $ -           $ -           $ -           $ -      
                                 
    Quarter Ended  
    January 31,     October 31,     July 31,     April 30,  
    2009     2008     2008     2008  
 
 
                               
Market price range of common stock
                               
Class A
                               
High
  $ 12.15     $ 34.62     $ 41.60     $ 40.90  
Low
  $ 3.42     $ 10.91     $ 25.59     $ 34.47  
Class B
                               
High
  $ 12.25     $ 35.17     $ 41.45     $ 40.33  
Low
  $ 3.50     $ 11.16     $ 25.66     $ 34.56  
Quarterly dividends declared per common share Class A and Class B (1)
  $ -         $ 0.08     $ 0.08     $ 0.08  
 
(1)
 
On December 5, 2008, the Board of Directors suspended the cash dividends on shares of Class A and Class B common stock following the payment of dividends on December 15, 2008, until such dividends are reinstated. The Company’s bank revolving credit facility prohibits the Company from paying any dividends on its Class A and Class B common stock through February 2012.
For the three months ended January 31, 2010 there were no unregistered issuances or repurchases of stock.

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The following graph shows a comparison of cumulative total return for the period from January 31, 2005 through January 31, 2010 among the Company’s Class A Common Stock (FCEA) and Class B Common Stock (FCEB), Standard & Poor’s 500 Stock Index (“S&P 500®”) and the Dow Jones U.S. Real Estate Index. The cumulative total return is based on a $100 investment on January 31, 2005 and the subsequent change in market prices of the securities at each respective fiscal year end. It also assumes that dividends were reinvested quarterly.
(LINE GRAPH)
                                                 
    Jan-05   Jan-06   Jan-07   Jan-08   Jan-09   Jan-10
Forest City Enterprises Inc. Class A
  $ 100     $ 132     $ 211     $ 140     $ 24       $41  
Forest City Enterprises Inc. Class B
  $ 100     $ 130     $ 208     $ 138     $ 25       $40  
S&P 500®
  $ 100     $ 110     $ 126     $ 123     $ 76     $ 101  
Dow Jones US Real Estate Index
  $ 100     $ 128     $ 175     $ 132     $ 66       $98  

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Item 6. Selected Financial Data
The Operating Results and per share amounts presented below have been reclassified for properties disposed of and/or classified as held for sale during the years ended January 31, 2010, 2009, 2008, 2007 and 2006. In addition, Operating Results, Financial Position and per share amounts have been adjusted for the retrospective application of the following accounting guidance that we adopted on February 1, 2009: (i) noncontrolling interests, (ii) accounting guidance for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) and (iii) classification of certain stock-based compensation as participating securities. The following data should be read in conjunction with our financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included elsewhere in this Form 10-K. Our historical operating results may not be comparable to our future operating results.
                                         
    Years Ended January 31,  
    2010     2009     2008     2007     2006  
    (in thousands, except share and per share data)  
 
Operating Results:
                                       
Total revenues from real estate operations (1)
    $ 1,257,222     $ 1,280,570     $ 1,276,473     $ 1,112,960     $ 1,082,091  
     
 
                                       
Earnings (loss) from continuing operations attributable to Forest City Enterprises, Inc. (1)
    $ (29,066 )   $ (123,517 )   $ (13,100 )   $ 31,333     $ 68,987  
 
                                       
Earnings (loss) from discontinued operations attributable to Forest City Enterprises, Inc. (1)
    (1,585 )     10,270       64,673       145,689       14,532  
     
 
                                       
Net earnings (loss) attributable to Forest City Enterprises, Inc.
    $ (30,651 )   $ (113,247 )   $ 51,573     $ 177,022     $ 83,519  
     
 
                                       
Diluted Earnings per Common Share:
                                       
 
                                       
Earnings (loss) from continuing operations attributable to Forest City Enterprises, Inc. (1)
    $ (0.21 )   $ (1.20 )   $ (0.13 )   $ 0.31     $ 0.67  
 
                                       
Earnings (loss) from discontinued operations attributable to Forest City Enterprises, Inc. (1)
    (0.01 )     0.10       0.63       1.39       0.14  
     
 
                                       
Net earnings (loss) attributable to Forest City Enterprises, Inc.
    $ (0.22 )   $ (1.10 )   $ 0.50     $ 1.70     $ 0.81  
     
 
                                       
Weighted Average Diluted Shares Outstanding (2)
      139,825,349         102,755,315         102,261,740         104,454,898         102,603,932  
     
 
                                       
Cash Dividend Declared per share - Class A and B
    $ -     $ 0.2400     $ 0.3100     $ 0.2700     $ 0.2300  
     
                                         
    Years Ended January 31,  
    2010     2009     2008     2007     2006  
    (in thousands)  
 
Financial Position:
                                       
Consolidated assets
  $ 11,916,711     $ 11,380,507     $ 10,191,855     $ 8,923,141     $ 7,906,789  
Real estate, at cost
  $ 11,340,779     $ 10,648,573     $ 9,225,753     $ 8,231,296     $ 7,155,126  
Long-term debt, primarily nonrecourse mortgages
  $ 8,634,210     $ 8,289,954     $ 7,229,735     $ 6,181,859     $ 5,841,332  
  (1)  
This category is adjusted for discontinued operations. See the “Discontinued Operations” section of the MD&A in Item 7.
 
  (2)  
In May 2009, we sold 52,325,000 shares of our Class A common stock, resulting in an increase of weighted average shares outstanding.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Corporate Description
We principally engage in the ownership, development, management and acquisition of commercial and residential real estate and land throughout the United States. We operate through three strategic business units and five reportable segments. The Commercial Group, our largest strategic business unit, owns, develops, acquires and operates regional malls, specialty/urban retail centers, office and life science buildings, hotels and mixed-use projects. The Residential Group owns, develops, acquires and operates residential rental properties, including upscale and middle-market apartments and adaptive re-use developments. Additionally, the Residential Group develops for-sale condominium projects and also owns interests in entities that develop and manage military family housing. New York City operations are part of the Commercial Group or Residential Group depending on the nature of the operations. The Land Development Group acquires and sells both land and developed lots to residential, commercial and industrial customers. It also owns and develops land into master-planned communities and mixed-use projects.
Corporate Activities and The Nets, a member of the National Basketball Association (“NBA”) in which we account for our investment on the equity method of accounting, are other reportable segments of the Company.
We have approximately $11.9 billion of consolidated assets in 27 states and the District of Columbia at January 31, 2010. Our core markets include Boston, the state of California, Chicago, Denver, the New York City/Philadelphia metropolitan area and the Greater Washington D.C./Baltimore metropolitan area. We have offices in Albuquerque, Boston, Chicago, Denver, London (England), Los Angeles, New York City, San Francisco, Washington, D.C., and our corporate headquarters in Cleveland, Ohio.
Significant milestones occurring during 2009 included:
   
The opening of the first Costco in Manhattan in our East River Plaza retail center. Costco occupies 110,000 square feet on the first floor of East River Plaza. The remainder of the approximately 500,000 square foot retail center, which is more than 90% leased and will be home to Manhattan’s first Target, is expected to open in 2010;
 
   
The sale of Grand Avenue, a retail center in Queens, New York, which closed April 16, 2009. The property had a selling price of $33,500,000 and generated net proceeds of approximately $9,042,000;
 
   
The sale of our partnership interests in three supported-living apartment communities located in Teaneck, New Jersey, Chevy Chase, Maryland and Yonkers, New York to a subsidiary of Hyatt Corporation. The sale generated proceeds of approximately $30,000,000. The three properties, all of which operate under the Classic Residence by Hyatt brand, have a total of 869 supported-living rental units;
 
   
The formal approval of the acquisition and development of our Brooklyn Atlantic Yards project (“Atlantic Yards”), a 22-acre residential and commercial real estate project in Brooklyn, New York, by the required state governmental authorities with final documentation of the transactions being executed on December 23, 2009. The closing clears the way for additional work to proceed on the project, beginning with construction of the Barclays Center arena (“Arena”), the planned future home of The Nets. In conjunction, The Brooklyn Arena Local Development Corporation, an entity formed by the State of New York, issued $511,000,000 of tax-exempt bonds to finance a portion of the construction of the Arena at Atlantic Yards, the proceeds of which will become available upon the satisfaction of certain conditions including vacant possession of the project site. The interest rate on the bonds was 6.48%;
 
   
Entering into a purchase agreement in December 2009 with an affiliate of Onexim Group, an international private investment fund, to create a strategic partnership for the development of Atlantic Yards and the Arena. Pursuant to these agreements, entities to be formed by Onexim Group will invest $200,000,000 and make certain contingent funding commitments to acquire 45% of the Arena project and 80% of The Nets, and the right to purchase up to 20% of the Atlantic Yards Development Company, which will develop the non-arena real estate. We will retain a noncontrolling ownership stake in The Nets, and will be managing partner of the Arena and majority owner of the balance of the Atlantic Yards real estate. As a 45% owner of the Arena and an 80% owner of the team, Onexim will be responsible for those respective percentages of the debt of each asset;
 
   
Being chosen to receive an allocation of New Market Tax Credits (“NMTC”) as part of a $5 billion federal program to create jobs and revive neighborhoods. The allocation of $55,000,000 will be used to earn or syndicate tax credits through the investment in real estate development projects located in distressed and low-income communities throughout the country as defined by the U.S. Treasury Department’s CDFI Fund. This is the third time we have received a NMTC allocation, for a total of $151,000,000 in allocations under the program;

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On December 2, 2009, the City of Las Vegas City Council approved the issuance and sale of $185,000,000 of primarily Build America Bonds to finance the construction of a new City Hall building on property we own in downtown Las Vegas. The closing and funding of the Build America Bonds was completed on December 17, 2009. We have been engaged by the City of Las Vegas to perform fee services on their behalf for development of the new City Hall project. Construction on the project began in January 2010;
 
   
The sale of 52,325,000 shares of our Class A Common Stock in May 2009, which included the underwriters’ exercise of their over-allotment option in full, in an underwritten public offering pursuant to an effective registration statement at a public offering price of $6.60 per share. We received net proceeds of $329,917,000 after deducting underwriting discounts, commissions and other offering expenses;
 
   
The exchange of $167,433,000, or 61.4%, of the $272,500,000 of 3.625% Puttable Equity-Linked Senior Notes due October 2011 for a new issue of 3.625% Puttable Equity-Linked Senior Notes due October 2014. In conjunction with the exchange of notes, we also issued an additional $32,567,000 of 3.625% Puttable Equity-Linked Senior Notes due October 2014;
 
   
The issuance, at par, of $200,000,000 aggregate principal amount of convertible senior notes due October 2016. Interest on the notes is payable semi-annually at a rate of 5.00% per annum. We received net proceeds from the offering of $177,262,000, net of the cost of the convertible note hedge transaction and estimated offering costs;
 
   
Closing a new, two-year $500,000,000 revolving credit facility with our 15-member bank group. Key Bank National Association serves as Administrative Agent, PNC Bank National Association serves as Syndication Agent, and Bank of America, N.A. serves as Documentation Agent for the group. All 14 members of our prior bank group, along with one new bank, are part of the new facility. The new facility replaced our prior $750,000,000 revolving credit facility, which was scheduled to mature in March 2010;
 
   
The closing on major financings including a $90,000,000 nonrecourse mortgage refinancing for 45/75 Sidney Street, an office building at our University Park at MIT project in Cambridge, Massachusetts and a $101,000,000 nonrecourse mortgage refinancing for Bayside Village, a 431-unit unconsolidated apartment community in San Francisco, California; and
 
   
Closing $1,473,144,000 in nonrecourse mortgage financing transactions.
In addition, subsequent to January 31, 2010, we achieved the following significant milestones:
   
The grand opening of Village of Gulfstream, a mixed-use, open-air specialty retail center, in Hallandale Beach, Florida. The 510,000 square-foot center, adjacent to Gulfstream Park Racetrack and Casino, is South Florida’s newest outdoor shopping and entertainment destination, featuring an exciting collection of fashion boutiques, home decor shops, signature restaurants, outdoor cafes and nightclubs;
 
   
The creation of joint ventures with Bernstein Management Corporation for ownership of three residential multifamily properties, totaling 1,340 rental units, in the Washington, D.C. metropolitan area. We realized proceeds of over $30,000,000 and the joint ventures assumed $163,000,000 of the secured debt related to these properties. The three properties, the 549-unit Grand in North Bethesda, Maryland, the 385-unit Lenox Club in Arlington, Virginia and the 406-unit Lenox Park in Silver Spring, Maryland, are part of our portfolio of apartment communities. Each company’s joint venture entity will own 50% of our prior stake in the properties;
 
   
The creation and first-stage closing of joint ventures in our mixed-use University Park project in Cambridge, Massachusetts. Under the terms of the joint venture agreements, Health Care REIT will acquire a 49% interest in the seven University Park life science properties owned solely by us. For its share of the joint ventures, Health Care REIT will invest $170,000,000 in cash and the joint ventures will assume $320,000,000 of secured debt on the seven buildings. Certain of our subsidiaries will retain 51% ownership in the properties and will serve as asset and property manager for the joint ventures. The first-stage closing included six of the buildings, valued at $610,000,000. Closing on the seventh building, valued at $58,000,000 is expected during the second quarter of 2010, subject to third-party consents; and
 
   
The privately negotiated exchange of approximately $51,200,000 of 3.625% Puttable Equity-Linked Senior Notes due October 2011, $121,700,000 of 7.625% Senior Notes due June 2015 and $5,800,000 of 6.500% Senior Notes due February 2017 for approximately $50,700,000, $114,400,000 and $4,900,000 of our Series A Cumulative Perpetual Convertible Preferred Stock, respectively. We issued an additional $50,000,000 of Convertible Preferred Stock for cash pursuant to the exchange. The Convertible Preferred Stock has an annual dividend rate of 7.0% and an initial conversion price of $15.12.

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Critical Accounting Policies
Our consolidated financial statements include all majority-owned subsidiaries where we have financial or operational control and variable interest entities (“VIEs”) where we are deemed to be the primary beneficiary. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, we have identified certain critical accounting policies which are subject to judgment and uncertainties. We have used our best judgment to determine estimates of certain amounts included in the financial statements as a result of these policies, giving due consideration to materiality. As a result of uncertainties surrounding these events at the time the estimates are made, actual results could differ from these estimates causing adjustments to be made in subsequent periods to reflect more current information. The accounting policies that we believe contain uncertainties that are considered critical to understanding the consolidated financial statements are discussed below. Our management reviews and discusses the policies below on a regular basis. These policies have also been discussed with our audit committee of the Board of Directors.
Recognition of Revenue
Real Estate Sales – We follow the accounting guidance on the sales of real estate. The specific timing of a sale is measured against various criteria in the accounting guidance related to the terms of the transaction and any continuing involvement in the form of management or financial assistance associated with the property. If the sales criteria are not met, we defer gain recognition and account for the continued operations of the property by applying the deposit, finance, installment or cost recovery methods, as appropriate.
We follow the accounting guidance on the impairment or disposal of long-lived assets for reporting dispositions of operating properties. Assuming no significant continuing involvement, all earnings of properties which have been sold or determined by management to be held for sale are reported as discontinued operations. We consider assets held for sale when the transaction has been approved by the appropriate level of management and there are no significant contingencies related to the sale that may prevent the transaction from closing. In most transactions, these contingencies are not satisfied until the actual closing and, accordingly, the property is not identified as held for sale until the closing actually occurs. However, each potential sale is evaluated based on its separate facts and circumstances.
Leasing Operations – We enter into leases with tenants in our rental properties. The lease terms of tenants occupying space in the retail centers and office buildings generally range from 1 to 30 years, excluding leases with certain anchor tenants, which typically run longer. Minimum rents are recognized on a straight-line basis over the non-cancelable term of the related lease, which include the effects of rent steps and rent abatements under the leases. Overage rents are recognized in accordance with accounting guidance on revenue recognition, which states that this income is to be recognized only after the contingency has been removed (i.e., sales thresholds have been achieved). Recoveries from tenants for taxes, insurance and other commercial property operating expenses are recognized as revenues in the period the applicable costs are incurred.
Construction – Revenues and profit on long-term fixed-price contracts are recorded using the percentage-of-completion method. On reimbursable cost-plus fee contracts, revenues are recorded in the amount of the accrued reimbursable costs plus proportionate fees at the time the costs are incurred.
Military Housing Fee Revenues – Revenues for development fees related to our military housing projects are earned based on a contractual percentage of the actual development costs incurred by the military housing projects and are recognized on a monthly basis as the costs are incurred. We also recognize additional development incentive fees upon successful completion of certain criteria, such as incentives to realize development cost savings, encourage small and local business participation, comply with specified safety standards and other project management incentives as specified in the development agreements. Base development and development incentive fees of $14,030,000, $62,180,000 and $56,045,000 were recognized during the years ended January 31, 2010, 2009 and 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.
Revenues for construction management fees are earned based on a contractual percentage of the actual construction costs incurred by the military housing projects and are recognized on a monthly basis as the costs are incurred. We also recognize certain construction incentive fees based upon successful completion of certain criteria as set forth in the construction contracts. Base construction and incentive fees of $9,857,000, $13,505,000 and $10,012,000 were recognized during the years ended January 31, 2010, 2009 and 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.
Revenues for property management and asset management fees are earned based on a contractual percentage of the annual net rental income and annual operating income, respectively, that is generated by the military housing privatization projects as defined in the agreements. We also recognize certain property management incentive fees based upon successful completion of certain criteria as set forth in the property management agreements. Property management, management incentive and asset management fees of $15,448,000, $14,318,000 and $9,357,000 were recognized during the years ended January 31, 2010, 2009 and 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.

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Recognition of Costs and Expenses
Operating expenses primarily represent the recognition of operating costs, which are charged to operations as incurred, administrative expenses and taxes other than income taxes. Interest expense and real estate taxes during active development and construction are capitalized as a part of the project cost.
Depreciation and amortization is generally computed on a straight-line method over the estimated useful life of the asset. The estimated useful lives of buildings and certain first generation tenant allowances that are considered by management as a component of the building are primarily 50 years. Subsequent tenant improvements and those first generation tenant allowances not considered a component of the building are amortized over the life of the tenant’s lease. This estimate is based on the length of time the asset is expected to generate positive operating cash flows. Actual events and circumstances can cause the life of the building and tenant improvement to be different than the estimates made. Additionally, lease terminations can affect the economic life of the tenant improvements. We believe the estimated useful lives and classification of the depreciation and amortization of fixed assets and tenant improvements are reasonable and follow industry standards.
Major improvements and tenant improvements that are considered our assets are capitalized in real estate costs and expensed through depreciation charges. Tenant improvements that are considered lease inducements are capitalized into other assets and amortized as a reduction of rental revenue over the life of the tenant’s lease. Repairs, maintenance and minor improvements are expensed as incurred.
A variety of costs are incurred in the development and leasing of properties. After determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment. Our capitalization policy on development properties is based on accounting guidance for the capitalization of interest cost and accounting guidance for costs and the initial rental operations of real estate properties. The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. We consider a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity. We cease capitalization on any portion substantially completed and occupied or held available for occupancy, and capitalize only those costs associated with the portion under construction. Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the respective accounts and any resulting gains or losses are reported in the Consolidated Statements of Operations.
Allowance for Projects Under Development – We record an allowance for estimated development project write-offs for our projects under development. A specific project is written off when it is determined by management that it is probable the project will not be developed. The allowance, which is consistently applied, is adjusted on a quarterly basis based on our actual development project write-off history. The allowance balance was $23,786,000 and $17,786,000 at January 31, 2010 and 2009, respectively, and is included in accounts payable and accrued expenses in our Consolidated Balance Sheets. The allowance increased by $6,000,000 for both of the years ended January 31, 2010 and 2009 and decreased by $3,900,000 for the year ended January 31, 2008. Any change in the allowance is reported in operating expenses in our Consolidated Statements of Operations.
Acquisition of Rental Properties - Upon acquisition of a rental property, we allocate the purchase price of the property to net tangible and identified intangible assets acquired based on fair values. Above-market and below-market in-place lease values for acquired properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) our estimate of the fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. Capitalized above-market lease values are amortized as a reduction of rental income (or rental expense for ground leases in which we are the lessee) over the remaining non-cancelable terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income (or rental expense for ground leases in which we are the lessee) over the remaining non-cancelable terms of the respective leases, including any fixed-rate renewal periods.
Intangible assets also include amounts representing the value of tenant relationships and in-place leases based on our evaluation of each tenant’s lease and our overall relationship with the respective tenant. We estimate the cost to execute leases with terms similar to in-place leases, including leasing commissions, legal expenses and other related expenses. This intangible asset is amortized to expense over the remaining term of the respective leases. Our estimates of value are made using methods similar to those used by independent appraisers or by using independent appraisals. Factors considered by us in this analysis include an estimate of the carrying costs during the expected lease-up periods, current market conditions and costs to execute similar leases. In estimating carrying costs, we include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which primarily range from three to twelve months. We also consider information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. We also use the information obtained as a result of our pre-acquisition due diligence as part of our consideration of conditional asset retirement obligations, and when necessary, will record a conditional asset retirement obligation as part of our purchase price.

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Characteristics considered by us in allocating value to our tenant relationships include the nature and extent of our business relationship with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The value of tenant relationship intangibles is amortized over the remaining initial lease term and expected renewals, but in no event longer than the remaining depreciable life of the building. The value of in-place leases is amortized over the remaining non-cancelable term of the respective leases and any fixed-rate renewal periods.
In the event that a tenant terminates its lease, the unamortized portion of each intangible, including market rate adjustments, in-place lease values and tenant relationship values, would be charged to expense.
Allowance for Doubtful Accounts and Reserves on Notes Receivable – We record allowances against our rent receivables from commercial and residential tenants that we deem to be uncollectible. These allowances are based on management’s estimate of receivables that will not be realized from cash receipts in subsequent periods. We also maintain an allowance for receivables arising from the straight-lining of rents. This receivable arises from earnings recognized in excess of amounts currently due under the lease agreements. Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. The allowance against our straight-line rent receivable is based on our historical experience with early lease terminations as well as specific review of our significant tenants and tenants that are having known financial difficulties. There is a risk that our estimate of the expected activity of current tenants may not accurately reflect future events. If the estimate does not accurately reflect future tenant vacancies, the reserve for straight-line rent receivable may be over or understated by the actual tenant vacancies that occur. We estimate the allowance for notes receivable based on our assessment of expected future cash flows estimated to be paid to us. If our estimate of expected future cash flows does not accurately reflect actual events, our reserve on notes receivable may be over or understated by the actual cash flows that occur. Our allowance for doubtful accounts, which includes our straight-line allowance, was $33,825,000 and $27,213,000, at January 31, 2010 and 2009, respectively. Management believes the increase in the reserve is indicative of the general economic environment and its impact on the ability of certain retail and office tenants to pay all of their commitments recorded on the Consolidated Balance Sheet as of January 31, 2010.
Historic and New Market Tax Credit Entities – We have certain investments in properties that have received, or we believe are entitled to receive, historic preservation tax credits on qualifying expenditures under Internal Revenue Code (“IRC”) section 47 and new market tax credits on qualifying investments in designated community development entities (“CDEs”) under IRC section 45D, as well as various state credit programs including participation in the New York State Brownfield Tax Credit Program which entitles the members to tax credits based on qualified expenditures at the time those qualified expenditures are placed in service. We typically enter into these investments with sophisticated financial investors. In exchange for the financial investors’ initial contribution into the investment, the financial investor is entitled to substantially all of the benefits derived from the tax credit, but generally has no material interest in the underlying economics of the property. Typically, these arrangements have put/call provisions (which range up to 7 years) whereby we may be obligated (or entitled) to repurchase the financial investors’ interest. We have consolidated each of these properties in our consolidated financial statements, and have reflected these investor contributions as accounts payable and accrued expenses in our Consolidated Balance Sheets.
We guarantee the financial investor that in the event of a subsequent recapture by a taxing authority due to our noncompliance with applicable tax credit guidelines we will indemnify the financial investor for any recaptured tax credits. We initially record a liability for the cash received from the financial investor. We generally record income upon completion and certification of the qualifying development expenditures for historic tax credits and upon certification of the qualifying investments in designated CDEs for new market tax credits resulting in an adjustment of the liability at each balance sheet date to the amount that would be paid to the financial investor based upon the tax credit compliance regulations, which range from 0 to 7 years. Income related to the sale of tax credits of $32,698,000, $11,168,000 and $10,788,000 was recognized during the years ended January 31, 2010, 2009 and 2008, respectively, which was recorded in interest and other income in our Consolidated Statements of Operations.
Impairment of Real Estate – We review our real estate portfolio, including land held for development or sale, to determine if the carrying costs will be recovered from future undiscounted cash flows whenever events or changes indicate that recoverability of long-lived assets may not be supported by current assumptions. Impairment indicators include, but are not limited to, significant decreases in property net operating income, significant decreases in occupancy rates, the physical condition of the property and general economic conditions. In cases where we do not expect to recover our carrying costs, a loss is recorded as an impairment of real estate to the extent the carrying value exceeds fair value. Significant estimates are made in the determination of future undiscounted cash flows including historical and budgeted net operating income, estimated holding periods, risk of foreclosure and estimated cash proceeds received upon disposition of the asset. Determining fair value of real estate, if required, also involves significant judgments and estimates. Changes to these estimates made by management could affect whether or not an impairment charge would be required and/or the amount of impairment charges recognized.
Impairment of Unconsolidated Entities – We follow the accounting guidance for the equity method of accounting to determine if there has been an other-than-temporary decline in value of our investments in unconsolidated entities. We review our investments in unconsolidated entities for impairment whenever events or changes indicate that the fair value may be less than the carrying value of our investment. For our equity method real estate investments, a loss in value of an investment which is other-than-temporary is recognized as a component of equity in earnings (loss) of unconsolidated entities in our Consolidated Statements of Operations. This determination is based upon the length of time elapsed, severity of decline and other relevant facts and circumstances.

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Variable Interest Entities – In accordance with accounting guidance on consolidation of variable interest entities (“VIE”), we consolidate a VIE in which we have a variable interest (or a combination of variable interests) that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both, based on an assessment performed at the time we become involved with the entity. VIEs are entities in which the equity investors do not have a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. We reconsider this assessment only if the entity’s governing documents or the contractual arrangements among the parties involved change in a manner that changes the characteristics or adequacy of the entity’s equity investment at risk, some or all of the equity investment is returned to the investors and other parties become exposed to expected losses of the entity, the entity undertakes additional activities or acquires additional assets beyond those that were anticipated at inception or at the last reconsideration date that increase its expected losses, or the entity receives an additional equity investment that is at risk, or curtails or modifies its activities in a way that decreases its expected losses. We may be subject to additional losses to the extent of any financial support that we voluntarily provide in the future. Additionally, if different estimates are applied in determining future cash flows, and how the cash flows are funded, we may have otherwise concluded on the consolidation method of an entity.
The determination of the consolidation method for each entity can change as reconsideration events occur. Expected results after the formation of an entity can vary, which could cause a change in the allocation to the partners. In addition, if we sell a property, sell our interest in a joint venture or enter into a new joint venture, the number of VIEs we are involved with could vary between quarters.
During the year ended January 31, 2010, we settled outstanding debt of one of our unconsolidated subsidiaries, Gladden Farms II, a land development project located in Marana, Arizona. In addition, we were informed of the outside partner’s intention to discontinue any future funding into the project. As a result of the loan transaction and the related negotiations with the outside partner, it has been determined that Gladden Farms II is a VIE and we are the primary beneficiary, which required consolidation of the entity during the year ended January 31, 2010. The impact of the initial consolidation of Gladden Farms II is an increase in net real estate of approximately $21,643,000 and an increase in noncontrolling interests of approximately $5,010,000. Based on our determination of fair value, we recorded a gain of $1,774,000 upon consolidation of the entity that is recorded in interest and other income in the Consolidated Statements of Operations.
As of January 31, 2010, we determined that we were the primary beneficiary of 46 VIEs representing 34 properties (33 VIEs representing 22 properties in the Residential Group, 11 VIEs representing 10 properties in the Commercial Group and 2 VIEs/properties in the Land Development Group). The creditors of the consolidated VIEs do not have recourse to our general credit. As of January 31, 2010, we held variable interests in 46 VIEs for which we are not the primary beneficiary. The maximum exposure to loss as a result of our involvement with these unconsolidated VIEs is limited to our recorded investments in those VIEs totaling approximately $100,000,000 at January 31, 2010. Our VIEs consist of joint ventures that are engaged, directly or indirectly, in the ownership, development and management of office buildings, regional malls, specialty retail centers, apartment communities, military housing, supported-living communities, land development and The Nets.
The carrying value of real estate, nonrecourse mortgage debt and noncontrolling interests of VIEs for which we are the primary beneficiary are as follows:
                 
    January 31,
    2010     2009
    (in thousands)  
 
               
Real estate, net
  $ 2,016,000     $ 1,602,000  
Nonrecourse mortgage debt
  $ 1,584,000     $ 1,237,000  
Noncontrolling interest
  $ 41,000     $ 63,000  
In addition to the VIEs described above, we have also determined that we are the primary beneficiary of a VIE which holds collateralized borrowings of $29,000,000 (see the “Senior and Subordinated Debt” section of the MD&A) as of January 31, 2010.
Fiscal Year – The years 2009, 2008 and 2007 refer to the fiscal years ended January 31, 2010, 2009 and 2008, respectively.
Retrospective Adoption of Accounting Guidance for Convertible Debt Instruments
Effective February 1, 2009, we adopted the Financial Accounting Standards Board’s (“FASB”) accounting guidance for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). This accounting guidance required us to adjust the prior year financial statements to show retrospective application upon adoption. This accounting guidance requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. This accounting guidance changed the accounting treatment for our 3.625% Puttable Equity-Linked Senior Notes due October 2011 (the “2011 Notes”), which were issued in October 2006, by requiring the initial debt proceeds from the sale of the 2011 Notes to be allocated between a liability component and an equity component. This allocation is based upon what the assumed interest rate would have been on the date of issuance if we had issued similar nonconvertible debt. The resulting debt discount will be amortized over the debt instrument’s expected life as additional non-cash interest expense. Due to the increase in interest expense, we recorded

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additional capitalized interest based on our qualifying expenditures on our development projects. Deferred financing costs decreased related to the reallocation of the original issuance costs between the debt instrument and equity component and the gain recognized from the purchase of $15,000,000, in principal, of the 2011 Notes during the three months ended October 31, 2008 was adjusted to reflect the requirements of gain recognition under this accounting guidance (see the “Senior and Subordinated Debt” section of the MD&A).
The following tables reflect our as reported amounts along with the as adjusted amounts as a result of the retrospective adoption of this accounting guidance as of January 31, 2009 and for the years ended January 31, 2009 and 2008:
                                                 
    January 31, 2009                          
    As     Retrospective     As                          
    Reported     Adjustments     Adjusted                          
    (in thousands)                          
Consolidated Balance Sheets
                                               
Real estate, net
  $ 9,212,834     $ 16,468     $ 9,229,302                          
Other assets
    936,902       (631 )     936,271                          
Senior and subordinated debt
    870,410       (24,346 )     846,064                          
Deferred income taxes
    439,282       16,054       455,336                          
Additional paid-in capital
    241,539       26,257       267,796                          
Retained earnings
    645,852       (2,128 )     643,724                          
                                                 
    January 31, 2009     January 31, 2008  
    As     Retrospective     As     As     Retrospective     As  
    Reported     Adjustments     Adjusted     Reported     Adjustments     Adjusted  
    (in thousands, except per share data)  
Consolidated Statements of Operations(1)
                                               
Depreciation and amortization
  $ 266,604     $ 181     $ 266,785     $ 227,113     $ 40     $ 227,153  
Interest expense, net of capitalized interest
    363,284       1,054       364,338       321,394       1,363       322,757  
Loss (gain) on early extinguishment of debt
    1,670       489       2,159       8,334       -       8,334  
Deferred income tax loss (benefit)
    (1,855 )     (677 )     (2,532 )     14,074       (551 )     13,523  
Earnings (loss) from continuing operations
    (108,653 )     (1,047 )     (109,700 )     7,256       (852 )     6,404  
Net earnings (loss) attributable to Forest City Enterprises, Inc.
    (112,200 )     (1,047 )     (113,247 )     52,425       (852 )     51,573  
Net earnings (loss) attributable to Forest City Enterprises, Inc. per share - basic and diluted
    (1.09 )     (0.01 )     (1.10 )     0.51       (0.01 )     0.50  
  (1)  
Adjusted to reflect the impact of discontinued operations (see the “Discontinued Operations” section of the MD&A) and the impact of noncontrolling interest.
Noncontrolling Interest
Interests held by partners in real estate partnerships consolidated by us are reflected in noncontrolling interest, previously referred to as minority interest, on the Consolidated Balance Sheets. Noncontrolling interest represents the noncontrolling partners’ share of the underlying net assets of our consolidated subsidiaries. In December 2007, the FASB issued accounting guidance for noncontrolling interests and the objective of this accounting guidance is to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements. We adopted this accounting guidance on February 1, 2009 and adjusted our January 31, 2009 Consolidated Balance Sheet to reflect noncontrolling interest as a component of total equity. Included in the balance sheet reclass was $58,247,000 of accumulated deficit noncontrolling interest resulting from deficit restoration obligations of noncontrolling partners, previously recorded as a component of investments in and advances to affiliates. In addition, we reclassed noncontrolling interest on our Consolidated Statement of Operations for the years ended January 31, 2009 and 2008.
Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities
In June 2008, the FASB issued accounting guidance addressing whether instruments granted in share-based payment transactions are participating securities. This accounting guidance requires that nonvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents be treated as participating securities in the computation of earnings per share pursuant to the two-class method. This accounting guidance was effective for fiscal years beginning after December 15, 2008. We have adopted the new guidance for the year ended January 31, 2010 and have adjusted our computation of earnings per share for the years ended January 31, 2009 and 2008 to conform to the new guidance.

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Results of Operations
We report our results of operations by each of our three strategic business units as we believe this provides the most meaningful understanding of our financial performance. In addition to our three strategic business units, we have two additional segments: The Nets and Corporate Activities.
Net Earnings (Loss) Attributable to Forest City Enterprises, Inc. – Net loss attributable to Forest City Enterprises, Inc. for the year ended January 31, 2010 was $30,651,000 versus $113,247,000 for the year ended January 31, 2009. Although we have substantial recurring revenue sources from our properties, we also enter into significant one-time transactions, which could create substantial variances in net earnings (loss) between periods. This variance to the prior year is primarily attributable to the following increases, which are net of tax and noncontrolling interest:
   
$30,462,000 ($49,761,000, pre-tax) related to the 2009 gains on disposition of our unconsolidated investments in Classic Residence by Hyatt properties, supported-living apartments in Teaneck, New Jersey, Chevy Chase, Maryland and Yonkers, New York, Clarkwood and Granada Gardens, apartment communities in Warrensville Heights, Ohio and Boulevard Towers, an apartment community in Amherst, New York;
 
   
$24,123,000 ($39,404,000, pre-tax, which includes $795,000 for unconsolidated entities) primarily related to the 2009 early extinguishment of nonrecourse mortgage debt at a consolidated retail project and Gladden Farms, a land development project located in Marana, Arizona and the gain on early extinguishment of debt on the exchange of a portion of our 2011 Notes for a new issue of puttable equity-linked senior notes due October 15, 2014 (see the “Puttable Equity-Linked Senior Notes due 2011” section of the MD&A);
 
   
$13,620,000 ($22,247,000, pre-tax, which includes $304,000 for unconsolidated entities) of decreased write-offs of abandoned development projects in 2009 compared to 2008;
 
   
$13,181,000 ($21,530,000, pre-tax) related to an increase in income recognized on the sale of state and federal Historic Preservation Tax Credits, Brownfield Tax Credits and New Market Tax Credits;
 
   
$12,791,000 ($20,894,000, pre-tax) related to the change in fair market value of derivatives between the comparable periods, which was marked to market as a reduction of interest expense due to derivatives not qualifying for hedge accounting;
 
   
$7,554,000 ($12,434,000, pre-tax) related to the reduction in fair value of the Denver Urban Renewal Authority (“DURA”) purchase obligation and fee, that resulted from the Lehman Brothers, Inc. (“Lehman”) bankruptcy in 2008;
 
   
$6,732,000 ($10,996,000, pre-tax, which includes $770,000 for unconsolidated entities) related to a reinstatement by the United States Department of Housing and Urban Development of certain replacement reserves previously written off at four of our residential properties located in Michigan;
 
   
$2,784,000 ($4,548,000, pre-tax) related the 2009 gain on disposition of Grand Avenue, a specialty retail center in Queens, New York;
 
   
$2,203,000 ($3,599,000, pre-tax) related to a gain recognized in 2009 for insurance proceeds received related to fire damage of an apartment building in excess of the net book value of the damaged asset;
 
   
$1,860,000 ($3,031,000, pre-tax) related to the 2008 participation payments on the refinancing of 350 Massachusetts Avenue, an unconsolidated office building and Jackson Building, a consolidated office building, both located in Cambridge, Massachusetts;
 
   
$1,467,000 ($2,396,000, pre-tax) related to the 2009 net gain on an industrial land sale at Mesa del Sol in Albuquerque, New Mexico; and
 
   
$1,293,000 ($2,500,000, pre-tax decrease) related to a decrease in allocated losses from our equity investment in The Nets (see “The Nets” section of the MD&A).
These increases were partially offset by the following decreases, net of tax and noncontrolling interests:
   
$30,677,000 ($50,110,000, pre-tax) related to the 2009 increase in impairment charges of consolidated (including discontinued properties) and unconsolidated entities;
 
   
$6,717,000 ($9,426,000, pre-tax) primarily related to military housing fee income from the management and development of units in Hawaii, Illinois, Washington and Colorado;
 
   
$8,159,000 ($13,297,000, pre-tax) related to the 2008 gains on disposition of two supported-living apartment communities, Sterling Glen of Lynbrook, in Lynbrook, New York and Sterling Glen of Rye Brook, in Rye Brook, New York;

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$2,448,000 ($3,998,000, pre-tax) related to the 2009 participation payment on the refinancing of 45/75 Sidney;
 
   
$2,417,000 ($3,978,000, pre-tax) related to the 2008 lease termination fee income at an office building in Cleveland, Ohio; and
 
   
$2,035,000 ($3,350,000, pre-tax) related to the 2008 gain on the sale of an ownership interest in a parking management company.
Net loss attributable to Forest City Enterprises, Inc. for the year ended January 31, 2009 was ($113,247,000) versus net earnings attributable to Forest City Enterprises, Inc. of $51,573,000 for the year ended January 31, 2008. This variance to the prior year is primarily attributable to the following decreases, which are net of tax and noncontrolling interest:
   
$64,604,000 ($105,287,000, pre-tax) related to the 2007 gains on disposition of Landings of Brentwood, a consolidated apartment community in Nashville, Tennessee and the following six consolidated supported-living apartment communities: Sterling Glen of Bayshore in Bayshore, New York, Sterling Glen of Center City in Philadelphia, Pennsylvania, Sterling Glen of Darien in Darien, Connecticut, Sterling Glen of Forest Hills in Forest Hills, New York, Sterling Glen of Plainview in Plainview, New York and Sterling Glen of Stamford in Stamford, Connecticut;
 
   
$18,758,000 ($30,879,000, pre-tax) related to increased write-offs of abandoned development projects in 2008 compared to 2007. The increase primarily relates to the write-off at Summit at Lehigh Valley, a Commercial development project with a housing component in Allentown, Pennsylvania, of $13,069,000 ($21,513,000, pre-tax) in 2008;
 
   
$17,920,000 ($20,111,000, pre-tax) related to an increase in allocated losses from our equity investment in The Nets (see “The Nets” section of the MD&A);
 
   
$10,940,000 ($17,830,000, pre-tax) related to the 2007 net gain recognized in other income on the sale of Sterling Glen of Roslyn, a consolidated supported-living apartment community under construction in Roslyn, New York;
 
   
$8,168,000 ($13,311,000, pre-tax) related to the 2007 gains on disposition of our unconsolidated investments in University Park at MIT Hotel in Cambridge, Massachusetts and White Acres, an apartment community in Richmond Heights, Ohio offset by the 2008 gains on disposition of our unconsolidated investments in One International Place and Emery-Richmond, office buildings in Cleveland, Ohio and Warrensville Heights, Ohio, respectively;
 
   
$7,930,000 related to a cumulative effect of change in our effective tax rate during 2008;
 
   
$7,554,000 ($12,434,000, pre-tax) related to the reduction in fair value of the DURA purchase obligation and fee, that resulted from the Lehman bankruptcy in 2008;
 
   
$6,707,000 ($10,986,000, pre-tax) related to the 2008 increase in impairment charges of consolidated and unconsolidated entities;
 
   
$5,611,000 ($9,237,000, pre-tax) related to the change in fair market value of derivatives between the comparable periods, which was marked to market through interest expense as a result of the derivatives not qualifying for hedge accounting; and
 
   
$5,255,000 ($8,651,000, pre-tax) related to the 2008 increase in outplacement and severance costs related to involuntary employee separations.
These decreases were partially offset by the following increases, net of tax and noncontrolling interest:
   
$13,924,000 ($18,197,000, pre-tax) primarily related to military housing fee income from the management and development of units in Hawaii, Illinois, Washington and Colorado;
 
   
$8,159,000 ($13,297,000, pre-tax) related to the 2008 gains on disposition of Sterling Glen of Lynbrook and Sterling Glen of Rye Brook;
 
   
$4,437,000 ($7,304,000 pre-tax) primarily related to the gain on early extinguishment of a portion of our puttable equity-linked senior notes due October 15, 2011 (see the “Puttable Equity-Linked Senior Notes” section of the MD&A) in 2008 as compared to the loss on early extinguishment of nonrecourse mortgage debt primarily at Eleven MetroTech Center, an office building in Brooklyn, New York, in order to secure more favorable financing terms and at New York Times, an office building in Manhattan, New York, in order to obtain permanent financing, both in 2007;
 
   
$2,417,000 ($3,978,000, pre-tax) related to the 2008 lease termination fee income at an office building in Cleveland, Ohio; and
 
   
$2,035,000 ($3,350,000, pre-tax) related to the 2008 gain on the sale of an ownership interest in a parking management company.

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Summary of Segment Operating Results – The following tables present a summary of revenues from real estate operations, operating expenses, interest expense, equity in earnings (loss) of unconsolidated entities and impairment of unconsolidated entities by segment for the years ended January 31, 2010, 2009 and 2008, respectively. See discussion of these amounts by segment in the narratives following the tables.
                         
    Years Ended January 31,
    2010     2009     2008  
    (in thousands)  
Revenues from Real Estate Operations
                       
Commercial Group
    $ 946,670     $ 930,006     $ 847,816  
Commercial Group Land Sales
    27,068       36,777       76,940  
Residential Group
    263,217       279,939       259,460  
Land Development Group
    20,267       33,848       92,257  
The Nets
    -       -       -  
Corporate Activities
    -       -       -  
     
Total Revenues from Real Estate Operations
    $ 1,257,222     $ 1,280,570     $ 1,276,473  
     
 
                       
Operating Expenses
                       
Commercial Group
    $ 460,015     $ 489,542     $ 435,374  
Cost of Commercial Group Land Sales
    21,609       17,062       54,888  
Residential Group
    161,971       177,219       180,789  
Land Development Group
    33,119       52,878       67,687  
The Nets
    -       -       -  
Corporate Activities
    39,857       44,097       41,635  
     
Total Operating Expenses
    $ 716,571     $ 780,798     $ 780,373  
     
 
                       
Interest Expense
                       
Commercial Group
    $ 239,308     $ 254,298     $ 207,430  
Residential Group
    27,962       36,888       43,038  
Land Development Group
    2,109       (98 )     118  
The Nets
    -       -       -  
Corporate Activities
    80,891       73,250       72,171  
     
Total Interest Expense
    $ 350,270     $ 364,338     $ 322,757  
     
 
                       
Equity in Earnings (Loss) of Unconsolidated Entities
                       
Commercial Group
    $ 6,657     $ 6,896     $ 11,487  
Gain on disposition of One International Place
    -       881       -  
Gain on disposition of Emery-Richmond
    -       200       -  
Gain on disposition of University Park at MIT Hotel
    -       -       12,286  
Residential Group
    2,969       9,193       10,296  
Gain on disposition of Classic Residence by Hyatt properties
    31,703       -       -  
Gain on disposition of Clarkwood
    6,983       -       -  
Gain on disposition of Granada Gardens
    6,577       -       -  
Gain on disposition of Boulevard Towers
    4,498       -       -  
Gain on disposition of White Acres
    -       -       2,106  
Land Development Group
    5,405       9,519       5,245  
The Nets
    (43,489 )     (40,989 )     (20,878 )
Corporate Activities
    -       -       -  
     
Total Equity in Earnings (Loss) of Unconsolidated Entities
    $ 21,303     $ (14,300 )   $ 20,542  
     
 
                       
Impairment of Unconsolidated Entities
                       
Commercial Group
    $ 10,521     $ 9,193     $ -  
Residential Group
    24,303       9,443       8,269  
Land Development Group
    1,532       2,649       3,200  
The Nets
    -       -       -  
Corporate Activities
    -       -       -  
     
Total Impairment of Unconsolidated Entities
    $ 36,356     $ 21,285     $ 11,469  
     

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Commercial Group
Revenues from Real Estate Operations – Revenues from real estate operations for the Commercial Group, including the segment’s land sales, increased by $6,955,000, or 0.7%, for the year ended January 31, 2010 compared to the same period in the prior year. The variance to the prior year is primarily attributable to the following increases:
   
$21,831,000 related to new property openings as noted in the table below; and
 
   
$2,829,000 related to increased revenues earned on a construction contract with the New York City School Construction Authority for the construction of a school at Beekman, a development project in Manhattan, New York. This represents a reimbursement of costs that is included in operating expenses discussed below.
These increases were partially offset by the following decreases:
   
$9,709,000 related to decreases in commercial outlot land sales primarily at South Bay Southern Center, in Redondo Beach, California, Short Pump Town Center in Richmond, Virginia, Promenade Bolingbrook in Bolingbrook, Illinois, White Oak Village in Richmond, Virginia, Orchard Town Center in Westminster, Colorado and Saddle Rock Village in Aurora, Colorado, which were partially offset by increases in commercial outlot land sales at Salt Lake City in Utah and Victoria Gardens in Rancho Cucamonga, California; and
 
   
$3,978,000 related to lease termination fee income in 2008 at an office building in Cleveland, Ohio that did not recur.
The balance of the remaining decrease of $4,018,000 was generally due to downward pressures on occupancies and rental rates primarily in the retail sector.
Revenues from real estate operations for the Commercial Group, including the segment’s land sales, increased by $42,027,000, or 4.5%, for the year ended January 31, 2009 compared to the same period in the prior year. The variance to the prior year is primarily attributable to the following increases:
   
$66,676,000 related to new property openings as noted in the table below;
 
   
$5,288,000 related to increased revenues earned on a construction contract with the New York City School Construction Authority for the construction of a school at Beekman. This represents a reimbursement of costs that is included in operating expenses discussed below; and
 
   
$3,978,000 related to lease termination fee income in 2008 at an office building in Cleveland, Ohio.
These increases were partially offset by the following decrease:
   
$40,163,000 related to decreases in commercial outlot land sales primarily at Promenade Bolingbrook, White Oak Village and Ridge Hill in Yonkers, New York, which were partially offset by increases in commercial outlot land sales at Short Pump Town Center and South Bay Southern Center.
The balance of the remaining increase of $6,248,000 was generally due to fluctuations in mature properties.
Operating and Interest Expenses – Operating expenses decreased $24,980,000, or 4.9%, for the year ended January 31, 2010 compared to the same period in the prior year. The variance to the prior year is primarily attributable to the following decreases:
   
$26,854,000 related to decreased write-offs of abandoned development projects in 2009 compared to 2008, which was primarily due to the 2008 write-off at Summit at Lehigh Valley; and
 
   
$1,759,000 related to the 2008 participation payment on the refinancing at Jackson Building, an office building in Cambridge, Massachusetts that did not recur.
These decreases were partially offset by the following increases:
   
$7,265,000 related to new property openings as noted in the table below;
 
   
$4,547,000 related to increases in commercial outlot land sales primarily at Salt Lake City and Victoria Gardens which were partially offset by decreases in commercial outlot land sales at Short Pump Town Center, Promenade Bolingbrook, White Oak Village, Orchard Town Center, and Saddle Rock Village;
 
   
$3,998,000 related to the 2009 participation payment on the refinancing of 45/75 Sidney Street, an office building in Cambridge, Massachusetts; and

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$2,829,000 related to construction of a school at Beekman. These costs are reimbursed by the New York City School Construction Authority and are included in revenues from real estate operations discussed above.
The balance of the remaining decrease of $15,006,000 was generally due to cost reduction activities within the Commercial Group relating to direct property expenses and general operating activities.
Operating expenses increased $16,342,000, or 3.3%, for the year ended January 31, 2009 compared to the same period in the prior year. The variance to the prior year is primarily attributable to the following increases:
   
$26,978,000 related to write-offs of abandoned development projects, primarily at Summit at Lehigh Valley;
 
   
$18,335,000 related to new property openings as noted in the table below;
 
   
$5,288,000 related to construction of a school at Beekman. These costs are reimbursed by the New York City School Construction Authority and are included in revenues from real estate operations discussed above; and
 
   
$1,759,000 related to a participation payment on the refinancing at Jackson Building.
These increases were partially offset by the following decrease:
   
$37,826,000 related to decreases in commercial outlot land sales primarily at Promenade Bolingbrook, White Oak Village and Ridge Hill, which were partially offset by increases in commercial outlot land sales at Short Pump Town Center and Saddle Rock Village.
The balance of the remaining increase of $1,808,000 was generally due to fluctuations in mature properties and general operating activities.
Interest expense for the Commercial Group decreased by $14,990,000, or 5.9%, for the year ended January 31, 2010 compared to the same period in the prior year. Interest expense for the Commercial Group increased by $46,868,000, or 22.6%, during the year ended January 31, 2009 compared to the same period in the prior year. Approximately $19,325,000 of the decrease and $7,380,000 of the increase for the years ended January 31, 2010 and 2009, respectively, represents the change in fair value of a forward swap related to an unconsolidated property that is marked to market through interest expense. The remaining increases are primarily attributable to the openings of the properties listed in the table below.
The following table presents the increases in revenues and operating expenses incurred by the Commercial Group for newly-opened properties for the year ended January 31, 2010 compared to the same period in the prior year:
                                 
                    Year Ended January 31,
                    2010 vs. 2009
                    Revenues        
                    from        
        Quarter/Year   Square     Real Estate     Operating  
Property   Location   Opened   Feet     Operations     Expenses  
 
                   
(in thousands)
Retail Centers:
                               
Promenade at Temecula Expansion
  Temecula, California   Q1-2009     127,000       $ 1,281     $ 568  
White Oak Village
  Richmond, Virginia   Q3-2008     843,000       5,256       1,487  
Shops at Wiregrass
  Tampa, Florida   Q3-2008     734,000       10,524       4,121  
Orchard Town Center
  Westminster, Colorado   Q1-2008     1,018,000       2,797       563  
 
                               
Office Building:
                               
Johns Hopkins – 855 North Wolfe Street
  East Baltimore, Maryland   Q1-2008     279,000       1,973       526  
 
                   
 
                               
Total
                    $ 21,831     $ 7,265  
                     

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The following table presents the increases in revenues and operating expenses incurred by the Commercial Group for newly-opened/acquired properties for the year ended January 31, 2009 compared to the same period in the prior year:
                                 
                    Year Ended January 31,
                    2009 vs. 2008
                    Revenues        
                    from        
        Quarter/Year   Square     Real Estate     Operating  
Property   Location   Opened   Feet     Operations     Expenses  
 
 
                  (in thousands)
Retail Centers:
                               
White Oak Village
  Richmond, Virginia   Q3-2008     843,000       $ 2,227     $ 927  
Shops at Wiregrass
  Tampa, Florida   Q3-2008     734,000       2,187       1,654  
Orchard Town Center
  Westminster, Colorado   Q1-2008     1,018,000       5,570       3,935  
Victoria Gardens-Bass Pro
  Rancho Cucamonga, California   Q2-2007     180,000       1,038       422  
Promenade Bolingbrook
  Bolingbrook, Illinois   Q1-2007     771,000       5,149       1,238  
 
                               
Office Buildings:
                               
Johns Hopkins – 855 North Wolfe Street
  East Baltimore, Maryland   Q1-2008     279,000       5,729       2,592  
New York Times
  Manhattan, New York   Q3-2007     738,000       38,548       4,568  
Richmond Office Park
  Richmond, Virginia       Q2-2007 (1)     568,000       5,492       1,669  
Illinois Science and Technology Park-Building Q
  Skokie, Illinois   Q1-2007     161,000       736       1,330  
 
                   
 
                               
Total
                    $ 66,676     $ 18,335  
                     
 
(1)   Acquired property.
Comparable occupancy for the Commercial Group is 90.1% and 90.3% for retail and office, respectively, as of January 31, 2010 compared to 89.7% and 89.9%, respectively, as of January 31, 2009. Retail and office occupancy as of January 31, 2010 and 2009 is based on square feet leased at the end of the fiscal quarter. Comparable occupancy relates to properties opened and operated in both the years ended January 31, 2010 and 2009. Average occupancy for hotels for the year ended January 31, 2010 is 69.1% compared to 68.8% for the year ended January 31, 2009.
As of January 31, 2010, the average base rent per square feet expiring for retail and office leases is $26.41 and $30.93, respectively, compared to $26.60 and $30.82, respectively, as of January 31, 2009. Square feet of expiring leases and average base rent per square feet are operating statistics that represent 100% of the square footage and base rental income per square foot from expiring leases. The average daily rate (“ADR”) for our hotel portfolio is $140.01 and $146.26 for the years ended January 31, 2010 and 2009, respectively. ADR is an operating statistic and is calculated by dividing revenue by the number of rooms sold for all hotels that were open and operating for both the years ended January 31, 2010 and 2009.
Residential Group
Revenues from Real Estate Operations – Included in revenues from real estate operations is fee income related to the development and construction management related to our military housing projects. Military housing fee income and related operating expenses may vary significantly from period to period based on the timing of development and construction activity at each applicable project. Revenues from real estate operations for the Residential Group decreased by $16,722,000, or 6.0%, during the year ended January 31, 2010 compared to the prior year. The variance is primarily attributable to the following decrease:
   
$50,668,000 related to military housing fee income from development and management of military housing units located primarily on the islands of Oahu and Kauai, Hawaii, Chicago, Illinois, Seattle, Washington, and Colorado Springs, Colorado (see the “Military Housing Fee Revenues” section below for further details).
This decrease was partially offset by the following increases:
   
$14,000,000 related to the land sale and related development opportunity in Mamaroneck, New York;
 
   
$6,578,000 related to the cancellation of a net leasing arrangement whereby we assumed the operations from the lessee at Forest Trace in Lauderhill, Florida;
 
   
$6,321,000 related to insurance premiums earned from an owner’s controlled insurance program; and
 
   
$5,538,000 related to new property openings and acquired properties as noted in the table below.
The balance of the remaining increase of $1,509,000 was primarily due to third-party management fees and other miscellaneous fluctuations.

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Revenues from real estate operations for the Residential Group increased by $20,479,000, or 7.9%, during the year ended January 31, 2009 compared to the same period in the prior year. This variance is primarily attributable to the following increases:
   
$14,589,000 related to military housing fee income from development and management of military housing units located primarily on the islands of Oahu and Kauai, Hawaii, Chicago, Illinois, Seattle, Washington, and Colorado Springs, Colorado (see the “Military Housing Fee Revenues” section below for further details);
 
   
$4,777,000 related to new property openings and acquired property as noted in the table below;
 
   
$4,750,000 primarily related to an increase in rents and occupancies at the following properties: Sky 55 in Chicago, Illinois, 100 Landsdowne Street in Cambridge, Massachusetts, Ashton Mill in Cumberland, Rhode Island, Oceanpointe Towers in Long Branch, New Jersey, Midtown Towers in Parma, Ohio, Lenox Park in Silver Spring, Maryland, Pavilion in Chicago, Illinois, and 101 San Fernando in San Jose, California; and
 
   
$2,449,000 related to the change to the full consolidation method of accounting from equity method at Village Center in Detroit, Michigan and Independence Place I in Parma Heights, Ohio.
These increases were partially offset by the following decreases:
   
$4,893,000 related to the net leasing arrangements whereby we receive fixed rental income in exchange for the operations of certain supported-living apartment properties which were retained by the lessee (see the “Discontinued Operations” section of the MD&A); and
 
   
$1,920,000 primarily related to decreases in occupancy at the following properties: Emerald Palms in Miami, Florida, Heritage in San Diego, California, and Museum Towers and One Franklintown, both of which are in Philadelphia, Pennsylvania.
The balance of the remaining increase of approximately $727,000 was generally due to fluctuations in other mature properties.
Operating and Interest Expenses – Operating expenses for the Residential Group decreased by $15,248,000, or 8.6%, during the year ended January 31, 2010 compared to the prior year. This variance is primarily attributable to the following decreases:
   
$31,358,000 related to management expenditures associated with military housing fee revenues; and
 
   
$10,226,000 related to a reinstatement by the United States Department of Housing and Urban Development of certain replacement reserves previously written off at three of our residential properties located in Michigan.
These decreases were partially offset by the following increases:
   
$14,000,000 related to the cost of the land sale and related development opportunity in Mamaroneck, New York;
 
   
$9,404,000 related to the assignment of the net lease arrangement with Forest Trace;
 
   
$3,998,000 related to insurance expenses associated with an owner’s controlled insurance program;
 
   
$3,988,000 related to new property openings and acquired properties as noted in the table below; and
 
   
$1,530,000 related to write-offs of abandoned development projects.
The balance of the remaining decrease of $6,584,000 was generally due to cost reduction activities within the Residential Group relating to direct property expenses and general operating activities.
Operating expenses for the Residential Group decreased by $3,570,000, or 2.0% during the year ended January 31, 2009 compared to the same period in the prior year. This variance is primarily attributable to the following decreases:
   
$5,400,000 related to the net lease arrangements whereby we receive fixed rental income in exchange for the operations of certain supported-living apartment properties which were retained by the lessee (see the “Discontinued Operations” section of the MD&A);
 
   
$5,292,000 related to reduced payroll costs and specific cost reduction activities; and
 
   
$4,892,000 related to management expenditures associated with military housing fee revenues.

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These decreases were partially offset by the following increases:
   
$6,608,000 related to new property openings and an acquired property as noted in the table below;
 
   
$6,146,000 related to write-offs of abandoned development projects; and
 
   
$1,593,000 related to the change to the full consolidation method of accounting from the equity method at Village Center and Independence Place I.
The balance of the remaining decrease of approximately $2,333,000 was generally due to fluctuations in mature properties and general operating activities.
Interest expense for the Residential Group decreased by $8,926,000 or 24.2% during the year ended January 31, 2010 and $6,150,000, or 14.3%, during the year ended January 31, 2009 compared to the same periods in the prior years primarily as a result of decreased variable interest rates partially offset by increases related to the opening and acquisitions of the properties listed in the below table.
The following table presents the increases in revenues and operating expenses incurred by the Residential Group for newly-opened/acquired properties for the year ended January 31, 2010 compared to the same period in the prior year:
                                 
                    Year Ended January 31,
                    2010 vs. 2009
                    Revenues        
                    from        
        Quarter/Year           Real Estate     Operating  
Property   Location   Opened   Units   Operations     Expenses  
 
 
                  (in thousands)
80 DeKalb
  Brooklyn, New York   Q4-2009 (1)     365       $ 61     $ 1,251  
North Church Towers
  Parma Heights, Ohio   Q3-2009 (2)     399       942       604  
Hamel Mill Lofts
  Haverhill, Massachusetts   Q4-2008 (1)     305       765       1,303  
Lucky Strike
  Richmond, Virginia   Q1-2008          131       918       226  
Mercantile Place on Main
  Dallas, Texas   Q1-2008/Q4-2008     366       2,852       604  
 
                   
 
                               
Total
                    $ 5,538     $ 3,988  
                     
     
 
 
(1)   Property to open in phases.
 
 
(2)   Acquired property
The following table presents the increases in revenues and operating expenses incurred by the Residential Group for newly-opened/acquired properties for the year ended January 31, 2009 compared to the same period in the prior year:
                                    
                    Year Ended January 31,
                    2009 vs. 2008
                    Revenues
from
       
        Quarter/Year           Real Estate     Operating
Property   Location   Opened   Units   Operations     Expenses
 
                    (in thousands)
Hamel Mill Lofts
  Haverhill, Massachusetts   Q4-2008 (1)     305       $ 23   $   559  
Lucky Strike
  Richmond, Virginia   Q1-2008          131       592       426  
Mercantile Place on Main
  Dallas, Texas   Q1-2008/Q4-2008     366       558       3,195  
Wilson Building
  Dallas, Texas   Q4-2007 (2)     143       1,859       1,426  
Cameron Kinney
  Richmond, Virginia   Q2-2007 (2)     259       509       344  
Botanica II
  Denver, Colorado   Q2-2007          154       1,236       658  
 
                   
 
                               
Total
                    $ 4,777   $   6,608  
                     
     
 
 
(1)   Property to open in phases.
 
 
(2)   Acquired property.
Comparable average occupancy for the Residential Group is 92.2% and 93.1% for the years ended January 31, 2010 and 2009, respectively. Average residential occupancy for the years ended January 31, 2010 and 2009 is calculated by dividing gross potential rent less vacancy by gross potential rent. Comparable average occupancy relates to properties opened and operated in both the years ended January 31, 2010 and 2009.

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Comparable net rental income (“NRI”) for our Residential Group was 90.2% and 92.3% for the years ended January 31, 2010 and 2009, respectively. NRI is an operating statistic that represents the percentage of potential rent received after deducting vacancy and rent concessions from gross potential rent.
Military Housing Fee Revenues – Revenues for development fees related to our military housing projects are earned based on a contractual percentage of the actual development costs incurred by the military housing projects and are recognized on a monthly basis as the costs are incurred. We also recognize additional development incentive fees upon successful completion of certain criteria, such as incentives to realize development cost savings, encourage small and local business participation, comply with specified safety standards and other project management incentives as specified in the development agreements. Base development and development incentive fees of $14,030,000, $62,180,000 and $56,045,000 were recognized during the years ended January 31, 2010, 2009 and 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.
Revenues for construction management fees are earned based on a contractual percentage of the actual construction costs incurred by the military housing projects and are recognized on a monthly basis as the costs are incurred. We also recognize certain construction incentive fees based upon successful completion of certain criteria as set forth in the construction contracts. Base construction and incentive fees of $9,857,000, $13,505,000 and $10,012,000 were recognized during the years ended January 31, 2010, 2009 and 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.
Revenues for property management and asset management fees are earned based on a contractual percentage of the annual net rental income and annual operating income, respectively, that is generated by the military housing privatization projects as defined in the agreements. We also recognize certain property management incentive fees based upon successful completion of certain criteria as set forth in the property management agreements. Property management, management incentive and asset management fees of $15,448,000, $14,318,000 and $9,357,000 were recognized during the years ended January 31, 2010, 2009 and 2008, respectively, which were recorded in revenues from real estate operations in the Consolidated Statements of Operations.
Land Development Group
Revenues from Real Estate Operations – Land sales and the related gross margins vary from period to period depending on the timing of sales and general market conditions relating to the disposition of significant land holdings. Our land sales have been impacted by slowing demand from home buyers in certain core markets for the land business, reflecting conditions throughout the housing industry. Revenues from real estate operations for the Land Development Group decreased by $13,581,000 for the year ended January 31, 2010 compared to the prior year. This variance is primarily attributable to the following decreases:
   
$6,556,000 related to lower land sales at Prosper in Prosper, Texas, Tangerine Crossing in Tucson, Arizona and Legacy Lakes in Aberdeen, North Carolina, combined with several smaller decreases in land/unit sales at other land development properties;
 
   
$6,051,000 related to lower land sales at Summers Walk in Davidson, North Carolina; and
 
   
$3,935,000 primarily related to reduced fee income and profit participation due to lower home sales at Stapleton in Denver, Colorado.
These decreases were partially offset by the following increase:
   
$2,961,000 related to higher land sales primarily at Gladden Farms in Marana, Arizona and Creekstone in Copley, Ohio, combined with several smaller increases in land sales at other land development projects.
Revenues from real estate operations for the Land Development Group decreased by $58,409,000 for the year ended January 31, 2009 compared to the prior year. This variance is primarily attributable to the following decreases:
   
$34,899,000 related to lower land sales at Stapleton;
 
   
$7,596,000 related to lower land sales at Mill Creek in York County, South Carolina;
 
   
$5,792,000 related to lower land sales at Tangerine Crossing;
 
   
$5,222,000 related to lower land sales at Prosper;
 
   
$1,972,000 related to lower land sales at Sugar Chestnut in North Ridgeville, Ohio;
 
   
$1,560,000 related to lower land sales at Bratenahl Subdivision in Bratenahl, Ohio; and

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$4,546,000 related to lower land sales primarily at Wheatfield Lakes in Wheatfield, New York and Creekstone and lower unit sales at Rockport Square in Lakewood, Ohio, combined with several smaller decreases in land sales at other land development projects.
These decreases were partially offset by the following increases:
   
$2,458,000 related to higher land sales at Summers Walk; and
 
   
$720,000 related to higher land sales primarily at Legacy Lakes, combined with several smaller increases in land sales at other land development projects.
Operating and Interest Expenses – Operating expenses decreased by $19,759,000 for the year ended January 31, 2010 compared to the same period in the prior year. This variance is primarily attributable to the following decreases:
   
$17,568,000 at Stapleton primarily related to the $13,816,000 reduction in fair value of the DURA purchase obligation and fee, that resulted from the Lehman Brothers, Inc. bankruptcy in 2008 (see the “Other Structured Financing Arrangements” section of the MD&A) along with reduced payroll costs and specific cost reduction activities;
 
   
$5,944,000 primarily related to lower land sales at Prosper, Tangerine Crossing and Legacy Lakes, combined with several smaller decreases in land sales at other land development projects along with reduced payroll costs and specific cost reduction activities; and
 
   
$3,862,000 related to lower land sales at Summers Walk.
These decreases were partially offset by the following increases:
   
$5,115,000 primarily related to higher land sales at Gladden Farms and Creekstone, combined with several smaller increases in land sales at other land development projects; and
 
   
$2,500,000 legal settlement related to a former joint venture.
Operating expenses decreased by $14,809,000 for the year ended January 31, 2009 compared to the same period in the prior year. This variance is primarily attributable to the following decreases:
   
$17,824,000 at Stapleton primarily related to lower land sales;
 
   
$4,719,000 related to lower land sales at Mill Creek;
 
   
$3,533,000 related to lower land sales at Tangerine Crossing;
 
   
$1,168,000 related to lower unit sales at Rockport Square; and
 
   
$4,573,000 primarily related to lower land sales at Wheatfield Lakes, Monarch Grove in Lorain, Ohio and Sugar Chestnut, combined with several smaller decreases in land sales at other land development projects.
These decreases were partially offset by the following increases:
   
$13,816,000 ($12,434,000, net of noncontrolling interest) at Stapleton related to the reduction in fair value of the DURA purchase obligation and fee (see the “Other Structured Financing Arrangements” section of the MD&A);
 
   
$1,348,000 related to higher land sales at Summers Walk; and
 
   
$1,844,000 primarily related to higher land sales at Legacy Lakes, combined with several smaller increases in land sales at other land development projects.
Interest expense increased by $2,207,000 for the year ended January 31, 2010 compared to the prior year. Interest expense decreased by $216,000 for the year ended January 31, 2009 compared to the prior year. Interest expense varies from year to year depending on the level of interest-bearing debt within the Land Development Group.

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The Nets
Our equity investment in The Nets incurred a pre-tax loss of $43,489,000, $40,989,000 and $20,878,000 for the years ended January 31, 2010, 2009 and 2008, respectively, representing an increase in allocated losses of $2,500,000 and $20,111,000 compared to the respective prior year. For the years ended January 31, 2010, 2009 and 2008, we recognized approximately 68%, 54% and 25% of the net loss, respectively, because profits and losses are allocated to each member based on an analysis of the respective member’s claim on the net book equity assuming a liquidation at book value at the end of the accounting period without regard to unrealized appreciation (if any) in the fair value of The Nets. For the year ended January 31, 2010, we recognized a higher share of the loss than prior years because of the distribution priorities among members and because we advanced capital to fund operating losses. While these capital advances receive certain preferential capital treatment, generally accepted accounting principles require us to report losses, including significant non-cash losses resulting from amortization, in excess of our legal ownership of approximately 23%. Under certain facts and circumstances, generally accepted accounting principles may require losses to be recognized in excess of the basis in the equity investment. At January 31, 2010, we had recognized $333,000 of losses in excess of our investment basis.
Included in the losses for the years ended January 31, 2010, 2009 and 2008 are approximately $14,517,000, $20,862,000 and $10,556,000, respectively, of amortization, at our share, of certain assets related to the purchase of the team. The remainder of the losses substantially relate to the operations of the team. The team is expected to operate at a loss in 2010 and will require additional capital from its members to fund the operating losses.
Corporate Activities
Operating and Interest Expenses – Operating expenses for Corporate Activities decreased by $4,240,000 for the year ended January 31, 2010 compared to the prior year. The decrease was primarily related to a decrease in charitable contributions of $1,976,000 and other general corporate expenses, commensurate with cost saving initiatives.
Operating expenses increased by $2,462,000 for the year ended January 31, 2009 compared to the prior year. The increase was primarily related to company-wide severance and outplacement expenses of $8,651,000 offset by decreases in payroll and related benefits of $5,412,000 and stock-based compensation of $818,000, with the remaining difference attributable to general corporate expenses.
Interest expense for Corporate Activities consists primarily of interest expense on the senior notes and the bank revolving credit facility, excluding the portion allocated to the Land Development Group (see the “Financial Condition and Liquidity” section of the MD&A). Interest expense increased by $7,641,000 for the year ended January 31, 2010 compared to the prior year, as a result of interest expense related to corporate interest rate swaps due to a reduction in the LIBOR rate, additional interest expense on senior notes issued during the year ended January 31, 2010, and the bank revolving credit facility due to increased borrowings.
Interest expense increased by $1,079,000 for the year ended January 31, 2009 compared to the prior year, primarily related to unfavorable mark to market adjustments on corporate derivative instruments, offset by a decrease in bank revolving credit interest expense due to lower variable interest rates.
Other Activity
The following items are discussed on a consolidated basis.
Interest and Other Income
For the years ended January 31, 2010, 2009 and 2008, we recorded interest and other income of $54,005,000, $42,417,000 and $73,265,000, respectively. The increase of $11,588,000 for the year ended January 31, 2010 compared to the prior year is primarily due to the following increases: $21,530,000 related to the income recognition on the sale of state and federal Historic Preservation Tax Credits, Brownfield Tax Credits and New Market Tax Credits and a gain recognized in 2009 of $3,599,000 related to insurance proceeds received due to fire damage at an apartment building in excess of the net book value of the damaged asset. These increases were partially offset by the following decreases: $4,546,000 related to the income earned on the DURA purchase obligation and fee in 2008 that did not recur (see the “Other Structured Financing Arrangements” section of the MD&A), $3,350,000 related to the 2008 gain on the sale of an ownership interest in a parking management company and $1,838,000 related to interest income earned on two total rate of return swaps, one of which was terminated in September 2009. The remaining decrease is generally due to lower interest earned on our cash and restricted cash balances maintained with financial institutions. The decrease of $30,848,000 for the year ended January 31, 2009 compared to the prior year is primarily due to the following decreases: $17,830,000 related to the 2007 gain on disposition of Sterling Glen of Roslyn, $3,472,000 related to the income earned on the DURA purchase obligation and fee (see the “Other Structured Financing Arrangements” section of the MD&A) and $1,846,000 related to interest income earned by Stapleton Land, LLC on an interest rate swap related to the $75,000,000 tax increment financing bonds which matured in 2007. These decreases were partially offset by an increase of $3,350,000 related to the 2008 gain on the sale of an ownership interest in a parking management company.

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Equity in Earnings (Loss) of Unconsolidated Entities (also see the “Impairment of Unconsolidated Entities” section of the MD&A)
Equity in earnings of unconsolidated entities was $21,303,000 for the year ended January 31, 2010 and equity in loss of unconsolidated entities was ($14,300,000) for the year ended January 31, 2009, representing an increase of $35,603,000. The variance is primarily attributable to the following increases that occurred within our equity method investments:
-  
Commercial Group
   
$1,272,000 related to the 2008 participation payment on the refinancing at 350 Massachusetts Avenue, an office building located in Cambridge, Massachusetts.
-  
Residential Group
   
$31,703,000 related to the 2009 gain on disposition of our partnership interest in three Classic Residence by Hyatt properties, supported-living apartment communities located in Teaneck, New Jersey, Chevy Chase, Maryland, and Yonkers, New York;
 
   
$6,983,000 related to the 2009 gain on disposition of our partnership interest in Clarkwood, an apartment community located in Warrensville Heights, Ohio;
 
   
$6,577,000 related to the 2009 gain on disposition of our partnership interest in Granada Gardens, an apartment community located in Warrensville Heights, Ohio; and
 
   
$4,498,000 related to the 2009 gain on disposition of our partnership interest in Boulevard Towers, an apartment community in Amherst, New York.
-  
Land Development Group
 
   
$2,396,000 related to the 2009 net gain on an industrial land sale at Mesa Del Sol in Albuquerque, New Mexico; and     
 
   
$1,874,000 related to the 2009 gain on early extinguishment of nonrecourse mortgage debt at Shamrock Business Center in Painesville, Ohio.
These increases were partially offset by the following decreases:
-  
Commercial Group
   
$2,330,000 related to decreased occupancy and property reassessment resulting in significantly higher real estate taxes in 2009 at San Francisco Centre, a regional mall in San Francisco, California;
 
   
$1,235,000 related to lower hotel revenues in 2009 at the Westin Convention Center in Pittsburgh, Pennsylvania; and
 
   
$1,081,000 related to the 2008 gains on disposition of our partnership interests in One International Place and Emery-Richmond, office buildings in Cleveland, Ohio and Warrensville Heights, Ohio, respectively.
-  
Residential Group
 
   
$3,524,000 primarily related to lease-up losses at Uptown Apartments, an apartment community in Oakland, California;     
 
   
$1,273,000 primarily related to military housing fee income from the management and development of units in Hawaii, Illinois, Washington and Colorado; and
 
   
$953,000 related to the 2009 loss on early extinguishment of nonrecourse mortgage debt at Bayside Village, an apartment community in San Francisco, California.
-  
Land Development Group
 
   
$6,763,000 related to decreased sales at Central Station in Chicago, Illinois.     
-  
The Nets
 
   
$2,500,000 related to an increase in our share of the loss in The Nets (see “The Nets” section of the MD&A).     
The balance of the remaining decrease of $41,000 was due to fluctuations in the operations of our equity method investments.

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Equity in loss of unconsolidated entities was ($14,300,000) for the year ended January 31, 2009 and equity in earnings of unconsolidated entities was $20,542,000 for the year ended January 31, 2008, representing a decrease of $34,842,000. The variance is primarily attributable to the following decreases that occurred within our equity method investments:
-  
Commercial Group
   
$12,286,000 related to the 2007 gain on disposition of our partnership interest in University Park at MIT Hotel, located in Cambridge, Massachusetts; and
 
   
$1,272,000 related to the 2008 participation payment on the refinancing at 350 Massachusetts Avenue, an office building located in Cambridge, Massachusetts.
-  
Residential Group
   
$2,106,000 related to the 2007 gain on disposition of our partnership interest in White Acres, an apartment community located in Richmond Heights, Ohio.
-  
Land Development Group
 
   
$2,925,000 related to decreased land sales at Gladden Farms II in Marana, Arizona.         
-  
The Nets
 
   
$20,111,000 related to an increase in our share of the loss in The Nets (see “The Nets” section of the MD&A).         
These decreases were partially offset by the following increases:
-  
Commercial Group
   
$1,081,000 related to the 2008 gains on disposition of our partnership interests in One International Place and Emery-Richmond, respectively.
-  
Land Development Group
 
   
$3,010,000 related to increased sales at Central Station; and     
 
   
$1,649,000 related to increased land sales at various land development projects in San Antonio, Texas.     
The balance of the remaining decrease of $1,882,000 was due to fluctuations in the operations of our equity method investments.
Amortization of Mortgage Procurement Costs
We amortize mortgage procurement costs on a straight-line basis over the life of the related nonrecourse mortgage debt, which approximates the effective interest method. For the years ended January 31, 2010, 2009 and 2008, we recorded amortization of mortgage procurement costs of $13,974,000, $12,029,000 and $11,181,000, respectively. Amortization of mortgage procurement costs increased $1,945,000 and $848,000 for the years ended January 31, 2010 and 2009, respectively, compared to the same periods in the prior years.
Gain (Loss) on Early Extinguishment of Debt
For the years ended January 31, 2010, 2009 and 2008 we recorded $36,569,000, ($2,159,000) and ($8,334,000), respectively, as gain (loss) on early extinguishment of debt. The amounts for the year ended January 31, 2010 include a $24,219,000 gain on early extinguishment of nonrecourse mortgage debt at a retail project, a $9,466,000 gain on early extinguishment of nonrecourse mortgage debt at Gladden Farms, a land development project located in Marana, Arizona and a $4,683,000 gain related to the exchange of a portion of our 2011 Notes for a new issue of 2014 Notes (see the “Puttable Equity-Linked Senior Notes due 2011” section of the MD&A). These gains were partially offset by a charge to early extinguishment of debt as a result of the payment of $20,400,000 in redevelopment bonds by a consolidated wholly-owned subsidiary of ours (see the “Subordinated Debt” section of the MD&A).

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For the year ended January 31, 2009, the loss represents the impact of early extinguishment of nonrecourse mortgage debt at Galleria at Sunset, a regional mall located in Henderson, Nevada, 1251 S. Michigan and Sky55, apartment communities located in Chicago, Illinois, and Grand Lowry Lofts, an apartment community located in Denver, Colorado, in order to secure more favorable financing terms. These charges were offset by gains on the early extinguishment of a portion of our 2011 Notes (see the “Puttable Equity-Linked Senior Notes” section of the MD&A) and on the early extinguishment of the Urban Development Action Grant loan at Post Office Plaza, an office building located in Cleveland, Ohio. For the year ended January 31, 2008, the loss primarily represents the impact of early extinguishment of nonrecourse mortgage debt at Northern Boulevard and Columbia Park Center, specialty retail centers located in Queens, New York and North Bergen, New Jersey, respectively, and Eleven MetroTech Center, an office building located in Brooklyn, New York and the early extinguishment of borrowings at 101 San Fernando, an apartment community located in San Jose, California, in order to secure more favorable financing terms. The loss for the year ended January 31, 2008 also includes the impact of early extinguishment of the construction loan at New York Times, an office building located in Manhattan, New York, in order to obtain permanent financing, as well as the costs associated with the disposition of Landings of Brentwood, a consolidated apartment community in Nashville, Tennessee, which was sold during the year ended January 31, 2008 (see the “Discontinued Operations” section of the MD&A).
Impairment of Real Estate
We review our real estate portfolio, including land held for development or sale, for impairment whenever events or changes indicate that our carrying value of the long-lived assets may not be recoverable. In cases where we do not expect to recover our carrying costs, an impairment charge is recorded in accordance with accounting guidance on the impairment of long-lived assets. We recorded an impairment of certain real estate assets in continuing operations of $26,526,000, $1,262,000 and $102,000 for the years ended January 31, 2010, 2009 and 2008, respectively. In addition, included in discontinued operations is an impairment of real estate for two properties that were sold during the year ended January 31, 2010 (see the “Discontinued Operations” section of the MD&A). These impairments represent a write down to the estimated fair value due to a change in events, such as a purchase offer and/or consideration of current market conditions related to the estimated future cash flows.
In order to determine whether the long-lived asset carrying costs are recoverable from estimated future undiscounted cash flows, we use various assumptions that include historical and budgeted net operating income, estimated holding periods, risk of foreclosure and estimated cash proceeds received upon the disposition of the asset. Our assumptions were based on the most current information available at January 31, 2010. If the conditions mentioned above continue to deteriorate, or if our plans regarding our assets change, it could result in additional impairment charges in the future.
The following table summarizes our impairment of real estate for the years ended January 31, 2010, 2009 and 2008, which are included in the Consolidated Statements of Operations.
                                 
            Years Ended January 31,
            2010   2009   2008
                    (in thousands)          
Saddle Rock Village (Specialty Retail Center)
  (Aurora, Colorado)     $     13,179     $ -     $ -  
101 San Fernando (Apartment Community)
  (San Jose, California)     4,440       -       -  
Land Projects:
                               
Gladden Farms
  (Marana, Arizona)     2,985       -       -  
Tangerine Crossing
  (Tucson, Arizona)     905       -       -  
Romence Village (Investment in triple net lease property)
  (Portage, Michigan)     3,552       -       -  
Residential development property sold in February 2009
  (Mamaroneck, New York)     1,124       1,262       -  
Other
            341       -             102  
             
 
            $ 26,526     $ 1,262     $ 102  
             
Impairment of Unconsolidated Entities
We review our portfolio of unconsolidated entities for other-than-temporary impairments whenever events or changes indicate that our carrying value in the investments may be in excess of fair value. An equity method investment’s value is impaired only if management’s estimate of its fair value is less than the carrying value and such difference is deemed to be other-than-temporary. In order to arrive at the estimates of fair value of our unconsolidated entities, we use varying assumptions that may include comparable sale prices, market discount rates, market capitalization rates and estimated future discounted cash flows specific to the geographic region and property type, which are considered to be Level 3 inputs under accounting guidance related to estimating fair value.

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The following table summarizes our impairment of unconsolidated entities during the years ended January 31, 2010, 2009 and 2008, which are included in the Consolidated Statements of Operations.
                                 
            Years Ended January 31,
            2010   2009   2008  
          (in thousands)
 
Apartment Communities:
                               
Millender Center
  (Detroit, Michigan)     $ 10,317     $ -     $ -  
Uptown Apartments
  (Oakland, California)     6,781       -       -  
Metropolitan Lofts
  (Los Angeles, California)     2,505       -       -  
Residences at University Park
  (Cambridge, Massachusetts)     855       -       -  
Fenimore Court
  (Detroit Michigan)     693       -       -  
Mercury (Condominium)
  (Los Angeles, California)     -       8,036       8,269  
Classic Residence by Hyatt (Supported-Living Apartments)
  (Yonkers, New York)     3,152       1,107       -  
Advent Solar (Office Building)
  (Albuquerque, New Mexico)     1,693       -       -  
Specialty Retail Centers:
                               
Southgate Mall
  (Yuma, Arizona)     1,611       1,356       -  
El Centro Mall
  (El Centro, California)     -       2,030       -  
Coachella Plaza
  (Coachella, California)     -       1,870       -  
Pittsburgh Peripheral (Commercial Group Land Project)
  (Pittsburgh, Pennsylvania)     7,217       3,937       -  
Mixed-Use Land Development:
                               
Shamrock Business Center
  (Painesville, Ohio)     1,150       -       -  
Palmer
  (Manatee County, Florida)     -       1,214       -  
Cargor VI
  (Manatee County, Florida)     -       892       -  
Old Stone Crossing at Caldwell Creek
  (Charlotte, North Carolina)     122       365       300  
Smith Family Homes
  (Tampa, Florida)     -       -       2,050  
Gladden Farms II
  (Marana, Arizona)     -       -       850  
Other
            260       478       -  
             
 
            $ 36,356     $ 21,285     $ 11,469  
             
Write-Off of Abandoned Development Projects
On a quarterly basis, we review each project under development to determine whether it is probable the project will be developed. If we determine that the project will not be developed, project costs are written off to operating expenses as an abandoned development project cost. We may abandon certain projects under development for a number of reasons, including, but not limited to, changes in local market conditions, increases in construction or financing costs or due to third party challenges related to entitlements or public financing. As a result, we may fail to recover expenses already incurred in exploring development opportunities. We recorded write-offs of abandoned development projects of $27,415,000, $52,211,000 and $19,087,000 for the years ended January 31, 2010, 2009 and 2008, respectively, which were recorded in operating expenses in the Consolidated Statements of Operations.
Depreciation and Amortization
We recorded depreciation and amortization expense of $267,408,000, $266,785,000 and $227,153,000 for the years ended January 31, 2010, 2009 and 2008, respectively, which is an increase of $623,000, or 0.2%, and $39,632,000, or 17.4%, compared to the same period in the prior years.
Income Taxes
Income tax expense (benefit) for the years ended January 31, 2010, 2009 and 2008 was ($19,550,000), ($30,119,000) and $3,110,000, respectively. The difference in the income tax expense (benefit) reflected in the Consolidated Statements of Operations versus the income tax expense (benefit) computed at the statutory federal income tax rate is primarily attributable to state income taxes, the cumulative effect of changing our effective tax rate, additional state net operating losses and general business credits, changes to our charitable contribution carryover, changes to the valuation allowances associated with certain deferred tax assets, and various permanent differences between pre-tax generally accepted accounting principles (“GAAP”) income and taxable income.
At January 31, 2010, we had a federal net operating loss carryforward of $228,061,000 (generated primarily from the impact on our net earnings of tax depreciation expense from real estate properties and excess deductions from stock based compensation) that will expire in the years ending January 31, 2024 through January 31, 2030, a charitable contribution deduction carryforward of $41,733,000 that will expire in the years ending January 31, 2011 through January 31, 2015, General Business Credit carryovers of $17,514,000 that will expire in the years ending January 31, 2011 through January 31, 2030, and an alternative minimum tax (“AMT”) credit carryforward of $29,341,000 that is available until used to reduce Federal tax to the AMT amount.

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Our policy is to consider a variety of tax-deferral strategies, including tax deferred exchanges, when evaluating our future tax position. We have a full valuation allowance against the deferred tax assets associated with our charitable contributions. We have a valuation allowance against our general business credits, other than those general business credits which are eligible to be utilized to reduce future AMT liabilities. We have a valuation allowance against certain of our state net operating losses. These valuation allowances exist because we believe at this time it is more likely than not that we will not realize these benefits.
We apply the “with-and-without” methodology for recognizing excess tax benefits from the deduction of stock-based compensation. The net operating loss available for the tax return, as is noted in the paragraph above, is significantly greater than the net operating loss available for the tax provision due to excess deductions from stock-based compensation reported on the return, as well as the impact of adjustments to the net operating loss under the accounting guidance on accounting for uncertainty in income taxes. The January 31, 2010 tax return will include a stock-based compensation deduction of $72,000, none of which will decrease taxes payable on the current year tax provision since we are in a net taxable loss position before the stock option deduction. As a result, we did not record an adjustment to additional paid-in-capital, nor did we record a reduction in our current taxes payable due to stock-based compensation deductions. As of January 31, 2010, we have not recorded a net deferred tax asset of approximately $17,447,000 from excess stock-based compensation deductions taken on our tax return for which a benefit has not yet been recognized in our tax provision.
Accounting for Uncertainty in Income Taxes
Unrecognized tax benefits represent those tax benefits related to tax positions that have been taken or are expected to be taken in tax returns that are not recognized in the financial statements because we have either concluded that it is not more likely than not that the tax position will be sustained if audited by the appropriate taxing authority or the amount of the benefit will be less than the amount taken or expected to be taken in our income tax returns.
As of January 31, 2010 and 2009, we had unrecognized tax benefits of $1,611,000 and $1,481,000, respectively. We recognize estimated interest payable on underpayments of income taxes and estimated penalties that may result from the settlement of some uncertain tax positions as components of income tax expense. At January 31, 2010 and 2009, we had approximately $525,000 and $463,000, respectively, of accrued interest recorded related to uncertain income tax positions. During the years ended January 31, 2010, 2009 and 2008, income tax expense (benefit) relating to interest and penalties on uncertain tax positions of $61,000, ($377,000), and $137,000, respectively, was recorded in our Consolidated Statements of Operations. We settled Internal Revenue Service audits of two of our partnership investments during the years ended January 31, 2010 and 2009, both of which resulted in a decrease in our unrecognized tax benefits in the amounts of $174,000 and $845,000, respectively, and a decrease in the associated accrued interest and penalties in the amounts of $59,000 and $447,000, respectively.
We file a consolidated United States federal income tax return. Where applicable, we file combined income tax returns in various states and we file individual separate income tax returns in other states. Our federal consolidated income tax returns for the year ended January 31, 2005 and subsequent years are subject to examination by the Internal Revenue Service. Certain of our state returns for the years ended January 31, 2004 through January 31, 2006 and all state returns for the year ended January 31, 2007 and subsequent years are subject to examination by various taxing authorities.
A reconciliation of the total amounts of our unrecognized tax benefits, exclusive of interest and penalties, as of January 31, 2010 and 2009, is depicted in the following table:
                 
    Unrecognized Tax Benefit
    January 31,
    2010     2009  
    (in thousands)  
 
Balance, beginning of year
    $ 1,481     $ 2,556  
 
               
Gross increases for tax positions of prior years
    330       224  
Gross decreases for tax positions of prior years
    -       (71 )
Gross increases for tax positions of current year
    -       -  
Settlements
    (174 )     (845 )
Lapse of statutes of limitation
    (26 )     (383 )
     
 
               
Balance, end of year
    $ 1,611     $ 1,481  
     
The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized as of January 31, 2010 and 2009, is $155,000 and $145,000, respectively. Based upon our assessment of the outcome of examinations that are in progress, the settlement of liabilities, or as a result of the expiration of the statutes of limitation for certain jurisdictions, it is reasonably possible that the related unrecognized tax benefits for tax positions taken regarding previously filed tax returns will materially change from those recorded at January 31, 2010. Included in the $1,611,000 of unrecognized benefits as of January 31, 2010, is $1,306,000 which, due to the reasons above, could significantly decrease during the next twelve months.

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Discontinued Operations
All revenues and expenses of discontinued operations sold or held for sale, assuming no significant continuing involvement, have been reclassified in the Consolidated Statements of Operations for the years ended January 31, 2010, 2009 and 2008. We consider assets held for sale when the transaction has been approved and there are no significant contingencies related to the sale that may prevent the transaction from closing. There were no assets classified as held for sale at January 31, 2010 or 2009.
During the year ended January 31, 2010, we sold Grand Avenue, a specialty retail center in Queens, New York, which generated a pre-tax gain on disposition of a rental property of $4,548,000. The gain along with the operating results of the property through the date of sale is classified as discontinued operations for the years ended January 31, 2010, 2009 and 2008.
During the year ended January 31, 2008, we consummated an agreement to sell eight (seven operating properties and one property that was under construction at the time of the agreement) and lease four supported-living apartment properties to a third party. Pursuant to the agreement, during the second quarter of 2007, six operating properties listed in the table below and the property under construction were sold. The seventh operating property, Sterling Glen of Lynbrook, was operated by the purchaser under a short-term lease through the date of sale, which occurred on May 20, 2008. The gain along with the operating results of the property through the date of sale is classified as discontinued operations for the years ended January 31, 2009 and 2008.
The four remaining properties entered into long-term operating leases with the purchaser. On January 30, 2009, the purchase agreement for the sale of Sterling Glen of Rye Brook, whose operating lease had a stated term of ten years, was amended and the property was sold. The gain along with the operating results of the property through the date of sale is classified as discontinued operations for the years ended January 31, 2009 and 2008. On January 31, 2009, another long-term operating lease with the purchaser that had a stated term of ten years was cancelled and the operations of the property were transferred back to us.
During the year ended January 31, 2010, negotiations related to amending terms of the purchase agreements for Sterling Glen of Glen Cove and Sterling Glen of Great Neck (the remaining two properties under long-term operating leases) indicated the carrying value of these long-lived real estate assets may not be recoverable resulting in an impairment of real estate of $7,138,000 and $2,637,000, respectively, which reduced the carrying value of the long-lived assets to the estimated net sales price. The sale of the two properties closed in September 2009, resulting in no gain or loss upon disposition. The operating results of the properties through the date of sale, including the impairment charges, are classified as discontinued operations for the years ended January 31, 2010, 2009 and 2008.
The following table lists the consolidated rental properties included in discontinued operations:
                                             
                        Year     Year     Year  
            Square Feet/   Period     Ended     Ended     Ended  
Property   Location     Number of Units   Disposed     1/31/2010     1/31/2009     1/31/2008  
 
 
                                           
Commercial Group:
                                           
Grand Avenue
  Queens, New York   100,000 square feet     Q1-2009     Yes   Yes   Yes
 
                                           
Residential Group:
                                           
Sterling Glen of Glen Cove
  Glen Cove, New York   80 units     Q3-2009     Yes   Yes   Yes
Sterling Glen of Great Neck
  Great Neck, New York   142 units     Q3-2009     Yes   Yes   Yes
Sterling Glen of Rye Brook
  Rye Brook, New York   168 units     Q4-2008       -     Yes   Yes
Sterling Glen of Lynbrook
  Lynbrook, New York   130 units     Q2-2008       -     Yes   Yes
Sterling Glen of Bayshore
  Bayshore, New York   85 units     Q2-2007       -       -     Yes
Sterling Glen of Center City
  Philadelphia, Pennsylvania   135 units     Q2-2007       -       -     Yes
Sterling Glen of Darien
  Darien, Connecticut   80 units     Q2-2007       -       -     Yes
Sterling Glen of Forest Hills
  Forest Hills, New York   83 units     Q2-2007       -       -     Yes
Sterling Glen of Plainview
  Plainview, New York   79 units     Q2-2007       -       -     Yes
Sterling Glen of Stamford
  Stamford, Connecticut   166 units     Q2-2007       -       -     Yes
Landings of Brentwood
  Nashville, Tennessee   724 units     Q2-2007       -       -     Yes
In addition, our Lumber Group strategic business unit was sold during the year ended January 31, 2005 for $39,085,902, $35,000,000 of which was paid in cash at closing. Pursuant to the terms of a note receivable with a 6% interest rate from the buyer, the remaining purchase price was to be paid in four annual installments commencing November 12, 2006. We deferred a gain of $4,085,902 (approximately $2,400,000, net of tax) relating to the note receivable due, in part, to the subordination to the buyer’s senior financing. The gain is recognized in discontinued operations and interest income is recognized in continuing operations as the note receivable principal and interest are collected. During the years ended January 31, 2010, 2009 and 2008, we received the last three annual installments of $1,250,000 each, which included $1,172,000 ($718,000, net of tax), $1,108,000 ($680,000, net of tax) and $1,046,000 ($642,000, net of tax) of the deferred gain, respectively, and $78,000, $142,000 and $204,000 of interest income recorded in continuing operations, respectively.

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Table of Contents

The operating results related to discontinued operations were as follows:
                         
    Years Ended January 31,
    2010     2009     2008  
    (in thousands)  
     
Revenues from real estate operations
      $ 5,476     $ 17,176     $ 45,451  
 
                       
Expenses
                       
Operating expenses
    430       2,399       27,336  
Depreciation and amortization
    1,347       4,942       7,418  
Impairment of real estate
    9,775       -       -  
     
 
    11,552       7,341       34,754  
     
     
Interest expense
    (2,184 )     (7,210 )     (11,672 )
Amortization of mortgage procurement costs
    (50 )     (418 )     (533 )
Loss on early extinguishment of debt
    -       -       (984 )
     
Interest income
    -       125       1,045  
Gain on disposition of rental properties and Lumber Group
    5,720       14,405       106,333  
     
 
                       
Earnings (loss) before income taxes
    (2,590 )     16,737       104,886  
     
 
                       
Income tax expense (benefit)
                       
Current
    848       20,039       25,054  
Deferred
    (1,853 )     (13,572 )     15,672  
     
 
    (1,005 )     6,467       40,726  
     
 
                       
Earnings (loss) from discontinued operations
    (1,585 )     10,270       64,160  
 
                       
Operating loss attributable to noncontrolling interests
    -       -       (513 )
     
 
                       
Earnings (loss) from discontinued operations attributable to Forest City Enterprises, Inc.
      $ (1,585 )   $ 10,270     $ 64,673  
     
Gain on Disposition of Rental Properties and Lumber Group
The following table summarizes the pre-tax gain on disposition of rental properties and Lumber Group for the years ended January 31, 2010, 2009 and 2008:
                         
    Years Ended January 31,
    2010     2009     2008  
    (in thousands)  
     
Discontinued Operations:
                       
Grand Avenue (Specialty Retail Center)
      $ 4,548     $ -     $ -  
Sterling Glen Properties (Supported-Living Apartments) (1)
    -       13,297       80,208  
Landings of Brentwood (Apartments) (2)
    -       -       25,079  
Lumber Group
    1,172       1,108