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Excerpts - Forest City Enterprises Fourth Quarter Conference Call

Forest City Enterprises, Inc. (FCE.A)

Earnings Call

April 2, 2008 1:00 pm ET


Charles Ratner – President & CEO, Forest City Enterprises

Joanne Minieri – President & COO, Forest City Ratner Companies New York


Richard Moore - RBC Capital:

"Okay, thank you Chuck, and the last thing I had is on the Nets, I know that moves around, the amount that you book as expense moves relative to how much percentage ownership you have at any given time based on your contributions, how should we think about 2008? Is it going to be similar to 2007 or are there more changes that will affect what you expense for the Nets?"

Charles Ratner – Forest City Enterprises:

"I’m going to let Joanne answer the question but our percentage of ownership does not fluctuate at all. Our percentage of funding fluctuates. So that whatever beyond our ownership we put in as a funder we obviously have a priority return on and of."

Joanne Minieri – Forest City Ratner:

"Rich, our losses have two pieces to it. The operating losses which will pretty much remain generally within the $40 million range or they’ll obviously we work to (lower) losses and a piece of the losses relate to the amortization of the player contracts. The amortization will be burning off by the second quarter of ’09 and while the team losses will continue to approximate prior years, the amounts allocated to Forest City is expected to increase as additional capital is contributed to operate the team. So i expect us to be greater next year."

Richard Moore - RBC Capital:

"Great, thank you."


Charles Ratner – Forest City Enterprises:

"Finally, the Atlantic Yards in Brooklyn where we now control more than 85% of the land needed for the project and are moving ahead with demolition, infrastructure upgrades and construction of the temporary rail yard.

"This last project, Atlantic Yards in Brooklyn, has received considerable news coverage recently and I’d like to ask Joanne Minieri, President of Forest City Ratner Companies, our New York subsidiary to offer her perspectives and those of our company on this project. Joanne, please."

Joanne Minieri – Forest City Ratner:

"Thanks Chuck. We and our partners have been receiving favorable court decisions and now have won 18 separate rulings on the Atlantic Yards project. There have been no adverse decisions. Certain of these lawsuits have been and will be appealed however we remain confident of our position. We are proceeding with the expectation that the lawsuits may be resolved during the second half of this year and the Empire State Development Corporation will move forward with the process to transfer title of the land. In addition we are currently working closely with ESDC, the Empire State Development Corporation, to complete all project documents in pursuit of this targeted time table. As Chuck indicated, we continue to proceed through the predevelopment of Atlantic Yards whereby certain site work and the construction of the temporary rail yard are underway. Design and construction documents are progressing, we are pricing and bidding certain completed design documents and efforts are underway with the public parties to complete the affordable housing program.

"We at Forest City remain committed to the residential program at Atlantic Yards and we will continue to work with the governmental agencies and all of those involved. We have executed the funding agreement with the City and State for the $200 million of subsidy and received an additional $105 million allocation from the City. In February of this year we received our first funding for the project; $58 million. With respect to the arena, we are working closely with Goldman, Sachs and Barclays Bank on the available taxable and tax-exempt financing alternatives. Sponsorship interest which is an important driver for the arena financing remains strong.

"Projects of this size and significance are always subject to changing market demands and economic influences. As a development company we manage our projects under guiding principals and apply disciplines that include monitoring the design and cost risks, financing levels, the equity needs and the resulting long-term value creation. Atlantic Yards is no different. And upon the achievement of key project milestones, we will proceed as planned. Today’s economic environment is challenging, however we believe Forest City and the public party’s interests continue to be aligned with respect to the successful completion of the Atlantic Yards project."

Charles Ratner – Forest City Enterprises:

"Thank you, Joanne. You know I just want to point out to everybody this great success we’ve had in the New York Times over these past several years is largely the result of this tremendously talented team we have in New York led by Bruce Ratner and Joanne Minieri and a great group of people, many of whom have been with us well in excess of a decade and they’ve produced so well for us, its now a third of our company, our New York portfolio, tremendous opportunity and we have great confidence in their ability to bring Atlantic Yards to fruition.

"Let me take another moment to offer some historical perspective however based on our experience working through these kinds of cycles in large urban mixed-use projects. Almost by definition these projects have long timelines that often spin multiple economic cycles. If you look at some of our other projects of this type, think of the University Park at MIT, Central Station in Chicago, even the San Francisco Center project, you see that we’ve been here before. We’ve been able to deliver catalytic projects that achieve the goals that we and our partners both public entities and private partners, set out to achieve and have delivered great returns for our company and our shareholders. The economy sometimes alters the timeline, but we have demonstrated our ability to see these projects through to completion. The value they create is well worth the time and effort.

"The point is, that while we’re not immune to cycles in the economy, we’re not immune to lawsuits from other parties, we have experience at managing through them and a track record of bringing these large, complex projects to fruition. Over time they create a great sense of place and a great opportunity to make incremental value happen for all parties concerned."