Call End:

Forest City Enterprises (FCE.A)

Q2 2011 Earnings Call

September 09, 2011 11:00 AM ET

Executives

David J. LaRue - President and CEO

Robert G. O'Brien - EVP and CFO

Matthew L. Messinger – EVP of Investment Management

Analysts

Sheila McGrath – KBW

Jay Habermann - Goldman Sachs

Paul Adornato - BMO Capital Markets

Richard Moore - RBC Capital Markets

Presentation

Operator

Welcome to Forest City Enterprises Second Quarter 2011 Earnings Conference Call. The Company would like to remind you that today's remarks include forward-looking comments that are covered under Federal Safe Harbor provisions. Actual results could differ materially from those expressed or implied in such forward-looking statements due to various risks, uncertainties and other factors.

Please refer to the risk factors outlined in Forest City's annual and quarterly reports filed with the SEC for a discussion of factors that could cause results to differ. This call is being recorded and a replay will be available beginning at 2:00 PM Eastern Time today. Both the telephone replay and the webcast will be available until October 9, 2011, 11:59 PM Eastern Time.

Also, please note that exhibits referred to during today's call are available on the Investor Relations page of the Company's website www.forestcity.net. At this time, all participants are in a listen-only mode. Participants on the call will have the opportunity to ask questions following the Company's prepared remarks.

I would now like to turn the call over to Forest City's President and CEO, David LaRue. Please go ahead, Mr. LaRue.

David LaRue

Thank you operator. Good morning everyone and thank you for joining us today. Sharing remarks with me today is Bob O'Brien, our Chief Financial Officer. Matt Messinger, EVP of Investment Management in our New York office is also on the call and available to answer questions during the Q&A. By now I hope all of you have seen our second quarter press release and filings which went out at the close of business on Wednesday.

In a few minutes, Bob will review our financial and operating results and give you an update on our financing and capital raising activity. After that I'll review our openings and under construction pipeline, offer some closing thoughts and then we'll get to your questions.

As we indicated in our press release, we're pleased with our second quarter results. Our portfolio performed well with comparable property net operating income increases across all major property types. We made additional strides in our ongoing effort to strengthen the company and improve the balance sheet and overall debt metrics. We have continued to make progress on our under-construction pipeline, and we are selectively adding new projects primarily multifamily by taking advantage of existing entitlements at some of our large mixed-use projects in core markets.

Clearly, our outlook is impacted by the uncertainty of the general economy, so I'd like to separate the way we feel about our business from the way we view the economic outlook. We're cautious in our outlook when it comes to the economy. The persistence of high unemployment, slow to negligible growth, falling consumer confidence, global debt and political posturing in Washington are all very real concerns for us. Solving those issues will take time and improvements will come slowly, so there is a reason for caution in the near to mid-term. In the meantime, we are focused on factors within our control on running a core real estate portfolio with well over 200 assets in an efficient, profitable manner while selectively taking advantage of new development opportunities and creating value for our shareholders.

I also point out that current conditions have presented important opportunities. The first is increased demand for our multifamily products. The general economic uncertainty in housing crisis have created a new generation of renters, some due to necessity, some by choice. Combined with limited new supply this has driven our portfolio performance and opened up growth opportunities in our existing pipeline. In our core markets and key mixed use projects such as Denver and Stapleton, Atlantic Yards in Brooklyn and the yards in DC, we have existing entitlements that we are able to activate judiciously. Financing is accessible for these new multifamily projects. Demand clearly exists and we are poised to meet it. I have more to say on that later when I talk about the pipeline.

The second opportunity created by our current conditions is historically low interest rates. We have the ability to access capital at attractive rates to refinance existing properties and lock in long term rates that lead to improved earnings and cash flow from the portfolio. Low interest rates have also allowed for our newly opened projects to absorb the lease up phase with less impact on our income statement. Bob will have more to say about this later.

In short, the challenges that exist do not deter us from feeling good about the business and about our opportunity for future growth. We put in the hard work over the past several years to strengthen the company and position it for future success.

With that, let me turn it over to Bob for a review of our financial and operating results and to talk about our view of the capital markets. Bob?

Robert O’Brien

Thanks, Dave. Good morning everybody. On today's call I'll be referring to our results in our earnings release, our 10-Q filing and our supplemental package. If you don't have access to them, you can contact us for a copy or visit our website for reference during the call. I'll also refer to our EBDT bridge which depicts the positive and negative factors impacting our results. It's in our supplemental package and also available directly through a link on the investors page of our website.

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