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Forest City to restructure Ratner's New York portfolio.

Forest City Enterprises, Inc. is negotiating with Bruce C. Ratner to restructure their combined interest in a total of 30 retail, office and residential operating properties and certain service companies that currently are owned jointly by Forest City and Ratner.

All of the properties included in this portfolio except one are located in the New York City metropolitan area.

Currently Forest City owns a majority interest in its New York portfolio. Upon closing of the proposed transaction, Forest City will be entitled to substantially all of the remaining economic benefits of the underlying properties.

The parties also are negotiating the restructuring of certain jointly-owned projects under active development which will be valued when each development is completed. Beyond these development projects, Forest City will have the right to all future development.

In connection with the proposed transaction, Ratner will contribute his ownership interest and Forest City will contribute a portion of its ownership interest in the portfolio into a newly-formed limited liability company. Ratner will receive approximately $60 million in cash and 3.9 million units in the new limited liability company, although the mix of cash and units is still under consideration.

This restructuring excludes the impact of any non-recourse debt related to these assets because it already is included in Forest City's consolidated financial statements.

Following a one-year lockup period, each of these units may be exchanged for one share of Forest City's Class A Common Stock or, at Forest City's option, cash equal to the then-current market price of the stock. F or the first five years only, units that have not been exchanged will receive their proportionate share of an aggregate annual preferred payment of $2.5 million plus an amount equal to the dividends payable on Forest City stock. After five years, the annual preferred payment on the outstanding units will equal only the dividends payable on Forest City stock.

In addition, Forest City will indemnify Ratner for any tax liability that he may incur as a result of the sale of any of these properties during the 12-year period following the closing of the transaction.

Forest City intends to conduct its New York operations in the same manner as it has for the past 20 years. Bruce Ratner will become an executive employee of Forest City and will continue to be the president and chief executive officer of Forest City Ratner Companies.

In addition, upon closing of the proposed transaction, Ratner will become a member of Forest City's Board of Directors.

Forest City's Board of Directors has established a special committee of independent directors to consider and act upon the proposed transaction. The special committee has engaged Greenhill & Co., LLC as its adviser to evaluate the proposed transaction from a financial perspective.
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Publication:Real Estate Weekly
Geographic Code:1USA
Date:Aug 9, 2006
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