FOREST CITY ENTERPRISES INC, S-3/A, 1997-04-30

FOREST CITY ENTERPRISES INC
S-3/A, 1997-04-30
OPERATORS OF NONRESIDENTIAL BUILDINGS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997

REGISTRATION NO. 333-22695

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------------

AMENDMENT NO. 1

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

------------------------
FOREST CITY ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
Ohio 10800 Brookpark Road 34-0863886
(STATE OR OTHER JURISDICTION OF Cleveland, Ohio 44130 -- (216) 267-1200 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, IDENTIFICATION NUMBER)
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
</TABLE>

WILLIAM M. WARREN

General Counsel, Senior Vice President and Assistant Secretary
10800 Brookpark Road
Cleveland, Ohio 44130
(216) 267-1200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

------------------------

COPY TO:

DAVID P. PORTER
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
(216) 586-3939

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time as determined by market conditions and other factors, after the
effective date of this Registration Statement.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED APRIL 29, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1997

1,700,000 SHARES

[FOREST CITY ENTERPRISES LOGO]
CLASS A COMMON STOCK
(PAR VALUE $.33 1/3 PER SHARE)
---------------------

Forest City Enterprises, Inc. is a national real estate company principally
engaged in the development, acquisition, ownership and management of commercial
and residential real estate throughout the United States. The Company owns
approximately $2.5 billion of properties at cost in 20 states and the District
of Columbia. As of January 31, 1997, it operated a portfolio of real estate that
consisted of 14.3 million square feet of retail space at 30 shopping centers,
6.4 million square feet of office space in 20 buildings, five hotels with 1,530
rooms and 31,441 units in 114 apartment communities, and owned 5,920 acres of
land held for improvement and sale.

All of the shares of Class A Common Stock offered hereby are being issued
and sold by the Company. The Company has outstanding two classes of common
stock: the Class A Common Stock and Class B Common Stock. The Class A Common
Stock and the Class B Common Stock have identical economic rights in the
Company, but the voting rights differ. The holders of Class A Common Stock and
the holders of Class B Common Stock, voting as separate classes, have the right
to elect 25% and 75%, respectively, of the members of the Board of Directors. On
all other matters submitted to a shareholder vote, the shares of Class A Common
Stock have one vote per share and the shares of Class B Common Stock have ten
votes per share. See "Description of Common Stock -- Voting Rights" in the
accompanying Prospectus. Both the Class A Common Stock and Class B Common Stock
are listed on the American Stock Exchange, the Class A Common Stock under the
symbol "FCEA" and the Class B Common Stock under the symbol "FCEB." On April 29,
1997, the last reported sale price of the Class A Common Stock on the American
Stock Exchange was $43.25 per share. See "Price Range of Common Stock and
Dividend History."

SEE "RISK FACTORS" BEGINNING ON PAGE S-15 FOR CERTAIN FACTORS RELEVANT TO
AN INVESTMENT IN THE CLASS A COMMON STOCK.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
---------------- ------------------ ----------------
<S> <C> <C> <C>
Per Share of Class A Common Stock.................... $ $ $
Total(3)............................................. $ $ $
</TABLE>

- ---------------
(1) Forest City has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting estimated expenses of $650,000 payable by Forest City.
(3) Forest City has granted the Underwriters an option for 30 days to purchase
up to an additional 255,000 shares of Class A Common Stock at the initial
public offering price per share, less the underwriting discount, solely to
cover over-allotments. If such option is exercised in full, the total
initial public offering price, underwriting discount and proceeds to Company
will be $ , $ and $ , respectively. See
"Underwriting."
---------------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the shares
will be ready for delivery in New York, New York, on or about , 1997,
against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
MCDONALD & COMPANY
--------------------- SECURITIES, INC.

The date of this Prospectus Supplement is , 1997.
<PAGE> 3

APPENDIX

(DESCRIPTION OF GRAPHICS)

INSIDE FRONT COVER:

Map of the United States and lower Canada. Displaying the Company's portfolio of
Real Estate by location and type, including Shopping Centers, Office Buildings,
Land Development, Hotels, Apartments, and Lumber Trading Regional Offices.

<TABLE>
<CAPTION>
SHOPPING OFFICE LAND REGIONAL
CENTERS BUILDINGS DEVELOPMENT HOTELS APARTMENTS OFFICES
-------- --------- ----------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA
Los Angeles.......... 3 1 6 X
Fresno............... 1
San Jose............. 1(c)
San Francisco........ 1
NEVADA
Las Vegas............ 2 X 1
ARIZONA
Tucson............... 2 X X
UTAH
Salt Lake City....... X
OREGON
Bend................. X
Portland............. X
WASHINGTON
Federal Way.......... X
COLORADO
Denver............... 1
ILLINOIS
Chicago.............. X 2 X
INDIANA
Indianapolis......... 1
OHIO
Akron-Canton......... 4 1
Cleveland............ 3 9 X 2 17,3(c) X
MICHIGAN
Detroit.............. 1 4 X
Flint................ 2 X
MINNESOTA
Minneapolis.......... X
PENNSYLVANIA
Philadelphia......... 1 1
Pittsburgh........... 1 2 1 1
NEW JERSEY
Jackson.............. 1
Teaneck.............. 1
</TABLE>

- ---------------
(c) = Under Construction.
<PAGE> 4

<TABLE>
<CAPTION>
SHOPPING OFFICE LAND REGIONAL
CENTERS BUILDINGS DEVELOPMENT HOTELS APARTMENTS OFFICES
-------- --------- ----------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
NEW YORK
Buffalo.............. 2 X 1
New York............. 4,3(c) 5,1(c) 1 X
VIRGINIA
Richmond............. X
MARYLAND
Baltimore............ X
DISTRICT OF COLUMBIA
Washington, D.C...... 1 5,1(c) X
FLORIDA
Ft. Lauderdale....... X
Miami................ X 1
Tampa................ 1 X
ALABAMA
Birmingham........... X
TEXAS
Houston.............. 5 X
KANSAS
Manhattan............ 1
MASSACHUSETTS
Cambridge............ 3,1(c) 1 X
CONNECTICUT
Stanford............. 1
NEW HAMPSHIRE
Nashua............... X
KENTUCKY
Bowling Green........ 1
Newport.............. 1
WEST VIRGINIA..........
Charleston........... 1 1
CANADA
British Columbia
Vancouver............ X
ONTARIO
Toronto.............. X
</TABLE>

- ---------------
(c) = Under Construction.
<PAGE> 5

INSIDE FRONT COVER CONTINUED

PHOTOGRAPH: Photograph of Tucson Mall
CAPTION: Tucson Mall -- Tucson, Arizona

PHOTOGRAPH: Photograph of Bayside Village
CAPTION: Bayside Village -- San Francisco, California

PHOTOGRAPH: Photograph of 42nd Street
CAPTION: 42nd Street -- New York, New York

PHOTOGRAPH: Photograph of MetroTech
CAPTION: MetroTech -- Brooklyn, New York
DESCRIPTION: 1. Eleven MetroTech; 2. Nine MetroTech (under construction); 3. Two
MetroTech; 4. One MetroTech; 5. Gallery at MetroTech.

PHOTOGRAPH: Photograph of Showcase
CAPTION: Showcase -- Las Vegas, Nevada

PHOTOGRAPH: Photograph of Atlantic Center
CAPTION: Atlantic Center -- Brooklyn, New York

PHOTOGRAPH: Photograph of Emerald Palms
CAPTION: Emerald Palms -- Miami, Flordia

PHOTOGRAPH: Photograph of Galleria at Sunset
CAPTION: Galleria at Sunset -- Henderson, Nevada
<PAGE> 6

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF CLASS A COMMON STOCK
AND CLASS B COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND
SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY
BID, DURING AND AFTER THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE> 7

PROSPECTUS SUPPLEMENT SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial information and
statements, and the notes thereto, and other data included elsewhere or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus. Unless otherwise indicated, all information in this Prospectus
Supplement (i) gives effect to the three-for-two split, effected in the form of
a stock dividend, of each outstanding share of the Company's Class A Common
Stock, par value $.33 1/3 per share (the "Class A Common Stock"), and Class B
Common Stock, par value $.33 1/3 per share (the "Class B Common Stock"), which
occurred on February 17, 1997, and (ii) assumes no exercise of the Underwriters'
over-allotment option. See "Price Range of Common Stock and Dividend History"
and "Underwriting." As used in this Prospectus Supplement, references to the
years 1996, 1995 and 1994 refer to the fiscal years ended January 31, 1997, 1996
and 1995, respectively, "Forest City" or the "Company" refers to Forest City
Enterprises, Inc., an Ohio corporation, and its consolidated subsidiaries, and
the "Offering" refers to the offering made hereby of 1,700,000 shares of the
Class A Common Stock.

THE COMPANY

Founded 77 years ago and publicly traded since 1960, Forest City is one of
the leading real estate development companies in the United States. It develops,
acquires, owns and manages commercial and residential real estate projects in 20
states and the District of Columbia. At January 31, 1997, the Company had $2.7
billion in consolidated assets, of which approximately $2.5 billion was invested
in commercial and residential real estate. The Company had a total equity market
capitalization (the market value of the Company's outstanding Class A Common
Stock and Class B Common Stock) of $536 million at January 31, 1997.

The Company has a portfolio diversified both geographically and among
property types, and operates through four principal business groups: the
Commercial Group, the Residential Group, the Land Group and the Lumber Trading
Group. The following table sets forth, by type of property, a summary of the
Company's operating portfolio of commercial, residential and land projects as of
January 31, 1997.

<TABLE>
<CAPTION>
NUMBER OF REPRESENTATIVE PRINCIPAL
TYPE OF PROPERTY PROPERTIES TOTAL SIZE METROPOLITAN REGIONS
- -------------------------------------- ----------- ------------------- --------------------------------------
<S> <C> <C> <C>
COMMERCIAL GROUP
Shopping Centers.................... 30 14.3 million square New York City (4); California (4);
feet Cleveland (3); Akron, OH (3); Las
Vegas (2); Tucson (2)

Office Buildings.................... 20 6.4 million Cleveland (9); New York City (5);
leasable square Cambridge, MA (3); Pittsburgh (2)
feet
Hotels.............................. 5 1,530 rooms Cleveland (2); Pittsburgh (1);
Charleston, WV (1); Detroit (1)

RESIDENTIAL GROUP
Apartment Communities (1)........... 114 31,441 units Cleveland (20); California (7);
Washington, D.C. (5); Detroit (4);
Cambridge, MA (1); Las Vegas (1)

LAND GROUP
Land held for improvement and
sale.............................. -- 5,920 acres Ft. Lauderdale; Las Vegas; Cleveland;
Tucson
</TABLE>

- ---------------
(1) Includes 9,402 syndicated senior citizen units in 57 apartment communities
developed under Federal subsidy programs in which the Company holds a
residual interest, none of which are reflected under the caption
"Representative Principal Metropolitan Regions" in the table above.

S-3
<PAGE> 8

The Company's earnings before depreciation, amortization and deferred taxes
("EBDT") grew by approximately 13% per share to $6.87 per share in 1996 from
$6.08 per share in 1995. This growth reflected the addition in 1996 of 11
properties to the Company's portfolio, with a total cost of $330 million (of
which the Company's share was $186 million), and strong performance in the
Company's existing portfolio, which reflected continued high occupancy rates and
increased rental rates. For a further discussion and a more complete definition
of EBDT, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

At January 31, 1997, the shopping centers, office buildings and hotels
comprising the Commercial Group totaled $1.7 billion (or 62%) of total assets.
Properties in the Company's Residential Group totaled $643 million (or 23%) of
total assets. In 1996, 51% of total revenues and 62% of EBDT were contributed by
the Commercial Group and 19% of total revenues and 27% of EBDT were generated by
the Residential Group. See "Business -- Commercial Group" and "-- Residential
Group."

The Land Group develops raw land into master planned communities, mixed-use
and other residential developments and currently owns more than 5,920 acres of
undeveloped land for this purpose. The Company currently has major land
development projects in five states. See "Business -- Land Group." The Lumber
Trading Group is one of the largest lumber wholesalers in North America. See
"Business -- Lumber Trading Group." In 1996, the combined land and lumber
operations contributed 10% of EBDT and constituted 11% of the Company's total
assets. The Company's "Corporate" activities relate to its investments in, and
advances to, affiliates and general corporate items.

The following charts illustrate the division of the Company's business
among its four operating groups and its "Corporate" activities as of January 31,
1997 (dollars in millions).

[DESCRIPTION OF GRAPHICS: PIE CHARTS]

REVENUES -- $610.4
<TABLE>
<CAPTION>
DOLLAR AMOUNT
(DOLLARS IN MILLIONS) PERCENT
<S> <C> <C>
Residential..................................................... $ 116.5 19%
Corporate....................................................... $ 5.7 1%
Lumber Trading.................................................. $ 124.5 20%
Land............................................................ $ 53.9 9%
Commercial...................................................... $ 309.8 51%

EBDT -- $90.4
</TABLE>

<TABLE>
<CAPTION>
DOLLAR AMOUNT
(DOLLARS IN MILLIONS) PERCENT
<S> <C> <C>
Residential..................................................... $ 24.6 27%
Corporate....................................................... $ 0.6 1%
Lumber Trading.................................................. $ 5.1 6%
Land............................................................ $ 3.9 4%
Commercial...................................................... $ 56.2 62%

TOTAL ASSETS -- $2,741.4
</TABLE>

<TABLE>
<CAPTION>
DOLLAR AMOUNT
(DOLLARS IN MILLIONS) PERCENT
<S> <C> <C>
Residential..................................................... $ 642.8 23%
Corporate....................................................... $ 100.6 4%
Lumber Trading.................................................. $ 209.9 8%
Land............................................................ $ 89.0 3%
Commercial...................................................... $ 1,699.1 62%
</TABLE>

The Company's management strength reflects over 50 years in the real estate
business and the continuous leadership of three generations of the
Ratner/Miller/Shafran families. The Company's core management team includes 41
senior managers, whose average tenure with the Company is 17 years. The Company
believes that the depth and experience of its management team is vital to the
Company's future growth and ability to operate through various real estate
cycles. In 1995, Charles A. Ratner, who joined the Company in 1966, became the
Company's third Chief Executive Officer. The Company's executive officers and
directors as a group owned 2,392,034 shares, or 31.1%, of the Class A Common
Stock and 1,692,217 shares, or 31.3%, of the Class B Common Stock outstanding at
March 4, 1997. The total value of such shares as of April 29, 1997 would have
been approximately $177 million, based on the last reported sale prices on April
29, 1997 for Class A Common Stock ($43.25 per share) and Class B Common Stock
($43.25 per share). See "Risk Factors -- Control by Class B Common Shareholders;
Anti-Takeover Provisions" and "-- Conflicts of Interest."

S-4
<PAGE> 9

STRATEGY FOR GROWTH AND COMPETITIVE ADVANTAGES

The Company's strategic objective is to maximize shareholder value by
investing in new real estate development and acquisitions at returns greater
than the cost of capital, and increasing the value of its existing portfolio by
growing net operating income. The Company believes that its capital strategy and
operating and organizational structure are integral factors in achieving this
objective, and that as a result of its geographic and property type
diversification its growth is not dependent on any one locale or property type.

NEW DEVELOPMENT

The Company expects to grow primarily through real estate development,
which it believes will maximize shareholder value over the long term by
providing attractive rates of return on the Company's investment. The initial
stabilized average unleveraged return ("Unleveraged Return on Cost") on the 11
projects opened in 1996 is projected to be 11.1%.* The Company calculates the
Unleveraged Return on Cost on a completed property by dividing the expected net
operating income during the initial twelve months after stabilization or, if the
property was stabilized as of January 31, 1996, the actual results for the 12
months ended January 31, 1997 (on a cash basis and not on a straight-line
basis), by the estimated or actual total project cost.

Forest City has a proven track record in developing new real estate
projects. Since January 31, 1988, the Company has grown its real estate assets
at cost from $1.1 billion to $2.5 billion while adding 59 properties to its
portfolio. It currently has 12 projects under construction or under contract to
acquire with a total estimated cost of $429 million (of which the Company's
share will be $184 million).** The projects include three shopping centers, two
office buildings and seven residential apartment communities that will add
954,000 square feet of gross leasable area ("GLA") to the Company's commercial
portfolio and 2,179 units to its residential portfolio.**

In addition, the Company has eight shopping centers and five residential
apartment communities under active pre-construction development that are
expected to open over the next four years.** The Company expects the total cost
of these projects to be approximately $581 million (of which the Company's share
will be $368 million).** In each instance, the Company has a signed partnership
agreement to proceed with the development, owns or controls the land under an
option agreement and has commenced or, in some cases, completed the entitlement
process. The Company also has invested approximately $67 million in other
projects it is pursuing as a part of its continuing development program.

The Company believes its 50-year history of real estate development and its
experienced management team give the Company distinct advantages over its
competitors in developing new projects. All 11 of the commercial and residential
projects that were opened by the Company in 1996 were completed on-time and
on-budget.

- ---------------

*This is a forward-looking statement and is based on current facts and
expectations. Actual results may vary materially from those projected. In
particular, see "Risk Factors -- Real Estate Development and Investment
Risks," "-- Dependence on Rental Income From Real Property," "-- Changes in
Interest Rates," "-- Tax-Exempt and UDAG Financing," "-- Reliance on Major
Tenants" and "-- Competition."

**This is a forward-looking statement and is based on current facts and
expectations. The development and acquisition of real estate properties
involves various risks, including an inability to obtain financing or
government entitlements, construction delays and cost overruns. See "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants," "--
Competition" and "-- Partnership Risks," for a more complete discussion of the
risks associated with the Company's development and acquisition activities.

S-5
<PAGE> 10

The Company's development activities also are enhanced by its experience in
managing a diversified portfolio and its ability to move quickly to develop more
than one property type in growth markets.

See "Risk Factors -- Real Estate Development and Investment Risks," "--
Significant Geographic Concentration," "-- Illiquidity of Real Estate
Investment," "-- Dependence on Rental Income From Real Property" and "--
Partnership Risks."

ACQUISITIONS

The Company recently has taken advantage of acquisition opportunities,
principally in the residential apartment area. These opportunities arose as a
result of a downturn in the residential apartment market in the early 1990s,
which made it more economical to buy and renovate existing properties than to
build new projects. Accordingly, in the last five years, the Company has focused
on the acquisition of distressed properties in desirable locations and on
existing properties that are in good condition but that present other
opportunities to add value by restructuring the financing or repositioning the
asset for a different tenant base. Since 1992, the Company has acquired an
interest in 12 residential properties with 5,034 units. The average occupancy
for these projects in 1996 was 92%, and they had generated an Unleveraged Return
on Cost of 11.1% at January 31, 1997. Approximately 45% of the total project
costs of these properties were financed with tax-exempt bonds. The Company has
contracts expected to close in the second quarter of 1997 for two residential
properties, totaling 682 units, at an aggregate purchase price of $46.7 million,
and is actively exploring other opportunities.* In addition to acquisitions by
the Residential Group, the Commercial Group has complemented its development
program through the acquisition of a major Pittsburgh commercial complex in 1994
and also has acquired and continues to pursue opportunities to acquire increased
ownership positions in a number of its existing projects. See "Risk Factors --
Real Estate Development and Investment Risks," "-- Significant Geographic
Concentration," "-- Illiquidity of Real Estate Investment," "-- Dependence on
Rental Income From Real Property" and "-- Partnership Risks."

MAXIMIZING VALUE FROM EXISTING PROPERTIES

The Company actively manages its portfolio of existing commercial and
residential projects to maximize net operating income by raising rental rates on
expiring leases, increasing occupancy, and maintaining tight cost controls.
Comparable Net Operating Income for the Commercial Group's portfolio increased
6.2% from 1994 to 1995 and 0.9% from 1995 to 1996. Comparable Net Operating
Income for the Residential Group increased 6.0% from 1994 to 1995 and 6.7% from
1995 to 1996. Combined, Comparable Net Operating Income from the Company's
investment real estate portfolio increased 6.1% from 1994 to 1995 and 2.5% from
1995 to 1996. As used in this Prospectus Supplement, "Comparable Net Operating
Income" means increases or decreases in net operating income from properties
that were in operation throughout 1996 and 1995 or 1995 and 1994, as the case
may be. Occupancy for the shopping center and residential portfolio remained
relatively consistent at 88% and 96%, respectively, in both 1995 and 1996, while
office portfolio occupancy increased from 92% in 1995 to 95% in 1996. The
Company's existing shopping center and office leases contain contractual
aggregate net rental increases of $24.6 million and $10.7 million, respectively,
over the next five years and $22.4 million and $14.3 million, respectively, over
the succeeding five years. These net rental increases will positively affect the
Company's EBDT because the Company does not account for rents on a straight-line
basis.

- ---------------

*The statements with respect to these projects are forward-looking statements
and are based on current facts and expectations. No assurance can be given
that these properties will be acquired. See "Risk Factors -- Real Estate
Development and Investment Risks."

S-6
<PAGE> 11

challenges real estate tax assessments, and has an energy group specifically
focused on reducing the Company's energy costs. At January 31, 1997, the
Company's property level expenses for properties open since February 1, 1994,
had increased at a compound annual average rate of 0.6% for its shopping
centers, office buildings and apartment communities, which was less than the
rate of inflation during those years.

The Company continually reinvests in its properties where appropriate to
maintain and increase value. The Company expands or renovates properties when it
believes such an investment will achieve an attractive return or is appropriate
to maintain the property's value and market position. Since January 31, 1994,
the Company has invested or committed to invest $27.3 million in expansions at
six shopping centers and $11.0 million in renovations of two of these shopping
centers, two additional shopping centers, two hotels and two apartment
communities.

Periodic capital expenditures permit the Company's properties to remain
competitive, attract and retain tenants and maintain or increase rental rates.
On average, the Company spends approximately $12 million per year for recurring
capital expenditures, including tenant improvement costs, to maintain its
commercial and residential properties. The majority of such expenditures in the
Commercial Group are for tenant improvements, which vary from year to year based
on lease expirations. Recurring capital expenditures total approximately $4
million per year for the Residential Group's properties ($200 to $225 per
residential unit), and approximately $8 million per year for the Commercial
Group's properties.

See "Risk Factors -- Real Estate Development and Investment Risks,"
"-- Illiquidity of Real Estate Investment," "-- Dependence on Rental Income From
Real Property," "-- Competition," "-- Environmental Liabilities" and
"-- Partnership Risks."

CAPITAL STRATEGY

The Company believes that its capital strategy is an important aspect of
maximizing returns to shareholders and that project returns should be evaluated
in the context of the cost of capital and risk associated with each project. The
Company utilizes nonrecourse mortgage financing as its primary source of
capital. As part of its financing strategy, the Company employs a wide variety
of financing techniques to fund new developments and acquisitions, including
taxable and tax-exempt financing, syndications, joint ventures and
government-subsidized loans and incentives. The Company finances its projects at
the time of construction or acquisition, primarily using variable-rate debt. It
refinances the projects, generally with fixed-rate debt, upon stabilization when
values allow the Company to withdraw some or all of its equity in the project.
The Company continually evaluates its mature properties for opportunities to
withdraw capital through additional refinancings. The capital generated by such
refinancings is then reinvested in new projects. Other than indebtedness under
the FCRPC Credit Agreement (as defined under the caption "Description of Certain
Indebtedness -- Forest City Rental Properties Corporation Credit Agreement."),
all of the Company's mortgage indebtedness is nonrecourse. See "Description of
Certain Indebtedness -- Mortgage Debt Financing."

As part of its financing strategy, the Company has made significant use of
tax-exempt financing. At January 31, 1997, the Company had approximately $134.3
million of tax-exempt financing outstanding, with a weighted average interest
rate of 4.38%, including the costs of credit enhancement. In addition, the
Company had Urban Development Action Grant ("UDAG") loans and other
government-subsidized funding of $77.4 million outstanding at January 31, 1997,
with a weighted average interest rate of 2.60%. The availability and cost of
such financing is integral to the Company's analysis of the attractiveness of a
project. The use of these types of financings lowered the weighted average
interest rate on the Company's mortgage debt by approximately 45 basis points at
January 31, 1997.

S-7
<PAGE> 12

cated properties generated $916,000 of operating income. As of January 31, 1997,
the Company had received $5.9 million of distributions in excess of its original
investment in these projects. See "Business -- Residential Group -- Syndication
Activity" and "Risk Factors -- Potential Liability From Syndicated Properties."

Reflecting the advantages of these financing techniques, the Company's
overall weighted average interest rate on its mortgage debt was 7.25% at January
31, 1997. As a result of the Company's historical ability to fund its business
expansion primarily through cash flow from existing assets and refinancings of
mature properties, it has made limited use of the public markets for financing
purposes. The purpose of the Offering is to accelerate the completion of the
Company's existing development program and to allow it to capitalize on its
numerous current opportunities. See "-- New Development," "Use of Proceeds,"
"Business," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Risk Factors -- High Leverage; Credit Facility
Covenants," "-- Changes in Interest Rates" and "-- Tax-Exempt and UDAG
Financing."

OPERATING AND ORGANIZATIONAL STRUCTURE

In 1995, the Company reorganized its business into the four current
principal business groups: Commercial, Residential, Land and Lumber Trading.
Each group operates autonomously, and each of the Commercial Group and
Residential Group has its own development, acquisition, leasing, property and
financial management functions. The Company believes that this structure permits
each group to better focus on its business and permits key employees to exercise
the independent leadership, creativity and entrepreneurial skills necessary in
the real estate business. See "-- New Development."

For Federal income tax purposes, the Company operates as a "C" corporation,
which distinguishes it from many competitors that operate as tax-qualified real
estate investment trusts ("REITs"). As a "C" corporation, the Company is not
subject to the mandatory distribution requirements imposed on REITs and is able
to reinvest its earnings in new development opportunities. The tax benefits the
Company receives from its depreciation and interest expense deductions
significantly reduce its taxable income. The Company's consolidated tax position
and the tax benefits generated from its real estate operations allow it to
reduce the tax payable with respect to the earnings from its Land and Lumber
Trading Groups. At January 31, 1997, the Company had a net operating loss
carryforward for tax purposes of $88.9 million, which will expire in the years
ending January 31, 2005 through January 31, 2011, and general business credit
carryovers of $3.6 million, which will expire in the years ending January 31,
2003 through January 31, 2011. In 1996 the Company paid no regular Federal
corporate income tax and paid $570,000 in Federal alternative minimum tax.

NEW PROPERTY DEVELOPMENT AND ACQUISITION

The following tables reflect the Company's active commercial and
residential development and acquisition program. The Company believes that
opportunities for new projects exist among all of its property types. The
Company's development activities in recent years have focused on California,
Nevada, the New York City and Washington, D.C. metropolitan areas, and northeast
Ohio. The Company believes that California and Nevada represent long-term growth
markets, that the New York City metropolitan area retail market and Washington
D.C. metropolitan area residential market are underserved, and that northeast
Ohio presents the opportunity to leverage its large existing portfolio in that
market.*

- ---------------

*This is a forward-looking statement and is based on current facts and
expectations. The development and acquisition of real estate properties
involves various risks, including an inability to obtain financing or
government entitlements, construction delays and cost overruns. See "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete discussion of
the risks associated with the Company's development and acquisition activities.

S-8
<PAGE> 13

PROJECTS OPENED/ACQUIRED IN 1996.

During 1996, the Company opened six new shopping centers with an aggregate
of 1.4 million square feet of GLA, acquired a new apartment complex with 419
apartment units, and opened 336 additional apartment units at four existing
projects. Each of the projects opened in 1996 were on schedule and on budget.
These projects are projected to provide an Unleveraged Return on Cost of
approximately 11.1%.*

The following table sets forth certain information regarding these
properties.**

<TABLE>
<CAPTION>
COMPANY'S
DEVELOPED (D) DATE TOTAL COST SHARE OF TOTAL
OR OPENED/ COMPANY AT 100% COST SQUARE GLA(1)/
PROPERTY LOCATION ACQUIRED (A) ACQUIRED OWNERSHIP (%) (IN MIL.) (IN MIL.) FEET NO. OF UNITS
- ------------------- ------------------------------ -------- ------------- ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL GROUP
Shopping Centers
Galleria at
Sunset............ Henderson, NV D Feb-96 60% $ 82.0 $ 49.2 892,000 294,000
Hunting Park....... Philadelphia, PA D Apr-96 70 14.9 10.4 144,000 144,000
Bruckner
Boulevard......... Bronx, NY D Sep-96 70 15.1 10.6 114,000 114,000
Marketplace at
Riverpark......... Fresno, CA D Sep-96 50 26.5 13.3 453,000 284,000
Atlantic Center.... Brooklyn, NY D Nov-96 75 75.2 56.4 391,000 391,000
Showcase........... Las Vegas, NV D Dec-96 20 76.9 15.4 189,000 189,000
------ ------ --------- ---------
Subtotal.......... $290.6 $ 155.3 2,183,000 1,416,000
------ ------- ========= =========

RESIDENTIAL GROUP
Tam-A-Rac(2)....... Willoughby, OH D Feb-96 50% $ 3.3 $ 1.7 64
Cherry Tree(2)..... Strongsville, OH D Apr-96 50 6.9 3.5 132
Big Creek(2)....... Parma Hts., OH D May-96 50 4.3 2.2 72
Emerald Palms...... Miami, FL A May-96 100 21.8 21.8 419
Pebble Creek(2).... Twinsburg, OH D Sep-96 50 3.4 1.7 68
--
------ -------
Subtotal.......... $ 39.7 $ 30.9 755
========
------ -------
Total........... $330.3 $ 186.2
====== =======
</TABLE>

- ---------------
(1) Represents the total square feet available for lease by the Company.
Remaining square footage is owned by anchors.
(2) Part of a phased construction process.

- ---------------

**Construction remains to be completed at the Marketplace at Riverpark, Atlantic
Center and the Showcase. Accordingly, with respect to these projects, the
information in the table concerning total cost, the Company's share of total
cost, total square feet and GLA are forward-looking statements. The completion
of these projects is subject to various development risks, including cost
overruns and construction delays. See "Risk Factors -- Real Estate Development
and Investment Risks," "-- Dependence on Rental Income From Real Property,"
"-- Changes in Interest Rates," "-- Tax-Exempt and UDAG Financing,"
"-- Reliance on Major Tenants," "-- Competition" and "-- Partnership Risks,"
for a more complete description of risks associated with the completion of
these projects.

S-9
<PAGE> 14

PROJECTS UNDER CONSTRUCTION/TO BE ACQUIRED

As of January 31, 1997, the Company had 12 properties under construction or
under contract to be acquired. These projects include three shopping centers
with a total of 465,000 square feet of GLA, two office and mixed-use projects
with 489,000 square feet of leasable space, two residential projects with an
aggregate of 1,185 units under development, two residential projects with an
aggregate of 682 units under purchase contract and expansions to three existing
residential communities to add an aggregate of 312 units. The Unleveraged Return
on Cost for these projects is projected to be 10.4%.*

The following table sets forth certain information regarding these
projects.**

<TABLE>
<CAPTION>
ESTIMATED COMPANY'S
DEVELOPED(D) DATE OF TOTAL COST SHARE TOTAL
OR OPENING/ COMPANY AT 100% OF COST SQUARE GLA(1)/NO.
PROPERTY LOCATION ACQUIRED(A) ACQUISITION OWNERSHIP (%) (IN MIL.) (IN MIL.) FEET OF UNITS
- --------------------- ------------------------------ ----------- ------------- ---------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL GROUP
Shopping Centers
Grand Avenue......... Queens, NY D Q3-97 70% $ 23.6 $ 16.5 100,000 100,000
Gun Hill Road........ Bronx, NY D Q3-97 70 13.5 9.5 147,000 147,000
Northern Boulevard... Queens, NY D Q4-97 70 39.4 27.6 218,000 218,000
------ ------ ------- -------
Subtotal............ $ 76.5 $ 53.6 465,000 465,000
------ ------ ------- -------
Offices/Mixed Use
Nine MetroTech....... Brooklyn, NY D Q1-98 65% $ 59.7 $ 38.8 317,000 317,000
Univ. Park at
MIT(2).............. Cambridge, MA D Q1-98 50 76.1 38.1 172,000 172,000
------ ------ ------- -------
Subtotal............ $135.8 $ 76.9 489,000 489,000
------ ------ ------- -------
Subtotal Commercial $212.3 $ 130.5 954,000 954,000
------ ------- ======= =======

RESIDENTIAL GROUP
Big Creek(3)......... Parma Hts., OH D Q2-97 50% $ 5.3 $ 2.7 88
Museum Towers........ Philadelphia, PA A Q2-97 87 25.7 22.4 286
Pacific Village...... Bellevue, WA A Q2-97 100 21.0 21.0 396
Cherry Tree(3)....... Strongsville, OH D Q3-97 50 7.5 3.8 144
Tam-A-Rac(3)......... Willoughby, OH D Q3-97 50 4.1 2.1 80
Enclave(4)........... San Jose, CA D Q4-97 1 74.1 0.7 633
The Grand(4)......... Bethesda, MD D Q4-98 0.9 79.1 0.7 552
------ ------- ------
Subtotal............ $216.8 $ 53.4 2,179
======
------ -------
Total........... $429.1 $ 183.9
====== =======
</TABLE>

- ---------------

(1) Represents the total square feet available for lease by the Company.
Remaining square footage is owned by anchors.
(2) In addition to the 172,000 square feet of GLA, the project also includes a
210 room hotel and a 950 car garage.
(3) Part of a phased construction process.
(4) Project included in the Company's syndication program. Under this program,
the Company maintains a substantial economic interest in the project. See
"Business -- Residential Group -- Syndication Activity" and "Risk Factors --
Potential Liability From Syndicated Properties."

- ---------------

*This is a forward-looking statement and is based on current facts and
expectations. The development and acquisition of real estate properties
involves various risks, including construction delays and cost overruns. See
"Risk Factors -- Real Estate Development and Investment Risks," "-- Dependence
on Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete discussion of
the risks associated with the Company's development and acquisition
activities.

**This table presents forward-looking information concerning various projects
under development or subject to purchase contracts and is based on current
facts and expectations. This completion or acquisition of these projects is
subject to significant risks, including cost overruns and construction delays.
See "Risk Factors -- Real Estate Development and Investment Risks,"
"-- Dependence on Rental Income From Real Property," "-- Changes in Interest
Rates," "-- Tax- Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and " -- Partnership Risks," for a more complete description
of the risks associated with the development and acquisition of these
projects.

S-10
<PAGE> 15

PROJECTS UNDER DEVELOPMENT

In addition to projects currently under construction, the Company has a
number of additional projects in various stages of development. For these
projects, the Company has a signed partnership agreement to proceed with the
development, owns or controls the land under an option agreement and has
commenced or, in some cases, completed the entitlement process. Certain
significant hurdles may remain for these projects, including obtaining
financing. See "Risk Factors -- Real Estate Development and Investment
Risks -- Development Risks." At January 31, 1997, the Company had invested $25.1
million in these projects. The Company anticipates that a substantial portion of
the proceeds from the Offering, together with new nonrecourse mortgage
financing, will be used to finance these projects. See "Use of Proceeds."

The following table sets forth certain information regarding these
projects.*

<TABLE>
<CAPTION>
COMPANY'S
DEVELOPED(D) ESTIMATED TOTAL COST SHARE TOTAL
OR DATE OF COMPANY AT 100% OF COST SQUARE GLA(1)/NO.
PROPERTY LOCATION ACQUIRED(A) OPENING OWNERSHIP (%) (IN MIL.) (IN MIL.) FEET OF UNITS
- ---------------------- ------------------ ------------- --------- -------------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMERCIAL GROUP
Shopping Centers
42nd Street........... Manhattan, NY D 1998 70% $ 79.0 $ 55.3 291,000 291,000
Atlantic City......... Atlantic City, NJ D 1998 80 42.2 33.8 254,000 254,000
Metropolitan Avenue... Queens, NY D 1998 70 26.0 18.2 113,000 113,000
Richmond Avenue....... Staten Island, NY D 1998 70 20.2 14.1 76,000 76,000
Pasadena.............. Pasadena, CA D 1999 50 28.1 14.1 163,000 163,000
Temecula.............. Temecula, CA D 1999 75 60.9 45.7 940,000 293,000
Galleria at Sunset
Expansion............ Henderson, NV D 2000 60 27.6 16.6 477,000 139,000
Pittsburgh Mall....... Pittsburgh, PA D 2000 67 78.9 52.9 1,008,000 291,000
---------
-
------ ------ ---------
Subtotal............. $362.9 $ 250.7 3,322,000 1,620,000
------ ------ ========= =========

RESIDENTIAL GROUP
Big Creek............. Parma Hts., OH D 1998/1999 50% $ 21.6 $ 10.8 360
Tam-A-Rac............. Willoughby, OH D 1998/1999 50 9.3 4.7 170
Riverdale............. Bronx, NY D 1999 50 40.0 20.0 209
San Jose II (2)....... San Jose, CA D 1999 1 44.8 0.4 346
Assisted Living....... New York City D Various 80 102.0 81.6 600
Metropolitan Area
------ ------- -----
Subtotal............. $217.7 $ 117.5 1,685
========
------ -------
Total.............. $580.6 $ 368.2
====== =======
</TABLE>

- ---------------
(1) Represents the total square feet available for lease by the Company.
Remaining square footage is owned by anchors.
(2) Project included in the Company's syndication program. Under this program,
the Company maintains a substantial economic interest in the project. See
"Business -- Residential Group -- Syndication Activity" and "Risk Factors --
Potential Liability From Syndicated Properties."

In addition to the projects listed above, the Company is actively pursuing
the development of numerous other projects as a part of its on-going development
program. These projects, in which the Company had invested an aggregate of $67
million at January 31, 1997, are focused on areas where the Company has existing
developments, including New York City, Chicago and California, and in new
markets, including Atlanta and Atlantic City.

- ---------------

*This table presents forward-looking information concerning various projects
under development and is based on current facts and expectations. The
completion of these projects is subject to significant risks, including an
inability to obtain financing or government entitlements, construction delays
and cost overruns. See "Risk Factors -- Real Estate Development and Investment
Risks," "-- Dependence on Rental Income From Real Property," "-- Changes in
Interest Rates," "-- Tax-Exempt and UDAG Financing," "-- Reliance on Major
Tenants," "-- Competition" and "-- Partnership Risks," for a more complete
description of the risks associated with the development of these projects.

S-11
<PAGE> 16

THE OFFERING(1)

Common Stock offered
hereby................... 1,700,000 shares of Class A Common Stock

Common Stock to be
outstanding after the
Offering................. 9,402,633 shares of Class A Common Stock(2)
5,409,343 shares of Class B Common Stock(2)

American Stock Exchange
Symbols.................. The Class A Common Stock is listed on the American
Stock Exchange under the symbol "FCEA." The Class B
Common Stock is listed on the American Stock
Exchange under the symbol "FCEB."

Use of Proceeds............ Forest City initially will use the net proceeds
from the Offering to repay recourse debt
outstanding under the Revolving Credit Facility (as
defined under the caption "Description of Certain
Indebtedness -- Forest City Rental Properties
Corporation Credit Agreement."). Any excess
proceeds of the Offering would be used for general
corporate purposes. The Company expects
subsequently to use some or all of the available
amounts under the Revolving Credit Facility to
finance its on-going development and construction
activities. See "Use of Proceeds."

Voting Rights.............. The holders of Class A Common Stock and the holders
of Class B Common Stock, voting as separate
classes, have the right to elect 25% and 75%,
respectively, of the members of the Board of
Directors. On all other matters submitted to a
shareholder vote, shares of Class A Common Stock
have one vote per share and the shares of Class B
Common Stock have ten votes per share. See
"Description of Common Stock -- Voting Rights" in
the accompanying Prospectus.

Risk Factors............... Prospective purchasers of Class A Common Stock
should carefully consider the information set forth
under "Risk Factors."
- ---------------
(1) Excludes 255,000 shares of Class A Common Stock that may be issued upon the
exercise of the Underwriters' over-allotment option.
(2) Assumes no conversions of existing shares of Class B Common Stock into Class
A Common Stock and no exercise of the outstanding options to acquire 180,900
shares of Class A Common Stock; reflects information on shares outstanding
as of April 25, 1997.

S-12
<PAGE> 17

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables set forth selected summary historical consolidated
financial data of the Company as of and for the fiscal years ended January 31,
1993, 1994, 1995, 1996 and 1997. The summary historical financial data,
excluding EBDT and the market price per share of common stock, were derived from
the Company's audited consolidated financial statements for the fiscal years
ended January 31, 1995, 1996 and 1997 (including the accompanying notes thereto,
the "Consolidated Financial Statements"), and should be read in conjunction
with, and are qualified in their entirety by reference to, the Consolidated
Financial Statements, appearing elsewhere in this Prospectus Supplement and
incorporated by reference in the accompanying Prospectus. The summary historical
consolidated financial data, excluding EBDT and the market price per share of
common stock, set forth below with respect to the fiscal years ended January 31,
1993 and 1994 are derived from audited consolidated financial statements of the
Company not included or incorporated by reference herein or in the accompanying
Prospectus. The real estate activity data for the three years ended January 31,
1997 were derived from the Consolidated Financial Statements, appearing
elsewhere in this Prospectus Supplement and incorporated by reference in the
accompanying Prospectus, and for the seven years ended January 31, 1994, were
derived from audited consolidated financial statements of the Company not
included or incorporated by reference herein or in the accompanying Prospectus.
See the Consolidated Financial Statements, "Capitalization," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT RATIOS, OUTSTANDING SHARES AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS DATA:
Revenues..................................... $ 610,449 $ 529,433 $ 522,608 $ 519,379 $ 474,469
Earnings (loss) before extraordinary
gain(1).................................... $ 9,171 $ 6,939 $ (18,533)(2) $ 2,212(3) $ 12,687
Earnings (loss) before extraordinary gain per
share of common stock(4)................... $ 0.70 $ 0.51 $ (1.37)(2) $ 0.16(3) $ 0.94
BALANCE SHEET DATA:
Total assets -- cost basis................... $2,741,405 $2,631,046 $2,584,734(5) $2,668,057 $2,625,404
Long term debt, including mortgage debt...... $1,993,351 $1,945,120 $1,881,917 $2,026,451 $1,972,160
Shareholders' equity......................... $ 191,978 $ 189,589 $ 185,560 $ 145,442 $ 143,230
Shareholders' equity per share of common
stock(4)................................... $ 14.64 $ 14.18 $ 13.76 $ 10.78 $ 10.62
OTHER SELECTED DATA:
Earnings before depreciation, amortization
and deferred taxes from operations
(EBDT)(1)(6)............................... $ 90,404 $ 82,021 $ 81,262 $ 80,979 $ 77,075
EBDT per share of common stock for the
period(4).................................. $ 6.87 $ 6.08 $ 6.03 $ 6.00 $ 5.71
Cash dividends per share of common stock for
the period(4)
Class A.................................... $ 0.27 $ 0.17 $ 0.13 $ 0.00 $ 0.00
Class B.................................... $ 0.27 $ 0.17 $ 0.13 $ 0.00 $ 0.00
Market price per share of Class A common
stock at end of period(4).................. $ 41.00 $ 22.17 $ 20.25 $ 26.33 $ 17.50
Market price per share of Class B common
stock at end of period(4).................. $ 40.67 $ 22.00 $ 20.67 $ 28.83 $ 17.50
Weighted average shares of common stock
outstanding(4)............................. 13,155,236 13,480,164 13,487,421 13,487,421 13,487,421
Number of shares of common stock outstanding
at end of period(4)........................ 13,111,976 13,371,921 13,487,421 13,487,421 13,487,421
</TABLE>

- ---------------
(1) Excludes extraordinary gain, net of tax.

(2) The Loss before extraordinary gain and related amounts per common share for
the year ended January 31, 1995 were due primarily to the loss on the sale
of Park LaBrea Towers, a residential complex containing 2,825 units in Los
Angeles, California, of approximately $19,200,000, or $1.42 per common
share. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

(3) The decrease in earnings before extraordinary gain and related amounts per
common share of $10,475,000, or $0.78 per common share, from the year ended
January 31, 1993 to the year ended January 31, 1994 was due primarily to the
gain on the sale of an interest in South Bay Galleria, less a provision for
decline in real estate, in 1992 of approximately $17,400,000, or $1.29 per
common share.

(4) Adjusted for three-for-two stock split, in the form of a stock dividend,
effective February 17, 1997.

(5) The decrease in Total assets -- cost basis was due to the sale of Park
LaBrea Towers, partially offset by an increase in other real estate costs.

(6) Earnings before depreciation, amortization and deferred taxes consists of
net earnings (loss), excluding the provision for decline in real estate and
gain (loss) on disposition of properties, net of tax, before deducting the
non-cash charges from rental properties for depreciation and amortization
and deferred taxes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations -- EBDT."

S-13
<PAGE> 18

FOREST CITY RENTAL PROPERTIES CORPORATION

REAL ESTATE ACTIVITY(1)
<TABLE>
<CAPTION>
JANUARY 31,
------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
TOTAL REAL ESTATE -- END OF
YEAR
Completed rental properties,
before depreciation......... $2,227,859 $2,085,284 $1,995,629(2) $2,101,528 $2,045,946 $1,878,394
Projects under development.... 215,960 246,240 230,802 214,111 188,187 316,771
---------- ---------- ---------- ---------- ---------- ----------
2,443,819 2,331,524 2,226,431 2,315,639 2,234,133 2,195,165
Accumulated depreciation...... (387,733) (338,216) (293,465) (272,518) (232,905) (193,683)
---------- ---------- ---------- ---------- ---------- ----------
Rental properties, net of
depreciation.............. $2,056,086 $1,993,308 $1,932,966 $2,043,121 $2,001,228 $2,001,482
========== ========== ========== ========== ========== ==========
ACTIVITY DURING THE YEAR
Completed rental properties
Additions................... $ 160,690 $ 89,028 $ 77,265 $ 50,384 $ 200,440 $ 279,319
Acquisitions................ 22,264 28,587 32,811 5,198 -- --
Dispositions................ (40,379) (27,960) (215,975)(2) -- (32,888) (1,201)
---------- ---------- ---------- ---------- ---------- ----------
$ 142,575 $ 89,655 $ (105,899) $ 55,582 $ 167,552 $ 278,118
---------- ---------- ---------- ---------- ---------- ----------
Projects under development
New development............. 98,403 58,798 49,585 54,317 39,045 199,346
Transferred to completed
rental properties......... (128,683) (43,360) (32,894) (28,393) (167,629) (267,617)
---------- ---------- ---------- ---------- ---------- ----------
$ (30,280) $ 15,438 $ 16,691 $ 25,924 $ (128,584) $ (68,271)
---------- ---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN RENTAL
PROPERTIES, AT COST........... $ 112,295 $ 105,093 $ (89,208)(2) $ 81,506 $ 38,968 $ 209,847
========== ========== ========== ========== ========== ==========

<CAPTION>
1991 1990 1989 1988
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
TOTAL REAL ESTATE -- END OF
YEAR
Completed rental properties,
before depreciation......... $1,600,276 $1,145,591 $1,003,795 $ 808,643
Projects under development.... 385,042 451,211 203,563 216,070
---------- ---------- ---------- ----------
1,985,318 1,596,802 1,207,358 1,024,713
Accumulated depreciation...... (160,616) (136,192) (113,004) (100,434)
---------- ---------- ---------- ----------
Rental properties, net of
depreciation.............. $1,824,702 $1,460,610 $1,094,354 $ 924,279
========== ========== ========== ==========
ACTIVITY DURING THE YEAR
Completed rental properties
Additions................... $ 462,796 $ 147,546 $ 213,130 $ 54,089
Acquisitions................ 28,143 -- -- 7,757
Dispositions................ (36,254) (5,750) (17,978) (2,716)
---------- ---------- ---------- ----------
$ 454,685 $ 141,796 $ 195,152 $ 59,130
---------- ---------- ---------- ----------
Projects under development
New development............. 387,582 363,448 183,721 169,974
Transferred to completed
rental properties......... (453,751) (115,800) (196,228) (44,539)
---------- ---------- ---------- ----------
$ (66,169) $ 247,648 $ (12,507) $ 125,435
---------- ---------- ---------- ----------
INCREASE (DECREASE) IN RENTAL
PROPERTIES, AT COST........... $ 388,516 $ 389,444 $ 182,645 $ 184,565
========== ========== ========== ==========
</TABLE>

- ---------------

(1) The table includes real estate activity for Forest City Rental Properties
Corporation only, and does not include the real estate activity relating to
the Company's Land Group. See Note M to Consolidated Financial Statements.

(2) Reflects the sale of Park LaBrea Towers, a residential complex containing
2,825 units in Los Angeles, California. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

S-14
<PAGE> 19

RISK FACTORS

Prospective purchasers of Class A Common Stock should carefully review the
information contained elsewhere or incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus and should particularly consider the
following factors:

REAL ESTATE DEVELOPMENT AND INVESTMENT RISKS

GENERAL

Real property investments are subject to varying degrees of risk. The
Company's revenues and property values may be adversely affected by various
factors related to the general United States economy, by the economy of the
region or local area in which the Company's projects are located, and by local
real estate conditions. Some of the specific factors that can affect the
Company's real estate operations are:

(i) the perceptions of prospective tenants or purchasers of the
attractiveness of specific Company properties;

(ii) the Company's ability to provide adequate management and
maintenance and to obtain adequate insurance;

(iii) the Company's inability to collect rent due to bankruptcy or
insolvency of tenants or otherwise;

(iv) operating costs that increase over time without the ability to
raise rents or otherwise offset such increases; and

(v) declines in consumer spending associated with recessionary
economies that adversely affect the Company's revenue from its retail
centers.

Real estate values may also be adversely affected by such factors as
zoning, tax or other laws, interest rate levels and the availability of
financing.

DEVELOPMENT RISKS

The Company develops most of its real estate projects. New project
development is subject to a number of risks, including:

(i) an inability to secure sufficient financing on favorable terms,
including an inability to refinance construction loans;

(ii) construction delays or cost overruns, all of which may increase
project development costs;

(iii) not achieving anticipated occupancy or sales levels or
sustaining anticipated lease or sales levels;

(iv) an inability to secure tenants or anchors necessary to support
the project; and

(v) an inability to obtain zoning, occupancy and other required
governmental permits and authorizations.

The Company has in the past elected not to proceed with certain development
projects and anticipates that it will do so again from time to time in the
future. If the Company does not elect to proceed with a development opportunity,
the development costs associated therewith ordinarily will be charged against
income for the then-current period. Any such charge could have a material
adverse effect on the Company's results of operations or cash flows in the
period in which the charge is taken.

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In the construction of new projects, the Company generally guarantees the
lender under the construction loan the lien-free completion of the project. This
guarantee is recourse to the Company and places the risk of construction delays
and cost overruns on the Company. The guarantees are released upon completion of
the project. While the Company has generally been successful in completing
projects on time and on budget, no assurance can be given that the Company will
not be required to make significant expenditures in order to comply with its
lien-free completion obligations.

The Company periodically serves as either the construction manager or the
general contractor for its developments. The construction of real estate
projects entails certain risks, including risks that the project will fail to
conform to building plans, specifications and timetables, which may in turn be
affected by strikes, weather, government regulations and other conditions beyond
the Company's control. In addition, the Company may become liable for injuries
and accidents occurring during the construction process.

SIGNIFICANT GEOGRAPHIC CONCENTRATION

A significant portion of the Company's properties is geographically
concentrated. The Company has multiple developments and projects in and around
Cleveland, Ohio, New York City, California and Las Vegas, Nevada. As a result,
downturns in the local economy in such areas may have an adverse effect on the
Company's ability to market new developments to prospective purchasers and may
adversely affect rental and lease rates, which, in turn, could have a material
adverse effect on the Company's results of operations and cash flows. As of
January 31, 1997, the Company's properties located in and around Cleveland, New
York City, California and Las Vegas accounted for 29%, 26%, 15% and 4%,
respectively, of the Company's total assets, and 32%, 20%, 11% and 2%,
respectively, of the Company's total revenues during 1996.

ILLIQUIDITY OF REAL ESTATE INVESTMENT

Real estate investments are relatively illiquid and therefore may limit the
ability of the Company to react promptly to changes in economic or other
conditions.

DEPENDENCE ON RENTAL INCOME FROM REAL PROPERTY

The Company's results of operations and cash flows would be adversely
affected if a significant number of tenants were unable to meet their
obligations or if the Company were unable to lease a significant amount of space
in its income-producing properties on economically favorable lease terms. In the
event of a default by a tenant, the Company may experience delays in enforcing
its rights as lessor and may incur substantial costs in protecting its
investment. The bankruptcy or insolvency of a major tenant may have an adverse
effect on an income-producing property. See "-- Reliance on Major Tenants."

Two of the Company's tenants, The Caldor Corporation ("Caldor") and
Petrie's, are currently operating in bankruptcy. The Company has three shopping
centers in which Caldor is a major tenant, one in Philadelphia (113,000 square
feet) and two in Brooklyn, New York (with an aggregate of 221,000 square feet),
and nine shopping centers in which Petrie's is a tenant, with an aggregate of
81,129 square feet. Caldor has reaffirmed two of its leases, one in Brooklyn and
one in Philadelphia, but has rejected its lease for 90,000 square feet at
Flatbush Avenue in Brooklyn. Petrie's has reaffirmed all but one lease (2,973
square feet). Caldor and Petrie's are currently paying rent under their
respective affirmed leases. No assurance, however, can be given that Caldor or
Petrie's will emerge from bankruptcy or be able to continue to pay rent. If
Caldor or Petrie's ceases operations or ceases to perform under these leases,
the Company's rentals from the shopping centers where either of them is a tenant
will be adversely affected until the Company is able to find a replacement
tenant. No assurance, however, can be given that the Company will be

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able to find replacement tenants or achieve rental rates equivalent to those
being paid by Caldor or Petrie's.

In addition, during 1996 Handy Andy Home Improvement Centers ("Handy
Andy"), formerly an operator of home improvement stores in ten Company retail
locations, liquidated under bankruptcy proceedings and thus rejected all of its
leases with the Company. As of March 31, 1997, five locations had been relet or
sold. There can be no assurance that the Company will be able to find
replacement tenants for the remaining five locations.

The Company may also be adversely affected should a non-tenant mall anchor
close or enter bankruptcy. Many mall anchors own their store site and therefore
do not pay rent directly to the Company. However, such anchors typically
contribute towards common area maintenance and other charges through reciprocal
easement agreements, and the loss of such revenues could adversely affect the
Company's results of operations and cash flows. Further, the temporary or
permanent loss of an anchor is likely to reduce customer traffic in the mall and
cause reduced levels of percentage rent paid by mall tenants, or cause mall
tenants to close or enter bankruptcy, and could cause the mall to fail to meet
debt service requirements. A number of large department store companies have
reorganized under the bankruptcy laws in recent years. See "Business --
Commercial Group -- Shopping Centers -- Anchor and Significant Tenants."

CONTROL BY CLASS B COMMON SHAREHOLDERS; ANTI-TAKEOVER PROVISIONS

The Company's 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 the Board of
Directors, while the Class B Common Stock, voting as a separate class, is
entitled to elect the remaining 75% of the Board of Directors. On all other
matters, each share of Class A Common Stock is entitled to one vote per share
and each share of Class B Common Stock is entitled to ten votes per share.
These voting rights are subject to adjustment under certain circumstances as
described under the caption "Description of Common Stock -- Voting Rights" in
the accompanying Prospectus. Each share of Class B Common Stock is convertible
into one share of Class A Common Stock. See "Description of Common Stock" in
the accompanying Prospectus.

At March 4, 1997, the Ratner/Miller/Shafran Families, which include members
of the Company's current Board of Directors and certain executive officers (the
"Family Interests"), owned 74.3% of the Class B Common Stock. RMS, Limited
Partnership, which owned 74.0% of the Class B Common Stock, is a limited
partnership, comprised of the Family Interests, with eight individual general
partners, currently consisting of Samuel H. Miller, Co-Chairman of the Board of
Directors and Treasurer of the Company, Charles A. Ratner, President, Chief
Executive Officer and Director, Ronald A. Ratner, Executive Vice President of
the Company and Director, Brian J. Ratner, Senior Vice President-East Coast
Development of the Company and Director, Deborah Ratner Salzberg, Vice President
of Forest City Residential, Inc., a subsidiary of the Company, and Director,
Fannye Shafran and Joseph Shafran, and one position that is currently vacant.
Nathan Shafran and Fannye Shafran are the father and mother of Joan K. Shafran
and Joseph Shafran and the uncle and aunt of Charles A. Ratner, James A. Ratner
and Ronald A. Ratner, who are brothers, and of Albert B. Ratner. Albert B.
Ratner 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 Joseph Shafran. Samuel H. Miller was married to Ruth Ratner Miller (now
deceased), a sister of Albert B. Ratner. The vacant general partnership position
relates to shares controlled by the children of Ruth Ratner Miller. General
partners holding 60% of the total voting power of RMS, Limited Partnership
determine how to vote the Class B Common Stock held by RMS, Limited Partnership.
No person may transfer his or her interest in the Class B Common Stock held by
RMS, Limited Partnership without complying with various rights of first refusal.
Moreover, prior to any sale other than to a partner of RMS, Limited Partnership,
the Class B Common Stock must be converted to Class A Common Stock.

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In addition, at March 4, 1997, members of the Family Interests collectively
owned 43.9% of the Class A Common Stock. As a result of their ownership of the
Class B Common Stock, the Family Interests and RMS, Limited Partnership have the
ability to elect a majority of the Board of Directors (and as a result of their
ownership of Class A Common Stock may have the effective power under normal
voting circumstances to elect all of the Board of Directors), control the
management and policies of the Company and, in general, to determine (without
the consent of the Company's other shareholders) the outcome of any corporate
transaction or other matter submitted to the shareholders for approval,
including mergers, consolidations and the sale of all or substantially all of
the Company's assets, and to prevent or cause a change in control of the
Company. See "Description of Common Stock" in the accompanying Prospectus.

Even if the Family Interests or RMS, Limited Partnership reduce their level
of ownership of Class B Common Stock below the level necessary to maintain a
majority of voting power, the effect of certain provisions of Ohio law and the
Company's Restated Articles of Incorporation may have the effect of deterring
hostile takeovers or delaying or preventing a change in control or management of
the Company without the approval of the Family Interests or RMS, Limited
Partnership.

CONFLICTS OF INTEREST

RMS INVESTMENT CORP.

The Company paid approximately $182,000 as total compensation during 1996
to RMS Investment Corp. ("RMS"), a company controlled by the children of Charles
A. Ratner (the President, Chief Executive Officer and a Director of the
Company), the children of James A. Ratner (an Executive Vice President and a
Director of the Company), the children of Ronald A. Ratner (an Executive Vice
President and a Director of the Company), the children of Albert B. Ratner (a
Co-Chairman of the Company's Board of Directors), the children of Mark Ratner (a
brother of Charles A. Ratner, James A. Ratner and Ronald A. Ratner), and Albert
B. Ratner as Trustee, Samuel H. Miller, as Trustee, Nathan Shafran (Director),
as Trustee, and Fannye Shafran, as Trustee, that is engaged in property
management and leasing. RMS manages and provides leasing services to two of the
Company's Cleveland-area specialty retail shopping centers, Golden Gate (260,000
square feet) and Midtown Plaza(256,000 square feet). The rate of compensation
for such management services is 4% of all rental income, plus a lease fee of 2%
to 3% of rental income. Management believes these fees are comparable to that
which other management companies would charge.

ABSENCE OF NON-COMPETE AGREEMENTS; OWNERSHIP OF COMPETING PROPERTIES BY FAMILY
INTERESTS

Under the Company's current policy, no director, officer or employee,
including members of the Ratner/Miller/Shafran families, is allowed to invest in
a competing real estate opportunity without first obtaining approval of the
Company's Conflict of Interest Committee. However, the Company currently does
not have non-compete agreements with any of its directors, officers or employees
and, upon leaving the Company, any director, officer or employee could compete
with the Company. An exception to the Company's conflict-of-interest policy
permits existing directors, officers and employees, including Albert B. Ratner,
Co-Chairman of the Board of Directors, Samuel H. Miller, Co-Chairman of the
Board of Directors and Treasurer, Charles A. Ratner, President, Chief Executive
Officer and Director, Ronald A. Ratner, Executive Vice President and Director,
Brian J. Ratner, Senior Vice President-East Coast Development and Director, and
Deborah Ratner Salzberg, Vice President of Forest City Residential, Inc. (a
subsidiary of the Company) and Director, James A. Ratner, Executive Vice
President and Director, and Nathan Shafran, Director, to retain an interest in
15 properties that were acquired before 1960 and one post-1960 acquisition, with
a total cost of $94.0 million. All but one of those properties are located in
Cleveland and are in competition with some of the properties owned by the
Company. The ownership of these properties by these directors, officers and
employees makes it possible that conflicts of interest may arise between them
and the Company. Although no such conflicts are anticipated, areas of possible
conflict may be

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in the expansion of such properties that may compete with the Company or the
solicitation of tenants for the use of such properties.

HIGH LEVERAGE; CREDIT FACILITY COVENANTS

HIGH LEVERAGE

The Company has a relatively high ratio of debt (consisting primarily of
nonrecourse mortgage debt) to total market capitalization (approximately 78.8%
at January 31, 1997 based on the market value of its outstanding Class A Common
Stock and Class B Common Stock, long-term debt and outstanding mortgage debt at
such date). The Company does not expect a substantial amount of the outstanding
principal of such indebtedness to be repaid prior to maturity or to have funds
on hand sufficient to repay such indebtedness at maturity. As a result, it will
be necessary for the Company to refinance such debt through new debt financings
secured by individual properties or groups of properties, through unsecured debt
offerings or through additional equity offerings. If prevailing interest rates
or other factors at the time of refinancing result in higher interest rates, the
Company's interest expense would increase, which would adversely affect the
Company's results of operations and cash flows. In addition, in the event the
Company were unable to secure refinancing of such indebtedness on acceptable
terms, the Company might be forced to dispose of properties on unfavorable
terms, which may result in the recognition of losses upon such dispositions and
may adversely affect the Company's financial position, results of operations and
cash flows. In addition, to the extent the Company's properties are mortgaged to
secure the payment of indebtedness and the Company is unable to make the
required mortgage payments, such properties may be foreclosed upon with a
consequent loss of income and asset value to the Company.

The Company has balloon payments in the amount of approximately $257.4
million which become due in 1997, $139.5 million which become due in 1998 and
$392.3 million which become due in 1999. The Company has obtained credit
enhanced mortgage debt for a number of its properties; generally, the credit
enhancement (for example, a letter of credit) expires prior to the term of the
underlying mortgage debt and must be renewed or replaced to prevent acceleration
of the underlying mortgage debt. The Company treats credit enhanced indebtedness
as expiring in the year the credit enhancement expires. There can be no
assurance that the Company will be able to refinance such indebtedness, to
obtain renewals or replacement of credit enhancement devices, or to otherwise
obtain funds by selling assets or by raising equity. An inability to repay or
refinance such indebtedness when due could cause the mortgage lender to
foreclose on such properties, which could have a material adverse effect on the
Company's financial position, results of operations and cash flows. See
"Description of Certain Indebtedness -- Mortgage Debt Financing."

As of the date of this Prospectus Supplement, the Company has one
nonrecourse mortgage, aggregating $19.9 million (at the Company's ownership
percentage), that is past its stated maturity date. The property and building
securing this mortgage loan had a total cost of $18.9 million (at the Company's
ownership percentage). The Company is in the process of renegotiating this
mortgage with the lender and expects to receive an extension or otherwise
refinance this mortgage. There can be no assurance, however, that the Company
will be able to obtain an extension or refinance this mortgage. If the Company
is unsuccessful in these efforts, the lender could commence foreclosure
proceedings.

Within Tower City Center, the Company has four separate nonrecourse
mortgages on The Avenue and on part of the parking facilities that are
cross-collateralized and cross-defaulted with each other and with the
nonrecourse mortgage on the Ritz-Carlton Hotel and Chase Financial Tower. This
latter nonrecourse mortgage may be paid off separately without paying the other
four nonrecourse mortgages. In addition, the Company has separate nonrecourse
mortgages on six projects (Atlantic Center, Bruckner Boulevard, Gun Hill,
Flatbush Avenue, Grand Avenue and Northern Boulevard) in the New York City
metropolitan area, each of which is secured by the pledge of excess cash flow to
the other and a contingent assignment of the partnership interest of the limited
partner common to each of the six entities which own the properties. As a result
of this cross--

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collateralization and cross-pledge of excess cash flow, the results of
operations of any particular property covered by either of these arrangements
may be adversely affected by the results of operations of one or more of the
other properties subject to such arrangement. No assurance can be given that the
performance of one or more properties may not adversely affect the results of
operations from, and market value of, the other properties subject to these
arrangements.

CREDIT FACILITY COVENANTS

The Company has guaranteed the obligations of one of its subsidiaries,
Forest City Rental Properties Corporation ("FCRPC"), under the FCRPC Credit
Agreement pursuant to a Guaranty (as defined under the caption "Description of
Certain Indebtedness -- Forest City Rental Properties Corporation Credit
Agreement"). The Guaranty contains a number of covenants of the Company,
including a prohibition on consolidations and mergers, limitations on the amount
of indebtedness, guarantees and property liens that the Company may incur and
covenants by the Company to maintain a specified minimum annual cash flow and
consolidated net worth. Under the Guaranty, the Company is also restricted from
paying dividends on its Common Stock in excess of $10,000,000 in any fiscal
year. As of January 31, 1997, the Company was in compliance with its covenants
under the Guaranty and FCRPC was in compliance with its covenants under the
FCRPC Credit Agreement. See "Description of Certain Indebtedness -- Forest City
Rental Properties Corporation Credit Agreement."

A failure to comply with any of the covenants under the Guaranty or failure
by FCRPC to comply with any of the covenants under the FCRPC Credit Agreement
could result in an event of default, which would trigger the Company's
obligation to repay all amounts outstanding under the FCRPC Credit Agreement.
The ability of the Company and FCRPC to comply with these covenants will depend
upon the future economic performance of the Company and FCRPC. There can be no
assurance that such covenants will not affect the Company's ability to finance
its future operations or capital needs or to engage in other business activities
that may be desirable to the Company.

CHANGES IN INTEREST RATES

The Company's business and operating results have been in the past, and may
be in the future, adversely affected by changes in interest rates. For example,
an increase in interest rates will increase the interest payable on the
Company's outstanding variable-rate debt and would result in increased interest
expense if fixed-rate debt is refinanced at higher interest rates.

At January 31, 1997, excluding debt under the FCRPC Credit Agreement, the
Company had outstanding approximately $994.9 million aggregate principal amount
of fixed-rate debt, $134.3 million aggregate principal amount of tax-exempt
variable-rate debt and $769.2 million aggregate principal amount of taxable
variable-rate debt. Of this variable-rate debt, $330.4 million was subject to
interest rate swap agreements as of January 31, 1997. All borrowings under the
FCRPC Credit Agreement bear variable-rate interest, and all the borrowings
thereunder were subject to interest rate cap agreements as of January 31, 1997.
See "Description of Certain Indebtedness -- Mortgage Debt Financing."

To mitigate the effects of significant increases in interest rates on the
amounts payable with respect to the Company's variable-rate debt, the Company
makes use of interest rate exchange agreements, including interest rate caps and
swaps, primarily to manage interest rate risk associated with variable-rate
debt. Under interest rate cap agreements, the Company makes initial premium
payments to the counterparties in exchange for the right to receive payments
from them if interest rates on the related variable-rate debt exceed specified
levels during the agreement period. Parties to interest rate exchange agreements
are subject to market risk for changes in interest rates and risk of credit loss
in the event of nonperformance by the counterparties. Although the Company deals
only with highly rated financial institution counterparties (which, in certain
cases, are also the lenders on the related debt) and does not expect that any
counterparties will fail to meet their obligations, there can be no assurance
that this will not occur.

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At January 31, 1997, the Company's fixed-rate debt carried a weighted
average interest rate of 7.96%. Its weighted average variable-rate taxable
interest rate was 7.38%. The Company's weighted average variable-rate tax-exempt
debt interest rate was 4.38%. Its weighted average interest rate on UDAG loans
and other government subsidized financing was 2.60%. At January 31, 1997, a 100
basis point increase in taxable interest rates would have increased the pre-tax
interest cost of the Company's taxable variable-rate debt by approximately $4.4
million. Although tax-exempt interest rates generally increase in an amount that
is smaller than corresponding changes in taxable interest rates, a 100 basis
point increase in tax-exempt interest rates would have increased the pre-tax
interest cost of the Company's tax-exempt variable-rate debt by approximately
$1.3 million.

TAX-EXEMPT AND UDAG FINANCING

The Company regularly utilizes tax-exempt financing and UDAG loans, which
generally bear interest rates below rates available through conventional taxable
financing. At January 31, 1997, the Company had outstanding $134.3 million of
tax-exempt bonds and $77.4 million of UDAG loans.

There can be no certainty of the continued availability of tax-exempt
bonds, UDAG loans or similar government subsidized financing in the future,
either for new development or acquisitions, or for the refinancing of
outstanding debt. The inability to obtain tax-exempt bonds, UDAG loans or
similar government subsidized financing or the inability to refinance
outstanding debt on favorable terms could significantly affect the Company's
ability to pursue development and acquisition opportunities and could have a
material adverse effect on the Company's financial position, results of
operations and cash flows.

RELIANCE ON MAJOR TENANTS

For the year ended January 31, 1997, the contractual base rental revenues
from various operating divisions of The Limited, Inc. ("The Limited") and
Woolworth Corporation ("Woolworth") represented 7.8% and 3.7%, respectively, of
the Company's aggregate contractual shopping center base rental revenues for
such period.

The Company could be adversely affected in the event of the bankruptcy or
insolvency of major tenants such as The Limited or Woolworth, or a significant
downturn in the business of its major tenants. In addition, the Company could be
adversely affected in the event that a major tenant does not renew its leases as
they expire. Woolworth has closed one of its stores in the Company's shopping
centers since January 31, 1996. See "Business -- Commercial Group -- Shopping
Centers -- Shopping Center Leases and Tenant Lease Expirations."

COMPETITION

The real estate industry is highly competitive in all major markets. With
regard to the Commercial and Residential Groups, there are numerous other
developers, managers and owners of commercial and residential real estate that
compete with the Company nationally, regionally and/or locally in seeking
management and leasing revenues, land for development, properties for
acquisition and disposition and tenants for properties, some of whom may have
greater financial resources than the Company. There can be no assurance that the
Company will successfully compete for new projects or have the ability to react
to competitive pressures on existing projects caused by factors such as
declining occupancy rates or rental rates. In addition, tenants at the Company's
retail properties face continued competition in attracting customers from
retailers at other shopping centers, catalogue companies, warehouse stores,
large discounters, outlet malls, wholesale clubs and direct mail and
telemarketers. The existence of competing developers, managers and owners and
competition to the Company's tenants could have a material adverse effect on the
Company's ability to lease space in its properties and on the rents charged or
concessions granted, could materially and adversely affect the Company's results
of operations and cash flows, and could affect the realizable value of assets
upon sale.

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With regard to the Lumber Trading Group, the lumber wholesaling business is
highly competitive. Competitors in the lumber brokerage business include
numerous brokers and in-house sales departments of lumber manufacturers, many of
which are larger and have greater resources than the Company.

POTENTIAL LIABILITY FROM SYNDICATED PROPERTIES

As part of its financing strategy, the Company has used syndication as a
financing technique for certain of its residential projects, as well as for one
office building and one hotel. The Company's syndication partner is typically
allocated all, or nearly all, of the low income housing tax credits, in the case
of residential projects, and depreciation expense associated with the project
based on the syndication partner's equity capital contribution to the project.

These syndication partnerships, in the case of residential projects,
typically have required the Company to indemnify, on an after tax basis, the
syndication partner against the failure to receive, or the recapture of, such
allocated tax credits. In addition, the Company has typically been required to
indemnify the syndication partner, on an after tax basis, against the failure to
receive or the disallowance of the depreciation expense associated with the
project.

While the Company believes that all the necessary requirements for
qualification for such tax credits in the requisite amount have been and will be
met and that its syndication partners will be able to receive depreciation
expense associated with the syndicated properties, no assurance can be given
that this will, in fact, be the case or that the Company will not be required to
indemnify its syndication partners on an after tax basis for such amounts. Any
such indemnification payment could have a material adverse effect on the
Company's results of operations and cash flows. See "Business -- Residential
Group -- Syndication Activity."

DIVIDEND POLICY

In the last six years, the Company paid dividends on shares of Class A
Common Stock and Class B Common Stock in 1991, 1995 and 1996, but did not pay
dividends in 1992, 1993 and 1994. No assurance can be given that the Company
will continue to pay dividends and any determination to pay cash dividends in
the future will be at the discretion of the Company's Board of Directors and
will depend upon the Company's results of operations, financial condition,
contractual restrictions and other factors deemed relevant at that time by the
Company's Board of Directors. Under the Guaranty, the Company is prohibited from
paying more than $10,000,000 in dividends in any fiscal year. See " -- High
Leverage; Credit Facility Covenants -- Credit Facility Covenants."

LIMITED TRADING VOLUME AND MARKET FOR COMMON STOCK

The Company's Class A Common Stock has been traded on the American Stock
Exchange since 1960. The average daily trading volume in the Class A Common
Stock in the year ended January 31, 1997 was approximately 2,845 shares per day.
Accordingly, the prices at which such trades have been made may not reflect the
prices that would have prevailed had there been a more active market.
Furthermore, there can be no assurance that the trading price for the Class A
Common Stock after the Offering will approximate the price of the Class A Common
Stock prior to the Offering. There can be no assurance that a more active public
market for the Class A Common Stock will develop or be sustained after the
Offering or that the initial public offering price will correspond to the price
at which the Class A Common Stock will trade in the public market subsequent to
the Offering. See "Price Range of Common Stock and Dividend History."

SHARES ELIGIBLE FOR FUTURE SALE

The Company, its directors and executive officers and RMS, Limited
Partnership have agreed that they will not, for a period of 90 days following
the date of this Prospectus Supplement, without the prior written consent of
Goldman, Sachs & Co., offer, sell, contract to sell or otherwise dispose of any
Class A Common Stock or Class B Common Stock, or any security substantially
similar to the Class A Common Stock or Class B Common Stock, or any security
convertible or exchangeable into

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or redeemable for Class A Common Stock or Class B Common Stock or any such
substantially similar security. Following the Offering (based on the share
ownership of such persons on March 4, 1997 and assuming no conversions of Class
B Common Stock into Class A Common Stock and no exercise of the Underwriters'
over-allotment option) the Company's directors and executive officers and RMS,
Limited Partnership will in the aggregate hold approximately 25.4% of the
Company's Class A Common Stock and 74.1% of the Class B Common Stock. Future
sales, or the perception that such sales could occur, at the expiration of such
90-day period of Class A Common Stock or Class B Common Stock by the Company or
the shareholders named above could adversely affect the prevailing market price
of the Class A Common Stock. See "Underwriting."

EFFECT OF UNINSURED LOSS

The Company carries comprehensive liability, fire, flood, extended coverage
and rental loss insurance with respect to its properties within insured limits
and policy specifications that it believes are customary for similar properties.
There are, however, certain types of losses (generally of a catastrophic nature,
such as wars or earthquakes) that may be either uninsurable, or, in the
Company's judgment, not economically insurable. Should an uninsured loss occur,
the Company could lose both its invested capital in and anticipated profits from
the affected property.

The Company is self-insured as to the first $250,000 of liability coverage
and self-insured on the first $100,000 of property damage. While the Company
believes that its self-insurance reserves are adequate, no assurance can be
given that the Company will not incur losses that exceed these self-insurance
reserves.

LUMBER PRICES

Lumber prices are highly volatile, and the lumber business is highly
cyclical. The Company's Lumber Trading Group is exposed to the risk of changes
in lumber prices and to downturns in the new home building and home remodeling
markets. While the Company believes that it has in place adequate controls to
effectively manage this risk, no assurance can be given that the Company will
not suffer a loss from changes in lumber prices or a downturn in the new home
building and home remodeling markets. See "Business -- Lumber Trading Group."

ENVIRONMENTAL LIABILITIES

Under various Federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may become
liable for the costs of the investigation, removal and remediation of hazardous
or toxic substances on, under, in or migrating from such property. Such laws
often impose liability without regard to whether the owner or operator knew of,
or was responsible for, the presence of such hazardous or toxic substances. The
presence of hazardous or toxic substances, or the failure to remediate such
substances when present, may adversely affect the owner's ability to sell or
rent such real property or to borrow funds using such real property as
collateral, and may impose unanticipated costs and delays on projects. 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 remediations of such
wastes at the disposal or treatment facility, regardless of whether such
facility is owned or operated by such person. Other Federal, state and local
laws, ordinances and regulations require abatement or removal of certain
asbestos-containing materials in the event of demolition, renovations,
remodeling, damage or decay and impose certain worker protection and
notification requirements and govern emissions of and exposure to asbestos
fibers in the air.

In connection with its ownership, operation and management of its
properties, the Company could be held liable for the environmental response
costs associated with the release of such regulated substances or related
claims, whether by the Company, its tenants, former owners or tenants of the
property, or others. In addition to remediation actions brought by Federal,
state and local agencies, the presence of hazardous substances on a property
could result in personal injury, contribution or other claims by private
plaintiffs. Such claims could result in costs or liabilities which

S-23
<PAGE> 28

could exceed the value of such property. The Company is not aware of any
notification by any private party or governmental authority of any
non-compliance, liability or other claim in connection with environmental
conditions at any of its properties that it believes will involve any
expenditure which would be material to the Company, nor is the Company aware of
any environmental condition on any of its properties that it believes will
involve any such material expenditure. However, there can be no assurance that
any such non-compliance, liability, claim or expenditure will not arise in the
future. To the extent that the Company is held liable for the release of
regulated substances by tenants or others, there can be no assurance that the
Company would be able to recover its costs from such persons.

HISTORICAL OPERATING RESULTS

The Company incurred net losses per share of Common Stock in 1995, and its
combined fixed charges exceeded its earnings in 1995. No assurance can be given
that the Company will not experience losses, or that its earnings will be
sufficient to cover fixed charges, in the future.

PARTNERSHIP RISKS

The Company relies on the use of partnerships to finance many of its
projects, and enters into other partnerships to access opportunities not
otherwise available to it, such as some projects in which development rights are
owned by a third party who is not willing to sell its entire interest in the
project. The Company, through wholly owned subsidiaries, is typically a general
partner in most of such partnerships. A partnership may involve special risks
associated with the possibility that a partner (i) at any time may have economic
or business interests or goals that are inconsistent with those of the Company,
(ii) may, if a general partner, take actions contrary to the instructions or
requests of the Company or contrary to the Company's policies or objectives with
respect to its real estate investments or (iii) could experience financial
difficulties. If a partner of the Company is unable to fulfill capital
obligations, the Company may have to increase its own financial commitment to
the venture.

To the extent the Company is a general partner, or otherwise has joint and
several liabilities for actions of the partnership, actions by the Company's
partners may have the result of subjecting property owned by the partnership to
liabilities in excess of those contemplated by the terms of the partnership
agreement or have other adverse consequences. A subsidiary of the Company in its
role as a general partner of a particular partnership may be jointly and
severally liable for the debts and liabilities of that partnership, except for
nonrecourse mortgages. See "Description of Certain Indebtedness -- Mortgage Debt
Financing".

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

Certain of the statements contained in this Prospectus Supplement, the
accompanying Prospectus and in documents incorporated therein by reference may
be considered forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including without limitation the forward-looking statements identified as such
in this Prospectus Supplement and variations in the foregoing statements
whenever they appear in this Prospectus Supplement, the Prospectus and in
documents incorporated therein by reference. Forward-looking statements are made
based upon management's current expectations and belief concerning future
developments and their potential effects upon the Company. There can be no
assurance that future developments affecting the Company will be those
anticipated by management. There are certain important factors that could cause
actual results to differ materially from estimates or expectations discussed in
such forward-looking statements including, without limitation, the matters
discussed in "Risk Factors."

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<PAGE> 29

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of 1,700,000
shares of Class A Common Stock in this Offering are estimated to be
approximately $ (or $ , if the Underwriters' over-allotment
option is exercised in full). Forest City initially will use the net proceeds to
repay recourse debt outstanding under the Revolving Credit Facility. At April
28, 1997, $65.0 million was outstanding under the Revolving Credit Facility. The
borrowings under the Revolving Credit Facility currently bear interest at 7.7%
and mature on July 25, 1998. The indebtedness under the Revolving Credit
Facility was incurred to finance the Company's construction and development
activities. The Company expects subsequently to reborrow some or all of the
available amounts under the Revolving Credit Facility, and to use such
borrowings, together with any remaining proceeds of this Offering and the
proceeds of new mortgage debt financings, to finance its on-going development
and construction activities. Any excess proceeds from the Offering would be used
for general corporate purposes. See "Strategy For Growth and Competitive
Advantages -- New Development" and "-- Acquisitions."

PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY

Both the Class A Common Stock and Class B Common Stock are traded on the
American Stock Exchange under the symbols "FCEA" and "FCEB," respectively. The
following table sets forth, for the fiscal periods indicated, the high and low
per share sales prices for Class A Common Stock and Class B Common Stock as
reported on the American Stock Exchange and dividends paid per share of Class A
Common Stock and Class B Common Stock.

<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
-------------------------------- --------------------------------
DIVIDENDS DIVIDENDS
HIGH LOW PER SHARE HIGH LOW PER SHARE
------ ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter........................... $23.50 $20.25 $ -- $23.58 $20.75 $ --
Second Quarter.......................... 26.33 22.00 -- 26.25 22.33 --
Third Quarter........................... 26.33 24.50 .17 26.00 24.50 .17
Fourth Quarter.......................... 24.50 21.33 -- 24.33 21.33 --
1996
First Quarter........................... 25.50 22.00 -- 25.42 22.17 --
Second Quarter.......................... 28.08 24.50 -- 28.08 24.92 --
Third Quarter........................... 33.08 27.83 .21 32.67 27.92 .21
Fourth Quarter.......................... 41.67 32.67 -- 40.67 32.75 --
1997
First Quarter(1)(2)..................... 50.38 39.50 .06 50.00 42.00 .06
</TABLE>

- ---------------

(1) On December 11, 1996, the Board of Directors announced their intention to
pay cash dividends on a quarterly basis in the future, whereas recent cash
dividends had been paid on an annual basis. Quarterly cash dividends of $.06
per share (post-split) on shares of both Class A Common Stock and Class B
Common Stock were declared on December 11, 1996 and March 19, 1997, by the
Board of Directors. The first quarterly dividend of $.06 per share was paid
on March 17, 1997, to shareholders of record at the close of business on
March 3, 1997. The second quarterly dividend of $.06 per share will be
payable on June 16, 1997, to shareholders of record at the close of business
on June 2, 1997. Purchasers of Class A Common Stock in this Offering who
hold shares of Class A Common Stock on the record date will be entitled to
this dividend.
(2) Share prices through April 29, 1997.

The last reported sale prices on April 29, 1997 of the Class A Common Stock
and Class B Common Stock, as reported on the American Stock Exchange, were
$43.25 and $43.25 respectively. As of April 25, 1997, the number of registered
holders of Class A Common Stock and Class B Common Stock was 871 and 676,
respectively. Prior to the Offering, trading volume in the Company's Class A
Common Stock and Class B Common Stock on the American Stock Exchange has been
relatively low. The average monthly trading volume in the Company's Class A
Common Stock and Class B Common Stock for 1996 and 1995, as reported by the
American Stock Exchange

S-25
<PAGE> 30

(and as adjusted for the Company's stock dividends and stock split effected by
means of a stock dividend), was approximately 94,975 shares of Class A Common
Stock and 20,250 shares of Class B Common Stock in 1996 and approximately 74,712
shares of Class A Common Stock and 39,975 shares of Class B Common Stock in
1995. During 1996, the Company repurchased 232,950 shares of Class A Common
Stock and 26,550 shares of Class B Common Stock, and during 1995, the Company
repurchased 3,000 shares of Class A Common Stock and 112,500 shares of Class B
Common Stock. No prediction can be made as to the effect, if any, that the
Offering will have on the market price of the Company's Class A Common Stock or
Class B Common Stock or the liquidity or trading volume of the market for the
Company's Class A Common Stock or Class B Common Stock after the Offering. See
"Risk Factors -- Limited Trading Volume and Market for Common Stock" and
"-- Shares Eligible for Future Sale."

The Class A Common Stock and Class B Common Stock will participate equally
on a share-for-share basis in any and all cash dividends paid. No cash dividend
may be paid on a class of Common Stock until provision is made for payment of a
dividend of at least an equal amount on a share-for-share basis on the other
class of Common Stock. See "Description of Common Stock -- Dividends" in the
accompanying Prospectus. No assurance can be given that the Company will
continue to pay cash dividends. The Company has from time to time in the past
ceased paying dividends, and may do so again in the future. The Guaranty
prohibits the Company from paying more than $10.0 million of dividends in any
fiscal year. See "Description of Certain Indebtedness -- Forest City Rental
Properties Corporation Credit Agreement -- Guaranty Covenants of Forest City."
Any determination to pay cash dividends in the future will be at the discretion
of the Company's Board of Directors and will depend upon the Company's financial
condition, results of operations, cash flow, contractual restrictions under the
FCRPC Credit Agreement and Guaranty, and other factors deemed relevant at that
time by the Company's Board of Directors. See "Risk Factors -- High Leverage;
Credit Facility Covenants" and "-- Dividend Policy."

On December 11, 1996, the Board of Directors approved a three-for-two stock
split of all outstanding shares of the Company's Class A Common Stock and Class
B shares of Common Stock. The stock split was effective February 17, 1997 to
shareholders of record at the close of business on February 3, 1997, and was
effected by means of a stock dividend.

The Board of Directors has approved submission to the Company's
shareholders of amendments to the Articles of Incorporation to increase the
authorized shares of Class A Common Stock from 16,000,000 shares to 48,000,000
shares, the Class B Common Stock from 6,000,000 shares to 18,000,000 shares, and
the Company's Preferred Stock from 1,000,000 shares to 5,000,000 shares. If the
proposed amendments are approved at the Annual Meeting of Company Shareholders
to be held June 10,1997, the additional shares of capital stock would be
generally available for issuance without further action by the shareholders. It
is possible, depending upon the transaction in which either Class A Common
Stock, Class B Common Stock or Preferred Stock is issued, that issuance of such
capital stock could have a dilutive effect on shareholders' equity and earnings
per share attributable to present holders.

The affirmative vote of the holders of a majority of the combined voting
power of the outstanding shares of Class A Common Stock (with each share of
Class A Common Stock having one vote per share) and Class B Common Stock (with
each share of Class B Common Stock having ten votes per share) of the Company
present or represented at the meeting is required for approval of the proposed
amendments. The Company has been advised the shares held by the
Ratner/Miller/Shafran families and RMS, Limited Partnership will be voted in
favor of the proposals. If such shareholders voted in this manner, such vote
will be sufficient to approve such proposal.

S-26
<PAGE> 31

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
January 31, 1997, and as adjusted to give effect to the Offering (assuming an
initial public offering price of $43.25 per share, the last reported sale price
of the Class A Common Stock on the American Stock Exchange on April 29, 1997)
and the application of the gross proceeds therefrom, without deduction of the
Underwriters' discount and the estimated expenses ($650,000) payable by the
Company in connection with the Offering.

<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Mortgage debt, nonrecourse(1)........................................................... $ 1,898,428 $ 1,898,428
Long-term debt(1)....................................................................... 94,923 46,923
Shareholders' equity:(2)
Preferred stock-convertible, without par value; 1,000,000 shares authorized; no shares
issued.............................................................................. -- --
Common stock -- $.33 1/3 par value
Class A, 16,000,000 shares authorized; 7,932,358 shares issued, 7,696,408
outstanding........................................................................ 2,644 3,211
Class B, convertible, 6,000,000 shares authorized; 5,554,618 shares issued,
5,415,568 outstanding.............................................................. 1,851 1,851
Additional paid-in capital.............................................................. 43,996 116,954
Retained earnings....................................................................... 152,077 152,077
Less treasury stock, at cost; 235,950 Class A and 139,050 Class B shares................ (8,589) (8,589)
---------- ----------
Total shareholders' equity.......................................................... 191,978 265,504
---------- ----------
Total capitalization............................................................ $ 2,185,330 $ 2,210,855
========== ==========
</TABLE>

- ---------------

(1) At April 28, 1997, the Company had $1,838,086,000 of mortgage debt,
nonrecourse and $108,292,000 of long-term debt.
(2) The Company's Board of Directors has approved a proposal to increase the
Company's authorized shares. See "Price Range of Common Stock and Dividend
History."

S-27
<PAGE> 32

THE COMPANY

<TABLE>
<CAPTION>
NUMBER OF REPRESENTATIVE PRINCIPAL
TYPE OF PROPERTY PROPERTIES TOTAL SIZE METROPOLITAN REGIONS
- ----------------------------------- --------- ------------- ------------------------------
<S> <C> <C> <C>
COMMERCIAL GROUP
Shopping Centers................. 30 14.3 million New York City (4); California
square feet (4); Cleveland (3); Akron, OH
(3); Las Vegas (2); Tucson (2)

Office Buildings................. 20 6.4 million Cleveland (9); New York City
leasable (5); Cambridge, MA (3);
square feet Pittsburgh (2)

Hotels........................... 5 1,530 rooms Cleveland (2); Pittsburgh (1);
Charleston, WV (1); Detroit
(1)
RESIDENTIAL GROUP
Apartment Communities(1)......... 114 31,441 units Cleveland (20); California
(7); Washington, D.C. (5);
Detroit (4); Cambridge, MA
(1); Las Vegas (1)
LAND GROUP
Land held for improvement and Ft. Lauderdale; Las Vegas;
sale.......................... -- 5,920 acres Cleveland; Tucson
</TABLE>

- ---------------

(1) Includes 9,402 syndicated senior citizen units in 57 apartment communities
developed under Federal subsidy programs in which the Company holds a
residual interest, none of which are reflected under the caption
"Representative Principal Metropolitan Regions" in the table above.

The Company's EBDT grew by approximately 13% per share to $6.87 per share
in 1996 from $6.08 per share in 1995. This growth reflected the addition in 1996
of 11 properties to the Company's portfolio, with a total cost of $330 million
(of which the Company's share was $186 million), and strong performance in the
Company's existing portfolio, which reflected continued high occupancy rates and
increased rental rates. For a further discussion of EBDT, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

At January 31, 1997, the shopping centers, office buildings and hotels
comprising the Commercial Group totaled $1.7 billion (or 62%) of total assets.
Properties in the Company's Residential Group totaled $643 million (23%) of
total assets. In 1996, 51% of total revenues and 62% of EBDT were contributed by
the Commercial Group and 19% of total revenues and 27% of EBDT were generated by
the Residential Group. See "Business -- Commercial Group" and "-- Residential
Group."

The Land Group develops raw land into master planned communities, mixed-use
and other residential developments and currently owns more than 5,920 acres of
undeveloped land for this

S-28
<PAGE> 33

purpose. The Company currently has major land development projects in five
states. See "Business -- Land Group." The Lumber Trading Group is one of the
largest lumber wholesalers in North America. See "Business -- Lumber Trading
Group." In 1996, the combined land and lumber operations contributed 10% of EBDT
and constituted 11% of the Company's total assets. The Company's "Corporate"
activities relate to its investments in, and advances to, affiliates and general
corporate items.

The Company's management strength reflects over 50 years in the real estate
business and the continuous leadership of three generations of the
Ratner/Miller/Shafran families. The Company's core management team includes 41
senior managers, whose average tenure with the Company is 17 years. The Company
believes that the depth and experience of its management team is vital to the
Company's future growth and ability to operate through various real estate
cycles. In 1995, Charles A. Ratner, who joined the Company in 1966, became the
Company's third Chief Executive Officer. The Company's executive officers and
directors as a group owned 2,392,034 shares, or 31.1%, of the Class A Common
Stock and 1,692,217 shares, or 31.3%, of the Class B Common Stock outstanding at
March 4, 1997. The total value of such shares as of April 29, 1997 would have
been approximately $177 million, based on the last reported sale prices on April
29, 1997 for Class A Common Stock ($43.25) and Class B Common Stock ($43.25).
See "Risk Factors -- Control by Class B Common Shareholders; Anti-Takeover
Provisions" and "-- Conflicts of Interests."

STRATEGY FOR GROWTH AND COMPETITIVE ADVANTAGES

NEW DEVELOPMENT

The Company expects to grow primarily through real estate development,
which it believes will maximize shareholder value over the long term by
providing attractive rates of return on the Company's investment. The
Unleveraged Return on Cost on the 11 projects opened in 1996 is projected to be
11.1%.* The Company calculates the Unleveraged Return on Cost on a completed
property by dividing the expected net operating income during the initial twelve
months after stabilization or, if the project was stabilized as of January 31,
1996, the actual results during the preceding twelve months ended January 31,
1997 (on a cash basis and not on a straight-line basis), by the estimated or
actual total project cost.

Forest City has a proven track record in developing new real estate
projects. Since January 31, 1988, the Company has grown its real estate assets
at cost from $1.1 billion to $2.5 billion, while adding 59 properties to its
portfolio. It currently has 12 projects under construction or under contract to
acquire with a total estimated cost of $429 million (of which the Company's
share will be $184 million).** The projects include three shopping centers, two
office buildings and seven residential

- ---------------

**This is a forward-looking statement and is based on current facts and
expectations. The development and acquisition of real estate properties
involves various risks, including an inability to obtain financing or
government entitlements, construction delays and cost overruns. See "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete discussion of
the risks associated with the Company's development and acquisition
activities.

S-29
<PAGE> 34

apartment communities that will add 954,000 square feet of GLA to the Company's
commercial portfolio and 2,179 units to its residential portfolio.* The Company
believes that opportunities for new projects exist among all its property types.
The Company's development activities in recent years have focused on California,
Nevada, the New York City and Washington, D.C. metropolitan areas and northeast
Ohio. The Company believes that California and Nevada represent long-term growth
markets, that the New York City metropolitan area retail market and Washington,
D.C. metropolitan area residential market are underserved, and that northeast
Ohio presents the opportunity to leverage its large existing portfolio in that
market.*

In addition, the Company has eight shopping centers and five residential
apartment communities under active pre-construction development that are
expected to open over the next four years.* The Company expects the total cost
of these projects to be approximately $581 million (of which the Company's share
will be $368 million).* In each instance, the Company has a signed partnership
agreement to proceed with the development, owns or controls the land under an
option agreement and has commenced or, in some cases, completed the entitlement
process. The Company also has invested approximately $67 million in other
projects it is pursuing as a part of its continuing development program. These
projects are focused on areas where the Company has existing developments,
including the New York City and Chicago metropolitan areas, California, Nevada
and northeast Ohio and in new markets, including Atlanta and Atlantic City.

The Company's development program focuses principally on growing or
underserved markets where entitlements are difficult to obtain or where other
factors favor the Company's extensive experience in working with local
governments and regulatory agencies. The Company completed its first major
public/private development in Charleston, West Virginia, in 1983. A recent
example of this expertise is the Company's MetroTech development in downtown
Brooklyn, New York. This project involved the creation of 4.4 million leasable
square feet on a 16-acre site, representing a total cost of over $550 million.
In connection with this project, the Company collaborated with over 12 state and
local agencies to develop job credits and other incentives that resulted in the
creation or retention of 16,000 jobs and the attraction of several major new
businesses to downtown Brooklyn. The Residential Group also works closely with
governmental agencies and obtains significant financing assistance in many of
its projects. For example, in Orange County, California, the Company received
extensive assistance, including use of public programs to move the existing
tenants into other housing to facilitate the renovation and obtaining $7.5
million in low cost financing, in repositioning the Knolls, a distressed
property acquired in 1995. The Company believes its experience with governments
and government financing programs is a competitive advantage, especially with
respect to its urban development strategy, where public/private partnerships are
crucial.

The Company's development activities are also enhanced by its experience in
managing a diversified portfolio and its ability to move quickly to develop more
than one property type in growth markets. For example, the Company began
development in the Las Vegas area in 1988 with the acquisition of an option on
land to build a regional mall. In 1996, the Company opened the 892,000 square
foot Galleria at Sunset, which the Company plans to expand by an additional
477,000 square

- ---------------

S-30
<PAGE> 35

feet by the year 2000*. During Galleria at Sunset's development, the Company was
presented with several other Las Vegas region opportunities. In 1991, the
Company developed and opened the Palm Villas, a 350-unit apartment community in
the Las Vegas metropolitan area. The Company accelerated its Las Vegas-area
development activities by entering into a joint venture agreement in 1994 for
the development of Showcase, a 189,000 square foot entertainment center on the
Las Vegas Strip, which opened in 1996. Upon completion of all of these projects,
the Company's total assets in the Las Vegas metropolitan area will be $103
million.** In addition, the Company has pursued further growth opportunities in
the Las Vegas metropolitan area through the acquisition of an additional 1,300
acres that are being developed as a master planned community.

See "Risk Factors -- Real Estate Development and Investment Risks,"
"-- Significant Geographic Concentration," "-- Illiquidity of Real Estate
Investment," "-- Dependence on Rental Income From Real Property" and
"-- Partnership Risks."

ACQUISITIONS

In addition to acquisitions by the Residential Group, the Commercial Group
has complemented its development program through the acquisition of a major
Pittsburgh commercial complex in 1994 and also has acquired and continues to
pursue opportunities to acquire increased ownership positions in a number of its
existing projects. In 1994, Forest City and its joint venture partner purchased
Station Square from The Pittsburgh History & Landmarks Foundation. This
property, Pittsburgh's premier entertainment, business and retail center,
located on 52 acres of the riverfront across from the Golden Triangle, contains
office and retail space, parking for 2,000 cars and approximately 25 acres of
land for development. This acquisition, which had a total cost of $28 million,
has the potential to be further developed as an urban entertainment project.

In 1995, the Company increased its ownership interest in Liberty Center in
Pittsburgh from 19% to 50% at an additional investment of $2.6 million,
refinanced the mortgage, and took over

- ---------------

*This is a forward-looking statement and is based on the Company's current
facts and expectations. The completion of this expansion involves various
risks, including an inability to obtain financing or government entitlements,
construction delays and cost overruns. See "Risk Factors -- Real Estate
Development and Investment Risks," "-- Dependence on Rental Income From Real
Property," "-- Changes in Interest Rates," "-- Tax-Exempt and UDAG
Financing," "-- Reliance on Major Tenants," "--Competition" and
"--Partnership Risks," for a more complete discussion of the risks associated
with the completion of this expansion.

**The statements relating to these projects are forward-looking statements and
are based on current facts and expectations. The completion of these projects
involves various risks, including an inability to obtain financing or
government entitlements, construction delays and cost overruns. See "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- Changes in Interest Rates," "-- Tax-
Exempt and UDAG Financing," "-- Reliance on Major Tenants," "-- Competition"
and "-- Partnership Risks," for a more complete discussion of the risks
associated with the completion of these projects.

***The statements with respect to these projects are forward-looking statements
and are based on current facts and expectations. No assurance can be given
that these properties will be acquired. See "Risk Factors--Real Estate
Development and Investment Risks."

S-31
<PAGE> 36

management of the office, retail and parking facilities in this major mixed-use
property. See "Business -- Commercial Group -- Office, Mixed-Use and
Hotel -- Existing Portfolio." In 1994, the Company acquired the remaining 50%
interest in the 490,000 square foot Ballston Common retail center at an
additional investment of $7.0 million. Ballston Common is located at the
Ballston Metro Stop, one of the transportation hubs for the northern Virginia
area.

See "Risk Factors -- Real Estate Development and Investment Risks,"
"-- Significant Geographic Concentration," "-- Illiquidity of Real Estate
Investment," "-- Dependence on Rental Income From Real Property" and
"-- Partnership Risks."

MAXIMIZING VALUE FROM EXISTING PROPERTIES

The Company actively manages its portfolio of existing commercial and
residential projects to maximize net operating income by raising rental rates on
expiring leases, increasing occupancy and maintaining tight cost controls.
Comparable Net Operating Income for the Commercial Group's portfolio increased
6.2% from 1994 to 1995 and 0.9% from 1995 to 1996. Comparable Net Operating
Income for the Residential Group increased 6.0% from 1994 to 1995 and 6.7% from
1995 to 1996. Combined, Comparable Net Operating Income from the Company's
investment real estate portfolio increased 6.1% from 1994 to 1995 and 2.5% from
1995 to 1996. Occupancy for the shopping center and residential portfolio,
remained relatively consistent at 88% and 96%, respectively, in both 1995 and
1996 while office portfolio occupancy increased from 92% in 1995 to 95% in 1996.
The Company's existing shopping center and office leases contain contractual
aggregate net rental increases of $24.6 million and $10.7 million, respectively,
over the next five years and $22.4 million and $14.3 million, respectively, over
the succeeding five years. These net rental increases will positively affect the
Company's EBDT because the Company does not account for rents on a straight-line
basis.

The Company also maintains tight cost controls and leverages its economies
of scale to minimize operating expenses. The Company has a variety of measures
in place to control costs, including a national purchasing policy for the
Residential Group. The Company also aggressively challenges real estate tax
assessments, and has an energy group specifically focused on reducing the
Company's energy costs. At January 31, 1997, the Company's property level
expenses for properties open since February 1, 1994 had increased at a compound
annual average rate of only 0.6% for its shopping centers, office buildings and
apartment communities, which was less than the rate of inflation during those
years.

See "Risk Factors -- Real Estate Development and Investment Risks," "--
Illiquidity of Real Estate Investment," "-- Dependence on Rental Income From
Real Property," "-- Competition," "Environmental Liabilities" and "--
Partnership Risks."

S-32
<PAGE> 37

CAPITAL STRATEGY

The Company believes that its capital strategy is an important aspect of
maximizing returns to shareholders and that project returns should be evaluated
in the context of the cost of capital and risk associated with each project. The
Company utilizes nonrecourse mortgage financing as its primary source of
capital. As part of its financing strategy, the Company employs a wide variety
of financing techniques to fund new developments and acquisitions, including
taxable and tax-exempt financing, syndications, joint ventures and
government-subsidized loans and incentives. The Company finances its projects at
the time of construction or acquisition, primarily using variable-rate debt. It
refinances the projects, generally with fixed-rate debt, upon stabilization when
values allow the Company to withdraw some or all of its equity in the project.
The Company continually evaluates its mature properties for opportunities to
withdraw capital through additional refinancings. The capital generated by such
refinancings is then reinvested in new projects. Other than indebtedness under
the FCRPC Credit Agreement, at January 31, 1997 all of the Company's mortgage
indebtedness is nonrecourse. See "Description of Certain
Indebtedness -- Mortgage Debt Financing."

An example of the implementation of the Company's capital strategy is the
Galleria at Sunset in Henderson, Nevada. The Company financed the $82.0 million
cost of this regional mall with $22.0 million of equity and a $60.0 million
construction loan. Within two months of the opening of the Galleria at Sunset,
the Company refinanced the construction loan with a $75.0 million fixed-rate
mortgage, permitting the Company to withdraw $15.0 million of its original
equity investment for redeployment into other projects.

As part of its financing strategy, the Company has made significant use of
tax-exempt financing. At January 31, 1997, the Company had approximately $134.3
million of tax-exempt financing outstanding, with a weighted average interest
rate of 4.38%, including the costs of credit enhancement. In addition, the
Company had UDAG loans and other government-subsidized funding of $77.4 million
outstanding at January 31, 1997, with a weighted average interest rate of 2.60%.
The availability and cost of such financing is integral to the Company's
analysis of the attractiveness of a project. The use of these types of
financings lowered the weighted average interest rate on the Company's mortgage
debt by approximately 45 basis points at January 31, 1997.

The Company also has used syndication as a financing technique for its
residential projects. Syndication permits the Company to withdraw a substantial
portion of its invested capital from a project while retaining a significant
interest in the property's cash flow and residual value. The Company's
syndicated properties are generally financed using tax-exempt bonds. In 1996,
syndicated properties generated $916,000 of operating income. As of January 31,
1997, the Company had received $5.9 million of distributions in excess of its
original investment in these projects. See "Business -- Residential
Group -- Syndication Activity" and "Risk Factors -- Potential Liability From
Syndicated Properties."

Reflecting the advantages of these financing techniques, the Company's
overall weighted average interest rate on its mortgage debt was 7.25% at January
31, 1997. As a result of the Company's historical ability to fund its business
expansion primarily through cash flow from existing assets and refinancings of
mature properties, it has made limited use of the public markets for financing
purposes. The purpose of the Offering is to accelerate the completion of the
Company's existing development program and to allow it to capitalize on its
numerous current opportunities. See "-- New Development," "Use of Proceeds,"
"Business," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Risk Factors -- High Leverage; Credit Facility
Covenants," "-- Changes in Interest Rates" and "-- Tax-Exempt and UDAG
Financing."

OPERATING AND ORGANIZATIONAL STRUCTURE

S-33
<PAGE> 38

requirements imposed on REITs and is able to reinvest its earnings in new
development opportunities. The tax benefits the Company receives from its
depreciation and interest expense deductions significantly reduce its taxable
income. The Company's consolidated tax position and the tax benefits generated
from its real estate operations allow it to reduce the tax payable with respect
to the earnings from its Land and Lumber Trading Groups. At January 31, 1997,
the Company had a net operating loss carryforward for tax purposes of $88.9
million, which will expire in the years ending January 31, 2005 through January
31, 2011, and general business credits carryovers of $3.6 million, which will
expire in the years ending January 31, 2003 through January 31, 2011. In 1996
the Company paid no regular Federal corporate income tax and paid $570,000 in
Federal alternative minimum tax.

S-34
<PAGE> 39

BUSINESS

In 1995, the Company reorganized its business into the four current
principal business groups:

- The Commercial Group, which develops, acquires, owns and operates
shopping centers, office buildings and mixed-use projects including
hotels.

- The Residential Group, which develops, acquires, owns and operates the
Company's multi-family properties.

- The Land Group, which owns and develops raw land into master planned
communities and other residential developments for resale.

- The Lumber Trading Group, which operates the Company's lumber wholesaling
business.

Each group operates autonomously, and each of the Commercial Group and
Residential Group has its own development, acquisition, leasing, property and
financial management functions. As a result, each of these groups is able to
perform all of the tasks necessary to develop and maintain a property from
selecting a project site to financing the project to managing the completed
project. The Company believes that this structure permits each group to better
focus on its business and permits key employees to exercise the independent
leadership, creativity and entrepreneurial skills necessary in the real estate
business. The Company's "Corporate" activities relate to its investments in, and
advances to, affiliates and general corporate items.

The following charts illustrate the division of the Company's business
among its four operating groups and its "Corporate" activities as of January 31,
1997 (dollars in millions).

[DESCRIPTION OF GRAPHICS: PIE CHARTS]

EBDT -- $90.4
</TABLE>

TOTAL ASSETS -- $2,741.4
</TABLE>

The Commercial Group and Residential Group are operating units of Forest
City Rental Properties Corporation ("FCRPC"), which is a wholly owned subsidiary
of the Company. FCRPC is the borrower under the FCRPC Credit Agreement. The Land
Group and Lumber Trading Group are operating units of the Company.

S-35
<PAGE> 40

COMMERCIAL GROUP

The Company has developed retail projects for more than 50 years and
office, mixed-use and hotel projects for more than 30 years, and today the
Commercial Group owns a diverse portfolio in both urban and suburban locations
in 12 states. The Commercial Group targets densely populated locations where it
uses its expertise to develop complex projects, often employing public/private
partnerships.

As of January 31, 1997, the Commercial Group owned interests in 55
completed projects, including 30 retail properties, 20 office properties and
five hotels. The Commercial Group also has 13 projects under construction or
active development, and is pursuing numerous other development opportunities, in
which it had $64.1 million invested at January 31, 1997. The Commercial Group's
EBDT was $56.2 million in 1996 and constituted 62% of the Company's total EBDT.

SHOPPING CENTERS

The Company opened its first strip shopping center in 1948, and its first
enclosed regional mall in 1962. Since then, it has developed urban retail
centers, entertainment based centers, community centers and power centers
focused on "big box" retailing (collectively, "Specialty Retail Centers"), as
well as regional malls. As of January 31, 1997, the Commercial Group's shopping
center portfolio consisted of 14 regional malls with a GLA of 4.3 million square
feet and 16 Specialty Retail Centers with a total GLA of 3.4 million square
feet.

Malls are generally developed in collaboration with anchor stores that
usually own their own facilities as integral parts of the mall structure and
environment and which do not generate significant direct payments to the
Company. In contrast, anchor stores at specialty retail and power centers
generally are tenants under long-term leases which contribute significant rental
payments to the Company. See "Risk Factors -- Dependence on Rental Income From
Real Property."

While the Company continues to develop regional malls in strong markets,
the Company recently has pioneered the concept of bringing "big box" 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, which benefit
from the new jobs created in the urban locations.

Retail projects anchored by entertainment facilities are another growth
area for the Company. See "-- Entertainment: A New Growth Opportunity."

The Company capitalizes on enhanced real estate values associated with
properties that are adjacent to its commercial projects by acquiring such
ancillary properties for resale as undeveloped land prior to development.

PROJECTS OPENED IN 1996. In 1996, the Commercial Group completed six major
shopping center projects: Galleria at Sunset and Showcase in the Las Vegas
metropolitan area, Atlantic Center and Bruckner Boulevard in the New York City
metropolitan area, Hunting Park in Philadelphia, and Marketplace at Riverpark in
Fresno, California.

In February 1996, the Company opened the Galleria at Sunset in Henderson,
Nevada, a suburb of Las Vegas, one of the nation's fastest growing metropolitan
areas. This 892,000 square-foot enclosed regional mall, which cost $82.0
million, contains 294,000 square feet of GLA. The Galleria at Sunset's 115
stores showcase many new prototype designs from tenants such as Eddie Bauer, The
Limited, Ann Taylor and The Gap, as well as innovative store designs from local
and regional tenants. The four anchor department stores are Dillards,
Robinson-May, J.C. Penney and Mervyn's. The Galleria at Sunset was 89% leased as
of January 31, 1997. A 477,000 square foot expansion of the Galleria at Sunset,
including two new department stores, is planned to open by the year 2000.

S-36
<PAGE> 41

The expansion will include 139,000 square feet of GLA that will cost
approximately $27.6 million.* Concurrent with the development of the Galleria at
Sunset, the Company created 27 acres of outlots of which 14 acres have been sold
as of January 31, 1997, for a total of $10.5 million.

Showcase is a 189,000 square-foot entertainment and retail complex on the
Las Vegas Strip, whose first tenant opened in December 1996 and is 99% leased.
Developed by the Company, Showcase is anchored by Coca-Cola(R), whose facility
features a 100-foot tall glass Coke(R) bottle containing two elevators to
transport visitors within the four-story facility, exhibit galleries, a retail
shop, a theater and memorabilia display. Other major Showcase tenants include
GameWorks, an interactive theme park and retail store, United Artists, which
offers an 8-screen theater complex with 2,600 seats, the Official All-Star Cafe,
an arena-style restaurant owned by Planet Hollywood, and Ethel M. Chocolates, a
wholly owned subsidiary of Mars, Inc., which will sell premium chocolates and
have on-premises preparation of the confections. The Company estimates the total
cost of construction at $76.9 million (of which $58.9 million had been expended
at January 31, 1997).*

The New York City metropolitan area is the primary focus of Forest City's
urban retail program. The Company believes Queens, Brooklyn, the Bronx and
Staten Island are significantly under-retailed, particularly with respect to
big-box national retailers. In 1996, the Company completed two retail projects
in New York City. The first, Atlantic Center, is a 391,000 square foot,
multi-level shopping center adjacent to the Atlantic Terminal in Brooklyn.
Tenants include Old Navy, Marshalls, The Sports Authority, Office Max and
Caldor. This public/private partnership involved 10 different agencies of state,
local and Federal governments, created approximately 1,200 jobs and attracted a
new group of retailers to the neighborhood. The project, which opened in
November 1996 and is currently 95% leased, is the first new major retail complex
to be opened in Brooklyn in 25 years. The total estimated cost for Atlantic
Center is $75.2 million (of which $70.0 million had been expended at January 31,
1997).* The second project, Bruckner Boulevard is a 114,000 square foot retail
center featuring Old Navy, Pergament, Seaman's Furniture and Youngworld. This
$15.1 million project in the Bronx, which opened in September 1996, is currently
100% leased.

Hunting Park, a 144,000 square-foot retail complex in Philadelphia opened
in April 1996. Its major tenants include Payless Shoes, US Kidz and Caldor.
Hunting Park cost $14.9 million and is currently 98% leased.

In California, Target and Best Buy opened in the Company's newly
constructed Marketplace at Riverpark in Fresno which, when completed, will have
453,000 square feet of retail stores, including 284,000 square feet of GLA,
which will cost a total of $26.5 million (of which $12.7 million had been
expended at January 31, 1997).* The Marketplace at Riverpark has been opening in
stages since September 1996. As of January 31, 1997, 215,000 square feet of GLA
has been leased, of which 114,000 square feet has been opened.

- ---------------

*The statements relating to this project are forward-looking statements and are
based on current facts and expectations. The completion of this project
involves various risks, including construction delays and cost overruns. See
"Risk Factors -- Real Estate Development and Investment Risks," "-- Dependence
on Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete discussion of
the risks associated with the completion of this project.

S-37
<PAGE> 42
The following table provides additional information regarding the shopping
centers opened in 1996.*
<TABLE>
<CAPTION>
COMPANY'S
DEVELOPED (D) DATE TOTAL COST SHARE OF TOTAL
OR OPENED/ COMPANY AT 100% COST SQUARE
PROPERTY LOCATION ACQUIRED (A) ACQUIRED OWNERSHIP(%) (IN MIL.) (IN MIL.) FEET GLA(1)
- ----------------------- ----------------- ------------- -------- ------------ ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Galleria at Sunset..... Henderson, NV D Feb-96 60% $ 82.0 $ 49.2 892,000 294,000
Hunting Park........... Philadelphia, PA D Apr-96 70 14.9 10.4 144,000 144,000
Bruckner Boulevard..... Bronx, NY D Sep-96 70 15.1 10.6 114,000 114,000
Marketplace at
Riverpark............ Fresno, CA D Sep-96 50 26.5 13.3 453,000 284,000
Atlantic Center........ Brooklyn, NY D Nov-96 75 75.2 56.4 391,000 391,000
Showcase............... Las Vegas, NV D Dec-96 20 76.9 15.4 189,000 189,000
------ ------ --------- ---------
Total............ $290.6 $ 155.3 2,183,000 1,416,000
====== ====== ========= =========
</TABLE>
- ---------------
(1) Represents the total square feet available for lease by the Company.
Remaining square footage is owned by anchors.

PROJECTS UNDER CONSTRUCTION. The Commercial Group currently has three
shopping center projects under construction, all of which are urban retail
centers in the New York City area. Grand Avenue, located in Queens, is a 100,000
square-foot center anchored by Edward's Supermarket. This neighborhood center is
projected to open in August 1997 at a cost of $23.6 million (of which $13.9
million had been expended at January 31, 1997).** Northern Boulevard, also in
Queens, is a 218,000 square-foot project, scheduled to open in November 1997 at
a cost of $39.4 million (of which $12.7 million had been expended at January 31,
1997), and will feature Marshall's, Edward's Supermarket and Old Navy as its
major tenants.** Gun Hill Road, in the Bronx, features a Home Depot store and
Sneaker Stadium. This center contains 147,000 square feet and is projected to
open in August 1997 at a cost of $13.5 million (of which $9.9 million had been
expended at January 31, 1997).** As of January 31, 1997, Grand Avenue was 80%
leased, Gun Hill Road was 100% leased and Northern Boulevard was 92% leased.

The following table sets forth additional information regarding shopping
centers under construction.***
<TABLE>
<CAPTION>
ESTIMATED COMPANY'S
DEVELOPED(D) DATE OF TOTAL COST SHARE TOTAL
OR OPENING/ COMPANY AT 100% OF COST SQUARE
PROPERTY LOCATION ACQUIRED(A) ACQUISITION OWNERSHIP(%) (IN MIL.) (IN MIL.) FEET GLA(1)
- ---------------- ----------- ------------- ----------- ------------ ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Grand Avenue.... Queens, NY D Q3-97 70% $ 23.6 $ 16.5 100,000 100,000
Gun Hill Road... Bronx, NY D Q3-97 70 13.5 9.5 147,000 147,000
Northern
Boulevard..... Queens, NY D Q4-97 70 39.4 27.6 218,000 218,000
------ ------ ------- -------
Total..... $ 76.5 $ 53.6 465,000 465,000
====== ====== ======= =======
</TABLE>
- ---------------
(1) Represents the total square feet available for lease by the Company.
Remaining square footage is owned by anchors.

PROJECTS UNDER DEVELOPMENT. In 1997, construction will begin on two
enclosed regional malls. The first, which will be located between Los Angeles
and San Diego in Temecula, California and will comprise 940,000 square feet on
two levels, initially featuring three department stores, is expected
- ---------------
*Construction remains to be completed at the Marketplace at Riverpark,
Atlantic Center and the Showcase. Accordingly, with respect to these
projects, the information in the table concerning total cost, the Company's
share of total cost, total square feet and GLA are forward-looking
statements. The completion of these projects is subject to various
development risks, including cost overruns and construction delays. See "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete description
of risks associated with the completion of these projects.

**The statements relating to this project are forward-looking statements and
are based on current facts and expectations. The completion of this project
involves various risks, including construction delays and cost overruns. See
"Risk Factors -- Real Estate Development and Investment Risks,"
"-- Dependence on Rental Income From Real Property," "-- Changes in Interest
Rates," "-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete discussion
of the risks associated with the completion of this project.

***This table presents forward-looking information concerning various projects
under construction and is based on current facts and expectations. The
completion of these projects is subject to significant risks, including cost
overruns and construction delays. See "Risk Factors -- Real Estate
Development and Investment Risks," "-- Dependence on Rental Income From Real
Property," "-- Changes in Interest Rates," "-- Tax-Exempt and UDAG
Financing," "-- Reliance on Major Tenants," "-- Competition" and
"-- Partnership Risks," for a more complete description of the risks
associated with the construction of these projects.

S-38
<PAGE> 43

to open in the first quarter of 1999. An expansion is currently committed for
one additional department store. The mall will have approximately 293,000 square
feet of GLA and is estimated to cost $60.9 million (of which $0.8 million had
been expended at January 31, 1997).*

The other mall under active development will be located in suburban
Pittsburgh, adjacent to the Company's existing power center in Robinson
Township. This two-level mall, located near the recently completed Pittsburgh
International Airport, will have approximately 291,000 square feet of GLA and
four department stores comprising approximately 1.0 million total square feet.
Estimated cost is approximately $78.9 million (of which $16.8 million had been
expended at January 31, 1997).* In 1996, the Company received $5.6 million from
sales of outlots adjacent to this mall site. An additional 170 acres adjacent to
the new mall site are available for future sale or development.

In 1997, the Company will also begin construction on a new 163,000
square-foot complex in a major retail area in downtown Pasadena, California.
This shopping center, adjacent to an existing Macy's department store, will
feature specialty retail, entertainment and restaurants. This project is
expected to open in 1999 at a total estimated cost of $28.1 million (of which
$1.3 million had been expended at January 31, 1997).* Continuing its New York
City metropolitan area development program, the Company plans to begin
construction in 1997 on Metropolitan Avenue, a 113,000 square-foot retail center
in Queens. This project, expected to open in 1998, is anchored by Regal Cinemas
and will cost approximately $26.0 million (of which $2.2 million had been
expended at January 31, 1997).*

The following table sets forth additional information regarding shopping
centers under development.**

<TABLE>
<CAPTION>
TOTAL
COST COMPANY'S
DEVELOPED(D) ESTIMATED AT 100% SHARE TOTAL
OR DATE OF COMPANY (IN OF COST SQUARE
PROPERTY LOCATION ACQUIRED(A) OPENING OWNERSHIP(%) MIL.) (IN MIL.) FEET GLA(1)
- ---------------------- ------------------ ------------- --------- ------------ -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
42nd Street........... Manhattan, NY D 1998 70% $ 79.0 $ 55.3 291,000 291,000
Atlantic City......... Atlantic City, NJ D 1998 80 42.2 33.8 254,000 254,000
Metropolitan Avenue... Queens, NY D 1998 70 26.0 18.2 113,000 113,000
Richmond Avenue....... Staten Island, NY D 1998 70 20.2 14.1 76,000 76,000
Pasadena.............. Pasadena, CA D 1999 50 28.1 14.1 163,000 163,000
Temecula.............. Temecula, CA D 1999 75 60.9 45.7 940,000 293,000
Galleria at Sunset
Expansion............ Henderson, NV D 2000 60 27.6 16.6 477,000 139,000
Pittsburgh Mall....... Pittsburgh, PA D 2000 67 78.9 52.9 1,008,000 291,000
------ ------ --------- -------
Total.............. $362.9 $ 250.7 3,322,000 1,620,000
====== ====== ========= =========
</TABLE>

- ---------------
(1) Represents the total square feet available for lease by the Company.
Remaining square footage is owned by anchors.

ENTERTAINMENT: A NEW GROWTH OPPORTUNITY. The Company is capitalizing on the
trend in large metropolitan areas to build new major downtown or waterfront
attractions to revitalize the urban core. In addition, it is working with
communities that seek new multi-million dollar gaming and other entertainment
attractions. The Company believes urban locations will continue to provide
viable

- ---------------

*The statements relating to this project are forward-looking statements and are
based on current facts and expectations. The completion of this project
involves various risks, including an inability to obtain financing or
government entitlements construction delays and cost overruns. See "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete discussion of
the risks associated with the completion of this project.

**This table presents forward-looking information concerning various projects
under development and is based on current facts and expectations. The
completion of these projects is subject to significant risks, including an
inability to obtain financing or required government entitlements, cost
overruns and construction delays. See "Risk Factors -- Real Estate Development
and Investment Risks," "-- Dependence on Rental Income From Real Property,"
"-- Changes in Interest Rates," "-- Tax-Exempt and UDAG Financing,"
"-- Reliance on Major Tenants," "-- Competition" and "-- Partnership Risks,"
for a more complete description of the risks associated with the development
of these projects.

S-39
<PAGE> 44

entertainment and retail opportunities for developers who know how to work
effectively in public/ private partnerships. See "Strategy for Growth and
Competitive Advantages -- New Development."

Forest City's most visible entertainment projects are Showcase and 42nd
Street located in the Time Square area of New York City. See "-- Projects Opened
in 1996" and "-- Projects Under Development," above. The Commercial Group
expects to commence construction in 1997 at 42nd Street, a 291,000 square-foot
entertainment and retail complex. The Company has played an integral role in the
New York City and State of New York governments' programs to revitalize Times
Square. The Company has entered into ground leases with 42nd Street Development
Project, Inc. and New 42nd Street, Inc. and executed leases with Madame
Tussaud's Wax Museum, AMC Theaters, HMV Records and Just For Feet. This project
is expected to cost $79 million (of which $5.1 million had been expended at
January 31, 1997).*

Forest City has signed an agreement to connect The Galleria at Sunset with
a new hotel/casino and ice rink to be constructed and owned by Santa Fe Gaming
Corporation. This agreement is subject to various conditions, including Santa Fe
Gaming Corp.'s receipt of financing. If completed, this project will be the
first entertainment and gaming complex in the United States to be attached to a
regional shopping center. The casino will include a 300-room hotel, six to eight
restaurants, and an Olympic-sized ice arena seating 2,500 spectators.*

The Company has entered into an agreement with MGM Grand, Inc. ("MGM") to
develop approximately 30 acres of land on the Atlantic City boardwalk adjacent
to the Showboat Casino. MGM is working with local authorities to plan and
develop the adjoining casino-zoned land which consists of approximately 40
additional acres. Under the agreement, the Company would build and own a 254,000
square foot entertainment and retail complex as a component of a world class
casino/resort to be constructed by MGM. The agreement with MGM provides that a
portion of the payment to be received by the Company would be paid in shares of
MGM stock. This project is in a very early stage of development, and like the
Company's other projects under development is subject to numerous risks that may
cause it to not be completed in its present form or at all.*

EXISTING PORTFOLIO. The Company's existing shopping center portfolio
consists of 14 regional malls containing a total of 10.6 million square feet,
including anchors, and 4.3 million square feet of GLA. The Commercial Group also
owns 16 Specialty Retail Centers (including urban retail centers, power centers,
entertainment-based retail centers and community centers) with total GLA of 3.4
million square feet. The properties are located in 11 states, including seven in
Ohio, six in New York and four in California.

At January 31, 1997, 83% and 94% of the GLA in the Company's regional malls
and Specialty Retail Centers, respectively, was leased compared to 84% and 94%
at the end of 1995 and 84% and 91% in 1994, respectively. Forest City
aggressively markets vacant mall space to temporary tenants to create an
improved ambiance and retail mix within the centers. In its regional malls, the
Company also emphasizes the inclusion of "carts" with distinctive merchandise
that add visual and retail interest to the properties. While these tenants are
not under long-term leases, revenue generated from temporary mall and cart
tenants totaled $2.8 million, $2.7 million and $2.3 million, during 1996, 1995
and 1994, respectively. If square footage occupied by temporary tenants were
included, the regional mall GLA would have been 92% leased at January 31, 1997.

Average sales per square foot of GLA on a comparable basis at the Company's
regional malls were $265, $268 and $265 for 1994, 1995 and 1996, respectively.
Comparable sales figures for Specialty Retail Centers are not computed, as many
tenants at Specialty Retail Centers have no

- ---------------

* The statements relating to this project are forward-looking statements and are
based on current facts and expectations. The completion of this project
involves various risks, including an inability to obtain financing or
government entitlements, construction delays and cost overruns. See "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete discussion of
the risks associated with the completion of this project.

S-40
<PAGE> 45

obligation to report sales and many centers have not been open for more than one
year. The Company's existing shopping center leases contain contractual
aggregate net rental increases of $24.6 million over the next five years and
$22.4 million over the succeeding five year period.

The Company maintains tight cost controls and leverages its economies of
scale to minimize operating expenses. At January 31, 1997, the Company's
property level expenses for shopping centers open since February 1, 1994 had
increased at a compound annual average rate of only 0.5%.

The Company believes its regional shopping centers generally occupy secure
retail niches within their respective marketplaces. The Company's ability to
increase the value of its properties is demonstrated by the fact that net
operating income increased at a compound annual average rate of 4.4% for
regional malls in operation throughout the period from February 1, 1987 to
January 31, 1997. Below are descriptions of some of the Company's shopping
centers.

The Company's largest regional mall is Tucson Mall, which opened in 1982. A
major expansion in 1991 added one department store and additional GLA. Today the
mall contains 1,293,000 total square feet with 408,000 square feet of GLA. With
six department stores, it is the dominant mall in Southern Arizona. In 1996, the
mall generated $326 of sales per square foot of GLA, and at January 31, 1997,
was 95% leased.

Charleston Mall, the dominant retail center in West Virginia, was the
Company's first urban retail development, and its first major public/private
partnership development. The mall's unique three level design allowed for
897,000 total square feet with four department stores, and parking for 5,000
cars located on 22.9 acres in the center of downtown Charleston. The mall was
the key element in the renewal of Charleston's urban core. The mall generated
$338 per square foot in GLA in 1996 and at January 31, 1997 was 86% leased.
Based on a letter of intent, the Company anticipates entering into a new lease
that would bring the mall's occupancy to 95%. No assurance can be given,
however, that the letter of intent will lead to the execution of a lease.

The Avenue at Tower City, the retail portion of the Company's largest
mixed-use development, is a three level shopping center located in the center of
downtown Cleveland adjacent to the hub of Cleveland's bus and lightrail
transportation system. The 368,000 square foot Avenue was designed as a focal
point for the community and is a key element of Cleveland's downtown
renaissance. The mall generated sales of $319 per square foot of GLA in 1996 and
at January 31, 1997 was 93% leased.

The Plaza at Robinson Town Center is a 455,000 square foot power center
located in the Company's major development near Pittsburgh's new International
Airport, anchored by the only IKEA store in its market. Opened in 1989, The
Plaza, which was 98% leased at January 31, 1997, is the first phase of the
Robinson Town Center plan, which includes 715 acres for mixed-use development.
Approximately 160 acres have been sold as of January 31, 1997 to 12 retailers
who have built in excess of 600,000 square feet of retail space. The Pittsburgh
Mall, a 1,000,000 square foot regional mall, is under active development, and
397 acres have been designated for future retail or commercial use. Construction
of the nearby Pittsburgh Mall will begin in 1998. It is anticipated that the
Robinson project, when completed, will be the largest commercial development in
western Pennsylvania.*

Three of the Company's regional malls, Rolling Acres, Summit Park Mall and
Canton Centre, have experienced poor operating results. Each of these properties
have been targeted for repositioning. If these three centers were excluded from
the regional mall leasing and sales data, the

- ---------------

*The statements relating to this project are forward-looking statements and
are based on current facts and expectations. The completion of this project
involves various risks, including an inability to obtain financing or
government entitlements, construction delays and cost overruns. See "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete discussion
of the risks associated with the completion of this project.

S-41
<PAGE> 46

regional malls would have been 87%, 88% and 87% leased at the end of 1994, 1995
and 1996, respectively, and comparable sales per square foot would have been
$286, $290 and $288 for the same periods.

Expansion and Renovation. The process of creating a desirable environment
for retailers and shoppers requires periodic updating of the physical facilities
of all the retail centers. An integral part of the Company's management of its
existing shopping center portfolio involves expanding and renovating properties
to maintain and enhance their value. In the past three years, the Company has
expanded, renovated and/or committed to renovate eight shopping centers for a
total cost of $52.7 million ($34.2 million of which is the Company's share).
Examples of this ongoing program include Boulevard Mall in Amherst, New York and
Ballston Common in Arlington, Virginia.

At Boulevard Mall, the first mall developed by the Company, a renovation
program to physically update the property will be completed in May, 1997.*This
will be the third such program implemented during the 35 year history of this
property. From February 1, 1987 through January 31, 1997, the net operating
income of this mall grew at a compounded annual rate of 5.7%, demonstrating the
ability of older properties to continue to contribute to the Company's intended
growth.

At Ballston Common in Arlington, Virginia, the Company increased its
ownership in 1994 from 50% to 100% by purchasing the interest of its
institutional partner. As a result of the improving demographics in its market
and the desire to properly service the needs of a dense population base, the
center is being expanded to add a 60,000 square foot cinema and 21,000 square
feet of retail space, which will be leased entirely to restaurant and
entertainment tenants. The Company believes this expansion will broaden the
market appeal of the mall by capturing the significant entertainment
expenditures of the local population base. The Unleveraged Return on Cost for
this investment is projected to be 12.4%.*

Ballston Common is an example of how the Company is utilizing its expertise
to add entertainment complexes to existing retail properties to enhance their
appeal to shoppers, making them a "destination" location. During 1997, theater
and restaurant complexes also will be added at Courtland Center in Flint,
Michigan; and South Bay Galleria in Redondo Beach, California.*

Leasing and Marketing. Most of the Company's leases are structured on
triple net basis requiring tenants to pay most operating expenses. The Company
strictly controls expenses and capital expenditures to minimize tenant occupancy
costs, allowing for continued base rent appreciation. At January 31, 1997,
property level expenses since February 1, 1994 had increased at a compound
annual average rate of 0.6%, well below the inflation rate for the comparable
period. The Company believes that keeping increases in operating expenses as low
as possible is a way of maintaining a positive long-term landlord/tenant
relationship.

During 1995 and 1996, the Company executed a total of 422 new and renewal
leases representing 841,814 square feet. These leases generated an average
increase in base rent of $2.61 per square foot, or 13.5%. These leases had an
average base rent of $22.42 per square foot. There can be no assurance that the
Company will be able to sustain the same magnitude of lease increases in the
future.

The Company believes its retail sales performance can be positively
impacted by an aggressive and innovative management and marketing program. An
example of the implementation of this program is the Company's arrangement with
leading national retailers such as Disney to bring their special attractions to
the Company's malls, which enhance the competitive advantages of these
properties.

- ---------------

*The statements relating to these proposed expansions and/or renovations are
forward-looking statements and are based on current facts and expectations. The
completion of these proposed expansions and/or renovation's involves various
risks, including construction delays and cost overruns. See "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants" and
"-- Competition," for a more complete discussion of the risks associated with
the completion of these proposed expansions and/or renovations.

S-42
<PAGE> 47

The following table summarizes the Company's existing shopping centers as
of January 31, 1997.

<TABLE>
<CAPTION>
YEAR
COMPLETED/ RETAIL SQ. FT.
DATE OF LAST COMPANY INCLUDING
NAME RENOVATION OWNERSHIP(%) LOCATION MAJOR ANCHORS DEPT. STORES GLA
- ------------------ ------------ ------------ ----------------- ----------------------------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
REGIONAL MALLS
Antelope Valley
Mall............. 1990 40.0% Palmdale, CA Sears Roebuck and Co.; JC Penney's; 839,000 287,000
Gottshalk's; Harris; Mervyn's
The Avenue at
Tower
City............. 1990/1996 100.0 Cleveland, OH Dillard's 368,000 368,000
Ballston Common... 1986/1995 100.0 Arlington, VA Hecht's; JC Penney's 490,000 221,000
Boulevard Mall.... 1962/1996 50.0 Amherst, NY Jenss; JC Penney's; Kaufmann's 772,000 261,000
Canton Centre..... 1981/1988 100.0 Canton, OH Kaufmann's; JC Penney's; Montgomery 680,000 254,000
Ward
Chapel Hill
Mall............. 1966/1995 50.0 Akron, OH Kaufmann's; JC Penney's; Sears 882,000 321,000
Roebuck and Co.
Charleston Town
Center........... 1983/1994 50.0 Charleston, WV Kaufmann's; JC Penney's; Sears 897,000 360,000
Roebuck and Co.; Montgomery Ward
Courtland
Center........... 1968/1986 100.0 Flint, MI Crowley's; JC Penney's; Mervyn's 460,000 239,000
Galleria at
Sunset........... 1996 60.0 Henderson, NV Dillard's; Robinson-May; Mervyn's; 892,000 294,000
JC Penney's
Manhattan Town
Center........... 1987 37.5 Manhattan, KS Dillard's; JC Penney's; Sears 380,000 185,000
Roebuck and Co.
Rolling Acres
Mall............. 1975 80.0 Akron, OH Kaufmann's; JC Penney's; Sears 1,014,000 365,000
Roebuck and Co.; Dillard's; Target
South Bay
Galleria......... 1985 50.0 Redondo Beach, CA May Co.; Mervyn's; Nordstrom's 953,000 385,000
Summit Park
Mall............. 1972 100.0 Wheatfield, NY Bon-Ton; Jenss; Sears Roebuck and 695,000 309,000
Co.
Tucson Mall....... 1982/1992 67.5 Tucson, AZ Broadway's; Foley's; Dillard's; 1,293,000 408,000
Mervyn's; JC Penney's; Sears
Roebuck and Co.
---------- ---------
Subtotal....... 10,615,000 4,257,000
---------- ---------
SPECIALTY RETAIL CENTERS
Atlantic Center... 1996 75.0% Brooklyn, NY Caldor; The Sports Authority; 391,000 391,000
Pathmark; OfficeMax
Bowling Green
Mall............. 1966 50.0 Bowling Green, KY Kroger; Quality Big Lots 242,000 242,000
Bruckner
Boulevard........ 1996 70.0 Bronx, NY Pergament; Seaman's; Young World; 114,000 114,000
Old Navy
Chapel Hill
Suburban......... 1969 50.0 Akron, OH Value City; Petzazz 112,000 112,000
Courtyard......... 1990 50.0 Flint, MI V.G.'s Market; Home Depot; 233,000 124,000
OfficeMax
Flatbush Avenue... 1995 80.0 Brooklyn, NY Caldor 90,000 90,000
Gallery at
MetroTech........ 1990 80.0 Brooklyn, NY Toys "R" Us 163,000 163,000
Golden Gate....... 1958/1996 50.0 Mayfield Hts., OH OfficeMax; Old Navy; Koenig; 260,000 260,000
Michael's; Home Place
Hunting Park...... 1996 70.0 Philadelphia, PA Caldor; US Kidz; Payless Shoes 144,000 144,000
Marketplace at
Riverpark........ 1996 50.0 Fresno, CA Best Buy; Target; Marshall's; JC 453,000 284,000
Penney's
Midtown Plaza..... 1961 50.0 Parma, OH Hills 256,000 256,000
Newport Plaza..... 1977 50.0 Newport, KY IGA 157,000 157,000
The Plaza at
Robinson Town
Center........... 1989 50.0 Pittsburgh, PA T.J. Maxx; IKEA; Hills; Marshall's; 455,000 455,000
Sears Roebuck and Co.
Showcase.......... 1996 20.0 Las Vegas, NV Coca-Cola(R); All Star Cafe 189,000 189,000
South Bay
Southern......... 1978 100.0 Redondo Beach, CA CompUSA; General Cinema 160,000 160,000
Tucson Place...... 1989 100.0 Tucson, AZ Wal-Mart; Homelife; OfficeMax; 276,000 276,000
Smitty's
---------- ---------
Subtotal....... 3,695,000 3,417,000
---------- ---------
Shopping Centers at January 31, 1997 14,310,000 7,674,000
========== =========
Shopping Centers at January 31, 1996 13,422,000 6,938,000
========== =========
</TABLE>

S-43
<PAGE> 48

ANCHOR AND SIGNIFICANT TENANTS. Anchor stores are a critical factor to the
success of any retail mall. The customer's identification with a property
typically focuses on its anchors. Regional mall anchors generally are department
stores whose merchandise appeals to a broad range of shoppers. Although the
regional malls derive minimal operating income from anchor stores as compared to
mall stores, strong anchors play an important part in generating customer
traffic and in making the centers desirable locations for mall store tenants.
See "Risk Factors -- Dependence on Rental Income from Real Property."

Of the approximately 10.6 million square feet in the Company's regional
malls, approximately 4.6 million square feet or 43% is owned directly by the
mall anchor stores. Each mall anchor that owns its own store typically enters
into a reciprocal easement agreement with the other owners in the retail center
covering, among other things, operating covenants, reciprocal easements,
property operations, initial construction and future expansions.

The following table sets forth anchor stores occupying greater than three
sites and the number of square feet owned or leased by such anchors as of
January 31, 1997.

<TABLE>
<CAPTION>
TOTAL
NUMBER OF OCCUPIED
ANCHOR ANCHOR STORES (SQ. FT.)
-------------------------------------------------- ------------- ---------
<S> <C> <C>
JC Penney's....................................... 11 1,469,587
Sears Roebuck and Co.............................. 7 1,043,631
May Company/Kaufmann's............................ 8 1,472,478
Dillard's......................................... 5 594,749
Mervyn's/Target................................... 6 502,578
---------
Total........................................ 5,083,023
=========
</TABLE>

Other retail centers generally have anchor tenants that are large specialty
retailers, such as toy stores, home improvement stores, or grocery stores. Most
such anchors lease their locations from the mall owners under long term leases.

The following table identifies tenants that lease more than 100,000 square
feet of GLA in the Commercial Group's shopping centers.

<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE OF
LEASED OF SHOPPING
NUMBER OF SQ. SHOPPING CENTER BASE
TENANT(1) STORES FT.(2) CENTER GLA RENT(3)
-------------------------------- --------- --------- ------------ -------------
<S> <C> <C> <C> <C>
The Limited..................... 72 464,374 6.1% 7.8%
Caldor(4)....................... 3 334,091 4.4 4.4
Woolworth....................... 57 206,889 2.7 3.7
The GAP......................... 14 119,494 1.5 1.7
---- ----
Total...................... 1,124,848 14.7% 17.6%
==== ====
</TABLE>

- ---------------
(1) The tenant name includes all space associated with the various trade names
for the tenant.
(2) Represents 100% of the square footage of GLA, not Forest City's
proportionate share.
(3) Represents Forest City's proportionate share of net shopping center base
rent. Net shopping center base rent equals contractual rent for the year
ended January 31, 1997.
(4) Caldor is currently in bankruptcy proceedings and has rejected its lease at
Flatbush Avenue in Brooklyn for 90,000 square feet, which are included under
"Leased Sq. Ft." in the table. See "Risk Factors -- Dependence on Rental
Income From Real Property."

SHOPPING CENTER LEASES AND TENANT LEASE EXPIRATIONS. Current mall store
leases generally provide for tenants to pay rent comprised of two elements. The
first element is a fixed "base rent," often subject to increase according to a
schedule agreed upon at the time an agreement to lease is signed. The second
element is "percentage rent," which is based on a percentage of the tenant's
gross sales to the extent that the resultant rent exceeds the "base rent" or
these sales exceed a

S-44
<PAGE> 49

stated annual amount. While the percentage rent clause is important in enhancing
a shopping center's cash flow and value in an inflationary environment, the
Company's net rental revenue is derived predominantly from contractual base
rent. In the year ended January 31, 1997, base rent accounted for approximately
96% of total shopping center rental revenue, excluding cost recoveries.

Scheduled annual expirations over the next ten years for shopping center
leases in place at January 31, 1997 average approximately 6.8% of total occupied
mall store GLA, with no single year exceeding 8.0%. The average remaining term
of shopping center leases in place is 5.2 years. The following table shows lease
expirations for the next ten years of the Company's shopping centers, assuming
that none of the tenants exercise their renewal options. See "Risk
Factors -- Reliance on Major Tenants."

<TABLE>
<CAPTION>
PERCENT PERCENT
NUM. OF SQ. FT. OF TOTAL OF TOTAL AVG. BASE
LEASES OF LEASES LEASED BASE RENT BASE RENT/SQ. FT.
EXPIRATION YEAR EXPIRING EXPIRING(1) GLA EXPIRING(2) RENT(2) EXPIRING(3)
- ---------------------- -------- ----------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
1997.................. 183 441,389 6.6% $ 4,552,509 6.0% $15.96
1998.................. 152 405,492 6.1 4,316,756 5.7 9.64
1999.................. 139 504,242 7.6 3,906,283 5.2 12.40
2000.................. 219 519,415 7.8 7,423,471 9.8 21.32
2001.................. 121 371,116 5.6 3,644,718 4.8 13.40
2002.................. 119 400,349 6.0 5,730,837 7.6 9.99
2003.................. 126 426,731 6.4 6,124,636 8.1 21.47
2004.................. 117 432,591 6.5 5,020,284 6.7 11.88
2005.................. 126 499,075 7.5 6,385,690 8.5 19.47
2006.................. 183 508,237 7.6 7,786,562 10.3 20.20
All Other............. 95 2,151,993 32.3 20,574,195 27.3 12.49
-------- ----------- -------- ----------- -------- ------
Total............ 1,580 6,660,630 100.0% $75,465,941 100.0% $17.16
======= ========= ====== ============ ====== ======
</TABLE>

- ---------------

(1) Represents 100% of the shopping center's GLA expiring, not Forest City's
proportionate share.
(2) Computed at Forest City's proportionate share of annualized base rent.
Annualized net base rent equals the contractual base rent for the month
ended January 31, 1997, annualized for 12 months, excluding increases in
operating expenses and real estate taxes over the base rent.
(3) Represents contracted net annualized base rent per square foot computed at
100%, rather than at Forest City's proportionate rate.

OFFICE, MIXED-USE AND HOTEL

In its office development activities, Forest City is primarily a
build-to-suit developer which works with tenants to meet their highly
specialized requirements. The Company's office development has focused primarily
on mixed-use projects in urban developments, often built in conjunction with
hotels and shopping centers or as part of a major office campus. As a result of
this focus on new urban developments, 50% of the Company's office buildings were
built within the last seven years and are concentrated in four new urban
developments located in Brooklyn, Cleveland, Cambridge and Pittsburgh.

PROJECTS UNDER CONSTRUCTION. At the Company's MetroTech complex in
Brooklyn, construction began in 1996 on the 317,000 square-foot Nine MetroTech
office building, the headquarters for the New York City Fire Department. This
project, in which the Company will have a 65% interest, is anticipated to be
completed in 1998 at a total cost of $59.7 million.* Upon its completion early
in

- ---------------

*The statements relating to this project are forward-looking statements and are
based on current facts and expectations. The completion of this project
involves various risks, including construction delays and cost overruns. See
"Risk Factors -- Real Estate Development and Investment Risks," "-- Dependence
on Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants" and
"-- Competition," for a more complete discussion of the risks associated with
the completion of this project.

S-45
<PAGE> 50

1998, the MetroTech complex and the adjoining One Pierreport Plaza will include
3,100,000 square feet of office space in the six buildings in which the Company
owns an interest.

In February 1997, the Company, the designated developer of University Park
at MIT in Cambridge, commenced construction on the next phase of University Park
at MIT. MIT, the ground lessor of this development, has now joined the Company
as a 50% joint venture partner in the development of the current phase of this
project. This new phase, which is scheduled to open in 1998, will feature a
$76.1 million mixed-use development that will include 77,000 square feet of
office space, a 210-room hotel managed by DoubleTree, 95,000 square feet of
retail space with CompUSA and Star Market as anchor tenants, and a 950 car
parking garage.*

Both of these mixed-use projects have additional land available for further
development or sale, allowing the Company to continue capitalizing on the
strength of the projects as they grow and mature over time.

The following table sets forth additional information regarding office
buildings under construction.**

<TABLE>
<CAPTION>
TOTAL
ESTIMATED COST COMPANY'S
DEVELOPED(D) DATE OF AT 100% SHARE TOTAL
OR OPENING/ COMPANY (IN OF COST SQUARE
PROPERTY LOCATION ACQUIRED(A) ACQUISITION OWNERSHIP(%) MIL.) (IN MIL.) FEET GLA(1)
- ------------------------- ---------------- ------------- ----------- ------------ -------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine MetroTech........... Brooklyn, NY D Q1-98 65% $ 59.7 $38.8 317,000 317,000
University Park at MIT
(2)..................... Cambridge, MA D Q1-98 50 76.1 38.1 172,000 172,000
------ ------ ------- -------
Total................. $135.8 $76.9 489,000 489,000
====== ====== ======= =======
</TABLE>

- ---------------

EXISTING PORTFOLIO. The Company's existing portfolio of office/mixed-use
and hotel projects consists of 20 office buildings containing 6.4 million square
feet, including mixed-use projects with an aggregate of 164,000 gross leasable
square feet of retail space and five hotels with 1,530 rooms. The majority of
Forest City's office space is located in large, Class A buildings in four
mixed-use projects located in major urban centers. Class A buildings generally
are those that have above average size, design, location and access, attract
high quality tenants, are well maintained and professionally managed, and
achieve among the highest rent, occupancy and tenant retention rates within
their markets. The Company's leases are generally structured on a "gross" basis
wherein fixed lease payments are inclusive of net rent, current operating
expenses and current real estate taxes. In addition, tenants generally pay
increases in operating expenses and real estate taxes above their respective
base year amounts.

At January 31, 1995, 1996 and 1997, occupancy for the Company's office
buildings was 91%, 92%, and 95%, respectively. Average rental rates for new
leases and renewals with existing tenants increased 6.0% from 1994 to 1995 and
36.4% from 1995 to 1996. The existing leases in the office portfolio contain
contractual aggregate net rent increases of $10.7 million over the next
five-years and $14.3 million over the succeeding five-year period.

- ---------------

*The statements relating to this project are forward-looking statements and are
based on current facts and expectations. The completion of this project
involves various risks, including an inability to obtain financing or
government entitlements, construction delays and cost overruns. See "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete discussion of
the risks associated with the completion of this project.

**This table presents forward-looking information concerning projects under
construction and is based on current facts and expectations. The completion of
these projects is subject to significant risks, including cost overruns and
construction delays. See "Risk Factors -- Real Estate Development and
Investment Risks," "-- Dependence on Rental Income From Real Property,"
"-- Changes in Interest Rates," "-- Tax-Exempt and UDAG Financing,"
"-- Reliance on Major Tenants," "-- Competition" and "-- Partnership Risks,"
for a more complete description of the risks associated with the completion of
these projects.

S-46
<PAGE> 51

The Company maintains tight expense controls and leverages its economies of
scale to minimize operating expenses. The Company's property level expenses for
office buildings open since 1994 have decreased a compound annual average rate
of 0.7%.

The majority of the Company's interests in office and mixed-use projects is
aggregated in four developments located in Brooklyn, Cleveland, Cambridge and
Pittsburgh:

MetroTech. The MetroTech complex, located on 16 acres controlled by the
Company in downtown Brooklyn, currently consists of four high-tech office
buildings (One MetroTech, Two MetroTech, Ten MetroTech and Eleven MetroTech)
with over 2,000,000 square feet leased to major tenants such as Brooklyn Union
Gas, Bear Stearns & Co. Inc., Securities Industry Automation Corp., the Internal
Revenue Service and the City of New York. These four buildings are currently 99%
leased. Adjacent to MetroTech is the Company's One Pierrepont Plaza containing
672,000 square feet and including Morgan Stanley & Co. Incorporated and Goldman,
Sachs & Co. among its major tenants. This project, in which occupancy exceeds
99%, was the first major office building developed in Brooklyn in over 25 years.
In addition, the Company sold the development rights to two parcels on which The
Chase Manhattan Bank has built two office buildings. Land and development rights
are available for two additional buildings at MetroTech.

Tower City. The Company owns four office buildings, containing
approximately 1.5 million square feet, in Tower City Center in Cleveland, Ohio.
Tower City is connected to the Gateway Sports Complex, home of the Cleveland
Indians baseball team and the Cleveland Cavaliers basketball team, and houses a
368,000 square foot retail center and 11-screen movie theater complex. Tower
City is comprised of Terminal Tower, Chase Financial Tower, M.K. Ferguson Plaza
and Skylight Office Tower, and had an occupancy of 91% at January 31, 1997. In
addition, the Company owns the 208-room Ritz Carlton in Tower City. Remaining
within the Tower City complex are 8.5 acres of adjacent land and air rights
available for future development or sale. In 1995, the Company sold five
additional acres for $18.3 million as the site for a future Federal court house
which will be connected to the Tower City complex.

University Park at MIT. This office complex, located next to MIT,
currently contains three buildings (the Clark, Jackson and Richards Buildings)
totalling 347,000 square feet, which are 100% occupied. Development rights are
in place for an additional 1.4 million square feet of mixed-use development
after completion of the current phase of the project under construction. See
"-- Projects Under Construction."

Liberty Center. This mixed-use project in downtown Pittsburgh is connected
to the Pittsburgh convention center. Liberty Center includes 526,000 square feet
of office space, which is 94% leased. Federated Investors occupies 65% of the
available office space under a long-term lease. The project also includes a
616-room DoubleTree Hotel that was completely renovated in 1996, 30,258 square
feet of retail space and a 498-car parking facility.

S-47
<PAGE> 52

The following table summarizes the Commercial Group's existing office
buildings as of January 31, 1997.
<TABLE>
<CAPTION>
YEAR
COMPLETED COMPANY
NAME OR ACQUIRED OWNERSHIP (%) LOCATION MAJOR TENANTS
- ---------------------------- ----------- -------------- ---------------------- ----------------------------
<S> <C> <C> <C> <C>
METROTECH CENTER
Eleven MetroTech
Center.................. 1995 65.0% Brooklyn, NY E-911 -- City of New York
One MetroTech............. 1991 65.0 Brooklyn, NY Brooklyn Union Gas; Bear,
Stearns & Co., Inc.
One Pierrepont Plaza...... 1988 85.0 Brooklyn, NY Morgan Stanley & Co.,
Incorporated; Goldman,
Sachs & Co.; U.S. Attorney
Ten MetroTech Center...... 1991 80.0 Brooklyn, NY Internal Revenue Service
Two MetroTech............. 1990 65.0 Brooklyn, NY Securities Industry
Automation Corp.
Subtotal................
TOWER CITY CENTER
Chase Financial Tower..... 1991 95.0% Cleveland, OH Chase Financial
M.K. Ferguson Plaza(1).... 1990 1.0 Cleveland, OH M.K. Ferguson; Chase
Financial
Skylight Office Tower..... 1991 85.0 Cleveland, OH Ernst & Young, L.L.P.
Terminal Tower............ 1983 100.0 Cleveland, OH Forest City
Subtotal................
MIT
Clark Building............ 1989 50.0% Cambridge, MA Oravax
Jackson Building.......... 1987 100.0 Cambridge, MA Ariad Pharmaceuticals
Richards Building......... 1990 100.0 Cambridge, MA Genzyme Tissue Repair;
Alkermes
Subtotal................
OTHER
Chagrin Plaza I & II...... 1969 66.7% Beachwood, OH National City Bank
Emery-Richmond............ 1991 50.0 Warrensville Hts., OH Allstate Insurance
Halle Building............ 1986 75.0 Cleveland, OH Sealy, Inc.; North American
Refractories Co.
Liberty Center............ 1986 50.0 Pittsburgh, PA Federated Investors
San Vicente............... 1983 25.0 Brentwood, CA Foote, Cone; Needham, Harper
Signature Square I........ 1986 50.0 Beachwood, OH Ciuni & Panichi
Signature Square II....... 1989 50.0 Beachwood, OH Sterling Software
Station Square............ 1994.... 25.0 Pittsburgh, PA Woodsons; Grand Concourse
Subtotal................
Office Buildings at January 31, 1997 and 1996

<CAPTION>
LEASABLE
SQUARE
NAME FEET
- ---------------------------- -----------
<S> <C>
METROTECH CENTER
Eleven MetroTech
Center.................. 216,000
One MetroTech............. 932,000

One Pierrepont Plaza...... 672,000

Ten MetroTech Center...... 409,000
Two MetroTech............. 521,000
----------
Subtotal................
2,750,000
----------
TOWER CITY CENTER
Chase Financial Tower..... 119,000
M.K. Ferguson Plaza(1).... 482,000

Skylight Office Tower..... 321,000
Terminal Tower............ 583,000
----------
Subtotal................
1,505,000
----------
MIT
Clark Building............ 122,000
Jackson Building.......... 99,000
Richards Building......... 126,000
----------
Subtotal................
347,000
----------
OTHER
Chagrin Plaza I & II...... 116,000
Emery-Richmond............ 5,000
Halle Building............ 379,000

Liberty Center............ 526,000
San Vicente............... 469,000
Signature Square I........ 79,000
Signature Square II....... 81,000
Station Square............ 144,000
----------
Subtotal................
1,799,000
----------
Office Buildings at January 6,401,000
==========
</TABLE>

- ---------------

(1) Syndicated. See "Risk Factors -- Potential Liability From Syndicated
Properties."

S-48
<PAGE> 53

OFFICE BUILDING TENANT LEASE EXPIRATIONS. Over the next five years,
scheduled annual expirations in office leases in place at January 31, 1997
average approximately 7.3% per year of Forest City's total occupied leasable
office area, with no single year exceeding 11%. The average remaining term of
significant office leases (20,000 square feet or more) is 8.3 years. The
following table shows lease expirations for the next ten years at the Company's
office buildings, assuming that none of the tenants exercises any of their
renewal options.

<TABLE>
<CAPTION>
PERCENT PERCENT
NUM. OF SQ. FT. OF TOTAL OF TOTAL AVG. BASE
LEASES OF LEASES LEASED BASE RENT BASE RENT/SQ. FT.
EXPIRATION YEAR EXPIRING EXPIRING(1) SQ. FT. EXPIRING(2) RENT(2) EXPIRING(3)
- -------------------- -------- --------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
1997................ 100 349,641 5.7% $ 3,960,378 5.0% $17.96
1998................ 78 494,080 8.1 5,617,422 7.1 16.43
1999................ 57 253,646 4.1 3,756,058 4.8 20.35
2000................ 47 627,235 10.3 9,303,522 11.8 22.42
2001................ 50 491,060 8.0 7,428,825 9.4 21.86
2002................ 32 291,903 4.8 4,423,824 5.6 18.51
2003................ 17 339,148 5.6 4,534,350 5.8 26.95
2004................ 18 531,177 8.7 7,208,830 9.1 20.17
2005................ 11 171,480 2.8 2,462,982 3.1 20.12
2006................ 9 114,526 1.9 1,015,449 1.3 21.27
Thereafter.......... 19 2,446,481 40.0 29,120,067 37.0 19.53
--- --------- ------ ---------- ----- ------
Total.......... 438 6,110,377 100.0% $78,831,707 100.0% $20.17
=== ========= ====== ========== ===== ======
</TABLE>

- ---------------

(1) Represents 100% of the office building's leasable area expiring, not Forest
City's proportionate share.
(2) Computed at Forest City's proportionate share of annualized base rent.
Annualized net base rent equals the contractual base rent for the month
ended January 31, 1997, annualized for 12 months, excluding increases in
operating expenses and real estate taxes over the base rent.
(3) Represents contractual net annualized base rent per square foot computed at
100%, rather than Forest City's proportionate share.

PRINCIPAL OFFICE TENANTS. The following table sets forth information
concerning each office tenant whose portion of percentage of annualized net
office base rent exceeded one percent at January 31, 1997. Together, these
tenants represented approximately 48.9% of total office leasable area at January
31, 1997, and approximately 55.4% of total office rental revenue. No single
office tenant accounted for more than 14% of total annualized net office base
rent revenue for the year ended January 31, 1997.

S-49
<PAGE> 54

<TABLE>
<CAPTION>
PERCENTAGE OF
COMPANY'S PERCENTAGE OF
ANNUALIZED COMPANY'S
NET TOTAL OFFICE
OFFICE BASE LEASED LEASABLE
TENANT RENT(1) SQUARE FEET(2) AREA(3)
- --------------------------------------------------------------- ------------- -------------- -------------
<S> <C> <C> <C>
U.S. Government................................................ 13.8% 544,907 8.5%
Brooklyn Union Gas............................................. 9.0 479,527 7.5
Morgan Stanley & Co., Incorporated............................. 6.2 383,112 6.0
SIAC........................................................... 5.8 328,759 5.1
Federated Investors, Inc. ..................................... 3.7 345,266 5.4
Bear, Stearns & Co., Inc. ..................................... 3.4 268,086 4.2
City of New York............................................... 2.7 216,000 3.4
Chase Financial Corp. ......................................... 1.9 133,176 2.1
Genzyme Corporation............................................ 1.8 61,720 .9
Aetna.......................................................... 1.6 66,344 1.0
Goldman, Sachs & Co. .......................................... 1.5 76,031 1.2
Ernst & Young, L.L.P. ......................................... 1.5 86,956 1.4
Forest City.................................................... 1.4 80,934 1.2
Board of Education of the City of New York..................... 1.1 63,128 1.0
---- --------- ----
Total...................................................... 55.4% 3,133,946 48.9%
==== ========= ====
</TABLE>

- ---------------
(1) Represents Forest City's proportionate share of net annualized office base
rent. Annualized net base rent equals the contractual base rent for the
month ended January 31, 1997, annualized for 12 months.
(2) Represents 100% of the office leasable square feet, not Forest City's
proportionate share.
(3) Represents percentage of square footage in all Company office projects
occupied by tenant.

HOTELS. The Company currently owns five hotels, with a total of 1,530
rooms: the DoubleTree at Liberty Center in Pittsburgh; the Ritz-Carlton and
Budgetel in Cleveland, Ohio; the Charleston Marriott in West Virginia; and the
DoubleTree at Millender Center in Detroit, Michigan. Average occupancy and room
rates were 72% and $100, respectively, in 1996, compared to 69% and $98,
respectively, in 1995.

The following table summarizes the Company's existing hotels.

<TABLE>
<CAPTION>
DATE OF
OPENING/ COMPANY
NAME ACQUISITION OWNERSHIP(%) LOCATION ROOMS
- ------------------------------------------------------ ----------- ------------ ------------------ -----
<S> <C> <C> <C> <C>
Budgetel.............................................. 1982 28.4% Mayfield Hts., OH 102
Charleston Marriott................................... 1983 95.0 Charleston, WV 354
DoubleTree at Liberty Center.......................... 1986 50.0 Pittsburgh, PA 616
DoubleTree at Millender Center(1)..................... 1985 4.0 Detroit, MI 250
Ritz-Carlton.......................................... 1990 95.0 Cleveland, OH 208
-----
Hotel Rooms at January 31, 1997 and 1996 1,530
=====
</TABLE>

- ---------------
(1) Syndicated. See "Risk Factors -- Potential Liability From Syndicated
Properties."

S-50
<PAGE> 55

RESIDENTIAL GROUP

The Company's Residential Group develops, acquires, owns, leases and
manages residential rental property in 16 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
portfolio includes mature middle-market apartments in geographically attractive
suburbs, newer and higher end apartments in unique urban locations and newer
apartments in the suburbs. The Residential Group, which focuses on large
apartment complexes, does not develop or operate single-family housing or
condominium projects.

The Residential Group's experience in managing its buildings plays a vital
role in increasing revenues and the profitability of its portfolio. The Group's
management concentrates on increasing the cash flow and long-term value of its
existing real estate by seeking to increase rental rates, improving occupancy
and reducing operating expenses, as well as employing refinancing strategies and
making appropriate capital expenditures for expansion and renovation of these
assets when it is economically advantageous.

The Residential Group contributed 27% of the Company's EBDT in 1996 and
constituted 23% of the Company's total assets at January 31, 1997. As of January
31, 1997, the Residential Group owned interests in 114 completed residential
communities with 31,441 units, (including 57 projects with 9,402 units in which
the Company holds a residual interest only). In addition, at January 31, 1997
the Residential Group had two properties under contract to purchase, and also
had eight residential communities in active construction or development. Since
1990, the Residential Group has added 21 properties with 7,997 units to its
portfolio, at a total cost to the Company (including properties thereafter
syndicated) of $312 million.

Historically, the Group's apartment portfolio grew primarily through
developing and constructing new apartment communities. In recent years, the
Residential Group has been able to capitalize on a number of acquisition
opportunities as distressed properties in desirable locations became available.
In other cases, attractive acquisition possibilities have arisen for existing
properties that are in good condition but that present opportunities to increase
value by restructuring the financing or repositioning the asset for a different
tenant base. Since 1992, the Company has acquired an interest in 12 residential
properties with 5,034 units, and currently has two additional properties with
682 units under purchase contract. The Company acquired these projects at a
total cost of $138.7 million, or an average cost per unit of $27,500,
substantially below the estimated replacement cost. The Company invested $19.7
million of its own equity capital in connection with such acquisitions and, at
January 31, 1997, consistent with its financing strategy, had withdrawn $5.7
million of its equity through refinancings or syndication proceeds. These
properties generated an Unleveraged Return on Cost of 11.1% at January 31, 1997,
at which time occupancy was 92%. Approximately 45% of the total project costs of
these properties was financed with tax-exempt bonds.

In many of its activities, the Residential Group, like the Commercial
Group, capitalizes on the Company's experience in working with Federal, state
and local government agencies and government financing programs. The Residential
Group has developed or acquired 11 projects through the use of tax-exempt loans,
and developed or renovated six urban and suburban projects through the use of
UDAG or other types of government-subsidized financing and grants. At January
31, 1997, the Residential Group had approximately $243.3 million of tax-exempt
financing outstanding(of which the Company's portion was $117.8 million,
primarily due to the effects of syndication) and $62.1 million in UDAG or other
government subsidized loans (of which the Company's portion was $14.0 million,
primarily due to the effects of syndication).

S-51
<PAGE> 56

PROJECTS OPENED/ACQUIRED IN 1996

In 1996, the Company acquired Emerald Palms, an eight-year old 419-unit
complex of townhomes and garden apartments in southwest Dade County, Florida, at
a total cost of $21.8 million. This project, which was 97% occupied as of
January 31, 1997, was financed by assuming a 7.25%, $17 million fixed-rate
mortgage loan, and is projected to produce an Unleveraged Return on Cost of
10.5%.* Also, in 1996, the Company added new phases at four Cleveland-area
apartment complexes, including 64 units at the Tam-A-Rac complex in Willoughby,
68 units at the Pebble Creek apartments in Twinsburg, 132 units at the Cherry
Tree development in Strongsville and 72 units at the Big Creek development in
Parma Heights. At January 31, 1997 these developments were 89%, 98%, 96% and 86%
occupied, respectively. The total cost of these new phases was $17.9 million.

The following table sets forth additional information regarding residential
properties opened or acquired in 1996.

<TABLE>
<CAPTION>
COMPANY'S
DEVELOPED (D) TOTAL COST SHARE OF
OR DATE COMPANY AT 100% COST
PROPERTY LOCATION ACQUIRED (A) OPENED/ACQUIRED OWNERSHIP(%) (IN MIL.) (IN MIL.) NO. OF UNITS
- ------------------- ----------------- ------------- --------------- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tam-A-Rac(1)....... Willoughby, OH D Feb-96 50% $ 3.3 $ 1.7 64
Cherry Tree(1)..... Strongsville, OH D Apr-96 50 6.9 3.5 132
Big Creek(1)....... Parma Hts., OH D May-96 50 4.3 2.2 72
Emerald Palms...... Miami, FL A May-96 100 21.8 21.8 419
Pebble Creek(1).... Twinsburg, OH D Sep-96 50 3.4 1.7 68
------ ----- ----
Total.......... $ 39.7 $30.9 755
====== ===== ====
</TABLE>

- ---------------

(1) Part of a phased construction process.

UNDER CONSTRUCTION/TO BE ACQUIRED

The development cycle for the Company's residential projects typically is
less than three years from conception to initial occupancy. Accordingly, the
Residential Group's project pipeline can increase or decrease significantly over
a relatively short timeframe.

Construction began in 1996 on The Enclave, a 633-unit apartment complex in
San Jose, California. The first units of this property are scheduled to open in
the fourth quarter of 1997. The total cost of this project is estimated at $74.1
million.** The Enclave, along with a second San Jose project described under
"-- Projects Under Development" will address rental housing needs in one of the
country's strongest and fastest growing markets. Current occupancy rates in the
San Jose rental market exceed 98%.

Construction will begin in 1997 on The Grand, a 552-unit luxury high rise
in Bethesda, Maryland, part of the Washington, D.C. metropolitan area, another
fast growing residential market. It is expected that the first units of this
$79.1 million project will open in the fall of 1998 and will increase the
Company's portfolio in this market to six communities totalling 2,164 units.*
Obtaining the entitlements necessary for The Enclave, The Grand and the new San
Jose project evidence the Company's ability to work closely with local
governments and to capitalize on development opportunities in dynamic urban
areas.

- ---------------

**The statements relating to this project are forward-looking statements and are
based on current facts and expectations. The completion of this project
involves various risks, including construction delays and cost overruns. See
"Risk Factors -- Real Estate Development and Investment Risks," "-- Dependence
on Rental Income From Real Property," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "-- Partnership Risks," for a more complete discussion of
the risks associated with the completion of this project.

S-52
<PAGE> 57

In early 1997, the Residential Group entered a new market with its contract
to acquire Pacific Village, a 396-unit garden apartment complex in the Seattle
suburb of Bellevue. The Residential Group intends to subsequently renovate and
reposition this property at a cost of approximately $5.2 million over a 12 month
period.* The Company has also contracted to buy Museum Tower, a 286-unit
high-rise in downtown Philadelphia that is located near One Franklintown,
another high-rise owned by Forest City. The proximity of these two communities
will provide cost savings opportunities in management and service.** The
contract purchase prices for Pacific Village and Museum Tower are approximately
$16 million and $26 million, respectively.

Expansion continues at three Cleveland-area residential projects: Big Creek
(88 units), Cherry Tree (144 units) and Tam-A-Rac (80 units). These projects,
which capitalize on the Company's northeast Ohio property base, are examples of
the Company's long-term, phased development programs.

The total cost of projects under construction or under contract to acquire
is estimated to be $216.8 million, of which $178.9 has been, or is expected to
be financed, with tax-exempt bonds.***

The following table sets forth additional information regarding residential
properties under construction or to be acquired in 1997.****

<TABLE>
<CAPTION>
ESTIMATED TOTAL COMPANY'S
DEVELOPED(D) DATE OF COST SHARE
OR OPENING/ COMPANY AT 100% OF COST NO.
PROPERTY LOCATION ACQUIRED(A) ACQUISITION OWNERSHIP(%) (IN MIL.) (IN MIL.) OF UNITS
- -------------------------------- ----------------- ------------- ----------- ------------ --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Big Creek(1).................... Parma Hts., OH D Q2-97 50% $ 5.3 $ 2.7 88
Museum Towers................... Philadelphia, PA A Q2-97 87 25.7 22.4 286
Pacific Village................. Bellevue, WA A Q2-97 100 21.0 21.0 396
Cherry Tree(1).................. Strongsville, OH D Q3-97 50 7.5 3.8 144
Tam-A-Rac(1).................... Willoughby, OH D Q3-97 50 4.1 2.1 80
Enclave(2)...................... San Jose, CA D Q4-97 1 74.1 0.7 633
The Grand(2).................... Bethesda, MD D Q3-98 .9 79.1 0.7 552
------ ------ -------
Total........................ $ 216.8 $53.4 2,179
====== ====== =======
</TABLE>

- ---------------
(1) Part of a phased construction process.
(2) Project included in the Company's syndication program. Under this program,
the Company maintains a substantial economic interest in the project. See
"-- Syndication Activity" and "Risk Factors -- Potential Liability From
Syndicated Properties."

- ---------------

*The statements with respect to this project are forward-looking statements
and are based on current facts and expectations. No assurance can be given
that the property will be acquired or that, if acquired, the Company will be
able to successfully renovate and reposition this property. See "Risk
Factors--Real Estate Development and Investment Risks."

**The statements with respect to this project are forward-looking statements
and are based on current facts and expectations. No assurance can be given
that the property will be acquired or that, if acquired, the Company will be
able to successfully implement cost saving opportunities. See "Risk
Factors--Real Estate Development and Investment Risks."

***The statements concerning the Company's development of these projects are
forward-looking statements and are based on current facts and expectations.
No assurance can be given that any of these projects will be developed or
acquired or, if developed or acquired, whether they will be successful. The
development and acquisition of these projects is subject to significant
risks, including an inability to obtaining financing or government
entitlements, cost overruns and construction delays. See "Risk Factors --
Real Estate Development and Investment Risks," "-- Dependence on Rental
Income From Real Property," "-- Changes in Interest Rates," "-- Tax-Exempt
and UDAG Financing," "-- Reliance on Major Tenants," "-- Competition" and
"-- Partnership Risks," for a more complete description of the risks
associated with the development and acquisition of these projects.

****This table presents forward-looking information concerning various projects
under construction or subject to purchase contracts and is based on current
facts and expectations. The completion or acquisition of these projects is
subject to significant risks, including an inability to obtain financing or
government entitlements, cost overruns and construction delays. See "Risk
Factors--Real Estate Development and Investment Risks," "--Dependence on
Rental Income From Real Property," "--Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "--Reliance on Major Tenants,"
"--Competition" and "--Partnership Risks," for a more complete description
of the risks associated with the development and acquisition of these
projects.

S-53
<PAGE> 58

PROJECTS UNDER DEVELOPMENT

The Company expects to begin construction on a second San Jose apartment
complex with 346 units, at a projected cost of $44.8 million, during the current
year. In addition, the Residential Group will continue development at two
Cleveland area projects.

The Company is also increasing its presence in the senior housing industry
through new congregate and assisted living communities.

The Company believes that the nation's aging population provides an area of
continued growth in the residential business. The Company's congregate living
residences provide amenities to their residents which typically include meals
served two times daily, housekeeping, including linen services, 24-hour
security, concierge service and transportation to off-site shopping and social
activities. In addition, residents have access to on-site retail stores, such as
pharmacy and convenience stores and beauty salons. Social directors arrange
educational and social programs for residents which include guest speakers from
outside of the facility. Financial counseling and exercise programs also are
available. Assisted living residences typically provide a higher level of
personal care services.

Through separate joint ventures with Classic Residences by Hyatt and a
local Detroit developer, the Company currently owns an interest in three
congregate living facilities containing 864 units, with an aggregate occupancy
rate of 97%. As a result of the strong performance of these properties,
including a 17% gain in net operating income in 1996 versus 1995, the
Residential Group is proceeding with development of a third joint venture
congregate facility with Classic Residences by Hyatt in the Riverdale section of
The Bronx, New York.

The Residential Group also has entered into a joint venture to develop
assisted living communities in the greater New York City metropolitan area. The
Company believes that the age and economic status of the area's population
provides a favorable base for such projects. The prototype for each building
will range from 75 to 100 units with a cost per building of $13 million to $20
million. The Company now controls three sites in Nassau County on Long Island,
NY, where it is actively pursuing development of assisted living projects, and
anticipates commencing construction on the first site in late 1997 or early
1998. These buildings will take approximately one year to build and one
additional year to rent up.*

The total cost of projects under active development is estimated to be
$217.7 million of which $44.8 million is expected to be financed by tax-exempt
bonds.**

- ---------------

*The statements concerning the Company's development of these projects are
forward-looking statements and are based on current facts and expectations.
No assurance can be given that any of these projects will be developed or, if
developed, whether they will be successful. The development of these projects
is subject to significant risks, including an inability to obtaining
financing or government entitlements, cost overruns and construction delays.
See "Risk Factors -- Real Estate Development and Investment Risks," "--
Dependence on Rental Income From Real Property," "-- Changes in Interest
Rates," "-- Tax-Exempt and UDAG Financing," "-- Reliance on Major Tenants,"
"-- Competition" and "--Partnership Risks," for a more complete description
of the risks associated with the development of these projects.

**This is a forward-looking statement and is based on current facts and
expectations. The development of these projects involves various risks,
including an inability to obtain financing or government entitlements, cost
overruns and construction delays. See "Risk Factors -- Real Estate and
Development and Investment Risks," "-- Dependence on Rental Income From Real
Property," "-- Changes in Interest Rates," "-- Tax-Exempt and UDAG
Financing," "-- Reliance on Major Tenants," "-- Competition" and
"-- Partnership Risks," for a more complete discussion of the risks
associated with the Company's development of these projects.

S-54
<PAGE> 59

The following table sets forth additional information regarding residential
projects under active development.*

<TABLE>
<CAPTION>
COMPANY'S
DEVELOPED(D) ESTIMATED TOTAL COST SHARE
OR DATE OF COMPANY AT 100% OF COST NO.
PROPERTY LOCATION ACQUIRED(A) OPENING OWNERSHIP (%) (IN MIL.) (IN MIL.) OF UNITS
- ----------------------- ------------------ ------------- --------- ------------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Big Creek.............. Parma Hts., OH D 1998/1999 50% $ 21.6 $ 10.8 360
Tam-A-Rac.............. Willoughby, OH D 1998/1999 50 9.3 4.7 170
Riverdale.............. Bronx, NY D 1999 50 40.0 20.0 209
San Jose II(1)......... San Jose, CA D 1999 1 44.8 0.4 346
Assisted Living........ New York D Various 80 102.0 81.6 600
Metropolitan Area
------ ------ -----
Total.............. $217.7 $117.5 1,685
====== ====== =====
</TABLE>

- ---------------

(1) Project included in the Company's syndication program. Under this program,
the Company maintains a substantial economic interest in the project. See
"-- Syndication Activity" and "Risk Factors -- Potential Liability From
Syndicated Properties."

EXISTING PORTFOLIO

The Company's Residential Group consists of 31,441 units in which Forest
City has an ownership interest, including 9,402 units of syndicated senior
citizen subsidized housing that the Company manages and in which it owns a
residual interest. These 9,402 units generated net operating income from fees
and cash flow participation of $3.1 million, $2.0 million and $2.1 million,
respectively, in 1994, 1995 and 1996, respectively. They also paid management
fees of $3.2 million, $3.4 million and $3.6 million in 1994, 1995 and 1996,
respectively, to the Company's apartment management division.

At January 31, 1995, 1996 and 1997, excluding all properties syndicated by
the Company, average occupancy at the Company's residential communities remained
consistent at 96%, while average comparable rental rates increased at a compound
annual rate of 3.9% from 1994 to 1996. During 1994, 1995 and 1996, average
comparable operating expenses increased at a compounded annual rate of 2.2%.
Comparable Net Operating Income grew 6.0% and 6.7% in 1995 and 1996,
respectively, over the prior year.

Two recently acquired properties were renovated in the past year. The
Knolls, located in Orange County, California, reopened following 15 months of
renovation. This gated 260-unit townhome complex is currently in lease-up, and
is expected to reach stabilization in May of 1997.** The Residential Group
received extensive assistance from local authorities, which used public programs
to move the existing tenants into other housing to facilitate the renovation,
and provided $7.5 million in low cost financing. The 336-unit Vineyards, in
Cleveland's Broadview Heights suburb, was also renovated and converted from
electric to gas heating at a cost of $1.0 million, significantly reducing the
property's operating expenses. The Vineyards had 93% average occupancy during
1996.

As a long-term owner, the Residential Group has successfully repositioned
many of its properties that have been affected by local demographic changes or
the aging of the facility. For example, the Midtown Towers located in Parma,
Ohio, opened in 1969 as a conventional elevator-midrise apartment project that
targeted a mostly senior-citizen tenant base. By 1990, the building's
demographics had changed to include a far higher proportion of families with
children, in part due to

- ---------------

*This table presents forward-looking information concerning various projects
under development and is based on current facts and expectations. The
completion of these projects is subject to significant risks, including an
inability to obtain financing or government entitlements, cost overruns and
construction delays. See "Risk Factors -- Real Estate Development and
Investment Risks," "-- Dependence in Rental Income From Real Property,"
"-- Changes in Interest Rates," "-- Tax-Exempt and UDAG Financing,"
"-- Reliance on Major Tenants," "-- Competition" and "-- Partnership Risks,"
for a more complete description of the risks associated with the development
of these projects.

**This is a forward-looking statement and is based on current facts and
expectations. No assurance can be given that stabilization will be achieved in
May 1997. See "Risk Factors -- Real Estate Development and Investment Risks"
and "-- Competition."

S-55
<PAGE> 60

changes in Federal housing laws. In response to these changes, during 1993 the
Company refinanced the facility and renovated it to appeal to a more stable
family-oriented tenant base and has achieved a 93% occupancy rate. Another
example of repositioning is the Hamptons, located in Beachwood, Ohio and opened
in 1969. Over time, the tenant base aged and vacancies became difficult to fill.
Following renovations completed in 1996, the Hamptons was repositioned for a
broader tenant base, and has achieved a 94% occupancy rate.

The Residential Group strives to maintain high occupancy rates while
increasing rental rates. One of the ways that this is accomplished is through
the addition of amenities that enhance tenant appeal at relatively low cost. In
addition to the fitness centers and other recreational facilities, including
swimming pools, available at a majority of the Company's apartment communities,
the Company provides additional complimentary amenities that meet the needs of
its tenants. At the Knolls, Laurels, Midtown Towers and Waterford Village, the
Company operates learning centers which provide child care and tutoring
services, as well as organized entertainment and athletic activities for
children of residents. At the Oaks, One Franklintown, Queenswood and Surfside
Towers, the Company provides shuttle bus services to community residents. To
increase security, the Company has installed continuously staffed front desks at
eight properties. The Lenox Club, Lenox Park and Millender Center also provide
concierge services, including travel and entertainment arrangements. These
amenities attract new tenants, and the Company believes it is more than able to
recover the costs of these complimentary amenities through increased rental and
occupancy rates.

S-56
<PAGE> 61

The following is a complete list of the Residential Group's existing
communities as of January 31, 1997:

<TABLE>
<CAPTION>
DATE OF
OPENING/ COMPANY
NAME ACQUISITION OWNERSHIP(%) LOCATION UNITS
- ------------------------------------------------ ---------- ------------ ---------------------- ------
<S> <C> <C> <C> <C>
Bayside Village I, II & III..................... 1988-1989 50.0% San Francisco, CA 862
Big Creek....................................... 1996 50.0 Parma Hts., OH 72
Boot Ranch...................................... 1991 50.0 Tampa, FL 236
Boulevard Towers................................ 1969 50.0 Amherst, NY 402
Camelot......................................... 1967 50.0 Parma, OH 150
Chapel Hill Towers.............................. 1969 50.0 Akron, OH 402
Cherry Tree..................................... 1996 50.0 Strongsville, OH 132
Chestnut Lake................................... 1969 50.0 Strongsville, OH 789
Clarkwood....................................... 1963 50.0 Warrensville Hts., OH 568
Classic Residence by Hyatt...................... 1990 50.0 Chevy Chase, MD 339
Classic Residence by Hyatt...................... 1989 50.0 Teaneck, NJ 221
Copper Creek.................................... 1992 20.0 Houston, TX 300
Deer Run I & II................................. 1987-1989 43.0 Twinsburg, OH 562
Emerald Palms................................... 1996 100.0 Miami, FL 419
Fenimore Court(1)............................... 1982 0.5 Detroit, MI 144
Fort Lincoln II................................. 1979 45.0 Washington, D.C. 176
Fort Lincoln III & IV........................... 1981 24.9 Washington, D.C. 306
Granada Gardens................................. 1966 50.0 Warrensville Hts., OH 940
Greenbriar...................................... 1992 20.0 Houston, TX 400
Hamptons........................................ 1969 50.0 Beachwood, OH 649
Highlands I & II................................ 1988-1990 100.0 Grand Terrace, CA 556
Hunter's Hollow................................. 1990 50.0 Strongsville, OH 208
Independence Place I............................ 1976 50.0 Parma Hts., OH 202
Kennedy Lofts(1)................................ 1990 0.5 Cambridge, MA 142
Knolls(1)....................................... 1995 1.0 Orange, CA 260
Laurels......................................... 1995 100.0 Justice, IL 520
Lenox Club(1)................................... 1991 0.5 Arlington, VA 385
Lenox Park(1)................................... 1992 0.5 Silver Spring, MD 406
Liberty Hills................................... 1979-1986 50.0 Solon, OH 396
Metropolitan.................................... 1989 100.0 Los Angeles, CA 270
Midtown Towers.................................. 1969 50.0 Parma, OH 635
Millender Center(1)............................. 1985 4.0 Detroit, MI 339
Noble Towers.................................... 1979 50.0 Pittsburgh, PA 133
Oaks............................................ 1994 100.0 Bryan, TX 248
One Franklintown................................ 1988 100.0 Philadelphia, PA 335
Palm Villas..................................... 1991 100.0 Henderson, NV 350
Panorama Towers................................. 1978 99.0 Los Angeles, CA 154
Parmatown....................................... 1972-1973 100.0 Parma, OH 412
Pavilion(1)..................................... 1992 0.5 Chicago, IL 1,115
Pebble Creek.................................... 1995-1996 50.0 Twinsburg, OH 148
Peppertree...................................... 1993 100.0 College Station, TX 208
Pine Ridge Valley............................... 1967-1974 50.0 Willoughby, OH 1,147
Queenswood(1)................................... 1990 0.7 Corona, NY 296
Regency Towers.................................. 1994 100.0 Jackson, NJ 372
Shippan Avenue.................................. 1980 100.0 Stamford, CT 148
Studio Colony................................... 1986 80.0 Los Angeles, CA 450
Surfside Towers................................. 1970 50.0 Eastlake, OH 246
Tam-A-Rac I, II & III........................... 1991-1996 50.0 Willoughby, OH 392
Toscana......................................... 1991-1992 100.0 Irvine, CA 563
Trolley Plaza................................... 1981 100.0 Detroit, MI 351
Trowbridge...................................... 1988 53.3 Southfield, MI 304
Twin Lakes Towers............................... 1966 50.0 Denver, CO 254
Village Green................................... 1994-1995 25.0 Beachwood, OH 360
Vineyards....................................... 1995 100.0 Broadview Hts., OH 336
Waterford Village(1)............................ 1994 1.0 Indianapolis, IN 520
White Acres..................................... 1966 50.0 Richmond Hts., OH 473
Woodforest Glen................................. 1992 20.0 Houston, TX 336
Subtotal.................................... 22,039
Senior Citizens Apartments(2)................... 9,402
Apartments at January 31, 1997 31,441
Apartments at January 31, 1996 30,686
</TABLE>

- ---------------
(1) Syndicated. See "-- Syndication Activity" and "Risk Factors -- Potential
Liability From Syndicated Properties."
(2) Syndicated, subsidized units in 57 communities in which the Company holds a
residual interest only. See "Risk Factors -- Potential Liability From
Syndicated Properties."

S-57
<PAGE> 62

SYNDICATION ACTIVITY

The Company has financed a number of real estate projects through
syndication. Syndication is an important part of the Company's strategy to
maximize capital. See "Strategy for Growth and Competitive Advantages -- Capital
Strategy." In a typical syndication, the Company develops a property, obtains
nonrecourse mortgage financing and invests the required equity. Prior to
construction, the Company enters into a partnership agreement with the
syndication partner, typically a large, sophisticated institutional or corporate
investor. The partner usually contributes all or a substantial amount of the
equity required for the project, allowing the Company to reduce its equity
requirement.

The syndication partner is allocated the majority of the low income housing
tax credits and tax losses associated with the project. The transaction is
structured in the form of a limited partnership, with the Company as general
partner retaining control of the project. The cash flow rights of the
syndication partner consist of a small preferred return on its initial equity
and a minor participation in the remaining cash flow. The Company earns a
management fee and retains the remaining majority interest in the cash flow and
residual value. In 1996, syndicated properties generated $916,000 of operating
income. As of January 31, 1997, the Company had received $5.9 million of
distributions in excess of its original investment in these projects.

In the event of a sale, the syndication partner normally receives the
return of its initial equity plus a minor participation in the net proceeds.
When the property is refinanced, the syndication partner normally receives a
minor participation in the net refinancing proceeds.

The Company believes that syndications effectively represent a form of
tax-efficient financing in which the Company may only have a nominal ownership
interest but retains the same economic potential as projects structured with
more traditional forms of financing.

The syndication partnerships are not consolidated in the Company's
Consolidated Financial Statements. Accordingly, neither the assets nor the
mortgage debt relating to these partnerships are reflected on the Company's
consolidated balance sheet. Since the Company reports only a nominal ownership
in the project, the Company's net cash investment in the projects is reflected
as an investment in, and advance to, affiliates. Any cash received from
operations is reported as income received.

If the Company's syndicated properties had not been syndicated, the total
assets and mortgage debt included in the Company's consolidated balance sheet at
January 31, 1997 would have increased $256 million and $207 million,
respectively.

The Company expects to continue syndicating certain development properties
in the future as a means of financing its ownership in them where it is
economically appropriate.

These syndication partnerships typically have required the Company to
indemnify, on an after tax basis, the syndication partner against the failure to
receive, or the recapture of, allocated tax credits. In addition, the Company
has typically been required to indemnify the syndication partner, on an after
tax basis, against the failure to receive or the disallowance of the
depreciation expense associated with the project. See "Risk Factors -- Potential
Liability From Syndicated Properties."

LAND GROUP

The Company has been in the land business since the 1930's. The Land Group
acquires and sells both raw land and developed lots to residential, commercial
and industrial customers. The Land Group projects attract national, regional and
local builders. The Land Group contributed $2.9 million, $4.2 million and $3.9
million of the Company's EBDT in 1994, 1995 and 1996, respectively, representing
3.6%, 5.1% and 4.3% of total EBDT in those years. At January 31, 1997, the Land
Group constituted 3.2% of the Company's total assets and had approximately 5,920
acres of land in inventory.

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Historically, the Land Group's activities focused on land development
projects in northeast Ohio. Over time, the Group's activities expanded to
larger, more complex projects, and regional expansion into western New York
State. In the last ten years, the Group has extended its activities on a
national basis, first in Arizona, and more recently in Florida and Nevada.

The Company has three developments in the fast-growing Southeast/Broward
County area of Florida. These developments have a total of 704 acres with a
potential of 1,959 additional lots. The Company's highly-successful, Silver
Lakes development in Pembroke Pines, Florida, which was built adjacent to former
stone quarries that have been converted into lakes, is in its last year of
development. The Land Group expects to complete sales of 265 lots in 1997 at
this development.* This project, which received a Florida Quality Development
award, will include more than 5,116 new homes upon completion. The Land Group's
447 acre Silver Shores project, located adjacent to Silver Lakes, is currently
under development and will enable the Company to build on the momentum created
by Silver Lakes. The Company also has 56 acres of commercial land under
development in this area.

As part of its strategy to take advantage of the fast-growing Las Vegas
metropolitan area, the Company is in the second year of developing Seven Hills,
a 1300 acre Rees Jones golf course community development with a total potential
for 3,400 lots. The Company currently has six builders on the site and has sold
795 lots as of January 31, 1997. The Company expects the total cost of this
project (in which the Company has a 14.6% interest) to be $107.8 million, of
which $54.8 million had been expended as of January 31, 1997.**

In Northeast Ohio, the Land Group currently is engaged in four major
development projects as well as over 20 smaller projects. The 905 acre Ethan's
Green commenced active development in 1986. Since then, the Company has sold
approximately 800 acres, which have been developed with 1,397 single family
homes and 562 apartment units. The approximately 105 remaining acres have been
supplemented by an additional 134 acres in an adjoining parcel on which
construction will start in 1997.***

The Land Group began its national expansion in Tucson, following the
Commercial Group's success in developing a mall and adjacent properties there.
The Company anticipates that a first phase of 569 lots for single family homes
will start in 1997 at Tangerine Crossing, located north of Tucson.*** This
project is comprised of 309 acres owned in fee, with an adjacent 929 acres of
state-owned land subject to a commercial holding lease in favor of the Company.

In 1993, the Company formed Granite Development Partners, L.P. as a vehicle
to finance land development. Granite owns 10 properties and a partial interest
in two additional properties with an aggregate book value as of January 31, 1997
of $8.8 million. Granite's principal asset is the Seven Hills project. The
Company owned 100% of Granite until December 1996, when holders of warrants
exercised their rights and acquired 56.25% of Granite. As a result of this
reduction in the Company's interest in Granite, the Land Group's assets and
indebtedness declined from $120.9 million and $60.5 million, respectively, at
January 31, 1996, to $89.0 million and $27.4 million, respectively, at January
31, 1997.

In addition to the sales activities of the Land Group, the Company also
sells land acquired by its Commercial Group and Residential Group adjacent to
their respective projects. Proceeds from such

- ---------------

*This is a forward-looking statement and is based on current facts and
expectations. No assurance can be given that the Land Group will be able to
complete these sales. See "Risk Factors -- Information Concerning
Forward-Looking Statements."

**This is a forward-looking statement and is based on current facts and
expectations. The actual cost of this project may vary materially from that
currently projected. In particular, see "Risk Factors -- Real Estate
Development and Investment Risks."

***This is a forward-looking statement and is based on current facts and
expectations. No assurance can be given that the Land Group will be able to
commence this project in 1997. See "Risk Factors--Real Estate Development and
Investment Risks."

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land sales are included in the revenues and assets of such Groups. See
"-- Commercial Group" and "-- Residential Group."

LUMBER TRADING GROUP

The Company's original business was selling lumber to homebuilders. The
Company expanded this business in 1969 through its acquisition of Forest City
Trading Group, Inc., which is a lumber wholesaler to customers in all 50 states
and in all Canadian provinces. Through ten strategically located independent
trading companies in the United States and Canada, employing 343 traders, Forest
City sold the equivalent of seven billion board feet of lumber in 1996, with a
gross sales volume of nearly $3 billion, making the Company one of the largest
lumber wholesalers in North America. The Lumber Trading Group constituted 8% of
the Company's total assets at January 31, 1997, and contributed $2.6 million,
$3.0 million, and $5.1 million of the Company's EBDT in 1994, 1995 and 1996,
respectively, representing 3.2%, 3.7% and 5.6% of total EBDT in those years.

The Lumber Trading Group currently has offices in 11 states, the District
of Columbia, Vancouver, British Columbia and Toronto, Ontario. The Company opens
offices in response to the changing demands of the lumber industry. In 1996, the
Lumber Trading Group opened offices in Utah and Texas. The new Houston, Texas
office is part of the Lumber Trading Group's strategic initiative to increase
its participation in the southern pine market, which is growing in popularity as
logging restrictions limit production in the Pacific Northwest.

The Lumber Trading Group's core business is supplying lumber for new home
construction and to the repair and remodeling markets. Approximately 60% of the
Lumber Trading Group's sales involve back-to-back trades in which the Company
brings together a buyer and seller for an immediate purchase and sale. The
balance of transactions are trades in which the Company takes a short-term
ownership position and is at risk for lumber market fluctuations.

The Lumber Trading Group has a program in place to hedge its exposure to
lumber prices. While this hedging does not completely eliminate the Lumber
Trading Group's exposure to lumber price volatility, the Company believes this
hedging, and its other internal controls, are sufficient to effectively manage
this risk. See "Risk Factors -- Lumber Prices."

The Lumber Trading Group seeks to increase income through cost controls,
including the use of information services and aggressive control of freight and
shipping costs. The Lumber Trading Group has developed state of the art systems
for freight management, trader information, cash and credit management and
communications, certain of which it sells to others. The Company believes that
the Lumber Trading Group's size and technology provide it with a competitive
advantage.

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SELECTED FINANCIAL AND OTHER INFORMATION

The following selected historical consolidated financial data should be
read in conjunction with, and are qualified in their entirety by reference to,
the Consolidated Financial Statements appearing elsewhere in this Prospectus
Supplement and incorporated by reference in the accompanying Prospectus. The
selected historical consolidated financial data, excluding EBDT and the market
price per share of common stock, set forth below with respect to the fiscal
years ended January 31, 1993, 1994, 1995, 1996 and 1997 are derived from the
Consolidated Financial Statements. The selected historical consolidated
financial data, excluding EBDT and the market price per share of common stock,
set forth below with respect to the fiscal years ended January 31, 1993 and 1994
are derived from audited consolidated financial statements of the Company not
included or incorporated by reference herein or in the accompanying Prospectus.
The real estate activity data for the three years ended January 31, 1997 were
derived from the Consolidated Financial Statements, appearing elsewhere in this
Prospectus Supplement and incorporated by reference in the accompanying
Prospectus, and for the seven years ended January 31, 1994, were derived from
audited consolidated financial statements of the Company not included or
incorporated by reference herein or in the accompanying Prospectus. See the
Consolidated Financial Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT RATIOS, OUTSTANDING SHARES AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS DATA:
Revenues.......................... $ 610,449 $ 529,433 $ 522,608 $ 519,379 $ 474,469
Earnings (loss) before
extraordinary gain(1)........... $ 9,171 $ 6,939 $ (18,533)(2) $ 2,212(3) $ 12,687
Earnings (loss) before
extraordinary gain per share of
common stock(4)................. $ 0.70 $ 0.51 $ (1.37)(2) $ 0.16(3) $ 0.94

BALANCE SHEET DATA:
Total assets -- cost basis........ $2,741,405 $2,631,046 $2,584,734(5) $2,668,057 $2,625,404
Long term debt, including mortgage
debt............................ $1,993,351 $1,945,120 $1,881,917 $2,026,451 $1,972,160
Shareholders' equity.............. $ 191,978 $ 189,589 $ 185,560 $ 145,442 $ 143,230
Shareholders' equity per share of
common stock(4)................. $ 14.64 $ 14.18 $ 13.76 $ 10.78 $ 10.62

OTHER SELECTED DATA:
Earnings before depreciation,
amortization and deferred taxes
from operations (EBDT)(1)(6).... $ 90,404 $ 82,021 $ 81,262 $ 80,979 $ 77,075
EBDT per share of common stock for
the period(4)................... $ 6.87 $ 6.08 $ 6.03 $ 6.00 $ 5.71
Cash dividends per share of common
stock for the period(4)
Class A......................... $ 0.27 $ 0.17 $ 0.13 $ 0.00 $ 0.00
Class B......................... $ 0.27 $ 0.17 $ 0.13 $ 0.00 $ 0.00
Market price per share of Class A
common stock at end of
period(4)....................... $ 41.00 $ 22.17 $ 20.25 $ 26.33 $ 17.50
Market price per share of Class B
common stock at end of
period(4)....................... $ 40.67 $ 22.00 $ 20.67 $ 28.83 $ 17.50
Weighted average common shares
outstanding(4).................. 13,155,236 13,480,164 13,487,421 13,487,421 13,487,421
Number of common shares
outstanding at end of
period(4)....................... 13,111,976 13,371,921 13,487,421 13,487,421 13,487,421
</TABLE>

S-61
<PAGE> 66

- ---------------

(1) Excludes extraordinary gain, net of tax.

(4) Adjusted for three-for-two stock split, in the form of a stock dividend,
effective February 17, 1997.

(5) The decrease in Total assets -- cost basis was due to the sale of Park
LaBrea Towers, partially offset by an increase in other real estate costs.

S-62
<PAGE> 67

FOREST CITY RENTAL PROPERTIES CORPORATION

</TABLE>

- ---------------

S-63
<PAGE> 68

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company develops, acquires, owns and manages commercial and residential
real estate properties in 20 states and the District of Columbia. The Company
owns a portfolio that is diversified both geographically and by property types
and operates through four principal business groups: Commercial Group,
Residential Group, Land Group and the Lumber Trading Group.

The Company uses an additional measure, along with net earnings (loss), to
report its operating results. This measure, referred to as Earnings Before
Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of
operating results or cash flows from operations as defined by generally accepted
accounting principles. However, the Company believes that EBDT provides
additional information about its operations and, along with net earnings (loss),
is necessary to understand its operating results. The Company believes that EBDT
is also an indicator of the Company's ability to generate cash to meet its
funding requirements. EBDT is defined and discussed in detail under "-- Results
of Operations-- EBDT."

The Company's EBDT grew by 10.2% (or 13.0% per share) in 1996 to
$90,404,000, or $6.87 per share of common stock, from $82,021,000, or $6.08 per
share of common stock in 1995. This increase in EBDT was primarily the result of
the addition of new retail properties, improved operating results from the
Company's existing portfolio, acquisition of apartment projects, sales of land
by the Commercial and Land Groups, strong lumber trading activity and favorable
interest rates. EBDT grew by 0.9% (or 1.0% per share) in 1995 from $81,262,000,
or $6.03 per share of common stock in 1994, with the positive impact of new
project openings offset by the effect of the disposition of Park LaBrea Towers,
a 2,825-unit apartment community in Los Angeles, California.

RESULTS OF OPERATIONS

The Company reports its results of operations by each of its four principal
business groups as it believes such reporting provides the most meaningful
understanding of the Company's financial performance.

The major components of EBDT are Revenues, Operating Expenses and Interest
Expense, each of which is discussed below. Net Operating Income ("NOI") is
defined as Revenues less Operating Expenses. See Note I to the Consolidated
Financial Statements and information in the table "Three Year Summary of
Earnings Before Depreciation, Amortization and Deferred Taxes" at the end of
this section.

NET OPERATING INCOME FROM REAL ESTATE OPERATIONS

NOI from the combined Commercial Group and Residential Group for 1996 was
$196,456,000 compared to $199,651,000 in 1995, a 1.6% decrease. NOI in 1996 and
1995 was affected by the following items, which the Company believes are
non-recurring: (1) an increase of $5,863,000 in development expenses in 1996
over 1995, which includes write-offs of abandoned projects in excess of normal
levels and (2) a decrease of $6,565,000 in the EBDT resulting from an unusually
low cost basis in the land sold in 1995 (on comparable sales revenues) compared
to 1996. See "-- Commercial Group -- Operating and Interest Expenses." Adjusting
for these items, NOI would have been $202,319,000 and $193,086,000 for 1996 and
1995, respectively, a 4.8% increase. Comparable NOI (for properties in operation
throughout both periods) increased 2.5% from 1995 to 1996 and 6.1% from 1994 to
1995. Eliminating asset dispositions and the non-recurring development expenses
discussed above, and including the expected NOI during the initial twelve months
after stabilization for the 11 properties that were opened or acquired in 1996
and annualizing the ground

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<PAGE> 69

rent received in 1996 from a project under construction, would result in total
NOI of approximately $209,964,000.*

COMMERCIAL GROUP

REVENUES. Revenues of the Commercial Group increased by $15,593,000 (or
5.3%) to $309,834,000 in 1996 from $294,241,000 in 1995. This increase was
primarily the result of the opening of the Galleria at Sunset in Henderson,
Nevada ($5,578,000), improved performance from existing properties ($6,412,000)
and the benefit of a full year of operating results from properties that opened
in 1995 ($5,403,000). These increases were offset by a reduction in revenues due
to the dispositions of Beachwood Place ($786,000) and Victor Village ($438,000)
(see "-- Other Transactions -- Gain (Loss) on Disposition of Properties") and
the loss of revenue from ten leases rejected by Handy Andy which went bankrupt
in 1996 ($1,109,000).

Revenues of the Commercial Group in 1995 increased by $35,275,000 (or
13.6%) from $258,966,000 in 1994. This increase was primarily attributable to
the sale of a five acre parcel of land at Tower City Center in Cleveland, Ohio
to the Federal government ($18,300,000) and outlot sales in Henderson, Nevada
($1,708,000). In addition, 1995 revenues increased from the openings in 1995 of
Eleven MetroTech ($3,200,000) and Flatbush Avenue ($1,200,000), and from a full
year of operations at Station Square in Pittsburgh, Pennsylvania ($1,268,000).
Lastly, the Company acquired an additional 31% interest in Liberty Center, a
mixed-use property in Pittsburgh ($8,800,000). In 1994, commercial outlot sales
of $7,176,000 were recorded in the Land Group. Commercial outlot sales have been
recorded in the Commercial Group since 1995.

OPERATING AND INTEREST EXPENSES. In 1996, operating and interest expenses
for the Commercial Group increased $22,126,000 and $2,103,000 (or 15.1% and
2.4%), respectively, over 1995 to $168,466,000 and $88,149,000, respectively.
The increase in operating expenses was primarily attributable to the decrease in
the EBDT ($6,565,000) resulting from an unusually low cost basis in the land
sold in 1995 (on comparable sales revenues), increased development expenses
($5,726,000) and the opening of new properties ($5,089,000). At January 31,
1997, the Company's property level expenses for properties open since 1994 had
increased at a compounded annual rate of only 0.1%, reflecting the Company's
emphasis on controlling costs. The increase in interest expense was attributable
to the financing of new properties.

Operating and interest expenses increased $8,757,000 and $19,015,000 in
1995 (or 6.4% and 28.4%), respectively, from $137,583,000 and $67,031,000,
respectively, in 1994. The increase in operating expense was primarily the
result of the acquisition of Station Square and an additional 31% interest in
Liberty Center ($6,475,000) and the opening of new properties in New York
($1,491,000). The increase in interest expense was due to the financing of new
properties ($1,804,000), the acquisition of Station Square, the additional 31%
interest in Liberty Center and the additional 50% interest in Ballston Common
($6,733,000), higher outstanding principal balances on nonrecourse mortgages
resulting from refinancings to fund development projects ($4,420,000) and an
increase in interest rates ($6,094,000).

NET OPERATING INCOME. Commercial Group NOI for 1996 was $141,368,000,
compared to $147,901,000 in 1995, a 4.4% decrease. NOI increased 0.9% from 1995
to 1996 for Commercial Group properties in operation throughout both years and
6.2% from 1994 to 1995 for Commercial Group properties in operation throughout
both years. Adjusting for the items discussed above under "-- Net Operating
Income from Real Estate Operations," Commercial Group NOI would be

- ---------------

*This is a forward-looking statement and is based on current facts and
expectations. Actual results may vary materially from those projected. In
addition, construction remains to be completed at the Marketplace at Riverpark,
Atlantic Center and the Showcase, and completion of these projects is subject
to various development risks, including cost overruns and construction delays.
In particular, see "Risk Factors -- Real Estate Development and Investment
Risks," "-- Dependence on Rental Income From Real Property," "-- Changes in
Interest Rates," "-- Tax-Exempt and UDAG Financing," "-- Reliance on Major
Tenants," "-- Competition" and "-- Partnership Risks."

S-65
<PAGE> 70

$147,094,000 and $141,336,000 for 1996 and 1995 respectively, a 4.1% increase.
Eliminating asset dispositions and the items discussed above under "-- Net
Operating Income from Real Estate Operations," and including the expected NOI
during the initial twelve months after stabilization for the six Commercial
Group properties that were opened or acquired in 1996 and annualizing the ground
rent received in 1996 from a Commercial Group project under construction, would
result in total NOI of approximately $157,861,000.*

RESIDENTIAL GROUP

REVENUES. Revenues for the Residential Group increased by $10,776,000 (or
10.2%) to $116,525,000 in 1996, from $105,749,000 in 1995. This increase
reflected a full year of performance from the 1995 acquisitions of Laurels, a
520-unit apartment complex in Justice, Illinois ($2,701,000), and the Vineyards,
a 336-unit apartment community in Cleveland, Ohio ($1,887,000). Revenues in 1996
were also favorably impacted by the addition of 336 units added to four
developments in Cleveland ($874,000) and the acquisition of Emerald Palms, a
419-unit apartment community in Miami, Florida ($2,563,000). Average monthly
rental rates increased in 1996, generating an additional $3,240,000 in annual
revenues over 1995. Average occupancy in 1996 remained at 96%, consistent with
the 1995 level. These revenue increases were offset, in part, by the disposition
of Vineyard Village, a 152-unit apartment building in Ontario, California
($1,079,000).

Revenues for the Residential Group in 1995 decreased by $22,375,000 (or
17.5%) from $128,124,000 in 1994. Excluding the revenues of Park LaBrea Towers,
which was sold in 1994 (see "-- Other Transactions -- Gain (Loss) on Disposition
of Properties"), revenues increased by $5,796,000 (or 5.8%). This increase
reflected a full year of operations at Regency Towers, a 372-unit apartment
community in Jackson, New Jersey, and Oaks, a 248-unit apartment complex in
Bryan, Texas ($3,200,000). Average monthly rental rates increased in 1995,
generating an additional $2,868,000 in annual revenues over 1994. Average
occupancy in 1995 remained at 96%, the same level as in 1994.

OPERATING AND INTEREST EXPENSES. Operating and interest expenses for the
Residential Group increased by $7,438,000 and $2,420,000 (or 13.8% and 7.9%),
respectively, to $61,437,000 and $32,947,000, respectively, in 1996 from
$53,999,000 and $30,527,000, respectively, in 1995. The majority of the increase
in operating and interest expense reflected the expenses and debt service
associated with the addition of Laurels, the Vineyards and 336 new units at
existing properties in Cleveland, Ohio discussed above. During fiscal years
ended January 31, 1995, 1996 and 1997, average comparable operating expenses
increased at a compounded annual rate of 2.2%.

Operating and interest expenses in 1995 decreased by $15,466,000 and
$6,166,000 (or 22.3% and 16.8%), respectively, from $69,465,000 and $36,693,000,
respectively, in 1994. Excluding Park LaBrea Towers, which was sold in 1994,
operating and interest expenses increased by $1,449,000 and $6,386,000 (or 2.8%
and 26.5%), respectively, from $52,550,000 and $24,141,000, respectively, in
1994. The increase in operating and interest expenses was primarily due to the
full year of operations for Regency Towers and Oaks, which were acquired in 1994
and the 1995 acquisition of Laurels. In addition, interest expense in 1995 was
also affected by increased interest rates.

NET OPERATING INCOME. Residential Group NOI for 1996 was $55,088,000,
compared to $51,750,000 in 1995, a 6.5% increase. NOI increased 6.7% from 1995
to 1996 for Residential Group

- ---------------

S-66
<PAGE> 71

properties in operation throughout both years and 6.0% from 1994 to 1995 for
Residential Group properties in operation throughout both years. Eliminating
asset dispositions and including the expected NOI during the initial twelve
months after stabilization for the five Residential Group properties that were
opened or acquired in 1996, would result in total NOI of approximately
$52,103,000.*

LAND GROUP

REVENUES. Revenues for the Land Group increased by $10,999,000 (or 25.6%)
in 1996, from $42,889,000 in 1995 to $53,888,000 in 1996. This increase
reflected income from the sale of a parcel of land in Miami, Florida
($9,029,000) and increased sales at the Company's Silver Lakes development in
Fort Lauderdale, Florida ($2,343,000). Revenues decreased by $6,005,000 (or
12.3%) in 1995 from $48,894,000 in 1994. The decrease was primarily the result
of two large commercial outlot sales in 1994 totaling $7,176,000. Commercial
outlot sales have been recorded in the Commercial Group since 1995.

OPERATING AND INTEREST EXPENSES. Operating expenses increased by
$9,966,000 and interest expense decreased by $1,151,000 (or 32.0% and 14.5%),
respectively, to $41,068,000 and $6,813,000, respectively, in 1996 from
$31,102,000 and $7,964,000, respectively, in 1995. Operating expenses decreased
by $7,262,000 and interest expense increased $724,000 (or 18.9% and 10.0%),
respectively, in 1995 from $38,364,000 and $7,240,000, respectively, in 1994.
The fluctuation in operating expenses primarily reflected the sales volume in
each year. The decrease in interest expense in 1996 compared to 1995 resulted
from a reduction in interest-bearing debt. The increase in interest expense in
1995 compared to 1994 was primarily due to the financing of new land
acquisitions.

LUMBER TRADING GROUP

REVENUES. Revenues of the Lumber Trading Group increased by $43,398,000
(or 53.5%) from $81,093,000 in 1995 to $124,491,000 in 1996. Of this increase,
$26,708,000 reflected the consolidation of the revenues of Forest City/Babin, a
wholesaler of major appliances, cabinets and hardware to housing contractors,
for the first time. At the end of 1995, the Company acquired the remaining 50%
interest in Forest City/Babin and now consolidates this wholly owned subsidiary.
The Company previously accounted for its 50% interest in Forest City/Babin using
the equity method. The remaining increase was primarily due to an increase in
the Lumber Trading Group's margins as a result of increased housing starts.
Revenues of the Lumber Trading Group in 1995 were relatively flat compared to
1994.

OPERATING AND INTEREST EXPENSES. Operating and interest expenses in the
Lumber Trading Group increased in 1996 by $40,170,000 and $88,000 (or 57.2% and
1.7%), respectively, from $70,189,000 and $5,078,000, respectively, in 1995. A
significant portion of this increase ($25,844,000 and $572,000 in operating and
interest expenses, respectively), was the result of the Forest City/Babin
acquisition described above. The remaining $14,326,000 increase in operating
expenses reflected the increase in variable expenses due to increased sales
volume. The remaining $484,000 decrease in interest expense was the result of
reduced inventory and a reduced rate of interest on the Lumber Trading Group's
lines of credit. Operating and interest expenses were flat in 1995 compared to
1994.

CORPORATE ACTIVITIES

REVENUES. Revenues of the Corporate Activities increased $250,000 (or
4.6%) in 1996 to $5,711,000 from $5,461,000 in 1995. Corporate Activities
revenues decreased $573,000 (or 9.5%) in 1995 from $6,034,000 in 1994. Corporate
Activities revenues consist primarily of interest income

- ---------------

*This is a forward-looking statement and is based on current facts and
expectations. Actual results may vary materially from those projected. In
particular, see "Risk Factors -- Real Estate Development and Investment Risks,"
"-- Dependence on Rental Income From Real Property," "-- Changes in Interest
Rates," "-- Tax-Exempt and UDAG Financing" "-- Reliance on Major Tenants," and
"-- Competition."

S-67
<PAGE> 72

on advances made by the Company on behalf of its partners, and vary from year to
year depending on interest rates and the amount of advances outstanding.

OPERATING AND INTEREST EXPENSES. Operating expenses increased $2,375,000
(or 37.4%) in 1996 to $8,723,000 from $6,348,000 in 1995, primarily due to a
favorable adjustment of $1,247,000 for a self-insurance accrual in 1995 that did
not recur in 1996 and increased general corporate expenses in 1996. Operating
expenses decreased $3,288,000 (or 34.1%) in 1995 from $9,636,000 in 1994. This
decrease was primarily the result of the favorable insurance adjustment noted
above and certain asset management costs that were charged to Corporate
Activities in 1994 and prior years. Beginning in 1995, these asset management
costs were being reported by each principal business group as part of its
operating expenses. Interest expense, which consists primarily of interest
expense on the Term Loan and Revolving Credit Facility that had not been
allocated to a principal business group, remained essentially flat for 1996,
1995, and 1994.

OTHER TRANSACTIONS

PROVISION FOR DECLINE IN REAL ESTATE. The Company's provision for decline
in real estate totaled $12,263,000, $9,581,000 and $10,133,000, in 1996, 1995
and 1994, respectively. In 1996, the Company entered into a joint venture
agreement with MGM to develop a casino/retail project which substantially
changed the scope of the Company's original development of the project. The 1996
provision for decline in real estate includes $5,104,000 of development costs
incurred by the Company which management determined to write-off as a result of
the change in scope of the project. In addition, the Company recorded a
provision for decline in real estate relating to the land acquired for The
Enclave, a 633-unit apartment complex in San Jose, California. This provision
for decline in real estate resulted from an adjustment of $5,583,000 to write
down the land to its fair market value. The 1995 provision primarily reflected
the write-off of development costs of $7,242,000 associated with future phases
of Toscana, a 563-unit apartment complex in Irvine, California discussed below
under "-- Recent Developments," based on management's determination that the
Company would not pursue future development. Also in 1995, the provision for
decline in real estate included an adjustment of $1,404,000 relating to the
write down of parcels of land to fair market value which were originally
acquired for the Enclave project and deeded back to the original land owner. The
1994 provision reflected an adjustment to fair market value of Laurel Plaza, a
Los Angeles, California shopping center which was sold in 1995.

GAIN (LOSS) ON DISPOSITION OF PROPERTIES. The gain (loss) on disposition
of properties totaled a gain of $17,574,000, a loss of $754,000 and a loss of
$30,835,000, respectively, in 1996, 1995 and 1994. The 1996 gain primarily
reflects the disposition of the Company's 18.63% interest in Beachwood Place, a
regional shopping center in Cleveland, Ohio ($17,788,000) and the disposition of
Victor Village, a California strip shopping center ($499,000). The 1995 loss was
primarily the result of the disposition of Vineyard Village, as described above,
($650,000). The 1994 loss is primarily the result of the disposition of Park
LaBrea Towers, as described above.

EXTRAORDINARY GAIN. Extraordinary gain, net of tax, totaled $2,900,000,
$1,847,000 and $60,449,000, respectively, in 1996, 1995 and 1994 representing
extinguishment of nonrecourse debt and related accrued interest relating to The
Enclave and the Clark Building in Cambridge, Massachusetts in 1996, to Liberty
Center in 1995, and to Park LaBrea Towers in 1994. See Note N to the Company's
Consolidated Financial Statements.

INCOME TAXES. Income tax expense (benefit) totaled $12,951,000,
$10,623,000 and ($5,964,000), respectively in 1996, 1995 and 1994. At January
31, 1997, the Company had a tax net operating loss carryforward ("NOL") of
$88,868,000 (generated primarily over time in the ordinary course of business
from the significant impact of depreciation expense from real estate properties
on the Company's net earnings) which will expire in the years ending January 31,
2005 through January 31, 2011 and general business credit carryovers of
$3,601,000 which will expire in the years

S-68
<PAGE> 73

ending January 31, 2003 through January 31, 2011. The Company's policy is to
utilize its NOL before it expires and will consider a variety of strategies to
implement that policy. Federal, state and local income taxes paid (refunded)
totaled $830,000, ($888,000) and $3,244,000 in 1996, 1995 and 1994,
respectively. In 1996, the Company paid no regular Federal corporate income tax
and paid $570,000 in Federal alternative minimum tax.

NET EARNINGS. In 1996, the Company's net earnings grew to $12,071,000, or
$.92 per share of common stock, from $8,786,000, or $.65 per share of common
stock in 1995. Excluding the 1994 Park LaBrea Towers transaction discussed under
"-- Other Transactions -- Gain (Loss) on Disposition of Properties," net
earnings in 1995 increased from 1994 net earnings of $4,635,000, or $0.34 per
share of common stock.

EBDT. The Company defines Earnings Before Depreciation, Amortization and
Deferred Taxes ("EBDT") as net earnings from operations before depreciation,
amortization and deferred taxes on income, and excludes provision for decline in
real estate, gain (loss) on disposition of properties and extraordinary gains.
The Company excludes depreciation and amortization expense from EBDT because
they are non-cash items and the Company believes the values of its properties
have appreciated over time in excess of their original cost. Deferred income
taxes are excluded because they are a non-cash item. Payment of current income
taxes has not been historically significant and is not expected to be
significant in the foreseeable future. The provision for the decline in real
estate is excluded from EBDT because it is typically a non-cash item that varies
from year to year based on factors unrelated to the Company's overall financial
performance. The Company excludes gain (loss) on the disposition of properties
from EBDT because it develops and acquires properties for long-term investment,
as opposed to short-term trading gains. As a result, the Company views
dispositions of properties other than commercial outlots or land held by the
Land Group as nonrecurring items. Extraordinary gains are generally the result
of the restructuring of nonrecourse debt obligations and are not considered to
be a component of the Company's operating results.

RECENT DEVELOPMENTS

During February 1997, the Company settled litigation with the original land
owner of Toscana, a 563-unit apartment complex in Irvine, California, and sold
the project back to the original land owner. As a result, the Company had
litigation settlement proceeds of $15,000,000 (the after-tax amount of which
will be included in EBDT for the first quarter of fiscal 1997); a pre-tax loss
on disposition of the property of $35,505,000; and a pre-tax extraordinary gain
of $18,272,000 related to the extinguishment of a portion of the nonrecourse
mortgage debt. The net result of these transactions to the Company was a pre-tax
loss of $2,233,000. Revenues, operating expenses, interest expense and asset
cost for 1996 related to Toscana were $7,218,000, $2,791,000, $4,097,000 and
$78,271,000, respectively.

FINANCIAL CONDITION AND LIQUIDITY

The Company believes that its sources of liquidity and capital are adequate
to meet its needs in the foreseeable future.* The Company's principal sources of
funds are cash provided by operations, the Revolving Credit Facility and
refinancings of existing properties. The Company's principal use of funds are
the financing of new developments, capital expenditures and payments on
nonrecourse mortgage debt on real estate.

The Lumber Trading Group is financed separately from the rest of the
Company's principal business groups, and the financing obligations of the Lumber
Trading Group are nonrecourse to the Company. Accordingly, the liquidity of the
Lumber Trading Group is discussed separately below under "-- Lumber Trading
Group Liquidity."

- ---------------

*This is a forward-looking statement and is based on current facts and
expectations. See "Risk Factors -- Information Concerning Forward-Looking
Statements."

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<PAGE> 74

1996 AND 1995 MORTGAGE REFINANCINGS

In 1996, the Company refinanced $482,428,000 of mortgage indebtedness with
$525,370,000 of new nonrecourse mortgage indebtedness. In 1995, the Company
refinanced $361,421,000 of mortgage indebtedness with $366,842,000 of new
nonrecourse mortgage indebtedness.

OUTLOOK FOR 1997. As of January 31, 1997, the Company had $288,915,000
million of nonrecourse mortgage indebtedness due and payable in 1997. Of this
amount, as of March 31, 1997, the Company had already refinanced $40,000,000 and
discharged $67,800,000 with proceeds from the sale of Toscana (see "-- Recent
Developments"). The Company anticipates that the remaining $181,115,000 of
mortgage indebtedness will either be refinanced with new nonrecourse mortgage
indebtedness or extended.*

LONG-TERM DEBT

At January 31, 1997, the Company had recourse debt of $93,000,000
outstanding, comprised of $45,000,000 under a $70,000,000 Term Loan maturing
July 1, 2001 and $48,000,000 under an $80,000,000 Revolving Credit Facility
maturing July 25, 1998. The Company is required to make quarterly principal
payments of $2,500,000 under the Term Loan. The Company has entered into an
interest rate swap agreement to fix $87,000,000 of the Term Loan and Revolving
Credit Facility for the period February 1, 1997 through February 1, 1998. The
Term Loan and Revolving Credit Facility and the Company's Guaranty require FCRPC
and the Company to maintain certain levels of cash flow and require the Company
to maintain a specified level of net worth and restrict the payment of dividends
by the Company to $10,000,000 per year. At March 31, 1997, the Company had
$15,000,000 of borrowings available under the Revolving Credit Facility, which
is the Company's principal source of temporary borrowings.

INTEREST RATE EXPOSURE

At January 31, 1997, the Company had $994,957,000 in fixed-rate and
$903,471,000 in variable-rate nonrecourse mortgages outstanding, with a weighted
average interest rate of 7.25%. At January 31, 1997, the Company's fixed-rate
debt carried a weighted average interest rate of 7.96%. Its weighted average
variable-rate taxable interest rate was 7.38%. Of the variable-rate debt,
$134,302,000 are tax-exempt financings which carried a weighted average interest
rate of 4.38% at January 31, 1997. Its weighted average interest rate on UDAG
loans and other government subsidized financing was 2.60%. The Company generally
does not hedge tax-exempt debt because of the low base rate on this type of
financing. With respect to taxable variable-rate debt, the Company generally
attempts to obtain interest rate protection for such debt with a maturity in
excess of one year. Of the $769,169,000 in taxable variable-rate debt
outstanding at February 1, 1997, $330,385,000 was protected by interest rate
swaps with a weighted average rate of 7.79% and an average remaining term of 2.3
years, effectively reducing the Company's interest rate exposure from the
taxable variable-rate debt to $438,784,000. In addition, $40,969,000 of
variable-rate debt was protected by interest rate caps, of which $19,139,000
extends for more than one year.

At January 31, 1997, a 100 basis point increase in taxable interest rates
would have increased the pre-tax interest cost of the Company's taxable
variable-rate debt by approximately $4.4 million. Although tax-exempt interest
rates generally increase in an amount that is smaller than corresponding changes
in taxable interest rates, a 100 basis point increase in tax-exempt interest
rates would have increased the pre-tax interest cost of the Company's tax-exempt
variable-rate debt by approximately $1.3 million.

- ---------------

*This is a forward-looking statement and is based on current facts and
expectations. No assurance can be given that the Company will be able to
refinance or extend this indebtedness. See "Risk Factors -- Information
Concerning Forward- Looking Statements." In particular, see "Risk
Factors -- Real Estate Development and Investment Risks," "-- Dependence on
Rental Income From Real Property," "-- High Leverage; Credit Facility
Covenants," "-- Changes in Interest Rates," "-- Tax-Exempt and UDAG Financing"
and "-- Reliance on Major Tenants."

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<PAGE> 75

LUMBER TRADING GROUP LIQUIDITY

The Lumber Trading Group is separately financed with two lines of credit
and an accounts receivable sale program, which are not recourse to the Company.

The Lumber Trading Group has in place two lines of credit totaling
$46,000,000. These credit lines are secured by the assets of the Lumber Trading
Group, and are used by the Lumber Trading Group to finance its working capital
needs. At January 31, 1997, the Lumber Trading Group had $26,554,000 of
available credit under these facilities.

The Lumber Trading Group also has sold an undivided ownership interest in a
pool of accounts receivable of up to a maximum of $90,000,000. The Lumber
Trading Group uses this program to finance its working capital needs. At January
31, 1997, $34,000,000 had been sold under this accounts receivable program.

The Company believes that the amounts available under these credit
facilities, together with the accounts receivable sale program, will be
sufficient to meet the Lumber Trading Group's liquidity needs in 1997.

CASH FLOWS

Net cash provided by operating activities was $62,227,000, $72,509,000 and
$132,305,000 in 1996, 1995 and 1994, respectively. The decrease in cash provided
by operating activities in 1996 from 1995 is primarily the result of an increase
in inventories for the Lumber Trading Group ($5,346,000), a decrease in deferred
profit on contract sales ($6,484,000) and an increase in interest paid
($2,545,000), offset in part by an increase in rents and other revenues
received. The decrease in cash provided by operating activities in 1995 from
1994 was primarily due to an increase in interest paid ($13,436,000), the
increase in other assets for lease procurement costs and restricted cash
($18,721,000) and 1994 activity which did not recur in 1995: (1) the decrease in
inventories for the Lumber Trading Group ($26,456,000), and (2) the increase in
accounts payable and accrued expenses for the Land Group ($6,703,000). The
additional increases in operating expenses in 1996 and 1995 were offset by rents
and other revenues received during those years.

Net cash used in investing activities totaled $134,903,000, $112,848,000
and $132,305,000 in 1996, 1995 and 1994, respectively. Capital expenditures,
other than development and acquisition activities, totaled $32,007,000
(including both recurring and investment capital expenditures) in 1996 and were
financed primarily with cash provided by operating activities. In 1996, net cash
used in investing activities reflected the Company's use of $120,667,000 of
funds for acquisition and development activities, which were financed with
$117,202,000 in new mortgage indebtedness (see below for discussion of Cash
Flows from Financing Activities) and the remainder from cash provided by
operating activities. Net cash used in investing activities in 1996 also
includes the gross proceeds from the dispositions of Beachwood Place
($15,427,000) and Victor Village ($10,613,000).

Capital expenditures, other than development and acquisition activities,
totaled $29,954,000 (including both recurring and investment capital
expenditures) in 1995 and were financed primarily with cash provided by
operating activities. In 1995, the Company used $87,385,000 of funds for
acquisition and development activities, which were financed with $68,146,000 in
new mortgage indebtedness (see below for discussion of Cash Flows from Financing
Activities), and the remainder from cash provided by operating activities. Net
cash used in investing activities in 1995 also includes proceeds from the
dispositions of Vineyard Village($7,450,000) and Laurel Plaza ($8,500,000) for
$15,950,000.

In 1994, capital expenditures, other than development and acquisition
activities, totaled $39,206,000 (including both recurring and investment capital
expenditures) and were financed primarily with cash provided by operating
activities. The Company used $82,396,000 of funds in 1994 for acquisition and
development activities, which were financed with $66,205,000 in new

S-71
<PAGE> 76

mortgage indebtedness and the remainder from cash provided by operating
activities. Net cash used in investing activities in 1994 also includes proceeds
from the sale of Park LaBrea Towers ($15,264,000).

Capital expenditures for 1997, other than development and acquisition
activities, are estimated to total $34,816,000. In 1997, the Company anticipates
expending $91,839,000 in acquisition and development activities. The Company
anticipates that approximately one-half of these capital expenditures will be
financed with nonrecourse mortgage indebtedness, and that the remaining portion
with cash from operations and borrowings under the Revolving Credit Facility.*

Net cash provided by financing activities totaled $74,833,000, $33,006,000
and $24,680,000 in 1996, 1995 and 1994, respectively. The Company's refinancing
of mortgage indebtedness is discussed above in "-- 1996 and 1995 Mortgage
Refinancings" and borrowings under new mortgage indebtedness for acquisition and
development activities is included in the preceding paragraphs discussing net
cash used in investing activities. In addition, net cash provided by financing
activities in 1996 reflected $15,200,000 of restricted cash pledged for the
financing of The Enclave, a 633 unit apartment community in San Jose, California
currently under construction, $6,080,000 of common stock repurchases and the
payment of $2,797,000 of dividends. Net cash provided by financing activities in
1995 reflected, in addition to the refinancing of mortgage indebtedness and
borrowing under new mortgage indebtedness, $2,509,000 in common stock
repurchases and the payment of $2,248,000 of dividends. Net cash provided by
financing activities in 1994 reflected, in addition to new indebtedness for
acquisition and development activities, refinancing of existing mortgages
indebtedness and the payment of $1,798,000 of dividends.

STOCK SPLIT, DIVIDENDS AND AUTHORIZED SHARES

The Board of Directors approved a three-for-two stock split of both the
Company's Class A and Class B Common Stock, which became effective February 17,
1997 to shareholders of record at the close of business on February 3, 1997. The
stock split was effected as a stock dividend.

The Board of Directors of the Company recently announced that they intend
to pay cash dividends on a quarterly basis in the future, whereas cash dividends
in 1995 and 1996 were paid on an annual basis. A quarterly cash dividend of $.06
per share (post-split) on shares of both Class A and Class B Common Stock was
paid on March 17, 1997. The $.06 quarterly dividend per share equates to an
annual pre-split dividend of $.36 per share and represents a 12.5% increase over
the annual dividend declared in 1996. The second 1997 quarterly dividend of $.06
per share on shares of both Class A and Class B Common Stock will be paid on
June 16, 1997 to shareholders of record at the close of business on June 2,
1997. Purchasers of Class A Common Stock in this Offering who hold shares of
Class A Common Stock on the record date will be entitled to this dividend.

The Company's current authorized shares are comprised of 16,000,000 shares
of Class A Common Stock, 6,000,000 shares of Class B Common Stock and 1,000,000
shares of Preferred Stock. The Board of Directors has approved for submission to
shareholders at the Company's 1997 Annual Meeting amendments to the Company's
Articles of Incorporation to increase the Company's authorized shares to
48,000,000 shares of Class A Common Stock, 18,000,000 shares of Class B Common
Stock and 5,000,000 shares of Preferred Stock.

INFLATION

The Commercial Group's exposure to increases in costs and operating
expenses resulting from inflation is minimized due to the provisions of its
leases with its tenants that require tenants to

- ---------------

*The statements in this paragraph are forward-looking statements and are based
on current facts and expectations. Many factors may affect the Company's
development activities and its ability to finance these activities. See "Risk
Factors -- Information Concerning Forward-Looking Statements." In particular,
see "Risk Factors -- Real Estate Development and Investment Risks," "-- High
Leverage; Credit Facility Covenants," "-- Changes in Interest Rates,"
"-- Tax-Exempt and UDAG Financing," "-- Competition," and "-- Environmental
Liabilities."

S-72
<PAGE> 77

reimburse the Company for the majority of its operating expenses. Also, many of
the Company's leases provide for payments based on a percentage of the rental
income of the tenants, which generally increases in periods of inflation. The
Residential Group's risk in a period of inflation is minimized by the annual
turnover of tenant leases, which allow for immediate market rate increases. The
Land and the Lumber Trading Groups may be affected by inflation by the
availability of buyers of new housing to obtain mortgage financing when interest
rates are high.

NEW ACCOUNTING STANDARDS

In March, 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 121 " Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS 121 establishes accounting standards for the review of impairment of a
long-lived asset whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The Company has adopted the
provisions of SFAS 121, which has no material effect on the financial position
or results of operations of the Company.

During 1996, the Company granted options under its Stock Option Plan. The
Company recognizes compensation cost in accordance with the provisions of
Accounting Principles Board Opinion No. 25 and related Interpretations. The
Company has not adopted the recognition provisions of SFAS 123 "Accounting for
Stock-Based Compensation," but the disclosures required by SFAS 123 have been
included in the Notes to the Consolidated Financial Statements.

In February 1997, FASB issued SFAS 128 "Earnings per Share," which is
effective for fiscal years ending after December 15, 1997. This Statement
simplifies the standards for computing earnings per share ("EPS") and makes them
comparable to international EPS standards. The Company will adopt the provisions
of SFAS 128 for its fiscal year ending January 31, 1998, but does not expect
such adoption to have a material impact on EPS.

S-73
<PAGE> 78

FOREST CITY ENTERPRISES, INC.

THREE YEAR SUMMARY OF EARNINGS BEFORE DEPRECIATION, AMORTIZATION AND DEFERRED
TAXES
<TABLE>
<CAPTION>
LUMBER TRADING
COMMERCIAL GROUP RESIDENTIAL GROUP LAND GROUP GROUP
---------------------------- ---------------------------- ------------------------- -----------------
1996 1995 1994 1996 1995 1994 1996 1995 1994 1996 1995
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $309,834 $294,241 $258,966 $116,525 $105,749 $128,124 $53,888 $42,889 $48,894 $124,491 $81,093
Operating expenses,
including depreciation and
amortization for non-real
estate Groups............. 168,466 146,340 137,583 61,437 53,999 69,465 41,068 31,102 38,364 110,359 70,189
Interest expense........... 88,149 86,046 67,031 32,947 30,527 36,693 6,813 7,964 7,240 5,166 5,078
Income tax provision....... (2,970) 7,026 (1,980) (2,464) 581 (5,120) 2,078 (358) 368 3,913 2,823
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------- -------
253,645 239,412 202,634 91,920 85,107 101,038 49,959 38,708 45,972 119,438 78,090
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------- -------
Earnings before
depreciation, amortization
and deferred taxes
(EBDT).................... $ 56,189 $ 54,829 $ 56,332 $ 24,605 $ 20,642 $ 27,086 $ 3,929 $ 4,181 $ 2,922 $ 5,053 $ 3,003
======== ======== ======== ======== ======== ======== ======= ======= ======= ======== =======
Reconciliation to net
earnings:
Earnings before
depreciation, amortization
and deferred taxes
(EBDT)....................
Depreciation and
amortization -- real
estate Groups.............
Deferred taxes -- real
estate Groups.............
Provision for decline in
real estate, net of tax...
Gain (loss) on disposition
of properties, net of
tax.......................
Extraordinary gain, net of
tax.......................
Net earnings...............

CORPORATE ACTIVITIES TOTAL
------------------------ ----------------------------
1994 1996 1995 1994 1996 1995 1994
------- ------- ------ ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $80,590 $ 5,711 $5,461 $ 6,034 $610,449 $529,433 $522,608
Operating expenses,
including depreciation and
amortization for non-real
estate Groups............. 70,312 8,723 6,348 9,636 390,053 307,978 325,360
Interest expense........... 5,372 289 386 485 133,364 130,001 116,821
Income tax provision....... 2,268 (3,929) (639) 3,629 (3,372) 9,433 (835)
------- ------ ------ ------ -------- -------- --------
77,952 5,083 6,095 13,750 520,045 447,412 441,346
------- ------ ------ ------ -------- -------- --------
Earnings before
depreciation, amortization
and deferred taxes
(EBDT).................... $ 2,638 $ 628 $ (634) $(7,716) $ 90,404 $ 82,021 $ 81,262
======= ====== ====== ====== ======== ======== ========
Reconciliation to net
earnings:
Earnings before
depreciation, amortization
and deferred taxes
(EBDT).................... $ 90,404 $ 82,021 $ 81,262
Depreciation and
amortization -- real
estate Groups............. (70,221) (63,557) (63,956)
Deferred taxes -- real
estate Groups............. (13,197) (4,974) (10,532)
Provision for decline in
real estate, net of tax... (7,413) (6,073) (4,986)
Gain (loss) on disposition
of properties, net of
tax....................... 9,598 (478) (20,321)
Extraordinary gain, net of
tax....................... 2,900 1,847 60,449
-------- -------- --------
Net earnings............... $ 12,071 $ 8,786 $ 41,916
======== ======== ========
</TABLE>

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<PAGE> 79

PROPERTIES

The following tables provide summary information regarding the Company's
real estate portfolio as of January 31, 1997.

SHOPPING CENTERS -- EXISTING PORTFOLIO

<TABLE>
<CAPTION>
YEAR
COMPLETED/ RETAIL SQ. FT.
DATE OF LAST COMPANY INCLUDING
NAME RENOVATION OWNERSHIP(%) LOCATION MAJOR ANCHORS DEPT. STORES GLA
- ----------------- ------------ ---------- ----------------- -------------------------------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
REGIONAL MALLS
Antelope Valley
Mall............ 1990 40.0% Palmdale, CA Sears Roebuck and Co.; JC Penney's; 839,000 287,000
Gottshalk's; Harris; Mervyn's
The Avenue at
Tower City...... 1990/1996 100.0 Cleveland, OH Dillard's 368,000 368,000
Ballston
Common.......... 1986/1995 100.0 Arlington, VA Hecht's; JC Penney's 490,000 221,000
Boulevard Mall... 1962/1996 50.0 Amherst, NY Jenss; JC Penney's; Kaufmann's 772,000 261,000
Canton Centre.... 1981/1988 100.0 Canton, OH Kaufmann's; JC Penney's; Montgomery 680,000 254,000
Ward
Chapel Hill
Mall............ 1966/1995 50.0 Akron, OH Kaufmann's; JC Penney's; Sears Roebuck 882,000 321,000
and Co.
Charleston Town
Center.......... 1983/1994 50.0 Charleston, WV Kaufmann's; JC Penney's; Sears Roebuck 897,000 360,000
and Co.; Montgomery Ward
Courtland
Center.......... 1968 100.0 Flint, MI Crowley's; JC Penney's; Mervyn's 460,000 239,000
Galleria at
Sunset.......... 1996 60.0 Henderson, NV Dillard's; Robinson-May; Mervyn's; JC 892,000 294,000
Penney's
Manhattan Town
Center.......... 1987 37.5 Manhattan, KS Dillard's; JC Penney's; Sears Roebuck 380,000 185,000
and Co.
Rolling Acres
Mall............ 1975 80.0 Akron, OH Kaufmann's; JC Penney's; Sears Roebuck 1,014,000 365,000
and Co.; Dillard's; Target
South Bay
Galleria........ 1985 50.0 Redondo Beach, CA May Co.; Mervyn's; Nordstrom's 953,000 385,000
Summit Park
Mall............ 1972 100.0 Wheatfield, NY Bon-Ton; Jenss; Sears Roebuck and Co. 695,000 309,000
Tucson Mall...... 1982/1992 67.5 Tucson, AZ Broadway's; Foley's; Dillard's; 1,293,000 408,000
Mervyn's; JC Penney's; Sears Roebuck
and Co.
---------- ---------
Subtotal...... 10,615,000 4,257,000
---------- ---------
SPECIALTY RETAIL CENTERS
Atlantic
Center.......... 1996 75.0% Brooklyn, NY Caldor; The Sports Authority; 391,000 391,000
Pathmark; OfficeMax
Bowling Green
Mall............ 1966 50.0 Bowling Green, KY Kroger; Quality Big Lots 242,000 242,000
Bruckner
Boulevard....... 1996 70.0 Bronx, NY Pergament; Seaman's; Young World; Old 114,000 114,000
Navy
Chapel Hill
Suburban........ 1969 50.0 Akron, OH Value City; Petzazz 112,000 112,000
Courtyard........ 1990 50.0 Flint, MI V.G.'s Market; Home Depot; OfficeMax 233,000 124,000
Flatbush
Avenue.......... 1995 80.0 Brooklyn, NY Caldor 90,000 90,000
Gallery at
MetroTech....... 1990 80.0 Brooklyn, NY Toys "R" Us 163,000 163,000
Golden Gate...... 1958/1996 50.0 Mayfield Hts., OH OfficeMax; Old Navy; Koenig; 260,000 260,000
Michael's; Home Place
Hunting Park..... 1996 70.0 Philadelphia, PA Caldor; US Kidz; Payless Shoes 144,000 144,000
Marketplace at
Riverpark....... 1996 50.0 Fresno, CA Best Buy; Target; Marshall's; JC 453,000 284,000
Penney's
Midtown Plaza.... 1961 50.0 Parma, OH Hills 256,000 256,000
Newport Plaza.... 1977 50.0 Newport, KY IGA 157,000 157,000
The Plaza at
Robinson Town
Center.......... 1989 50.0 Pittsburgh, PA T.J. Maxx; IKEA; Hills; Marshall's; 455,000 455,000
Sears Roebuck and Co.
Showcase......... 1996 20.0 Las Vegas, NV Coca-Cola(R); All Star Cafe 189,000 189,000
South Bay
Southern........ 1978 100.0 Redondo Beach, CA CompUSA; General Cinema 160,000 160,000
Tucson Place..... 1989 100.0 Tucson, AZ Wal-Mart; Homelife; OfficeMax; 276,000 276,000
Smitty's
---------- ---------
Subtotal...... 3,695,000 3,417,000
---------- ---------
Shopping Centers at January 31, 1997 14,310,000 7,674,000
========== =========
Shopping Centers at January 31, 1996 13,422,000 6,938,000
========== =========
</TABLE>

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<PAGE> 80

OFFICE BUILDINGS -- EXISTING PORTFOLIO

<TABLE>
<CAPTION>
LEASABLE
YEAR COMPLETED COMPANY SQUARE
NAME OR ACQUIRED OWNERSHIP (%) LOCATION MAJOR TENANTS FEET
- -------------------------- --------------- -------------- ---------------------- ---------------------------- -----------
<S> <C> <C> <C> <C> <C>
METROTECH CENTER
Eleven MetroTech
Center................ 1995 65.0% Brooklyn, NY E-911 -- City of New York 216,000
One MetroTech........... 1991 65.0 Brooklyn, NY Brooklyn Union Gas; Bear 932,000
Stearns & Co., Inc.
One Pierrepont Plaza.... 1988 85.0 Brooklyn, NY Morgan Stanley & Co. 672,000
Incorporated; Goldman,
Sachs & Co.; U.S. Attorney
Ten MetroTech Center.... 1991 80.0 Brooklyn, NY Internal Revenue Service 409,000
Two MetroTech........... 1990 65.0 Brooklyn, NY Securities Industry 521,000
Automation Corp.
----------
Subtotal..............
2,750,000
----------
TOWER CITY CENTER
Chase Financial Tower... 1991 95.0% Cleveland, OH Chase Financial 119,000
M.K. Ferguson 1990
Plaza(1).............. 1.0 Cleveland, OH M.K. Ferguson; Chase 482,000
Financial
Skylight Office Tower... 1991 85.0 Cleveland, OH Ernst & Young, L.L.P 321,000
Terminal Tower.......... 1983 100.0 Cleveland, OH Forest City Enterprises, 583,000
Inc.
----------
Subtotal..............
1,505,000
----------
MIT
Clark Building.......... 1989 50.0% Cambridge, MA Oravax 122,000
Jackson Building........ 1987 100.0 Cambridge, MA Ariad Pharmaceuticals 99,000
Richards Building....... 1990 100.0 Cambridge, MA Genzyme Tissue Repair; 126,000
Alkermes
----------
Subtotal..............
347,000
----------
OTHER
Chagrin Plaza I & II.... 1969 66.7% Beachwood, OH National City Bank 116,000
Emery-Richmond.......... 1991 50.0 Warrensville Hts., OH All State Insurance 5,000
Halle Building.......... 1986 75.0 Cleveland, OH Sealy, Inc.; North American 379,000
Refractories Co.
Liberty Center.......... 1986 50.0 Pittsburgh, PA Federated Investors 526,000
San Vicente............. 1983 25.0 Brentwood, CA Foote, Cone; Needham, Harper 469,000
Signature Square I...... 1986 50.0 Beachwood, OH Ciuni & Panichi 79,000
Signature Square II..... 1989 50.0 Beachwood, OH Sterling Software 81,000
Station Square.......... 1994 25.0 Pittsburgh, PA Woodsons; Grand Concourse 144,000
----------
Subtotal..............
1,799,000
----------
Office Buildings at January 31, 1997 and 1996 6,401,000
==========
</TABLE>

HOTELS -- EXISTING PORTFOLIO
<TABLE>
<CAPTION>
DATE OF
OPENING/ COMPANY
NAME ACQUISITION OWNERSHIP (%) LOCATION ROOMS
- -------------------------------------- ----------- ------------- ------------------ -----
<S> <C> <C> <C> <C>
Budgetel.............................. 1982 28.4% Mayfield Hts., OH 102
Charleston Marriott................... 1983 95.0 Charleston, WV 354
DoubleTree at Liberty Center.......... 1986 50.0 Pittsburgh, PA 616
DoubleTree at Millender Center(1)..... 1985 4.0 Detroit, MI 250
Ritz-Carlton.......................... 1990 95.0 Cleveland, OH 208
-----
Hotel Rooms at January 31, 1997 and 1996 1,530
=====
</TABLE>

- ---------------

(1) Syndicated. See "Risk Factors -- Potential Liability From Syndicated
Properties."

S-76
<PAGE> 81

APARTMENTS -- EXISTING PORTFOLIO

<TABLE>
<CAPTION>
DATE OF
OPENING/ COMPANY
NAME ACQUISITION OWNERSHIP (%) LOCATION UNITS
- ------------------------------------------------ ---------- --------------- ---------------------- ------
<S> <C> <C> <C> <C>
Bayside Village I, II & III..................... 1988-1989 50.0% San Francisco, CA 862
Big Creek....................................... 1996 50.0 Parma Hts., OH 72
Boot Ranch...................................... 1991 50.0 Tampa, FL 236
Boulevard Towers................................ 1969 50.0 Amherst, NY 402
Camelot......................................... 1967 50.0 Parma, OH 150
Chapel Hill Towers.............................. 1969 50.0 Akron, OH 402
Cherry Tree..................................... 1996 50.0 Strongsville, OH 132
Chestnut Lake................................... 1969 50.0 Strongsville, OH 789
Clarkwood....................................... 1963 50.0 Warrensville Hts., OH 568
Classic Residence by Hyatt...................... 1990 50.0 Chevy Chase, MD 339
Classic Residence by Hyatt...................... 1989 50.0 Teaneck, NJ 221
Copper Creek.................................... 1992 20.0 Houston, TX 300
Deer Run I & II................................. 1987-1989 43.0 Twinsburg, OH 562
Emerald Palms................................... 1996 100.0 Miami, FL 419
Fenimore Court(1)............................... 1982 0.5 Detroit, MI 144
Fort Lincoln II................................. 1979 45.0 Washington, D.C. 176
Fort Lincoln III & IV........................... 1981 24.9 Washington, D.C. 306
Granada Gardens................................. 1966 50.0 Warrensville Hts., OH 940
Greenbriar...................................... 1992 20.0 Houston, TX 400
Hamptons........................................ 1969 50.0 Beachwood, OH 649
Highlands I & II................................ 1988-1990 100.0 Grand Terrace, CA 556
Hunter's Hollow................................. 1990 50.0 Strongsville, OH 208
Independence Place I............................ 1976 50.0 Parma Hts., OH 202
Kennedy Lofts(1)................................ 1990 0.5 Cambridge, MA 142
Knolls(1)....................................... 1995 1.0 Orange, CA 260
Laurels......................................... 1995 100.0 Justice, IL 520
Lenox Club(1)................................... 1991 0.5 Arlington, VA 385
Lenox Park(1)................................... 1992 0.5 Silver Spring, MD 406
Liberty Hills................................... 1979-1986 50.0 Solon, OH 396
Metropolitan.................................... 1989 100.0 Los Angeles, CA 270
Midtown Towers.................................. 1969 50.0 Parma, OH 635
Millender Center(1)............................. 1985 4.0 Detroit, MI 339
Noble Towers.................................... 1979 50.0 Pittsburgh, PA 133
Oaks............................................ 1994 100.0 Bryan, TX 248
One Franklintown................................ 1988 100.0 Philadelphia, PA 335
Palm Villas..................................... 1991 100.0 Henderson, NV 350
Panorama Towers................................. 1978 99.0 Los Angeles, CA 154
Parmatown....................................... 1972-1973 100.0 Parma, OH 412
Pavilion(1)..................................... 1992 0.5 Chicago, IL 1,115
Pebble Creek.................................... 1995-1996 50.0 Twinsburg, OH 148
Peppertree...................................... 1993 100.0 College Station, TX 208
Pine Ridge Valley............................... 1967-1974 50.0 Willoughby, OH 1,147
Queenswood(1)................................... 1990 0.7 Corona, NY 296
Regency Towers.................................. 1994 100.0 Jackson, NJ 372
Shippan Avenue.................................. 1980 100.0 Stamford, CT 148
Studio Colony................................... 1986 80.0 Los Angeles, CA 450
Surfside Towers................................. 1970 50.0 Eastlake, OH 246
Tam-A-Rac I, II & III........................... 1990-1996 50.0 Willoughby, OH 392
Toscana......................................... 1991-1992 100.0 Irvine, CA 563
Trolley Plaza................................... 1981 100.0 Detroit, MI 351
Trowbridge...................................... 1988 53.3 Southfield, MI 304
Twin Lakes Towers............................... 1966 50.0 Denver, CO 254
Village Green................................... 1994-1995 25.0 Beachwood, OH 360
Vineyards....................................... 1995 100.0 Broadview Hts., OH 336
Waterford Village(1)............................ 1994 1.0 Indianapolis, IN 520
White Acres..................................... 1966 50.0 Richmond Hts., OH 473
Woodforest Glen................................. 1992 20.0 Houston, TX 336
Subtotal.................................... 22,039
------
Senior Citizens Apartments(2)................... 9,402
------
Apartments at January 31, 1997 31,441
======
Apartments at January 31, 1996 30,686
======
</TABLE>

- ---------------
(1) Syndicated. See "Business--Residential Group--Syndication Activity" and
"Risk Factors--Potential Liability From Syndicated Properties."
(2) Syndicated, subsidized units in 57 communities in which the Company holds a
residual interest only. See "Risk Factors -- Potential Liability From
Syndicated Properties."

S-77
<PAGE> 82

DESCRIPTION OF CERTAIN INDEBTEDNESS

MORTGAGE DEBT FINANCING

The Company utilizes nonrecourse mortgage indebtedness, where the property
is the sole security for each mortgage loan, as its primary source of capital.
At January 31, 1997, the Company had approximately $1.9 billion of total
mortgage indebtedness outstanding (all of which is nonrecourse), representing
95.3% of the Company's total debt. The Company has only four mortgages that are
cross-collateralized and cross-defaulted and six mortgages that are
cross-collateralized by excess cash flows and a pledge of limited partnership
interests. The nonrecourse, non-cross-collateralized nature of the Company's
mortgage indebtedness generally ensures that adverse results at one project will
not affect the Company's other assets.

At January 31, 1997, the Company had a weighted average interest rate on
its outstanding mortgage debt of 7.25%. Outlined below is a schedule of the
Company's portion of outstanding mortgage debt by maturity and weighted average
interest rate by category as of January 31, 1997.

<TABLE>
<CAPTION>
FIXED TO
VARIABLE(1) TAX EXEMPT MATURITY UDAG TOTAL
---------- ---------- -------- ------- ----------
<S> <C> <C> <C> <C> <C>
1997............................................ $233,687 $ 1,217 $ 53,896 $ 115 $ 288,915
1998............................................ 135,854 2,394 29,193 122 167,563
1999............................................ 238,690 1,326 176,467 129 416,612
2000............................................ 112,255 115,928 90,434 136 318,753
2001............................................ 5,804 13,437 68,375 10,570 98,186
Thereafter...................................... 42,879 -- 499,182 66,338 608,399
-------- -------- -------- ------- ----------
Ownership Total................................. $769,169 $134,302 $917,547 $77,410 $1,898,428
======== ======== ======== ======= ==========
Weighted Average Rate........................... 7.38%(2) 4.38% 7.96% 2.60% 7.25%
</TABLE>

- ---------------

(1) These amounts are prior to the effect of interest rate swaps described below
which effectively reduce the amount of variable rate debt to $438.8 million.
(2) Rate includes the effect of approximately $330.4 million of interest rate
swaps.

The table above includes both the regularly scheduled annual amortization
payments as well as the balloon payments due at maturity. The $134.3 million of
Tax-Exempt debt shown above represents credit enhanced variable-rate bonds that
generally adjust interest rates weekly. Although the underlying bonds have
maturities that extend beyond 2001, the schedule reflects the maturity date of
the credit enhancement. Of the $769.2 million of taxable variable-rate debt
shown above, approximately $330.4 million is subject to interest rate swap
agreements with an average rate of 7.79% and average term of 2.3 years,
effectively converting that portion of the variable-rate debt to a fixed-rate
through the maturity of the swap. In addition, the Company had in place $41.0
million of interest rate cap contracts as of January 31, 1997, of which $19.1
million extend for more than one year. See "Risk Factors -- Changes in Interest
Rates."

In a typical development financing, the Company utilizes nonrecourse
mortgage debt for approximately 75% of the cost of a new project at the time of
construction, funding the remaining capital through equity invested by the
Company. The financing is generally a variable-rate construction loan with a
three to seven year maturity, permitting the Company to refinance without the
payment of penalties. Under the terms of such loan, the Company guarantees, on a
recourse basis, the lien-free completion of each project. Once the construction
is completed, the Company's completion guaranty is released. Upon the completion
and stabilization of each project, the Company refinances the initial
construction loan, obtaining a permanent, generally fixed-rate, nonrecourse
mortgage.

The Company routinely has significant balloon mortgage payments due in each
year. Historically, the Company has been successful in refinancing this
indebtedness. As discussed under "Strategy for Growth and Competitive
Advantages -- Capital Strategy," an important part of the

S-78
<PAGE> 83

Company's financing strategy is to obtain capital through refinancing for
redeployment in other projects.

As a result of the increase in valuation typically created by the lease up
of the project, the initial refinancing often can generate funds in excess of
the initial construction mortgage, thereby reducing the Company's equity
investment in the project. The next refinancing, typically within seven years,
generally permits the Company to withdraw substantially all of, if not more
than, its equity investment in the project. Subsequent refinancings of mature
properties continue to provide new capital on a tax free basis to help fund new
projects.

The table below sets forth the Company's refinancings over the past three
years.

<TABLE>
<CAPTION>
REPAYMENT OF
SCHEDULED MATURITIES & ACTUAL NET PROCEEDS
YEAR VOLUNTARY REFINANCINGS PERCENTAGE REFINANCING PERCENTAGE TO THE COMPANY(1)
- ---- ---------------------- ---------- ------------ ---------- -----------------
<C> <S> <C> <C> <C> <C> <C>
1996 Fixed.......... $ 72,235 15.0% $ 240,472 45.8%
Variable....... 410,193 85.0 284,898 54.2
------------ ------ ------------ ------
Total.......... $ 482,428 100.0% $ 525,370 100.0% $ 48,942
============ ====== ============ ====== ============
1995 Fixed.......... $ 101,441 28.1% $ 148,345 40.4%
Variable....... 259,979 71.9 218,498 59.6
------------ ------ ------------ ------
Total.......... $ 361,420 100.0% $ 366,843 100.0% $ 7,833
============ ====== ============ ====== ============
1994 Fixed.......... $ 7,594 2.7% $ 60,993 21.1%
Variable....... 279,284 97.3 228,376 78.9
------------ ------ ------------ ------
Total.......... $ 286,878 100.0% $ 289,369 100.0% $ 4,748
============ ====== ============ ====== ============
</TABLE>

- ---------------
(1) Net proceeds do not equal the difference between the amount refinanced and
the amount paid off due to contractual preferences on distributions.

See "Risk Factors -- High Leverage; Credit Facility Covenants," "-- Changes
in Interest Rates and "-- Tax-Exempt and UDAG Financing."

FOREST CITY RENTAL PROPERTIES CORPORATION CREDIT AGREEMENT

FCRPC, a wholly owned subsidiary of the Company, is a party to a Credit
Agreement, dated as of July 25, 1994, and amended as of September 12, 1995,
April 4, 1996 and December 18, 1996, with the lenders named therein and KeyBank
National Association, as Agent for the lenders thereunder (as so amended, the
"FCRPC Credit Agreement"),

Set forth below is a summary of certain terms of the FCRPC Credit
Agreement. The summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the FCRPC Credit Agreement, which is
included as an exhibit to the Registration Statement of which the accompanying
Prospectus is a part. For the purposes of the following discussion, capitalized
terms used herein and not otherwise defined have the meanings assigned to them
in the FCRPC Credit Agreement.

GENERAL

The FCRPC Credit Agreement provided initially for aggregate facilities of
up to $150 million, consisting of: (i) $70 million in Initial Term Loans,
payable in 28 equal quarterly installments commencing October 1, 1994 and
maturing on July 1, 2001; and (ii) a revolving credit facility (the "Revolving
Credit Facility") of up to $80 million (with a sublimit for letters of credit of
up to $20 million), under which Revolving Loans may be borrowed on a revolving
basis until July 25, 1998 (such date, unless extended by the lenders and FCRPC,
the "Termination Date"), at which time the Revolving Loans will mature, subject
to FCRPC's right at such time to borrow Additional Term Loans to repay the
outstanding Revolving Loans, with such Additional Term Loans being payable in 28

S-79
<PAGE> 84

equal quarterly installments commencing on the first Quarterly Date after such
Additional Term Loans are made. At March 31, 1997, $45.0 million aggregate
principal amount of Term Loans and $65.0 million aggregate principal amount of
Revolving Loans were outstanding under the FCRPC Credit Agreement. No letters of
credit were outstanding under the FCRPC Credit Agreement at March 31, 1997.

Borrowings under the FCRPC Credit Agreement are unsecured borrowings of
FCRPC. The Company has unconditionally guaranteed the obligations of FCRPC under
the FCRPC Credit Agreement pursuant to the Guaranty.

PREPAYMENTS

Loans outstanding under the FCRPC Credit Agreement may be prepaid in whole
or in part without penalty, subject to customary provisions for payment of
breakage and similar costs in the case of prepayment of Loans which bear
interest based on the LIBOR Rate Option. Revolving Loans which are prepaid may
be re-borrowed prior to the Termination Date.

INTEREST RATES

Term Loans under the FCRPC Credit Agreement bear interest at rates, at
FCRPC's election, of (i) LIBOR plus a spread ranging between 200 and 250 basis
points based upon the time after the Closing Date or (ii) Prime Rate plus a
spread ranging between 25 and 75 basis points based upon the time after the
Closing Date. Revolving Loans under the FCRPC Credit Agreement bear interest at
rates, at FCRPC's election, of (i) LIBOR plus a spread of 200 basis points or
(ii) Prime Rate plus a spread of 25 basis points.

FEES

The Commitment Fee is calculated at the rate of three-eighths of one
percent per annum ( 3/8%) on the average daily unborrowed amount of the
Revolving Loan Commitment, paid quarterly. In addition, FCRPC paid a Closing Fee
of $550,000, and is obligated to pay an Agent Fee in an agreed customary amount
on a quarterly basis. FCRPC paid $75,360 and $125,000 in Commitment Fees and
Agent Fees, respectively, during 1996.

COVENANTS

The FCRPC Credit Agreement contains customary affirmative and negative
covenants, including (i) restrictions on FCRPC or any of its Subsidiaries
selling or otherwise transferring all or a substantial part of its assets, or
subject to certain exceptions, being involved in any merger or combination; (ii)
restrictions prohibiting FCRPC or any of its Subsidiaries from incurring or
having outstanding any indebtedness for borrowed money or other Funded
Indebtedness of any kind, subject to exceptions for, among other things,
existing indebtedness and refinancings thereof, certain nonrecourse
indebtedness, certain permitted subordinated indebtedness, and certain unsecured
commercial paper not in excess of the unused Revolving Loan Commitments; (iii)
restrictions on liens of FCRPC and its Subsidiaries; (iv) restrictions on
advances and loans by FCRPC and its Subsidiaries, subject to certain exceptions
for loans secured by mortgages or made in the ordinary course in connection with
the acquisition or development of properties; and (v) restrictions on guarantees
by FCRPC or any of its Subsidiaries, subject to certain exceptions. The FCRPC
Credit Agreement also prohibits FCRPC from having a Gross Cash Flow for any year
less than the sum of (i) 150% until the Termination Date and 125% thereafter, of
all payments of principal and interest on the Loans due in such year, plus (ii)
100% of the principal payments made in such year on all loans secured by real
estate mortgages (other than any final principal payment on any loan secured by
real estate. At January 31, 1997, FCRPC's Gross Cash Flow was $86.9 million, or
79.2% in excess of that required to be generated.

S-80
<PAGE> 85

EVENTS OF DEFAULT

The FCRPC Credit Agreement contains customary Events of Default, including
a failure to pay principal or interest, a failure to comply with certain
covenants, a material inaccuracy of a representation or warranty, a default on
any other recourse indebtedness after any applicable cure period or a default
under any nonrecourse indebtedness which has a material adverse effect on FCRPC
or a Guaranty Default.

GUARANTY OF FOREST CITY

Under the Guaranty of Payment of Debt, made and issued as of July 25, 1994
and as amended through December 18, 1996 (the "Guaranty"), between the Company
and the syndicate of banks that are parties to the FCRPC Credit Agreement the
Company has guaranteed on a recourse basis the punctual payment of all
obligations under the FCRPC Credit Agreement. The Guaranty contains a number of
affirmative and negative covenants, including (i) a covenant that the Company
and FCRPC will not permit their Cash Flow to fall below (A) for the fiscal year
ended January 31, 1997, the greater of (x) $55 million or (y) $52.5 million plus
50% of the amount by which their Cash Flow in their fiscal year ended January
31, 1996 exceeded $52.5 million or (B) with respect to any fiscal year ending
after January 31, 1997, the sum of $55 million plus the cumulative sum of
amounts equal to 50% of the amount, if any, by which their Cash Flow in each
fiscal year (commencing with their fiscal year ending January 31, 1998) exceeds
their Cash Flow in the preceding fiscal year; (ii) a covenant of the Company to
not permit its Net Worth (determined on a consolidated basis) to fall below $155
million, increased on a cumulative basis by 25% of Net Earnings (before
Dividends) in each fiscal year beginning after January 31, 1996; (iii) a
covenant of the Company not to permit its adjusted minimum Net Worth (determined
on a consolidated basis) plus accumulated depreciation, plus deferred taxes, to
fall below $475 million; (iv) restrictive covenants including limitations on the
amount of indebtedness, guarantees and property liens that the Company or any
Subsidiary (other than FCRPC and its Subsidiaries) may incur or have
outstanding, and (v) restrictions on dividends and stock repurchases, subject to
certain exceptions, under which the Company could pay dividends of up to $10
million in any year as measured by each anniversary at July 24. At January 31,
1997, the Company's Net Worth (A) under (ii) above, was $192 million, or 21.5%
in excess of that required to be maintained, and (B) under (iii) above, was
$707.3 million, or 48.9% in excess of that required to be maintained. The
Company's and FCRPC's Cash Flow for the year ended January 31, 1997, was $90.4
million and $86.9 million, respectively, or 34.4% and 79.2%, respectively, over
the required minimum amounts. At January 31, 1997, the Company had paid
dividends of $2.8 million, or 72% less than that permitted under (v) above. The
Guaranty contains customary Events of Default, including a failure to make any
payment required by the Guaranty, the failure to comply with certain covenants
or a default on recourse indebtedness after any applicable cure period or any
nonrecourse indebtedness which has a material adverse effect on the Company.

A failure by the Company to comply with any of the covenants under the
Guaranty or failure by FCRPC to comply with any of the covenants under the FCRPC
Credit Agreement could result in an event of default, which could trigger the
Company's obligation to repay all amounts outstanding under the FCRPC Credit
Agreement. See "Risk Factors -- High Leverage; Credit Facility
Covenants -- Credit Facility Covenants."

S-81
<PAGE> 86

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND SENIOR MANAGERS:

The following table sets forth certain information with respect to the
Company's directors, executive officers, and senior managers.

DIRECTORS

<TABLE>
<CAPTION>
DIRECTOR JOINED
NAME OCCUPATION AND POSITION SINCE COMPANY
- ---------------------------- ------------------------------------------ -------- -------
<S> <C> <C> <C>
Albert B. Ratner............ Co-Chairman of the Board of Directors 1960 1951
Samuel H. Miller............ Co-Chairman of the Board of Directors and 1960 1945
Treasurer of the Company
Charles A. Ratner........... President and Chief Executive Officer of 1972 1966
the Company
Nathan Shafran.............. Vice Chairman of the Board of Directors; 1960 1939
Honorary Board Member, effective June
10, 1997
James A. Ratner............. Executive Vice President of the Company 1984 1975
and President of Forest City Rental
Properties Corporation, a subsidiary of
the Company
Ronald A. Ratner............ Executive Vice President of the Company 1985 1975
and President of Forest City Residential
Group, Inc., a subsidiary of the Company
Brian J. Ratner............. Senior Vice President -- East Coast 1993 1987
Development of the Company
Deborah Ratner Salzberg..... Vice President of Forest City Residential 1995 1985
Group, Inc., a subsidiary of the Company
J Maurice Struchen.......... Retired Chairman and Chief Executive 1971 --
Officer of Society Corporation, now Key
Corporation (banking)
Joan K. Shafran............. Managing Partner, The Berimore Company 1997 --
(investments)
Michael P. Esposito, Jr. ... Retired Chief Administrative and Control 1995 --
Officer of The Chase Manhattan Bank,
N.A.; Chairman of the Board of Exel
Limited (Bermuda; insurance); Partner,
Inter-Atlantic Securities Corporation
(financial services)
Jerry V. Jarrett............ Retired Chairman and Chief Executive 1984 --
Officer of Ameritrust Corporation
(banking)
Scott S. Cowen.............. Dean and Professor, Weatherhead School of 1989 --
Management, Case Western Reserve
University
</TABLE>

S-82
<PAGE> 87

OTHER EXECUTIVE OFFICERS AND SENIOR MANAGERS

<TABLE>
<CAPTION>
JOINED
NAME POSITION COMPANY
- ---------------------------- ------------------------------------------ -------
<S> <C> <C> <C>
Thomas G. Smith............. Senior Vice President, Chief Financial 1985
Officer and Secretary of the Company
William M. Warren........... Senior Vice President, General Counsel and 1953
Assistant Secretary
Linda M. Kane............... Vice President -- Corporate Controller 1990
</TABLE>

FOREST CITY COMMERCIAL GROUP

<TABLE>
<CAPTION>
JOINED
NAME POSITION COMPANY
- ---------------------------- ------------------------------------------ -------
<S> <C> <C> <C>
James A. Ratner............. President and Chief Executive Officer, 1975
Commercial Group
David J. LaRue.............. Executive Vice President and Chief 1986
Operating Officer, Commercial Group
Emerick Corsi............... Senior Vice President -- Development, 1979
Commercial Group
William Hewitt.............. Senior Vice President -- West Coast 1988
Leasing, Commercial Group
Brian Jones................. President -- West Coast Division, 1986
Commercial Group
D. Layton McCown............ Senior Vice President and Chief Financial 1986
Officer, Commercial Group
Glenn Moenich............... President -- Forest City Commercial 1976
Construction
Brian J. Ratner............. Senior Vice President -- East Coast 1987
Development, Commercial Group
Michael Stevens............. Senior Vice President -- Retail Leasing, 1987
Commercial Group
Robert G. O'Brien........... President, Forest City Finance Corporation 1988
Jack R. Kuhn................ President -- Office Building Division, 1985
Forest City Commercial Management
Rod Marques................. Vice President -- Administration, Forest 1967
City Commercial Management
Mark A. Randol.............. President -- Shopping Center Division, 1979
Forest City Commercial Management
Bruce Ratner................ President and Chief Executive Officer, 1983
Forest City Ratner Companies
David L. Berliner........... Senior Vice President -- General Counsel, 1989
Forest City Ratner Companies
Sandeep Mathrani............ Senior Vice President -- Retail 1994
Development, Forest City Ratner
Companies
Joanne M. Minieri........... Chief Financial Officer, Forest City 1995
Ratner Companies
</TABLE>

S-83
<PAGE> 88

<TABLE>
<CAPTION>
JOINED
NAME POSITION COMPANY
- ---------------------------- ------------------------------------------ -------
<S> <C> <C> <C>
Robert P. Sanna............. Senior Vice President -- Construction, 1989
Design and Development, Forest City
Ratner Companies
James P. Stuckey............ Senior Vice President -- Office 1994
Development, Forest City Ratner
Companies
Terence M. Whalen........... Chairman and Chief Executive Officer, 1989
First New York Management
Donna C. Singleton.......... Senior Vice President -- Controller, First 1984
New York Management
</TABLE>

FOREST CITY RESIDENTIAL GROUP

<TABLE>
<CAPTION>
JOINED
NAME POSITION COMPANY
- ---------------------------- ------------------------------------------ -------
<S> <C> <C> <C>
Ronald A. Ratner............ President and Chief Executive Officer, 1975
Residential Group
James Brady................. Vice President -- Financial Operations, 1989
Residential Group
David J. Levey.............. Vice President -- Development 1983
James J. Prohaska........... Executive Vice President -- Operations, 1974
Residential Group
Deborah Ratner Salzberg..... Vice President -- Forest City Residential 1985
Development, Inc.
Greg Vilkin................. President -- Western Division, Residential 1990
Group
Edward Pelavin.............. President, Forest City Capital Corporation 1973
George Cvijovic............. Co-President -- Chief Operations' Officer, 1977
Forest City Residential Management, Inc.
Angelo Pimpas............... Co-President -- Chief Administrative 1981
Officer, Forest City Residential
Management, Inc.
</TABLE>

FOREST CITY LAND GROUP

<TABLE>
<CAPTION>
JOINED
NAME POSITION COMPANY
- ---------------------------- ------------------------------------------ -------
<S> <C> <C> <C>
Robert F. Monchein.......... President, Land Group 1979
Mark Ternes................. Vice President, Land Group 1986
</TABLE>

FOREST CITY LUMBER TRADING GROUP

<TABLE>
<CAPTION>
JOINED
NAME POSITION COMPANY
- ---------------------------- ------------------------------------------ -------
<S> <C> <C> <C>
Milan Stoyanov.............. President, Lumber Trading Group 1970
Lois Tonning................ Vice President, Lumber Trading Group 1970
</TABLE>

S-84
<PAGE> 89

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement and
Pricing Agreement, the Company has agreed to sell to each of the Underwriters
named below, and each of such Underwriters, for whom Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston
Corporation and McDonald & Company Securities, Inc., are acting as
representatives, has severally agreed to purchase from the Company, the
respective number of shares of Class A Common Stock set forth opposite its name
below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A
UNDERWRITER COMMON STOCK
---------------------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co. .................................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated....................
Credit Suisse First Boston Corporation................................
McDonald & Company Securities, Inc....................................

---------
Total....................................................... 1,700,000
=========
</TABLE>

Under the terms and conditions of the Underwriting Agreement and the
Pricing Agreement, the Underwriters are committed to take and pay for all of the
shares offered hereby, if any are taken.

The Underwriters propose to offer the shares of Class A Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus Supplement and in part to certain securities
dealers at such price less a concession of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain brokers and dealers. After the shares of
Class A Common Stock are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the representatives.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus Supplement to purchase up to an aggregate of
255,000 additional shares of Class A Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
1,700,000 shares of Class A Common Stock offered.

The Company, its directors and executive officers and RMS, Limited
Partnership, have agreed that during the period beginning from the date of this
Prospectus Supplement and continuing to and including the date 90 days after the
date of this Prospectus Supplement, not to offer, sell, contract to sell or
otherwise dispose of, or file a registration statement with respect to, any
Class A Common Stock, Class B Common Stock or any securities of the Company
which are substantially similar to Class A Common Stock or the Class B Common
Stock or which are convertible into or exchangeable or redeemable for the Class
A Common Stock or the Class B Common Stock or such substantially similar
securities, without the prior written consent of Goldman, Sachs & Co., except
for the shares of Class A Common Stock offered in connection with the Offering
and for options and shares of Class A Common Stock issuable pursuant to employee
benefit plans existing, or for

S-85
<PAGE> 90

shares of Class A Common Stock issued on the conversion, exchange or redemption
of convertible, exchangeable or redeemable securities outstanding, on the date
of this Prospectus Supplement.

In connection with the Offering, the Underwriters may purchase and sell
shares of the Class A Common Stock and Class B Common Stock in the open market.
These transactions may include over-allotment and stabilizing transactions and
purchases to cover syndicate short positions created in connection with the
Offering. Stabilizing transactions consist of certain bids or purchases for the
purpose of preventing or retarding a decline in the market price of the Class A
Common Stock or Class B Common Stock; and syndicate short positions involve the
sale by the Underwriters of a greater number of Class A Common Stock than they
are required to purchase from the Company in the Offering. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the shares of Class A Common Stock
sold in the Offering for their account may be reclaimed by the syndicate if such
shares of Class A Common Stock are repurchased by the syndicate in stabilizing
or covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Class A Common Stock and Class B Common Stock
which may be higher than the price that might otherwise prevail in the open
market. These transactions may be effected on the American Stock Exchange, in
the over-the-counter market or otherwise.

Goldman, Sachs & Co. leases space from the Company in the ordinary course
of its business (see "Business -- Commercial Group -- Office, Mixed-Use and
Hotel -- Principal Office Tenants") and affiliates of Credit Suisse First Boston
Corporation have provided nonrecourse mortgage loans to the Company in the
ordinary course of business.

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.

VALIDITY OF THE CLASS A COMMON STOCK

The validity of the Class A Common Stock to which this Prospectus
Supplement relates will be passed upon for the Company by Jones, Day, Reavis &
Pogue, Cleveland, Ohio, and for the Underwriters by Sullivan & Cromwell, New
York, New York. Sullivan & Cromwell will rely as to all matters of Ohio law upon
the opinion of Jones, Day, Reavis & Pogue.

S-86
<PAGE> 91

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Balance Sheets as of January 31, 1997 and 1996........................... F-3
Consolidated Statements of Earnings for the years ended January 31, 1997, 1996 and
1995................................................................................ F-4
Consolidated Statements of Shareholders' Equity for the years ended January 31, 1997,
1996 and 1995....................................................................... F-5
Consolidated Statements of Cash Flows for the years ended January 31, 1997, 1996 and
1995................................................................................ F-6
Notes to Consolidated Financial Statements............................................ F-8
</TABLE>

F-1
<PAGE> 92

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors
Forest City Enterprises, Inc.

We have audited the accompanying consolidated balance sheets of Forest City
Enterprises, Inc. and its subsidiaries as of January 31, 1997 and 1996, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended January 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Forest City
Enterprises, Inc. and its subsidiaries as of January 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 31, 1997, in conformity with generally
accepted accounting principles.

Coopers & Lybrand L.L.P.

Cleveland, Ohio
March 13, 1997

F-2
<PAGE> 93

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
January 31,
------------------------
1997 1996
---------- ----------
(dollars in thousands)
<S> <C> <C>
ASSETS
Real Estate
Completed rental properties....................................... $2,247,393 $2,101,564
Projects under development........................................ 220,137 246,240
Land held for development or sale................................. 52,649 77,279
---------- ----------
2,520,179 2,425,083
Less accumulated depreciation..................................... (399,830) (347,912)
---------- ----------
Total Real Estate.............................................. 2,120,349 2,077,171
Cash................................................................ 41,302 39,145
Notes and accounts receivable, net.................................. 204,959 168,177
Inventories......................................................... 48,769 41,186
Investments in and advances to affiliates........................... 145,242 145,238
Other assets........................................................ 180,784 160,129
---------- ----------
$2,741,405 $2,631,046
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage debt, nonrecourse.......................................... $1,898,428 $1,832,059
Accounts payable and accrued expenses............................... 378,230 342,511
Notes payable....................................................... 37,041 19,856
Long-term debt...................................................... 94,923 113,061
Deferred income taxes............................................... 115,488 105,111
Deferred profit..................................................... 25,317 28,859
---------- ----------
Total Liabilities.............................................. 2,549,427 2,441,457
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock - convertible, without par value;
1,000,000 shares authorized; no shares issued..................... -- --
Common stock - $.33 1/3 par value
Class A, 16,000,000 shares authorized; 7,932,358 and 7,906,990
shares issued, 7,696,408 and 7,903,990 outstanding,
respectively................................................... 2,643 2,635
Class B, convertible, 6,000,000 shares authorized; 5,554,618 and
5,580,431 shares issued, 5,415,568 and 5,467,931 outstanding,
respectively................................................... 1,851 1,859
---------- ----------
4,494 4,494
Additional paid-in capital.......................................... 43,996 44,014
Retained earnings................................................... 152,077 143,590
---------- ----------
200,567 192,098
Less treasury stock, at cost; 1997: 235,950 Class A and 139,050
Class B shares, 1996: 3,000 Class A and 112,500 Class B shares.... (8,589) (2,509)
---------- ----------
Total Shareholders' Equity..................................... 191,978 189,589
---------- ----------
$2,741,405 $2,631,046
========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE> 94

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
For the Years Ended January 31,
------------------------------------
1997 1996 1995
-------- -------- --------
(in thousands, except per share
data)
<S> <C> <C> <C>
Revenues.............................................. $610,449 $529,433 $522,608
-------- -------- --------
Operating expenses.................................... 386,970 305,819 323,736
Interest expense...................................... 133,364 130,001 116,821
Provision for decline in real estate.................. 12,263 9,581 10,133
Depreciation and amortization......................... 73,304 65,716 65,580
-------- -------- --------
605,901 511,117 516,270
-------- -------- --------
Gain (loss) on disposition of properties.............. 17,574 (754) (30,835)
-------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES................... 22,122 17,562 (24,497)
-------- -------- --------
INCOME TAX EXPENSE (BENEFIT)
Current............................................. 1,935 370 6,057
Deferred............................................ 11,016 10,253 (12,021)
-------- -------- --------
12,951 10,623 (5,964)
-------- -------- --------
NET EARNINGS (LOSS) BEFORE EXTRAORDINARY GAIN......... 9,171 6,939 (18,533)
Extraordinary gain, net of tax........................ 2,900 1,847 60,449
-------- -------- --------
NET EARNINGS.......................................... $ 12,071 $ 8,786 $ 41,916
======== ======== ========
NET EARNINGS PER COMMON SHARE
Net earnings (loss) before extraordinary gain, net
of tax........................................... $ .70 $ .51 $ (1.37)
Extraordinary gain, net of tax...................... .22 .14 4.48
-------- -------- --------
NET EARNINGS PER COMMON SHARE......................... $ .92 $ .65 $ 3.11
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE> 95

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
------------------------------
CLASS A CLASS B ADDITIONAL TREASURY STOCK
-------------- -------------- PAID-IN RETAINED ---------------
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
------ ------ ------ ------ ---------- -------- ------ ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 31, 1994, AS
PREVIOUSLY REPORTED................ 5,146 $1,715 3,846 $1,282 $ 45,511 $ 96,934 -- $ -- $145,442
Three-for-two stock split effective
February 17, 1997 applied
retroactively.................... 2,573 857 1,922 640 (1,497) -- -- -- --
----- ------ ----- ------ ------- -------- --- ------- ---------
BALANCES AT JANUARY 31, 1994, AS
RESTATED........................... 7,719 2,572 5,768 1,922 44,014 96,934 -- -- 145,442
Net earnings....................... 41,916 41,916
Dividends -- $.13 per share........ (1,798) (1,798)
----- ------ ----- ------ ------- -------- --- ------- ---------
BALANCES AT JANUARY 31, 1995, AS
RESTATED........................... 7,719 2,572 5,768 1,922 44,014 137,052 -- -- 185,560
Net earnings....................... 8,786 8,786
Dividends -- $.17 per share........ (2,248) (2,248)
Conversion of Class B shares to
Class A shares................... 188 63 (188) (63) --
Purchase of treasury stock......... 116 (2,509) (2,509)
----- ------ ----- ------ ------- -------- --- ------- ---------
BALANCES AT JANUARY 31, 1996, AS
RESTATED........................... 7,907 2,635 5,580 1,859 44,014 143,590 116 (2,509) 189,589
Net earnings....................... 12,071 12,071
Dividends:
Annual 1996 -- $.21 per share.... (2,797) (2,797)
Quarterly 1997 -- $.06 per
share.......................... (787) (787)
Conversion of Class B shares to
Class A shares................... 25 8 (25) (8) --
Purchase of treasury stock......... 259 (6,080) (6,080)
Cash in lieu of fractional shares
from three-for-two stock split... (18) (18)
----- ------ ----- ------ ------- -------- --- ------- ---------
BALANCES AT JANUARY 31, 1997......... 7,932 $2,643 5,555 $1,851 $ 43,996 $152,077 375 $(8,589) $191,978
===== ====== ===== ====== ======= ======== === ======= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE> 96

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the Years Ended January 31,
----------------------------------
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Rents and other revenues received.............. $530,597 $508,494 $480,470
Proceeds from land sales....................... 44,297 44,740 42,493
Land development expenditures.................. (25,741) (24,163) (33,430)
Operating expenditures......................... (352,372) (324,553) (238,655)
Interest paid.................................. (134,554) (132,009) (118,573)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES... 62,227 72,509 132,305
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................... (157,601) (122,878) (121,602)
Proceeds from disposition of properties........ 26,040 15,950 15,264
Investments in and advances to affiliates...... (3,342) (5,920) (25,967)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES....... (134,903) (112,848) (132,305)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgage and long-term debt........ 175,202 103,993 99,894
Payments on long-term debt..................... (26,932) (12,873) (17,555)
Principal payments on mortgage debt on real
estate...................................... (55,880) (43,631) (34,228)
Increase in notes payable...................... 22,820 6,140 434
Payments on notes payable...................... (6,263) (8,624) (17,277)
Increase in cash restricted for letter of
credit...................................... (15,200) -- --
Payment of deferred financing costs............ (10,037) (7,242) (4,790)
Purchase of treasury stock..................... (6,080) (2,509) --
Dividends paid to shareholders................. (2,797) (2,248) (1,798)
-------- -------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES............................. 74,833 33,006 24,680
-------- -------- --------
NET INCREASE (DECREASE) IN CASH.................. 2,157 (7,333) 24,680
CASH AT BEGINNING OF YEAR........................ 39,145 46,478 21,798
-------- -------- --------
CASH AT END OF YEAR.............................. $ 41,302 $ 39,145 $ 46,478
======== ======== ========
</TABLE>

F-6
<PAGE> 97

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
For the Years Ended January 31,
----------------------------------
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
NET EARNINGS..................................... $ 12,071 $ 8,786 $ 41,916
Depreciation................................... 52,979 50,821 49,869
Amortization................................... 20,325 14,895 15,711
Deferred income taxes.......................... 10,377 11,461 24,201
Provision for decline in real estate........... 12,263 9,581 10,133
(Gain) loss on disposition of properties....... (17,574) 754 30,835
Extraordinary gain............................. (4,797) (3,055) (90,823)
Decrease (increase) in land held for
development or sale......................... 8,980 2,887 (5,768)
(Increase) decrease in notes and accounts
receivable.................................. (40,579) 29,425 947
(Increase) decrease in inventories............. (7,583) (2,237) 24,271
Increase (decrease) in accounts payable and
accrued expenses............................ 40,225 (29,232) 37,403
(Decrease) increase in deferred profit......... (3,542) 2,942 (592)
(Increase) in other assets..................... (20,918) (24,519) (5,798)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES... $ 62,227 $ 72,509 $132,305
======== ======== ========
</TABLE>

Supplemental Non-Cash Disclosure:

The following items represent the non-cash effect of reductions in the
Company's interest in Granite Development Partners, L.P. and the Clark Building,
and the disposition of the Company's interest in Beachwood Place, during the
fiscal year ended January 31, 1997 and an increase in the Company's interest in
Liberty Center during the fiscal year ended January 31, 1996.

<TABLE>
<S> <C> <C> <C>
Operating Activities
Land held for development or sale.............. $ 15,650 $ -- $ --
Notes and accounts receivable.................. 3,797 -- --
Other assets................................... 5,175 -- --
Accounts payable and accrued expenses.......... (5,311) -- --
-------- -------- --------
Total effect on operating activities...... $ 19,311 $ -- $ --
========= ========= =========
Investing Activities
Capital expenditures........................... $ 16,085 $(15,714) $ --
Investments in and advances to affiliates...... 3,338 -- --
-------- -------- --------
Total effect on investing activities...... $ 19,423 $(15,714) $ --
========= ========= =========
Financing Activities
Mortgage and long-term debt.................... $(39,362) $ 15,714 $ --
Notes payable.................................. 628 -- --
-------- -------- --------
Total effect on financing activities...... $(38,734) $ 15,714 $ --
========= ========= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-7
<PAGE> 98

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Forest City Enterprises, Inc. is a major, vertically integrated national
real estate company with four principal business groups. The COMMERCIAL GROUP
develops, acquires, owns and operates shopping centers, office buildings and
mixed-use projects including hotels. The RESIDENTIAL GROUP develops or acquires,
and owns and operates the Company's multi-family properties. The LAND GROUP owns
and develops raw land into master planned communities and other residential
developments for resale. The LUMBER TRADING GROUP operates the Company's lumber
wholesaling business.

Forest City Enterprises, Inc. owns approximately $2.5 billion of properties
at cost in 20 states and Washington, D.C. The Company's executive offices are in
Cleveland, Ohio. Regional offices are located in New York, Los Angeles, Boston,
Chicago, Portland, Tucson, Detroit and Washington, D.C.

FISCAL YEAR

The years 1996, 1995 and 1994 refer to the fiscal years ended January 31,
1997, 1996 and 1995, respectively.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Forest City
Enterprises, Inc. and all wholly-owned subsidiaries ("Enterprises" and the
"Company"). The Company also includes its proportionate share of the assets,
liabilities and results of operations of its real estate partnerships, joint
ventures and majority-owned corporations. These entities are included as of
their respective fiscal year-ends (generally December 31).

All significant intercompany accounts and transactions between consolidated
entities have been eliminated. Entities which the Company does not control are
accounted for on the equity method. Undistributed earnings of such entities
included in retained earnings are $418,000 at January 31, 1997.

The Company is required to make estimates and assumptions when preparing
its financial statements and accompanying notes in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.

Certain prior years' amounts in the accompanying financial statements have
been reclassified to conform to the current year's presentation. The
Consolidated Statements of Cash Flows have been presented using the direct
method, whereas the indirect method was used in prior years.

RECOGNITION OF REVENUE AND PROFIT

REAL ESTATE SALES -- The Company follows the provisions of Statement of
Financial Accounting Standards (SFAS) No. 66, "Accounting for Sales of Real
Estate" for reporting the disposition of properties.

LEASING OPERATIONS -- The Company enters into leases with tenants in its
rental properties. The lease terms of tenants occupying space in the shopping
centers and office buildings range from 1 to 25 years, excluding leases with
anchor tenants. Minimum rent revenues are recognized when due from tenants.
Leases with most shopping center tenants provide for percentage rents when the
tenants' sales volumes exceed stated amounts. The Company is also reimbursed for
certain expenses related to operating its commercial properties.

F-8
<PAGE> 99

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

LUMBER BROKERAGE -- The Company recognizes the gross margin on these sales
as revenue. Sales invoiced for the years 1996 through 1994 were approximately
$2,884,000,000, $2,337,500,000 and $2,697,500,000, respectively.

CONSTRUCTION -- Revenue and profit on long-term fixed-price contracts are
reflected under 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.

RECOGNITION OF COSTS AND EXPENSES

Operating expenses primarily represent the recognition of operating costs,
administrative expenses and taxes other than income taxes.

For financial reporting purposes, interest and real estate taxes during
development and construction are capitalized as a part of the project cost.

Depreciation is generally computed on a straight-line method over the
estimated useful asset lives. The estimated useful lives of buildings range from
20 to 50 years.

Major improvements are capitalized and expensed through depreciation
charges. Repairs, maintenance and minor improvements are expensed as incurred.
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 Earnings.

The Company periodically reviews its properties to determine if its
carrying costs will be recovered from future operating cash flows. In cases
where the Company does not expect to recover its carrying costs, an impairment
loss is recorded as a provision for decline in real estate.

LAND OPERATIONS

Land held for development or sale is stated at the lower of carrying amount
or fair value less cost to sell.

INVENTORIES

The lumber brokerage inventories are stated at the lower of cost or market.
Inventory cost is determined by specific identification and average cost
methods.

OTHER ASSETS

Included in other assets are costs incurred in connection with obtaining
financing, which are deferred and amortized over the life of the related debt.
Costs incurred in connection with leasing space to tenants are also included in
other assets and are deferred and amortized on the straight-line method over the
lives of the related leases.

INCOME TAXES

Deferred tax assets and liabilities reflect the tax consequences on future
years of differences between the tax and financial statement basis of assets and
liabilities at year-end. The Company has recognized the benefits of its tax loss
carryforward and general business tax credits which it expects to use as a
reduction of the deferred tax expense.

F-9
<PAGE> 100

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determined the estimated fair value of its debt and hedging
instruments by aggregating the various types (i.e. fixed-rate versus
variable-rate debt) and discounting future cash payments at interest rates that
the Company believes approximates the current market. There was no material
difference in the carrying amount and the estimated fair value of the Company's
total mortgage debt and hedging instruments.

INTEREST RATE PROTECTION AGREEMENTS

The Company maintains a practice of hedging its variable interest rate risk
by purchasing interest rate caps or entering into interest rate swap agreements
for periods of one to five years. The principal risk to the Company through its
interest rate hedging strategy is the potential inability of the financial
institution from which the interest rate protection was purchased to cover all
of its obligations. To mitigate this exposure, the Company purchases its
interest rate protection from either the institution that holds the debt or from
institutions with a minimum A credit rating.

The cost of interest rate protection is capitalized in other assets in the
Consolidated Balance Sheets and amortized over the benefit period as interest
expense in the Consolidated Statements of Earnings.

STOCK-BASED COMPENSATION

The Company follows Accounting Principles Board Opinion (APBO) No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations to
account for stock-based compensation. As such, compensation cost for stock
options is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of grant over the amount the employee is required to
pay for the stock.

STOCK SPLIT

On December 11, 1996, the Board of Directors declared a three-for-two stock
split of the Company's common stock payable February 17, 1997 to shareholders of
record on February 3, 1997. The stock split was effected as a stock dividend.
The stock split is given retroactive effect to the beginning of the earliest
period presented in the accompanying Consolidated Balance Sheets and
Consolidated Statements of Shareholders' Equity by transferring the par value of
the additional shares issued from the additional paid-in capital account to the
common stock accounts. All share and per share data included in this annual
report, including stock option plan information, have been restated to reflect
the stock split.

EARNINGS PER SHARE

Earnings per share are computed by dividing net earnings by the weighted
average number of common shares outstanding during the year of 13,155,236 in
1996, 13,480,164 in 1995 and 13,487,421 in 1994. Stock options outstanding
during 1996 did not have a material dilutive effect on earnings per share.

F-10
<PAGE> 101

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

CAPITAL STOCK

Class B common stock is convertible into Class A common stock on a
share-for-share basis. The 1,000,000 authorized shares of preferred stock
without par value, none of which have been issued, may be convertible into Class
A common stock.

Class A common shareholders elect 25% of the members of the Board of
Directors and Class B common shareholders elect the remaining directors
annually. The Company currently has 12 directors.

During 1996, the Company repurchased 232,950 shares of Class A and 26,550
shares of Class B common stock, and during 1995, the Company repurchased 3,000
shares of Class A and 112,500 shares of Class B common stock. All these shares
were held in treasury at January 31, 1997.

NEW ACCOUNTING STANDARD

Effective February 1, 1996, the Company adopted the provisions of SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". SFAS No. 121 requires that long-lived assets to be
held and used or disposed of should be reviewed for impairment whenever events
or changes in circumstances indicate the carrying amount of an asset may not be
recoverable. The Company adopted SFAS No. 121 and determined that no impairment
loss is required to be recognized for real estate held and used or to be
disposed of in the current year.

B. REAL ESTATE AND RELATED ACCUMULATED DEPRECIATION AND NONRECOURSE MORTGAGE
DEBT

The components of real estate cost and related nonrecourse mortgage debt
are presented below.

<TABLE>
<CAPTION>
January 31, 1997
-------------------------------------------------------
Less Nonrecourse
Total Accumulated Net Mortgage
Cost Depreciation Cost Debt
---------- ----------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Completed rental properties
Residential.................... $ 605,201 $ 110,467 $ 494,734 $ 496,545
Commercial
Shopping centers............ 787,468 125,721 661,747 682,596
Office and other
buildings................. 835,190 151,545 683,645 657,189
Corporate and other equipment.. 19,534 12,097 7,437 --
---------- -------- ---------- ----------
2,247,393 399,830 1,847,563 1,836,330
---------- -------- ---------- ----------
Projects under development
Residential.................... 46,564 -- 46,564 9,601
Commercial
Shopping centers............ 91,223 -- 91,223 8,729
Office and other
buildings................. 82,350 -- 82,350 12,070
---------- -------- ---------- ----------
220,137 -- 220,137 30,400
---------- -------- ---------- ----------
Land held for development or
sale........................... 52,649 -- 52,649 31,698
---------- -------- ---------- ----------
$2,520,179 $ 399,830 $ 2,120,349 $ 1,898,428
========== ======== ========== ==========
</TABLE>

F-11
<PAGE> 102

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

C. NOTES AND ACCOUNTS RECEIVABLE, NET

Notes and accounts receivable are summarized below.

<TABLE>
<CAPTION>
January 31,
----------------------
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Lumber brokerage............................................. $ 153,944 $ 116,295
Real estate sales............................................ 14,509 13,862
Syndication activities....................................... 12,865 15,072
Receivable from tenants...................................... 12,795 12,527
Other receivables............................................ 15,840 14,108
-------- --------
209,953 171,864
Allowance for doubtful accounts.............................. (4,994) (3,687)
-------- --------
$ 204,959 $ 168,177
======== ========
</TABLE>

Notes receivable at January 31, 1997 of $24,536,000, reflected in real
estate sales and syndication activities in the table above, are collectible
primarily over five years, with $15,488,000 being due within one year. The
weighted average interest rate at January 31, 1997 and 1996 was 9.2% and 11.8%,
respectively.

In July 1996, the Lumber Trading Group entered into a three-year agreement
under which it is selling an undivided interest in a pool of accounts receivable
up to a maximum of $90,000,000. At January 31, 1997 and 1996, the Company had
received $34,000,000 and $27,000,000, respectively, as net proceeds from this
transaction. The program is non-recourse to the Company and the Company bears no
risk as to the collectability of the accounts receivable. An interest in
additional accounts receivable may be sold as collections reduce previously sold
interests.

D. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Included in accounts payable and accrued expenses at January 31, 1997 and
1996 are book overdrafts of approximately $66,971,000 and $48,316,000,
respectively. The overdrafts are a result of the Company's cash management
program and represent checks issued but not yet presented to a Company bank for
collection.

E. NOTES PAYABLE

The components of notes payable, which represent indebtedness whose
original maturity dates are within one year of issuance, are as follows.

<TABLE>
<CAPTION>
January 31,
------------------
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Payable To
Banks................................................... $15,191 $12,743
Other................................................... 21,850 7,113
------- -------
$37,041 $19,856
======= =======
</TABLE>

Notes payable to banks reflect borrowings on the Lumber Trading Group's
$46,000,000 bank lines of credit. The Company has the right to borrow an
additional $10,000,000 for up to 90 days

F-12
<PAGE> 103

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

E. NOTES PAYABLE -- CONTINUED

through May 31, 1997 under these bank lines of credit. Borrowings under these
bank lines of credit, which are non-recourse to the Company, are collateralized
by all the assets of the Lumber Trading Group and bear interest at prime and has
a fee of 1/5% per annum on the unused portion of the available commitment. These
bank lines of credit are subject to review and extension annually. The weighted
average interest rate was 8.3% and 8.9% at January 31, 1997 and 1996,
respectively.

Interest expense on notes payable was $5,166,000 in 1996, $5,078,000 in
1995 and $5,321,000 in 1994. Interest actually paid on notes payable was
$5,097,000 in 1996, $5,129,000 in 1995 and $5,527,000 in 1994.

F. MORTGAGE DEBT, NONRECOURSE

Mortgage debt, which is collateralized by completed rental properties,
projects under development and certain undeveloped land, is as follows.
<TABLE>
<CAPTION>
January 31,
--------------------------------------------------
1997 1996
--------------------- ---------------------
(dollars in thousands)
RATE(1) Rate(1)
------- -------
<S> <C> <C> <C> <C>
Fixed............................... $ 917,547 7.96% $ 738,217 8.09%
Variable --
Taxable(2)........................ 769,169 7.38 910,767 7.16
Tax-Exempt........................ 134,302 4.38 128,199 4.13
UDAG and other subsidized loans..... 77,410 2.60 54,876 2.56
---------- ----------
$1,898,428 7.25 $1,832,059 7.19
========== ==========
</TABLE>

- ---------------

(1) The weighted average interest rates shown above include both the base index
and the lender margin.

(2) At February 1, 1997, $330,385,000 of this debt is subject to interest rate
swaps as described below.

Debt related to projects under development at January 31, 1997 totals
$30,400,000, out of a total commitment from lenders of $93,461,000. Of this
outstanding debt, $25,288,000 is variable-rate debt and $5,112,000 is fixed-rate
debt. The Company generally borrows funds for development and construction
projects with maturities of three to seven years utilizing variable-rate
financing. Upon opening and achieving stabilized operations, the Company
generally obtains long-term fixed-rate financing.

F-13
<PAGE> 104

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

F. MORTGAGE DEBT, NONRECOURSE -- CONTINUED

As of January 31, 1997, the Company had entered into $378,385,000 of London
Interbank Offered Rate ("LIBOR") interest rate swap agreements for durations
ranging from one to five years, as follows.

<TABLE>
<CAPTION>
SWAP BASE PRINCIPAL
LIBOR RATE PERIOD OUTSTANDING
- ----------- -------------------- --------------
(in thousands)
<S> <C> <C>
6.25% 03/15/96 - 12/29/00 $ 21,624
6.28% 04/15/96 - 04/15/99 99,095
6.54% 06/03/96 - 10/31/00 58,052
6.64% 01/02/97 - 01/04/99 39,750
6.21% 02/01/97 - 02/01/98 80,000
6.28% 05/01/96 - 11/12/01 31,864
6.25% 05/01/97 - 02/01/98 48,000
-------
$378,385
=======
</TABLE>

The effect of these interest rate swap agreements reduces the Company's
outstanding taxable variable-rate debt at February 1, 1997, to $438,784,000,
which is 23.1% of the total mortgage debt.

In addition, the Company has purchased LIBOR interest rate caps ranging
from 6.50% to 9.85% on $40,969,000 of its variable-rate debt with varying
expiration dates through February 1, 2001.

The Urban Development Action Grants and other subsidized loans bear
interest at rates which are below prevailing commercial lending rates and are
granted to the Company as an inducement to develop real estate in economically
underdeveloped areas. A right to participate by the local government in the
future cash flows of the project is generally a condition of these loans.
Participation in annual cash flows generated from operations is recognized as an
expense in the period earned. Participation in appreciation and cash flows
resulting from a sale or refinancing is recorded as an expense at the time of
sale or is capitalized as additional basis and amortized if amounts are paid
prior to the disposition of the property.

Mortgage debt maturities for the next five years ending January 31 are as
follows: 1998, $288,915,000; 1999, $167,563,000; 2000, $416,612,000; 2001,
$318,753,000 and 2002, $98,186,000.

The Company is engaged in discussions with its current lenders and is
actively pursuing new lenders to extend and refinance the mortgage debt that
matures. The Company intends to convert a significant portion of its existing
variable-rate debt to fixed-rate mortgages in order to reduce the volatility in
the Company's project mortgage interest expense.

Interest incurred on mortgage debt was $129,241,000 in 1996, $126,520,000
in 1995 and $110,899,000 in 1994, of which $1,383,000, $2,861,000 and $2,156,000
was capitalized, respectively. Interest actually paid on mortgage debt, net of
capitalized interest, was $122,341,000 in 1996, $118,889,000 in 1995 and
$105,256,000 in 1994.

F-14
<PAGE> 105

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

G. LONG-TERM DEBT

Long-term debt is as follows.

<TABLE>
<CAPTION>
January 31,
---------------------
1997 1996
------- --------
(in thousands)
<S> <C> <C>
Term loan................................................... $45,000 $ 55,000
Revolving credit agreement.................................. 48,000 53,000
Other debt.................................................. 1,923 5,061
------- --------
$94,923 $113,061
======= ========
</TABLE>

At January 31, 1997, the Company had a term loan maturing July 1, 2001 and
an $80,000,000 revolving credit agreement maturing July 25, 1998. The term loan
requires quarterly principal payments of $2,500,000. The revolving credit
agreement allows for up to $20,000,000 in outstanding letters of credit (none of
which were outstanding at January 31, 1997), which shall reduce the revolving
credit portion available to the Company. At its maturity, the revolving credit
agreement may be renewed annually or converted to a seven-year term loan by the
Company. The term loan and revolving credit agreement provide, among other
things, for 1) interest rates which range from 1/4% to 3/4% over the prime
rate or 2% to 2 1/2% over LIBOR; 2) the maintenance of a specified level of net
worth and cash flows (as defined); and 3) a restriction on dividend payments. At
January 31, 1997, approximately $7,203,000 of retained earnings were available
for payment of dividends.

The Company has entered into an interest rate swap agreement to fix
$87,000,000 of the term loan and revolving credit agreement at the base LIBOR
rate of 6.21% plus lender margin for the period February 1, 1997 to February 1,
1998.

Interest rates on the other debt ranged primarily from 6.1% to 12.3% at
January 31, 1997.

Maturities of other debt for the next five years ending January 31 are as
follows: 1998, $850,000; 1999, $794,000; 2000, $151,000; 2001, $80,000; and
2002, $22,000.

Interest incurred on long-term debt was $6,982,000 in 1996, $7,764,000 in
1995 and $7,650,000 in 1994 of which $6,642,000, $6,500,000 and $4,893,000 was
capitalized, respectively. Interest actually paid on long-term debt was
$7,116,000 in 1996, $7,991,000 in 1995 and $7,790,000 in 1994.

CONSOLIDATED INTEREST

Total interest incurred on all forms of indebtedness (included in Notes E,
F and G) was $141,389,000 in 1996, $139,362,000 in 1995 and $123,870,000 in 1994
of which $8,025,000, $9,361,000 and $7,049,000 was capitalized, respectively.
Interest paid on all forms of indebtedness was $134,554,000 in 1996,
$132,009,000 in 1995 and $118,573,000 in 1994.

F-15
<PAGE> 106

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

H. INCOME TAXES

The provision (benefit) for income taxes consists of the following
components.

<TABLE>
<CAPTION>
For the Years Ended January 31,
----------------------------------
1997 1996 1995
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Current
Federal....................................... $ 896 $ 159 $ 4,764
Foreign....................................... 580 143 63
State......................................... 459 68 1,230
------- ------- --------
1,935 370 6,057
------- ------- --------
Deferred
Federal....................................... 6,985 6,083 (9,945)
Foreign....................................... (126) -- --
State......................................... 4,157 4,170 (2,076)
------- ------- --------
11,016 10,253 (12,021)
------- ------- --------
Total provision (benefit)....................... $12,951 $10,623 $ (5,964)
======= ======= ========
</TABLE>

The effective tax rate for income taxes varies from the federal statutory
rate of 35% for 1996, 1995 and 1994 due to the following items.

<TABLE>
<CAPTION>
For the Years Ended January 31,
----------------------------------
1997 1996 1995
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Statement earnings (loss) before income taxes... $22,122 $17,562 $(24,497)
======= ======= ========
Income taxes computed at the statutory rate..... $ 7,742 $ 6,146 $ (8,574)
Increase (decrease) in tax resulting from:
State taxes, net of federal benefit........... 3,000 2,220 (839)
Contribution carryover........................ 811 520 494
Nondeductible lobbying costs.................. 811 -- --
Adjustment of prior estimated taxes........... (111) 566 589
Valuation allowance........................... 351 897 102
Losses without tax benefits................... -- -- 2,067
Other items................................... 347 274 197
------- ------- --------
Total provision (benefit)....................... $12,951 $10,623 $ (5,964)
======= ======= ========
</TABLE>

F-16
<PAGE> 107

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

H. INCOME TAXES -- CONTINUED
An analysis of the deferred tax provision (benefit) is as follows.

<TABLE>
<CAPTION>
For the Years Ended January 31,
----------------------------------
1997 1996 1995
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Excess of tax over statement depreciation and
amortization.................................. $ 4,730 $ 5,743 $ 8,046
Allowance for doubtful accounts deducted for
statement purposes............................ (349) 461 (464)
Costs on land and rental properties under
development expensed for tax purposes......... 3,244 (515) 366
Revenues and expenses recognized in different
periods for tax and statement purposes........ (2,652) 6,224 (14,893)
Development fees deferred for statement
purposes...................................... (109) (1,326) (400)
Provision for decline in real estate............ (1,650) 3,547 (3,547)
Deferred state taxes, net of federal benefit.... 2,392 2,565 757
Interest on construction advances deferred for
statement purposes............................ (189) (953) 1,609
Benefits of tax loss carryforward recognized
against deferred taxes........................ 3,187 (5,656) (1,869)
Deferred compensation........................... 2,061 (734) (1,728)
Valuation allowance............................. 351 897 102
------- ------- --------
Deferred provision (benefit).................... $11,016 $10,253 $(12,021)
======= ======= ========
</TABLE>

The types of differences that give rise to significant portions of the
deferred income tax liability are as follows.

<TABLE>
<CAPTION>
TEMPORARY DEFERRED TAX
DIFFERENCES (ASSET)LIABILITY
----------- ----------------
(in thousands)
<S> <C> <C>
Depreciation........................................... $ 237,653 $ 93,992
Capitalized costs...................................... 142,517 56,365
Net operating losses................................... (88,868) (35,147)
General business credits............................... -- (3,601)
Other.................................................. 2,996 3,879
-------- --------
$ 294,298 $115,488
======== ========
</TABLE>

Income taxes paid (refunded) totaled $830,000, $(888,000) and $3,244,000 in
1996, 1995 and 1994, respectively. At January 31, 1997, the Company had a net
operating loss carryforward for tax purposes of $88,868,000 which will expire in
the years ending January 31, 2005 through January 31, 2011 and general business
credits carryovers of $3,601,000 which will expire in the years ending January
31, 2003 through January 31, 2011. The Company's deferred tax liability at
January 31, 1997 is comprised of deferred liabilities of $194,574,000, deferred
assets of $83,832,000 and a valuation allowance related to state taxes and
general business credits of $4,746,000.

F-17
<PAGE> 108

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

I. SEGMENT INFORMATION

Principal business groups are determined by the type of customer served or
the product sold. The COMMERCIAL GROUP develops, acquires, owns and operates
shopping centers, office buildings and mixed-use projects including hotels. The
RESIDENTIAL GROUP develops or acquires, and owns and operates the Company's
multi-family properties. The LAND GROUP owns and develops raw land into master
planned communities and other residential developments for resale to users
principally in Arizona, Florida, Nevada, New York and Ohio. The LUMBER TRADING
GROUP operates the Company's lumber wholesaling business. CORPORATE includes
interest on corporate borrowings and general administrative expenses. The
following tables summarize selected financial data by business segment for the
fiscal years ended January 31, 1997, 1996 and 1995.

<TABLE>
<CAPTION>
For the Years Ended January 31,
------------------------------------------------------------------------
Earnings (Loss) Before
Revenues Income Taxes
----------------------------------- ---------------------------------
1997 1996 1995 1997 1996 1995
--------- --------- --------- -------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial Group..................................... $ 309,834 $ 294,241 $ 258,966 $ (1,656) $ 12,283 $ 7,482
Residential Group(1)................................. 116,525 105,749 128,124 6,795 7,238 4,880
Land Group........................................... 53,888 42,889 48,894 6,007 3,823 3,290
Lumber Trading Group(2).............................. 124,491 81,093 80,590 8,966 5,826 4,906
Provision for decline in real estate................. -- -- -- (12,263) (9,581) (10,133)
Gain (loss) on disposition of properties............. -- -- -- 17,574 (754) (30,835)
Corporate............................................ 5,711 5,461 6,034 (3,301) (1,273) (4,087)
-------- -------- -------- -------- ------- --------
Consolidated..................................... $ 610,449 $ 529,433 $ 522,608 $ 22,122 $ 17,562 $ (24,497)
======== ======== ======== ======== ======= ========
</TABLE>

<TABLE>
<CAPTION>
For the Years Ended January 31,
-------------------------------------------------------------------
Real Estate
-------------------------------------------------------------------
Identifiable Assets at Depreciation and Amortization
January 31, Additions, net
--------------------------------------- ---------------------------------- ------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
----------- ----------- ----------- --------- --------- ---------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial
Group........... $ 1,699,056 $ 1,640,810 $ 1,566,320 $ 84,972 $ 83,623 $ 95,264 $ 54,875 $ 49,572 $ 46,870
Residential
Group(1)........ 642,873 613,480 614,609 26,120 27,612 (184,465) 15,419 14,001 17,108
Land Group........ 88,953 121,031 126,680 (25,658) (8,887) 5,791 748 59 90
Lumber Trading
Group........... 209,901 172,305 175,107 2,285 (504) 542 2,140 1,962 1,377
Corporate......... 100,622 83,420 102,018 7,377 1,103 (62) 122 122 135
---------- ---------- ---------- -------- -------- --------- ------- ------- -------
Consolidated... $ 2,741,405 $ 2,631,046 $ 2,584,734 $ 95,096 $ 102,947 $ (82,930) $ 73,304 $ 65,716 $ 65,580
========== ========== ========== ======== ======== ========= ======= ======= =======
</TABLE>

- ---------------

(1) The Residential Group includes the Company's apartment and residential
development divisions. In prior years, these divisions were reported
separately. Segment information for the years ended January 31, 1996 and
1995 in this Note I combines these divisions to conform to the current year
presentation.

(2) The Company recognizes the gross margin on lumber brokerage sales as
revenue. Sales invoiced for the years ended January 31,1997, 1996 and 1995
were approximately $2,884,000,000, $2,337,500,000 and $2,697,500,000,
respectively.

F-18
<PAGE> 109

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

J. LEASES

THE COMPANY AS LESSOR

The following summarizes the minimum future rental income to be received on
noncancelable operating leases of commercial properties that generally extend
for periods of more than one year.

<TABLE>
<CAPTION>
FOR THE YEARS
ENDING JANUARY 31,
------------------
(in thousands)
<S> <C>
1998............................................................. $ 152,852
1999............................................................. 149,394
2000............................................................. 142,181
2001............................................................. 134,404
2002............................................................. 116,515
Later years...................................................... 823,259
----------
Total minimum future rentals................................ $1,518,605
==========
</TABLE>

Most of the commercial leases include provisions for reimbursements of
other charges including real estate taxes and operating costs. Other charges
amounted to $94,033,000, $84,533,000 and $83,881,000 in 1996, 1995 and 1994,
respectively.

THE COMPANY AS LESSEE

The Company is a lessee under various operating leasing arrangements for
real property and equipment having terms expiring through 2076, excluding
optional renewal periods.

Minimum fixed rental payments under long-term leases (over one year) in
effect at January 31, 1997 are as follows.

<TABLE>
<CAPTION>
FOR THE YEARS
ENDING JANUARY 31,
------------------
(in thousands)
<S> <C>
1998................................ $ 9,425
1999................................ 8,711
2000................................ 6,874
2001................................ 6,373
2002................................ 5,651
Later years......................... 140,915
--------
Total minimum lease payments...... $177,949
========
</TABLE>

Rent expense was $8,813,000, $6,986,000 and $6,468,000 for 1996, 1995 and
1994, respectively.

K. CONTINGENT LIABILITIES

As of January 31, 1997, the Company has guaranteed loans totaling
$1,661,000 and has $12,555,000 in outstanding letters of credit.

The Company customarily guarantees lien-free completion of its
construction. Upon completion the guarantees are released. The Company is also
involved in certain claims and litigation related to its operations. Based upon
the facts known at this time, management is of the opinion that the

F-19
<PAGE> 110

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

K. CONTINGENT LIABILITIES -- CONTINUED

ultimate outcome of all such claims and litigation will not have a material
adverse effect on the financial condition, results of operations or cash flows
of the Company.

L. STOCK OPTION PLAN

During 1994, the Board of Directors of the Company and the shareholders
approved the 1994 Stock Option Plan ("Plan"). Shares may be awarded under the
Plan to key employees in the form of either incentive stock options or
non-qualified stock options. The aggregate number of shares that may be awarded
during the term of the Plan is 375,000 shares, subject to adjustments under the
Plan. The maximum number of shares that may be awarded to any employee during
any calendar year is 37,500 shares. The exercise price of all non-qualified and
incentive stock options shall be at least equal to the fair market value of a
share on the date the option is granted unless the grantee of incentive stock
options constructively owns more than ten percent of the total combined voting
power of all classes of stock of the Company, in which case the exercise price
of each incentive stock option shall be not less than 110% of the fair market
value of a share on the date granted. The Plan is administered by the
Compensation Committee of the Board of Directors. During 1996, 180,900 Class A
fixed stock options were granted. The options have a term of 10 years and vest
over two to four years. No options were granted in 1994 and 1995.

The Company applies APBO No. 25 and related Interpretations in accounting
for its Plan. Accordingly, no compensation cost has been recognized for its
Plan. During 1996, the Company adopted the disclosure provisions of SFAS No. 123
"Accounting for Stock-Based Compensation." Had compensation cost been determined
in accordance with SFAS No. 123, net earnings and earnings per share for 1996
would have been reduced to the pro forma amounts indicated below.

<TABLE>
<CAPTION>
NET EARNINGS
EARNINGS PER SHARE
-------------- ---------
(in thousands)
<S> <C> <C>
As reported.............................................. $ 12,071 $ .92
Pro forma................................................ $ 11,846 $ .90
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
the grant in 1996: dividend yield of .5%; expected volatility of 30.7%;
risk-free interest rate of 6.5%; and expected life of 8.7 years.

F-20
<PAGE> 111

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

L. STOCK OPTION PLAN -- CONTINUED

A summary of stock option activity during 1996 is presented below.

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding at beginning of year........................ --
Granted................................................. 180,900 $28.75
Exercised............................................... --
Forfeited............................................... --
---------
Outstanding at end of year.............................. 180,900 $28.75
=========
Options exercisable at year end......................... --
=========
Weighted average fair value of options granted during
the year.............................................. $ 14.37
=========
Range of exercise prices................................ $ 28.75
=========
Weighted average remaining contractual life............. 9.6 years
=========
</TABLE>

M. SUMMARIZED FINANCIAL INFORMATION

Forest City Rental Properties Corporation ("Rental Properties") is a
wholly-owned subsidiary engaged in the development, acquisition and management
of real estate projects, including apartment complexes, regional malls and
shopping centers, hotels, office buildings and mixed-use facilities. Condensed
consolidated balance sheets and statements of earnings for Rental Properties and
its subsidiaries follows.

F-21
<PAGE> 112

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

M. SUMMARIZED FINANCIAL INFORMATION -- CONTINUED

FOREST CITY RENTAL PROPERTIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
January 31,
--------------------------
1997 1996
---------- ----------
(in thousands)
<S> <C> <C>
ASSETS
Real Estate
Completed rental properties.................................... $2,227,859 $2,085,284
Projects under development..................................... 215,960 246,240
---------- ----------
2,443,819 2,331,524
Less accumulated depreciation.................................. (387,733) (338,216)
---------- ----------
Total Real Estate...................................... 2,056,086 1,993,308
Cash............................................................. 14,194 24,430
Other Assets..................................................... 267,596 250,171
---------- ----------
$2,337,876 $2,267,909
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES
Mortgage debt, nonrecourse....................................... $1,866,730 $1,767,910
Accounts payable and accrued expenses............................ 101,532 130,099
Long-term debt................................................... 93,467 108,049
Other liabilities and deferred credits........................... 157,466 150,143
---------- ----------
Total Liabilities...................................... 2,219,195 2,156,201
---------- ----------
SHAREHOLDER'S EQUITY
Common stock and additional paid-in capital...................... 5,378 5,378
Retained earnings................................................ 113,303 106,330
---------- ----------
Total Shareholder's Equity............................. 118,681 111,708
---------- ----------
$2,337,876 $2,267,909
========== ==========
</TABLE>

F-22
<PAGE> 113

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

M. SUMMARIZED FINANCIAL INFORMATION -- CONTINUED

FOREST CITY RENTAL PROPERTIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
For the Years Ended January 31,
------------------------------------
1997 1996 1995
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Revenues............................................... $426,226 $398,576 $386,858
-------- -------- --------
Operating expenses..................................... 228,110 198,282 205,707
Interest expense....................................... 121,186 117,560 104,836
Provision for decline in real estate................... 11,684 9,581 10,133
Depreciation and amortization.......................... 70,221 63,557 63,956
-------- -------- --------
431,201 388,980 384,632
-------- -------- --------
Gain (loss) on disposition of properties............... 17,574 (754) (30,835)
-------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES.................... 12,599 8,842 (28,609)
INCOME TAX EXPENSE (BENEFIT)
Current.............................................. (989) (1,213) (375)
Deferred............................................. 9,515 6,925 (7,573)
-------- -------- --------
8,526 5,712 (7,948)
-------- -------- --------
NET EARNINGS (LOSS) BEFORE EXTRAORDINARY GAIN.......... 4,073 3,130 (20,661)
Extraordinary gain, net of tax......................... 2,900 1,847 60,449
-------- -------- --------
NET EARNINGS........................................... $ 6,973 $ 4,977 $ 39,788
======== ======== ========
</TABLE>

N. GAIN (LOSS) ON DISPOSITION AND EXTRAORDINARY GAIN

During 1996, the Company recorded a gain on disposition of properties of
$17,574,000, before tax of $7,976,000, primarily resulting from the sale of its
18.63% interest in Beachwood Place, a regional shopping center in suburban
Cleveland, Ohio. In 1995, a loss on disposition of properties of $754,000,
before tax of $276,000, was recognized on the sale of a California apartment
complex.

Extraordinary gains, net of tax, of $2,900,000 and $1,847,000 were recorded
for 1996 and 1995, respectively. These gains were the result of the
extinguishment of nonrecourse mortgage debt and related accrued interest on
three rental properties. In 1994, loss on disposition of properties of
$19,181,000, net of tax of $11,654,000, was recognized on the sale of Park
LaBrea Towers, a 2,825-unit apartment complex located in Los
Angeles, California. Prior to the sale transaction, an extraordinary gain of
$56,462,000, net of tax of $27,715,000, was recorded as a result of
extinguishment of nonrecourse purchase money mortgage debt and related accrued
interest.

Also in 1994, two other rental properties recognized extraordinary gains on
nonrecourse debt extinguishment, amounting to $3,987,000, net of tax.

O. SUBSEQUENT EVENT

During February 1997, the Company settled litigation with the original land
owner of Toscana, a 563-unit apartment complex in Irvine, California, and in
connection therewith sold the property to the original land owner. As a result
of these transactions, the Company recorded litigation settlement proceeds of
$15,000,000, a pre-tax loss on disposition of the property of $35,505,000, and a
pre-tax extraordinary gain of $18,272,000 related to the extinguishment of a
portion of the nonrecourse

F-23
<PAGE> 114

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

O. SUBSEQUENT EVENT -- CONTINUED
mortgage debt. The net result of these transactions to the Company was a pre-tax
loss of $2,233,000.

QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------------------------------------------------
JAN. 31, OCT. 31, JULY 31, APR. 30, Jan. 31, Oct. 31, July 31, Apr. 30,
FISCAL YEAR 1997 1996 1996 1996 1996 1995 1995 1995
- ----------------------------- -------- -------- --------- -------- -------- -------- --------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues..................... $169,177 $163,809 $ 148,492 $128,971 $170,643 $126,399 $ 120,807 $111,584
Earnings (loss) before income
taxes(1)................... $ 2,065 $ 15,527 $ 5,488 $ (958) $ 21,131 $ 1,706 $ (998) $ (4,277)
Net earnings (loss) before
extraordinary gain(1)(2)... $ (759) $ 8,054 $ 2,822 $ (946) $ 10,450 $ 601 $ (903) $ (3,209)
Net earnings (loss).......... $ (759) $ 10,047 $ 3,729 $ (946) $ 10,450 $ 601 $ 944 $ (3,209)
Net earnings (loss) before
extraordinary gain per
common share(1)(2)(4)...... $ (.05) $ .61 $ .21 $ (.07) $ .77 $ .04 $ (.06) $ (.24)
Net earnings (loss) per
common share(4)............ $ (.05) $ .76 $ .28 $ (.07) $ .77 $ .04 $ .08 $ (.24)
Dividends declared per common
share(3)(4)
Annual dividend
Class A.................. $ -- $ .21 $ -- $ -- $ -- $ .17 $ -- $ --
Class B.................. $ -- $ .21 $ -- $ -- $ -- $ .17 $ -- $ --
Quarterly dividend
Class A.................. $ .06 $ -- $ -- $ -- $ -- $ -- $ -- $ --
Class B.................. $ .06 $ -- $ -- $ -- $ -- $ -- $ -- $ --
Market price range of common
stock(4)
Class A
High..................... $ 41.67 $ 33.08 $ 28.08 $ 25.50 $ 24.50 $ 26.33 $ 26.33 $ 23.50
Low...................... $ 32.67 $ 27.83 $ 24.50 $ 22.00 $ 21.33 $ 24.50 $ 22.00 $ 20.25
Class B
High..................... $ 40.67 $ 32.67 $ 28.08 $ 25.42 $ 24.33 $ 26.00 $ 26.25 $ 23.58
Low...................... $ 32.75 $ 27.92 $ 24.92 $ 22.17 $ 21.33 $ 24.50 $ 22.33 $ 20.75
</TABLE>

- ---------------

Both classes of common stock are traded on the American Stock Exchange
("Exchange") under the symbols, FCEA and FCEB. High and low prices shown are
based upon data provided by the Exchange.

As of March 4, 1997, the number of registered holders of Class A and Class B
common stock were 883 and 687, respectively.

(1) Third quarter 1996 data has been restated to reflect the reclassification of
$3,297,000, before taxes, from provision for decline in real estate to
extraordinary gain. This reclassification represents a $.15 reduction in net
earnings (loss) before extraordinary gain per common share, but has no
effect on net earnings of the Company.

(2) Excludes the extraordinary gain, net of tax of $2,900,000 ($.22 per share)
and $1,847,000 ($.14 per share), in fiscal 1996 and 1995, respectively.
These items are explained in Note N in the Notes to Consolidated Financial
Statements.

(3) Future dividends will depend upon such factors as earnings, capital
requirements and financial condition of the Company. Approximately
$7,203,000 of retained earnings were available for payment of dividends as
of January 31, 1997, under the restrictions contained in the term loan and
revolving credit agreement with a group of banks.

(4) Adjusted for three-for-two split of Class A and Class B common stock
effective February 17, 1997.

F-24
<PAGE> 115

SUBJECT TO COMPLETION, DATED APRIL 29, 1997

$250,000,000

FOREST CITY ENTERPRISES, INC.

DEBT SECURITIES, PREFERRED STOCK, DEPOSITARY SHARES, AND CLASS A COMMON STOCK

Forest City Enterprises, Inc., an Ohio corporation ("Forest City" or the
"Company"), may from time to time offer together or separately its (a) debt
securities, in one or more series, which may be either senior subordinated debt
securities (the "Senior Subordinated Debt Securities") or junior subordinated
debt securities (the "Junior Subordinated Debt Securities" and, together with
the Senior Subordinated Debt Securities, the "Debt Securities"), (b) shares of
its preferred stock, without par value (the "Preferred Stock"), which may be
issued in the form of Depositary Shares (as defined herein) evidenced by
Depositary Receipts (as defined herein), and (c) shares of its Class A Common
Stock, par value $.33 1/3 per share (the "Class A Common Stock"). The Debt
Securities, Preferred Stock, and Class A Common Stock, are referred to herein
collectively as the "Offered Securities."

The Offered Securities may be issued in one or more series or issuance and
will be limited to $250,000,000 aggregate public offering price (or its
equivalent, based on the applicable exchange rate at the time of sale, in one or
more foreign currencies, currency units or composite currencies as shall be
designated by Forest City).

Specific terms of the particular Offered Securities in respect of which
this Prospectus is being delivered will be set forth in an accompanying
Prospectus Supplement (the "Prospectus Supplement"), which will describe,
without limitation and where applicable, the following: (a) in the case of the
Debt Securities, the specific designation, aggregate principal amount,
denominations, maturity, premium, if any, interest rate (which may be fixed or
variable) or method of calculating interest, if any, place or places where
principal, premium, if any, and interest, if any, on such Debt Securities will
be payable, the currency in which principal, premium, if any, and interest, if
any, on such Debt Securities will be payable, any terms of redemption, any
sinking fund provisions, terms for any conversion or exchange into other Offered
Securities, initial public offering or purchase price, methods of distribution
and other special terms, (b) in the case of Preferred Stock, the specific
designation, stated value and liquidation preference per share and number of
shares offered, dividend rate (which may be fixed or variable) or method of
calculating dividends, place or places where dividends will be payable, any
terms of redemption, any sinking fund provisions, terms for any conversion or
exchange into other Offered Securities, initial public offering or purchase
price, methods of distribution and other special terms, (c) in the case of Class
A Common Stock, the number of shares offered, initial public offering or
purchase price, methods of distribution and other special terms, and (d) in the
case of Depositary Shares, the fractional share of Preferred Stock represented
by each such Depositary Share.

The Debt Securities will be unsecured. Accordingly, holders of the Debt
Securities should look only to the assets of Forest City for payments of
interest and principal and premium, if any. The Debt Securities will be
subordinated in right of payment to all senior debt of Forest City, and the
Junior Subordinated Debt Securities will be subordinated to the Senior
Subordinated Debt Securities, to the extent described herein and in the
applicable Prospectus Supplement relating thereto. The Debt Securities may be
denominated in United States dollars or, at the option of Forest City if so
specified in the applicable Prospectus Supplement, in one or more foreign
currencies or currency units. The Debt Securities may only be issued in
registered form or in the form of one or more global debt securities unless
otherwise specified in the applicable Prospectus Supplement. If so specified in
the applicable Prospectus Supplement, Debt Securities of a series may be issued
in whole or in part in the form of one or more temporary or permanent global
debt securities.

The Prospectus Supplement also will contain information, as applicable,
about certain United States Federal income tax considerations relating to the
Offered Securities.

The Offered Securities may be sold through agents, underwriters or dealers
as designated from time to time, directly to purchasers, or through a
combination of such methods. See "Plan of Distribution." If agents of Forest
City or any dealers or underwriters are involved in the sale of the Offered
Securities in respect of which this Prospectus is being delivered, the names of
such agents, dealers or underwriters and any applicable commissions or
discounts, if any, will be set forth in or may be calculated from the Prospectus
Supplement with respect to such Offered Securities.

This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.
------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------

The date of this Prospectus is , 1997.

<PAGE> 116

AVAILABLE INFORMATION

Forest City is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at prescribed rates
at the public reference facilities of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at 7 World Trade Center, 13th Floor, Suite 1300, New York,
New York 10048 and Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants, such as Forest City, that file
electronically with the Commission and the address of such Web site is
http://www.sec.gov. Additionally, the Class A Common Stock of Forest City, par
value $.33 1/3 per share, and the Class B Common Stock of Forest City, par value
$.33 1/3 per share, are listed on the American Stock Exchange, Inc. and such
reports, proxy statements and other information concerning Forest City are also
available for inspection at the offices of the American Stock Exchange, Inc.
located at 86 Trinity Place, New York, NY 10006-1881.

Forest City has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the Offered Securities. This Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
For further information with respect to Forest City and the Offered Securities,
reference is made to the Registration Statement and the exhibits and the
financial statements, notes and schedules filed as a part thereof or
incorporated by reference therein, which may be inspected at the public
reference facilities of the Commission, at the addresses set forth above.
Statements made in this Prospectus concerning the contents of any documents
referred to herein are not necessarily complete, and in each instance are
qualified in all respects by reference to the copy of such document filed as an
exhibit to the Registration Statement.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by Forest City with the Commission are
incorporated into this Prospectus by reference:

1. Forest City's Annual Report on Form 10-K for the fiscal year ended
January 31, 1997 (File No. 1-4372); and

2. Description of Forest City's Class A Common Stock contained in its
Registration Statement on Form 10 (File No. 1-4372).

Each document or report filed by Forest City pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering described herein shall be deemed to be
incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such document.

Forest City will provide without charge to any person, including any
beneficial owners, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all documents incorporated by reference
herein (other than exhibits not specifically incorporated by reference into the
texts of such documents). Requests for such documents should be directed to:
Forest City Enterprises, Inc., 10800 Brookpark Road, Cleveland, Ohio 44130,
Attention: Secretary (telephone: 216-267-1200).

2
<PAGE> 117

Any statement contained herein, or in a document all or a portion of which
is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,

to constitute a part of the Registration Statement or this Prospectus.

3
<PAGE> 118

FOREST CITY

Founded 77 years ago and publicly traded since 1960, Forest City
Enterprises, Inc. (with its Subsidiaries, the "Company" or "Forest City") is one
of the leading real estate development companies in the United States. It
develops, acquires, owns and manages commercial and residential real estate
projects in 20 states and the District of Columbia. At January 31, 1997, the
Company had $2.7 billion in consolidated assets, of which approximately $2.5
billion was invested in commercial and residential real estate.

The Company operates through its four principal business groups:

- The Commercial Group, which develops, acquires, owns and operates
shopping centers, office buildings and mixed-use projects including
hotels.

- The Residential Group, which develops, acquires, owns and operates the
Company's multi-family properties.

- The Land Group, which owns and develops raw land into master planned
communities and other residential developments for resale.

- The Lumber Trading Group, which operates the Company's lumber wholesaling
business.

Forest City was incorporated in Ohio in 1960 as a successor to a business
started in 1921. The address of Forest City's principal executive offices is
10800 Brookpark Road, Cleveland, Ohio 44130; its telephone number is
(216)267-1200.

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated. For the purpose of computing such ratio,
"earnings" consist of income from continuing operations before provision for
income taxes and extraordinary gain, plus fixed charges, and distributed income
from less than 50%-owned companies carried at equity, amortization of previously
capitalized interest, equity method losses where the debt obligations are not
guaranteed, less net capitalized interest of consolidated subsidiaries. "Fixed
charges" comprise interest on long-term and short-term debt, capitalized
interest, amortization of loan procurement costs and the portion of rents
representative of an appropriate interest factor.

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges............................ 1.11 1.10 -- 1.04 1.08
</TABLE>

To date, Forest City has not issued any shares of Preferred Stock;
therefore, the ratio of earnings to combined fixed charges and preferred stock
dividends is the same as the ratio of earnings to fixed charges and are not
separately presented. Total fixed charges exceeded the Company's adjusted
earnings by $28,104 for the fiscal year ended January 31, 1995. For the fiscal
year ended January 31, 1995, the Company recorded a loss of $31 million relating
to the sale of Park Labrea Towers. Earnings, as adjusted, reflects this loss but
does not reflect an extraordinary gain of $60 million, also relating to the sale
of Park Labrea Towers. The Company has sources of funds other than earnings from
operations, principally from depreciation and deferred taxes, that are available
to cover fixed charges.

4
<PAGE> 119

USE OF PROCEEDS

Except as otherwise set forth in the applicable Prospectus Supplement,
Forest City intends to use the net proceeds from the sale of the Offered
Securities for general corporate purposes, which may include repayment of
indebtedness, additions to working capital, capital expenditures and
acquisitions or for such other purposes as may be specified in the applicable
Prospectus Supplement. A more detailed description of the use of proceeds of any
specific offering of Offered Securities will be set forth in the Prospectus
Supplement pertaining to such offering.

DESCRIPTION OF DEBT SECURITIES

The Senior Subordinated Debt Securities are to be issued under an Indenture
(the "Senior Subordinated Indenture"), between Forest City, as issuer, and
National City Bank, as Trustee (the "Trustee"). The Junior Subordinated Debt
Securities will be issued pursuant to a separate Indenture (the "Junior
Subordinated Indenture"), also between Forest City, as issuer, and National City
Bank, as Trustee. The Senior Subordinated Indenture and Junior Subordinated
Indenture are sometimes referred to collectively as the "Indentures." A copy of
the form of each Indenture is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The Debt Securities may be issued from time
to time in one or more series. The particular terms of each series, or of Debt
Securities forming a part of a series, which are offered by a Prospectus
Supplement will be described in such Prospectus Supplement.

The following summaries of certain provisions of the Indentures do not
purport to be complete and are subject, and are qualified in their entirety by
reference, to all the provisions of the Indentures, including the definitions
therein of certain terms, and, with respect to any particular Debt Securities,
to the description of the terms thereof included in the Prospectus Supplement
relating thereto. Wherever particular Sections or defined terms of the
Indentures are referred to herein or in a Prospectus Supplement, such Sections
or defined terms are incorporated by reference herein or therein, as the case
may be.

The Company currently conducts substantially all of its operations through
subsidiaries. The Company's ability to pay principal and interest on the Debt
Securities is dependent upon the ability of its subsidiaries to distribute their
income to the Company. Certain of these subsidiaries are subject to capital
adequacy restrictions and financial covenants.

The Junior Subordinated Debt Securities will be subordinated in right of
payment to all Senior Debt (as defined herein) and the Senior Subordinated Debt
Securities will be subordinated in right of payment to all Senior Indebtedness
(as defined herein). See "--Subordination of Debt Securities". The only Senior
Debt or Senior Indebtedness now outstanding are borrowings under the Credit
Agreement dated as of July 25, 1994 among Forest City Rental Properties
Corporation, a wholly owned subsidiary of the Company, and the banks party
thereto, as amended (the "Credit Agreement"), which borrowings are guaranteed in
full by the Company. The Company may borrow up to $125,000,000 under the Credit
Agreement; as of March 31, 1997, $110.0 million was outstanding under the Credit
Agreement.

The Holders of Debt Securities (including Senior Subordinated Debt
Securities) will also be structurally subordinated to the creditors of the
Company's subsidiaries. At January 31, 1997, approximately $1.9 billion of
indebtedness issued or guaranteed by subsidiaries of the Company was outstanding
in addition to borrowings under the Credit Agreement. Except for the borrowings
and guaranties permitted under the Credit Agreement, all indebtedness issued or
guaranteed by subsidiaries of the Company is nonrecourse to the Company.

GENERAL

The Indentures will provide that Debt Securities in separate series may be
issued thereunder from time to time without limitation as to aggregate principal
amount. Forest City may specify a

5
<PAGE> 120

maximum aggregate principal amount for the Debt Securities of any series.
(Section 301) The Debt Securities are to have such terms and provisions which
are not inconsistent with the Indentures, including as to maturity, principal
and interest, as Forest City may determine.

The applicable Prospectus Supplement will set forth whether the Debt
Securities offered will be Senior Subordinated Debt Securities or Junior
Subordinated Debt Securities, the price or prices at which the Debt Securities
to be offered will be issued and will describe the following terms of such Debt
Securities: (1) the title of such Debt Securities; (2) any limit on the
aggregate principal amount of such Debt Securities or the series of which they
are a part; (3) the Person to whom any interest on a Debt Security of the series
shall be payable, if other than the Person in whose name that Debt Security (or
one or more predecessor Debt Securities) is registered at the close of business
on the Regular Record Date for such interest; (4) the date or dates on which the
principal of any of such Debt Securities will be payable; (5) the rate or rates
at which any of such Debt Securities will bear interest, if any, the date or
dates from which any such interest will accrue, the Interest Payment Dates on
which any such interest will be payable and the Regular Record Date for any such
interest payable on any Interest Payment Date; (6) the place or places where the
principal of and any premium and interest on any of such Debt Securities will be
payable; (7) the period or periods within which, the price or prices at which
and the terms and conditions on which any of such Debt Securities may be
redeemed, in whole or in part, at the option of Forest City; (8) the obligation,
if any, of Forest City to redeem or purchase any of such Debt Securities
pursuant to any sinking fund or analogous provision or at the option of the
Holder thereof, and the period or periods within which, the price or prices at
which and the terms and conditions on which any of such Debt Securities will be
redeemed or purchased, in whole or in part, pursuant to such obligation; (9) the
denominations in which any of such Debt Securities will be issuable, if other
than denominations of $1,000 and any integral multiple thereof; (10) if the
amount of principal of or any premium or interest on any of such Debt Securities
may be determined with reference to an index or pursuant to a formula, the
manner in which such amounts will be determined; (11) if other than the currency
of the United States of America, the currency, currencies or currency units in
which the principal of or any premium or interest on any of such Debt Securities
will be payable (and the manner in which the equivalent of the principal amount
thereof in the currency of the United States of America is to be determined for
any purpose, including for the purpose of determining the principal amount
deemed to be Outstanding at any time); (12) if the principal of or any premium
or interest on any of such Debt Securities is to be payable, at the election of
Forest City or the Holder thereof, in one or more currencies or currency units
other than those in which such Debt Securities are stated to be payable, the
currency, currencies or currency units in which payment of any such amount as to
which such election is made will be payable, the periods within which and the
terms and conditions upon which such election is to be made and the amount so
payable (or the manner in which such amount is to be determined); (13) if other
than the entire principal amount thereof, the portion of the principal amount of
any of such Debt Securities which will be payable upon declaration of
acceleration of the Maturity thereof; (14) if the principal amount payable at
the Stated Maturity of any of such Debt Securities will not be determinable as
of any one or more dates prior to the Stated Maturity, the amount which will be
deemed to be such principal amount as of any such date for any purpose,
including the principal amount thereof which will be due and payable upon any
Maturity other than the Stated Maturity or which will be deemed to be
Outstanding as of any such date (or, in any such case, the manner in which such
deemed principal amount is to be determined); (15) if applicable, that such Debt
Securities, in whole or any specified part, are defeasible pursuant to the
provisions of the relevant Indenture described under "Defeasance and Covenant
Defeasance -- Defeasance and Discharge" or "Defeasance and Covenant
Defeasance -- Covenant Defeasance," or under both such captions; (16) if
applicable, the terms of any right to convert Debt Securities into shares of
Class A Common Stock of Forest City or other securities or property; (17)
whether any of such Debt Securities will be issuable in whole or in part in the
form of one or more Global Securities, as defined in the applicable Indenture,
and, if so, the respective Depositaries for such Global Securities, the form of
any legend or legends to be borne by any such Global Security in addition to or
in lieu of

6
<PAGE> 121

the legend referred to under "Form, Exchange and Transfer" or "Global
Securities" and, if different from those described under such captions, any
circumstances under which any such Global Security may be exchanged in whole or
in part for Securities registered, and any transfer of such Global Security in
whole or in part may be registered, in the names of Persons other than the
Depositary for such Global Security or its nominee; (18) any addition to or
change in the Events of Default applicable to any of such Debt Securities and
any change in the right of the Trustee or the Holders to declare the principal
amount of any of such Debt Securities due and payable; (19) any addition to or
change in the covenants applicable to such Debt Securities; and (20) any other
terms of such Debt Securities not inconsistent with the provisions of the
relevant Indenture. (Section 301)

Debt Securities, including Original Issue Discount Securities, may be sold
at a substantial discount below their principal amount. Certain special United
States Federal income tax considerations (if any) applicable to Debt Securities
sold at an original issue discount will be described in the applicable
Prospectus Supplement under "United States Taxation." In addition, certain
special United States Federal income tax or other considerations (if any)
applicable to any Debt Securities which are denominated in a currency or
currency unit other than United States dollars will be described in the
applicable Prospectus Supplement.

CONVERSION RIGHTS

The terms on which Debt Securities of any series are convertible into
Common Stock or other securities or property will be set forth in the Prospectus
Supplement relating thereto. Such terms shall include provisions as to whether
conversion is mandatory or at the option of the holder and may include
provisions pursuant to which the number of shares of Common Stock or other
securities or property to be received by the Holders of Debt Securities upon
conversion would be calculated according to the market price of Common Stock or
other securities or property as of a time stated in the applicable Prospectus
Supplement. (Article Fourteen)

SUBORDINATION OF DEBT SECURITIES

Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Debt Securities.

SENIOR SUBORDINATED DEBT SECURITIES

The Senior Subordinated Debt Securities will, to the extent set forth in
the Senior Subordinated Indenture, be subordinate in right of payment to the
prior payment in full of all Senior Indebtedness, which includes the guaranty by
Forest City of the obligations under the Credit Agreement. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshalling of
assets or any bankruptcy, insolvency, debt restructuring or similar proceedings
in connection with any insolvency or bankruptcy proceeding of Forest City, the
holders of Senior Indebtedness will first be entitled to receive payment in full
of all amounts due thereon or to be due thereon, if any, on such Senior
Indebtedness before the Holders of the Senior Subordinated Debt Securities will
be entitled to receive or retain any payment in respect of the principal of (and
premium if any) or interest, if any, on the Senior Subordinated Debt Securities.
(Section 1502)

By reason of such subordination, in the event of liquidation or insolvency,
Holders of Senior Subordinated Debt Securities may recover less than holders of
Senior Indebtedness and may recover more than the Holders of the Junior
Subordinated Debt Securities.

In the event of the acceleration of the maturity of any Senior Subordinated
Debt Securities, the holders of all Senior Indebtedness outstanding at the time
of such acceleration will first be entitled to receive payment in full of all
amounts due thereon before the Holders of the Senior Subordinated Debt
Securities will be entitled to receive any payment upon the principal of (or
premium, if any) or interest, if any, on the Senior Subordinated Debt
Securities. (Section 1503)

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No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Senior Subordinated Debt Securities may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Indebtedness, or an event of default with respect to any Senior
Indebtedness resulting in the acceleration of the maturity thereof, or if any
judicial proceeding shall be pending with respect to any such default. (Section
1504) For purposes of the subordination provisions, the payment, issuance and
delivery of cash, property or securities (other than stock and certain
subordinated securities of Forest City) upon conversion of a Senior Subordinated
Debt Security will be deemed to constitute payment on account of the principal
of such Senior Subordinated Debt Security.

JUNIOR SUBORDINATED DEBT SECURITIES

The Junior Subordinated Debt Securities will, to the extent set forth in
the Junior Subordinated Indenture, be subordinate in right of payment to the
prior payment in full of all Senior Debt. Upon any payment or distribution of
assets to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors, marshalling of assets
or any bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with any insolvency or bankruptcy proceeding of Forest City, the
holders of Senior Debt will first be entitled to receive payment in full of all
amounts due thereon or to be due thereon, if any, on such Senior Debt before the
Holders of the Junior Subordinated Debt Securities will be entitled to receive
or retain any payment in respect of the principal of (and premium if any) or
interest, if any, on the Junior Subordinated Debt Securities. (Section 1502)

By reason of such subordination, in the event of liquidation or insolvency,
Holders of Junior Subordinated Debt Securities may recover less than holders of
Senior Debt and may recover less than the Holders of the Senior Subordinated
Debt Securities.

In the event of the acceleration of the maturity of any Junior Subordinated
Debt Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon before the Holders of the Junior Subordinated Debt Securities will
be entitled to receive any payment upon the principal of (or premium, if any) or
interest, if any, on the Junior Subordinated Debt Securities. (Section 1503)

No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Junior Subordinated Debt Securities may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Debt, or an event of default with respect to any Senior Debt resulting in
the acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default. (Section 1504) For purposes of the
subordination provisions, the payment, issuance and delivery of cash, property
or securities (other than stock and certain subordinated securities of Forest
City) upon conversion of a Junior Subordinated Debt Security will be deemed to
constitute payment on account of the principal of such Junior Subordinated Debt
Security.

DEFINITIONS

Unless otherwise indicated in the applicable Prospectus Supplement, the
following definitions are applicable to the Indentures relating to the Debt
Securities. Reference is made to the relevant Indenture for the full definition
of each term.

"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property

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or services, (v) all indebtedness of the Person, whether incurred on or prior to
the date of the relevant Indenture or thereafter incurred, for claims in respect
of derivative products, including interest rate, foreign exchange rate and
commodity forward contracts, options and swaps and similar arrangements; and
(vi) every obligation of the type referred to in the foregoing clauses (i)
through (v) of another Person and all dividends of another Person the payment of
which, in either case, such Person has guaranteed or is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise; provided that such
definition shall not include trade accounts payable or accrued liabilities
arising in the ordinary course of business.

"Senior Debt" means the principal of (and premium, if any) and interest if
any, (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to Forest City to the extent that such
claim for post-petition interest is allowed in such proceeding) on Debt, whether
incurred on or prior to the date of the Junior Subordinated Indenture or
thereafter created, assumed or incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Junior
Subordinated Debt Securities or to other Debt which is pari passu with, or
subordinated to, the Junior Subordinated Debt Securities; provided, however,
that Senior Debt shall not be deemed to include (a) any Debt which, when
incurred and without respect to any election under Section 1111(b) of the
Bankruptcy Reform Act of 1978, was without recourse to Forest City, (b) Debt to
any employee of Forest City, and (c) the Junior Subordinated Debt Securities.

"Senior Indebtedness" means (i) the principal of (and premium, if any) and
interest on all indebtedness for borrowed money of Forest City other than the
Debt Securities, whether incurred on or prior to the date of the Senior
Subordinated Indenture or thereafter incurred, except obligations that by their
terms are not superior in right of payment to the Senior Subordinated Securities
or to other indebtedness which is pari passu with, or subordinated to, the
Senior Subordinated Securities and (ii) any deferrals, renewals or extensions of
any such indebtedness for money borrowed. The term "indebtedness for money
borrowed" as used in the foregoing sentence means any obligation of, or any
obligation guaranteed by, Forest City for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments, and any deferred obligation for the payment of the purchase price
of property or assets.

ADDITIONAL TERMS

Neither Indenture limits or prohibits the incurrence of additional Senior
Debt or Senior Indebtedness, either of which may include indebtedness that is
senior to the Debt Securities, but subordinate to other obligations of Forest
City. In connection with the future issuances of Offered Securities, the
Indentures may be amended or supplemented to limit the amount of indebtedness
incurred by Forest City. See "-- Restrictive Covenants." The Senior Subordinated
Debt Securities, when issued, will constitute Senior Debt. The guaranty by
Forest City of the obligations of Forest City Rental Properties Corporation
under the Credit Agreement constitutes both Senior Debt and Senior Indebtedness.

The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Debt Securities of a particular series.

FORM, EXCHANGE AND TRANSFER

The Debt Securities of each series will be issuable only in fully
registered form, without coupons, and, unless otherwise specified in the
applicable Prospectus Supplement, only in denominations of $1,000 and integral
multiples thereof. (Section 302)

At the option of the Holder, subject to the terms of the relevant Indenture
and the limitations applicable to Global Securities, Debt Securities of each
series will be exchangeable for other Debt Securities of the same series of any
authorized denomination and of a like tenor and aggregate principal amount.
(Section 305)

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Subject to the terms of the relevant Indenture and the limitations
applicable to Global Securities, Debt Securities may be presented for exchange
as provided above or for registration of transfer (duly endorsed or with the
form of transfer endorsed thereon duly executed) at the office of the Security
Registrar or at the office of any transfer agent designated by Forest City for
such purpose. No service charge will be made for any registration of transfer or
exchange of Debt Securities, but Forest City may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. Forest City
has appointed National City Bank as Security Registrar. Any transfer agent (in
addition to the Security Registrar) initially designated by Forest City for any
Debt Securities will be named in the applicable Prospectus Supplement. (Section
305) Forest City may at any time designate additional transfer agents or rescind
the designation of any transfer agent or approve a change in the office through
which any transfer agent acts, except that Forest City will be required to
maintain a transfer agent in each Place of Payment for the Debt Securities of
each series. (Section 1002)

If the Debt Securities of any series (or of any series and specified terms)
are to be redeemed in part, Forest City will not be required to (i) issue,
register the transfer of or exchange any Debt Security of that series (or of
that series and specified terms, as the case may be) during a period beginning
at the opening of business 15 days before the day of mailing of a notice of
redemption of any such Debt Security that may be selected for redemption and
ending at the close of business on the day of such mailing or (ii) register the
transfer of or exchange any debt Security so selected for redemption, in whole
or in part, except the unredeemed portion of any such Debt Security being
redeemed in part. (Section 305)

GLOBAL SECURITIES

Some or all of the Debt Securities of any series may be represented, in
whole or in part, by one or more global securities which will have an aggregate
principal amount equal to that of the Debt Securities represented thereby (a
"Global Security"). Each Global Security will be registered in the name of a
depositary (the "Depositary") or a nominee thereof identified in the applicable
Prospectus Supplement, will be deposited with such Depositary or nominee or a
custodian thereof and will bear a legend regarding the restrictions on exchanges
and registration of transfer thereof referred to below and any such other
matters as may be provided for pursuant to the Indentures.

Notwithstanding any provision of the relevant Indenture or any Debt
Security described herein, no Global Security may be exchanged in whole or in
part for Debt Securities registered, and no transfer of a Global Security in
whole or in part may be registered, in the name of any Person other than the
Depositary for such Global Security or any nominee of such Depositary unless (i)
the Depositary has notified Forest City that it is unwilling or unable to
continue as Depositary for such Global Security or has ceased to be qualified to
act as such as required by the relevant Indenture, (ii) there shall have
occurred and be continuing an Event of Default with respect to the Debt
Securities represented by such Global Security or (iii) there shall exist such
circumstances, if any, in addition to or in lieu of those described above as may
be described in the applicable Prospectus Supplement. All securities issued in
exchange for a Global Security or any portion thereof will be registered in such
names as the Depositary may direct. (Sections 204 and 305)

As long as the Depositary, or its nominee, is the registered Holder of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of such Global Security and the Debt
Securities represented thereby for all purposes under the Debt Securities and
the relevant Indenture. Except in the limited circumstances referred to above,
owners of beneficial interests in a Global Security will not be entitled to have
such Global Security or any Debt Securities represented thereby registered in
their names, will not receive or be entitled to receive physical delivery of
certificated Debt Securities in exchange therefor and will not be considered to
be the owners or Holders of such Global Security or any Debt Securities
represented

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thereby for any purpose under the Debt Securities or the relevant Indenture. All
payments of principal of and any premium and interest on a Global Security will
be made to the Depositary or its nominee, as the case may be, as the Holder
thereof. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. These
laws may impair the ability to transfer beneficial interests in a Global
Security.

Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of Debt Securities represented by the Global
Security to the accounts of its participants. Ownership of beneficial interests
in a Global Security will be shown only on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depositary
(with respect to participants' interests) or any such participant (with respect
to interests of persons held by such participants on their behalf). Payments,
transfers, exchanges and other matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by the
Depositary from time to time. None of Forest City, the Trustee or any agent of
Forest City or the Trustee will have any responsibility or liability for any
aspect of the Depositary's or any participant's records relating to, or for
payments made on account of, beneficial interests in a Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.

PAYMENT AND PAYING AGENTS

Unless otherwise indicted in the applicable Prospectus Supplement, payment
of interest on a Debt Security on any interest Payment Date will be made to the
Person in whose name such Debt Security (or one or more Predecessor Debt
Securities) is registered at the close of business on the Regular Record Date
for such interest. (Section 307)

Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
Forest City may designate for such purpose from time to time. Unless otherwise
indicated in the applicable Prospectus Supplement, the corporate trust office of
the Trustee in The City of New York will be designated as the Company's sole
Paying Agent for payments with respect to Debt Securities of each series. Any
other Paying Agents initially designated by Forest City for the Debt Securities
of a particular series will be named in the applicable Prospectus Supplement.
Forest City may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent or approve change in the office through which
any Paying Agent acts, except that Forest City will be required to maintain a
Paying Agent in each Place of Payment for the Debt Securities of a particular
series. (Section 1002)

All moneys paid by Forest City to a Paying Agent for the payment of the
principal of or any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to Forest City, and the Holder of such
Debt Security thereafter may look only to Forest City for payment thereof.
(Section 1003)

RESTRICTIVE COVENANTS

Covenants specific to a particular series of Debt Securities will be
included in the applicable Prospectus Supplement.

CONSOLIDATION, MERGER AND SALE OF ASSETS

The Indentures will provide that Forest City may not consolidate with or
merge into, or convey, transfer or lease its properties and assets substantially
as an entirety to, any Person (a "Successor

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Person"), and may not permit any Person to merge into, or convey, transfer or
lease its properties and assets substantially as an entirety to, Forest City,
unless (i) the Successor Person (if any) is a corporation, partnership, trust or
other entity organized and validly existing under the laws of any domestic
jurisdiction and assumes Forest City's obligations on the Debt Securities and
under the Indentures, (ii) immediately after giving effect to the transaction,
and treating any indebtedness which becomes an obligation of Forest City or any
Subsidiary as a result of the transaction as having been incurred by it at the
time of the transaction, no Event of Default, and no event which, after notice
or lapse of time or both, would become an Event of Default, shall have occurred
and be continuing, (iii) if, as a result of the transaction, property of Forest
City would become subject to a Lien that would not be permitted by the relevant
Indenture, Forest City takes such steps as shall be necessary to secure the Debt
Securities, if any, equally and ratably with (or prior to) the indebtedness
secured by such Lien and (iv) certain other conditions are met. (Section 801)

EVENTS OF DEFAULT

Each of the following will constitute an Event of Default under the
relevant Indenture with respect to Debt Securities of any series: (a) failure to
pay principal of or any premium on any Debt Security of that series when due,
whether or not such payment is prohibited by the subordination provisions of the
relevant Indenture; (b) failure to pay any interest on any Debt Securities of
that series when due, continued for 30 days, whether or not such payment is
prohibited by the subordination provisions of the relevant Indenture; (c)
failure to deposit any sinking fund payment, when due, in respect of any Debt
Security of that series, whether or not such deposit is prohibited by the
subordination provisions of the relevant Indenture; (d) failure to perform any
other covenant of Forest City in the relevant Indenture (other than a covenant
included in the relevant Indenture solely for the benefit of a series other than
that series), continued for 60 days after written notice has been given by the
Trustee, or the Holders of at least 10% in aggregate principal amount of the
Outstanding Debt Securities of that series, as provided in the relevant
Indenture; (e) failure to pay when due (subject to any applicable grace period)
the principal of, or acceleration of, any indebtedness for money borrowed by
Forest City, if, in the case of any such failure, such indebtedness has not been
discharged or, in the case of any such acceleration, such indebtedness has not
been discharged or such acceleration has not been rescinded or annulled, in each
case, within 10 days after written notice has been given by the Trustee, or the
Holders of at least 10% in principal amount of the Outstanding Debt Securities
of that series, as provided in the relevant Indenture; (f) certain events in
bankruptcy, insolvency or reorganization; and (g) any other Event of Default
specified in the applicable Prospectus Supplement. (Section 501)

If any Event of Default (other than an Event of Default described in clause
(f) above) with respect to the Debt Securities of any series at the time
Outstanding shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Securities of that
series by notice as provided in the relevant Indenture may declare the principal
amount of the Debt Securities of that series (or, in the case of any Debt
Security that is an Original Issue Discount Security or the principal amount of
which is not then determinable, such portion of the principal amount of such
Debt Security, or such other amount in lieu of such principal amount, as may be
specified in the terms of such Debt Security) to be due and payable immediately.
If an Event of Default described in clause (f) above with respect to the Debt
Securities of any series at the time Outstanding shall occur, the principal
amount of all the Debt Securities of that series (or, in the case of any such
Original Issue Discount Security or other Debt Security, such specified amount)
will automatically, and without any action by the Trustee or any Holder, become
immediately due and payable. After any such acceleration, but before a judgment
or decree based on acceleration, the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of that series may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal (or other specified
amount), have been cured or waived as provided in the relevant Indenture.
(Section 502) For information as to waiver of defaults, see "Modification and
Waiver."

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Subject to the provisions of the relevant Indenture relating to the duties
of the Trustee in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the relevant Indenture at the request or direction of any of the Holders,
unless such Holders shall have offered to the Trustee reasonable indemnity.
(Section 603) Subject to such provisions for the indemnification of the Trustee,
the Holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the Debt
Securities of that series. (Section 512)

No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the relevant Indenture, or for the appointment of
a receiver or a trustee, or for any other remedy thereunder, unless (i) such
Holder has previously given to the Trustee written notice of a continuing Event
of Default with respect to the Debt Securities of that series, (ii) the Holders
of at least 25% in aggregate principal amount of the Outstanding Debt Securities
of that series have made a written request, and such Holder or Holders have
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee and (iii) the Trustee has failed to institute such proceeding, and has
not received from the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series a direction inconsistent with such
request, within 60 days after such notice, request and offer. (Section 507)
However, such limitations do not apply to a suit instituted by a Holder of a
Debt Security for the enforcement of payment of the principal of or any premium
or interest on such Debt Security on or after the applicable due date specified
in such Debt Security. (Section 508)

Forest City will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not Forest City, to their knowledge,
is in default in the performance or observance of any of the terms, provisions
and conditions of each Indenture and, if so, specifying all such known defaults.
(Section 1004)

MODIFICATION AND WAIVER

Modifications and amendments of the relevant Indenture may be made by
Forest City and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the Stated Maturity of
the principal of, or any installment of principal of or interest on, any Debt
Security, (b) reduce the principal amount of, or any premium or interest on, any
Debt Security, (c) reduce the amount of principal of an Original Issue Discount
Security or any other Debt Security payable upon acceleration of the Maturity
thereof, (d) change the place or currency of payment of principal of, or any
premium or interest on, any Debt Security, (e) impair the right to institute
suit for the enforcement of any payment on or with respect to any Debt Security,
(f) in the case of Debt Securities, modify the subordination provisions in a
manner adverse to the Holders of the Debt Securities, (g) reduce the percentage
in principal amounts of Outstanding Debt Securities of any series, the consent
of whose Holders is required for modification or amendment of the relevant
Indenture, (h) reduce the percentage in principal amount of Outstanding Debt
Securities of any series necessary for waiver of compliance with certain
provisions of the relevant Indenture or for waiver of certain defaults, (i)
modify such provisions with respect to modification and waiver, or (j) in the
case of convertible Debt Securities, make any change that adversely affects the
right to convert any Debt Security as provided in the relevant Indenture or
Prospectus Supplement (except as permitted by the relevant Indenture or to
decrease the conversion price of any such Debt Security). (Section 902)

Each Indenture will provide that the Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of any series may waive
compliance by Forest City with certain restrictive provisions of such Indenture.
The Holders of a majority in principal amount of the

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Outstanding Debt Securities of any series may waive any past default under the
relevant Indenture, except a default in the payment of principal, premium or
interest and certain covenants and provisions of the relevant Indenture which
cannot be amended without the consent of the Holder of each Outstanding Debt
Security of such series affected. (Section 513) In addition, each Indenture will
provide that any consents or waivers sought from Holders of Debt Securities may
be obtained in connection with a tender offer or exchange offer for any series
of Outstanding Debt Securities or in consideration of payments of money or other
value, provided that such tender offer, exchange offer or offer of consideration
or other value is made to all Holders of the Outstanding Debt Securities of such
series on the same terms. (Section 908)

Each Indenture will provide that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given or
taken any direction, notice, consent, waiver or other action under such
Indenture as of any date, (i) the principal amount of an Original Issue Discount
Security that will be deemed to be Outstanding will be the amount of the
principal thereof that would be due and payable as of such date upon
acceleration of the Maturity thereof to such date, (ii) if, as of such date, the
principal amount payable at the Stated Maturity of a Debt Security is not
determinable (for example, because it is based on an index), the principal
amount of such Debt Security deemed to be Outstanding as of such date will be an
amount determined in the manner prescribed for such Debt Security and (iii) the
principal amount of a Debt Security denominated in one or more foreign
currencies or currency units that will be deemed to be Outstanding will be the
U.S. dollar equivalent, determined as of such date in the manner prescribed for
such Debt Security, of the principal amount of such Debt Security (or, in the
case of a Debt Security described in clause (i) or (ii) above, of the amount
described in such clause). Certain Debt Securities, including those for whose
payment or redemption money has been deposited or set aside in trust for the
Holders and those that have been fully defeased pursuant to Section 1302, will
not be deemed to be Outstanding. (Section 101)

Except in certain limited circumstances, Forest City will be entitled to
set any day as a record date for the purpose of determining the Holders of
Outstanding Debt Securities of any series entitled to give or take any
direction, notice, consent, waiver or other action under each Indenture, in the
manner and subject to the limitations provided in the Indentures. In certain
limited circumstances, the Trustee will be entitled to set a record date for
action by Holders. If a record date is set for any action to be taken by Holders
of a particular series, such action may be taken only by persons who are Holders
of Outstanding Debt Securities of that series on the record date. To be
effective, such action must be taken by Holders of the requisite principal
amount of such Debt Securities within a specified period following the record
date. For any particular record date, this period will be 180 days or such other
shorter period as may be specified by Forest City (or the Trustee, if it set the
record date), and may be shortened or lengthened (but not beyond 180 days) from
time to time. (Section 104)

DEFEASANCE AND COVENANT DEFEASANCE

If and to the extent indicated in the applicable Prospectus Supplement,
Forest City may elect, at its option at any time, to have the provisions of
Section 1302, relating to defeasance and discharge of indebtedness, or Section
1303, relating to defeasance of certain restrictive covenants in the relevant
Indenture, applied to the Debt Securities of any series, or to any specified
part of a series. (Section 1301)

DEFEASANCE AND DISCHARGE

The Indentures will provide that, upon Forest City's exercise of its option
(if any) to have Section 1302 applied to any Debt Securities, Forest City will
be discharged from all its obligations with respect thereto, including the
provisions of Article Fifteen of the relevant Indenture relating to
subordination, except for certain obligations to exchange or register the
transfer of Debt Securities, to replace stolen, lost or mutilated Debt
Securities, to maintain paying agencies and to hold moneys

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for payment in trust, upon the deposit in trust for the benefit of the Holders
of such Debt Securities of money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on such Debt Securities on the
respective Stated Maturities in accordance with the terms of the Indentures and
such Debt Securities. Such defeasance or discharge may occur only if, among
other things, Forest City has delivered to the Trustee an Opinion of Counsel to
the effect that Forest City has received from, or there has been published by,
the United States Internal Revenue Service a ruling, or there has been a change
in tax law, in either case to the effect that Holders of such Debt Securities
will not recognize gain or loss for Federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to Federal income tax
on the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge were not to occur. (Sections
1302 and 1304)

COVENANT DEFEASANCE

The Indentures will provide that, upon Forest City's exercise of its option
(if any) to have Section 1303 applied to any Debt Securities, Forest City may
omit to comply with certain restrictive covenants, including any that may be
described in the applicable Prospectus Supplement, and the occurrence of certain
Events of Default, which are described above in clause (d) (with respect to such
restrictive covenants) and clause (e) under "Events of Default" and any that may
be described in the applicable Prospectus Supplement, will be deemed not to be
or result in an Event of Default, in each case with respect to such Debt
Securities, and the provisions of Article Fifteen
relating to subordination will cease to be effective with respect to any Debt
Securities. Forest City, in order to exercise such option, will be required to
deposit, in trust for the benefit of the Holders of such Debt Securities, money
or U.S. Government Obligations, or both, which, through the payment of principal
and interest in respect thereof in accordance with their terms, will provide
money in an amount sufficient to pay the principal of and any premium and
interest on such Debt Securities on the respective Stated Maturities in
accordance with the terms of the relevant Indenture and such Debt Securities.
Forest City will also be required, among other things, to deliver to the Trustee
an Opinion of Counsel to the effect that holders of such Debt Securities will
not recognize gain or loss for Federal income tax purposes as a result of such
deposit and defeasance of certain obligations and will be subject to Federal
income tax on the same amount, in the same manner and at the same times as would
have been the case if such deposit and defeasance were not to occur. In the
event Forest City exercised this option with respect to any Debt Securities and
such Debt Securities were declared due and payable because of the occurrence of
any Event of Default, the amount of money and U.S. Government Obligations so
deposited in trust would be sufficient to pay amounts due on such Debt
Securities at the time of their respective Stated Maturities but may not be
sufficient to pay amounts due on such Debt Securities upon any acceleration
resulting from such Event of Default. In such case, Forest City would remain
liable for such payments. (Sections 1303 and 1304)

NOTICES

Notices to Holders of Debt Securities will be given by mail to the
addresses of such Holders as they may appear in the Security Register. (Sections
101 and 106)

TITLE

Forest City, the Trustee and any agent of Forest City or the Trustee may
treat the Person in whose name a Debt Security is registered as the absolute
owner thereof (whether or not such Debt Security may be overdue) for the purpose
of making payment and for all other purposes. (Section 308)

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RELATIONSHIPS WITH THE TRUSTEE

National City Bank is Trustee under both the Senior Subordinated Indenture
and the Junior Subordinated Indenture. National City Bank is also a lender under
the Credit Agreement and is, and likely will be in the future, a lender with
respect to individual projects of the Company's subsidiaries.

GOVERNING LAW

The Indentures and the Debt Securities will be governed by, and construed
in accordance with, the law of the State of New York. (Section 112)

DESCRIPTION OF PREFERRED STOCK

The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which a
Prospectus Supplement may relate. Specific terms of any series of Preferred
Stock offered by a Prospectus Supplement will be described in the applicable
Prospectus Supplement. The description set forth below is subject to and
qualified in its entirety by reference to the Amended Articles of Incorporation
of Forest City adopted as of October 11, 1983 (the "Articles") fixing the
preferences, limitations and relative rights of a particular series of Preferred
Stock.

GENERAL

Under the Articles, the Board of Directors of the Company is authorized
without further shareholder action, to provide for the issuance of up to
1,000,000 shares of Preferred Stock, in such series, with such preferences,
conversion or other rights, restrictions, limitations as to dividends,
qualifications or other provisions, as may be fixed by the Board of Directors.

The Preferred Stock will have the dividend, redemption, liquidation,
sinking fund and conversion rights set forth below unless otherwise provided in
the applicable Prospectus Supplement relating to a particular series of
Preferred Stock. Reference is made to the Prospectus Supplement relating to the
particular series of Preferred Stock offered thereby for specific terms,
including: (i) the designation and authorized number of shares of each series;
(ii) the title and liquidation preference per share of such Preferred Stock and
the number of shares offered; (iii) the price at which such series will be
issued; (iv) the dividend rate, the dates on which dividends shall be payable
and the dates from which dividends shall commence to accumulate; (v) any
redemption or sinking fund provisions of such series; (vi) any conversion
rights; and (vii) any additional dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and restrictions of such
series.

The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the applicable Prospectus Supplement relating to a
particular series of Preferred Stock, each series will rank on a parity as to
dividends and distributions in the event of a liquidation with each other series
of Preferred Stock and, in all cases, will be senior to the Class A Common Stock
and the Class B Common Stock of Forest City, par value $.33 1/3 per share (the
"Class B Common Stock," and together with the Class A Common Stock, the "Common
Stock").

The Board of Directors has approved submission to the Company's
shareholders of amendments to the Articles to increase the authorized shares of
the Company's Preferred Stock from 1,000,000 shares to 5,000,000 shares. If the
proposed amendments are approved at the Annual Meeting of Company Shareholders
to be held June 10, 1997, the additional shares of Preferred Stock would be
generally available for issuance without further action by the shareholders. In
addition, the Board of Directors has approved submission to the Company's
shareholders of amendments to the Articles to increase the Class A Common Stock
from 16,000,000 shares to 48,000,000 shares and the Class B Common Stock from
6,000,000 shares to 18,000,000 shares. See "Description of Common Stock." It is
possible, depending upon the transaction in which Class A Common Stock, Class B
Common Stock or Preferred Stock is issued, that issuance of such

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capital stock could have a dilutive effect on shareholders' equity and earnings
per share attributable to present holders of Class A Common Stock and Class B
Common Stock.

DIVIDEND RIGHTS

Holders of Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors, out of assets of the Company
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the applicable Prospectus Supplement relating to such series of
Preferred Stock. Holders of Preferred Stock will be entitled to receive
dividends in preference to and in priority over dividends on account of Common
Stock and will be cumulative from the date determined by the Board of Directors.

If the applicable Prospectus Supplement so provides, as long as any shares
of Preferred Stock are outstanding, no dividends will be declared or paid or any
distributions be made on the Common Stock, unless the accrued dividends on each
series of Preferred Stock have been declared and paid.

Each series of Preferred Stock will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of Preferred Stock may be
entitled to dividends at different dividend rates or based upon different
methods of determination. Except as provided in the applicable Prospectus
Supplement, no series of Preferred Stock will be entitled to participate in the
earnings or assets of the Company.

RIGHTS UPON LIQUIDATION

Upon any dissolution, liquidation or winding-up of the Company, the holders
of each series of Preferred Stock will be entitled to receive out of the assets
of the Company, whether from capital, surplus or earnings, and before any
distribution of any assets is made on account of Class A Common Stock or Class B
Common Stock, the amount per share fixed by the Board of Directors for such
series of Preferred Stock (as reflected in the applicable Prospectus
Supplement), plus unpaid dividends to the date fixed for distribution. Holders
of Preferred Stock will be entitled to no further participation in any
distribution made in conjunction with any such dissolution, liquidation or
winding-up.

REDEMPTION

A series of Preferred Stock may be redeemable, in whole or in part, at the
option of the Company, and may be subject to mandatory redemption pursuant to a
sinking fund, in each case upon terms, at the times, the redemption prices and
for the types of consideration set forth in the Prospectus Supplement relating
to such series. The Prospectus Supplement relating to a series of Preferred
Stock which is subject to mandatory redemption will specify the number of shares
of such series that will be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to any accrued and unpaid dividends thereon to the
date of redemption.

If, after giving notice of redemption to the holders of a series of
Preferred Stock, the Company deposits with a designated bank funds sufficient to
redeem such Preferred Stock, then from and after such deposit, all shares called
for redemption will no longer be outstanding for any purpose, other than the
right to receive the redemption price and the right, if applicable, to convert
such shares into Class A Common Stock of the Company prior to the date fixed for
redemption. The redemption price will be stated in the Prospectus Supplement
relating to a particular series of Preferred Stock.

Except as indicated in the applicable Prospectus Supplement, the Preferred
Stock is not subject to any mandatory redemption at the option of the holder.

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<PAGE> 132

SINKING FUND

The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, of a sinking fund for the purchase or redemption of that series.

CONVERSION RIGHTS

The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
Class A Common Stock. The Preferred Stock will have no preemptive rights.

VOTING RIGHTS

Under ordinary circumstances, the holders of Preferred Stock have no voting
rights except as required by law. However, if dividends on the Preferred Stock
are in arrears for an aggregate of six quarterly dividends upon such shares, the
holders of the Preferred Stock, voting as a class, will become entitled to elect
two Directors until such time as such arrearages are paid and current dividends
paid or declared and funded.

TRANSFER AGENT AND REGISTRAR

The transfer agent, registrar and dividend disbursement agent for a series
of Preferred Stock will be selected by the Company and be described in the
applicable Prospectus Supplement. The registrar for shares of Preferred Stock
will send notices to shareholders of any meetings at which holders of Preferred
Stock have the right to vote on any matter.

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DESCRIPTION OF DEPOSITARY SHARES

GENERAL

Forest City may, at its option, elect to offer fractional shares of
Preferred Stock ("Depositary Shares"), rather than full shares of Preferred
Stock. In such event, Forest City will issue to the public receipts for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock) of
a share of a particular series of Preferred Stock, as described below.

The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between Forest City and a depositary named in the applicable Prospectus
Supplement (the "Stock Depositary"). Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share will be entitled, in proportion to
the applicable fraction of a share of Preferred Stock represented by such
Depositary Share, to all the rights and preferences of the Preferred Stock
represented thereby (including dividend, voting, redemption, subscription and
liquidation rights).

The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. Copies of the
forms of Deposit Agreement and Depositary Receipt are filed as exhibits to the
Registration Statement of which this Prospectus is a part. The following summary
of certain provisions of the Deposit Agreement does not purport to be complete
and is subject, and is qualified in its entirety by reference, to all the
provisions of the Deposit Agreement, including the definitions therein of
certain terms, and with respect to any particular Depositary Receipts, to the
description of the terms thereof included in the Prospectus Supplement relating
thereto.

Pending the preparation of definitive Depositary Receipts, the Stock
Depositary may, upon the written order of Forest City, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) definitive Depositary Receipts but not
in definitive form. Definitive Depositary Receipts will be prepared thereafter
without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at Forest City's expense.

DIVIDENDS AND OTHER DISTRIBUTIONS

The Stock Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares relating to such Preferred Stock in proportion to the
number of such Depositary Shares owned by such holders. The Stock Depositary
will distribute only such amount, however, as can be distributed without
attributing to any holder of Depositary Shares a fraction of one cent, and the
balance not so distributed will be held by the Stock Depositary (without
liability for interest thereon) and will be added to and treated as part of the
sum next received by the Stock Depositary for distribution to record holders of
Depositary Shares.

In the event of a distribution other than in cash, the Stock Depositary
will distribute property received by it to the record holders of Depositary
Shares entitled thereto, in such amounts as are, as nearly as practicable, in
proportion to the number of such Depositary Shares owned by such holder, unless
the Stock Depositary determines that it is not feasible to make such
distribution, in which case the Stock Depositary may, with the approval of
Forest City, adopt such method as it deems equitable and practical, including
the sale of such property and distribute the net proceeds from such sale to such
holders.

The Deposit Agreement will also contain provisions relating to the manner
in which any subscription or similar rights offered by Forest City to holders of
the Preferred Stock shall be made available to the holders of Depositary Shares.

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<PAGE> 134

WITHDRAWAL OF PREFERRED STOCK

Upon surrender of Depositary Receipts at the corporate trust office of the
Stock Depositary (unless the related Depositary Shares have previously been
called for redemption), the holder of the Depositary Shares evidenced thereby
will be entitled to delivery at such office to or upon such holder's order, of
the number of whole shares of the related series of Preferred Stock and any
money or other property represented by such Depositary Shares. Holders of
Depositary Shares making such withdrawals will be entitled to receive whole
shares of the related series of Preferred Stock on the basis set forth in the
related Prospectus Supplement for such series of Preferred Stock, but holders of
such whole shares of such Preferred Stock will not thereafter be entitled to
receive Depositary Shares in exchange therefor. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess of the
number of Depositary Shares representing the number of whole shares of the
related series of Preferred Stock to be withdrawn, the Stock Depositary will
deliver to such holder at the same time a new Depositary Receipt evidencing such
excess number of Depositary Shares.

REDEMPTION OF DEPOSITARY SHARES

If a series of Preferred Stock represented by Depositary Shares is subject
to redemption, the Stock Depositary Shares will be redeemed from the proceeds
received by the Stock Depositary resulting from the redemption, in whole or in
part, of such series of Preferred Stock held by the Stock Depositary in
accordance with the terms of the Deposit Agreement. Whenever Forest City redeems
shares of Preferred Stock held by the Stock Depositary, the Stock Depositary
will redeem as of the same redemption date the number of Depositary Shares
representing shares of Preferred Stock so redeemed. If fewer than all the
Depositary Shares are to be redeemed, the Stock Depositary Shares to be redeemed
will be selected by lot or pro rata as may be determined by the Depositary or by
any other method that may be determined by the Stock Depositary to be equitable.

After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be outstanding and all rights of the holders of the
Depositary Shares will cease, except the right to receive the money, securities,
or other property payable upon such redemption and any money, securities, or
other property to which the holders of such Depositary Shares were entitled upon
such redemption upon surrender to the Stock Depositary of the Depositary
Receipts evidencing such Depositary Shares.

VOTING THE PREFERRED STOCK

Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Stock Depositary will mail the information
contained in such notice of meeting to the record holders of the Depositary
Shares relating to such Preferred Stock. Each record holder of such Depositary
Shares on the record date (which will be the same date as the record date for
the Preferred Stock) will be entitled to instruct the Stock Depositary as to the
exercise of the voting rights pertaining to the amount of whole shares of the
Preferred Stock represented by such holder's Depositary Shares. The Stock
Depositary will endeavor, insofar as practicable, to vote the amount of whole
shares of the Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and Forest City will agree to take all
reasonable action which may be deemed necessary by the Stock Depositary in order
to enable the Stock Depositary to do so. The Stock Depositary will abstain from
voting shares of the Preferred Stock to the extent it does not receive specific
instructions from the holder of Depositary Shares representing such Preferred
Stock.

AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT

The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between Forest City and the Stock Depositary. However, any amendment which
materially and adversely alters the rights of the holders

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<PAGE> 135

of Depositary Shares will not be effective unless such amendment has been
approved by the holders of at least a majority of the Depositary Shares then
outstanding under such Deposit Agreement. The Deposit Agreement may be
terminated by the Stock Depositary or Forest City only if (i) all outstanding
Depositary Shares under such Deposit Agreement have been redeemed or (ii) there
has been a final distribution in respect of the Preferred Stock in connection
with any liquidation, dissolution or winding up of Forest City and such
distribution has been distributed to the holders of Depositary Receipts.

CHARGES AND EXPENSES OF DEPOSITARY

Forest City will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. Forest City
will pay charges of the Stock Depositary in connection with the initial deposit
of the Preferred Stock and any redemption of the Preferred Stock at the option
of Forest City, and any withdrawals of Preferred Stock by the holders of
Depositary Shares. Holders of Depositary Receipts will pay all other transfer
and other taxes and governmental charges and such other charges as they are
expressly provided in the Deposit Agreement to be for their accounts.

RESIGNATION AND REMOVAL OF DEPOSITARY

The Stock Depositary may resign at any time by delivering to Forest City
notice of its election to do so, and Forest City may at any time remove the
Stock Depositary, any such resignation or removal to take effect upon the
appointment of a successor depositary and its acceptance of such appointment as
provided in the Deposit Agreement. Such successor depositary must be appointed
within 60 days after delivery of the notice of resignation or removal and must
be a bank or trust company having its principal office in the United States of
America and having a combined capital and surplus of at least $50,000,000.

MISCELLANEOUS

Forest City will deliver, at its own expense, all notices and reports
required by law, by the rules of any national securities exchange upon which the
Preferred Stock, the Depositary Shares or the Depositary Receipts are listed or
by the Company's Articles to be furnished to the record holders of Preferred
Stock.

As provided in the Deposit Agreement, neither the Stock Depositary nor
Forest City will be liable if it is prevented or delayed by law or any other
circumstance beyond its control in performing its obligations under the Deposit
Agreement. The obligations of Forest City and the Stock Depositary under the
Deposit Agreement will be limited to performance in good faith of their duties
thereunder and they will not be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. Forest City and the Stock Depositary may
rely upon written advice of counsel or accountants, or upon information provided
by persons presenting Preferred Stock for deposit, holders of Depositary
Receipts or other persons believed to be competent and on documents believed to
be genuine.

DESCRIPTION OF COMMON STOCK

The Articles authorize the issuance of (a) 16,000,000 shares of Class A
Common Stock, of which, at January 31, 1997, and after giving effect to a
three-for-two stock split effective February 17, 1997, 7,932,358 shares were
issued and were held of record by 884 shareholders, 235,950 shares were held in
treasury and 7,696,408 shares were outstanding and (b) 6,000,000 shares of Class
B Common Stock, convertible on a share-for-share basis into Class A Common
Stock, of which, at January 31, 1997, and after giving effect to a three-for-two
stock split effective February 17, 1997, 5,554,618 shares were issued and were
held of record by 690 shareholders, 139,050 shares were held in treasury and
5,415,568 shares were outstanding.

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The description set forth below of the Class A Common Stock and Class B
Common Stock is subject to and qualified in its entirety by reference to the
Articles.

The Board of Directors has approved submission to the Company's
shareholders of amendments to the Articles to increase the authorized shares of
Class A Common Stock from 16,000,000 shares to 48,000,000 shares and the Class B
Common Stock from 6,000,000 shares to 18,000,000 shares. If the proposed
amendments are approved at the Annual Meeting of Company Shareholders to be held
June 10, 1997, the additional shares of Class A Common Stock and Class B Common
Stock would be generally available for issuance without further action by the
shareholders. In addition, the Board of Directors has approved submission to the
Company's shareholders of amendments to the Articles to increase the Company's
Preferred Stock from 1,000,000 shares to 5,000,000 shares. See "Description of
Preferred Stock." It is possible, depending upon the transaction in which Class
A Common Stock, Class B Common Stock or Preferred Stock is issued, that issuance
of such capital stock could have a dilutive effect on shareholders' equity and
earnings per share attributable to present holders of Class A Common Stock and
Class B Common Stock.

GENERAL

Except as described below, the shares of Class A Common Stock and the
shares of Class B Common Stock are in all respects identical, and the respective
holders shall be entitled to participate in any dividend, reclassification,
merger, consolidation, reorganization, recapitalization, liquidation,
dissolution or winding up of the affairs of the Company, share-for-share,
without priority or other distinction between classes.

Both the Class A and Class B Common Stock are listed on the American Stock
Exchange. As of January 31, 1997, and after giving effect to a three-for-two
stock split effective February 17, 1997, Class A Common Stock accounted for
approximately 59% of the total number of shares of Common Stock issued and
outstanding.

DIVIDENDS

The Directors of Forest City are not required to declare a regular cash
dividend in any fiscal year. The Class A Common Stock and Class B Common Stock
will participate equally on a share-for-share basis in any and all cash
dividends paid. No cash dividend can be paid on a class of Common Stock until
provision is made for payment of a dividend of at least an equal amount on a
share-for-share basis on the other class of Common Stock for such fiscal year.

Any extra dividend, special dividend or dividend paid other than cash
(other than a stock dividend) is required to be paid equally to the holders of
Class A Common Stock and the holders of Class B Common Stock on a
share-for-share basis. If the Directors determine to declare any stock dividend
with respect to either class of Common Stock, they must at the same time declare
a proportionate stock dividend with respect to the other class of Common Stock.
If the shares of either class of Common Stock are combined or subdivided, the
shares of the other class of Common Stock must be combined or subdivided in an
equivalent manner. In the discretion of the Directors, dividends payable in
Class A Common Stock may be paid with respect to shares of either class of
Common Stock, but dividends payable in Class B Common Stock may be paid only
with respect to shares of Class B Common Stock.

VOTING RIGHTS

The holders of the Class A Common Stock (voting as a separate class) are
entitled to elect 25% of the Directors rounded up to the nearest whole number.
All other Directors are elected by the holders of the Class B Common Stock
voting as a separate class. Cumulative voting for the election of Directors is
provided by Ohio law if notice in writing is given by any shareholder to the
President, a Vice President or the Secretary of the Company not less than
forty-eight hours before the time fixed for the holding of the meeting that such
shareholder desires cumulative voting with respect to the election of directors
by a class of shareholders to which he belongs, and if an announcement of the
giving of such notice is made upon the convening of the meeting by the Chairman
or Secretary

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<PAGE> 137

or by or on behalf of the shareholder giving such notice, each holder of shares
of that class shall have the right to accumulate such voting power as he
possesses at such election with respect to shares of that class. Each holder of
shares of Class A Common Stock or Class B Common Stock, as the case may be,
shall have as many votes as equal the number of shares of that class of Common
Stock owned by him multiplied by the number of directors to be elected by the
holders of that class of Common Stock. These votes may be distributed among the
total number of directors to be elected by the holders of that class of Common
Stock or distributed among any lesser number, in such proportion as the holder
may desire.

In the event that the number of outstanding shares of Class A Common Stock
is (as of the record date for any shareholder meeting at which Directors will be
elected) less than 10% of the combined outstanding shares of Class A and Class B
Common Stock, then the holders of Class A Common Stock will not have the right
to elect 25% of the Directors. In such event, the holders of the Class A Common
Stock and the holders of the Class B Common Stock would vote together as a
single class in the election of all Directors, with each Class A share having
one vote and each Class B share having ten votes.

Further, in the event that the number of outstanding shares of Class B
Common Stock as of the above-mentioned record date, is less than 500,000 shares,
the holders of Class B Common Stock will lose their rights to elect 75% of the
Directors. In such event, the holders of the Class A Common Stock would continue
to vote as a separate class to elect 25% of the Directors rounded up to the
nearest whole number, and the holders of the Class A and Class B Common Stock
would vote together as a single class in the election of the remaining
Directors, with each Class A share having one vote and each Class B share having
ten votes.

The holders of Class A Common Stock and the holders of Class B Common Stock
are entitled to vote as separate classes (1) for the election of Directors (as
discussed above); (2) to amend the Articles or the Code of Regulations of Forest
City or approve a merger or consolidation of Forest City with or into another
corporation if such amendment, merger or consolidation would adversely affect
the rights of the particular class; and (3) on all matters as to which class
voting may be required by applicable Ohio law. The holders of the Class A Common
Stock vote together with the holders of the Class B Common Stock as a single
class on all matters which are submitted to shareholder vote, except as
discussed above. When all holders of shares of Forest City vote as a single
class, each Class A share has one vote and each Class B share has ten votes.

CONVERSION

Holders of shares of Class B Common Stock are entitled to convert, at any
time and at their election, each share of Class B Common Stock into one share of
Class A Common Stock. Shares of Class A Common Stock are not convertible into
any security of Forest City.

OTHER TERMS

Shareholders of Forest City have no preemptive or other rights to subscribe
for additional shares of voting securities of Forest City (except for the
conversion rights of Class B Common Stock described above and conversion rights
of Preferred Stock, if any). Upon any liquidation, dissolution or winding up of
Forest City, the assets legally available for distribution to holders of all
classes of Common Stock are distributable ratably among the holders of the
shares of all classes of Common Stock outstanding at the time. No class of
Common Stock is subject to redemption.

TRANSFER AGENT

National City Bank Corporate Trust Operations Department, Cleveland, Ohio,
currently serves as transfer agent for the Common Stock.

PLAN OF DISTRIBUTION

Forest City may sell Offered Securities to or through underwriters and may
sell Offered Securities directly to other purchasers or through agents.

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<PAGE> 138

The distribution of the Offered Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices.

In connection with the sale of Offered Securities, underwriters may receive
compensation from Forest City or from purchasers of Offered Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Offered Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Offered Securities may be deemed to be underwriters, and any
discounts or commissions received by them from Forest City and any profit on the
resale of Offered Securities by them may be deemed to be underwriting discounts
and commissions, under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from Forest City will be
described, in the relevant Prospectus Supplement.

Under agreements which may be entered into by Forest City, underwriters and
agents who participate in the distribution of Offered Securities may be entitled
to indemnification by Forest City against certain liabilities, including
liabilities under the Securities Act.

If so indicated in the relevant Prospectus Supplement, Forest City will
authorize underwriters or other persons acting as Forest City's agents to
solicit offers by certain institutions to purchase Offered Securities from
Forest City pursuant to contracts ("Delayed Delivery Contracts") providing for
payment and delivery on a future date. Institutions with which Delayed Delivery
Contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others, but in all cases such institutions must be approved by Forest City. The
obligations of any purchaser under Delayed Delivery Contracts will be subject
only to the conditions that (i) the purchase of the Offered Securities shall not
at the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such purchaser is subject, and (ii) if the Offered
Securities are being sold to underwriters, Forest City shall have sold to such
underwriters the total principal amount of the Offered Securities less the
principal amount thereof covered by Delayed Delivery Contracts. The underwriters
and such other agents will not have any responsibility in respect of the
validity or performance of such Delayed Delivery Contracts.

Agents, underwriters, and dealers may be customers of, engage in
transactions with, or perform services for, Forest City and its subsidiaries in
the ordinary course of business.

VALIDITY OF THE OFFERED SECURITIES

The validity of the Offered Securities offered hereby will be passed upon
for Forest City by Jones, Day, Reavis & Pogue, Cleveland, Ohio, and for any
underwriters or agents by counsel to be named in the applicable Prospectus
Supplement. Counsel to the underwriters or agents may, in some instances, rely
as to certain matters of Ohio law upon the opinion of Jones, Day, Reavis &
Pogue.

EXPERTS

The consolidated financial statements and financial statement schedules of
Forest City and Subsidiaries appearing in Forest City's Annual Report on Form
10-K for the year ended January 31, 1997 have been audited by Coopers & Lybrand
L.L.P., independent accountants as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements and financial statement schedules are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.

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INSIDE BACK COVER

PHOTOGRAPH: Photograph of Silver Lakes
CAPTION: Silver Lakes -- Fort Lauderdale, Flordia

PHOTOGRAPH: Photograph of Studio Colony
CAPTION: Studio Colony -- Los Angeles, California

PHOTOGRAPH: Photograph of Liberty Center
CAPTION: Liberty Center -- Pittsburgh, Pennsylvania

PHOTOGRAPH: Photograph of Tower City Center
CAPTION: Tower City Center -- Cleveland, Ohio
<PAGE> 140

======================================================

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF, OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary............. S-3
Risk Factors.............................. S-15
Use of Proceeds........................... S-25
Price Range of Common Stock and Dividend
History................................. S-25
Capitalization............................ S-27
The Company............................... S-28
Strategy for Growth and Competitive
Advantages.............................. S-29
Business.................................. S-35
Selected Financial and Other
Information............................. S-61
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. S-64
Properties................................ S-75
Description of Certain Indebtedness....... S-78
Management................................ S-82
Underwriting.............................. S-85
Validity of the Class A Common Stock...... S-86
Index to Consolidated Financial
Statements.............................. F-1
</TABLE>

PROSPECTUS

<TABLE>
<S> <C>
Available Information..................... 2
Incorporation of Certain Documents by
Reference............................... 2
Forest City............................... 4
Ratio of Earnings to Fixed Charges........ 4
Use of Proceeds........................... 5
Description of Debt Securities............ 5
Description of Preferred Stock............ 16
Description of Depositary Shares.......... 19
Description of Common Stock............... 21
Plan of Distribution...................... 23
Validity of the Offered Securities........ 24
Experts................................... 24
</TABLE>

======================================================

======================================================
1,700,000 SHARES

FOREST CITY
ENTERPRISES, INC.
CLASS A COMMON STOCK
(PAR VALUE $.33 1/3 PER SHARE)
---------------------

[FOREST CITY ENTERPRISES LOGO]

---------------------

GOLDMAN, SACHS & CO.

MERRILL LYNCH & CO.

CREDIT SUISSE FIRST BOSTON

MCDONALD & COMPANY
SECURITIES, INC.

REPRESENTATIVES OF THE UNDERWRITERS

======================================================
<PAGE> 141

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and commissions,
are estimated as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.................. $ 75,757.58
Trustee's Fees and Expenses*......................................... 15,000.00
Transfer Agent and Registrar Fees*................................... 15,000.00
Legal Fees and Expenses*............................................. 300,000.00
Accounting Fees and Expenses*........................................ 150,000.00
Printing Expenses*................................................... 500,000.00
Miscellaneous*....................................................... 20,000.00
--------
Total........................................................... $1,075,757.58
========
</TABLE>

- ---------------

* Estimated

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Under Ohio law, Ohio corporations are authorized to indemnify directors,
officers, employees, and agents within prescribed limits and must indemnify them
under certain circumstances. Ohio law does not provide statutory authorization
for a corporation to indemnify directors, officers, employees, and agents for
settlements, fines, or judgments in the context of derivative suits. However, it
provides that directors (but not officers, employees, and agents) are entitled
to mandatory advancement of expenses, including attorneys' fees, incurred in
defending any action, including derivative actions, brought against the
director, provided the director agrees to cooperate with the corporation
concerning the matter and to repay the amount advanced if it is proved by clear
and convincing evidence that his act or failure to act was done with deliberate
intent to cause injury to the corporation or with reckless disregard to the
corporation's best interests.

Ohio law does not authorize payment of judgments to a director, officer,
employee, or agent after a finding of negligence or misconduct in a derivative
suit absent a court order. Indemnification is permitted, however, to the extent
such person succeeds on the merits. In all other cases, if a director, officer,
employee, or agent acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, indemnification
is discretionary except as otherwise provided by a corporation's articles, code
of regulations, or by contract except with respect to the advancement of
expenses of directors.

Under Ohio law, a director is not liable for monetary damages unless it is
proved by clear and convincing evidence that his action or failure to act was
undertaken with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interests of the corporation. There is, however,
no comparable provision limiting the liability of officers, employees, or agents
of a corporation. The statutory right to indemnification is not exclusive in
Ohio, and Ohio corporations may, among other things, procure insurance for such
persons.

Forest City's Code of Regulations provides that Forest City shall indemnify
any person made or threatened to be made a party to any action, suit, or
proceeding, other than an action by or in the right of Forest City, by reason of
the fact that he is or was a director, trustee, officer, employee, or agent of
Forest City or of any other bank, corporation, partnership, trust or other
enterprise for which he was serving as a director, officer, or employee at the
request of Forest City, against

II-1
<PAGE> 142

expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of Forest City,
and with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful.

Under the terms of Forest City's directors' and officers' liability and
company reimbursement insurance policy, directors and officers of Forest City
are insured against certain liabilities, including liabilities arising under the
Securities Act.

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement for Debt Securities.
1.2 -- Form of Underwriting Agreement for Preferred Stock.
1.3 -- Form of Underwriting Agreement for Class A Common Stock.
4.1 -- Form of Senior Subordinated Indenture between the Registrant and National
City Bank, as Trustee thereunder.
4.2 -- Form of Junior Subordinated Indenture between the Registrant and National
City Bank, as Trustee thereunder.
4.3 -- Form of Deposit Agreement, including form of Depositary Receipt.
4.4 -- Credit Agreement, dated as of July 25, 1994, among Forest City Rental
Properties Corporation, the banks named therein and Society National Bank, as
agent, incorporated by reference to Exhibit 10.1 to the Registrant's Form
10-Q for the quarter ended July 31, 1994 (File No. 1-4372).
4.5 -- Guaranty of Payment of Debt, dated as of July 25, 1994, between Forest City
Enterprises, Inc. and the banks named therein incorporated by reference to
Exhibit 10.2 to the Registrant's Form 10-Q for the quarter ended July 31,
1994 (File No. 1-4372).
4.6 -- First Amendment to Credit Agreement, dated as of September 12, 1995 among
Forest City Rental Properties Corporation, the banks named therein and
Society National Bank, as agent, incorporated by reference to Exhibit 10.3 to
the Registrant's Form 10-Q for the quarter ended October 31, 1995 (File No.
1-4372).
4.7 -- First Amendment to Guaranty of Payment of Debt, dated as of September 12,
1995, among Forest City Enterprises, Inc., the banks named therein and
Society National Bank, as agent, incorporated by reference to Exhibit 10.4 to
the Registrant's Form 10-Q for the quarter ended October 31, 1995 (File No.
1-4372).
4.8 -- Second Amendment to Credit Agreement, dated as of April 4, 1996, among Forest
City Rental Properties Corporation, the banks named therein and Society
National Bank, as agent.
4.9 -- Second Amendment to Guaranty of Payment of Debt, dated as of April 4, 1996,
among Forest City Enterprises, Inc., the banks named therein and Society
National Bank, as agent, incorporated by reference to Exhibit 10.6 to the
Registrant's Form 10-K for the fiscal year ended January 31, 1997 (File No.
1-4372).
4.10 -- Third Amendment to Credit Agreement, dated as of December 18, 1996, among
Forest City Rental Properties Corporation, the banks named therein and
KeyBank National Association, f/k/a Society National Bank, as agent.
4.11 -- Third Amendment to Guaranty of Payment of Debt, dated as of December 18,
1996, among Forest City Enterprises, Inc., the banks named therein and
KeyBank National Association, f/k/a Society National Bank, as agent.
</TABLE>

II-2
<PAGE> 143

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------------------------------------------------------------
<S> <C> <C>
4.12 -- Amended Articles of Incorporation of the Registrant, incorporated by
reference to Exhibit 3.1 to the Registrant's Form 10-Q for the quarter ended
October 31, 1983 (File No. 1-4372).
4.13 -- Code of Regulations of the Registrant, as amended June 14, 1994, incorporated
by reference to Exhibit 3.2 to the Registrant's Form 10-K for the fiscal year
ended January 31, 1997 (File No. 1-4372).
5 -- Opinion of Jones, Day, Reavis & Pogue.
*12 -- Computation of Ratio of Earnings to Fixed Charges.
*23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Jones, Day, Reavis & Pogue (contained in Exhibit 5).
24 -- Powers of Attorney.
25.1 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
National City Bank, as Trustee under the Senior Subordinated Indenture.
25.2 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
National City Bank, as Trustee under the Junior Subordinated Indenture.
</TABLE>

- ---------------

* Filed herewith

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in said Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as a
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

II-3
<PAGE> 144

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

The undersigned Registrant hereby undertakes that:

For purposes of determining any liability under the Securities Act of 1933
(the "Securities Act"), each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be determined to be the initial
bona fide offering thereof.

II-4
<PAGE> 145

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cleveland, the State of Ohio, on April 29, 1997.

FOREST CITY ENTERPRISES, INC. By:
/s/ CHARLES A. RATNER
------------------------------------
Charles A. Ratner
President and Chief Executive
Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------------------------------
<S> <C> <C>

/s/ ALBERT B. RATNER Co-Chairman of the Board April 29, 1997
- ---------------------------------------- and Director
Albert B. Ratner

/s/ SAMUEL H. MILLER Co-Chairman of the Board, April 29, 1997
- ---------------------------------------- Treasurer and Director
Samuel H. Miller

* President, Chief Executive April 29, 1997
- ---------------------------------------- Officer and Director (Principal
Charles A. Ratner Executive Officer)
/s/ THOMAS G. SMITH Senior Vice President, Chief April 29, 1997
- ---------------------------------------- Financial Officer and Secretary
Thomas G. Smith (Principal Financial Officer)

/s/ LINDA M. KANE Vice President and Corporate April 29, 1997
- ---------------------------------------- Controller (Principal Accounting
Linda M. Kane Officer)

/s/ NATHAN SHAFRAN Vice Chairman of the Board April 29, 1997
- ---------------------------------------- and Director
Nathan Shafran

/s/ JAMES A. RATNER Executive Vice President April 29, 1997
- ---------------------------------------- and Director
James A. Ratner

/s/ RONALD A. RATNER Executive Vice President April 29, 1997
- ---------------------------------------- and Director
Ronald A. Ratner

/s/ J MAURICE STRUCHEN Director April 29, 1997
- ----------------------------------------
J Maurice Struchen
</TABLE>

II-5
<PAGE> 146

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------------------------------
<S> <C> <C>

/s/ MICHAEL P. ESPOSITO, JR. Director April 29, 1997
- ----------------------------------------
Michael P. Esposito, Jr.

/s/ JERRY V. JARRETT Director April 29, 1997
- ----------------------------------------
Jerry V. Jarrett

/s/ SCOTT S. COWEN Director April 29, 1997
- ----------------------------------------
Scott S. Cowen

/s/ BRIAN J. RATNER Director April 29, 1997
- ----------------------------------------
Brian J. Ratner

/s/ DEBORAH RATNER SALZBERG Director April 29, 1997
- ----------------------------------------
Deborah Ratner Salzberg
</TABLE>

- ---------------

* The undersigned, pursuant to a Power of Attorney executed by each of the
Directors and officers identified above and filed with the Securities and
Exchange Commission, by signing his name hereto, does hereby sign and execute
this Amendment No. 1 to Registration Statement on behalf of each of the
persons noted above, in the capacities indicated.

<TABLE>
<S> <C>
By: /s/ Charles A. Ratner April 29, 1997
-----------------------------------------
Charles A. Ratner, Attorney-in-Fact
</TABLE>

II-6
<PAGE> 147

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------
<S> <C> <C>
1.1 Form of Underwriting Agreement for Debt Securities.
1.2 Form of Underwriting Agreement for Preferred Stock.
1.3 Form of Underwriting Agreement for Class A Common Stock.
4.1 Form of Senior Subordinated Indenture between the Registrant and National City
Bank, as Trustee thereunder.
4.2 Form of Junior Subordinated Indenture between the Registrant and National City
Bank, as Trustee thereunder.
4.3 Form of Deposit Agreement, including form of Depositary Receipt.
4.4 Credit Agreement, dated as of July 25, 1994, among Forest City Rental Properties
Corporation, the banks named therein and Society National Bank, as agent,
incorporated by reference to Exhibit 10.1 to the Registrant's Form 10-Q for the
quarter ended July 31, 1994 (File No. 1-4372).
4.5 Guaranty of Payment of Debt, dated as of July 25, 1994, between Forest City
Enterprises, Inc. and the banks named therein incorporated by reference to
Exhibit 10.2 to the Registrant's Form 10-Q for the quarter ended July 31, 1994
(File No. 1-4372).
4.6 First Amendment to Credit Agreement, dated as of September 12, 1995 among Forest
City Rental Properties Corporation, the banks named therein and Society National
Bank, as agent, incorporated by reference to Exhibit 10.3 to the Registrant's
Form 10-Q for the quarter ended October 31, 1995 (File No. 1-4372).
4.7 First Amendment to Guaranty of Payment of Debt, dated as of September 12, 1995,
among Forest City Enterprises, Inc., the banks named therein and Society National
Bank, as agent, incorporated by reference to Exhibit 10.4 to the Registrant's
Form 10-Q for the quarter ended October 31, 1995 (File No. 1-4372).
4.8 Second Amendment to Credit Agreement, dated as of April 4, 1996, among Forest
City Rental Properties Corporation, the banks named therein and Society National
Bank, as agent.
4.9 Second Amendment to Guaranty of Payment of Debt, dated as of April 4, 1996, among
Forest City Enterprises, Inc., the banks named therein and Society National Bank,
as agent, incorporated by reference to Exhibit 10.6 to the Registrant's Form 10-K
for the fiscal year ended January 31, 1997 (File No. 1-4372).
4.10 Third Amendment to Credit Agreement, dated as of December 18, 1996, among Forest
City Rental Properties Corporation, the banks named therein and KeyBank National
Association, f/k/a Society National Bank, as agent.
</TABLE>

<PAGE> 148

<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------
<S> <C> <C>
4.11 Third Amendment to Guaranty of Payment of Debt, dated as of December 18, 1996,
among Forest City Enterprises, Inc., the banks named therein and KeyBank National
Association, f/k/a Society National Bank, as agent.
4.12 Amended Articles of Incorporation of the Registrant, incorporated by reference to
Exhibit 3.1 to the Registrant's Form 10-Q for the quarter ended October 31, 1983
(File No. 1-4372).
4.13 Code of Regulations of the Registrant, as amended June 14, 1994, incorporated by
reference to Exhibit 3.2 to the Registrant's Form 10-K for the fiscal year ended
January 31, 1997 (File No. 1-4372).
5 Opinion of Jones, Day, Reavis & Pogue.
* 12 Computation of Ratio of Earnings to Fixed Charges.
* 23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Jones, Day, Reavis & Pogue (contained in Exhibit 5).
24 Powers of Attorney.
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
National City Bank, as Trustee under the Senior Subordinated Indenture.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
National City Bank, as Trustee under the Junior Subordinated Indenture.
</TABLE>

- ---------------

* Filed herewith.

<PAGE> 1
EXHIBIT 12
Forest City Enterprises, Inc.
Statement of Ratio of Earnings to Fixed Charges
(In thousands)

<TABLE>
<CAPTION>
Fiscal Year Ended January 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings:

Earnings (loss) from continuing operations before
income taxes and extraordinary gain $22,122 $17,562 ($24,497) $ 6,536 $ 23,151

Adjustments to earnings (loss):
Interest incurred, net of capitalized interest 133,364 130,001 116,821 111,494 111,309
Amortization of loan procurement costs(a) 11,901 6,873 7,141 8,896 5,769
Previously capitalized interest amortized
into earnings (b) 3,674 3,580 3,439 3,655 3,528
Change in undistributed earnings of entities
accounted for under the equity method (38) 2,106 (76) 1,859 (446)
Portion of rents representative of
interest factor (c) 2,589 1,692 1,436 3,166 3,555
Equity method losses where debt obligations
are not guaranteed 101 201 79 27 35
-------- -------- -------- -------- --------

Earnings, as adjusted $173,713 $162,015 $104,343 $135,633 $146,901

Fixed charges:
Interest expensed 133,364 130,001 116,821 111,494 111,309
Interest capitalized 8,025 9,362 7,049 6,332 15,446
Amortization of loan procurement costs (a) 11,901 6,873 7,141 8,896 5,769
Portion of rents representative of
interest factor (c) 2,589 1,692 1,436 3,166 3,555
-------- -------- -------- -------- --------
Total fixed charges (d) $155,879 $147,928 $132,447 $129,888 $136,079
-------- -------- -------- -------- --------
Ratio of earnings to fixed charges (e) 1.11 1.10 -- 1.04 1.08
======== ======== ======== ======== ========

(a) A portion of loan procurement cost amortization was estimated based on costs capitalized to date, the Company's amortization
policy and historical nonrecourse debt balances.

(b) Previously capitalized interest amortized into earnings was estimated by analyzing interest costs capitalized since January 31,
1974 and the Company's depreciation policy.

(c) Portion of rents representative of interest factor was estimated by applying an estimated interest percentage to actual rent
expense.

(d) Total fixed charges exceeds the Company's adjusted earnings by $28,104 and $34,825 for the fiscal year ended January 31,
1995 and 1992, respectively. For the fiscal year ended January 31, 1995, the Company recorded a loss of $31 million relating
to the sale of Park Labrea Towers. Earnings, as adjusted, reflects this loss but does not reflect an extraordinary gain of
$60 million, also relating to the sale of Park Labrea Towers.

(e) The Company has sources of funds other than earnings from operations, principally from depreciation and deferred taxes, that
are available to cover fixed charges.

</TABLE>

<PAGE> 1
Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement of
Forest City Enterprises, Inc. and subsidiaries on Form S-3 of our report dated
March 13, 1997, on our audits of the consolidated financial statements and
financial statement schedules of Forest City Enterprises, Inc. and subsidiaries
as of January 31, 1997 and 1996 and for the years ended January 31, 1997, 1996,
and 1995. We also consent to the reference to our firm under the caption
"Experts."

COOPERS & LYBRAND L.L.P.

Cleveland, Ohio
April 24, 1997