UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

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o    Soliciting Material Pursuant to Section 240.14a-12

Forest City Enterprises, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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FOREST CITY ENTERPRISES, INC.

Notice of Annual Meeting of Shareholders

To Be Held June 16, 2010

NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of Forest City Enterprises, Inc. (the “Company”) will be held in the 6th floor Riverview Room of the Ritz-Carlton Hotel, Tower City Center, 1515 West Third Street, Cleveland, Ohio 44113, on Wednesday, June 16, 2010 at 2:00 p.m., Eastern Daylight Time, for the purpose of considering and acting upon:

	(1)		The election of fourteen (14) directors, nominated by the Board of Directors, each to hold office until the next annual shareholders’ meeting and until a successor shall be elected and qualified. Four (4) directors will be elected by holders of Class A Common Stock and ten (10) by holders of Class B Common Stock.
	(2)		The proposed amendment of the Amended Articles of Incorporation to increase the number of authorized shares of Class A Common Stock.
	(3)		The proposed amendment of the Amended Articles of Incorporation to increase the number of authorized shares of Preferred Stock.
	(4)		The proposed amendment of the Code of Regulations to allow the Board of Directors to amend the Code of Regulations to the extent permitted by law.
	(5)		The proposed amendment and restatement of the 1994 Stock Plan.
	(6)		The ratification of PricewaterhouseCoopers LLP as independent registered public accounting firm for the Company for the fiscal year ending January 31, 2011.
	(7)		Such other business as may properly come before the meeting or any adjournment or postponement thereof.

Shareholders of record at the close of business on April 21, 2010 will be entitled to notice of and to vote at such annual meeting or any adjournment or postponement thereof.

BY THE ORDER OF THE BOARD OF DIRECTORS

Geralyn M. Presti, Secretary

Cleveland, Ohio
May 3, 2010

IMPORTANT: It is important that your stock be represented at the meeting. Whether or not you intend to be present, please mark, date and sign the appropriate enclosed proxy or proxies and send them by return mail in the enclosed envelope, which requires no postage if mailed in the United States.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE SHAREHOLDER MEETING TO BE HELD ON JUNE 16, 2010

The Proxy Statement, Annual Report on Form 10-K, Summary Annual Report and Supplemental Package
are available on the Investor Relations page at www.forestcity.net.

Table of Contents

		Page
Solicitation and Revocation of Proxies			1
Outstanding Shares and Voting Rights			1
Election of Directors			1
Director Compensation			9
Principal Security Holders			11
Corporate Governance			12
Meetings and Committees of the Board of Directors			16
Compensation Committee Interlocks and Insider Participation			19
Compensation Discussion & Analysis			19
Compensation Committee Report			32
Potential Payments upon Termination			32
Executive Compensation Tables			37
Equity Compensation Plan Information			42
Certain Relationships and Related Transactions			42
Section 16(a) Beneficial Ownership Reporting/Compliance			44
Proposals to Amend Section A of Article IV, Capital Stock, of the Amended Articles of Incorporation			44
Proposal to Amend the Forest City Enterprises, Inc.’s Code of Regulations to allow the Board of Directors to Amend the Code of Regulations to the Extent Permitted by Law			47
Proposal to Approve the Forest City Enterprises, Inc. 1994 Stock Plan (As Amended and Restated as of June 16, 2010)			48
Ratification of Independent Registered Accounting Firm			54
Audit Committee Report			55
Independent Registered Public Accounting Firm Fees and Services			55
Shareholder Proposals for 2011 Annual Meeting			56
Other Business			56
Cost and Method of Proxy Solicitation			56
Exhibits
Exhibit A-1 through A-3 – Proposed Changes to Section A of Article IV of the Amended Articles of Incorporation			A-1
Exhibit B – Proposed Amendment to Article XI of the Forest City Enterprises, Inc. Code of Regulations			B-1
Exhibit C - 1994 Stock Plan (As Amended and Restated as of June 16, 2010)			C-1

i 

Proxy Statement

Solicitation and Revocation of Proxies

The enclosed proxy or proxies relating to shares of Class A Common Stock and Class B Common Stock are solicited on behalf of the Board of Directors of Forest City Enterprises, Inc. (“Forest City,” “we,” “us,” or “our”) for use at the annual meeting of shareholders to be held on Wednesday, June 16, 2010 at 2:00 p.m., Eastern Daylight Time, in the 6th floor Riverview Room of the Ritz-Carlton Hotel, Tower City Center, 1515 West Third Street, Cleveland, Ohio 44113. This proxy statement and related form of proxy are being first sent to shareholders on or about May 3, 2010. A shareholder giving a proxy may revoke it by notifying our Secretary in writing or at the annual meeting.

Outstanding Shares and Voting Rights

As of April 21, 2010, the record date fixed for the determination of shareholders entitled to vote at the annual meeting, there were outstanding 135,618,556 of our shares of Class A Common Stock, par value $.33 1/3 per share (the “Class A Common Stock”), and 21,490,825 of our shares of Class B Common Stock, par value $.33 1/3 per share (the “Class B Common Stock”), (collectively, “Common Stock”). At the annual meeting, the holders of Class A Common Stock will be entitled as a class to elect four (4) directors and will be entitled to one vote per share for this purpose. Michael P. Esposito, Jr., Joan K. Shafran, Louis Stokes and Stan Ross have been nominated for election to serve as these directors. At the annual meeting, the holders of Class B Common Stock will be entitled as a class to elect ten (10) directors and will be entitled to one vote per share for this purpose. Albert B. Ratner, Samuel H. Miller, Charles A. Ratner, James A. Ratner, Ronald A. Ratner, Scott S. Cowen, Brian J. Ratner, Deborah Ratner Salzberg, Bruce C. Ratner and Deborah L. Harmon have been nominated for election to serve as these directors. Additionally, the holders of Class A Common Stock will be entitled to a separate class vote with respect to Proposals 2 and 3, which propose to amend Article IV, Capital Stock, of the Amended Articles of Incorporation. In both instances, the holders of Class A Common Stock will be entitled to one vote per share. Except for the election of directors and Proposals 2 and 3, the holders of Class A Common Stock and Class B Common Stock will vote together on all other matters presented at the meeting and will be entitled to one (1) vote per share of Class A Common Stock and ten (10) votes per share of Class B Common Stock held as of the record date.

If notice in writing is given by any shareholder to our President, a Vice President or the Secretary 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 the holder belongs, and if an announcement of the giving of such notice is made upon the convening of the meeting by the Chairman or Secretary or by or on behalf of the shareholder giving such notice, each holder of shares of that class will have the right to accumulate such voting power as the holder 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, will have as many votes as equal the number of shares of that class of common stock owned by that holder 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 order to carry out the business of the meeting, we must have a quorum. This means that at least a majority of the outstanding shares eligible to vote must be represented at the meeting, either by proxy or in person. Broker non-votes and abstaining votes will be counted for purposes of determining whether a quorum is present. However, abstentions or broker non-votes effectively count as votes “against” the election of a director and a “non-routine” proposal, as each abstention or broker non-vote would be one less vote in favor of a director or a proposal. Because of changes in NYSE rules, we note that, unlike previous years, your broker will not be able to vote your shares with respect to the election of directors if you have not provided directions to your broker. Therefore, you must give specific instructions to your broker for your shares to be voted on the election of directors and the other “non-routine” matters set forth in proposals 2 through 5. The ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2011 is a “routine” matter on which brokers will be able to vote with or without specific instructions.

Election of Directors

It is intended that proxies will be voted for the election of the nominees named below as our directors unless authority is withheld. Each is to serve until the next annual shareholders’ meeting and until their successor is elected and qualified. In the event any one or more of such nominees unexpectedly becomes unavailable for election, proxies will be voted in accordance with the best judgment of the proxy holder. All nominees are presently our directors.

At February 26, 2010, the Ratner, Miller and Shafran families, which include members of our current Board of Directors and certain executive officers not including Bruce C. Ratner (“Family Interests”), owned 10.8% of the Class A Common Stock and 84.4% of the Class B Common Stock. RMS, Limited Partnership (“RMSLP”), which owned 87.3% of the Class B Common Stock outstanding as of the record date, is a limited partnership, comprised of the Family Interests, with seven individual general partner positions, currently consisting of: Samuel H. Miller, Co-Chairman of the Board of Directors and our Treasurer; Charles A. Ratner, our President and Chief Executive Officer and Director; Ronald A. Ratner, our Executive Vice President and Director; Brian J. Ratner, our

Executive Vice President and Director; Deborah Ratner Salzberg, President of Forest City Washington, Inc., one of our subsidiaries, and Director; Joan K. Shafran, Director; and Abraham Miller. Charles A. Ratner, James A. Ratner and Ronald A. Ratner are brothers. 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, Bruce C. Ratner and Joan K. Shafran. Samuel H. Miller was married to Ruth Ratner Miller (now deceased), a sister of Albert B. Ratner, and is the father of Abraham Miller.

Under the partnership agreement of RMSLP, the voting power of the general partners representing a family branch is determined by dividing the interest of the family branch they represent by the aggregate interests of all family branches. The voting power of the general partner or general partners representing a family branch may not be divided or apportioned but must be voted together as a whole. If the general partners representing a family branch are unable to agree on how to vote that branch, the total voting power of the other general partners is computed without reference to the voting power otherwise available to that family branch. General partners holding 60% of the total voting power (excluding the voting power of a family branch, if any, unable to agree on how to vote on a particular matter) of RMSLP determine how to vote the Class B Common Stock held by RMSLP.

The following table sets forth the shares of Class B Common Stock held by RMSLP at February 26, 2010, which under the partnership agreement are voted by the general partners of RMSLP, who under Rule 13d-3 of the Securities Exchange Act of 1934, are deemed to be the beneficial owners of those shares of Class B Common Stock:

				Shares of Class B				Percent of RMSLP’s
		Name of		Common Stock				Holdings of Class B
Family Branch		General Partners		Held through RMSLP				Common Stock
Max Ratner		Charles A. Ratner			9,169,467				48.8	%
		Ronald A. Ratner
Albert Ratner		Brian J. Ratner			4,928,658				26.3	%
		Deborah Ratner Salzberg
Samuel H. Miller		Samuel H. Miller			998,206				5.3	%
Nathan Shafran		Joan K. Shafran			2,580,808				13.7	%
Ruth Miller		Abraham Miller			1,101,854				5.9	%
Total					18,778,993				100.0	%

Set forth below are each nominee’s name, age, year first elected as a director, principal occupation, professional history and public company directorships held currently and during the past five years, and information about the experience, qualifications, attributes or skills that led to the conclusion that such person should serve as our director.

NOMINEES FOR ELECTION AS CLASS A DIRECTORS

Michael P. Esposito, Jr.

Mr. Esposito, 70, has been a Forest City director since 1995. He serves on the Compensation and Corporate Governance and Nominating Committees and chairs the Audit Committee. Mr. Esposito has been the Non-Executive Chairman of Syncora Holdings Ltd., a guarantee insurance company, since 2006 and Non-Executive Chairman of Primus Guaranty Ltd., a seller of credit protection, since 2002. In 2007, he retired as the Non-Executive Chairman of XL Capital Ltd., an insurance company. Mr. Esposito retired from The Chase Manhattan Bank, N.A. as the Executive Vice President Chief Control Compliance and Administrative Officer after serving 34 years with the company in positions including principal accounting officer, corporate controller and chief financial officer. Mr. Esposito’s prior experience has also included leadership positions within the Bank Administration Institute, American Bankers Association, Conference Board, and served as a member of the Advisory Council to the Financial Accounting Standards Board.

Mr. Esposito’s extensive financial experience and qualification as an “audit committee financial expert” provide substantial financial expertise to our Board of Directors. His service with other publicly held companies expertly guides us on developing best practices in areas such as risk management and corporate governance. His substantial experience with the banking and insurance industries give us unique insight with respect to capital and debt management. Having served on our Board of Directors for 15 years, he has developed an in depth knowledge of the real estate industry in general and Forest City in particular.

Joan K. Shafran

Ms. Shafran, 62, has been a Forest City director since 1997. Ms. Shafran has been the Chief Operating Officer of Powell Partners, a real estate investment firm, since 1997 and the Executive Managing Partner of The Berimore Co., a real estate investment firm, since 1992. She is also the Chair of the Board of Trustees of Goddard College and has many years of experience as a consultant to the design and publishing industries.

As a member of one of the founding families and a large shareholder with a diverse background and experience in the operation of real estate investment companies, Ms. Shafran brings a different perspective as well as a breadth of experience and knowledge to our Board of Directors.

Louis Stokes

Mr. Stokes, 85, has been a Forest City director since 1999 and serves on the Compensation and Corporate Governance and Nominating Committees. He has been an attorney with Squire, Sanders & Dempsey L.L.P. since 1999 after spending 30 years as a Member of the United States Congress.

Mr. Stokes has a strong commitment to diversity and was honored by the American Bar Association Commission on Racial and Ethnic Diversity with the 2010 Spirit of Excellence Award for his dedication to expanding opportunity in the legal profession to all minorities. During his tenure in the United States Congress, he chaired several important committees, including, the Ethics Committee and the House Appropriations Subcommittee on Veteran Affairs, Housing and Urban Development and Independent Agencies. With a legal expertise in legislative counseling and as a former member of the US Congress, Mr. Stokes provides the Board with a unique perspective on public/private partnerships.

Stan Ross

Mr. Ross, 74, has been a Forest City director since 1999 and serves on the Audit and Compensation Committees. Mr. Ross, a Certified Public Accountant, is the Chairman of the Board of the University of Southern California’s Lusk Center for Real Estate. He is the retired Vice Chairman of the Real Estate Industry Services for Ernst & Young, where he was a member of the firm’s Management Committee and a former Managing Partner of the Real Estate Group. Mr. Ross is Life Trustee and Governor of the Urban Land Institute. He was also a member of the Auditing Standards Board of the American Institute of Certified Public Accountants.

As a Certified Public Accountant and “audit committee financial expert”, Mr. Ross brings substantial financial expertise to the Board of Directors. His extensive experience and national recognition in the real estate industry gives us thoughtful and far-reaching insight on the current trends, practices and challenges facing the real estate industry. Mr. Ross’ expertise in strategic planning for real estate companies has provided invaluable guidance to our Board of Directors throughout his more than 10 year tenure and particularly during the current economic crisis.

NOMINEES FOR ELECTION AS CLASS B DIRECTORS

Albert B. Ratner

Mr. Ratner, 82, has been a Forest City director since 1960. He has been the Co-Chairman of our Board of Directors since June 1995. He previously served as Chief Executive Officer from 1975 to June 1995, Vice Chairman from June 1993 to June 1995, and President prior to June 1993. Mr. Ratner is also an officer and/or director of various subsidiaries. Mr. Ratner is active with numerous community, charitable and business organizations.

As a member of one of our founding families with nearly 60 years of experience at Forest City, Albert B. Ratner provides us with leadership, experience, knowledge and vision.

Samuel H. Miller

Mr. Miller, 88, has been a Forest City director since 1960. He has been the Co-Chairman of our Board of Directors since June 1995 and our Treasurer since 1992. He previously served as Chairman of the Board from June 1993 to June 1995 and Vice Chairman and Chief Operating Officer prior to June 1993. Mr. Miller is also an officer and/or director of various subsidiaries. Mr. Miller is active with numerous community, educational, charitable and business organizations, including the Cleveland Clinic Foundation, Cleveland State University, John Carroll University, Notre Dame College, Catholic Diocese of Cleveland Foundation, Baldwin Wallace College, and serves as the Co-Chairman of Medical Mutual of Ohio.

A key shareholder with over 60 years experience at Forest City, Mr. Miller provides us with leadership, experience, knowledge and vision.

Charles A. Ratner

Mr. Ratner, 68, has been a Forest City director since 1972. He has been our Chief Executive Officer since June 1995 and President since June 1993. He previously served as Chief Operating Officer from June 1993 to June 1995 and Executive Vice President prior to June 1993. Mr. Ratner is also an officer and/or director of various subsidiaries. Mr. Ratner has been a director of American Greetings Corporation, a greeting card company, since 2000 and a director of RPM, Inc., a lubricants company, since 2005. Mr. Ratner is active with numerous community, charitable and business organizations, including United Way, the Greater Cleveland Partnership, the Musical Arts Association, the Jewish Community Federation of Cleveland, the Cleveland Foundation and University Hospital.

As a member of one of the founding families and a large shareholder with over 40 years experience at Forest City, Charles A. Ratner brings a wealth of leadership, experience and knowledge to the Board of Directors.

James A. Ratner

Mr. Ratner, 65, has been a Forest City director since 1984. He has been an Executive Vice President since March 1988 and is an officer and/or director of various subsidiaries. Mr. Ratner is active with numerous community, charitable and business organizations, including the Cleveland Museum of Art, the Urban Land Institute, the Playhouse Square Foundation and the Cleveland Foundation.

As a member of one of the founding families and a large shareholder with over 30 years experience at Forest City, James A. Ratner brings a wealth of experience and knowledge to the Board of Directors.

Ronald A. Ratner

Mr. Ratner, 63, has been a Forest City director since 1985. He has been an Executive Vice President since March 1988 and is an officer and/or director of various subsidiaries. Mr. Ratner is active with numerous community, educational, charitable and business organizations, including the Urban Land Institute, The Ohio State University, Brandeis University, National Multi Housing Council, the International Advisory Board of the Harvard Real Estate Initiative, the Western Reserve Historical Society and the Akron Art Museum.

As a member of one of the founding families and a large shareholder with over 30 years experience at Forest City, Ronald A. Ratner brings a wealth of experience and knowledge to the Board of Directors.

Scott S. Cowen

Mr. Cowen, 63, has been a Forest City director since 1989. He serves on the Compensation Committee, chairs the Corporate Governance and Nominating Committee and is the Presiding Director for the executive sessions of independent directors. Mr. Cowen has been the President of Tulane University since July 1998. Prior to 1998, he was Dean at Weatherhead School of Management at Case Western Reserve University, where he was also a professor for 23 years. Mr. Cowen has been a member of the board of directors of Newell Rubbermaid, Inc., a consumer products corporation, since 1999, American Greetings Corporation, a greeting card company, since 1989 and JoAnn Stores, Inc., a specialty retailer, since 1987.

As the chief executive officer of a $1 billion non-profit organization in New Orleans, Mr. Cowen has unique expertise in leadership. In recognition of his leadership skills, he received the Carnegie Award for Academic Leadership and was named one of the “Ten Best College Presidents” in America by Time magazine in 2009. Leading Tulane University, as well as the City of New Orleans, through the aftermath of Hurricane Katrina, he also developed unique and exceptional skills in crisis management. Mr. Cowen’s consultation with dozens of companies from start-ups to Fortune 100 companies, along with his extensive service on the board of public companies has given him expertise in financial management, problem solving, strategic planning and corporate governance.

Brian J. Ratner

Mr. Ratner, 52, has been a Forest City director since 1993. He has been an Executive Vice President since June 2001 and is an officer and/or director of various subsidiaries. Mr. Ratner is active with numerous community, charitable and business organizations, including the International Council of Shopping Centers, Urban Land Institute, Rock and Roll Hall of Fame and Museum, and Case Western Reserve University.

As a member of one of the founding families and a large shareholder with over 20 years experience at Forest City, Brian J. Ratner brings a wealth of experience and knowledge to the Board of Directors.

Deborah Ratner Salzberg

Ms. Ratner Salzberg, 57, has been a Forest City director since 1995. She is President of Forest City Washington, Inc., one of our subsidiaries, since 2002 and is also an officer and/or director of various subsidiaries. Ms. Ratner Salzberg is active with numerous District of Columbia community, charitable and business organizations, including the Jewish Federation of Greater Washington, the District of Columbia Building Industry Association, the Meyer Foundation, National Building Museum and the Arts for the Aging. She also serves on the board of Kenyon College.

As a member of one of the founding families and a large shareholder with over 20 years experience at Forest City, Deborah Ratner Salzberg brings a wealth of experience and knowledge to the Board of Directors.

Bruce C. Ratner

Mr. Ratner, 65, has been a Forest City director since 2007. He has been our Executive Vice President since November 2006 and Chairman and Chief Executive Officer of Forest City Ratner Companies, one of our subsidiaries, since 1987. Mr. Ratner is also an officer and/or director of various subsidiaries. Mr. Ratner is actively involved with numerous New York City community, charitable and business organizations, including the Museum of Jewish Heritage – A living Memorial to the Holocaust, the Metropolitan Museum of Art, the Brooklyn Academy of Music, the City Parks Foundation, the Memorial Sloan-Kettering Cancer Center and the Weill Cornell Medical College.

As a member of one of the founding families with over 25 years experience as a commercial real estate developer in New York City, Bruce C. Ratner brings a wealth of experience and knowledge to the Board of Directors.

Deborah L. Harmon

Ms. Harmon, 50, has been a Forest City director since 2008 and serves on the Audit and Compensation Committees. In September 2009 Ms. Harmon co-founded Artemis Real Estate Partners, LLC, a real estate investment firm which manages institutional, third party capital in a variety of real estate strategies. She currently serves as Artemis’ Chief Executive Officer. Ms. Harmon has also served as President of Harmon & Co. and as a principal of Caravel Management, LLC since 2008. From 2001 through 2007, she was President and Chief Investment Officer of the J.E. Robert Companies, Inc., a fully integrated real estate investment firm. Prior to joining the J.E. Roberts Companies, Ms. Harmon was a Managing Director at Bankers Trust Company working in both the corporate finance and real estate groups. From 1997 through March 2001, she was a member of the Avis Group Holdings, Inc. board, chairing the Special Committee of Independent Directors. In June 2009, Ms. Harmon was appointed by the President to serve as a Commissioner for the White House Fellows program.

With over 20 years in the management of real estate investment funds, Ms. Harmon has an extensive knowledge of the real estate financial markets and the real estate finance industry. She has comprehensive expertise in capital markets and valuation. Her investment experience, in general, and real estate experience, in particular, delivers a diverse perspective on the capital markets in which we operate, as well as the competitive environment in which we must raise capital.

 

 

We have been advised that the shares owned by RMSLP and otherwise owned by the Families Interests will be voted for the approval of the elections of the directors nominated. If such shares are voted for approval, then such vote will be sufficient to elect the nominees voted on by the Class B Common Stock shareholders.

The following table sets forth the beneficial ownership of shares of Class A and Class B Common Stock as of February 26, 2010 of each current director, nominee, and the other Named Executive Officers (as defined on page 37), as well as all directors and executive officers as a group.

		Number of Shares of Common Stock Beneficially Owned
											Class A
										Assuming
		Class A					Percent				Conversion of				Percent			Class B					Percent
		Common					of				Class B by the				of			Common					of
Name		Stock(a)(c)					Class(a)				Beneficial Owner(b)(c)				Class(b)			Stock					Class
Michael P. Esposito, Jr.			161,079	(1)			0.12	%			161,079				0.12	%				-				-
Joan K. Shafran			258,189	(2)			0.19	%			19,050,682	(2)(3)			12.47	%			18,792,493	(3)			83.95	%
Louis Stokes			89,638	(4)			0.07	%			89,638				0.07	%				-				-
Stan Ross			93,729	(5)			0.07	%			93,729				0.07	%				-				-
Albert B. Ratner			2,677,025	(6)			2.00	%			2,697,766	(6)(7)			2.01	%			20,741	(7)			0.09	%
Samuel H. Miller			1,218,659	(8)			0.91	%			19,997,652	(8)(9)			13.09	%			18,778,993	(9)			83.89	%
Charles A. Ratner			3,106,367	(10)			2.32	%			21,885,360	(10)(11)			14.31	%			18,778,993	(11)			83.89	%
James A. Ratner			4,785,868	(12)			3.57	%			4,785,868	(12)(13)			3.57	%			-	(13)				-
Jerry V. Jarrett (d)			58,329	(14)			0.04	%			58,329				0.04	%				-				-
Ronald A. Ratner			3,015,409	(15)			2.25	%			21,794,402	(15)(16)			14.25	%			18,778,993	(16)			83.89	%
Scott S. Cowen			63,210	(17)			0.05	%			63,210				0.05	%				-				-
Brian J. Ratner			1,344,160	(18)			1.00	%			20,123,153	(18)(19)			13.16	%			18,778,993	(19)			83.89	%
Deborah Ratner Salzberg			1,391,014	(20)			1.04	%			20,170,007	(20)(21)			13.19	%			18,778,993	(21)			83.89	%
Bruce C. Ratner			1,425,612	(22)			1.05	%			1,425,612				1.05	%				-				-
Deborah L. Harmon			8,529	(23)			0.01	%			8,529				0.01	%				-				-
OTHER NAMED EXECUTIVE OFFICER
Robert G. O’Brien (e)			408,832	(24)			0.30	%			408,832				0.30	%				-				-
ALL DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS AS A GROUP (18 in number)			13,272,682	(25)			9.73	%			32,088,887	(25)(26)			20.64	%			18,816,205	(26)			84.06	%

	(1)		Includes 48,547 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or vesting within 60 days thereafter.
	(2)		Includes 63,324 shares of Class A Common Stock held in partnerships in which Joan K. Shafran has shared power of voting and disposition. Ms. Shafran has beneficial ownership of 86,248 shares of Class A Common Stock held in trusts and a foundation: 18,620 shares for which she is trustee and has shared power of voting and disposition and 67,628 shares for which she has sole power of voting and disposition.
	(3)		Includes 13,500 shares of Class B Common Stock held in a partnership in which Joan K. Shafran has shared power of voting and disposition. Ms. Shafran’s beneficial ownership of the remaining 18,778,993 shares of Class B Common Stock reflects her status as a general partner of RMSLP. See discussion of RMSLP on pages 1-2.
	(4)		Includes 1,769 shares of restricted stock and 73,856 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter.
	(5)		Includes 884 shares of restricted stock and 77,402 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter.
	(6)		Albert B. Ratner has beneficial ownership of 2,416,595 shares of Class A Common Stock held in trusts and foundations: 1,803,924 shares for which he is a trustee with shared power of voting and disposition and 612,671 shares for which he has sole power of voting and disposition. Mr. Ratner also has beneficial ownership of 256,605 shares held in trusts for which he is trust advisor and has shared power of voting and disposition.
	(7)		Albert B. Ratner has beneficial ownership of 15,740 shares of Class B Common Stock held in a trust for which he is trustee and has sole power of voting and disposition. Does not reflect the following shares of which Albert B. Ratner disclaims beneficial ownership: 5,013,307 shares of Class B Common Stock held in trusts for which he is trustee and 275,112 shares held in trusts for which he is trust advisor, of which 2,378,478 shares are held in the Albert Ratner Family Branch of RMSLP and 2,909,941 shares are held in the Max Ratner Family Branch of RMSLP. See discussion of RMSLP on pages 1-2.
	(8)		Samuel H. Miller has beneficial ownership of 1,210,020 shares of Class A Common Stock held in trusts and a foundation: 848,505 shares for which he has sole power of voting and disposition and 361,515 shares for which he is a trustee with shared power of voting and disposition.
	(9)		Samuel H. Miller’s beneficial ownership of these shares of Class B Common Stock reflects his status as a general partner of RMSLP. See discussion of RMSLP on pages 1-2.
	(10)		Charles A. Ratner has beneficial ownership of 2,840,981 shares of Class A Common Stock held in trusts and foundations for which he is trustee and has shared power of voting and disposition. Mr. Ratner has beneficial ownership of 122,186 shares held in trusts for which he is trust advisor and has shared power of voting and disposition. Includes 143,200 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter.
	(11)		Charles A. Ratner’s beneficial ownership of these shares of Class B Common Stock reflects his status as a general partner of RMSLP. See discussion of RMSLP on pages 1-2.
	(12)		James A. Ratner has beneficial ownership of 4,582,767 shares of Class A Common Stock held in trusts: 4,552,325 shares for which he is trustee and has shared power of voting and disposition and 30,442 shares for which he has sole power of voting and disposition. Mr. Ratner has beneficial ownership of 113,101 shares held in trusts for which he is trust advisor and has shared power of voting and disposition. Includes 90,000 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter.
	(13)		Does not reflect the following shares of which James A. Ratner disclaims beneficial ownership: 4,401,231 shares of Class B Common Stock held in trusts for which he is trustee and 922,866 shares held in trusts for which he is trust advisor, of which 4,145,111 shares are held in the Max Ratner Family Branch of RMSLP and 1,178,986 shares are held in the Albert Ratner Family Branch of RMSLP. See discussion of RMSLP on pages 1-2.
	(14)		Includes 884 shares of restricted stock and 45,002 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter.
	(15)		Ronald A. Ratner has beneficial ownership of 2,868,591 shares of Class A Common Stock held in trusts: 1,860,052 shares for which he is trustee and has shared power of voting and disposition and 1,008,539 shares for which he has sole power of voting and disposition. Mr. Ratner has beneficial ownership of 56,818 shares held in trusts for which he is trust advisor and has shared power of voting and disposition. Includes 90,000 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter.
	(16)		Ronald A. Ratner’s beneficial ownership of these shares of Class B Common Stock reflects his status as a general partner of RMSLP. See discussion of RMSLP on pages 1-2.
	(17)		Includes 1,769 shares of restricted stock and 52,256 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter.
	(18)		Brian J. Ratner has beneficial ownership of 1,240,821 shares of Class A Common Stock held in trusts and foundations: 1,236,471 shares for which he is trustee and has shared power of voting and disposition and 4,350 shares for which he has sole power of voting and disposition. Mr. Ratner has beneficial ownership of 36,800 shares held in trusts for which he is trust advisor and has shared power of voting and disposition. Includes 12,839 shares of restricted stock and 53,700 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter.
	(19)		Brian J. Ratner’s beneficial ownership of these shares of Class B Common Stock reflects his status as a general partner of RMSLP. See discussion of RMSLP on pages 1-2.
	(20)		Deborah Ratner Salzberg has beneficial ownership of 1,272,979 shares of Class A Common Stock held in trusts and foundations: 550,994 shares for which she is trustee and has shared power of voting and disposition and 721,985 shares for which she has sole power of voting and disposition. Ms. Ratner Salzberg has beneficial ownership of 51,952 shares held in trusts for which she is trust advisor and has shared power of voting and disposition. Includes 12,983 shares of restricted stock and 53,100 shares that were issuable upon the exercise of stock options vested at

			February 26, 2010 or that will vest within 60 days thereafter.
	(21)		Deborah Ratner Salzberg’s beneficial ownership of these shares of Class B Common Stock reflects her status as a general partner of RMSLP. See discussion of RMSLP on pages 1-2.
	(22)		On February 26, 2010, Bruce C. Ratner and certain individuals and entities affiliated with Bruce C. Ratner held 3,646,755 Class A Common Units (“Units”) in Forest City Master Associates III, LLC that were obtained in a transaction designed to increase Forest City’s ownership interest in 30 properties and service companies that were owned jointly by us and Bruce C. Ratner. See “Transactions With Bruce C. Ratner and His Affiliates” on page 43 for a more detailed description of the transaction. The Units may be exchanged for an equal number of shares of our Class A Common Stock or, at our option, for cash equal to the then-current market price of our Class A Common Stock. Bruce C. Ratner claims beneficial ownership in 982,452 Units held by him and 428,160 Units held in a trust for which he is trustee. Bruce C. Ratner disclaims beneficial ownership in 2,017,518 Units held in trusts in which he is not trustee and 218,625 Units held directly by others. Bruce C. Ratner claims beneficial ownership of 15,000 shares of Class A Common Stock held in a custodial account.
	(23)		Includes 884 shares of restricted stock and 7,202 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter.
	(24)		Includes 91,809 shares of restricted stock and 149,400 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter.
	(25)		These shares of Class A Common Stock represent all the shares in which beneficial ownership is claimed by these persons. Shares for which beneficial ownership have been claimed by more than one person have been counted only once in this category. Includes 148,713 shares of restricted stock and 956,725 shares that were issuable upon the exercise of stock options vested at February 26, 2010 or that will vest within 60 days thereafter, and 1,410,612 Class A Common Units (see note 22 above).
	(26)		These shares of Class B Common Stock represent all the shares in which beneficial ownership is claimed by these persons. Included in this total are 18,778,993 shares of Class B Common Stock that are held by RMSLP. Shares for which beneficial ownership have been claimed by more than one person have been counted only once in this category.
	(a)		Does not reflect potential conversion of Class B Common Stock to Class A Common Stock.
	(b)		Reflects potential conversion of all Class B Common Stock held by the nominee or officer listed to Class A Common Stock. Shares of Class B Common Stock are convertible pursuant to their terms into shares of Class A Common Stock at any time on a one-for-one basis.
	(c)		This column includes, if any, Class A stock options that were exercisable on February 26, 2010 or that will be exercisable within 60 days after such date.
	(d)		Jerry V. Jarrett is not standing for re-election this year.
	(e)		Officer and/or director of various subsidiaries.

Voting Agreement: On November 8, 2006, we entered into a Voting Agreement with RMSLP, Powell Partners Limited, Joseph Shafran, and Bruce C. Ratner. Pursuant to the terms of the agreement, the Board of Directors appointed Bruce C. Ratner as a Class B director. Additionally, RMSLP, Powell Partners Limited and Joseph Shafran have agreed to vote the shares owned by them for the election of Bruce C. Ratner to the Board of Directors at each meeting of our shareholders. If such shares are voted in accordance with the Voting Agreement, then such vote will be sufficient to elect Bruce C. Ratner as a Class B director. The Voting Agreement will terminate under any of the following three circumstances: (i) Bruce C. Ratner’s death or his physical or mental incapacity that prevents him from performing all duties required of our directors; (ii) Bruce C. Ratner and his affiliates no longer hold at least 1.5 million Class A Common Units in Forest City Master Associates III, LLC (or stock issued upon exchange of the Class A Common Units) while he is employed by us or at least 2.5 million Class A Common Units (or stock issued upon exchange of the Class A Common Units) if he is no longer employed by us; or (iii) Bruce C. Ratner materially breaches his non-compete agreement with us or any written policy generally applicable to all members of our Board of Directors. See page 43 for further discussion about Forest City Master Associates III, LLC.

Director Compensation

Our director compensation policy is outlined in the following chart. Compensation is paid to nonemployee directors only. Directors who are also our employees receive no additional compensation for service as directors.

	Director Compensation Policy			Amount (1)
	Annual Board Retainer				$50,000
	Annual Stock Award to Independent Directors (2)				$100,000
	Annual Retainer to Independent Director Serving as “Presiding Director”				$12,500
	Annual Retainer to Committee Chairman for:
	Audit Committee				$24,000
	Compensation Committee				$16,000
	Corporate Governance and Nominating Committee				$12,000
	Annual Retainer to Committee Members (other than Chairman) for:
	Audit Committee				$12,000
	Compensation Committee				$8,000
	Corporate Governance and Nominating Committee				$6,000
	Other Fees for:			(fees per day)
	Attending other formal meetings in their capacity as directors not held on the same day as a board meeting or board committee meeting, such as Executive Committee and strategic planning meetings.				$1,500
	Attending special meetings or performing special services in their capacity as members of a board committee, in each case as determined and approved by the applicable committee.				$1,500
	Director Stock Ownership Requirement:
	Independent directors have up to five years to accumulate ownership of at least 5,000 shares of our stock. The shares may be acquired through direct acquisition, exercise of stock options, vesting of restricted stock or accumulation of phantom stock in their deferred compensation plan.

	(1)		We pay annual retainers in quarterly installments.
	(2)		Independent directors may choose between stock options and/or restricted stock in 25% multiples. The default selection is a 50%-50% mix if no choice is made. All grants have graded vesting over three years. The number of Class A Common Stock options granted is determined by dividing the amount of award allocated to stock options by the Black-Scholes fair value, and the number of shares of restricted Class A Common Stock is determined by dividing the amount of award allocated to restricted stock by the closing price of the Class A Common Stock on the date of grant.

Due to the significant decline in the price of our stock between 2008 and 2009, coupled with a review of the number of shares available under the Stock Plan, the Corporate Governance and Nominating Committee chose to reduce the value of equity grants provided in 2009 to our independent directors by 50%.

The Deferred Compensation Plan for Nonemployee Directors permits nonemployee members of the Board of Directors to defer 50% or 100% of their annual board retainer. Directors electing to participate select either a cash investment option or stock investment option for fees deferred during the year. Fees deferred to the stock investment option are deemed to be invested in phantom shares of our Class A Common Stock. Dividends earned on phantom shares are deemed to be reinvested in more shares. After the participant ceases to be our director, the phantom shares accumulated in the participant’s account will be paid out in real shares of Class A Common Stock or cash, as elected by the participant. There were 10,590 phantom shares accumulated in participants’ accounts as of January 31, 2010. In December 2009, the Plan was amended to allow participants to make an annual election as of each December 31 to reallocate their account balances between the two investment options. The Plan does not limit the number of shares that can be issued under the stock investment option.

The Corporate Governance and Nominating Committee annually reviews the policy of independent/nonemployee director compensation and stock ownership requirements.

Director Compensation Table

The information presented in the following table is for the year ended January 31, 2010. All other directors not listed are our employees and receive no compensation in their capacity as director.

																								Change in Pension
																								Value and
																								Nonqualified
																			Non-Equity					Deferred
				Fees Earned or															Incentive Plan					Compensation					All Other
				Paid in Cash					Stock Awards					Option Awards					Compensation					Earnings					Compensation					Total
	Name			($)					($) (1)					($) (2)					($)					($) (3)					($)					($)
	Scott S. Cowen			$	82,500				$	-				$	50,000				$	-				$	-				$	-				$	132,500
	Michael P. Esposito, Jr.			$	89,500				$	-				$	50,000				$	-				$	173				$	-				$	139,673
	Deborah L. Harmon			$	64,000				$	-				$	50,000				$	-				$	-				$	-				$	114,000
	Jerry V. Jarrett			$	87,000				$	-				$	50,000				$	-				$	-				$	-				$	137,000
	Stan Ross			$	70,000				$	-				$	50,000				$	-				$	-				$	-				$	120,000
	Joan K. Shafran(4)			$	50,000				$	-				$	-				$	-				$	-				$	-				$	50,000
	Louis Stokes			$	64,000				$	-				$	50,000				$	-				$	871				$	-				$	114,871

	(1)		Restricted stock grants are valued at their grant-date fair value based on the closing price of the Class A Common Stock on the date of grant. No restricted stock was granted during the year ended January 31, 2010. The aggregate number of unvested restricted stock outstanding at January 31, 2010 was as follows: Cowen, 1,769 shares; Harmon, 884 shares; Jarrett, 884 shares; Ross, 884 shares and Stokes, 1,769 shares.
	(2)		Stock option grants are valued at their grant-date fair value that is estimated using the Black-Scholes option-pricing model. The assumptions used in the fair value calculations in 2009 are described in Footnote P, “Stock-Based Compensation,” to our consolidated financial statements for the year ended January 31, 2010, which are included in our Annual Report on Form 10-K filed with the SEC on March 30, 2010. During the year ended January 31, 2010, we granted stock options, having a grant-date fair value of $4.56 per share, as follows: 10,966 options each to Cowen, Esposito, Harmon, Jarrett, Ross and Stokes. The options have an exercise price of $7.80, which was the closing price of the underlying Class A Common Stock on the date of grant. The aggregate number of stock options outstanding at January 31, 2010 was as follows: Cowen, 64,966 options; Esposito, 64,803 options; Harmon, 16,285 options; Jarrett, 59,485 options; Ross, 91,885 options; and Stokes, 86,566 options.
	(3)		Represents the amount of above-market earnings on the director’s nonqualified deferred compensation balances. The amount of above-market earnings was computed to be the amount by which the actual earnings exceeded what the earnings would have been had we used 120% times the Federal Long-Term Rates published by the Internal Revenue Service in accordance with Section 1274(d) of the Internal Revenue Code.
	(4)		Joan K. Shafran is a nonemployee director, but is not an independent director. She receives the annual cash retainer, but does not receive the annual stock award.

Principal Security Holders

Unless otherwise indicated, the following table sets forth the security ownership as of February 26, 2010 of all other persons who beneficially own 5% or more of our Common Stock.

		Number of Shares of Common Stock Beneficially Owned
										Class A
										Assuming
		Class A								Conversion of								Class B
		Common				Percent				Class B by the				Percent				Common				Percent
Name and Address		Stock(a)				of Class(a)				Beneficial Owner(b)				of Class(b)				Stock				of Class
Third Avenue Management LLC			27,119,135	(1)			20.23	%			27,144,935	(1)			20.25	%			25,800	(1)			0.12	%
622 Third Avenue, 32nd Floor
New York, NY 10017
Wellington Management Company, LLP			17,797,433	(2)			13.28	%			17,797,433	(2)			13.28	%			-				0.00	%
75 State Street
Boston, MA 02109
Morgan Stanley & Co. Incorporated			11,490,892	(3)			8.57	%			11,490,892	(3)			8.57	%			-				0.00	%
1585 Broadway
New York, NY 10036
Cohen & Steers Capital Management, L.P.			8,935,514	(4)			6.67	%			8,935,514	(4)			6.67	%			-				0.00	%
280 Park Avenue, 10th Floor
New York, NY 10017
Abraham Miller			169,360	(5)			0.13	%			18,948,353	(5)			12.40	%			18,778,993	(5)			83.89	%
Graffiti, Inc.
3111 Carnegie Avenue
Cleveland, OH 44115
Ratner, Miller & Shafran Family Interests			14,546,063	(6)			10.82	%			33,433,427	(6)			21.80	%			18,887,364	(6)			84.38	%
(see page 1)
Terminal Tower
50 Public Square, Suite 1600
Cleveland, OH 44113

	(1)		Third Avenue Management LLC (“TAM”), a Delaware limited liability company, is an investment adviser registered under Section 203 of the Investment Advisers Act of 1940. TAM has sole power of voting for 27,030,017 shares and sole power of disposition of 27,119,135 shares of Class A Common Stock. Various other Third Avenue investment companies registered under the Investment Company Act of 1940 have the right to receive dividends and sales proceeds from certain of the shares reported by TAM. Various separately-managed accounts for whom TAM acts as investment advisor have the right to receive dividends and sales proceeds from certain of the shares reported by TAM. The number of shares of Class A Common Stock beneficially owned represent shares beneficially owned at December 31, 2009 as disclosed in Schedule 13G filed with the SEC by the Principal Security Holder. The number of shares of Class B Common Stock beneficially owned represent shares beneficially owned at December 31, 2009 as disclosed in a Questionnaire for 5% Beneficial Owners provided to us by the Principal Security Holder.
	(2)		Wellington Management Company, LLP, an investment adviser registered under Section 203 of the Investment Advisers Act of 1940 has shared voting power of 14,296,880 shares of Class A Common Stock and shared dispositive power of 17,797,433 shares of Class A Common Stock. The number of shares of Class A Common Stock beneficially owned represent shares beneficially owned at December 31, 2009 as disclosed in Schedule 13G filed with the SEC by the Principal Security Holder.
	(3)		The securities being reported upon by Morgan Stanley & Co. Incorporated (“Morgan Stanley”), as a parent holding company, are owned or may be deemed to be beneficially owned, by Morgan Stanley Investment Management Inc., an investment adviser registered under Section 203 of the Investment Advisers Act of 1940. Morgan Stanley Investment Management Inc. is a wholly owned subsidiary of Morgan Stanley. Morgan Stanley has sole voting power of 8,918,608 shares of Class A Common Stock and sole dispositive power of 11,490,892 shares of Class A Common Stock. The number of shares of Class A Common Stock beneficially owned represent shares beneficially owned at December 31, 2009, as disclosed in Schedule 13G filed with the SEC by the Principal Security Holder.
	(4)		Cohen & Steers Capital Management, Inc., an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, and its affiliates, Cohen & Steers, Inc. and Cohen & Steers Europe S.A., have sole voting power of 6,629,033 shares of Class A Common Stock and sole dispositive power of 8,935,514 shares of Class A Common Stock. This represents the number of shares of Class A Common Stock beneficially owned at December 31, 2009, as disclosed in Schedule 13G filed with the SEC by the Principal Security Holder.

Principal Security Holders (continued)

	(5)		Abraham Miller is the son of Samuel H. Miller, Co-Chairman of the Board of Directors and Treasurer. Abraham Miller has beneficial ownership of 169,360 shares of Class A Common Stock held in trusts: 67,606 shares for which he is a trustee with shared power of voting and disposition and 101,754 shares for which he has sole power of voting and disposition. Abraham Miller’s beneficial ownership of the Class B Common Stock reflects his status as a general partner of RMSLP. See discussion of RMSLP under “Election of Directors” on pages 1-2.
	(6)		The Ratner, Miller and Shafran families have an ownership interest in the Company as reflected in the Principal Security Holders table. These securities are beneficially owned by members of these families either individually or through a series of trusts, foundations and custodianships. Of the shares of Class B Common Stock listed, RMSLP owns 18,778,993 shares, which represent 83.89% of the Class B Common Stock outstanding at February 26, 2010.
			Certain members of the Ratner, Miller and Shafran families have been nominated for election to serve on our Board of Directors. (See information regarding nominees and directors previously disclosed for further information regarding the beneficial ownership of Common Stock by these individuals).
	(a)		Does not reflect potential conversion of Class B Common Stock to Class A Common Stock.
	(b)		Reflects potential conversion of all Class B Common Stock held by the principal security holder listed to Class A Common Stock. Shares of Class B Common Stock are convertible into shares of Class A Common Stock at anytime on a one-for-one basis.

Corporate Governance

We are managed by our senior management under the direction of the Board. The Board operates within a comprehensive plan of corporate governance and has adopted, and periodically reviews, policies and procedures to guide it in the discharge of its oversight responsibilities. Those policies and procedures are summarized in this section. Copies of the Corporate Governance Guidelines adopted by our Board, its committee charters, the Forest City Enterprises, Inc. Amended and Restated Code of Legal and Ethical Conduct (“Code of Legal and Ethical Conduct”) and other relevant information are set forth or explained in greater detail on our website at www.forestcity.net. References to our website are for your convenience; however, the information contained on our website is not incorporated into this proxy statement or any other report we file with the SEC.

We regularly review our corporate governance policies and practices. The Board also routinely compares our corporate governance policies and practices to those suggested by various groups or authorities active in corporate governance, as well as the requirements of the Sarbanes-Oxley Act of 2002 and the listing standards of the New York Stock Exchange. These reviews specifically focus on the following areas of corporate governance:

	•		our Corporate Governance Guidelines in general;
	•		our current Board composition and compensation;
	•		our Board and Board committee operation and charters;
	•		certain procedures relating to our Code of Legal and Ethical Conduct;
	•		our director nomination process;
	•		our shareholder communications process; and
	•		director continuing education.

We expect to adopt further changes in the future that the Board believes are the best corporate governance policies and practices for it.

Corporate Governance Guidelines

The Board believes in establishing a corporate culture of accountability, responsibility and ethical behavior through the careful selection and evaluation of senior management and members of the Board of Directors and by carrying out the responsibilities of the Board of Directors with honesty and integrity. Our Corporate Governance and Nominating Committee performed its annual review of our Corporate Governance Guidelines and did not recommend any substantive changes. Our Corporate Governance Guidelines, among other things, provide for Audit, Compensation, and Corporate Governance and Nominating Committees; all members of the Audit Committee to be independent directors; regular sessions of independent directors; an annual self-assessment process for the Board and its committees; succession planning; new director orientation; and continuing director education. These guidelines, as amended, largely document practices and principles already in place at the Board level and are available on our website at www.forestcity.net.

Board Leadership Structure

The Board has chosen to separate the positions of chair and chief executive officer. Albert B. Ratner and Samuel H. Miller are the Co-Chairmen of the Board. With their collective 120 years of experience at Forest City, they are leaders in the real estate industry and well suited to providing oversight and direction to our management. We believe this structure is optimal for us because it avoids any duplication of effort between the Co-Chairmen and the Chief Executive Officer and permits Charles A. Ratner, our Chief Executive Officer and President, to focus his efforts on the day to day management of the Company. This separation provides strong leadership for the Board and the Company through the Co-Chairmen, while also positioning our Chief Executive Officer as our leader in the eyes of our employees and other stakeholders.

Our independent directors meet in an executive session following each regularly scheduled Board meeting. In accordance with our Corporate Governance Guidelines, Scott S. Cowen, as an independent director and Chairman of the Corporate Governance and Nominating Committee, is the Presiding Director over all of those sessions. The executive sessions provide balance between the different perspectives of the independent directors and the management directors and maintain proper independent oversight of management.

The Board has no formal policy that requires the separation or combination of the chair and chief executive officer roles and may reconsider the best board leadership structure for us from time to time. While we recognize that different board leadership structures may be appropriate for companies in different situations, we believe our current leadership structure, with Albert B. Ratner and Samuel H. Miller serving as Co-Chairmen, Charles A. Ratner serving as Chief Executive Officer and President and Scott S. Cowen serving as a Presiding Director, is the optimal structure for us at this time.

The Board’s Role in Risk Oversight

Our Board plays an important role in our risk oversight. While management is responsible for the day-to-day management of the risks we face, our Board, and its committees, oversee risks through their direct decision-making authority with respect to significant matters and the oversight of management.

Risk oversight is administered by our Board (or a committee thereof) through:

(1) The review and discussion of regular periodic reports to the Board and its committees on topics relating to the risks we face, including, among others, market conditions, cash projections, internal financial measures, occupancy rates, the status of current and anticipated development projects, compliance with debt covenants, management of debt maturities, access to debt and equity capital markets, existing and potential legal claims against us and various other matters relating to our business;

(2) The required approval by the Board (or a committee thereof) of significant transactions and other decisions, including, among others, executive compensation plans, equity and capital transactions, budget and the appointment and retention of senior management;

(3) The direct oversight of specific areas of our business by the Audit, Compensation, and Corporate Governance and Nominating Committees; and

(4) Regular periodic reports from our auditors and other outside consultants regarding various areas of potential risk.

Our Board also relies on management to bring significant matters impacting us to their attention.

Our Board discharges many of its responsibilities and oversight functions with respect to risk through its Audit, Compensation, and Corporate Governance and Nominating Committees. The Audit Committee is the lead committee for the Board’s risk oversight functions through their review of our internal controls over financial reporting, periodic review of fraud risks identified by management, and our financial statements and their preparation. In addition, the Audit Committee oversees our Code of Legal and Ethical Conduct, including an annual update on the content, implementation, operation and effectiveness of our ethics program and the administration of our whistleblower procedures. The Compensation Committee establishes the appropriate compensation incentives. The Audit, Compensation, and Corporate Governance and Nominating Committees are jointly responsible for assessing whether our compensation programs and policies encourage inappropriate risk taking. The Corporate Governance and Nominating Committee is responsible for advising the Board on matters of organizational and governance structure for effective oversight. See pages 16-19 for further discussion of the roles and responsibilities of each of the committees.

Because all of these committees are comprised of independent directors, our independent directors have a significant role in the Board’s risk oversight function. As part of the oversight process, each committee regularly receives reports from members of senior management on areas of material risk to us that are under the purview of that committee to enable it to understand our risk identification, risk management and risk mitigation strategies. While each committee is responsible for evaluating and overseeing certain risks, the entire Board is apprised of such risks through regular committee reports. This enables the Board and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships.

Because of the role of the Board in our risk oversight, the Board believes that any leadership structure that it adopts must allow it to effectively oversee the management of the risks relating to our operations. The Board recognizes that there are different leadership structures that could allow them to effectively oversee the management of the risks relating to our operations, and while the Board believes their current leadership structure enables them to effectively manage such risks, it was not the primary reason the Board selected their current leadership structure over other potential alternatives. See the discussion under the heading “Board Leadership Structure” above for a discussion of why the Board has determined that their current leadership structure is appropriate.

Independence Determinations

We are considered a “controlled company” under the NYSE corporate governance rules because, as of February 26, 2010, the Family Interests controlled 14,546,063 Class A votes and 188,873,640 Class B votes for an aggregate voting percentage of 56.8%. See “Election of Directors” on pages 1-2 for a description of the Family Interests. As a result of our controlled company status, we are not required to have a majority of the Board of Directors composed of independent directors. The Board has determined that all members of our Compensation Committee, Corporate Governance and Nominating Committee and Audit Committee are independent.

The Board unanimously determined that Messrs. Cowen, Esposito, Jarrett, Ross and Stokes and Ms. Harmon are neither affiliated persons of ours, nor do they have any material relationship with us (other than their role as our director) and, therefore, qualify as independent directors within the meaning of all applicable laws and regulations, including the enhanced independence standards of the NYSE.

The enhanced independence standards of the NYSE discussed by the Corporate Governance and Nominating Committee in their review of director independence status are as follows:

A.		No director will qualify as “independent” unless the Board of Directors affirmatively determines that the director has no material relationship with us, either directly or as a partner, shareholder or officer of an organization that has a relationship with us. We will identify which directors are independent and disclose these affirmative determinations.
B.		No director can be independent if the director is, or has been within the last three years, our employee.
C.		No director can be independent whose immediate family member is or has been an executive officer of ours within the last three years.
D.		No director can be independent if the director received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from us, other than (a) director and committee fees, (b) compensation received by a director for former service as an interim Chairman, Chief Executive Officer or other executive officer, (c) compensation received by an immediate family member for service as our employee (other than an executive officer), and (d) pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).
E.		No director can be independent if:

	•		the director is our internal auditor or a current partner or employee of our independent registered public accounting firm;
	•		the director has an immediate family member who is our internal auditor or a current partner of our independent registered public accounting firm;
	•		the director has an immediate family member who is our internal auditor or a current employee of our independent registered public accounting firm and personally works on our audit; or
	•		the director or an immediate family member was within the last three years our internal auditor or a partner or employee of our independent registered public accounting firm and personally worked on our audit within that time.

F.

No director can be independent if the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company’s compensation committee.

G.

No director can be independent if the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, us for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of such other company’s consolidated gross revenues.

In making these independence determinations, the Board considered all of the factors that automatically compromise director independence as specified in the respective independence standards of the SEC and the NYSE, including but not limited to charitable contributions to any charitable organization in which such director serves as a trustee or director, and determined that none of those conditions existed. In addition, the Board considered whether any material relationship beyond those factors that automatically compromise director independence existed between either us and/or our management and/or any of their respective affiliates or family members or otherwise between each director or any family member of such director or any entity with which director or family member of such director was employed or otherwise affiliated. For those directors for whom the Board determined there was a relationship, with respect to each of the most recent three completed fiscal years, the Board evaluated the following:

	•		Payments made to a company where Michael P. Esposito served as chairman of the board until his retirement in December 2007 and determined that the amount of such payments in such fiscal year was below the limits set forth in our independence standards;
	•		Payments made to a law firm where Louis Stokes is senior counsel and determined that the amount of such payments in each fiscal year was below the limits set forth in our independence standards; and
	•		Charitable contributions to various organizations where Messrs. Cowen, Ross, Stokes or Jarrett serve or served as a director or trustee and determined that the amount of the contribution to any organization in each fiscal year was below the limits set forth in our independence standards.

The Board determined for those directors identified as independent above that any relationship that existed was not material and did not compromise that director’s independence from management. Accordingly, all of these directors are independent under SEC and NYSE requirements, as well as our own Corporate Governance Guidelines.

Communications with the Board

We have established procedures to permit confidential and anonymous (if desired) submissions to the Presiding Director (the chairman of the Corporate Governance and Nominating Committee) regarding concerns about our conduct. Interested parties may make their concerns about us known to the independent or non-management directors by directly mailing Scott S. Cowen, the Presiding Director, a statement of concerns marked “Confidential” and addressed as follows:

Mr. Scott S. Cowen, Presiding Director
c/o General Counsel
“Confidential”
Forest City Enterprises, Inc.
Terminal Tower
50 Public Square, Suite 1360
Cleveland, Ohio 44113

Code of Legal and Ethical Conduct

We require that all directors, officers and employees adhere to our Code of Legal and Ethical Conduct in addressing the legal and ethical issues encountered in conducting their work. The Code of Legal and Ethical Conduct requires, among other things, that our employees avoid conflicts of interest, comply with all laws and other legal requirements and otherwise act with integrity. We require management personnel and newly hired employees to acknowledge receipt and compliance with the Code of Legal and Ethical Conduct and annually distribute the Code of Legal and Ethical Conduct to all employees to request their review and written acknowledgment of compliance. In addition, those with supervisory duties are also required to acknowledge their responsibility for both informing and monitoring compliance with the Code of Legal and Ethical Conduct on the part of employees under their supervision.

The Board adopted a Senior Financial Officers Code of Ethical Conduct as an addendum to the Code of Legal and Ethical Conduct. The Senior Financial Officers Code of Ethical Conduct formalizes the general standards of honesty, integrity and judgment that we expect of all senior financial officers. We require all senior financial officers to acknowledge receipt of and compliance with the Code of Ethical Conduct annually.

We have implemented an anonymous hotline monitored by an external, third-party firm. Our Audit Committee has adopted a policy statement entitled “Employee Complaint Procedures for Accounting and Auditing Matters” establishing procedures to investigate complaints.

Meetings and Committees of the Board of Directors

The Board

Our Board presently consists of six independent members and nine members of the Ratner, Miller and Shafran families, including eight members of management and one non-management family member. Biographical information and information about the Board committees on which our directors serve are set forth in “Election of Directors” on pages 1-5 of this proxy statement.

During the year ended January 31, 2010, our Board of Directors held four regular meetings and five special meetings. All directors attended at least 75% of the aggregate of the meetings of the Board and those committees on which each independent director served. Our policy with respect to attendance by directors at the annual meeting of shareholders is that attendance is required when the annual meeting of shareholders coincides with a Board of Directors meeting. The exception to this attendance requirement is when the two meetings are not consecutively scheduled. All fifteen directors attended our 2009 annual meeting of shareholders.

The independent members of the Board meet in an executive session following each regularly scheduled Board meeting. Scott S. Cowen, as the Chairman of the Corporate Governance and Nominating Committee, serves as Presiding Director of all of these sessions.

Committees of the Board

The Board’s policy is to conduct its specific oversight tasks through committees, with the objective of freeing the Board as a whole to focus on strategic business and risk oversight and matters that by law or good business practice require the attention of the full Board. Our Board has established three standing committees, functioning in the following areas:

	•		audit and financial reporting;
	•		management compensation; and
	•		nominations, corporate governance and succession planning.

Each of the standing committees operates under a written charter approved by the Board following review and recommendation by the Corporate Governance and Nominating Committee. The committee charters for each of the standing committees can be viewed on our website at www.forestcity.net. Each Board committee is authorized to retain outside advisors.

Audit Committee: Our Audit Committee is presently composed of four nonemployee, independent directors: Michael P. Esposito, Jr., the chairman, Jerry V. Jarrett, Stan Ross and Deborah L. Harmon. The Board determined that Messrs. Esposito, Jarrett and Ross and Ms. Harmon each qualify as an audit committee “financial expert” in accordance with the requirements of Section 407 of the Sarbanes-Oxley Act of 2002 and the SEC rules implementing that section. The Audit Committee’s purpose is to assist the Board in fulfilling its oversight responsibilities with respect to the following:

	•		the integrity of our financial statements, including our system of internal controls, accounting controls and disclosure controls;
	•		our compliance with legal, ethical and regulatory requirements including, but not limited to, the requirements of the Sarbanes-Oxley Act of 2002;
	•		the independent registered public accounting firm’s qualifications and independence;
	•		the performance of the independent registered public accounting firm and our internal audit function; and
	•		production of the Audit Committee’s report, made pursuant to the Securities Exchange Act of 1934, to be included in the proxy statement relating to our annual meeting of shareholders.

The Audit Committee meets with the independent registered public accounting firm on a quarterly basis and periodically as deemed necessary. In addition, the Audit Committee has created a policy for “Employee Complaint Procedures for Accounting and Auditing Matters,” which establishes procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

Our shareholders will have the opportunity to ratify the appointment of our independent registered public accounting firm at our 2010 annual meeting (see Ratification of Independent Registered Public Accounting Firm on page 54). Although this ratification is not required by law, the Board believes that shareholders should have an opportunity to express their views on the subject.

The Audit Committee met nine times during the year ended January 31, 2010.

A copy of the Audit Committee Report is included in this proxy statement on page 55. The Audit Committee charter, as amended, is available on our website at www.forestcity.net.

Compensation Committee: Our Compensation Committee is presently composed of six nonemployee, independent directors: Jerry V. Jarrett, the chairman, Scott S. Cowen, Michael P. Esposito, Jr., Stan Ross, Louis Stokes and Deborah L. Harmon. The Compensation Committee’s purpose is to assist the Board in carrying out its oversight responsibilities relating to compensation matters by:

	•		establishing and administering compensation of our executive officers and senior management;
	•		reviewing, at least annually, the goals, objectives and policies of our executive compensation plans;
	•		reviewing, at least annually, the succession plan for the Company and our senior executives;
	•		reviewing the total compensation for the Chief Executive Officer and the other most highly compensated individuals included in the Summary Compensation Table on page 37 as well as certain senior executive officers of important business units and subsidiaries in light of the executive compensation goals and objectives;
	•		administering our stock option or other equity incentive plans and approving all equity incentive awards for our executive officers; and
	•		in accordance with federal securities laws, reviewing the Compensation Discussion & Analysis prepared by our management and recommending the inclusion of such disclosure in the proxy statement relating to our annual meeting of shareholders.

The committee also annually evaluates the performance of our Chief Executive Officer based on objective and subjective criteria, including an assessment of business performance, accomplishment of long-term strategic objectives, and management development. For a description of the committee’s policies and procedures for the consideration and determination of executive compensation, see the Compensation Discussion & Analysis – Oversight of the Executive Compensation Program on page 20.

The Compensation Committee met six times during the year ended January 31, 2010.

A copy of the Compensation Committee Report is included in this proxy statement on page 32. The Compensation Committee charter, as amended, is available on our website at www.forestcity.net.

Corporate Governance and Nominating Committee: Our Corporate Governance and Nominating Committee is composed of three nonemployee, independent directors: Scott S. Cowen, the chairman, Louis Stokes and Michael P. Esposito, Jr. The Corporate Governance and Nominating Committee’s purpose is to assist the Board in carrying out its oversight responsibilities relating to corporate governance matters, including the composition of the Board. As part of its responsibilities, the committee considers and makes recommendations to the full Board with respect to the following matters:

	•		identifying individuals qualified to become Board members and the director nominees for the next annual meeting of shareholders;
	•		director nominees for each committee;
	•		our organizational and governance structure, including developing and recommending to the Board the Corporate Governance Guidelines applicable to us;

	•		our Code of Legal and Ethical Conduct;
	•		appropriate procedures for the succession planning for our senior executive officer positions;
	•		appropriate procedures to evaluate the performance of our Chief Executive Officer;
	•		evaluation of the Board and its committees;
	•		nonemployee Board member compensation and stock ownership requirements;
	•		determination of which members of senior management qualify as officers subject to Section 16 of the Securities Exchange Act of 1934;
	•		related party transactions; and
	•		the Audit Committee “financial expert” and the “financial literacy” of the Audit Committee members.

The Corporate Governance and Nominating Committee utilizes a variety of methods for identifying and evaluating nominees for director. The committee regularly reviews the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the committee considers various potential candidates for director. The Corporate Governance and Nominating Committee may consider candidates recommended by shareholders, as well as from other sources, such as current directors or officers, professional search firms or other appropriate sources. The committee may choose not to consider an unsolicited recommendation if no vacancy exists on the Board of Directors, and the Corporate Governance and Nominating Committee does not perceive a need to increase the size of the Board of Directors.

Third party consultants may be retained from time to time to identify potential candidates, but any such retention will be made directly by the Corporate Governance and Nominating Committee. If retained, third party consultants would be used primarily to identify potential candidates, conduct customary background and reference checks and recommend potential candidates to the committee in accordance with criteria furnished by the committee. On occasion, at the request of the chairperson of the committee, third party consultants may also conduct preliminary screening and interviews to assess candidate suitability in accordance with criteria furnished by the committee.

Our Corporate Governance Guidelines contain Board membership criteria that apply to the Corporate Governance and Nominating Committee’s recommended nominees for a position on our Board of Directors. Under these criteria, members of the Board shall demonstrate the qualities of integrity and high ethical standards, have the ability to communicate clearly and persuasively, express opinions, raise questions and make informed, independent judgments. A director shall possess knowledge, experience and skills in a minimum of one specialty area, such as: knowledge of the real estate industry (development, management, operations, marketing, competition, etc.); accounting and finance; corporate management; and international, legal or governmental expertise. Other qualifications include diversity in gender, ethnic background, geographic origin or personal and professional experience. The willingness and ability to work with other members of our Board of Directors in an open and constructive manner and the ability to devote sufficient time to prepare for and attend Board meetings are required. Service on other boards of public companies should be limited to no more than three or four, subject to the Board of Directors’ review.

To submit a recommendation of a director candidate to the Corporate Governance and Nominating Committee, a shareholder should submit the following information in writing, addressed to the Chairman of the Corporate Governance and Nominating Committee, at the address shown on page 15:

	•		the name, age, business address and residence of the person recommended as a director candidate;
	•		the principal occupation or employment of the person;
	•		any information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended;
	•		the written consent of the person being recommended as a director candidate to being named in the proxy statement as a nominee and to serving as a director if elected;
	•		the name and record address of the nominating shareholder;
	•		the number of shares and class of common stock beneficially owned, for at least one year, by the nominating shareholder; and

•

a statement disclosing whether such shareholder is acting with or on behalf of any other person and, if applicable, the identity of such person.

In order for a director candidate to be considered for nomination at our annual meeting of shareholders, the recommendation must be received by the Corporate Governance and Nominating Committee at least 90 calendar days prior to the date our proxy statement was released to shareholders in connection with the previous year’s annual meeting, advanced by one year.

The Corporate Governance and Nominating Committee met five times during the year ended January 31, 2010.

The Corporate Governance and Nominating Committee charter, as amended, is available on our website at www.forestcity.net.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee of the Board of Directors consists entirely of nonemployee, independent directors. No member of the Compensation Committee is a current or former officer or employee of ours or any of our subsidiaries, and none had interlocking relationships with any other entities of the type that would be required to be disclosed in this proxy statement.

Compensation Discussion & Analysis

Introduction

We are a real estate company principally engaged in the ownership, development, management and acquisition of commercial and residential real estate and land throughout the United States. We were founded in 1920 and have been publicly-traded since 1960. Headquartered in Cleveland, Ohio, we have offices throughout the United States and in London, England. As of January 31, 2010, we had approximately $11.9 billion in consolidated assets, 3,019 employees, annual revenues of $1.26 billion, and an equity market capitalization of $1.76 billion.

We attribute much of our long-term success to our highly talented and experienced employees and our core values: integrity and openness in dealings with all stakeholders; creativity and an entrepreneurial spirit; teamwork; diversity and community involvement; sustainability; and long-term value creation through a high-performance culture. Our executive compensation program is intended to support these values, reinforce our culture and drive long-term growth and value creation. The following discussion summarizes our executive compensation program’s key objectives and primary components.

	We designed our executive compensation program to meet the needs of our Company, our shareholders and our employees, and with the intent of achieving the following key objectives:
	•    To focus senior management on key business objectives as reflected in our annual business plan and long-term strategic plan that support our ultimate objective of maximizing shareholder value.
	•    To attract and retain highly talented employees to lead our continued growth and success and to reward them for their contributions toward that success.
	•    To reinforce our core values by providing for fair and competitive pay that is aligned with performance.

	In order to achieve these objectives, our executive compensation program includes the following primary components:
	•    Competitive base salaries reflective of each executive’s responsibility level and individual performance over time.			•    Performance-based annual incentives that are tied to the attainment of specified business objectives at the corporate, business unit, and/or individual levels.
	•    Long-term incentives linked to strategic goals and long-term shareholder value creation.			•    Benefits that meet the needs of our employees and their families at a reasonable shared cost.

Each of these pay components is described in more detail later in this document.

Oversight of the Executive Compensation Program

The Compensation Committee (“Committee”) of the Board of Directors administers our executive compensation program. The current members of the Committee are Jerry V. Jarrett (Chairman), Scott S. Cowen, Michael P. Esposito, Jr., Deborah L. Harmon, Stan Ross, and Louis Stokes. All members of the Committee are independent directors as defined under Section 162(m) of the Internal Revenue Code (“Section 162(m)”), are non-employee directors as defined in Rule 16b-3 under the Securities Exchange Act of 1934 and qualify as independent directors under the NYSE listing standards.

In reviewing and designing the various components of our executive compensation program, the Committee periodically draws upon the expertise of our Chief Executive Officer and Executive Vice President, Human Resources who typically attend the Committee meetings. Our CEO provides advice and counsel to the Committee regarding alignment of performance measures under our annual Short-Term Incentive Plan (“STIP”) and our Long-Term Incentive Plan (“LTIP”) relative to our annual business and strategic plans, may discuss the performance of key executives who report to him in the determination of the individual component of awards as well as any merit increases or pay adjustments, offers guidance and recommendations on succession and management planning activities and discusses the impact of design of our incentive programs (including equity awards) on our ability to attract, motivate and retain key personnel. Our EVP, Human Resources provides information pertaining to our compensation programs and in connection with succession planning reviews. Our Chief Financial Officer, who attends meetings as requested, periodically provides an accounting and analysis of the financial results of performance measures under the STIP and LTIP. The Committee meets in executive session when discussing the compensation of the CEO.

The Committee has the authority to retain, terminate, and approve fees for any compensation consultant used to assist in the evaluation of compensation for executive officers and other senior management employees. It may also obtain advice and assistance from internal or external legal, accounting, or other advisors.

The Committee retained Mercer Human Resources Consulting (“Mercer”) to provide guidance on various aspects of our executive compensation program including: a review of our overall compensation program design and potential modifications given economic and business conditions; recommendations and design modifications regarding the annual and long-term incentive compensation plans; a review of enhanced disclosure requirements resulting from regulatory changes, and benchmarking of competitive trends. Mercer discussed these topics with executive management and provided summary information to the Committee during the year. In addition to these consulting services, we purchased a standard benchmark survey product pertaining to non-executive compensation from Mercer during 2009.

Additionally, in September 2009, the Committee engaged Pearl Meyer and Partners to review compensation for executives at our Forest City Ratner Companies subsidiary in New York. The results of this review and any recommendations are expected to be shared with the Committee during the first half of 2010. The Committee periodically obtains ongoing legal and compensation design guidance and information from other sources, including publications from various consulting firms.

Our management is responsible for the preparation of this Compensation Discussion & Analysis.

Executive Summary of changes made to our compensation program in 2009

The following summarizes the major changes taken with respect to our executive compensation program during 2009. Further discussion of each change is provided throughout this Compensation Discussion & Analysis:

•

For the 2009 performance period, the Committee approved a change in one of the performance measures used to determine awards earned under our annual STIP. In addition to a target Earnings Before Depreciation, Amortization and Deferred Taxes per share (“EBDT per share”) amount, the Committee approved the use of a Corporate Liquidity measure under the STIP. The Corporate Liquidity component of the STIP was based on cash generated to operate the business and meet investment obligations. Corporate Liquidity was used in lieu of a measure of internal value creation (Total Return) that had been used in prior years under the STIP. In approving this change in early 2009, the Committee took into consideration the impact of current economic conditions on the lending and capital markets at the time, particularly for real estate. Given the substantial reduction in the availability of and access to capital associated with the volatility in the capital markets and changes to our strategic goals, the Committee agreed that a Corporate-wide Liquidity measure should be used in 2009. We removed the business unit portion of the STIP award opportunity that had been in place for select executives for a number of years for the 2009 performance period to focus executives on the most critical aspects of our overall business plan.

	•		During 2008, the Committee had approved the use of a value-based approach to granting shares to LTIP participants under the Forest City Enterprises, Inc. 1994 Stock Plan, as amended and restated as of June 19, 2008 (“Stock Plan”). Given the significant decline in our share price beginning in late 2008 and continuing into 2009, and the limited number of shares available for grant under the Stock Plan, we did not grant similar share values in 2009. The Committee explored several alternatives and then approved equity grants subject to a run rate cap of 0.95% of weighted average common shares outstanding as discussed further in the “Equity” section of this document. A greater total number of options and restricted shares were granted than during 2008; however the Black-Scholes value for options and the grant date fair value of restricted shares were significantly less.
	•		In early 2010, the Committee approved the use of a modified approach in how awards would be determined under the executive version of the STIP for the 2010 performance period. The formula, which consists of an EBDT goal, will establish a maximum award per executive that could be earned. The Committee would be able to apply negative discretion using a variety of other qualitative and/or quantitative factors when determining the executive’s actual 2010 award, if any. We intend to qualify any payments earned under the executive version of the STIP as performance-based compensation as defined under IRC Section 162(m).
	•		The Committee also approved a new two-year performance cycle in early 2010, associated with an award opportunity under the cash-based portion of the Executive Long-Term Incentive Plan (“Executive LTIP”). Any actual awards earned are to be based on performance relative to a cumulative EBDT goal for the period ending January 31, 2012. In approving the new opportunity, the Committee considered changes to our strategic business plans and goals prompted by economic and business conditions in the real estate market in general, as well as competitive pay practices at other organizations. The Committee also took into consideration the reduced likelihood that payments under the cash-based LTIP for the 2008 — 2011 cycle would be earned. We structured this opportunity to qualify any payments earned as performance-based compensation as defined under IRC Section 162(m).

Executive Compensation Core Principles

The Committee uses a set of core principles as outlined below, to guide the development and use of specific compensation elements. Our executive compensation program should reinforce key business objectives and our core values. Performance goals under the STIP and the LTIP are linked to our annual business plan and strategic plans, with an emphasis on long-term shareholder value creation.

	•		Pay should be aligned with performance: Our executive compensation program emphasizes variable incentive pay tied to challenging performance goals, with no awards earned for results below a designated threshold level. Senior executives and managers can earn significant incentive awards when outstanding Company, business unit and/or individual performance results are achieved and little or no awards when performance is below the target level. Performance is measured relative to the annual business plan and long-term strategic plan.
	•		A majority of pay for top executives should be performance contingent: Our executive compensation program promotes a pay for performance orientation, consistent with our high-performance culture, through the emphasis on incentive compensation. We provide incentive award opportunities, expressed as a percent of base salary, to our Named Executive Officers (as defined on page 37). The STIP currently promotes teamwork through the use of corporate performance goals for Named Executive Officers as outlined below in the “Components of the Executive Compensation Program” section beginning on page 23. We base awards under the cash-based portion of the LTIP on corporate and/or business unit performance goals, and the awards are only earned if targets are met. Stock option awards under the LTIP will only have value if our stock price appreciates between the time of grant and the time of exercise. Similarly, performance share awards will only be earned if certain performance goals are met. Actual pay levels will vary with our performance results.
			The Committee has discretion to determine the incentive amounts paid under the STIP and the LTIP in the event of extraordinary or unusual circumstances that are separate and apart from normal economic cycles. The Committee did not exercise this discretion during 2009.
	•		Incentive compensation should be tied to short-term and long-term performance: Our executive compensation program seeks to link incentive pay to performance over multiple time frames. Annual incentives under the STIP reward short-term performance in support of our annual business plan. Long-term incentives include the cash component of the LTIP that reflects performance over a period of up to four years (generally consistent with our strategic planning cycle), and equity components (currently stock options, restricted stock awards and/or performance share grants), which reward long-term shareholder value creation.

	•		Long-term incentives are emphasized to align executive and shareholder interests: Our executive compensation program places greater emphasis on long-term incentives as compared with annual incentives, to focus senior management on long-term strategic goals and shareholder value creation. We currently use a combination of equity-based and cash-based long-term award vehicles to minimize potential shareholder dilution resulting from the sole use of equity plans.
	•		Total compensation should be fair, competitive and communicated: We operate in a highly competitive industry and must ensure that our executive pay program allows us to attract and retain senior management talent for continued growth and success. Pay levels are periodically reviewed to determine if they are externally competitive and internally equitable. For the 2009 performance cycle, we used two corporate performance measures, EBDT per share and Corporate Liquidity under the STIP. We provide annual notification to participants of performance goals and corresponding award opportunities for the incentive compensation plans.
	•		Our executive compensation program should not encourage the taking of excessive risks that could be detrimental to the interests of our shareholders: Our use of annual and long-term incentives, the award of different types of equity compensation and the use of different performance measures do not encourage our senior management to take unreasonable risks relating to our business. The Audit, Compensation, and Corporate Governance and Nominating Committees believe our compensation program elements do not encourage excessive risk taking since overall pay is appropriately balanced between various components as outlined in the “Components of Executive Compensation Program” section beginning on page 23. Further information is also contained in the “Additional Executive Compensation Policies” section of this Compensation Discussion & Analysis.

Target Executive Officer Pay Levels and Relevant Employment Market

We use targeted pay levels to reinforce core principles and key objectives under our executive compensation program. Assuming at goal performance the targets relative to the market are as follows:

Total Annual Cash

Long-Term

Base Salary

Annual Incentives

Compensation

Incentives

Total Direct Compensation

(A)

(B)

(A + B)

(C)

(A + B + C)

Slightly above market medians

At market medians

Slightly above market medians

Above market medians

Above market medians

Base salaries and annual incentives are targeted competitively to attract talented and experienced executives. Long-term incentives are targeted above the market median, reinforcing our focus on challenging long-term strategic goals and shareholder value creation and to facilitate the attraction and retention of talented senior executives and managers.

Due to the emphasis on performance-based incentive compensation, actual total direct pay can be above or below targeted levels based on our actual versus planned performance results and level of stock price appreciation. For example, total direct compensation may be at or above the market 75th percentile when we achieve superior performance results, or well below the market median when goals are not met.

The level of overall compensation provided to our Named Executive Officers during the past fiscal year varied from historical levels. Due to constraints in the number of available shares and the use of a run rate cap, eligible Named Executive Officers were provided with substantially less equity value than in prior years, We calculated our run rate using the total shares issued divided by the weighted average common shares outstanding during the fiscal year immediately prior to the grant. While our overall targeted position relative to the market has not changed significantly, we believe our ability to accurately assess our overall competitive pay position relative to market at this time has been made more difficult given the challenging economic environment all companies face and the adjustments they are making to their compensation programs in light of these conditions. The Committee continues to monitor trends through a variety of surveys and other sources as they become available.

Relevant Employment Market for Executive Officers: The relevant employment market for executives is national and includes diversified real estate organizations, including publicly-traded and privately-held companies, with equity market capitalizations and/or total assets comparable to ours. Because we operate in 27 states and the District of Columbia, including several high cost of living locations such as New York and California, we consider geographic pay differentials when establishing base salaries for senior executives and managers, as applicable.

In assessing pay competitiveness for senior management, we review published compensation surveys for the real estate industry (reflecting data for both public and private companies), including: the National Association of Real Estate Investment Trusts (NAREIT) Compensation Survey, the National Multi-Housing Council’s National Apartment Survey and Mercer’s Real Estate Compensation Survey and U.S. Benchmark Database. We use the survey data to benchmark the pay practices and levels for our executives relative to jobs with similar duties as described in the surveys. We review base salary, short-term and long-term incentive opportunities to determine if our pay practices remain in line with our overall executive pay strategy and key objectives. In addition, Mercer periodically reviews proxy-statement pay data for a designated group of publicly-traded industry peers as referenced below. We use this to compare compensation for our Named Executive Officers.

We periodically review the companies in our peer group for their similarity in sales, asset size and/or market capitalization. Given that we have diversified real estate holdings, we give significant consideration to ensure the peer companies chosen represent a cross-section of the industry including land as well as retail, office and residential development and management companies. Peer group companies in the most recent review consisted of: AMB Property Corporation, Apartment Investment and Management Company, AvalonBay Communities, Inc., Boston Properties, Inc., Brookfield Properties Corporation, CBL & Associates Properties, Inc., Cousins Properties, Incorporated, Developers Diversified Realty Corporation, Duke Realty Corporation, Equity Residential, General Growth Properties, Inc., Kimco Realty Corporation, Liberty Property Trust, Macerich Company, Simon Property Group, Inc., SL Green Realty Corp., St. Joe Company, Taubman Centers, Inc., UDR, Inc. and Vornado Realty Trust.

Components of the Executive Compensation Program

The table below provides a high level overview of the four primary components within our executive compensation program. A more detailed description for each component follows.

	Element			Key Objectives			Paid in			Performance Linkage
	Base Salary			Provide fixed income stream based on level of responsibility, experience and individual performance			Cash			Partially linked (merit increases tied to performance)
	Annual Incentives			Align pay with achievement of short-term performance goals in support of annual business plan			Cash			Highly linked
	Long-Term Incentives			Align pay with achievement of longer-term strategic goals and shareholder value creation, enhance retention of senior management, facilitate stock ownership			Equity-Linked Incentive Compensation       •   Stock Options       •   Performance Shares       •   Restricted Stock Cash			Highly linked
	Benefits & Perquisites			Provide for employee health, welfare and retirement needs			Health Care Life and Disability Retirement Plans			Minimally or not linked

The following table illustrates the percentage of the target 2009 annualized equivalent direct compensation opportunity (defined as base salary plus short-term and long-term incentives) for each of our Named Executive Officers. Benefits are excluded from the chart below since no formal target levels typically exist for these programs.

As noted in the descriptions of each component of our executive compensation program that follow, actual awards earned could differ from the annualized target levels shown below.

				Percent of Annualized Total Target
				Direct Compensation Opportunity Attributable to:
																			Target					Target
														Target					Performance					Restricted					Target
	Named Executive Officer			Base Salary					Target STIP					Option Value					Share Value					Stock Value					Cash LTIP
	Charles A. Ratner				34	%				27	%				13	%				13	%				0	%				13	%
	James A. Ratner				34	%				27	%				13	%				13	%				0	%				13	%
	Ronald A. Ratner				34	%				27	%				13	%				13	%				0	%				13	%
	Robert G. O’Brien				27	%				22	%				17	%				17	%				0	%				17	%
	Brian J. Ratner				36	%				21	%				11	%				0	%				11	%				21	%

Because of their substantial ownership interests, the Committee accepted management’s recommendation regarding the target annualized equivalent direct compensation opportunity for Charles A. Ratner, James A. Ratner and Ronald A. Ratner.

Consistent with our executive compensation core principles, the majority of the target pay levels shown for each Named Executive Officer above are performance-based. For Charles A. Ratner, James A. Ratner and Ronald A. Ratner, about one quarter of their target annualized total direct compensation opportunity is delivered through annual incentives, with approximately another 40% through stock options, performance shares and long-term cash incentives.

Similarly, a large portion of Robert G. O’Brien’s target annualized total direct compensation is based on performance. About 20% of his target opportunity is attributable to annual incentives, with approximately 50% aligned with longer-term incentives. This is consistent with our desire to focus and reward our executives based on longer-term performance.

Approximately 20% of Brian J. Ratner’s target annualized equivalent compensation opportunity is provided via our annual incentive program. Because of the more limited scope of his role as a corporate executive vice president and as President of East Coast Development for our Commercial Division, a smaller portion of Brian J. Ratner’s target annual compensation opportunity is attributable to performance-based long-term incentives, with about one-third of the total delivered through stock options and our cash-based LTIP. Brian J. Ratner also receives about 10% of his target annualized compensation in the form of time vested restricted shares.

These target levels of compensation have been in place since the 2008 fiscal year and are based on benchmarking data and recommendations from Mercer. However as noted earlier in this Compensation Discussion & Analysis and in each section that follows, the actual amounts earned by each of our Named Executive Officers will vary based on company, business unit and/or individual performance. Additionally, due to changes in the market value of our shares during 2009 coupled with share availability constraints under our Stock Plan, the Committee approved short-term adjustments to the number of shares granted. Further discussion of this is included in the “Equity” section which follows.

Base Salary: Base salary is reflective of the executive’s level of responsibility, experience, individual performance and contributions to our overall success. It also impacts annual and long-term incentive award opportunities that are expressed as a percentage of base salary.

Base salaries are targeted competitively consistent with our overall pay philosophy and may be adjusted for senior executives and management within certain high cost of living locations (such as New York and California) to reflect geographic pay differentials. We do not apply geographic pay differentials to targeted pay levels for employees within our Cleveland headquarters, including our Named Executive Officers. Actual salaries may be above or below the targeted level, based on each executive’s level of experience and performance.

In determining base salary levels for other executive officers, the Committee considers:

	•		Pay practices of comparable real estate organizations;
	•		CEO recommendations for our other executive officers; and
	•		Their assessment of each executive’s contributions towards our success.

As discussed earlier, we set pay levels for our senior executives and managers using external market data and also take into account internal equity considerations. Consistent with their employment agreements, base salary amounts for certain Named Executive Officers in 2009 were unchanged from the previous fiscal year-end as follows: Charles A. Ratner, $500,000; James A. Ratner, $450,000; and Ronald A. Ratner, $450,000. Robert G. O’Brien’s salary, which is not determined by an employment agreement, was $475,000 and reflects his responsibilities as Executive Vice President and CFO. Brian J. Ratner’s salary was $321,368, reflecting his responsibility as a corporate executive vice president and as President of East Coast Development for our Commercial Division, and is also not based on an employment contract. The salaries for Messrs. Robert G. O’Brien and Brian J. Ratner are determined using competitive pay information from the various benchmark salary surveys previously referenced in this document and are adjusted periodically as deemed appropriate. Additionally, Mr. O’Brien’s salary takes into consideration data from peer group proxy reviews.

Annual Incentives: Eligible Named Executive Officers and other members of senior management participate in the STIP. The Plan’s primary objective is to motivate senior executives and managers to achieve specified business objectives over the short-term that lead to long-term value creation. Actual awards earned, if any, can be considerably above or below target levels based on our actual versus planned performance.

Each year, our CEO in consultation with the CFO and members of the senior management team, recommends performance goals to the Committee for each measure under the STIP. Any earned awards are subsequently paid in cash upon final determination and approval by the Committee. Performance measures under the STIP for the 2009 performance period included EBDT per share at the corporate level and Corporate Liquidity defined as cash generated to operate the business and meet investment obligations. Management recommended and the Committee approved a shift to the Corporate Liquidity measure for 2009 given the strategic importance of this goal. In late 2008 and continuing into early 2009, the availability of and access to capital in the markets had diminished significantly and the overall economic conditions for real estate were very challenging, thus prompting a shift from the Total Return measure used under the STIP for the 2008 performance period.

For 2009, the Committee also approved a management recommendation to change the overall weighting of each component in determining the overall STIP award. In prior years, James, A. Ratner and Ronald A. Ratner had had a portion of their award determined by business unit performance, but now were more closely aligned with corporate executives in that their award was to be based on Corporate results. We made this change to further promote team work and collaboration among various business units and to focus on our strategic goals during a challenging business climate.

Brian J. Ratner’s STIP award opportunity was based on a combination of Corporate and individual performance results. Given his responsibilities including his oversight of specific development projects and activities, management and the Committee felt it was appropriate to base a significant portion of his 2009 STIP award opportunity on individual performance. For the 2009 performance period his award took into account his performance relative to individual objectives as noted in the discussion of results that follows.

Other than Brian J. Ratner, our Named Executive Officers do not have a portion of their overall STIP award determined by their individual performance. The Committee approved this change in 2008 to qualify payments made to certain Named Executive Officers as performance-based under Section 162(m). As noted previously, given the responsibilities for each of these executives and the impact of their decisions on our overall results, the Committee felt it was appropriate in 2009 to tie their award fully to corporate results.

Consistent with our core compensation principles, eligible Named Executive Officers had a target 2009 STIP award opportunity expressed as a percentage of base salary. Using the previously mentioned survey resources and a review of proxy pay information, Named Executive Officers with the exception of Brian J. Ratner had a 2009 STIP target opportunity of 80% of base pay. Brian J. Ratner’s STIP opportunity was 60% of base salary reflecting the reduced scope of his responsibilities. Actual payouts under the STIP could range between 0% and 200% of the target opportunity, depending on the level of performance. Corporate financial goals were equally weighted between EBDT per share and Corporate Liquidity. The performance mix under the STIP for the 2009 performance period for Named Executive Officers was as follows:

				Percent of STIP Award based on:
				Corporate EBDT
	Named Executive Officer			Per Share					Corporate Liquidity					Individual Performance
	Charles A. Ratner				50	%				50	%			Not Applicable
	James A. Ratner				50	%				50	%			Not Applicable
	Ronald A. Ratner				50	%				50	%			Not Applicable
	Robert G. O’Brien				50	%				50	%			Not Applicable
	Brian J. Ratner				20	%				20	%				60	%

The annual corporate performance targets used in 2009 reflected our annual business plan, which was reviewed and approved in principle by the Board of Directors. When annually establishing this plan, management and the Board of Directors consider:

	•		The historical performance of the Company;
	•		External elements such as economic conditions and competitive factors; and
	•		Company capabilities and performance objectives.

For the 2009 fiscal year performance period, the target for earning 100% of the award attributable to the EBDT per share component of the STIP was $2.31 and the threshold for earning 50% of the target award for this measure was $2.08. A maximum level award of 200% for this component would be earned if actual EBDT per share was at least 120% of the target, or $2.78. Actual 2009 fiscal year performance for EBDT per share was $2.00 resulting in below threshold performance and no award being earned for this component.

For the Corporate Liquidity measure under the STIP, the target for earning 100% of the award attributable to this component was to generate sufficient cash during the year, without increasing our recourse debt, to meet our operating requirements and investment obligations. A maximum level of award would be earned if net cash generated was $100 million or more than that required to meet these operational and investment obligations, and no payment would be earned if net cash used during the performance period for these purposes was greater than $72 million. Actual performance was net cash generated of over $278 million, resulting in 200% of the target award being earned.

Brian J. Ratner’s individual performance relative to goals for the 2009 performance period took into account the milestones achieved with regard to several projects for which he was responsible, but primarily his role in the Village at Gulfstream Park project that opened in February 2010. Brian J. Ratner is not covered under the Executive STIP, but is covered under the Senior Management STIP.

The total STIP payments earned by the Named Executive Officers as a percent of base salary along with the target, threshold and maximum award percentages were as follows:

				STIP Award Percentage
																								Actual 2009 STIP
	Named Executive Officer			Target					Threshold					Maximum					Actual					Award Amount
	Charles A. Ratner				80	%				40	%				160	%				80	%			$	400,000
	James A. Ratner				80	%				40	%				160	%				80	%			$	360,000
	Ronald A. Ratner				80	%				40	%				160	%				80	%			$	360,000
	Robert G. O’Brien				80	%				40	%				160	%				80	%			$	380,000
	Brian J. Ratner				60	%				12	%				120	%				90	%			$	289,887

The Committee determines awards payable to the CEO. The Committee reviewed and approved the performance results achieved, resulting in awards shown above being earned by eligible Named Executive Officers under the STIP for the 2009 performance period.

In addition during the year, we paid Robert G. O’Brien a discretionary bonus of $114,000 for his critical leadership efforts associated with a successful public equity offering in May 2009. In determining the amount of the award, the Committee considered that the transaction netted approximately $330 million in proceeds to the organization, helped us avoid the assumption of additional recourse debt, and was instrumental in helping augment our liquidity position at a time of significant challenges within the capital markets.

In early 2010, the Committee approved the use of a different approach in determining any awards to be earned under the executive version of the STIP. We made this change with Committee approval to ensure any payments earned continue to qualify as performance-based compensation under IRC Section 162(m). The Committee approved the use of a measure that will provide any eligible executive with a 2010 STIP award based on 1% of the excess of EBDT over $200 million for the performance period, but not to exceed $1.0 million per eligible executive. The Committee can apply negative discretion in determining amounts, if any, to be earned by each executive eligible under the STIP and may consider other qualitative and/or quantitative factors in determining these awards. In terms of our current Named Executive Officers, Charles A. Ratner, James A. Ratner, Ronald A. Ratner and Robert G. O’Brien are participants in this Plan.

Long-Term Incentives: Our long-term incentives align pay with long-term strategic goals and shareholder value creation. They also enhance our retention of senior executives and managers, and facilitate stock ownership. Our long-term incentives consist primarily of two components: cash awards provided through the LTIP, and equity provided primarily through the use of stock options, restricted stock and/or performance shares. In 2008, the Committee approved the addition of performance shares to the award mix since it allows for actual awards earned to be tied directly to our performance as measured by our long-term strategic goals.

Our Named Executive Officers and other senior management members are currently eligible to receive long-term incentives. Under the LTIP, most equity awards are granted annually while cash awards are generally provided over a multi-year time frame to coincide with our strategic planning cycle. This promotes a balanced focus on objectives under the strategic plan in support of long-term value creation.

In determining award levels for Named Executive Officers and senior management, the Committee gives consideration to competitive market practice, employee responsibility level, and internal equity.

Based on a comprehensive competitive benchmarking study conducted by Mercer in early 2008, the annualized LTIP for the CFO position and certain other senior executive positions was targeted at 180% of base salary. Brian J. Ratner’s target was determined to be 120% of his base salary, commensurate with his responsibilities and consistent with benchmark market data for similar positions. Given their substantial ownership interests, the target total annualized LTIP levels for Charles A. Ratner, James A. Ratner and Ronald A. Ratner were maintained at 120%.

The current annualized mix of LTIP awards for Charles A. Ratner, James A. Ratner, Ronald A. Ratner and Robert G. O’Brien is one-third in the form of stock options, one-third in terms of annualized equivalent performance shares and one-third in an annualized equivalent cash award opportunity. Actual awards earned, if any, can be considerably above or below target levels based on our actual versus planned performance relative to strategic goals and stock price appreciation. Given recent changes in equity valuations and the limited availability of shares under the Stock Plan, the actual value of the shares issued under the LTIP to each Named Executive Officer in 2009 was below the targeted levels approved under the LTIP. This is discussed further in the “Equity” section of this document beginning on page 29. Given his level of responsibilities, Brian J. Ratner is currently not provided with a performance share grant opportunity and his annualized mix of awards under the LTIP is one half in the form of an annualized equivalent cash award opportunity, one-quarter in the form of stock options and one-quarter in the form of restricted stock.

Cash LTIP

Our Named Executive Officers participate in the cash-based portion of the LTIP with actual award levels ranging from between 0% to 175% of targeted levels based on performance results over a related performance period. A cash LTIP performance cycle for Charles A. Ratner, James A. Ratner, Ronald A. Ratner and Robert G. O’Brien began effective May 1, 2008 and will run through January 31, 2012. The cash LTIP performance period for Brian J. Ratner began February 1, 2008 and will continue until January 31, 2012. The performance period that began in May 2008 for the majority of Named Executive Officers was driven by our desire to qualify any payments earned as performance-based compensation as defined under IRC Section 162(m). Since the goals were finalized after the end of our first fiscal quarter, we chose with Committee approval, to have the performance period begin with the second quarter.

				Target Annual Award Equivalent																								Percent of 2008 – 2011 Cash LTIP Award opportunity based on:
																								Percentage in
																								the form of
																								annualized
														Percentage in										equivalent					Cumulative					Annualized
									Percentage					the form of					Percentage					Cash LTIP					Corporate					Corporate					Business
				Total					in the					annualized					in the					(paid once at					EBDT per					Total					Unit Total
				LTIP					form of					equivalent					form of					the end of the					share over					Return over					Return over
	Named Executive			Award					Stock					Performance					Restricted					performance					performance					performance					performance
	Officer			Percentage					Options					Shares					Stock					period)					period					period					period
	Charles A. Ratner				120	%				40	%				40	%				0	%				40	%				50	%				50	%				0	%
	James A. Ratner				120	%				40	%				40	%				0	%				40	%				50	%				25	%				25	%
	Ronald A. Ratner				120	%				40	%				40	%				0	%				40	%				50	%				25	%				25	%
	Robert G. O’Brien				180	%				60	%				60	%				0	%				60	%				50	%				50	%				0	%
	Brian J. Ratner				120	%				30	%				0	%				30	%				60	%				50	%				25	%				25	%

Performance goals for these opportunities were derived from our strategic plan at the time. Executives are eligible to earn an incentive that accrues toward a single payment at the end of each performance period, provided that performance objectives are met. For example, the annual cash-based LTIP accrual for the CEO is targeted at 40% of his base salary or 160% of his average base salary over the performance cycle.

The cumulative total target, threshold and maximum award opportunities under the cash-based LTIP are shown below for the performance periods ending January 31, 2012. The corresponding dollar amounts for threshold, target and maximum awards are shown under the Grants of Plan-Based Awards table on page 39.

				Cumulative Cash LTIP Award Opportunity expressed as a Percentage of Average Base
				Salary over the multi-year Performance Period beginning in 2008 and ending
				January 31, 2012
	Named Executive Officer			Cumulative Target					Cumulative Threshold					Cumulative Maximum
	Charles A. Ratner				160	%				80	%				280	%
	James A. Ratner				160	%				80	%				280	%
	Ronald A. Ratner				160	%				80	%				280	%
	Robert G. O’Brien				240	%				120	%				420	%
	Brian J. Ratner				240	%				120	%				420	%

Actual awards earned under the cash LTIP could range from 0% to 175% of target. Brian J. Ratner’s cumulative target under the cash LTIP cycle that began in 2008 is greater than the targets for Charles A. Ratner, James A. Ratner and Ronald A. Ratner, since half of his annualized equivalent LTIP is in this form, while only a third of that for these other Named Executive Officers is in the form of cash. The Committee determines awards payable to the Chief Executive Officer. The Committee also reviews and approves awards payable to other participants.

In light of the economic climate and business conditions, the Committee in 2009 began to assess whether the cash-based LTIP goals for the 2008 – 2011 performance cycle were still relevant and attainable. As a result of this assessment, in early 2010, the Committee approved the establishment of an additional two-year performance cycle under the cash-based LTIP for Charles A. Ratner, James A. Ratner, Ronald A. Ratner and Robert G. O’Brien. This cycle coincides with a revised strategic planning period encompassing fiscal years 2010 and 2011. In light of current economic and business conditions and our desire to qualify any payments earned under the cash-based LTIP as performance-based under IRC Section 162(m), the Committee approved an award amount for each of these executives that would be equivalent to 1% of the excess of cumulative EBDT over $400 million for the performance period, but not to exceed $2.0 million per executive, and subject to the Committee’s exercise of negative discretion in determining any final award earned. The actual amounts, if any, earned by each executive will be based on achievement of the aforementioned cumulative EBDT goal and will take certain other qualitative and/or quantitative factors as determined by the Committee, into account. In approving the new two-year cycle, the Committee considered the following:

	•		The need to more closely align the incentive opportunities for these select Named Executive Officers to revised longer-term business goals as outlined in the strategic business plan. Revised goals will take into account significant changes in the business and economic conditions since early 2008, when the most recent multi-year cash-based LTIP performance period began.
	•		The likelihood that the goals established in 2008 for the multi-year cash-based LTIP performance period ending January 31, 2012 may not be achieved. However, should the goals established for the multi-year performance period beginning in 2008 be achieved in addition the two-year performance goals under the cash-based LTIP, the Committee could still choose to apply negative discretion to either award to ensure overall pay earned is appropriate relative to levels of performance achieved and consistent with market pay conditions at the time.
	•		Our desire to pay our senior executives competitively, aligned with achievement of business objectives. Our overall compensation program places significant emphasis on longer-term performance in determining overall pay opportunities for senior executives, and it is somewhat unlikely that the original goals set forth under different assumptions in early 2008 for the cash-based LTIP will be achieved, thus impacting the overall potential of offering a competitive pay package.

Equity

In terms of equity awards, we typically grant stock options and/or restricted stock under the LTIP following the release of full year earnings for the prior fiscal year. Stock options have an exercise price equal to the closing market price of our Class A Common Stock on the date of grant. The Committee has not granted options, and does not intend to grant options, with an exercise price less than the closing market price of our Class A Common Stock on the grant date, reprice options or issue options with “reload” provisions.

Stock option and/or restricted stock awards may be granted to Named Executive Officers as well as other senior executives and managers of significant subsidiaries as determined by the Committee, based on an evaluation of their duties and overall performance including current and potential contributions to our success. We use different award tiers that are based on recommendations by Mercer that take into consideration market pay practices to determine the mix of options, restricted stock and/or performance shares. Options will only have value if our stock price appreciates from the time of grant to the time of exercise. In order to enhance employee retention, stock options typically vest over a four-year period following the date of grant as follows:

	•		25% after two years;
	•		another 25% after three years; and
	•		the remaining 50% after four years.

Stock options granted are exercisable for up to 10 years from the date of grant to allow executives to maximize pre-tax gains and focus them on long-term shareholder value creation. For 2009, we used the Black-Scholes option pricing model to determine grant levels. As discussed earlier in this document, and as shown in the table contained on page 28 under the LTIP, equity awards are expressed as a targeted annualized percentage of pay. However, given the significant decline in the value of our stock price between 2008 and early 2009, we would have had to issue several times as many shares in 2009 as we had in 2008 to achieve the desired percentage of pay target for our executives. As a result, the Committee evaluated several options for 2009 in determining the level of equity grants to be provided under the LTIP to Named Executive Officers and other executives.

The Committee considered whether to provide Named Executive Officers with the same number of options and restricted shares as they had received in 2008. However, given the significant decline in share prices and corresponding Black-Scholes values, the total value of such grants in 2009 would have been a small fraction of the amounts called for under the LTIP. Absent recent events in the market, the Committee for now remains committed to using a value-based approach in determining shares to be provided under the LTIP, therefore this alternative was not chosen.

The Committee also considered whether to simply issue sufficient shares at then current market values to each Named Executive Officer and other participating executives in order to provide the targeted value of options and restricted stock called for under our program. In addition to depleting nearly all of the remaining authorized shares available, the Committee considered survey data from other companies and the appropriateness of potentially issuing a substantial number of additional options and shares using historically low share price valuations, and concluded this would not be appropriate.

After careful consideration, the Committee approved the issuance of shares subject to a cap not to exceed 0.95% of weighted average common shares outstanding. This run rate cap was deemed to be within an acceptable range relative to benchmark data and also did not result in exhausting all of the remaining shares available for issuance under the Stock Plan. Additionally for 2009, greater emphasis was placed on the issuance of restricted shares for certain executives under the LTIP in lieu of stock options. However, as in prior years, Messrs. Charles A. Ratner, James A. Ratner and Ronald A. Ratner continued to receive their equity grants in the form of stock options.

As noted earlier in this document, the total value of shares granted to each executive during 2009 was significantly lower than in 2008. As a result, the Committee approved the use of a greater number of restricted shares relative to options to partially compensate for the significant decline in the value of grants. During fiscal year 2009, we granted an aggregate total of 86,590 stock options to Named Executive Officers, allocated among them as shown in the Grants of Plan-Based Awards Table included in this proxy statement. We granted a total of 44,656 shares of restricted stock to Robert G. O’Brien. Of these and consistent with the approach used with most other executives, approximately 20,500 shares represented a portion of his LTIP based equity grant that had been converted from options to restricted stock for 2009. The remaining shares of restricted stock we granted to Mr. O’Brien represented an award to promote retention and provide an enhanced ownership stake. Given his annualized equivalent targets under the LTIP would have called for a mix of stock options and restricted stock, Brian J. Ratner received a grant of 10,189 restricted shares. The grant date value of these shares is included on page 39 in the Grants of Plan-Based Awards Table.

Charles A. Ratner, James A. Ratner, Ronald A. Ratner and Robert G. O’Brien were provided with a performance share grant opportunity during 2008 under which they were eligible to earn shares of stock based on the performance of our Company over a three and three-quarter year period ending January 31, 2012. The performance period that began in May 2008 for performance share grant eligible Named Executive Officers was driven by our desire to qualify any payments earned as performance-based compensation as defined under IRC Section 162(m). The actual number of shares earned, if any, will be determined using the same measures and targets used to calculate awards earned under the cash LTIP over the same performance period. The number of performance shares earned could range from between 0% and 175% of the target annualized equivalent amount times four. We used the same measures and targets for this performance share grant opportunity as under the cash-based LTIP. The Committee approved the use of performance shares since it believes use of these shares effectively aligns the amounts earned with actual performance of the organization.

				Cumulative Performance Share Award Opportunity expressed as a Percentage of
				2008 Base Salary over the three and three-quarter year Performance Period ending
				January 31, 2012
	Named Executive Officer			Cumulative Target					Cumulative Threshold					Cumulative Maximum
	Charles A. Ratner				160	%				80	%				280	%
	James A. Ratner				160	%				80	%				280	%
	Ronald A. Ratner				160	%				80	%				280	%
	Robert G. O’Brien				240	%				120	%				420	%
	Brian J. Ratner			Not Applicable					Not Applicable					Not Applicable

The corporate and business unit targets for performance used under both the cash LTIP and for performance share award determination purposes take into consideration our long-term strategic business plan. The strategic plan is reviewed and approved in principle by the Board of Directors. When establishing the strategic plan, management and the Board of Directors consider:

	•		The historical performance of the Company over extended time periods;
	•		External elements such as economic conditions and competitive factors; and
	•		Company capabilities and performance objectives.

The actual value of any shares earned will be dependent on the share price as of the date received. The Committee determines awards payable to the CEO. The Committee also reviews and approves awards payable to other participants.

Similar to the cash-based LTIP and in light of the economic climate and business conditions, in early 2010, the Committee considered whether an additional two-year grant opportunity for performance shares was appropriate for Charles A. Ratner, James A. Ratner, Ronald A. Ratner, Robert G. O’Brien and select other senior executives. However, in lieu of a new two-year performance share grant opportunity, the Committee approved the conversion of a portion of an annualized performance share grant opportunity at target into the form of additional options and restricted shares for Charles A. Ratner, James A. Ratner, Ronald A, Ratner and Robert G. O’Brien. In making this decision, we considered the accounting treatment and tax deductibility of any additional performance share awards along with the retentive value of a two-year performance period and concluded that a shift toward a mix of options and restricted shares, which vest over four years, was appropriate for the 2010 grants.

Benefits and Other Perquisites: Consistent with our pay for performance philosophy, Named Executive Officers do not receive a large number of perquisites or supplemental benefits. Named Executive Officers as well as other members of senior management receive customary benefits such as group term life insurance. Likewise, these individuals are eligible to participate in a qualified 401(k) retirement plan, which provides for an employer matching contribution of up to $3,500 per year. We do not maintain a qualified defined benefit pension plan.

To supplement retirement benefits and enhance retention of senior executives, all Named Executive Officers also participate in an unfunded nonqualified supplemental retirement plan administered by the Committee, which historically provided for discretionary annual accruals that only begin to vest after 10 years of service, with full vesting after 15 years of service. Effective with the 2009 fiscal year, no new participants will be admitted into this plan and no additional annual contributions will be made on behalf of Named Executive Officers and other senior executives and managers.

We also provide our Named Executive Officers with an executive medical benefit and the premium cost associated with a long-term care policy. Each Named Executive Officer is also offered a company-provided car or allowance for personal use. Certain Named Executive Officers also receive reimbursements for club dues. The value of these items is included in the All Other Compensation column of the Summary Compensation Table on page 37.

Additionally, a death benefit is provided to all Named Executive Officers, except for Brian J. Ratner. The benefit is equal to the annual salary of each executive at the time of death and is paid to his designated beneficiaries in the form of salary continuation for a period of five years in the event the executive dies while in our employment. Further information on the value of these benefits is provided in the “Potential Payments upon Termination” section of this proxy statement.

Additional Executive Compensation Policies

Stock Ownership Guidelines: We encourage executive stock ownership but do not currently have formal guidelines in place due to the significant ownership levels of the executive officer team. All our Named Executive Officers currently own Forest City Stock.

Employment Agreements: As disclosed in the Summary Compensation Table included elsewhere in this proxy statement, we have employment agreements with Charles A. Ratner, James A. Ratner, and Ronald A. Ratner that provide for a minimum base salary, death benefit agreements and are renewable for one-year periods. In addition, the agreements for Charles A. Ratner, James A. Ratner and Ronald A. Ratner contain a non-compete provision. Robert G. O’Brien has a death benefit agreement with us but no employment contract. Brian J. Ratner does not have a death benefit agreement or an employment contract with us.

Tax and Accounting Implications

Deductibility of Executive Compensation: Section 162(m) limits the amount of compensation provided to certain executive officers that publicly-traded companies can deduct to $1 million per “covered employee” unless it qualifies as “performance-based” (as defined under Section 162(m)). In order to qualify as “performance based”, compensation must be based solely on pre-established objective goals under a shareholder approved plan, with no positive discretion permitted when determining award payouts. To the extent any of the Named Executive Officers have received non-qualifying compensation in excess of the $1 million limit it was not deducted. The Committee’s policy with respect to Section 162(m) is to consider tax deductibility while also maintaining the flexibility to structure the executive compensation program to support Company and shareholder interests, even if some compensation is not fully tax deductible.

Amendments to the STIP and LTIP approved by shareholders in 2008 allow for payments under these plans to Named Executive Officers to qualify as performance-based under Section 162(m). Additionally, the Stock Plan was amended to permit the use of performance shares and allowed these shares to qualify for the performance-based exception under Section 162(m).

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion & Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion & Analysis be included in this proxy statement.

		Jerry V. Jarrett (Chairman)		Scott S. Cowen		Michael P. Esposito, Jr.
		Deborah L. Harmon		Stan Ross		Louis Stokes

The foregoing Compensation Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that we specifically incorporate the information by reference and shall not otherwise be deemed filed under such acts.

Potential Payments upon Termination

The following discussion outlines the payments that would be provided to our Named Executive Officers in the event of termination, retirement or death as of January 31, 2010. Given the significant ownership interests in Common Stock by our Named Executive Officers as described in the Compensation Discussion & Analysis, we do not provide for individual severance or change of control benefits.

Short-Term Incentive Plan

Termination Event

Retirement

Voluntary

Involuntary

Involuntary with

Death

without Cause

Cause

No STIP unless

No STIP unless

No STIP unless

Eligible for pro-

Eligible for pro-

deemed by

deemed by

deemed by

rated payment paid

Name

rated payment

Committee

Committee

Committee

to estate

$0, unless

$0, unless

$0, unless

Charles A. Ratner

$400,000

Committee uses

Committee uses

Committee uses

$400,000

discretion

discretion

discretion

$0, unless

$0, unless

$0, unless

James A. Ratner

$360,000

Committee uses

Committee uses

Committee uses

$360,000

discretion

discretion

discretion

$0, unless

$0, unless

$0, unless

Ronald A. Ratner

$360,000

Committee uses

Committee uses

Committee uses

$360,000

discretion

discretion

discretion

$0, unless

$0, unless

$0, unless

Robert G. O’Brien

$380,000

Committee uses

Committee uses

Committee uses

$380,000

discretion

discretion

discretion

$0, unless

$0, unless

$0, unless

$0, unless

$0, unless

Brian J. Ratner

Committee uses

Committee uses

Committee uses

Committee uses

Committee uses

discretion

discretion

discretion

discretion

discretion