By Lorna Pappas

CLOSE UP

AGE: 65 EDUCATION: B.A. from Colgate University; J.D. from New York University School of Law FAMILY: Wife, four children and seven grandchildren HOBBIES: Travel, hiking, skiing, community service LAST TWO BOOKS READ: Biographies of Albert Einstein and Abraham Lincoln FAVORITE VACATION SPOT: Israel COMMUNITY AND PROFESSIONAL ACTIVITIES: Executive committee of the Greater Cleveland Partnership; trustee of the Mandel Associated Foundations and David and Inez Myers Foundation; on the boards of the Musical Arts Association, American Greetings, RPM International, the University Hospital of Cleveland, the Jewish Agency and the United Jewish Communities; former chair of the Cleveland Foundation, Jewish Community Federation of Cleveland and the United Way of Cleveland; active with several industry initiatives including the Board of Governors of NAREIT.

The entrepreneurial spirit within Forest City Enterprises (NYSE: FCE.A) has scripted an interesting, all-American success story. From an immigrant Polish family constructing residential garages in the 1920s to a U.S. real estate conglomerate with more than $9 billion in asset value in 2007, Forest City has grown beyond the wildest dreams of its founders. In fact, the company reported its 27th consecutive year of growth in earnings before depreciation, deferred taxes and amortization (EBDT/EBDTA).

Charles Ratner, president and CEO, is a son of one of the founders and namesake of the first Ratowczer (later changed to Ratner) to emigrate to the United States in 1906. As a child, he watched his father and uncles start the company as a small lumberyard. He later worked in the family business as a carpenter's apprentice and, after graduating from law school, he ran a chain of the family's home centers before entering into the company's real estate department.

Today, the company boasts a diverse portfolio of shopping centers, urban and suburban apartment villages, land development for master-planned communities and retail, office, hotel and mixed-use properties totaling $9.2 billion in asset value as of April 2007. Approximately 70 percent of those assets are in core urban U.S. markets, including the company's six targeted markets: Boston; California (including San Francisco, Los Angeles, Rancho Cucamonga and Simi Valley); Chicago; Denver; New York City/Philadelphia and Washington D.C./Baltimore.

Job, community and family are as important to Ratner today as they were to his father and uncles when they came to the United States. Recently, Portfolio sat down with Ratner to discuss company values and what's next for Forest City.

Portfolio: Your family ties put this industry in front of you, but what about real estate has made you build your career in it?
Ratner: After entering the family business, I learned that real estate is an excellent way to give back to the community by creating unique, attractive environments in which people can live, work, shop and play. Real estate provides a constructive, healthy and exciting environment to enhance their quality of life. I have a rewarding career.

Portfolio: I've heard a lot about the importance of values at your company. What kind of environment do you strive to create at Forest City?
Ratner: There are a number of factors that characterize Forest City. Most importantly, I want to maintain a culture within the company. I inherited a great culture from a wonderful family, and today that family is more than blood. Many of us at Forest City, related or not, have been together for decades, and have accomplished what none could do alone. I have a commitment to a Forest City family that I continually try to foster.

I also believe in an open environment. Bureaucracy can lead to limited opportunities for people to disagree and challenge opinions, which can stifle corporate growth. It's important to me to maintain and cultivate the openness we've worked hard to establish.

Lastly, I have a strong belief in and commitment to the company's eight core values, which are integrity/openness, community involvement, sustainability, entrepreneurial spirit, teamwork, diversity, value orientation and performance ethic.

Portfolio: You listed sustainability as one of the eight core values. Why is this so important to the company?
Ratner: Respecting the environment is an absolute moral and business imperative. Sustainable development and its operating philosophy are competitive necessities. We have integrated the principles of sustainability into the projects we develop and manage.

Last year we appointed two directors to lead our sustainability and energy management initiatives. We also mobilized a cross-functional, intra-company council to help focus on sustainability as a company-wide priority.

Forest City also uses the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) guidelines to assess the environmental performance of our development projects. We see sustainability as the balancing of social systems environmental resources and economic objectives, a triple bottom line of people, planet and profit. It is the right, productive and crucial thing to do, and I can't overstate its importance in this business.

Portfolio: What differentiates Forest City from other real estate companies? More importantly, what are the main attributes attracting investors?
Ratner: We are not a REIT, though the advantages of being a REIT are wonderful, and the REIT industry has elevated real estate as an investment class.

We are a C-corporation that's been public since 1960, when REITs were created. Appropriate tax planning provides us the most advantages without the dividend requirements of REITs, while still topping their total returns. As a C-corporation, we have relatively more capital available for growth, which is important to us as a developer.

Portfolio: What is the company's development strategy?
Ratner: Forest City primarily develops new real estate as opposed to acquiring existing assets. We believe that more value is added via ground-up development, and though there's more risk involved in new versus acquired real estate, it's worth the higher returns.

Investors are more comfortable with this risk when they see a proven track record—another of our competitive advantages. In both low- and high-growth market situations, Forest City consistently has grown its cash flow. In the last 10 years we've seen a 25 percent compounded annual growth rate on our stock price. We continually bring developments from inception to completion while creating a positive spread over our cost of capital, creating real value for shareholders that's reflected in the marketplace.

Additionally, the company's pipeline includes more than 20 projects under development, including four mixed-use projects, totaling more than $1.9 billion as of April 30, 2007.

Portfolio: Looking ahead, what will be the biggest challenges facing Forest City in the next decade?
Ratner: A recurring challenge is to relate to the marketplace as a C-corporation, not a REIT, that is diversified and largely involved in development, which has been seen as a greater risk. The challenge is to convince the investing public that this is a competitive advantage.

Additionally, over the next 10 years, employees will be the main consideration. If we have the right people and talent executing this business, we will continue to be successful.

Portfolio: When you are not changing the future course for Forest City, how do you spend your free time?
Ratner: I have two passions other than this business: one is family, and the other is community involvement.

The first, and most important, is my family: my wife, Ilana, our four children and our seven grandchildren are very committed to our lives together. My wife and I travel a lot and have an apartment in Jerusalem. We are committed to the future of Israel, and our work for that agenda is a great source of comfort.

Civic activity is part of the culture in which I grew up, and it's fostered here at Forest City. We have a community engagement initiative in which employees are encouraged to give back in a variety of ways. For example, this past June, on Forest City's annual Community Day, more than 1,300 employees in 36 cities traded office duties to plant flowers, build fences, serve meals, etc., in the communities in which they live and work. They donated more than 11,000 hours of community service on that one day alone.

I believe your life rests on a stool with three legs: job, community and family. All have to be strong for your life to be in balance. Clearly the most important is family, but the others also are vital. I'm having fun and making a difference at the same time.