Thursday, March 12, 2009

Purchase of FCE bonds, sale of FCE properties suggest corporation faces unsteady fate

NoLandGrab (with some help from Gari N. Corp) beats me to the punch regarding Atlantic Yards developer Forest City Enterprises' current financial difficulties.

First, Yahoo Finance, Tim Melvin of RealMoney.com declares that Third Avenue, the largest institutional holder of Forest City Enterprises stock, is also buying senior debt that would yield better than 30%.

It's a huge return should the company survive the recession or, according to Gari N. Corp, a potentially large return even if FCE hits bankruptcy, given that bondholders would be repaid first. He comments: "The fact that Third Ave is now buying bonds as well as stock suggests that it has a very real concern that the stock would be wiped out in bankruptcy."

FCE selling properties

The Cleveland Plain Dealer, citing newsletter Real Estate Alert, says that FCE is seeking buyers for 15 properties: 10 apartment properties, four shopping centers and the office portion of University Park at MIT, a mixed-use development at the Massachusetts Institute of Technology in Cambridge, MA.

Four shopping centers? I'll bet none are in Brooklyn, NY, where synergy is a goal. One reason why FCE values Atlantic Yards is it would increase the value of the Atlantic Terminal and Atlantic Center malls across Atlantic Avenue.

Another is that AY would not only stem significant losses in operating the Nets, but it would raise the value of the team.

So FCE likely will stick with Atlantic Yards

NLG points out that FCE stock closed at $4.25, down 9%. Above is the past week of FCE news via Morningstar.

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