"It's a process and an issue we continue to look at," CEO David LaRue said. "We still have substantial NOLs [net operating losses] that allow us as a C Corp to continue to be very tax-efficient... As we go through repositioning, and go through non-core asset sales, it gives us some additional flexibility."
Forest City has been selling assets in non-core areas like Cleveland, its home base. Indeed, the Plain Dealer of Cleveland reported yesterday:
The REIT decision follows years of transformation at Forest City, which has left the land business and sold off properties in secondary markets including Cleveland while focusing on office buildings, apartments and shopping centers in major cities.
Today, Forest City issued a statement, Forest City to convert to a REIT, continue to pursue strategic plan initiatives, indicating REIT status would begin in 2016.
"We will continue to leverage our core competencies in high-barrier markets, while we continue to reshape our business, improve our balance sheet, and transition to a REIT structure," LaRue added. "Further, our undervalued operating portfolio is well positioned to benefit from strong growth in the key urban markets where we are focused, and we have an identifiable pipeline of additional opportunities in those markets that we believe will fuel further incremental growth."
CFO Bob O'Brien indicated that "we expect to utilize the majority of our net operating loss carryforwards during 2015." Becoming a REIT would "allow us to maintain a tax-efficient structure to continue to drive shareholder value, while also instituting a regular quarterly dividend to shareholders." Forest City killed its dividend during the recession.
The timing seems curiously coincident--or coordinated?--with the news/leak that Nets principal owner Mikhail Prokhorov is exploring the sale of his share of the team, which at the very least would help Forest City value its share.