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Forest City announces key step on path to REIT conversion for 2016

On July 13, Forest City Enterprises announced it was furthering announced plans to convert to a real estate investment trust, or REIT, beginning next year:
Forest City Realty Trust, Inc. ("Forest City REIT"), its newly formed wholly owned subsidiary, filed a preliminary proxy statement/prospectus on Form S-4 with the Securities and Exchange Commission (the "SEC") in connection with Forest City's previously announced plan to convert to a real estate investment trust ("REIT"). The REIT conversion is expected to be effective commencing with the taxable year ending December 31, 2016.
As noted by the Plain Dealer, Forest City must get shareholder approval at a yet-unscheduled meeting for the switch. The change will lower federal taxes as the most taxable income will be distributed as dividends. (The company has previously harvested losses.)

The company's name next year will become Forest City Realty Trust, Inc., while Forest City Enterprises will be a subsidiary and all will be known by the Forest City shorthand. And while Forest City will remain headquartered in Cleveland, it will officially become a Maryland company, as that state is more hospitable to REITs.

The boilerplate

The announcement acknowledges risks and uncertainties, including:
Forest City REIT may fail to quality as a REIT effective for the taxable year ending December 31, 2016 or at all, and, if it does quality as a REIT, it may be unable to maintain that qualification; realizing the anticipated benefits to shareholders if the REIT conversion is completed; the impact on Forest City REIT of complying with requirements to qualify as a REIT; the amount and timing of any future distributions by Forest City and/or Forest City REIT, including the 2015 special dividend and those that are required to be made in order to complete the REIT conversion; the impact of issuing equity, debt or both to satisfy the 2015 special dividend and other costs incident to effectuating the REIT conversion; the impact of covenants that could prevent us from satisfying the distribution requirements under the Internal Revenue Code that must be met in order for us to complete the REIT conversion; our lack of experience operating as an entity that qualifies as a REIT; legislative, administrative, regulatory or other actions affecting REITs, including positions taken by the Internal Revenue Service; our ability to obtain the shareholder approval necessary for us to effect the 2015 special dividend and the merger in connection with the REIT conversion; our ability to complete non-core asset dispositions; the impact to our deferred tax liability balance if the REIT conversion is completed; our ability to obtain requisite consents needed to complete the REIT conversion; the state of the economy and financial markets generally and the effect of our industry; and the market for our common stock. 
More information

Forest City REIT has filed a registration statement on Form S-4 containing a preliminary proxy statement of Forest City and a preliminary prospectus of Forest City REIT with the SEC. It did not provide a link, but that document--or, rather, set of documents--is searchable and available on the SEC web site.

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