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Forest City Enterprises, long a family-controlled corporation, to shift to a majority of independent directors; also, new plans to sell land, change corporate focus

Forest City Enterprises (FCE), parent of Brooklyn developer Forest City Ratner, is making some changes.

It has decided to sell its land band business to focus on"core rental products - apartments, office and retail properties" in core markets (including New York), and also to divest itself from properties in non-core markets.

Also, long controlled by some interlocking families, namely the Ratners, FCE is shifting its board to a majority of independent director, rather than family members.

That may be an effort to enhance credibility in the marketplace, but even independent directors are not necessarily corporate watchdogs, as history has proven again and again. FCE public board meetings, at least according to webcasts, show a clubby, go-along atmosphere.

Repositioning the company

The new business focus will cost the company's bottom line--an impairment charge means that the assets are worth less on the market than currently assumed--but also will provide new cash to drive new investments and pay off loans.

From the press release:
A primary driver of the company's strategic plan is greater focus on core rental products - apartments, office and retail - in core markets - New York, Washington, D.C., Boston, Dallas, Los Angeles, San Francisco and Denver.
As part of the commitment to greater focus on core markets and products, Forest City will strategically reposition or divest portions of its land business and is actively reviewing alternatives to do so. The land business buys and sells raw land, develops subdivisions and sells lots to homebuilders. The land portfolio consists of approximately 35 active projects primarily located in the Southwestern U.S., Texas, the Carolinas and Ohio.
As a result of this decision, Forest City expects to recognize a non-cash impairment charge of approximately $150-$165 million, pre-tax, in the quarter ended January 31, 2012. Anticipated cash proceeds from executing the repositioning will be used to both pay down debt and selectively activate new development.
The press release on directors

A press release from FCE, Forest City Announces Governance Actions:
CLEVELAND, Feb. 2, 2012 /PRNewswire via COMTEX/ --Forest City Enterprises, Inc., (NYSE: FCEA and FCEB) today announced that its board of directors has determined to reduce the size of the board from the current 15 authorized seats to 13, effective with the company's annual meeting of shareholders in June

The board further determined that it expects seven of the 13 director nominees at the upcoming annual meeting to be independent, subject to identifying a suitable additional independent candidate for nomination to the board.

Two non-independent directors, James A. Ratner and Joan K. Shafran, will complete their service as directors at the annual meeting and will not be re-nominated. Ratner is an executive vice president of Forest City Enterprises and is chairman and CEO of the company's Commercial Group, its largest business unit. He will continue to serve the company in those capacities.

Commenting on the planned change, Chairman Charles A. Ratner stated, "The board determined that reducing the overall size of the board and moving to a majority of independent directors are prudent steps in keeping with our continuing commitment to good corporate governance practices. The board thanks Jim and Joan for their diligent and faithful service as directors."

"Forest City has a rich culture and a history of growth and adapting to change," Ratner added. "The actions we are taking demonstrate our commitment to that legacy and to continuing to improve, evolve and grow."
An analyst who follows the company applauded. Reported the Plain Dealer of Cleveland:
"There are two things that have greatly improved the governance at Forest City in the last year," said Paul Adornato, an analyst who tracks the company for BMO Capital Markets. "First, the company appointed the first non-family member as CEO in the company's history. Secondly, they have reduced the size of the board and have independent directors comprising the majority of the board.
"These are both shareholder-friendly moves."
Well, where were the analysts regularly complaining about the "shareholder-unfriendly" board dominated by one family?

The current board

Independent (6): Arthur F. Anton, Scott S. Cowen, Michael P. Esposito Jr., Deborah L. Harmon, Stan Ross, Louis Stokes

Family (7): Brian J. Ratner, Bruce C. Ratner, Charles A. Ratner, James A. Ratner, Ronald A. Ratner, Deborah Ratner Salzberg, Joan K. Shafran

Ex oficio (1): David J. LaRue (the first non-family CEO)