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Forest City Enterprises reports losses, offers details: 84% of arena income, "over 200" arena events, about $500M investment in Atlantic Yards

Forest City Enterprises yesterday announced FFO (funds from operations), Operating FFO, net earnings/loss and revenues for the fiscal first quarter ended April 30, 2013.

As noted below, an accompanying investor presentation offered details on arena income flow, the projected number of events, and the amount of money invested in Atlantic Yards.

First-quarter 2013 FFO was $53.1 million, compared with $89.2 million in the first quarter of 2012. The company blamed non-recurring factors including lower commercial land sales, decreased FFO from the change in fair market value of nondesignated derivatives, and a loss on extinguishment of debt. (Here's the AP story.)

Among the problems was $3.4 million of lower NOI net operating income (NOI) from an anticipated vacancy at One Pierrepont Plaza in Brooklyn.

The first-quarter net loss attributable to Forest City Enterprises, Inc. was $19.4 million, compared with net earnings of $22.8 million in the first quarter of 2012. Among the positive signs were lower allocated losses for the company's share of the Nets ($4.0 million)."

Looking on the bright side

"As anticipated and previously discussed with investors, our first-quarter FFO results reflect the impact of decreased capitalized interest as we have reduced the size of our under-construction pipeline," said David J. LaRue, Forest City president and chief executive officer in a statement. "Overall comparable net operating income for the quarter was impacted by the timing of vacancies in our New York specialty retail portfolio and underperformance by our apartments in non-core markets. Seasonal factors, including increased utility and operating expenses due to the harsher winter in several markets, contributed to that underperformance.

"Despite these impacts in the first quarter, we continue to see solid underlying fundamentals, as illustrated by strong positive gains in leasing spreads in both our office and retail portfolios during the quarter, together with continued rent growth and increased comparable occupancy in our multifamily portfolio."

"During the quarter, we achieved significant milestones in executing the key drivers of our strategic plan," he stated, citing several financing transactions and an agreement with affiliates of QIC, a large large institutional investment managers in Australia, to form joint ventures to recapitalize and invest in eight regional retail malls.


The release stated:
In Brooklyn, work continues on B2 BKLYN, the first residential tower at Atlantic Yards, adjacent to Barclays Center. The 32-story tower will have 363 units, half of which will be reserved for low, moderate and middle income households. B2 BKLYN is being built using a modular construction process in partnership with Skanska USA. Work on the foundation is underway. Production of modules is expected to begin by mid-summer at a factory in the Brooklyn Navy Yard, with delivery to the site beginning in the fall. The project is expected to be completed in the second quarter of 2014.
The arena mortgage: $374 million

According to 10Q form dated 4/30/13:
As of April 30, 2013, we had three nonrecourse mortgages greater than five percent of our total nonrecourse mortgage debt and notes payable. The mortgages, encumbering New York Times, an office building in Manhattan, New York, Westchester’s Ridge Hill, a mixed-use retail project in Yonkers, New York, and Barclays Center, a sports and entertainment arena in Brooklyn, New York, have outstanding balances of $640,000,000, $469,000,000 and $373,622,000 respectively, at April 30, 2013.
An investor presentation

An Investor Presentation released yesterday offered some details on Forest City projects.

The arena has 84% of its contractually obligated income in place (vs. 82% in the first quarter, which was little more than two months ago). That means net operating income (NOI) is expected to stabilize in 2016, after the Islanders move.

The arena projects "over 200 events" a year. Once, as in a 9/10/10 press release, the number was "more than 225 events." Arena CEO Brett Yormark recently said "over 220 events." 

In another slide, Forest City cites its cash investment in Atlantic Yards of "approximately $500 million." In July 2009, Forest City Ratner executive MaryAnne Gilmartin said Forest City Ratner FCR had spent over $500 million on land acquisition, construction, demolition, and soft costs.