Skip to main content

In bumpy conversion to REIT, Forest City announces plan to raise $750 million by issuing new stock

Forest City Enterprises, attempting a complicated conversion to a dividend-paying real estate investment trust (REIT) by 2016, yesterday announced quarterly losses as well as an effort to raise some $750 million by issuing 32.5 million shares of common stock. (The stock price is about $24.)

That represents inevitable dilution of the company's stock value, though the last--and rare--time Forest City issued stock, during the recession, it turned out to be a bargain, since the stock sold at $6.60.

As stated in a press release, the company intends to use up to $400 million of the net proceeds to finance its previously announced acquisition of the 49 percent equity interest of Health Care REIT, Inc., as well as pay off/reduce debt and for general corporate purposes.

Converting to REIT

Forest City framed it all as progress. Another press release quoted CFO Bob O'Brien:
"Since we launched our strategic plan at the end of 2011, through March 31, 2015, total debt plus preferred equity has been reduced by $2.4 billion, at pro-rata ($2.3 billion at full consolidation), with reduced corporate recourse obligations of $847 million and lower annual fixed charges of $53 million," O'Brien noted. "Over that period, our ratio of net debt to net operating income (NOI) has gone from more than 13 times, to 11 times today. We expect to accelerate our deleveraging activities with the objective of reducing our leverage to the range of 7 to 8 times net debt to NOI over the next 18 to 36 months."
The planned REIT conversion involved costs of $6.2 million ($3.8 million, net of tax) for the first quarter, and such costs will continue through the REIT conversion next year. Forest City CEO David LaRue also said the company will reinstate a quarterly dividend shortly after the REIT conversion.

Forest City plans to sell its shares of the Barclays Center and the Brooklyn Nets before conversion to a REIT.

First quarter results

A press release, Forest City Reports 2015 First-Quarter Results, highlighted the following
- Operating FFO up 20% over first quarter 2014
- Overall Comp NOI up 5.3%, led by retail and apartments
- Strength in regional malls: comp sales hit $550 psf; new, same-space leases up 27%
- FFO negatively impacted by loss on extinguishment of debt, REIT conversion costs
- Arena annual stabilized NOI estimate revised downward to $55 million (see my coverage)
While Operating FFO (funds from operations) was indeed up, the company also had a quarterly net loss of $54.2 million, or $0.27 per share, compared with net earnings of $15.5 million, or $0.08 per share, for first quarter of 2014. In 2014, Forest City's results were positive because it had sold several properties.

"Our first-quarter results reflect the positive impact of our strategies of growing NOI from our mature portfolio and deleveraging at the corporate and property levels," said  LaRue, Forest City president and chief executive officer. "Operating FFO was up significantly for the quarter, primarily driven by increased NOI from the mature portfolio and lower interest expense. FFO was negatively impacted primarily by loss on extinguishment of debt from our first-quarter exchange transactions that resulted in $288.8 million of Senior Notes being converted to Class A common stock."

"Growth in office comp NOI continues to reflect the lease-up of vacancies at One Pierrepont Plaza in Brooklyn," LaRue said. That's where Hillary Clinton's campaign took two floors.

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

No, security guards can't ban photos. Questions remain about visibility of ID/sticker system.

The bi-monthly Atlantic Yards/Pacific Park Community Update meeting June 14, held at 55 Hanson Place, addressed multiple issues, including delays in the project, a new detente with project neighbors,concerns about traffic congestion, upcoming sewer work and demolitions, and an explanation of how high winds caused debris to fly off the under-construction 38 Sixth Avenue building. I'll have more coverage.
Security issues came up several times at the meeting.
Wayne Bailey, a resident who regularly takes photos and videos (that I often use) of construction/operations issues that impact residents, asked representatives of Tishman Construction if the security guard at the sites they're building works for them.
After Tishman Senior VP Eric Reid said yes, Bailey asked why a guard told him not to shoot video of the site, even though he was on a public street.

"I will address it with principals for that security firm," Reid said.
Forest City Ratner executive Ashley Cotton, the …

Atlantic Yards/Pacific Park graphic: what's built/what might be coming + FAQ (post-dated pinned post)

This graphic, posted in January 2018, is post-dated to stay at the top of the blog. It will be updated as announced configurations change and buildings launch. Note the unbuilt B1 and the proposed shift in bulk to the unbuilt Site 5.

The August 2014 tentative configurations proposed by developer Greenland Forest City Partners will change. The project is already well behind that tentative timetable.

How many people are expected?

Atlantic Yards/Pacific Park has a projected 6,430 apartments housing 2.1 persons per unit (as per Chapter 4 of the 2006 Final Environmental Impact Statement), which would mean 13,503 new residents, with 1,890 among them in low-income affordable rentals, and 2,835 in moderate- and middle-income affordable rentals.

That leaves 8,778 people in market-rate rentals and condos, though let's call it 8,358 after subtracting 420 who may live in 200 promised below-market condos. So that's 5,145 in below-market units, though many of them won't be so cheap.

As …

The passing of David Sheets, Dean Street renter, former Freddy's bartender, eminent domain plaintiff, and singular personality

David Sheets, longtime Dean Street renter, Freddy's bartender, eminent domain plaintiff, and singular personality, died 1/17/18 in HCA Greenview Hospital in Bowling Green, KY. He was 56.

There are obituary notices in the Bowling Green Daily News and the Wichita Eagle, which state:
He was born in Wichita, KS where he attended public Schools and Wichita State University. He lived for many years in Brooklyn, NY, and was employed as a legal assistant. David's hobby was cartography and had an avid interest in Mass Transit Systems of the world. David was predeceased by his father, Kenneth E. Sheets. He is survived by his mother, Wilma Smith, step-brother, Billy Ray Smith and his wife, Jane all of Bowling Green; step-sister, Ellen Smith Alexander and her husband, Jerry of Bella Vista, AR; several cousins and step-nieces and step-nephews also survive. Memorial Services will be on Monday, January 22, 2018 at 1:00 pm with visitation from 10:00 am to 1:00 pm Monday at Johnson-Vaughn-Phe…

Some skepticism on Belmont hockey deal: lease value seems far below Aqueduct racino; unclear (but large?) cost for LIRR service

As I wrote for The Bridge 12/20/1, The Islanders Say Bye to Brooklyn, But Where Next?, the press conference announcing a new arena at Belmont Park for the New York Islanders was "long on pomp... but short on specifics."

Notably, a lease valued at $40 million "upfront to lease up to 43 acres over 49 years... seems like a good deal on rent for the state-controlled property." Also, the Long Island Rail Road will expand service to Belmont.

That indicates public support for an arena widely described as "privately financed," but how much? We don't know yet, but some more details--or at least questions--have emerged.

An Aqueduct comparable?

Well, we don't know what the other bid was, and there aren't exactly parcels that large offering direct comparables.

But consider: Genting New York LLC in September 2010 was granted a franchise to operate a video lottery terminal under a 30 year lease on 67 acres at Aqueduct Park (as noted by Gov. Andrew Cuomo).

As…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…