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Forest City: B2 modular tower requires another extension on forbearance agreement with mortgage lender; result not assured

Maybe I'm reading too much into the tea leaves, but language in two successive filings with the Securities and Exchange Commission suggests that Forest City Enterprises is somewhat less confident that its mortgage loan regarding the ill-fated modular tower, B2 (aka 461 Dean Street) will be extended.

Or maybe things are just moving slowly.

May 2015 statement

Consider the language in the 5/4/15 Form 10-Q:
At March 31, 2015, we have $50,093,000 capitalized on the Consolidated Balance Sheet related to B2 BKLYN. Based on the most current information available, total project costs are estimated to be $162,100,000, after giving effect to an impairment charge recorded in 2014. Significant estimates and assumptions were used to develop the estimated total project costs and may change in the future.
Subsequent to the construction stoppage in 2014, we received a notice of default on the nonrecourse mortgage secured by B2 BKLYN. We have since entered into a forbearance agreement with our lender which expires on June 8, 2015 and are currently in negotiations for a longer term agreement. In the event we are unable to complete the negotiation of a longer term agreement, or cure the default, we may be required to repay the current outstanding balance of $45,000,000 currently secured by, amongst other things, $37,500,000 of restricted bond proceeds included in restricted cash, $10,000,000 of cash in escrow and an equity letter of credit of $9,300,000. In addition, we may be required to continue funding the completion of B2 BKLYN with equity until the uncertainties regarding its construction are resolved.
(Emphases added)

August 2015 statement

The 8/4/15 Form 10-Q similarly notes the legal dispute with former partner Skanska USA and Forest City's decision to buy out Skanska’s 50% ownership interest in the modular factory in the Brooklyn Navy Yard and to re-start work at the factory and resume vertical construction. Construction completion is estimated to be finished in the third quarter of 2016. (That doesn't mean it will have a Certificate of Occupancy by then, however.)

The document continues:
At June 30, 2015, we have $74,182,000 capitalized on the Consolidated Balance Sheet related to B2 BKLYN. Based on the most current information available, total project costs are estimated to be $162,100,000, after giving effect to an impairment charge recorded in 2014. Significant estimates and assumptions were used to develop the estimated total project costs and may change in the future.
Subsequent to the construction stoppage in 2014, we received a notice of default on the nonrecourse mortgage secured by B2 BKLYN. We have since entered into a forbearance agreement with our lender which expires on September 8, 2015, and we may seek another extension; however, we can provide no assurance that our lender will agree to extend the forbearance agreement. Depending on the outcome of our lender discussions, we may be required to repay the current outstanding balance of $45,000,000 currently secured by, amongst other things, $37,500,000 of restricted bond proceeds included in restricted cash, $10,000,000 of cash in escrow and an equity letter of credit of $9,300,000. In the meantime, we continue to fund construction costs with equity.
The statement "lender discussions" implies that they are already seeking another extension, but "we may seek" suggests they haven't started. They have little more than a month.

The Form 10-Q also discloses "Risks Relating to Our Business":
In the “We Are Exposed to Additional Development Risk in Connection with Using a New Construction Methodology on B2 BKLYN Modular Construction, Litigation Risks, and Owning a Factory to Produce the Modular Units” risk factor in the 2014 Annual Report, we disclosed risks associated with the construction of B2 BKLYN, an apartment building under construction in Brooklyn, New York. The following updates and supplements that information as of June 30, 2015.
During the six months ended June 30, 2015, we restarted work at the factory used to construct the modular units used in the B2 BKLYN project, including fabrication and assembly of modular units, and we resumed vertical construction during the three months ended June 30, 2015. Based on the latest information available, we estimate the construction will be completed in the third quarter of 2016. Although work has been resumed at the factory, the project may continue to encounter delays, and we may fail to satisfy completion deadlines set forth under the lending arrangements for the project and the lenders may not be willing to extend such deadlines. Failure to meet the completion deadlines could result in a default under such lending arrangements with a resulting acceleration of the debt and foreclosure of the project, as well as reputational damage.

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