Skip to main content

Forest City responds to hedge fund's critique, calls it hasty and counterproductive (but ignores some specifics)

Yesterday, Forest City Realty Trust issued both a public statement and a (public) message to employees in response to the harsh letter from the hedge fund Land & Buildings.

The statement noted that Land & Buildings had less than 1% of shares--a previous report said 1% and said the hedge fund had not engaged with the company before submitting a notice of intent to nominate members of the board of directors. Forest City noted that its "governance enhancements... were well received by shareholders"--indeed, the largest outside shareholder approved--and said it was "executing on a strategic plan" to improve performance.

Forest City, however, did not address charges of nepotism, the accusation that its G&A (general & administrative) costs were out of line, and the charge that Forest City Ratner, the New York subsidiary, was responsible for significant underperformance.

As noted by the Plain Dealer, Forest City's shares went up yesterday by 1.6%. That's more than Vanguard's REIT index, which went up .77%.

The statement:
Forest City is committed to acting in the best interests of the Company and its shareholders and values feedback from all shareholders. Following discussions with and input from the Company’s largest shareholders, the Board and management team took significant steps to enhance the Company’s corporate governance by entering into agreements to declassify its common equity, appoint two new independent directors and adopt a majority voting standard for the election of directors.
Following Forest City’s press release announcing these corporate governance changes on December 6, 2016, including a proposal to eliminate the Company’s dual-class share structure, Land & Buildings purchased less than 1% of Forest City’s outstanding Class A Common Stock and submitted a notice of its intent to nominate three individuals for the election of Class A Directors to the Forest City Board of Directors at the Company’s 2017 Annual Meeting, the last day that shareholders could legally submit proposals to the Company. Land & Buildings made no attempt to engage with management on this issue prior to the submission of their candidates and requested priority and approval rights over other shareholders.
After their submission, Company management met with Land & Buildings to discuss their proposed candidates and Land & Buildings indicated that although their candidates were qualified, that there were a number of other industry executives they believed to be better candidates than their own nominees. Land & Buildings provided a list of 11 additional potential board candidates. Consistent with our fiduciary duties and as communicated in our numerous conversations with the firm’s Founder and CIO, Jonathan Litt, Land & Buildings’ formal and informal nominees will be vetted and considered in the search process for two new, independent directors.
We are surprised that after working with our shareholders and announcing our governance enhancements, which were well received by shareholders, and prior to learning who Forest City’s new independent director nominees will be, Land & Buildings would choose this counterproductive path. Forest City has articulated and is executing on a strategic plan to build a strong sustainable capital structure, focus on core markets and products, and achieve operational excellence. Moving forward, Forest City will continue to make decisions and take actions that are in the best interests of the Company’s shareholders. The Company looks forward to continuing its open, constructive dialogue with shareholders as it executes its strategic plan to create shareholder value.
As previously announced on December 6, 2016, Forest City entered into an agreement to eliminate the Company’s dual-class share structure and also announced a number of other corporate governance enhancements and Board changes. As part of these Board changes, Bruce C. Ratner has stepped down from the Board. In addition, Stan Ross has decided not to stand for re-election at the Company’s 2017 Annual Meeting. The Company intends to fill these two board vacancies with new, independent directors and has retained Ferguson Partners Ltd. to lead the search for highly qualified candidates.
The Company also announced the retirement of Charles Ratner from the Company and as Executive Chairman of the Forest City Board, and the appointment of James A. Ratner as non-executive Chairman of the Forest City Board, succeeding Charles Ratner as of year-end 2016. Following these actions, the Board will be comprised of thirteen directors, eight of whom will be independent, one of whom will be the President and Chief Executive Officer, and four of whom will be members of the founding family, the Company’s largest non-institutional shareholder. Furthermore, the Company announced plans to implement a majority voting standard in the election of directors following the 2017 Annual Meeting.
The message to employees:
As some associates may be aware, yesterday an activist shareholder, Land & Buildings Investment Management LLC, which only recently became a Forest City shareholder, issued a press release critical of the company’s board and management, and calling for the company to take a range of actions - beyond those that we have already taken or announced as part of our ongoing strategic transformation.
Associates are well aware of the many significant steps the company has taken - thanks to your hard work and dedication - over the last several years as we have executed on our strategy to focus on core markets and products, build a strong capital structure and pursue operational excellence. In addition, we have improved the transparency of our financial disclosure and enhanced our governance practices, including plans to eliminate our dual-class stock structure and appoint two new independent board members, effective with a shareholder vote at our 2017 Annual Meeting later this spring.
The broad range of our strategic and governance actions over the past several years have been favorably received by many investors, including a number of our largest and longest-tenured shareholders. For that reason, we were surprised that Land & Buildings would choose to take such a negative, and, we believe, counterproductive stance.
I want to assure associates that the entire board and senior leadership team believe the actions we have taken and continue to take as a company, have put Forest City on a positive growth path for the future that will continue to enhance value for all the company’s stakeholders, including associates.
While the Land & Buildings press release and any subsequent communication on this matter are likely to generate media coverage, I urge you not to let it be a distraction from the vital day-to-day work of continuing to execute our strategies, serve tenants and residents, and support fellow associates. We have a core team of senior staff and advisors focused on addressing this issue and will update the broader associate base if and when developments merit.
As always, thank you for your commitment to the continued success of Forest City.


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 February 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--but not yet approved--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…

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).


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 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…