Forest City document describes transactions with Ratner (+no bonus); hedge fund investor said to target Ratner family
Also, the New York Post reports today:
Activist investor Land & Buildings next week is expected to follow through on its threat to call for a special meeting of Forest City Realty Trust shareholders, The Post has learned.I don't think that's likely, give that Land & Buildings (previous coverage) was not able to get a larger hedge fund owner, Scopia Capital Management, on its side.
If the hedge fund is successful in calling the meeting, it could result in all four of the Ratner family members getting ousted from the company, sources said.
...L&B next week will call for a special meeting, at which shareholders would vote to kick Ratner family members off the board, and likely Bruce Ratner out of the company, sources said.
From the FCRT document:
...The employment agreement with Bruce C. Ratner provides for an annual salary of $450,000. The employment agreement is renewable annually. Mr. Ratner is eligible to receive a bonus and equity-based awards, as well as benefits and perquisites commensurate with other senior management executives. During the year ended December 31, 2016, Mr. Ratner did not receive a cash bonus or any equity-based awards.(All emphases added)
In other words, he didn't have a great year.
A non-compete that anticipates different outcomes
From the document:
Pursuant to his employment agreement, Bruce C. Ratner agreed that during his employment with us, and for a two-year period following thereafter, he will not engage in any activity that competes with our business. If we terminate Mr. Ratner’s employment without cause, the two-year period will be reduced to one year. Mr. Ratner also agreed that he will not directly or indirectly induce any of our employees, or any of our affiliates, to terminate their employment or other relationships with us and will not employ or offer employment to any person who was employed by us or our subsidiaries unless such person has ceased to be employed by us or our affiliates for a period of at least one year. Mr. Ratner owns, and will continue to own, a certain property that was not transferred to us. This property may be managed, developed, expanded, operated and sold independently of our business. Should Mr. Ratner sell the property, he may purchase additional property, to effectuate a Section 1031 tax deferred exchange under the Internal Revenue Code, with the prior approval of the Audit Committee. Except for this property or any potential purchase of property to effect a tax-deferred transaction or any transaction approved by the Audit Committee, Mr. Ratner will engage in all business activities of the type conducted by us only through and on behalf of us, as long as he is employed by us.So if Ratner gets terminated, he could start competing within a year. Well, he's winding down, anyhow.
That other property
But why are they mentioning "a certain property that was not transferred to us"? (Is this 105 Grand Avenue in Clinton Hill, as reported in September 2016 by The Real Deal?)
Maybe because he's otherwise supposed to only do this work "through and on behalf of" the parent company.
A series of transactions
From the document:
The transactions with Bruce C. Ratner and his affiliates set forth below were contemplated as part of the restructuring of the ownership interests held by Bruce C. Ratner and the conditions under which such transactions would take place were provided for in a master contribution and sale agreement (the “Master Contribution and Sale Agreement”). Because of the importance and nature of the Master Contribution and Sale Agreement, the transaction was specifically reviewed and approved during the year ended January 31, 2007 by a special committee of the Board comprised solely of independent directors.
The description of the transactions
The document describes many transactions, but none involving Atlantic Yards/Pacific Park:
Transactions with Bruce C. Ratner and His Affiliates
During the fiscal year ended January 31, 2007, we entered into the Master Contribution and Sale Agreement with Bruce C. Ratner pursuant to which the parties agreed to restructure their ownership interests in a total of 30 retail, office and residential operating properties and certain service companies that were owned jointly by us and Mr. Ratner. Pursuant to the Master Contribution and Sale Agreement, Mr. Ratner, certain entities and individuals affiliated with him, including members of his family and/or trusts for the benefit of such family members (“BCR Entities”), and certain entities affiliated with Forest City (“FCE Entities”) either contributed their interests in these operating properties and service companies to Forest City Master Associates III, LLC (“Master III”), a limited liability company that is owned jointly by the FCE Entities and the BCR Entities but is controlled by us, or in some cases, the BCR Entities transferred their interests for cash consideration.
In connection with the Master Contribution and Sale Agreement, the parties and their respective affiliates also entered into several additional related agreements, including a Registration Rights Agreement, a Tax Protection Agreement and the Master III Operating Agreement. Under the Master III Operating Agreement, we issued Mr. Ratner and the BCR Entities 3,894,232 Class A Common Units (“Units”) in Master III. Certain of the BCR Entities exchanged 247,477 of the Units for cash and shares of our Class A Common Stock in July 2008, 673,565 of the Units for shares of our Class A Common Stock in June 2014 and 1,032,402 of the Units for shares of our Class A Common Stock in September 2015. During the year ended December 31, 2016, the BCR Entities received a distribution preference pursuant to the Master Contribution and Sale Agreement in the amount of $659,868 as a result of the dividends paid on shares of the Company’s Class A Common Stock, of which amount, Mr. Ratner’s interest was $62,427.
Under the terms of the Master Contribution and Sale Agreement, we agreed with Mr. Ratner and the BCR Entities to a method for valuing and possibly restructuring certain properties that were under development. Each of the development projects shall remain owned jointly until the individual development project has been completed and achieves “stabilization.” When a development project achieves “stabilization,” it will be valued, either by negotiation, through arbitration or by obtaining a bona fide third-party offer. Once each project’s value has been determined, we may, in our discretion, cause that project to be contributed to Master III in exchange for additional Units, sold to Master III for cash, sold to the third party or remain jointly owned by us and Mr. Ratner.
During 2008, two of the development properties, New York Times, an office building located in Manhattan, New York, and Twelve MetroTech Center , an office building located in Brooklyn, New York, achieved stabilization, and, in accordance with the terms of the Master Contribution and Sale Agreement, we caused the respective FCE Entities to acquire the interest of the BCR Entities in those two properties for cash. Under the terms of the redemption agreements, the applicable BCR Entities assigned their interests in the two projects to the respective FCE Entities and will receive approximately $121,000,000 over a 15-year period. During the year ended December 31, 2016, no redemption distribution installment payments were paid.
During the year ended December 31, 2014, in accordance with the Master Contribution and Sale Agreement, we accrued an $11,000,000 development fee payable to Mr. Ratner related to Westchester’s Ridge Hill, a regional mall in Yonkers, New York, as certain milestones had been reached in the development and operation of the property. In December 2015, we caused certain of our affiliates to acquire the BCR Entities’ interests in Westchester’s Ridge Hill , for $10. In January 2016, we paid the $11,000,000 development fee to Mr. Ratner.Paying $10 for the interests in Ridge Hill is, obviously, not a big deal. But the development fee isn't peanuts.
From the document:
In January 2016, we closed on the sale of 625 Fulton Avenue, a development site in Brooklyn, New York. Pursuant to the terms of the Master Contribution and Sale Agreement, we are required to make a $6,238,000 tax indemnity payment to the BCR Entities, of which amount Mr. Ratner will receive $124,760. The payment, which was accrued during the three months ending March 31, 2016, was paid in four quarterly installments of $1,559,382 commencing in April 2016, with the last installment paid in January 2017.
In January 2017, we closed on the sale of Shops at Bruckner Boulevard, a retail shopping center in Bronx, New York. Pursuant to the terms of the Master Contribution and Sale Agreement, we expect to be required to make a $482,000 tax indemnity payment to the BCR Entities. The payment will be accrued during the three months ending March 31, 2017 and will be paid in four quarterly installments of commencing in April 2017, with the last installment paid in January 2018.
One remaining development property, the air rights for any future residential vertical development at East River Plaza, continued to be owned or otherwise pursued jointly by the relevant FCE Entities and BCR Entities. The operating agreement related to such property generally requires the FCE Entities to provide all equity contributions for the property on behalf of the FCE Entities and BCR Entities and entitles the FCE Entities to a preferred return on the outstanding balance of such advances made on behalf of the BCR Entities prior to the BCR Entities sharing in cash distributions.
On January 13, 2015, RRG Sterling Owner, LLC, a subsidiary of Master III, acquired 500 Sterling Place, an apartment building in Brooklyn, New York from a third-party developer for a purchase price of $48,075,000. The Property was acquired using the proceeds of, and is subject to, a mortgage loan in the original principal amount of $36,000,000 and a current balance of approximately $34,642,000. It is proposed that certain BCR Entities enter into an exchange transaction with Master III where such BCR Entities will exchange Units in consideration for 100% of the membership interests in the sole member and 100% owner of RRG Sterling Owner, LLC. The number of Units to be exchanged will be based upon the net equity value of 500 Sterling Place as determined using a third party appraisal, plus transaction costs, including transfer taxes (approximately $1,470,150) and legal fees (approximately $10,000), less the total amount of a down payment BCR already made on the Property ($1,200,000). The BCR Entities have agreed upon a $20 per Unit value for purposes of determining the number of Units to exchange. As a result of the proposed exchange, the ultimate ownership of 500 Sterling Place will transfer from Master III to the BCR Entities, subject to the aforementioned mortgage loan.In other words, Ratner's extended family will own 500 Sterling, outright.