Forest City New York (formerly Forest City Ratner) yesterday laid off some 15 staffers, I'm told by a well-informed source, including some with high salaries and significant responsibility. That would represent more than a ten percent cut.
That number is not confirmed--multiple queries to the developer did not draw responses--but the Wall Street Journal yesterday reported cuts nationally by Cleveland-based parent Forest City Realty Trust (FCRT).
Forest City Laying Off 50 Workers as It Refocuses on Property Development Business, the WSJ reported, “Today our company is fundamentally different than when we began our journey,” corporate CEO David LaRue said in a company message, the paper reported. “The pending sale of our retail portfolio is a major step in defining our future as a leading urban placemaker focused on residential, office and mixed-use projects in the best markets.”
However, if most layoffs nationally affect employees working in Forest City’s downsizing entertainment and retail businesses, according to the WSJ, that may not be the full story in New York.
Some of those laid off, I was told, work in the firm's development arm. So the loss of some key figures could mean a tighter rein from the parent, punishment from Cleveland regarding poor overall performance, as well as a slowdown in ambitious development plans.
Some people laid off will work through the end of the year, while others will leave this month, according to the WSJ, referring to the cuts nationally. The WSJ did not specify cuts in New York.
A second downsizing in New York
This would represent the second New York downsizing in two years. As the Real Deal reported 11 months ago, Forest City New York then had about 110 full-time employees, 23 fewer than in the previous year. So a loss of 15 people from 110 is far more significant than a loss of 50 from a national company with some 2000 people (the number reported by the WSJ) or 1800 (the number reported by the Plain Dealer) or 1750 (the number from Crain's).
FCRT recently became a real estate investment trust, or REIT, and began paying dividends. Activist investors have successfully pushed the firm not only to restore dividends but to eliminate the family controlled board and the two-class share structure, which vested power in the extended Ratner family.
Two different hedge funds have targeted poor performance by the company, focusing on projects in New York, notably the Atlantic Yards/Pacific Park project in Brooklyn and the Ridge Hill project in Westchester, as a drag on returns.
What it means
I'm speculating here, but staff cuts could mean that Forest City New York will focus less on large projects and more on managing existing projects.
That could mean a further retreat from Pacific Park, where Forest City owns 30% of the project going forward as part of Greenland Forest City Partners; the joint venture has put three sites up for sale or investment, with no takers yet.
Such cuts also could mean a continued loss of clout within the parent company for Forest City New York Chairman Bruce Ratner. He last year left the corporate board as part of the push to diversify beyond the family; the failure to honor him in the announcement was conspicuous.
My email query yesterday to two p.r. spokesmen and Forest City NY's External Affairs spokeswoman didn't get a response. Nor did a phone call to one of the p.r. spokesmen. Nor did an email to a corporate spokesman in Cleveland. Perhaps we'll learn more today.