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Forest City selling 461 Dean (only building they own 100%), plans to take tax loss; 535 Carlton just 51% leased

There's some very interesting news within the press release issued yesterday, Forest City Reports 2017 Third-Quarter and Year-to-Date Results, which indicated increased net earnings and funds from operations.

They're selling--though no deal has been reached--461 Dean (aka B2), the ill-fated modular tower that is the only building owned 100% by Forest City Realty Trust/Forest City New York. Otherwise, it has a 30% share in Greenland Forest City Partners, which excludes the arena.

Not only are they selling, they're taking a loss. "The second impairment, $44.3 million related to 461 Dean Street in Brooklyn, stems from of our recent decision to market this consolidated property for sale, resulting in a change in our hold assumptions," stated CEO David LaRue. "Disposition of the asset would generate a tax loss that we can use to offset gains from our in-process retail transactions, while also generating significant cash proceeds for further debt reduction or other strategic uses."

It's not the first loss. As I reported 2/25/15, "Fourth-quarter earnings were negatively impacted by a pre-tax, non-cash impairment related to our B2 BKLYN project and the modular factory of $146.0 million, of which $38.7 million represents the write off of the factory," stated LaRue.

That's more than $190 million total, though they may get some value back from the ongoing, unresolved lawsuit with Skanska, their former partner in the modular factory.

No real update

Also, Forest City offered no real update on its efforts to potentially sell, divest or merge:
On September 11, 2017, the company announced that its Board of Directors, together with management and in consultation with financial and legal advisors, had commenced a process to consider a broad range of alternatives to enhance stockholder value, including, but not limited to, an accelerated and enhanced operating plan, structural alternatives for the company's assets, and potential merger, acquisition or sale transactions. That process is underway and will proceed in a timely manner. However, there is no timetable for completion and there can be no assurance that this review will result in a strategic change or any transaction being announced or agreed upon. The company will not comment further on the progress or status of the review unless the company determines that further disclosure is appropriate or required by law
38 Sixth not quite open, 535 Carlton only 51% leased

Though the press release said that, during the third quarter of 2017, "the company began phased opening of... 38 Sixth Avenue, a 303-unit, all-affordable apartment community at Pacific Park Brooklyn that is part of the company's strategic partnership with Greenland USA," that's not really true.

As I reported 10/18/17, Forest City New York executive Ashley Cotton said that move-ins were expected to begin in November. Indeed, a graphic (below) accompanying another document released yesterday indicated that 38 Sixth was 0% leased as of October 26.

Interestingly enough, the 100% affordable 535 Carlton remains only 51% leased, apparently a sign of the difficulty of leasing half the building, which is aimed at a relatively narrow slice of middle-income households. Leasing started in January, and it was 21% leased by 4/27/17.

Meanwhile, 461 Dean is 90% leased, a little more than one year after market-rate leasing began.

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