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Forest City completes sale of Atlantic Center/Atlantic Terminal malls; 42nd Street complex still in lease dispute

A press release 12/22/17, Forest City completes conversion of ownership in 10 New York City specialty retail centers, indicated that Forest City Realty Trust has formally sold its 51% share in the Atlantic Terminal and Atlantic Center malls, as expected, to its partner Madison International Realty.

Note this statement: "the 42nd Street retail/entertainment complex, is expected to transact at a later date upon resolution of the ground lease dispute with the City of New York." That's a reference to a lawsuit (case file) over the terms of a 20-year lease that renews next year.

Forest City paid a base rent of $1.17 million a year for the first 20 years of the lease, gaining that very nice deal in tougher times, and the two parties are in dispute about the way to calculate the value of the lease renewal. 

According to remarks at a November hearing by Supreme Court Justice Charles Ramos, he is inclined to grant Forest City's request for arbitration to resolve the dispute, rather than let it proceed through the court system.

The press release
CLEVELAND, Dec. 22, 2017 /PRNewswire/ -- Forest City Realty Trust, Inc. (NYSE: FCEA) today announced the closing of the conversion of its common ownership interest to preferred interest in 10 specialty retail centers in the New York City metropolitan area.
The closing covers 10 of the 13 centers that are part of a joint venture between Forest City and Madison International Realty, LLC. Closings on the conversion of Forest City's common interest in two other centers in the portfolio – Shops at Northern Boulevard and Queens Place – are expected by the end of the first quarter of 2018 as remaining lender matters are addressed. Final closings on each of the individual centers are expected to occur as Forest City secures replacement assets into which to redeploy its preferred interest. The last center in the joint venture, the 42nd Street retail/entertainment complex, is expected to transact at a later date upon resolution of the ground lease dispute with the City of New York.
"We are very pleased to achieve this key milestone in executing our strategic plan and delivering on our commitment to create value," said David J. LaRue, Forest City president and chief executive officer. "As we identify opportunities to redeploy our interest from this portfolio, we will continue to focus on high-quality urban residential, office and mixed-use assets in our major core markets.
"I want to thank our partner, Madison International Realty, and our own internal team for the perseverance, creativity and flexibility required to bring this complex transaction to this important stage of completion," LaRue added.
As previously disclosed, the overall transaction values the 12 centers (excluding 42nd Street) at approximately $450 million at Forest City's 51 percent share and reflects an approximate 5 percent cap rate on 2016 net operating income.
The 10 retail centers that are part today's announced closings are Shops at Gun Hill Road (Waring), Shops at Gun Hill Road (Ely) and Castle Center in the Bronx, Harlem Center in Manhattan, The Heights, Atlantic Terminal Mall and Atlantic Center in Brooklyn, Forest Avenue and Shops at Richmond Avenue in Staten Island, and Columbia Park Center in North Bergen, New Jersey.