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Forest City earnings release: no details on Greenland deal; Forest City to be wholly owned subsidiary

OK, Forest City Realty Trust's second-quarter earnings release came out yesterday, and neither it nor any other document I could find indicated how much Greenland paid Forest City for its second round of investment in Atlantic Yards/Pacific Park.(Here was my ballpark estimate.)

The document did offer some clarification on the announced deal to be absorbed by Brookfield:
On July 30, 2018, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Antlia Holdings LLC ("Parent"), and Antlia Merger Sub Inc. ("Merger Sub"), pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company (the "Merger"), with the Forest City surviving the Merger as a wholly owned subsidiary of Parent. Parent and Merger Sub were formed by a Brookfield Asset Management Inc. ("Brookfield") real estate investment fund. Consummation of the Merger is subject to the satisfaction or waiver of specified closing conditions, including (i) the approval of the Merger by the affirmative vote of the holders of a majority of the outstanding Shares entitled to vote on such matter at a meeting of the Forest City stockholders, (ii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and (iii) other customary closing conditions for a transaction of this type. We anticipate the Merger will close in the fourth quarter of 2018.
So, at least in the short term, Forest City will be a wholly owned subsidiary of the parent, a company owned by Brookfield Asset Management. Does that mean the Forest City brand name will survive? Stay tuned.

More on the deal

The Real Deal, in the 8/1/18 article headlined Brookfield has agreed to buy Forest City. Now what?, noted that a Forest City spokesperson "said it’s too early to say whether or not the sale will lead to the closure or downsizing of any of the REIT’s operations," and that Forest City would become a private entity owned by Brookfield.

“Forest City’s embedded development, its joint ventures and its preference for secured debt would put off some bidders, but Brookfield is a very experienced developer, similar to Forest City,” stated a report from the investment banking advisory firm Evercore, cited by the Real Deal. “With Brookfield’s access to capital, perhaps the company will be able to more quickly accelerate development/redevelopment.”

REIT analyst Paul Adornato told The Real Deal that, while Brookfield's offer was still below Forest City's asset value, the latter's complexity, as well as the management challenges related to a family-owned firm, made it unlikely to get full value. It's still a boon for shareholders.

And analyst Sheila McGrath observed that Brookfield likely won't sell any Forest City properties until the end of 2020, given tax implications.

Indeed, National Real Estate Investor noted that McGrath called it a win-win for both companies.

The Cleveland mayor's comments

Cleveland Mayor Frank G. Jackson, according to Cleveland Jewish News, cited the company’s long history in Cleveland:
“Forest City Realty Trust has had a long history and played a significant role in the development of Cleveland,” Jackson said. “They’ve grown from a small lumber company to a large Cleveland business and then to a national real estate developer. The Ratner and Miller families continue to be an instrumental part of our city’s civic life, supporting health institutions, education, arts and more. Cleveland would not be what and who we are today without the Ratner and Miller families and Forest City. We look forward to working with the Brookfield Property Group and building on Forest City’s positive impact in Cleveland.”

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