The Real Deal New York

Forest City REIT conversion will attract investors: LaRue

CEO says company is "undervalued," new status "helps us to close" valuation gap

February 05, 2016 03:08PM

Forest City Realty Trust

From left: Charles Ratner and David LaRue

Forest City Realty Trust’s recent conversion into a real estate investment trust will help the company “attract a larger share of investment” and make the company “even more focused on our real estate business,” according to president and CEO David LaRue.

Forest City’s REIT conversion, which became official on Jan. 1, came out of a strategic planning initiative, dating back to 2012, that focused streamlining the company to its “core products and core markets,” LaRue said.

While LaRue downplayed the conversion as being motivated by tax factors – noting that, “From a tax standpoint, we were tax efficient” – he said the change means the Cleveland-based company is now “operating in a standard format for real estate company,” which gives it “common ground for the public to evaluate us.”

“As you look at investors and analysts, Forest City Realty Trust as a REIT is a business they understand,” LaRue told National Real Estate Investor in an interview. “They know we have to distribute and pay a dividend based on taxable income. That is a benefit to shareholders.”

He added that the company believes it is currently “undervalued,” and that the conversion “helps us to close a substantial part of that [valuation] gap” by giving Forest City a status through which “dollars first get allocated from investors to invest in real estate companies.”

As part of its streamlining initiative and greater focus on real estate, Forest City recently sold its stake in the NBA’s Brooklyn Nets and the team’s Barclays Center home in Downtown Brooklyn to Nets majority owner Mikhail Prokhorov. [National Real Estate Investor]Rey Mashayekhi