Following pressure from an activist investor, Forest City Realty Trust today announced it would eliminate a dual-share structure that gave the Ratner family unchallenged voting control over the company.
Simultaneously, Bruce and Charles Ratner announced they will resign from the real estate investment trust’s board at the end of the year. Bruce Ratner will continue to serve as executive chairman of Forest City Ratner, the trust’s New York division.
“After carefully reviewing the Company’s options to further enhance value for shareholders, we determined that now is the right time to collapse the dual-class structure,” company chairman Charles Ratner and the firm’s special committee chair Scott Cowen said in a joint statement. “Today’s announcement will strengthen the Company’s corporate governance profile by aligning voting rights with the economic interests of all our shareholders.”
Activist investor Scopia Capital Management had called for the change in August, arguing that the dual structure “clearly harms the company.” At the time, the Ratner family held just 3.8 percent of the firm’s common, class-A shares but 92 percent of its class-B shares, giving it control of the board. Under the proposed changes, each class-B share will be converted into 1.31 class-A shares.
“We believe Forest City shareholders will benefit from the proposed reclassification and having an additional independent director on the Company’s Board,” two Scopia executives said in a joint statement Tuesday.
The REIT’s share price has been underperforming, though the reclassification should benefit shareholders. Since the market close on Monday, Forest City Realty Trust’s stock is up 7.6 percent, trading at $20.18.
Major hurdles, remain, however. Last month the Cleveland-based real estate trust announced delays at FCR’s marquee Pacific Park mixed-use development in Brooklyn, where it is partnering with Chinese firm Greenland Holdings. FCR last quarter announced a $307.6 million impairment — a drop in asset value — largely due to Pacific Park Brooklyn, citing high construction costs, a weakening residential market and uncertainty over 421a.
Bruce Ratner [TRDataCustom] served as CEO of Forest City Ratner until 2013, when MaryAnne Gilmartin took over. — Konrad Putzier