Forest City turns second-quarter profit

By David Jones | September 08, 2010 07:27PM

Charles Ratner

Forest City Enterprises, the parent company of Forest City Ratner, swung to a profit in the fiscal second quarter as rental income rose and the company closed on the sale of the New Jersey Nets to a Russian billionaire. The Cleveland-based firm reported net income of $122.8 million, or 61 cents a share, in the quarter ended July 31, compared with a net loss of $1.8 million, or 1 cent, in the year-ago period.

The company gained $31.4 million before taxes on the sale of the National Basketball Association team to Mikhail Prokorov, who now holds an 80 percent stake in the franchise. Revenue fell slightly to $309.2 million from $313.7 million, in the year-ago quarter.

Charles Ratner, president and CEO at Forest City, said the increase was mainly due to strength in the company’s rental properties, particularly multi-family.

Analysts said the earnings are a sign that the commercial real estate market may have truly bottomed out and is beginning to turn.

“It’s great to see a major owner of US real estate report increases in comparable property net-operating income and occupancy rates portfolio wide,” said Dan Fasulo, managing director of research at Real Capital Analytics. “We are clearly witnessing signs of stabilization in the commercial property sector that will hopefully work into a meaningful recovery in the upcoming quarters.”

The company said it has three projects under construction in New York and one in Washington, while it has started construction on only two new projects nationwide, the Barclays Center in Brooklyn, which will become the home of the Nets, and the first building at the Yards in Washington. The company said it has fully funded construction for the arena, and is actively marketing sponsorship, food and beverage, event bookings and luxury suite sales.

Forest City said the steel curtain wall is nearly complete at the Beekman, the firm’s 76-story Frank Gehry-designed tower, and leasing of the building’s 904 market-rate units is expected to begin during the first part of next year.

Earlier this week, the company closed an $85 million refinancing of its 312,000 square-foot entertainment-and-retail Complex On West 42nd Street.  

At Ridge Hill, a mixed-use retail mall in Yonkers, N.Y., the company is in advanced discussions with several major tenants, including a number of restaurants. The property is currently 31 percent leased. As The Real Deal previously reported, Saks Fifth Avenue pulled out as anchor tenant of the $685 million complex, less than a year after signing a deal to open an 80,000 square-foot store.

The company recently had a grand opening for East River Plaza in Harlem, a 527,000-square-foot mall home to Manhattan’s first Target and first Costco stores.