Forest City plans to convert to a REIT

Switch allows Pacific Park developer to slash tax bill
January 14, 2015 09:06AM

To take advantage of tax benefits, Forest City Enterprises is planning to convert to a real estate investment trust.

The transition, set to take effect next January, will offer the Cleveland-based giant a chance to maintain a “tax-efficient structure to continue to drive shareholder value,” the company’s chief financial officer Robert O’Brien said in a statement to Bloomberg News. In recent years, the company has increased its focus on owning properties, rather than developing them.

The publicly traded Forest City is the operator of the Barclays Center in Brooklyn, through its subsidiary Forest City Ratner, which is led by Bruce Ratner. The firm is building the world’s tallest modular residential tower in the borough. Ratner told the New York Daily News this week that construction on that building, known as B2, is back on schedule after being delayed due to a legal fight.

REITs distribute at least 90 percent of their taxable income to their shareholders. In return, the companies don’t have to pay federal taxes on those earnings.

The developer’s Pacific Park project in Brooklyn, previously called Atlantic Yards, has generated controversy over the substantial tax breaks and subsidies it receives. [Bloomberg News] — Claire Moses