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Forest City reports $103M net earnings

Company is mum on takeover talks

Forest City's David LaRue and a rendering of 38 Sixth Avenue and the Barlcays Center (Credit: SHoP Architects)
Forest City's David LaRue and a rendering of 38 Sixth Avenue and the Barlcays Center (Credit: SHoP Architects)

Forest City Realty Trust’s discussions about whether or not to sell the company will be “robust” but not necessarily “timely,” its chief said.

During a fourth quarter earnings call on Friday, CEO David LaRue wouldn’t budge from his word choice to describe the process. When he was asked why the phrase, “timely,” had been dropped from a press release about the real estate investment trust’s exploration of “strategic alternatives,” like a merger or acquisition, LaRue would only say that the board is running a “robust and thorough process that is ongoing.”

It’s not clear how long this process will take.

Five months ago, Forest City announced it would consider selling the company. Last week, Bloomberg reported that the REIT was in talks with private equity giant Brookfield Asset Management about a possible deal. Executives wouldn’t discuss the negotiations on Friday.

The company reported $102.9 million in net earnings in the fourth quarter of 2017, a significant jump from last year’s $1.8 million. Net earnings for the year clocked in at $206 million, compared to 2016’s net loss of $158.4 million.

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The company has attributed the dramatic discrepancy to deferred taxes related to the company’s REIT conversion, which was completed in January 2016. Net earnings in the fourth quarter of 2015 were $548.7 million. The company’s MetroTech office complex had the highest net operating income in the fourth quarter of all its properties at $85.3 million.

LaRue said the company is on the lookout for opportunities to reinvest in office or multifamily properties to replace its 51 percent stake in 12 retail centers that it owned jointly with Madison International Realty.

He said the company is looking at buying out partners at some of its properties, including 80 Dekalb Avenue and University Park at MIT. When asked about the sale of Westfield Corp. to Unibail-Rodamco, and whether it would affect San Francisco Centre, LaRue said there hadn’t been any discussions about selling the REIT’s stake in the shopping center. Westfield and Forest City own the San Francisco Centre.

He indicated, however, that the company would be open to such discussions.

In the last year, the company’s taken several steps to limit its retail and development exposure. Earlier this month, the REIT announced the sale of 25 percent of its 30 percent stake in Pacific Park to its partner, Greenland USA. In another sign that the company is moving away from ground-up development in New York, MaryAnne Gilmartin, CEO of Forest City New York, stepped down earlier this month to form her own firm. LaRue said that while the company is seeking to keep its development ratio at 7.5 percent, it’d be open to development opportunities if and when market conditions are right.

“We still have a very significant part of our portfolio in New York City,” he said. “We have ambitions and plans for continued investment in the market.”

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