Shareholders greenlight Brookfield’s $6.8B purchase of Forest City

Deal expected to close in December

Bruce Flatt and David LaRue (Credit: iStock)
Bruce Flatt and David LaRue (Credit: iStock)

After facing some opposition, Brookfield Asset Management will move forward with its $6.8 billion purchase of Forest City Realty Trust.

Forest City’s shareholders voted in favor of the deal on Thursday morning, the company announced. The vote clears the way for Brookfield to buy the real estate investment trust, a deal that is expected to close on or before Dec. 10.

The news follows failed efforts to stall the shareholder vote. Forest City’s former CEO Albert Ratner had filed a federal lawsuit on Monday, seeking to delay the proceeding until the company released a proxy statement with updated financial information. He called the Brookfield deal a “shameful value giveaway” that deprived shareholders of as much as $5.8 billion. But an Ohio judge on Wednesday refused to halt the vote. According to the company’s latest filing with the Securities and Exchange Commission, votes representing nearly 183 million shares of common stock were cast in favor of the acquisition. Roughly 34 million shares were against the deal, while 838,747 abstained.

Forest City announced the deal in July, after rejecting an earlier bid from Brookfield. In March, the company announced that it would change its board instead of pursuing a sale. At the time, hedge funds Starboard Value and Scopia Capital Management were each granted additional seats on the board. Meanwhile, the Ratner family — which founded the company in 1920 — was limited to two members on the board, down from four. In his lawsuit, Albert Ratner questioned the timing of the board reorganization and Brookfield’s subsequent bid.

“You have to remember that when the old board left, they left it in a position where they said we are going to be a standalone company,” Ratner told The Real Deal in a recent interview. “The same day as the new board was sworn in, there was a new offer from Brookfield.”

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Ratner alleged in his complaint that the new board didn’t adequately explore other options for the company. He pointed to the company’s third-quarter results, which showed more than $715 million net earnings attributable to shareholders. In a proxy issued just 18 days before the third-quarter earnings were released, company officials estimated that $0.72 in dividends per share would be available. But last quarter’s earnings showed that dividends were actually at $2.26 per share. Ratner argued that the company should’ve alerted shareholders that they would lose an additional $2.26 per share in value, “money that had been earned by Forest City while they were stockholders and that would instead flow to Brookfield under the proposed transaction.”
Since becoming a REIT in January 2016, Forest City has inched away from ground-up development and focused on consolidating its portfolio. Earlier this year, the REIT sold all but 5 percent of its remaining interest in the megadevelopment, Pacific Park, to partner Greenland USA. The company also sold 461 Dean Street, the last property it wholly owned in Pacific Park.
Meanwhile, Brookfield’s development arm has been on a tear. In April, the company bought seven-building development site in Mott Haven for $165 million.