CLEVELAND, Feb. 27, 2017 /PRNewswire/ -- Forest City Realty
Trust, Inc. (NYSE: FCEA and FCEB) today announced financial results
for the three months and year ended December
31, 2016.
Net Earnings/Loss
For the three months ended
December 31, 2016, the company had
net earnings of $1.8 million, or
$0.01 per share, compared with net
earnings of $548.7 million, or
$2.00 per share, for the three months
ended December 31, 2015. The primary
driver of the quarter-over-quarter variance was a 2015 one-time
adjustment to deferred taxes related to the company's REIT
conversion of $588.6 million.
For the year ended December 31,
2016, the company had a net loss of $158.4 million, or $0.61 per share, compared with net earnings of
$496.0 million, or $1.97 per share, for the year ended December 31, 2015. The primary drivers of the
year-over-year variance were the 2015 gain on change of control of
interest related to the acquisition of our partner's interest at
University Park at MIT, together with the 2015 one-time adjustment to
deferred taxes mentioned above. (All per-share amounts
referenced in this release are on a fully diluted basis.)
Additional factors impacting net earnings/loss for the three
months and year ended December 31,
2016, are described below under FFO and Operating FFO and
are included in the company's annual report on Form 10-K for the
year ended December 31, 2016, filed
with the Securities and Exchange Commission (SEC) and supplemental
package for the quarter ended December 31, 2016, furnished to
the SEC on Form 8-K. The Form 8-K and supplemental package are
available on the company's website, www.forestcity.net.
Revenues
Consolidated revenues for the three months
ended December 31, 2016, were
$239.7 million, compared with
$272.8 million for the three months
ended December 31, 2015. Consolidated
revenues for the year ended December 31,
2016, were $929.5 million,
compared with $978.2 million for the
year ended December 31, 2015. The
primary drivers of the revenue variance for the full year, compared
with 2015, were lower land sales at Stapleton and the sale of the
company's military housing business.
Funds From Operations (FFO)
Total FFO for the three
months ended December 31, 2016 was
$80.4 million, or $0.31 per share, compared with $78.5 million, or $0.29 per share, for the three months ended
December 31, 2015. FFO for the year
ended December 31, 2016 was
$241.7 million, or $0.92 per share, compared with $505.7 million, or $1.98 per share for the year ended December 31, 2015.
Drivers of the year-over-year FFO variance included increased
2016 gains from disposition of the 625 Fulton Avenue development
parcel in Brooklyn and the
company's interest in the Nets, as well as lower 2016 income tax
expense, offset by increased impairment, primarily related to the
third-quarter 2016 impairment of Pacific Park Brooklyn, and the
2015 gain on change of control of interests related to University Park at MIT mentioned above.
FFO and FFO per share are non-GAAP measures commonly used by
publicly traded real estate companies. Included with this press
release is a table reconciling net earnings/loss, the most
comparable GAAP measure, to FFO.
Operating FFO
Operating FFO for the three months ended
December 31, 2016, was $113.3 million, compared with $103.9 million for the three months ended
December 31, 2015. For the year ended
December 31, 2016, Operating FFO was
$386.5 million compared with
$337.6 million for the year ended
December 31, 2015.
Positive factors impacting 2016 full-year Operating FFO were
decreased interest expense of $24.3
million; improved corporate G&A/other NOI of
$19.5 million, the majority of which
is reduced overhead expense; increased NOI from the mature
portfolio of $18.4 million; increased
Operating FFO from new property openings and acquisitions of
$16.8 million; interest on notes
receivable of $8.8 million; increased
Operating FFO from other sources of $4.8
million; and increased capitalized interest of $1.7 million. These positive factors were
partially offset by reduced Operating FFO from properties sold of
$36.2 million and lower land sales at
Stapleton of $9.2 million.
Factors impacting Operating FFO for the fourth quarter and full
year 2016 are illustrated in bridge diagrams included in the
company's supplemental package for the three months ended
December 31, 2016. The supplemental package and annual report
also include additional explanations of factors impacting Net
Earnings, Operating FFO and FFO for the three months and year ended
December 31, 2016.
Operating FFO is a non-GAAP measure derived from FFO. The
company believes Operating FFO provides investors with additional
information about its core operations. Included with this press
release is a table reconciling FFO to Operating FFO.
Commentary
"Overall, our results for the fourth
quarter and full year 2016 met our expectations and reflect the
substantial progress we have made in our continued transformation
as a company, and our commitment to further improve performance and
create value that we believe will be reflected in our share price,"
said David J. LaRue, Forest City president and chief executive
officer.
"Our operating portfolio performed well throughout 2016, and we
opened seven new properties in core markets from our
pipeline. This solid performance was achieved in a year in
which we also began operating as a REIT, re-instituted a dividend
for the first time since 2008, streamlined our organizational
structure, began reporting based on new segments, completed
$1.3 billion gross value of
dispositions and joint ventures, meaningfully improved operating
margins, undertook a strategic review of our retail portfolio,
announced major governance changes, and reached an agreement with
the controlling shareholder to pursue the collapse of the company's
dual-class share structure.
"Operating FFO was up for both the fourth quarter and full year,
demonstrating the benefits of our focus on core products in our
core markets, reduced leverage and improved operating margins. As
one example, in the fourth quarter, lower G&A expense and
reduced interest expense were the two largest drivers of the growth
in Operating FFO in the period.
"Comp NOI results for the year were in line with our
expectations, with overall growth moderating in the second half, as
anticipated. In the fourth quarter, office Comp NOI was down
marginally, driven primarily by the timing of vacancies and phased
occupancy by new tenants at University
Park at MIT. Apartment Comp NOI
was up modestly in the quarter, as expected, reflecting continued
absorption of new supply in key markets. Retail Comp NOI results
were down in the fourth quarter, following stronger growth in the
prior year and in the first half of 2016.
"Our margin improvement initiatives accelerated in 2016. Overall
margins on Comp NOI improved 250 basis points in 2016 and total
margins on an adjusted EBITDA basis increased 460 basis
points. While we're pleased with that progress, we are
confident that we can do more, and we are targeting an additional
400 to 500 basis point improvement in adjusted EBITDA margins over
the next 12 to 18 months.
"Our asset disposition and de-leveraging efforts also gained
meaningful traction in 2016, beginning with the sale of the
Barclays Center arena and the Brooklyn Nets. We also exited our
military housing business and are under contract to exit our
federally assisted housing business, with final closings now
anticipated by mid-year. In total for 2016, we sold or
entered joint ventures for businesses or properties with a total
gross value of $1.3 billion,
eliminating $407.9 million of
associated debt from our balance sheet. Since the beginning
of the year, we've completed additional dispositions with
a total gross value of $108.7 million
and eliminated another $70.4 million
in debt.
"As we previously announced, in the fourth quarter, we used some
of the liquidity from asset dispositions, together with funds from
a term loan facility, to retire the non-recourse mortgage debt on
the New York Times building, adding
that asset - one of our most productive and valuable - to our
unencumbered asset pool. That unencumbered pool now includes assets
that generated a total of approximately $110
million of NOI in 2016.
"Related to the previously announced strategic review of our
retail portfolio, we continue to move forward with productive
negotiations with our existing partners - QIC in the case of our
regional malls, and Madison International for our New York City specialty retail portfolio. We
have executed non-binding letters of intent with both partners and
are working toward definitive agreements. We're pleased with the
economics of the potential transactions, which reflect an average
cap rate of approximately five percent on 2016 net operating income
of approximately $110 million and
total debt of approximately $1.0
billion, at Forest City's
share. Assuming we successfully finalize definitive agreements with
our partners, we expect the assets to transact in tranches over the
next 24 to 36 months, commencing this year.
"As we have indicated previously, these are complex transactions
where structure and timing are important in order for us to
efficiently redeploy the majority of our ownership stakes into new
apartment or office assets. Assuming negotiations continue on their
current paths, we hope to be able to announce definitive
agreements by midyear. We need to remind investors, however, that
no transaction can be guaranteed, and we may not be able to
transact on either portfolio in the foreseeable future, or on the
terms described in this release."
Comparable NOI, Occupancies and Rent
Overall
comparable NOI decreased 0.7 percent for the three months ended
December 31, 2016, compared with the
same period in 2015, with an increase of 1.1 percent in apartments
and decreases of 2.9 percent in retail and 0.4 percent in office.
For full-year 2016, overall comparable NOI increased 3.2 percent,
with increases of 3.6 percent in office, 2.6 percent in retail and
3.3 percent in apartments, compared with results for the same
period in 2015.
Comparable office occupancies were 93.2 percent at
December 31, 2016, down from 96.2 percent in the fourth
quarter of 2015. The decline in office occupancies is primarily due
to the timing of a large vacancy at University Park at MIT, which has since been leased. For the rolling
12-month period ended December 31, 2016, rent per square foot
in new, same-space office leases increased 11.0 percent over prior
rents.
In the apartment portfolio, average monthly rents per unit for
the company's total comparable apartments rose to $1,495 for the year ended December 31, 2016, a 2.9 percent increase
compared with average monthly rents for the year ended December 31, 2015. Comparable average rents per
unit in the company's core markets were $1,968, a 2.8 percent increase from the
comparable period in 2015. Comparable economic occupancies for the
year ended December 31, 2016, were
94.3 percent, down from 94.8 percent for the year ended
December 31, 2015.
In the retail portfolio, comparable retail occupancies at
December 31, 2016, decreased to 94.3 percent, compared with
94.7 percent at December 31, 2015. Sales in the company's
regional malls averaged $555 per
square foot on a rolling 12-month basis, up from $550 per square foot at September 30, 2016, and down from $558 per square foot at December 31, 2015.
For the rolling 12-month period ended December 31, 2016, new,
same-space leases in the company's regional malls increased 12.0
percent over prior rents.
Comparable NOI, defined as NOI from stabilized properties
operated in the year ended December 31,
2016 and 2015, is a non-GAAP financial measure. Included in
this release is a schedule that presents comparable NOI and a
reconciliation of earnings/loss before income taxes to NOI.
Openings and Projects Under Construction
During the
fourth quarter, the company completed and began phased opening of
NorthxNorthwest (formerly Museum Towers II), a 286-unit apartment
community in Philadelphia that is
part of the company's residential development fund with the Arizona
State Retirement System (ASRS).
At December 31, 2016, Forest
City had 12 projects under construction at a total cost of
$1.9 billion, or $825.9 million at the company's share. These
include:
APARTMENTS:
- Eliot on 4th, a 365-unit apartment community with
5,000 square feet of retail space at the company's Waterfront
Station mixed-use project in Washington,
D.C., is expected to be completed in the first quarter of
2017.
- Broadway and Hill, a 391-unit apartment community
in Los Angeles with 15,000 square
feet of street-level retail, is expected to be completed in the
third quarter of 2017.
- West Village II, a 389-unit apartment community
in Dallas, began construction in
the first quarter and is expected to begin phased opening in the
first quarter of 2018.
Eliot on 4th, Broadway and Hill, and West Village II are also
part of the company's ASRS residential development fund.
Other apartment projects currently under construction include
the following three properties at Pacific Park Brooklyn that are
part of the company's strategic partnership with Greenland
USA:
- 535 Carlton, a 298-unit, all-affordable apartment
community, began phased opening in the first quarter of 2017.
- 550 Vanderbilt,
a 278-unit condominium property, is expected to begin closing unit
sales in the first quarter of 2017.
- 38 Sixth Avenue, a 303-unit, all-affordable
apartment community with 6,000 feet of street-level retail, is
expected to begin phased opening in the second quarter of
2017.
Remaining apartment projects under construction include:
- Town Center Wrap, a 399-unit apartment community
with 7,000 square feet of street-level retail at Stapleton in
Denver, is expected to begin
phased opening in the second quarter of 2017.
- Hudson Exchange, a 421-unit apartment community
in Jersey City, NJ, with 9,000
square feet of street-level retail, is expected to be completed in
the first quarter of 2018.
- Ballston Quarter Residential, a 406-unit
apartment community, including 53,000 square feet of lower-level
retail, that is part of the company's mixed-use redevelopment of
the former Ballston Common Mall in Arlington, VA. The project is expected to
begin phased opening in the third quarter of 2018.
OFFICE:
- The Bridge at Cornell Tech, a 235,000-square-foot
corporate "co-location" building at Cornell Tech's new campus on
Roosevelt Island in New York City. The building, in which
Cornell will occupy approximately 40
percent of the space, is expected to open in the second quarter of
2017.
RETAIL
- Ballston Quarter Redevelopment, the
307,000-square-foot retail component of the company's mixed-use
redevelopment of the former Ballston Common Mall in Arlington, VA. The retail component is
expected to be completed in the third quarter of 2018.
Outlook
"Our transformation into a high-performing
REIT, operating in some of America's strongest urban markets
continues," said LaRue. "We are laser focused on accelerating
execution of our strategies to make us even stronger and more
competitive. Our goals include achieving an additional 400 to 500
basis points of margin improvement, transacting on our retail
portfolio and redeploying our ownership stake into quality assets
in strong markets, completing additional non-core dispositions,
driving our leverage ratio down to our target mid-seven times
range, and increasing our dividend commensurate with growth in our
taxable income.
"At the same time, we will continue to improve transparency and
enhance governance, including our previously announced actions to
increase the number of independent directors on the board,
institute majority voting for all directors, and, subject to
shareholder approval, collapse our dual-class share structure.
"We believe achieving these near-term goals, combined with
diligent execution of our longer-term strategies, position
Forest City for growth. With
our strong operating portfolio and pipeline of quality future
entitlement, together with disciplined capital allocation and
skilled, creative and dedicated associates, we are confident in our
ability to create sustainable value and increase total shareholder
returns."
Corporate Description
Forest City Realty Trust, Inc.
is an NYSE-listed national real estate company with $8.2 billion in consolidated assets. The company
is principally engaged in the ownership, development, management
and acquisition of office, retail and apartment real estate
throughout the United States. For
more information, visit www.forestcity.net.
Supplemental Package
Please refer to the Investors
section of the company's website at www.forestcity.net for a
supplemental package, which the company furnished to the SEC on
Form 8-K on February 27, 2017, and is also available on the
company's website, www.forestcity.net. The supplemental package
includes operating and financial information for the quarter ended
December 31, 2016, with
reconciliations of non-GAAP financial measures, such as Operating
FFO, FFO, NOI, and comparable NOI, to their most directly
comparable GAAP financial measures.
Investor Presentations
Please note the company
periodically posts updated investor presentations on the Investors
page of its website at www.forestcity.net. It is possible the
periodic updates may include information deemed to be material.
Therefore, the company encourages investors, the media, and other
interested parties to review the Investors page of its website at
www.forestcity.net for the most recent investor presentation.
FFO
FFO, a non-GAAP measure, along with net earnings,
provides additional information about the company's core
operations. While property dispositions, acquisitions or other
factors impact net earnings in the short-term, it believes FFO
presents a more consistent view of the overall financial
performance of its business from period-to-period since the core of
its business is the recurring operations of its portfolio of real
estate assets. Management believes that the exclusion from FFO of
gains and losses from the sale of operating real estate assets
allows investors and analysts to readily identify the operating
results of the assets that form the core of the company's activity
and assists in comparing those operating results between periods.
Implicit in historical cost accounting for real estate assets in
accordance with GAAP is the assumption that the value of real
estate assets diminishes predictably over time. Since real estate
values have historically risen or fallen with market conditions,
many industry investors and analysts have considered presentations
of operating results for real estate companies using historical
cost accounting alone to be insufficient. Because FFO excludes
depreciation and amortization of real estate assets and impairment
of depreciable real estate, management believes that FFO,
along with the required GAAP presentations, provides a more
complete measurement of the Company's performance relative to its
competitors and a more appropriate basis on which to make decisions
involving operating, financing and investing activities than the
required GAAP presentations alone would provide.
The majority of the company's peers in the publicly traded real
estate industry are REITs and report operations using FFO as
defined by the National Association of Real Estate Investment
Trusts ("NAREIT"). Although the company was not a REIT for the
prior period presented, management believes it is important to
publish this measure to allow for easier comparison of its
performance to its peers. The major difference between the company
and its REIT peers is that the company was a taxable entity and any
taxable income it generated could have resulted in payment of
federal or state income taxes. The company's REIT peers typically
do not pay federal or state income taxes on their qualified REIT
investments, but distribute a significant portion of their taxable
income to shareholders. Due to the company's effective tax
management policies, it has not historically been a significant
payer of income taxes. This has allowed it to retain its internally
generated cash flows but has also resulted in large expenses for
deferred taxes as required by GAAP.
FFO is defined by NAREIT as net earnings excluding the following
items at the company's ownership: i) gain (loss) on full or partial
disposition of rental properties, divisions and other investments
(net of tax); ii) non-cash charges for real estate depreciation and
amortization; iii) impairment of depreciable real estate (net
of tax); and iv) cumulative or retrospective effect of change in
accounting principle (net of tax).
Operating FFO
In addition to reporting FFO, the
company reports Operating FFO, a non-GAAP measure, as an additional
measure of its operating performance. It believes it is appropriate
to adjust FFO for significant items driven by transactional
activity and factors relating to the financial and real estate
markets, rather than factors specific to the on-going operating
performance of its properties. The company uses Operating FFO as an
indicator of continuing operating results in planning and executing
its business strategy. Operating FFO should not be considered to be
an alternative to net earnings computed under GAAP as an indicator
of the company's operating performance and may not be directly
comparable to similarly-titled measures reported by other
companies.
The company defines Operating FFO as FFO adjusted to exclude: i)
impairment of non-depreciable real estate; ii) write-offs of
abandoned development projects and demolition costs; iii) income
recognized on state and federal historic and other tax credits; iv)
gains or losses from extinguishment of debt; v) change in fair
market value of nondesignated hedges; vi) gains or losses on change
in control of interests; vii) the adjustment to recognize rental
revenues and rental expense using the straight-line method; viii)
participation payments to ground lessors on refinancing of our
properties; ix) other transactional items; x) the Nets pre-tax FFO;
and xi) income taxes on FFO. The company believes its presentation
of FFO and Operating FFO provides important supplemental
information to its investors.
NOI
NOI, a non-GAAP measure, reflects the company's
share of the core operations of its rental real estate portfolio,
prior to any financing activity. NOI is defined as revenues less
operating expenses at the company's ownership within its Office,
Retail, Apartments and Development segments, except for revenues
and cost of sales associated with sales of land held in these
segments. The activities of its Corporate and Other segments do not
involve the operations of its rental property portfolio and
therefore are not included in NOI.
The company believes NOI provides important information about
its core operations and, along with earnings before income taxes,
is necessary to understand its business and operating results.
Because NOI excludes general and administrative expenses, interest
expense, depreciation and amortization, revenues and cost of sales
associated with sales of land, other non-property income and
losses, and gains and losses from property dispositions, it
provides a performance measure that, when compared year over year,
reflects the revenues and expenses directly associated with owning
and operating office, retail and apartment real estate and the
impact to operations from trends in occupancy rates, rental rates,
and operating costs, providing a perspective on operations not
immediately apparent from net income. The company uses NOI to
evaluate its operating performance on a portfolio basis since NOI
allows it to evaluate the impact that factors such as occupancy
levels, lease structure, rental rates, and tenant mix have on its
financial results. Investors can use NOI as supplementary
information to evaluate the company's business. In addition,
management believes NOI provides useful information to the
investment community about its financial and operating performance
when compared to other REITs since NOI is generally recognized as a
standard measure of performance in the real estate industry. NOI is
not intended to be a performance measure that should be regarded as
an alternative to, or more meaningful than, our GAAP measures, and
may not be directly comparable to similarly-titled measures
reported by other companies.
Comparable NOI
In addition to NOI, the company uses
comparable NOI as a metric to evaluate the performance of its
office, retail and apartment properties. This measure provides a
same-store comparison of operating results of all stabilized
properties that are open and operating in all periods presented.
Non-capitalizable development costs and unallocated management and
service company overhead, net of service fee revenues, are not
directly attributable to an individual operating property and are
considered non-comparable NOI. In addition, certain income and
expense items at the property level, such as lease termination
income, real estate tax assessments or rebates, certain litigation
expenses incurred and any related legal settlements and NOI impacts
of changes in ownership percentages, are excluded from comparable
NOI. Other properties and activities such as Arena, federally
assisted housing, military housing, straight-line rent adjustments
and participation payments as a result of refinancing transactions
are not evaluated on a comparable basis and the NOI from these
properties and activities is considered non-comparable NOI.
Comparable NOI is an operating statistic defined as NOI from
stabilized properties operated in all periods presented. The
company believes comparable NOI is useful because it measures the
performance of the same properties on a period-to-period basis and
is used to assess operating performance and resource allocation of
the operating properties. While property dispositions, acquisitions
or other factors impact net earnings in the short term, the company
believes comparable NOI presents a more consistent view of the
overall performance of its operating portfolio from period to
period. A reconciliation of earnings (loss) before income taxes,
the most comparable financial measure calculated in accordance with
GAAP, to NOI, and a reconciliation from NOI to comparable NOI are
included in this release.
Safe Harbor Language
Statements made in this news
release that state the company's or management's intentions, hopes,
beliefs, expectations or predictions of the future are
forward-looking statements. The company's actual results could
differ materially from those expressed or implied in such
forward-looking statements due to various risks, uncertainties and
other factors. Risks and factors that could cause actual results to
differ materially from those in the forward-looking statements
include, but are not limited to, the company's ability to qualify
or to remain qualified as a REIT, its ability to satisfy REIT
distribution requirements, the impact of issuing equity, debt or
both, and selling assets to satisfy its future distributions
required as a REIT or to fund capital expenditures, future growth
and expansion initiatives, the impact of the amount and timing of
any future distributions, the impact from complying with REIT
qualification requirements limiting its flexibility or causing it
to forego otherwise attractive opportunities beyond rental real
estate operations, the impact of complying with the REIT
requirements related to hedging, its lack of experience operating
as a REIT, legislative, administrative, regulatory or other actions
affecting REITs, including positions taken by the Internal Revenue
Service, the possibility that the company's Board of Directors will
unilaterally revoke its REIT election, the possibility that the
anticipated benefits of qualifying as a REIT will not be realized,
or will not be realized within the expected time period, the impact
of current lending and capital market conditions on its liquidity,
its ability to finance or refinance projects or repay its debt, the
impact of the slow economic recovery on the ownership, development
and management of its commercial real estate portfolio, general
real estate investment and development risks, litigation risks,
vacancies in its properties, risks associated with developing and
managing properties in partnership with others, competition, its
ability to renew leases or re-lease spaces as leases expire,
illiquidity of real estate investments, its ability to identify and
transact on chosen strategic alternatives for a portion of its
retail portfolio, bankruptcy or defaults of tenants, anchor store
consolidations or closings, the impact of terrorist acts and other
armed conflicts, its substantial debt leverage and the ability to
obtain and service debt, the impact of restrictions imposed by the
company's revolving credit facility, term loan facility and senior
debt, exposure to hedging agreements, the level and volatility of
interest rates, the continued availability of tax-exempt government
financing, its ability to receive payment on the notes receivable
issued by Onexim in connection with their purchase of our interests
in the Barclays Center and the Nets, the impact of credit
rating downgrades, effects of uninsured or underinsured losses,
effects of a downgrade or failure of its insurance carriers,
environmental liabilities, competing interests of its directors and
executive officers, the ability to recruit and retain key
personnel, risks associated with the sale of tax credits, downturns
in the housing market, the ability to maintain effective internal
controls, compliance with governmental regulations, increased
legislative and regulatory scrutiny of the financial services
industry, changes in federal, state or local tax laws and
international trade agreements, volatility in the market price of
its publicly traded securities, inflation risks, cybersecurity
risks, cyber incidents, shareholder activism efforts, conflicts of
interest, risks related to its organizational structure including
operating through its Operating Partnership and its UPREIT
structure and completion of the proposed reclassification of its
common stock, as well as other risks listed from time to time in
the company's SEC filings, including but not limited to, the
company's annual and quarterly reports.
Reconciliation of
Net Earnings (Loss) to FFO
|
|
|
|
|
|
|
|
The table below
reconciles net earnings (loss), the most comparable GAAP measure,
to FFO, a non-GAAP measure.
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Years Ended December
31,
|
|
2016
|
2015
|
|
2016
|
2015
|
|
(in
thousands)
|
Net earnings
(loss) attributable to Forest City Realty Trust,
Inc.
|
$
1,825
|
$
548,714
|
|
$
(158,402)
|
$
496,042
|
Depreciation and
Amortization—Real Estate Groups (1)
|
82,105
|
94,756
|
|
318,635
|
337,740
|
Gain on disposition
of full or partial interests in rental properties
|
(3,552)
|
—
|
|
(129,367)
|
(22,039)
|
Impairment of
depreciable rental properties
|
—
|
38,431
|
|
155,595
|
447,587
|
Income tax expense
(benefit) adjustment — current and deferred
(2):
|
|
|
|
|
|
Gain on disposition of
full or partial interests in rental properties
|
—
|
—
|
|
55,272
|
8,549
|
Impairment of
depreciable rental properties
|
—
|
(14,785)
|
|
—
|
(173,590)
|
One-time adjustment to
deferred taxes related to REIT conversion
|
—
|
(588,607)
|
|
—
|
(588,607)
|
FFO attributable
to Forest City Realty Trust, Inc.
|
$
80,378
|
$
78,509
|
|
$
241,733
|
$
505,682
|
|
|
|
|
|
|
FFO Per Share -
Diluted
|
|
|
|
|
|
Numerator (in
thousands):
|
|
|
|
|
|
FFO attributable
to Forest City Realty Trust, Inc.
|
$
80,378
|
$
78,509
|
|
$
241,733
|
$
505,682
|
If-Converted Method
(adjustments for interest, net of tax for 2015):
|
|
|
|
|
|
5.000% Notes due
2016
|
—
|
8
|
|
—
|
415
|
4.250% Notes due
2018
|
778
|
1,005
|
|
3,806
|
5,646
|
3.625% Notes due
2020
|
363
|
646
|
|
2,006
|
3,754
|
FFO for per share
data
|
$
81,519
|
$
80,168
|
|
$
247,545
|
$
515,497
|
Denominator:
|
|
|
|
|
|
Weighted average
shares outstanding—Basic
|
258,725,549
|
257,682,590
|
|
258,509,970
|
237,559,598
|
Effect of stock
options, restricted stock and performance shares
|
1,045,086
|
1,951,293
|
|
1,177,562
|
2,407,276
|
Effect of convertible
debt
|
5,031,753
|
12,013,760
|
|
6,410,539
|
17,920,119
|
Effect of convertible
2006 Class A Common Units
|
1,940,788
|
1,940,788
|
|
1,940,788
|
2,667,712
|
Weighted average
shares outstanding - Diluted
|
266,743,176
|
273,588,431
|
|
268,038,859
|
260,554,705
|
FFO Per Share -
Diluted
|
$
0.31
|
$
0.29
|
|
$
0.92
|
$
1.98
|
|
|
|
|
|
|
(1) The
following table provides detail of depreciation and
amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Years Ended December
31,
|
|
2016
|
2015
|
|
2016
|
2015
|
|
(in
thousands)
|
Full
Consolidation
|
$
62,327
|
$
72,546
|
|
$
250,848
|
$
252,925
|
Non-Real
Estate
|
(779)
|
(1,055)
|
|
(3,114)
|
(4,500)
|
Real Estate Full
Consolidation
|
61,548
|
71,491
|
|
247,734
|
248,425
|
Real Estate related
to noncontrolling interest
|
(7,142)
|
(4,374)
|
|
(22,821)
|
(16,069)
|
Real Estate
Unconsolidated
|
27,699
|
22,792
|
|
93,687
|
85,345
|
Real Estate
Discontinued Operations
|
—
|
4,847
|
|
35
|
20,039
|
Real Estate at
Company share
|
$
82,105
|
$
94,756
|
|
$
318,635
|
$
337,740
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) The
following table provides detail of income tax expense
(benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Years Ended December
31,
|
|
2016
|
2015
|
|
2016
|
2015
|
|
(in
thousands)
|
Income tax expense
(benefit) on FFO
|
|
|
|
|
|
Operating Earnings:
|
|
|
|
|
|
Current taxes
|
$
1,466
|
$
(6,367)
|
|
$
5,711
|
$
(4,637)
|
Deferred taxes
|
100
|
2,763
|
|
24,122
|
154,688
|
Total income tax expense
(benefit) on FFO
|
1,566
|
(3,604)
|
|
29,833
|
150,051
|
Income tax expense
(benefit) on non-FFO
|
|
|
|
|
|
Disposition of full or partial interests in rental
properties:
|
|
|
|
|
|
Current taxes
|
$
—
|
$
(2,345)
|
|
$
(4,351)
|
$
5,975
|
Deferred taxes
|
—
|
2,345
|
|
59,623
|
2,574
|
Disposition of full or
partial interests in rental properties
|
—
|
—
|
|
55,272
|
8,549
|
Impairment of depreciable rental properties - deferred
taxes
|
$
—
|
$
(14,785)
|
|
$
—
|
$
(173,590)
|
One-time
adjustment to deferred taxes related to REIT conversion
|
—
|
(588,607)
|
|
—
|
(588,607)
|
Total
income tax expense (benefit) on non-FFO
|
—
|
(603,392)
|
|
55,272
|
(753,648)
|
Grand
Total
|
$
1,566
|
$
(606,996)
|
|
$
85,105
|
$
(603,597)
|
|
|
|
|
|
|
|
|
Reconciliation of
FFO to Operating FFO
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Years Ended December
31,
|
|
|
2016
|
2015
|
% Change
|
|
2016
|
2015
|
% Change
|
|
(in
thousands)
|
|
|
(in
thousands)
|
|
FFO attributable
to Forest City Realty Trust, Inc.
|
$
80,378
|
$
78,509
|
|
|
$
241,733
|
$
505,682
|
|
Impairment of
non-depreciable real estate
|
—
|
—
|
|
|
307,630
|
17,691
|
|
Write-offs of
abandoned development projects and demolition costs
|
601
|
3,640
|
|
|
10,659
|
19,609
|
|
Tax credit
income
|
(3,101)
|
(4,287)
|
|
|
(12,126)
|
(14,807)
|
|
Loss on
extinguishment of debt
|
3,930
|
3,133
|
|
|
33,863
|
65,103
|
|
Change in fair market
value of nondesignated hedges
|
(1,849)
|
(791)
|
|
|
95
|
(4,850)
|
|
Interest rate swap
breakage fee
|
24,635
|
—
|
|
|
24,635
|
—
|
|
(Gains) losses on
change in control of interests
|
—
|
1,405
|
|
|
—
|
(486,279)
|
|
Net gain on
disposition of interest in development project
|
—
|
—
|
|
|
(136,687)
|
—
|
|
Net gain on
disposition of partial interest in other investment -
Nets
|
—
|
—
|
|
|
(136,247)
|
—
|
|
Straight-line rent
adjustments
|
(2,139)
|
(26)
|
|
|
(10,108)
|
(4,497)
|
|
Participation
payments
|
73
|
1,002
|
|
|
73
|
1,013
|
|
Organizational
transformation and termination benefits
|
9,215
|
22,627
|
|
|
31,708
|
48,125
|
|
Nets pre-tax
FFO
|
—
|
2,325
|
|
|
1,400
|
40,760
|
|
Income tax expense
(benefit) on FFO
|
1,566
|
(3,604)
|
|
|
29,833
|
150,051
|
|
Operating FFO
attributable to Forest City Realty Trust, Inc.
|
$
113,309
|
$
103,933
|
9.0 %
|
|
$
386,461
|
$
337,601
|
14.5 %
|
If-Converted Method
(adjustments for interest, pre-tax):
|
|
|
|
|
|
|
|
5.000%
Notes due 2016
|
—
|
13
|
|
|
—
|
678
|
|
4.250%
Notes due 2018
|
778
|
1,641
|
|
|
3,806
|
9,222
|
|
3.625%
Notes due 2020
|
363
|
1,054
|
|
|
2,006
|
6,132
|
|
Operating FFO
attributable to Forest City Realty Trust, Inc.
(If-Converted)
|
$
114,450
|
$
106,641
|
|
|
$
392,273
|
$
353,633
|
|
Weighted average
shares outstanding - Diluted
|
266,743,176
|
273,588,431
|
|
|
268,038,859
|
260,554,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Earnings (Loss) Before Income Taxes (GAAP) to Net Operating Income
(non-GAAP)(in thousands):
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Years Ended December
31,
|
|
2016
|
2015
|
|
2016
|
2015
|
Earnings (loss)
before income taxes (GAAP)
|
$
1,307
|
$
(51,660)
|
|
$
(454,173)
|
$
(38,035)
|
(Earnings) loss from
unconsolidated entities
|
(4,734)
|
8,488
|
|
263,533
|
(28,762)
|
Earnings (loss)
before income taxes and earnings from unconsolidated
entities
|
(3,427)
|
(43,172)
|
|
(190,640)
|
(66,797)
|
Land sales
|
(25,599)
|
(31,580)
|
|
(48,078)
|
(79,169)
|
Cost of land
sales
|
8,471
|
15,697
|
|
13,661
|
31,413
|
Other land
development revenues
|
(3,403)
|
(2,912)
|
|
(10,183)
|
(8,254)
|
Other land
development expenses
|
2,185
|
2,145
|
|
8,923
|
9,753
|
Corporate general and
administrative expenses
|
10,904
|
13,199
|
|
62,683
|
51,974
|
Organizational
transformation and termination benefits
|
9,215
|
22,627
|
|
31,708
|
48,125
|
Depreciation and
amortization
|
62,327
|
72,546
|
|
250,848
|
252,925
|
Write-offs of
abandoned development projects and demolition costs
|
290
|
3,756
|
|
10,348
|
9,534
|
Impairment of real
estate
|
—
|
25,971
|
|
156,825
|
451,434
|
Interest and other
income
|
(13,564)
|
(9,762)
|
|
(46,229)
|
(37,739)
|
(Gains) loss on
change in control of interests
|
—
|
1,405
|
|
—
|
(486,279)
|
Interest
expense
|
30,311
|
37,481
|
|
131,441
|
157,166
|
Interest rate swap
breakage fee
|
24,635
|
—
|
|
24,635
|
—
|
Amortization of
mortgage procurement costs
|
1,324
|
1,793
|
|
5,719
|
7,549
|
Loss on
extinguishment of debt
|
3,876
|
3,133
|
|
32,960
|
65,086
|
NOI related to
unconsolidated entities (1)
|
58,835
|
49,587
|
|
223,592
|
213,590
|
NOI related to
noncontrolling interest (2)
|
(9,837)
|
(7,348)
|
|
(37,221)
|
(32,521)
|
NOI related to
discontinued operations (3)
|
—
|
8,520
|
|
1,198
|
21,943
|
Net Operating
Income attributable to Forest City Realty Trust,
Inc.
|
$
156,543
|
$
163,086
|
|
$
622,190
|
$
609,733
|
|
|
|
|
|
|
(1) NOI related to
unconsolidated entities:
|
|
|
|
|
|
Equity in earnings
(GAAP)
|
$
4,181
|
$
3,972
|
|
$
29,701
|
$
22,313
|
Exclude non-NOI
activity from unconsolidated entities:
|
|
|
|
|
|
Land and non-rental
activity, net
|
(509)
|
664
|
|
(3,658)
|
(3,756)
|
Interest and other
income
|
(1,197)
|
(722)
|
|
(2,544)
|
(1,779)
|
Write offs of
abandoned development projects
|
327
|
—
|
|
327
|
10,191
|
Depreciation and
amortization
|
28,638
|
23,594
|
|
97,423
|
88,455
|
Interest expense and
extinguishment of debt
|
27,395
|
22,079
|
|
102,343
|
98,166
|
NOI related to
unconsolidated entities
|
$
58,835
|
$
49,587
|
|
$
223,592
|
$
213,590
|
|
|
|
|
|
|
(2) NOI related to
noncontrolling interest:
|
|
|
|
|
|
Earnings from
continuing operations attributable to noncontrolling interests
(GAAP)
|
$
(915)
|
$
(2,812)
|
|
$
(6,078)
|
$
(13,258)
|
Exclude non-NOI
activity from noncontrolling interests:
|
|
|
|
|
|
Land and non-rental
activity, net
|
1,909
|
1,747
|
|
3,882
|
4,979
|
Interest and other
income
|
449
|
670
|
|
1,600
|
2,105
|
Write offs of
abandoned development projects
|
(16)
|
(116)
|
|
(16)
|
(116)
|
Depreciation and
amortization
|
(7,401)
|
(4,454)
|
|
(23,617)
|
(16,354)
|
Interest expense and
extinguishment of debt
|
(3,863)
|
(2,383)
|
|
(12,807)
|
(9,877)
|
Loss on disposition
of full or partial interests in rental properties
|
—
|
—
|
|
(185)
|
—
|
NOI related to
noncontrolling interest
|
$
(9,837)
|
$
(7,348)
|
|
$
(37,221)
|
$
(32,521)
|
|
|
|
|
|
|
(3) NOI related to
discontinued operations:
|
|
|
|
|
|
Operating loss from
discontinued operations, net of tax (GAAP)
|
$
—
|
$
(3,058)
|
|
$
(1,126)
|
$
(27,520)
|
Less loss from
discontinued operations attributable to noncontrolling
interests
|
—
|
2,150
|
|
776
|
16,962
|
Exclude non-NOI
activity from discontinued operations (net of noncontrolling
interest):
|
|
|
|
|
|
Depreciation and
amortization
|
—
|
5,088
|
|
56
|
20,330
|
Interest
expense
|
—
|
4,917
|
|
1,738
|
18,861
|
Income tax
benefit
|
—
|
(577)
|
|
(246)
|
(6,690)
|
NOI related to
discontinued operations
|
$
—
|
$
8,520
|
|
$
1,198
|
$
21,943
|
|
|
|
|
|
|
Net Operating
Income (Non-GAAP) Detail (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months December
31,
|
|
|
Years Ended December
31,
|
|
|
2016
|
2015
|
% Change
|
|
2016
|
2015
|
% Change
|
Office
Segment
|
|
|
|
|
|
|
|
Comparable NOI
|
65,274
|
65,563
|
(0.4)%
|
|
254,087
|
245,221
|
3.6 %
|
Non-Comparable NOI
|
(368)
|
1,272
|
|
|
17,224
|
7,644
|
|
Office Product Type NOI
|
64,906
|
66,835
|
|
|
271,311
|
252,865
|
|
Other NOI(1)
|
2,755
|
(309)
|
|
|
7,400
|
(1,964)
|
|
Total Office Segment
|
67,661
|
66,526
|
|
|
278,711
|
250,901
|
|
Retail
Segment
|
|
|
|
|
|
|
|
Comparable NOI
|
40,528
|
41,744
|
(2.9)%
|
|
162,912
|
158,845
|
2.6 %
|
Non-Comparable NOI
|
1,582
|
3,694
|
|
|
2,291
|
16,561
|
|
Retail Product Type NOI
|
42,110
|
45,438
|
|
|
165,203
|
175,406
|
|
Other NOI(1)
|
2,532
|
262
|
|
|
3,785
|
1,986
|
|
Total Retail Segment
|
44,642
|
45,700
|
|
|
168,988
|
177,392
|
|
Apartment
Segment
|
|
|
|
|
|
|
|
Comparable NOI
|
41,033
|
40,580
|
1.1 %
|
|
168,390
|
162,949
|
3.3 %
|
Non-Comparable NOI
|
3,185
|
(1,476)
|
|
|
11,310
|
(2,780)
|
|
Apartment Product Type NOI
|
44,218
|
39,104
|
|
|
179,700
|
160,169
|
|
Federally Assisted Housing
|
4,732
|
5,036
|
|
|
19,693
|
19,602
|
|
Other NOI(1)
|
(318)
|
(1,486)
|
|
|
(2,693)
|
(15,018)
|
|
Total Apartment Segment
|
48,632
|
42,654
|
|
|
196,700
|
164,753
|
|
Operations
|
|
|
|
|
|
|
|
Comparable NOI
|
146,835
|
147,887
|
(0.7)%
|
|
585,389
|
567,015
|
3.2 %
|
Non-Comparable NOI (2)
|
4,399
|
3,490
|
|
|
30,825
|
21,425
|
|
Product Type NOI
|
151,234
|
151,377
|
|
|
616,214
|
588,440
|
|
Federally Assisted Housing
|
4,732
|
5,036
|
|
|
19,693
|
19,602
|
|
Other NOI (1):
|
|
|
|
|
|
|
|
Straight-line rent adjustments
|
1,773
|
71
|
|
|
9,194
|
4,068
|
|
Participation payments
|
(73)
|
(1,002)
|
|
|
(73)
|
(1,013)
|
|
Other
Operations
|
3,269
|
(602)
|
|
|
(629)
|
(18,051)
|
|
|
4,969
|
(1,533)
|
|
|
8,492
|
(14,996)
|
|
Total
Operations
|
160,935
|
154,880
|
|
|
644,399
|
593,046
|
|
Development
Segment
|
|
|
|
|
|
|
|
Recently-Opened
Properties/Redevelopment
|
939
|
3,987
|
|
|
3,965
|
10,361
|
|
Other Development (3)
|
(5,331)
|
(11,299)
|
|
|
(28,676)
|
(41,499)
|
|
Total Development Segment
|
(4,392)
|
(7,312)
|
|
|
(24,711)
|
(31,138)
|
|
Other
Segment
|
—
|
15,518
|
|
|
2,502
|
47,825
|
|
Grand
Total
|
$
156,543
|
$
163,086
|
|
|
$
622,190
|
$
609,733
|
|
|
|
|
|
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(1) Includes
straight-line rent adjustments, participation payments as a result
of refinancing transactions on our properties and management and
service company overhead, net of service fee revenues.
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(2) Non-comparable
NOI includes lease termination income of $2,079 and $3,404 for the
three months and year ended December 31, 2016, compared with $11
and $3,279 for the three months and year ended December 31,
2015.
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(3) Includes
straight-line adjustments, non-capitalizable development overhead
and other costs on our development projects.
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To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/forest-city-reports-2016-fourth-quarter-and-yearend-results-300413662.html
SOURCE Forest City Realty Trust, Inc.