CLEVELAND, May 4, 2017
/PRNewswire/ -- Forest City Realty Trust, Inc. (NYSE: FCEA and
FCEB) today announced financial results for the three months ended
March 31, 2017.
Net Earnings
For the three months ended March 31,
2017, the company had net earnings of $40.9 million, or $0.16 per share, compared with net earnings of
$244.0 million, or $0.92 per share, for the three months ended
March 31, 2016.
The quarter-over-quarter variance in net earnings was driven
primarily by significant first-quarter 2016 gains on dispositions
and joint ventures, including the disposition of the company's
interest in the Brooklyn Nets basketball team, the Barclays Center
arena, the 625 Fulton Avenue development parcel in Brooklyn and the company's military housing
business, that did not recur in 2017.
Additional factors impacting net earnings/loss for the three
months ended March 31, 2017, are
described below under FFO and Operating FFO and are included in the
company's quarterly report on Form 10-Q for the three months ended
March 31, 2017, filed with the
Securities and Exchange Commission (SEC) and supplemental package
for the quarter ended March 31, 2017, furnished to the SEC on
Form 8-K. The Form 10-Q and supplemental package are available on
the company's website, www.forestcity.net.
Revenues
Consolidated revenues for the three months ended March 31, 2017, were $216.0 million, compared with $226.3 million for the three months ended
March 31, 2016.
Funds From Operations (FFO)
FFO for the three months ended March 31,
2017 was $92.3 million, or
$0.35 per share, compared with
$290.6 million, or $1.08 per share for the three months ended
March 31, 2016.
Drivers of the year-over-year FFO variance include first-quarter
2016 gains totaling $245.8 million,
net of tax, or approximately $0.90
per share, from disposition of the 625 Fulton Avenue development
parcel in Brooklyn and the
company's interest in the Nets, partially offset by lower 2017 loss
on extinguishment of debt of $24.6
million, and decreased 2017 organizational transformation
and termination costs of $4.2
million.
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, the most comparable
GAAP measure, to FFO.
Operating FFO
Operating FFO for the three months ended March 31, 2017 was $94.5
million compared with $81.2
million for the three months ended March 31, 2016.
Positive factors impacting 2017 first-quarter Operating FFO were
decreased interest expense of $11.7
million; improved corporate G&A/other NOI of
$11.1 million, the majority of which
is reduced overhead expense; lease termination fee income of
$1.8 million and Operating FFO from
other sources of $0.2 million. These
positive factors were partially offset by reduced Operating FFO
from properties sold of $5.0 million
and reduced interest capitalized to active development projects of
$6.5 million, reflecting the
completion and delivery of new properties into the portfolio and a
corresponding overall lower level of development activity.
Factors impacting Operating FFO for the first quarter are
illustrated in a bridge diagram included in the company's
supplemental package for the three months ended March 31,
2017. The quarterly report and supplemental package also include
additional explanations of factors impacting Net Earnings,
Operating FFO and FFO for the three months ended March 31, 2017.
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.
Governance Update
On April 24, the company announced
the appointment of Z. Jamie Behar,
CFA, former managing director, real estate & alternative
investments at GM Investment Management Corp, and Craig Macnab, former chairman and chief
executive officer of National Retail Properties, to serve as
independent directors. Behar fills the vacancy created when
Bruce C. Ratner, executive chairman
of the company's New York
subsidiary, stepped down from the board at the end of 2016. Macnab
will succeed Stan Ross, an
independent director who has served on the board for 18 years and
who has informed the company he will not stand for re-election at
the June 9 annual meeting. With these
actions, eight of the company's 13 directors are independent.
Also at the upcoming annual meeting, shareholders will be asked
to approve collapsing the company's current dual-class share
structure. Assuming approval of the reclassification, the company
intends to adopt a majority voting standard for all directors in
uncontested elections.
Commentary
"Financial results for the first quarter reflect our ongoing
focus on operational excellence," said David J. LaRue, Forest City president and chief
executive officer. "Operating FFO was up 16 percent, quarter over
quarter, reflecting margin gains from reduced expenses, both
corporate and at the property level, and an improved business mix.
Overall Adjusted EBITDA margins in the first quarter improved 420
basis points, compared with the same period last year. This
represents an improvement of 90 basis points, compared with margins
for the full year 2016, in line with our goal to improve margins
400 to 500 basis points over our 2016 results by mid-year 2018.
"In addition, strong same-space leasing spreads in office and
retail, and continued rent growth in apartments, reflect underlying
strength in the portfolio. As a result, we remain confident in our
ability to deliver solid full-year performance from our portfolio
and additional value from our development pipeline.
"Overall comparable property net operating income dipped 1.0
percent, compared with exceptionally strong growth in the first
quarter of 2016, which was up 9.7 percent overall.
Property-specific factors in office and retail impacted
first-quarter comp NOI growth, as did a decrease in occupancy in
apartments. We believe the portfolio is well positioned to overcome
this slow start in Comp NOI, and we expect overall growth of
approximately 3 percent for the full year.
"Results in apartments were impacted by a decline in occupancy
stemming from efforts in the second half of 2016 to aggressively
increase rents for renewals. That strategy has been refined, and by
the end of the first quarter, we were seeing both rents and
occupancy trending positive, boding well for improved results in
future periods.
"Fundamentals remain solid overall in our office portfolio, as
reflected by same-space leasing spreads up 13.9 percent on a
rolling 12-month basis, and 19.9 percent in the first quarter
alone. Comp NOI results in the quarter for office were impacted
primarily by the timing of a tenant downsizing at our Ballston office building, which adjoins
Ballston Quarter in Arlington, VA,
a mixed-use project currently undergoing extensive
redevelopment. In addition, office results were impacted by
vacancies at Post Office Plaza in Cleveland, which we are actively marketing for
sale consistent with our strategy to reduce non-core market
exposure. We continue to feel very good about our Cambridge and New
York City office portfolios, which together account for more
than 80 percent of our office NOI.
"In retail, results for the quarter were impacted by the timing
of lease expirations and re-merchandising programs at San Francisco
Center, which were the largest factors in the retail Comp NOI dip
in the quarter. Nonetheless, the solid fundamentals of the mall
portfolio continue to be reflected in strong same-space leasing
spreads, which were up 14.6 percent in the first quarter, on a
rolling 12-month basis. Rolling 12-month sales per square foot in
our regional malls increased meaningfully with the removal from the
comp set of Boulevard Mall near Buffalo, where we expect to execute a
deed-in-lieu with the lender. The resulting jump in rolling
12-month sales to $570 per square
foot across the balance of the malls, demonstrates the quality of
the portfolio.
"As a result of the success of our residential development fund
with the Arizona State Retirement System (ASRS), we have notified
our partner that, based on exceeding target returns, we intend to
exercise our promote option to increase our ownership stake from
the current 25 percent to approximately 30 percent. The implied
increase in value to Forest City is roughly $30 million on a total equity investment of
approximately $100 million.
"Progress continues on finalizing documentation for the expected
disposition of our interests in our retail portfolio. Overall
pricing and structure for these anticipated transactions has not
changed since we described them in our yearend 2016 earnings
release -- 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.
"In the case of our regional malls, we have agreed with our
partner, QIC, that, upon executing definitive documentation, we
intend to sell our interest outright in seven of the 11 properties
yet this year. For the remaining four malls -- Victoria Gardens,
Short Pump Town Center, Galleria at Sunset, and Promenade Temecula
-- our objective will be to exchange our interest and redeploy our
stakes into new apartment or office assets in core markets.
For our New York specialty retail
portfolio, we have reached agreement with our partner, Madison
International, on substantial terms and conditions, subject to
final drafting points and third-party investor sign-off. Given
progress to date, we have agreed with Madison to move ahead with obtaining
third-party consents. The transaction is being structured in a
tax-efficient manner, and we expect an initial closing on the
definitive documents this summer, with closings to be completed as
soon as possible, but no later than 24 months from initial
closing.
"While we are pleased with progress to date and
confident in our ability to consummate these transactions, we
need to remind investors that no transaction can be guaranteed, and
we may not be able to transact in the foreseeable future or at the
terms described here.
"The disposition of our federally assisted housing portfolio
continues. To date, we have closed the sale of 14 of the 47
properties in the portfolio, collecting $41.5 million of the anticipated $65 million of total net proceeds from the
disposition. We expect the remaining closings to be completed over
the balance of 2017."
Comparable NOI, Occupancies and Rent
Overall comparable net operating income (NOI) for the three
months ended March 31, 2017,
decreased 1.0 percent, with decreases of 1.4 percent in office, 0.3
percent in apartments and 1.2 percent in retail, compared with
results for the same period in 2016.
Comparable office occupancies were 93.5 percent at
March 31, 2017, down from 96.4 percent in the first quarter of
2016. The decline in office occupancies is primarily related to the
previously mentioned tenant downsizing at Ballston, and vacancies at Post Office Plaza,
as well as the timing of a vacancy at One Pierrepont Plaza in
Brookyn. For the rolling 12-month period ended March 31, 2017,
rent per square foot in new, same-space office leases increased
13.9 percent over prior rents.
In the apartment portfolio, average monthly rents per unit for
the company's total comparable apartments rose to $1,526 for the three months ended March 31, 2017, a 1.4 percent increase compared
with average monthly rents for the three months ended March 31, 2016. Comparable average rents per unit
in the company's core markets were $2,008, a 1.0 percent increase from the
comparable period in 2016. Comparable economic occupancies for the
three months ended March 31, 2017,
were 93.6 percent, down from 94.3 percent for the three months
ended March 31, 2016.
In the retail portfolio, comparable retail occupancies at
March 31, 2017, decreased to 93.6 percent, compared with 94.2
percent at March 31, 2016. Sales in the company's regional
malls averaged $570 per square foot
on a rolling 12-month basis, up from $555 per square foot at December 31, 2016, and up from $558 per square foot at March 31, 2016. For
the rolling 12-month period ended March 31, 2017, new,
same-space leases in the company's regional malls increased 14.6
percent over prior rents.
Comparable NOI, defined as NOI from stabilized properties
operated in the Three Months Ended March 31,
2017 vs. 2016, is a non-GAAP financial measure. Included in
this release is a schedule that presents comparable NOI and a
reconciliation of earnings before income taxes to NOI.
Openings and Projects Under Construction
During the first quarter, the company completed and began phased
opening of Eliot on 4th, a 365-unit apartment
community at the company's Waterfront Station mixed-use project in
Washington, D.C., and 535
Carlton, a 298-unit, all-affordable apartment community at
Pacific Park Brooklyn. In addition, unit closings began in the
first quarter at 550 Vanderbilt, a 278-unit condominium
property, also at Pacific Park Brooklyn.
At March 31, 2017, Forest City had 11 projects under
construction at a total cost of $1.4
billion, or $651.2 million at
the company's share. These include:
APARTMENTS:
- Axis (formerly 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.
- Ardan (formerly West Village II), a 389-unit
apartment community in Dallas, is
expected to begin phased opening in the first quarter of 2018.
Eliot on 4th, Axis, and Ardan are part of the company's
residential development fund with the Arizona State Retirement
System.
Other apartment projects currently under construction
include:
- 38 Sixth Avenue, a 303-unit, all-affordable
apartment community with 6,000 square feet of street-level retail
at Pacific Park Brooklyn that is part of the company's strategic
partnership with Greenland USA, is
expected to begin phased opening in the second quarter of
2017.
- Mint Town Center (formerly 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.
- VYV (formerly 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.
- The Guild, a 191-unit apartment community at The
Yards in Washington, D.C., is
expected to be completed in the fourth quarter of 2018.
- Capper 769, a 179-unit apartment community in
Washington, D.C., is expected to
be completed in the first quarter of 2019.
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
"We remain confident in our ability to deliver solid full-year
results," said LaRue. "The underlying fundamentals in our portfolio
are strong, and we are continuing to see the positive impact of our
strategies of growing our portfolio through our focus on core
markets, improving margins, further deleveraging, and
completing targeted dispositions. We also continue to complete and
deliver new, well-leased properties from our pipeline of
approximately 20 million square feet of entitled future
opportunities in strong core markets.
"At the same time, we are also committed to further improving
transparency and enhancing governance, as demonstrated by
increasing the independence of the board, and, subject to
shareholder approval at our upcoming Annual Meeting, collapsing our
current dual-class share structure and instituting majority voting
for all directors in uncontested elections.
"As we noted in our recently completed summary annual report,
2017 is a year of execution for Forest City. Having focused for the
past several years on transforming Forest City, we are now in a
position to pivot and refocus on growth - growth in our portfolio,
in operating margins, in NOI, in FFO, in our dividend, and in
our company. The key to unleashing that growth focused
execution.
"Our near-term goals are clear: improve margins by an additional
400 to 500 basis points from full-year 2016 results, achieve a
leverage ratio in the mid-seven times range, successfully transact
our retail portfolio and redeploy our ownership into high-quality
assets in strong markets, continue to exercise prudent capital
allocation and selectively activate new opportunities from our
pipeline in addition to driving growth from the mature portfolio.
By accelerating the diligent execution of these strategies, we
believe we can and will achieve growth, create sustainable value
for all stakeholders 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 May 4, 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 March 31, 2017,
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 company's
core assets 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 ratably over time. Since real estate
values have historically risen or fallen with market conditions,
many real estate 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 report operations using FFO as defined by the
National Association of Real Estate Investment Trusts ("NAREIT").
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, Apartments,
Retail 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, apartment and retail 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, apartment and retail
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.
Important Additional Information
The directors, director nominees and executive officers of the
Company and other persons may be deemed to be participants in the
solicitation of proxies from stockholders in respect of the matters
to be considered at the Company's 2017 Annual Meeting of
Stockholders, including the reclassification transaction.
Information about the Company's directors, director nominees, and
executive officers, including a description of their direct and
indirect interests, is contained in the proxy statement/prospectus,
which was filed with the SEC on May 1,
2017, and in the Company's other filings with the SEC.
This document does not constitute an offer to sell, or the
solicitation of an offer to buy, any securities or a solicitation
of any vote or approval nor shall there be any sale of securities
in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. In connection with the
Company's 2017 Annual Meeting of Stockholders and the
reclassification transaction, the Company has filed with the SEC,
and the SEC has declared effective, a Registration Statement on
Form S-4, containing a proxy statement/prospectus of the Company,
which proxy statement/prospectus is being mailed to stockholders on
or about May 2, 2017. This document
is not a substitute for such registration statement, proxy
statement/prospectus or any other documents that the Company may
file with the SEC or send to stockholders in connection with the
reclassification transaction. Stockholders are urged to read the
proxy statement/prospectus and any other relevant documents because
they contain important information.
Stockholders can obtain a free copy of the proxy
statement/prospectus, as well as other filings containing
information about the Company, without charge, at the SEC's
website, www.sec.gov, and on the Investor Relations page of the
Company's website at http://ir.forestcity.net/.
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 failure to receive stockholder approval of the
reclassification proposal, any other delays with respect to, or the
failure to complete, the reclassification, the company's ability to
carry out future transactions and strategic investments, as well as
the acquisition related costs, unanticipated difficulties realizing
expected benefits expected when entering into a transaction, 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, including risks
with respect to the outcome of any legal proceedings that have or
may be instituted against the Company or others relating to the
reclassification, 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 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, 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
March 31,
|
|
2017
|
2016
|
|
(in
thousands)
|
Net earnings
attributable to Forest City Realty Trust, Inc.
(GAAP)
|
$
40,917
|
$
244,035
|
Depreciation and
Amortization—real estate (1)
|
78,349
|
78,862
|
Gain on disposition
of full or partial interests in rental properties
|
(27,004)
|
(99,758)
|
Impairment of
depreciable rental properties
|
—
|
12,464
|
Income tax expense
adjustment — current and deferred (2):
|
|
|
Gain on
disposition of full or partial interests in rental
properties
|
—
|
55,036
|
FFO attributable
to Forest City Realty Trust, Inc. (Non-GAAP)
|
$
92,262
|
$
290,639
|
|
|
|
FFO Per Share -
Diluted
|
|
|
Numerator (in
thousands):
|
|
|
FFO attributable
to Forest City Realty Trust, Inc.
|
$
92,262
|
$
290,639
|
If-Converted Method
(adjustments for interest):
|
|
|
4.250% Notes
due 2018
|
778
|
1,472
|
3.625% Notes
due 2020
|
363
|
918
|
FFO for per share
data
|
$
93,403
|
$
293,029
|
Denominator:
|
|
|
Weighted average
shares outstanding—Basic
|
258,797,277
|
257,951,076
|
Effect of stock
options, restricted stock and performance shares
|
1,320,911
|
1,484,743
|
Effect of convertible
debt
|
5,031,753
|
10,577,203
|
Effect of convertible
2006 Class A Common Units
|
1,910,625
|
1,940,788
|
Weighted average
shares outstanding - Diluted
|
267,060,566
|
271,953,810
|
FFO Per Share -
Diluted
|
$
0.35
|
$
1.08
|
|
|
|
(1) The
following table provides detail of depreciation and
amortization:
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2017
|
2016
|
|
(in
thousands)
|
Full
Consolidation
|
$
63,555
|
$
63,211
|
Non-Real
Estate
|
(702)
|
(819)
|
Real Estate Full
Consolidation
|
62,853
|
62,392
|
Real Estate related
to noncontrolling interest
|
(6,696)
|
(4,327)
|
Real Estate
Unconsolidated
|
22,192
|
20,762
|
Real Estate
Discontinued Operations
|
—
|
35
|
Real Estate at
Company share
|
$
78,349
|
$
78,862
|
|
|
|
|
|
|
(2) The
following table provides detail of income tax expense
(benefit):
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2017
|
2016
|
|
(in
thousands)
|
Income tax expense
on FFO
|
|
|
Operating
Earnings:
|
|
|
Current
taxes
|
$
51
|
$
3,629
|
Deferred
taxes
|
—
|
24,157
|
Total income tax
expense on FFO
|
51
|
27,786
|
Income tax expense
(benefit) on non-FFO
|
|
|
Disposition of full
or partial interests in rental properties:
|
|
|
Current
taxes
|
$
—
|
$
(4,587)
|
Deferred
taxes
|
—
|
59,623
|
Total income tax
expense on non-FFO
|
—
|
55,036
|
Grand
Total
|
$
51
|
$
82,822
|
Reconciliation of
FFO to Operating FFO
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2017
|
2016
|
% Change
|
|
(in
thousands)
|
|
FFO attributable
to Forest City Realty Trust, Inc.
|
$
92,262
|
$
290,639
|
|
Write-offs of
abandoned development projects and demolition costs
|
351
|
—
|
|
Tax credit
income
|
(2,691)
|
(3,008)
|
|
Loss on
extinguishment of debt
|
4,466
|
29,084
|
|
Change in fair market
value of nondesignated hedges
|
(1,502)
|
1,396
|
|
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
|
(2,942)
|
(1,861)
|
|
Organizational
transformation and termination benefits
|
4,525
|
8,720
|
|
Nets pre-tax
FFO
|
—
|
1,400
|
|
Income tax expense
(benefit) on FFO
|
51
|
27,786
|
|
Operating FFO
attributable to Forest City Realty Trust, Inc.
|
$
94,520
|
$
81,222
|
16.4 %
|
If-Converted Method
(adjustments for interest) (in thousands):
|
|
|
|
4.250% Notes
due 2018
|
778
|
1,472
|
|
3.625% Notes
due 2020
|
363
|
918
|
|
Operating FFO
attributable to Forest City Realty Trust, Inc.
(If-Converted)
|
$
95,661
|
$
83,612
|
|
Weighted average
shares outstanding - Diluted
|
267,060,566
|
271,953,810
|
|
Reconciliation of
Earnings (Loss) Before Income Taxes (GAAP) to Net Operating Income
(non-GAAP) (in thousands):
|
|
|
|
|
Three Months Ended
March 31,
|
|
2017
|
2016
|
Earnings (loss)
before income taxes (GAAP)
|
$
31,672
|
$
(41,533)
|
Earnings from
unconsolidated entities
|
(26,979)
|
(10,536)
|
Earnings (loss)
before income taxes and earnings from unconsolidated
entities
|
4,693
|
(52,069)
|
Land sales
|
(5,760)
|
(3,933)
|
Cost of land
sales
|
2,001
|
340
|
Other land
development revenues
|
(1,105)
|
(1,916)
|
Other land
development expenses
|
2,564
|
2,348
|
Corporate general and
administrative expenses
|
15,583
|
17,112
|
Organizational
transformation and termination benefits
|
4,525
|
8,720
|
Depreciation and
amortization
|
63,555
|
63,211
|
Impairment of real
estate
|
—
|
12,464
|
Interest and other
income
|
(10,272)
|
(9,654)
|
Interest
expense
|
27,975
|
34,635
|
Amortization of
mortgage procurement costs
|
1,222
|
1,665
|
Loss on
extinguishment of debt
|
2,843
|
29,084
|
NOI related to
unconsolidated entities (1)
|
55,100
|
55,245
|
NOI related to
noncontrolling interest (2)
|
(9,671)
|
(8,088)
|
NOI related to
discontinued operations (3)
|
—
|
1,198
|
Net Operating
Income (Non-GAAP)
|
$
153,253
|
$
150,362
|
|
|
|
(1) NOI related to
unconsolidated entities:
|
|
|
Equity in earnings
(GAAP)
|
$
9,278
|
$
10,536
|
Exclude non-NOI
activity from unconsolidated entities:
|
|
|
Land and non-rental
activity, net
|
(1,136)
|
(941)
|
Interest and other
income
|
(1,525)
|
(365)
|
Write offs of abandoned
development projects and demolition costs
|
351
|
—
|
Depreciation and
amortization
|
23,089
|
21,674
|
Interest expense and
extinguishment of debt
|
25,043
|
24,341
|
NOI related to
unconsolidated entities
|
$
55,100
|
$
55,245
|
|
|
|
(2) NOI related to
noncontrolling interest:
|
|
|
(Earnings) loss from
continuing operations attributable to noncontrolling interests
(GAAP)
|
$
106
|
$
(2,121)
|
Exclude non-NOI
activity from noncontrolling interests:
|
|
|
Land and non-rental
activity, net
|
246
|
349
|
Interest and other
income
|
524
|
377
|
Depreciation and
amortization
|
(6,983)
|
(4,519)
|
Interest expense and
extinguishment of debt
|
(3,564)
|
(1,989)
|
Loss on disposition of
full or partial interests in rental properties
|
—
|
(185)
|
NOI related to
noncontrolling interest
|
$
(9,671)
|
$
(8,088)
|
|
|
|
(3) NOI related to
discontinued operations:
|
|
|
Operating loss from
discontinued operations, net of tax (GAAP)
|
$
—
|
$
(1,126)
|
Less loss from
discontinued operations attributable to noncontrolling
interests
|
—
|
776
|
Exclude non-NOI
activity from discontinued operations (net of noncontrolling
interest):
|
|
|
Depreciation and
amortization
|
—
|
56
|
Interest
expense
|
—
|
1,738
|
Income tax
benefit
|
—
|
(246)
|
NOI related to
discontinued operations
|
$
—
|
$
1,198
|
Net Operating
Income (Non-GAAP) Detail (in thousands)
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2017
|
2016
|
% Change
|
Office
Segment
|
|
|
|
Comparable
NOI
|
64,871
|
65,792
|
(1.4)%
|
Non-Comparable
NOI
|
5,075
|
4,147
|
|
Office Product Type
NOI
|
69,946
|
69,939
|
|
Other NOI
(1)
|
3,454
|
(521)
|
|
Total Office
Segment
|
73,400
|
69,418
|
|
Apartment
Segment
|
|
|
|
Comparable
NOI
|
45,328
|
45,443
|
(0.3)%
|
Non-Comparable
NOI
|
76
|
(1,129)
|
|
Apartment Product
Type NOI
|
45,404
|
44,314
|
|
Federally Assisted
Housing
|
4,285
|
5,548
|
|
Other NOI
(1)
|
(732)
|
(4,201)
|
|
Total Apartment
Segment
|
48,957
|
45,661
|
|
Retail
Segment
|
|
|
|
Comparable
NOI
|
37,770
|
38,211
|
(1.2)%
|
Non-Comparable
NOI
|
1,593
|
4,234
|
|
Retail Product Type
NOI
|
39,363
|
42,445
|
|
Other NOI
(1)
|
(338)
|
1,010
|
|
Total Retail
Segment
|
39,025
|
43,455
|
|
Operations
|
|
|
|
Comparable
NOI
|
147,969
|
149,446
|
(1.0)%
|
Non-Comparable NOI
(2)
|
6,744
|
7,252
|
|
Product Type
NOI
|
154,713
|
156,698
|
|
Federally Assisted
Housing
|
4,285
|
5,548
|
|
Other NOI
(1):
|
|
|
|
Straight-line
rent adjustments
|
2,798
|
1,848
|
|
Other
Operations
|
(414)
|
(5,560)
|
|
|
2,384
|
(3,712)
|
|
Total
Operations
|
161,382
|
158,534
|
|
Development
Segment
|
|
|
|
Recently-Opened
Properties/Redevelopment
|
(1,252)
|
629
|
|
Other Development
(3)
|
(6,877)
|
(11,303)
|
|
Total Development
Segment
|
(8,129)
|
(10,674)
|
|
Other
Segment
|
—
|
2,502
|
|
Grand
Total
|
$
153,253
|
$
150,362
|
|
|
|
|
|
(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.
|
|
(2) Non-comparable
NOI includes lease termination income of $2,140 for the three
months ended March 31, 2017, compared with $334 for the three
months ended March 31, 2016.
|
|
(3) Includes
straight-line adjustments, non-capitalizable development overhead
and other costs on our development projects.
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/forest-city-reports-2017-first-quarter-results-300451951.html
SOURCE Forest City Realty Trust, Inc.