The Ratner family – a prominent fixture of the real estate management and development industry – is being pressured by an activist investor to relinquish voting control of Forest City Realty Trust, as the firm’s executives and investors seek to strengthen the real estate investment trust’s underperforming stock.
Scopia Capital Management — which owns a 7.4 percent stake in the REIT — called on Forest City’s board to abolish a dual-class stock structure that grants the Ratners voting control. That structure, Scopia contented, “clearly harms the company,” the Wall Street Journal reported. At present, the Ratner family owns 3.8 percent of Forest City’s common Class A shares and 92 percent of its Class B shares, giving the family control of nine out of 13 board members. The $6 billion company converted to a real estate investment trust in January.
Forest City executives stated that it values “constructive input” from shareholders, but emphasized that it is focused on executing a business plan to drive value. Forest City has focused most of its energy on building up margins and selling assets, including the Barclays Center and a stake in the NBA’s Brooklyn Nets.
As Forest City CEO MaryAnne Gilmartin elaborated to The Real Deal in July, the company plans to place about 10 percent of its assets annually into development, which she estimated to be in the neighborhood of $1 billion. Based on information in investor documents, Forest City generated a net operating income of about $227 million in 2015, a small increase from its income of $218.8 million in 2014 and representing about 37 percent of the REIT’s total NOI.
Analyst Paul Adornato of BMO Capital Markets insisted that there is no real reason to believe the Ratners are “at odds” with public shareholders, but he acknowledged that the ownership structure “is still a legacy structure that many investors would like to see reformed.”
Forest City Realty Trust is an American diversified real estate management and development company based in Cleveland, Ohio. Its portfolio includes interests in retail centers, apartment communities, office buildings and mixed-use projects in the U.S. The company has recently expanded into military housing communities.
Projects developed or under development by Forest City include:
8 Spruce Street, also known as “New York by Gehry,” is named for its designer, world-renowned architect Frank Gehry.
Pacific Park, Brooklyn, a mixed use development in Brooklyn. This project includes Barclays Center, a new home for the Brooklyn Nets, an NBA basketball team owned by Bruce Ratner, Executive Chairman of Forest City’s New York City subsidiary.
Central Station, a primarily residential development on the site of a former railroad terminal in Chicago, Illinois.
Mercantile Place on Main, a mixed-use urban redevelopment project of a historical office complex in Dallas, Texas.
Mesa del Sol, planned for 100,000 inhabitants in Albuquerque, New Mexico, is Forest City’s largest mixed-use development, co-owned by Covington Capital Partners.
The New York Times Building, a 52-story building designed by architect Renzo Piano.