A Forest City holding. Photo by Forest City Realty Trust.
CLEVELAND–Albert Ratner, the former CEO of Forest City and its co-Chairman emeritus, is urging shareholders to vote against the REIT's $11.4 billion acquisition by Brookfield Asset Management on Nov. 15, 2018 when the special meeting for shareholders is scheduled.
Ratner, who controls close to 1% of the REIT's stock, listed several reasons why the acquisition is a bad deal for the company in an open letter to shareholders that was released this morning. He took issue with the deal's price, its timing and the process, which he called flawed. He said that Forest City can strike a better deal as it has a low debt structure and that there are superior value opportunities available to the REIT.
He writes that:
It defies reason that the six new members of the board agreed to such a hasty, significantly undervalued transaction, given Forest City's
- high quality portfolio of real estate assets;
- minimal $300 million in recourse debt, among the lowest of any company in the industry;
- string of several recent value-enhancing initiatives, discussed below, that were completed during or after the sale process, and thus were not reflected in the company's stock price prior to signing and announcement of the Brookfield transaction; and
- major value-unlocking milestone date (related to the expiration of tax-related sale restrictions stemming from its REIT conversion), now just about 26 months away.
According to Ratner's letter, the vote by Forest City's board to approve the acquisition was narrowly divided by 7-to-5. He said that six of the directors that voted in favor of acquisition had just joined the board some 66 days before, and that a seventh director changed his 'no' vote to 'yes,' breaking the 6-to-6 deadlock.
Forest City had overhauled its board earlier this year adding representatives from activist shareholders Scopia and Starboard Value LP.
Later, in July, Forest City Realty Trust agreed to be acquired by Brookfield for $25.35 per share in an all-cash transaction valued at $11.4 billion including debt. This was an about face from a decision it announced in March, namely that it would not sell itself after considering the strategic alternatives. Instead the REIT opted to give certain stakeholders in the company a greater voting share on the Board — a nod to the demands activists shareholders have been making on the REIT for the past several months.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
