UPDATED, 12:34 a.m., August 13: The Ratner family is facing pressure from an activist investor to relinquish voting control of Forest City Realty Trust, as company executives and investors look to shore up the real estate investment trust’s underperforming stock.
Scopia Capital Management — which owns a 7.4 percent stake in the REIT — urged the Forest City’s board to do away with a dual-class stock structure that gives the Ratners voting control. That structure, Scopia argued, “clearly harms the company,” the Wall Street Journal reported. Currently, the family owns 3.8 percent of Forest City’s common Class A shares and 92 percent of its Class B shares, giving them control of nine out of 13 board members. The $6 billion company converted to a REIT in January.
In a statement, Forest City [TRDataCustom] execs said it values “constructive input” from shareholders, but said it is focused on executing a business plan to drive value. Forest City has focused on boosting margins and selling assets, including the Barclays Center and a stake in the NBA’s Brooklyn Nets.
MaryAnne Gilmartin, CEO of Forest City Ratner, the REIT’s New York division, told The Real Deal last month that FCR plans to put about 10 percent of its assets each year into development, which she estimated to be roughly $1 billion. According to investor documents, FCR generated net operating income of about $227 million in 2015, up slightly from $218.8 million in 2014 and representing about 37 percent of the REIT’s total NOI.
Shares of Forest City closed at $23.66 per share on Tuesday, but analysts say its portfolio is worth $30 a share.
Analyst Paul Adornato of BMO Capital Markets said there’s no reason to think 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.” [WSJ] — E.B. Solomont
Clarification: This story was amended to clarify that MaryAnne Gilmartin is the CEO of Forest City Ratner, Forest City’s New York division.