Forest City Says It's Considering Options Including a Merger

(Bloomberg) -- Forest City Realty Trust Inc., a property company that’s faced pressure from an activist investor, said it’s considering alternatives to increase shareholder value, including a potential merger or acquisition.

The Cleveland-based real estate investment trust, with $8.2 billion in assets, will look at a range of options while it continues its current strategies, according to a statement Monday. In the past several years, Forest City has worked to pay down debt, reduce complexity and reform its corporate governance while focusing on core urban markets.

The company is dedicated to “pursuing the right course of action for our company and all stockholders,” James A. Ratner, non-executive chairman, said in the statement. “During this time, the entire Forest City team remains focused on the company’s operations and committed to closing the gap between our share trading price and net asset value.”

Forest City -- best known for Pacific Park, its 6,430-unit mainly residential project in downtown Brooklyn, originally known as Atlantic Yards -- has been under pressure by Land & Buildings Investment Management LLC’s Jonathan Litt, who in April said Forest City would attract numerous bidders if it put itself up for sale. 

Activist Investor

The REIT should “fully and fairly evaluate strategic alternatives and provide some answers and reassurance to shareholders that all possible paths to maximizing shareholder value are explored,” Litt said in an April 25 letter to Forest City shareholders. “We are highly confident that a formal strategic review process would produce indications of interest from credible private equity and public real estate investment trust buyers that could provide full value to shareholders.”

A representative for Land & Buildings declined to comment on Monday. The firm held 289,300 Forest City shares, or about 1 percent of the REIT, as of June 30, according to data compiled by Bloomberg.

The shares have advanced 23 percent this year through Sept. 8. They were up 1.7 percent to $26.10 at 11:29 a.m. New York time Monday.

The Ratner family founded Forest City in 1920, according to its website. The company built the New York Times headquarters tower on Eighth Avenue in Manhattan, and a Frank Gehry-designed residential tower on Spruce Street in lower Manhattan. At Pacific Park, Forest City has teamed up with China’s Greenland Holding Group, which has a 70 percent stake in the development.

In April, Forest City added Z. Jamie Behar and Craig Macnab to its board, with Chief Executive Officer David J. LaRue citing their “fresh insights” and experience “as we continue to execute on our strategy to ensure long-term growth at Forest City.” Litt, in his letter, said that even if the two directors are independent, they would probably be “outgunned” by Ratner appointees.

Forest City is working with investment banks Lazard Ltd. and Goldman Sachs Group Inc. Sullivan & Cromwell LLP is providing legal advice.

--With assistance from Scott Deveau

To contact the reporter on this story: Heather Perlberg in Washington at hperlberg@bloomberg.net.

To contact the editors responsible for this story: Daniel Taub at dtaub@bloomberg.net, Christine Maurus