CLEVELAND, Feb. 8, 2018 /PRNewswire/ -- Forest City Realty
Trust, Inc. (NYSE: FCEA) today announced financial results for the
three months and year ended December 31,
2017.
Net Earnings/Loss
The company had 2017 fourth-quarter
net earnings of $102.9 million, or
$0.38 per share, compared with net
earnings of $1.8 million, or
$0.01 per share for the fourth
quarter of 2016. For the year ended December
31, 2017, the company had net earnings of $206.0 million, or $0.78 per share, compared with a net loss of
$158.4 million, or $0.61 per share, for the year ended December 31, 2016. Per share amounts throughout
this release are presented on a fully diluted basis.
The primary drivers of the net earnings variance for the fourth
quarter included higher gains on disposition of non-core assets,
increased tax benefit and a 2016 interest rate swap breakage fee
that did not recur. These positive factors were partially
offset by higher organizational transformation costs and severance,
compared with the fourth quarter of 2016.
In addition to these fourth-quarter factors, the net earnings
variance for the full year was driven primarily by lower 2017
impairments, partially offset by 2016 gains from
dispositions.
Additional factors impacting net earnings/loss for the three
months and year ended December 31,
2017, are described below under FFO and Operating FFO and
are included in the company's supplemental package for the quarter
ended December 31, 2017, furnished to
the SEC on Form 8-K. The Form 8-K and supplemental package are
available on the company's website, www.forestcity.net.
Revenues
Consolidated revenues for the fourth quarter
were $225.9 million, compared with
$239.7 million for the fourth quarter
of 2016. For the year ended December
31, 2017, revenues were $911.9
million, compared with $929.5
million for the year ended December
31, 2016.
Funds From Operations (FFO)
Fourth-quarter FFO was
$113.8 million, or $0.42 per share, compared with $80.4 million, or $0.31 per share for the fourth-quarter of
2016. FFO for the year ended December
31, 2017 was $422.1 million,
or $1.58 per share, compared with
$241.7 million, or $0.92 per share for the year ended December 31, 2016.
As noted under Net Earnings/Loss, drivers of the positive
quarter-over-quarter FFO variance included increased tax benefit
and a 2016 interest rate swap breakage fee that did not recur in
2017, partially offset by higher organizational transformation
costs and severance. The year-over-year FFO variance was
primarily driven by 2016 impairment of non-depreciable real estate
that did not recur in 2017, partially offset by 2016 gains on
disposition.
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 fourth quarter was
$102.6 million, or $0.38 per share, compared with $113.3 million, or $0.43 per share, for the fourth quarter of 2016.
For the year ended December 31, 2017
Operating FFO was $412.8 million, or
$1.54 per share, compared with
$386.5 million, or $1.46 per share, for the year ended December 31, 2016.
Primary positive factors impacting 2017 full-year Operating FFO
included decreased interest expense of $31.3
million, increased net operating income (NOI) from the
mature portfolio of $13.2 million,
improved other NOI/Corporate G&A of $12.7 million, most of which is reduced overhead
expense, a tax credit related to Westchester's Ridge Hill of $7.2
million, lease termination fee income of $4.1 million, increased NOI from new property
openings of $3.5 million, and
increased profit from land sales, primarily at Stapleton, of
$1.9 million. These positive factors
were partially offset by reduced Operating FFO from properties sold
of $22.3 million; reduced interest
capitalized to active development projects of $19.8 million; and a 2016 development fee related
to Ballston Quarter that did not recur.
Factors impacting Operating FFO for the fourth quarter and year
to date are illustrated in bridge diagrams included in the
company's supplemental package for the three months and year ended
December 31, 2017. The supplemental
package also includes additional explanations of factors impacting
Net Earnings, Operating FFO and FFO for the three months and year
ended December 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.
Strategic Alternatives
As previously announced, the
company's Board of Directors, together with management and in
consultation with financial and legal advisors, is undertaking a
comprehensive review of strategic alternatives to enhance
stockholder value, including, but not limited to, an accelerated
and enhanced operating plan, structural alternatives for the
company's assets, and potential merger, acquisition or sale
transactions.
There is no timetable for completion of this review, and there
can be no assurance that this review will result in a strategic
change or any transaction being announced or agreed upon. The
company will not comment further on the progress or status of the
review unless the company determines that further disclosure is
appropriate or required by law. While the review is underway, the
company remains fully focused on its operations and on the
continued execution of its strategies to create stockholder value
and close the gap between its share price and net asset value.
Commentary
"We finished 2017 with outstanding results,
driven by continued diligent execution of our strategies," said
David J. LaRue, Forest City
president and chief executive officer. "Those strategies - simplify
and streamline the business, deleverage, improve margins and reduce
development risk - have transformed Forest City into a focused
owner, operator and placemaker with a strong balance sheet,
competitive margins, high-quality assets in the nation's best
markets, and growth opportunities within the portfolio and from
entitled development.
"For the full year, net earnings, FFO and Operating FFO were
each up meaningfully, both in total and on a per-share basis. 2017
Operating FFO of $1.54 per share was
near the top of the guidance range we introduced with our
second-quarter results last year. We are particularly pleased
with the growth in Operating FFO because we achieved it in a year
in which we also executed gross dispositions of $650 million, reduced total debt by $505 million, and had nearly $20 million less in capitalized
interest as a result of reduced development.
"The portfolio finished the year on a high note, as we had
anticipated,with comparable property NOI in the fourth quarter up
6.4 percent in office and 5.6 percent in apartments. For the year,
overall comp NOI growth was 3.1 percent, in line with the guidance
we provided to investors during 2017. We also continue to see
strong same-space rent growth in our office portfolio, led by
University Park in Cambridge and
MetroTech in Brooklyn.
"Our ratio of net debt to adjusted EBITDA finished the year at
7.4 times, on a rolling 12-month basis, a full turn of improvement
from 8.4 times at the end of 2016, and well on the way to our goal
of 6.5 times by 2019. The 7.4 times ratio is down nearly 40 percent
from the end of 2013, and reflects elimination of approximately
$2.2 billion of debt from our balance
sheet over that period of time.
"Our focus on margin improvement, through both revenue
enhancements and expense reduction, continues to pay off.
Results to date from our operations and corporate segments already
reflect 370 basis points of improvement in our adjusted EBITDA
margins, compared with yearend 2016. We are confident in our
ability to achieve our goal of a stabilized run rate of 400 to 500
basis points of improvement.
"Turning to our retail dispositions, during the fourth quarter,
we closed the sale of the first two regional malls in our 10-mall
portfolio disposition to QIC and closed a third mall in January. We
expect three more malls to sell outright in early 2018 as we obtain
lender consents, with the final four malls expected to close at
later dates as we secure replacement assets into which to redeploy
our ownership stake. As a reminder, the overall QIC transaction
values the regional malls at approximately $1.55 billion at our share.
"For our 12-center specialty retail disposition with Madison
International, during the fourth quarter we closed on the
conversion of our common ownership interest in those centers to a
preferred interest. The transaction with Madison values the specialty portfolio at
approximately $450 million at our
share. We are working with our partner to identify office and/or
apartment assets into which we expect to redeploy our ownership
interest.
"On January 15, we announced an
agreement with Greenland USA, our
joint-venture partner at Pacific Park Brooklyn, to reduce our
ownership in the JV going forward from 30 percent to 5 percent, and
to increase Greenland's stake from
70 percent to 95 percent. The three multifamily buildings already
completed by the JV will remain in the 70/30 structure, and Forest
City will complete construction of the permanent rail yard at the
site. Greenland will assume
primary responsibility for vertical development of the remaining
entitlement. Final closing of the agreement is pending necessary
approvals and consents.
"As we noted in our press release announcing this change, this
is a win-win for both companies, as well as for community partners
and stakeholders. It allows us to continue to execute on our
strategy of reducing development risk, and gives us added
flexibility in capital allocation. We remain fully engaged at
Pacific Park and we continue to believe strongly in New York City, our largest core market. We
intend to maintain a significant presence in this important
market."
"I want to express my deep gratitude to our talented and
dedicated associates, whose hard work during 2017 led directly to
these outstanding results. It is difficult to overstate what they
have achieved, and continue to achieve, in the face of uncertainty
and the potential for distraction. Throughout our transformation,
they have continued to perform at a very high level and to focus on
creating value for our shareholders and driving future
success."
Comparable NOI, Occupancies and Rent
Overall
comparable net operating income for the three months ended
December 31, 2017, increased 6.1
percent, with increases of 6.4 percent in office and 5.6 percent in
apartments compared with results for the same period in 2016.
Comparable office occupancies were 97.4 percent at
December 31, 2017, up from 96.3 percent in the fourth quarter
of 2016. For the rolling 12-month period ended December 31,
2017, rent per square foot in new, same-space office leases
increased 16.4 percent over prior rents.
In the apartment portfolio, average monthly rents per unit for
the company's comparable apartments rose to $1,537 for the year ended December 31, 2017, a 1.6 percent increase
compared with average monthly rents for the year ended December 31, 2016. Comparable average rents per
unit in the company's core markets were $2,020, a 1.2 percent increase from the
comparable period in 2016. Comparable economic occupancies for the
year ended December 31, 2017, were
93.8 percent, down from 94.2 percent for the year ended
December 31, 2016.
Comparable NOI, defined as NOI from stabilized properties
operated in the three months and years ended December 31, 2017 and 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.
Opening and Projects Under Construction
During the
fourth quarter, Forest City began phased opening of Mint Town
Center, a 399-unit apartment community with 7,000 square feet of
street-level retail at Stapleton in Denver.
At December 31, 2017, Forest City had 6 projects under
construction at a total cost of $616.9
million, or $191.2 million at
the company's share, for a development ratio of 5.8 percent, well
below the company's long-term target of 7.5 percent. Projects under
construction include:
APARTMENTS:
- Ardan, a 389-unit apartment community in
Dallas that is also part of the
ASRS fund, is expected to begin phased opening 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.
- Aster Conservatory Green North, a 256-unit
apartment community at Stapleton in Denver, is expected to be completed in the
first quarter of 2019.
- The Guild, a 191-unit apartment community at The
Yards in Washington, D.C., is
expected to be completed in the first quarter of 2019.
- Capper 769, a 179-unit apartment community in
Washington, D.C., is expected to
be completed in the first quarter of 2019.
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
"2017 was a year of outstanding performance
for Forest City," said LaRue. "That performance is a direct result
of executing our strategies and reflects our commitment to create
shareholder value by continuously enhancing the performance of our
real estate and our company.
"This management team - and all of our associates - take pride
in 'doing what we say we will do.' We also know that
consistently meeting or exceeding our goals for the business is how
we build credibility and trust with investors, partners,
communities and other stakeholders. Over just the past few years,
we have dramatically simplified and streamlined the business,
focused our portfolio on urban placemaking and high-performing
assets in top markets, significantly reduced debt and development
risk, improved margins, processes, and efficiency, and positioned
the company for future growth.
"Our strategy and collective efforts are supported by a strong
board that, as an integral part of our transformation, has taken
historic actions to significantly enhance governance practices,
increase independence, eliminate our former dual-share class
structure, increase shareholder returns through dividend growth and
listen and respond to the input and viewpoints of shareholders.
"Together, we look ahead to 2018 and beyond knowing that we have
the talent, drive, strategic vision and collective ability to grow
Forest City and create substantial shareholder value going
forward."
Corporate Description
Forest City Realty Trust, Inc.
is an NYSE-listed national real estate company with $8.1 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 February 8, 2018, and is
also available on the company's website, www.forestcity.net. The
supplemental package includes operating and financial information
for the quarter ended December 31, 2017, with reconciliations
of non-GAAP financial measures, such as Operating FFO, FFO, NOI,
comparable NOI, EBITDA and Adjusted EBITDA 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, the company believes
FFO presents a 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 and 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 another measurement of the Company's
performance relative to its competitors and an additional 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, a non-GAAP measure, as a metric to evaluate the
performance of its office and apartment 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. Due to the planned/ongoing
disposition of substantially all of the company's regional mall and
specialty retail portfolios, it is no longer disclosing comparable
NOI for its retail properties. 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 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.
EBITDA
EBITDA, a non-GAAP measure, is defined as net
earnings excluding the following items at the company's share: i)
non-cash charges for depreciation and amortization; ii) interest
expense; iii) amortization of mortgage procurement costs; and iv)
income taxes. EBITDA may not be directly comparable to
similarly-titled measures reported by other companies. The company
uses EBITDA as the starting point in order to calculate Adjusted
EBITDA as described below.
Adjusted EBITDA
The company defines Adjusted EBITDA, a
non-GAAP measure, as EBITDA adjusted to exclude: i) impairment of
real estate; ii) gains or losses from extinguishment of debt; iii)
gain (loss) on full or partial disposition of rental properties and
other investments; iv) gains or losses on change in control of
interests; v) other transactional items, including organizational
transformation and termination benefits; and vi) the Nets pre-tax
EBITDA. The company believes EBITDA, Adjusted EBITDA and net debt
to Adjusted EBITDA provide additional information in evaluating our
credit and ability to service the company's debt obligations.
Adjusted EBITDA is used by the company's chief operating decision
maker and management to assess operating performance and resource
allocations by segment and on a consolidated basis. The company's
management believes Adjusted EBITDA gives the investment community
a further understanding of the company's operating results,
including the impact of general and administrative expenses and
acquisition-related expenses, before the impact of investing and
financing transactions and facilitates comparisons with
competitors. However, Adjusted EBITDA should not be viewed as an
alternative measure of the company's operating performance since it
excludes financing costs as well as depreciation and amortization
costs which are significant economic costs that could materially
impact the company's results of operations and liquidity. Other
REITs may use different methodologies for calculating Adjusted
EBITDA and, accordingly, the company's Adjusted EBITDA may not be
comparable to other REITs.
Net Debt to Adjusted EBITDA
Net Debt to Adjusted
EBITDA, a non-GAAP measure, is defined as total debt, net at the
company's share (total debt includes outstanding borrowings on the
company's revolving credit facility, term loan facility,
convertible senior debt, net, nonrecourse mortgages and notes
payable, net) less cash and equivalents, at the company's share,
divided by Adjusted EBITDA. Net Debt to Adjusted EBITDA is a
supplemental measure derived from non-GAAP financial measures that
the company uses to evaluate its capital structure and the
magnitude of its debt against its operating performance. The
company believes that investors use versions of this ratio in a
similar manner. The company's method of calculating the ratio may
be different from methods used by other REITs and, accordingly, may
not be comparable to other REITs.
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 uncertain outcome, impact,
effects and results of the company's Board of Directors' review of
operating, strategic, financial and structural alternatives, the
company's ability to carry out future transactions and strategic
investments, as well as the acquisition related costs,
unanticipated difficulties realizing 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,
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) (GAAP) to FFO (non-GAAP)
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The table below
reconciles net earnings (loss), the most comparable GAAP measure,
to FFO, a non-GAAP measure.
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Three Months Ended
December 31,
|
|
Years Ended December
31,
|
|
2017
|
2016
|
|
2017
|
2016
|
|
(in
thousands)
|
Net earnings
(loss) attributable to Forest City Realty Trust, Inc.
(GAAP)
|
$
102,906
|
$
1,825
|
|
$
206,030
|
$
(158,402)
|
Depreciation and
Amortization—real estate (1)
|
73,681
|
82,105
|
|
310,594
|
318,635
|
Gain on disposition
of full or partial interests in rental properties
|
(63,460)
|
(3,552)
|
|
(154,958)
|
(129,367)
|
Impairment of
depreciable rental properties
|
—
|
—
|
|
54,888
|
155,595
|
Income tax expense
adjustment — current and deferred (2):
|
|
|
|
|
|
Gain on
disposition of full or partial interests in rental
properties
|
687
|
—
|
|
5,561
|
55,272
|
FFO attributable
to Forest City Realty Trust, Inc. (Non-GAAP)
|
$
113,814
|
$
80,378
|
|
$
422,115
|
$
241,733
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|
|
FFO Per Share -
Diluted
|
|
|
|
|
|
Numerator (in
thousands):
|
|
|
|
|
|
FFO attributable
to Forest City Realty Trust, Inc.
|
$
113,814
|
$
80,378
|
|
$
422,115
|
$
241,733
|
If-Converted Method
(adjustments for interest):
|
|
|
|
|
|
4.250%
Notes due 2018
|
778
|
778
|
|
3,112
|
3,806
|
3.625%
Notes due 2020
|
363
|
363
|
|
1,451
|
2,006
|
FFO for per share
data
|
$
114,955
|
$
81,519
|
|
$
426,678
|
$
247,545
|
Denominator:
|
|
|
|
|
|
Weighted
average shares outstanding—Basic
|
265,312,881
|
258,725,549
|
|
262,510,532
|
258,509,970
|
Effect
of stock options, restricted stock and performance
shares
|
1,758,062
|
1,045,086
|
|
1,533,491
|
1,177,562
|
Effect
of convertible debt
|
5,153,208
|
5,031,753
|
|
5,153,233
|
6,410,539
|
Effect
of convertible 2006 Class A Common Units
|
1,111,044
|
1,940,788
|
|
1,594,238
|
1,940,788
|
Weighted
average shares outstanding - Diluted
|
273,335,195
|
266,743,176
|
|
270,791,494
|
268,038,859
|
FFO Per Share -
Diluted
|
$
0.42
|
$
0.31
|
|
$
1.58
|
$
0.92
|
|
|
|
|
|
|
(1) The
following table provides detail of depreciation and
amortization:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Years Ended December
31,
|
|
2017
|
2016
|
|
2017
|
2016
|
|
(in
thousands)
|
Full
Consolidation
|
$
58,857
|
$
62,327
|
|
$
248,353
|
$
250,848
|
Non-Real
Estate
|
(713)
|
(779)
|
|
(2,791)
|
(3,114)
|
Real Estate Full
Consolidation
|
58,144
|
61,548
|
|
245,562
|
247,734
|
Real Estate related
to noncontrolling interest
|
(7,292)
|
(7,142)
|
|
(26,920)
|
(22,821)
|
Real Estate
Unconsolidated
|
22,829
|
27,699
|
|
91,952
|
93,687
|
Real Estate
Discontinued Operations
|
—
|
—
|
|
—
|
35
|
Real Estate at
Company share
|
$
73,681
|
$
82,105
|
|
$
310,594
|
$
318,635
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) The
following table provides detail of income tax expense
(benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Years Ended December
31,
|
|
2017
|
2016
|
|
2017
|
2016
|
|
(in
thousands)
|
Income tax expense
on FFO
|
|
|
|
|
|
Operating Earnings:
|
|
|
|
|
|
Current taxes
|
$
1,082
|
$
1,466
|
|
$
1,217
|
$
5,711
|
Deferred taxes
|
(28,200)
|
100
|
|
(28,200)
|
24,122
|
Total income tax
expense on FFO
|
(27,118)
|
1,566
|
|
(26,983)
|
29,833
|
|
|
|
|
|
|
Income tax expense
(benefit) on non-FFO
|
|
|
|
|
|
Disposition of full or
partial interests in rental properties:
|
|
|
|
|
|
Current
taxes
|
$
687
|
$
—
|
|
$
5,561
|
$
(4,351)
|
Deferred taxes
|
—
|
—
|
|
—
|
59,623
|
Total income tax expense
on non-FFO
|
687
|
—
|
|
5,561
|
55,272
|
Grand
Total
|
$
(26,431)
|
$
1,566
|
|
$
(21,422)
|
$
85,105
|
Reconciliation of
FFO to Operating FFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Years Ended December
31,
|
|
|
2017
|
2016
|
% Change
|
|
2017
|
2016
|
% Change
|
|
(in
thousands)
|
|
|
(in
thousands)
|
|
FFO attributable
to Forest City Realty Trust, Inc.
|
$
113,814
|
$
80,378
|
|
|
$
422,115
|
$
241,733
|
|
Impairment of
non-depreciable real estate
|
—
|
—
|
|
|
—
|
307,630
|
|
Write-offs of
abandoned development projects and demolition costs
|
181
|
601
|
|
|
3,703
|
10,659
|
|
Tax credit
income
|
(2,444)
|
(3,101)
|
|
|
(11,572)
|
(12,126)
|
|
Loss on
extinguishment of debt
|
46
|
3,930
|
|
|
4,514
|
33,863
|
|
Change in fair market
value of nondesignated hedges
|
430
|
(1,849)
|
|
|
(957)
|
95
|
|
Interest rate swap
breakage fee
|
—
|
24,635
|
|
|
—
|
24,635
|
|
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
|
(2,670)
|
(2,139)
|
|
|
(12,402)
|
(10,108)
|
|
Participation
payments
|
—
|
73
|
|
|
—
|
73
|
|
Organizational
transformation and termination benefits
|
20,374
|
9,215
|
|
|
34,395
|
31,708
|
|
Nets pre-tax
FFO
|
—
|
—
|
|
|
—
|
1,400
|
|
Income tax expense
(benefit) on FFO
|
(27,118)
|
1,566
|
|
|
(26,983)
|
29,833
|
|
Operating FFO
attributable to Forest City Realty Trust, Inc.
|
$
102,613
|
$
113,309
|
(9.4)%
|
|
$
412,813
|
$
386,461
|
6.8 %
|
If-Converted Method
(adjustments for interest) (in thousands):
|
|
|
|
|
|
|
|
4.250%
Notes due 2018
|
778
|
778
|
|
|
3,112
|
3,806
|
|
3.625%
Notes due 2020
|
363
|
363
|
|
|
1,451
|
2,006
|
|
Operating FFO
attributable to Forest City Realty Trust, Inc.
(If-Converted)
|
$
103,754
|
$
114,450
|
|
|
$
417,376
|
$
392,273
|
|
Weighted average
shares outstanding - Diluted
|
273,335,195
|
266,743,176
|
|
|
270,791,494
|
268,038,859
|
|
Operating FFO per
share - Diluted
|
$
0.38
|
$
0.43
|
(11.6)%
|
|
$
1.54
|
$
1.46
|
5.5 %
|
Reconciliation of
Earnings (Loss) Before Income Taxes (GAAP) to Net Operating Income
(non-GAAP) (in thousands):
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Years Ended December
31,
|
|
2017
|
2016
|
|
2017
|
2016
|
Earnings (loss)
before income taxes (GAAP)
|
$
41,922
|
$
1,307
|
|
$
144,890
|
$
(454,173)
|
(Earnings) loss from
unconsolidated entities
|
(29,768)
|
(4,734)
|
|
(124,784)
|
263,533
|
Earnings (loss)
before income taxes and earnings from unconsolidated
entities
|
12,154
|
(3,427)
|
|
20,106
|
(190,640)
|
Land sales
|
(14,470)
|
(25,599)
|
|
(59,778)
|
(48,078)
|
Cost of land
sales
|
4,712
|
8,471
|
|
27,708
|
13,661
|
Other land
development revenues
|
(3,215)
|
(3,403)
|
|
(7,963)
|
(10,183)
|
Other land
development expenses
|
2,136
|
2,185
|
|
9,711
|
8,923
|
Corporate general and
administrative expenses
|
16,068
|
10,904
|
|
62,149
|
62,683
|
Organizational
transformation and termination benefits
|
20,374
|
9,215
|
|
34,395
|
31,708
|
Depreciation and
amortization
|
58,857
|
62,327
|
|
248,353
|
250,848
|
Write-offs of
abandoned development projects and demolition costs
|
—
|
290
|
|
1,596
|
10,348
|
Impairment of real
estate
|
—
|
—
|
|
44,288
|
156,825
|
Interest and other
income
|
(13,122)
|
(13,564)
|
|
(53,651)
|
(46,229)
|
Interest
expense
|
31,958
|
30,311
|
|
120,431
|
131,441
|
Interest rate swap
breakage fee
|
—
|
24,635
|
|
—
|
24,635
|
Amortization of
mortgage procurement costs
|
1,483
|
1,324
|
|
5,550
|
5,719
|
Loss on
extinguishment of debt
|
118
|
3,876
|
|
2,961
|
32,960
|
NOI related to
unconsolidated entities (1)
|
49,141
|
58,835
|
|
209,608
|
223,592
|
NOI related to
noncontrolling interest (2)
|
(12,927)
|
(9,837)
|
|
(43,664)
|
(37,221)
|
NOI related to
discontinued operations (3)
|
—
|
—
|
|
—
|
1,198
|
Net Operating
Income (Non-GAAP)
|
$
153,267
|
$
156,543
|
|
$
621,800
|
$
622,190
|
|
|
|
|
|
|
(1) NOI related to
unconsolidated entities:
|
|
|
|
|
|
Equity in earnings
(GAAP)
|
$
1,329
|
$
4,181
|
|
$
25,163
|
$
29,701
|
Exclude non-NOI
activity from unconsolidated entities:
|
|
|
|
|
|
Land and non-rental
activity, net
|
1,021
|
(509)
|
|
(4,559)
|
(3,658)
|
Interest and other
income
|
(1,391)
|
(1,197)
|
|
(5,484)
|
(2,544)
|
Write offs of
abandoned development projects and demolition costs
|
181
|
327
|
|
2,107
|
327
|
Depreciation and
amortization
|
23,637
|
28,638
|
|
95,222
|
97,423
|
Interest expense and
extinguishment of debt
|
24,364
|
27,395
|
|
97,159
|
102,343
|
NOI related to
unconsolidated entities
|
$
49,141
|
$
58,835
|
|
$
209,608
|
$
223,592
|
|
|
|
|
|
|
(2) NOI related to
noncontrolling interest:
|
|
|
|
|
|
Earnings from
continuing operations attributable to noncontrolling interests
(GAAP)
|
$
(519)
|
$
(915)
|
|
$
(9,006)
|
$
(6,078)
|
Exclude non-NOI
activity from noncontrolling interests:
|
|
|
|
|
|
Land and non-rental
activity, net
|
(143)
|
1,909
|
|
4,800
|
3,882
|
Interest and other
income
|
487
|
449
|
|
1,973
|
1,600
|
Write offs of
abandoned development projects and demolition costs
|
—
|
(16)
|
|
—
|
(16)
|
Depreciation and
amortization
|
(7,662)
|
(7,401)
|
|
(28,271)
|
(23,617)
|
Interest expense and
extinguishment of debt
|
(5,141)
|
(3,863)
|
|
(17,260)
|
(12,807)
|
Gain (loss) on
disposition of full or partial interests in rental properties and
interest in unconsolidated entities
|
51
|
—
|
|
4,100
|
(185)
|
NOI related to
noncontrolling interest
|
$
(12,927)
|
$
(9,837)
|
|
$
(43,664)
|
$
(37,221)
|
|
|
|
|
|
|
(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
December 31,
|
|
|
Years Ended December
31,
|
|
|
2017
|
2016
|
% Change
|
|
2017
|
2016
|
% Change
|
Office
Segment
|
|
|
|
|
|
|
|
Comparable NOI
|
66,273
|
62,265
|
6.4 %
|
|
260,822
|
253,584
|
2.9 %
|
Non-Comparable NOI
|
2,656
|
2,641
|
|
|
17,514
|
17,727
|
|
Office
Product Type NOI
|
68,929
|
64,906
|
|
|
278,336
|
271,311
|
|
Other
NOI(1)
|
2,870
|
2,755
|
|
|
11,880
|
7,400
|
|
Total
Office Segment
|
71,799
|
67,661
|
|
|
290,216
|
278,711
|
|
Apartment
Segment
|
|
|
|
|
|
|
|
Comparable NOI
|
46,024
|
43,590
|
5.6 %
|
|
184,910
|
178,935
|
3.3 %
|
Non-Comparable NOI
|
114
|
628
|
|
|
1,354
|
765
|
|
Apartment Product Type NOI
|
46,138
|
44,218
|
|
|
186,264
|
179,700
|
|
Federally Assisted Housing
|
234
|
4,732
|
|
|
10,047
|
19,693
|
|
Other
NOI(1)
|
(1,123)
|
(318)
|
|
|
(3,815)
|
(2,693)
|
|
Total
Apartment Segment
|
45,249
|
48,632
|
|
|
192,496
|
196,700
|
|
Retail
Segment
|
|
|
|
|
|
|
|
Retail
NOI
|
36,044
|
42,110
|
|
|
154,703
|
165,203
|
|
Madison
Preferred Return
|
231
|
—
|
|
|
231
|
—
|
|
Retail
Product Type NOI
|
36,275
|
42,110
|
|
|
154,934
|
165,203
|
|
Other
NOI(1)
|
268
|
2,532
|
|
|
(414)
|
3,785
|
|
Total
Retail Segment
|
36,543
|
44,642
|
|
|
154,520
|
168,988
|
|
Operations
|
|
|
|
|
|
|
|
Comparable NOI
|
112,297
|
105,855
|
6.1 %
|
|
445,732
|
432,519
|
3.1 %
|
Retail
NOI
|
36,275
|
42,110
|
|
|
154,934
|
165,203
|
|
Non-Comparable NOI (2)
|
2,770
|
3,269
|
|
|
18,868
|
18,492
|
|
Product
Type NOI
|
151,342
|
151,234
|
|
|
619,534
|
616,214
|
|
Federally Assisted Housing
|
234
|
4,732
|
|
|
10,047
|
19,693
|
|
Other
NOI (1):
|
|
|
|
|
|
|
|
Straight-line rent
adjustments
|
2,078
|
1,773
|
|
|
10,854
|
9,194
|
|
Participation
payments
|
—
|
(73)
|
|
|
—
|
(73)
|
|
Other Operations
|
(63)
|
3,269
|
|
|
(3,203)
|
(629)
|
|
|
2,015
|
4,969
|
|
|
7,651
|
8,492
|
|
Total
Operations
|
153,591
|
160,935
|
|
|
637,232
|
644,399
|
|
Development
Segment
|
|
|
|
|
|
|
|
Recently-Opened Properties/Redevelopment
|
1,965
|
796
|
|
|
3,179
|
3,180
|
|
Other
Development (3)
|
(2,289)
|
(5,188)
|
|
|
(18,611)
|
(27,891)
|
|
Total
Development Segment
|
(324)
|
(4,392)
|
|
|
(15,432)
|
(24,711)
|
|
Other
Segment
|
—
|
—
|
|
|
—
|
2,502
|
|
Grand
Total
|
$
153,267
|
$
156,543
|
|
|
$
621,800
|
$
622,190
|
|
|
|
|
|
|
|
|
|
(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 $1,263 and $7,482 for the
three months and year ended December 31, 2017, compared with $2,079
and $3,404 for the three months and year ended December 31,
2016.
|
|
(3) Includes
straight-line adjustments, non-capitalizable development overhead
and other costs on our development projects.
|
|
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SOURCE Forest City Realty Trust, Inc.