PRNewswire 8-Nov-2018 11:10 AM
ISS Report Offers "Cautionary Support," But Notes "Valid Concerns with the Approval Process and Transaction Terms"
Ratner Urges Shareholders to Vote "No" – Against the Transaction
CLEVELAND, Nov. 8, 2018 /PRNewswire/ -- Albert Ratner today cited several concerns that echo his own in this week's Institutional Shareholder Services (ISS) communication and Forest City Realty Trust, Inc.'s (NYSE:FCEA) ("Forest City" or "FCE" or "the company") strong third quarter and nine-month results as evidence of major deficiencies in the proxy statement regarding the company's proposed sale to Brookfield Property Partners (NASDAQ:BPY, TSX:BPY) ("Brookfield").
Mr. Ratner is co-Chairman emeritus and former Chief Executive Officer of Forest City. His personal and family members'1 individual ownership stakes add up to approximately 10% of the company's outstanding common shares.
Critical Issues and Questions Forest City's Proxy Statement Fails to Address
Mr. Ratner highlighted several significant defects in the company's proxy statement, which denies shareholders the information they need to properly evaluate and vote on this transaction:
"Forest City shareholders deserve adequate disclosures in the interest of ensuring full and fair value. No matter how you slice it, there is a gaping chasm in valuation between the figures and framework depicted in the proxy and the true value of the company," Mr. Ratner said.
Mr. Ratner's Commentary on ISS Report Findings
Mr. Ratner also commented on findings in a report issued this week by ISS to its clients that offered 'cautionary support' for shareholders to vote for the transaction, and noted, among other things:
According to Mr. Ratner, "While I am encouraged by ISS's validation of the concerns that five dissenting Forest City directors and I have about the price and process by which Forest City's short-time, activist-led directors approved by a vote of 7-5 (hastily changed from an initial 6-6 split) a sale to Brookfield, ISS's recommendation, which appears to be premised at least in part on its view that we are in a rising interest rate environment, doesn't account for the beneficial impact of inflation on the value of the company's real estate.
"As experienced real estate developers and investors know, when interest rates rise, there are fewer new builds and, consequently, fewer new properties become available. As a result, existing properties – such as those owned by the company – are able to command higher rents, which increases, rather than decreases, the value of those properties.
"To be crystal clear, the question is not whether Forest City should be monetized, but whether Forest City shareholders should relinquish to Brookfield close to half of the intrinsic value of their shares for the sake of whatever incremental certainty Brookfield's expedient offer may provide. And the answer for me is clear: no.
"I urge my fellow shareholders to join me in voting to reject Brookfield's grossly inadequate offer, which understates the value of the company by at least $5.8 billion on an undiscounted basis, and promptly pursue an alternative path to deliver the value the company is worth," Mr. Ratner said.
Finally, Mr. Ratner reiterates his five key arguments against the transaction: Wrong Price; Wrong Timing; Flawed Process; Forest City's existing, high quality/low debt structure; and, Superior Value Opportunities available to Forest City shareholders if they reject the transaction – many of which, ISS seems to corroborate – and which the company's 10-Q as of September 30, 2018 certainly corroborates.
IMPORTANT NOTICE: The cost of this communication is being borne entirely by Mr. Albert Ratner. Mr. Ratner is NOT asking for shareholder proxies. He will not accept proxy cards, and any proxy cards received will be returned.
1 Mr. Ratner does not presume to speak on behalf of the founding family members of Forest City, or to represent their individual opinions.
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SOURCE Albert Ratner
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