Published 6 August 2006
The mixing of public & private interests by the heads of US companies – and the holding of a bookshelf of titles, usually by the founder – is somewhat at odds with good governance as seen from this side of the world.
One listed property company, Forest City Enterprises Inc, a $US7.8 billion owner, developer & manager of commercial & residential property headed by members of the Ratner family, is negotiating with Bruce Ratner to restructure their combined interest in 30 retail, office & residential operating properties & certain service companies, all but one in the New York City metropolitan area.
I’ve written about their business before because Bruce Ratner has been trying to develop the Atlantic Yards, a brownfields former naval base in Brooklyn, into an intensive mixture of residential & commercial uses, plus a stadium to be home to the Nets basketball team, and the lines between listed company & private interests has always seemed muddy.
Forest City owns a majority interest in its New York portfolio and will be entitled to substantially all of the remaining economic benefits of the underlying properties when the deal closes. Certain joint development projects will also be valued on completion, after which the company will have the right to all future development on those sites.
Mr Ratner will get $US60 million in cash plus 3.9 million units in a jointly owned new company and, after a one-year lockup period, may swap these units for Forest City stock, or cash at the company’s option. The company will indemnify Mr Ratner for any tax liability arising from sale of any of these properties over the first 12 years after the deal is completed.
Forest City said it intended to conduct its New York operations in the same manner as it had for the past 20 years, but some of Mr Ratner’s roles will change. He will become an executive employee of the listed reit and join its board of directors, which already has 5 Ratners (out of 13 directors) on it. Meanwhile, he’ll continue as president & chief executive of Forest City Ratner Companies, the New York affiliate of Forest City Enterprises.
The transaction is expected to be accretive to Forest City’s long-term ebdt/share (earnings before depreciation, amortisation & deferred taxes) but slightly dilutive (less than 2%) to short-term ebdt/share.
Website: Forest City Enterprises
Forest City Ratner Companies
Earlier story:
4 February 2004: Snapshot on world property, week to 8 February 2004
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Attribution: Company release, story written by Bob Dey for this website.
