Forest City Enterprises has been around since 1920, and has been a public company since 1960. It launched Forest City Realty Trust, a real estate investment trust, or REIT, at the beginning of this year, as part of an effort to diversify its business to become more of a long-term owner of commercial property.
This strategy is a move away from Forest City’s history as primarily a developer and allows steady operating income demanded by a REIT structure and helps ensure that the company can pay out its $.06 per share quarterly dividend. The new strategy has been focused in major cities like New York, where Forest City has a significant footprint, which includes the New York Times Building and, until recently, Brooklyn’s Barclays Center, which the company developed, prior to its launching of the REIT.
The transition to a REIT was not without some growing pains.
As this quick chart looking at Forest City’s stock price shows, share price lost 22 percent of its value around the middle of February of this year. The trough closely follows the sale of Forest City’s interest in both the Barclays Center and the company’s ownership share of the NBA’s Brooklyn Nets. To build up the war chest necessary to operate as a REIT, both assets were sold to Russian billionaire Mikhail Prokhorov, and were each valued at $875 million.
MaryAnne Gilmartin, head of Forest City Ratner Companies, otherwise known as the firm’s New York office, said shortly after the sales that owning an arena and a major professional sports team are not typical “good groups” for a REIT, due to their wide fluctuations in returns. Investors seem convinced of this, as the share price, which hit a low point of $16.67 back on Feb. 11, was fully recovered by St. Patrick’s Day and has hovered close to $20 since.