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March 16, 2009

Forest City in the News: Financial Straits Edition

When any company starts cannibalizing its holdings of revenue-producing assets and begins pulling back on its most successful, award-winning projects, then it's hard to come to any conclusion other than the company executives are doing massive triage to keep things afloat.

 

LAYOFFS AT TOP PROJECTS

Last week, New Mexico Business Weekly reported that Forest City cut its Mesa del Sol staff in half. The same tsunami of layoffs also hit Forest City's other award-winning megaproject:

DenverPost.com, Forest City chops down jobs

Forest City Stapleton, the master developer of the Stapleton residential and retail area, has laid off seven employees, according to sources.

 

DUMPING PREMIUM PERFORMING ASSETS

When a company has to raise cash in a tough economy, it is forced to start dumping the good stuff.

Crain's Cleveland Business, Forest City puts desirable assets in play

Over the last few years, Forest City has sold hundreds of millions of dollars of assets in a process CEO Charles Ratner described last April as “selling from the bottom” to prune properties with limited growth opportunities. It relinquished better properties only when it could get “a very, very good price,” he said at the time.

Forest City now is marketing a portfolio that’s the opposite of prior dispositions — it consists of gem office and retail buildings in superior markets and apartments in hot rental markets. And it’s trying to sell in a battered market where it will be hard to achieve a very, very good price.

The industry newsletter Real Estate Alert reported in its March 11 issue that Forest City is offering for sale or seeking to recapitalize 10 apartment buildings with a total of 4,000 suites in markets from Washington, D.C., and Philadelphia to San Jose.

Also on the block with the CB Richard Ellis and the Holliday Fenoglio Fowler brokerages are four retail properties in New York City and a stake in the 2.4 million-square-foot office component at the University Park mixed-use complex in Boston.

The trade newsletter said Forest City hopes to garner $1.15 billion from the sales.

NoLandGrab: And when the "good stuff" is on the auction block, it's gotta make you wonder if the NJ Nets are for sale as well, despite team executives' assertions to the contrary.

 

A CAUTIONARY TALE

What happens when a city stakes an urban renewal plan on a single development company, which, though it has a track record of completing projects, finds itself in financial straits?

Things are worse than before: businesses under threat of eminent domain have moved, the local economy loses years when a more incremental, diversified master plan could have been implemented, and the city is left holding the bag.

KFCN, Commercial Hope For Downtown Sans Forest City

Thanks to developer Forest City Enterprises and the Fresno City Council, the day of reckoning has come for Fresno, which now has to consider its next steps.

Some believe downtown could still get that different look even without a big developer. Commercial real estate broker Victoria Gonzales has a handful of clients whose business plans for growth and expansion over the last 5 years stalled out.

Many, like this bike shop, were forced to move because the uncertainty surrounding Forest City's construction plans.

"We've seen business leave, and businesses go out of business and property owners who can't sell their properties," she said.

Gonzales said the signs of a nearly abandoned commercial district are everywhere.

Posted by lumi at March 16, 2009 5:54 AM