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December 8, 2009
FCE anticipates "groundbreaking in the fourth quarter" (could be January); AY mortgage delayed (hard bargain or cash-flow problem?)
Atlantic Yards Report
OK, would you want to buy one-notch-above-junk bonds from a company that can't — or won't — pay its mortgage?
Forest City Enterprises (FCE), parent of Forest City Ratner, today announced third quarter earnings--up 24% from the same period of time last year--and decreased losses--$0.03 per share, compared with $0.19 per share in the third quarter last year.
There were two statements asserting that Atlantic Yards was on track, citing significant milestones, "while challenges remain."
Indeed, there are signs the company still faces cash flow difficulties or, perhaps, is just a hard bargainer. FCE delayed an 11/30/09 payment of $5 million on a $162 million mortgage secured by all land owned in the Atlantic Yards footprint and was granted an extension until December 10, with negotiations continuing about modifying the mortgage. (See highlighted text below.)
A groundbreaking on Atlantic Yards is "anticipated" for the fourth quarter; note that FCE's fiscal year ends January 31.
A conference call with investment analysts is scheduled for 11 am Thursday.
From the press release
The Company achieved the following additional milestones either during the third quarter or subsequent to the end of the quarter:
--In late September, Forest City Ratner Companies, the Company's New York-based subsidiary, and Nets Sports and Entertainment signed a letter of intent with an affiliate of Onexim Group, an international private investment fund, to create a strategic partnership for the development of the Atlantic Yards project in Brooklyn, and the Barclays Center arena, the planned home of the NBA's Nets. As part of the agreement, entities to be formed by Onexim Group will invest $200 million and make certain contingent funding commitments to acquire 45 percent of the arena project and 80 percent of the NBA team, and the right to purchase up to 20 percent of the Atlantic Yards Development Company, which will develop the non-arena real estate.
--On November 24, the New York State Court of Appeals issued a key favorable ruling in a lawsuit related to the Company's Atlantic Yards development project in Brooklyn. The suit challenged the State's use of eminent domain related to the project. The court rejected the challenge in a 6-1 ruling, clearing a significant legal hurdle for the project. Subsequently, during the week of December 1, the major bond rating agencies issued investment-grade ratings for $500 million in tax-exempt bonds to finance a portion of the construction of the Barclays Center arena. Both of these events are major positive milestones for the overall project, and while challenges remain, they enable the project to move forward with an anticipated ground-breaking in the fourth quarter.
(Emphasis added)
Warning from the 10-Q
A 10-Q form filed with the Securities and Exchange Commission stated:
...Subsequent to October 31, 2009, we have elected to delay a November 30, 2009 scheduled amortization payment of $5,000,000 on our $162,000,000 nonrecourse mortgage secured by all land owned in the Atlantic Yards footprint and were granted an extension until December 10, 2009. We have commenced negotiations with the lender to modify the terms of the mortgage but can give no assurance that these negotiations will be successful. If no agreement is reached under the nonrecourse loan between the parties, we can relinquish the land to the lender in lieu of payment of the mortgage.
(Emphasis added)
Additional coverage...
The Wall Street Journal, Forest City Enterprises Loss Narrows, But Company Cautious
The owner of commercial and residential properties reported a loss of $4.4 million, or 3 cents a share, for the quarter ended Oct. 31, compared with a year-earlier loss of $19.1 million, or 19 cents a share. On a continuing basis, the company swung to earnings of 1 cent a share from a loss of 15 cents.
Total revenue fell 7.3% to $306.1 million.
Analysts polled by Thomson Reuters projected a loss of 1 cent a share on revenue of $351 million.
Cleveland Plain Dealer, Losses narrow, EBDT up at Forest City Enterprises in the third quarter
Forest City, based in Cleveland, expects the rest of this year and 2010 to be challenging for the real estate industry, which has been battered by the recession, falling property values and a pullback on lending.
...The company announced quarterly earnings after markets closed today. Shares of Forest City's stock (NYSE: FCE-A) closed trading today at $11.50, down 45 cents or 3.8 percent.
Posted by eric at December 8, 2009 9:59 PM