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July 6, 2011

Forest City sells 49% stake in two New York rental buildings, Beekman and 80 DeKalb, at apparent discount to raise cash

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Like New York, it seems "Forest City Ratner is open for business." But maybe the line should be "everything must go — no reasonable offer will be refused!"

To lower debt payments, Forest City Enterprises is selling nearly half of two New York rental properties developed by subordinate Forest City Ratner, keeping 51% ownership. Similarly, the company sold nearly half of New York area retail properties in March to raise cash.

The press release at bottom, which is distilled in The Real Deal, Forest City restructures financing at 8 Spruce, DKLB BKLN, provides the developer's preferred angle:

Forest City Enterprises and National Real Estate Advisors [NREA] announced agreements to restructure the financing at 8 Spruce Street, the Frank Gehry-designed 76-story rental tower in Lower Manhattan and at DKLB BKLN the luxury tower in Fort Greene, Brooklyn, saving the companies hundreds of millions of dollars in debt payments.

Crain's Cleveland Business also distilled the press release.

But there's a trade-off: while Forest City may save hundreds of millions in debt, it sold stakes in both buildings for what seem to be discounts. (I suspect I'm missing some elements of the financial deal, but the raw math is still worth a look.)

In the press release, Forest City CEO David LaRue hinted that times are still tough: "Finally, by extending the bank credit facilities, it allows additional time for economic conditions and rents to further improve before refinancing is necessary."

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Related coverage...

The Real Deal, Forest City restructures financing at 8 Spruce, DKLB BKLN

Forest City Enterprises and National Real Estate Advisors announced agreements to restructure the financing at 8 Spruce Street, the Frank Gehry-designed 76-story rental tower in Lower Manhattan and at DKLB BKLN the luxury tower in Fort Greene, Brooklyn, saving the companies hundreds of millions of dollars in debt payments.

The development is key for Forest City, the parent firm of Forest City Ratner, as this $876 million rental tower, formerly known as the Beekman, was under pressure to bring in enough renters to become profitable in a market that is just getting its sea legs.

Crain's Cleveland Business, Forest City Enterprises, National Real Estate Advisors recapitalize two N.Y. apartments

Posted by eric at July 6, 2011 11:30 AM