10-K 1 fcrt-1231201610k.htm 10-K Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-37671
FOREST CITY REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland
 
47-4113168
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
Terminal Tower
Suite 1100
50 Public Square
Cleveland, Ohio
 
44113
(Address of principal executive offices)
 
(Zip Code)
 
 
 
Registrant’s telephone number, including area code
 
216-621-6060
Securities registered pursuant to Section 12(b) of the Act:
 
 
Title of each class
 
Name of each exchange on
which registered
Class A Common Stock ($.01 par value)
 
New York Stock Exchange
Class B Common Stock ($.01 par value)
 
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES  ý     NO  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES  ¨    NO   ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES  ý    NO   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES  ý    NO   ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act: (Check one):
Large accelerated filer     x
 
Accelerated filer    ¨
 
Non-accelerated filer     ¨
 
Smaller Reporting Company    ¨
 
 
 
(Do not check if a smaller reporting company)  
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES  ¨    NO  ý
The aggregate market value of the outstanding common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter was $5,205,897,387.
The number of shares of registrant’s common stock outstanding on February 22, 2017 was 241,526,975 and 18,788,169 for Class A and Class B common stock, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2017 Annual Meeting of Shareholders are incorporated by reference into Part III to the extent described herein.



Forest City Realty Trust, Inc. and Subsidiaries
Annual Report on Form 10-K
For The Year Ended December 31, 2016
Table of Contents
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 16.
 



PART I

Item 1. Business
General
Forest City Realty Trust, Inc. (with its subsidiaries, the “Company”) principally engages in the operation, development, management and acquisition of office, retail and apartment real estate and land throughout the United States. The Company had approximately $8.2 billion of consolidated assets in 20 states and the District of Columbia at December 31, 2016. The Company’s core markets include Boston, Chicago, Dallas, Denver, Los Angeles, Philadelphia, and the greater metropolitan areas of New York City, San Francisco and Washington D.C. The Company has regional offices in Boston, Dallas, Denver, Los Angeles, New York City, San Francisco, Washington, D.C., and the Company’s corporate headquarters in Cleveland, Ohio.
The Company recently completed an internal reorganization and began presenting reportable segments based on this new structure for the reporting period ended September 30, 2016. The new structure is organized around the Company’s real estate operations, real estate development and corporate support service functions. Prior periods have been recast to conform to the current period’s reportable segment presentation.
Real Estate Operations represents the performance of the Company’s core rental real estate portfolio and is comprised of the following reportable operating segments:
Office - owns, acquires and operates office and life science buildings.
Retail - owns, acquires and operates regional malls, specialty/urban retail centers and amenity retail within our mixed-use projects.
Apartments - owns, acquires and operates rental properties, including upscale and middle-market apartments, adaptive re-use developments and subsidized senior housing.
The remaining reportable operating segments consist of the following:
Development represents the development and construction of office and life science buildings, regional malls, specialty/urban retail centers, amenity retail, apartments, condominiums and mixed-use projects. Included in the Development segment are recently opened operating properties prior to stabilization. Development also includes the horizontal development and sale of land to residential, commercial and industrial customers primarily at its Stapleton project in Denver, Colorado.
Corporate is comprised of departments providing executive oversight to the entire company and various support services for Operations, Development and Corporate employees.
Other represents the operations of several non-core investments, including the Barclays Center, a sports and entertainment arena located in Brooklyn, New York (“Arena”) (sold in January 2016), the Company’s equity method investment in the Brooklyn Nets (the “Nets”) (sold in January 2016), and military housing operations (sold in February 2016).
Financial information about reportable operating segments required by this item is included in Item 8 – Financial Statements and Supplementary Data and Note AA – Segment Information.
Segment Transfers
The Development segment includes projects in development, projects under construction along with recently opened operating properties prior to stabilization. Projects will be reported in their applicable operating segment (Office, Retail or Apartments) beginning on January 1 of the year following stabilization. Therefore, the Development segment will continue to report results from recently opened properties until the year-end following initial stabilization. The Company generally defines stabilized properties as achieving 92% or greater occupancy or having been open and operating for one or two years, depending on the size of the project. Once a stabilized property is transferred to the applicable Operations segment on January 1, it will be considered “comparable” beginning with the next January 1, as that will be the first time the property is stabilized in both periods presented.
REIT Conversion
On January 13, 2015, the board of directors of Forest City Enterprises, Inc., the Company’s predecessor, approved a plan to pursue conversion to real estate investment trust (“REIT”) status. On May 29, 2015, Forest City Enterprises, Inc. formed the Company as a Maryland corporation and wholly-owned subsidiary of Forest City Enterprises, Inc. On October 20, 2015, the shareholders of Forest City Enterprises, Inc. approved and adopted the merger agreement that implemented the restructuring of Forest City Enterprises, Inc. into a holding company so as to facilitate its conversion to a REIT.

2


Pursuant to the merger agreement, effective as of 11:59 pm, Eastern Time, on December 31, 2015 (the “Effective Time”), (i) a wholly-owned subsidiary of the Company merged with and into Forest City Enterprises, Inc., with Forest City Enterprises, Inc. as the surviving corporation, (ii) each outstanding share of Forest City Enterprises, Inc. Class A common stock, par value $.33 1/3 per share, and Class B common stock, par value $.33 1/3 per share, automatically converted into one share of Forest City Realty Trust, Inc. Class A common stock, $.01 par value per share, and Class B common stock, $.01 par value per share, respectively, (iii) Forest City Enterprises, Inc. became a wholly-owned subsidiary of the Company and (iv) the Company became the publicly-traded New York Stock Exchange-listed parent company that succeeded to and continued to operate substantially all of the existing businesses of Forest City Enterprises, Inc. and its subsidiaries. In addition, each share of Class A common stock of Forest City Enterprises, Inc. held in treasury at December 31, 2015 ceased to be outstanding at the Effective Time of the Merger, and a corresponding adjustment was recorded to Class A common stock and additional paid-in capital. Immediately following the merger, Forest City Enterprises, Inc. converted into a Delaware limited partnership named “Forest City Enterprises, L.P.” (the “Operating Partnership”).
In this annual report on Form 10-K, unless otherwise specifically stated or the context otherwise requires, all references to “the Company,” “Forest City,” “we,” “our,” “us” and similar terms refer to Forest City Enterprises, Inc. and its consolidated subsidiaries prior to the Effective Time and Forest City Realty Trust, Inc. and its consolidated subsidiaries, including the Operating Partnership, as of the Effective Time and thereafter.
Company Operations
The Company believes it is organized in a manner enabling it to qualify, and intends to operate in a manner allowing it to continue to qualify, as a REIT for federal income tax purposes. As such, the Company intends to elect REIT status for its taxable year ended December 31, 2016, upon filing the 2016 Form 1120-REIT with the Internal Revenue Service on or before October 15, 2017.
The Company holds substantially all of its assets, and conducts substantially all of its business, through the Operating Partnership. The Company is the sole general partner of the Operating Partnership and, as of December 31, 2016, the Company directly or indirectly owns all of the limited partnership interests in the Operating Partnership.
The Company holds and operates certain of its assets through one or more taxable REIT subsidiaries (“TRSs”). A TRS is a subsidiary of a REIT subject to applicable corporate income tax. The Company’s use of TRSs enables it to continue to engage in certain businesses while complying with REIT qualification requirements and allows the Company to retain income generated by these businesses for reinvestment without the requirement of distributing those earnings. The primary non-REIT qualified businesses held in TRSs include 461 Dean Street, an apartment building in Brooklyn, New York, Pacific Park Brooklyn project, land development operations, Barclays Center arena (sold in January 2016), the Nets (sold in January 2016), and military housing operations (sold in February 2016). In the future, the Company may elect to reorganize and transfer certain assets or operations from its TRSs to other subsidiaries, including qualified REIT subsidiaries.
Operating Segments
Real Estate Operations represents the performance of the Company’s core rental real estate portfolio. A summary of office, retail and apartment operating properties as of December 31, 2016 at 100% is as follows:
Operating Properties
Property Count
Gross Leasable Area (in square feet)
Number of Units
Office Buildings
36
9,794,000
 
 
 
 
 
Regional Malls
13
7,646,000
 
Specialty Retail Centers
19
3,479,000
 
Total Retail
32
11,125,000
 
 
 
 
 
Apartments
115
31,194
Total
183
20,919,000
31,194

3


Office
The Office segment owns, acquires and operates office and life science buildings in both urban and suburban locations. The Company has developed and acquired office buildings for more than 40 years.
The following tables provide lease expiration and significant tenant information relating to the Company’s office properties:
Office Lease Expirations as of December 31, 2016
Expiration Year
Number of Expiring Leases
Square Feet of Expiring Leases (1)
Percentage of Total Leased GLA 
Contractual Rent Expiring (2)
Percentage of Total Contractual Rent
Average Contractual Rent per Square Foot Expiring (1)
2017
63

507,787

5.37

%
$
17,301,943

4.27

%
$
35.69

2018
59

1,047,910

11.08

 
39,202,186

9.68

 
42.07

2019
49

835,629

8.84

 
34,989,868

8.64

 
43.94

2020
32

1,170,276

12.38

 
49,795,433

12.30

 
46.70

2021
49

916,037

9.69

 
33,682,793

8.32

 
43.19

2022
20

568,286

6.01

 
29,856,392

7.37

 
57.74

2023
15

406,462

4.30

 
29,369,284

7.25

 
73.28

2024
22

1,274,952

13.48

 
58,620,252

14.48

 
48.32

2025
9

427,608

4.52

 
13,597,484

3.36

 
37.10

2026
16

163,200

1.73

 
6,976,159

1.72

 
45.45

Thereafter
30

2,137,188

22.60

 
91,573,507

22.61

 
51.01

Total
364

9,455,335

100.00

%
$
404,965,301

100.00

%
$
47.55

(1)
Square feet of expiring leases and average contractual rent per square foot are operating statistics representing 100% of the square footage and contractual rental income per square foot from expiring leases.
(2)
Contractual rent expiring is an operating statistic and is not comparable to rental revenue, a GAAP financial measure. The primary differences arise because contractual rent is calculated at the Company’s ownership share and excludes adjustments for the impacts of straight-line rent, amortization of intangible assets related to in-place leases, above and below market leases and overage rental payments (which are not reasonably estimable). Contractual rent per square foot includes base rent, fixed additional charges for marketing/promotional charges, common area maintenance and real estate taxes.

Significant Office Tenants as of December 31, 2016
(Based on contractual rent of 2% or greater at the Company’s ownership share)
 
Tenant
Leased
Square
Feet
Percentage of
Total Office
Square Feet
City of New York
1,094,786

11.58

%
Takeda Pharmaceutical Company Limited
789,980

8.35

 
Anthem, Inc.
392,514

4.15

 
JP Morgan Chase & Co.
361,422

3.82

 
U.S. Government
318,401

3.37

 
Bank of New York Mellon Corp.
317,572

3.36

 
Johns Hopkins University
269,546

2.85

 
National Grid
259,561

2.75

 
Clearbridge Investments, LLC
201,028

2.13

 
Covington & Burling, LLP
160,565

1.70

 
Agios Pharmaceuticals, Inc.
146,034

1.54

 
Partners HealthCare
136,150

1.44

 
Seyfarth Shaw, LLP
96,909

1.02

 
Subtotal
4,544,468

48.06

 
Others
4,910,867

51.94

 
Total
9,455,335

100.00

%
 


4


Retail
The Retail segment owns, acquires and operates regional malls, specialty/urban retail centers and amenity retail in both urban and suburban locations. The Company opened its first community retail center in 1948 and its first enclosed regional mall in 1962. Since then, it has operated regional malls and specialty retail centers. The specialty retail centers include urban retail, entertainment-based, neighborhood and power centers (collectively, “specialty retail centers”). Amenity retail includes retail and entertainment based tenants typically located within or adjacent to our mixed-use projects.
In our regional malls, the anchor stores typically own their facilities as an integral part of the mall structure but do not typically generate significant rental revenue to the Company. In contrast, anchor stores at specialty retail centers generally are tenants under long-term leases that typically provide significant rental revenue to the Company.
The Company has pioneered the concept of operating specialty retail centers in urban locations previously ignored by major retailers. With high population densities and disposable income levels at or near those of the suburbs, these urban areas are advantageous for the Company, for the tenants who realize high sales per square foot and for the cities that benefit from the new jobs and incremental tax revenues.
In August 2016, the Company announced its Board of Directors authorized a process to review strategic alternatives for a portion of the retail portfolio. The Company has been exploring a range of options and expects the review process to be concluded by the end of the first quarter of 2017. Assuming the Company identifies and is able to transact on a chosen alternative, or alternatives, the Company’s intent would be to dispose of these retail assets in a tax-deferred manner and redeploy the equity from its retail portfolio into apartment and office assets that align with its focus on primarily core markets and urban, mixed-use placemaking projects, including amenity retail. There can be no assurance that any transaction could be consummated in a tax deferred manner, or at all.
The following tables provide lease expiration and significant tenant information relating to the Company’s retail properties:
Retail Lease Expirations as of December 31, 2016
Expiration Year
Number of Expiring Leases
Square Feet of Expiring Leases (1)
Percentage of Total Leased GLA 
Contractual Rent Expiring (2)
Percentage of Total Contractual Rent
Average Contractual Rent per Square Foot Expiring (1)
2017
255

753,930

7.87

%
$
25,430,827

11.07

%
$
64.70

2018
222

959,658

10.02

 
21,180,929

9.22

 
42.42

2019
212

1,138,492

11.88

 
24,344,735

10.59

 
41.60

2020
144

1,052,912

10.99

 
23,147,887

10.07

 
41.93

2021
146

1,039,509

10.85

 
26,773,160

11.65

 
47.73

2022
131

1,144,814

11.95

 
29,411,237

12.80

 
49.05

2023
80

646,609

6.75

 
18,440,826

8.03

 
46.10

2024
94

540,195

5.64

 
13,396,364

5.83

 
49.23

2025
119

609,642

6.36

 
15,165,283

6.60

 
49.89

2026
77

420,675

4.39

 
10,090,302

4.39

 
41.95

Thereafter
44

1,273,791

13.30

 
22,397,455

9.75

 
32.43

Total
1,524

9,580,227

100.00

%
$
229,779,005

100.00

%
$
45.15

(1)
Square feet of expiring leases and average contractual rent per square foot are operating statistics representing 100% of the square footage and contractual rental income per square foot from expiring leases.
(2)
Contractual rent expiring is an operating statistic and is not comparable to rental revenue, a GAAP financial measure. The primary differences arise because contractual rent is calculated at the Company’s ownership share and excludes adjustments for the impacts of straight-line rent, amortization of intangible assets related to in-place leases, above and below market leases and overage rental payments (which are not reasonably estimable). Contractual rent per square foot includes base rent, fixed additional charges for marketing/promotional charges, common area maintenance and real estate taxes.

5


Significant Retail Tenants as of December 31, 2016
(Based on contractual rent of 1% or greater at the Company’s ownership share)
Tenant
Primary DBA
Number of Leases
Leased Square Feet
Percentage of
Total Retail
Square Feet
Dick’s Sporting Goods, Inc.
Dick’s Sporting Goods
7

421,749

4.40

%
Bass Pro Shops, Inc.
Bass Pro Outdoor World
2

364,500

3.81

 
Target Corporation
Target
2

362,498

3.78

 
Regal Entertainment Group
Regal Cinemas, Edwards Theatres, United Artists Theatres
4

297,461

3.11

 
The Gap, Inc.
Banana Republic, Gap, Old Navy, Athleta
23

292,088

3.05

 
AMC Entertainment, Inc.
AMC Theaters
3

260,886

2.72

 
The TJX Companies, Inc.
Marshalls, T.J. Maxx
7

230,552

2.41

 
H&M Hennes & Mauritz AB
H&M
11

219,638

2.29

 
Ahold USA
Stop & Shop
3

187,025

1.95

 
L Brands, Inc.
Bath and Body Works, Victoria’s Secret, Pink
28

186,214

1.94

 
Burlington
Burlington
2

155,624

1.63

 
Abercrombie & Fitch Co.
Abercrombie & Fitch, Hollister
17

120,231

1.26

 
Ascena Retail Group, Inc.
Ann Taylor, Loft, Lane Bryant, Justice
23

113,426

1.18

 
Costco Wholesale Corporation
Costco
1

110,074

1.15

 
Express, Inc.
Express
12

108,446

1.13

 
Best Buy Co., Inc.
Best Buy
4

104,220

1.09

 
Foot Locker, Inc.
FootLocker, Lady FootLocker, Kids FootLocker, FootAction USA, Champs Sports
22

86,936

0.91

 
American Eagle Outfitters, Inc.
American Eagle Outfitters, Aerie
12

69,895

0.73

 
Signet Jewelers
Kay Jewelers, Zales Jewelers, Piercing Pagoda,
Jared The Galleria of Jewelry
25

36,716

0.38

 
Subtotal
208

3,728,179

38.92

 
Others
1,316

5,852,048

61.08

 
Total
1,524

9,580,227

100.00

%
See the “Operations-Office and Retail” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 for additional operating statistics.
Apartments
The Apartments segment owns, acquires, and operates rental properties. Its portfolio includes upscale and middle-market apartments, adaptive re-use developments and subsidized senior housing. During the year ended December 31, 2016, the Company executed a master purchase and sale agreement for the sale of its interests in 47 federally assisted housing apartment communities. Sales of individual properties began closing in January 2017.
A summary of apartment operating properties as of December 31, 2016 at 100% is as follows:
Operating Properties
Property Count
Number of Units
Core Market Apartment Communities
 
 
Greater New York City
5
1,968
Boston
5
771
Greater Washington D.C. (1)
10
2,475
Los Angeles
2
547
Greater San Francisco
4
1,776
Chicago
3
1,616
Philadelphia
4
1,096
Denver
4
853
Dallas
4
1,085
 
41
12,187
Non-Core Market Apartment Communities
27
10,888
Federally Assisted Housing (2)
47
8,119
Total
115
31,194
(1)
Includes Richmond, Virginia.
(2)
As of February 2017, four properties with a total of 966 units have been sold.

6


Development
In its office development activities, the Company is primarily a build-to-suit developer that works with tenants to meet their requirements. The Company’s office development has focused primarily on mixed-use projects in urban developments, often built in conjunction with hotels and/or retail centers or as part of a major office or life science campus. As a result of this focus on urban developments, the Company continues to concentrate future office and mixed-use developments largely in its core markets.
The Company’s retail development activities historically have included building regional malls and specialty/urban retail centers. Regional malls are developed in collaboration with anchor stores that typically own their facilities as an integral part of the mall structure. In contrast, anchor stores at specialty retail centers generally are tenants under long-term leases.
Following the August 2016 announcement to review strategic alternatives for a portion of its retail portfolio, the Company has begun to focus primarily on smaller amenity retail development in conjunction with the development of mixed-use projects whose primary focus is apartments or office rental properties.
The Company has been engaged in apartment community development for over 60 years and continues to concentrate future apartment community development largely in its core markets.
A summary of development properties at 100% is as follows:
December 31, 2016
Number of Properties
Number of Units
Gross Leasable Area (in square feet)
Properties Under Construction/Redevelopment:
 
 
 
Apartments
9

3,250

128,250

Retail
2


323,150

Office
1


235,000

Operating Properties Prior to Stabilization:
 
 
 
Apartments
7

2,042

43,000

Office
2


410,000

Total
21

5,292

1,139,400

The Stapleton project is one of the nation’s largest urban redevelopments with additional future entitlements, including apartments, retail and office space as well as single family neighborhoods, where the Company sells residential lots to homebuilders. The Company controls the future development opportunity at Stapleton through an option agreement. As of December 31, 2016, the Company owns 364 acres of undeveloped land (including 128 saleable acres) and a purchase option for 536 acres at Stapleton over the next two years.
Through December 31, 2016, the Company has purchased 2,399 acres at Stapleton. In addition to the developable land available through purchase options, there are 1,116 acres reserved for regional parks and open space, of which 1,067 acres are currently under construction or have been completed. At December 31, 2016, Stapleton also has approximately 2.5 million square feet of retail space, approximately 400,000 square feet of office space, approximately 2.5 million square feet of other commercial space and 1,608 apartment units completed, with another 399 apartment units under construction.
Other
The Other segment represents the operations of several non-core investments, including the Barclays Center, a sports and entertainment arena located in Brooklyn, New York (“Arena”) (sold in January 2016), the Company’s equity method investment in the Brooklyn Nets (the “Nets”) (sold in January 2016), and military housing operations (sold in February 2016).

7


Competition
The real estate industry is highly competitive in many markets in which the Company operates. There are numerous other developers, managers and owners of office, retail and apartment real estate and undeveloped land competing with the Company nationally, regionally and/or locally, some of whom may have greater financial resources and market share than the Company. They compete with the Company for management and leasing opportunities, land for development, properties for acquisition and disposition, and for anchor stores and tenants for properties. The Company may not be able to successfully compete in these areas. In addition, competition could over-saturate markets and as a result, the Company may not have sufficient cash to meet the nonrecourse debt service requirements on certain of its properties. Although the Company may attempt to negotiate a restructuring or extension of the nonrecourse mortgage, it may not be successful, which could cause a property to be transferred to the mortgagee.
The Company’s apartment portfolio not only competes against other apartment buildings in the area, but other housing options, such as condominiums and single home ownership. If trends shift more to home ownership instead of rental, the Company’s results of operations, cash flows and realizable value of assets upon disposition could be materially and adversely affected.
Tenants at the Company’s retail properties face continual competition in attracting customers from retailers at other shopping centers, catalogue companies, online merchants, warehouse stores, large discounters, outlet malls, wholesale clubs, direct mail and telemarketers. The Company’s competitors and those of its tenants could have a material adverse effect on the Company’s ability to lease space in its properties and on the rents it can charge or the concessions it may have to grant. These factors could materially and adversely affect the Company’s results of operations, cash flows, and realizable value of its assets upon sale.
Number of Employees
The Company had 1,936 full-time and 139 part-time employees as of December 31, 2016.
Available Information
Forest City Realty Trust, Inc. is a Maryland corporation and its executive offices are located at 50 Public Square, Suite 1100, Cleveland, Ohio 44113. The Company makes available, free of charge, on its website at www.forestcity.net, its annual, quarterly and current reports, including amendments to such reports, as soon as reasonably practicable after the Company electronically files such material with, or furnishes such material to, the Securities and Exchange Commission (“SEC”). The Company’s SEC filings can also be obtained from the SEC website at www.sec.gov.
The Company’s corporate governance documents, including the Company’s Corporate Governance Guidelines, Code of Legal and Ethical Conduct, Supplier Code of Conduct and Board committee charters, are also available on the Company’s website at www.forestcity.net or in print to any stockholder upon written request addressed to Corporate Secretary, Forest City Realty Trust, Inc., 50 Public Square, Suite 1360, Cleveland, Ohio 44113.
The Company periodically posts updated investor presentations on the Investors page of its website at www.forestcity.net. The periodic updates may include information deemed to be material. Therefore, the Company encourages investors, the media and other interested parties to review the Investors page of its website at www.forestcity.net for the most recent investor presentation.
The information found on the Company’s website or the SEC website is not part of this Form 10-K.

8


Item 1A. Risk Factors
Included below are the primary risks and uncertainties that if realized could have a material adverse effect on our business, financial condition, results of operations, cash flows or our access to liquidity.
RISKS RELATED TO OUR STATUS AS A REIT
If We Fail to Qualify as a REIT, We Would Be Subject to U.S. Federal Income Tax as a Regular C Corporation and Would Not be Able to Deduct Distributions to Shareholders When Computing Our Taxable Income
We plan to elect to be taxed as a REIT commencing with the taxable year ended December 31, 2016, upon filing the 2016 Form 1120-REIT with the Internal Revenue Service on or before October 15, 2017. Accordingly, we have been operating, and plan to continue operating, in a manner consistent with REIT qualification rules; however, we cannot assure you that we will qualify as a REIT for the taxable year ended December 31, 2016 or that we will remain so qualified. Determining whether we qualify as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”), to our operations for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable regulations that have been promulgated under the Code is greater in the case of an entity holding assets through an operating partnership, as we do. In addition, determining whether we qualify as a REIT will involve numerous factual determinations concerning matters and circumstances not entirely within our control.
If we fail to qualify as a REIT, or qualify but subsequently cease to so qualify, we will face serious tax consequences that would substantially reduce the funds available for distribution to our shareholders for each of the years involved because:
we will not be allowed to deduct our distributions to shareholders in computing our taxable income;
we will be subject to U.S. federal and state income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates; and
unless we are entitled to relief under the Code, we would be disqualified from qualifying as a REIT for the four taxable years following the year during which we were disqualified.
Any such corporate tax liability may require us to borrow funds or liquidate some investments to pay any such additional tax liability, which in turn could have an adverse impact on the value of our common stock.
Although we intend to operate so as to qualify as a REIT, future economic, market, legal, tax or other considerations might cause us to revoke or lose our anticipated REIT status, which could have a material adverse effect on our business, future prospects, financial condition or results of operations and could adversely affect our ability to successfully implement our business strategy or pay a dividend.
Even if We Qualify as a REIT, Certain of Our Business Activities Will Be Subject To Corporate Level Income Tax and Foreign Taxes, Which Will Continue to Reduce Our Cash Flows, and Will Have Potential Deferred and Contingent Tax Liabilities
Even if we qualify as a REIT commencing with the taxable year ended December 31, 2016:
We may be subject to certain U.S. federal, state and local taxes and foreign taxes on our income and assets, including alternative minimum taxes, taxes on any undistributed income, and state, local or foreign income, franchise, property and transfer taxes. We could in certain circumstances be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Code to maintain our ability to qualify as a REIT. We plan to hold certain of our assets and operations and to receive certain items of income through one or more TRSs. The primary non-REIT qualified businesses held in TRSs include 461 Dean Street, an apartment building in Brooklyn, New York, Pacific Park Brooklyn project, land development operations, Barclays Center arena (sold in January 2016), the Nets (sold in January 2016), and military housing operations (sold in February 2016). Those TRS assets and operations would continue to be subject, as applicable, to U.S. federal and state corporate income taxes. In addition, we may incur a 100% excise tax on transactions with a TRS if they are not conducted on an arm’s-length basis. Any of these taxes would decrease our earnings and our cash available for distributions to shareholders.
We will be subject to U.S. federal income tax at the highest regular corporate rate (currently 35%) on all or a portion of the gain recognized from a sale of assets occurring within a specified period (generally, five years) after the effective date of our REIT election, to the extent of the built-in gain based on the fair market value of those assets held by us on the effective date of our REIT election in excess of our then tax basis in those assets. The same rules would apply to any assets we acquire from a C corporation in a carryover basis transaction with built-in gain at the time of the acquisition by us. This gain can be offset by any remaining federal net operating loss carryforwards. Furthermore, if we choose to dispose of any assets within the specified period, we will attempt to utilize various tax planning strategies, including Section 1031 of the Code like-kind exchanges, to mitigate the exposure to the built-in-gains tax. Gain from a sale of an asset occurring after the specified period ends will not be subject to this corporate level tax.

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If we were to make a technical or inadvertent mistake regarding whether certain items of our income satisfy either or both of the Code’s REIT gross income tests and as a result were to fail either or both such tests (and did not lose our status as a REIT because such failure was due to reasonable cause and not willful neglect), we would be subject to corporate level tax on the income that does not meet the Code’s REIT gross income test requirements. Any such taxes we pay will reduce our cash available for distribution to our shareholders.
The IRS and any state or local tax authority may successfully assert liabilities against us for corporate income taxes for taxable years of the Company prior to January 1, 2016, in which case we will owe these taxes plus applicable interest and penalties, if any.
Failure to Make Sufficient Distributions Would Jeopardize Our Qualification as a REIT and/or Would Subject Us to U.S. Federal Income and Excise Taxes
A company must distribute to its shareholders with respect to each taxable year at least 90% of its taxable income (computed without regard to the dividends paid deduction and net capital gain and net of any available net operating losses (“NOLs”)) in order to qualify as a REIT, and 100% of its taxable income (computed without regard to the dividends paid deduction and net capital gain and net of any available NOLs) in order to avoid U.S. federal income and excise taxes. For these purposes, the non-TRS subsidiaries of a company that qualifies as a REIT will be treated as part of such company and therefore such company will also be required to distribute out the taxable income of such subsidiaries. To the extent that we satisfy the 90% distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our shareholders for a calendar year is less than a minimum amount specified under the Code.
Generally, we expect to distribute all or substantially all of our REIT taxable income. However, we may decide to utilize our existing NOLs, if any, to reduce all or a portion of our taxable income in lieu of making corresponding distributions to our shareholders. If our cash available for distribution falls short of our estimates, we may be unable to maintain the proposed quarterly distributions that approximate our taxable income and, as a result, may be subject to U.S. federal income tax on the shortfall in distributions or may fail to qualify as a REIT. Our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for U.S. federal income tax purposes, or the effect of nondeductible expenditures, such as capital expenditures, payments of compensation for which Section 162(m) of the Code denies a deduction, the creation of reserves or required debt service or amortization payments.
We May Be Required to Borrow Funds, Sell Assets, or Raise Equity During Unfavorable Market Conditions to Qualify as a REIT or to Fund Capital Expenditures, Future Growth and Expansion Initiatives
In order to meet the REIT distribution requirements and maintain our qualification and taxation as a REIT, or to fund capital expenditures, future growth and expansion initiatives, we may need to borrow funds, sell assets or raise equity, even if the then-prevailing market conditions are not favorable for these borrowings, sales or offerings. Any insufficiency of our cash flows to cover our REIT distribution requirements could adversely impact our ability to raise debt, to sell assets, or to offer equity securities in order to fund distributions required to maintain our expected qualification as a REIT and to avoid U.S. federal income and excise taxes. Furthermore, the REIT distribution requirements may increase the financing we need to fund capital expenditures, future growth and expansion initiatives. This would increase our total leverage.
Whether we issue equity, at what price and the amount and other terms of any such issuances will depend on many factors, including alternative sources of capital, our then-existing leverage, our need for additional capital, market conditions and other factors beyond our control. If we raise additional funds through the issuance of equity securities or debt convertible into equity securities, the percentage of stock ownership by our existing shareholders may be reduced. In addition, new equity securities or convertible debt securities could have rights, preferences and privileges senior to those of our current shareholders, which could substantially decrease the value of our securities owned by them. Depending on the share price we are able to obtain, we may have to sell a significant number of shares in order to raise the capital we deem necessary to execute our long-term strategy, and our shareholders may experience dilution in the value of their shares as a result.
In addition, if we fail to comply with certain asset tests at the end of any calendar quarter, we would have to correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to continue to qualify as a REIT (if we so qualify). As a result, we may be required to liquidate otherwise attractive investments. These actions may reduce our income and amounts available for distribution to our shareholders.

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Because, as a REIT, We Expect to Distribute Substantially All of Our Taxable Income From Our Real Estate Operations to Our Shareholders or Lenders, We Will Continue to Need Additional Capital to Make New Investments. If Additional Funds Are Not Available on Favorable Terms, or At All, Our Ability to Make New Investments Will Be Impaired and the Issuance of Additional Equity Securities To Raise Funds May Result in Dilution
If, following our planned qualification as a REIT commencing with the taxable year ended December 31, 2016, we distribute substantially all of our taxable income to our shareholders and we desire to make new investments through our Operating Partnership, our business will require a substantial amount of capital. We may acquire additional capital from the issuance of securities senior to our common stock, including additional borrowings or other indebtedness or the issuance of additional securities, including limited partnership interests. We may also acquire additional capital through the issuance of additional equity. However, we may not be able to raise additional capital in the future on favorable terms, or at all. Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. This may materially affect our business and ability to grow and may impact the market’s perception of us and the price of our common stock.
Additional issuances of equity securities may result in dilution to our shareholders. Although we expect to deploy additional capital in accretive transactions, such additional dilution may reduce your percentage of ownership of the Company and voting percentage.
Our Cash Distributions Are Not Guaranteed and May Fluctuate
To maintain our qualification as a REIT, we must annually distribute to our shareholders an amount equal to at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains.
The amount, timing and frequency of future distributions, however, will be at the sole discretion of our Board of Directors and will be declared based upon various factors, many of which are beyond our control, including, our financial condition and operating cash flows, the amount required to maintain REIT status and reduce any income and excise taxes that we otherwise would be required to pay, limitations on distributions in our existing and future debt instruments, our ability to utilize NOLs to offset, in whole or in part, our distribution requirements, limitations on our ability to fund distributions using cash generated through our TRSs and other factors that our Board of Directors may deem relevant. We may also have available NOLs that could reduce or substantially eliminate our REIT taxable income, and thus we may not be required to distribute material amounts of cash to qualify as a REIT. We expect that, for the foreseeable future, we will continue to utilize available NOLs to reduce our REIT taxable income. At December 31, 2016, we had a federal NOL carryforward of $180,698,000 available to use on our REIT tax return expiring in the years ending December 31, 2029 through 2035.
Complying with REIT Qualification Requirements May Limit Our Flexibility or Cause Us to Forego Otherwise Attractive Opportunities Beyond Rental Real Estate Operations
To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our shareholders and the ownership of our stock. We may be required to make distributions to shareholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Thus, compliance with the requirements to qualify as a REIT may hinder our ability to operate solely on the basis of maximizing profits.
In particular, in order to qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consist of cash, cash items, government securities and qualified real estate assets. The remainder of our investment in securities (other than government securities, securities of any TRS or disregarded entity subsidiary of ours and securities that are qualified real estate assets) generally may not include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of any TRS or disregarded entity subsidiary of ours and securities that are qualified real estate assets) may consist of the securities of any one issuer. If we fail to comply with these requirements at the end of any calendar quarter, we must remedy the failure within 30 days or qualify for certain limited statutory relief provisions to avoid losing our anticipated status as a REIT. As a result, we may have to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our shareholders.

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Ownership and Transfer Limitations Contained in Our Charter May Restrict Shareholders From Acquiring or Transferring Shares
In order for us to qualify as a REIT, no more than 50% of the value of the outstanding shares of our stock may be owned, directly or indirectly or through application of certain attribution rules, by five or fewer “individuals” (as defined in the Code) at any time during the last half of a taxable year (other than the first taxable year for which we qualify as a REIT). To facilitate our anticipated qualification as a REIT, among other purposes, our charter generally prohibits any person from actually or constructively owning more than 9.8% of the value of our outstanding common stock and preferred stock or 9.8% (by value or by number of shares, whichever is more restrictive) of the outstanding shares of our common stock, unless our Board of Directors exempts the person from such ownership limitations. Absent such an exemption from our Board of Directors, the transfer of our stock to any person in excess of the applicable ownership limit, or any transfer of shares of such stock in violation of the other ownership and transfer restrictions contained in our charter, may be void under certain circumstances, and the intended transferee of such stock will acquire no rights in such shares. These provisions of our charter may have the effect of delaying, deferring or preventing someone from taking control of us, even though a change of control might involve a premium price for our shareholders or might otherwise be in their best interest.
Complying With the Requirements to Qualify As a REIT May Limit Our Ability to Hedge Effectively and Increase the Cost of Our Hedging, and May Cause Us to Incur Tax Liabilities
As a REIT, certain provisions of the Code will limit our ability to hedge liabilities. Generally, following our anticipated qualification as a REIT commencing with the taxable year ended December 31, 2016, income from hedging transactions that we may enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets will not constitute “gross income” for purposes of the Code’s REIT gross income tests, provided certain requirements are satisfied. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of the Code’s REIT gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRSs would be subject to tax on income or gains resulting from hedges entered into by them or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in any of our TRSs generally will not provide any tax benefit, except for being carried forward for use against future taxable income in the applicable TRS.
We Have Limited Experience Operating as a Company That Qualifies as a REIT, Which May Adversely Affect Our Financial Condition, Results of Operations, Cash Flow and Ability to Satisfy Debt Service Obligations and the Per Share Trading Price of Our Common Stock
We began operating in a manner consistent with REIT qualification rules on January 1, 2016. Our senior management team, including the new members of the senior management team who were appointed in connection with our internal reorganization to a new organizational structure, has limited experience operating a corporation that qualifies as a REIT. The experience of our senior management team may not be sufficient to operate the Company successfully and in a manner that allows us to qualify as a REIT. Our failure to qualify as a REIT, or to remain so qualified, could adversely affect our financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy debt service obligations.
Legislative or Other Actions Affecting Entities That Qualify As REITs, Including Adverse Change in Tax Laws, Could Have a Negative Effect on Us or Our Shareholders
At any time, the federal income tax laws governing entities that qualify as REITs or the administrative interpretations of those laws may be amended or changed. Federal, state and local tax laws are constantly under review by persons involved in the legislative process, the IRS, the U.S. Department of the Treasury, and state and local taxing authorities. The shortfall in tax revenues for states and municipalities in recent years may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income following our qualification as a REIT. These increased tax costs could adversely affect our financial condition, results of operations and the amount of cash available for payment of dividends. Changes to the tax laws, regulations and administrative interpretations, which may have retroactive application, could adversely affect us or our shareholders.
We cannot predict whether, when, in what forms, or with what effective dates, the tax laws, regulations and administrative interpretations applicable to us or our shareholders may be changed. Accordingly, any such change may significantly affect our ability to qualify as a REIT, or the federal income tax consequences to you or us of the Company so qualifying.
Our Board of Directors Will Be Able to Unilaterally Revoke Our Anticipated Election to Be Taxed as a REIT Following Our Anticipated Qualification as a REIT, and This May Have Adverse Consequences for Our Shareholders
Our charter provides that our Board of Directors may revoke or otherwise terminate our REIT election without the approval of our shareholders, if the Board of Directors determines that it is no longer in our best interests to elect to be taxed as a REIT for U.S. federal income tax purposes. If we do not elect to, or revoke our election to, be so taxed, we will not be allowed to deduct dividends paid to shareholders in computing our taxable income, and will be subject to federal income tax at regular corporate rates and state and local taxes, which may adversely impact our total return to our shareholders.

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We May Not Realize the Anticipated Benefits to Shareholders, Including the Achievement of Significant Tax Savings for Us and Regular Distributions to Our Shareholders
Even if we successfully qualify and remain qualified as a REIT, we cannot provide assurance that our shareholders will experience benefits attributable to our qualification and taxation as a REIT, including our ability to reduce our corporate level federal tax through distributions to shareholders and to make regular distributions to shareholders. The realization of the anticipated benefits to shareholders will depend on numerous factors, many of which are outside our control. In addition, future cash distributions to shareholders will depend on our cash flows, as well as the impact of alternative, more attractive investments as compared to dividends. Further, changes in legislation or the federal tax rules could adversely impact the benefits of being a REIT.
RISKS RELATED TO OUR BUSINESS OPERATIONS AND THE REAL ESTATE INDUSTRY
Lending and Capital Market Conditions May Negatively Impact Our Liquidity and Our Ability to Finance or Refinance Projects or Repay Our Debt
Current U.S. and global economic conditions continue to remain uncertain despite recent improvements. The capital markets have continued to improve from post-recession lows, with banks and permanent lenders originating new loans for real estate projects, particularly as their existing portfolio loans get paid off. Originations of new loans for commercial mortgage backed securities have continued as well. Underwriting standards have stabilized and lenders continue to favor high quality operating assets in strong markets. However, in the current financial regulatory environment, limits are beginning to be placed on the overall liquidity in the market for construction loans provided by banks and new loans for commercial mortgage backed securities. Given this impact on market liquidity and for other reasons, we may not be able to obtain financings on terms comparable to those we secured in the past, or at all. Economic conditions during the recession required us to curtail our investment in certain new development opportunities, which will negatively impact our growth. Although we continue to break ground and complete construction projects consisting primarily of apartments in core markets, we remain cautious in investing in new development opportunities. If economic conditions begin to trend downwards, and/or if interest rates on new loans rise significantly we may be required to further curtail our development or expansion projects and potentially write down our investments in some projects.
Current economic conditions, although improved, are still volatile and could deteriorate, which may impact our ability to refinance our debt and obtain renewals or replacement of credit enhancement devices, such as letters of credit, on favorable terms, or at all. While some of our current financings have extension options, some are contingent upon pre-determined underwriting qualifications. Projects may not meet the required conditions to qualify for such extensions. Our inability to extend, repay or refinance our debt when it becomes due, including upon a default or acceleration event, could result in foreclosure on the properties pledged as collateral, which could result in a loss of our investment. We may be unable to refinance or extend our maturing debt obligations and lenders in certain circumstances may require a higher rate of interest, repayment of a portion of the outstanding principal or additional equity contributions to the project.
A significant amount of our total outstanding long-term debt at December 31, 2016 becomes due in each of the next three fiscal years. If these amounts are unable to be refinanced, extended or repaid from other sources, such as sales of properties or new equity, our cash flow may not be sufficient to repay all maturing debt.
Total outstanding debt includes credit enhanced mortgage debt we have obtained for a number of our properties to back the bonds issued by a government authority and then remarketed to the public. Generally, the credit enhancement, such as a letter of credit, expires prior to the terms of the underlying mortgage debt and must be renewed or replaced to prevent acceleration of the underlying mortgage debt. We treat credit enhanced debt as maturing in the year the credit enhancement expires. However, if the credit enhancement is drawn upon due to the inability to remarket the bonds due to reasons including, but not limited to, market dislocation or a downgrade in the credit rating of the credit enhancer, not only would the bonds incur additional interest expense, but the debt maturity could accelerate to as early as 90 days after the acceleration occurs.
Additionally, in the event of a failure of a lender or counterparty to a financial contract, obligations under the financial contract might not be honored and many forms of assets may be at risk and may not be fully returned to us. Should a financial institution, particularly a construction lender, fail to fund its committed amounts when contractually obligated, our ability to meet our obligations and complete projects could be adversely impacted.
The Ownership, Development and Management of Commercial Real Estate is Challenging During the Slow Economic Recovery
The current economic environment continues to impact the real estate industry, specifically for retail and office properties. Some commercial tenants are experiencing financial pressure and are continuing to place demands on landlords to provide rent concessions. The financial hardships on some tenants are so severe they may leave the market entirely or declare bankruptcy, creating fluctuating vacancy rates in commercial properties. The tenants with good financial condition are often considering offers from competing projects and may wait for the best possible deal before committing.

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We Are Subject to Risks Associated with Investments in Real Estate
The value of, and our income from, our properties may decline due to circumstances that adversely affect real estate generally and those specific to our properties. General factors that may adversely affect our real estate portfolios, if they were to occur or continue, include:
Increases in interest rates;
The availability of financing, including refinancing or extensions of our nonrecourse mortgage debt maturities, on acceptable terms, or at all;
A decline in the economic conditions at the national, regional or local levels, particularly a decline in one or more of our core markets;
Decreases in rental rates;
An increase in competition for tenants and customers or a decrease in demand by tenants and customers;
The financial condition of tenants, including the extent of bankruptcies and defaults;
An increase in supply of or decrease in demand for our property types in our core markets;
Declines in consumer confidence and spending that adversely affect our revenue from our retail centers;
Declines in housing markets in Stapleton, Colorado that adversely affect our land sales revenue from our Development segment;
The adoption on the national, state or local level of more restrictive laws and governmental regulations, including more restrictive zoning, land use or environmental regulations and increased real estate taxes; and
Opposition from local community or political groups with respect to the development, construction or operations at a particular site.
In addition, there are factors that may adversely affect the value of specific operating properties or result in reduced income or unexpected expenses. As a result, we may not achieve our projected returns on the properties and we could lose some or all of our investments in those properties. Those operational factors include:
Adverse changes in the perceptions of prospective tenants or purchasers of the attractiveness of the property;
Our inability to provide adequate management and maintenance;
The investigation, removal or remediation of hazardous materials or toxic substances at a site;
Our inability to collect rent or other receivables;
Vacancies and other changes in rental rates;
An increase in operating costs that cannot be passed through to tenants;
Introduction of a competitor’s property in, or in close proximity to, one of our current markets;
Underinsured or uninsured natural disasters, such as earthquakes, floods or hurricanes; and
Our inability to obtain adequate insurance.
We Are Subject to Real Estate Development Risks
In addition to the risks described above, our development projects are subject to significant additional risks relating to our ability to complete our projects on time and on budget. Factors that may result in a development project exceeding budget, being delayed or being prevented from completion include:
An inability to secure sufficient financing on favorable terms, or at all, including an inability to refinance or extend construction loans;
Construction delays or cost overruns, either of which may increase project development costs or lead to impairments;
An increase in commodity costs;
An inability to obtain zoning, occupancy and other required governmental permits and authorizations;
An inability to secure tenants or anchors necessary to support the project;

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Failure to achieve or sustain anticipated occupancy or sales levels;
Threatened or pending litigation;
Failure by partners to fulfill obligations; and
Construction stoppages due to labor disputes.
Some of these development risks were magnified during the recession and continue to be heightened given current uncertain and potentially volatile market conditions. See also “Lending and Capital Market Conditions May Negatively Impact Our Liquidity and Our Ability to Finance or Refinance Projects or Repay Our Debt”. If market volatility causes economic conditions to remain unpredictable or to trend downwards, we may not achieve our projected returns on properties under development and we could lose some or all of our investments in those properties. In addition, the lead time required to develop, construct and lease-up a development property has substantially increased, which could adversely impact our projected returns or result in a termination of the development project.
In the past, we have elected not to proceed, or have been prevented from proceeding, with certain development projects, and we anticipate this may occur again. In addition, development projects may be delayed or terminated because a project partner or prospective anchor withdraws, a project partner fails to fulfill contractual obligations or a third party challenges our entitlements or public financing.
We periodically serve as either the construction manager or the general contractor for our development projects. The construction of real estate projects entails unique risks, including risks that the project will fail to conform to building plans, specifications and timetables. These failures could be caused by labor strikes, weather, government regulations and other conditions beyond our control. In addition, we may become liable for injuries and accidents occurring during the construction process that are underinsured.
In the construction of new projects, we generally guarantee the lien-free completion of the project to the construction loan lender. This guaranty is recourse to us and places the risk of construction delays and cost overruns on us. In addition, from time to time, we guarantee our construction obligations to major tenants and public agencies. These types of guarantees are released upon completion of the project, as defined. We may have significant expenditures in the future in order to comply with our lien-free completion obligations which could have an adverse impact on our cash flows.
Our Pacific Park Brooklyn project is currently facing these and other development risks.
On June 30, 2014, we entered into a joint venture with Greenland Atlantic Yards, LLC, a subsidiary of Shanghai-based Greenland Holding Group Company Limited (“Greenland”), to develop Pacific Park Brooklyn, a 22 acre mixed-use project in Brooklyn, New York. Under the joint venture, Greenland acquired 70% of the project and will co-develop the project with us, along with sharing in the entire project costs going forward in proportion to ownership interests. The joint venture will execute on the remaining development rights, including the infrastructure and vertical construction of the apartment units, but excluded Barclays Center (sold in January 2016) and 461 Dean Street apartment community. Consistent with the approved master plan, the joint venture will develop the remaining portion of Phase I and all of Phase II of the project, including the permanent rail yard. The remaining portion of Phase I that will be developed by the joint venture is comprised of seven buildings totaling approximately 3.1 million square feet. Phase II consists of seven buildings totaling approximately 3.3 million square feet.
Under the joint venture with Greenland, the Pacific Park Brooklyn project will be managed by a board composed of three representatives from Greenland and two representatives from the Company. While decisions would require a majority vote, many decisions labeled “Special Major Decisions” would require a vote by us for approval. There is the risk that many of the decisions made by the joint venture would not be in our best interests and further, that an inability to agree on certain of the Special Major Decisions would trigger buy-sell rights and obligations between us and Greenland. The exercise of the buy-sell rights could result in our having to fund the purchase of Greenland’s interest in the entire joint venture or in one or more individual parcels. It could also result in having our interests be purchased and the loss of ownership of the Pacific Park Brooklyn project or of one or more parcels thereof.
On June 27, 2014, the City of New York and State of New York entities revised certain project requirements with the goal of accelerating the construction of affordable housing. Among the requirements, affordable units are required to constitute 35% of all units for which construction has commenced until 1,050 affordable units have been started, after which the percentage drops to 25%. Failure to meet this requirement will prevent the joint venture from seeking new building permits, as well as give the State the right to seek injunctive relief. Also, temporary certificates of occupancy (“TCOs”) for a total of 2,250 affordable housing units are required to be issued by May 31, 2025 or a $2,000 per unit per month penalty will be imposed for those affordable units which have not received TCOs by such date, until issued.
The joint venture broke ground on the first affordable apartment community, 535 Carlton, in December, 2014. In mid-2015, the joint venture commenced construction on two more buildings, 38 Sixth Avenue, an affordable apartment building, and 550 Vanderbilt, a condominium building. From the formation of the joint venture in June 2014 through the quarter ended June 30, 2016, we reviewed the estimates and assumptions in the discounted cash flow model and updated them as necessary.

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During the three months ended September 30, 2016, it became evident the occupancy and rental rate declines in the Brooklyn market was determined not to be temporary as a result of an increased supply of new rental product amplified by the sun-setting and the uncertainty around the 421 A real estate tax abatement program. The condominium market in New York has also softened, causing the projected sale schedule for 550 Vanderbilt to be adjusted accordingly. Separately, the construction costs across the New York market continue to trend upward, resulting in increases in the estimated trade costs for certain infrastructure as well as vertical construction. In addition, the expiration of and the continued uncertainty related to the availability of the 421 A real estate tax abatement program puts further stress on anticipated returns. As a result, during the three months ended September 30, 2016, as part of our formal strategic plan update, a decision was made to revise the overall project schedule for Pacific Park Brooklyn. Accordingly, we updated the discounted cash flow model to reflect the updated timing of the project schedule as well as the revenue, expense and cost assumptions. Based on the above, the estimated fair value of the investment no longer exceeded the carrying value. As a result, we recorded an other-than-temporary impairment of $299,300,000 during the year ended December 31, 2016. The remaining basis in the investment (net of estimated future funding obligations) is not material. See Note SImpairment of Real Estate and Impairment of Unconsolidated Entities in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.
Substantial additional costs for rail yard and infrastructure improvements, including a platform over the new permanent rail yard, will be required to proceed with Phase II of Pacific Park Brooklyn. More specifically, our agreement with the Metropolitan Transit Authority (“MTA”) requires collateral to be posted and for the construction of the permanent rail yard to be substantially complete by December 2017. Collateral of $86,000,000 was posted with the MTA, of which our portion was 30%, or approximately $26,000,000, which resulted in an increase to our equity method investment.
There is also the potential for increased costs and further delays to the project as a result of (i) increasing construction costs, (ii) scarcity of labor and supplies, (iii) the unavailability of additional needed financing, (iv) our or our partners’ inability or failure to meet required equity contributions, (v) increasing rates for financing, (vi) our inability to meet certain agreed upon deadlines for the development of the project, (vii) other potential litigation seeking to enjoin or prevent the project or litigation for which there may not be insurance coverage and (viii) our or our partners’ inability to fulfill contractual obligations. In addition, as applicable contractual and other deadlines and decision points approach, we could have less time and flexibility to plan and implement our responses to these or other risks to the extent that any of them may actually arise. The occurrence of one or more of these factors could result in the fair value of our equity method investment to be less than the carrying value which could result in a future impairment.
We Are Exposed to Litigation Risks Related to the Construction of 461 Dean Street
461 Dean Street is an apartment building in Brooklyn, New York adjacent to the Barclays Center at the Pacific Park Brooklyn project. This modular construction project opened during the three months ended September 30, 2016. We had a fixed price contract (the “CM Contract”) with Skanska USA to construct the apartment building. In 2014, Skanska USA ceased construction and we terminated the CM Contract for cause. Each party has filed lawsuits relating primarily to the project’s delays and associated additional completion costs. We continue to vigorously pursue legal action against Skanska USA for damages related to their default of the CM Contract. However, there is no assurance that we will be successful in recovering these damages or defending against Skanska USA’s claims.
Vacancies in Our Properties May Adversely Affect Our Results of Operations, Cash Flows and Fair Value Calculations
Our results of operations and cash flows may be adversely affected if we are unable to continue leasing a significant portion of our office, retail and apartment real estate portfolio. We depend on office, retail and apartment tenants in order to collect rents and other charges. The current market conditions have impacted our tenants on many levels. Despite improvement in certain economic measures, it will take time for many of our current or prospective tenants to achieve a financial outlook similar to what they had prior to the recession, if ever. The downturn has been particularly hard on retail tenants, many of whom have announced store closings and scaled back growth plans. If we are unable to sustain historical occupancy levels in our real estate portfolio, our cash flows and results of operations could be adversely affected. Our ability to sustain our current and historical occupancy levels also depends on many other factors discussed elsewhere in this section.
We Face Risks Associated with Developing and Managing Properties in Partnership with Others
We use partnerships and limited liability companies (“LLCs”) to finance, develop or manage some of our real estate investments. Acting through our wholly-owned subsidiaries, we typically are a general partner or managing member in these partnerships or LLCs. There are, however, instances in which we do not control or even participate in management or day-to-day operations of these properties. The use of partnerships and LLCs involve special risks associated with the possibility that:
A partner or member may have interests or goals inconsistent with ours;
A general partner or managing member may take actions contrary to our instructions, requests, policies or objectives with respect to our real estate investments;
A partner or a member could experience financial difficulties that prevent it from fulfilling its financial or other responsibilities to the project, or its lender, or the other partners or members; or

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A partner may not fulfill its contractual obligations.
In the event any of our partners or members files for bankruptcy, we could be precluded from taking certain actions affecting our project without bankruptcy court approval, which could diminish our control over the project even if we were the general partner or managing member. In addition, if the bankruptcy court were to discharge the obligations of our partner or member, it could result in our ultimate liability for the project being greater than originally anticipated.
To the extent we are a general partner, we may be exposed to unlimited liability, which may exceed our investment or equity in the partnership. If one of our subsidiaries is a general partner of a particular partnership, it may be exposed to the same kind of unlimited liability.
Our Properties and Businesses Face Significant Competition
The real estate industry is highly competitive in many of the markets in which we operate. Competition could over-saturate any market and create vacancies at our properties, resulting in an adverse effect to our operations and cash flow. As a result, we may not have sufficient cash to meet the nonrecourse debt service requirements on certain of our properties. Although we may attempt to negotiate a restructuring with the mortgagee, we may not be successful, particularly in light of current credit markets, which could cause a property to be transferred to the mortgagee.
There are many developers, managers and owners of office, retail and apartment real estate and undeveloped land, as well as other REITs, private real estate companies and investors, that compete with us nationally, regionally and/or locally, some of whom have greater financial resources and market share than us. They compete with us for management and leasing opportunities, land for development, properties for acquisition and disposition, and for anchor stores and tenants for properties. The leasing of real estate in particular is highly competitive. The principal means of competition are rent, location, services provided and the nature and condition of the facility to be leased. We may not be able to successfully compete in these areas. If our competitors prevent us from realizing our real estate objectives, the operating performance of our projects may fall short of expectations and adversely affect our financial performance.
Tenants at our retail properties face continual competition in attracting customers from Internet shopping, retailers at other shopping centers, catalogue companies, online merchants, television shopping networks, warehouse stores, large discounters, outlet malls, wholesale clubs, direct mail and telemarketers. Our competitors and those of our tenants could have a material adverse effect on our ability to lease space in our retail properties and on the rents we can charge or the concessions we can grant. This in turn could materially and adversely affect our results of operations and cash flows, and could affect the realizable value of our assets upon sale. Further, as new technologies emerge, the relationship among customers, retailers, and shopping centers are evolving on a rapid basis and it is critical we adapt to such new technologies and relationships on a timely basis. We may be unable to adapt quickly and effectively, which could adversely impact our financial performance.
We May Be Unable to Renew Leases or Re-lease Space as Leases Expire
When our tenants decide not to renew their leases upon their expiration, we may not be able to re-lease the space. Even if tenants do renew or we can re-lease the space, the terms of renewal or new lease, taking into account, among other things, the cost of improvements to the property and leasing commissions, may be less favorable than the terms in the expired leases. In addition, changes in space utilization by our tenants may impact our ability to renew or re-lease space without the need to incur substantial costs in renovating or redesigning the internal configuration of the relevant property. If we are unable to promptly renew the leases or re-lease the space at similar rates or if we incur substantial costs in renewing or obtaining new leases for the space, our cash flow and ability to service debt obligations and pay dividends and distributions to security holders could be adversely affected.
We May Be Unable to Sell Properties to Reposition Our Portfolio
Because real estate investments are relatively illiquid, we may be unable to dispose of underperforming properties and may be unable to reposition our portfolio in response to changes in national, regional or local real estate markets. In addition, potential buyers may be unable to secure financing, which could negatively impact our ability to dispose of our properties. As a result, we may incur operating losses from some of our properties and may have to write down the value of some properties due to impairment. In addition, real estate investments may be relatively difficult to sell quickly. Consequently, we may have limited ability to vary our portfolio promptly in response to changes in economic or other conditions.
We May Be Unable to Identify and Transact on Chosen Strategic Alternatives for Our Retail Portfolio
In August 2016, we announced our Board of Directors has authorized a process to review strategic alternatives for a portion of our retail portfolio. We have been exploring a range of options and expect the review process to be concluded by the end of the first quarter of 2017. Assuming we identify and are able to transact on a chosen alternative, or alternatives, our intent would be to dispose of these retail assets in a tax-deferred manner and redeploy the equity from our retail portfolio into apartment and office assets that align with our focus on primarily core markets and urban, mixed-use placemaking projects, including amenity retail.

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As part of the strategic review, we have begun discussions with certain strategic partners and other potential buyers for several of the retail assets. As a result, we updated our impairment analysis on our retail assets, which resulted in the recording of a significant impairment charge during the three months ended September 30, 2016 related to two of our consolidated assets. As we continue to review strategic alternatives for our retail portfolio, we may be required to further update our undiscounted cash flow impairment analysis of fully consolidated assets, including probability weighted estimated holding periods. Changes in these estimates and assumptions may result in future impairments. There can be no assurance any transaction could be consummated in a tax deferred manner, or at all.
Our Results of Operations and Cash Flows May Be Adversely Affected by Tenant Defaults or Bankruptcy
Our results of operations and cash flows may be adversely affected if a significant number of our tenants default on their obligations to us. A default by a tenant may result in the inability for such tenant to re-lease space from us on economically favorable terms, or at all. In the event of a default by a tenant, we may experience delays in payments and incur substantial costs in recovering our losses.
In addition, our ability to collect rents and other charges will be difficult if the tenant is bankrupt or insolvent. Our tenants have from time to time filed for bankruptcy or been involved in insolvency proceedings. We may be required to expense costs associated with leases of bankrupt tenants and may not be able to replace future rents for tenant space rejected in bankruptcy proceedings which could adversely affect our properties. The current bankruptcies of some of our tenants, and the potential bankruptcies of other tenants in the future, could make it difficult for us to enforce our rights as lessor and protect our investment.
Based on tenants with contractual rent of greater than 2% as of December 31, 2016, our five largest office tenants by leased square feet are the City of New York, Takeda Pharmaceutical Company Limited, Anthem, Inc., JP Morgan Chase & Co. and U.S. Government. Given our large concentration of office space in the Greater New York City metropolitan area, we may be adversely affected by negative events specific to that region.
Based on tenants with contractual rent of greater than 1% as of December 31, 2016, our five largest retail tenants by leased square feet are Dick’s Sporting Goods, Inc., Bass Pro Shops, Inc., Target Corporation, Regal Entertainment Group and The Gap, Inc. An event of default or bankruptcy of one of our largest tenants would increase the adverse impact on us.
We May Be Negatively Impacted by the Consolidation or Closing of Anchor Stores
Our retail centers are generally anchored by department stores or other “big box” tenants. Recently, we received notice that two anchor stores at our retail centers would be closing. We could be adversely affected if additional anchor stores were to consolidate, close or enter into bankruptcy. Given the current economic environment for retailers, there is a heightened risk an anchor store could close or enter into bankruptcy. Although non-tenant anchors generally do not pay us rent, they typically contribute towards common area maintenance and other expenses. Even if we own the anchor space, we may be unable to re-lease this area or to re-lease it on comparable terms. The loss of these revenues could adversely affect our results of operations and cash flows. Further, the temporary or permanent loss of any anchor would likely reduce customer traffic in the retail center, which could lead to decreased sales at other retail stores. Rents obtained from other tenants may be adversely impacted as a result of co-tenancy clauses in their leases. In addition, some non-anchor tenants will have the ability to vacate and terminate their leases. One or more of these factors could cause the retail center to fail to meet its debt service requirements. The consolidation of anchor stores may also negatively affect current and future development projects. We may be required to invest additional capital to try to maintain occupancy, attract additional/replacement tenants and to maintain or improve the value of the asset.
Terrorist Attacks and Other Armed Conflicts May Adversely Affect Our Business
We have significant investments in large metropolitan areas, including Boston, Chicago, Dallas, Denver, Los Angeles, Philadelphia, and the greater metropolitan areas of New York City, San Francisco and Washington D.C., which face a heightened risk related to terrorism. Some tenants in these areas may choose to relocate their business to less populated, lower-profile areas of the United States. This could result in a decrease in the demand for space in these areas, which could increase vacancies in our properties and force us to lease our properties on less favorable terms. In addition, properties in our real estate portfolio could be directly impacted by future terrorist attacks, which could cause the value of our property and the level of our revenues to significantly decline.
Future terrorist activity, related armed conflicts or prolonged or increased tensions in the Middle East could cause consumer confidence and spending to decrease and adversely affect mall traffic. Additionally, future terrorist attacks could increase volatility in the United States and worldwide financial markets. Any of these occurrences could have a significant impact on our revenues, costs and operating results.

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Our High Debt Leverage May Prevent Us from Responding to Changing Business and Economic Conditions
Our high degree of debt leverage could limit our ability to obtain additional financing or adversely affect our liquidity and financial condition. We have a ratio of net debt (consisting of nonrecourse mortgage debt, a revolving credit facility, a term loan facility and convertible senior debt) to total market capitalization of approximately 39.3% and 42.8% at December 31, 2016 and 2015, respectively, based on our net debt outstanding at that date and the market value of our outstanding common stock. Our high leverage may adversely affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, development or other general corporate purposes and may make us more vulnerable to a prolonged downturn in the economy.
Nonrecourse mortgage debt is collateralized by individual completed rental properties, projects under development and undeveloped land. We do not expect to repay a substantial amount of the principal of our outstanding debt prior to maturity or to have available funds from operations sufficient to repay this debt at maturity. As a result, it will be necessary for us to refinance our debt through new debt financings or through equity offerings. If interest rates are higher at the time of refinancing, our interest expense would increase, which would adversely affect our results of operations and cash flows. Cash flows and our liquidity would also be adversely affected if we are required to repay a portion of the outstanding principal or contribute additional equity to obtain the refinancing. In addition, in the event we were unable to secure refinancing on acceptable terms, or at all, we might be forced to sell properties on unfavorable terms, which could result in the recognition of losses and could adversely affect our financial position, results of operations and cash flows. If we were unable to make the required payments on any debt collateralized by a mortgage on one of our properties or to refinance that debt when it comes due, the mortgage lender could take that property through foreclosure and, as a result, we could lose income and asset value as well as harm our Company reputation.
Subsequent to December 31, 2016, the $92,218,000 nonrecourse mortgage encumbering Boulevard Mall matured and has been transferred to a Special Servicer who has subsequently delivered a Default Notice to the Borrower. We are in the process of working with the Special Servicer to determine alternatives for this property, although there is no assurance that we will be successful in addressing the mortgage. If we are unable to successfully address this mortgage, the lender could commence foreclosure proceedings and we could lose the asset.
Our Corporate Debt Covenants Could Adversely Affect Our Financial Condition
We have guaranteed our Operating Partnership’s obligations under the $600,000,000 Credit Agreement (the “Credit Facility”) and $335,000,000 Term Loan Credit Agreement (the “Term Loan Facility”). The Credit Facility and Term Loan Facility have restrictive covenants, including a prohibition on certain types of disposition, mergers, consolidations, and limitations on lines of business we are allowed to conduct. Additionally, the Credit Facility and Term Loan Loan Facility contain financial covenants, including the maintenance of a maximum total leverage ratio, maximum secured and unsecured leverage ratios, maximum secured recourse leverage ratio, a minimum fixed charge coverage ratio, and a minimum unencumbered interest coverage ratio (all as specified in the Credit Facility and Term Loan Facility).
The failure to comply with any of our financial or non-financial covenants could result in an event of default and accelerate some or all of our indebtedness, which could have a material adverse effect on our financial condition. Our ability to comply with these covenants will depend upon our future economic performance. These covenants may adversely affect our ability to finance our future operations or capital needs or to engage in other business activities that may be desirable or advantageous to us.
We Are Subject to Risks Associated With Hedging Agreements
We enter into interest rate swap agreements and other interest rate hedging contracts, including caps to mitigate or reduce our exposure to interest rate volatility or to satisfy lender requirements. These agreements expose us to additional risks, including a risk the counterparties will not perform. Moreover, the hedging agreement may not qualify for hedge accounting or our hedging activities may not have the desired beneficial impact on our results of operations. Should a hedging agreement prematurely terminate, there could be significant costs and cash requirements involved to fulfill our initial obligation under the hedging agreement.
When a hedging agreement is required under the terms of a mortgage loan, it is often a condition the hedge counterparty agree to certain conditions which include, but are not limited to, maintaining a specified credit rating. With the volatility in the financial markets and reporting requirements recently adopted by governmental agencies, there is a reduced pool of eligible counterparties that can meet or are willing to agree to the required conditions, which has resulted in an increased cost for hedging agreements. This could make it difficult to enter into hedging agreements in the future. Additionally, if the counterparty failed to satisfy any of the required conditions and we were unable to renegotiate the required conditions with the lender or find an alternative counterparty for such hedging agreements, we could be in default under the loan and the lender could take that property through foreclosure.
Our bonds that are structured in a total rate of return swap arrangement (“TROR”) have maturities reflected in the year the bond matures as opposed to the TROR maturity date, which is likely to be earlier. Throughout the life of the TROR, if the property is not performing at designated levels or due to changes in market conditions, the property may be obligated to make collateral deposits with the counterparty. At expiration or termination of the TROR arrangement, the property must pay or is entitled to the difference, if any, between the fair market value of the bond and par. If the property does not post collateral or make the counterparty whole at expiration, the counterparty could foreclose on the property.

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Any Rise in Interest Rates Will Increase Our Current and Future Interest Costs
Including the effect of the protection provided by the interest rate swaps, caps and long-term contracts in place as of December 31, 2016, a 100 basis point increase in taxable interest rates (including properties accounted for under the equity method, corporate debt and the effect of interest rate floors) would increase the annual pre-tax interest cost for the next 12 months of our current outstanding variable-rate debt by approximately $8,327,000 at December 31, 2016. Although tax-exempt rates generally move in an amount smaller than corresponding changes in taxable interest rates, a 100 basis point increase in tax-exempt rates (including properties accounted for under the equity method) would increase the annual pre-tax interest cost for the next 12 months of our current outstanding tax-exempt variable-rate debt by approximately $6,423,000 at December 31, 2016. This analysis includes a portion of our taxable and tax-exempt variable-rate debt related to construction loans for which the interest expense is capitalized. For variable rate bonds, during times of market illiquidity, a premium interest rate could be charged on the bonds to successfully market them, which would result in even higher interest rates. A rising interest rate environment would increase the cost of and affect our ability to refinance, secure or issue future borrowings on terms favorable to us, or at all. In addition, rising interest rates may affect our ability to develop, acquire or dispose of real estate at terms favorable to us.
If We Are Unable to Obtain Tax-Exempt Financings, Our Interest Costs Would Rise
We regularly utilize tax-exempt financings and tax increment financings, which generally bear interest at rates below prevailing rates available through conventional taxable financing. Tax-exempt bonds or similar government subsidized financing may not continue to be available to us in the future, either for new development or acquisitions, or for the refinancing of outstanding debt. Our ability to obtain these financings or to refinance outstanding tax-exempt debt on favorable terms could significantly affect our ability to develop or acquire properties and could have a material adverse effect on our results of operations, cash flows and financial position.
Downgrades in Our Credit Rating Could Adversely Affect Our Performance
We are periodically rated by nationally recognized rating agencies. Any downgrades in our credit rating could impact our ability to borrow by increasing borrowing costs as well as limiting our access to capital. In addition, a downgrade could require us to post cash collateral and/or letters of credit to cover our self-insured property and liability insurance deductibles, surety bonds, energy contracts and hedge contracts, which would adversely affect our cash flow and liquidity.
Our Business Will Be Adversely Impacted Should an Uninsured Loss, a Loss in Excess of Insurance Limits or a Delayed or Denied Insurance Claim Occur
We carry comprehensive insurance coverage for general liability, property, flood, wind, earthquake, California earthquake on California commercial properties (but not on California residential properties) and rental loss (and environmental insurance on certain locations) with respect to our properties within insured limits and policy specifications we believe are customary for similar properties. There are, however, specific types of potential losses, including environmental loss, loss from cyber crimes, loss resulting from the actual or alleged negligence of our employees relating to professional liability, or losses of a catastrophic nature, such as losses from wars, terrorism, hurricanes, wind, earthquakes (including California earthquakes) or other natural disasters, that, in our business judgment, cannot be purchased at a commercially viable cost or whereby such losses, if incurred, would exceed the insurance limits procured. In the event of an uninsured loss or a loss in excess of our insurance limits, or a failure by an insurer to meet its obligations under a policy, we could lose both our invested capital in, and anticipated profits from, the affected property and could be exposed to liabilities with respect to that which we thought we had adequate insurance to cover. Any such uninsured loss could materially and adversely affect our results of operations, cash flows and financial position. Under our current policies, which have varying expiration dates, our properties are insured against acts of terrorism, subject to various limits, deductibles and exclusions for acts of war and terrorist acts involving biological, chemical and nuclear damage. Once these policies expire, we may not be able to obtain adequate terrorism coverage at a commercially reasonable cost. In addition, our insurers may not be able to maintain reinsurance sufficient to cover any losses we may incur as a result of terrorist acts. As a result, our insurers’ ability to provide future insurance for any damages we sustain as a result of a terrorist attack may be reduced or eliminated or may not be available at a commercially reasonable cost.
Additionally, most of our current project mortgages require “all-risk”/“special form” property insurance, and we may be unable to continue to obtain such “all risk”/“special form” policies that will satisfy lender requirements. We are self-insured as to the first $500,000 of commercial general liability coverage per occurrence. We may incur losses that exceed this self-insurance.
As a property developer, owner, and manager, we will likely experience property and liability claims and will reasonably seek the coverage of the insurance policies we have procured. There may be instances where there are severe and complex claims that can be prolonged and litigated and insurance recoveries may be delayed, partially delayed or ultimately denied in full. This delay or denial may have an adverse impact on our financial condition.
We also carry several other types of insurance policies that have various terms and limits where it is available at commercially reasonable terms and prices. However, these may not cover all claims, alleged claims, or actual losses that may potentially occur or are made by various parties against us.

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A Downgrade or Financial Failure of Our Insurance Carriers May Have an Adverse Impact on our Financial Condition
The insurance carrier(s) we utilize have satisfactory financial ratings at the time the policies are placed and made effective based on various insurance carrier rating agencies commonly used in the insurance industry. However, these financial ratings may not remain satisfactory or constant throughout the policy period. There is a risk these financial ratings may be downgraded throughout the policy period or the insurance carrier(s) may experience a financial failure. A downgrade or financial failure of our insurance carrier(s) may result in their inability to pay current and future claims. This inability to pay claims may have an adverse impact on our financial condition. In addition, a downgrade or a financial failure of our insurance carrier(s) may cause our insurance renewal or replacement policy costs to increase.
We May Not Receive Some of the Proceeds from the Sale of Our Ownership Interests in Barclays Center and the Nets
On January 29, 2016, we completed the sale of Barclays Center and the Nets to Onexim Sports and Entertainment Holdings USA, Inc. (“Onexim”). Proceeds from the sale were in a combination of cash and notes receivable. The sales price for our equity interest in Barclays Center was $162,600,000 generating net cash proceeds of $60,924,000 and a note receivable of $92,600,000 (the “Arena Note”). The sales price for our equity interest in the Nets was $125,100,000 payable entirely in the form of a note receivable (the “Nets Note”). There is no guarantee that Onexim will be able to repay us the full amount of the Arena Note and/or the Nets Note when they become due and payable. If Onexim defaults on the Arena Note and/or the Nets Note, we may not be able to recover any of the amounts owed to us under such note(s), which would require us to write-off some or all of the Arena Note and/or the Nets Note and could have a material adverse effect on our results of operations and cash flows.
We May Be Adversely Impacted by Environmental Matters
We are subject to various foreign, federal, state and local environmental protection and health and safety laws and regulations governing, among other things: the generation, storage, handling, use and transportation of hazardous materials; the emission and discharge of hazardous materials into the ground, air or water; and the health and safety of our employees. In some instances, federal, state and local laws require abatement or removal of specific hazardous materials such as asbestos-containing materials or lead-based paint, in the event of demolition, renovations, remodeling, damage or decay. Laws and regulations also impose specific worker protection and notification requirements and govern emissions of and exposure to hazardous or toxic substances, such as asbestos fibers in the air. We incur costs to comply with such laws and regulations, but we may not have been or may not be at all times in complete compliance with such laws and regulations.
Under certain environmental laws, an owner or operator of real property may become liable for the costs of the investigation, removal and remediation of hazardous or toxic substances at that property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of the hazardous or toxic substances. Certain contamination is difficult to remediate fully and can lead to more costly design specifications, such as a requirement to install vapor barrier systems, or a limitation on the use of the property and could preclude development of a site at all. The presence of hazardous substances on a property could also result in personal injury, contribution or other claims by private parties. In addition, persons who arrange for the disposal or treatment of hazardous or toxic wastes may also be liable for the costs of the investigation, removal and remediation of those wastes at the disposal or treatment facility, regardless of whether that facility is owned or operated by that person.
We have invested, and will continue to invest in, properties that have been used for or are near properties that have had industrial purposes in the past. As a result, our properties are or may become contaminated with hazardous or toxic substances. We will incur costs to investigate and possibly to remediate those conditions and some contamination may remain in or under the properties even after such remediation. While we investigate these sites and work with all relevant governmental authorities to meet their standards given our intended use of the property, there may be new information identified in the future indicating there are additional unaddressed environmental impacts, there could be technical developments that will require new or different remedies to be undertaken in the future, and the regulatory standards imposed by governmental authorities could change in the future.
As a result of the above, the value of our properties could decrease, our income from developed properties could decrease, our projects could be delayed, we could become obligated to third parties pursuant to indemnification agreements or guarantees, our expense to remediate or maintain the properties could increase, and our ability to successfully sell, rent or finance our properties could be adversely affected by environmental matters in a manner that could have a material adverse effect on our financial position, cash flows or results of operation. We may incur losses related to environmental matters, including losses that may materially exceed any available insurance.

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Our Directors and Executive Officers May Have Interests in Competing Properties, and We Do Not Have Non-Compete Agreements with Certain of Our Directors and Executive Officers
Under our current policy, no director or executive officer, including any member of the Ratner, Miller and Shafran families, is allowed to invest in a competing real estate opportunity without first obtaining the approval of the Audit Committee of our Board of Directors. We do not have non-compete agreements with any director or executive officer, other than Ronald Ratner, Bruce Ratner, David LaRue and Robert O’Brien. Upon leaving Forest City, any other director, officer or employee could compete with us. Notwithstanding our policy, we permit our principal shareholders who are officers and employees to develop, expand, operate or sell, independent of our business, certain commercial, industrial and residential properties they owned prior to the implementation of our policy. As a result of their ownership of these properties, a conflict of interest may arise between them and Forest City, which may not be resolved in our favor. The conflict may involve the development or expansion of properties that may compete with our properties and the solicitation of tenants to lease these properties.
Our Success Depends on Recruiting and Retaining Key Personnel With Extensive Experience Dealing With the Commercial Real Estate Industry, and The Loss of These Key Personnel Could Threaten Our Ability to Operate Our Business Successfully
Our success depends, to a significant extent, on the continued services of our senior management team. Although our senior management team has limited experience operating a corporation that qualifies as a REIT, each member of our senior management team has extensive experience in the commercial real estate industry based on their time managing our predecessor, Forest City Enterprises, Inc., and other companies devoted to real estate investment, management and development. Each member of our senior management team has developed key relationships through past business dealings with numerous members of the commercial real estate community, including current and prospective tenants, lenders, investors, industry groups, real estate brokers, developers and managers. If we lost key members of the senior management team, our relationships with these groups could suffer.
We are Subject to Recapture Risks Associated with Sale of Tax Credits
As part of our financing strategy, we have financed several real estate projects through limited partnerships with investment partners. The investment partner, typically a large, sophisticated institution or corporate investor, invests cash in exchange for a limited partnership interest and special allocations of expenses and the majority of tax losses and credits associated with the project. These partnerships typically require us to indemnify, on an after-tax or “grossed up” basis, the investment partner against the failure to receive or the loss of allocated tax credits and tax losses.
If all necessary requirements for qualification for such tax credits are not met, our investment partners may not be able to receive expense allocations associated with these properties and we may be required to indemnify our investment partners on an after-tax basis for these amounts. Indemnification payments (if required) could have a material adverse effect on our results of operations and cash flows.
A Downturn in the Housing Market May Adversely Affect Our Results of Operations and Cash Flows
At Stapleton, our remaining active land project, we depend on homebuilders and buyers to continue buying our land inventory. Our residential land sales at Stapleton have remained steady and historically have not been as negatively impacted by past recessions as other residential land projects throughout the United States. However, if the national housing market experiences a downturn, it may eventually have a more pronounced negative impact on Stapleton. Our ability to sustain our historical sales levels of land at Stapleton depends in part on the continued strength of the local housing market. Our failure to successfully sell our land inventory on favorable terms would adversely affect our results of operations and cash flows and could result in a write-down in the value of our land due to impairment.
In addition, we have made certain interest-bearing advances to the Park Creek Metropolitan District (the “District”) for in-tract infrastructure at Stapleton. The District is obligated to repay the advances pursuant to various Reimbursement Agreements. The District intends to repay the advances from the future issuances of bonds, supported by the real estate tax base at Stapleton. If the future real estate tax base at Stapleton is not adequate to support the projected amount of future issuances of bonds to repay the advances, we may have to write-off some or all of the advances, which could be significant.
Failure to Continue to Maintain Effective Internal Controls in Accordance with Section 404 of the Sarbanes-Oxley Act of 2002 Could Have a Material Adverse Effect on Our Ability to Ensure Timely and Reliable Financial Reporting
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) requires our management to evaluate the effectiveness of, and our independent registered public accounting firm to attest to, our internal control over financial reporting. The process of documenting, testing and evaluating our internal control over financial reporting is complex and time consuming. Due to this complexity and the time-consuming nature of the process, and because currently unforeseen events or circumstances beyond our control could arise, we may not be able to continue to comply fully in subsequent fiscal periods with Section 404 in our Annual Report on Form 10-K. We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404, which could adversely affect public confidence in our ability to record, process, summarize and report financial data to ensure timely and reliable external financial reporting.

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Compliance or Failure to Comply with the Americans with Disabilities Act and Other Similar Laws Could Result in Substantial Costs
The Americans with Disabilities Act generally requires that public buildings, including office buildings, be made accessible to disabled persons. In the event that we are not in compliance with the Americans with Disabilities Act, the federal government could fine us or private parties could be awarded damages against us. If we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affect our results of operations and cash flows.
We may also incur significant costs complying with other regulations. Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. In addition, existing requirements may change and compliance with future requirements may require significant unanticipated expenditures that could adversely affect our cash flows and results of operations.
Legislative and Regulatory Actions Taken Now or in the Future Could Adversely Affect Our Business
The 2007-2009 recession resulted in governmental regulatory agencies and political bodies placing increased focus and scrutiny on the financial services industry. This increased scrutiny resulted in unprecedented programs and actions targeted at restoring stability in the financial markets and in creating a stronger regulatory framework to reduce the risk and severity of future crises.
In July 2010, the U.S. Congress enacted the Dodd Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). There are significant corporate governance and executive compensation-related requirements that have been, and will in the future be, imposed on publicly-traded companies under the Dodd-Frank Act. Several of these provisions require the SEC to adopt additional rules and regulations in these areas. For example, the Dodd-Frank Act requires publicly-traded companies to give shareholders a non-binding vote on executive compensation and so-called “golden parachute” payments, heightens certain independence standards for compensation advisers and authorizes the SEC to promulgate rules that would allow shareholders to nominate their own candidates for board seats using a registrant’s proxy materials. Our efforts to comply with these requirements have resulted in, and are likely to continue to result in, an increase in expenses and a diversion of management’s time from other business activities. In addition, if shareholders do not vote to approve our executive compensation practices and/or our equity plan amendments, these actions may interfere with our ability to attract and retain key personnel who are essential to our future success. Given the uncertainty associated with both the results of the existing Dodd-Frank Act requirements and the manner in which additional provisions of the Dodd-Frank Act will be implemented by various regulatory agencies and through regulations, the full extent of the impact of such requirements on our operations is unclear. Accordingly, the changes resulting from the Dodd-Frank Act may impact the profitability of business activities, require changes to certain business practices, or otherwise adversely affect our financial condition, results of operations, cash flows, the quoted trading price of our securities and our ability to satisfy our debt service obligations and to pay dividends and distributions to our shareholders.
In addition, U.S. Government, Federal Reserve, U.S. Treasury and other governmental and regulatory bodies may take other actions to address the financial crisis. Additionally, the new U.S. presidential administration and Congress may take actions, whether through legislation, regulation, or administrative action, that would amend or repeal some or all of Dodd-Frank and/or other financial services legislation enacted in response to the financial crisis. While we cannot predict whether or when such actions may occur, such actions may have an adverse impact on our business, results of operations and financial condition.
Changes in Federal, State or Local Tax Laws and International Trade Agreements Could Adversely Affect Our Business
From time to time, changes in federal, state and local tax laws or regulations are enacted. These changes could impact the rates paid for items such as income, real estate, sales or other taxes. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and amounts of such changes. If such changes occur, we may be required to pay additional taxes on our assets, equity or income. Such changes could also impact our tenants as well as individual customers of those tenants, which could impact our ability to lease space in our properties. This in turn could materially and adversely affect our results of operations and cash flows.
New laws or regulations, or changes in existing laws or regulations, or the manner of their interpretation or enforcement, could increase our cost of doing business and restrict our ability to operate our business or execute our strategies. In particular, there may be significant changes in U.S. laws and regulations and existing international trade agreements by the new U.S. presidential administration that could affect a wide variety of industries and businesses, including those businesses we own and operate. It remains unclear what the new U.S. presidential administration will do, if anything, with respect to existing laws, regulations, or trade agreements. If the new U.S. presidential administration materially modifies U.S. laws and regulations and international trade agreements, our business, financial condition, and results of operations could be affected.
Changes in Market Conditions Could Negatively Impact the Market Price of Our Publicly Traded Securities
At times, the stock market can experience volatile conditions resulting in substantial price and volume fluctuations often unrelated or disproportionate to the financial performance of companies. These broad market and industry fluctuations may adversely affect the price of our common stock regardless of our operating performance. A decline in the price of our common stock could have an adverse effect on our business by reducing our ability to generate capital through sales of our common stock, subjecting us to further credit rating downgrades and, in the case of a substantial decline, increasing the risk of not satisfying the New York Stock Exchange’s continued listing standards.

23


Inflation May Adversely Affect our Financial Condition and Results of Operations
Increases in inflation at a rate higher than increases in rental income could have a negative impact on our operating margins and cash flows. In some circumstances, increases in operating expenses for commercial properties can be passed on to our tenants. However, some of our commercial leases contain clauses that may prevent us from easily passing on increases of operating expenses to the respective tenants.
Cybersecurity Risks and Cyber Incidents Could Adversely Affect Our Business and Disrupt Operations
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information. We face cyber incidents and security breaches through malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization and other significant disruptions of our IT networks and related systems. The risk of a cybersecurity breach or disruption, particularly through a cyber incident, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our tenants. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
While we maintain some of our own critical information technology systems, we also depend on third parties to provide important information technology services relating to several key business functions, such as payroll, human resources, electronic communications and certain finance functions. Although we along with such third parties employ a number of measures to prevent, detect and mitigate these threats, including password protection, firewalls, backup servers, threat monitoring and periodic penetration testing, there is no guarantee such efforts will be successful in preventing a data breach. Furthermore, the security measures employed by third-party service providers may prove to be ineffective at preventing breaches of their systems.
Our three primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants, and private data exposure. Our financial results may be negatively impacted by such an incident or resulting negative media attention.
A cyber incident could:
Disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our tenants;
Result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines;
Result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;
Result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;
Result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space;
Require significant management attention and resources to remedy and damages that result;
Subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or
Damage our reputation among our tenants, investors and associates.
Moreover, cyber incidents perpetrated against our tenants, including unauthorized access to customers’ credit card data and other confidential information, could diminish consumer confidence and consumer spending and negatively impact our business.
Shareholder Activism Efforts Could Cause a Material Disruption to Our Business
We recently received communications and inquiries from investors regarding the governance and strategic direction of our Company, including matters related to the reclassification of our Common Stock. While we have agreed to submit a Common Stock reclassification proposal at our 2017 Annual Meeting of Shareholders, other investors could take steps to involve themselves in the governance and strategic direction of our Company. Such investor activism could result in uncertainty of the direction of the Company, substantial costs and diversion of management’s attention and resources, which could harm our business, hinder execution of our business strategy and initiatives, create adverse volatility in the market price of our common stock, and make it difficult to attract and retain qualified personnel and business partners.

24


RISKS RELATED TO OUR ORGANIZATIONAL STRUCTURE
The Ratner, Miller and Shafran Families Own a Controlling Interest in the Company, and Those Interests May Differ from Other Shareholders
Our authorized common stock consists of Class A common stock and Class B common stock. The economic rights of each class of common stock are identical, but the voting rights differ. The Class A common stock, voting as a separate class, is entitled to elect 25% of the members of our Board of Directors, while the Class B common stock, voting as a separate class, is entitled to elect the remaining members of our Board of Directors. On all other matters, the Class A common stock and Class B common stock vote together as a single class, with each share of our Class A common stock entitled to one vote per share and each share of Class B common stock entitled to ten votes per share. At January 31, 2017, members of the Ratner, Miller and Shafran families, which include members of our current board of directors and executive officers, owned 92.4% of the Class B common stock. RMS, Limited Partnership (“RMS LP”), which owned approximately 68.6% of the Class B common stock, is a limited partnership, comprised of interests of these families, with seven individual general partners, currently consisting of:
Samuel H. Miller, Co-Chairman Emeritus of our Board of Directors;
Charles A. Ratner;
Ronald A. Ratner, Executive Vice President - Development and a Director;
Brian J. Ratner, Executive Vice President and a Director;
Deborah Ratner Salzberg, Executive Vice President and a Director;
Joan K. Shafran; and
Abraham Miller.
Charles A. Ratner, James A. Ratner, Chairman of our Board of Directors, and Ronald A. Ratner are brothers. Albert B. Ratner, Co‑Chairman Emeritus of our Board of Directors, is the father of Brian J. Ratner and Deborah Ratner Salzberg and is first cousin to Charles A. Ratner, James A. Ratner, Ronald A. Ratner, Joan K. Shafran and Bruce C. Ratner, Executive Vice President. Samuel H. Miller was married to Ruth Ratner Miller (now deceased), a sister of Albert B. Ratner, and is the father of Abraham Miller. General partners holding 60% of the total voting power of RMS LP determine how to vote the Class B common stock held by RMS LP. No person may transfer his or her interest in the Class B common stock held by RMS LP without complying with various rights of first refusal.
In addition, at January 31, 2017, members of these families collectively owned 3.7% of the Class A common stock. As a result of their ownership in Forest City, these family members and RMS LP have the ability to elect a majority of our Board of Directors and to control our management and policies. Generally, they have the power to control 42% of the votes and, as a result, have a significant influence on the outcome of any corporate transaction or other matters submitted to our shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets and may also prevent or cause a change in control of Forest City.
Even if these families or RMS LP reduce their level of ownership of Class B common stock below the level necessary to maintain a majority of the voting power, specific provisions of Maryland law and our charter and bylaws may have the effect of discouraging a third party from making a proposal to acquire us or delaying or preventing a change in control or management of Forest City without the approval of these families or RMS LP.
Completion of our previously announced reclassification transaction would effectuate a material change in the way shareholders elect members of the Board of Directors. Our failure to complete the reclassification transaction could adversely affect the market price of the Class A Common Stock and/or the Class B Common Stock.
As previously disclosed, at the 2017 annual meeting of our shareholders, we plan to submit a proposal to shareholders to approve a reclassification, by means of an amendment and restatement of our charter, whereby each issued and outstanding share of Class B Common Stock will be reclassified and exchanged into 1.31 shares of Class A Common Stock (the “Reclassification”), which proposal, if submitted, will be voted upon by holders of Class A Common Stock and Class B Common Stock separately as a class. If effectuated, the Reclassification will change the way in which our Board of Directors is elected because, from and after the Reclassification, all of our Directors will be elected by holders of Class A Common Stock.
We cannot be certain that the Reclassification will be completed. If the Reclassification is not completed, our businesses and financial results may be adversely affected, including as follows:
we may experience negative reactions from the financial markets, including negative impacts on the market price of shares of Class A Common Stock and/or Class B Common Stock; and
we will have expended substantial time and resources that could otherwise have been spent on our existing businesses and the pursuit of other opportunities that could have been beneficial to us.

25


We Operate Through an Operating Partnership and, as Such, Rely on Funds Received From Our Operating Partnership to Pay Liabilities, and the Interests of Our Shareholders are Structurally Subordinated to All Liabilities and Obligations of Our Operating Partnership and Its Subsidiaries
We hold substantially all of our assets, and conduct substantially all of our business, through Forest City Enterprises, L.P., a Delaware limited partnership (the “Operating Partnership”). Consequently, our ability to service our debt obligations and ability to pay dividends on shares of our common stock is strictly dependent upon the earnings and cash flows of the Operating Partnership, the ability of its direct and indirect subsidiaries to first satisfy their obligations to creditors and the ability of the Operating Partnership to make intercompany distributions to us. Under the Delaware Revised Uniform Limited Partnership Act, the Operating Partnership will be prohibited from making any distribution to us to the extent that at the time of the distribution, after giving effect to the distribution, the total liabilities of the Operating Partnership (other than some non-recourse liabilities and certain liabilities to the partners in the Operating Partnership) would exceed the fair value of the Operating Partnership’s assets.
In addition, because we are a holding company, the equity interests of our shareholders will be structurally subordinated to all existing and future liabilities and obligations of the Operating Partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, claims of our shareholders will be satisfied only after all of our and the Operating Partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.
If the Operating Partnership Fails to Qualify As a Partnership For Federal Income Tax Purposes, We Would Not Qualify As a REIT and Would Suffer Other Adverse Consequences
We believe that the Operating Partnership will be treated as a partnership for U.S. federal income tax purposes. As a partnership, the Operating Partnership will not be subject to entity-level federal income tax on its income. Instead, each of its partners, including the Company, will be required to pay tax on its allocable share of the Operating Partnership’s income. There can be no assurance, however, that the IRS will not challenge the status of the Operating Partnership (or any other limited partnership subsidiary of the REIT) as a partnership for federal income tax purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating the Operating Partnership (or any such other limited partnership subsidiary of the Company) as an entity taxable as a C corporation for U.S. federal income tax purposes, we would be unable to satisfy the gross income tests and certain of the asset tests that must be met in order to qualify as a REIT and, accordingly, we would likely be prevented from so qualifying. Also, the failure of the Operating Partnership or any limited partnership subsidiary of the Company to qualify as a partnership for U.S. federal income tax purposes could cause the partnership to become subject to U.S. federal and state corporate income tax, which would reduce significantly the amount of cash available for debt service and for distribution to the partners in such partnership, including the Company.
Our UPREIT Structure Could Inhibit Us From Selling Properties or Retiring Debt That Would Otherwise Be in Our Best Interest
To ensure that the sellers of properties are able to contribute properties to the Operating Partnership on a tax-deferred basis, contributors of such properties may require us to agree to maintain a certain level of minimum debt at the Operating Partnership level and refrain from selling such properties for a period of time. Our UPREIT structure, therefore, could inhibit us from selling properties or retiring debt that would otherwise be in our best interest.
Our Interest May be Diluted Upon the Issuance of Additional Units of the Operating Partnership
Upon the issuance of partnership units in the Operating Partnership to partners other than the Company and FCILP, LLC, a wholly-owned direct subsidiary of the Company organized under the laws of the state of Delaware (“FCILP”), the percentage interest of the Company and FCILP (and therefore, the indirect interest of our shareholders) in assets of the Operating Partnership would be reduced. This reduction in the indirect interest of initial shareholders would remain if partnership units were redeemed for cash (provided such cash represented the proceeds of a new issuance of shares of our common stock) or for shares of our Class A common stock, even though our interest in the Operating Partnership would increase.
Conflicts of Interest May Arise Between the Interests of Our Shareholders and the Interests of Holders of Partnership Units
As the sole general partner of the Operating Partnership, we owe a duty of good faith and fair dealing to the limited partners in the Operating Partnership. In most cases, we expect that the interests of such limited partners will coincide with the interests of us and our shareholders because (a) we own a substantial amount of the limited partnership interests in the Operating Partnership and (b) the limited partners generally receive shares of our Class A common stock or cash proceeds tied to the share price of our Class A common stock upon redemption of their partnership units. Under certain circumstances, however, the rights and interests of the limited partners might conflict with those of our shareholders. The agreement of limited partnership of the Operating Partnership provides that in the event we determine, in our sole and absolute discretion, that any such conflict cannot be resolved in a manner not adverse to either our shareholders or the Operating Partnership’s limited partners, such conflict will be resolved in favor of our shareholders.

26


Our UPREIT Structure May Increase the Costs of Managing the Company and the Operational Complexity and Risk of Our Corporate Structure
The conversion of our predecessor, Forest City Enterprises, Inc., to the Operating Partnership may result in us incurring more costs than Forest City Enterprises, Inc. historically incurred, including professional expenses related to general and administrative, accounting, tax, consulting, audit and legal costs. There can be no assurance that our business plan and future expected growth will make up for any increase in general and administrative expenses. Further, we are structured as an UPREIT and as such, our operations are more complex than those of Forest City Enterprises, Inc. prior to the REIT conversion; this complexity may introduce other operational risks that previously did not exist and cannot reasonably be anticipated, and such risks may have a material adverse impact on our business, operations and/or financial condition.
Issuance of Securities by Us With Claims That Are Senior to Those of Holders of Shares of Our Common Stock May Limit or Prevent Us From Paying Dividends on Our Common Stock
Shares of our common stock are equity interests. As such, shares of our common stock will rank junior to any indebtedness and other non-equity claims with respect to assets available to satisfy claims on us. We may issue senior securities, which may expose us to risks associated with leverage, including increased risk of loss. If we issue preferred securities, which will rank senior to shares of our common stock in our capital structure, the holders of such preferred securities may have separate voting rights and other rights, preferences or privileges more favorable than the rights, preferences and privileges incident to holding shares of our Class A common stock and/or shares of our Class B common stock, and the issuance of such preferred securities could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for our shareholders or otherwise be in our best interest.
In addition, partnership interests or other securities issued by the Operating Partnership may have a senior priority on cash flow or liquidation proceeds generated by the Operating Partnership.
Unlike indebtedness, for which principal and interest customarily are payable on specified due dates, in the case of shares of our common stock, dividends are payable only when, as and if authorized by our Board of Directors and declared by us and depend on, among other things, our results of operations, financial condition, debt service requirements, distributions to be received from the Operating Partnership, other cash needs and any other factors our Board of Directors may deem relevant or as required by applicable law. We may incur substantial amounts of additional debt and other obligations that will rank senior to shares of our common stock.
Certain Provisions of Our Charter and Bylaws and Maryland Law May Inhibit a Change in Control That Shareholders Consider Favorable and Could Also Limit the Market Price of Our Common Stock
Certain provisions in our charter and bylaws and Maryland law may impede, or prevent, a third party from acquiring control of us without the approval of our Board of Directors. These provisions:
impose restrictions on ownership and transfer of our stock (such provisions being intended to, among other purposes, facilitate our compliance with certain Code requirements relating to ownership of our stock);
prevent our shareholders from amending our bylaws;
limit who may call a special meeting of shareholders;
establish advance notice and informational requirements and time limitations on any director nomination or proposal that a shareholder wishes to make at a meeting of shareholders;
do not permit cumulative voting in the election of our Board of Directors, which would otherwise permit less than a majority of shareholders to elect one or more directors; and
authorize our Board of Directors to, without shareholder approval, amend our charter to increase or decrease the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares.
Certain Provisions of Maryland Law Could Impede Changes in Control
Certain provisions of the Maryland General Corporation Law (“MGCL”) may impede a third party from making a proposal to acquire us or inhibit a change of control under circumstances that otherwise could be in the best interest of holders of shares of our common stock, including:

27


“business combination” provisions that, subject to certain exceptions and limitations, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding voting stock) or an affiliate thereof for five years after the most recent date on which the shareholder becomes an interested stockholder, and thereafter impose two supermajority shareholder voting requirements on these combinations;
“control share” provisions that provide that, subject to certain exceptions, holders of “control shares” of the Company (defined as voting shares which, when aggregated with other shares controlled by the shareholder, entitle the holder to exercise voting power in the election of directors within one of three increasing ranges) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares,” subject to certain exceptions) have no voting rights with respect to the control shares except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares; and
additionally, Title 3, Subtitle 8 of the MGCL permits our board of directors, without shareholder approval and regardless of what is currently provided in our charter and bylaws, to implement certain corporate governance provisions.
As permitted by the MGCL, our Board of Directors has by resolution exempted from the Maryland Business Combination Act all business combinations between us and any other person, provided that each such business combination is first approved by our Board of Directors (including a majority of directors who are not affiliates or associates of such person). Our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of shares of our stock. There can be no assurance that these exemptions or resolutions will not be amended or eliminated at any time in the future.
Tax Protection Agreements Could Limit Our Ability to Sell or Otherwise Dispose of Certain Properties and May Require the Operating Partnership to Maintain Certain Debt Levels That Otherwise Would Not Be Required to Operate Our Business
We may from time to time enter into tax protection agreements with certain third parties, including joint venture partners (a “Tax Protected Party”). These tax protection agreements may provide generally that prior to a specified date (the “Tax Protected Period”), if we (1) sell, exchange, transfer, convey or otherwise dispose of the protected property (the “Tax Protected Property”) in a taxable transaction, (2) cause or permit any transaction that results in the disposition by the Tax Protected Party of all or any portion of his/her interest in the Operating Partnership in a taxable transaction, or (3) fail to maintain indebtedness that would be allocable to the Tax Protected Parties for tax purposes or, alternatively, fail to offer the Tax Protected Parties who own units in the Operating Partnership the opportunity to guarantee specific types of the Operating Partnership’s indebtedness in order to enable them to continue to defer certain tax liabilities, then we will indemnify the Tax Protected Parties who own units in the Operating Partnership against certain resulting tax liabilities. Our indemnification obligations may generally decline ratably over the Tax Protected Period. Therefore, it may be economically prohibitive for us to sell, exchange, transfer, convey or otherwise dispose of one or more of the Tax Protected Properties during the Tax Protected Period because of these indemnity obligations. Moreover, these obligations may require us to maintain more or different indebtedness than we would otherwise require for our business. As a result, these tax protection agreements may, during their respective terms, restrict our ability to take actions or make decisions that otherwise would be in our best interest.

Item 1B. Unresolved Staff Comments
None.

Item 2. Properties
Our Corporate headquarters are located in Cleveland, Ohio. Our core markets include Boston, Chicago, Dallas, Denver, Los Angeles, Philadelphia, and the greater metropolitan areas of New York City, San Francisco and Washington D.C.
The following presents information as of December 31, 2016 on our portfolio of real estate assets by operating segment including 2016 property openings, recently opened properties/redevelopment and projects under construction included in our Development segment, by product type, broken out by consolidated and unconsolidated assets.

28


Projects Under Construction
December 31, 2016

In addition to the growth in our operating portfolio through improved NOI at our existing properties, we have used development as a primary source of growth in our real estate operations. The following tables summarize projects under construction as of December 31, 2016 and properties we have opened during the year ended December 31, 2016.
 
 
Anticipated
 
 
 
 
 
 
 
 
 
 
 
 
Opening
Legal
Consolidated (C)
Cost at
Cost Incurred to Date (b)
No. of
 
 
 
Lease %
 
Location
Date
Ownership %
Unconsolidated (U)
Completion (a)
Consolidated
Unconsolidated
Units
 
GLA
 
(c)
 
 
 
 
 
(in millions)
 
 
 
 
 
Projects Under Construction
 
 
 
 
 
 
 
 
 
 
 
Apartments:
 
 
 
 
 
 
 
 
 
 
 
 
Arizona State Retirement System Joint Venture:
 
 
 
 
 
 
 
 
 
 
 
Eliot on 4th
Washington, D.C.
Q1-17
25
%
C
$
143.7

$
103.2

$
0.0

365

 
5,000

 
 
Broadway and Hill
Los Angeles, CA
Q3-17
25
%
C
140.4

109.7

0.0

391

 
15,000

 
 
West Village II
Dallas, TX
Q1-18/Q2-18
25
%
C
122.1

38.7

0.0

389

 
4,250

 
 
 
 
 
 
 
$
406.2

$
251.6

$
0.0

1,145

 
24,250

 
 
Greenland Joint Venture (d):
 
 
 
 
 
 
 
 
 
 
 
535 Carlton (e)
Brooklyn, NY
Q1-17/Q4-17
30
%
U
$
168.1

$
0.0

$
156.4

298

 

 
 
550 Vanderbilt (condominiums)
Brooklyn, NY
Q1-17/Q3-17
30
%
U
362.7

0.0

274.3

278

 
7,000

 
 
38 Sixth Ave
Brooklyn, NY
Q2-17/Q2-18
30
%
U
202.7

0.0

145.7

303

 
28,000

 
 
Pacific Park - Parking (f)
Brooklyn, NY
Q1-17/Q1-18
30
%
U
46.2

0.0

34.8


 

 
 
 
 
 
 
 
$
779.7

$
0.0

$
611.2

879

 
35,000

 
 
Town Center Wrap
Denver, CO
Q2-17/Q4-17
95
%
C
93.1

40.1

0.0

399

 
7,000

 
 
Hudson Exchange
Jersey City, NJ
Q3-17/Q1-18
50
%
U
214.3

0.0

136.6

421

 
9,000

 
 
Ballston Quarter Residential
Arlington, VA
Q3-18/Q1-19
51
%
U
178.3

0.0

25.3

406

 
53,000

 
 
 
 
 
 
 
$
1,671.6

$
291.7

$
773.1

3,250

 
128,250

 
 
Office:
 
 
 
 
 
 
 
 
 
 
 
 
The Bridge at Cornell Tech
Roosevelt Island, NY
Q2-17
100
%
C
$
164.1

$
110.5

$
0.0


 
235,000

 
43
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail:
 
 
 
 
 
 
 
 
 
 
 
 
The Yards - District Winery
Washington, D.C.
Q4-17
100
%
C
$
10.6

$
6.5

$
0.0


 
16,150

 
100
%
Ballston Quarter Redevelopment
Arlington, VA
Q3-18
51
%
U
83.1

0.0

27.8


 
307,000

 
39
%
 
 
 
 
 
$
93.7

$
6.5

$
27.8


 
323,150

 
 
Total Projects Under Construction 
$
1,929.4

$
408.7

$
800.9

 
 
 
 
 

See footnotes on the following page.

29


Property Openings
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
Location
Date
Opened
Legal Ownership %
Consolidated (C)
Unconsolidated (U)
Cost
at Completion (a)
No. of Units
 
GLA
Lease % (c)
 
 
 
 
 
(in millions)
 
 
 
 
 
2016 Property Openings
 
 
 
 
 
 
 
 
 
 
Apartments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
461 Dean Street (g)
Brooklyn, NY
Q3-16/Q1-17
100
%
C
$
195.6

363

 
4,000

 
19
%
The Bixby (g)
Washington, D.C.
Q3-16/Q1-17
25
%
U
59.2

195

 

 
56
%
Kapolei Lofts (h)
Kapolei, HI
Q3-15/Q3-16
100
%
C
149.5

499

 

 
55
%
Arizona State Retirement System Joint Venture:
 
 
 
 
 
 
 
 
 
 
NorthxNorthwest (g)
Philadelphia, PA
Q4-16/Q1-17
25
%
C
$
115.0

286

 

 
9
%
Blossom Plaza
Los Angeles, CA
Q2-16
25
%
C
100.6

237

 
19,000

 
79
%
The Yards - Arris
Washington, D.C.
Q1-16
25
%
C
143.2

327

 
20,000

 
82
%
 
 
 
 
 
$
358.8

850

 
39,000

 
 
 
 
 
 
 
 
 
 
 
 
 
Aster Town Center North
Denver, CO
Q4-15/Q1-16
90
%
C
23.4

135

 

 
98
%
 
 
 
 
 
$
786.5

2,042

 
43,000

 
 
Office:
 
 
 
 
 
 
 
 
 
 
1812 Ashland Ave
Baltimore, MD
Q2-16
85
%
C
$
61.2


 
164,000

 
75
%
300 Massachusetts Ave
Cambridge, MA
Q1-16
50
%
U
175.6


 
246,000

 
99
%
 
 
 
 
 
$
236.8


 
410,000

 
 
Total Property Openings
$
1,023.3

 
 
 
 
 

(a)
Represents estimated project costs to achieve stabilization. Amounts exclude capitalized interest not allocated to the underlying joint venture.
(b)
Represents total capitalized project costs incurred to date, including all capitalized interest related to the development project.
(c)
Lease commitments as of February 20, 2017.
(d)
During 2016, the Company recorded an impairment of $299.3 million related to our equity method investment in the Greenland Joint Venture, of which $33.3 million was allocated to the under construction assets listed above. Costs at completion and incurred to date have not been adjusted by the impairment as the amounts represent costs at 100%.
(e)
In January 2017, the property received 51 of 298 tenant certificates of occupancy.
(f)
Expected to include 370 parking spaces.
(g)
As of December 31, 2016, these properties are open and have received partial tenant certificates of occupancy, 253 of 363 for 461 Dean Street, 127 of 195 for The Bixby and 162 of 286 for NorthxNorthwest. The remaining tenant certificates of occupancy are expected to be received in Q1-17.
(h)
Kapolei Lofts is an apartment project on land leased to the Company. The Company consolidates the land lessor, who is entitled to a preferred return that currently exceeds anticipated operating cash flow of the project. However, in accordance with the waterfall provisions of the distribution Agreement, the Company expects to share in the net proceeds upon a sale of the project. The payments made under the lease are deemed a preferential return and allocated to noncontrolling interest.



30



Real Estate Operating Portfolio as of December 31, 2016 - Office Segment


Property
Count
Name
Date of
Opening/
Acquisition/
Expansion
Legal Ownership (1)
Company
 Ownership (2)
Consolidated (C)
Unconsolidated (U)
Location
Major Tenants
Gross Leasable
Area
Gross Leasable Area at Company %
 
Life Science
 
 
 
 
 
 
 
 
 
University Park at MIT
 
 
 
 
 
 
 
 
1
26 Landsdowne Street
1987
100
%
100
%
C
Cambridge, MA
Ariad Pharmaceuticals, Inc.
100,000

100,000

2
35 Landsdowne Street
2002
100
%
100
%
C
Cambridge, MA
Millennium Pharmaceuticals
202,000

202,000

3
350 Massachusetts Ave
1998
50
%
50
%
U
Cambridge, MA
Millennium Pharmaceuticals; Star Market
169,000

85,000

4
38 Sidney Street
1989
50
%
50
%
U
Cambridge, MA
Sanofi Pasteur Biologics; Blueprint Medicines Corp.
122,000

61,000

5
40 Landsdowne Street
2003
100
%
100
%
C
Cambridge, MA
Millennium Pharmaceuticals
215,000

215,000

6
45/75 Sidney Street
1999
100
%
100
%
C
Cambridge, MA
Novartis; Takeda Vaccines
277,000

277,000

7
64 Sidney Street
1990
100
%
100
%
C
Cambridge, MA
Vericel Corporation; Novartis
126,000

126,000

8
65 Landsdowne Street
2001
100
%
100
%
C
Cambridge, MA
Partners HealthCare System
122,000

122,000

9
88 Sidney Street
2002
100
%
100
%
C
Cambridge, MA
Agios Pharmaceuticals
146,000

146,000

10
Johns Hopkins - 855 North Wolfe Street
2008
84
%
99
%
C
Baltimore, MD
Johns Hopkins; Brain Institute; Howard Hughes Institute; Lieber Institute
279,000

276,000

11
University of Pennsylvania
2004
100
%
100
%
C
Philadelphia, PA
University of Pennsylvania
122,000

122,000

 
Illinois Science and Technology Park (Sold January 2017)
 
 
 
 
 
 
12
4901 Searle
2006
100
%
100
%
C
Skokie, IL
Northshore University Health System
204,000

204,000

13
4930 Oakton
2006
100
%
100
%
C
Skokie, IL
Leasing in progress
40,000

40,000

14
8025 Lamon
2006
100
%
100
%
C
Skokie, IL
Vetter Development Services; Charles River Laboratories
130,000

130,000

15
8045 Lamon
2007
100
%
100
%
C
Skokie, IL
Astellas; Polyera; Fresenius Kabi USA, LLC; LanzaTech Inc.
159,000

159,000

 
Life Science Total
2,413,000

2,265,000

 
New York
 
 
 
 
 
 
 
 
16
New York Times
2007
100
%
100
%
C
Manhattan, NY
ClearBridge Advisors, LLC, a Legg Mason Co.; Covington & Burling; Osler Hoskin & Harcourt; Seyfarth Shaw
735,000

735,000

17
Harlem Office
2003
100
%
100
%
C
Manhattan, NY
Office of General Services-Temporary Disability & Assistance; State Liquor Authority
147,000

147,000

18
Atlantic Terminal Office
2004
100
%
100
%
C
Brooklyn, NY
Bank of New York; HSBC
400,000

400,000

 
MetroTech Campus
 
 
 
 
 
 
 
 
19
One MetroTech Center
1991
83
%
83
%
C
Brooklyn, NY
JP Morgan Chase; National Grid
903,000

745,000

20
Two MetroTech Center
1990
83
%
83
%
C
Brooklyn, NY
City of New York - Board of Education; City of New York - DoITT; Internal Revenue Service; NYU
517,000

427,000

21
Nine MetroTech Center
1997
85
%
85
%
C
Brooklyn, NY
City of New York - Fire Department
317,000

269,000

22
Eleven MetroTech Center
1995
85
%
85
%
C
Brooklyn, NY
City of New York - DoITT; E-911
216,000

184,000

23
Twelve MetroTech Center
2004
100
%
100
%
C
Brooklyn, NY
National Union Fire Insurance Co.
177,000

177,000

24
Fifteen MetroTech Center
2003
95
%
95
%
C
Brooklyn, NY
Wellpoint, Inc.; City of New York - HRA
649,000

617,000

25
One Pierrepont Plaza
1988
100
%
100
%
C
Brooklyn, NY
Morgan Stanley; Mt. Sinai School of Medicine; G.S.A.
762,000

762,000

 
New York Total
4,823,000

4,463,000


31



Real Estate Operating Portfolio as of December 31, 2016 - Office Segment (continued)


Property
Count
Name
Date of
Opening/
Acquisition/
Expansion
Legal Ownership (1)
Company
 Ownership (2)
Consolidated (C)
Unconsolidated (U)
Location
Major Tenants
Gross Leasable
Area
Gross Leasable Area at Company %
 
Other Office
 
 
 
 
 
 
 
 
26
Ballston Common Office Center
2005
100
%
100
%
C
Arlington, VA
US Coast Guard
176,000

176,000

27
Edgeworth Building
2006
100
%
100
%
C
Richmond, VA
Hirschler Fleischer; Ernst & Young; Rummel, Klepper & Kahl
139,000

139,000

28
Enterprise Place
1998
50
%
50
%
U
Beachwood, OH
University of Phoenix; Advance Payroll; PS Executive Centers; Retina Assoc. of Cleveland
131,000

66,000

29
Glen Forest Office Park
2007
100
%
100
%
C
Richmond, VA
The Brinks Co.; Bon Secours Virginia HealthSource; CAPTECH Ventures
563,000

563,000

30
Fidelity Investments
2008/2009
80
%
80
%
C
Albuquerque, NM
Fidelity Investments
210,000

168,000

31
Post Office Plaza
1990
100
%
100
%
C
Cleveland, OH
Chase Home Finance, LLC; Squire Patton Boggs, LLP
477,000

477,000

32
Signature Square I
1986
50
%
50
%
U
Beachwood, OH
Ciuni & Panichi; Liberty Bank
79,000

40,000

33
Signature Square II
1989
50
%
50
%
U
Beachwood, OH
Pro Ed Communications; Goldberg Co.; Resilience Management
82,000

41,000

 
Station Square
 
 
 
 
 
 
 
 
34
Commerce Court
2007
100
%
100
%
C
Pittsburgh, PA
US Bank; Wesco Distributors; Cardworks Services; Marc USA
375,000

375,000

35
Landmark Building
1994/2002
100
%
100
%
C
Pittsburgh, PA
Innovu; Grand Concourse Restaurant
84,000

84,000

36
Westfield San Francisco Centre - Emporium Office
2006
50
%
50
%
U
San Francisco, CA
San Francisco State University; Cruncyroll Inc.; TRUSTe, Inc.
242,000

121,000

 
Other Office Total
2,558,000

2,250,000

 
Total Office Buildings at December 31, 2016
9,794,000

8,978,000

 
Total Office Buildings at December 31, 2015
10,454,000

9,633,000

 
Consolidated Office Buildings Total
8,969,000

8,564,000

 
Unconsolidated Office Buildings Total
825,000

414,000

 
Total Office Buildings
9,794,000

8,978,000




32



Real Estate Operating Portfolio as of December 31, 2016 - Retail Segment


Property Count
Name
Date of
Opening/
Acquisition/
Expansion
Legal
Ownership 
(1)
Company
Ownership 
(2)
Consolidated (C)
Unconsolidated (U)
Location
Major Tenants/Anchors
Total
Square
Feet
Total
Square
Feet at
Company %
Gross
Leasable
Area
Gross
Leasable
Area at
Company
%
 
Regional Malls
 
 
 
 
 
 
 
 
1
Antelope Valley Mall
1990/1999/
2014/2015
51
%
51
%
U
Palmdale, CA
Macy’s; Sears; JCPenney; Dillard’s; Forever 21; Cinemark Theatre; Dick’s Sporting Goods
1,184,000

604,000

653,000

333,000

2
Boulevard Mall
1996/2000/2015
100
%
100
%
C
Amherst, NY
JCPenney; Macy’s; Sears; Michael’s; Dick’s Sporting Goods
962,000

962,000

385,000

385,000

3
Charleston Town Center
1983
26
%
26
%
U
Charleston, WV
Macy’s; JCPenney; Sears; Brickstreet Insurance
892,000

227,000

347,000

88,000

4
Galleria at Sunset
1996/2002/2015
51
%
51
%
U
Henderson, NV
Dillard’s; Macy’s; JCPenney; Dick’s Sporting Goods; Kohl’s
1,599,000

815,000

444,000

226,000

5
Mall at Robinson
2001
51
%
51
%
U
Pittsburgh, PA
Macy’s; Sears; JCPenney; Dick’s Sporting Goods
900,000

459,000

383,000

195,000

6
Promenade Temecula
1999/2002/2009
51
%
51
%
U
Temecula, CA
JCPenney; Sears; Macy’s; Edwards Cinema
1,279,000

652,000

544,000

277,000

7
Shops at Northfield Stapleton
2005/2006
100
%
100
%
C
Denver, CO
Bass Pro Shops; Target; Harkins Theatre; JCPenney; Macy’s
1,125,000

1,125,000

672,000

672,000

8
Shops at Wiregrass
2008
51
%
51
%
U
Tampa, FL
JCPenney; Dillard’s; Macy’s; Barnes & Noble
747,000

381,000

358,000

183,000

9
Short Pump Town Center
2003/2005
34
%
34
%
U
Richmond, VA
Nordstrom; Macy’s; Dillard’s; Dick’s Sporting Goods
1,341,000

456,000

717,000

244,000

10
South Bay Galleria
1985/2001/2014
51
%
51
%
U
Redondo Beach, CA
Macy’s; Kohl’s; AMC Theatres
960,000

490,000

477,000

243,000

11
Victoria Gardens
2004/2007
51
%
51
%
U
Rancho Cucamonga, CA
Bass Pro Shops; Macy’s; JCPenney; AMC Theatres
1,403,000

716,000

862,000

440,000

12
Westchester’s Ridge Hill
2011/2012
49
%
49
%
U
Yonkers, NY
Lord & Taylor; WESTMED Medical Group; Apple; LA Fitness; Whole Foods; Dick’s Sporting Goods; National Amusements’ Cinema de Lux; Legoland; Lowe’s (2017 opening)
1,271,000

623,000

1,271,000

623,000

13
Westfield San Francisco Centre
2006
50
%
50
%
U
San Francisco, CA
Nordstrom; Bloomingdale’s; Century Theatres
1,184,000

592,000

533,000

267,000

 
Regional Malls Total
14,847,000

8,102,000

7,646,000

4,176,000


33



Real Estate Operating Portfolio as of December 31, 2016 - Retail Segment (continued)

Property Count
Name
Date of
Opening/
Acquisition/
Expansion
Legal
Ownership 
(1)
Company
Ownership 
(2)
Consolidated (C)
Unconsolidated (U)
Location
Major Tenants/Anchors
Total
Square
Feet
Total
Square
Feet at
Company %
Gross
Leasable
Area
Gross
Leasable
Area at
Company
%
 
Specialty Retail Centers
 
 
 
 
 
 
 
 
14
42nd Street
1999
51
%
51
%
U
Manhattan, NY
AMC Theatres; Madame Tussaud’s Wax Museum; Dave & Buster’s; Ripley’s Believe It or Not!; Modell’s
312,000

159,000

312,000

159,000

15
Atlantic Center
1996
51
%
51
%
U
Brooklyn, NY
Stop & Shop; Old Navy; Marshall’s; NYC - Dept of Motor Vehicles; Best Buy; Burlington Coat Factory
394,000

201,000

394,000

201,000

16
Atlantic Terminal Mall
2004
51
%
51
%
U
Brooklyn, NY
Target; Designer Shoe Warehouse; Uniqlo;
     Chuck E. Cheese’s; Guitar Center
371,000

189,000

371,000

189,000

17
Brooklyn Commons
2004
100
%
100
%
C
Brooklyn, NY
Lowe’s
151,000

151,000

151,000

151,000

18
Castle Center
2000
51
%
51
%
U
Bronx, NY
Stop & Shop
63,000

32,000

63,000

32,000

19
Columbia Park Center
1999
38
%
38
%
U
North Bergen, NJ
Shop Rite; Old Navy; LA Fitness; Shopper’s World; Phoenix Theatres; Big Lots
347,000

133,000

347,000

133,000

20
East River Plaza
2009/2010
50
%
50
%
U
Manhattan, NY
Costco; Target; Old Navy; Marshall’s; PetSmart; Bob’s Furniture; Aldi; Burlington Coat Factory
523,000

262,000

523,000

262,000

21
Forest Avenue
2000
51
%
51
%
U
Staten Island, NY
United Artists Theatres
70,000

36,000

70,000

36,000

22
Harlem Center
2002
51
%
51
%
U
Manhattan, NY
Marshall’s; CVS/Pharmacy; Staples; H&M
126,000

64,000

126,000

64,000

23
Queens Place
2001
51
%
51
%
U
Queens, NY
Target; Best Buy; Designer Shoe Warehouse; Macy’s Furniture; Macy’s Backstage
455,000

232,000

222,000

113,000

24
Shops at Atlantic Center Site V
1998
100
%
100
%
C
Brooklyn, NY
Modell’s; PC Richard & Son
47,000

47,000

17,000

17,000

25
Shops at Bruckner Boulevard (Sold January 2017)
1996
51
%
51
%
U
Bronx, NY
Conway; Old Navy; Marshall’s
116,000

59,000

116,000

59,000

26
Shops at Gun Hill Road
1997
51
%
51
%
U
Bronx, NY
Home Depot; Chuck E. Cheese’s
147,000

75,000

147,000

75,000

27
Shops at Northern Boulevard
1997
51
%
51
%
U
Queens, NY
Stop & Shop; Marshall’s; Old Navy; Guitar Center; Raymour & Flanigan Furniture
218,000

111,000

218,000

111,000

28
Shops at Richmond Avenue
1998
51
%
51
%
U
Staten Island, NY
Staples; Dick’s Sporting Goods
76,000

39,000

76,000

39,000

29
Station Square
1994/2002
100
%
100
%
C
Pittsburgh, PA
Hard Rock Café; Buca di Beppo; Texas de Brazil; Pittsburgh Riverhounds
153,000

153,000

153,000

153,000

30
The Heights
2000
51
%
51
%
U
Brooklyn, NY
United Artists Theatres; Barnes & Noble
102,000

52,000

102,000

52,000

 
The Yards
 
 
 
 
 
 
 
 
 
 
31
Boilermaker Shops
2012
100
%
100
%
C
Washington, D.C.
Willie’s Brew & Que; Bluejacket Brewery
40,000

40,000

40,000

40,000

32
Lumber Shed
2013
100
%
100
%
C
Washington, D.C.
FC Washington; Osteria Morini; Agua 301
31,000

31,000

31,000

31,000

 
Specialty Retail Centers Total
3,742,000

2,066,000

3,479,000

1,917,000

 
Total Retail Centers at December 31, 2016
18,589,000

10,168,000

11,125,000

6,093,000

 
Total Retail Centers at December 31, 2015
19,109,000

11,660,000

11,646,000

7,395,000

 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Retail Centers Total
2,509,000

2,509,000

1,449,000

1,449,000

 
Unconsolidated Retail Centers Total
16,080,000

7,659,000

9,676,000

4,644,000

 
Total Retail Centers
18,589,000

10,168,000

11,125,000

6,093,000


34



Real Estate Operating Portfolio as of December 31, 2016 - Apartment Segment

Property Count
Name
Date of
Opening/
Acquisition/
Expansion
Legal
Ownership (1)
Company
Ownership 
(2)
Consolidated (C)
Unconsolidated (U)
Location
Leasable
Units
(3)
Leasable Units
at Company % (3)
 
 
Core Market Apartment Communities
 
 
 
 
 
 
 
 
 
Greater New York City
 
 
 
 
 
 
 
 
1
8 Spruce Street
2011/2012
26
%
26
%
U
Manhattan, NY
899

234

 
2
500 Sterling Place
2015
100
%
100
%
C
Brooklyn, NY
77

77

 
3
DKLB BKLN
2009/2010
51
%
51
%
U
Brooklyn, NY
365

186

 
4
Queenswood
1990
94
%
94
%
C
Corona, NY
296

278

 
5
Worth Street
2003
50
%
50
%
U
Manhattan, NY
331

166

 
 
 
 
 
 
 
 
1,968

941

 
 
Boston
 
 
 
 
 
 
 
 
6
100 (100 Landsdowne)
2005
100
%
100
%
C
Cambridge, MA
203

203

 
7
91 Sidney
2002
100
%
100
%
C
Cambridge, MA
135

135

 
8
KBL
1990
3
%
100
%
C
Cambridge, MA
142

142

 
9
Loft 23
2005