February 2018
Investor
Presentation
Exhibit 99.1
Disclosure Information
INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS
Statements made in this presentation that state the Company’s or management's intentions, hopes, beliefs, expectations
or predictions of the future are forward-looking statements. It is important to note that the Company's future events and
actual results, financial or otherwise, could differ materially from those projected in such forward-looking statements.
Additional information concerning factors that could cause future events or actual results to differ materially from those in
the forward-looking statements are included in the ―Risk Factors‖ section of the Company's SEC filings, including, but not
limited to, the Company's Annual Report and quarterly reports. You are cautioned not to place undue reliance on such
forward-looking statements.
USE OF NON-GAAP MEASURES
We frequently use the non‐GAAP measures at total company ownership of funds from operations (―FFO‖), Operating FFO,
Earnings Before Interest, Taxes, Depreciation and Amortization (―EBITDA‖), Adjusted EBITDA, Net Debt to Adjusted
EBITDA, net operating income (―NOI‖), net asset value (―NAV‖) and comparable NOI to explain operating performance and
assist investors in evaluating our business. For a more thorough discussion of FFO, Operating FFO, EBITDA, Adjusted
EBITDA, Net Debt to Adjusted EBITDA, NOI, Comparable NOI, and NAV, including how we reconcile these measures to
their GAAP counterparts, please refer to the supplemental package for the quarter-ended December 31, 2017, furnished
to the SEC on Form 8‐K on February 8, 2018 and the supplemental package for the year-ended December 31, 2016,
furnished to the SEC on Form 8‐K on February 27, 2017. Copies of our quarterly and annual supplemental packages can
be found on our website at www.forestcity.net, or on the SEC’s website at www.sec.gov.
Please note: We periodically post updated investor presentations on the Investors page of our website at
www.forestcity.net. It is possible the periodic updates may include information deemed to be material. Therefore, we
encourage investors, the media, and other interested parties to review the Investors page of our website at
www.forestcity.net for the most recent investor presentation.
Pictures shown on cover from left to right are Twelve12, the New York Times building and 88 Sidney Street.
Section Page #
Our Company 1
Our Portfolio 6
Near-Term Priorities and Long-Term Strategy 8
Capital Structure Overview 13
Property Margins and Overhead 15
Corporate Responsibility and ESG 19
Appendix: Additional Financial Information 21
Table of Contents
1
2
3
4
5
A
6
• Premier assets in core, high-barrier-to-entry urban markets
• Scale and focus within core markets; top 10 assets comprise ~60% of NOI(1)
• Outsized growth opportunities from existing JV buyouts, in-process
developments and entitled pipeline in attractive core markets
• Identified margin enhancements resulting in ~400-500bps of adjusted EBITDA
margin expansion, compared with yearend 2016
• Effective, seasoned management team averaging ~20 years of experience at
Forest City; successfully executed key strategic goals in the Company’s
evolution(2)
• Substantial upside in dividend; anticipated to more than double Q1 2017
dividend by 2019
- 1 -
Value Proposition 1
High-quality assets concentrated in core, urban markets with strong growth
profiles and operated by an experienced, proven management team
(1) Reflects portfolio pro forma for pending retail and FAH dispositions. Percentage based on Q4 2017 estimated annualized stabilized NOI.
(2) Average represents top senior executives excluding Ketan Patel who joined Forest City as General Counsel in 2017.
NAV per Share
Trading Gap
FFO per Share NAV per Share Stockholder Returns
Commitment to Outperformance
Guiding Principles
- 2 -
1
(1) Core markets include Boston, Dallas, Denver and Los Angeles as well as the Greater New York City, San Francisco and Washington, D.C.
metropolitan areas. Reflective of portfolio pro forma for pending retail and FAH dispositions.
Focused Placemaking
• Premier national portfolio of
high-quality office and
multifamily assets
• Concentrated exposure in
seven leading core markets(1)
• Pursue development at
attractive risk-adjusted
returns
Sustainable Growth
• Operate within well-defined
capital allocation parameters
• Tailored capital structure for
future growth opportunities
• Disciplined approach to
activating development
pipeline
Exceptional Performance
• Streamlined operations for
―best-in-class‖ performance
• Reduced exposure to non-
core assets and markets
• Accountability through
transparency in governance
◦ Focus on core markets
◦ Refine portfolio
◦ Deliver in-process
developments
Portfolio Optimization Earnings Enhancements
◦ Reduce cost of capital
◦ Improve margins
◦ Stabilize accretive
developments
Growth Opportunities
◦ Existing development
entitlements
◦ Opportunistic JV buyouts
◦ Targeted acquisitions
Key Factors As of 2011 Today Target
Core Asset
Focus
Non-Core
Markets 82.2% NOI from 9 Markets
(1) 88.7% NOI from 9 Markets(1) >90.0% NOI from 7 Core Markets(2)
Development 16.7%
2011 Development Ratio
5.8%
Q4 2017 Development Ratio
Target development ratio less than ~7.5%
and deliver NAV and FFO growth from
existing projects
Margin
Improvement
44.4%
Adjusted EBITDA Margin
57.1%
Year Ended December 31, 2017
(excluding development)
~400-500bps
of upside from identified cost savings, as compared to
the year-ended 2016
JV Exposure Majority of NOI from JVs
University Park at MIT, QIC and Madison JV
transactions
Opportunity for partner buy-outs
from captive deal pipeline reduces JV exposure
Leverage
13.1x
Net Debt / Adj. EBITDA
7.4x
Net Debt / Adj. EBITDA Year Ended Dec 31, 2017
6.5x
Long Term Net Debt / Adj. EBITDA
Dividend
Policy None
More than Double Q1 2017
Dividend by 2019
Other
Corporate
Governance
Items
6/15 Independent Board Members
2/6 Independent Board Members with
less than 10 years tenure
21.5 yrs Avg. Board Tenure
Executive Chairman
8/13 Independent Board Members
6/8 Independent Board Members with less than 10
years tenure
12.2 yrs Avg. Board Tenure
Non-Executive Chairman
Predominantly Independent
Board
Majority Voting standard in uncontested
elections
Ongoing Board Refreshment
(1) Nine markets include Boston, Chicago, Dallas, Denver, Los Angeles and Philadelphia, as well as the Greater New York City, San Francisco and Washington, D.C.
metropolitan areas.
(2) Core markets include Boston, Dallas, Denver and Los Angeles as well as the Greater New York City, San Francisco and Washington, D.C. metropolitan areas.
Retail FAH
Office Apartment
- 3 -
Focus on Continued Execution
Mixed-Use
Office Apartment
1
Hotels
Military
Housing
Land Team / Arena
Retail FAH
Office Apartment
Q3 17
$0.14
Q2 17
$0.09
Q1 17
$0.09
S
tra
te
g
ic
G
o
a
ls
Fin
a
n
cia
l
C
o
rp
o
rat
e
G
o
v
e
rn
a
n
c
e
Q3 17
$0.14
- 4 -
Recent Steps & Accomplishments… 1
Management and the Board have a proven track record of achieving their stated goals and
are focused on continuing successful execution of the Company’s strategy
· Increased Focus
· Narrowing focus to two property types, apartment and office, from eight in 2011
· Pending disposition of the majority of our retail portfolio through the sale of 10 regional malls
and 12 New York shopping center assets to our existing partners, QIC and Madison International,
for a combined ~5.1% cap rate (represents $2.0Bn valuation and $1.1Bn NAV)(1)
· Currently generate 88.7% of NOI from nine markets compared to 82.2% in 2011(2)
· 2017 Operating FFO · 2017 Operating FFO: $1.54 per share; In line with guidance provided Q2 2017
· Expanded Margins
· Adjusted EBITDA margin has expanded from 44.4% in 2011 to 57.1% at year end 2017 (excluding
development)
· Improved Corporate
Governance
· Eliminated dual-class structure, implemented majority voting, established a predominately
independent Board and committed to ongoing Board refreshment
· Initiated Dividend
· Re-initiated dividend in 2016 and increased dividend by 50% in Q1 2017, and 56% from Q2 2017
to Q3 2017
· Reduced Leverage · Steadily decreased leverage from 13.1x Net Debt / Adj. EBITDA in 2011 to 7.4x at year-end 2017
· Enhanced Disclosure
· Changed fiscal year-end to Dec. 31, disclosed new segment level data, added detailed margin and
overhead information and currently provide annualized NOI and NAV components
· Outperformed Peers(3)
· Outperformed our proxy peers on a 1, 3 and 5 year basis by ~11%, ~4% and ~6%, respectively
· Outperformed MSCI US REIT Index on a 1and 5 year basis by ~5% and <1%, respectively
Source: FactSet, SNL Financial.
(1) See page 24 for additional disclosure.
(2) Nine markets include Boston, Chicago, Dallas, Denver, Los Angeles and Philadelphia, as well as the Greater New York City, San Francisco and Washington,
D.C. metropolitan areas. Excluding NOI from FAH properties.
(3) On an equity market cap-weighted, total returns basis as of 2/07/2018; proxy peers include ARE, AIV, AVB, BXP, CBL, DDR, DRE, EQR, FRT, KIM, MAC,
SLG, UDR and VNO.
20%
(14%)
(6%)
4%
(19%)
(6%)
3%
(22%)
(12%)
(0.1%)
(12.1%)
(8.1%)
(40%)
(30%)
(20%)
(10%)
--
10%
20%
2/7/15 8/7/15 2/7/16 8/7/16 2/7/17 8/7/17 2/7/18
29.4%
35.2%
35.6%
(10%)
--
10%
20%
30%
40%
50%
60%
2/7/13 2/7/14 2/7/15 2/7/16 2/7/17 2/7/18
- 5 -
…Have Yielded Strong Results 1
1 Year Total Return 3 Year Total Return 5 Year Total Return
Source: FactSet, SNL Financial.
(1) Peers are proxy peers.
(2) On an equity market cap-weighted, total returns basis as of 2/07/2018; proxy peers include ARE, AIV, AVB, BXP, CBL, DDR, DRE, EQR, FRT, KIM, MAC,
SLG, UDR and VNO.
Forest City Proxy Peers(2) MSCI US REIT Index (RMZ)
Total Returns Since Key Strategic Milestones
Converted to a REIT
Reclassification
Announcement
Announcement of REIT
Conversion / Strategic Plan
01/13/2015 01/04/2016 12/06/2016
Total returns have been in-line with or outperformed peers both over a 1, 3 and
5 year basis, and since key strategic milestones(1)
(11.7%)
(5.6%)
0.7%
(20%)
(15%)
(10%)
(5%)
--
5%
10%
15%
20%
2/7/17 4/7/17 6/7/17 8/7/17 10/7/17 1 / / 7 8
(12%)
(10%) (11%)
Announcement of Definitive
Docs with Madison
09/20/2017
Near-Term Strategic Priorities
- 6 -
Objective Near-Term Impact
Execute Sale of Retail Portfolio
· Reduces retail exposure, with ~92% of pro forma NOI from
office and multifamily assets
Margin Improvement
· ~400-500bps of identified adjusted EBITDA margin
improvement
Increase Dividend · Continue to increase current quarterly dividend through 2019
Reduce Leverage
· ~6.5x Net Debt / Adj. EBITDA by year-end 2018 from 7.4x as
of 12/31/2017(1)
Deliver Near-Term Developments
· Near-term incremental FFO contribution of $0.06 – $0.08 per
share from 2017 and 2018 openings upon stabilization
Navigate “BIG” Period
· Minimize built-in gains (―BIG‖) recognition, resulting from
REIT conversion, while retail and other non-core asset sales
are executed
· ―BIG‖ period lasts until 12/31/2020
(1) See page 16 for current capital structure.
2
Forest City has identified six key near-term strategic priorities intended to
simplify & focus the portfolio, increase cash flow and drive stockholder returns
4
3
2
1
5
6
Long-Term Strategy
- 7 -
2
▪ Focus investing in top tier core markets (inventory of
opportunity: NYC, D.C., San Francisco and Denver)
▪ Deliver ongoing ―power of place‖ developments into
stabilized core portfolio
▪ Continue to evaluate the merit of the long-term
ownership of non-core and remaining retail
Portfolio Optimization
Growth Opportunities
▪ Disciplined development targeting 6% – 7% yield on
cost or 150-200bps spread to stabilized cap rates
▪ Opportunistic acquisitions from captive pipeline of JV
partner interests
▪ Targeting development ratio less than ~7.5%
▪ Value creation potential from development pipeline
Earnings Enhancements
▪ Reduce cost of capital
▪ Strengthen balance sheet
▪ Efficient organizational structure of continuous
improvement mindset
▪ Significant FFO from delivery of current developments
Maximize
Stockholder
Value
Portfolio Composition(1)
- 8 -
Total Operating Portfolio Office (% of Total NOI)
(2)
Apartment (% of Total NOI)(3)
~$278MM
NOI
~$185MM
NOI
3
Note: NOI data as presented is at Company share.
(1) Reflects portfolio pro forma for pending retail and FAH dispositions. Percentages based on Q4 2017 estimated annualized stabilized NOI.
(2) Other Office includes assets located in suburban areas of Alexandria, VA, Pittsburgh, PA, Richmond, VA, San Francisco, CA, and Albuquerque, NM.
Other Life Science includes an asset in Philadelphia, PA and an asset in Baltimore, MD.
(3) Core markets include Boston, Chicago, Dallas, Denver, Los Angeles and Philadelphia as well as the Greater New York City, San Francisco and
Washington, D.C. metropolitan areas. Non-Core markets include Cleveland, OH, Cumberland, RI, Haverhill, MA, New Haven, CT, San Diego, CA,
Orange, CA and Stratford, CT.
AMERICAN CIGAR LOFTS | RICHMOND, VA
40 LANDSDOWNE ST | CAMBRIDGE, MA
FOUNDRY LOFTS | WASHINGTON, D.C.
~$503MM
NOI
Atlantic Terminal
Office
Top Ten Assets
- 9 -
3
Pro forma for pending retail portfolio dispositions, Forest City’s portfolio is concentrated in
a select number of high-quality assets with the top ten assets comprising ~60% of total NOI
Note: Reflects portfolio pro forma for pending retail and FAH asset dispositions. NOI reflects Q4 2017 estimated annualized stabilized NOI. GLA as of 12/31/2017.
Note: NOI and GLA data as presented is at Company share.
(1) Includes Arris, an apartment building, and District Winery, that were not stabilized as of Q4 2017. These properties are excluded in other NOI calculations or
percentages.
(2) Includes One Pierrepont Plaza.
Cambridge Life
Science Portfolio
Boston, MA
1.5MM SF GLA
$84.0MM NOI
2
NYC San Francisco
San Francisco, CA
388K SF GLA
$21.1MM NOI
Westfield SF Centre
4
Bayside Village
San Francisco, CA
431 Units
$11.7MM NOI
Brooklyn, NY
400K SF GLA
$10.4MM NOI
New York, NY
736K SF GLA
$51.1MM NOI
New York Times
3
East River Plaza
New York, NY
265K SF GLA
$11.6MM NOI
7
8 Spruce Street
New York, NY
234 Units
$9.8 MM NOI
9
Brooklyn, NY
3.2MM SF GLA
$85.3MM NOI
Metrotech
Portfolio(2)
Boston
Retail
Office
Apartment
Mixed-Use
Top 10 Asset NOI Contribution
Property Type Key
# Denotes ranking by NOI
Greater Washington,
D.C.
276K SF GLA
$9.8MM NOI
Johns Hopkins
8
Washington, D.C.
71K SF GLA / 485 Units
$14.0MM NOI
The Yards(1)
10
~$503MM
NOI
Washington, D.C.
6
5 1
~$278MM
NOI
Key Office Stats
New
York
Life
Science Other
Rent PSF: $52.72 $69.38 $26.13
Occupancy: 99.1 % 99.7 % 90.6 %
Total GLA: 4,826 2,129 1,789
Company GLA: 4,466 1,858 1,626
% Total NOI(1): 30% 19% 6%
Allocated Debt: $353MM $602MM $191MM
Office Segment Overview
- 10 -
Top Office Assets (% of NOI)
Property Location
GLA
(000s)
Rent
PSF Occupancy
% Office
NOI(1)
Metrotech(2)(3) Brooklyn, NY 3,180 $45.31 99.4 % 31%
Cambridge Life Science(2) Cambridge, MA 1,460 $75.45 100.0 % 30%
New York Times(2) Manhattan, NY 736 $94.41 99.3 % 18%
Remaining Core 1,947 $42.82 91.7 % 17%
Non-Core(4) 627 $20.83 96.8 % 4%
Total / Wtd. Avg. 7,950 $51.84 96.7 % 100%
29 properties encompassing 8.0MM SF primarily located in core-urban markets
▪ 17 traditional office properties (6.1MM SF) and 12 life science properties (1.9MM SF)
3
Note: All figures shown at Company share as of December 31, 2017.
(1) Based on Q4 2017 estimated annualized stabilized NOI.
(2) Subject to a ground lease.
(3) Includes One Pierrepont Plaza.
(4) Includes assets located in Albuquerque, NM, and Pittsburgh, PA.
(5) Includes Greater Washington, D.C. and Richmond, VA.
300 MASSACHUSETTS AVE | CAMBRIDGE, MA TWELVE METROTECH CENTER | BROOKLYN, NY
(5)
(4)
Geographic Overview (% of Office NOI)(1)
Top Apartment Assets (% of NOI)(1)
Property Location Units
Rent /
Unit(2)
Economic
Occupancy % Apt. NOI
Bayside Village San Francisco, CA 431 $ 3,049 93.3 % 6.4 %
8 Spruce Street Manhattan, NY 234 $ 4,846 95.0 % 5.3 %
Pavilion Chicago, IL 1,058 $ 1,188 92.8 % 4.4 %
Remaining Core 7,134 $ 1,988 94.6 % 59.7 %
Non-Core(3) 7,853 $ 1,006 92.6 % 24.2 %
Total / Wtd. Avg. 16,710 $ 1,537 93.8 % 100 %
Apartment Segment Overview
- 11 -
68 total properties; 23,135 total leasable units (16,710 at Company share)(1)
· >75% of apartment NOI comes from core assets
Note: All figures shown at Company share as of 12/31/2017 and NOI reflects Q4 2017 estimated annualized stabilized NOI.
(1) Pro forma for FAH disposition.
(2) Reflects gross potential monthly rent less concessions, based on comparable unit data as of 12/31/2017.
(3) Core markets include Boston, Chicago, Dallas, Denver, Los Angeles and Philadelphia as well as the Greater New York City, San Francisco and
Washington, D.C. metropolitan areas. Non-Core markets include Cleveland, OH, Cumberland, RI, Haverhill, MA, New Haven, CT, San Diego, CA,
Orange, CA and Stratford, CT.
(4) Includes Richmond, VA.
3
Sky55 | CHICAGO BAYSIDE VILLAGE | SAN FRANCISCO, CA 8 SPRUCE STREET | NEW YORK, NY
(3)
Key Apartment Stats(1)
Core Non-Core
Rent per Unit: $ 2,020 $ 1,006
Occupancy: 94.4 % 92.6 %
Total Units: 12,245 10,890
Company Units: 8,857 7,853
Avg. Units / Property: 299 403
% of Total NOI: 28 % 9 %
Allocated Debt: $ 1.33 Bn $ 309 MM
Geographic Overview (% of Apt. NOI)(1)
(4)
~$185MM
NOI
- 12 -
3
Near-Term Growth(1) Long-Term Growth(2)
Summary of Potential Growth
(1) Reflects projects under construction. See page 21 for additional detail. Dollar amounts represent cost at Company share.
(2) Reflects development pipeline. Dollar amounts and square feet are at Company share. May not sum to totals as presented due to rounding.
(3) $171.3MM reflects cost net of subsidies. Gross cost is $191.2MM.
(4) Dollar amounts reflect projects under development at Company Share.
(5) Completed Projects include: Foundry Lofts, Boilermaker Shops, Lumbershed, Arris, Twelve12, District Winery; Projects Underway include The Guild.
(6) Value of NOI less cost. Assumes 4.5% blended cap rate for residential and office (Source: CoStar as of Q4 2017).
Robust growth pipeline of ~$191MM of projects currently under construction
and a development pipeline of ~20MM entitled SF in core markets
The Yards Development
Phase 1 Value Created(6) = $205MM - $230MM
Cash on Cost Return = 6.6% - 7.1%
Cash on Cost spread to Cap Rate = 210-260 bps
Completed
Projects(5) Projects Underway Total Phase I
Total
Investment
$198MM ~$212MM - $232MM ~$410MM - $430MM
Total NOI $15MM ~$13MM - $15MM ~$28MM - $30MM
THE BRIDGE AT CORNELL TECH | NEW YORK, NY
By Year
Year Opening # of Projects
Net Cost
($MM)(3)
NOI Range
($MM) Yield Range
2018 3 157.2
2019 3 14.1
Total/Wtd. Avg. 6 $ 171.3 $10 - $13 6.5% - 7.0%
By Property Type
Year Opening # of Projects
Net Cost
($MM)(3)
NOI Range
($MM) Yield Range
Apartment 5 $ 133.9
Retail 1 37.4
Total/Wtd. Avg. 6 $ 171.3 $10 - $13 6.5% - 7.0%
Square Feet
Name Location $MM(4) Office Apt. Retail Other Total
Stapleton Denver, CO 0.0 3.1 1.8 0.2 0.2 5.4
The Yards Washington, D.C. 69.4 1.8 2.0 0.3 0.5 4.6
Pier 70 San Francisco, CA 44.2 1.2 0.9 0.4 0.8 3.2
Hudson Exchange Jersey City, NJ 13.8 0.0 2.7 0.2 0.0 2.8
Pacific Park Brooklyn, NY 64.5 0.3 1.2 0.0 0.3 1.8
5M San Francisco, CA 33.3 0.6 0.3 0.0 0.0 0.9
Waterfront Station Washington, D.C. 11.0 0.0 0.3 0.0 0.0 0.3
Operating
Properties 11.5 0.0 0.0 0.0 0.0 0.0
Other 6.0 0.1 0.5 0.2 0.0 0.8
Non-Core Markets 32.2 1.6 0.4 0.1 0.0 2.1
Total 285.7 8.8 9.9 1.4 1.8 21.8
Capital Structure Overview
- 13 -
Capitalization(1) Capitalization (%)(1)(2)
Leverage Metrics & Liquidity(1)
4
(1) All figures shown at Company share unless noted. Balance sheet as of December 31, 2017 and share price as of 1/31/2018.
(2) Does not include $242.5MM of cash and cash equivalents or $0.6MM of net unamortized mortgage procurement costs.
(3) Based on 273.3MM shares outstanding.
(4) Rolling 12-months ended December 31, 2017.
Key
Common Equity
Secured Debt
Term Loan
Convertible Senior Debt
(dollars in thousands) Consolidated Company's Share
Secured Debt $ Amt Rate $ Amt Rate
Fixed-rate Mortgage Debt $ 1,667.4 4.27 % $ 3,169.4 4.31 %
Variable-rate Mortgage Debt 689.0 3.59 % 727.2 4.20 %
Tax-Exempt Notes Payable 673.4 2.58 % 701.8 2.73 %
Total Secured Debt $ 3,029.8 $ 4,598.4
Net unamortized mortgage
procurement costs (31.5 ) (40.3 )
Total Secured Debt, Net $ 2,998.3 3.74 % $ 4,558.1 4.06 %
Unsecured Debt
Revolving Credit Facility L+125bps L+125bps
May 2021 Term Loan, Net $ 333.7 L+145bps $ 333.7 L+145bps
Convertible Senior Debt:
4.250% Notes due 2018 73.2 4.25 % 73.2 4.25 %
3.625% Notes due 2020 40.0 3.63 % 40.0 3.63 %
Net unamortized mortgage
procurement costs (0.6 ) (0.6 )
Total Unsecured Debt, Net $ 446.3 $ 446.3 2.54 %
Total Debt $ 3,444.6 $ 5,004.4
Less: Cash and Cash Equivalents (204.3 ) (242.5 )
Net Debt $ 3,240.3 $ 4,761.9
Common Equity ($23.47 per share as
of 1/31/2018) (3) $ 6,414.4 $ 6,414.4
Noncontrolling Interest 416.3
Total Enterprise Value $ 11,176.3
Dollars in millions
Company Share Net Debt / TEV 43 %
Fixed Charge Coverage Ratio 1.92 x
Net Debt / Adjusted EBITDA (4) 7.4 x
Total Liquidity: $ 806.1
Cash and Cash Equivalents $ 242.5
Revolver Capacity $ 563.6
Illustrative Deleveraging Plan
- 14 -
Leverage target of ~6.5x by year-end 2018 as the Company continues its focus on
enhancing the balance sheet profile and builds equity in stabilized assets
4
Note: The 2017 and 2018 information is illustrative. It is based on a number of significant assumptions any or all which may turn out to be untrue. You
should not place undue reliance on this forward-looking information. There can be no assurance that these plans will be implemented, or if
implemented, that will be effective in achieving our strategic goals.
Key Drivers of Further Deleveraging:
Debt Reduction:
▪ Disposition of FAH portfolio
▪ Disposition of retail assets
▪ Proceeds from dispositions potentially used
to pay down debt
Key Drivers of Further Deleveraging:
EBITDA Growth:
▪ Strong continued free cash flow generation
from operating assets
▪ Additional ~400–500bps in adj. EBITDA
margin improvement from identified cost
savings
▪ NOI contributions from New Property
Openings
Key Drivers of Further Deleveraging from 2017 to 2018:
Adjusted EBITDA Margin Expansion
- 15 -
5
Identified cost savings are expected to provide ~400-500bps of additional
margin improvements by year-end 2018
Illustrative Adjusted EBITDA Margin Enhancement Bridge
Note: Diagonal lines on bridge are reflective of the range of potential enhancements.
Office NOI Margins
- 16 -
Total Office
5
Our New York and Life Science assets have adjusted property margins in line
with top-quartile performing peers
New York (54% of Office NOI) Life Science (36% of Office NOI)
Other (10% of Office NOI)
Note: Margin figures from the year ended December 31, 2017. NOI and GLA figures shown at Company share. NOI dollar amounts based on Q4 2017
estimated annualized stabilized NOI. GLA as of 12/31/2017.
$99MM NOI
1.9MM GLA
$278MM NOI
8.0MM GLA
$28MM NOI
1.6MM GLA
$151MM NOI
4.5MM GLA
Apartment NOI Margins
- 17 -
Total Apartment
5
Our apartment portfolio has adjusted property margins which are generally in
line with peers operating in the respective markets
Core Markets (75% of Apartment NOI)(1) Non-Core (25% of Apartment NOI)(2)
Note: Margin figures from the year ended December 31, 2017. NOI and GLA figures shown at Company share. NOI is Q4 2017 estimated annualized
stabilized NOI. Units as of December 31, 2017. Apartment peers normally exclude management fees.
(1) Core markets include Boston, Chicago, Dallas, Denver, Los Angeles and Philadelphia as well as the Greater New York City, San Francisco and
Washington, D.C. metropolitan areas.
(2) Non-Core markets include Cleveland, OH, Cumberland, RI, Haverhill, MA, New Haven, CT, San Diego, CA, Orange, CA and Stratford, CT.
$185MM NOI
16,710 Units
$45MM NOI
7,853 Units
$140MM NOI
8,857 Units
Corporate Overhead
- 18 -
5
Forest City is focused on improving efficiency to align its corporate overhead
with best-in-class peers
G&A as a % of Revenue(1)
Note: Revenue and G&A data as of fiscal year-end 2016 for Forest City.
(1) Forest City revenue is pro rata for JVs, minority interests and discontinued operations.
(2) Adjustments include Apartment segment service and management fees and corporate allocations, which were removed from the Apartment
segment comparable NOI margin bridges shown previously in the supplemental package. Additionally the remaining Apartment segment
service and management company overhead (reflected in Apartment segment ―other NOI‖ in the NOI Detail section of this supplemental
package) is included in these adjustments.
Annual G&A
Expense: $63MM ~$98MM
~$73MM–$83MM
Expected range of 5.75% - 6.50%
pro forma for achieving identified
cost savings of ~$15MM-$25MM
~Q3 2018
(2)
ESG Ratings & Rankings
• “A” rating from MSCI
• GRESB Green Star Recognition for 3rd straight year
• Published 5th annual comprehensive GRI report (www.forestcity.net/corporate-responsibility)
• CDP Climate Change participant in 2017
Environmental Performance
• Formally committed to set a Science-based GHG Emissions Reduction target
• Designated a 2017 LEED Power Builder by the US Green Building Council
• Achieved an 11.1% energy reduction since 2010 and 7.3% water use reduction since 2013
Governance Highlights
• Formal oversight of ESG Gree added to Board of Director's Governance and Nominating Committee
• 30% of Board Members are Women, 2020 Women on Boards Winning 'W' Company
Governance Highlights
• Only U.S. REIT Gon Equileap's 2017 Top 200 Gender Equality Global Report and Ranking
• 12% spend with minority, women and/or veteran business enterprises in 2016, exceeding
Enterprise-Wide Diverse Supplier Spend goal
Corporate Responsibility and ESG 6
Forest City creates thriving, mixed-use developments that address both the
environmental and social needs of our core markets
- 19 -
Proactive Management/Alignment of ESG Topics
and Risks to Business Strategy
6
- 20 -
• Ethics & Anti-corruption Policies & Training
• Cybersecurity
• Board Diversity
• ESG Governance & Accountability
• Materiality & Stakeholder Engagement
• Building Lifecycle: Sustainable Operations
• Diversity & Inclusion
• Health & Wellness
• Recruitment, Onboarding & Training
• Associate Benefits
• Resident/Tenant Health & Safety
• Associate Engagement
Exceptional Performance
Pursuit of best-in-class operations and processes that support a
thriving workplace culture, allowing our associates to achieve their full
potential, deliver excellent customer service and create value for all
stakeholders
• Building Lifecycle: Sustainable Construction &
Development
• Walkability & Livability
• Affordable Housing
• Supplier Diversity
• Government Affairs
• Community Integration & Public-Private Partnerships
• Community Giving & Volunteerism
• Communications & Transparency
Sustainable Growth
Disciplined and strategic approach to making decisions, allocating
capital and managing future growth enabling a high quality operating
portfolio and ensuring that we realize our urban placemaking strategy
in our core markets
Focused Placemaking
Unique ability to create value in our core markets by using our
development and operations capabilities to bring exceptional
apartments, offices and communities to life, consistent with our vision
to be the creative leader in realizing the power of place
Appendix
THE NEW YORK TIMES BUILDING | NEW YORK, NY
Project Name
Property
Type Ownership(3) Units / SF(4) Cost Incurred(MM)(4)
Expected
Cost(MM)(4)
Anticipated
Stabilization
2017 Phased Openings
Axis Apartment 30% 391 48.1 41.8 Q1 2019
Pacific Park Parking Parking 30% n/a 2.5 4.1 Q3 2017
Mint Town Center Apartment 88% 399 73.3 82.7 Q2 2019
Projects Under Construction
Ardan Apartment 30% 115 $31.5 $36.2 Q3 2019
Ballston Quarter Residential Apartment 51% 207 37.1 92.9 Q3 2020
Aster Conservatory Green North Apartment 0% — — — Q2 2020
The Yards – The Guild Apartment 0% — — — Q3 2019
Capper 769 Apartment 25% 45 6.5 17.9 Q1 2020
Ballston Quarter Redevelopment Retail 51% 156,570 34.7 44.2 Q3 2019
Total Projects Under Construction $109.8 $191.2
Total (Includes 2017 Openings) $233.7 $319.8
Development Detail
- 21 -
(1) Represent phased openings.
(2) Pacific Park Parking costs include garages that are open/under construction as well as garages not yet under construction.
(3) The Company invests in certain real estate projects through joint ventures and, at times, may provide funding at percentages that differ from the
Company’s legal ownership.
(4) Figures shown at Company share.
(5) Opening date.
A
(1)
(1)
(1)
(1)(2) (5)
Summary of Stapleton
- 22 -
Plans for Stapleton include more than 12,000 homes and apartments, 3MM SF of
retail and 10MM SF feet of office, research, development and industrial space
# of Lots Sold to Homebuilders
Completed Project Summary as of 12/31/2017
Completed Retail GLA: 2.6MM SF
Completed Office GLA: 393k SF
Completed Other Commercial GLA: 3.3MM SF
Completed Apartment Units: 1,748
Apartment Units Under Construction: 515
Owned Land: 449 Acres
Land Controlled via Option: 312 Acres
· Located in Denver, CO, Stapleton is one of the largest
urban in-fill redevelopment projects in U.S. history
· Future entitlements in-place for apartment, retail, office
and single family uses
· Upon completion, Stapleton is expected to be home to
30,000 residents and 35,000 workers
· Stapleton exemplifies Forest City’s excellence in urban
placemaking
· Over the past few years Stapleton land sales have
contributed ~$40MM annually to FFO, which is expected
to continue in the near-term
ASTER TOWN CENTER | DENVER, CO
A
*Represents 11 months ended 12/31/2013
The Yards Development Case Study
- 23 -
At full build-out, The Yards is expected to include up to 3,000 residential units,
1.8MM SF of office space and approximately 500k SF of retail and dining space
ARRIS | WASHINGTON, D.C.
A
FOUNDRY LOFTS | WASHINGTON, D.C.
Phase 1 Value Created(2) = $205MM - $230MM
Cash on Cost Return = 6.6% - 7.1%
Cash on Cost spread to Cap Rate = 210-260 bps
Completed
Projects(1) Projects Underway Total Phase I
Total
Investment
$198MM ~$212MM - $232MM ~$410MM - $430MM
Total NOI $15MM ~$13MM - $15MM ~$28MM - $30MM
Source: CoStar as of Q4 2017.
(1) Completed Projects include: Foundry Lofts, Boilermaker Shops, Lumbershed, Arris, Twelve12; Projects Underway include The Guild and
District Winery.
(2) Value of NOI less cost. Assumes 4.5% blended cap rate for residential and office.
The Yards Project Summary The Yards Geographic Overview
Downtow
n
Capitol Riverfront
The White House
Washington Monument The Capitol
Nationals Park
Washington D.C.
Arlington,
VA
E
N
W
S
695
395
295
395
1
mile
The
Yards
Summary of Retail Transaction
- 24 -
A
QIC Madison(1) Forest City
Westfield San Francisco Centre
Ballston Quarter (redevelopment)
East River Plaza
Station Square
The Yards:
· Boilermaker Shops
· Lumber Shed
· Twelve12
Charleston Town Center
Atlantic Center Site V
Brooklyn Commons
Atlantic Center
Atlantic Terminal
Castle Center
Columbia Park Center
Forest Avenue
Harlem Center
Shops at Gun Hill Road (Ely)
Shops at Gun Hill Road (Waring)
Shops at Richmond Avenue
The Heights
Shops at Northern Boulevard
Queens Place
42nd Street
Outright Sales:
Mall at Robinson
Shops at Wiregrass
Westchester’s Ridge Hill
Shops at Northfield Stapleton -
closed 10/24/17
South Bay Galleria - closed 12/21/17
Antelope Valley Mall - closed 1/22/18
Galleria at Sunset
Short Pump Town Center
Promenade Temecula
Victoria Gardens
Cap Rate ~5.1%
Valuation $2.0 Bn
QIC Madison(1)
~$1.55B ~$450M
Debt - $0.9 Bn ~680M ~250M
NAV - $1.1 Bn ~870M ~200M
$104.8MM
2016 NOI
(1) During Q4 2017 we closed on the conversion of our common interest to a preferred interested. 42nd Street is
expected to close after resolution of the ground lease rate reset dispute with the City of New York.
NAV Components (as of December 31, 2017)
- 25 -
A
Q4 2017 Net Stabilized Stabilized Annualized Nonrecourse
(Dollars in millions at company's share) NOI
(1)
Adjustments
(2)
NOI Stabilized NOI Debt, net
(3)
Operations
Office Real Estate
Life Science
Cambridge $ 19.8 $ 1.2 $ 21.0 84.0$ (502.5)$
Other Life Science 3.6 0.1 3.7 14.8 (99.1)
New York
Manhattan 14.0 - 14.0 56.0 -
Brooklyn 23.9 - 23.9 95.6 (353.4)
Other Office 7.6 (0.6) 7.0 28.0 (190.9)
Subtotal Office $ 68.9 $ 0.7 $ 69.6 278.4$ (1,145.9)$
Apartment Real Estate
Apartments, Core-Markets 35.0 - 35.0 140.0 (1,334.2)
Apartments, Non-Core Markets 11.2 - 11.2 44.8 (309.0)
Subtotal Apartment Product Type $ 46.2 $ - $ 46.2 184.8$ (1,643.2)$
Federally Assisted Housing
(4)
0.2 0.3 0.5 2.0 (18.2)
Subtotal Apartments 46.4 0.3 46.7 186.8 (1,661.4)
Retail Real Estate
Other Retail 12.5 (2.4) 10.1 40.4 (453.4)
Subtotal $ 127.8 $ (1.4) $ 126.4 $ 505.6 $ (3,260.7)
Straight-line rent adjustments 2.1 - 2.1 8.4 -
Other operations (0.1) - (0.1) (0.4) -
Total Operations $ 129.8 $ (1.4) $ 128.4 $ 513.6 $ (3,260.7)
Development
Recently-Opened Properties/Redevelopment $ 2.0 $ 9.5 $ 11.5 46.0$ (370.0)$
Straight-line rent adjustments 0.6 - 0.6 2.4 -
Other Development (2.9) - (2.9) (11.6) -
Total Development $ (0.3) $ 9.5 $ 9.2 $ 36.8 $ (370.0)
Retail Dispositions NAV
(5)
QIC $ 17.9 729.3$ (633.9)$
Madison 5.9 204.0 (239.4)
Total Retail Dispositions $ 23.8 $ 933.3 $ (873.3)
NAV Components (as of December 31, 2017)
- 26 -
A
(Dollars in millions at company's share) Nonrecourse
Development Book Value
(3)
Debt, net
(3)
Projects under construction
(6)
136.8$ (20.6)$
Projects under development 285.2$ (166.3)$
Land inventory
Stapleton 50.1$ —$
Commercial Outlots 2.8$ —$
Other Tangible Assets
Cash and equivalents 242.5$
Restricted cash 197.8$
Accounts receivable, net
(7)
271.2$
Notes Receivable 478.6$
Net investments and advances to unconsolidated entities 42.5$
Prepaid expenses and other deferred costs, net 82.3$
Recourse Debt and Other Liabilities
Revolving credit facility —$
Term loan, net (333.7)$
Convertible senior debt, net (112.6)$
Less: convertible debt 112.6$
Construction payables (94.8)$
Operating accounts payable and accrued expenses
(8)
(620.1)$
Share Data (in millions)
Diluted weighted average number of shares for the three months ended December 31, 2017 273.3
1) Q4 2017 Earnings Before Income Taxes reconciled to NOI for the three months ended December 31, 2017 in the Supplemental Operating Information section
of the supplemental package, furnished to the SEC on form 8-K on February 8, 2018.
2) The net stabilized adjustments column represents adjustments assumed to arrive at an estimated annualized stabilized NOI. We include stabilization
adjustments to the Q4 2017 NOI as follows:
a) Due to the redevelopment of 26 Landsdowne Street (Life Science Office - Cambridge), we have included a stabilization adjustment to the Q4 2017 NOI
to arrive at our estimate of annualized stabilized NOI prior to the commencement of our current redevelopment.
b) Due to quarterly fluctuations of NOI as a result of distribution restrictions from our limited-distribution federally assisted housing properties, we have
included a stabilization adjustment to the Q4 2017 NOI to arrive at our estimate of stabilized NOI. Our estimate of stabilized NOI is based on the 2016
annual NOI of $2.0 million, which excludes NOI related to 37 properties in this portfolio sold during the year ended December 31, 2017.
c) Partial period NOI for recently sold properties has been removed in the Operations Segments.
d) Due to the planned transfer of Charleston Town Center (Other Retail) to the lender in a deed-in-lieu transaction, we have removed NOI and nonrecourse
debt, net, related to this property.
e) For recently-opened properties currently in initial lease-up periods included in the Development Segment, NOI is reflected at 5% of the company
ownership cost. This assumption does not reflect our anticipated NOI, but rather is used in order to establish a hypothetical basis for an estimated
valuation of leased-up properties. The following properties are currently in their initial lease-up periods:
- 27 -
NAV Components-Footnotes(as of December 31, 2017) A
Property
Lease
Commitment
% as of
February 1, 2018
Office:
The Bridge at Cornell Tech (New York Office) $ 164.1 $ 164.1 53%
1812 Ashland Ave (Other Life Science) $ 61.2 $ 61.2 75%
Total Office $ 225.3 $ 225.3
Apartments:
Mint Town Center $ 94 $ 82.7 16%
Axis (Core Market) $ 140.4 $ 41.8 18%
VYV (Non-Core Market) $ 214.3 $ 107.1 35%
38 Sixth Avenue (Core Market) $ 202.7 $ 50.1 23%
535 Carlton (Core Market) $ 168.1 $ 41.7 66%
Eliot on 4th (Core Market) $ 138.3 $ 42.6 66%
NorthxNorthwest (Core Market) $ 115 $ 33.5 49%
461 Dean Street (Core Market) $ 151.3 $ 151.3 92%
Th Bixby (C re M rket) $ 59.2 $ 11.8 97%
Blossom Plaza (Core Marke ) $ 100.6 $ 29.9 97%
The Yards - Arris (Core Market) $ 143.2 $ 42.9 89%
Total Apartments $ 1,527.10 $ 635.4
Retail
The Yards - District Winery $ 10.6 $ 10.6 100%
Grand Total $ 1,763.00 $ 871.3
Cost at
100%
Cost at
Company
Share
(in millions)
NAV Components-Footnotes(as of December 31, 2017)
- 28 -
NOI attributable to Kapolei Lofts, an apartment community on land in which we lease, is not included in NOI from lease-up properties. We
consolidate the land lessor, who is entitled to a preferred return that currently exceeds anticipated operating cash flow of the project, and
therefore, this project is reflected at 0% for company-share purposes. In accordance with the waterfall provisions of the distribution
agreement, we expect to share in the net proceeds upon a sale of the project, which is not currently reflected on the NAV component
schedule.
f) Due to the redevelopment of Ballston Quarter (Development Segment; Recently-Opened Properties/Redevelopment), we have
included a stabilization adjustment to the Q4 2017 NOI to arrive at $2.6 million, our estimate of annualized stabilized NOI prior to the
commencement of our current redevelopment.
The net stabilized adjustments are not comparable to any GAAP measure and therefore do not have a reconciliation to the nearest
comparable GAAP measure.
3) Amounts represent the company’s share of each respective balance sheet line item as of December 31, 2017 and may be calculated using the
financial information contained in the Appendix of the supplemental package furnished to the SEC on form 8-K on February 8, 2018. Due to the
planned transfer of Charleston Town Center to the lender in a deed in lieu transaction, we have removed nonrecourse debt, net, of $49.1 million
related to this property.
4) Represents the remaining 10 federally assisted housing apartment communities. We previously signed a master purchase and sale agreement to
dispose of this portfolio and expect to receive net proceeds of approximately $65 million. As of December 31, 2017, 37 properties have closed,
representing $61.4 million in net proceeds.
5) Net Asset Value related to the retail portfolio dispositions:
a) As a result of the signed definitive agreement to dispose of our 10 regional malls to QIC, we have calculated the remaining net asset value
based on agreed upon pricing, excluding two regional malls which closed in Q4 2017. The remaining eight regional malls are expected to
transact at a weighted-average cap rate of 4.9%.
b) In accordance with the signed definitive agreement to dispose of our 12 specialty retail centers to Madison, during Q4 2017, we converted
our common ownership interest in 10 assets to preferred ownership interests. The nonrecourse debt, net, associated with the 10 converted
assets is approximately $182.0 million. We have calculated the net asset value based on agreed upon pricing and this portfolio is expected
to transact at a weighted-average cap rate of 5.3%.
6) NOI for the following properties is stabilized under Recently-Opened Properties/Redevelopment. As such, we have removed the following from
projects under construction:
a) $34.7 million, which represents the costs on the balance sheet associated with the ongoing redevelopment of Ballston Quarter.
b) $68.1 million, which represents costs on the balance sheet associated with the phased openings of Axis ($21.9 million) and Mint Town
Center ($46.2 million).
c) $80.0 million, which represents costs on the balance sheet associated with vacant space not ready for its intended use at The Bridge at
Cornell Tech.
7) Includes $141.7 million of straight-line rent receivable (net of $7.7 million of allowance for doubtful accounts).
8) Includes $51.3 million of straight-line rent payable.
A
Definitions of non-GAAP measures
EBITDA
EBITDA, a non-GAAP measure, is defined as net earnings excluding the following items at our company share: i) non-cash charges
for depreciation and amortization; ii) interest expense; iii) amortization of mortgage procurement costs; and iv) income taxes. EBITDA
may not be directly comparable to similarly-titled measures reported by other companies. We use EBITDA as the starting point in
order to calculate Adjusted EBITDA as described below.
Adjusted EBITDA
We define Adjusted EBITDA, a non-GAAP measure, as EBITDA adjusted to exclude: i) impairment of real estate; ii) gains or losses
from extinguishment of debt; iii) gain (loss) on full or partial disposition of rental properties, development projects and other
investments; iv) gains or losses on change in control of interests; v) other transactional items, including organizational transformation
and termination benefits; and vi) the Nets pre-tax EBITDA. We believe EBITDA, Adjusted EBITDA and net debt to Adjusted EBITDA
provide additional information in evaluating our credit and ability to service our debt obligations. Adjusted EBITDA is used by the chief
operating decision maker and management to assess operating performance and resource allocations by segment and on a
consolidated basis. Management believes Adjusted EBITDA gives the investment community a further understanding of the
Company’s operating results, including the impact of general and administrative expenses and acquisition-related expenses, before
the impact of investing and financing transactions and facilitates comparisons with competitors. However, Adjusted EBITDA should
not be viewed as an alternative measure of the Company’s operating performance since it excludes financing costs as well as
depreciation and amortization costs which are significant economic costs that could materially impact the Company’s results of
operations and liquidity. Other REITs may use different methodologies for calculating Adjusted EBITDA and, accordingly, the
Company’s Adjusted EBITDA may not be comparable to other REITs.
Net Debt to Adjusted EBITDA
Net Debt to Adjusted EBITDA, a non-GAAP measure, is defined as total debt, net at our company share (total debt includes
outstanding borrowings on our revolving credit facility, our term loan facility, convertible senior debt, net, nonrecourse mortgages and
notes payable, net) less cash and equivalents, at our company share, divided by Adjusted EBITDA. Net Debt to Adjusted EBITDA is
a supplemental measure derived from non-GAAP financial measures that the Company uses to evaluate its capital structure and the
magnitude of its debt against its operating performance. The Company believes that investors use versions of this ratio in a similar
manner. The Company’s method of calculating the ratio may be different from methods used by other REITs and, accordingly, may
not be comparable to other REITs.
- 29 -
A
Definitions of non-GAAP measures
Net Asset Value Components
We disclose components of our business relevant to calculate NAV, a non-GAAP measure. There is no directly comparable
GAAP financial measure to NAV. We consider NAV to be a useful supplemental measure which assists both management and
investors to estimate the fair value of our Company. The calculation of NAV involves significant estimates and can be calculated
using various methods. Each individual investor must determine the specific methodology, assumptions and estimates to use to
arrive at an estimated NAV of the Company. NAV components are shown at our total company ownership. We believe disclosing
the components at total company ownership is essential to estimate NAV, as they represent our estimated proportionate amount
of assets and liabilities the Company is entitled to.
The components of NAV do not consider the potential changes in rental and fee income streams or development platform. The
components include non-GAAP financial measures, such as NOI, and information related to our rental properties business at the
Company’s share. Although these measures are not presented in accordance with GAAP, investors can use these non-GAAP
measures as supplementary information to evaluate our business.
NOI
NOI, a non-GAAP measure, reflects our share of the core operations of our rental real estate portfolio, prior to any financing
activity. NOI is defined as revenues less operating expenses at our ownership within our Office, Apartments, Retail, and
Development segments, except for revenues and cost of sales associated with sales of land held in these segments. The
activities of our Corporate and Other segments do not involve the operations of our rental property portfolio and therefore are not
included in NOI.
We believe NOI provides important information about our core operations and, along with earnings before income taxes, is
necessary to understand our business and operating results. Because NOI excludes general and administrative expenses,
interest expense, depreciation and amortization, revenues and cost of sales associated with sales of land, other non-property
income and losses, and gains and losses from property dispositions, it provides a performance measure that, when compared
year over year, reflects the revenues and expenses directly associated with owning and operating office, apartment and retail
real estate and the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing a
perspective on operations not immediately apparent from net income. We use NOI to evaluate our operating performance on a
portfolio basis since NOI allows us to evaluate the impact that factors such as occupancy levels, lease structure, rental rates, and
tenant mix have on our financial results. Investors can use NOI as supplementary information to evaluate our business. In
addition, management believes NOI provides useful information to the investment community about our financial and operating
performance when compared to other REITs since NOI is generally recognized as a standard measure of performance in the real
estate industry. NOI is not intended to be a performance measure that should be regarded as an alternative to, or more
meaningful than, our GAAP measures, and may not be directly comparable to similarly-titled measures reported by other
companies.
- 30 -
A
Definitions of non-GAAP measures
FFO
FFO, a non-GAAP measure, along with net earnings, provides additional information about our core operations. While property
dispositions, acquisitions or other factors impact net earnings in the short-term, we believe FFO presents a consistent view of the
overall financial performance of our business from period-to-period since the core of our business is the recurring operations of
our portfolio of real estate assets. Management believes that the exclusion from FFO of gains and losses from the sale of
operating real estate assets allows investors and analysts to readily identify the operating results of the Company’s core assets
and assists in comparing those operating results between periods. Implicit in historical cost accounting for real estate assets in
accordance with GAAP is the assumption that the value of real estate assets diminishes ratably over time. Since real estate
values have historically risen or fallen with market conditions, many real estate investors and analysts have considered
presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because
FFO excludes depreciation and amortization of real estate assets and impairment of depreciable real estate, management
believes that FFO, along with the required GAAP presentations, provides another measurement of the Company’s performance
relative to its competitors and an additional basis on which to make decisions involving operating, financing and investing
activities than the required GAAP presentations alone would provide.
The majority of our peers in the publicly traded real estate industry report operations using FFO as defined by the National
Association of Real Estate Investment Trusts (―NAREIT‖). FFO is defined by NAREIT as net earnings excluding the following
items at our ownership: i) gain (loss) on full or partial disposition of rental properties, divisions and other investments (net of tax);
ii) non-cash charges for real estate depreciation and amortization; iii) impairment of depreciable real estate (net of tax); and iv)
cumulative or retrospective effect of change in accounting principle (net of tax).
Operating FFO
In addition to reporting FFO, we report Operating FFO, a non-GAAP measure, as an additional measure of our operating
performance. We believe it is appropriate to adjust FFO for significant items driven by transactional activity and factors relating to
the financial and real estate markets, rather than factors specific to the on-going operating performance of our properties. We use
Operating FFO as an indicator of continuing operating results in planning and executing our business strategy. Operating FFO
should not be considered to be an alternative to net earnings computed under GAAP as an indicator of our operating
performance and may not be directly comparable to similarly-titled measures reported by other companies.
We define Operating FFO as FFO adjusted to exclude: i) impairment of non-depreciable real estate; ii) write-offs of abandoned
development projects and demolition costs; iii) income recognized on state and federal historic and other tax credits; iv) gains or
losses from extinguishment of debt; v) change in fair market value of nondesignated hedges; vi) gains or losses on change in
control of interests; vii) the adjustment to recognize rental revenues and rental expense using the straight-line method; viii)
participation payments to ground lessors on refinancing of our properties; ix) other transactional items; x) the Nets pre-tax FFO;
and xi) income taxes on FFO.
- 31 -
A
Reconciliation of non-GAAP measures
(1)-(3) See page 20 in the supplemental package furnished to the SEC for the three months and year ended December 31, 2017 for footnotes. - 32 -
A
Reconciliation of Earnings (Loss) Before Income Taxes (GAAP) to Net Operating Income (non-GAAP) (in thousands)
2017 2017
Earnings (loss) before income taxes (GAAP) 41,922$ 144,890$
Earnings from unconsolidated entities (29,768) (124,784)
Earnings (loss) before income taxes and earnings from unconsolidated entities 12,154 20,106
Land sales (14,470) (59,778)
Cost of land sales 4,712 27,708
Other land development revenues (3,215) (7,963)
Other land development expenses 2,136 9,711
Corporate general and administrative expenses 16,068 62,149
Organizational transformation and termination benefits 20,374 34,395
Depreciation and amortization 58,857 248,353
Write-offs of abandoned development projects and demolition costs — 1,596
Impairment of real estate — 44,288
Interest and other income (13,122) (53,651)
Interest expense 31,958 120,431
Amortization of mortgage procurement costs 1,483 5,550
Loss on extinguishment of debt 118 2,961
NOI related to unconsolidated entities(1) 49,141 209,608
NOI related to noncontrolling interest(2) (12,927) (43,664)
Net Operating Income (Non-GAAP) 153,267$ 621,800$
Three Months Ended
December 31,
Year Ended
December 31,
(in thousands)
Reconciliation of non-GAAP measures
(cont’d)
(1) See page 24 in the supplemental package furnished to the SEC for the quarter ended December 31, 2017 for footnotes. - 33 -
A
Three Months Ended
December 31,
2017 2017 2016
Net earnings (loss) attributable to Forest City Realty Trust, Inc. (GAAP) 102,906$ 206,030$ (158,402)$
Depreciation and amortization 74,394 313,385 321,749
Interest Expense
(1)
51,253 198,777 221,812
Interest rate swap breakage fee — — 24,635
Amortization of mortgage procurement costs 1,921 7,469 8,680
Income tax expense (26,431) (21,422) 85,105
EBITDA attributable to Forest City Realty Trust, Inc. (Non-GAAP) 204,043$ 704,239$ 503,579$
Impairment of real estate — 54,888 463,225
Net loss on extinguishment of debt 46 4,514 33,863
Net gain on disposition of interest in development project — — (136,687)
Net gain on disposition of partial interest in other investment - Nets — — (136,247)
Net gain on disposition of full or partial interests in rental properties (63,460) (154,958) (129,367)
Nets pre-tax EBITDA — — 1,400
Organizational transformation and termination benefits 20,374 34,395 31,708
Adjusted EBITDA attributable to Forest City Realty Trust, Inc. (Non-GAAP) 161,003$ 643,078$ 631,474$
2017 2017 2016
Nonrecourse mortgage debt and notes payable, net, at company share 4,558,045$ 4,558,045$ 5,063,175$
Revolving credit facility — — —
Term loan, net 333,668 333,668 333,268
Convertible senior debt, net 112,637 112,637 112,181
Total debt 5,004,350$ 5,004,350 5,508,624
Less cash and equivalents (242,471) (242,471) (221,478)
Net Debt 4,761,879$ 4,761,879$ 5,287,146$
Net Debt to Adjusted EBITDA (Annualized) 7.4x 7.4x 8.4x
As of December 31, As of December 31,
(in thousands)
Year Ended December 31,
(in thousands)