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SEC Filings

PREM14A
FOREST CITY REALTY TRUST, INC. filed this Form PREM14A on 09/21/2018
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Table of Contents

Background of the Merger

Forest City’s equity has historically traded at prices that reflect lower multiples of earnings and cash flow than many of our peer companies and at prices that reflect a greater discount to our internal estimates of the NAV of our assets than our perception of the comparable discounts for other publicly traded real estate companies. Our Board has recognized these discounts and we have sought for several years to take actions to reduce or eliminate them. Actions taken have included: (i) improving our corporate governance by establishing a majority independent Board, even when voting control of the Company was held by the founding family of the Company, (ii) electing a chief executive officer who was not a member of the Company’s founding family, (iii) converting to a REIT under the Code beginning with the taxable year ended December 31, 2016, (iv) developing and successfully executing a business plan to improve operating margins, reduce leverage, increase the Company’s focus on a more limited number of real estate segments and markets and reduce investment in real estate development and (v) eliminating the Company’s dual-class capitalization, which had conferred voting control over the Company on the founding family at a time when majority economic ownership was held by the public.

On June 9, 2017, at the 2017 annual meeting of our stockholders (the “2017 AGM”), our stockholders approved a proposal to replace our then-existing dual-class capitalization with a “one-share, one-vote” common stock structure (the “Reclassification”). Prior to the Reclassification, holders of our then-existing Class B common stock, despite not representing a majority of the economic interests in the Company, were entitled to elect directors to fill nine of the 13 seats on our Board. By virtue of its beneficial ownership of a majority of our then-existing Class B common stock, RMS, Limited Partnership (“RMS”), a limited partnership owned exclusively by members of the Company’s founding family, had the power, therefore, to elect a majority of our Board. This voting control by the Company’s founding family was eliminated as a result of the Reclassification.

Notwithstanding the efforts described above, including the Reclassification, in the summer of 2017 our Board recognized that there continued to be a gap between the public value of the Company’s equity and estimates of the NAV of our assets and the trading value of comparable companies. Consistent with its practice of seeking advice and assistance in reviewing and evaluating our business strategy, our Board requested that representatives of Lazard, Goldman Sachs and Sullivan & Cromwell LLP (“Sullivan & Cromwell”) attend a meeting of our Board convened on June 9, 2017 in conjunction with the 2017 AGM. Lazard served as financial advisor to the special committee of independent directors that negotiated the terms of the Reclassification with RMS and had historically performed various discrete financial advisory engagements for the Company in connection with liability management transactions. Goldman Sachs served as financial advisor to the Company in connection with the Reclassification and has been our longstanding outside financial advisor and has performed numerous financial advisory engagements for the Company over the course of this relationship. Sullivan & Cromwell served as legal counsel to the special committee of independent directors that negotiated the terms of the Reclassification, served as legal counsel to the Company in connection with its conversion to a REIT under the Code and has historically served as legal counsel to the underwriters of our debt and equity offerings. In advance of the meeting, our Board directed representatives of Lazard and Goldman Sachs to work with our senior management to develop a stockholder engagement plan and a preliminary list of operating, strategic, financial and structural alternatives potentially available to us, in each case for our Board’s review at the meeting.

On June 9, 2017, our Board convened a meeting, which was attended by members of our senior management and representatives of Lazard, Goldman Sachs, Sullivan & Cromwell and Venable LLP (“Venable”), our regular Maryland law counsel. At the meeting, our Board, after consulting with members of our senior management and representatives of Lazard and Goldman Sachs, reviewed and approved a plan for selected directors and members of our senior management to participate in a series of in-person meetings with our stockholders, including several activist investors, to solicit feedback regarding our performance, business strategy, competitive position and corporate governance. Also at this meeting, representatives of Lazard and Goldman Sachs reviewed with our Board a preliminary list of operating, strategic, financial and structural alternatives potentially available to the Company as well as various preliminary financial analyses of such alternatives. A representative of Venable also reviewed with our Board the duties of the directors in the context of considering such alternatives. Although the

 

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