|FOREST CITY REALTY TRUST, INC. filed this Form DEFM14A on 10/12/2018|
Goldman Sachs first derived a range of theoretical future values per share for common stock as of December 31, 2018, 2019, 2020 and 2021, by multiplying OFFO multiples ranging from 13.0x to 17.0x by the estimates of the Companys OFFO for the NTM Period for the years ending December 31, 2018, 2019, 2020 and 2021, respectively, reflected in the final business case projections and adding accumulated dividends over the same periods of time. These illustrative multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account historical average OFFO multiples for common stock since January 1, 2016, which ranged between 12.1x to 16.8x. By applying a discount rate of 10.3%, reflecting an estimate of the Companys cost of equity, derived by application of the CAPM, which incorporates certain company-specific inputs, including, among others, a beta for the company, as well as certain financial metrics for the United States markets generally, Goldman Sachs discounted to present value as of June 30, 2018, both the theoretical future values per share it derived and the estimated dividends to be paid per share of common stock through the end of the applicable year as reflected in the final business case projections, excluding dividends paid by the Company to stockholders of the Company over the period from January 1, 2018 through June 30, 2018, to yield illustrative present values per share of common stock ranging from $20.22 to $27.47.
Illustrative Discounted Dividend Analysis for the Company
Using the final business case projections, Goldman Sachs performed an illustrative discounted dividend analysis on the Company to derive a range of illustrative present values per share of common stock.
Using discount rates ranging from 9.3% to 11.3%, reflecting estimates of the cost of equity for the Company, derived by application of CAPM, Goldman Sachs derived a range of illustrative equity values per share of common stock by discounting to present value as of June 30, 2018, (a) the estimated dividends to be paid by the Company to stockholders of the Company over the period from June 30, 2018 through December 31, 2021 and (b) a range of illustrative terminal values for the Company as of December 31, 2022, calculated by multiplying OFFO multiples ranging from 13.0x to 17.0x to the estimate of the Companys OFFO for the year ending December 31, 2022, reflected in the final business case projections. This analysis derived illustrative present values per share of common stock ranging from $21.03 to $28.31.
Illustrative Implied Premia of Precedent REIT Transactions
Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for transactions announced in the five years prior to July 27, 2018 involving a U.S. REIT target, where the disclosed transaction value for the target was greater than $1.0 billion and at least 70% of the total consideration consisted of cash consideration (excluding mortgage and timber REIT transactions). For the entire period, using publicly available information, Goldman Sachs calculated the 25th percentile, median and 75th percentile premia of the price paid in the transactions relative to the closing stock prices of the target involved in the transaction on the trading day prior to the date on which such transaction was announced or a news report, management commentary, public filing, or other public disclosure regarding such transaction occurred, which is referred to as the undisturbed date. The following table presents the results of this analysis:
Goldman Sachs then applied a reference range of illustrative premia of 12.7% to 23.8%, reflecting the 25th percentile and 75th percentile one-day premia, to the closing price per share of common stock on June 15, 2018, the last trading day prior to a report that Brookfield was engaging in discussions to acquire the Company, of $20.03 to derive a range of illustrative implied values per share of common stock of $22.57 to $24.80.