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SEC Filings

DEFM14A
FOREST CITY REALTY TRUST, INC. filed this Form DEFM14A on 10/12/2018
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estimates (compared to 5.35% in the base case as-of-December 31, 2020 NAV estimates). The result of applying these modified cap rates yielded an estimated NAV per share of $33.01 for the modified as-of-March 31, 2018 NAV estimates and an estimated NAV per share of $43.78 for the modified as-of-December 31, 2020 NAV estimates (in each case without applying any discount rates).

 

   

Development Sensitivity with Other Asset-Specific Adjustments: Our management also prepared several sensitivity analyses estimating “conservative,” “fair,” and “favorable” cases for potential value creation embedded in our development pipeline, compared to the alternative of attributing current book value under the “base” case. The conservative case was based on an average of two bids we received during the strategic process with respect to our development pipeline (i.e., the Round 2 indications submitted by each of Sponsor B and Sponsor E), with certain adjustments to align with management’s view of book value. The favorable case was based on management’s assessment of potential future cash flows of development projects and mark to market valuation for land (rather than ascribing book value to these development and land assets), using the same cap rates as used in the base case analysis described above and discounted to the present using a 8% discount rate. The fair case was the average of management’s conservative and favorable cases. In addition, as part of these three analyses, our management also made certain negative valuation adjustments to estimated NAV to account for potential downside scenarios relative to the base case as it relates to certain known encumbrances, primarily ground lease rent resets, and partner participation payments. Applying these analyses to the as-of-March 31, 2018 NAV estimates and using a weighted average cap rate of 5.21% for the portfolio yielded a per share NAV estimate of $27.67 in the conservative case, a per share NAV estimate of $29.51 in the fair case and a per share NAV estimate of $31.35 in the favorable case.

 

   

Discount Rate Sensitivity: As presented in the table below, given that the base case of the as-of-December 31, 2020 NAV estimates described above was not generally discounted to the present, our management also prepared several alternative valuations of the as-of-December 31, 2020 NAV estimates, for each of the base case, conservative case, fair case and favorable case, using a weighted average cap rate of 5.35% for the portfolio and projected dividends through 2020, which were all discounted to the present by applying a broad range of discount rates ranging from 12% to 6%. Applying these assumptions to the as-of-December 31, 2020 NAV estimates and projected dividends through 2020 yielded a range of per share NAV estimates of $29.11 to $33.57 under the conservative case, $30.05 to $34.66 under the fair case, $30.59 to $35.28 under the base case and $31.00 to $35.75 under the favorable case.

 

     Discount Rate  

Scenario

   12%      10%      8%      6%  

Conservative

   $ 29.11      $ 30.52      $ 32.01      $ 33.57  

Fair

   $ 30.05      $ 31.51      $ 33.04      $ 34.66  

Base

   $ 30.59      $ 32.07      $ 33.63      $ 35.28  

Favorable

   $ 31.00      $ 32.50      $ 34.08      $ 35.75  

In order to fully understand management’s alternative valuations of the as-of-December 31, 2020 NAV estimates, the table above must be read together with the full text of this section. The table alone does not constitute a complete description of management’s alternative valuations of the as-of-December 31, 2020 NAV estimates. Considering the data in the table above without considering the full description of the alternative valuations of the as-of-December 31, 2020 NAV estimates, including the methodologies and underlying assumptions, could create a misleading or incomplete view of management’s alternative valuations of the as-of-December 31, 2020 NAV estimates.

Selected Third Party Analysis

On February 2, 2018, the initial transaction committee engaged a nationally recognized commercial real estate services firm to provide market-based input regarding a selected portfolio of the Company’s most significant

 

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