|FOREST CITY REALTY TRUST, INC. filed this Form 10-Q on 10/30/2018|
Forest City Realty Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
O. Loss on Extinguishment of Debt
For the three and nine months ended September 30, 2018, the Company recorded $19,000 and $3,995,000, respectively, primarily related to debt refinancings during the six months ended June 30, 2018 at Pavilion and Museum Towers, apartment buildings in Chicago, Illinois and Philadelphia, Pennsylvania, respectively. For the three and nine months ended September 30, 2017, the Company recorded $0 and $2,843,000, respectively, primarily related to Illinois Science and Technology Park, office buildings in Skokie, Illinois that were sold during the first quarter of 2017.
P. Net Gain on Disposition of Interest in Unconsolidated Entities
The following table summarizes the net gain on disposition of interest in unconsolidated entities which are included in earnings (loss) from unconsolidated entities:
During the three months ended September 30, 2018, the Company exchanged its preferred ownership interests in ten specialty retail properties included in the Madison International joint venture for our partner’s 50% ownership interest in three life science office buildings located in Cambridge, Massachusetts, and our partner’s 49% ownership interest in DKLB BKLN, a 365-unit apartment community located in Brooklyn, New York, in non-cash transactions.
During the nine months ended September 30, 2018, the Company completed the sale of Antelope Valley Mall (Q1 2018), Mall at Robinson (Q1 2018), Shops at Wiregrass (Q1 2018), Victoria Gardens - Bass Pro Shops (Q1 2018) and Westchester’s Ridge Hill (Q2 2018) under our signed definitive agreement with QIC. These 2018 dispositions generated net cash proceeds of approximately $84,671,000 and a note receivable of $113,065,000, which matures in April 2019.
During the nine months ended September 30, 2018, the Company completed the sale of five unconsolidated federally assisted housing (“FAH”) apartment communities. These dispositions resulted in net cash proceeds of $3,013,000. During the nine months ended September 30, 2017, the Company completed the sale of twenty-nine unconsolidated FAH apartment communities. These dispositions resulted in net cash proceeds of $56,969,000.
During the nine months ended September 30, 2017, the Company sold its ownership interest in Shops at Bruckner Boulevard, an unconsolidated specialty retail center in Bronx, New York. The sale generated net cash proceeds of $8,863,000.
Q. Income Taxes
The Company files its U.S. federal tax return as a REIT and the Company’s TRSs file as C corporations. The Company files individual separate income tax returns in various states.
As a REIT, the Company is required to annually distribute to its stockholders an amount equal to at least 90% of its REIT taxable income (computed without regard to the dividends paid deduction and net capital gain and net of any available net operating losses). The Company may be subject to certain state gross income and franchise taxes, as well as taxes on any undistributed income and federal and state corporate taxes on any income earned by its TRSs. In addition, the Company could be subject to corporate income taxes related to assets held by the REIT which are sold during the five year period following the date of conversion (ending December 31, 2020), to the extent such sold assets had a built-in gain on the date of conversion.
Income tax expense was $2,981,000 and $3,940,000 for the three and nine months ended September 30, 2018, respectively, and $304,000 and $4,817,000 for the three and nine months ended September 30, 2017, respectively. The Company did not recognize any federal corporate income tax on its earnings in the REIT for any of the periods presented.