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SEC Filings

10-Q
FOREST CITY REALTY TRUST, INC. filed this Form 10-Q on 10/30/2018
Entire Document
 

Office
The increases in revenues and operating expenses along with the decrease in equity in earnings related to the change in consolidation method are due to the change from equity method to full consolidation method of accounting for the three life science office properties at University Park at MIT (Q3-2018) upon the acquisition of our partner’s equity interests in those properties. The decreases in revenues and operating expenses related to recent disposals are primarily due to the sale of Illinois Science & Technology Park, office buildings in Skokie, Illinois (Q1-2017), and Post Office Plaza, an office building in Cleveland, Ohio (Q3-2017). The decrease in equity in earnings related to recent disposals is primarily due to a non-recurring land sale adjacent to our suburban Cleveland, Ohio office properties (Q3-2017).
Apartments
The decreases in revenues and operating expenses along with the increase in equity in earnings related to the change in consolidation method are due to the change from full consolidation to equity method accounting upon the deconsolidation of Bayside Village, an apartment community in San Francisco, California (Q1-2018). The decreases in revenues and operating expenses along with the decrease in equity in earnings related to recent disposals are primarily due to the sale of 500 Sterling Place, an apartment community in Brooklyn, New York (Q3-2017), and our FAH apartment communities and related service and management companies during 2017 and 2018.
Retail
The decreases in revenues and operating expenses related to recent disposals are primarily due to the deed in lieu transaction on Boulevard Mall, a regional mall in Amherst, New York (Q4-2017), and the sales of The Shops at Northfield Stapleton, a regional mall in Denver, Colorado (Q4-2017), and Brooklyn Commons, a specialty retail center in Brooklyn, New York (Q2-2018). The decreases in equity in earnings related to recent disposals are primarily due to the various assets sold under the signed definitive agreements with QIC and Madison International to dispose of 10 regional malls and 11 specialty retail assets, respectively. The decreases in revenues and operating expenses reported in Other are primarily due to the transfer of service and management functions to QIC and Madison International relating to the properties sold under the signed definitive agreements.
Development
The decrease in equity in earnings for other is primarily related to the $6,218,000 write-off of abandoned development projects of unconsolidated entities in the first quarter of 2018. The decrease in revenue and operating expenses related to other is primarily due to a reduction of development fees and reduced overhead.
Corporate
The decrease in operating expenses is primarily due to the ongoing Corporate overhead reductions and the recognition of the remaining deferred gain related to the Terminal Tower sale (our previous Corporate headquarters). At the time of the Terminal Tower sale, we maintained continuing involvement through a lease and were required to defer a portion of the gain on sale. The deferred gain was being amortized over the 36 month lease term (with extensions). Upon vacating the premises early, the remaining deferred gain was recorded as contra rent expense in accordance with GAAP.
The fluctuation in organizational transformation and termination benefits is a result of the transactional nature of these project costs. The following table summarizes the components of organizational transformation and termination benefits:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
2017
 
2018
2017
 
(in thousands)
Termination benefits
$
4,095

$
1,764

 
$
12,320

$
10,501

Strategic alternative costs
4,194


 
16,868


Shareholder activism costs

869

 

3,520

Total
$
8,289

$
2,633

 
$
29,188

$
14,021

For the periods presented, we experienced workplace reductions and recorded the associated termination benefits expenses (outplacement and severance payments based on years of service and other defined criteria) for each occurrence. We record a severance liability during the period in which costs are estimable and notification has been communicated to affected employees.
Strategic alternative costs consist primarily of professional fees (legal and investment banking advisors) incurred related to the Board of Directors’ process to consider a broad range of alternatives to enhance stockholder value, including, but not limited to, an accelerated and enhanced operating plan, structural alternatives for our assets, and potential merger, acquisition or sale transactions. If the Merger is consummated, we expect to incur additional third party strategic alternative costs, some of which may be material.
Shareholder activism costs are comprised of advisory, legal and other professional fees associated with activism matters.

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