CLEVELAND, June 3, 2013 /PRNewswire/ -- Forest City Enterprises, Inc., (NYSE: FCEA and FCEB) and QIC, one of the largest institutional investment managers in Australia, today announced the signing of an agreement to form joint ventures to recapitalize and invest in a portfolio of eight of Forest City's regional retail malls.
The transaction values the eight properties at a total of $2.05 billion, representing a cap rate of approximately 5.75 percent on forecasted 2013 net operating income. Sales at the eight malls currently average approximately $500 per square foot, on a rolling 12-month basis. Upon closing, Forest City expects to raise cash liquidity of approximately $330 million, after transaction costs. Closing of the joint ventures is expected to occur before the end of the company's fiscal third quarter.
Under the agreement, Forest City will contribute its current ownership interest in each of the properties to the joint venture and QIC will acquire 49 percent of those interests for cash. Ownership of the individual properties, at closing, will vary based on existing partnerships currently in place at three of the malls. Forest City will be the managing member of the individual joint ventures and will continue to be responsible for leasing, operations, marketing, financing, development services and asset management of the properties.
"We are pleased to partner with QIC, an experienced global investor, to invest in and enhance these strong retail centers," said David J. LaRue, Forest City president and chief executive officer. "This is another example of our strategy of securing strategic capital partners to invest with us in both existing assets and new opportunities. The transaction clearly demonstrates the tremendous value of these properties. Unlocking a portion of that value allows us to advance our deleveraging efforts while also reinvesting in our portfolio and new development. I want to thank our entire transaction team, led by James Ratner, Duane Bishop and Frank Wuest, as well as everyone involved from QIC, for achieving this great outcome."
Managing Director of QIC Global Real Estate, Steven Leigh, said QIC was pleased to enter into a partnership with Forest City, a highly experienced, long-term owner, developer and manager of prime real estate throughout the United States. Leigh said QIC's expansion into the United States retail sector is a natural progression for the business following extensive investigation of the real estate market.
"The joint venture with Forest City Enterprises for investment in a portfolio of eight, high-quality retail assets represents a significant opportunity for QIC to further expand into the United States with a successful retail operator and is part of our long-term investment strategy," said Leigh. "QIC has more than 20 years of experience in investing, managing and adding value to prime retail assets in Australia and internationally. In this time we have established a blue-chip portfolio of investments comprising large-scale shopping centres and CBD office buildings. We now look forward to working with Forest City to implement our successful investment and management strategies in the United States."
Preliminary priorities for the joint venture will be renovation and/or expansion of four malls: Galleria at Sunset in Henderson, Nevada, Antelope Valley Mall in Palmdale, California, Short Pump Town Center in Richmond, Virginia, and South Bay Galleria in Redondo Beach, California. The other properties included in the joint venture are Victoria Gardens in Rancho Cucamonga, California, Charleston Town Center in Charleston, West Virginia, Mall at Robinson near Pittsburgh, Pennsylvania, and Promenade in Temecula, California. Forest City initially plans to use a majority of the liquidity from the transaction to reduce debt, but also expects to use a portion of the liquidity to fund the expansion and reinvestment initiatives referenced above, as well as invest in the balance of its mature real estate portfolio and new development opportunities in its core markets.
About Forest City
Forest City Enterprises, Inc. is an NYSE-listed national real estate company with $10.6 billion in total assets. The company is principally engaged in the ownership, development, management and acquisition of commercial and residential real estate and land throughout the United States. For more information, visit www.forestcity.net.
QIC is Australia's third largest institutional investment manager* with $71.3 billion in funds under management**. With a strong foundation in Australia, their global presence extends to Asia, Europe and the United States. Established in 1991 by the Queensland Government to manage its long term investments, QIC operates as an independent and commercial organization with a sole investment management focus. QIC's current global real estate portfolio comprises over $10 billion in assets.
*Rainmaker Survey – September 2012
** As at 31 March 2013
Safe Harbor Language
Statements made in this news release that state Forest City's or its management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. The company's actual results could differ materially from those expressed or implied in such forward-looking statements due to various risks, uncertainties and other factors. Risks and factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the impact of current lending and capital market conditions on its liquidity, ability to finance or refinance projects and repay its debt, the impact of the current economic environment on its ownership, development and management of its real estate portfolio, general real estate investment and development risks, vacancies in its properties, the strategic decision to reposition or divest portions of the company's land business, further downturns in the housing market, competition, illiquidity of real estate investments, bankruptcy or defaults of tenants, anchor store consolidations or closings, international activities, the impact of terrorist acts, risks associated with an investment in a professional sports team, its substantial debt leverage and the ability to obtain and service debt, the impact of restrictions imposed by its credit facility and senior debt, exposure to hedging agreements, the level and volatility of interest rates, the continued availability of tax-exempt government financing, the impact of credit rating downgrades, effects of uninsured or underinsured losses, effects of a downgrade or failure of its insurance carriers, environmental liabilities, conflicts of interest, risks associated with the sale of tax credits, risks associated with developing and managing properties in partnership with others, the ability to maintain effective internal controls, compliance with governmental regulations, increased legislative and regulatory scrutiny of the financial services industry, volatility in the market price of its publicly traded securities, inflation risks, litigation risks, cybersecurity risks and cyber incidents, as well as other risks listed from time to time in the company's SEC filings, including but not limited to, the company's annual and quarterly reports.
SOURCE Forest City Enterprises, Inc.
Robert O'Brien, Executive Vice President - Chief Financial Officer, 216-621-6060, Jeff Linton, Senior Vice President - Corporate Communication, 216-621-6060