Forest City Realty Trust — Investor Presentation (November 2017)
38 slides from Forest City Realty Trust's investor presentation, Nov 2, 2017
Slide 1: November 2017 Investor Presentation
November 2017 Investor Presentation Exhibit 99.1
Slide 2: Disclosure Information
Disclosure Information INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS Statements made in this presentation that state the Company’s or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is important to note that the Company's futu
Slide 3: Table of Contents
Section Page # Our Company 1 Our Portfolio 6 Near-Term Priorities and Long-Term Strategy 8 Capital Structure Overview 13 Property Margins and Overhead 15 Corporate Responsibility and ESG 19 Appendix: Additional Financial Information 21 Table of Contents 1 2 3 4 5 A 6
Slide 4: Value Proposition
Premier assets in core, high-barrier-to-entry urban markets Scale and focus within core markets; top 10 assets comprise ~59% of NOI(1) Outsized growth opportunities from existing JV buyouts, in-process developments and entitled pipeline in attractive core markets Identified margin enhancemen
Slide 5: Guiding Principles
Guiding Principles - 2 - 1 (1) Core markets include Boston, Dallas, Denver and Los Angeles as well as the Greater New York City, San Francisco and Washington, D.C. metropolitan areas. Reflective of portfolio pro forma for pending retail and FAH dispositions. Focused Placemaking Premier national po
Slide 6: Key Factors: 2011 vs Today vs Target
Key Factors As of 2011 Today Target S tra te g ic G o a ls Core Asset Focus Non-Core Markets 82.2% NOI from 9 Markets(1) 88.3% NOI from 9 Markets(1) >90.0% NOI from 7 Core Markets(2) Development 16.7% 2011 Development Ratio 5.8% Q3 2017 Development Ratio Target development ratio less than ~7.5% and
Slide 7: Recent Steps & Accomplishments
- 4 - Recent Steps & Accomplishments… 1 Management and the Board have a proven track record of achieving their stated goals and are focused on continuing successful execution of the Company’s strategy Increased Focus Narrowing focus to two property types, apartment and office, from eight in 2011
Slide 8: Have Yielded Strong Results
18.7% 11.4% 21.5% (20%) (10%) -- 10% 20% 30% 40% 10/31/14 4/30/15 10/31/15 4/30/16 10/31/16 4/30/17 10/31/17 48.3% 57.7% 58.1% (10%) 20% 50% 80% 10/31/ 2 8/31/13 6/3 /14 4/30/15 2/29/16 12/31/16 10/31/17 34% (5%) 3% 16% (11%) 4% 14% (14%) (3%) 115% 28% 43% - 5 - …Have Yielded Strong Results 1 1 Year
Slide 9: Near-Term Strategic Priorities
Near-Term Strategic Priorities - 6 - Objective Near-Term Impact Execute Sale of Retail Portfolio Reduces retail exposure, with ~92% of pro forma NOI from office and multifamily assets Margin Improvement ~400-500bps of identified adjusted EBITDA margin improvement Increase Dividend Continue to
Slide 10: Long-Term Strategy
Long-Term Strategy - 7 - 2 Portfolio Optimization Focus investing in top tier core markets (inventory of opportunity: NYC, D.C., San Francisco and Denver) Deliver ongoing “power of place” developments into stabilized core portfolio Continue to evaluate the merit of the long-term ownership of n
Slide 11: Portfolio Composition
[CATEGORY NAME] 28% Non-Core 9% Brooklyn 19% Manhattan 11% Cambridge Life Science 16% Other Life Science 3% Other Office 6% Portfolio Composition - 8 - Total Operating Portfolio Office (% of Total NOI)(2) Apartment (% of Total NOI)(3) ~$281MM NOI ~$188MM NOI 3 (1) Note: NOI data as presented is at C
Slide 12: Top Ten Assets
Top 10 59% Remaining 41% Atlantic Terminal Office Top Ten Assets - 9 - 3 Pro forma for pending retail portfolio dispositions, Forest City’s portfolio is concentrated in a select number of high-quality assets with the top ten assets comprising ~59% of total NOI Note: Reflects portfolio pro forma for
Slide 13: Office Segment Overview
New York 54% Boston 29% Washington, D.C. 8% San Francisco 1% Philadelphia 2% Other 6% Key Office Stats New York Life Science Other Rent PSF: $52.40 $68.93 $25.26 Occupancy: 98.2% 95.1% 91.1% Total GLA: 4,823 2,126 2,081 Company GLA: 4,463 1,855 1,773 % Total NOI(1): 30% 19% 6% Allocated Debt: $406MM
Slide 14: Apartment Segment Overview
New York 10% Washington, D.C. 14% San Francisco 11% Chicago 9% Boston 8% Philadelphia 7% Denver 7% Los Angeles 5% Dallas 5% Other 25% Top Apartment Assets (% of NOI)(1) Property Location Units Rent / Unit(2) Economic Occ’y % Apt. NOI Bayside Village San Francisco, CA 431 $3,039 93.0% 6% 8 Spruce Str
Slide 15: Near-Term and Long-Term Growth
Year Opening # of Projects Net Cost ($MM) NOI Range ($MM) Yield Range 2017 1 83.4$ 2018 3 157.2 2019 2 14.1 6 254.7$ $16.8 - $18.1 6.6% - 7.1% Property Type # of Projects Net Cost ($MM) NOI Range ($MM) Yield Range Apartment 5 217.3$ Retail 1 37.4 6 254.7$ $16.8 - $18.1 6.6% - 7.1% By Year By Propert
Slide 16: Capital Structure Overview
Company Share Net Debt / TEV 43% Fixed Charge Coverage Ratio 2.14x Net Debt / Adj. EBITDA 7.8x Total Liquidity: 783.5$ Cash and Cash Equivalents 226.4$ Revolver Capacity 557.1 Common Equity Secured Debt Term Loan Convertible Senior Debt Capital Structure Overview - 13 - Capitalization(1) Capitalizat
Slide 17: Illustrative Deleveraging Plan
Illustrative Deleveraging Plan - 14 - Leverage target of ~6.5x by year-end 2018 as the Company continues its focus on enhancing the balance sheet profile and builds equity in stabilized assets 4 Note: The 2017 and 2018 information is illustrative. It is based on a number of significant assumptions a
Slide 18: Adjusted EBITDA Margin Expansion
49.7% ~125bps ~150bps ~225bps ~275bps ~50bps 53.7% ~75bps 54.7% Year-End 2016 Property NOI Corporate G&A and Other Operations NOI Development Overhead Year-End 2018 Adjusted EBITDA Margin Expansion - 15 - 5 Identified cost savings are expected to provide ~400-500bps of additional margin improvements
Slide 19: Office NOI Margins
Office NOI Margins - 16 - Total Office 5 Our New York and Life Science assets have adjusted property margins in line with top-quartile performing peers New York (54% of Office NOI) Life Science (35% of Office NOI) Other (11% of Office NOI) Note: Margin figures from the nine months ended September 30
Slide 20: Apartment NOI Margins
Apartment NOI Margins - 17 - Total Apartment 5 Our apartment portfolio has adjusted property margins which are generally in line with peers operating in the respective markets Core Markets (75% of Apartment NOI)(1) Non-Core (25% of Apartment NOI)(2) Note: Margin figures from the nine months ended Se
Slide 21: Corporate Overhead
Corporate Overhead - 18 - 5 Forest City is focused on improving efficiency to align its corporate overhead with best-in-class peers G&A as a % of Revenue(1) Note: Revenue and G&A data as of fiscal year-end 2016 for Forest City. (1) Forest City revenue is pro rata for JVs, minority interests and disc
Slide 22: Corporate Responsibility and ESG
Green Building Performance Committed to set a Science-based GHG Emissions Reduction target Desgnated a 2017 LEED Power Builder by the US Green Building Council Achieved an 11.1% energy reduction since 2010 and 7.3% water use reduction since 2013 ESG Ratings & Rankings “A” rating from MSC
Slide 23: Proactive Management/Alignment of ESG Topics and Risks
Proactive Management/Alignment of ESG Topics and Risks to Business Strategy 6 - 20 - Ethics & Anti-corruption Policies & Training Cybersecurity Board Diversity ESG Governance & Accountability Materiality & Stakeholder Engagement Building Lifecycle: Sustainable Operations Diversity & In
Slide 24: Appendix
Appendix THE NEW YORK TIMES BUILDING | NEW YORK, NY
Slide 25: Development Detail
Development Detail - 21 - Project Name Property Type Ownership(3) Units / SF(4) Cost Incurred(MM)(4) Expected Cost(MM)(4) Anticipated Stabilization 2017 Phased Openings Axis Apartment 30% 391 46.5 41.8 Q1 2019 38 Sixth Avenue Apartment 30% 303 42.6 50.1 Q3 2018 Pacific Park Parking Parking 30% n/a 2
Slide 26: Summary of Stapleton
Summary of Stapleton - 22 - Plans for Stapleton include more than 12,000 homes and apartments, 3MM SF of retail and 10MM SF feet of office, research, development and industrial space # of Lots Sold to Homebuilders Completed Project Summary as of 9/30/2017 Completed Retail GLA: 2.5MM SF Completed Off
Slide 27: The Yards Development Case Study
The Yards Development Case Study - 23 - At full build-out, The Yards is expected to include up to 3,000 residential units, 1.8MM SF of office space and approximately 400k SF of retail and dining space ARRIS | WASHINGTON, D.C. A FOUNDRY LOFTS | WASHINGTON, D.C. Phase 1 Value Created(2) = $205MM - $23
Slide 28: Summary of Retail Transaction
Summary of Retail Transaction - 24 - A QIC Madison(1) Forest City Westfield San Francisco Centre Ballston Quarter (redevelopment) East River Plaza Station Square The Yards: - Boilermaker Shops - Lumber Shed - Twelve12 Boulevard Mall Charleston Town Center Atlantic Center Site V Brooklyn Commons Atla
Slide 29: NAV Components (as of September 30, 2017)
NAV Components (as of September 30, 2017) - 25 - A Q3 2017 Net Stabilized Stabilized Annualized Nonrecourse (Dollars in millions at company's share) NOI (1) Adjustments (2) NOI Stabilized NOI (3) Debt, net (4) Operations A B =A+B Office Real Estate Life Science Cambridge $ 17.2 $ 3.3 $ 20.5 82.0$ (5
Slide 30: NAV Components (continued)
NAV Components (as of September 30, 2017) - 26 - A (Dollars in millions at company's share) Nonrecourse Development Book Value (4) Debt, net (4) Projects under construction (6) 208.6$ (59.4)$ Projects under development 282.8$ (166.0)$ Land inventory Stapleton 46.8$ —$ Commercial Outlots 7.8$ —$ Othe
Slide 31: NAV Components Footnotes
1) Q3 2017 Earnings Before Income Taxes reconciled to NOI for the three months ended September 30, 2017 in the Supplemental Operating Information section of the supplemental package, furnished to the SEC on form 8-K on November 2, 2017. 2) The net stabilized adjustments column represents adjustments
Slide 32: NAV Components Footnotes (continued)
NAV Components-Footnotes(as of September 30, 2017) - 28 - NOI attributable to Kapolei Lofts, an apartment community on land in which we lease, is not included in NOI from lease-up properties. We consolidate the land lessor, who is entitled to a preferred return that currently exceeds anticipated ope
Slide 33: Definitions of non-GAAP measures
Definitions of non-GAAP measures EBITDA EBITDA, a non-GAAP measure, is defined as net earnings excluding the following items at our company share: i) non-cash charges for depreciation and amortization; ii) interest expense; iii) amortization of mortgage procurement costs; and iv) income taxes. EBITD
Slide 34: Definitions of non-GAAP measures (cont'd)
Definitions of non-GAAP measures(cont’d) NOI NOI, a non-GAAP measure, reflects our share of the core operations of our rental real estate portfolio, prior to any financing activity. NOI is defined as revenues less operating expenses at our ownership within our Office, Apartments, Retail, and Develop
Slide 35: Definitions of non-GAAP measures (cont'd)
Definitions of non-GAAP measures(cont’d) Operating FFO In addition to reporting FFO, we report Operating FFO, a non-GAAP measure, as an additional measure of our operating performance. We believe it is appropriate to adjust FFO for significant items driven by transactional activity and factors relat
Slide 36: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures (1)-(3) See page 22 in the supplemental package furnished to the SEC for the three and nine months ended September 30, 2017 for footnotes. Additionally, see page 25 in the supplemental package furnished to the SEC for the year-ended December 31, 2016 for footnotes
Slide 37: Reconciliation of non-GAAP measures (cont'd)
Reconciliation of non-GAAP measures(cont’d) (1) See page 25 in the supplemental package furnished to the SEC for the quarter ended September 30, 2017 for footnotes. Additionally, see page 32 in the supplemental package furnished to the SEC for the year-ended December 31, 2016 for footnotes. - 33 - A
Slide 38: 2017 Guidance
Low High Net earnings attributable to common stockholders - diluted 0.43$ 0.48$ Depreciation and amortization—real estate 1.17 1.17 Gain on disposition of full or partial interests in rental properties, net of tax (0.32) (0.32) Impairment of depreciable rental properties 0.20 0.20 Adjustments for co
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