Forest City Realty Trust — Investor Presentation (February 2018)
37 slides from Forest City Realty Trust's investor presentation, Feb 8, 2018
Slide 1: February 2018 Investor Presentation
February 2018 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 ~60% 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 Core Asset Focus Non-Core Markets 82.2% NOI from 9 Markets (1) 88.7% NOI from 9 Markets(1) >90.0% NOI from 7 Core Markets(2) Development 16.7% 2011 Development Ratio 5.8% Q4 2017 Development Ratio Target development ratio less than ~7.5% and deliver NAV and FFO gr
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
20% (14%) (6%) 4% (19%) (6%) 3% (22%) (12%) (0.1%) (12.1%) (8.1%) (40%) (30%) (20%) (10%) -- 10% 20% 2/7/15 8/7/15 2/7/16 8/7/16 2/7/17 8/7/17 2/7/18 29.4% 35.2% 35.6% (10%) -- 10% 20% 30% 40% 50% 60% 2/7/13 2/7/14 2/7/15 2/7/16 2/7/17 2/7/18 - 5 - …Have Yielded Strong Results 1 1 Year Total Return
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 ▪ 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 non-core and remaining r
Slide 11: Portfolio Composition
Portfolio Composition(1) - 8 - Total Operating Portfolio Office (% of Total NOI) (2) Apartment (% of Total NOI)(3) ~$278MM NOI ~$185MM NOI 3 Note: NOI data as presented is at Company share. (1) Reflects portfolio pro forma for pending retail and FAH dispositions. Percentages based on Q4 2017 estimat
Slide 12: Top Ten Assets
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 ~60% of total NOI Note: Reflects portfolio pro forma for pending retail and FAH as
Slide 13: Office Segment Overview
~$278MM NOI Key Office Stats New York Life Science Other Rent PSF: $52.72 $69.38 $26.13 Occupancy: 99.1 % 99.7 % 90.6 % Total GLA: 4,826 2,129 1,789 Company GLA: 4,466 1,858 1,626 % Total NOI(1): 30% 19% 6% Allocated Debt: $353MM $602MM $191MM Office Segment Overview - 10 - Top Office Assets (% of N
Slide 14: Apartment Segment Overview
Top Apartment Assets (% of NOI)(1) Property Location Units Rent / Unit(2) Economic Occupancy % Apt. NOI Bayside Village San Francisco, CA 431 $ 3,049 93.3 % 6.4 % 8 Spruce Street Manhattan, NY 234 $ 4,846 95.0 % 5.3 % Pavilion Chicago, IL 1,058 $ 1,188 92.8 % 4.4 % Remaining Core 7,134 $ 1,988 94.6
Slide 15: Summary of Potential Growth
- 12 - 3 Near-Term Growth(1) Long-Term Growth(2) Summary of Potential Growth (1) Reflects projects under construction. See page 21 for additional detail. Dollar amounts represent cost at Company share. (2) Reflects development pipeline. Dollar amounts and square feet are at Company share. May not su
Slide 16: Capital Structure Overview
Capital Structure Overview - 13 - Capitalization(1) Capitalization (%)(1)(2) Leverage Metrics & Liquidity(1) 4 (1) All figures shown at Company share unless noted. Balance sheet as of December 31, 2017 and share price as of 1/31/2018. (2) Does not include $242.5MM of cash and cash equivalents or $0.
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
Adjusted EBITDA Margin Expansion - 15 - 5 Identified cost savings are expected to provide ~400-500bps of additional margin improvements by year-end 2018 Illustrative Adjusted EBITDA Margin Enhancement Bridge Note: Diagonal lines on bridge are reflective of the range of potential enhancements.
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 (36% of Office NOI) Other (10% of Office NOI) Note: Margin figures from the year ended December 31, 2017.
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 year ended December
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: ESG Ratings & Rankings
ESG Ratings & Rankings • “A” rating from MSCI • GRESB Green Star Recognition for 3rd straight year • Published 5th annual comprehensive GRI report (www.forestcity.net/corporate-responsibility) • CDP Climate Change participant in 2017 Environmental Performance • Formally committed to set a Science-ba
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
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 48.1 41.8 Q1 2019 Pacific Park Parking Parking 30% n/a 2.5 4.1 Q3 2017 Mint Town Center Apartment 88% 399 73.3 82.7 Q2 2019 Projects U
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 12/31/2017 Completed Retail GLA: 2.6MM SF Completed Of
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 500k 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 Charleston Town Center Atlantic Center Site V Brooklyn Commons Atlantic Center Atl
Slide 29: NAV Components (as of December 31, 2017)
NAV Components (as of December 31, 2017) - 25 - A Q4 2017 Net Stabilized Stabilized Annualized Nonrecourse (Dollars in millions at company's share) NOI (1) Adjustments (2) NOI Stabilized NOI Debt, net (3) Operations Office Real Estate Life Science Cambridge $ 19.8 $ 1.2 $ 21.0 84.0$ (502.5)$ Other L
Slide 30: NAV Components (as of December 31, 2017)
NAV Components (as of December 31, 2017) - 26 - A (Dollars in millions at company's share) Nonrecourse Development Book Value (3) Debt, net (3) Projects under construction (6) 136.8$ (20.6)$ Projects under development 285.2$ (166.3)$ Land inventory Stapleton 50.1$ —$ Commercial Outlots 2.8$ —$ Other
Slide 31: NAV Components Footnotes
1) Q4 2017 Earnings Before Income Taxes reconciled to NOI for the three months ended December 31, 2017 in the Supplemental Operating Information section of the supplemental package, furnished to the SEC on form 8-K on February 8, 2018. 2) The net stabilized adjustments column represents adjustments
Slide 32: NAV Components Footnotes
NAV Components-Footnotes(as of December 31, 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 oper
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
Definitions of non-GAAP measures Net Asset Value Components We disclose components of our business relevant to calculate NAV, a non-GAAP measure. There is no directly comparable GAAP financial measure to NAV. We consider NAV to be a useful supplemental measure which assists both management and inves
Slide 35: Definitions of non-GAAP measures
Definitions of non-GAAP measures FFO FFO, a non-GAAP measure, along with net earnings, provides additional information about our core operations. While property dispositions, acquisitions or other factors impact net earnings in the short-term, we believe FFO presents a consistent view of the overall
Slide 36: Reconciliation of non-GAAP measures
Reconciliation of non-GAAP measures (1)-(3) See page 20 in the supplemental package furnished to the SEC for the three months and year ended December 31, 2017 for footnotes. - 32 - A Reconciliation of Earnings (Loss) Before Income Taxes (GAAP) to Net Operating Income (non-GAAP) (in thousands) 2017 2
Slide 37: Reconciliation of non-GAAP measures (cont'd)
Reconciliation of non-GAAP measures (cont’d) (1) See page 24 in the supplemental package furnished to the SEC for the quarter ended December 31, 2017 for footnotes. - 33 - A Three Months Ended December 31, 2017 2017 2016 Net earnings (loss) attributable to Forest City Realty Trust, Inc. (GAAP) 102,9
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