Brookfield to Buy Forest City in $11.4B Deal

By Paul Rosta

Forest City president & CEO David LaRue

Ending years of speculation about Forest City Realty Trust’s future, Brookfield Asset Management has agreed to buy the Cleveland-based REIT in an $11.4 billion deal, the companies announced on Tuesday.

Scheduled to close during the fourth quarter, the acquisition would significantly expand Brookfield’s holdings in multiple  categories. The Cleveland-based REIT’s portfolio encompasses 6.3 million square feet of office space, 2.3 million square feet of life science facilities, 2.2 million square feet of retail and 18,500 multifamily unit. Also included are five development projects in the New York City area, San Francisco and Washington, D.C. 

“Forest City has created a high-quality portfolio of operating and development assets over its 100-year history,” said Brookfield Property Group CEO Brian Kingston. “We look forward to creating further value in these great assets on behalf of our limited partners.” 

The proposed deal is the latest in a series of major moves by both companies. On July 26, GGP Inc.’s shareholders approved the retail REIT’s planned $14.8 billion acquisition by another Brookfield affiliate, Brookfield Property Partners L.P.

The Yards, a Forest City property in Washington, D.C.

For Forest City’s part, the sale to Brookfield Asset Management would cap a lengthy makeover. Among other steps, Forest City has adopted REIT status, refreshed its board of directors, and reconfigured its portfolio to focus on office, mixed-use and residential properties in the company’s strongest markets.

The firm has completed a series of major deals in the past year. In late June, Forest City completed the restructuring of Greenland Forest City Partners, the joint venture that is developing the 22-acre Pacific Park Brooklyn project in Brooklyn, N.Y. Last September, Forest City agreed to sell its controlling interest in a 2.1 million-square-foot retail portfolio to its partner, Madison International Realty. On the buy side, in April Forest City closed on Madison International’s interest in a 2.3 million-square-foot science and technology park in Cambridge, Mass.

“We are pleased that Brookfield recognizes the success of our ongoing efforts to strengthen the business, the attractiveness of our office, apartment and mixed-use portfolio, the skill and dedication of our associates, and the significant opportunities to drive future growth embedded in our more than 18 million square feet of entitlements,” Forest City President & CEO David LaRue commented.

Forest City’s push to reinvent itself had been attracting attention for some time. On March 22, Forest City released a letter informing its shareholders that it had turned down a non-binding proposal from an unnamed suitor, described as “a large financial investor with a strong track record of executing large, complex real estate and corporate transactions.” The suitor told Forest City that it was unwilling to eliminate third-party consents as a condition to signing or closing.