Albert Ratner sues to delay vote on Forest City sale

November 13, 2018

Albert Ratner sues to delay vote on Forest City sale

CLEVELAND, Ohio -- The path to Thursday’s planned shareholder vote on the sale of Forest City Realty Trust, Inc., hasn’t been a smooth one.

And it’s getting rockier.

Albert Ratner, a former chief executive officer and member of the Cleveland-based company’s founding family, filed a lawsuit seeking to delay the vote on grounds that shareholders haven’t received complete, accurate information. The suit, filed in federal court, is an escalation of Ratner’s recent campaign against a transaction he describes as underpriced and unjust.

“This is my life,” Ratner, who is 90, said of the company during an interview late last week. “While we haven’t always been successful, the one thing we’ve always tried to do is we’ve tried to be fair to people. And this is just plain unfair.”

In his lawsuit, Ratner asks the court to temporarily block shareholders from voting on the proposed sale of Forest City, a publicly traded real estate investment trust, to an affiliate of Toronto-based Brookfield Asset Management for $25.35 per share. He argues that the proxy statement, a regulatory filing meant to inform and guide shareholders, omitted key facts and included erroneous information.

Ratner and his wife own just under 1 percent of the company’s shares. Members of the Ratner, Miller and Shafran families, who controlled the nearly century-old real estate business for most of its history, collectively own roughly 10 percent of the stock. The only other family member to publicly take a position on the sale is James Ratner, a company director whose opposition was noted in the proxy filing.

“I’m not speaking for the rest of the family, other than to say we are a closely-knit family,” Albert Ratner said.

Forest City has declined to comment publicly on Ratner’s pushback.

The company announced the Brookfield deal in late July, after an unusual, divided vote by its recently reconfigured board. Directors had been evenly split, six to six, but ultimately voted seven to five to forge ahead with the deal.

CEO David LaRue, a longtime Forest City employee, was the swing vote. The other proponents were newcomers to the board, some of them seated only two months beforehand at the behest of two hedge funds who had bought up company stock.

Ratner, who was chief executive from 1975 to 1995 and a director until 2011, says that shareholders are getting shortchanged. Forest City’s real estate - apartments, office buildings, mixed-use projects and other properties in major cities - is worth more than the price that Brookfield is paying, he notes.

And Ratner asserts that shareholders’ returns are further depressed by the fact that Forest City isn’t paying out dividends for the second half of this year, while the Brookfield transaction is on the table. The sale, if approved, would happen in late 2018.

In recent reports, two shareholder-advisory firms have expressed support - though somewhat tempered - for the deal.

Glass Lewis & Co. noted Ratner’s concerns but described Brookfield’s offer as a “financially compelling exit point” for shareholders and “a reasonable valuation” of the company relative to its peers. The benefits of selling now outweigh the risks of maintaining Forest City as a standalone business, Glass Lewis said last week.

Institutional Shareholder Services also recommended that shareholders vote in favor of the transaction, though the firm said Ratner “has raised valid concerns with the approval process and transaction terms.”

Ultimately, ISS concluded after conversations with company leaders and Ratner, “cautionary support for this proposal is warranted, as it represents an opportunity to crystallize value at a premium in a rising interest rate environment.”

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