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Brookfield buys Forest City for $11.4B

Brookfield Asset Management purchased Forest City Realty Trust in an all-cash deal valued at $11.4 billion on Tuesday morning.

Brookfield paid $25.35 a piece for all of Forest City’s outstanding shares, a 26.6 percent premium, according to joint press release issued by the two publically traded companies.

Forest City values its portfolio at $8 billion but, after factoring in its debts, which are included in the acquisition, Bloomberg pegs the true purchase price at $6.8 billion.

The deal is expected to close in the fourth quarter of this year, pending approval from Forest City stockholders.

After the acquiring the Cleveland-based REIT, Brookfield Property Group CEO Brian Kingston praised Forest City’s robust collection of assets, which includes 6.3 million s/f of office space and 18,500 multifamily units nationwide and 33 properties in New York, alone.

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

Forest City has been entertaining takeover pitches for months, though none has passed muster until now.

Following an attempted buyout this past spring, the company issued a statement saying “stockholder value would be better enhanced on a stand-alone basis” rather than by accepting the terms offered.

The past year and a half have been tumultuous for the company that pioneered Brooklyn’s real estate renaissance.

Cousins Bruce and Charles Ratner relinquished control of the company at the end of 2016 following an investor campaign to decentralize the board’s power structure. Last year, the Mary Anne Gilmartin stepped down as CEO of its New York operation to start her own firm and this year, the company ceded control of its marquee property, Pacific Park, by reducing its ownership from 30 percent to 5 percent.

Greenland USA, a Chinese state-owned developer, now owns 95 percent of the 22-acre development site.

Forest City still has several high-profile properties in New York City, including the New York Times Building on Eighth Avenue, the New York by Gehry apartments on Spruce Street and its first big redevelopment project in Brooklyn: the MetroTech office complex. It also counts several city malls as part of its 2.2 million s/f retail portfolio, including Atlantic Center and Atlantic Terminal in Brooklyn and Queens Place in Forest Hills.

Additionally, it has high-profile assets in San Francisco and Washington, D.C., as well as a 2.3 million s/f of life science assets, primarily in Cambridge, Massachusetts.

Forest City CEO David LaRue credits the company’s employees with building a diverse portfolio and said he feels the sale will benefit the REIT’s investors.

“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,” he said.

“We believe that this transaction will deliver an immediate cash premium to stockholders for their investment and represents the best path forward for our company and our stockholders.”

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