Forest City Enterprises, Inc.
Address:
Terminal Tower
50 Public Square, Suite 1100
Cleveland, Ohio 44113-2203
U.S.A.
Telephone: (216) 621-6060
Fax: (216) 263-6208
http://www.fceinc.com
Statistics:
Public Company
Incorporated: 1960
Employees: 4,271
Operating Revenues: $906.57 million (2001)
Stock Exchanges: New York
Ticker Symbol: FCEA
NAIC: 531110 Lessors of Residential Buildings and Dwellings; 531120 Lessors of Nonresidential Buildings (Except Miniwarehouses)
Company Perspectives:
Forest City Enterprises is a national owner and developer of real estate, committed to building superior, long-term value for its shareholders and customers. We accomplish this through the operation, acquisition and development of commercial, rental housing, urban entertainment and land development projects. We operate by developing meaningful relationships and leveraging our unparalleled entrepreneurial capabilities with creative talent in a fully integrated real estate organization.
Key Dates:
1922: Charles Ratner founds Forest City Lumberyard in Cleveland, Ohio.
1924: Ratner's brother Leonard founds Buckeye Lumber.
Late 1920s:[fsps*2.5]Charles and Leonard form B & F Building Co. to construct homes in Cleveland.
1930s:Forest City begins acquiring real estate in the Cleveland area.
1941: Forest City begins building prefabricated homes.
1955: The Ratners begin converting their lumberyards into do-it-yourself home stores.
1960: Forest City Enterprises is incorporated and makes an initial public offering.
1968: The company acquires an Akron, Ohio, construction company.
1970s:Forest City owns 17 shopping centers and 39 apartment buildings.
1980: The company acquires Cleveland's historic Terminal Tower and launches an extensive renovation project.
1987: Forest City sells its home store chain.
1990: The Terminal Tower redevelopment is completed and renamed Tower City.
1991: Forest City's real estate portfolio reaches $2 billion.
1993: Forest City partners with a Mexican company to develop commercial properties in Mexico.
1997: The company moves its headquarters into the new Tower City complex.
2001: Forest City breaks ground on the redevelopment of Denver's former Stapleton Airport.
Company History:
With properties in 19 states and the District of Columbia worth a total of $4 billion, Forest City Enterprises, Inc. is a developer and manager of commercial and residential real estate. Its extensive portfolio of hotels, apartment communities, and retail and office space is concentrated in large, urban markets. Headquartered in Cleveland, Ohio, the company maintains regional offices in New York, Los Angeles, Boston, Tucson, Denver, San Francisco, and Washington, D.C. In addition to its real estate interests, the company operates one of the nation's largest lumber wholesalers.
Foundation and Development in the Early 20th Century
The family affair began in 1905, when members of the Ratner clan began to immigrate to the United States from their native Poland. Charles, the eldest and first to arrive in Cleveland, Ohio, founded Forest City Lumberyard in 1922. Upon their arrival, Leonard and younger siblings Max, Fannye, and Dora borrowed money to start a small creamery offering milk, butter, and eggs. Trained as a weaver, Leonard joined his older brother in the lumber business mid-decade, opening Buckeye Lumber in 1924. Two years later, the Ratners sold their creameries to focus on the lumber and building materials market. In the late 1920s, Leonard and Charles turned the lumberyard over to brother Max, who had just earned a law degree from Case Western Reserve's John Marshall Law School. Fannye's husband, Nathan Shafran, came into the lumber business around this same time. Leonard and Charles then founded B & F Building Co., which constructed single-family homes on Cleveland's east side. Leonard rejoined the family lumber firm in 1934, bringing with him his expertise in residential construction.
Although the company sold construction materials primarily to contractors in the 1920s, 1930s, and 1940s, it had also reached out to the general public during the Great Depression. At this time, Forest City Lumber started a lending program that enabled homeless people to borrow $549 toward the purchase of building materials. By investing their own "sweat equity," these struggling individuals could build a very inexpensive home.
Forest City made its first forays into the real estate business during the 1930s and 1940s by acquiring inexpensive land repossessed by banks and other institutions. Some lots were purchased as cheaply as $10 each. During the interwar period, the company lent land and building materials to local builders with the understanding they would pay for both when the homes were sold. Then Forest City became a pioneer in the construction of prefabricated homes in 1941, but this activity was interrupted by World War II. To help in the war effort, Forest City made wooden munitions boxes for the government.
Sam Miller, who joined the company in 1947, was credited with launching Sunrise Land Co., the land development arm of the business. Miller became a full-fledged member of the family shortly thereafter when he married Leonard's daughter Ruth. Envisioning an opportunity for growth in the postwar housing shortage, the Ratners entered residential construction and were key developers of some of Cleveland's largest suburbs. The group also began to develop its extensive land holdings into apartments and shopping centers. This new focus on consumers may have led the company to begin converting its lumberyards into do-it-yourself home stores in 1955. Forest City's early entry into this important market helped make it Ohio's biggest building materials company by the end of the decade.
Incorporation Signals Transition: The 1960s and 1970s
Forest City Enterprises was incorporated in 1960 with Leonard Ratner as chairman and Max Ratner as president. In an initial public stock offering that same year, the Ratners sold a 19.5 percent stake of the company at a face value of $4.5 million. Forest City's stock was listed on the American Stock Exchange by 1965. Although the company continued to develop its retail and wholesale lumber businesses during the 1960s and 1970s, this corporate reorganization represented a turning point for Forest City, when real estate came to the fore.
Beginning in 1966, under the direction of Max Ratner's son Charles, Forest City's building materials chain grew from $12 million in annual sales to nearly $200 million over the next two decades. The division added one of the nation's largest lumber distributors, an Oregon company, to its portfolio in 1969. Over the course of the 1960s and 1970s, it opened stores in Detroit, Chicago, and Akron. By the late 1970s the chain boasted 20 do-it-yourself centers.
Forest City's real estate developments took several forms. The company built, owned, and operated shopping centers, malls, office buildings, industrial parks, and hotels. It also acquired Akron-based construction firm Thomas J. Dillon & Co., Inc. in 1968. Under the guidance of Nathan Shafran, Forest City applied its patented method of modular high-rise housing construction to this new subsidiary. The firm's "Operation Breakthrough" program erected nearly 60,000 units of low-cost housing for the elderly over the next 30 years. By the end of the 1970s Forest City owned 17 shopping centers and 39 apartment buildings with a combined total of 10,800 housing units. The company had also diversified into mortgage banking, property leasing, and property management, as well as petroleum and natural gas development.
Albert B. Ratner advanced to the presidency in 1973, when Max assumed the chairmanship and Leonard took the title of founder-chairman. Corporate revenues increased from $32 million in 1963 to $235.3 million by 1979, but net income only grew from $1 million to $1.4 million.
The 1980s and 1990s: Major Urban Projects and Foreign Investment
At the dawn of the 1980s, Forest City began to phase out its smaller ventures and concentrate its resources on larger urban developments. The most significant divestment of this transition came in 1987 when the company sold its Forest City Materials chain to Handy Andy Home Improvement Centers, Inc. Forest City had dominated the local home improvement market until the early 1980s, when DIY Home Warehouse and Kmart Corp.'s Builders Square infiltrated Cleveland. Forest City tried to match the competition with deep discounts and a switch to a warehouse format, but soon realized it needed more volume and more buying power to compete with these large, well-financed national chains. This dramatic break with the company's traditional business freed it to focus on the mega-projects for which it would become nationally known in the 1980s and 1990s.
Forest City played a key role in the revitalization of downtown Cleveland, then applied the skills it had gained to urban projects throughout the United States. In 1980 the company bought Cleveland's Terminal Tower, a passenger rail terminal originally built before the Great Depression. Although the $250 million project endured several fits and starts, it would become a cornerstone of the city's rebirth. When completed in 1990, the three million-square-foot, multiuse urban renewal redevelopment featured hotels, a mall, and offices. Renamed Tower City, the project helped push Forest City's real estate portfolio over $2 billion in 1991. Major retail and commercial projects in Boston, Pittsburgh, Brooklyn, Los Angeles, Tucson, San Francisco, Chicago, and elsewhere echoed the scale and impact of Tower City in Cleveland. Forest City also continued to pursue residential developments throughout this period, creating everything from single-family inner city projects to luxury apartments and condominiums.
Although Forest City sailed through the late 1980s and early 1990s credit crunch better than many of its competitors, it was compelled to eliminate its quarterly dividend in 1991 and put the brakes on 17 projects in 1992.
Having specialized in large urban redevelopments for about a decade, a confident Forest City wagered future prosperity on international projects and gambling houses. The company made its first international foray via a 1993 joint venture with Mexico's Grupo Protexa. Ian Bacon, the executive in charge of this endeavor, compared Mexico to the United States of the 1950s and 1960s: a market ripe for the development of regional malls and shopping centers.
Forest City became increasingly involved in the construction and management of casinos--euphemistically dubbed "urban entertainment" in the industry--in the mid-1990s. Projects in Pittsburgh, Las Vegas, and Atlantic City either planned for or proposed gambling. Although gambling and its social and economic effects were hotly contested topics in the early 1990s, analyst Sheldon Grodsky wryly told the Cleveland Plain Dealer's Bill Lubinger that, "This is what they do, whether they do it with gambling-related property or retail or mixed use or apartments--that's real estate development." Clearly Forest City and the Ratner family had long been winners at the real estate game, and there was no reason to believe a losing streak was at hand.
Charles A. Ratner, son of Max, became president and chief operating officer, then assumed the role of chief executive officer in 1995 after his father's death. The year also marked the company's 75th anniversary and Forest City's new CEO revealed a strategic plan outlining financial goals and the strategies necessary to reach them, a mission statement, and a set of core values. Two years later, in 1997, the company moved its stock listing from the American Stock Exchange to the New York Stock Exchange. Also in 1997, Forest City moved its corporate headquarters to Tower City, its recently developed high-profile Cleveland property.
Novel Projects As Company Enters the New Millennium
Forest City closed out the 20th century with a burst of urban development activity. Among the projects the company completed in 1998 and 1999 were a large office building in the Massachusetts Institute of Technology's University Park; a luxury apartment high-rise in Bethesda, Maryland; a mall near San Diego, California; and a shopping center in New Jersey. As these new properties were opening, Forest City had plenty in the pipeline to replace them. In 1998 alone the company launched more than a dozen projects. Two of the most high profile jobs were on opposite coasts: in New York City, the company began construction of a 300,000-square-foot hotel and entertainment complex in Times Square, while in San Francisco it kicked off redevelopment of the city's historic Emporium building near Union Square.
One of its largest and most unusual projects came in 1999 when Forest City was awarded the $4 billion job of redeveloping Denver's obsolete Stapleton Airport. The project--which was delayed by numerous obstacles before finally getting underway in early 2001--involved converting some 3,000 acres of former airport land into a community complete with housing, retail, and office space. By the time the company broke ground on the Stapleton project, it was in the midst of planning for a number of other developments including a Times Square headquarters for the venerable New York Times Company; a one million-square-foot mall near Richmond, Virginia; an upscale shopping area in Pasadena, California; and a state-of-the-art facility in Cleveland, designed to house telecommunications and IT companies.
In 2001, as businesses across the United States struggled with a difficult economy, Forest City weathered the storm well. For the year, the company achieved record results in both revenues and earnings and took steps to strengthen its financial liquidity. It also made a secondary public offering of 3.9 million shares (which generated $118 million) and sold seven properties, including a $108 million mall in Tucson. The influx of capital allowed the company to reduce its nonrecourse mortgage debt by almost $96 million.
Forest City stormed into 2002, completing nine property acquisitions and opening five new developments all in the first half of the fiscal year. It also continued to make significant progress in ongoing developments at Denver's Stapleton Airport and MIT's University Park. For the second quarter, the company posted an increase of around 8 percent in both revenues and earnings over the same period in 2001.
Barring unforeseen events, the company appeared likely to continue in an aggressive development mode. In a September 2002 press release, Forest City President Charles Ratner said the company expected to complete at least five more retail projects during the year, as well as reach several milestones at the Stapleton project. In addition, there were 18 projects in construction--eight residential communities, three office developments, and seven retail centers.
Principal Subsidiaries: Forest City Capital Corporation; Forest City Commercial Group, Inc.; Forest City Finance Corporation; Forest City Land Group; Forest City Ratner Companies; Forest City Rental Properties Corporation; Forest City Residential Group, Inc.; Forest City Residential Management, Inc.; Forest City Residential West, Inc.; Forest City Trading Group, Inc.
Principal Competitors: The Inland Group, Inc.; Trammell Crow Company; Trizec Properties, Inc.
Further Reading:
- Bullard, Stan, "Forest City Finds Amigo to Build Malls in Mexico," Crain's Cleveland Business, May 17, 1993, pp. 3, 25.
- ------, "Forest City's Miller Likes Privacy, Power," Crain's Cleveland Business, August 2, 1993, pp. 13, 15.
- Chatman, Angela D., "Ohio Companies Among Tops in Multifamily Units," Cleveland Plain Dealer, April 1, 1995, p. 9SU.
- Clark, Sandra, "Putting Projects on Hold," Cleveland Plain Dealer, January 16, 1992, p. 1D.
- DeWitt, John, "Halle's Building Splendid Again," Cleveland Plain Dealer, December 11, 1985, p. 7D.
- Gerdel, Thomas, "Forest City Goes Full Speed on Its Development Course," Cleveland Plain Dealer, July 31, 1990, pp. 1D, 8D.
- Gleisser, Marcus, "Business Leader Max Ratner Dies," Cleveland Plain Dealer, June 2, 1995, pp. 1A, 12A.
- ------, "Close Family Enterprise," Cleveland Plain Dealer, January 15, 1987, p. 2C.
- ------, "Forest City Named Developer for Project in NYC's Times Square," Cleveland Plain Dealer, September 8, 1995.
- Hardin, Angela, "A Woman of Influence: Tower City Owes Its Existence to Miller's Determination, Energy," Crain's Cleveland Business, April 3, 2000, p. 30.
- "Hurting Balance Sheet Helps Firm Build Assets," Engineering News Record, October 11, 1979 p. 23.
- Karle, Delinda, "Forest City Ends Home Improving," Cleveland Plain Dealer, January 15, 1987, pp. 1A, 17A.
- Koshar, John Leo, "Ambitious Projects Fill Forest City's Drawing Boards," Cleveland Plain Dealer, July 1, 1984, p. 1G.
- Lubinger, Bill, "Forest City Forges Gambling Ties," Cleveland Plain Dealer, July 10, 1996, pp. 1C, 3C.
- Moore, Paula, "Stapleton's Ambitious Developer: Founded As a Lumber Company, Forest City Tackles Monstrous Airport Project," Denver Business Journal, January 29, 1999, p. 3B.
- Phillips, Stephen, "Forest City Betting on Projects," Cleveland Plain Dealer, July 1, 1994, pp. 1C, 2C.
- Rudnitsky, Howard, "Survivor," Forbes, June 8, 1992, p. 48.
- Sabath, Donald, "Forest City to Celebrate Nate Shafran's 50 Years," Cleveland Plain Dealer, June 13, 1989, p. 4D.
- Sartin, V. David, "Save Tower City, Kucinich Demands," Cleveland Plain Dealer, September 1, 1984, pp. 1A, 11A.
- ------, "Tower City Project Is Scrapped," Cleveland Plain Dealer, August 31, 1984, pp. 1A, 10A.
- Sullivan, Elizabeth, "Hilton, Forest City Sign Deal on Downtown Hotel," Cleveland Plain Dealer, July 27, 1983, pp. 1A, 8A.
Source: International Directory of Company Histories, Vol. 52. St. James Press, 2003.
