Seeking Alpha: A Look Through The Trees At A REIT-To-Be

Forest City Enterprises (FCE.A)(FCE.B) is still a company in transition. It is hard to say that the transition has gone unrewarded, as the stock is up more than 70% from its October 2012 lows and up almost five times from its early 2009 trough. Even so, the company's move from operating as a highly-leveraged property developer to a more focused and income-oriented REIT-type company seems to have more value yet to give.

Forest City has a lot of positives going for it. The company is well-diversified, with a third of its net operating income coming from its office properties, another third from retail, and about one-quarter from multi-family residential (apartments). The company is also geographically diversified (albeit centered on New York City) and has been extending its investment and development operations through joint ventures with other developers and partnerships with pension funds.

The company has done a good job of locking up much of its debt with fixed rates, and counter-intuitively may be less vulnerable to rising rates (or rate expectations) that undermine REIT investments. NAV valuations are tricky (a consummate example of "garbage in, garbage out"), but I believe that Forest City is still undervalued today and perhaps may be 25% or more undervalued.

Please follow this link to Seeking Alpha:
A Look Through The Trees At A REIT-To-Be