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Forest City Enterprises (NYSE:FCE.A)

Q4 2012 Earnings Call

March 28, 2013 11:00 am ET

Executives

David J. LaRue - Chief Executive Officer, President and Director

Robert G. O'Brien - Chief Financial Officer and Executive Vice President

Analysts

Sheila McGrath - Evercore Partners Inc., Research Division

Samit Parikh - ISI Group Inc., Research Division

Trish Azeez

Operator

Welcome to Forest City Enterprise Fourth Quarter and Year-End 2012 Earnings Conference Call.

The company would like to remind you that today's remarks include forward-looking comments that are covered under Federal Safe Harbor provisions. Actual results could differ materially from those expressed or implied in such forward-looking statements due to various risks, uncertainties and other factors. Please refer to the risk factors outlined in Forest City's annual report on Form 10-K filed with the SEC for a discussion of factors that could cause the results to differ.

This call is being recorded and a replay will be available beginning at 2:00 p.m. Eastern Time today. Both the telephone replay and the webcast will be available until April 28, 2013, 11:59 p.m. Eastern Time.

The company would like to remind listeners that it will be using non-GAAP terminology such as operating FFO, FFO, comparable property net operating income and pro rata share in its discussion today. Please refer to the -- to Forest City's supplemental package, which is posted on the company's website at www.forestcity.net for an explanation of these terms and why the company uses them, as well as reconciliation to their comparable financial measures in accordance with generally accepted accounting principles. [Operator Instructions]

I would now like to turn the call over to Forest City's President and CEO, David LaRue. Please go ahead, Mr. LaRue.

David J. LaRue

Thank you, Stephanie. Good morning, everyone. Thank you for joining us today. With me today is Bob O'Brien, our Chief Financial Officer. Our results for the fourth quarter and full year 2012 went out yesterday after the close of the market. I hope you've had a chance to review them. In a few minutes, I'll ask Bob for his comments on our results. After that, I'll give an update on our pipeline and offer some thoughts, then we'll get to your questions.

As you saw in our press release, we're pleased with the results for 2012. FFO, operating FFO and overall comp NOI were all up over prior year as were revenues and net earnings. Our portfolio continued to show strength, particularly in multifamily where we had strong comp -- strong growth in comp NOI throughout the year. 2012 was also a year of significant progress in executing on our strategic plan. As many of you are aware, the key drivers of the plan are building a strong sustaining capital structure, focusing on our core markets and products and achieving operational excellence throughout our business. Let me touch on a few of these highlights to the year that tie to these drivers.

We successfully opened 4 new properties in our core markets, the largest being Barclays Center in Brooklyn. We started 7 new projects, 6 of them multifamily. These include apartment projects in Denver, Dallas, Washington, D.C., as well as B2 BKLYN, the first multifamily component of Atlantic Yards. We disposed of 12 non-core assets, generating cash of approximately $129 million. We completed the sale of substantially all of our land development business after having announced our plan to exit the majority of that business at the beginning of the year.

We launched the strategic capital partnership with Arizona State Retirement System to create a $400 million multifamily development fund, targeting 5 of our core markets.

We brought in TIAA-CREF into our partnership at 8 Spruce Street in Manhattan, in a transaction that valued the building at a record $1.05 billion and resulted in proceeds to Forest City of $129 million.

During the year and continue into 2013, we completed a number of capital market transactions that resulted in reduced fixed charges and improved debt metrics. We negotiated a new 3-year $465 million revolving credit facility that closed the line just after year end. We made strategic investments to strengthen our mature portfolio, including major renovation of our Charleston Town Center Mall and approximately 700 unit rehabs in a number of our apartment communities and other improvements. Lastly, we achieved $19 million in cost savings to date from process improvement, procurement and energy management initiatives undertaken over the past 2 years. These benefit tenants, our partners and us as Forest City. We expect those savings to grow as these programs are fully embedded throughout our business.

We'll be happy to talk to you about any of these during the Q&A, but now let me turn the call over to Bob. Bob?

Robert G. O'Brien

Thanks, Dave. Good morning, everybody. On today's call, I'll be referring to our results in our earnings release and supplemental package. They are available through our SEC filings, as well as in the Investors section of our website. I'll focus most of my comments on results for operating FFO, a metric we introduced in the second quarter of 2012. As a reminder, we believe operating FFO provides investors with a picture of how our core operations are performing by removing transactional, onetime and nonrecurring items that tend to distort total FFO for any given period.

Bridges depicting the positive and negative factors impacting operating FFO for the quarter and the year can be found on Pages 31 and 32 of the supplemental package. I don't intend to walk through all the variances, but when you look at the 2 bridges, you see a number of common factors impacting both the quarter and full year results. Among the positive factors are increased NOI from the mature portfolio, reduced interest on the mature portfolio, increased land sales, primarily at Stapleton, and increased FFO from new property openings.

There are also common negative factors impacting results for both periods. By far, the larger of these is reduced capitalized interest on our under construction pipeline. You'll also note that of the total $35.5 million of reduced capitalized interest we reported for the year, almost half of that came in the fourth quarter, which primarily reflects the third quarter opening of Barclays Center Arena, the last of our large New York under construction project. As the full year bridge shows, our operating FFO ended the year at $234.7 million, up a little over 3% from $227.5 million in 2011.

Turning to FFO for a moment. Total funds from operations in 2012 were $267.4 million or $1.27 per share compared with $178.2 million or $0.88 per share for 2011. I should point out that a significant factor in the magnitude of the FFO variance were the impairments we took at the end of 2011 on our land held for divestiture as a result of our decision to divest most of our land business. The 2011 land impairment was also a significant factor in the magnitude of the year-over-year variance in net earnings.

Turning to some of our operating metrics for the year. Overall comp NOI was up 3.2%, with increases of 7.3% in apartments, 2.1% in retail and 2.1% in office compared with the full year 2011 results. In the residential portfolio, comparable average occupancies for 2012 were 94.7%, up modestly from 94.5% last year.

Average monthly residential rents in our comparable apartments in our core markets were $1,597 for the year, a 5.3% increase from 2011. And average monthly rent across all of our comparable apartments were up 4.7% year-over-year.

In retail, comparable retail occupancies were basically flat compared with year-end 2011. Sales in our regional malls averaged $470 per square foot on a rolling 12-month basis, up 6.1% compared with the same period in 2011, and new same-space leases in our regional malls were up 11.3% over prior rent.

In office, comparable occupancies were down 12 basis points at year end. On a rolling 12-month basis, rent per square foot in new office leases decreased 2.8% over expiring leases. As we indicated in our press release, the decline in office rent per square foot for new office leases primarily driven by the timing of a lease expiration at our University Park at MIT life science office park in Cambridge. Basically, we had a lease at MIT expire during the year and the space was not immediately refilled. We had several re-signings at MIT at excellent rates, as well as new office leases in other markets, but they didn't offset the expiration as this statistic is not reported on a comp basis.

Dave mentioned briefly our capital market transactions during 2012 and continuing this year. In July 2012, we issued an additional $125 million of our 2034 senior notes and used the proceeds to retire that same amount of our 2015 senior notes, effectively extending that maturity 19 years at approximately the same interest rate while maintaining the flexibility to call that debt at any time. In October and December of last year, we executed separate exchange transactions of the majority of our convertible preferred stock for common stock and cash. After the year end, we announced the redemption of both remaining preferred stock, which took place earlier this month, and the remaining 2015 notes, which takes place tomorrow.

Between the exchanges in 2012 and this month's redemption, taking out these 2 securities reduces annual fixed charges and dividend payments and interest expense by approximately $20 million.

Dave also mentioned our new revolving credit facility. We're very pleased with the new facility which has improved pricing and more favorable terms. It will also give us additional flexibility in operating the business. I want to thank all of our land banks for their ongoing commitment and confidence in Forest City.

Let me pause here to go a little deeper on the topic of reduced capitalized interest and its impact on our reported results. Since our year-end 2011 conference call, we've talked several times about the fact that we expected a significant reduction in capitalized interest. As we target maintaining our under construction and under development pipeline at no more than 15% of total assets going forward, that also effectively reset the ongoing level of capitalized interest we will be reporting. I also want to point out that our goal in 2013 is to meaningfully accelerate non-core asset disposition. Asset sales have always been a part of our strategy for raising equity to invest in our business. Over the past 10 years or so, we've averaged proceeds from sales of approximately $120 million per year. For 2013, we are targeting proceeds from sales in the range of $200 million to $250 million. We expect to use the proceeds from these dispositions to delever, invest in our portfolio and take advantage of new opportunities in our core markets and products.

Of course, there can be no guarantee we'll be able to reach that target for non-core dispositions. Our clear goal, however, is to accelerate non-core dispositions in the near term.

So the significant reduction in capitalized interest, combined with an accelerated pace of asset dispositions, are expected to impact overall FFO and operating FFO results in the near term. Offsetting these factors, we expect continued improvement in our core operations together with interest rate savings and reduced fixed charges, as well as the continued ramp-up of the recently opened properties.

As a result of these factors, we expect our 2013 FFO and operating FFO to be relatively flat to our 2012 results. Obviously, we'll be happy to answer any questions about this during the Q&A. As I hope most of you have seen, Fitch Ratings recently issued an initial rating on Forest City at BB- with a stable outlook. The rating gives us an additional benchmark to measure our progress as we continue to delever and work to improve our balance sheet and debt metrics.

Before I turn over to David, let me just remind everyone on the call that we will be converting to a calendar year end at December 31 of this year. We'll report a 2-month stub period for November and December and then be on a calendar basis going forward.

With that, let me turn it over to Dave for an update on the pipeline and some closing thoughts. Dave?

David J. LaRue

Thank you, Bob. All of our efforts, including those Bob just outlined, are establishing a stronger company with solid foundation for future growth. That will take time even with aggressive execution, but we are confident on our strategic direction, pleased with what we've achieved to date and optimistic about Forest City's future. With that said, there's still clearly work to be done on our balance sheet and in our portfolio as well.

In that vein, let me take a moment to talk about Westchester's Ridge Hill Center in Yonkers. It is the project that gets the most questions from investors these days and we certainly understand why. There's a focal point of our team, too. There are several things I like to comment on concerning Ridge Hill. First, we have a solid plan to complete the lease-up and stabilization of the property. We have the right talent focused on doing so and we are confident we'll get there. You'll see in our year-end pipeline that we've added approximately $23 million of cost to Ridge Hill, most of which is additional tenant allowances that will help us execute on the continued lease-up.

Second, all of the debt at Westchester's Ridge Hill is already on our balance sheet. That means from here on, every new lease we sign and every -- creates additional dollars that will take on the project is immediately accretive to our results. We now anticipate that this center will stabilize at a sub-5% cash on cost return, which is below our original pro forma. Despite this, we believe in the long-term value of this investment, given the quality of the asset and the market in which it sits.

Turning to our 2012 openings and projects under construction. Our largest opening was Barclays Arena in Atlantic Yards in Brooklyn. The arena has already welcomed approximately 1.4 million visitors for a wide variety of sports and entertainment events, including approximately 45 sold-out events to date. 82% of forecasted contractually obligated revenues for the arena are in place. Day-of-event revenues have been lined with -- in line with our expectations and with strong results for concessions in particular.

During the fourth quarter, we began construction on B2 BKLYN, the first residential tower at Atlantic Yards, immediately adjacent to Barclays Center. This 32-story tower will have 363 units, half of which will be reserved for low, moderate and middle-income households. In partnership with Skanska, a global construction group and leader in prefabricated building components, B2 will be built using modular construction that we anticipate will lower cost over time, create less waste and reduce truck traffic during construction, which are among some of the benefits. Modules will be produced at 100,000 square foot facility in Brooklyn Navy Yard beginning this summer. At The Yards in Washington, D.C., we opened Boilermaker Shops, the 39,000 square foot office retail property during the fourth quarter. Two other properties at The Yards are under construction. Lumber Shed is a 32,000 square foot adaptive office -- reuse office building with street level retail that is expected to open in the third quarter of 2013. Twelve12 is a 218-unit apartment property with a grocery store, a fitness facility at street level. Twelve12 is expected to open in the third quarter of 2014.

Stapleton in Denver, we opened 2 new multifamily properties in 2012. In the first quarter, we opened 85-unit first phase of Aster Town Center and is 91% leased. At the beginning of the third quarter, we opened Botanica Eastbridge, a 118-unit apartment community that is 53% leased. Late in the year, we began work on a third apartment property, Aster Northfield, which will have 352 units. It will be the first apartment community to be constructed north of Interstate 70. I know a number of you on the call have visited Stapleton and you know that the bulk of our development activities to date has been on the south side of this 400 -- 4,700-acre property. With the new I-70 interchange that opened in 2011, access to Stapleton, particularly to the north, has been greatly enhanced and -- which opens this entire area for additional development.

As we noted in our press release, 2012 marked the 10th anniversary of the first residents moving to Stapleton. Today, the community is home to approximately 15,000 residents and includes 4,700 homes, 779 rental apartments, 2.1 million square feet of retail, nearly 400,000 feet of office space, 1.2 million square feet of flex/R&D space, 8 schools, 800 acres of parks, open space and trails. Of the total acreage designated for development at Stapleton, we have acquired approximately 1,800 acres to date, with 1,142 acres remaining for future development.

At the end of the fiscal year, we opened the 203-unit Continental Building in our Mercantile Place on Main development in downtown Dallas. First movements have begun and with opening -- and the opening has received substantial reviews and media coverage in the region. With the Continental, we now have more than 700 apartments in downtown Dallas.

During the fourth quarter, we began construction on West Village, a new 381-unit apartment project in the uptown area of Dallas. We expect to open West Village in the third quarter of 2014. In Boston, construction continues on 120 Kingston, our 240-unit apartment building on the Rose Kennedy Greenway, near the border of Boston's financial district in Chinatown neighborhood. We expect the property to open in the second quarter of 2014. Finally, construction continues on Stratford Avenue, a 128-unit multifamily project in Fairfield, Connecticut, with completion expected in late 2013.

It's now time to get your questions. So let me close by saying that as always, we continue to monitor economic and market conditions, but we're pleased with our results and progress in 2012 and thus far, in 2013. We believe our focus on strong urban markets and our pipeline of entitled opportunities give us a competitive advantage, and that our advantage is sustained by our proven skill and efficiency as operators and asset managers. We're confident in our strategic direction and we're optimistic about the future of Forest City. I'd like to thank all of our investors for their continued support and interest in our business.

With that, let's take some questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Sheila McGrath with Evercore.

Sheila McGrath - Evercore Partners Inc., Research Division

You mentioned asset sales of $200 million to $250 million. I'm just wondering your rationale for ramping up the sales and if that gets you to a leverage level that you're targeting by year end.

David J. LaRue

Bob, you want to take that?

Robert G. O'Brien

Sure. Yes, so net proceeds out of sales in that range, $200 million to $250 million. At our historic leverage ratio against market, that's -- at 60% leverage, that's north of $0.5 billion worth of real estate that we -- that our share that we would hope to sell. Sheila, I think that our -- that metric, as we talked about, are a work in progress. I don't think that's going to get us all the way to where we ultimately want to be, but it's going to give us a substantial amount of capital to continue to delever and continue to improve our debt metrics. I think we believe and the market seems to be bearing it out. You saw we sold an apartment building just outside of Detroit just a week or 2 ago at a very attractive cap rate that the market is now, given where interest rates are and given where capital is, amenable to looking at and buyers purchasing in secondary markets. So we're going to divest in those non-core markets to try to raise capital to improve our balance sheet and invest in our balance sheet. As I try to indicate in my prepared remarks, clearly, that's going to have a -- that's going to dilute our FFO because we're not going to -- we don't believe, even at the -- with the capital and the interest rates where they are, that the last FFO from property sales will probably not be fully offset by the investment of those proceeds in the balance sheet, at least in the near term, but we're moving our NOI from where it is today in some of these non-core markets into the core markets, thereby increasing the quality of that NOI long term.

Sheila McGrath - Evercore Partners Inc., Research Division

And then, Bob or David, could you be a little bit more specific on are these asset sales joint ventures in some of your larger assets or they're 100% focused in non-core markets?

Robert G. O'Brien

Well, I think our primary focus has been -- we've certainly brought investors into some of our higher profile assets like the retail portfolio in New York and like our MIT transaction. So the focus, given the improvement in the economy and the more greater availability of capital, is to focus on those non-core markets where it's not as critical. That being said, I often say that everything is ultimately for sale at a price. And if we can get full value in some of our core markets or products, that's something that we would consider. But for the most part, at least in our plan, is divestment of our interest in -- of non-core products and non-core markets.

Sheila McGrath - Evercore Partners Inc., Research Division

Okay. Two more quick questions. I was just wondering if you could talk about your thoughts. I know you amended your line of credit to allow more stock buybacks. So just wonder if you could talk about your thoughts on stock buyback, eventually a dividend, or -- and all in the context of deleveraging. Is this something that we shouldn't expect this year? Or just give us your thoughts on balancing those initiatives.

David J. LaRue

Dave, I'll try and then I'd ask you to kind of follow up. So we wanted the flexibility for a variety of reasons. Obviously, our stock has, as many, have been quite volatile and it follows, while we've often said and analysts indicate that we sell at a fairly steep discount to our NAV, but at times it gets dramatically lower. And it's times like that we might want to be opportunistic. But I think that, that -- the use of capital to buy back stock is probably lower, not probably, is lower on the priority list than deleveraging our balance sheet. We think that is one of the key components of our strategy to help allay some investors concerns about the level of leverage, the level of our fixed charge coverages. We've made a lot of progress over the last few years. We expect to continue to do that. So we would not lease it as we look at it today given our liquidity, anticipate a significant use of our capital to buy back stock, but we have to obviously want to be opportunistic to the extent that there's a dislocation in the marketplace. Dave?

David J. LaRue

Yes, Sheila, I would add that as you asked the question from a priority standpoint, again, balance sheet deleveraging is #1. The other 2, whether it's a stock buyback or dividend, is a way to return capital to our investors and at the appropriate time in that in our execution of our strategy and based upon the portfolio generating substantially more recurring cash flow because of that deleveraging, those other opportunities for investment or return of capital to stockholders does come into the discussion. But that, as Bob indicated, will be after we've continued to focus on that first priority.

Sheila McGrath - Evercore Partners Inc., Research Division

Okay. Great. Well, last quick question. The next line item, just for modeling purposes and I know you don't give guidance, but it was a big swing in the quarter. I'm just wondering, how should we think about that into 2013?

David J. LaRue

Yes. I think the quarter was just a recognition and true up of capital that had been returned based upon prior losses that we incurred during the development of Barclays Center. As, I think, we stated or you could recall, we had an obligation to fund operating losses above $60 million until we had opened the Barclays Center. We did that and fulfilled that obligation and then after that true up -- after the arena opened and the true up occurred, that recognition of capital in this quarter resulted in that change. As we look forward, again, we, I think, effectively own -- we and our original -- the original investor group own 20% of the team. And as you go forward, it would be no more than that 20% that we would find on future losses. So again, we won't have that, I think, volatility of us being 100% and then recovering going back.

Operator

Your next question comes from the line of Samit Parikh with ISI.

Samit Parikh - ISI Group Inc., Research Division

Wanted to ask you a little bit more on Ridge Hill. I know you spoke shortly earlier about it in your comments. But with LEGOLAND opening yesterday and, I guess, Uniqlo on the way, can you just talk about what you have out there or just give us a sense of the momentum on what you have out there with retailers in terms of LOIs? And since you re-casted this new loan under asset, is it sort of more lenient in any way in terms of your ability to sign leases at maybe more favorable rents for the retailers just to get sort of leasing an NOI moving in the right direction on this asset?

David J. LaRue

Let me address the first part of that, which is momentum. And again, we realized and we stated before that we have been making great progress in terms of opening the tenants and the deals that we had signed and had committed over the time. At that same point, signing and executing new leases was falling behind our expectations. With the opening -- the continued opening of quality tenants, going from Lord & Taylor last year and Apple last year and the LEGO -- Brooks Brothers this week and LEGOLAND this week and with Uniqlo opening in mid-April is our current projection or anticipated opening. We think we have a plan and positive momentum to continue to build on. As you know, we don't make aware to everybody what LOIs we have out there. But based upon a continued increase in visitors to the center and traffic to the center, again, LEGOLAND alone is projecting over 350,000 visitors a year to come to the shopping center. We think we've made it past that inflection point and have, with regard to the bank, time to stabilize the property. We're looking to stabilize the property over the next 2 years. So that will occur in 2015. Our bank line does not have, I guess, restrictions in it in terms of what flexibility we have and to do deals with tenants. What we have been able to do with recasting this pro forma, adding the additional tenant allowance that I mentioned during my comments is, I think, set in motion a plan and -- with available capital to allow the leasing team to execute on that strategy and, again, prove out that return that I mentioned.

Samit Parikh - ISI Group Inc., Research Division

And so you said now you're expecting less than 5%. Is there more of a specific you can give us? Are you thinking like 4%, lower than 4%, somewhere between 4% and 5% now given [ph] the yield on stabilization?

David J. LaRue

Yes. Again, I didn't say sub-4%. So again, so you're in that right range when I say sub-5%.

Samit Parikh - ISI Group Inc., Research Division

Okay. Then moving on, I guess, to, call it -- you've got some improved -- important approvals, I think, recently, one at the -- at Cambridge, I think. I believe you received an important approval to move ahead with building that new -- a new building for Millennium, I guess, on 300 Mass. Ave. And you're also moving ahead, I believe, with sort of your redevelopment plan. I know it's pretty sizable at Ballston. Just wondering if you could give us any sort of comments, any details on timing and what you think about planning there and yes, there you go.

David J. LaRue

Yes. Thank you for the question. The deal at 300 Mass. Ave. at our University Park project did receive approvals. We are 100% leased in that building with Millennium, which is our current -- I think, our second largest tenant overall in our office portfolio. But they're going to take the building, which is approximately 250,000 feet. We anticipate that, that will get under construction by late summer, early fall of this coming year. And again, we're very excited about being able to serve the tenants' needs there while we add to our own real estate portfolio in that very strong market. Ballston, we have been looking at that market. If any of you have seen the property, it really sits in a great submarket in the Washington, D.C. area. We've owned the property for quite some time, and we are looking at a redevelopment that enhances the retail while allows -- it allows for the addition of either residential units or other needs that could be in the market. It could be a hotel. It could be et cetera. It could be additional office if we find a tenant. So the redevelopment plan, because of the dynamic to that market, is flexible. But with the overall plan, we see enhanced value opportunity, specifically in the retail, by making it more attractive. And I think it matched the market demands better than it does now.

Robert G. O'Brien

Okay. Dave, let me just comment on MIT just so everybody's clear. We will do that development and joint venture with MIT as we did the balance of the park. They own part of the land on which we're going to build. But we will be a 50-50 partner with MIT in that transaction, similar to the way we were originally in MIT. HCN is not part of this transaction, at least not initially. We may explore that once the building is open. I just want to make sure people are clear about our ownership interest there.

Samit Parikh - ISI Group Inc., Research Division

Just on Barclays Center. It looks like you had a pretty good pickup in NOI there. It seems like momentum is really picking up in the center. You're signing a lot of new events. Are you still thinking 2016 stabilization? Do you think it could be earlier? And do you have any sense of what you're expecting in terms of annual NOI for '13 out of the center?

David J. LaRue

Yes. We're still anticipating, again, a 2015, '16 stabilization. That will be the -- I say, '15, '16, that's the hockey season when the Islanders finally move into the center. We have projected that $70 million stabilized NOI number to occur once the Islanders are in and we have the benefit of that additional acre as a property. In terms of ramping up between now and then, without giving you a specific number, I think the 82% of that -- of the contractually obligated rent being signed, allows us to have a substantial increase in our revenues over the course of this 2013 operating year and move towards that stabilized projection. So without giving you the exact number, we are on track. I would tell you it was moving towards that stabilized $70 million NOI.

Samit Parikh - ISI Group Inc., Research Division

Okay. And then last question, for Bob. Sir, what are you seeing from your lenders on refis among the sort of fixed rate debt that's maturing at 5.9% this year? What are you getting back in terms of terms?

Robert G. O'Brien

Yes, it's a pretty -- thanks, Samit. It's a pretty robust market, as I'm sure most participants on the call are aware of. Lenders are lending. Certainly, this stuff that's coming up in our portfolio was all stabilized, well leased. As you referenced, we highlight just under 6% interest rate on the $700 million, almost $800 million of stuff that's maturing this year. Interest rates are 4% or below, give or take. And pretty generous terms and pretty robust competition out there. So we feel there's a real opportunity this year to accelerate those refinancings, work with our lenders to lower our overall interest rate and then obviously interest expense, improving our debt metrics further. It's clearly an attractive financing environment.

Samit Parikh - ISI Group Inc., Research Division

Do you think you can get terms like what we've seen from some of the REITs who are trading down from mid-5s to low 4s? Or is it not going to be that aggressive?

Robert G. O'Brien

No, think it will be. We'll have some things to announce probably by midyear, and a couple of our regional centers are coming due at the end of this year. We're already in discussions with some of the life companies who have provided financings in the past to get them to lock in, so they don't have competition. And in order to do so, they're going to be pretty aggressive. So I think it will range from sub-4 to mid-4s, but probably on average, being the 4% to 4.25% range on most of our stabilized property this year. So again, that's fairly nice pickup.

Operator

Your next question comes from the line of Trish Azeez with BMO Capital Markets.

Trish Azeez

Back to the disposition pipeline, what do you anticipate in terms of timing? Are we expecting just equal kind of quarterly increments?

Robert G. O'Brien

Yes. I think, obviously, it's kind of hard to accurately judge exactly when these things are going to close. Each buyer has their own due diligence, and there's always challenges in documentation. I would expect that probably won't see a lot of activity before the end of the second quarter. I think it will pick up in the third quarter and the fourth quarter this year. So probably more happening in the middle of the year to the end of the year in that range.

Trish Azeez

Okay. And I know you guys don't give guidance, but there were pretty large swings in the other commercial income last year. I think 21 -- $29 million in the first quarter and then losses of around $15 million and $18 million in the second and fourth quarters. Can you provide just some color on anything coming down the pipe that might cause similar sizable swings in 2013? Maybe any large projects you guys are reconsidering.

David J. LaRue

Trish, this is Dave. I can't, off the top off my head right now, recall what those major swings are. But, again, as we continue to stabilize our portfolio, it doesn't mean that we won't have a potential sale of an asset that was in our development pipeline, for example, which could cause a peak swing in terms of revenue. So maybe not like the sale of a shopping center or another development parcel or an asset that was sold in that development pipeline. On the downside, I think if you look at 2012, we had 2 major write-offs from that development pipeline, one being when we decided to write-off and abandon our efforts in India and the second was in this past quarter, when we wrote off our investment that we had in our -- the Cantera [ph] site in Washington, D.C. So those were hits to that and again, those are substantial hits. I think between the 2, it could have been approximately $25 million on that write-off. So we, again, look at our pipeline of projects under development on an ongoing basis. We evaluate, as in the case of these 2, that it was no longer feasible for us to continue to carry those or want to carry those and made the decision to write them off. But that is an ongoing process that we do at each quarter.

Trish Azeez

Okay. And just lastly, with your conversion to the calendar year reporting, do you plan to release your, like, 2012 results with the December 31, 2012 year end prior to the first quarter earnings release?

Robert G. O'Brien

I'm not sure I'm following your question.

Trish Azeez

Well, you'll be converting to the 2013 calendar year reporting this quarter, so this coming quarter, and you'll be reporting first quarter earnings. Do you plan to release your 2012 results as if they ended December 31, 2012, before that earnings release just so analysts and investors have a chance to update their models?

Robert G. O'Brien

So we will be running as we have on a 1 month delayed compared to most of the other real estate companies for all of 2013. That period will be the November, December period, so the fourth quarter will be a 2-month quarter. And going forward from 2013, we will go back to give calendar year comparable information once we hit 12/31/13.

Operator

With no further question in queue, I will turn the call back over to Mr. David LaRue for closing remarks. Please proceed.

David J. LaRue

All right. Thank you, Stephanie. I would like to thank all of you for your confidence in our company and especially in the strategy that we've outlined, which we believe continues to highlight and enhance the value of Forest City Enterprises. And that value accrues to the benefit, obviously, of our stockholders, the communities where we do business and where we operate and to the associates. So again, thank you. Have a good day. Happy holidays to everybody, and we will talk to you in next quarter. Thank you.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a great day.

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