DEAL TOY: A PIECE OF THE ROCK

Forbes - - CONTENTS -

In 1989, a Ja­panese con­glom­er­ate over­paid for Rock­e­feller Cen­ter. Are Chi­nese in­vestors mak­ing sim­i­lar mis­takes?

WHEN THE CON­GLOM­ER­ATE

Mit­subishi Es­tate struck a deal to take con­trol of Man­hat­tan’s Rock­e­feller Cen­ter in late 1989, it capped a decade of go­go ac­qui­si­tion of U.S. tro­phy as­sets—fire­stone Tire & Rub­ber, Columbia Pic­tures and plum real es­tate—by Ja­panese cor­po­ra­tions. This deal, struck just weeks be­fore Ja­pan’s stock mar­ket cratered, would prove hubris­tic, land­ing the iconic build­ing com­plex in bank­ruptcy.

2. cash­ing out, cash­ing in

owned by the rock­e­feller fam­ily for decades, the build­ings be­came a liq­uid­ity spigot in 1985, when dozens of heirs ex­tracted $1.3 bil­lion from them via a mort­gage held in a pub­licly traded real es­tate in­vest­ment trust. in 1989, the fam­ily opted to cede con­trol, sell­ing an 80% share of hold­ing com­pany rock­e­feller Group to Mit­subishi for $1.4 bil­lion.

3. Buyer’s Re­morse

bullish on amer­ica, Mit­subishi en­vi­sioned even­tual rock Cen­ter rents of $100 per square foot (they were about $33 when the deal closed), but a sharp early-’90s U.s. real es­tate re­ces­sion dic­tated oth­er­wise. in 1995, Mit­subishi de­faulted on the com­plex’s mort­gage, spark­ing a bid­ding war for con­trol among bil­lion­aires david rock­e­feller (John Jr.’s son), Jerry speyer and sam Zell (as well as 28-yearold ag­i­ta­tor bill ack­man).

a year later, the vic­tor was a con­sor­tium led by rock­e­feller, com­mer­cial-prop­erty gi­ant Tish­man speyer and Gold­man sachs. in 2000, Tish­man speyer and Chicago’s Crown fam­ily bought rock­e­feller Cen­ter out­right for $1.85 bil­lion.

1. child of the de­pres­sion

built on derelict Mid­town Man­hat­tan land leased in late 1929 from Columbia Uni­ver­sity, rock­e­feller Cen­ter was planned as the home of the Metropoli­tan opera. as the de­pres­sion be­gan to bite, though, John d. rock­e­feller Jr. (son of the orig­i­nal oil ti­tan) boldly shifted fo­cus.

sell­ing stan­dard oil shares at heavy losses, rock­e­feller per­son­ally cov­ered three-quar­ters of the $125 mil­lion con­struc­tion cost ($2.1 bil­lion to­day) to erect a 12-build­ing art deco mas­ter­piece that em­ployed 40,000 con­struc­tion work­ers through the tu­mult of the early 1930s.

4. Se­cond time AS farce?

To­day for­eign buy­ers are once again look­ing to park their cash in pres­tige Man­hat­tan prop­er­ties. Three years ago, the un­her­alded Chi­nese con­glom­er­ate an­bang in­sur­ance Group inked a star­tling $1.95 bil­lion deal for the Wal­dorf-as­to­ria ho­tel. The deal is part of a new wave of asian money. since 2014, ac­cord­ing to dealogic, com­pa­nies from China have plowed $100 bil­lion into U.s. as­sets.

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