Mitsubishi-Rockefeller Deal Is a Good Sign
What does it mean that Mitsubishi Estate, the real estate arm of a gigantic Japanese business combine, is buying a 51% interest in Rockefeller Group--the owners of New York’s Rockefeller Center? Once again, as with so much foreign investment, Americans hesitate and wonder if they should worry or cheer.
The one-word answer is cheer--the deal means additional investment in New York real estate and in other business ventures. But hesitation is understandable because it looks as though the Rockefellers--a name synonymous with rich in America--are selling out. And if the rich are selling out, things must be bad.
Well, the truth is, the Rockefellers are shifting investments, not selling out. The Mitsubishi-Rockefeller deal takes a bit of understanding, but ultimately reflects a strength of the U.S. system.
First, the real estate deal is bullish for New York, where commercial property is in a periodic downtrend. The Japanese company is investing $846 million for a majority interest in a company, Rockefeller Group, which owns 15 Rockefeller Center buildings and other properties.
That price may seem oddly low, considering that a single building in that part of Manhattan sold recently for more than $600 million. But an explanation, as usual in real estate, lies in the details. It’s uncertain how much Mitsubishi will ultimately own of the Rockefeller Center buildings. They are mortgaged to a real estate investment trust, which may be able to convert those mortgage loans 11 years from now into a 71.5% ownership in the properties. That would leave Rockefeller Group and its Mitsubishi partner owning roughly 14% each. On the other hand, the convertible mortgages may be prepaid during the 1990s by Rockefeller and Mitsubishi, in which case they will remain full owners of the New York landmark.
Whatever the outcome, Mitsubishi’s confidence in New York is clear. The Japanese company is going to invest even more money to upgrade and modernize the Rockefeller Center buildings, says William G. Bowen, chairman of a committee overseeing Rockefeller family trusts.
In another sense, the deal goes beyond real estate. Mitsubishi is taking an interest in a family investment company, one that manages trusts set up in 1934 for the grandchildren of John Davison Rockefeller--the builder of the Standard Oil Trust, which was the forerunner of six of the world’s largest oil companies. The number of Rockefeller heirs has now grown to 85 or so, but they are not cashing out as Mitsubishi buys in. The trust’s $846 million from the deal will be invested by Rockefeller Group in other non-real estate ventures.
The Rockefeller trusts have already spawned several companies that invest in other outfits. One, Venrock Partners, was an initial backer of Apple Computer--and turned less than $500,000 into $110 million.
In fact, the Rockefellers--with a family fortune estimated at more than $5 billion--could teach Mitsubishi lessons in how the U.S. system moves money around, both for business and charitable purposes.
Mitsubishi is impressive: Started as a shipping company in the last century, the firm today links more than 40 companies (Mitsubishi Electric, Mitsubishi Motors, Kirin Beer among them) with $200 billion in revenue. The 41 companies work closely together and are a prime example of the kind of Japanese business concentration that would violate U.S. antitrust laws--and which many Americans see as sinister.
However, it may be that concentration is not as good for business as antitrust laws--because the Rockefeller legacy is more impressive than Mitsubishi’s. Rockefeller’s Standard Oil, broken up in 1911 by an antitrust ruling, has spawned six companies--Exxon, Chevron, Mobil, Amoco, Arco and Sohio (which is now part of British Petroleum)--with more than $200 billion in oil revenue alone. The legacy also includes the Chase Manhattan Bank and an enormous number of other businesses.
Most impressive of all, however, is the philanthropy that flowed from the Rockefeller fortune, thanks to a tradition in U.S. tax law that encourages money to be set aside in trusts and used for charitable purposes. Among other things, Rockefeller money backed agricultural experiments that have curbed famine in Asia. It has backed cancer research, built Williamsburg, Va., and numerous museums.
Why is that notable? Because other countries, including Japan, don’t have such a tax-encouraged philanthropic system--although one could develop if Mitsubishi picks up pointers from the Rockefellers.
Meanwhile, it’s hardly cause for concern that Mitsubishi is investing $846 million in New York, with more to come in the 1990s. Cause for concern, if you think about it, might be if the Rockefeller heirs were pulling their money out to invest in Japan.
