Rockefeller Center Owners File Chapter 11; Market Cited : Real estate: Partnerships are controlled by Japan’s Mitsubishi group. Rockefeller family condemns the action.
The Japanese-controlled partnerships that own New York’s famed Rockefeller Center filed for Chapter 11 bankruptcy protection Thursday in one of the largest examples yet of a major Japanese investment in the United States gone sour.
The partnerships, Rockefeller Center Properties and RCP Associates, said they took the action “because of the impact of the deep and prolonged recession in the New York real estate market.”
Rockefeller Center, built during the 1930s, sits squarely in the middle of Manhattan and is one of New York’s most famous landmarks. It is home to a dozen Art Deco skyscrapers, the NBC studios and an ice skating rink that’s a favorite of tourists and movie makers.
The partnerships are units of the property’s direct owner, Rockefeller Group Inc., which in turn is 80% owned by Mitsubishi Estate Co., the real estate arm of Japan’s giant Mitsubishi group. The other 20% is retained by the Rockefeller family.
Mitsubishi Estate bought its interest in the property in 1989, investing a steep $1.4 billion just as New York’s real estate market was at its peak. But real estate values have dropped sharply since then.
The two partnerships said that in recent years they’ve taken in $623 million less in rents than they have had to pay out in mortgage payments. They said Thursday that the bankruptcy filing will have no impact on the center’s tenants, but “will allow us to ensure the center’s long-term future.”
The property’s woes come on the heels of other Japanese investments in high-profile but ill-fated U.S. corporations and properties. In November, for example, Aoki Corp. of Japan agreed to sell Westin Hotel Co. to a U.S. investor group for $561 million, after having paid $1.5 billion for it in 1988.
In Hollywood, Sony Corp. last year took a $2.7-billion write-off on its 1989 purchase of Columbia Pictures Entertainment. And last month, Matsushita Electric Industrial Co. agreed to sell 80% of its Universal City-based MCA Inc. unit to Seagram Co. for $5.7 billion, after relations between MCA and its parent eroded badly.
The Rockefeller family promptly condemned the Rockefeller Center bankruptcy filing, saying the action was forced by Mitsubishi over the family’s objections.
William G. Bowen, chairman of Rockefeller Trust Committee, which manages the family’s stake in the center, said, “We disassociated ourselves and the Rockefeller family from this extremely shortsighted and unwise decision.”
The filing came after negotiations broke down between the owners and Rockefeller Center Properties Inc., a publicly traded real estate investment trust that holds the $1.3-billion mortgage on the property and is separate from the Rockefeller Center Properties partnership that’s controlled by Mitsubishi.
Trading in the trust’s shares on the New York Stock Exchange was halted Thursday in advance of the announcement. The stock was at $5.25 a share, up 25 cents, after it had slid $1.125 on Wednesday based on reports of a possible bankruptcy filing.
Mitsubishi had been negotiating to buy the trust’s shares, and also had attempted to renegotiate the terms of the mortgage.
“We think it is unconscionable to attempt to take advantage of the U.S. bankruptcy laws in light of Mitsubishi Estate’s significant assets, including short-term assets of more than $2 billion,” said Richard Scarlata, president of Rockefeller Center Properties Inc. “The decision to attempt to walk away from that (mortgage) commitment should weight heavily upon Mitsubishi Estate.”
The 1989 sale to Mitsubishi was seen as a financial coup for the Rockefeller family, which was able to get a huge amount of cash out of the property just as Manhattan real estate prices peaked.
It also prompted worries at the time that the Japanese were buying up America’s cultural landmarks. But the deal has turned into a major embarrassment for Mitsubishi, which faces the loss of its entire investment in the property.
The two partnerships said Thursday that without fundamental changes in the terms of the mortgage, they face additional losses of about $400 million between 1995 and 2007.
Oil baron John D. Rockefeller Jr. began building the center with his own money in the middle of the Great Depression, and the property was completed in 1941.
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Associated Press contributed to this report.
