Goldman Sachs Emerges as Bidder for N.Y. Landmark : Real estate: Mitsubishi, Rockefellers will give up ownership of Rockefeller Center.
Goldman, Sachs & Co. on Tuesday emerged as a rival bidder for Rockefeller Center after Japan’s Mitsubishi Estate Co. and the Rockefeller family formally announced plans to give up ownership of the landmark office and entertainment complex in New York.
The Goldman Sachs offer surfaced during a day of wheeling and dealing and court proceedings to determine the fate of Rockefeller Center now that Mitsubishi is preparing to walk away from its nearly $2-billion investment in the property, which is mired in bankruptcy proceedings.
A competing group, consisting of investor Sam Zell, Merrill Lynch and Walt Disney Co., on Tuesday bolstered its existing $250-million bid for Rockefeller Center by attracting General Electric as an investor. General Electric’s NBC television network is a major Rockefeller Center tenant.
“I think this thing is far from over,” said Ben Lambert, chairman of Eastdil, a New York-based real estate firm. “There is always the potential that there will be additional groups” to make a bid.
Rockefeller Center is 80% owned by Mitsubishi Estate, the real estate arm of the giant trading company, and 20% owned by Rockefeller family trusts. In federal Bankruptcy Court in New York on Tuesday, lawyers representing Rockefeller Center Group--the Mitsubishi-Rockefeller family entity that owns the center--confirmed plans to turn over the 12-building complex in midtown Manhattan to Rockefeller Center Properties Inc.
Rockefeller Center Properties is a publicly traded real estate investment trust that holds the $1.3-billion mortgage on the center, which oil tycoon John D. Rockefeller built at the height of the Great Depression of the 1930s.
Last May, after years of losses covered by Mitsubishi, Rockefeller Center Group filed for Chapter 11 federal bankruptcy protection amid high levels of debt and low rental rates. The owners and Rockefeller Center Properties now have until Oct. 3 to present the court with a reorganization plan to take the center out of bankruptcy.
Much of the attention will now focus on what Rockefeller Center Properties will do. On Tuesday, the trust’s shares rose 75 cents to $7.875 on the New York Stock Exchange. The real estate trust has already agreed to essentially split ownership of the center 50-50 with the Zell investment group in return for a $250-million cash infusion. The deal must be approved by the real estate trust’s shareholders.
But Goldman Sachs, in a filing with the Securities and Exchange Commission, says it would also pledge $250 million and that it would give the real estate trust’s existing shareholders a larger ownership stake, of about 60%. Goldman Sachs already holds $225 million in Rockefeller Center Properties’ debt and owns securities that can be converted into a 20% stake in the real estate trust.
So far, many shareholders in Rockefeller Center Properties remain tepid to both offers, and they could complicate efforts to gain control of the facility.
“There are other alternatives--it’s no longer just Zell,” said an investor with a substantial holding in the real estate trust. “Why should they settle for a low price?”
But many real estate observers say any new owner will have to be careful to avoid being trapped as Mitsubishi was between large mortgage payments and lower-than-expected rental income. Although Rockefeller Center is more than 90% occupied, the owners have had to drop rental rates dramatically to keep tenants and compete in a market experiencing glut of unoccupied office space, brokers say.
“It’s never going to command the top rents,” said real estate securities analyst Jonathan Litt at Salomon Bros.
Mitsubishi is one of the many Japanese investors that paid huge sums for U.S. real estate in the late 1980s only to watch the holdings drop dramatically in value during the 1990s.
