Things haven’t been much fun lately for David Rockefeller. First the patriarch of one of the world’s richest families hauled himself to Japan to bargain over the future of Rockefeller Center, New York’s renowned office complex. While there, the 80-year-old Rockefeller broke his leg on a Tokyo sidewalk. Last week came another painful blow. Mitsubishi Estate Co., the real-estate giant that is Rockefeller Center’s controlling stockholder, put the debt-laden complex into bankruptcy. By any measure, it was an embarrassment for a family whose very name stands for wealth.
But don’t weep for the Rockefellers just yet. They’re not exactly living on cat food. The descendants of oil tycoon John D. Rockefeller don’t have to give hack a penny of the $3 billion-plus they’ve realized from their Rockefeller Center holdings since 1985. In fact, last week’s bankruptcy filing actually highlights the family’s formidable financial acumen. You can trace the financial woes of Rockefeller Center, with its famous skating rink, statue of Prometheus and 12 midtown Manhattan Art Deco buildings, to the family’s success at getting money out of it.
Back when the Rockefellers sold 80 percent of their Rock Center stake to Mitsubishi in 1989, the news media were filled with jingoistic rantings about the Japanese taking over America. But it’s been clear for years that at $1.37 billion, the Japanese vastly overpaid. The complex was boring on rents rising enough for it to be able to service its monster mortgage; instead, rents fell. The Rockefellers offered various schemes to rescue the overindebted property, in which they still have a 20 percent interest, but Mitsubishi seems to have worried that the family was actually using front men in an attempt to buy the center back for a song. Rather than risk being outsmarted by the Rockefellers a second time, sources close to Mitsubishi said, the company decided to try its luck in bankruptcy court. Better to embarrass the Rockefellers by smirching their name than to get suckered for a second time. The result: a messy bankruptcy that could drag on for years. Mitsubishi wouldn’t talk.
You can see why Japan’s biggest real-estate company might feel spooked by the Rockefellers. The family sold at the height of the market, after having built the property in the depths of the Depression. Isn’t timing wonderful? The current cashout started when the family took out $500 million of cash in 1985 as part of the complex deal that created Rockefeller Center Properties Inc., a publicly traded real-estate investment trust. (The trust owns the $1.3 billion mortgage that is now in default.) That deal placed a very high value on Rockefeller Center real estate. A year later, when Mitsui Fudosan, another big Japanese real-estate firm, set its sights on the nearby Exxon Building, the 1985 deal’s valuation helped the Rockefellers and Exxon Corp., joint owners of the building, collect an astounding $610 million, The Exxon Building sale, in turn, helped set up the $1.37 billion sale to Mitsubishi, which was eager to stuff its portfolio with even bigger, more prestigious U.S. properties than Tokyo competitor Mitsui could boast.
Add everything up, and the Rockefellers emerged with almost $2.2 billion before taxes. The buyers have lost their shirts. The Rockefellers would have made even more money had they sold 100 percent of the center’s parent company to Mitsubishi. But they couldn’t: the center’s mortgage required the family to keep at least a 20 percent ownership. Even Rockefellers can’t get every last dime.
The Rockefellers see themselves among the injured. “We were strongly opposed to the bankruptcy filing,” says William G. Bowen, chairman of the Rockefeller Trust Committee. He said the family was willing to put up 20 percent of the money needed to rescue the center. “We felt an obligation not to default on the mortgage. Not only is the bankruptcy unwise economically, it exposes a great cultural asset to risk.”
The family and Mitsubishi apparently decided to buy the real-estate trust’s shares to get control of the mortgage held by the trust. They agreed to offer $7.50 a share–about $300 million-for the stock, but had a falling out over how to split the cost. The amount in question: about $30 million. Neither side blinked, Bankruptcy city.
But the filing doesn’t expose the Rockefellers to much financial risk. They made their money by selling, not buying, and have their $2 billion to keep them warm. An example of why the Rockefellers are the Rockefellers. And why the rest of us aren’t.
