As chairman of both RGI and the REIT, I was acutely aware that I had a conflict of interest. To avoid any appearance of impropriety I resigned as chairman and director of the REIT in December 1992. Claude Ballard, a limited partner of Goldman Sachs, replaced me.
By 1993 it was mandatory for RGI to act decisively if continued financial deterioration was to be averted. While the recession had ended, there was still no prospect that the Center would be able to renew leases at the higher levels we had anticipated. With lower rents RGI would not be able to handle its obligations to the REIT, and Mitsubishi and the 1934 Trusts would be forced to cover deficits amounting to hundreds of millions of dollars after 1994. I advised Mitsubishi that its only viable options would be to restructure the debt or buy out the REIT. Because the REIT shares had fallen to below $10 a share, I thought the latter was the more tenable alternative.
In early 1994, with REIT shares then trading at $6, Mitsubishi tendered $4.35 a share to the REIT. The REIT board promptly rejected the bid but, still facing a severe credit crunch, secured financing from Goldman Sachs’s Whitehall Realty in the form of $225 million in debentures carrying an interest rate of 14 percent. As a result Whitehall, headed by Daniel Neidich, would become a dominant player in the REIT’s affairs, and relations would become adversarial between the REIT and RGI.
As Rockefeller Center’s losses continued to mount—reaching a cumulative total of $575 million in 1994—Mitsubishi made one final effort to buy out the REIT. In cooperation with the 1934 Trusts, Mitsubishi offered $7 a share, or $270 million in total, with Mitsubishi providing $216 million and the 1934 Trusts $54 million. The REIT countered with a demand for $310 million.
The Japanese balked and insisted that any additional funds would have to come from the 1934 Trusts. Mitsubishi had already invested almost $2 billion in the property and would go no further. In response Bill Bowen insisted that any increased investment from the 1934 Trusts would make business sense only if Mitsubishi offered concessionary terms, including a preferred five-year equity investment with a 12 percent dividend rate. He also demanded control of RGI if Mitsubishi missed four dividend payments. The Japanese were infuriated by Bowen’s terms and immediately backed away from the deal, indicating they would not make any more payments to the REIT. The prospect of the unthinkable—a Rockefeller Center bankruptcy—had become a real possibility.
AN ILL-FATED TRIP TO TOKYO
Even though my role in all of this had largely been reduced to that of an observer, I felt strongly that bankruptcy should be avoided at all costs. I thought a personal appeal to Mitsubishi’s senior management might bring them back to the bargaining table, so Dick Voell and I flew to Tokyo to press their top executives to reconsider their decision. As I was entering Mitsubishi’s headquarters on the morning of our meeting with Takeo Fukuzawa and his senior colleagues, I slipped, fell, and broke my leg. It took thirty uncomfortable minutes for a wheelchair to arrive. By the time it did, my adrenaline had taken over, and the pain had momentarily subsided. I insisted that we proceed with the meeting before I was taken to the hospital.
Mr. Fukuzawa and his associates were aghast when I was wheeled into the boardroom. They listened respectfully while I spoke about the dangers and stigma of bankruptcy, and beseeched them to reopen negotiations with the REIT. I remained at the meeting for nearly an hour, but ultimately neither my broken leg nor my arguments persuaded them.
The purchase of the Rockefeller Group had been Mitsubishi’s largest overseas investment, although the more conservative members of their board had opposed it from the start. With the Japanese economy in the process of a meltdown and Rockefeller Center in serious trouble, this faction now held the upper hand. While negotiations continued for the next few months and at one point it looked as though Mitsubishi and the 1934 Trusts were close to working out a deal, it was to no avail. On May 11, 1995, the Mitsubishi board in Tokyo voted to walk away from the property.
On that same day members of the RGI board assembled in the ornate boardroom on the fifth floor of the Simon & Schuster Building on Sixth Avenue and 49th Street. It was a somber meeting. There was only one item on the agenda: a resolution to withhold the $20 million payment to the REIT and thereby precipitate a default. I made one last attempt to prevent the bankruptcy, noting the damaging consequences of a default to Mitsubishi, the Rockefeller family, and the Center itself. Drew Lewis, George Scharffenberger, Dick Dilworth, Dick Voell, and I voted against the resolution. We were outvoted by Mitsubishi’s directors and George Putnam, the 1934 Trusts’ representative on the board. Two days later RCP Associates and Rockefeller Center Properties—the two partnerships that had borrowed the money from the REIT a decade earlier—filed for bankruptcy protection. Dick Voell, finding himself in an increasingly untenable position, resigned as RGI president within six weeks.
Mitsubishi’s unfortunate decision had a painful financial consequence for them. Under the terms of the original deal, the 1934 Trusts had the right to “put” to Mitsubishi the 20 percent of RGI shares they continued to own at a price of $1,495 a share. The trusts exercised their right and received an additional $160 million from the Japanese in 1997. Thus, while Mitsubishi gained full ownership of RGI, the full burden of the loss fell on them.
RECLAIMING A JEWEL
Soon after the embarrassing and well-reported bankruptcy, Prudence Abraham, the judge overseeing the case, invited bidders to present plans to deal with the Center’s mortgage, which was now controlled by the REIT. Rockefeller Center was again “in play.”
Much to everyone’s surprise, the REIT had been able to stave off bankruptcy, but its financial condition was, to say the least, fragile, and a number of large real estate companies were clearly interested in picking up the property at a bargain price. I was concerned about the Center’s future and let it be known that I would be willing to join a new ownership group. The members of my family whom I approached were not interested in a continuing role in the Center, so I had to look elsewhere for partners.
During the course of the summer I kept in touch with events through my associate, Richard E. Salomon, and my lawyer, Peter Herman of Milbank, Tweed. Gianni Agnelli told me he would be helpful if there was a need for his investment. A few weeks later he called from Europe and told me that he had spoken with Stavros Niarchos, who was also intrigued with the idea of investing in the Center.
Gianni and Stavros each agreed to put up $61 million. Jerry Speyer, one of the principals in Tishman Speyer, also became involved in the discussions and expressed an interest in managing the Center. In the end Jerry and I each committed $15 million, or about 5 percent each of the funds required. With those commitments in hand we struck a deal with Goldman’s Whitehall Realty for a 50 percent ownership in a joint venture to purchase the REIT. In November 1995 the REIT board accepted our offer of $8 a share plus our assumption of the $845 million debt the REIT owed to its shareholders, and the REIT shareholders ratified the decision in March of the following year. Rockefeller Center was ours.
Despite claims from some quarters—notably Barron’s—that “mom and pop” investors had suffered huge losses in buying shares of the REIT, the fact was that original investors recovered their initial investment and actually made a modest profit. Between 1985 and 1995 the REIT paid $10.13 in dividends and returned $4.87 in capital for each share. Shareholders also received $8 per share when we assumed control of the property, producing a total return of $23 per share on a $20 investment—by no means a spectacular return, but at least not a loss.
Since one reason for my participation was to prevent the Center from being summarily dismembered, Whitehall agreed, at my insistence, to maintain ownership of the property for five years before considering a sale. And to underscore their good faith I was elected the nonexecutive chairman of the company RCPI Trust.
The irony of a Rockefeller once again “owning” Rockefeller Center, albeit a very small percentage, was not lost on the media. I said at the time that Rockefeller Center represented a “c
rown jewel, not only for New York but for the nation.” I was confident that our group would not only maintain the Center’s cachet, but also add to it.
ROCKEFELLER CENTER RENAISSANCE
We began our tenure as the new owners of the Center by asking Jerry Speyer to design a business strategy that would enhance its value and realize its full potential at a time when New York had finally shaken off the last vestiges of the recession of the early 1990s. Jerry responded by crafting a comprehensive plan for a “new” Rockefeller Center: a redesign of the plaza, the redevelopment of the underground concourses, and a retail strategy to attract upscale stores and tenants. The result has been a brighter, more colorful, and more dynamic Center epitomized by NBC’s Today Show broadcast from the plaza that attracts thousands of visitors every morning.
In addition we reduced the Center’s enormous debt load by selling to NBC’s parent company, General Electric, a condominium interest in 30 Rockefeller Plaza and other portions of the complex for $440 million in mid-1996. This seemed a fitting conclusion to my initial conversation with GE chairman Jack Welch about Rockefeller Center at the Alfalfa dinner a decade earlier.
My confidence in the inevitable renaissance of Rockefeller Center has been rewarded. The resurgence of the American economy in the latter half of the 1990s truly lifted all boats, including the large ocean liner named Rockefeller Center. By the year 2000, with refurbished facilities, space-age elevators, prominent new tenants such as Christie’s auction house, and an array of upscale retail outlets, the Center had reclaimed its position as one of the most sought-after treasures of American real estate.
A TOUCH OF SADNESS
Rockefeller Center had recovered much more rapidly than any of us could have anticipated. In view of this fact I agreed with Dan Neidich in the spring of 2000 when he proposed selling the property. We hoped to obtain in excess of $2 billion for the Center, but the offers from the four final bidders fell well below that level. In late December 2000, during an early morning conference call, we learned that the highest bid was still $50 million short of our $1.8 billion minimum price. We discussed the possibility of refinancing the property but came to no definite decision. However, at the very end of the call, Jerry Speyer said that he would be willing to pay $1.85 billion and asked that we accept or reject his offer by noon of that same day.
I discussed Jerry’s bid with Gianni Agnelli, the executors of Stavros Niarchos’s estate, and my own advisors. Goldman clearly wanted to sell, and the others seemed interested in accepting Jerry’s offer. I was convinced that Jerry and his associates, the Crown family of Chicago, would maintain the Center’s integrity and quality, and exhibit the same sense of public obligation that had characterized my family’s ownership of more than seventy years. So in the end I agreed to sell as well.
This “final” sale of Rockefeller Center netted me about $45 million after taxes and expenses, a threefold gain in my investment in barely four years. While I was pleased with this happy outcome, of course, I must admit to a touch of sadness as well. Barring some extraordinary development—and the history of Rockefeller Center has been full of unusual events—this will mark the end of my family’s long involvement with the Center that dates back to Father’s daring decision to build an innovative urban showcase in the middle of Manhattan during the depths of the Depression.
*Beginning in 1982 the Trust Committee sold about 14 percent of RGI stock to a company owned by Gianni Agnelli of Italy, to the family of William Hewitt of California, and to B. K. Johnson of Texas, in order to provide certain Rockefeller family trusts with greater liquidity and additional income for the beneficiaries.
*The funds were actually lent to two partnerships owned by RGI, Rockefeller Center Properties and RCP Associates, in order to insulate the parent company from a long list of legal and financial contingencies.
*We later learned informally that Mitsui Fudosan would have offered about $1 billion for the property. However, that price may have gone higher if the two Japanese companies had entered into a bidding war.
CHAPTER 31
PARTNERSHIPS
My wife, Peggy, meant more to me than anyone else.
We were married for fifty-six years, and her death in 1996 left an irreplaceable gap in my life. Her affection, wisdom, and wit were a source of strength throughout our life together. Her love enabled me to become more self-confident in facing the many responsibilities I had inherited or assumed, but she also saved me from the error of self-satisfaction when I was blessed with success. Peggy and I shared a deep pleasure in many things: sailing, collecting art, listening to fine music, carriage driving, and travel, especially when we could get away by ourselves. Yet while we enjoyed being together, we also had different interests, which we pursued independently. This was the key to our long and very happy marriage.
PEGGY
Peggy loved working with her hands—planting flowers, driving tractors, even making furniture for our bedroom in Maine. She embraced new projects with an intensity that was wondrous to behold, and became expert on subjects as esoteric and diverse as the artificial insemination of cattle and the identification of antique porcelain. Peggy was not a dilettante; rather, she was serious about anything she undertook. Never satisfied to just sit on the board of any organization, she was a font of creative ideas and always willing to do her share to implement them. Two organizations in particular, the Maine Coast Heritage Trust and the American Farmland Trust, occupied much of her time and energy during the last two decades of her life and reveal the passion and commitment she brought to everything she did.
Sailing in Maine became an absorbing pastime for both of us soon after World War II. We spent many happy days of our annual summer vacations cruising among the islands of Maine’s rugged coast in a thirty-six-foot wooden-hulled sloop without an engine or a “head” in the company of family and friends. Later we graduated to a forty-two-foot Hinckley Sou’wester but continued to handle the sailing ourselves.
Peggy’s concern for the future of our beloved cruising ground led her to join forces with our fellow sailor and friend Thomas Cabot to form the Maine Coast Heritage Trust (MCHT) to help protect the islands from inappropriate development. Largely through Tom’s and Peggy’s leadership, MCHT became an effective preservation force by encouraging landowners to place conservation easements on their property. This innovative legal tool has enabled MCHT to protect 115 privately owned islands and more than twenty-five thousand acres of Maine’s magnificent coast.
In the 1970s, Peggy became interested in raising beef cattle and pursued this new interest with her characteristic enthusiasm and energy. She surveyed the American beef cattle industry and discovered that Simmenthals, a recently introduced European breed with a larger frame than the more familiar Black Angus, was gaining in popularity. Peggy believed she would have a greater chance of success with Simmenthals, rather than with older, more established varieties. Although making a profit in the cattle business was by no means assured—production costs were high and demand uncertain—Peggy was determined to go ahead.
She began with a small herd of polled, or hornless, animals (a characteristic also coming into vogue, in part, because of the ease in handling them) at Hudson Pines. Her first real success was an impressive bull whom she named “Keep It Clean” because all his progeny, even when he was bred to horned cows, would be polled.* Peggy’s purebreds quickly gained favor, and her auctions at the handsome Stone Barns, which Father had built in the 1930s at Pocantico, attracted buyers from around the world.
Peggy soon expanded operations from Tarrytown to Maine and began to look for land in upstate New York. She finally settled on Livingston in Columbia County, about seventy-five miles up the Hudson from Pocantico, and eventually purchased almost three thousand acres there, much of it in pasture where several hundred Simmenthals could graze. Later she converted most of the acreage to the commercial production of corn, soybeans, and wheat.
Columbia County’s beauty enchanted us. Nestled along the H
udson River with the Catskill Mountains to the west and the Berkshires to the east, the area had been settled for hundreds of years. After buying the land we discovered the area had been home to my Rockefeller ancestors when they emigrated from the German Rhineland early in the eighteenth century. As Peggy became more absorbed with the Livingston farm, she commissioned the architect Edward Larrabee Barnes to design a residence for us, which we named Four Winds. In the years before she died, Peggy spent a day or two a week there. Since her death I have kept the farm going, though I am only able to get there several times a year.
Peggy’s burgeoning involvement with raising cattle and farming in Columbia County deepened her awareness of modern agriculture’s new economic realities. Increasing costs and the arrival of the global marketplace had made good management and adequate financial resources essential if one was to remain in business. At the same time the inexorable growth of urban areas spawned a surge of development into rural areas that was gobbling up much of the nation’s best farmland without regard for the quality of the land or the consequences to future generations. Small family farms had once abounded in Columbia County and other parts of the northeastern United States, but many of their owners had succumbed to the pressure and sold their land to real estate developers at high prices. Large subdivisions of suburban tract homes were appearing in erstwhile farming communities.
In an effort to stem the tide, Peggy helped to organize the American Farmland Trust (AFT) in 1980. The AFT did not want to prevent all development; it wanted to impose order on the helter-skelter process while championing the cause of farmland preservation. A key tool was the conservation easement, which allowed landowners to place legally binding restrictions on the future use of their property, limiting it, for instance, to agricultural purposes or keeping it “forever wild.” The AFT also lobbies state governments to appropriate and set aside permanent financial reserves to acquire these easements and thereby provide small farmers with the necessary liquidity to stay in business.
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