A Las Vegas hotel mogul finalized one of his last mega transactions, selling his hotel company to an even craftier deal meister. The ownership of America's best-known bastion of capitalism and commerce changed hands — again. And a Swedish furniture firm with designs on the U.S. consumer market leased nearly 2 million sq. ft. of industrial space in the Golden State for distribution.
The 12-month period that began Jan. 1, 2000, was a period of deals — some hot, some not, some fraught with more twists and turns than a ride at Disney World. Once again, transactions took center stage in the American real estate industry as weak REITs were gobbled up by stronger ones, a major ski operator joined forces with one of the nation's largest innkeepers, and retail malls and centers were shopped around the globe.
“2000 was a year of numerous deals,” said Roger Cline, director of hospitality consulting services at New York-based Arthur Andersen LLP, “but the transaction activity slowed somewhat compared with previous years.”
Hoopla surrounded a number of transactions, including Manhattan's Rockefeller Center, which was scooped up by New York mega developer Tishman Speyer, partnering with Chicago's Crown family in a transaction valued at $1.85 billion. The agreement finally severed links with the global symbol of capitalism and the Rockefeller family that built the development during the Great Depression to show economic confidence in America's future.
Mega deals were the cornerstone of Equity Office Properties Trust's strategy during the year. The Chicago-based REIT headed by deal maker par excellence Sam Zell engineered one of the largest real estate transactions in 2000: a merger with Cornerstone Properties, which was valued at $4.6 billion and increased Equity Office's portfolio by 24%.
The Big Apple showed increasing appeal to buyers and sellers for large real estate deals. Again, Equity Office Properties Trust was one of the major players. In partnership with Lehman Brothers, the REIT acquired an equity interest in the 1301 Avenue of the Americas building, valued at approximately $715 million. The Seagram Building in downtown Manhattan also found a new owner: New York-based RFR Holding LLC, which bought the building from TIAA-CREF, one of the nation's largest financial services organizations.
New York wasn't alone in commercial transactions. Three thousand miles west in San Francisco, Hines, the Houston development firm, and the California Public Employees' Retirement System (CalPERS) initiated a $200 million, 665,000 sq. ft. office development.
Office transactions also had some northern exposure. TrizecHahn Corp., the Toronto-based real estate giant, sold some $1.2 billion of Canadian office properties, using the proceeds to execute a share buyback and to invest in technology ventures.
Among the large transactions during the year, Rodamco North America (RNA), a Dutch-based mall property owner, spent $3.4 billion to acquire Urban Shopping Centers, based in Chicago.
Hospitality also proved to be a deal maker's nirvana. Legendary deal maker Kirk Kerkorian's MGM Grand hotels and Steve Wynn's Mirage Resorts merged in a $4.4 billion deal that brought a number of trophy properties, including the Bellagio in Las Vegas, under the MGM umbrella. It appeared to be Wynn's last major hotel deal, for now at least.
In another huge hotel deal, Washington, D.C.-based MeriStar Hotels & Resorts, the nation's largest independent hotel management company, merged with Newry, Maine-based American Skiing Co., the country's largest ski resort operating company. The new company, renamed Doral International, has assets of approximately $1.2 billion.
“Combining a ski project with hotels was fairly unique,” said Cline of Arthur Andersen.
Big deals were also the order of the day in the industrial sector. Newport Beach, Calif.-based Pacific Gulf Properties, for instance, agreed to sell its portfolio of 72 industrial properties containing 14.9 million sq. ft. to CalWest Industrial Properties, a joint venture of RREEF and CalPERS, carrying a price tag of about $850 million.
In California, north of the Los Angeles basin at the intersection of Interstate 5 and Highway 99, the Tejon Ranch and IKEA — the world's largest home furnishings retailer — broke ground on an 80-acre, 1.8 million sq. ft. Western North American distribution facility.
Opting for the heartland, the Gap Inc. is establishing a 1.4 million sq. ft. distribution center at a Columbus, Ohio-area commerce center owned by Indianapolis-based Duke-Weeks Realty Corp.
The multifamily sector wasn't standing on the sidelines in 2000. The industry also saw mega deals such as Dallas-based Olympus Real Estate's acquisition of Dallas-based Walden Residential Properties, one of the nation's largest multifamily REITs, in a $1.7 billion deal. According to Washington, D. C.-based Fannie Mae, which provided $650 million in debt financing for the transaction, the deal is the largest privatization of a multifamily REIT.