Rockefeller Group International Inc. History

Company Perspectives:

To be a leading developer/owner/manager of high-quality office facilities and other types of commercial real estate for America's leading organizations and individuals; and to be the dominant provider of a full range of real estate-related services on a global basis to clients of the same caliber.

Key Dates:

1931:

Work begins on the Rockefeller Center complex in midtown Manhattan.

1940:

Company completes the original 14 buildings in the center.

1959:

Opening of Time & Life Building marks expansion of the center to the west.

1972:

Rockefeller Center reaches final form of 21 buildings on 24 acres.

1976:

Company purchases Cushman & Wakefield, one of the nation's largest real estate brokerages.

1985:

Rockefeller Group mortgages Rockefeller Center for $1.3 billion.

1989:

Mitsubishi buys a majority share of Rock Group for $846 million.

1995:

Bankrupt Rockefeller Group surrenders Rockefeller Center to the mortgage holder.

2000:

Rockefeller Group develops office parks in three states.

2002:

Company completes new office tower in midtown Manhattan.

Company History:

Rockefeller Group International Inc., which does business as The Rockefeller Group, is no longer linked to the Rockefeller family, but it still owns and/or manages, through a subsidiary, 7.7 million square feet of premier office space within New York City's Rockefeller Center in midtown Manhattan and develops and manages commercial property in other parts of the United States. Other subsidiaries rent individual furnished offices and suites to businesses and provide telephone and communications services in office buildings to client firms. Through Cushman & Wakefield Inc., it offers office real-estate brokerage and management services to clients in 48 countries. Rockefeller Group International is a subsidiary of Japanese-based Mitsubishi Estates Co., Ltd.

Creation and Growth of Rockefeller Center: 1931-72

The Rockefeller Group (commonly called Rock Group by journalists) got its start as Metropolitan Square Corporation in 1928, when John D. Rockefeller, Jr., was spearheading a civic drive to provide New York with a new opera house as the centerpiece of an income-producing complex of buildings to be built on a 12-acre site between West 48th and 51st streets and Fifth and Sixth Avenues. Strategically located in the heart of midtown Manhattan, this tract was owned, with few exceptions, by Columbia University, but Rockefeller had acquired neighboring lots over many years. On the last day of 1928 he leased the entire Columbia-owned property for 24 years, with options to 2015. Metropolitan Life Insurance Co. agreed in 1931 to finance the project by purchasing bonds up to $65 million at 5 percent annual interest.

The Great Depression put an end to the opera-house plan, but Rockefeller forged ahead with the intention of developing a commercial project. Radio Corporation of America agreed, in 1930, to lease what became the 70-story RCA Building, the largest of a complex of office buildings unified in gray stone facing and by details and ornamentation in the then-popular Art Deco style. RCA controlled the RKO motion-picture studio as well as the NBC radio network, and another building was erected to house RKO offices and a lavish, 6,200-seat theater to exhibit films and live stage shows. As a result, the western end of the complex came to be known as Radio City, and the theater as Radio City Music Hall. Legal authority over the complex was vested in Rockefeller Center Inc. (RCI). Erected between 1931 and 1940 at a cost of at least $100 million, the original 14 buildings of Rockefeller Center represented six million square feet of rentable space. It was one of the largest projects ever undertaken by private enterprise, employing nearly 75,000 workers.

Rockefeller Center earned its first operating profit in 1943. Five years later the center still had a debt of $95 million, but in 1950 the Metropolitan Life mortgage was retired. Two years later John D. Rockefeller, Jr., donated the $57.7 million still owed him by Rockefeller Center to a fund held by his five sons. In 1955 these five brothers sold 46.7 percent of the center to family trusts.

RCI now began developing property adjoining the original buildings of Rockefeller Center on the other side of Sixth Avenue (officially Avenue of the Americas). In 1959 it opened the 48-story Time & Life Building in partnership with Time, Inc. Later three more office towers to the south of the Time-Life Building were erected and named for RCI's partners and anchor tenants, Celanese Corporation, McGraw-Hill Inc., and Esso Corporation (later Exxon Corporation). The 43-story Sperry Rand building, on the eastern side of Sixth Avenue just north of the original Rockefeller Center tract, was completed in 1962 in partnership with Uris Building Corporation. These structures greatly changed the face of once-dilapidated Sixth Avenue, which became a corporate corridor. Such transactions were in conformity with RCI's post-World War II policy of establishing joint ventures with blue-chip corporate partners rather than building on speculation. Rockefeller Center also bought the 28-story Sinclair Office Building at Fifth Avenue and West 48th Street in 1963.

Other RCI Holdings: 1972-84

With the completion of the 45-story Celanese Building in 1972, the Rockefeller Center complex reached its final form of 21 buildings on 24 acres, with a total of about 20 million square feet of space, including not only offices but some 200 shops and restaurants. RCI's annual revenue was believed to be at least $250 million. But during the recession-ridden 1970s, the vacancy rate rose as high as 15 percent, as such major tenants as Shell Oil Co., American Cyanamid, U.S. Rubber Co., and Eastern Air Lines departed the city. Radio City Music Hall had fallen into the red in the 1960s and remained there. But RCI had other resources. Long before, the family-owned enterprise had formed Rockefeller Center Management Corporation to market its expertise in finance, engineering, building maintenance and other areas of experience developed in operating Rockefeller Center itself. Another holding was Trinity Paper and Plastics Corporation, the nation's second largest producer of grocery store bags and sacks.

Rockefeller Center Development Corporation, formed in 1976, erected a number of joint-venture buildings outside the city, including the Public Service Electric & Gas Co. building in Newark, New Jersey, two high-rises in Detroit's Renaissance Center, and 44 Flower Street in Los Angeles, which became headquarters for Wells Fargo Bank. Starting with the International Trade Center in Morris County, New Jersey, RCI began developing several suburban office parks and duty-free foreign trade zones in New Jersey. It purchased Cushman & Wakefield Inc., one of the nation's largest real estate brokerages and management companies, from RCA in 1976. Founded in 1917, Cushman & Wakefield had 21 U.S. branches at the time of the purchase. At about the same time RCI acquired the construction and research division of Tishman Realty and Construction Co.

RCI also made unprofitable investments. It lost about $40 million on The Entertainment Channel, a cable-television network it launched in 1981 with RCA. The company, in 1980, entered the booming oil-and-gas-exploration market at its peak by purchasing the Wessely Energy Corporation, a holding it disposed of in 1984. In that year it purchased Outlet Communications Inc., a group of seven television and four radio stations.

RCI--still 94 percent owned by Rockefeller family trusts--wanted to spread its investments because Rockefeller Center was providing only a modest return to the 90 or so fourth- and fifth-generation descendants of John D. Rockefeller, Sr., who now controlled a majority of RCI stock. David Rockefeller, formerly head of Chase Manhattan Bank, became chairman of RCI in 1982 and brought in Dick Voell as president and chief executive officer. To raise cash for the younger Rockefellers, they sold the group's holdings in a number of office properties, such as the Wells Fargo Building and Renaissance Center II, for a healthy profit. By the time RCI changed its name to Rockefeller Group Inc. in 1984, the company was reported to be considering selling or optioning a share of Rockefeller Center. Such a transaction, however, would have to involve a buyout of Columbia's ownership of the 12 acres beneath the center's original 14 buildings.

Road to Bankruptcy: 1985-95

In 1985 Rock Group raised $1.3 billion by mortgaging Rockefeller Center to Rockefeller Center Properties Inc., a newly formed real estate investment trust that offered shares to the public. In return this trust won the right to convert the mortgage to a 71.5 percent stake in Rockefeller Center in 2000. From the sum collected by Rock Group, a sizable amount was paid to the family trusts, which distributed it to the family heirs as a dividend. Another $400 million went to buy the land owned by Columbia University, and about $500 million was set aside for future acquisitions. Rock Group, which retained management control of the complex, also achieved a striking windfall in 1986 when it sold Outlet Communications at a profit of almost $300 million. Excluding Cushman & Wakefield, the group had 3,700 employees in 1988 and estimated annual revenue of $775 million.

In 1989 Mitsubishi Estates Co., a unit of the giant Japanese conglomerate with holdings in fields including banking, real estate, shipbuilding, and automobiles, purchased 51 percent of Rock Group for $846 million. Seemingly dazzled by the prestige of Rockefeller Center, the Japanese were reported to have quickly agreed to pay a price far higher than David Rockefeller expected. Moreover, he and Voell were allowed to remain in charge of management. Exercising an option clause in the agreement, they sold another 29 percent of Rock Group to Mitsubishi for $527 million during 1990-91, raising the Japanese company's stake to 80 percent.

The purchase soon proved a debacle for the buyers. At the time of the transaction more than 95 percent of the commercial space in the original Rockefeller Center buildings was occupied, but much of this space had been rented cheaply under long-term leases negotiated in the mid-1970s, when New York's economy was dismal. With at least one-third of the leases coming up for renewal in 1994, Mitsubishi expected to realize much greater income, but the New York real estate market collapsed again at the end of the 1980s and did not recover for years.

By the end of March 1995 Mitsubishi had covered cash shortfalls of $623 million for the two partnerships of Rock Group that technically owned Rockefeller Center, yet the center was still $900 million in debt. Six weeks later the two filed for Chapter 11 bankruptcy. As a result, Rockefeller Center Properties, the public real estate investment trust (REIT), took possession of the center. This company, in 1996, sold Rockefeller Center to a group led by Goldman Sachs & Co. and Tishman Speyer Properties, L.P. (and including private investors, one of them being David Rockefeller). Rockefeller Trust Co., manager of 170 family trusts, sold the remaining 20 percent that they owned of Rock Group to Mitsubishi in 1997.

Still Thriving Developer and Manager: 1995-2002

Rockefeller and Voell resigned their positions in Rock Group after the bankruptcy filing, and a senior officer, Lorian Marlantes, succeeded as chief executive of the company, which retained prominent properties west of the original Rockefeller Center, such as a controlling interest in the McGraw-Hill Building and full ownership of the Time & Life Building (having purchased Time's share in 1986). Some 846 of its 1,192 employees departed or were let go, and the company moved its headquarters across Sixth Avenue to the McGraw-Hill Building. Rock Group also continued property management of this building and the Time-Life and former Exxon and Celanese buildings. In addition, it retained a parking lot to the west, extending to Seventh Avenue between West 49th and 50th streets. In 1999 it agreed to build a 33-story office tower on this site, in partnership with Morgan Stanley Dean Witter & Co. Morgan Stanley sold its share in the enterprise in 2001 for about $700 million to Lehman Brothers Holdings Inc., which made the completed structure its headquarters.

In 1997 Rock Group bought 140 acres and an existing building in what had been a research park in Florham Park, New Jersey, then built and leased two more. Three years later the group formed a joint venture with the Gale Group to buy an adjoining 473 acres and develop it as an office park. Rock Group also was developing two foreign trade zones in New Jersey, one near Cranbury, the other in Mount Olive Township. Under this concept companies received favorable import-duty treatment until a product was sold in the United States or was re-exported. Rock Group also had purchased land for such zones in West Palm Beach and Homestead, Florida, and in suburban St. Louis. In addition, commercial building sites had been acquired in such areas as northern California and eastern and central Florida.

Rock Group also held a 77 percent stake in Cushman & Wakefield Inc., which in 2003 was managing over 325 million square feet of building space and had 158 offices in 48 countries. Its annual revenue was more than $700 million, and it was the largest manager of commercial property in New York City. Rockefeller Group Business Centers, Inc. opened its doors in 1994 to rent individual furnished offices and suites. In its first location--one of Rockefeller Center's office towers--the firm offered tenants a choice of 89 small furnished offices; use of a receptionist and a telephone operator; a mailroom and office cleaning service; and conference rooms, photocopying machines, and kitchen space. The company then expanded a few blocks south to 1180 Avenue of the Americas. By 2003 it had four locations and was servicing 400 offices. Rockefeller Group Telecommunications Services, Inc., a subsidiary established in 1984 to serve Rockefeller Center tenants, had extended its comprehensive onsite telephone and communications services to more than 30 Class-A office towers, over 500 client firms, and more than 50,000 telephone lines. The parent company had added "International" to its name by late 1999.

Principal Subsidiaries: Cushman & Wakefield Inc. (77%); Rockefeller Group Business Centers, Inc.; Rockefeller Group Development Corporation; Rockefeller Group Telecommunications Services, Inc.

Principal Competitors: Brookfield Properties Corporation; Forest City Commercial Group Inc.; Insignia/ESG Inc.; Reckson Associates Realty Corporation; Tishman Speyer Properties, L.P.; Vornado Realty Trust.

Further Reading:

• Barnes, Peter W., "Rockefellers Set Sale of Outlet Unit for $625 Million," Wall Street Journal, February 6, 1986, p. 2.
• Brauchli, Marcus W., "Mitsubishi Estate Raises Rockefeller Holding to 80%," Wall Street Journal, July 15, 1991, p. A7D.
• Burton, Jonathan, "Getting Out at the Top," Forbes, October 28, 1991, pp. 149-50.
• Cole, Robert J., "Japanese Buy New York Cachet with Deal for Rockefeller Center," New York Times, October 31, 1989, pp. A1, D6.
• Croghan, Lore, "Never on Spec: Developer Gets Ready for Comeback," Crain's New York Business, April 5, 1999, p. 31.
• ------, "Rock Group Filling Executive Suites," Crain's New York Business, May 4, 1998, p. 38.
• Deutsch, Claudia H., "A Group Without a Center," New York Times, December 1, 1999, pp. B1, B12.
• Feldman, Amy, "Rockefeller Group Sets Off on Rocky Road to Rebuilding," Crain's New York Business, October 28, 1996, p. 16.
• Fowler, Glenn, "Rockefeller Center Reaching Its Final Form," New York Times, October 4, 1970, Sec. 8, pp. 1, 9.
• Grant, Peter, "C&W Sagging Under Rock's Weight," Crain's New York Business, January 2, 1995, pp. 11-12.
• ------, "Retirement of Rock CEO a Seismic Shift in Culture," Crain's New York Business, July 10, 1995, p. 7.
• Harr, John E., and Peter L. Johnson, The Rockefeller Century, New York: Scribners, 1988.
• Holusha, John, "Flexible Design Helps Firm Take Over a Building," New York Times, February 27, 2002, p. C6.
• ------, "Rockefeller Group Setting Sights Beyond New York," New York Times, January 1, 2003, p. C3.
• Knecht, Bruce, "New Money for the New Rockefellers," New York Times, January 9, 1983, Sec. 3, pp. 1, 28.
• Krinsky, Carol Herselle, Rockefeller Center, New York: Oxford University Press, 1978.
• Laing, Jonathan R., "No Putting on Heirs," Barron's, March 31, 1986, pp. 8-9, 20, 24, 26, 30.
• Lipman, Joanne, "Rockefellers Mortgage Site in New York," Wall Street Journal, July 30, 1985, p. 3.
• Oser, Alan S., "Rockefeller Interests Expand," New York Times, July 7, 1976, p. 57.
• Strom, Stephanie, "Rockefeller Center Forced to File for Bankruptcy by Tokyo Owner," New York Times, May 12, 1995, pp. A1, D4.

Source: International Directory of Company Histories, Vol. 58. St. James Press, 2004.

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