Other People's Money by Charles V. Bagli

Author:Charles V. Bagli
Language: eng
Format: epub, mobi
Publisher: Penguin Group US
Published: 2013-03-18T16:00:00+00:00

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For MetLife, the results of the Stuyvesant Town-Peter Cooper Village transaction could not have been better. The sale sent the company’s share price to a fifty-two-week high of $58.60 and MetLife’s end-of-the-year accounting revealed that it had reaped an incredible $3 billion gain, net of income tax, on the deal, or half the $6.16 billion in net income, or profit, for all of 2006. MetLife also reported that its net investment income from the two complexes was $73 million in 2006, up from $70 million in 2004.9 So it had not been losing money on the property. But the gains from the sale were nothing short of spectacular.

Over the prior four years, MetLife had sold twenty properties for more than $10.5 billion. It only made $85 million on the $835 million sale of the Sears Tower, where it had foreclosed on a loan. But the other buildings had been built or purchased by the insurer decades ago, so most of the purchase price was profit. MetLife’s former headquarters building at 1 Madison Avenue brought in $918 million. After buying the MetLife Building in Manhattan for $400 million in 1980, the company sold it twenty-five years later for $1.72 billion. The $3 billion gain on Stuyvesant Town-Peter Cooper Village was unparalleled.

No wonder MetLife, in preparing for the traditional “closing dinner” for the brokers, lawyers and company executives who worked on the deal, wanted something more substantial than the traditional Lucite block, known as a “tombstone,” emblazoned with the names of buyer, seller and broker.

The insurer commissioned a crystal wedge that stood eight and a half inches high and weighed a full ten pounds. It was nestled in a velvet-lined black box. The company logos were affixed in their respective colors: blue for MetLife, green for CB Richard Ellis, silver for Tishman Speyer and black for BlackRock. Hovering inside the glass was a laser-etched schematic of the layout of the buildings at Stuyvesant Town-Peter Cooper Village. The inscription read: “Peter Cooper Village; Stuyvesant Town; Largest Real Estate Transaction in World History.”

The tombstone was distributed to about 30 people at the closing party at Top of the Rock, the observatory atop 30 Rockefeller Plaza in midtown. From that perch 850 feet above the street, Rob Speyer and Steven A. Kandarian, MetLife’s chief investment officer and soon-to-be chief executive officer, had unobstructed views of Stuyvesant Town-Peter Cooper Village, 1.5 miles to the south. Feeling expansive, Kandarian wished Speyer well, although he did not want to see him turn around and sell it for an even higher price tomorrow, a crazy possibility in the rollicking market. There was not a whisper of doubt among this gathering of some of the country’s shrewdest real estate investors that the market would continue its upward march. “I sincerely hope you do well with this transaction,” Kandarian said to Speyer, “just not too soon.”10

Kandarian need not have worried that he had undersold Stuyvesant Town-Peter Cooper Village. Four years later, he looked uncannily prescient in selling the property at the peak of the market, before the boom collapsed in a devastating recession.

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