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Stephen Ross, dealmaker
MAP HINTS: Click expands a name. Control+Click centers map on a name. Solid lines are current relations. Dotted lines are former relations. For advanced tools choose Tools > Options from the menu at top. More help. Not seeing the maps? Please go here to check for the latest version of Java.New York real estate magnate Stephen M. Ross has been cutting deals at a whirlwind pace in recent weeks.
Centerline Holding Company, which he chairs, today announced that Freddie Mac would securitize its $2.8 billion bond portfolio. Centerline said it would also receive a $131 million investment in January from the Related Cos.
Centerline execs said the moves were designed to reduce debt, attract capital for growth and shelter the firm from volatile interest rates.
Yet several stockholders participating in the company’s online conference call this morning described the arrangement as a sweetheart deal benefitting Ross and his companies at the expense of public shareholders.
Ross also chairs Related Cos. Jeff T. Blau, Related’s president, is a managing trustee of Centerline. A third Centerline trustee, Robert J. Dolan, is dean of the Stephen M. Ross School of Business, named for its prime benefactor.
Related had a large cash infusion earlier this month, when several firms invested a total $1.4 billion. Mubadala Development Co. of Abu Dhabi and the Olayan Group of Saudi Arabia put in about $1 billion. Goldman Sachs and Michael Dell’s investment company, MSD Capital, invested an additional $400 million for a 7.5% stake, placing Related’s value at more than $5 billion.
Ross told the Wall Street Journal that Related opened talks for the cash infusion before the mortgage crisis erupted. The market “was so good we knew it wouldn’t last,” he said.
Ross formed Related 25 years ago to develop and manage government-assisted rental apartments. Over the last two decades, the company has become heavily involved in luxury residential and commercial projects, including Manhattan’s Time Warner Center.
Related is also developing properties around Penn Station, and is bidding on a massive project to redevelop the Hudson Yards on the city’s west side.
On another front, the Miami Herald reported two weeks ago that Ross and Jorge Perez were talking to Wayne Huizenga about buying the Miami Dolphins. Perez is the managing general partner of Related’s Florida operations.
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Buffett buys one of the Pritzkers’ prizes
MAP HINTS: Click expands a name. Control+Click centers map on a name. Solid lines are current relations. Dotted lines are former relations. For advanced tools choose Tools > Options from the menu at top. More help. Not seeing the maps? Please go here to check for the latest version of Java.Warren Buffett has followed the dealings of the Pritzker family for half a century, but he had never had a direct business connection to them. . .until now.
In a deal announced Christmas day, Buffett’s Berkshire Hathaway is paying $4.5 billion for 60 percent of Pritzker-owned Marmon Holdings, a conglomerate with about $7 billion in annual revenue. Berkshire will acquire most of the remainder of Marmon over the next few years.
The transaction between the Oracle of Omaha and Chicago’s wealthiest family took less than two weeks to execute, according to The Wall Street Journal.
“I liked them,” Buffett told the Journal. “They were my kind of guys. I knew I’d be very comfortable.”
In an interview with the Chicago Tribune, Tom Pritzker, chairman of Marmon, said the deal will “give more freedom to those family members who want more freedom.”
Counting Marmon, the family has raised more than $10 billion from asset sales the past six years, according to the Journal, as it progresses toward a goal of dividing holdings among 11 adult cousins by 2011.
Jay and Robert Pritzker, grandsons of founder Nicholas Pritzker, ran the family’s businesses for decades. Jay died in 1999. Tom is Jay’s son.
The family still holds large stakes in the Hyatt hotel chain, Royal Caribbean Cruises and TransUnion, a credit bureau.
One other Buffett-Pritzker connection: Tom Pritzker told the Tribune that his mother, Cindy, once served on the board of trustees of Grinnell College in Iowa with Buffett, who became a trustee in 1968 and remains on the board.
Read related stories: Business · Dynasties
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Losing money but getting a bonus at D.R. Horton
MAP HINTS: Click expands a name. Control+Click centers map on a name. Solid lines are current relations. Dotted lines are former relations. For advanced tools choose Tools > Options from the menu at top. More help. Not seeing the maps? Please go here to check for the latest version of Java.If you have been following D.R. Horton and the troubled home building industry, you might be wondering how a company that reported a net loss of more than $700 million in its most recent fiscal year can pay its top two executives nearly $1.6 million apiece in performance bonuses for that year.
The answer: Fort Worth-based Horton calculates and pays its bonuses quarterly, not annually. So, if the company makes money in a quarter, the executives earn bonuses, no matter what happens in the other reporting periods.
The bonus formula is even more finely focused in the October-December period, according to the company’s annual proxy statement released last week. Then, executive bonuses are based solely on December. In effect, October and November don’t count.
Horton, one of the largest builders in the country, reported losses of more than $870 million in the last half of its 2007 fiscal year, ended Sept. 30, erasing profit from the first half.
Since 2001, chairman Donald Horton and CEO Donald Tomnitz each have received more than $45 million in bonuses. That includes a total of nearly $25 million apiece during the boom years of 2005 and 2006.
In fiscal 2007, bonuses were based on consolidated pre-tax income. At its annual meeting Jan. 31, the company is asking shareholders to approve compensation plan modifications that, in part, also factor in cost containment and operating cash flow.
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