Familiar Faces, Distant Owners

CarrAmerica Deal Advances Trend

Oliver T. Carr Jr., Charles E. Smith and John E. "Chip" Akridge III put their names on companies that represented homegrown money and enterprise in Washington commercial real estate.

Over decades they built many of the area's signature office buildings. Now such locally owned companies may be going the way of other business landmarks, such as banks and department stores, that sold to out-of-towners.

"You used to have Citizens, Riggs and First Virginia, all of these great regional banks," said Raymond A. Ritchey, an executive vice president with Boston Properties Inc. who runs its local office. "And then we had all these regional retailers like Garfinkels, Woodies and Giant. And now we're seeing real estate companies going the same way."

Last week, CarrAmerica Realty Corp. -- a District-based real estate investment trust that traces its local roots to Carr's company in the 1950s -- announced a deal to sell for $5.6 billion to Blackstone Group, a New York-based private investment firm.

"What was once a market with local developers is now becoming more institutionalized and national in scope," said Greg Fazakerley, a D.C. developer. "It's gone through a metamorphosis."

What's driving the change, real estate brokers and buyers say, is that large companies like Blackstone have deep pockets to buy multibillion-dollar portfolios of real estate and enough diversity in their holdings to ride out downturns in individual markets. In snapping up a company like CarrAmerica, the out-of-towners also buy local connections and expertise.

The Blackstone deal for CarrAmerica also reflects another trend that is playing out nationally: publicly traded real estate companies going private.

Some real estate investment trusts, which have tax benefits but must pay most of their taxable income as dividends to shareholders, are finding they are not able to operate as nimbly and aggressively as private firms. As public companies, it is difficult for them to buy and hold property for development because rating agencies frown on too much debt. Real estate companies also complain that analysts and investors undervalue their stock.

CarrAmerica is the third local, publicly traded real estate company to make a deal to go private in the past year. Private investors bought Capital Automotive REIT for $3.4 billion late last year, and Blackstone offered $2.6 billion last month to buy MeriStar Hospitality Corp., a Bethesda hotel investment company.

Cedrik Lachance, an analyst at Green Street Advisors Inc., said large publicly traded developers are attractive acquisitions for private companies flush with cash.

"There's been a tremendous amount of capital allocated to real estate in companies like Blackstone, and that glut of money is seeking a home," Lachance said. "They're putting it to work easily through REIT acquisitions."

The Carr family has been in Washington real estate since Solomon Carr arrived from England in the 1880s. Oliver T. Carr Jr. started building houses in Montgomery County in the 1950s. After the real estate crash of the late 1980s, many companies struggled to stay out of bankruptcy. In 1993, Carr went public.