Carr Empire's Changing Skyline
Monday, November 20, 2006
This spring, homegrown CarrAmerica Realty Corp. sat at the pinnacle of its industry, owning, developing and managing a vast portfolio of office buildings. It was a Washington institution, tracing its roots back half a century, when Oliver T. Carr Jr. began building Montgomery County houses.
The original Oliver Carr Co. was the biggest and best real estate developer in town in the late 1980s, burnishing a reputation for commitment to the community. It had ventured into downtown after the 1968 riots, when others hesitated, putting up office buildings and growing along with its city.
Earlier this year, CarrAmerica owned and managed 26.3 million square feet in 12 markets across the country. It had 650 employees, including about 300 in the Washington area. Its stock was trading around $30 per share.
Over the summer, it sold to out-of-towners, and today CarrAmerica, as a stand-alone entity, is no more.
"The company is completely and irrevocably changed," said Thomas A. Carr, former chairman and chief executive of CarrAmerica, who stepped down this summer.
A unit of Blackstone Group L.P., a New York-based private investment firm, paid $5.6 billion, or $44.75 per share, for CarrAmerica's real estate empire, with properties in the District, Maryland and Virginia suburbs, and along the West Coast. At the time of the deal, the new owners said they'd use CarrAmerica as a "platform for future investments," although they didn't spell out how.
Four weeks later, Blackstone moved to sell CarrAmerica's 26 buildings in the Washington region to Tishman Speyer Properties, based in New York, a transaction that has yet to close. By then, about 100 local employees had been let go -- workers in accounting, human resources and information technology.
Neither entity will say what their plans are for the buildings in the Washington region, or the West Coast. Some in the industry say Tishman is likely to spruce up some of the older, Washington-area buildings.
As for the onetime CarrAmerica corporate headquarters on K Street NW, callers are still greeted with "Thank you for calling CarrAmerica." But Carr family members are no longer running the company. The employees who remain in the D.C. region work for a different owner, with another owner set to take over.
"Change is always painful, and going through the change has been difficult," Thomas Carr said recently. "The company carried the family name, and the family legacy was the icing on the cake. There was a tremendous amount of pride."
Blackstone, one of the largest private equity funds in the world, typically buys public companies with little money down and lots of borrowing, restructuring them and selling for a nice profit. Earlier this year, it also bought MeriStar Hospitality Corp., a hotel real estate investment company, in a $2.6 billion deal.
Blackstone saw the CarrAmerica deal as a short-term commodity play, say local real estate experts, speculating that Blackstone didn't want to keep CarrAmerica's entire portfolio and therefore sold off the most liquid assets -- the D.C. portfolio -- for which investors were willing to pay top dollar. Blackstone could use those profits to pay down debt on the West Coast buildings it bought from CarrAmerica. Some said Blackstone is likely to hang onto CarrAmerica's California assets, as it expects that market to continue to improve, and consider selling later.