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Carr Empire's Changing Skyline
Oliver T. Carr Jr., Washington commercial real estate giant and the patriarch of a family of developers, with Angie O'Grady, president of Preferred Offices.
(By Jonathan Ernst For The Washington Post)
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The General Services Administration, which handles real estate transactions for the federal government, cut its demand for space, sapping the local market.
To save itself and raise much-needed capital, the company went public in 1993 and became a real estate investment trust, known as a REIT; CarrAmerica did not have to pay corporate taxes as long as it paid out 95 percent of its taxable income to investors.
When its stock weakened, the company received a cash infusion in the mid-1990s from a company affiliated with Security Capital Group Inc., which was run by William D. Sanders. He invested $250 million in exchange for a 40 percent stake in CarrAmerica, which later bought him out.
By the late '90s, CarrAmerica was expanding rapidly, buying more than $2 billion worth of buildings in suburban markets, including San Francisco, Dallas, Austin, Chicago, Atlanta and Southern Florida.
In 2000, Oliver Carr Jr. stepped aside after four decades at the helm. Thomas Carr, who had been president and chief executive, replaced him as chairman. Two years later, Philip L. Hawkins became president -- the first time someone outside of the Carr family held the position.
"It was no longer this regional, family-influenced company," Thomas Carr said. "It became this modern, publicly held company with properties nationwide."
In 2002, the company sold its buildings and interests in Atlanta, Dallas, Chicago and Denver, as it changed its strategy and invested in newer, high-quality buildings in cities. Its properties in San Francisco and San Jose were hit hard with rising vacancies and dropping rents after the technology bubble burst. It sold some and held onto others, hoping for a turnaround that is just now coming.
And then, just as it was planning $1.5 billion in development, suitors began to appear.
"All of a sudden there was this arrival of private equity on the scene," Thomas Carr said. "It was something I hadn't anticipated. The notion of a private player coming in and doing a deal of this magnitude was out of left field."
One company asked whether it could make a quick offer. Carr said he had two conditions: a compelling price and a quick turnaround. That deal didn't materialize, though other buyers were circling.
"Blackstone moved in like an eagle or hawk," Oliver Carr Jr. said, "and grabbed the company."
Thomas Carr said the board picked Blackstone for one reason: the highest price.
"It was really that complicated," he said jokingly. "How could you get that much money to shareholders without taking this offer? I had a fiduciary responsibility as CEO to put the offer on the table. It was the right thing to do."
Although there was some surprise internally and among local real estate executives at how quickly Blackstone flipped the company's D.C. assets, Thomas Carr said, "Blackstone didn't change their stripes" as the deal went along. "They did what they said they were going to do."
Still, the local real estate industry is feeling a loss as the CarrAmerica name disappears.
"We're losing some of the soul," said Raymond A. Ritchey, executive vice president of Boston Properties Inc., "when some of the long-term iconic names cease to exist in our industry."
