Merchandise Mart Up For Sale [$1B will buy you Christopher Kennedy's Merchandise Mart Properties]

Parent company Vornado Realty Trust has been dropping hints along Wall Street and with potential buyers that it wants to sell the subsidiary, including the fortress-like structure along the Chicago River. The New York real estate investment trust purchased it from the Kennedy family in 1998 for $630 million.

Vornado's efforts already have yielded a $1.25-billion offer, that deal died last month, people familiar with the negotiations say.

A sale could portend big changes for Mr. Kennedy, 47, who as Mart president since 2000 has led a major expansion of the business, which stages trade shows and leases showroom and office space in eight buildings nationwide. The Mart's management team is likely to be a key part of any deal.

Vornado executives are expected to continue to troll for a buyer for the Mart, which has been battered by recession and tenant defections and doesn't fit with the REIT's core business of owning office and retail properties in New York and Washington, D.C., analysts say.

“The Mart division has been identified by management as an asset best owned and operated by someone else,” says John Guinee, an analyst at Baltimore-based Stifel Nicolaus & Co.

Mr. Kennedy declines to comment on whether the REIT wants to sell off the Mart but says Vornado's management “will look at yield above everything else, and if they can reinvest at a higher yield, they will. Always.”

The Kennedys have been associated with the 3.5-million-square-foot Merchandise Mart since 1945, when patriarch Joseph Kennedy paid $12.5 million for the architectural gem. Under Christopher Kennedy's management, the Mart has expanded from four buildings in two markets to eight buildings in six markets totaling nearly 8.9 million square feet.

At 30 Patriarch Joseph P. Kennedy became a stockbroker and acquired a fortune for dealing in insider trading and stock manipulation. He was said a master of the stock pool, a practice [legal] by a few traders who conspired to pump a stock's price, dumping just before the bubble burst.

Kennedy's real strength wasn't his alleged criminal ties but his business smarts, notably an exquisite sense of timing. In the mid-1920s he became a movie mogul (taking time out for a celebrated dalliance with Gloria Swanson), then organized a merger and sold out just when the industry was consolidating, clearing five to six million dollars. He pulled out of stocks early in 1929 and sold short following the crash, actually making money while others got creamed. Just before Prohibition was repealed he lined up several lucrative liquor-importing deals.

By the 1930s Kennedy was rich, but it was said he didn't make the big money by today's standards until he got heavy into real estate during World War II, scooping up $100 million [mol]. In 1945 he made this deal that is the centerpiece of the Kennedy fortune: $12.5 million that had cost $30 million to build.. annual gross in rent exceeded the purchase price not long after. Source says.

Perhaps time to dump when in an economic slump. Thought the Kennedys historically dump prior a severe downturn.

Interesting question on tenants besides the usual anchors..for my own knowledge/history:

http://themartcenter.com/tenant-listing/

Tenant Listing includes the Chicago Teachers Union, Comcast, Discovery, US Post Office, US Green Building Council (USGBC)-Chicago Chapter, Special Deputy Receiver represents the Director of Insurance of the State of Illinois in managing all Illinois insurance companies in receivership,Chicago Sun Times... 2,000 design showrooms, trade shows etc..

the chain retails have moved to their own locations

six million square feet is a lot of space to keep filled..

Owners Vornado Realty Trust (VNO) [Kennedy is the boss or President of the Merchandise Mart Division] claims 60 million sf in NY [United Nations Plaza and the New York Stock Exchange] and DC [largest landlords to the Federal Government].

Vornado Realty Trust 1998 committed to buying Chicago’s Merchandise Mart and other Kennedy family properties for $625 million.

Under the terms of the definitive agreement, Vornado will pay approximately $625 million for the 3.7 million-square-foot Merchandise Mart, the adjacent 1.8 million-square-foot Apparel Mart and two buildings in Washington, D.C.

Vornado was prohibited from reselling the properties for the next 20 years.

That stipulation, combined with the large amount of OP units, reveals why the Kennedy family chose a REIT to exit its direct investment in the portfolio. By swapping equity for shares, the sellers “defer paying taxes” on that portion of the proceeds until such time as the property is resold, or until they resell the shares-—Vornado Takes Kennedy Portfolio for $625M
http://www.allbusiness.com/operations/facilities-commercial-real-estate/4420696-1.html

[REIT: A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages... receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate.]

Chris Kennedy, Son Of Robert F. Kennedy, Polling For Possible Senate Run (06/2009)

http://www.huffingtonpost.com/2009/05/02/chris-kennedy-son-of-robe_n_195216.html

Republicans who run are sure to campaign against the scandals surrounding Blagojevich in this Democrat-controlled state. Democrats must sort through a wide-open field that could include anyone from a protege and basketball pal of President Barack Obama to a son of the late Robert F. Kennedy.

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