SL Green Wins Approval Of Reckson Shareholders

By Jennifer S. Forsyth
From

After four months of contentious debate, shareholders ofReckson Associates Realty Corp. voted yesterday to approve its acquisition by SL Green Realty Corp., after Reckson's chief executive personally sacrificed $25 million to make sure the deal went through.

The deal is a significant victory for New York-based SL Green, as Reckson holds five coveted office buildings in Manhattan at a time when it would be almost impossible to acquire that much New York real estate piecemeal. With rental rates climbing and few additional buildings being constructed, New York office buildings are being sold for record prices. The acquisition gives SL Green bragging rights as the largest office landlord in the city.

Also a winner was Reckson Chief Executive Scott Rechler, who along with a group of his investors will end up with about one-third of the Reckson portfolio. Yet his success came at a price.

Yesterday morning, as the shareholder meeting resumed after a 24-hour delay, Mr. Rechler announced that Reckson, a Uniondale, N.Y., real-estate investment trust, would issue a special dividend of $25 million -- equal to about 29 cents per Reckson share -- if the merger closed.

That $25 million was the amount Mr. Rechler was due as a severance package in the merger agreement with SL Green. He volunteered to forgo that payment to ensure that the deal got done. (The holders of two-thirds of Reckson shares had to approve the merger agreement.)

Mr. Rechler said in an interview that he was willing to give up the severance because SL Green made it clear to Reckson it wouldn't increase its bid. When asked what he would do now, Mr. Rechler said: "I'm going to Vermont, to sit under a tree and contemplate life -- $25 million poorer."

That Mr. Rechler was forced to make such a gesture reflects his role as a lightning rod since the Reckson-SL Green deal was announced Aug. 3. SL Green announced it would buy Reckson for cash and stock then valued at $4.1 billion, not including debt assumption, but would sell back about one-third of the assets, all in the New York city suburbs, to Mr. Rechler and his investors for $2.1 billion -- a price some investors and shareholders believed was too low. At SL Green's 4 p.m. composite price yesterday of $134.24, the deal is valued at about $45.62 a share.

Even as the postponed shareholder meeting was about to begin, other suitors were still expressing interest in Reckson's assets.

According to people familiar with the situation, one last-minute bid was from financier Carl Icahn, whose second proposal for all of Reckson earlier in the week was rebuffed. This time Mr. Icahn bid only for the suburban property that was to be bought by Mr. Rechler's group. But once the meeting began, Mr. Rechler announced, without naming Mr. Icahn, that an 11th-hour bid had been rejected by Reckson's board. Reckson didn't disclose the amount of the bid.

Meanwhile, lawyers representing New York developer Harry Macklowe's Macklowe Properties worked through the night before the shareholder meeting, readying an offer of between $2.3 billion and $2.4 billion for another part of Reckson, according to a person familiar with that planned offer. The target: Reckson's Manhattan properties plus a building in Long Island City, Queens. But Macklowe dropped that plan after Reckson announced as the meeting began thatCohen & Steers, one of Reckson's biggest shareholders, had agreed to support the merger after Mr. Rechler gave up his severance payment. The special dividend increased shareholder value and also eliminated Cohen & Steers's concerns about the severance agreement, Cohen & Steers co-CEO Robert Steers said in an interview.

It would also have been a second run at Reckson for Mr. Macklowe. On Nov. 16, Mr. Macklowe teamed up with Mr. Icahn in a $49-a-share, all-cash offer for all of Reckson. That proposal had buoyed the hopes of some Reckson shareholders that a bidding war would force SL Green to pay substantially more to seal the deal. But over the weekend both Mr. Macklowe and another partner that had joined later withdrew, fearing the price was too high. That forced Mr. Icahn to shuffle the terms of his offer to a cash-and-stock deal, which was rejected by the Reckson board Monday night.

After the vote was finally tallied yesterday, SL Green issued a statement saying, "While the events of the past three weeks have not been easy, the decision validated the credibility of our bid in the strongest possible way."

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