Finance Related Cos. gets $1.4B infusion     December 18, 2007 By: Eric Kalis eal estate giant Related Cos. is getting a capital infusion of $1.4 billion, an investment that could signal the company’s desire to aggressively expand its South Florida portfolio with new acquisitions and projects. The New York-based developer with more than $24 billion in real estate assets either on the books or in development sold $1.4 billion, or 7.5 percent of the company’s equity, to Goldman Sachs and MSD Capital, the investment arm of Dell Inc. chief executive officer Michael Dell. Related also raised an undisclosed amount through a debt placement with three international investment groups, including Mubadala Development Co., the investment arm of the government of Abu Dhabi, and Saudi Arabia’s Olayan Group. The third foreign investor was not disclosed. Each new investor will have a stake in future Related development projects, according to a news release, but the company’s management will not change. Some of Related’s signature projects are the CityPlace retail, entertainment and residential complex in West Palm Beach and the Time Warner Center and Moynihan Station in New York. Related agreed earlier this year to buy the 11 U.S. Virgin Megastores music stores, including one in Downtown Disney in Orlando, from Virgin Entertainment Group. In a statement, Related chief executive officer Stephen Ross said the deal should bolster the company’s growth plans. “These new financial partnerships ensure that Related has a ready and deep source of capital to take advantage of virtually any opportunity regardless of size or scale,” Ross said. “In the last decade the size, scope and geographic diversity of Related’s development pipeline has increased dramatically.” Jorge Perez, Miami managing partner and founder of the Related Group of Florida, did not return a call for comment. Ross and Perez have reportedly been in early talks to acquire the Miami Dolphins football team and Dolphin Stadium in north Miami-Dade County from billionaire entrepreneur H. Wayne Huizenga. Although the investment deal could possibly free up capital for Ross and Perez to make a bid for the Dolphins, real estate analyst Lewis Goodkin, president and CEO of Goodkin Research in Miami, said Related is more likely motivated by a strategy to pursue acquisitions in a down housing market. Related has a large South Florida residential portfolio that includes three Donald Trump-branded condominium developments, as well as the Icon Brickell and Loft projects. The company could move to acquire distressed properties in the region at bargain prices and wait for an advantageous time to build, he said. Related “is not selling its interest because it is in trouble,” Goodkin said. “They have been so successful. [Ross and Perez] have a couple of things brewing and seem to have genuine interest in acquiring the Dolphins, but the real focus [of this transaction] is that Related continues to be a big player in the opportunity side of its business.” Mubadala CEO and managing director Khaldoon Khalifa Al Mubarak said in a statement the Abu Dhabi government plans a long-term investment in Related. “We share their approach to investing in premier projects that build long-term value,” Al Mubarak said. “Related has great leadership and an impressive project pipeline with even more potential opportunities.” Mubadala, which is active in commercial and industrial investments in the Middle East, does not currently have any North American real estate holdings. Some of the company’s major investments include Emirates Integrated Telecommunications Co., the United Arab Emirates’ second telecom operator; the Abu Dhabi Ship Building Co.; and Dolphin Energy, one of the largest gas producers in the Middle East. Goodkin said the weak U.S. dollar is encouraging big investors from the Middle East, Latin America and Europe to make significant investments in U.S. real estate. This should hurt domestic real estate players but give more options and stronger financial backing to companies such as Related, he said. “This is a unique period for real estate because there are a lot of opportunities to buy at attractive prices,” Goodkin said. “The currency advantage gives someone in one of the Arab countries, which have invested substantially in other currencies, a tremendous advantage to invest in the U.S. at this time.” Eric Kalis can be reached at ekalis@alm.com or at (305) 347-6651.