Manhattan transfer is a costly face-off

STANDING at a window in the Mitsui offices, Shuji said: 'To understand what's happened in Manhattan, you have to understand the mentality of the salaryman. You are young - 30 years old. You work for Mitsui. You've got to do something before the Sumitomo guy does. If it appears in the Nikkei (Japan's leading financial daily) that Sumitomo did their big deal, your company president will look at the newspaper and say, 'What's Shuji Tomikawa doing there?' ' To the salaryman, he explains, what is important is not money or profits but the avoidance of conspicuous failure.

'Dai-Ichi suffers, Mitsubishi suffers, Mitsui suffers,' says Shuji. 'We all suffer together. That makes Japanese salarymen feel better . . . as long as no one firm is extremely profitable.'

Of course, the fear of falling behind exists everywhere, but nowhere does it drive behaviour as in Japan. When Mitsui bought the Exxon Building, its chief zaibatsu rivals, Sumitomo and Mitsubishi, found themselves embarrassingly short of prestige. 'Sumitomo had two guys who had been there six or seven years without buying anything,' an investment banker central to the deal told me. 'They called and said, 'Look, we need something. And we need something slightly above Mitsui.' Not long afterward, Sumitomo bought 666 Fifth Avenue. It stood a block away from the Mitsui offices, like one of those towers in San Gimignano from which medieval Italians poured boiling oil on to their rivals.

This left Mitsubishi staring up in envy.

Enter Rockefeller Center.

On 1 September 1989, it was announced that all bids on the property must be submitted to Shearson Lehman, investment bankers to the Rockefeller Corporation, by 15 November. We now know that representatives of the Rockefeller family discreetly approached Mitsubishi as much as 10 months earlier. But it wasn't until Mitsui declared its intention to build on the property that Mitsubishi truly came to life.

Not long after 1 September, Mitsui Real Estate received a pair of visitors from Mitsubishi Bank. 'They were so obviously spies for real estate,' says one Mitsui employee. 'They were trying to find out what we were going to do. I told them we were going to buy office space in Detroit.'

The ensuing battle has gone largely unreported. Mitsubishi, which had no experience in New York property acquisitions, was at a disadvantage. Walk into the New York offices of Mitsui and you see rows of computers used for valuation; Mitsubishi had none of these. They hired a Texas company to evaluate Rockefeller Center.

In New York on 26 October there was a convention of the Urban Land Institute, an association of real estate professionals. Mitsui, as always, sent its New York professionals. Mitsubishi, for the first time, did not. 'They were trying to demonstrate how hard they were working on the Rockefeller Center project,' said one source close to the rivalry. Yet everyone at Mitsui knew that a team in Texas was doing all the work.

'This wasn't a normal American-style corporate rivalry,' said a real estate specialist who watched it all. 'It had nothing to do with who made the most money. It had to do with the prestige of the company, with being the biggest. They were taking their backyard battle into the global market.'

The time to bid arrived early, because a team from Mitsubishi pre-empted Mitsui and on 29 October offered dollars 846m for 51 per cent of the Rockefeller shares; Mitsui, believing itself to be valuing the property generously, would have come in a distant second had it bid. Its offer would have been around dollars 400m.

Several people involved suggested that Mitsubishi put nearly half a billion dollars on the table simply because it feared losing the property to Mitsui. One Mitsui employee told me he felt Mitsui had been invited to bid merely to goad Mitsubishi. 'It was a wonderful approach. We were a stalking- horse,' he said.

'Mitsubishi's decision,' one man involved with the sale told me, 'was emotional rather than rational.' It would be difficult to prove that Mitsubishi Estates overpaid for Rockefeller Center to avoid humiliation at the hands of its rivals. On the other hand, would anyone care to argue the opposing case?

(Photograph omitted)