REAL ESTATE REPORT Mike Prentiss Plays To Win

IT’S LATE IN AUGUST, AND MIKE Prentiss is on the verge of making one of the biggest real estate purchases in the history of this country: for roughly $450 million, Prentiss and his investors are buying all of the U.S. office and industrial properties of Toronto-based Cadillac Fairview Corporation Ltd. But after working on the deal for more than a year, spending untold hours on airplanes and in boardrooms in Boston, Chicago, Toronto, and Dallas, Prentiss says if the deal were dead tomorrow, he wouldn’t shed any tears.

“Seriously. Absolutely,” Prentiss says, with an apparent complacency that is extremely puzzling.

He is sitting somewhat uncomfortably on one of the leather couches in his modern, citified office in Pacific Place, one leg sort of flailed out past the chrome and glass coffee table-he’s just had foot surgery for a sports-related injury and is wearing a sort of high-tech cast. His six-foot-four, 225-pound (he’d say 215) frame looks handsome, but unnatural in the confines of a business suit. Like the tropical fish in the aquarium set like a picture frame into his office wall, Prentiss sometimes seems trapped in his surroundings.

“I have vacillated back and forth on this deal and I still do today, because the honest truth is, notwithstanding all of the work and sweat and tears that everybody has put into it, if tomorrow it’s dead and we find something and we can’t close it, 1 won’t shed any tears. That’s fine with me,” Prentiss says.

Prentiss has the look of a man who’s very satisfied with himself, He knows he’s reached a pinnacle in his career and is successful both financially and in terms of respect from his peers.

But his calmness over this deal seems strange for a man whose friends say is “ambition in the raw” and whose adversaries say is brutal, the “toughest [expletive deleted] negotiator in town.” Could it be that maybe, just maybe, this rugged man from the Northwest who took Atlanta by storm and became president of Ackerman Development Company at age thirty-one, then moved on in 1980 to conquer Dallas as president of Cadillac Fairview Urban Development is (gasp) mellowing?

At forty-three, Mike Prentiss is not getting soft-just hearing about his past year’s antics is enough to leave me spent. And he stalks his pleasure as voraciously as his business. In the trunk of Prentiss’s car is more sports equipment than at Doak Walker’s sporting goods store. While most men and women his age play at sports for the fun of it or for the exercise. Prentiss’s regular tennis, basketball, racquetball, and golf opponents say he always plays to win. And he gets absolutely furious when he loses.

Michael Young of Dallas-based Michael Young and Partners is a friend and business associate of Premiss’s. He also plays basketball with him regularly and says when you play anything with Premiss, you play until he wins.

“You may win in the beginning, but Mike will keep playing until he wears you down,” Young says. “That is consistent with the way he does business. He’s a real grinder, relentless in negotiations.”

That doesn’t sound like a guy who would walk away from a $450 million deal and leave $1.8 billion in assets with roughly $1.35 billion in debt on the table. And the projects Prentiss is acquiring are those he helped create during his nine-year tenure at Cadillac Fairview, buildings like Momentum Place and First City Center in downtown Dallas and the IBM Tower, Atlanta’s newest landmark,just to name a few. But in a sense, Prentiss has already wort the Cadillac Fairview tournament even if this deal were never done.

In the summer of 1986, when the Cadillac Fairview sale was announced, the company bought Prentiss out of the various partnerships he had in Cadillac Fairview projects. To say the least, it was lucrative for him.

“I’m not doing this for financial reasons. I’ve managed to spend a lot of money in my life, but I still have enough now that I don’t have to work any more,” Prentiss says.

That’s part of the key to his apparent complacency with closing this megadeal. He’s not doing it for the money. And he’s tempted not to do it at all because he’s got the money. He is doing it, however, for the challenge, the excitement; though it sounds flip, he’s doing it because, like Everest, it was there. But like Everest, this deal presents problems by no means easy to surmount.



FOR NINE YEARS, PRENTISS SAYS HE HAS pretended that Dallas-based Cadillac Fair-view Urban Development was his, even though he knew it wasn’t; he knew it was part of the much larger publicly held corporate entity. But in a sense that unit of Cadillac Fairview was Mike Prentiss. Like its leader, the identity and nature of the urban development unit was much different from the safe, mature, stuffy parent. The approximately 17 million square feet of office and industrial property completed or under construction that Prentiss controls is sexier than the rest of Cadillac Fairview’s assets-older shopping center and office properties in Canada and the U.S. Like Prentiss, these assets are riskier, younger, more speculative. That means they are at the same time more of a challenge, yet more fun to manage, Looking after this much speculative real estate during tough times may not be most people’s idea of fun, but you can’t underestimate the fun factor when it comes to Mike Prentiss. The exhilaration of the challenge is important.

In May of last year, when the Bronfman family of Montreal, heirs to the Seagram liquor fortune, told the Cadillac Fairview board that they wanted to sell their 51 percent interest in the company, there were several obvious buyers for the huge real estate interest: the Reichmann family of Toronto, which already owned 26 percent of Cadillac Fair-view stock, or large U.S. real estate development dynasties like Gerald Hines Interests of Houston or the Trammell Crow Company. But in the end, Prentiss, who hails from humbler stock, and his investors at Boston-! based Copley Real Estate Advisors Inc.. would be the buyers to outbid these noble mammoths.

“When the sale of the company first came up, my gut reaction was I’d like to lake a run at it-at buying the whole company. But first, that was really impractical, and second, I wouldn’t want to do that because it was just too big and I don’t think it would be any fun,” Prentiss says.

But during the process of working through the sale with Goldman Sachs, Prentiss says he was encouraged to try to buy the U.S. office and industrial property for several reasons, the most obvious being that he was the person most familiar with the assets. But Prentiss’s initial bid was also part of the sale strategy.

“Goldman Sachs said that most people would expect that I would be making a bid, and if I didn’t, people might wonder why not, might think there was something wrong with the portfolio. So part of the motivation was that I would heat up and stir up the bid process,” Prentiss says.

And with the most speculative property out of the way-property concentrated in the economically depressed, overbuilt office markets of the Southwest-it would also be easier to find a conservative buyer for the balance of the company. Enter JMB Realty Corporation, the Chicago-based real estate giant, with plans to purchase the company for $2 billion and subsequently sell the urban and industrial development unit assets to Prentiss. Now, everybody’s happy, right?

Well, not exactly. The deal fell through, and fell through again, and again-almost daily from the start.

“One of the problems with our deal is there are too many parties involved,” gripes Prentiss. “We have three parties to deal with and in a deal like this it’s hard enough to get two parties to agree on everything.”

And in addition to the three large parties-Cadillac Fairview, JMB, and the Prentiss/ Copley Investment Group-there are the lenders and the partners on some 140 different properties who all must agree on the deal. At any one meeting, Prentiss says, more than twenty people are sitting around a table having a screaming match. And this stuff has been going on for over a year now.

Technically, JMB has a contract to purchase all of the shares of Cadillac Fairview, but Cadillac Fairview is actually the seller of the urban development assets to Prentiss/ Copley and JMB is buying the balance of the company. Throw in proposed amendments in the Canadian income tax legislation that adversely affect the transaction, plus some fluctuating exchange rates on Canadian versus U.S. dollars, and you have one bitch of a deal to close. At one point, Prentiss decided it couldn’t be closed.

“On July 4, we terminated negotiations,” Prentiss says. “And I hadn’t felt so good in a year. I was really glad it was over. But I think that comes from the uncertainty. It’s been fifteen months of not knowing what was going to happen, but knowing that whatever did happen was going to have a dramatic impact on my career.”

Needless to say, there’s been a lot of anxiety around the offices of Cadillac Fairview Urban Development. After the July 4 termination, the deal has been on again, and off again, and on again. . .Prentiss and his employees have been through month after month of limbo, not knowing if they were going to have a job the next week.

Another time when the deal was off Prentiss was called back home from a trip to Venice. On the way back he made a list of everything he would do if the deal didn’t, in fact, go through.

“I figure I could stay busy for more than a year with all the little projects I’ve got. I’ve got a lot of interests. I’ve always believed that you are a much more successful business person if you’ve got a variety of interests. The guy that all he wants to do is work and he doesn’t play sports and he doesn’t like to drink and he doesn’t like to chase women can be pretty boring,” Prentiss says.

This fun-factor strategy has certainly worked for him. You can’t accuse Mike Prentiss of not enjoying his money. He’s got houses all over the country, the latest additions being a place on the Cape and a horse farm in Virginia. And he bought a new sailboat recently. Though Prentiss toys with the idea of not working for a year, taking off to trek around Nepal or whatever, those who know him well say he would be climbing the walls within weeks. Plus, his wife says she’s not about to share power with him around the house, and the idea of that type of intimidation is enough to scare even Mike Prentiss back to the office.



ON THE SURFACE, PRENTISS IS A PRETTY easy person to label. Jock. Right wing. Chauvinist, It’s probably not just a coincidence that the women who work for Mike Prentiss all have great legs. But past the apparent chauvinism and these other somewhat negative labels, Prentiss’s boyish appreciation of women, his unwavering zeal for team sports and palling around with the guys, and his lust for making deals work his way are very appealing. He’s thoroughly likable-though some people who once worked for him would earnestly disagree.

Prentiss is not the easiest man to work for. His associates say he is no less than brilliant at his business in every aspect from construction to financing, and he expects as much and more from his management team. At forty-three, Prentiss has the experience of a man fifteen years his senior. And though his resume contains some of the expected trappings of a man of his position-including the notorious Harvard MBA-his career path has unpretentious beginnings and is marked here and there with some good doses of luck. “I think you make part of your breaks, but luck is a large part of it, too. Certainly there are people out there who are just as good if not better than I am at everything that I do. But they didn’t get as lucky,” Prentiss says.

Prentiss has always been around the building industry. Though he really didn’t have a plan of attack, he just kept gaining more and different types of experience in real estate, He always knew he could make money at that profession.

When he was growing up in Tacoma, Washington, the less glamorous, more industrial step-city to Seattle, he worked for his Uncle Tom, who was a big concrete manufacturer in the Northwest. Though Prentiss says his family wasn’t poor, his parents were divorced and he and his mother and two younger brothers lived pretty much hand to mouth.

“Uncle Tom was sort of like my surrogate father. He’s a great guy. I knew he made $100,000 a year or more and I always thought, God, if I could make $100,000 a year, I’d be rich.”

He says he really wanted to be a forest ranger, a profession he wouldn’t have gotten rich on, but instead of forestry, he studied engineering at Washington State University. Prentiss spent five years in the Navy during the Vietnam war, gaining expertise building warehouses and officers’ quarters on the Whidbey Island Naval Air Station off the coast of Seattle. At twenty-two, Prentiss had 400 people working for him-all older than him. He thinks that kind of responsibility was invaluable and helped him immensely in his career. A contractor working for him while he was in the Navy put the Harvard spark in Prentiss”s mind, something that changed his future dramatically.

In 1971, finished with his military career, Prentiss looked ahead to graduate school. He says going to Harvard had never entered his mind until this contractor, an older man in his fifties, asked him if he’d ever considered it. This guy sent him to Portland to talk to a friend who was a Harvard graduate, and Prentiss liked him immediately.

“He was sharp and successful and I said, by God, that’s where I’m going to go.” Prentiss says.

As he has so often in his life, despite the odds against him, Prentiss went ahead with abandon. His test scores were tops by Washington standards, but at Harvard he was near the bottom. As the months went by, Prentiss failed to make cut after cut for admission.

“I didn’t make the March cut, and by this time, this school I’d never thought of going to was the most important thing in my life. I had never even been there, but I really wanted to go. I got in on the last round. I got the letter one day and that night I got a phone call that they were giving me a fellowship. I’ll never understand that, but it was a real windfall, because between that and the GI Bill, I could afford to go,” Prentiss says.

It’s not surprising that Prentiss did very well at Harvard. He wanted to. so he worked extremely hard, he wore his competition down, and he ended up a Baker scholar. With those credentials, he could walk through almost any door he wanted. He chose Ackerman Development Company, and a year later, he was president.



WHEN PRENTISS TURNED FORTY, A GROUP of his closest friends bought a billboard in Dallas-one he was sure to see on his way to work. On it they had printed the message: Happy Fortieth Birthday Big-Time-No-Time-For-Small-Time Mike Prentiss.

“Mike’s not exactly known for his humility,” says John Fowler, managing director of Fowler, Goedecke, Ellis & O’Connor Inc., a Boston investment banking firm. Fowler, part of the billboard consortium, hired Prentiss the summer after his first year at Harvard and he likes to say he taught Prentiss everything he knows about the real estate business.

After Prentiss has done the biggest real estate deal in U.S. history, will there be room for anyone else in this town? Where does Mr. Big Time go when he’s done the biggest?

Surprisingly, he plans to get smaller,

“I want to get smaller, not bigger in terms of assets,” Prentiss says. And he adds that he could care less if Prentiss Properties Limited–his company that will develop and manage assets for the Prentiss/Copley Investment Group-ever ends up on the building magazines’ biggest builders lists. “I just want to make it profitable, profitable for all of our people and profitable for all of our investors,” Prentiss says. He plans to concentrate on seven or eight markets and to develop those in an orderly fashion.

Prentiss says his company will be doing fewer giant projects like Momentum Place- a building that he’s already worked on for seven years and will spend at least two more years on before it’s leased up. “I don’t need to be spending ten years on a given building. It’s not worth it,” he says.

Part of this new “thinking small” is a reflection of Premiss’s relationship with his investors at Copley Real Estate Advisors Inc. He did two joint-venture projects with Copley at Cadillac Fairview; both are large, master-planned office parks that offer less risk and fewer complications.

Prentiss and Joe O’Connor, Copley’s chief executive, are a good match. They met about five years ago at a symposium where they were both speaking. The chemistry was right, and they’ve been friends, drinking buddies, and business partners ever since.

If this deal doesn’t go through, they’ll still do business together and Prentiss will get around to accomplishing the tasks on that list he made flying home from Venice.

“If this thing doesn’t work out, I could just go up and work on (his farm I bought in Virginia. I guarantee you I’ll have the best damn horse farm around,” Prentiss says.

“That’s just my nature.”