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Wednesday, October 2, 1996
RF&P merger vote expected Oct. 15
BY JEFF E. SCHAPIRO
Times-Dispatch Staff Writer
A merger of state-owned RF&P Corp. and a Washington real estate giant appears to be a done deal.
The overseers of the Virginia Retirement System and its RF&P subsidiary will meet in Richmond on Oct. 15 to vote on the long-anticipated RF&P partnership with the Charles E. Smith Cos. ''We're getting near the end-game,'' said VRS trustee Edwin T. Burton III, who heads a special committee of the pension fund that was set up more than a year ago to screen offers for RF&P. Yesterday, Burton's committee and most members of the VRS board of trustees huddled over glazed doughnuts and coffee to discuss details of the RF&P-Smith marriage, which has been in the works for months.
With an estimated pricetag of $350 million, the venture would include such properties as Crystal City in Arlington, the enormous office-residential complex built by Smith atop RF&P land. Potomac Yard in Alexandria, one of the last large undeveloped tracts inside the Capital Beltway, would be excluded from the RF&P-Smith partnership. Under the merger, VRS and Smith would share dividends from a new real estate investment trust.
Two other companies have been angling for RF&P, a railroad-turned-real estate company acquired by VRS in 1992 in a $548 million deal that came under the scrutiny of state and federal prosecutors.
Also courting RF&P: SFRE Inc., an Alexandria real estate investment company backed by grain behemoth Cargill Inc.; and Lazard Freres & Co., a prestigious New York banking house representing World Global Center, which wants to develop Potomac Yard.
Potomac Yard, an abandoned rail yard once offered as a home for a new Redskins stadium, is the subject of zoning and environmental disputes with municipal and federal governments.
Burton declined comment on the SFRE and Lazard offers, and whether the firms might have a shot at RF&P properties not included in the anticipated merger.
VRS, with $22 billion in assets, could collect more than $20 million a year from the agreement with Smith. The fund has not seen a dime on its investment in RF&P because the company elected to keep its profits.
RF&P represents less than 5 percent of VRS' holdings but, because of the legal and political controversy surrounding the company, has created negative publicity for the pension fund.
The real estate investment trust could go public, potentially generating a windfall for RF&P and Smith that could help both pay down mortgages.