The Real Deal Miami

Carlos Slim’s bulging portfolio

By Adam Piore | October 01, 2010 07:00AM

Billionaire Slim’s New York real estate buys are no secret, but what about the rest of the holdings of the world’s richest man?

Carlos Slim

New Yorkers know him as the New York Times’ white knight, and the man who just dropped $44 million on the Duke Semans Mansion on the Upper East Side, but Mexican billionaire Carlos Slim has plenty of other real estate holdings outside of New York.

While Slim has beefed up his New York real estate portfolio lately, he’s also made moves like gaining control of a prime half-billion-dollar property in Beverly Hills. And his companies are investing $1.4 billion in a huge Mexico City complex and plan to construct two new shopping centers in other Mexican cities — one in San Luis Potosí, the other in Villahermosa — in 2011.

In addition, a Slim-controlled holding company recently announced plans to spin off a separate real estate division in the coming months, sparking a rally on the Mexican Stock Exchange that drove its stock to its highest price in 18 years.

With a bank account estimated at $56 billion, Slim is the richest man in the world. But while he built his fortune as the telecom giant of Latin America, he’s also long dabbled in Mexican real estate, and controls a vast empire of shopping malls, office buildings, and now universities — which only seems poised to grow in the near future.

“He is very, very active, all over the place,” Luis Miranda, an analyst at Banco Santander SA in Mexico City, told The Real Deal. “In real estate, when he sees an opportunity, he takes it.”

Slim likely learned the value of buying land from his father, a Lebanese immigrant, who opened a general store and then bought up prime real estate in Mexico City during the revolution of 1918. Slim studied engineering in college, and founded a real estate company early in his career while working as a trader on the Mexican Stock Exchange.

Now Grupo Carso, his main umbrella company, owns everything from real estate to mining businesses to telecom to retailers.

In Mexico, the company owns (or at least holds a large stake in) 20 shopping centers, including 10 in Mexico City, and operates a number of stores in the country under U.S. imprints, including Saks Fifth Avenue, Sears and the Coffee Factory. Most centers are geared to middle- and upper-class Mexican youth, and are close to full occupancy.

Those shopping centers are just one pillar in an empire that is so pervasive in Mexican society that there’s even a widely used term for it: “Slimlandia.”

“Cradle to grave, in Mexico, you can spend your whole day — your whole life — in a Slim bubble,” said George Grayson, professor of government at the College of William & Mary, and an expert on Latin America, who coined the term. “From your first telephone call, to listening to radio stations owned by him, to eating his food products — to, yes, shopping in his malls.”

And Slim’s empire shows no signs of shrinking.

“From what I know, they are buying everywhere,” said Marco Munoz, director for special projects at the Teresa Lozano Long Institute of Latin American Studies at the University of Texas.

In Mexico City, Slim’s $1.4 billion Plaza Carso aims to revitalize a rundown area in the city, with movie theaters, housing and commercial space (which will be home to a number of Slim-controlled enterprises) as well as a museum that will feature 64,000 pieces of art. The Soumaya Museum, named after Slim’s late wife, will open later this month.

Meanwhile, Grupo Carso’s announcement in late August that it plans to split its mining and real estate divisions into separate companies prompted its shares to jump 12 percent on the Mexican Stock Exchange.

“They have not yet disclosed what assets they will include [in the new firm],” said Miranda, noting that the company acquired a number of real estate holdings, such as hospitals, universities and undeveloped land, from a sister company in 2007 and will likely take many of those assets. “This will unlock value in the holding company.”

Growing NYC portfolio

Slim has been relying on a different investment vehicle to make his buys outside of Mexico. His New York purchases were made through Inmobiliaria Carso, a closely held entity for Slim’s family that is not required to release as much information.

Grayson said Slim’s New York investments may be more geared to protecting his family’s wealth.

“He wants a diversified portfolio,” Grayson said. “Things aren’t exactly hunky-dory in Mexico right now. Sections of the country are suffering mounting drug violence because of the clash of cartels, and also the backlash from the army’s battle with cartels. New York may not exactly be Eden, but it’s a safer place to put your dollars.”

Slim’s July purchase of the Duke Semans Mansion on East 82nd Street and Fifth Avenue may be part of that plan. Slim has declined to comment on the property, but a spokesperson has previously stated that he purchased it along with other investors, and does not plan to live in it.

Also, as has been reported, Slim ponied up $140 million in June to buy 417 Fifth Avenue from a joint venture of the Moinian Group and Goldman Sachs’ Whitehall Street Real Estate Fund, which had paid $250 million for the 11-story office tower in 2007.

“It’s not a fancy building … and he didn’t overpay for it,” said Craig Evans, senior managing director at Cassidy Turley. “You don’t stay rich based on ego. And if you want to get some exposure in New York, it’s a reasonable way to do it.”

Slim, of course, also snapped up a 6.4 percent stake in the common stock of the New York Times in 2008, then bailed the company out during the height of the credit crunch in 2009 with a $250 million loan. The terms were tough: 14 percent interest and 15.9 million warrants for New York Times stock.

But Slim’s most valuable real estate asset in New York City may well be the least obvious: Slim is the largest shareholder in Saks Fifth Avenue.

“Here is Saks with this giant fucking building — plus they have air space,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm headquartered in New York, referring to the department store’s Fifth Avenue flagship. “How much do you think that building is worth?”

Lots of capital

Through his bank, Banco Inbursa, Slim may be in a position to acquire even more distressed property in the months ahead.

Banco Inbursa is the senior lender on the former New York Times building on West 43rd Street, which was acquired by the Israeli billionaire Lev Leviev for $525 million in 2007.

The bank purchased much of the debt on the building from principal lender Credit Suisse last year. After buying the debt, Slim agreed to provide a $75 million revolving loan to finance Leviev’s ambitious new plans to transform the building into a vertical mall that will include luxury shops, bowling lanes, restaurants, a hotel and 26 condos.

It’s a project right up Carlos Slim’s alley.

In February, he also acquired eight acres of prime Beverly Hills real estate at the junction of Wilshire and Santa Monica boulevards, after his Banco Inbursa foreclosed on a $500 million condo, retail and hotel development slated to be designed by architect Richard Meier. No plans have been announced for its future. The land, which is next to the Beverly Hilton Hotel, was to be developed by British brothers Nicholas and Christian Candy.

Experts expect more deals, whether through the bank or the holding company, in the coming months.

Ben Thypin, senior market analyst at Real Capital Analytics, said Slim’s companies are uniquely positioned to take advantage of the current atmosphere.

“They have a lot of capital and they can do deals very quickly,” he said. “My guess is that they are aggressively entering New York and trying to take advantage of the depressed environment to pick up quality assets cheap.”