NYT - Cellular Pioneer (Craig McCaw) Puts Up 'For Sale' Signs
September 28, 2001
Cellular Pioneer Puts Up 'For Sale' Signs
By GERALDINE FABRIKANT and GRETCHEN MORGENSON
Craig O. McCaw was always a man in a hurry. He began building the nation's first cross-country cellular phone
network when he was in his 20's. Before he turned 50, he sold it to AT&T (news/quote) for a profit of $840
million. Then he invested that money in new telecommunications ventures and rode the technology stock tsunami to
a $9 billion fortune last year.
Now, Mr. McCaw appears to be in a hurry again. This time, a hurry to unload many of the properties he amassed
as one of the world's richest people. "For sale" signs have appeared on three homes; three jets; a 300-foot yacht; a
ranch; a private island off Vancouver, British Columbia; and even a collection of rare California wines.
The billionaire's "garage" sale is almost certainly a result of the severe downturn in the telecommunications industry.
And it offers a glimpse of how freely the entrepreneurs of the 1990's spent in the apparent belief that the go-go
years would never end.
A believer in telecommunications who has been called a visionary, Mr. McCaw continued to invest heavily in the
industry even after he sold his cellular network, McCaw Cellular Communications, to AT&T in 1994.
For a while the strategy worked. When technology stocks peaked in March of last year, Mr. McCaw's biggest
investments in two public companies, Nextel Communications Inc. (news/quote) and XO Communications Inc.
(news/quote), were worth $8.8 billion. Today, after selling some stock, his holdings are worth about $1 billion. Mr.
McCaw declined to be interviewed about his sales. But his spokesman, Robert Ratliffe, maintained that Mr.
McCaw was selling properties to raise cash to buy telecommunications assets on the cheap.
"A year or so ago, he saw where the economy was going and thought cash would be king," Mr. Ratliffe said. "So
he took assets that were easy to sell because he thought there was greater opportunity in telecom than he had seen
in 20 years."
But private islands, yachts and planes are not usually considered easy to sell. And several people close to the sales
said they were being made under duress.
While Mr. McCaw's big holdings in public companies can be easily assessed, a complete picture of his financial
position cannot. Whether he has taken on significant debt, for example, is not public information.
Nevertheless, the sales are a sign of how badly some of the nation's wealthiest people have been hurt by the
collapse in stock prices. Just a week ago, some members of the Bass family, heirs to a Texas fortune, were forced
to sell 135 million shares of Disney stock for $2 billion to satisfy a lender's call for cash.
Dennis Weibling, president of Eager River, Mr. McCaw's investment holding company, said that Mr. McCaw was
not being forced to sell assets to meet a lender's call for cash as was the case with the Basses.
"Craig has just over $10 million in margin debt," Mr. Weibling said.
To be sure, Mr. McCaw is nobody's idea of a pauper. He still owns a home in Seattle; a $20 million estate in
Atherton, Calif.; a $7.4 million home in Idaho; several planes; helicopters and other unspecified assets, a
spokesman said.
Still, his decision to sell the island, yacht and other personal assets follows the sale of considerable stock. It is
unclear whether Mr. McCaw still owns any of the AT&T stock that he received in the sale of his company, but Mr.
Weibling said that Mr. McCaw had sold the 18.4 million shares of Lucent Technologies (news/quote) stock that
grew out of his AT&T holding by mid-2000. Mr. Weibling would not disclose how much that sale generated. The
stock came public at $7.44 a share in 1996 and rose to a peak of $77.77 in March 2000. Yesterday, the shares
brought $5.49.
Mr. McCaw has also raised capital in recent months through a series of complex transactions relating to his stake in
Nextel, a wireless communications company. He owns 48 million shares directly and controls 25 million more
shares that are held by family members.
Yesterday, shares of Nextel and XO Communications fell to 52-week lows. At the close of trading, Nextel
brought $7.95, down from $48.13 at this time last year. XO closed at 33 cents, down from $38.88 a year ago.
Perhaps the most lavish asset that Mr. McCaw has disposed of is Tatoosh, a 300-foot yacht he sold to Paul Allen,
the co-founder of Microsoft (news/quote), for $100 million this summer. The yacht carries two helicopters, a 40-
foot speedboat, a sailboat and a swimming pool.
According to his spokesman, Mr. McCaw had not planned to sell the boat, but Mr. Allen insisted on buying it. Mr.
Ratliffe added that Mr. McCaw "enjoys building things more than owning them."
"The time to use the leisure assets wasn't as available," Mr. Ratliffe said.
Michael White of Cavendish White, a leading yacht brokerage firm based in London, said that Mr. McCaw
"probably didn't make any profit on that sale." Although he had ordered it several years ago, Mr. McCaw took
possession of the yacht last year.
James Island, Mr. McCaw's 780- acre refuge off the coast of Vancouver, is on the market for $49.9 million.
Mr. Ratliffe said that Mr. McCaw bought the island for an undisclosed amount to preserve it, halting a developer's
plan to build 350 homes. The property includes a golf course designed by Jack Nicklaus, a half- dozen guest
cottages and a communications system, but there is no main house on the island.
Farhah Vladi, a broker of private islands, says the property is worth about $4 million.
"You can't ask that much more, unless there is gold underneath," Mr. Vladi said. "One of the biggest islands in the
U.S., Niihau island in Hawaii, is worth $50 million, and it is 10,000 acres or so."
Mr. McCaw has already sold two homes in Seattle. A waterfront property, where he lived with his first wife,
Wendy, brought $20 million, and the other generated $7 million. A condominium is on the market, as is a
5,000-acre ranch in Carmel, Calif. Mr. McCaw is asking $40 million for the ranch, Mr. Ratliffe said.
Mr. McCaw and his second wife, Susan, live in a house in Seattle that he bought from Kenny G, the musician who
performed at the couple's wedding in San Francisco in 1998.
A pilot and airplane aficionado, Mr. McCaw has also sold several planes. These include a Gulfstream G-5, bought
by the actor Jim Carrey for an estimated $38 million in February. The Washington Times bought a Bombardier
Global Express from Mr. McCaw in late 2000 before it was completely built. A Boeing (news/quote) 737, which
he has ordered but has not yet received, is for sale at $54 million. Mr. McCaw still owns a Bombardier Challenger
604 and several smaller planes and helicopters.
According to Mr. Ratliffe, Mr. McCaw has a history of buying and selling planes, and "slots," a customer's place in
line to receive the next completed plane.
The recent transactions were provoked in part by the billionaire's changing preferences for airplanes, his
spokesman said. But an airplane broker who tracked the transactions noted that Mr. McCaw was selling planes far
more rapidly than he has in the past.
A collection of rare California wines, some with vintages from the 1960's, was also sold recently.
"The house Mr. McCaw used to own, had a wine cellar, and the new house does not," Mr. Ratliffe explained.
"Anyway, he does not drink, and the sale is immaterial." The collection's value was estimated at $200,000.
The two telecommunications companies in which Mr. McCaw has focused his investments Nextel Communications
and XO Communications are under enormous financial pressure.
He also controls ICO Global Communications (news/quote), a satellite company he bought out of bankruptcy in
June 2000, and Teledesic, another satellite operation.
The outlook for XO Communications, which began as Nextlink Communications, is especially grim. The firm
started as a developer of fiber optic networks that provided phone and data services to business customers and
subsequently bought radio spectrum from the government and from an Internet access company.
XO will need to raise $750 million by 2003, said Aryeh Bourkoff, an analyst at UBS Warburg, who also said the
company's roughly $4 billion in bonds are trading at about 25 cents on the dollar. "The stock is unlikely to recover,"
Mr. Bourkoff said, "until the company closes that funding gap."
Investors' concerns notwithstanding, Mr. McCaw remains optimistic, Mr. Ratliffe said. "XO has not missed their
numbers," unlike others in the industry, he said. "We continue to have faith in management's ability to perform in line
with expectations."
Nextel, one of the nation's largest wireless companies, was taken over by Mr. McCaw in 1995 when it was facing
financial pressure and needed financing. The company has grown since, but the stock has plummeted on investor
fears that its $16 billion of debt and additional capital requirements will hobble its operations.
Fred Moran, a telecommunications analyst at Jeffries & Company, said the stock was down even as shares in rival
companies, like Sprint PCS, have risen. Mr. Ratliffe said the company was in no danger of defaulting on its debt.
Last year, Mr. McCaw gave 5.9 million Nextel shares about 11.5 percent of his stake to ICO Global
Communications, a satellite telecommunications concern that he controls. The arrangement generated $350 million
for the company.
Mr. McCaw's wife, Susan, a Harvard Business School graduate, is behind some of the recent downsizing, Mr.
Ratliffe said. The couple has two children, he noted, and an island does not suit the family's needs. A more modest
lifestyle is what Mrs. McCaw prefers, he said.
Copyright 2001 The New York Times Company |
