Call It The Great Walt Way

As a youngster growing up on New York's Park Avenue, Michael D. Eisner got hooked on Broadway. Starting with Oklahoma! at age 2, each of young Michael's birthdays was celebrated with a trip to the theater. Now, five decades and an entertainment empire later, Walt Disney Co.'s chairman seems intent on reclaiming a piece of his former haunt.

As part of a group headed by Chicago investor Sam Zell, Disney is bidding to own a piece of famed Rockefeller Center, complete with its ice-skating rink and storied Radio City Music Hall. Zell and Disney, facing a rival bid from Goldman, Sachs & Co., may not end up with the property at all. And as investments go, this is small potatoes for Disney: Zell puts its stake in his $250 million takeover at roughly $25 million--that's one-quarter what the company spent on its new Indiana Jones thrill ride at Disneyland. But the strategic and psychic value of acquiring yet another Disney showcase could go way beyond the paltry sum involved.

EXPANSIVE VISION. Disney already has created a broad beachhead in the Big Apple. This summer, it signed a long-term lease to operate the 90-year-old New Amsterdam Theater on 42nd Street just off 7th Avenue. Now, after pressuring the city and state to provide low-interest loans for 75% of the costs, it is directing a $34 million renovation of the property. It has persuaded AMC Entertainment to open a 25-screen film complex down the block and has the option to sell time-share apartments in a $303 million hotel and entertainment site across the street.

Nearby, a Disney Store is scheduled to open next year. Another is going up on Fifth Avenue. Brokers also say Disney is looking into leasing a retail space in the World Trade Center. And with its deal to acquire Capital Cities/ABC Inc., it will inherit Cap Cities' headquarters in New York--a prime property. "This is a substantial number of commitments they are making," says Mary Ann Tighe, executive managing director of real estate brokerage firm Edward S. Gordon Co. and a board member of a nonprofit organization overseeing the 42nd Street renovation. She figures Disney has committed $100 million to New York real estate so far.

Why would Eisner, whose troops are scurrying to complete the company's $19 billion merger with Cap Cities, bother with these relatively minor projects in New York? The answer may lie in his expansive vision of Disney's role in the entertainment business. "People have a need to get out of their homes and find live entertainment," he told BUSINESS WEEK recently, "and if they venture out, we intend to be there."

RADIO CITY RULERS? That's why Disney bought pro hockey's Mighty Ducks of Anaheim and has an option to buy baseball's California Angels. It's why the company launched Beauty and the Beast on Broadway last year and plans by 1997 to launch a new stage show a year in New York. Among the possibilities: Mary Poppins, Pocahontas, and a children's version of the opera Aida. Already, Beauty, which is playing to sellout crowds in Broadway's Palace Theater and in Los Angeles, Toronto, and other cities, is a major profit center.

Disney is no stranger to Radio City, where it opened its Lion King and Beauty animated films and where it annually stages its Christmas shows. As part of the Zell deal, the company has an option to pick up the management contract for the 5,874-seat venue and for the smallish Equity Theater nearby. Zell is counting on his partner's help in turning around money-losing Radio City. "Disney enhances the value of the center and may bring it back to prominence," Zell says.

Disney executives deny that they are about to assume control of Radio City. But there is a precedent for such a move: A few years back, Disney took over the dilapidated El Capitan Theater in Hollywood and invested $16 million in an upgrade. Today, the El Capitan shows only Disney movies, with stage shows as regular events. There are other signs that Disney thinks such a strategy is smart: Realtors in Chicago say Disney also is considering upgrading that city's Chicago Theater for use in promoting Disney movies.

Still, Disney executives say their role in Zell's deal is little more than an investment. "We needed a place to invest the cash that this company produces," says Stephen Bollenbach, Disney's chief financial officer, "and this looks like a good bet." And Disney has largely pulled back from other real estate investments. In 1987, it sold off its expansive Arvida real estate development unit, choosing instead to concentrate on far more modest time-share communities in Hilton Head, S.C., and Vero Beach, Fla., as well as on Celebration, its residential village in Florida (box).

For now, Disney's New York presence seems slightly incongruous. Looking at the desolate scene around the sooty New Amsterdam, it's hard to imagine the Disneyfication to come. A nearby shop sells Harley Davidson and heavy metal T-shirts, and down the block The Nugget advertises "Live Girls. 25-cent peep-show" in neon lights. These no doubt are not the Broadway memories of Eisner's youth. But even in Times Square, Disney's coffers could work some very fast magic.