Former owner Tishman Speyer closes in on Chrysler Building deal
According to Crain’s Magazine in New York City:
“Prominent developer Tishman Speyer is in advanced talks to acquire the city’s iconic Chrysler Building for a second time, according to people familiar with the matter. Terms have not been agreed to, and the deal still hinges on how much rent Tishman Speyer would pay to Cooper Union, the nonprofit owner of the ground underneath the jewel of the New York skyline. “Tishman Speyer previously acquired the Chrysler in 1997 for about $220 million, two years after buying Rockefeller Center out of bankruptcy. The firm sold its last 10% stake in the skyscraper when the building was sold to developers RFR and Signa Holding in 2019 for $150 million.”
The Cooper Union ownership of land beneath the iconic Chrysler Building is very unusual in New York City, where the developer usually owns the land and the city charges property taxes on location. It’s unusual to have a distant private owner of the land who doesn’t also own the building on top of it, but this was arranged so that the students of Cooper Union University could have free tuition. However, expenses due to university expansion changed what used to be charged for ground (dirt) rent, says Crain’s:
“The price went down because the cost of the Chrysler’s dirt went up dramatically. Starting in 2018, Cooper Union quadrupled the annual ground rent from $7.75 million to $32.5 million. The prestigious arts and engineering school imposed the sharp increase after it borrowed $175 million in 2006 to develop a new academic building at its Astor Place campus.
According to the college’s most recent annual financial statement, the ground rent is poised to rise again in two years, to $41 million.
That hefty rent is what initially put the Chrysler Building “in play,” as one dealmaker described it. RFR and Signa were driven out from their ownership early last year after defaulting on $21 million worth of ground rent. The companies argued in court that the rent Cooper Union charged wasn’t realistic in light of the market’s realities and the building’s physical needs, but a judge found this unpersuasive and ruled that Cooper Union could evict them.”
The inelasticity of total cost – building cost + land rent – and the decrease in building cost whenever the land value rent goes up proves that a city land value tax would also effect the building price. But a Land Value Tax would also return value to the city, whose population demand created the value, instead of private owners, or banks. With the offset of decreased taxes on productive activities, collected from wages, sales, or usage taxes, more labor and commerce would drive prosperity higher. The city survives despite the inefficiency of taxes on productive activities, but it could thrive with a shift to land value taxes alone.
Read the Crain’s article here (Paywalled): https://www.crainsnewyork.com/real-estate/tishman-speyer-talks-acquire-chrysler-building-again