Tishman Speyer has acquired New York’s iconic Chrysler Building, taking on the challenge of restoring the Art Deco landmark as it competes with a growing supply of modern, amenity-rich office towers. The company plans to renovate the building’s interiors, revive underused spaces and introduce new facilities for tenants.
The sale follows the foreclosure of the building in January, after its previous owner, Aby Rosen’s RFR Holding, struggled to move forward with a planned renovation amid changes in the office market since the pandemic. Canadian public pension fund PSP Investments is partnering with Tishman Speyer in the latest ownership deal.
Plans to modernise the landmark
Although many of the Chrysler Building’s 77 floors are showing their age, the property offers considerable potential for redevelopment. Tishman Speyer has spent recent years upgrading Rockefeller Center, another major New York landmark, while expanding its appeal as a destination for shopping and leisure.
The company plans to apply a similar approach to the Chrysler Building, including the restoration of its small underground concourse. The space, once occupied by independent businesses such as a shoe-repair shop and a barbershop, was cleared several years ago ahead of an upscale redevelopment that never materialised.
Tishman Speyer says the concourse will be repurposed for fitness, wellness and meeting facilities. The company also intends to create a private club for tenants on the 61st floor. The floor has a colourful history: photographer Margaret Bourke-White briefly maintained a studio there in the 1930s and reportedly lived in the building despite restrictions, keeping two pet alligators.
The new club could draw inspiration from the legendary Cloud Club, a private dining venue once located high in the tower’s spire. The project also follows the broader trend of revitalising New York’s ageing office landmarks, including the Empire State Building, which has undergone extensive upgrades over the past decade.
A second ownership cycle
This is Tishman Speyer’s second spell as owner of the Chrysler Building. The company bought the property in 1997 for $220 million, renovated its lobby and other areas, and gradually sold its interest. It exited in 2008 in a transaction that valued the building at $800 million.
The subsequent decline in the property’s value has been substantial. Rosen acquired it in 2019 for $150 million, while the price of the latest transaction has not been disclosed.
The announcement refers to a $235 million investment, although it is unclear how much of that sum will be allocated to renovations and restoration. The building’s ageing infrastructure and the weaker market for older office space have contributed to its declining value.
The acquisition comes as the area around Grand Central Terminal remains an active office market, with relatively low vacancy rates and several major towers opening in recent years, including One Vanderbilt, 270 Park Avenue and 425 Park Avenue. Another large development is expected to rise on the site of the former Grand Hyatt hotel.
In a curious twist, Tishman Speyer is acquiring the Chrysler Building while seeking to sell the neighbouring 666 Third Avenue, previously known as Chrysler Building East and the Kent Building.
Ground rent remains a major factor
The building’s complex ground-lease arrangement is another important factor affecting its value. The land beneath the tower belongs to Cooper Union for the Advancement of Science and Art, the college based in Manhattan’s Astor Place neighbourhood that has been working to stabilise its finances.
The latest ground-rent terms have not been disclosed. However, according to the New York Times, annual rent rose from $7.75 million to $32.5 million in 2018. Earlier reports projected that it could increase to $42 million in 2028 and $55 million in 2038.
The actual amount under the newly negotiated lease could have significant implications for the building’s future economics. Unlike many office properties, a substantial share of the Chrysler Building’s revenue must account for payments to the owner of the underlying land.
The arrangement also has implications for Cooper Union. In a joint statement, the parties noted that the long-term ground lease with Tishman Speyer comes as the college pursues an ambitious plan to restore full-tuition scholarships for all undergraduate students.
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