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REA
May 22, 2019  

Offices Next to Chrysler Building for Sale

A Tishman Speyer partnership is marketing a Midtown Manhattan office building adjacent to the recently sold Chrysler Building.

The 767,000-square-foot Chrysler East, at 666 Third Avenue, is expected to fetch bids of around $700/sf, or nearly $540 million. At that valuation, a buyer’s initial annual yield would be in the high-4% range. New York-based Tishman and its partners, two unidentified sovereign wealth funds, have listed the property with Cushman & Wakefield.

The 32-story building is 98% occupied. The sales pitch is emphasizing its diversified tenant roster and weighted average remaining lease term of more than eight years. Some 500,000 sf of new and renewed leases were signed in the past five years. The rent roll includes APG, First American Title Insurance, Oppenheimer & Co., and law firms Mintz Levin and Robinson & Cole. In-place rents are about 10% below current asking rates.

Chrysler East stretches along the west side of Third Avenue from East 42nd to East 43rd Street. It is attached to the east side of the 77-story Chrysler Building, at 405 Lexington Avenue, and the buildings share direct access to Grand Central Terminal, one block west.

The marketing campaign is touting major developments underway in the surrounding Grand Central/Midtown East area, spurred by a rezoning of Midtown East a few years ago. SL Green’s 1.6 million-sf office skyscraper at One Vanderbilt Avenue, just west of Grand Central Terminal, is slated to open next year. Three blocks north of the terminal, J.P. Morgan is tearing down its 1.5 million-sf headquarters at 270 Park Avenue to make way for a 2.5 million-sf replacement. Meanwhile, TF Cornerstone and MSD Capital, both of New York, and RXR Realty of Uniondale, N.Y., plan to redevelop the Grand Hyatt Hotel at the corner of Lexington and East 42nd Street into a 2 million-sf office/hotel complex. All told, some $12 billion of investment is projected in the neighborhood in the coming years.

Chrysler East was constructed in 1951 and expanded by 130,000 sf in a 2000 renovation that also added a glass facade designed by Philip Johnson. The property is designated LEED gold.

The 1.2 million-sf Chrysler Building was constructed between 1928 and 1930 and was, for a short time, the tallest building in the world. Together, the towers are known as Chrysler Center. A partnership between Tishman and Travelers Group bought the two-building complex in 1997 for $225 million. The seller, Fuji Securities, had inherited the buildings after lawyer Jack Kent Cooke defaulted on debt. In 2001, the Tishman partnership sold a 75% share of the leasehold interest in the Chrysler Building to TMW Real Estate for $300 million.

A year later, the Tishman team sold an 80% interest in Chrysler East to a Commerzbank syndicate for $224 million. Madison International Realty, a New York fund operator, later bought out some 800 members of the syndicate to take a 48.9% stake. In 2012, Madison and Commerzbank sold their positions to Tishman’s current partners, with Tishman retaining a 20% interest.

The larger Chrysler Building was recapitalized in 2008, with Abu Dhabi Investment Council taking a 90% stake in the leasehold interest and Tishman retaining 10%. That partnership sold the famous skyscraper last month via CBRE to a joint venture between Aby Rosen’s RFR Holding of New York and Signa Group of Austria. The price was around $150 million. The underlying ground is owned by Cooper Union for the Advancement of Science and Art.