The Chrysler Center/405 Lexington/666 Third
Property Sq Ft: 1,900,000
Purchase Date: November 1997
Purchase Price: $220MM
Year Built: 1951/1929
Client: Sultan of Brunei/Li Ka-shing/Vornado Realty Trust
In 1997, Tenantwise assembled a private equity group of the Sultan of Brunei, Li Ka-Shing and Vornado Realty Trust in order to bid in the bankruptcy auction for the Chrysler Complex, the co-joined buildings of 405 Lexington Avenue and 666 Third Avenue. As part of the acquisition process, Tenantwise engaged Skidmore Owings & Merrill to provide architectural renderings based on Tenantwise’s new plan for the complex: a reconstruction of poor performing retail based on a reconfiguration of excess unused air rights, and the construction of a number of “super floors” of greater than 100,000 sq ft which would appeal to trading floor tenants. As part of the retail reconfiguration, Tenantwise decided that a glass pyramid, like the one used successfully at the Louvre by I.M. Pei might offer a solution to bring needed sunlight to the dark retail spaces. While the Sultan of Brunei was prepared to provide equity, and debt had been procured through First Boston, Li Ka-shing and its operating entity, New World Development, underwent a change in senior management and withdrew from the equity group.
As Vornado took the lead in the provision of equity, Tenantwise was engaged by Vornado to provide it with strategic acquisition analysis in the bankruptcy auction process. As the process narrowed to finalists, Tishman Speyer violated the ground rules set by the Trustees, which were the beneficiaries of the leasehold estate, and negotiated an extension of the ground lease with Cooper Union. Tenantwise arranged for the purchase of the leasehold for its remaining term of 20 years from two Japanese banks, Fuji and Hokkaido Takushoko. By getting control of the leasehold, which had contractual extension rights at below market rents, Tenantwise/Vornado would have dis-intermediated Tishman Speyer from control of the building and forced Tishman into a $40MM loss. Unsure of its ability to increase loss factors above 20% or its ability to ever achieve a rent more than $35 per sq ft for the base floors of the building, Vornado withdrew from participation. Brunei was not prepared to lead even though GSIC (Government of Singapore) then secured by Tenantwise, was prepared to provide auxiliary equity. Tishman Speyer used Tenantwise’s concept of a glass pyramid and it stands today on 42nd Street. Tenantwise was compensated in its role as advisor despite the fact that the property did not transfer to Vornado.