Forget about buying the Brooklyn Bridge. An Abu Dhabi wealth fund is trying to offload another piece of iconic New York City real estate.
In what appears to be the latest consequence of the cooling in New York City’s commercial real-estate market over the past two years, the Abu Dhabi Investment Council is hoping to offload its 90% stake in the iconic building – which was briefly the tallest building in the world after its completion in 1930, until the Empire State Building was completed in 1931.
But experts say the Council could struggle to recoup the $800 million it paid for its stake in the building back in 2008, just before the bottom fell out of the US economy, according to the Wall Street Journal.
The biggest problem facing the Chrysler building is the opening of dozens of sleek contemporary high-rises across the city that were designed with current tastes in mind. These buildings benefit from amenities like terraces, bike rooms, gyms and other features popular with modern workers.
Another deterrent is the immense upkeep costs associated with maintaining buildings from the pre-War era. All of these reasons make buying the building impractical for land lords hoping to make money off renting office space (the rising cost of leasing the land underneath the building is also a factor). Meaning that any buyer would likely be more interested in owning the building for the bragging rights.
“There might be a billionaire who comes along and says, ‘I want to tell the world I own the Chrysler Building,'” said Adelaide Polsinelli, vice chair of the commercial investment sales and leasing division at real-estate services firm Compass.
But, she added, there are downsides to owning a prewar building. “When things break, it takes much longer to fix because there’s only one guy on the planet that has the tools to fix something from the 1920s and 1940s,” she said.
Still, with anxieties about possible volatility in stocks making some wealth investors wary, the Chrysler could benefit from the fact that New York City real-estate is considered a relatively “safe” asset.
Sale prices took a hit in 2017, when Chinese investors pulled back. But activity began to pick up again last year. Stock market turmoil could lead some investors to seek the security of bricks-and-mortar in big cities, said Jim Costello, a senior vice president with Real Capital Analytics.
“In Manhattan you know what you’re getting, and there’s a certain amount of safety,” he said.
And though the growing leasing and maintenance costs are certainly a deterrent, classic buildings like the Chrysler Building benefit from at least one distinct advantage: They don’t make buildings like they used to.
The Chrysler Building also faces rising costs associated with a ground lease. The land beneath the building is owned by the Cooper Union school. The building’s owners paid the school $7.75 million in rent during 2017, but that annual lease fee jumped to $32.5 million last year. It rises to $41 million in 2028, and there other associated fees along with the lease, according to Cooper Union’s financial documents.
Sill, some property investors say 1930s-era buildings hold a certain appeal, with their distinct architecture and sturdy floor plans. Some tech companies even welcome vintage properties. Google last year paid $2.4 billion for a former warehouse building, known as Chelsea Market, that dates back to the 19th century.
And while whoever buys the building may need to sink hundreds of millions of dollars in to upgrading the building, with oil prices finally inching higher (thanks to Saudi Arabia’s recent commitment to more production cutbacks), maybe the fund can find another Middle Eastern buyer to take the Chrysler building off its hands (because, if the recent past is any indication, Chinese investors are buying less US real estate, not more).
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