Shared with me and passed along to you....
The tallest building in the world was sold last week for the highest price ever paid for a single
structure. For $65 million, Chicago Financier Henry Crown sold the 102-story Empire State
Building, a flop when it was built in the Depression but a moneymaker now, to a syndicate headed
by a personable Manhattan lawyer and real estate wheeler-dealer, Lawrence Wien, 56.
The transaction was as complex as keen-eyed tax lawyers could make it. As soon as his Empire
State Building Associates takes title to the property next December 27, Wien (rhymes with keen)
will sell the building to the Prudential Insurance Co. for $29 million. Prudential, which already
owns the land on which the Empire State sits (worth $17 million), will turn right around and lease
the building and land back to the Wien syndicate for 114 years. Advantages for Prudential: a 7%
return on invested capital and a way around a New York law that limits Prudential's investment in a
single piece of real estate to less than $50 million. Advantages for Wien: the $29 million from
Prudential can be applied toward Colonel Crown's selling price, thereby reducing the actual cost to
the syndicate to $36 million, and the annual lease payments ($3,220,000) to Prudential can be
written off as a business expense.
A Thousand Partners. The Empire State deal is typical of Lawrence Wien's style of operating on
high-rent turf around the country. Columbia-educated, Wien got into commercial real estate in
1949 when he gathered a small group of investors to buy a two-story building for $165,000. Broker
on the deal was Harry B. Helmsley, chief of the Manhattan broker-management firm of Helmsley-
Spear. Wien and Helmsley have been allies ever since, have parlayed their original venture into a
$600 million real estate empire that includes New York's plush Plaza hotel and the more plebian
Taft, Cleveland's Leader Building and the Palm Beach Towers. From their handsomely appointed
offices in New York's skyscraper Lincoln Building, both Wien and Helmsley have been staring out
at the Empire State for years. Said Helmsley last week: "I think we have always wanted the Empire
State; it gets into your blood when you look out of your window and see a building you do not
own."
Heart of the Wien-Helmsley technique is large-scale syndication—a maneuver that they pioneered.
Syndication gives a number of people a chance to own property none of them could afford singly,
and often yields investors as much as 10% a year on their money, far better than most stocks.
Above all, since a syndicate of as many as a thousand members can still legally be called a
partnership, there is no corporate income tax to worry about. In the case of the Empire State, Wien
even syndicated the $4,000,000 deposit required. He himself put up only $500,000—a relatively
small sum compared with the $3,000,000 that lawyers and real estate brokers stand to collect as
fees on the transaction.
Chow in the Sky. Wien, who has a hand in the operation of nearly all his syndicated properties,
insists that he is not a speculator. "We buy for permanent investment," he declares, "and can only
sell a property with 100% consent of the investing partners." Among his plans for the Empire
State: to open a luxury restaurant beneath the highly profitable ($2,000,000 a year) observation
deck, plant trees around the base of the building, brighten its cavernous lobbies, and complete the
air conditioning of its 1,750,000 sq. ft. of rentable space, which currently has a highly satisfactory
99% occupancy.
No comments:
Post a Comment