Tishman Speyer finalizes 150-year Chrysler Building ground lease

Tishman Speyer and the Public Sector Pension Investment Board have finalized a 150-year ground lease for the Chrysler Building, IREI reported. The agreement carries a $235 million investment plus ground lease payments to Cooper Union, which owns the land beneath the 77-story tower at 405 Lexington Ave.

Tishman Speyer and its partners will use 100 percent equity to fund both the ground lease and the redevelopment, the report says. The plan covers restoration of the building's historic facade and crown, modernization of its infrastructure and new tenant amenities: an indoor-outdoor space on the 61st floor, plus fitness, wellness and meeting facilities in the underground arcade.

Funding the whole package with equity strips debt service out of a leasehold whose recurring obligation is ground rent to Cooper Union. It also sidesteps the floating-rate test this publication flagged on Tishman's $340 million Franklin refinancing, where a single-asset CMBS loan priced a leased trophy and left the next mark to the curve.

Third-quarter Manhattan office availability fell to a 2020 low while leasing ran 19.2 percent above its 10-year average, PRED reported on Oct. 4. The Chrysler plan buys into that demand through amenity spend on an existing tower rather than new construction — the same lever Tishman pulled at its Anaheim asset, where it paid $904,000 a key and budgeted further amenity work. As this publication has argued, New York office value now comes from leasing and hold period rather than the entry cap rate, and a 150-year ground lease is a long-dated wager on exactly that.