The Long View: Google, JPMorgan Chase and the new age of spectacularly rich corporate real estate buyers Why more companies decide to buy office space, and how the trend can change the market
270 Park Avenue and the Chelsea Market
They have more money than they know how to spend, safely stashed in offshore bank accounts. They are citizens of the world, moving from country to country chasing profit and lower taxes. And they like to buy trophy properties in Manhattan.
You’ll be forgiven for thinking of Middle Eastern sheiks and Russian oligarchs, but I am talking about big U.S. corporations.
Last week, The Real Deal reported that Google is paying $2.4 billion in cash for the Chelsea Market building. Last month, banking giant JPMorgan Chase announced it will tear down its existing headquarters and build a 70-story skyscraper at 270 Park Avenue in its place.
These two deals are harbingers of a new era. With corporate cash reserves at record highs, companies are starting to behave a little more like super-rich people. And like hedge funders and oil barons, they are developing a penchant for parking their wealth in Manhattan real estate. Welcome to the age of corporate stash pads.
“Looking around, not having many other investment opportunities, this is a good place to put your capital,” said Jahn Brodwin, a corporate finance advisor at FTI Consulting.
It’s not just Google and JPMorgan Chase. At Hudson Yards, private equity firm KKR, Wells Fargo and Time Warner agreed to buy office condos spanning a combined 2.3 million square feet. And on the West Coast, Facebook is building a small city for its employees that will include 1.75 million square feet of office space and 1,500 apartments.
Corporations buying office buildings isn’t new. In the early 20th century, New York’s tallest skyscrapers were built by big companies for their own use think of the old MetLife Building and the Woolworth Building. But in the second half of the 20th century, more and more firms ditched their real estate holdings and began leasing office space instead. They were looking to simplify their balance sheets and focus investment on their core business in a bid to appeal to stock market investors. Owning real estate usually meant taking out mortgages, which increased liabilities, Brodwin said. It also carried risk.
Now the pendulum is swinging back in the other direction. One reason: the sheer accumulation of wealth i爱上海同城