The Destruction of AIG Continues

Accompanying pictures of 70 Pine Street, Lower Manhattan, were taken today, a busy Friday in downtown New York, with no one in sight but me and a security guard. Home for more than 30 years to AIG, the US-government owned company sold the iconic tower two years ago for a song: the buyer paid $150 million and then resold the building one year later for $200 million. The second buyer closed the office building and is turning it to condos.  

Leaving $50 million on the table is an embarrasment, though it may seem a small sum in the context of the $182 billion of funds government poured through AIG to salvage neighboring Wall Street banks such as Goldman Sachs. But over the past three years many crown-jewel AIG assets have been sold for total consideration of $50 billion.  The terms of many show a good chance of leaving a proportionate $10 to $15 billion or more on the table, a serious cost by any reference.  A quick run down on the sales follows, but first a few notes on this marvelous piece of the New York skyline that AIG, under government control, sold for a song.

Completed in 1932, this was the last of the great jazz-age, pre-War downtown towers. Designed by Clinton & Russell, Holton & George, the building soars 952 feet, making it the seventh tallest U.S. building when AIG bought it. The base is of dark granite and the rest of brick, in tones that lighten as the tower rises, so that it becomes white at the top, like a snowcapped mountain. At the upper floors, every third brick is rounded instead of squared, animating the structure.  A granite model of the building flanks the entrance on Pine Street (photo shown upper left).

In its vast two-story marble lobby, a symphony of Art Deco butterflies and sunflowers rendered in colorful aluminum adorn the walls (example at right).  The building’s original double-decker elevators were the first ever installed in New York City: the upper cabs served even-numbered floors while lower cabs opened onto odd-numbered floors (upper cabs shown left).

The building’s skyline drama is highlighted by massive floodlights from the 55th to the top floor and a 27-foot lantern above a roof deck observatory. To guide planes, on top of the building stood a 97-foot stainless steel beacon with neon lights on top.

AIG acquired the building from Citgo in 1976 after Citgo had just completed a $22 million overhaul and upgrading project. AIG paid $15 million for the place.  That was a big New York real estate transaction given the City’s fiscal woes. Mayor Abraham Beame symbolized the significance by hosting the signing at a press conference in his office.

AIG renamed it the American International Building. The timing of AIG’s purchase, if not the event, marked the turning point for the City. Mayor Beame began to reinvigorate New York and his successor, Ed Koch, amplified the effort with the memorable national campaign: “I love New York.” The troubled New York of the 1970s turned into the prosperous New York of the 1980s that has thrived ever since. Real estate investments made in the New York of the 1970s returned enormous value and stand as symbols of American achievement.

Today, it is a different symbol, and perhaps it is fitting that it should be retired as a center of commerce in favor of residential use.  Though the government, dutifully followed by media, announced that the billions it funneled through AIG were intended to “save” it, “rescue” it, or “bail it out,” it did nothing of the sort, but destroy AIG and save, rescue and bail out Goldman Sachs and other recipients of the billions. The destruction of AIG, at a significant cost to taxpayers, is symbolized by the clumsy sale of this building at a discount to market value. Among other such sales underscoring both the destruction of AIG and the potential cost to taxpayers of money left on the table:

12/08  Hartford Steam Boiler $742 million (less than a year’s worth of earnings)

2/09 Tokyo office building $1.2 billion (huge tax bill on asset buyers had bid $2 billion for in past decade)

4/09 21st Century $2 billion

6/09 TransAtlantic $1.14 billion (subject of heated takeover battle this past summer with escalating bid)

3/10 ALICO $15.5 billion to Met Life (what a deal for an iconic franchise of a business)

10/10 AIA $25 billion (the crown jewel of AIG and heart of the company’s origins and essence, though in a public offering the price was not terrible)

1/11 Nan Shan $2.16 billion (venerable Taiwan life insurer with powerful position)

That adds to nearly $50 billon of consideration received; the value of the assets transferred is almost certainly not double that but it likely is short at least in the double digit billions, alas.

The old Directory at 70 Pine, about to be banished to the dust bins of history.  AIG, RIP.

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