Manhattan Towers for Sale

The Pan Am Building goes for a stunning $400 million

The rumors that real estate prices might have peaked received a setback last week, when Pan American World Airways announced that it was selling its octagonal Manhattan tower that looms over Park Avenue for $400 million. Completed in 1963, the 59-story aluminum and stainless steel-sheathed skyscraper leads directly into Grand Central Terminal and sits in the center of a midtown office construction boom. "To my knowledge," says John Robert White, chairman of Landauer Associates, Pan Am's real estate broker, "this is the largest price ever paid for a single urban building."

The Pan Am Building's buyer was Metropolitan Life Insurance Co., the nation's second biggest, which has lately been pouring large hunks of its $46 billion in assets into real estate deals around the country. In addition to acquiring the Pan Am Building, the insurance company is investing $245 million in Houston's Allied Bank Plaza and $110 million in Chicago's One South Wacker tower. Both are now under construction. Explains Metropolitan Chairman Richard Shinn: "We're looking for protection , against inflation."

Large institutional investors, like pension funds and insurance companies, have recently been casting covetous glances at big-city office real estate because they see it as an often better investment than the stocks and bonds they hold. In January the Royal Dutch/Shell pension fund paid $136 million for the Celanese Building in New York City, and in February the Teachers Insurance and Annuity Association bought Manhattan's Seagram Building for $85 million. The Equitable Life Assurance Society two months ago acquired the AmeriFirst Building in Miami for $52 million, and the Prudential Insurance Co., often rumored to be a potential purchaser of New York City's World Trade Center, last week bought a 36-story Hyatt hotel in San Francisco.

Current office building owners are willing sellers. They are anxious to pull their profits out of the long-depressed, but now booming, downtown real estate market in order to direct corporate cash to other projects. Pan Am, for example, wants to retire some of the $1.1 billion in long-term debt that it has built up to pay for new fuel-efficient jets. Pan Am was also looking for cash because in the first half of the year it sustained an operating loss of $108.5 million. Pan Am Chairman William Seawell doubts that the company will taxi up to profits again before the second half of 1981. In addition to selling off its headquarters, Pan Am has canceled service to two dozen international cities, and management layoffs are imminent.

The airline had been studying the possibility of parting with its building since last February, but the deal was finally accomplished only last month during a secret two-tier bidding operation. Finalists were allowed to put in sealed bids after agreeing to the initial suggested price of $325 million. Among them: Metropolitan Life, the Trump Organization, a Manhattan developer, and Olympia & COLBURN & York, a, Toronto leal estate firm. The hopeful buyers or their emissaries all hand-carried their offers to the offices of Landauer Associates, which just happened to be conveniently located in the Pan Am Building.

As part of its winning bid, Met Life agreed to let Pan Am keep its imprint on the building. The airline's name will continue to be on the face of the structure, and Pan Am will lease the 15% of the building that it presently occupies at about 30% below the current rate for prime New York office space. Says Losing Bidder Donald Trump: "The deal was extremely generous to Pan Am, but after ten or 15 years, it will probably turn out to be a good deal for Metropolitan." The insurance company is already happy with its proud tower. Says Metropolitan's Shinn: "In terms of prestige, location and quality of tenants, there is no more attractive building in the City of New York."

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