For students of New York University, retail property in the vicinity of the school in lower Manhattan is often a place to buy milk or a sandwich. For the developer Larry Silverstein, this property is part of his bond with billionaire investor Warren Buffett.
Buffett has recently spoken about their 1993 investment in this facility. Just last week, he mentioned a wager in his annual shareholder letter as part of an example of how long-term thinking will steadily produce profits. Just last year, he contacted Silverstein in order to say thanks for the opportunity.
“Considering that we both are in our 80s, he thought it appropriate to express his gratitude while he could do it, and I could hear it!” wrote the 82-year-old Silverstein in an email last week.
These men got to know one another in the 1990s when Warren Buffett was CEO of Salomon Inc., and Silverstein was the company’s New York landlord. Buffett requested of the developer to put him in a real estate deal that Silverstein believed was good enough for himself. This eventually turned into the E. 9th St. real estate property between Broadway and University Place.
The group to purchase the property consisted of Buffett, Silverstein and a friend named Fred Rose. They bought the 67,150 ft.² facility for $20 million, and purchased from Resolution Trust Corp., which is a US government agency that sells off the assets of failed savings-and-loan institutions, we learned according to Buffett’s annual letter and the summary sheet of the property during that time.
The Malkin family out of New York, who operate the Empire State building, also helped with the transaction, we learned from a Real Estate Weekly article during that time. Buffett invested $1 million, we learned in a recent email.
Day or Night
Since the purchase, Buffett has received over $1.5 million in special capital distributions because of the investment, as well as consistently increasing regular payments. He made $360,000 in 2012 and $432,000 and 2013, we also learned from the same email.
These are small sums for both of these men. Silverstein is one of the developers of New York’s World Trade Center site, and Buffett is the third richest person in the world because of his ownership of Berkshire Hathaway based out of Omaha Nebraska, that currently surpasses a $300 billion market cap.
At this time, tenants of the property are a Gristedes market and a Cosi sandwich shop, and they highlight some of Warren Buffett’s long-held principles. One such principle is to focus on a business that is going to produce instead of focusing on daily valuation. In the retail space, Buffett’s partners managed the property so that it boosted rental income, he wrote.
Everything achieve as part of this deal was based on trust. Buffett mentions that he has still never even seen this property, although he did mention that his line is always open for the property developer.
“I’ve given Larry Silverstein all of my various phone numbers and told him he can call me day or night,” said Buffett in the email.