Business & Practice

Sullivan & Cromwell Faces Fight Over Tax Bill for Wall Street HQ

Oct. 4, 2019, 7:36 PM

Sullivan & Cromwell is going to the mat over a $3.9 million property tax bill for the Wall Street building where it has its headquarters.

The law firm better known for closing some of corporate America’s biggest transactions is also the landlord at 125 Broad Street, a 42-story downtown New York office tower that it has owned in part since 1994 and nearly in total since 2016.

The firm filed a complaint in New York State Supreme Court Oct. 2 arguing that more than 20 of the building’s units should be assessed at about 40% of the value that New York City’s Tax Commission has assigned to them.

Property tax assessments are routinely appealed by landowners, but it is rarer that the process ends up in New York state court.

The complaint says the firm appealed the property tax assessment to the Tax Commission between January and March. In late May, the city’s assessments were confirmed and used to prepare the tax bills for fiscal year ending June 30, 2020, the complaint says.

New York City Department of Finance records for the 21 lots in question show outstanding tax bills worth a total of about $3.9 million. Many of the Broad Street units are assessed at about $3.7 million and carry tax bills of around $200,000. Sullivan & Cromwell has argued the valuations should be about $1.5 million—or 40% of what city tax authorities have claimed.

“The said assessments are excessive,” the complaint says, also calling them “erroneous,” “illegal,” and “unequal.”

Sullivan & Cromwell’s complaint says its building’s tax assessments were made at a higher “proportionate valuation” than assessments of other property in the same class assessed by the same city tax officer.

Neither the firm’s lawyer in the case, Jonathan Sherman of Sherman & Gordon, nor the city tax commission, responded to requests for comment. A Sullivan & Cromwell spokesperson did not immediately respond to a request for comment.

Sullivan & Cromwell’s longtime chairman, Joseph Shenker, was a leader of its global commercial real estate practice known for representing blue chip clients including Goldman Sachs. He negotiated the firm’s purchase of 40% of the Broad Street tower in 1994, the firm says. Sullivan & Cromwell later purchased a further 17.5% of the building before taking near complete ownership in 2016. That’s when it spent $202 million to purchase 16 floors and 560,000 square feet of space.

The initial purchase during the mid-1990s real estate downturn was at the “bargain-basement” price of $12.72 a square foot, the New York Times reported in 2010. Wall Street office buildings today lease for well more than $50 a square foot. 125 Broad Street is also home to offices of law firm Wilson Elser, the American Civil Liberties Union, insurer CNA Financial Corp. and others.

Even without its real estate investments, Sullivan & Cromwell is one of the most profitable firms in the country. The latest AmLaw rankings said its equity partners made on average more than $4.5 million in profit in 2018.

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: Jessie Kokrda Kamens at jkamens@bloomberglaw.com; Rebekah Mintzer at rmintzer@bloomberglaw.com

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