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Lazard’s High-Priced Real Estate Bargain

Friday, March 25, 2011 (All day)
Original URL: 
http://dealbook.nytimes.com/2011/03/25/lazards-high-priced-real-estate-bargain/

Manhattan’s high-end rental market has remained remarkably resilient, rising even amid a nationwide real estate slump. But the investment bank Lazard is still getting a deal on a luxury apartment it rents for one of its directors, Vernon E. Jordan Jr.

Mr. Jordan, a Washington lawyer and well-known confidante of President Bill Clinton, has been with Lazard since 2000 — pulling down seven figures in cash, stock and perks for years. In 2010, Mr. Jordan collected $500,000 in salary, a cash bonus of $1.08 million, an estimated $1.08 million in restricted stock and $527,344 in perks and other benefits,Lazard disclosed in its annual proxy filing.

He also gets “priority” use of a corporate apartment. Last year, Lazard spent $288,000 to put Mr. Jordan up. His free housing has been noted in the past, but what is striking is that the cost has not become more expensive. The $288,000 is the same price that Lazard paid in 2006, according to regulatory filings.

This is a bargain by Manhattan real estate standards. Since then, luxury rental prices in the borough have increased 3.5 percent to $65.77 a square foot, from $63.53 a square foot in early 2007, according to data from Miller Samuels, a Manhattan real estate appraisal firm.

Chances are good that Lazard has locked in a long-term lease on the apartment, compensation experts say. Since companies must disclose their costs of executive benefits, rather than the value of a benefit to an executive, the number would not have changed even as the surrounding rents rose.

Of course, the apartment is still expensive when compared with the overall luxury housing market, since the rent is much more than the amount most New Yorkers pay. The $288,000 rental costs — assuming they are for the full year — amount to $24,000 a month. The median rent for all luxury rentals in Manhattan is roughly $6,750 a month, according to Miller Samuel.

But even as Lazard’s rental costs remained the same, the firm and Mr. Jordan managed to cut their tax bills on his luxury pad. The Internal Revenue Service counts the apartment as a type of compensation — for which Mr. Jordan is required to pay taxes. Lazard, in an unusually generous but not unheard-of move, footed his tax bill, which amounted to $217,356 in 2010, the same as in 2009. In 2006, the taxes came to $250,000.

It is not clear why the tax benefit would decline even as the cost of the apartment stayed level. Mr. Jordan’s tax rate is not likely to have gone down, one compensation consultant notes, given his high income, and the top tax brackets have not fallen substantially in the last five years. Another possibility is that an earlier error in the calculations was later corrected, the consultant said.

A Lazard spokeswoman declined to comment on the arrangement.

Theo Francis is a senior reporter for the Web site Footnoted, a division of the financial information company Morningstar that scrutinizes corporate disclosures.

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