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In 1923, the year young Norman graduated from Harvard, Julius decided to build an office building across from Manhattan's Penn Station. Though the area was largely occupied by factories, Tishman thought it would be ideal for commuting office workers. He was right; other companies followed his lead. Right after World War II, the firm built the first fully air-conditioned office building and the first metalclad office building in Manhattan.
Three Generations. Norman Tishman took over as president after World War II (the company now has nine Tishmans ranging through three generations), devised a better way to finance his buildings. Irked by the necessity of tying up millions of dollars of company capital in buildings, he worked out a sale-leaseback plan. Under this system, Tishman sells a new building outright to a corporation (usually an insurance firm), leases it back at about 7% a year and operates it. The company can not only use its capital for other projects, but also gets a tax break. Its lease payments are counted as a nontaxable business expense; if it owned the building—and received the same amount as rent—the income would be taxable. Ten of Tishman's buildings are now operated under leaseback agreements.
By such shrewd tactics, the company, which the Tishman family controls with nearly 50% of the 1,940,000 shares of common stock, netted $4,033,975 in 1957, although the net profit for its first half of this year is down to $1,250,000. Tishman's goal is to build enough properties so that most or all the firm's profits will eventually come from rentals, make it immune to ups and downs in the market for new building. Says Norman Tishman: "When the day comes that we don't care whether we make a sale or not we will have reached our millennium."