Located a stone's throw from Morgan Stanley's 1.4-million-sf Times Square headquarters at 1585 Broadway, the new building, 745 Seventh Ave., has been under construction since 1999 and is scheduled for occupancy later this year. The firm recently leased Manhattan office space on Third Avenue and Morgan Stanley states it will continue to accumulate additional space at 750 Seventh Ave., 1633 Broadway, Pierrepont Plaza in Brooklyn and in retail branches throughout the city, It is reportedly planning to move some of its operations to the Westchester, Connecticut or New Jersey. Morgan Stanley did not return calls for comment.
While it is the only major financial firm to unload a major piece of real estate since the World Trade Center attacks, Morgan Stanley is downplaying speculation that the sale represents a defection from Manhattan's cheek-by-jowl financial community. "Our agreement is in the spirit of Wall Street's commitment to work together in the wake of the tragic events of September 11," Morgan Stanley Chairman and CEO Philip J. Purcell states. "Morgan Stanley will continue to have a major presence in New York City and will be better positioned from a business continuity standpoint." Morgan Stanley was the trade center's largest tenant with roughly 3,500 staff occupying 25 floors of the complex.
Lehman Brothers Chairman and CEO Richard S. Fuld Jr echoes Purcell's sentiments in his statement. "This agreement reaffirms our commitment to New York and is a win-win-win solution to a difficult office space problem facing both of our firms and the city," he says. "With a new, state-of-the-art headquarters building in Manhattan built specifically for investment banking and capital markets activities, we can relocate our operations quickly and efficiently."
According to Ray Cirz, CEO of Manhattan-based real estate appraisal firm Integra Realty Resources, selling to Lehman Brothers rather than a non-financial firm takes some of the sting out of Morgan Stanley's decision. "The good news is that Lehman Brothers is buying it, because it's a major financial institution," he says. But it's obviously a negative. It's bad for the market.
While no details of the transaction were disclosed, Cirz ballparked the building's cost at roughly $400 million, including the land. "That's what new construction costs in Midtown and it's a fairly typical building for Midtown."
Cirz says that while the World Trade Center bombings were the likely catalyst for Morgan Stanley's decision to sell, the concept of decentralizing the financial community is one that has been prophesied time and again. "I think it is a reaction to the September 11 attacks," he says. "But for years people have been telling us that technological advancements mean we don't need to be centralized. We're hoping that centralization is an inherent necessity of doing business and I'm betting it continues. Morgan Stanley appears to be the first defector. I hope they're the exception and not the rule.
Lehman Brothers' global headquarters were Downtown at One World Financial Center, which was evacuated following the attacks and remains vacant. The securities giant leases 563,000 sf in the Brookfield Properties building.
Morgan Stanley co-developed 745 Seventh Ave. with the Rockefeller Group, a subsidiary of which, Rockefeller Group Development Corp., will manage the building.
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