Lehman Brothers is permanently moving on up — to Midtown Manhattan. At the same time, tenants are returning to Downtown Manhattan to reoccupy space at One Liberty Plaza, one of the first office buildings to reopen following damage sustained in the World Trade Center (WTC) terrorist attacks.
For One Liberty Plaza owner Brookfield Properties, headquartered in Toronto, the battle is on to retain tenants in Lower Manhattan. Brookfield owns and manages 11% of Downtown's Class-A office market. “We've got a significant investment Downtown. It is the nation's third largest business district,” explained Richard Clark, president and CEO of Brookfield Financial Properties, the U.S. operations arm of the parent company.
Downtown recovery inches along
The real estate community faces many challenges in its effort to restore the Downtown office market. The postponement of an Oct. 22 re-opening ceremony for One Liberty Plaza, which New York Gov. George Pataki and Mayor Rudy Giuliani were scheduled to attend, is an example of that uphill struggle. The ceremony was designed to signal the continuing recovery of Downtown Manhattan, but due to the need for further inspection by city officials, the building was opened a couple days later without fanfare.
When the opening was delayed, it left Brookfield struggling to explain to tenants why they couldn't return to work on Oct. 22 as planned. To reassure tenants of the building's readiness for occupancy, the company posted an electronic brochure on its Web site.
In a letter welcoming tenants back to the building, Clark wrote: “In less than six weeks, we have made great strides in preparing the building for your return. An outstanding team of engineers, consultants and contractors has prepared the building for re-occupancy.”
The building was deemed structurally sound by independent consultants and engineers. Also, the air quality was tested and meets the standards set by the Occupational Safety and Health Association (OSHA), according to Clark's letter. Repairs to the building included the replacement of approximately 650 windows and the clean up of dust, debris and ash that blew into the building.
Brookfield also owns and manages the World Financial Center (WFC) across from the destroyed WTC complex. The next building scheduled to reopen — on Nov. 19 — is 1 WFC. Clark said the building requires the same kind of repairs as One Liberty Plaza, including window replacements and cleaning, as well as the replacement of granite panels chipped away by falling debris.
A key issue that must be addressed Downtown is the transportation quandary, said Clark. “One of the principal hubs of transportation Downtown has been destroyed,” he said, referring to damage to the subway stations beneath the WTC. “The key to Downtown's long-term health and future is coming up with a long-term transportation plan in a hurry.” The city has provided bus service to the Financial District as a temporary solution.
With reports of groups such as Nasdaq and Citigroup considering moves out of the Downtown office market, a recovery of the area seems a ways off. For investment bank Lehman Brothers, based in New York, finding a viable space to resume trading and other businesses such as its CMBS securities division was paramount. When Morgan Stanley & Co. put its Midtown office building at Seventh Avenue and 49th Street on the block, Lehman Brothers found what company spokesman Bill Ahern described as the right fit.
The building met all of the company's requirements, including 1 million sq. ft. of office space that would shortly be ready for occupancy, as well as built-in trading floors. Lehman Brothers is expected to move into the building by the end of the year.
In the wake of the relocation of approximately 6,000 employees to more than eight different offices, the Morgan Stanley building offers Lehman Brothers a central location. In the present scattered setup, Lehman Brothers' CMBS Group is located at 285 Eighth Ave., which UBS Warburg occupies. In an example of the generosity many New Yorkers have demonstrated since Sept. 11, the company offered space in its building to Lehman Brothers' displaced CMBS unit.