WITH the future of downtown still at a crossroads, the high-stakes decision over where Merrill Lynch will ply its trades for the next 50 years is finally coming to a resolution.
Assembly Speaker Sheldon Silver told us he would be meeting with Merrill execs as early as today to try to act as a facilitator in making a downtown pact.
While he would like to see Merrill in the new World Trade Center site, he would be just as happy if they renewed at the World Financial Center.
Merrill’s investment bankers have settled on three possibilities, sources said. They include World Trade Center Tower 3, also known as 175 Greenwich St., being developed by Silverstein Properties; a new tower by Vornado Realty Trust to replace the current Hotel Pennsylvania; or renewing with Brookfield Properties in Merrill’s current WFC location in Battery Park City coupled with a new trading pod.
Peter Riguardi, president of Jones Lang LaSalle, who is shepherding their search, said, “We are evaluating all their choices so that they can be in a position to make an educated decision.”
Merrill takes up 3 million feet in the WFC including all of WFC4 and part of WFC2 through leases that expire at the end of 2013.
But a renewal is not a simple check mark. That’s because Merrill needs better trading floors. A new lease would certainly involve less disruption of its work force.
“What they are talking about now is extending [World Financial Center] Tower 2 so as to construct a new trading floor for Merrill,” said James Cavanaugh of the Battery Park City Authority.
The approximately 500,000-foot pod would require BPCA and city approvals, architectural renderings, construction documents and, of course, construction.
Along with trading floors it would likely include more shopping and some elbow room for expansion of Merrill’s office space.
Brookfield declined comment, but a downtown source advised that its chairman, John Zuccotti, “can be very persuasive” when it comes to convincing Merrill to stay in its current location.
Brookfield would bend over backwards to keep its giant tenant happy and could do it at a far better number than the other contenders.
At the same time, Merrill would keep its important traders in place with new facilities.
Another critical factor is the continued escalation of construction costs and equipment demands due to worldwide development of towers in places as far flung as Dubai, India, Seoul, Shanghai and Singapore.
For instance, early on Tishman Construction had to pressure the supplier of two giant climbing tower cranes to commit to working on the Freedom Tower rather than sending them elsewhere.
The Port Authority is scheduled to turn over the excavated sites for Towers 3 and 4 to developer Larry Silverstein in January after which it is estimated to take four years to build.
The more complicated Tower 2 site gets turned over in July, and isn’t due to open until 2012.
The schedule puts the towers ahead both in cost and construction of Vornado’s Hotel Pennsylvania redevelopment plan – especially considering the 21-story hotel across from Madison Square Garden and Penn Station is still open.
What’s more, officials like Avi Schick, head of the state-run Lower Manhattan Development Corp., are focused on continued job growth. “We are going to work like heck to make sure Merrill Lynch stays downtown where they belong,” he said.
According to Cushman & Wakefield, downtown’s asking rents are now $45.66 per foot, the highest ever recorded while Class-A vacancy is 5.7 percent, the lowest since the third quarter of 2001.
WFC rents are averaging $71.34, but only a handful of spaces are available. Silverstein will be asking $100-plus rents for the next generation of towers.
Despite the recent Hermes and Tiffany deals, retailers have been skittish to commit to downtown because they have wanted to see the plans for the WTC site. These, too, are now completed.
Working backwards, Merrill needs at least a year to a year and a half to build its space and move into any new tower.
Vornado would be cutting it close to finish in mid-2011, but if Chairman Steve Roth gets his price quickly, he could pull it off.
Merrill has wanted more control over its space and Silverstein is not as willing as Vornado to work out a deal.
Throw in the tenacity of downtown officials to make them stay and we’re handicapping the deal as a tossup between Silverstein and Brookfield.
