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Morgan Stanley Bldg. To Be Sold to Lehman

Daily News Business Writer

October 09, 2001

Banking powerhouse Morgan Stanley cut its Manhattan real estate presence dramatically by agreeing yesterday to sell a new, 32-story office building to another investment bank, Lehman Brothers.

But while the deal could signal a Morgan retreat from New York, it means Lehman, displaced from the World Financial Center, will keep its home in Manhattan.

The building, under construction since 1999, was to have housed about 4,000 Morgan Stanley employees, primarily from the company's institutional sales and trading divisions.

"It leaves open the question of whether these jobs will leave the city or stay in Manhattan," said Myers Mermel, CEO of the Internet data service company Tenantwise.

The building stands on Seventh Ave. between 49th and 50th Sts. Morgan Stanley built it in partnership with the Rockefeller Group. The company planned to move people there from its Times Square headquarters at 1585 Broadway and from its offices at 1221 Sixth Ave. when it should be ready for occupancy in December or January, according to a company source.

Real estate sources said Lehman was paying between $600 million and $700 million for the building. The companies declined to comment.

Morgan Stanley lost nearly a million square feet of office space in the World Trade Center attack. The complex's largest tenant, Morgan Stanley had space in the south tower and in 5 World Trade Center.

Employees Relocated

Since the attack, the company has leased about 500,000 square feet of office space in Manhattan to make up for what it lost. The company has also moved some of its 3,700 World Trade Center employees to locations it already had in the city and New Jersey.

Still, Morgan Stanley spokesman Bret Gallaway said the company had not yet decided where to put many of its employees. Some real estate executives said the company was scouting several locations in New Jersey, including Princeton and Montvale.

"We're considering all options for our short-term and long-term space needs," Gallaway said.

Morgan's shrinking real estate portfolio also raised the possibility that it would soon cut jobs. The company laid off 1,500 workers in April, and one source said the company might soon make additional cuts.

After the attacks, Lehman Brothers scrambled to find new sites, signing leases in Jersey City and at 399 Park Ave. Combined with the sale, they raise questions about Lehman's future in the World Financial Center. The company owns 3 World Financial Center along with American Express and has long-term lease commitments at 1 World Financial Center.

"We remain committed to downtown Manhattan," said spokesman Bill Ahearn. But he added that when they would be able to return was "totally unclear."

"We just haven't been able to get in there and do any accurate estimating," Ahearn said.

Lehman has not given up its space downtown but may now have to seek subtenants for these World Financial Center offices.

Original Publication Date: 10/09/01
2001 Daily News, L.P.

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