(Updates with details on Nomura’s Worldwide Plaza lease starting in seventh paragraph, adds shares in final paragraph.)
June 29 (Bloomberg) -- Bank of America Corp. tentatively agreed to keep about 750,000 square feet of space at lower Manhattan’s World Financial Center, less than a sixth of its current lease, three people familiar with the discussions said.
The Charlotte, North Carolina-based bank plans to stay in offices at 2 and 4 World Financial Center, according to the people, who asked not to be identified because the talks are private. A lease signing may be months away, two of the people said. The company’s leases for 4.6 million square feet (427,000 square meters), inherited with the 2009 acquisition of Merrill Lynch & Co., run out in 2013.
The expirations represent more than half of the 8 million- square-foot World Financial Center, owned by Brookfield Office Properties Inc. The landlord also is facing the departure of Merrill subtenant Nomura Holdings Inc., which agreed to move its New York headquarters to Worldwide Plaza in Midtown.
Brookfield has “a lot of wood to chop,” John Stewart, an analyst at Green Street Advisors Inc. in Newport Beach, California, said in a phone interview. “Three million square feet to lease is nothing to sneeze at. But Brookfield has shown they have the leasing platform that’s up to that challenge.”
Bank of America’s downtown leases generate almost 10 percent of the New York-based landlord’s net operating income, Stewart wrote in a May 3 report.
The bank occupies about 2.7 million of the 4.6 million square feet it leases at the financial center, the rest of which is rented to subtenants including Tokyo-based Nomura, according to Brookfield’s regulatory filings.
Nomura signed a 20-year lease for more than 900,000 square feet at Worldwide Plaza, according to a statement today from George Comfort & Sons, the building’s landlord. The securities firm will take 20 full floors in the 1.8 million-square-foot skyscraper at Eighth Avenue and 50th Street. Comfort bought the tower in 2009 for $590 million, less than half of what previous owner Harry Macklowe paid in 2007 at the height of the market.
The deal demonstrates Nomura’s “commitment to build a top- tier investment bank in the U.S.,” Atsushi Yoshikawa, chief executive officer of Nomura Holding America, said in the statement. The company will move in mid-2013.
Melissa Coley, a Brookfield spokeswoman, declined to comment yesterday, as did Peter Truell, a spokesman for Nomura in New York.
Midtown and Downtown
Bank of America is “committed to both midtown and downtown Manhattan,” said T.J. Crawford, a spokesman. “At this point we aren’t prepared to discuss our future plans but we are always looking for ways to optimize our real estate portfolio.”
The lender’s New York headquarters is 1 Bryant Park, a 2.1 million-square-foot tower that it co-owns with the Durst Organization in Midtown. Bank of America has been moving some Merrill employees to that building since the acquisition.
Bank of America holds a 49 percent stake in 4 World Financial Center, Merrill’s former headquarters building.
Brookfield has “made significant headway” in preparing for the lease turnovers, Green Street’s Stewart said.
“There’s a lot of momentum right now in the lower Manhattan office market,” he said. “The hurdle doesn’t look as insurmountable as it looked two years ago.”
Brookfield this year has signed more than 600,000 square feet of new leases at the World Financial Center with companies including OppenheimerFunds Inc. and Commerzbank AG, both of whom were subtenants of Merrill, the company said earlier this month.
Conde Nast Lease
Conde Nast Publications Inc.’s $2 billion lease of about 1 million square feet at 1 World Trade Center, a skyscraper rising across West Street from the financial center, has the potential to create “a more vibrant environment” downtown that will be attractive to other tenants, Stewart said.
Citigroup Inc. and UBS AG have expressed interest in occupying offices at the World Trade Center site, according to people familiar with those companies’ space plans.
“Lower Manhattan represents probably the best opportunities for quality space between the World Financial Center and the World Trade Center in that large-block arena,” Dennis Friedrich, Brookfield’s president and global chief operating officer, said June 6 at a conference sponsored by the National Association of Real Estate Investment Trusts. “That has been driving activity at the World Financial Center and some of our other downtown assets.”
The company is in “serious discussions” on about 2 million square feet of potential leases at the financial center, Friedrich said. That number didn’t include Nomura, which the company had been working to retain.
Brookfield announced plans earlier this month to spend about $250 million remaking the financial center’s retail portion, emphasizing waterfront dining and a “dramatic” glass entryway off West Street for commuters coming up from the transit hub now under construction at the trade center site.
Brookfield fell 1 cent to $19.04 at 11:28 a.m. in New York Stock Exchange Composite trading. The shares have gained 9.2 percent this year, compared with a 7.5 percent advance in the Dow Jones U.S. Real Estate Index.
--With assistance from Hugh Son and Ashwin Seshagiri in New York. Editors: Kara Wetzel, Christine Maurus
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