Liberty for One: Investment Technology Group Signs Biggest Lease of the Year
Daniel Edward Rosen March 20, 2012, 10:30 a.m.
Officials at Investment Technology Group, a brokerage and market research firm with offices across the globe, knew there was no such thing as a dull moment when it comes to behind-the-scenes wheeling and dealing at a Manhattan office tower.
ITG’s current offices are at 380 Madison Avenue, a building involved in a fairly tricky ownership scenario. TAG 380, a subsidiary of the management firm run by Sheldon Solow, the legendary (and litigious) building owner, had paid $65 million for the 13-year leasehold for the property in 2001. That leasehold is set to expire in January 2014, and once that date strikes, the entire asset reverts back to an investment fund controlled by RREEF, a real estate investment fund and subsidiary of Deutsche Asset Management.
And when it regains the control of the leasehold, RREEF and its co-owners intend to either redevelop the building or raze it and rebuild from scratch. “It could even be torn down and a new building put up,” said a person familiar with the situation.
What that means for ITG and fellow tenants like the United Nations, which signed a six-year lease for 460,000 square feet, is a need for new homes by the end of 2013 at the latest.
Enter Newmark Knight Frank. John Hennessey, a managing principal in NKF’s Boston office, had worked with ITG for an office deal in the Boston market. Now faced with a pressing need for a new office, the firm reached out to NKF again to aid it in its search.
But if ITG was feeling the pressure, it wasn’t showing it.
“They were very focused, they were ahead of schedule, they were smart and had thought through everything,” said Neil Goldmacher, an executive vice president and principal at NKF. “They did not want to rush such an important decision, that’s for sure,” he added.
ITG was also very investigative, which is to be expected from the independent research brokerage firm. The firm looked at Mr. Goldmacher and his NKF team, along with their previous dealings with other financial services firms, especially those that, like ITG, have a “large component of mission-critical infrastructure” in their office space.
They were put at ease by Mr. Goldmacher, who previously worked with firms like JP Morgan, Knight Capital Group and Citibank, among others.
With its research and due-diligence complete, ITG signed NKF as its tenant representative in October 2010.
It enlisted the help of Mr. Goldmacher, Brian Goldman, Josh Friedman, Mr. Hennessey and Merrill Roth for a deal that would require “a lot of brain cells,” said one of the brokers.
Almost instantly, NKF took the team on a tour of a slew of high-quality, low-cost options, from everything in Midtown to lower Manhattan.
“What they really wanted was something that really gave a strong impression, you know, a very high-quality, trophy-type asset,” said Mr. Goldmacher.
The firm also wanted large, column-free floors that would be suitable for a growing and fast-paced trading operation.
“[They] wanted to create a state-of-the-art trading platform with fantastic infrastructure,” said Mr. Goldmacher.
Finding the kind of space that could fit both needs would be tricky, as the inventory of such buildings was limited at best.
At the end of 2010, the top executives of ITG were brought to 1 Liberty Plaza to look at an office space previously held by the Royal Bank of Canada.
The bank was leaving two floors of space to consolidate and relocate to the World Financial Center, where the firm has grown “exponentially,” according to a Brookfield employee. By the time ITG arrived, the Royal Bank of Canada had already left the sixth and fifth floors of 1 Liberty while still occupying a part of the fourth floor.
Off the bat, ITG was intrigued by 1 Liberty, said those close to the deal.
“It’s a trophy building, it’s at a great location, it has column-free, 40,000-square-foot floors,” said Mr. Goldmacher.
The evolving character of lower Manhattan, including the new Fulton Street Transit Center, the new World Trade Center and renovations to the World Financial Center (also a Brookfield property), was appealing to ITG as well.
Central to the appeal of the available space at 1 Liberty was Brookfield’s infrastructure, especially the possibility for ITG to be independent from the landlord’s power grid and entirely self-sufficient with its power needs.
“One Liberty has extensive infrastructure, and this tenant needed additional power and a back-up generator and chilled water,” said Duncan McCuaig, a vice president at Brookfield Properties who represented the firm in-house alongside colleague Sarah Pontius. “All those things we could accommodate.”
A perk at 1 Liberty: the building has its own set of significant back-up generators that can act as an emergency lifeline in the event the Con Edison grid fails at a moment’s notice.
“Tenants that have critical action plans, like at ITG, that can’t go down because they have critical infrastructure that has to be backed up, they’ll do it themselves,” said Mr. McCuaig.
As ITG needed three floors, Brookfield was able to reach a deal with the Royal Bank of Canada for that firm to get out of its fourth-floor lease.
The elephant in the room—or rather, the elephant in the courtyard—was the Occupy Wall Street protests that were taking shape in Zuccotti Park throughout the fall of 2011, and again last weekend. But those involved in the negotiations said that the protests, in which a full-time community set up tents and inhabited the Brookfield-owned Zuccotti Park to protest the discrepancy in income between the wealthy and the diminishing middle class, never became an issue.
“It was discussed, but I think everyone felt confident that over time that it would become less of an issue,” said Mr. Goldmacher. “They were very confident that the city and the mayor and Brookfield and OWS people would all figure out something eventually, and they did.”
Despite the protests being “directly across the street,” Brookfield said that it never became an issue.
“This is the second significant lease we’ve signed in the last several months,” said Mr. McCuaig, referring to the 45,000-square-foot lease signed by Getco at the building in February.
“It wasn’t an issue with either tenant, because they knew we are a quality owner that was going to take care of their front door, and we did, in conjunction with the city,” he added.
By the end of February, Brookfield and ITG came to an agreement. The firm would take 132,000 square feet of office space in a 16-year lease at an asking rent of $49 per square foot. ITG has a right to expand and renew in the space in the deal.
Aside from several large renewals, including a 360,000-square-feet deal in January by Bank of America and another transaction by Information Builders at 2 Penn Plaza that same month, the ITG deal is the largest in Manhattan this year. A 186,000-square-feet lease at 330 Madison Avenue by the investment firm Guggenheim Partners, was leaked to The Commercial Observer in late December 2011 and reported in its pages January 3, although it was likely sealed late last year.
One Liberty Plaza is now 98 percent leased.
As part of the deal, ITG was given dedicated space to install its own generators and independent air-conditioning systems.
In its move from 380 Madison, ITG was also consolidating. It had purchased several research companies over time, each with its own satellite offices spread across Manhattan. Those companies will be under one roof at 1 Liberty.
By moving downtown, ITG is receiving economic incentives from the city Economic Development Corporation, including real estate tax benefits and N.Y.C. commercial rent and occupancy tax break.
With the new space, ITG will be demolishing and renovating the entire office space, all the way down to the concrete and the windows.
“We are not keeping one thing,” said Mr. Goldmacher. “Everything is going to be brand new. It’s going to be really fantastic.”
Architectural firm Ted Moudis Associates is designing the office. VVA LLC is serving as the project manager for the office reconstruction.
The firm is expected to move into its new offices in 2013.
- Investment Technology Group
- TAG 380
- Neil Goldmacher
- Newmark Knight Frank
- Knight Capital Group
- John Hennessy
- 1 Liberty Plaza
- World Financial Center
- 380 Madison Avenue
- Duncan McCuaig
- Fulton Street Transit Center
- Sarah Pontius
- Deutsche Asset Management
- Ted Moudis & Associates
- VVA LLC
- Sheldon Solow
- Royal Bank of Canada