Bank of America has issued a request for proposal in recent weeks to the city’s major brokerage firms in search of a consultant to help it determine and execute its real estate strategy in Manhattan.
The RFP appears to be a sign that the bank will finally arrive at a decision on what to do with Merrill Lynch’s operations in lower Manhattan, which real estate experts have speculated could be either partially or entirely relocated to midtown where Bank of America bases its offices.
Merrill Lynch occupies the entirety of Four World Financial Center, an over 2 million square foot tower that the firm owns in partnership with the real estate investment trust Brookfield Properties. Merrill also has hundreds of thousands of square feet of additional space at the neighboring tower Two World Financial Center, offices that it had largely subleased years ago to other large tenants such as Nomura Securities, Deloitte and Oppenheimer Funds among others.
Because Merrill has such sizeable facilities and a stable of substantial subtenants whose own future leasing could be impacted by its decisions, real estate experts have looked to the outcome of the firm’s real estate strategy as potentially important to the health of the entire downtown office market.
The blows that Merrill suffered during the economic downturn and the integration of its operations into Bank of America after their merger both have likely resulted in a net reduction in the company’s size according to experts. Yet almost two years after Bank of America acquired the company as it teetered near insolvency during the depths of the financial crisis, questions remain how much Merrill will shrink and where its facilities will be located.
Even Brookfield Properties executives, in recent conference calls to discuss quarterly earnings, have only been able to express optimism that the bank would keep space at World Financial Center. Meanwhile, Brookfield has appeared to make moves to ready itself for life after Merrill, readying plans for a multimillion-dollar renovation of the four building World Financial Center complex and aggressively working to hold onto Nomura Securities and Deloitte after Merrill’s lease runs out in 2013.
Brokers familiar with the decision making of large financial firms say that the timing of Merrill’s RFP, three years ahead of its current lease expiration, is typical for tenants of its size, who often start years in advance because of the complexity of their real estate needs and also because it often takes time to find the right facilities.
Brokers familiar with Bank of America and Merrill who spoke on condition of anonymity said that after the merger, Bank of America pulled Merrill offices from Four World Financial Center into One Bryant Park. The decisions were made internally and, according to sources, included divisions of Merrill that bore a connection to Bank of America business lines that the bank could easily integrate.
“Neither Bank of America or Merrill has publicly let it be known that they have space they want to dispose of at Four World Financial Center,” said a broker familiar with Merrill’s downtown footprint. “But Brookfield has quietly made available floors in the building that were emptied by Merrill.”
While some of Bank of America’s early moves to integrate Merrill may have been guided by straightforward synergies, the RFP appears to constitute the beginning of a more formal, fine-tuned process aided by real estate professionals. Some of the city’s top brokers are expected to compete for the assignment, including Bob Alexander, a high level executive at CB Richard Ellis, Peter Riguardi, the head of Jones Lang LaSalle’s New York operations and executive brokers from Cushman & Wakefield.
The prevailing opinion among real estate experts is that Merrill will keep at least some space at World Financial Center but that a large portion, if not the bulk, of its operations will be brought to midtown. If the bank does end up moving from lower Manhattan, there are questions about where it will go as Bank of America is said to have essentially filled the over million square feet it occupies at One Bryant Park.
One interesting possibility that the bank may be exploring according to several real estate executives, is moving Merrill staff into Four Times Square if Conde Nast, the current anchor tenant in that building, decides to relocate to lower Manhattan, where it is said to be considering a lease at 1 World Trade Center. The Durst Organization, which developed One Bryant Park in partnership with Bank of America and also owns Four Times Square, appears to hold many of the pieces of such an arrangement.
The family owned company is currently bidding to take control of 1 World Trade Center from the Port Authority, an acquisition that could give it the leeway to more easily relocate Conde. Although there are no formal signs yet that Bank of America is eyeing Four Time Square, a number of sources say that any of the real estate advisors the bank ends up selecting would likely recommend space in the tower as one of its options. Four Times Square sits directly next to One Bryant Park, allowing Bank of America to establish a closely located campus of midtown facilities.