Angry New Yorker

Friday, December 12, 2003
Goldman's Unmitigated Gall
Ed. note - If Goldman gets one red cent from New York, there'd better be hell to pay.

Goldman Asks for Grants for Downtown
New York Times. Article here.

Three years ago, Goldman Sachs decided to build the tallest and most expensive skyscraper in Jersey City — a development that left New York officials fuming over the snub.

That 42-story, $1.3 billion tower is now nearing completion, but the investment bank is having trouble finding anyone to move into it. Faced with an unpopular new building across the Hudson, Goldman Sachs emerged suddenly last week with a new plan: to build a 1.5-million-square-foot tower in Lower Manhattan, directly across from ground zero.

And as it did in New Jersey, Goldman Sachs is seeking subsidies to build in New York, where its headquarters have long been located.

The investment bank has spurned suggestions that it move into 7 World Trade Center, the tower Larry Silverstein is building, or the so-called Freedom Tower, the 70-story building that is to be the centerpiece at ground zero. Neither of the buildings, which will have a total of 4.3 million square feet of office space, has a tenant.

Instead Henry M. Paulson, the firm's chairman, has told the governor and the mayor that Goldman wants its own tower, on what is known as Site 26 at Battery Park City, and wants some of the same cash grants, tax breaks and tax-free financing that are available downtown right now, according to state and city officials who are working with the bank.

"It's heartening that Goldman has decided to build in Lower Manhattan," said Harvey Robins, a mayoral aide to Edward I. Koch and David N. Dinkins. "But in terms of their planning, Jersey has turned into one big folly. Goldman squeezed Jersey for tax breaks and now they're not missing a beat in looking for subsidies on this side of the river."

Goldman itself declined to discuss its plans in New York.

"We're exploring a number of options," said Bruce Corwin, a spokesman for the bank, "but we're committed to remaining in downtown Manhattan."

State and city officials and downtown executives have embraced Goldman's proposal, although negotiations are expected to go on for some time. "I'm thrilled Goldman is committed to building a new headquarters downtown," said Carl Weisbrod, president of the Alliance for Downtown New York. "It's not only directly important in terms of Goldman's prestige and number of employees, but it's also a signal to others to consider building on the World Trade Center site and elsewhere in Lower Manhattan."

But even those who welcomed Goldman's initiative also marveled at the bank's "hubris."

Goldman bought the land in 1999 for the tower in Jersey City — one of three development parcels it acquired at the site of the old Colgate toothpaste factory — at a time when Wall Street was booming and the bank had doubled the size of its work force and its real estate holdings in Lower Manhattan. There was talk of building a trading floor and creating a training center.

Good building sites were unavailable downtown, Goldman executives said at the time in explaining their decision to jump across the Hudson River. What was also available in New Jersey was more than $160 million in tax breaks over 10 years.

Early in 2002, the company told employees that it would move equity sales and trading operations, as well as researchers and data departments, to its 875-foot tower under construction in Jersey City. That set off an insurrection by traders who did not want to be cast off to New Jersey, according to banking and real estate executives. At the same time, a downturn in the economy prompted Goldman to scrap plans for a second building in Jersey City and to cut 13 percent of its work force. The bank currently leases a total of about four million square feet in nine buildings in Lower Manhattan, although not all of it is occupied.

It recently negotiated a deal to pay the landlord at 10 Hanover Square near Wall Street $40 million to cancel its lease next September, according to real estate executives who were briefed on the talks. And last summer, with the cost of its new tower mounting, Goldman tried to lease it to Mellon Financial Services. Instead, real estate brokers say, Mellon appears close to leasing a different office tower in Jersey City that UBS is no longer moving into.

Mr. Corwin of Goldman Sachs said the bank now planned to move "a few thousand" employees into the Jersey tower, a building that could accommodate more than 6,000 workers, beginning in April. Brokers say that at least for now, the bank will occupy only about a quarter of the tower, although one Goldman banker said that half the building would be in use by next fall.

"Goldman's intention is to occupy about 350,000 square feet and mothball the rest," said a top real estate executive in New York who deals with the investment bank. But that has not stopped Goldman from thinking about consolidating its operations in Lower Manhattan, where it is spread across nine buildings. Given the tax incentives available for rebuilding downtown and the tax-free Liberty Bonds available for new construction, the bank focused on a new headquarters at Site 26, at the north end of the World Financial Center.

The parcel offers an unobstructed view of its Jersey City tower one mile to the west, which the company hopes will convince employees consigned to New Jersey that they are still in the mix as Goldman consolidates its operations into a tower on each side of the river over the next five years.

"They're having difficulty getting people to go to Jersey City," said one developer who has talked to Goldman. "If they get Site 26, they could run their own private ferry between the buildings."

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