Image of Investment Property

1585 Broadway

Property Sq Ft: 1,346,000

Purchase Date: October, 1993

Purchase Price: $176MM

Year Built: 1990

Client: Morgan Stanley

While in charge of the Corporate Real Estate group within the Investment Banking Division at Morgan Stanley, MMMermel represented Smith Barney in its acquisition search for a new headquarters building. Initially, MMMermel represented Smith Barney in negotiations for 1585 Broadway which was a bankrupt building then owned by a trio of Canadian banks. MMMermel negotiated for Smith Barney to become an assignee of the bank group in its plan of reorganization. Smith Barney chose to acquire another building through a transaction led by MMMermel: the acquisition of a former back office headquarters of Shearson Lehman at 388-392 Greenwich Street. Afterwards, MMMermel was engaged by DLJ to acquire the building. However, one day after the engagement, the president of DLJ drove by the site and said it was “unfit for the conduct of business regardless of cost.” Finally, MMMermel brought the idea of the purchase of 1585 Broadway to John Mack, President of Morgan Stanley. MMMermel was aware that the firm had suffered for more than a decade with debt and equity trading being separated on different floors at 1221 Avenue of the Americas. John Mack (who now serves as the chairman of the board of trustees of New York Presbyterian Hospital) believed that Morgan Stanley was losing approximately $15MM per annum in trading profits due to lack of communication between employees calling on the same clients for equity and debt.

MMMermel suggested the firm consider 1585 Broadway as a possible headquarters location due to its larger trading floors. The location of 1585 was problematic for investment banking, and a deal had been announced with Mitsui Fudosan for Morgan’s renewal at its then-headquarters at 1251 Avenue of the Americas. MMMermel arranged two sublease transactions that made Mitsui whole; advised Richard Fisher, John Mack, and the Inside Board in its acquisition of 1585 Broadway; and led the firm in bidding at a bankruptcy auction. After winning the bid at $176MM which was only 2% over the cover by Soros/Reichmann, Morgan Stanley was able to achieve occupancy costs equal to $20psf net. The Times Square location required outside signage which was an image problem which MMMermel solved by recommending a stock ticker around the building which exists to this day.

This was the largest single asset bankruptcy purchase at that time in history. The nature of Morgan’s move to Times Square built upon the occupancy of Cravath, Swaine & Moore at 825 Eighth Avenue (a building in which MMMermel had played a key role by advising one of the owning tenants, N.W. Ayer) and firmly established the neighborhood as an office location. It was called by many in the industry “the deal of the decade.”