Securing New York's Position as Financial Capital Will Be a Costly Endeavor

NEW YORK CITY-The Nasdaq Stock Market is about to move its headquarters to Manhattan and the New York Stock Exchange agreed two years ago to a deal to stay on Wall Street for the next 50 years if the city and state build it a new home across the street. Now both deals will cost the city and state, and ultimately the taxpayers, a combined total of approximately $1.95 billion. The consensus among government officials and the business community seems to be that this is a necessary price to pay to officially crown New York the global financial capital.

The city and state have prepared a package of approximately $50 million worth of incentives to be distributed to Nasdaq over a period of about two decades. The stock exchange created by the National Association of Securities Dealers will itself pay Brookfield Properties Corp. $50 per sf in rent. Nasdaq will be paying for the top two floors of One Liberty Plaza where Long Term Credit Bank of Japan had recently been paying $40 per sf. With a total of 260,000 sf in space, Nasdaq will be paying $13 million per year.

At the same time, the city’s Economic Development Corp., the Empire State Development Corp., the city itself and the state are planning to join together to raise approximately $1.15 billion to build a new trading facility for the NYSE. Two years ago when Mayor Giuliani and Governor Pataki announced the plan, the estimated construction cost was $400 million. Now that figure has jumped to $540 million. Just to buy the property at the corner of Wall and Broad streets will cost $350 million, now including payments to J.P. Morgan and Rockrose Development Corp.

The NYSE plans also call for the EDC to have a 1.3-million-sf office tower built at $765 million. When first announced, the mayor and governor explained the project as being a 650,000-sf trading facility. Now the project has become a total of 1.9 million feet. One of the developers reportedly in the running for the project is Brookfield Properties, the owner of the Nasdaq’s new space.

Officials for the city and state say that the mayor and governor are as positive now about the projects as when the NYSE deal was first announced in 1998. At the time the mayor commented, “This is a significant investment on the part of the city and state and is easily justified by the returns it will create for the city, because it will keep the financial sector’s center of gravity in Lower Manhattan and will solidify our role as the financial capital of the world.”

Richard A. Grasso, chairman and CEO of the NYSE, has noted, “We look forward to continuing to work hand-in-hand with Mayor Giuliani and Governor Pataki and their teams to ensure that New York remains the center of the global financial community. The NYSE’s dramatic and rapid growth in recent years and our growth prospects for the future make it necessary to expand by building a state-of-the-art trading center, which promises to be the world’s most technologically advanced center for trading of equities.”

One insider at a New York-based international banking firm tells GlobeSt.com, “With Jersey City luring some of the banking world’s heavy hitters, even with the stock dip this past spring, to have the Nasdaq move here and to keep Wall Street’s essence is critical to keeping New York the world’s focal point. Our position as a city and a nation is strengthened in the global community through strengthening the exchanges. It’s a huge investment, but it will pay off.”