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NEW YORK CITY-Morgan Stanley is flirting with the notion of selling its still-unfinished Midtown building to rival securities firm Lehman Brothers Holdings Inc. and moving part of its operation out of the city, published reports say. Such a move would be a major signal to both the real estate and financial communities that the events of September 11 will have ramifications that reach far beyond the question of whether or not to rebuild the flattened World Trade Center towers.

The news comes less than a week after reports that the firm will lay off 150 employees. It also comes a few days before a charity event to benefit the Morgan Stanley Victims Relief Fund, which was seeded with a $10 million gift from the company.

Morgan Stanley was scheduled to begin moving employees into the new building early next year. The 38-story tower, located on 7th Avenue between 49th and 50th streets, has been under construction since 1999. Should the firm decide to bail out of Midtown and send those employees to the suburbs, it would be the first large financial firm to break away from the pack by selling off a major Manhattan property.

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