Thank you for sharing!

Your article was successfully shared with the contacts you provided.

NEW YORK CITY-The Depository Trust & Clearing Corp.’s Tuesday announcement that it will move 1,600 employees to Jersey City’s Newport Office Center in early 2013 is sending a slight chill down the Lower Manhattan office market. That, despite the holding company’s announcement it will still keep its headquarters as well as around 700 workers on Manhattan Island.

The New York Post reported the 415,000-square-foot DTCC New Jersey space will be subleased from JPMorgan Chase for a price in the low $20s. Currently, Downtown space averages around $42 per square foot, according to Cushman & Wakefield. DTCC, founded in 1999 through the merger of Depository Trust Corp. and National Securities Clearing Corp., is currently located at 55 Water St. Downtown, where it occupies 900,000 square feet.

“There were a variety of factors we took into consideration when we were looking at our relocation plans for the future,” a spokesperson for DTCC tells GlobeSt.com. He says the company had been in internal discussions “for the better part of a year now.”

But reportedly the decision was hastened by the enticing efforts of New Jersey Economic Development Assoc. officials who sweetened the pot extensively, promising DTCC around $90 million in added incentives and tax financing. The incentives, along with the move itself, have been earning headlines across the region, offering evidence that the recession might be re-stoking incentive-centric border wars between Manhattan and its less pricey Gold Coast neighbor across the Hudson.

“The city and state made an effort to keep Depository Trust & Clearing Corp. in the city,” Steven Spinola, president of the Real Estate Board of New York, tells GlobeSt.com. “They formed a working group, made some offers and there were some meetings.”

He jokingly says the New Jersey incentives “basically write a check to the company, for somewhere close to 90% of what the employees end up paying in income tax.”

Actually, New Jersey’s Business Employment Incentive Program or BEIP offers grants based on the number of new jobs created. By adding 25 qualified jobs, ten for qualifying tech companies, within two years, companies can get reimbursed for up to 80% of gross withholding tax aid by new employees for up to 10 years, to a maximum of $50,000 per employee.

And, Spinola says New York City “will continue to lose tenants to New Jersey, because we have nothing like that.” Still, he acknowledges, therein lies an important question: “should we match, dollar for dollar, what other states are offering?”

More importantly, Spinoloa says the motivation ought to be keeping existing tenants in New York. Matter of factly, Spinola says “over the next couple of years, most of the city’s jobs will be coming from companies already here.” He says REBNY has suggested an incentive program that basically says if “a tenant signs a new 10-year lease and invests in its space, we’ll give you something in return.” Ultimately, he says, “We need to keep those jobs here.”

But, even if the REBNY recommendations were written in stone, Spinola doesn’t think it would have made the difference in the case of DTCC, because in this case, New Jersey’s incentives were so much greater than what REBNY has recommended.

A spokesman from the New York City Economic Development Corp. apparently agrees, telling GlobeSt.com that first and foremost, it was glad the company was maintaining its headquarters in Lower Manhattan. And, the spokesman adds, although “we’d like all of its operations to be here, we’d rather use scarce taxpayer dollars to invest in our future than engage in a reckless bidding war with New Jersey.”

But, New Jersey economic czar Jerry Zaro, calls that “a bit disingenuous,” saying New York City “bid very aggressively.” But, he adds, “I’d probably be doing the same thing if we’d lost.”

He points to the economic benefits of the planned move, noting, “right now, New Jersey makes zero dollars on DTCC. After this deal, they’re coming in with $81 million of capital expenditure, immediately on the construction of their facility, furniture and equipment,” but ultimately, he adds, his mission, is “putting people to work.

Some worry that in these challenged economic times, New York City should also be doing all it can to retain and attract new tenants to the city. After all, shrinkage in the financial industry has cast doubt on the city’s future job growth engines.

“Based on current unemployment trends, retention of existing tenants should be a clear priority for all participants in the marketplace, ” says Robert Knakal, chairman of Massey Knakal Realty Services.

Sources closer to the negotiations between the city and DTCC say government officials presented several discretionary incentives to persuade the company to keep all operations in the city, as well as other “very significant” incentive packages. However, in the end, they say it would not have been in the best interest of the city to offer more, especially since nothing they came up with compared to the package from across the river.

Good Jobs New York is an advocacy group that seeks to promote policy holding government officials and corporations accountable to taxpayers, particularly in the realm of economic agencies giving subsidies to large corporations that threaten to leave New York. GJNY project director Bettina Damiani tells GlobeSt.com that “there’s enough smoke and mirrors, on both sides of the river, for people to feel they don’t have all the information about how tax breaks were involved in this project.”

Besides that, she says, “big corporations will tell you, they don’t make business locations based on tax breaks. That’s just not smart business.”

But Spinola says critics of government incentives have never actually been involved in the complicated, thorny process that attempts to try keeping tenants in New York City. “I did it when I was with the city,” he says. “Saved some, lost others and I used to say, you’d never know if you gave them too much to stay, but you always knew if you’d given them too little.”

But Damiani counters, pointing out a 2001 quote by New York City Mayor Michael Bloomberg who told the New York Times, “Any company that makes a decision as to where they are going to be based on the tax rate is a company that won’t be around very long. If you’re down to that incremental margin, you don’t have a business.”

With that, Spinola agrees, saying no corporation is going to make a location decision solely on whether there’s a tax incentive. He says it’s true, companies like DTCC are looking at everything New York and New Jersey have to offer. For example, “in New Jersey, they offer the tax incentives and the suburban office park. But in New York, there’s more excitement for the employees, greater access to your competitors, vendors and clients.” He says companies compare all of those things, including the incentives. And while some companies will pay anything to be in New York City, right now in a recession, “most companies have to look at the bottom line.”

Clearly, says Spinola, “anytime we lose jobs like this, it’s a blow to the city of New York,” and to the real estate community. However, “my understanding was, that the owner of 55 Water St. was included in the discussions with what to offer DTCC. Everybody made an effort here,” he says.

Spinola adds, “I’m not sure if anything could have been done to change this. When these decisions are made, frequently they are made under the guise of an economic decision, and then, you find that in many cases, the people making the decision, end up moving the company closer to where they live. Sometimes you can’t change that no matter what you do.”

The DTCC spokesman tells GlobeSt.com that it mainly considered competitive costs for a long-term lease, availability of infrastructure support, telecommunications, transportation and accessibility of site to the headquarters in Manhattan. The spokesman says there were also issues for employees, such as commuting, the ability to recruit highly skilled staff, and yes, overall quality of life issues.

In the end, the DTCC spokesman tells GlobeSt.com that it was not just the incentives that coaxed its planned move to New Jersey. Besides, the address remains in Lower Manhattan. “We have a longstanding, excellent relationship with New York. I think that’s evident in the fact that we’re keeping our headquarters here, with 700 employees.”

For more in depth coverage about the DTCC move, from the other side of the Hudson, check out how New Jersey Nabs New York Jobs.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.