By Peter Grant
For sale cheap: the world's largest trading floor.
The property was part of a lavish development in Stamford,
Conn., in the 1990s designed to lure what was then Swiss Bank Corp.
and thousands of workers away from New York.
Soaring 40 feet high, the trading floor was bigger than a
football field, unimpeded by columns and soon filled with hundreds
of stock, bond and currency traders.
Now the office complex and its once-iconic trading floor are
both mostly empty and up for grabs.
CW Capital Asset Management, the servicer that controls the
$149.4 million mortgage on the 712,000-square-foot complex near the
Stamford train station, has hired Mission Capital Advisors to put
the debt on the block, according to people familiar with the
matter.
The mortgage is widely expected to sell for well under that
amount, given that the property has been vacated by its tenant, UBS
Group AG.
UBS acquired Swiss Bank in the late 1990s but has shrunk its
Stamford operations in recent years.
The Stamford office market, meanwhile, is suffering one of the
highest vacancy rates in the U.S., at more than 30%.
"If you look at the amount of tenants coming into this market
versus the overhang of space, you would see it's going to take
many, many years to lease all the large blocks up," said David
Block, a senior vice president in the Stamford office of
real-estate services giant CBRE Group Inc.
Real-estate industry executives predict that whoever buys the
mortgage will soon become owner of the complex at 677 Washington
Boulevard. The complex currently is controlled by AVG Partners, a
Beverly Hills, Calif., investment firm, according to a person
familiar with the matter. The property's owner defaulted on the
mortgage in October when it was due to be repaid, according to
Trepp LLC, a data firm that tracks the commercial real-estate debt
market.
AVG Partners didn't return requests for comment.
The empty trading floor has become a symbol of the end of a
freewheeling era on Wall Street in which banks and hedge funds made
vast sums buying and selling securities. The financial crisis
prompted a wave of regulation making it more difficult for banks to
trade their own capital. Hedge funds, meanwhile, retrenched.
The saga also spotlights the double-whammy that has hit the
Stamford office market in recent years. First, urban downtowns like
New York, with their young and creative workforces, have become
more attractive to employers than suburbs and satellite cities like
Stamford.
At the same time, the contraction of the financial-services
industry has hit two of Stamford's biggest employers: UBS and Royal
Bank of Scotland Group PLC.
UBS moved its Stamford operations out of 677 Washington mostly
to space nearby that had formerly housed RBS, which also has shrunk
its presence in the area. UBS reported last year that its
Connecticut staff had dropped by 500 to roughly 2,000 employees,
compared with 5,000 five years ago.
The picture was a lot rosier in 1994 when the state of
Connecticut lured Swiss Bank to Stamford partly by offering $120
million in tax credits. Back then, with Rudolph Giuliani just
starting his first term as New York City mayor, businesses were
leaving New York and Stamford was dreaming of becoming a new
financial center.
But Stamford has been struggling ever since the 2008 financial
crash, even as New York has rebounded. In 2011, when UBS was eyeing
a move back into Manhattan, Connecticut gave the firm a $20 million
incentive package to stay.
State officials and landlords are hopeful the incoming Trump
administration will stoke expansion in financial services. They
also pointed out that smaller financial-services companies continue
to thrive in the area.
"Having your back office in Connecticut isn't as important a
move as it used to be," said Catherine Smith, who heads the state's
Department of Economic and Community Development. "But we're still
seeing quite a bit of demand from hedge funds, private-equity firms
and the insurance industry."
What does one do with a trading floor that has expanded over the
years to about 100,000 square feet? Suggestions have ranged from
the whimsical -- like a roller derby rink -- to the more prosaic,
like call centers.
Ms. Smith suggested the floor could be converted into a film or
television studio. "A lot of television has come out of New York
into Stamford," she said.
The mortgage on 677 Washington was made in 2004 and converted
into commercial mortgage-backed securities. Its sale will likely
mean big losses for some of the bondholders because of the low
value of the property.
Last year, the vacant former Pitney Bowes headquarters in
Stamford sold for close to $40 million, or roughly $90 a square
foot. At that rate, 677 Washington would be worth about $65
million.
Write to Peter Grant at peter.grant@wsj.com
(END) Dow Jones Newswires
December 20, 2016 10:57 ET (15:57 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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