Lehman eyes 400,000 s/f at 1271 Ave. of Americas.

Lehman Brothers is said to be close to signing a 400,000 s/f lease for space that could serve its expansion needs while it waits for a new Manhattan office tower to be developed.

Although the global investment bank has a reputation among city brokers for being a fickle tenant that has flirted with large leases in the recent past only to back out or take space elsewhere, the firm has zeroed in on a block of space at 1271 Avenue of the Americas that one of the building's largest tenants, Time Inc., has had on the market for sublease since March.

The space would come with rents in the $70s per s/f and a ten-year term, a relatively short period for such a significant block. It is common for very large tenants to make 20-25 year commitments when leasing hundreds of thousands of square feet and sources say that Lehman's selection of a short-term deal is indicative that the company has a larger real estate strategy in the works.

Indeed, Lehman Brothers is in talks with Vornado Realty Trust to be an anchor tenant in a major office tower that Vornado is planning to develop on the site of the Pennsylvania Hotel. A Vornado executive confirmed Lehman's interest in the deal, which would be a boon to Vornado's plan to remake the office district surrounding Penn Station. Despite having some of the best transportation infrastructure in the city, the neighborhood hasn't completely dusted off the grit nor shed the antiquated low rise, brick buildings from its past as a center for manufacturing and the garment industry. But Vornado has purchased a number of buildings in the area and, along with The Related Companies, has plans to redevelop Penn Station, all in the hopes of erecting brand new class A buildings in a neighborhood it is trying to convert into a destination for corporate tenants who typically opt for Midtown's more established office corridors. A deal with a firm of Lehman's clout would be a huge endorsement of Vornado's vision for the area and also would attach a timeline to the project's development because the investment bank undoubtedly would need the space ready for occupancy before the 10-year deal it is currently negotiating expires.

A CB Richard Ellis team led by the firm's New York co-chairman, Robert Alexander, is representing Lehman in its lease at 1271 Avenue of the Americas. Studley represents the sublessor Time Inc. The deal is for floors 35, 37 through 45, and part of 46. Lehman Brothers currently occupies space in 1301 Avenue of the Americas, 50 Broadway, 399 Park Avenue and 745 Seventh Avenue, which it purchased from Morgan Stanley after 9/11 for its headquarters.