Smith Barney acquires downtown buildings.

Smith Barney Shearson has become the proud owner of the former Shearson Lehman buildings on Greenwich Street for a reported transfer price of $350 million. The two office buildings were part of the package deal when the brokerage division was acquired earlier this summer.

Shearson Lehman constructed die properties on Greenwich Street on land obtained from New York City at a cost of around $500 million. The larger building, 388 Greenwich which houses computer operations and is known as the Faulkner Center, has 1.6 million square feet while the smaller property at 390 Greenwich has 627,264 square feet.

Located near the waterfront on the lower West Side just below Canal Street, the land was considered an urban development area in the mid-60's and Shearson received Industrial and Commercial Incentive Program (ICIP) benefits. The land for the smaller building was transferred from the city to the company in 1986. Shearson purchased the land under the larger one this past June in preparation for the transfer to Smith Barney. The basic business terms were approved in October of 1984 by the Board of Estimate.

The buildings received cheap Fitzpatrick Power beginning in 1986 for 16 megawatts. When Smith Barney came on board, they gave back 4 megawatts for the city to reallocate.

Smith Barney Shearson is now moving into the high-tech buildings and using them as collateral for monies "greater than" the indicated purchase price for the two buildings, an official said.

A consortium of institutional lenders has appointed the State Street Bank & Trust Company of Connecticut to act as trustee for the properties. These will be held as a portion of the collateral for the loan, said to be a five-year obligation.

Coincidentally, the real estate tax assessment on the two properties works out to about 45 percent of the indicated purchase price, a ratio that is commonly used as a rule of thumb when adjusting the assessment for owners. But recently, in an acknowledgment of the market conditions, properties have been assessed at a ratio in some cases closer to 38 percent or less.

Smith Barney just completed a 10-year lease deal for 250,000 square feet of space at the Brooklyn Army terminal, increasing a 90,000 square foot current commitment, to provide for the consolidation of some back-office facilities.

A spokesperson for Smith Barney said the company also owns and has office space at 333 West 34th Street, a former Robert Hall building, and holds the lease to 13 floors at 1345 Sixth Avenue, which MasterCard just purchased.

The lease at 1345 runs out in 1994 but Smith Barney expects to keep a branch office or two open there.

Meanwhile, people have been moving down to the Greenwich Street properties as space becomes available or is renovated.

"We are extremely pleased that they decided to move to those buildings," said Economic Development Vice President Steven Fuld. "That is one of the most sophisticated back office and computer places in the city."

The Shearson Lehman agreement with the city was one of the first corporate retention deals. Under a pilot program, the company was offered ICIP benefits under the proposed formula, even though the state legislature had not formally adopted the program, which was being switched from the older ICIB plan.

The deal provided that Shearson Lehman would rent the land with an option to purchase based on set figures and calculated to provide the city with paybacks for any abated taxes not yet received if purchased within the deferral or payback periods.

In June, Shearson paid $12.277 million for the land under the larger building, 388 Greenwich Street. In 1987, they paid the city $13.581 million for the land under 390 Greenwich. No further abatements will be accrued by the new Smith Barney Shearson entity.

Meanwhile, Lehman Bros. continues to search for space that could entail 700,000 or more square feet. Among its options are the 55 Water Street building, about to be acquired by the Teachers Retirement Plan of Alabama from the Olympia & York bondholders, Financial Square, the World Trade Center, One Liberty Plaza and 101 Hudson Street in Jersey City. Lehman Bros. itself is said to be going public in the spring.