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Prudential deal: long search ends at home.

Before Prudential Securities Inc. signed the leases that will keep its head-quarters and 5,000 employees in the Big Apple, they conducted a national search, negotiated intensely with public officials and relied on the advice of two real estate services firms.

Prudential Securities last week announced the two Downtown Manhattan leases that combined will be the company's headquarters for at least the next 20 years. At 1 New York Plaza, Prudential will occupy 16 floors, totalling some 1 million square feet, and the company has renewed its lease for approximately 15 floors, totalling roughly 500,000 square feet, at 1 Seaport Plaza. The company will be vacating space in six other Downtown buildings.

The securities firm will receive more than $106 million in incentives from New YOrk City and New York State.

REW spoke to Prudential's dealmakers at Joseph Hilton & Associates Incorporated, Prudential's exclusive broker for the deal, and LaSalle Partners, which served as advisor.

Hilton, represented by President Joseph Hilton and Andrew Froelich, was actually named an exclusive broker by Prudential in 1986 when the securities firm was searching to move its back office space.

They worked on a deal -- including synchronizing a number of leases so all Prudential Securities leases would expire in 1994, Hilton said, but the plans took a detour when the stock market crashed in October of 1987.

"No one wanted to look at anything," said Hilton.

Two years ago, when the securities industry began showing signs of recovery, the assignment was resurrected, but with a broader scope. Prudential, now under a whole new management, had consolidation and new headquarters on the agenda.

"Now the company wasn't just looking at just back office," Froelich said.

Says Hilton, "It was a 90's solution to an 80's problem."

Hilton's search for more than 1 million square feet took them all over Manhattan -- Uptown and Downtown, including the Times Square redevelopment. (Prudential Securities officials last week said timing was the problem with that option). They looked in the seriously considered New Jersey. And they traveled around the country searching for options.

"We had to took very seriously at every possible opportunity that could accommodate 1 million square feet," said Hilton. "We studied every alternative in the United States. Not every site, but every state."

There were, according to Froelich, so many different disciplines required to identify Prudential's requirements and then to fill them. In addition to pinpointing lease alternatives, a new building was considered.

We had to have the ability to evaluate potential sites for development," he said.

New York vs. New Jersey

LaSalle Partners, led by Peter Roberts, entered the decision making process at the beginning of this year.

In January, Prudential had narrowed down its alternatives to either Manhattan or Jersey City. Roberts said LaSalle was called in to coordinate the whole process and to represent Prudential in the tangled negotiations between the securities firm and New Jersey and New York City and New York State officials who were vying for the major office deal and the jobs.

"The long-distance locations -- "the Houstons and the West Virginias" -- had been ruled out," Roberts said.

LaSalle, Roberts said, has been involved in a number of "public-private" deals in New York and Washington, D.C., and Chicago. They were involved in the AT&T/Sony deal and the ComEx development planned for Tribeca.

City Responded Swiftly

The city's aggressive incentive package includes $48.4 million in energy savings from the James A. Fitz-Patrick Nuclear Power Plant and $57.8 million in tax incentives.

The city will sacrifice $41.1 million in tax revenue -- $29.5 in sales tax, $24.1 million in property and commercial rent taxes, and $4.2 million in mortgage recording tax.

The state will waive $16.7 million in sales tax and mortgage recording tax.

The intricate negotiations with the city and state, Roberts said, were completed in only three months.

"The New York City and State team did a heck of a job, he said. "There are a lot of layers of approval. And this one I've go to tell you they did in record time."

The city, Hilton said, presented a package that would close the gap between doing business in New York and doing business elsewhere. While office prices have softened in New York, they have fallen all over, he said.

"[Prudential's] druthers was to remain in New York City but the economic cost was considerable," Hilton said. "The city realized it was a real possibility they would relocate."

Roberts, Hilton and Froelich all agree the deal required a lot of analysis and a complex series of transactions.

There was a synergy, Roberts said, between LaSalle and Joseph Hilton and Associates, and many of the anticipated tensions never happened.

"We worked very well together as a team," he said.

Other members of the team included construction managers Lehr McGovern Bovis, engineer Jeris, Baum & Bolles, and attorneys Skadden Arps Slate Meagher & Flom. Roberts credited Roger Parker, Prudential senior vice president, assembling that team.

Chase Manhattan Bank is the owner of One New York Plaza, at Water and Broad Streets. Edward S. Gordon Company is the rental agent. Resnick-Water Street Development Corp. (Burton Resnick) owns and operates 1 Seaport Plaza, which Prudential has an interest in.
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Title Annotation:Prudential Securities Inc. signs leases for commercial space in New York, New York
Author:Fitzgerald, Therese
Publication:Real Estate Weekly
Date:Aug 12, 1992
Previous Article:Can incubators hatch foreign influx?
Next Article:Senate bills target bankruptcy reform.

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