A $106.2 million accord unveiled yesterday between New York City New York State, and Prudential Securities Inc. will keep the securities firm's headquarters in Manhattan for the next 20 years, Mayor David N. Dinkins said.
Based on an incentive package of tax exemption, savings, and rebates, the argument will keep 5,000 jobs in the city and could generate up to $830 million in tax revenues on a present-value basis over the life of the 20-year agreement.
"We believe it to be a good deal for the city of New York. They [Prudential] were literally out the door," Mayor Dinkins said during a press conference at City Hall. Prudential had launched an intensive two-year search for more affordable office space, including several sites outside the city Mayor Dinkins also said.
Prudential Securities serves as a co-manager in the city's underwriting syndicate. Recently, the firm was senior manager of the city's first primary market offering of zero coupon bonds targeted for small retail investors.
Negotiations between city, state, and Prudential officials resulted in the incentive package that includes $57.8 million of sales tax exemptions, real-state tax savings, and mortgage-recording and commercial-rent tax rebates, plus $48.4 million in low-cost energy incentives.
"It came down to economics," Woody Knight, senior executive vice president for investment banking and corporate strategy at Prudential, said of the firm's decision to stay in New York City.
"Due to the negotiations, we were able to level the playing field on a benefit-cost basis" and find an affordable means of staying in the city, Mr. Knight added."
Earlier this year, Prudential officials had ruled out relocating offices to the city's Times Square district, the site of a planned redevelopment project. This decision was due in part to the area's high vacancy rate and the amount of time required to complete the redevelopment project, Mr. Knight said.
The agreement is the second-largest lease transaction in the history of the city and one of the largest lease renewals ever, Mr. Dinkins said.
Prudential will occupy 1.5 million square feet of office space and consolidate its seven offices into two locations at One New York Plaza and One Seaport Plaza in lower Manhattan, the heart of the city's financial district, Mr. Knight said.
City officials declined to comment on negotiations with two other firms, Smith Barney, Harris Upham & Co. and Morgan Stanley & Co., which also are reportedly considering relocating outside of city.
In recent years, a strategy of tax incentives has thwarted outside moves by other firms such as Bear, Stearns & Co. and attracted companies such as Duff & Phelps Inc. to open offices in the City.
City officials assembled a package of $44.6 million tax abatements and reduced energy costs to keep Bear Stearns from moving 1,500 employees out of the city, preserving an estimated $200 million of tax revenues.