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COMMERCIAL PROPERTY: The Salomon Solution; A Building Within a Building, at a Cost of $200 Million

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Published: February 19, 1989

LEAD: BEFORE it moves into a new office tower in downtown Manhattan, Salomon Brothers, the brokerage firm, intends to spend nearly two years and more than $200 million cutting out floors, adding elevators, reinforcing steel girders, upgrading power supplies and making other improvements in its million square feet of space.

BEFORE it moves into a new office tower in downtown Manhattan, Salomon Brothers, the brokerage firm, intends to spend nearly two years and more than $200 million cutting out floors, adding elevators, reinforcing steel girders, upgrading power supplies and making other improvements in its million square feet of space.

The work, which began last month at Seven World Trade Center, reflects both the adaptability of steel-framed towers and the extraordinary importance of fail-safe computer and telephone systems for the brokerage industry. According to many real estate experts, no company has ever made such extensive alterations to a new office building in Manhattan.

Salomon had tried to avoid the trouble and expense of alteration work by designing an office building, in partnership with a developer, from the ground up. But in late 1987, after the stock-market crash, Salomon withdrew as the co-owner and principal tenant of a project planned for Columbus Circle in midtown Manhattan.

The termination of that agreement left Salomon with an after-tax charge of $51 million and put the firm under intense pressure to find new headquarters space before its lease at One New York Plaza, in downtown Manhattan, expired in 1990. It no longer had time to shape the blueprints of a project; instead, it needed to find an existing building or one under construction that could be fitted for its high-technology operations in about two years.

After studying more than 50 options throughout the New York region, Salomon signed a 20-year lease for 22 floors - each spanning nearly an acre - at Seven World Trade Center, an office tower that has been largely vacant since Silverstein Properties completed it two years ago.

''We really had a time constraint,'' explained Gedale B. Horowitz, a senior executive director of Salomon. ''And we were driven very much by technology. We had to find a building that could accommodate our needs, including major-sized trading floors.''

Much of the new electrical, air-conditioning and mechanical equipment will serve three double-height trading floors. To create the extra height, workers are removing most of three existing floors, using jackhammers to demolish concrete slabs and torches to remove steel decking and girders beneath the concrete.

After the girders are cut into sections small enough to fit into a construction elevator they will be sold as scrap for about 4 cents a pound.

In some office buildings, that alteration would be impossible, but Silverstein Properties tried to second-guess the needs of potential tenants when it designed Seven World Trade Center as a speculative project.

''We built in enough redundancy to allow entire portions of floors to be removed without affecting the building's structural integrity, on the assumption that someone might need double-height floors,'' said Larry Silverstein, president of the company. ''Sure enough, Salomon had that need.

''And there were many other ways that we designed as much adaptability as possible into the building because we knew that flexible layout is important to large space users.''

Nearly 2,000 people will be working on the retrofit project during the peak period. The cost, which is estimated at $200 million - not including carpeting, furniture and other office equipment - will come out of Salomon's pocket.

''We made a landlord contribution to the work,'' Mr. Silverstein said, ''but Salomon's costs will go well beyond that contribution by many, many times.''

MORE than 375 tons of steel - requiring 12 miles of welding - will be installed to reinforce floors for Salomon's extra equipment. Sections of the existing stone facade and steel bracing will be temporarily removed so that workers using a roof crane can hoist nine diesel generators onto the tower's fifth floor, where they will become the core of a back-up power station.