BNY Mellon to Sell One Wall Street Office Tower - Analyst Blog

As part of its ongoing restructuring initiatives, The Bank of New York Mellon Corporation BK inked an agreement to vend off its One Wall Street headquarter building to a group led by Macklowe Properties, a New York-based real estate developer. The deal, valued at $585 million, is expected to close in third-quarter 2014. However, it is subject to certain customary closing conditions.

Further, BNY Mellon is on a lookout to lease nearly 400,000 square feet property in order to shift its current office structure. As per a Bloomberg report, the banking major is in talks with Brookfield Office Properties Inc. BPO and contemplating to move into 225 Liberty St. in lower Manhattan, or 70 Hudson St. in Jersey City.

While Jones Lang LaSalle Inc. JLL, a Chicago-based investment company is serving as BNY Mellon's leasing advisor, CBRE Group, Inc. CBG, a Los Angeles-based commercial real estate company acted as its advisor for the office tower sale.

What Prompted the Sale?

The 50-storey skyscraper that was functioning as BNY Mellon's headquarters since 1998 was not cost effective and hence, it failed to serve as an efficient work place for the workers. Therefore, the company's latest decision to shift to a relatively consolidated office space seems justified.

Moreover, the office tower based in lower Manhattan was acquired by BNY Mellon back in 1989. Though the exact price of the property at the time of acquisition is not known, the current valuation of $530 per square foot would likely be well ahead of it. Moreover, the company's chairman and chief executive officer Gerald L. Hassell, believes that the deal will result in solid financial gain for BNY Mellon.

In the present economic scenario with limited opportunities to enhance the top line, financial organizations are resorting to aggressive cost cutting measures to aid profitability. Since 2011, BNY Mellon has an expense-saving program in place which includes shedding expensive real estate properties. Notably, the company outpaced the targeted level of $650–$700 million cost saving set for 2014, in 2013 itself.

BNY Mellon currently carries a Zacks Rank #3 (Hold).