http://www.rew-online.com/news/story.aspx?id=514
Morgan Stanley troubles shed light on delayed Proskauer deal
Financial firm likely can no longer shell out financial incentives to make 250 West 55th Street deal happen
Daniel Geiger
11/25/2008
For months, talks have dragged on for a roughly 500,000 square feet deal that the law firm Proskauer Rose was said to be in negotiations to take at 250 West 55th Street, a new office tower on Eighth Avenue that is being developed by Boston Properties.
There has been speculation that the deal will crumble amid the sagging economy or that Proskauer has leveraged the uncertainties in the office market to improve the economics of its deal. Other brokers say that it is going along smoothly and that large deals simply require months of negotiations to hammer out.
Astory yesterday in The Wall Street Journal sheds light on what could be one major complicating factor.
The Journal wrote about the panic that engulfed Morgan Stanley in September, just after Lehman Brothers collapsed and how rival firms may have spread false rumors that the investment firm would also fall in order to profit on short positions and other complex investments they had betting against the firm.
Morgan Stanley’s shares plummeted and even though the firm reorganized within a more stable structure, a bank holding company, its stock price still hasn’t recovered.
Morgan Stanley was said to have played a role in Proskauer’s deal at 250 West 55th Street when it was first being negotiated late last year. Both firms have space in 1585 Broadway and Morgan Stanley was said to be offering Proskauer financial incentives to vacate the building so that the investment firm could have the building’s 1.3 million square feet of space all to itself. It’s easy to see, given the magnitude of Morgan Stanley’s troubles described in the article, how sweetening such a real estate deal would have become impossible for the embattled firm.
And
given the slowdown in the office market, it’s also clear that Proskauer would be more sensitive to having to pick up the premium rents that Boston Properties is seeking for the space without any contribution from Morgan Stanley.
Hence the talks that appeared to go on and on.