Most stiff-collared financial industry executives would probably be put off by Times Square’s garish billboards and unwieldy crowds. But when Frank Zarb, chairman of the National Association of Securities Dealers, went shopping for a new home for his expanding empire of stock markets, he became enamored with the neighborhood’s bright lights and newfound energy.
It’s easy to understand why. Mr. Zarb’s association, which already owns the Nasdaq, the nation’s second-largest stock market, would like nothing better than to outshine the New York Stock Exchange. It recently acquired the American Stock Exchange and is negotiating to purchase the Philadelphia Stock Exchange. What better way for Mr. Zarb to make a big-league splash than by building a glamorous new headquarters on Times Square beside the likes of Condé Nast, the Walt Disney Company, and Viacom Inc.?
But Mr. Zarb’s pursuit of Times Square real estate has put him at odds with a number of downtown property owners and business leaders who believe financial markets belong in lower Manhattan. And it has sparked a high-powered, behind-the-scenes debate about whether the Giuliani and Pataki administrations should subsidize the Nasdaq-American Stock Exchange’s grandiose midtown ambitions, or instead use their tax incentives to encourage Mr. Zarb to build his new headquarters in the financial district.
Leading the charge on behalf of the downtown forces are William Rudin, scion of the Rudin real estate family, and Carl Weisbrod, president of the Alliance for Downtown New York, a business improvement district whose board includes many important land barons and corporate heads. Together with John Zuccotti, chairman of World Financial Properties Inc., they have been quietly making the case that the Nasdaq-American Stock Exchange should build its new headquarters in lower Manhattan.
Neither Mr. Rudin nor Mr. Weisbrod would discuss their efforts. But members of the alliance’s board say that the future of the financial district, which has been sorely wounded by the exodus of major investment banks from the Wall Street area, depends on protecting its concentration of trading centers. The Nasdaq itself is currently based in Washington, but it has an office downtown on Whitehall Street.
A spokesman for the Nasdaq-American Stock Exchange declined to elaborate on the exchanges’ hunt for a new home, except to say exchange officials had yet to make a final decision. However, the Nasdaq-American Stock Exchange already has struck a deal to build a dazzling marketing and public relations center in the base of developer Douglas Durst’s Condé Nast Building on Times Square. And it is widely known that it is negotiating with Mr. Durst to erect a new headquarters on property owned by the developer nearby at 42nd Street and Sixth Avenue.
But Mr. Zarb and his board are also talking to Mr. Zuccotti’s World Financial Properties about building a headquarters downtown in Battery Park City and are considering a site on nearby West Street.
Mr. Zarb’s interest in two downtown sites would seem to create an opportunity for the city to steer the two exchanges in one direction or another. Instead, the city and state have taken an agnostic position, offering Mr. Zarb the same $200 million package of financial incentives if he and his board choose the quiet of Battery Park City or the cacophony of Times Square.
Naturally, the one-size-fits-all subsidy rankles some downtown defenders. Indeed, Robert Douglass, chairman of the Downtown-Lower Manhattan Association Inc., a coalition of the area’s major businesses, made it the centerpiece of a Nov. 5 letter of protest to Deputy Mayor Randy Levine and Charles Gargano, chairman of the Empire State Development Corporation.
Mr. Douglass lavished Mr. Gargano and Mr. Levine with praise for their recent decision to strengthen the financial district by offering a $560 million incentive package to keep the New York Stock Exchange from fleeing the Wall Street area. But he complained that the offer of a so-called “portable subsidy” to the Nasdaq-American Stock Exchange would undercut their efforts.
“I believe public policy warrants a significant differential subsidy between the two areas,” wrote Mr. Douglass, an attorney at Milbank, Tweed, Hadley & McCloy. “The city and state should provide those benefits in a manner consistent with the established policy of strengthening lower Manhattan, and in the process New York, as the Financial Capital of the World. The net effect of the so-called ‘portable’ subsidy is to encourage the relocation from downtown of both Amex and the existing New York operations of Nasdaq.”
Not surprisingly, such criticism doesn’t exactly thrill city officials. They argue that the city could benefit from an infusion of new jobs no matter where Mr. Zarb builds his new headquarters. Therefore, they say, a portable subsidy makes perfect sense.
City officials declined to discuss the matter with The Observer . But a source close to the negotiations dismissed Mr. Rudin, Mr. Weisbrod and their allies as meddlers who were attacking the Nasdaq-American Stock Exchange deal to protect their interests downtown.
“Carl Weisbrod and Billy Rudin and the whole crew over there, John Zuccotti and everybody, they are just posturing,” the source told The Observer . “But we’ve told all of them this is Nasdaq’s decision. This isn’t the New York Stock Exchange, which has been there for hundreds of years, pulling out and creating a hole. That is really up to the company. And if they prefer to go to Times Square, God bless ‘em. We’ll be very supportive of it. And if they don’t and they want to go to Battery Park City, that’s their decision.”
Downtown boosters find this argument a trifle simplistic. For one thing, they say, the American Stock Exchange already is downtown-on Trinity Place. So if it is yanked out of the neighborhood and consolidated with the Nasdaq on Times Square, the financial district stands to lose a devastating number of jobs, including the market’s 600 employees and the 1,500 brokers, specialists and others who prowl its trading floor.
Such an exodus could be extremely painful to lower Manhattan, which is trying to reinvent itself in a manner similar to Times Square. It wasn’t long ago that Times Square was considered one of urban America’s lost causes-a dying theater district overrun by porn businesses and menacing street types. Today, it is a buzzing international crossroads for media and entertainment corporations-not to mention Morgan Stanley Dean Witter & Company, an exile from Wall Street.
Downtown, on the other hand, still bears the scars of the 1987 stock market crash. Longtime stalwarts like Drexel Burnham Lambert and E.F. Hutton simply vanished from the landscape. An estimated 100,000 jobs disappeared. Vacancies in many downtown buildings climbed as high as 25 percent.
Since then, Mr. Rudin, Mr. Weisbrod and others have championed an effort to keep the area’s financial core from further unraveling and to redevelop many of the area’s ghostly older buildings into apartment houses and offices for fledgling high-technology business. For all their successes, however, the recovery remains a work in progress. And a fragile one to boot.
That would explain the fearful cries emanating from downtown now that Mr. Zarb is shopping around Times Square. “I’ve been here from 30 years,” Mr. Douglass said. “I’ve just seen it come and go and almost go in the 1990’s. Any time this happens, I have to get on my horse and go to battle. I’m not sure everybody likes me making these arguments, but I have to do it.”
The source close to the negotiations said, however, that the downtown advocates are missing an important point-Mr. Zarb doesn’t want to be just another part of the Wall Street crowd. “I’ve talked to Frank Zarb a hundred times and Nasdaq’s preference is clearly to go to Times Square,” said the source. “The reason-and it makes sense-is that they feel if they are downtown, they will be perceived as a stepchild to the New York Stock Exchange.”
As long as Mr. Zarb and his board see their salvation in Times Square and all of its high wattage, downtown may be out of luck.