Posted by on December 20, 2016 4:56 pm
Tags: , , , , , , , , , , , , , , , , , ,
Categories: Banking Bond Business Economy Finance Financial crisis of 2007–2008 Great Depression Investment banks money Mortgage loan RBS Renaissance Royal Bank of Scotland Stamford, Connecticut Swiss Bank Corporation Tax evasion TREPP Trump Administration UBS

Back in September, before the much hoped for Trump “renaissance” of Wall Street, we presented two pictures that summarized the recent transformation of the US financial sector from a trader- to an algo-centric one.

We showed the trading floor in UBS’ Stamford office, once the largest in the world and big enough to hold 23 basketball courts, and which was a symbol of everything that went right on Wall Street. Packed with traders, it was a non-stop cacophony of screaming, constant motion and furious energy – to an outsider sheer chaos, which somehow ended up generating millions in profits for the bank every day. Some time around 2008, just before the financial crisis hit, it looked like this.

Fast forward 8 years later, when all that’s left of the UBS trading floor, and the legacy of that version of Wall Street, is this:

Some history: the property was part of a lavish development in Stamford, Conn., in the 1990s designed to lure what was then Swiss Bank Corp. and thousands of workers away from New York. Soaring 40 feet high, the trading floor was bigger than a football field, unimpeded by columns and soon filled with hundreds of stock, bond and currency traders. UBS acquired Swiss Bank in the late 1990s but has shrunk its Stamford operations in recent years.

And now, as the WSJ reports, the world’s largest trading floor is for sale. The details:

The office complex and its once-iconic trading floor are both mostly empty and up for grabs. CW Capital Asset Management, the servicer that controls the $149.4 million mortgage on the 712,000-square-foot complex near the Stamford train station, has hired Mission Capital Advisors to put the debt on the block, according to people familiar with the matter.

The mortgage is widely expected to sell for well under that amount, given that the property has been vacated by its tenant, UBS Group AG.

Adding insult to injury, the mortgage backing the property was recently defaulted on.

Real-estate industry executives predict that whoever buys the mortgage will soon become owner of the complex at 677 Washington Boulevard. The complex currently is controlled by AVG Partners, a Beverly Hills, Calif., investment firm. The WSJ notes that “the property’s owner defaulted on the mortgage in October when it was due to be repaid, according to Trepp LLC, a data firm that tracks the commercial real-estate debt market.

The mortgage on 677 Washington was made in 2004 and converted into commercial mortgage-backed securities. Its sale will likely mean big losses for some of the bondholders because of the low value of the property. Last year, the vacant former Pitney Bowes headquarters in Stamford sold for close to $40 million, or roughly $90 a square foot. At that rate, 677 Washington would be worth about $65 million.

It’s not just the landmark UBS trading floor: the entire Stamford office market is suffering one of the highest vacancy rates in the U.S., at more than 30%, as banks and hedge funds have been forced to downsize and cut costs aggressively at a time of encroaching “passive investing” replacements.

“If you look at the amount of tenants coming into this market versus the overhang of space, you would see it’s going to take many, many years to lease all the large blocks up,” said David Block, a senior vice president in the Stamford office of real-estate services giant CBRE Group Inc.

Stamford has been struggling ever since the 2008 financial crash, even as New York has rebounded. In 2011, when UBS was eyeing a move back into Manhattan, Connecticut gave the firm a $20 million incentive package to stay. Meanwhile, state officials and landlords are hopeful the incoming Trump administration will stoke expansion in financial services. They also pointed out that smaller financial-services companies continue to thrive in the area.

“Having your back office in Connecticut isn’t as important a move as it used to be,” said Catherine Smith quoted by the WSJ, who heads the state’s Department of Economic and Community Development. “But we’re still seeing quite a bit of demand from hedge funds, private-equity firms and the insurance industry.”

Some more nostaglic observations:

The empty trading floor has become a symbol of the end of a freewheeling era on Wall Street in which banks and hedge funds made vast sums buying and selling securities. The financial crisis prompted a wave of regulation making it more difficult for banks to trade their own capital. Hedge funds, meanwhile, retrenched.

The saga also spotlights the double-whammy that has hit the Stamford office market in recent years. First, urban downtowns like New York, with their young and creative workforces, have become more attractive to employers than suburbs and satellite cities like Stamford.

At the same time, the contraction of the financial-services industry has hit two of Stamford’s biggest employers: UBS and Royal Bank of Scotland Group PLC.

UBS moved its Stamford operations out of 677 Washington mostly to space nearby that had formerly housed RBS, which also has shrunk its presence in the area. UBS reported last year that its Connecticut staff had dropped by 500 to roughly 2,000 employees, compared with 5,000 five years ago.

So what can a potential buyer do with the massive trading floor that has expanded over the years to about 100,000 square feet? Suggestions have ranged from the whimsical, like a roller derby rink, to the more prosaic, like call centers. Cahternie Smith suggested the floor could be converted into a film or television studio. “A lot of television has come out of New York into Stamford,” she said.

Leave a Reply

Your email address will not be published. Required fields are marked *