Not Your Father's Financial District
The canyons of Wall Street are lined with condos. Dog walkers on strolls outnumber hung-over assistants on cigarette breaks. Gilded-Age moneymaking monoliths now house spas, sushi joints and luxury retailers. What happened? Coming to terms with Lower Manhattan's makeover.
by Jeff Heilman
From the thirty-eighth-floor window of his 30 Broad Street office, Legend Merchant Group's Sean Gambino looks out at the epicenter of New York's storied Financial District and shakes his head. A 16-year veteran of the securities industry, Gambino, whose firm specializes in SPAC deals, has a profound appreciation for the history down here, and for the way things used to be.
"Every day I watch the floor traders parked outside the Exchange, furiously working their BlackBerrys," Gambino, 37, says. "There's not as much face-to-face interaction."
The essence and culture of the area is changing, he explains. Take the Hermès store at 15 Broad, for example. "Not long ago, there was a Bugatti Veyron parked outside the store," Gambino recalls. "It was decked out in Hermès leather and filled with all this custom leather luggage. Not what I'm used to seeing on Wall Street."
Not only is Manhattan's Financial District -- call it everything south of Chambers Street -- welcoming new luxury retailers, but the fabric of the entire area is being radically transformed. What was once a cavernous citadel of men, concrete and their moneymaking schemes has, thanks to a real-estate boom, tantalizing post-9/11 tax abatements and Liberty Bonds, emerged in the past few years as a high-end developer's dream.
While a range of potential setbacks lies ahead -- looming recession, the bursting of the real-estate bubble, uncertainty surrounding the future of the lifeblood NYSE -- a host of other forces suggests that the makeover of the Financial District has only begun. And, furthermore, that there is no turning back. Hybrid trading may spell the end of the NYSE, but insofar as FiDi is concerned, the term is emblematic, as commercial melds with residential, historic allure with modern amenities. Fittingly, it is money and crowds (rich people, many of them foreigners) driving the transformation.
"It's more than the arrival of a Thomas Pink store changing the landscape; there's a change in attitude as people think of FiDi as a place to live," explains Scott Placona, a 25-year-old investment-banking associate at Joseph Gunnar & Co. "It's not so much about the disappearance of tradition, but a fresh appreciation for what Lower Manhattan means to the city -- and the world."
"If J.P. Morgan were around today to see BMW open a showroom on his block, I think he'd be stunned," says David Miranda, a former NYSE specialist who grew up on Sullivan Street just north of the neighborhood. "This is a major metamorphosis."
Starting at the intersection of Wall and Broad and radiating outward, river to river, the forging of an upbeat, upscale destination is a working order with no resistance. Receding are the days when interloping armies simply worked in the Financial District and bolted as fast as they could finagle use of the company car service. "Even a few years ago, it was so empty down here after the closing bell you could lie down in the street," says Vincent Alessi, a managing partner at Bobby Van's Steakhouse, which arrived on Broad Street in 2005. "Now we're packed almost every night with a regular Wall Street crowd."
In 1990, just 14,000 residents lived south of Chambers. Today, that number has grown to more than 50,000 -- and Elizabeth Berger, president of the Alliance for Downtown New York, projects it will reach 60,000 by year's end. Since 2005, more than 13 million square feet of former office space have been converted into some 11,000 new apartments. "Our mission is to animate Lower Manhattan," Berger declares. "This neighborhood is not 'on the verge' of anything -- it's here."
Everywhere in FiDi one finds startling evidence of this transformation: the luxury-brand retailers (Tiffany's, Hermès, Thomas Pink) that have set up shop within spitting distance of the Big Board; the condos that have engulfed 25 Broad, once the storied Broad Exchange and the former home of PaineWebber, not to mention a historic hub for legions of curbside traders; the $27,800-per-year prep school, Claremont Prep, that resides in what was once the Bank of America International building. The former JPMorgan Chase building at 75 Wall has a beach planned for its forty-second-floor deck. Pram-pushing parents populate the circa-1903 Cocoa Exchange building on Wall Street Court. Artful lodger André Balazs -- who anointed FiDi the new Soho last year -- is diving in with his 47-story William Beaver House across from Delmonico's. Epic megaliths steeped in history, such as the former Chase Manhattan digs at 20 Pine, have been converted to luxury residences replete with yoga studios, swimming pools and rooftop gardens.
But what does this all mean for the money monoculture that has dominated the labyrinths of Lower Manhattan for almost four centuries? Will it be cast aside by a master plan unseen in New York since the days of Robert Moses, or might it be the pivot of the most dynamic turn yet of FiDi's evolutionary wheel?
That, indeed, is the big-money question -- $20 billion rebuilds the World Trade Center site alone -- but in this New York financial story, the bulls are already edging the bears.
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Our fathers might not recognize the new FiDi, but then neither would our forefathers. The southern tip of Manhattan was once rife with mosquitoes, wolves, marshes and rocks. Still, the area captivated explorer Henry Hudson, whose report of his 1609 visit to the site sent fur trading flying. His Dutch employers built Fort Amsterdam as a trading post in 1625; a year later, Peter Minuit famously secured the island from the locals. Thus was born on the bottom of the island a place called New Amsterdam; Pearl and Greenwich Streets were its original shorelines.
A muddy outdoor market of small huts quickly evolved around the main trading post, not unlike the specialist booths of today's Big Board. Dutch auctioneers and dealers transacted loans along a six-foot wooden-plank wall erected in 1653 to protect them from Indians -- not to mention the British and French invaders to the north. That wall fell into disrepair and was ultimately scrapped in 1699, but a street that ran alongside it remained. Come the end of the Revolutionary War, the crude outdoor bourse had moved inside coffeehouses and taverns. Tontine's was a favorite haunt of speculators like William Duer, whose duplicitous bank-stock trading precipitated the Street's first crash in 1792. The fallout inspired two dozen merchants to formalize stock exchanging under a buttonwood tree at what is today 68 Wall Street.
Trading went formal, and inside. Hedge-fund managers of the present are often aggregated as a dubious if not sinister lot. But relative to some of their predatory nineteenth-century descendants, today's traders are downright eleemosynary. Not until 1932's trust-busting regulations did things really turn "legit" -- though by then a grinding bear market held the Street in a near–death grip. Then came the Eisenhower bull market, and a slew of other hallmark stock-market surges to follow: the rise of the Nifty 50 in the late '60s, the mid-'80s Reagan rally, the '90s dot-com craze.
Through it all, a sense of community held firm in the Financial District. Explains NYSE floor legend Art Cashin: "That spirit of the Buttonwood 24 brotherhood, that bond between men, has always been the Street's lifeblood. If I lament any change, it's the passing of the old way of doing business."
"There will always be a special magic in the canyons of Wall Street," adds Dayton Carr, who runs a private-equity fund. Shortly after founding one of the country's first venture-capital funds in 1968, Carr moved his Financial District office to Midtown, and has not worked downtown since. Still, the man considered the father of the secondary market for private equity has not lost an ounce of his appreciation for the Lower Manhattan he once called home.
"Back in my hectic, hurly-burly days as a Smith Barney trainee," says Carr, now 66 and the president and managing director of VCFA Group, a leading purchaser of secondary interests in venture capital, "I would find a lunchtime oasis in places like Trinity Church or the waterfront."
The allure remains undiminished. When friends visit from out of town, Carr takes them on walking or driving tours of his haunts from yesteryear, including his personal favorite, Fraunces Tavern.
Power haunts like Harry's and Delmonico's, meanwhile, may have been the center of the universe for the masters of the universe, but in the greed-is-good '80s the American psychos ran wild in the Seaport. Bras hung from the rafters at Jeremy's; "snowstorms" swirled in the restrooms of Bridgewater's, Flutie's and Sweets. It was an era of excesses, a time of naked motorcycle rides through Brooklyn and the occasional clandestine sneaking of strippers onto the floor of the NYSE.
"We used to hit Pipeline and Moran's over in the World Financial Center," says Gambino, recalling freer days in the '90s. "A hamburger and Coke would turn into a three-martini lunch, and then nobody made it back to their desks."
The center of levity soon shifted toward the Hudson River. There, it was lusty lunches at Saint Charlie's on Albany Street, cocktail blowouts at Pipeline and Moran's, and orgiastic dinners at Morton's before everybody zoomed up to Tribeca and other trendier zones farther uptown. And when the Towers fell, there were those who believed downtown was finished as a major financial center.
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To many on the Street, the ultimate margin call is in on the raw, physical, human way of doing business. Just last year the pits were eliminated at the New York Board of Trade, which had been subletting from the New York Mercantile Exchange since the NYBOT's former home at 7 WTC was destroyed on 9/11. Electronic, automated processes continue to drain the life from the NYSE, poised to consolidate with the AMEX. The latter's prestigious 86 Trinity Place digs might as well have a bull's-eye across its Art Deco façade.
There is, indeed, no ignoring the depressing pall of what could become of the area if the NYSE turns into a museum. Even many of the traders and brokers who have survived two years of cutbacks admit that they mostly trade electronically and that it's more or less useless for them to be standing around down there, save for providing a backdrop for CNBC. Still, putting the issue of the NYSE's future aside (hey, John Thain did), and even taking into account the generally downward economic trend, bear-market fears and real-estate devaluation worries, FiDi seems surprisingly vibrant. The idea of the area as a neighborhood in which people choose to hang their hat appears to be taking hold.
Already, the Crest, at 63 Wall Street (formerly the home of Brown Brothers Harriman), is at 100 percent occupancy; 10 Hanover Square (formerly the Goldman Sachs headquarters) is at 99 percent. Young professionals (or their parents) are buying in FiDi; some 26 percent of the households in Lower Manhattan are singles with no children. Foreigners are snapping up the ultra-luxury residences in U.S. dollars; a wealthy Scandinavian financier recently paid $5 million for a William Beaver penthouse. And bemoan the trend if you must, but part-time tenants with extraordinary means and funny accents are better than none at all. Whether they will create demand for still more services, goods and entertainment remains to be seen.
The Alliance for Downtown New York's June 2007 residential survey reveals, in fact, that two-thirds of all employed residents of Lower Manhattan now work elsewhere in Manhattan -- with only one in four Lower Manhattanites working in financial services. "Too many f------ dog walkers," barks a smock-clad broker exiting the NYSE when asked how he's adapting to his changing environs.
All of which begets the fear that Wall Street may ultimately end up mothballed, exiled from its eponymous environs. But an emerging, more hopeful bet goes something like this: Far from being extinct, Wall Street, the Financial District and the dealmaking community are merely in a state of suspension inside a chrysalis shell, preparing to reemerge in Lower Manhattan with a new identity, a new state of mind and a new center of gravity. Goldman Sachs's new $2.3 billion headquarters -- thought to be among the most expensive office buildings ever constructed -- is soaring skyward on West Street. When completed in 2009, the 2.1 million–square-foot high-tech tower will house Goldman's investment-banking and management operations, six mammoth trading floors and some 13,000 employees. Merrill Lynch appears set to extend its World Financial Center lease until 2018. And while Deutsche Bank's eyesore on Liberty Street is coming down, JPMorgan Chase is committed to building on the site.
And then there is the World Trade Center site, its rebuilding in disarray for six years -- in disarray, that is, until now. With 7 WTC completed and mostly leased, the rest of the WTC -- with the trading community very much part of the architectural plans -- is finally on the way up (see "The Rising").
Says WTC developer Larry Silverstein: "What's going on downtown is more than a market cycle. It's a total, permanent transformation in all sectors -- commercial, residential, retail and tourism. The breadth and diversity of the new downtown economy makes it more durable, more dynamic and more lasting than at any point in its history."
The Alliance reports that some 193 companies have relocated to Lower Manhattan since 2005, leasing 4.4 million square feet at below-Midtown prices. As of the end of December, Lower Manhattan's commercial real-estate availability rate dipped to 7.2 percent, marking the first time since September 2001 that Lower Manhattan's availability has fallen below Midtown's rate (which is 7.7 percent). A growing number of non-financial entities, such as law and advertising firms, are coming in, as well as more retail.
"Retail confidence in the Financial District is high," notes Joseph Isa, a broker for Winick Realty Group, which controls around 75 percent of the available retail leasing.
Michael Shvo, who is marketing the 58-story W New York–Downtown Hotel and Residences being built just south of Ground Zero, calls FiDi "a micro-market with a life all its own." To wit: Despite prices starting at $2,000 per square foot, 72 of the W's 223 units sold on the first day.
"It's not enough to build great buildings," adds Silverstein, who will also construct an 80-story residential skyscraper one block north of Ground Zero -- a dazzling Four Seasons Hotel included. "If you want to keep the financial community while attracting other businesses, a first-class, 24/7 residential neighborhood is essential."
Missteps, mismanagement and politics -- and self-serving developers -- notwithstanding, the FiDi of tomorrow stands to be many things: a place of historical significance and immutable character; a testament to resiliency; a dazzling island neighborhood; a world-class tourist destination anchored by the WTC memorial.
After work, Sean Gambino is known to repair to Harry's for drinks with friends. It's a place that reminds him of the old days. "There's almost more sushi than steak on Wall Street," he says with a laugh, "which would have been blasphemy in the past." Digesting the transformation of FiDi, he notes, is not the easiest thing to do, but he's not pessimistic about it: "I think Morgan and Rockefeller would be proud to see that the neighborhood they single-handedly helped sculpt is now among the top spots to live, work and play."