JPMorgan Chase Seeks Incentives to Build 6.5 Billion Dollar New Headquarters in Manhattan

JPMorgan Chase hopes to build a campus at Hudson Yards for 16,000 workers. Credit Kirsten Luce for The New York Times

City and state officials are negotiating with JPMorgan Chase over a potential deal in which the nation’s largest bank would build a vast $6.5 billion corporate campus with two high-rise towers in the new commercial district on the Far West Side of Manhattan.

The talks, which involve one of the largest real estate complexes for a single company in New York City history and a large package of incentives for Chase, have reached a feverish state after nearly falling apart this week.

The negotiations are so delicate that few people are willing to discuss them publicly for fear of alienating one side or another.

But a deal with the bank poses political risks for both the state and the city. Chase had initially sought, by one account, more than $1 billion in concessions from the city and the state while it continues to pare its payroll in the city. According to executives and officials, Chase wants to build the two towers — whose total space would be the equivalent of about two Empire State Buildings — at Hudson Yards on the north side of 33rd Street, between 10th and 11th Avenues. They would become home to 16,000 employees.

The bank’s move to the West Side would accelerate the transformation of a neighborhood once dominated by warehouses, factories and tenements into a gleaming forest of glass towers.

For Gov. Andrew M. Cuomo, offering generous subsidies and special incentives would provide more fodder to critics who say he has been too eager to please corporate and real estate interests that represent important sources of financial support for his re-election campaign.

And for Mayor Bill de Blasio, a fellow Democrat, who has railed against corporate subsidies, supporting the project would represent a significant departure that could be difficult to justify to his supporters on the left. At the same time, if the mayor opposes the project, it could leave him open to criticism that he is indifferent to the needs of the city’s largest employers.

The bank, however, has insisted that the benefits from the proposed deal would outweigh the value of any concessions or subsidies, especially since Chase would have to buy development rights from the city and make certain annual payments in order to erect the towers.

The bank’s “wish list” of concessions, however, has shrunk significantly in recent days. And the talks have picked up momentum, although a deal is far from assured. State officials are creating a counteroffer.

“There’s no way that the city would entertain a demand for a billion dollars in additional incentives at Hudson Yards,” said Alicia Glen, the deputy mayor for economic development. “We have always been willing to engage with them in a dialogue about how we could be helpful in making a move more feasible.”

Related Companies, one of the city’s most prolific developers, is building two office towers on the adjoining railyards that will be home to Time Warner and Coach, as well as several residential towers. The buildings are part of Related’s $15 billion development at the yards, which has picked up steam in the last two years.

But Chase must also come to terms with Related, which owns the two sites where the bank hopes to build. The bank wants to buy the property but it does not necessarily want Related to build its new headquarters. Related recently suggested that Chase build one of the towers and occupy half of the Time Warner building, a plan that the bank is likely to reject.

Chase first approached city and state officials in June with the idea of building on the West Side property. Under the proposal, Chase would build a 62-story tower and a 40-story tower, for a total of nearly four million square feet.

 “We don’t have a deal yet,” Related’s chairman, Stephen M. Ross, said on Thursday. “I don’t know if we can make one. A lot depends upon the city and the state.”

As is often the case in these kinds of deals, the bank drew up a lengthy list of possible concessions. Chase wanted to cut the mortgage recording tax, the transfer tax and sales taxes on construction materials. It also sought job-training grants, low-cost power from the state, an underground passageway between the two buildings that would require alterations to the newly built No. 7 subway station and financial help with reinforcing the foundation.

The neighborhood, formerly part of Hell’s Kitchen, was rezoned eight years ago for high-rise development by then-Mayor Michael R. Bloomberg. The rezoning included tax breaks and other incentives intended to encourage new construction.

City officials, who estimated that there are already $600 million in tax breaks and other incentives associated with the two sites, have been reluctant to sweeten the deal for Chase.

The Bloomberg administration issued $3 billion in bonds to pay for parks, a new tree-lined boulevard and an extension of the No. 7 subway line from Times Square to the spot where Chase wants to build the new towers.

Officials at the time had assured skeptics that development fees and payments in lieu of taxes from new towers would cover the debt payments. But development has been slower than anticipated, prompting the city to take more than $130 million from the city budget to make the annual debt payments.

Proponents of the Chase deal have argued that the city would no longer have to make those debt payments if the bank were allowed to build.

But there are many new residential towers in the neighborhoods, and Related has lured companies to the new commercial district. City and state officials also understand that Chase’s payroll is unlikely to grow as it relocates lower-level employees to other states.

Chase’s current corporate home is spread primarily over two buildings, at 270 Park Avenue and 383 Madison Avenue, which the bank could sell for a premium in the current real estate market. The bank has about 20,000 corporate employees in the city, not including executives and clerks at its 758 branch offices. Another 10,000 employees work upstate in cities like Buffalo and Syracuse.

A year ago, Chase sold Chase Manhattan Plaza, a 60-story building, for $725 million. The tower had been built in the early 1960s by David Rockefeller, then the bank’s chairman, as an expression of its commitment to the financial district.

Chase has been eager to reduce its costs in New York and move technical and operational employees to lower-cost locations in Delaware, New Jersey and elsewhere. In May, the bank announced plans to expand its technology and operations hub in Jersey City by 1,000 jobs after the bank was granted significant tax breaks by New Jersey, which has offered subsidies to companies willing to relocate from New York.

“For high-end jobs, New York City is the place to be,” said Kathryn S. Wylde, president of the Partnership for New York City, a business group. “But the midlevel jobs are at risk.”

Source: The New York Times