Brookfield Office Properties Inc., lower Manhattan’s largest office landlord, bought the New York Mercantile Exchange’s headquarters building from CME Group Inc. for $200 million.
CME’s Nymex is leasing about 449,000 square feet (41,700 square meters) of offices at 1 North End Ave. for the next two years, Brookfield said today in a statement. After that, the exchange plans to consolidate into 220,000 square feet for a subsequent 13 years. The 15-story building, adjacent to downtown Manhattan’s Brookfield Place, is 508,000 square feet.
CME, the world’s largest futures exchange, is selling real estate as it balances its tradition of open-outcry floor trading with the growth of electronic transactions. New York-based Brookfield plans to integrate 1 North End Ave. into its namesake office complex, formerly known as the World Financial Center, which is partly vacant and undergoing renovations.
“One North End Avenue has always unofficially been a part of Brookfield Place, and the opportunity to acquire and integrate the property was compelling for us as we continue our $250 million repositioning program,” Dennis Friedrich, chief executive officer of Brookfield Office, said in the statement.
The leaseback deal includes the Nymex trading floor, Chicago-based CME said. Last year, CME sold two of the three buildings that comprise the Chicago Board of Trade for $151.5 million and agreed to rent the space it occupies.
Brookfield plans to add a story to the North End Avenue building by reducing the height of one of its two 37-foot trading areas, and a gallery will be added overlooking the other trading floor, Melissa Coley, a company spokeswoman, said in an e-mail. The work will be completed by mid-2015 and will increase space in the property to 568,000 square feet, she said.
Nymex built the tower, which overlooks a yacht basin and ferry terminal on the Hudson River, in 1997. It previously rented space in the nearby World Trade Center, which was destroyed in the Sept. 11, 2001, terrorist attacks. CME acquired the building in 2008, when it bought the exchange. The building is subject to a ground lease from New York’s Battery Park City Authority that expires in 2069.
Floor trading, where buyers shout orders at one another, was surpassed by computerized transactions at Nymex in 2006. That year, Nymex listed its contracts on the CME Globex electronic-trading system.
“CME Group remains committed to our floor-based membership and open-outcry trading services in New York, which continue to serve our customers well,” Kevin Lennon, CME’s managing director of real estate, said in a separate statement.
For Brookfield, the deal delays for two years the need to find new tenants for the real estate Nymex plans to give up. Leases expired last month on former Merrill Lynch & Co. offices at the 8 million-square-foot Brookfield Place. The complex now has about 2.2 million square feet available after the law firm Jones Day signed a 20-year lease this month for 330,000 square feet, Coley said.
Brookfield is competing for tenants with the neighboring 4 World Trade Center, which opened Nov. 13 with about 1 million square feet unrented. About 1.4 million square feet are still to be leased at 1 World Trade Center, the Western Hemisphere’s tallest building, which is scheduled to open in January.
The pending vacancy at the Nymex tower is “prime office space” at the top of the building, with a rooftop terrace and views of the Statue of Liberty and yacht basin, Brookfield said in its statement.
James Kuhn, president of real estate brokerage Newmark Grubb Knight Frank, and Holly Duran and Jeff Mulder of Holly Duran Real Estate Partners LLC represented CME Group in the marketing of the property.
“It was very important to Nymex that they had an institutional-quality landlord,” Kuhn said in a telephone interview. “It also added some benefit that Brookfield has expertise working with the Battery Park authority and is diligent about securities issues and other operating issues associated with the World Financial Center.”