15:18 07.11.2006 | All news from "Commercial property news and information"
As the NYSE Builds a Fortress, A Neighbor Calls It Bad Business
By Aaron Lucchetti
From
Few businesses have installed as many visible security measures since the 2001 terrorist attacks as the New York Stock Exchange. The Big Board keeps several nearby streets closed to traffic and erected steel pylons around its perimeter. Visitors have to go through a gantlet of security measures to get into the building.
Now, one of its landlords says things have gotten out of hand.
NYSE Group Inc., the exchange's parent company, said in a regulatory filing this week that the landlord for one of its buildings is arguing the NYSE is in default of certain lease covenants because of its massive security effort. The security has made it difficult for tenants ofVornado Realty Trust, the landlord, and visitors to get into the building, according to people familiar with the matter. This could drive down the value of office space in the building, hurting Vornado.New York-based Vornado, which leases the land under the building from an NYSE unit, is demanding the Big Board fix the situation by Dec. 15. NYSE said in the filing that it believes the claims are without merit. Vornado wouldn't comment on the terms of the lease.
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The dispute illustrates the balancing act that firms face when juggling commerce with protecting employees. The NYSE, as one of the most well-known symbols of capitalism, has good reasons to be vigilant. The World Trade Center site is just blocks from its headquarters and after a terror scare in 2004, the Department of Homeland Security raised the terror-threat level for the New York financial sector, citing NYSE as one of a handful of possible terror targets. The exchange was also forced to close its popular visitors' gallery.
The NYSE beefed up security in 1993 when terrorists detonated a bomb in the World Trade Center, killing six and injuring more than 1,000. These days getting inside the NYSE makes airline security look downright easy.
The streets closest to the NYSE are closed to traffic, and steel blocks have been erected around its perimeter. The building is patrolled by gun-toting guards. NYSE guests have to wait outside until an escort from the building brings them in. Visitors are photographed, their bags searched and many guests are required to give personal information including Social Security numbers. Then, visitors are forced to walk through metal detectors. On rainy days, guests at the exchange's south entrance have been encouraged to stay dry in a local bank branch while waiting to get inside. One big issue for Vornado, according to a person familiar with the matter, is that guests are forced to wait outside, often for some time, something that is unusual at other buildings.
The added security has kept the exchange safe. At the same time, the bigger security footprint has caused some local businesses to suffer. In 2004, Wall Street Garage Parking Corp. sued the exchange over its decision with the city to block traffic near the exchange, scaring potential customers away from his operation. The NYSE prevailed in court, and the streets remain blocked.
Other local businesses have felt the hit. At Champs Gourmet Deli near the exchange, revenues are down 40% since 2001, according to Greg Signorile, who founded the place with his father and two brothers 17 years ago. He says the NYSE's security policies are "strict, but I don't blame them." The deli used to deliver Italian heroes and roast-beef sandwiches by the dozen to a holding room in the exchange, but that ended in 2001. Now traders come to him.
The issue at dispute with Vornado concerns 20 Broad Street, one of the four major buildings that the NYSE occupies in Lower Manhattan. The white-brick tower is next to the famous landmark building that the exchange moved into in 1903. It contains an annex to the Big Board's original trading floor and has office space above that primarily houses NYSE officials and private financial firms, many of whom rent from Vornado and do business at the NYSE. It is unknown if any firms have left because of the security issue.
It's not the first time that the intense security has caused issues for the NYSE. In 2003, several NYSE employees were fired for previous crimes when a new terror-inspired fingerprinting policy uncovered previously undisclosed crimes.
In April, the well-known Stock Exchange Luncheon Club, located above the trading floor shut down, in part because stepped-up security discouraged patrons.
And on a competitive note, the Big Board's electronic rivals often point to the security issue, saying it is just another reason why their system is better. In fact, the NYSE said this week it is planning to close 20% of its trading space by 2008, though it isn't in the Vornado building.
As for the NYSE, it still considers the floor an asset because its traders are often able to step into trading in dicey situations and bring order to the market.