Lehman Acquires Midtown Tower

Lehman Bros. Holdings Inc., displaced from its headquarters near the World Trade Center, said Monday it agreed to buy a 32-story building under construction in midtown Manhattan from Morgan Stanley Dean Witter & Co.

Lehman will pay about $650 million for the 1-million-square-foot tower, which will be ready for occupancy later this year, said people familiar with the matter. The rate of $650 per square foot was the highest paid for a Manhattan office building and about 25% above the market price.

The transaction paved the way for Morgan Stanley to shrink its staff in New York City, while enabling Lehman to keep more than 6,000 jobs in the city.

Morgan Stanley, whose headquarters is two blocks away from the new building and was the biggest tenant in the World Trade Center, is retreating from a plan to concentrate its operations in one area in the wake of the attacks.

“Morgan Stanley will continue to have a major presence in New York City and will be better positioned from a business continuity standpoint,” said Chairman and Chief Executive Philip Purcell.

The company plans to move some of its employees into space it leased on 3rd Avenue in Manhattan. The space can house about 20%, or about 740 of the 3,700 employees, who had worked at the World Trade Center. The firm lost six people among its 3,700 in 2 World Trade Center.

Lehman considered New Jersey properties before agreeing to buy the building from Morgan Stanley.

Lehman’s shares slid $1.36 to $56.38 on the New York Stock Exchange. Morgan Stanley fell 61 cents to $47.76, also on the NYSE.