Fidelity Investments wants to occupy the vacant American Express building just south of the State House. Temporarily.
The Rhode Island State Investment Commission authorized state General Treasurer Paul J. Tavares on Wednesday to enter negotiations with Fidelity, which wants to lease the space until it completes construction on a third building at its Smithfield campus some time in 2008.
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The state pension fund took ownership of the 113,000-square-foot American Express building and its 150-space parking garage for $17.9 million at a Sept. 27 auction in a Boston U.S. Bankruptcy Court.
The pension fund had lent $25 million to the building’s developer and owner Gateway Eight LP, and took over the mortgage on the building after Gateway declared bankruptcy late last year.
Tavares said the pension fund has a $20.9-million liability from the original loan on the American Express building, also referred to as the Gateway Center.
Fidelity’s lease offer means the state pension fund could start generating income from the building, which has been empty since Boston Financial Data Services vacated it early this year.
Both Tavares and a Fidelity spokesman declined to discuss details of the lease offer.
Tavares, however, said the details of the lease, such as its term and rates, are under negotiation. Also, they must agree which party will pay the property taxes, utility bills and lease payments to Capital Properties Inc., which owns the building site.
In August, Fidelity announced plans to construct of $65-million building in Smithfield to house at least 1,000 employees. The 275,000-square-foot structure is planned for completion sometime in 2008.
Yet the Boston-based mutual fund giant apparently needs office space now.
“Due to our short-term space needs … we are seeking this space as a bridge until our new building comes on line,” said John C. Brockelman, a spokesman for Fidelity.
“We expect that most of the employees at the leased space will ultimately transfer to our Smithfield campus,” he added.
Asked about the number and types of employees that would work in the American Express building, Brockelman said: “We haven’t even done our due diligence or signed a lease, so it would be premature to discuss the details of what we would do with the building.”
Brockelman declined to discuss whether the availability of space in the American Express building will prompt Fidelity to add to its current 1,600-person work force in the state. He said, however, that “we expect the majority of the employees that will be located there will be relocations from other sites.”
Despite plans to lease the American Express building to Fidelity, the state pension fund is actively seeking buyers for the property.
Tavares said that obtaining a tenant for the building will only increase its allure to potential buyers, who are more likely to invest in an occupied rather than vacant building.
The pension fund needs at least $17.9 million from a buyer to break even on its investment in the building, the general treasurer said. It would then seek the balance of the $20.9-million debt from the R.I. Economic Development Corporation, which guaranteed up to $3 million of the loan to the pension fund. The EDC guarantee, however, would have to come from an appropriation in the state budget, Tavares acknowledged.
The General Assembly’s Joint Committee on Legislative Services submitted a $20.9-million bid for the property, wanting the building for part-time legislators and state departments currently leasing. But the bid was disqualified because the expenditure would be subject to approval by the rest of the Legislature and the governor.
