It isn't often that the opening of a foreign bank's US office is treated with a fanfare. But the dedication of the new US headquarters of Austria's Creditanstalt-Bankverein last fall was just such an event. In chic new quarters overlooking Long Island Sound in Greenwich, Connecticut, state governor John Rowland addressed an overflowing crowd of clients, bankers and local TV reporters. "We look at this as a flagship," said Rowland, referring to Creditanstalt's move from New York City to Greenwich, just 45-minutes north by train. The Austrian bank's relocation, he hopes, "will be the first of many other financial institutions".
Creditanstalt, which is destined to become part of Bank Austria, may be the first foreign bank to headquarter itself in Greenwich but at least eight others now based in Manhattan, including banks from Belgium, Germany, Mexico and the Middle East, are quietly scooping out space in what has become one of the area's most overheated commercial real estate markets. With 98% of the prime office space leased, Greenwich rents are now higher than those on Wall Street and almost equal to midtown Manhattan's. Greenwich zoning laws restrict high-rise buildings, so it's unlikely the town will be able to house major US financial institutions, or even the US offices of the largest European banks, such as SBC Warburg. Warburg is building a new office tower just a few miles north of Greenwich in Stamford, another part of the region's new financial corridor.
The Swiss bank's move, announced in 1994, helped break the psychological barrier to leaving Manhattan for many institutions. "There was a myth that you had to be in a certain place to be successful," says Creditanstalt chairman Guido Schmidt-Chiari. When first approached by the New York executives on the idea of moving to Greenwich, Creditanstalt's board balked. "Sitting in Vienna, the idea of moving from New York City to Greenwich seemed exotic."
After obtaining approval from the Federal Reserve Board, Creditanstalt, which has $4 billion in assets, has moved its main branch with a staff of 110. "It's easy for a wholesale bank," says Schmidt-Chiari. "Basically it's just a bunch of telephones and very skilled people. So you can pack up your operations and go." The bank's US treasury operations and corporate finance activities will be housed in Greenwich. About 10 people will remain in New York City, including traders in foreign exchange, money markets and those dealing with Creditanstalt's eastern European business.
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Greenwich has a New England heritage of old money so the leafy suburb of 60,000 has long been one of the wealthiest in the US. It is home to many of Wall Street's top executives, as well as to those in corporate America. But in recent years it has also developed a burgeoning financial community that has attracted younger people and newer money. Fashionable restaurants and shops now fill the downtown streets. Luxury retailer Saks Fifth Avenue has just opened on the site of a former dime store, Woolworth's. Then there is the recent opening of a Hyatt Regency Hotel.
Among the Greenwich newcomers are an estimated 75 hedge funds, almost 200 financial advisers, a smattering of investment banking boutiques and a dozen US commercial banks that have established branches there specializing in private banking. Among the most prominent of the Greenwich hedge funds are Long Term Capital, the fixed-income arbitrage fund set up by legendary Salomon Brothers' trader John Meriwether, and the operation of Paul Tudor Jones, who moved from New York City this year. US banks that have set up branches to cater to Greenwich's wealthy include Chase Manhattan Bank and Fleet Financial, both of which established a toehold by buying local banks.
The largest financial player is Greenwich Capital, the 500-person fixed-income trading operation purchased this year by National Westminster Bank, which has been in the town for 15 years. AIG Trading, the trading subsidiary of the insurance giant which moved to Greenwich three years ago, and Weeden & Co, an institutional brokerage that moved there four years ago, are other sizeable institutions. Although Weeden was lured by tax breaks offered by the state, in the hot market of Greenwich today such incentives are seldom required. Even without any special breaks, taxes were a "significant component" of Creditanstalt's decision to relocate, says Denis O'Dowd, Creditanstalt's North American chief executive. He claims the move will cut the bank's local taxes by 45%.
"A lot of the intellectual capital of New York is moving out of the city and into Greenwich," says Steve McMenamin, director of equity research for brokerage Cantor Fitzgerald, who lives and works in Stamford. "Greenwich is no longer really a suburb," he says, "it has become more of an international town." He points out that the British ambassador to the UN lives on his street and that resources at the local library rival those of many investment firms. Not all of Greenwich's new workers are quite so impressed, however many still live in New York City and "reverse commute". A head of one hedge fund believes the town is still too "American" and "suburban" for those used to the diversity and cosmopolitanism of Manhattan.
Quality of life and lower taxes are the reasons financial firms give for setting up shop in Greenwich. Technology, globalization and an emphasis on trading make it possible. Those who trade from dawn to dusk have little need to see clients daily the main advantage of a Manhattan address. If anything the mystique, not to mention the privacy, of traders is only accentuated by the obscure location. Nevertheless, Manhattan is also conveniently close. "If you do want to have a face-to-face meeting with a client, it's very easy to get to New York," says John Moffy, the publisher and owner of Greenwich magazine.
Likewise, for those for whom seeing their clients mainly involves travelling in the US and internationally, a base in Manhattan is not a prerequisite. Creditanstalt, for example, says that only 6% of its US banking clients are located in the metropolitan New York region. Another newcomer to Greenwich, Spectrum Capital, the aircraft lease financing boutique owned by Mitsubishi Trust, has only 25% of its clients in Manhattan.