In the annals of dealmaking in Westchester County, this deal will not go down as one of the easier or quicker ones.
Yet the result in Somers, after three years of negotiations marked by an interstate rivalry for about 1,000 jobs, a U.S. senator”™s intervention and a corporate acquisition that brought new players to the table, was the largest lease transaction in county history.
At One Pepsi Way in Somers, Pepsi Beverages Co. (PBC), the bottling division of PepsiCo Inc. in Purchase, has signed a five-year lease that keeps the company”™s headquarters in Westchester through 2015. The company can opt to extend the lease for five years.
The bottler will occupy the entire nine-story, 540,000-square-foot building, a 50 percent expansion of the space leased by the former Pepsi Bottling Group Inc. (PBG), whose 10-year lease expired Jan. 1. Pepsi Beverages Co. was formed last year after PepsiCo paid $7.8 billion to acquire PBG and its other largest U.S. bottler, Minnesota-based Pepsi Americas Inc.
The lease agreement keeps approximately 900 jobs in northern Westchester ”“ county officials put the number at 860 and state officials at 907. County officials said parent PepsiCo might transfer 22 jobs from Connecticut to the expanded space and there accommodate overflow from its global headquarters in Purchase.
PBC officials said the Somers facility in all will house 1,200 company employees and contractors who lead and support the bottling division”™s 70,000 employees in the U.S., Canada and Mexico.
PepsiCo is directly responsible for 10,000 jobs in New York state. Its stature as a major private employer drove officials at all levels of government and state and county business groups to join last year in opposing an excise tax on sugared beverages proposed by former Gov. David Paterson in his executive budget. The tax, which Paterson also proposed in 2009 as a measure to curb childhood obesity and generate health care revenue, was viewed sourly by the state Legislature and twice died in Albany.
One Pepsi Way”™s owner, Murray Hill Properties L.L.C. in Manhattan, began negotiating a lease renewal with Pepsi Bottling Group in spring 2008, spurred by reports that Connecticut officials had offered the company as much as $30 million in incentives to relocate to Danbury. That prospect of a jobs exodus prompted a countering call from U.S. Sen. Charles E. Schumer, the Democrat from Brooklyn, to PBG Chairman and CEO Eric J. Foss, now CEO of Pepsi Beverages Co.
The state”™s chief economic development arm, Empire State Development Corp., sweetened the Somers lease deal with a $4 million grant to PepsiCo to invest in the expanded headquarters. PepsiCo has estimated it will spend $6 million to $9 million as it takes over two floors largely vacated by General Motors Corp. after its bankruptcy filing in 2009. The GM lease expired at the end of March.
The Westchester County Industrial Development Agency recently approved sales and use tax exemptions for PepsiCo during its expansion project. The IDA estimated the company”™s sale tax savings at $230,000.
Paul M. Jacobs, executive vice president in the Stamford, Conn., office of CB Richard Ellis, in a press release said the Pepsi bottler”™s leasing team extensively studied the market for space alternatives “and based on employee demographics and state incentives, our client considered relocating its headquarters out of New York.”
After three years of negotiating talks, the company decided that expansion in Somers was “the best option to meet PBC”™s current and future real estate requirements in the region,” Jacobs said.
The tenant”™s CBRE leasing team in Stamford, Jacobs and senior managing director, Robert Caruso, declined to comment further on the negotiations.
The tenant also was represented by PepsiCo”™s attorney, Garry Berman, of Robinson & Cole L.L.P. Murray Hill Properties was represented by Glenn Walsh and Arthur Mirante, of Cushman & Wakefield Inc., and attorney Allen Wieder of Paul, Weiss, Rifkind, Wharton & Garrison L.L.P.
“We”™re excited to share this news with the local community and the state leaders who worked to assure us that New York will continue to be a great place to do business,” Foss, the Pepsi Beverages CEO, said in a prepared statement. “The Pepsi enterprise has had a long and successful history in New York. We”™ve always been proud to play a positive role in the communities in and around Westchester County, and we”™re eager to continue doing so in the years ahead.”
Though the agreement was not publicly announced until March 24, when Pepsi Beverages completed its lease filings, Pepsi officials and landlord Norman Sturner shook hands on the deal”™s basic terms in December. The PBC lease accounted for 30 percent of all office leasing activity in Westchester in 2010, according to CB Richard Ellis.
Hedging against the bottler”™s relocation, Sturner, founding principal and president of Murray Hill Properties, a year ago began marketing the Somers property for sale or lease when negotiations foundered after PepsiCo”™s acquisition of PBG.
“You can spell ”˜perseverance”™ with a capital P,” Sturner said. “It”™s been a very long time coming, but we got it done.”
