As it shrinks staff, JPMorgan will empty most of the leased space in downtown Seattle used by WaMu, the biggest occupant of downtown office property.
In a mass layoff that also could shake Seattle’s real-estate market, JPMorgan Chase is cutting about 80 percent of the Seattle work force at Washington Mutual.
About 3,400 mostly high-paid headquarters employees will be let go, while workers at WaMu’s 185 Washington branches will keep their jobs.
As it shrinks staff, JPMorgan will empty most of the leased space in downtown Seattle used by WaMu, the biggest occupant of downtown office property. It may even empty a big piece of its 2-year-old WaMu Center headquarters tower, now owned by JPMorgan.
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“We are going to build a great company for the long run. Unfortunately, that entails tough decisions in the short run,” said JPMorgan CEO Jamie Dimon, who visited Seattle this week for the first time since his bank bought most of WaMu’s assets after federal regulators seized the thrift Sept. 25.
One of Dimon’s big messages to corporate and civic leaders Monday was that JPMorgan next year will maintain WaMu’s 2008 charitable donations of $2.65 million to Washington state nonprofits, primarily in Seattle.
That’s little solace to WaMu employees, some of whom feel they were misled by Dimon and his cadre of New York bankers.
Right after WaMu was bought, said one person in the credit-risk department who learned Monday she is being laid off, “we went from conference call to conference call hearing, ‘We really love you guys, we’re going to keep the majority of the people and work to get people jobs in other areas.’
“I expected to at least have somebody talk to me about what could I do and what am I interested in,” said the employee, who spoke on condition of anonymity.
JPMorgan executives should have made clear they wanted mostly the workers in WaMu branches, not the headquarters, she said.
Only about 20 percent of WaMu’s nationwide work force of 43,200 is being laid off, bank officials said Monday.
JPMorgan, known for cutting costs after making acquisitions, slashed more deeply after buying investment bank Bear Stearns last summer. It offered jobs to only 6,500 of Bear’s 14,000 workers, and also cut 2,000 JPMorgan positions.
Seattle is taking the brunt of the WaMu reductions because headquarters jobs — everything from human resources to legal to information technology — can be done by JPMorgan operations elsewhere. One of the few WaMu departments being kept is multifamily lending, which makes loans for apartment buildings, JPMorgan spokesman Tom Kelly said.
The layoff is the state’s biggest in at least five years, according to a state Employment Security Department database. But it pales in comparison to Boeing’s cuts of tens of thousands of jobs in the latest major downturn that ended in 2004.
About 1,500 of the WaMu layoffs have already occurred or will soon. But about 1,900 of the 3,400 total will be part of a “transition team” to help merge WaMu’s business into JPMorgan. Those people will keep their jobs at least a few months and in some cases up to a year, Kelly said, and will earn double pay retroactive to Oct. 1.
When they leave, most of the laid-off Seattle workers will receive six to eight weeks’ pay for six to 24 months of service, then 1.5 to two weeks’ pay for every year after that. Senior managers will receive 16 weeks’ pay for up to four years of service, then four weeks’ pay for every year after that.
For high-ranking employees, the package is not as generous as it would have been had WaMu not been seized by the Federal Deposit Insurance Corp. (FDIC) in the nation’s largest bank failure.
JPMorgan is not paying so-called “change of control” severance, which it would have paid if it had bought WaMu from shareholders rather than from the federal government.
Under the change-of-control agreement, hundreds of executives would have received severance that equaled one year’s salary or more, depending on their rank.
Because fewer workers require fewer offices, JPMorgan is putting at least 500,000 square feet of office space in downtown Seattle back on the market — perhaps considerably more.
Kelly said the bank plans to consolidate at WaMu Center and give back all the leased space WaMu occupies in other buildings downtown. That amounts to about 700,000 square feet, according to brokers and building owners. About 160,000 of that has been subleased; landlords of the remainder could end up with little or nothing.
JPMorgan, through WaMu, owns about 940,000 square feet at the 42-story WaMu Center and leases 200,000 more from the Seattle Art Museum. Kelly said the bank was discussing the future of the leased space with the museum but would not talk about it publicly. A museum representative did not return a call about the lease.
Kelly also said JPMorgan wouldn’t need all the space it owns in the tower and was reviewing its options.
“If they keep half of that building I’d be surprised,” said James Keating, a senior vice president in the Seattle office of brokerage Jones Lang LaSalle, which represents tenants.
Impact on rents
He said WaMu’s givebacks would increase pressure on landlords to reduce rents and offer more concessions. But the owners of the buildings losing WaMu are for the most part well-established institutions with deep pockets who resist trimming rents, Keating added.
That means immediate, dramatic cuts in rent rates are unlikely: “It’s going to take a while to work its way through,” Keating said.
Besides the WaMu Center, the bank leases space downtown in the Washington Mutual and Newmark towers and the 1111 Third Avenue, Second & Spring and HOB buildings.
Some leases expire next summer. Others aren’t scheduled to end until 2017.
JPMorgan has until Dec. 24 to decide which leases it wants to keep, according to its agreement with the FDIC. It can walk away from any space it does not want, and the landlords would become creditors in WaMu’s receivership.
A receivership is like bankruptcy, except with decisions made by the FDIC rather than a bankruptcy judge.
As creditors, the landlords would join others in claiming a piece of $1.9 billion in assets, the money JPMorgan paid for WaMu. Other creditors in the receivership, who may include landlords, debt holders and shareholders, already say they are owed $13.8 billion from WaMu, according to the FDIC.
The receivership is separate from the bankruptcy of Washington Mutual Inc., the bank’s parent company.
The central Seattle rental-office market is about 37 million square feet. Even if JPMorgan puts 1 million square feet back on the market, “the uptick is not that much,” said Oscar Oliveira, a senior vice president with brokerage Colliers International. “It adds a couple percentage points to the vacancy rate.”
The bank’s moves alone won’t push lease rates down, Oliveira said, but that could happen next year if still more tenants, such as Safeco, put large amounts of space up for sublease.
New office buildings containing more than 2.5 million square feet of office space are under construction in central Seattle and scheduled for completion within the next year. Most of that space hasn’t been leased; JPMorgan’s givebacks could provide even more competition for them.
But Douglas Howe, president of Touchstone., which owns one of those new buildings, said the market has been anticipating the bank’s moves for as long as a year and has corrected to account for them.
“The underlying fundamentals of the Seattle market are still very strong moving forward,” he said.
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