Thursday, troubled financial service provider Citigroup, Inc. (C) sought to clarify numerous media reports on its office remodeling, which it considers misleading.
New York based Citigroup said it decided to consolidate two executive floors into one mid last year, indicating that the restructuring process would result in savings over next few years.
The executive office changes, revealed in April 2007, were part of a $15 billion cost saving plan spread over several years. Citi filed with New York City, early in June 2008, before receiving $45 billion in taxpayer bailout money, seeking permission to alter second floor of its Park Avenue headquarters to add offices for executives. The idea behind the plan was to make the executives work hand in hand among themselves and with Chief Executive Vikram Pandit. Citi does envisage leasing the resulting vacant third floor that would generate income for the company.
In a move intended to clarify reports appearing in the media, Citigroup explained that the consolidation of executive headquarters at 399 Park Avenue was part of an ongoing global effort to substantially reduce expenses.
The banking conglomerate stated that over the last two quarters, premises and equipment expenses were down by $100 million and it expects to realize significantly more savings in 2009. Citi also underlined that globally, office density would be 120 usable sq. ft. per person by the end of 2009, down from 132 usable sq. ft. per person currently.
The bank also stressed that consolidation at Park Avenue is part of its global cost savings initiative and will result in the reduction of space on the executive floors by 50%, going from two floors to one and subleasing the remaining space. Citi clarified that cost involved in such a consolidation is for all executive office space and not just the CEO's office.
Citigroup also noted doubling the overall occupancy rate on the remaining floor at 399 Park Avenue by creating smaller offices, increasing workstation to office ratios and by utilizing alternative work strategies. Occupancy on the remaining floor is expected to be 177 from the current 89.
Based on conservative assumptions, the bank estimates that space consolidation, through densification and sublease, will result in $20 million net savings over the life of the lease, an amount well in excess of the project costs.
Citi also reported that its premises and equipment expenses were down to $1.737 billion in the fourth-quarter of 2008 from $1.834 billion in the second-quarter of 2008.
Total global real estate space had also gone down to 94.3 million square feet in the fourth quarter of fiscal 2008 from 100.20 million square feet in the second quarter. The company anticipates fourth quarter 2009 total global real estate space to be further down to 83.9 million square feet.
Citigroup closed Thursday's regular trading at $2.60, down $0.48 or 15.58% on a volume of 1.25 billion shares on the NYSE.
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