In light of CSX Corp.’s intention to cut 1,000 management jobs, it appears the Jacksonville-based company won’t need to lease space in the Bank of America Tower Downtown after all.
CSX spokesman Gary Sease did not directly address the question of how the cuts would impact interest in that building, but it seems doubtful a deal would go forward.
“Last week’s difficult decision to reduce our management workforce by approximately 1,000 positions has resulted in the need to reassess our Jacksonville headquarters office space needs,” Sease said by email.
Most of those jobs will be in Jacksonville and will be cut by late this month. CSX’s management ranks comprise 2,500 people in Jacksonville and 4,500 managers systemwide.
Through Jan. 6, CSX confirmed in letters to the city that it wanted to cut costs and move 550 jobs from leased space in Southpoint into the Bank of America Tower.
CSX’s world changed Jan. 18 when news broke that Canadian Pacific Railway Ltd. CEO Hunter Harrison was leaving his job early. Harrison, backed by the Mantle Ridge hedge fund, is negotiating with the CSX board to take the CEO role.
The job cuts surfaced Feb. 21 after CSX announced Chairman and CEO Michael Ward and President Clarence Gooden would retire May 31.
CSX said those changes were “part of an orderly transition of the company’s senior leadership that the board has been considering for more than a year.”
Executive Vice President Fredrik Eliasson was named president, but no CEO was identified.
Harrison is known for maximizing railroad efficiencies and reports peg his compensation request at $300 million. Mantle Ridge, which is working with Harrison, wants six of 14 seats on CSX’s board. Mantle Ridge controls 4.9 percent of CSX’s stock.
CSX plans to schedule a special meeting to let shareholders decide if they want to accept Harrison’s and Mantle Ridge’s demands.
That means it’s no surprise that CSX would put additional space considerations on hold.
The expected lease of 120,000 square feet at the Bank of America Tower at 50 N. Laura St. would have made CSX its largest tenant.
Owner Hertz Investment Group said the lease would have boosted occupancy from 70 percent leased to 85-88 percent. James Ingram, Hertz executive vice president and chief investment officer, could not be reached for comment Tuesday or Wednesday morning.
CSX wanted the Downtown Investment Authority to work with Hertz to close the gap to make a lease work. That amount was $1.9 million over the seven-year lease. DIA CEO Aundra Wallace could not be reached Wednesday morning for comment.
In a Jan. 20 report to the city, Wallace said DIA staff had discussed job expansion opportunities with CSX but was waiting for the company to get back with the DIA.
In Nov. 30 and Jan. 6 letters to the DIA, CSX Real Property Inc. President Richard Hood said “CSX is under pressure to reduce its overhead costs company-wide.”
It decided to consider consolidating operations that have occupied two adjacent buildings in Southpoint for more than 25 years and move them Downtown.
CSX owns its Downtown headquarters buildings at 500 and 550 Water St. That’s likely where CSX could consolidate the Southpoint operations in light of the downsizing.
The workers to be moved were in the company’s finance, technology, labor relations and corporate real estate organizations.
Ingram said previously CSX would move by the middle of the first quarter of 2018 as the Southpoint lease expired in March 2018.
Colliers International is marketing the structures leased by CSX at 6735 and 6737 Southpoint Drive S. for use as a corporate office campus. Together, they provide 275,229 square feet of space.
Colliers Executive Vice President Chuck Diebel said Wednesday the company continues to market the buildings to new tenants, having heard nothing different from CSX.
He said he doesn’t know what CSX’s plans are for the functions in those buildings, but thinks they might move to the company’s Downtown locations.
Diebel said the job-cut situation was unfortunate for Downtown, in light of the decreased need for space, and the people who will no longer work there with CSX.
“It’s not good for the city,” he said.
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