Stifel Nicolaus & Co., the St. Louis company that bought part of Legg Mason Inc., plans to move to a signature downtown building where it will add its name to the city's skyline, a sign that Baltimore's investment banking community is growing again after being hit by the sale of Alex. Brown & Sons.
Stifel announced yesterday that it signed an 11-year lease for four upper floors at One South Street. The 30-story building had been occupied largely by Alex. Brown employees until Deutsche Bank AG took over the investment banking firm eight years ago and steadily reduced its work force in Baltimore.
About 300 Stifel employees will relocate next year from the Legg Mason building blocks away and take over the state-of-the-art trading floor once used by Alex. Brown.
Stifel also intends to take down the Alex. Brown signage on one facade to put up its own name. The Alex. Brown name will remain, for now, on the other side of the building.
The move marks a new chapter in the investment banking industry in Baltimore that began with Alex. Brown, which helped build the city in the 1800s, and most recently saw the sale of the Legg Mason division to Stifel. That division went up for sale when Legg swapped its brokerage for Citigroup Inc.'s asset management unit in a $3.7 billion deal last year.
"Baltimore isn't losing another company; it's gaining a world-class investment firm," said Ronald J. Kruszewski, chairman and chief executive of Stifel and its parent, Stifel Financial Corp. "Consolidation in the industry has created this huge void, and we are just fortunate to be standing there able to take advantage."
Kruszewski emphasized the company's commitment to Baltimore, which has lost more than a dozen major corporate headquarters to mergers during the past two decades. He and the Stifel board recently agreed that he should spend at least a few days every other week in the city.
Stifel is looking to grow in the Mid-Atlantic and Southeast regions. The top floor to be leased by Stifel will be empty initially, including a corner office with an expansive view of the Inner Harbor, where the company plans to house a local brokerage group.
Dozens of investment banks have consolidated in recent years, a trend that industry observers say led large Wall Street firms to seek bigger deals and abandon small- and mid-cap companies as clients. Alex. Brown, for one, sold three years shy of its bicentennial to Bankers Trust Corp., which was then bought by Germany's Deutsche Bank.
Stifel, as well as Signal Hill Capital Group, a boutique Baltimore investment bank founded four years ago by former Alex. Brown workers, have fashioned business plans around catering to those smaller clients. Signal Hill recently announced its expansion to 30 employees.
A company with its own 116-year history, Stifel also provides investment advisory and trading services. Last month, the company acquired a privately held bank, First Service Financial Co., outside St. Louis. Kruszewski said the company plans to offer bank accounts, loans, mortgages and lines of credit to Stifel customers.
Stifel has more than 120 offices across the United States, but at the time of the Legg Mason deal it had few operations east of Ohio.
Citigroup had acquired the investment banking division from Legg and made it clear that it would be willing to resell it. A number of its employees departed amid the uncertainty, wooed by headhunters from top Wall Street firms who set up makeshift offices in nearby hotels.
Stifel soon emerged as the suitor, paying $95 million for the division, and fought to keep it intact. While mergers frequently cost jobs as companies cut redundant operations, Kruszewski said there were no layoffs.
In the end, he said, only a couple of managing directors out of about 200 left, and former Legg employees bought about $25 million worth of Stifel stock in a private offering at the time of the transaction.
Hugh Warns, the director of research who stayed with the firm from Legg, said employees view the marriage with Stifel as a chance to build a powerhouse like Legg Mason and even to revive the entrepreneurial spirit of Alex. Brown, which employed about 1,500 people in the Baltimore area when it sold to Bankers Trust.
"We're toe-to-toe with Alex. Brown when it was in its heyday," Warns said.
Officials acknowledge the need to increase the company's name recognition. Kruszewski said people often mispronounce Stifel, which is pronounced "STEE-ful."
Deutsche Bank still has more than 400 employees, mostly in the brokerage business, in the building on South Street, which has nearly 480,000 square feet of space and houses several law firms and other businesses.
Stifel is subleasing its 76,000 square feet from Deutsche Bank for the first few years and then leasing from Miami-based America's Capital Partners, which bought the building this year.
Meanwhile, the Legg Mason brokers in Baltimore who were traded to Citigroup remain in the Legg building on Light Street. Citigroup has been subleasing space there while looking for a place to move.
Robert G. Sabelhaus, who ran the Legg Mason brokerage and stayed with Citigroup, said they plan to remain downtown and a lease deal is "imminent."
Before they go their separate ways, current and former Legg employees plan to have a get-together at a nearby pub tomorrow to mark the one-year anniversary of the deal with Citigroup.
The theme: Humpty-Dumpty.