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As Trade Center Talks Stumble, No. 2 Bidder Gets Another Chance - New York Times

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Friday, January 18, 2008

New York and Region

As Trade Center Talks Stumble, No. 2 Bidder Gets Another Chance

By CHARLES V. BAGLI Published: March 20, 2001

Despite round-the-clock negotiations, the Port Authority of New York and New Jersey failed to come to terms yesterday on a $3.25 billion deal that would have given Vornado Realty Trust control of the World Trade Center, the largest office complex in the country.

The bistate authority said it would now open exclusive talks with Silverstein Properties, the second-place bidder for the 10.6 million-square-foot complex and 110-story Twin Towers.

The authority failed to complete the deal with Vornado because ''seven or eight substantial issues'' remained unresolved yesterday, according to several authority commissioners. One sticking point was the company's refusal to put up $100 million in a show of good faith as the contract was signed but before the deal closed, two commissioners said.

The authority's decision to break off talks was a blow to Vornado and its chairman, Steven Roth, a real estate tycoon with a reputation for bare-knuckled negotiations. By all accounts, Mr. Roth wanted an international icon like the trade center for his company's roster of 20 Manhattan office towers, totaling more than 15 million square feet of space.

Mr. Roth could not be reached by telephone for comment yesterday.

''He's very disappointed,'' said a spokesman for Mr. Roth, Howard J. Rubenstein. ''He tried very hard to make a deal.''

Some authority executives feared the turnabout would become a nightmare for the authority, because Vornado's absence could drive down the sale price, or at least weaken the agency's bargaining position. It did not help, they said, that the roiling stock market served as a backdrop for the negotiations.

But real estate executives said that both Silverstein and Boston Properties still very much want to buy the lease for the trade center. With stock prices declining sharply, they said stable, high-quality real estate assets were actually more attractive.

''Nothing has happened that makes the World Trade Center any less desirable,'' said Mary Ann Tighe, a vice chairwoman of Insignia/ESG, a real estate brokerage firm. ''It's a world-class trophy. They're not going to have trouble finding people to step up.''

The Silverstein group, which includes Westfield America, a publicly traded real estate company, is not unknown to the authority. Larry A. Silverstein, the developer, heads the company and owns 7 World Trade Center, a 47-story, 2 million-square-foot tower that is part of the complex but is not owned by the authority.

In 1998, Governors George E. Pataki of New York and Christie Whitman of New Jersey decided to get out of the real estate business by selling the World Trade Center. The Port Authority had trimmed a list of more than 30 potential buyers to 3.

The authority's decision yesterday came after some high drama, brinksmanship and the authority's decision to extend their deadline by five days to try to get a contract with Vornado.

Earlier this year, Vornado submitted a blockbuster $3.25 billion bid designed to pre-empt the competition. The offer from the Silverstein team trailed by $600 million, while Boston Properties and Brookfield were $750 million behind.

Silverstein subsequently raised its bid to $3.22 billion, and the other group pushed its offer to $3.1 billion. But the authority selected Vornado as the winning bidder on Feb. 22. It gave Vornado 20 days to sign a contract, or the authority would open talks with the other bidders.

Two days before the deadline expired, Vornado insisted on a 39-year lease. The authority, which had required a 99-year lease, regarded the gambit as a last-minute attempt to wring a concession and change what had been a nonnegotiable item. Dissatisfied with Vornado's contract offer, the board decided last Wednesday to begin negotiations with the second bidder. Within an hour of being notified, Mr. Silverstein told the authority he was ready to go.

Before Mr. Silverstein could start, Mr. Roth telephoned key officials, convincing them that he was still seriously interested in a deal, even for 99 years. According to authority commissioners, Mr. Roth said he would put up $100 million as a show of good faith. But on Thursday morning, according to authority executives and commissioners, Mr. Roth told the agency that Vornado's board was unwilling to go along with him.

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