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Deal Is Signed To Take Over Trade Center - New York Times

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Sunday, February 22, 2009

New York and Region

Deal Is Signed To Take Over Trade Center

By CHARLES V. BAGLI Published: April 27, 2001

Despite some missteps and a last-minute snag, a developer signed a contract yesterday to take control of the 110-story World Trade Center complex in a deal worth $3.2 billion, the largest real estate transaction in New York history.

The completion of the deal is the end of an effort begun three years ago by Gov. George E. Pataki of New York and Christie Whitman, then the governor of New Jersey, to privatize the huge 10.6-million-square-foot office complex. It was built 30 years ago by the Port Authority of New York and New Jersey to stimulate development in Lower Manhattan. The governors pledged to use the proceeds from the transaction for new transportation projects.

A group led by Larry A. Silverstein, a developer, and Westfield America Inc., an owner of shopping centers, signed a 99-year lease yesterday after working nearly 24 hours straight on the agreement. Still, the Port Authority delayed the start of its board meeting yesterday afternoon until the developer delivered a $100 million letter of credit, the first installment on a $616 million down payment. The group will then make annual rent payments to the Port Authority, manage and lease the complex and spend $200 million on capital improvements.

In recent weeks, the deal was beset by a series of problems -- ranging from the enormous difficulty of structuring such a complex deal within a short time to the sudden slowdown in the economy -- that scuttled negotiations with one bidder and nearly toppled Mr. Silverstein.

The Silverstein group is scheduled to close the deal in July, although it has the option to extend the process for 30 days more.

''This agreement allows the private sector to bring its expertise to managing this landmark,'' Governor Pataki said in a statement yesterday, ''and it frees Port Authority resources for improvements in airports, tunnels, bridges and other parts of the region's transportation network.''

Mr. Silverstein was both tired and ebullient yesterday evening.

''I'm thrilled to pieces,'' he said yesterday. ''I've been looking at the trade center for years, thinking what a great piece of real estate, what a thrill it would be to own it. There's nothing like it in the world.''

Mr. Silverstein owns about 5.5 million square feet of office space downtown, including 7 World Trade Center, a 48-story tower that was built on land owned by the Port Authority.

Charles A. Gargano, vice chairman of the Port Authority, said the bistate agency would negotiate with the city over payments in lieu of taxes for the property. The World Trade Center paid the city about $29 million last year, but Mayor Rudolph W. Giuliani has insisted that the number should be equal to full property taxes, about $100 million.

The Silverstein group was the second bidder to negotiate for the right to control the trade center complex and its effort nearly collapsed Wednesday, much like the first attempt last month by Vornado Realty Trust, and its chairman, Steven Roth. Worried about the financial viability of Mr. Silverstein's group, the Port Authority was preparing to break off negotiations on Wednesday, when Mr. Silverstein asked for a little more time. The board gave him until yesterday afternoon to come up with a $100 million check and sign 1,000 pages of contracts, leases and agreements.

''The time comes in every transaction when you have to put the pencils down and stop negotiating,'' said Cherrie L. Nanninga, director of real estate for the Port Authority.

In the end, she said, there were various trade-offs. The Silverstein group lowered its down payment from $800 million to $616 million but raised its annual rent payment. Mr. Silverstein also had to post a nonrefundable letter of credit, which had many Port Authority executives holding their breath until shortly after 3 p.m. yesterday.

The twin towers complex opened in the 1970's to poor reviews. But the vast complex soon found a place in the popular culture. King Kong climbed one tower in a remake of the movie classic. And in 1993, a terrorist bomb explosion killed six people and injured more than a thousand.

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