Vornado Steven Roth Jonathan Litt Salomon Smith Barney Tim Ryan, a managing partner at J. P. Morgan Chase Charles A. Gargano, the vice chairman of the authority Lewis M. Eisenberg, the chairman of the Port Authority
March 17, 2001
World Trade Center Deal Remains in Doubt
By CHARLES V. BAGLI
The sale of the World Trade Center lease was supposed to be a smooth, well-oiled process. Instead, it has turned into a twisting, fast-paced ordeal whose outcome is still uncertain.
The Port Authority had planned to announce last Wednesday that it was selling the lease for the World Trade Center for $3.25 billion to Vornado Realty Trust, a deal that would have been the largest involving a single piece of real estate. Instead, the negotiations have turned into a long-running ordeal.
After several aborted efforts to issue a statement announcing the sale, Lewis M. Eisenberg, the chairman of the Port Authority, imposed a news blackout. Now the outcome of the sale is far from certain, as is exactly who will take over the vast office complex.
It was clear on Wednesday morning that Vornado was suddenly out, either because the company tried to change the terms of the deal at the last minute or because there was a simple misunderstanding. The withdrawal cleared the way for the No. 2 bidder, Silverstein Properties, to re-enter the picture.
But hours later, Vornado was back in. And despite another Vornado withdrawal on Thursday morning, the company was back at the negotiating table yesterday, when another frantic round of talks began.
The Port Authority has set a Monday deadline for completing the deal. But no one knows whether the agency will have a contract with Vornado.
”I’m so gun-shy about Vornado now, I don’t know what to think,” said one Port Authority commissioner. ”None of us are happy about what’s been going on. But we’re talking about a $3.25 billion deal and a $100 million down payment.”
Steven Roth, the chairman of Vornado, declined to discuss the World Trade Center yesterday.
Perhaps it is not surprising that the deal for the 10.6-million-square-foot complex with the 110-story Twin Towers should go through so many twists and turns. After all, Mr. Roth is known as a relentless, difficult and shrewd executive with whom almost no one enjoys bargaining.
”Everybody knows that Steve is a very tough negotiator,” said Jonathan Litt, the senior real estate analyst at Salomon Smith Barney. ”This only reinforces that reputation.”
Many real estate executives expressed doubt privately that Mr. Roth would complete the deal after the authority chose his company as the winning bidder on Feb. 22. Under the deal’s terms, Vornado would lease the trade center for 99 years for $3.25 billion.
As a safeguard, the authority said that if Vornado did not sign within 20 days, it would immediately begin negotiations with Silverstein, whose team had bid about $3.22 billion.
Both Vornado and the authority labored around the clock on a contract. But shortly before the 20-day deadline expired on Wednesday, Vornado told the authority it wanted to change an element of the contract, long agreed upon, by reducing the lease to 39 years with options to renew, according to real estate executives and several agency commissioners involved in the discussions.
Vornado, they said, insisted that it would gain a tax advantage from the change, and that it would also be more lucrative for the Port Authority, which would still get a total down payment of $700 million. But the authority viewed the change as an attempt by Vornado to seek a last-minute concession that had not been offered to any other bidder.
On Wednesday morning, the Port Authority board concluded that it was unable to sign a contract and therefore would open a 14-day negotiation period with Larry Silverstein, the president of Silverstein Properties, who immediately pulled together his partners and lawyers. It is unclear whether Mr. Silverstein, who did not return calls requesting comment, was told that his talks with the authority were exclusive.
Later that day, Mr. Eisenberg; Charles A. Gargano, the vice chairman of the authority; and Tim Ryan, a managing partner at J. P. Morgan Chase and an adviser to the authority on the deal, all received calls from Mr. Roth, who said that Vornado had not withdrawn and still wanted very much to do the deal, even if the lease was for 99 years, according to the real estate executives and the commissioners. As a show of good faith, Mr. Roth, the executives said, agreed to put up $100 million immediately and tighten up some of the rental terms.
The talks resumed. But on Thursday morning, Mr. Roth called the authority to say that he could not get the Vornado board to agree to the deal on such short notice, so he was withdrawing. The authority was stunned. Some Port Authority executives said they were glad to be rid of Mr. Roth and his shenanigans; others criticized the staff for putting Mr. Roth in an untenable situation.
Some top officials at the authority tried to resume talks with Mr. Roth, who ultimately agreed.