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Top Of The News: World Trade Center Traded

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Kristin Moore
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« on: April 17, 2011, 02:21:11 am »

Top Of The News: World Trade Center Traded
Dan Ackman, 02.23.01, 10:38 AM ET

NEW YORK - It was once the tallest building in the world and is still the tallest in New York City. But the World Trade Center has never excited the popular imagination the way the Empire State Building or the Chrysler Building, the previous world's tallest, have.

Yesterday, though, the twin towers were back in the record books when The Port Authority of New York and New Jersey, a nontaxing public authority, sold it to Vornado Realty Trust (nyse: VNO - news - people) for $3.25 billion, the largest real estate deal ever for a single property.

The transaction is actually a 99-year lease for the two 110-story office buildings and the surrounding complex containing two other office buildings. Specifics of the deal, including how much Vornado would pay per year, were not disclosed. Port Authority Chairman Lewis Eisenberg said the agency has entered into a "20-day exclusive negotiating period" with Vornado to complete the contract and associated documents.

Since the first tower was finished in 1970, the World Trade Center has never been one of the prize locations in New York City. The World Financial Center, immediately to the west of the towers, has a much more prestigious client list.

But for those who seek to make a splash in Gotham--whether it's Philippe Petit, the master tightrope artist, who walked on a wire strung between the towers in 1974, or George Willig, the human fly, who scaled the exterior of the towers in 1977--the World Trade Center is a place to be. Even King Kong paid a visit in the pathetic 1976 sequel to the classic film that starred the Empire State Building.

The building faced a more tragic form of notoriety in 1993 when Middle Eastern terrorists exploded a bomb in the basement, killing six and injuring more than a thousand.

Vornado, a real estate investment trust based in New York, was one of three finalists in the bidding for the property, beating out groups headed by Silverstein Properties and Westfield America (nyse: WEA - news - people) and another headed by Brookfield Properties (nyse: BPO - news - people) and Boston Properties (nyse: BXP - news - people), according to reports. In December, Vornado lost out on a bid for Rockefeller Center, which was sold for $1.85 billion.

Prior to the Rockefeller Center sale, other New York landmarks like the Chrysler Building, the Seagram Building and the General Motors buildings all changed hands.

Vornado, with 1999 revenues of $697 million, claims to own all or part of 23 other office buildings in the New York area, totaling 15.6 million square feet. The World Trade Center lease, which does not include a Marriott hotel and two other office buildings in the complex, adds roughly 10 million square feet to that total.

The transaction "reaffirms Vornado's place as a premier owner of property in New York City," says Michael Laginestra, vice chairman of Insigia/ESG, a commercial real estate company based in New York.

The deal is complicated by several factors. Because the construction was financed with bonds issued by the Port Authority, there are legal restrictions on any sale, which required Vornado to lease rather than buy the complex. Since it is owned by the Port Authority, the city cannot impose the same property tax as it would on a privately owned structure; Mayor Rudolph Giuliani has insisted that it be placed more firmly on city tax rolls.

The property is a cash cow for the Port Authority, as officials have estimated that the buildings earn a profit of $120 million annually. But New Jersey Gov. Christie Whitman and New York Gov. George Pataki decided several years ago that the authority, which has an annual budget in excess of $3.6 billion, should focus on transportation rather than real estate. Now, the agency will get an annual lease payment without having to worry about the real estate rental market.

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