It was Manhattan's richest real estate deal, as the city stands to make $110 million annually for the next 99 years. Also, it may have been one of the most elaborate deals in the leasing history of New York City.
In rare cases, complex lease negotiations such as this can drag on for over a year, closing well beyond the target date and exhausting both sides in the process.
Rome wasn't built in a day, and neither are multi-billion dollar leases signed overnight. Yet the World Trade Center's entire negotiation period--from start to finish--lasted only a few months, a relatively swift duration in the world of colossal lease transactions.
Just consider how a deal of this magnitude actually closes--vast piles of documentation, conferences after conferences after conferences and infinite attorney-client sessions dovetailing into that moment when all parties are in agreement and a 99-year ground lease is signed. Factor in formal meetings, deadlines and financing issues and the amount of details that have to be examined, debated or changed and the end result is a monstrosity of a deal.
Painstakingly complex, this deal was never assumed to be finished until last Wednesday. A rumor that the deal was about to close was in circulation days prior to the actual closing, but none of the principals were popping champagne in anticipation.
"A deal's not a deal until it's done," says Frances Greenburger of Time Equities.
In a business as sticky as real estate, the $3.2 billion lease is about as cohesive as they get. Until that lease is signed, nothing can be taken for granted, and nothing ever is.
Greenburger was asked to speculate about how a deal of this size closes--what steps are taken in the end when a target date is approaching or has been passed by.
"The Port Authority had a very focused agenda. Also, since they are part of the government, they can ask for things atypical of a real estate transaction," said Greenburger, chairman and CEO of Time Equities.
Given the difficulties that can arise in talks with any municipal concern, the speed with which this deal was closed is notable. Also, the World Trade Center is in better hands, something that the PA has even admitted.
"The fact that this building is back in the private sector is a real plus," said Marc Schauer, president of NAI Lawrence Group, a brokerage, managing and leasing firm.
Schauer, who knows Silverstein well, said that in a deal of this size there is usually a "pre-closing" before the deal is finally closed.
"There were probably fifty people in the room right up until the end. There are a million items that need to be dealt with. It really helps that Larry is such a hands-on person," said Schauer.
Stephen Estroff, a real estate attorney, summed up this lease as "enormously complex."
"Ground lease negotiations can be some of the most arduous and difficult types to close," said Estroff, a senior partner at Jenkins & Gilchrist Parker Chapin.
He characterized the lease as unusual due to the substantial upfront payment that Silverstein and his partners made.
In other regards, however, the deal was typical of any lease transaction 0since it adhered to a formal process.
"In New York state, unlike other places, you actually meet for a sit down closing. The seller wants to make sure that the buyer knows the property and has a solid source of equity," said John Caplan, senior vice president at CB Richard Ellis.
After the pre-closing, the sit down closing brings all of the principals together. While it ensures that all parties are on the same page, it can also lengthen the process when debate ensues.
In the case of the WTC, details will likely emerge in the weeks ahead about how this historic lease was closed.
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|Title Annotation:||Silverstein Properties Inc. assumes lease of World Trade Center|
|Publication:||Real Estate Weekly|
|Article Type:||Brief Article|
|Date:||Aug 1, 2001|
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