In The News › Bureau of Governmental Research report suggests selling the World Trade Center

Jan 15, 2009

Source: Times-Picayune

Filed under: Orleans Parish, World Trade Center

Bureau of Governmental Research report suggests selling the World Trade Center

Bureau of Governmental Research report suggests selling the World Trade Center
Posted by Kate Moran, The Times-Picayune January 15, 2009 6:53PM
Why not just sell it?

Five months after a New York developer backed out of a 99-year lease for the World Trade Center, a watchdog group has issued a report urging the city to sell the building outright rather than pursue what it called another needlessly complex lease with a private investor.

The Bureau of Governmental Research pressed the city to buy out an existing lease with the building’s master tenant, set a minimum price that approximates its fair market value and then sell it to a developer who agrees to renovate it within a certain timeframe or face financial penalties.

In the five-page report, the group argued that divesting the building would return it to the city’s tax rolls and simplify future negotiations between the city and interested developers. The city has spent more than 10 years haggling with two sets of investors who eventually withdrew from the project.

“It is an overly complicated transaction,” said Janet Howard, president and chief executive of BGR. “Our message is: Let’s try something simpler that gets the property back on the tax rolls.”

Sean Cummings, chief executive of the New Orleans Building Corporation, the public agency that owns the building, said the city cannot sell the building while a lease remains in place with the World Trade Center, the business and civic group that lends the office tower its name. That lease, which dates to 1963, expires in 2019.

The World Trade Center built the tower with proceeds from city-issued revenue bonds, and it paid the city an annual rent to service the debt until the bonds were retired in 1993. The organization pays no rent today, but it maintains and insures the property and has the right to seek a developer who can restore it.

“The Nagin administration inherited a lease that is still in effect and that gives the World Trade Center the right to redevelop the building,” Cummings said.

The city perhaps has another interest in leasing the building rather than selling it outright. The building corporation had planned to use the proceeds from the long-term lease to help finance Reinventing the Crescent, its ambitious plan to convert the city’s industrial waterfront into a contiguous public park. The lease in fact dictates that the money be used for the transformation of the riverfront.

If the building is sold for more than $5 million, however, the city charter requires that the proceeds be deposited into the municipal trust fund. To tap that fund for a major capital project like Reinventing the Crescent, the City Council would have to round up a two-thirds majority and could spend no more than half the fund in a particular year. The earmark for the riverfront would, in other words, be gone.

BGR argues that the city should abandon the long-term lease strategy because it has failed to produce results despite more than 10 years of efforting. The city negotiated for eight years with developers Lane and Larry Sisung, who withdrew from the project in 2006. It then began a new round with developer Full Spectrum NY, which backed out in August after it could not secure financing for the deal.

“Although past efforts have suffered from a variety of economic, financial, legal and political problems, the long delay raises questions about continuing the city’s underlying approach to redevelopment,” BGR’s report says.

The lease the city negotiated with Full Spectrum NY would have required the developer to pay $30 million up front rights to redevelop the building, $24.25 million of which would have gone for the riverfront project and the remainder to the World Trade Center as reimbursement for gutting and renovation work it did in anticipation of a deal with a private developer. The trade group would have also received an annual payment from the developer to finance its economic development activities.

BGR argued in its report that the city should buy out the World Trade Center’s interest in the building. While conceding that the city might want to give financial support to the trade group’s efforts, it argued that it should do so through a cooperative endeavor agreement and not through a real estate deal.

The World Trade Center issued a statement Thursday through its attorney, Howell Crosby of Chaffe McCall, saying it disagreed with some of BGR’s suggestions but shared its desire to restore the building to productive use. Crosby said any deal for the building remains unlikely while the nation’s credit markets remain in turmoil, but that the World Trade Center had taken away some valuable lessons for redeveloping the building from its previous rounds of negotiations with developers.

In the statement, the World Trade Center pledged its “commitment to find a developer who can, when the capital markets permit, successfully and timely redevelop the World Trade Center building in a manner that maximizes the positive impact on the city and acts as a catalyst for the further development of the New Orleans riverfront.”

Kate Moran can be reached at or 504.826.3491.

Jan 15, 2009

Source: Times-Picayune

Filed under: Orleans Parish, World Trade Center

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