Tax breaks, even redesign to lure NYC corporate tenants

Dangling millions, sometimes billions in incentives to big companies to become part of the latest megaproject is often the cost of doing business in the city's development market.

(Newsday) -- But the lure of big business reached a new level when a developer offered last week to redesign a building in the hope that Merrill Lynch & Co. would agree to move to ground zero. The government extended deadlines for two towers at the World Trade Center site to allow developer Larry Silverstein to build wider trading floors Merrill has sought.

The offer didn't seal a deal with Merrill Lynch, but it showed industry watchers how far governments and developers will go in an economic downturn to commit skittish tenants to big, sometimes uncertain projects.

"It's realistic," said Kathryn Wylde, president of the Partnership for New York City business group. "Things are slow because the economy is uncertain. Major prospective tenants are waiting to see how things roll out."

Across the city, big development projects are slowing down or falling apart because of uncertain financing, making an anchor tenant's commitment a potential make-or-break factor, experts say.

At Hudson Yards, an ambitious government effort to build skyscrapers and apartments over 26 acres of rail yards on Manhattan's far West Side, prospective tenants like Morgan Stanley and News Corp. bailed out before a winning bidder was chosen, citing an uncertain economic climate.

The Metropolitan Transportation Authority in March chose Tishman Speyer Properties, which had courted Morgan Stanley as an anchor tenant. But Tishman dropped out six weeks later, without securing a new tenant or financing for the multibillion-dollar project. Related Cos., chosen to replace Tishman, hasn't announced which tenants would replace News Corp. as its anchor.

At ground zero, state government agencies signed on early to rent space in two of the five office buildings planned to replace the destroyed twin towers. The new buildings are all expected to open in four to five years.

JPMorgan Chase & Co., one of the country's largest banks, struck a deal last year for a $300 million lease _ accompanied by $230 million in government incentives _ to anchor one of the towers, after reportedly threatening to move out of state.