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An effort by American International Group Inc. to acquire Citicorp's interest in 40 Wall St. has collapsed, sinking a chance to revive a building that symbolizes the collapse of downtown real estate.
Although the negotiations involved both AIG Chairman Maurice R. Greenberg and Citicorp Chief Executive John S. Reed, the two sides could not agree on terms. Sources say Citicorp, which has an $85 million mortgage on a long-term lease of the troubled tower, rejected a tentative AIG offer of $6.5 million.
Nevertheless, many real estate experts familiar with the prominent but deteriorating tower question whether the bank can find an offer better than AIG's. Given the high vacancy rate and low demand for office space downtown, only a large user could buy and renovate the 1.1 million-square-foot building. There are few such tenants in the market.
If Citicorp fails to sell 40 Wall, the bank may be forced to give it to the owner of the underlying land rather than finance expensive renovations required by its ground lease.
"Citicorp might have to walk away," says one banker familiar with the building. "This could end up being like 1166 Sixth Ave."
In the 1970s, a bank group, including Citicorp, gave up the 44-floor Sixth Avenue building to the owner of the land rather than pay rent and other expenses on the troubled property.
The AIG deal is just the latest example of a collapse of...