A Dallas-based developer is paying the city pennies to rent Pier 17 at South Street Seaport — but will rake in more than $100 million a year once its new mega mall is complete.
Under a deal between Howard Hughes Corp. and the city Economic Development Corp., the developer will pay only $1.2 million in annual base rent, according to documents obtained by The Post.
Howard Hughes plans to transform its mall at Pier 17 into a glittering, glass retail center with a rooftop venue for concerts and events. The project must be approved by the City Council by June, when construction is set to begin.
But critics say the out-of-town developer is getting a sweetheart deal for publicly owned land at the Seaport.
“Is this really for the benefit of the city or Howard Hughes, which will be charging much higher rents?” said a consultant with knowledge of deal. “You want to give a developer who’s investing a lot of money incentive, but it just seems way overboard.”
EDC officials say the agency has been losing money for years under its current lease with Howard Hughes.
The developer pays $600,000 annually for the pier’s three-story mall and a bevy of properties at the cobblestone-paved uplands, but charges its tenants at least $100 a square foot.
Now Howard Hughes expects as much as $300 a square foot in rent after Pier 17 is redeveloped — and could turn a $111 million annual profit.
That’s a big chunk of change for a developer that will pay only $3.24 a square foot for 370,000-square feet of prime downtown waterfront.
CEO David Weinreb told investors this month that future rents will be as high as $200 a square foot. Sources told The Post last year that new tenants would pay up to $300.
Still, the EDC says the deal is nothing but seaworthy.
Howard Hughes will take over the cost of maintaining the aging pier — about $1.7 million annually — and pay $210,000 a year for the East River esplanade.
In total, the lease will generate at least $3.1 million a year in revenue and cost savings until it expires in 2072.
“This renegotiated agreement will save the city millions of dollars per year while paving the way for a brand-new, world-class renovation of Pier 17 that will be built through a major private investment,” an EDC spokesman said.
Howard Hughes also has the option to lease other properties near the base of the pier, including the Tin Building site and the New Market Building.
A spokesman for Howard Hughes would not estimate the cost of the project, nor the number of retailers that will be part of it.
The city has lowballed rents at the Seaport since the late 1970s, when it hoped to lure developers to revitalize the sinking district.
Rouse Company was the first to develop the property. General Growth Properties acquired Rouse in 2004 and unsuccessfully floated plans for a mixed-use project. GGP went bankrupt six years later, and spin-off firm Howard Hughes stepped in. All have enjoyed the same lease since 1981.
Seaport activists are questioning why the city didn’t use the new agreement to start a sea change.
“I’m at a loss to explain why in this city this corporation should lease this property for so low a rent,” said David Sheldon, a member of the Save Our Seaport Coalition, which launched a petition to stop Howard Hughes from leasing the optional Seaport properties.
The South Street Seaport Museum will be open during construction, but where its historic ships will go is still in dispute.