From Rebuilt Tower, Silverstein Speaks of Frustrating Delays
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
While politicians and their hired architects have sought to create bold, patriotic symbols of Lower Manhattan’s revitalization, for the next few years the shimmering glass façade of Seven World Trade Center, taller and more slender than its predecessor, will have to serve as downtown’s commercial icon.
Five years after the terrorist attacks of September 11, 2001, it is the only commercial office building to rise again from the ashes. By most accounts, it will probably be another five years before the next office tower at ground zero is completed, and about two more years until a building even rises to street level.
The original Seven World Trade Center fell at 5:20 p.m. on September 11, 2001, after falling debris from the twin towers ignited fires that caused its collapse. That 47-story office tower was built by developer Larry Silverstein in the mid-1980s as the last piece of the World Trade Center.
Today, Mr. Silverstein’s office is on the 38th floor of the new Seven World Trade Center. His sleek and surprisingly small corner office overlooks ground zero, where the developer, now 75 years old, hopes to build three giant commercial towers on the east side of the site along Church Street. The Port Authority, as part of the pending conceptual agreement, will operate the 1,776-foot Freedom Tower and build the $500 million World Trade Center Memorial.
“Clearly, this has taken significantly longer than I ever dreamt it would,” Mr. Silverstein said in an interview. “The fact that all we have to show for it is Seven World Trade Center, I find deeply troubling and enormously frustrating.
“The fact that this is the only building down here just drives me, candidly, to distraction,” he said.
Mr. Silverstein said that, five years after the attacks, he would have expected the Freedom Tower to be climbing skyward, and more significant progress on the memorial and the PATH transportation hub. He leased the twin towers from the Port Authority for 99 years about six weeks before they collapsed, and now as part of that agreement he pays about $10 million every month in rent to the Port Authority, which includes board members appointed by the governors of New York and New Jersey.
Seven World Trade Center is developing a reputation as a come-from-behind kid. In early 2002, several officials including Mayor Bloomberg, Governor Pataki, and the former chairman of the Lower Manhattan Development Corporation, John Whitehead, asked Mr. Silverstein to slow down his development schedule for the building to incorporate more public input, and wait for a firm development plan for ground zero.
Civic groups and the families of victims of the terrorist attacks said Mr. Silverstein was rebuilding too quickly. Some real estate executives questioned the wisdom of building a new office tower when downtown’s vacancy rate was climbing and rents were falling.
For the last year, tenant interest in Seven World Trade Center has been used as a litmus test for the strength of the downtown real estate market, and the pace of its recovery from the attacks. In the run up to the building’s grand opening in May, the developer’s asking rents — at over $50 a square foot — were widely thought to be overly optimistic.
“A chorus of voices down here were telling me I was smoking something if I ever expected to get $50 per square foot,” Mr. Silverstein said.
Those voices included members of the Bloomberg administration and others who suggested that Mr. Silverstein was setting rents artificially high to make his plan to redevelop the entire World Trade Center site work out financially on paper. They warned of an impending financial train wreck.
But today, real estate experts say that Mr. Silverstein’s timing in building Seven World Trade Center has been impeccable, and that the building and its developer are uniquely positioned today to capitalize on increased demand for downtown office space.
A former president of the city’s Economic Development Corporation and the Alliance for Downtown, Carl Weisbrod, said that debate over Mr. Silverstein’s asking rents at Seven World Trade has been settled.
“His confidence in the market—that he could hold his price and attract the tenants necessary — has turned out to be the case,” Mr. Weisbrod said.
So far, the building has lease commitments for more than half the total space, and Mr. Silverstein said he expects the remaining two large blocks of office space to rent by next May. The New York Academy of Sciences, Mansueto, and Ameriprise Financial have signed leases, and Moody’s is expected to finalize a large lease for 400,000 square feet in the next few days.
This summer, Mr. Silverstein scrapped a large lease with the China Center, an office center for small Chinese companies, which had been arranged with the help of top city and state officials. Many saw the move as a sign of confidence from the developer that he could sign more conventional, big-name tenants for higher rent.
A managing director for the real estate firm Jones Lang LaSalle, John Wheeler, said that $50 per square foot is in step with asking rents for top-notch class A office space in Lower Manhattan. “When the market had a higher vacancy rate, politicians were telling Silverstein he should be lowering his rent to help to jumpstart downtown,” Mr. Wheeler said.
The major factor behind the increased interest is the spread between Midtown, where some office rents have risen to over $100 a square foot a year, and downtown, where rents are about half that. The spread is too large for many companies to ignore, and the rates for top office properties downtown have risen to around $50 from around $38 a square foot, according to commercial brokerages.
The World Financial Center, the large commercial complex owned by Brookfield Properties, across West Street from ground zero, is basically full after recent lease signings. Goldman Sachs is building a new headquarters a few blocks north on West Street, which is scheduled to be completed in 2009, but the company is expected to occupy the entire building, leaving Seven World Trade as the only new space for rent. Four towers are planned for ground zero, but are not expected to open for at least five years, when different market conditions could exist.
“By all of our projections, the price downtown will continue to rise and we expect a significant amount of pre-leasing on the World Trade Center site,” Mr. Wheeler said.
Mr. Wheeler added that the downtown commercial real estate market was slowing prior to the terrorist attacks.
“Today’s market has significantly more momentum than we had five years ago,” he said. “Seven World Trade Center will be indicative of the completion of Lower Manhattan’s revival.”
Mr. Silverstein contrasts his experience of building Seven World Trade Center with the pace of development just to the south across Vesey Street. He first met with architects and engineers about Seven World Trade Center the month after the terrorist attacks in October 2001. The developer made certain changes to accommodate critics, including downsizing plans and shifting the footprint to allow for a reconstituted Greenwich Street, which will eventually run through the former World Trade Center site. He began excavation in May 2002, the building’s glass curtain wall was sealed in November 2005, and it officially opened for business this May.
“As a private entrepreneur, without government interference, I was able to do what I do best,” he said. “I am builder, I can build. I can build on time. I can build on budget. I can finance. I can lease. I can get it done,” Mr. Silverstein said.
“Dealing with different government leaders, different political entities, with different political agendas makes for an excruciatingly difficult and frustrating experience,” he said.
Real estate experts and public officials familiar with the rebuilding process say that several factors enabled Mr. Silverstein to rebuild quickly. Most notably, because the building was part an older lease agreement with the Port Authority, it therefore was not included in the lengthy public review and design process that has stalled developments at the 16-acre site just to the south.
A Port Authority official explained: “It is like, deciding to go to dinner by yourself is a lot easier than going with your 30 closest friends.”
There were no deaths as a result of the terrorist attacks at the site of Seven World Trade, allowing for quicker site preparation. And public officials wanted to rebuild a Con Edison electrical sub-station, housed in the base of the former building, as quickly as possible to help power the new Lower Manhattan.
While Mr. Silverstein is still battling insurers in Federal Court over the exact terms of the payout resulting from the loss of the twin towers, the settlement over Seven World Trade was resolved quickly. Mr. Silverstein rebuilt the building for an estimated $700 million, partially using a settlement of more than $860 million he received from insurers.
Final consent on the latest conceptual agreement over ground zero could come as soon as the next meeting of board of the Port Authority on September 21.
Barring any further setbacks, steel will arrive at the site of the Freedom Tower in January, according to Port Authority officials, and construction is expected to reach street level by 2008, finishing by about 2011. The construction of the Memorial is under way and is expected to be completed in time for September 11, 2009. The Port Authority said it is on track to complete preparation of the east side of ground zero by the summer of 2008, which will allow for Mr. Silverstein to build three commercial buildings along Church Street, to be completed in 2011 or 2012.
Next month, the first tenant to sign a lease Seven World Trade, the New York Academy of Sciences, will officially move in, joining Ameriprise, which moved in this summer. The Academy of Sciences’ president, Ellis Rubinstein, said that in four or five years, when much of the adjacent site nears completion, the decision to move to Lower Manhattan will pay big dividends.
“When I go downtown to see the progress on our floor, I see tourists taking photos of our building,” he said, which “has become a symbol in and of itself.”
“They might regard it as part of the renewal,” he said.