Larry Silverstein never wanted this attention.
He woke up obscure on the morning of Sept. 11. Just a few
weeks before, the diminutive, 70-year-old developer had completed the deal of
his life, leading a group of investors in the $3.2 billion purchase of a
99-year lease on the World Trade
Center. Respected within the
insular world of New York real estate,
he remained little known in the world at large.
That all changed the moment the Trade
Center towers-the complex Mr.
Silverstein called “my dream”-collapsed.
Suddenly, the developer was thrust into an unaccustomed
public role as New York’s
rebuilder. On television, he vowed to reconstruct the complex. In the
newspapers, he proposed four 50-story towers. In a state of emergency, he was
hailed as an example of New York’s
can-do spirit.
“Should we rebuild the World
Trade Center,
the symbol of New York? Absolutely. Without a hesitation,” a choked-up Mr.
Silverstein declared in a speech to business leaders at the Regency Hotel on
Sept. 17, bringing the crowd to its feet. “Because to do
anything less would be to simply give an incredible victory to those who sought
to destroy our way of life.”
Now that the cheers have faded, the enormity of the
rebuilding job is becoming clear. In boardroom negotiations and back-channel
conversations, the crucial first question-who calls
the shots?-is coming closer to being resolved. And Mr. Silverstein’s likely
role is becoming ever more clouded.
“I think he will be very involved,” said Lewis Eisenberg,
chairman of the Port Authority of New York and New Jersey’s
board of commissioners, which built the World
Trade Center
and still owns the land beneath the rubble. “I don’t know in what particular
role at this point.”
Mr. Silverstein has talked to another prominent developer,
John Zuccotti of Brookfield Financial Properties, about
designing a master plan that
integrates the World Trade
Center site into Brookfield’s
World Financial
Center and Battery
Park City.
“We think we should begin by reconsidering the role of lower Manhattan
in the region,” said Mr. Zuccotti.
But the reality is, a little more than a month after the
terrorist attack, Mr. Silverstein is in trouble. He faces a cash crunch, a
multibillion-dollar fight with his insurers and tentative signals from Port
Authority officials at the precise moment he needs to move fast.
Real-estate executives who applauded Mr. Silverstein a month
ago now wonder whether he can hold onto the 16-acre site. Yet in an interview
at his Fifth Avenue office
on Oct. 12, Mr. Silverstein portrayed all these concerns as mere challenges to
overcome. “We paid for [the World Trade
Center],” Mr. Silverstein said.
“We’re doing what we have to do because we have a huge investment in this
thing. And as long as we have the cooperation and the wherewithal to rebuild,
that’s what we’re intent on doing.”
Neither element-cooperation or wherewithal-is a foregone
conclusion. While Mr. Eisenberg praised Mr. Silverstein as “a man of great
conscience and wisdom,” he and other Port Authority officials made it
abundantly clear that they expect to lead, and not simply follow Mr.
Silverstein.
“I don’t know the basis from which [Silverstein] is
speaking,” said Port Authority commissioner William Martini, a former New
Jersey Congressman. “Last I heard, the [land] is still
titled to the Port Authority.”
“I can’t do this alone,” Mr. Silverstein acknowledged. “I
can only do it with the government on the federal, state and city level, with
the Port Authority being a total participant.”
Mr. Eisenberg said that the Port Authority is making close
study of the site-and Mr. Silverstein’s legal rights to it.
“In some ways, it’s analogous to 1965,” when the World
Trade Center
was begun, said Mr. Martini. “Which entity is best positioned to lead [the
redevelopment]? It’s the Port Authority.”
Money, too, is becoming a problem for Mr. Silverstein. He
still has to pay rent to the Port Authority as if the World
Trade Center
still existed, full of tenants. For now, he says he is making the
payments-about $2.5 million a week-out of his own pocket. If he defaults on the
payments, he could lose control of the property.
Mr. Silverstein must soon collect at least some of the $7.2
billion in insurance claims he has filed. But his insurers are fighting him. A
long legal battle could turn on a bit of legalism: Mr. Silverstein says that
the assault constituted two distinct terrorist attacks, doubling his $3.6
billion in insurance policies; the insurers say it was one coordinated attack.
Experts call Mr. Silverstein’s claim audacious. Why is he
trying it? Perhaps because he thinks $3.6 billion won’t be enough. Financial
documents connected to a Trade Center bond issue earlier this year warned that
Mr. Silverstein’s casualty insurance policy amounted to “significantly less”
than the cost of rebuilding.
“Is the industry happy about having to pay us $7.2 billion?
The answer is no,” Mr. Silverstein said. “[But] without a doubt, we’ll get it
resolved.”
Appeals to Congress
According to Congressional staff, however, Mr. Silverstein
recently told members of Congress that he needs federal loan guarantees to keep
going while he waits on the insurance payoff. “He was greatly fearful that he
would not be able get that kind of financing without a guarantee,” said John
Sheiner, an aide to Representative Charles Rangel, who was present at the
meeting. But Mr. Silverstein dropped the idea when members of Congress voiced doubts.
Despite all these problems, Mr. Silverstein says he is
working on a tight time frame. “The site is going to be cleared, present
schedule, [in] 12 months,” he said. “Six months for environmental remediation
and securing the foundations. Eighteen months from today, structural steel can
be coming up out
of the ground. And five years from
today, we can have-and should have-a finished World
Trade Center.”
But that schedule could be wildly optimistic in a New
York barreling towards recession. Companies displaced
from the World Trade
Center have found ready space in
buildings emptied by the financial downturn, and any new complex will have to
vie for tenants with a dozen or so development sites at the ready around the
city.
“My sense is that this is going to be a long haul,” said
real-estate attorney Lawrence Lipson of Proskauer, Rose.
Among the three finalists in the bidding for the World
Trade Center,
Mr. Silverstein was considered an afterthought, a lone private investor among
big public companies. He rounded up a formidable consortium of investors and
used his patience, charm and wile to prevail. Now he faces a problem like none
any developer has ever seen.
“The impact on lower Manhattan
is devastating; [on] the city, huge; [on] the state, enormous,” Mr. Silverstein
said.
Mr. Silverstein added that he narrowly escaped death on
Sept. 11. “The only reason I wasn’t there that morning was because of a
doctor’s appointment,” he said. His firm lost four employees in the disaster.
“It’s painful. I’d rather not talk about it. Let’s get it behind us,” he said,
ending discussion of the disaster with a wave of his hand.
Mr. Silverstein watched the buildings collapse on a
television in his Fifth Avenue
office. He emerged from seclusion soon afterwards, telling The Wall Street
Journal that he planned to rebuild. Since then, he’s been moving forward
aggressively. “It costs $2.5 million a week,” Mr. Silverstein said. “So when
you’re sitting and contemplating the eternal verities, you can do that for 10
minutes, 12 minutes, but then you gotta get on with it.”
The plans tentatively call for four 50-story office towers
and a monument honoring the dead. “That’s their burial ground, so you need a
memorial,” Mr. Silverstein said.
He’s already hired prominent architect David Childs, of
Skidmore, Owings and Merrill; urban planner Alex Cooper, who designed Battery
Park City; and a lot of lawyers.
Mr. Silverstein has also been making the rounds around Washington,
accompanied by blue-chip Washington
lobbyists Ed Gillespie and Jack Quinn. In addition to the loan guarantees, he’s
asking for legislation shielding him from lawsuits connected to the attack.
Bottom-Line Realities
Mr. Silverstein’s alacrity caught many unprepared, including
the Port Authority, which lost 74 employees in the disaster, in addition to its
headquarters building. Yet Mr. Silverstein may have no choice but to move fast.
To keep paying rent to the Port Authority, he must collect at least some
portion of his $1 billion “business interruption” insurance policy. But this insurance
policy, Mr. Silverstein said, only kicks in if he can demonstrate that the
complex will be rebuilt. Even if he collects it, that insurance runs out in
three years.
So Mr. Silverstein needs the Port Authority’s cooperation.
“He’s going to have to negotiate with the Port Authority,” a New
York state official said, adding that Mr. Silverstein
shouldn’t put the authority “in a box.”
Not surprisingly, the Port Authority and Mr. Silverstein
have differing interpretations of what Mr. Silverstein’s rights are under the
arcane provisions of his lease which cover damage to, or the destruction of,
the building.
The problem, said Mr. Lipson-who engaged in lease
negotiations with the Port Authority on behalf of an unsuccessful bidder,
Vornado Realty Trust-is that no one spent much time contemplating the total
destruction of the complex when the lease was written.
“I remember making the comment, ‘[Terrorists] tried to
destroy the building once unsuccessfully; there’s no way the entire building’s
going to come down,’” Mr. Lipson said. “You see how stupid I was.”
The Port Authority has about $1.5 billion of its own
insurance, which will go to cover damage to the PATH train terminal underneath
the W.T.C. site and other infrastructure. But if Mr. Silverstein defaults on
the lease, the Port Authority stands to collect all his insurance money,
another New York state official
claimed.
Real-estate lawyers and developers said there are reasons
why the Port Authority might not want Mr. Silverstein to develop the site.
“This could be, from start to finish, a 10-year project,”
said one developer. “I think the Port Authority will question his organization,
and question the experience of his partners.”
Mr. Silverstein’s is a family-run private company. He has
built some buildings-most significantly 7 World Trade Center, which was also
destroyed in the attack-but nothing like the four-building complex he is now
proposing. His partners, which include members of the Goldman real-
estate family and real-estate
investor Joe Cayre, signed on to invest in buildings, and some speculate that
they may not want to be involved in a development project.
Philip Rosen, who represented Mr. Goldman on the deal, said
that the rest of the partners were fully behind Mr. Silverstein. “They’re
investors, but they’re also developers,” he said.
No single developer has tried to complete a project of such
scale in New York since the
1980′s, when George Klein attempted to build four office towers in Times
Square. That project went awry amid political squabbling and Mr.
Klein’s financial setbacks.
Many suggest that the formula that eventually worked in Times
Square-parceling out buildings to several different
developers-might be the model for the World
Trade Center
site.
Mr. Silverstein indicated he would be resistant to such an
idea. “As I recall, 42nd Street
took I don’t know how many years to get done,” he said. “If we were to go for
10 or 12 or 14 years … or bring in different people, then I gotta tell
you-we’re going to be out of money before we start.”
Some involved in the World
Trade Center
lease deal suggested that the Port Authority might try to buy out Mr.
Silverstein’s interest in the complex. “The most likely outcome, in my view,”
said one real-estate attorney who has made a close study of the deal, “is that
the Port Authority will say, ‘Larry, we love you, you’re a great guy, but we
want to do something new.’”
But another attorney who is close to the ownership group
said the partners would resist any buy-out. “I think that that would lead to
years of fighting,” he said. “I think that the best scenario is that everyone
sits in a room, locks the door and figures out what to do with the site.”
Mr. Silverstein said he’s in it for the long haul.
“I’ve simply decided the next five years of my life are
going to be dedicated to getting this rebuilt,” he said. “Because
emotionally, I find it necessary to do it … [and] because, God only knows, the
economy of this city-the economy of the state-is dependent upon our doing so.”
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