Big Shots Huddle As Wary Downtown Recalls Its Optimism

From the sixth floor of 1 Liberty Plaza, Ric Clark surveyed the

ruins below. Men in orange vests and hard hats were at work on the burned-out

husks of 4 and 5 World Trade Center, where Mr. Clark used to shop for books.

Across the way, sun glinted off the glass atrium at the center of the World

Financial Center, a giant office complex owned, like 1 Liberty, by the company

Mr. Clark runs, Brookfield Financial Properties.

“It looks more and more like a construction site every day,” Mr.

Clark said hopefully. Then a crane lifted a giant wedge of debris, and a cloud

of yellow smoke billowed from beneath the rubble.

At the center of disaster, such things pass for a return to

normalcy: a little less rubble, fewer barricades, a fainter whiff of noxious

smoke.

Mr. Clark and other downtown landlords are urging companies on

the margins of the disaster to come back to work. One Liberty, which was once

erroneously reported to have collapsed, reopened on Oct. 25. A huge banner

hanging above the door of another nearby office building reads “195 Broadway Is

Open.”

Yet lower Manhattan is still far from normal. You can see it on

the streets in the morning, where some commuters wear gas masks as they walk to

work. You can hear it in the office towers,wheresome employees are talking of

quitting, saying they can’t work while overlooking ground zero. And you can

sense it in the worried voices of downtown landlords and public officials, who

fear that a spate of recent corporate defections to Midtown, West- chester

County and New Jersey could develop into a full-fledged refugee crisis. For the

city, such a scenario would amount to a disaster as economically devastating as

the attack itself, with untold billions in tax revenue lost.

“To avoid an exodus, we’re going to have to do things to improve

the quality of life downtown,” said T.J. Gottesdiener, managing partner of

Skidmore, Owings and Merrill, an architectural firm whose offices are within

sight of the destruction.

On Oct. 19, a group of business leaders-including developers

Jerry Speyer, Howard Milstein and William Rudin, New York City Partnership head

Kathryn Wylde and former First Deputy Mayor Peter Powers-gathered in the

Manhattan offices of Senator Hillary Rodham Clinton to deliver the grim

assessment. Lower Manhattan is in deep trouble-physically, financially and

emotionally-and something has to be done immediately to save it.

At first, said one person who attended the meeting, the

prevailing attitude was “O.K., we’re going to fight this, we’re going to stay,

we’re going to overcome.”

Now reality has set in. “People are saying ‘We’re bleeding and we

need help,’” he said.

Every few days, it seems as if another large corporation

announces plans to forsake the area. Last week it was Citigroup, which

announced that it planned to put a large block of office space at 125 Broad

Street on the sublease market. The corporation joined Merrill Lynch, American

Express, Dow Jones and Lehman Brothers on the growing list of companies that

plan to relocate some or all of their employees from downtown.

Shortly after Mrs. Clinton met with the developers, she and

Senator Charles Schumer announced a plan to give a $3,000-per-employee tax

credit to businesses that stay downtown. But will financial incentives be

enough? Downtown landlords and real-estate agents say they are struck by the

degree to which tenants are making decisions to leave based on noneconomic-some

say irrational-factors.

“A lot of it has been catalyzed by emotion,” said Scott Pudalov,

a real-estate broker with Insignia-ESG. “It’s a knee-jerk reaction rather than

a rational [one].”

“The psychology of lower Manhattan is decimated,” said Larry

Silverstein, the developer who ran the World Trade Center and still owns

several other downtown buildings. The climate is so chilly that one landlord

said appraisers are lopping 20 to 30 percent off the value of downtown office

properties.

Moving could be a costly decision for many companies, especially

if they are unable to extricate themselves from their long-term leases

downtown-a likely prospect, according to attorneys. But the companies say they

have little choice. Some of their buildings are damaged. Transportation is

lousy, especially for suburban commuters. Their employees are scared and

traumatized.

Many companies insist on conducting their own tests on the air

and structural soundness of their buildings. “I talk to my tenants,” Mr.

Silverstein said in a recent interview. “They’re a very unhappy lot, for good

reason. First of all, the air-it’s not comfortable to breathe.” There’s the

transportation problems, he added, and the trucks.

“Then you look out the front windows of my building at 120

Broadway, and what do you look at? You look at ground zero. And every time they

remove another piece of [rubble], it flares up all over again.”

Mr. Silverstein said all this

is another reason why the World Trade Center should be quickly rebuilt-by him.

But in the short term, mending the collective psyche of downtown may be the

most daunting repair job of all.

On the morning of Oct. 26, Ilan Moss, 26, stood outside the

Rector Street office building where he works, smoking a cigarette. Mr. Moss

works in the Holocaust Claims Processing Office of the New York State Banking

Department. “I work with Holocaust survivors,” said Mr. Moss. “When I came back

to work, there was this fine dust all over my desk. I constantly wondered what

was in that dust. That was probably the worst thing.”

He often sees the trucks pass carrying twisted metal beams.

Tourists go by, asking the way to ground zero. He said he once saw some

stockbrokers come close to beating up a group of Germans carrying cameras.

He has a lot more smoking

companions than he used to, he said. Meanwhile, pregnant women in the office

are worried about what’s burning next door. A headline in the Daily News on Oct. 26 about air quality

on the site-”Toxic Zone”-did nothing to calm nerves.

At The Wall Street Journal ,

employees were already rattled. A memo circulated in mid-October said that

testing found unsafe asbestos levels in the paper’s offices in the World

Financial Center, which it has yet to reoccupy. Employees who have been

scattered around the region (some permanently) began meeting to see if they

could delay the paper’s return to downtown.

“Management has said that for a long time [the World Financial

Center] was a great place to work, and for some years hence it will be a

miserable place to work,” said Gardiner Harris, a reporter and Newspaper Guild

spokesman. “There are people who came to work that day and witnessed terrible

things-people jumping out of windows, the airplanes hitting the buildings,

horrific images that stay with them,” Mr. Harris continued. “Many of those

people have absolutely no interest in ever going back to the site. They are

scarred, they are scared, and some have threatened to quit if we complete our

return.”

Low Morale

They are hardly alone in their sentiments. At the Securities and

Exchange Commission, which was displaced from 7 World Trade Center and now

overlooks the site from offices in the Woolworth Building, morale is low. “I

have friends who say they’re thinking about quitting their jobs every day

because of the smell,” Andrew Bartlett, 26, an account manager for an

information-technology recruitment firm, said as he waited for the light to

turn at the corner of Rector Street and Broadway.

“There were a lot of people on the floor who never came back,”

said Steve Delgado, a trader on the New York Mercantile Exchange, as he sat on

a bench outside his offices, looking over New York Harbor towards the Statue of

Liberty. “There were people who were just too upset.”

Mr. Delgado said that in the days since, however, things have

gotten better. “The first week, it was so depressing coming down here,” he

said. “Unfortunately, six weeks later, it’s just become part of everyday life.”

Indeed, many downtown boosters are hoping that the longer they

remain downtown, the more workers and employers will become inured to what

happened on Sept. 11.

“This anxiety does have a

half-life,” said Harvey Weitz, a partner at Schneider, Kleinick, Weitz,

Damashek & Shoot. “Every day it becomes geometrically more remote.”

At first, Mr. Clark said, there was talk of blocking out the back

windows of 1 Liberty to shield returning employees from the view. But after a

few weeks, none of the returning tenants decided they wanted it done.

“Our guys watched people

jumping out the windows,” said Stephen Siegel, the chairman and chief executive

of Insignia-ESG, which will soon be returning to an office in 1 Liberty. “Yes,

I think it’s traumatic for employees to go back there. But I think some

employers are using that as an excuse.”

Some, like Mr. Siegel, said they would never leave downtown.

“We’ve been in this building since it opened in 1932,” said Jerome Caulfield,

managing partner at the law firm of Carter Ledyard, which occupies an office

building at 2 Wall Street.

But not everyone feels the same loyalty. Take the case of 1

Liberty Plaza.

After a few false starts, the

building reopened last week. Brookfield bent over backwards to reassure

tenants. Tight security measures were imposed. Brochures explaining the

strenuous environmental and engineering tests performed on the building were

left in the lobby. (“Many of you may have heard creaks in the building’s walls

in the past. Some people may only now become aware of these noises. Please

don’t be alarmed.”)

But as of Oct. 30, only two

of the building’s 20 tenants had moved back in, Mr. Clark said, with a few more

to come in November.

Mr. Clark said he believes the majority of the tenants will

eventually return. But one big one, the financial firm Gruntal, has said it’s

considering leaving the area; another, the Nasdaq stock exchange, recently

disclosed that it is considering leaving the offices it leased, with great

fanfare, only in April. “We’d only move back if it were safe,” said Nasdaq

spokesman Andy MacMillan, who added the company had been “struck by the

convenience” of midtown.

The tax incentives could help

persuade some of the wavering companies-but they are by no means a sure bet in

Congress. “This is a heavy lift,” said Bradley Tusk, a spokesman for Mr.

Schumer, “but we’re fighting like crazy to see that it happens.”

Brokers Optimistic

But real-estate brokers, perhaps a touch optimistically, said

they expected the situation to improve soon, as an onslaught of bargain-hunting

businesses look downtown-especially if there are tax breaks to do so.

“You can’t expect all these people to come back down there;

neither would you or I if something happened that was so seriously

traumatizing,” said Peter Hauspurg, chairman of Eastern Consolidated

Properties. “[But] eventually this will be forgotten, the place will look great

down there, and people looking for a bargain will head back down. There will be

a whole different group of people with a different set of memories.”

Mr. Clark, for his part, still thinks that the disaster-aid money

will transform downtown for the better, providing the impetus for an improved

mass-transit system and more stores and museums and restaurants.

“Some of the guys who say they’re leaving are having an emotional

reaction to the tragedy,” he said. “I think as time passes, they’ll see

progress.”

But some aren’t prepared to wait and see. A few hours before Mr.

Clark spoke so optimistically, Scott Fialkow, an accountant with the financial

firm Tudor Investment, wheeled a stack of file boxes on a handcart to the curb

in front of 1 Liberty. As he and a co-worker loaded the boxes into the trunk of

a black Cadillac, Mr. Fialkow explained that his company had decided to

relocate to offices in Connecticut.

“We heard each crash,” he said. “I think a lot of people were

scared to work in the city, let alone here.”

Mr. Fialkow closed the trunk, and the car pulled away.

-Additional

reporting by Karina Lahni and Sridhar Pappu