Late on the afternoon of Dec. 7, an 11-person jury on the 21st floor of the Daniel Patrick Moynihan United States Courthouse handed World Trade Center leaseholder Larry Silverstein a courtroom verdict that could add over $1 billion to his available rebuilding funds. And for a night at least, it seemed, the keys to the city.
Bernard Nussbaum, the head of Mr. Silverstein’s 20-strong legal team and former President Bill Clinton’s personal attorney during the Whitewater affair, was feeling it when he took his staff to the ultra-trendy Tribeca eatery Megu for several rounds of congratulatory drinks not far from the courtroom where the drama unfolded.
“The mood was both ecstatic and relieved at the same time,” said Silverstein lawyer Eric Roth, of Wachtell, Lipton, Rosen and Katz, who sipped gin-and-tonics throughout the toasting. “It had been a very hard-fought matter, and it wasn’t always fought according to the Marquis of Queensbury rules.”
One of the legal-team members, Marc Wolinsky, called the developer on the phone to deliver the news.
“He was over the moon,” Mr. Roth said about his client’s reaction.
Not long after, the 73-year-old Mr. Silverstein, turtle-like under his slicked-back hair and glasses, swanned through crowds at a benefit at Cipriani’s on 42nd Street, where New Jersey Senator Jon Corzine was one of the lesser lights.
This legal victory did something much bigger than just thwack Mr. Silverstein’s legal opposition: It made him the single most important person in the redevelopment of Ground Zero, the only man with the presumptive right to build and the only one with the private funds to do it.
And for a scion of one of New York’s great real-estate dynasties-who had pinned his legacy, before Sept. 11, on his purchase of the lease of the two iconic obelisks at the foot of Manhattan-that was no small victory.
Mr. Silverstein signed a 99-year lease on the World Trade Center six weeks before they were destroyed, and since then he has often said that his contract obliged him to rebuild a full 10 million square feet of office space on the site. But could he? Monday’s potential billion-dollar bounty may just prove the difference between being able to build only one tower on the site and being able to finance the five other buildings envisioned in the current master plan.
Architects like Lord Norman Foster, Jean Nouvel and Fumihiko Maki had already begun drawing for Mr. Silverstein-but then, architects are accustomed to designing to the size of a developer’s ego first, and his budget second.
One downtown business leader said that even Mr. Silverstein himself had grown skeptical about his chances to complete a full rebuilding of the site without a substantial insurance payout.
“Larry was the first to say that the prospects of his financing the project without the extra insurance proceeds were very thin, and conventional wisdom agreed with him,” said Kathy Wylde, president of the Partnership for New York City, a leading business-advocacy group. “The design and infrastructure requirements for this site are considerably more ambitious than the original Twin Towers, and I think there were real questions-questions that Larry was the first to raise-as to his ability to deliver without additional insurance money.”
Monday’s jury verdict will give Mr. Silverstein a great deal more breathing room in his negotiations with all the stakeholders at Ground Zero.
“This is a project we’ve always had confidence in,” said Charles Gargano, chairman of the Empire State Development Corporation, which oversees the rebuilding process, “But the additional $1.1 billion is good news, and it obviously makes Larry’s position more secure in that regard.”
For many on Mr. Silverstein’s legal team, it had been a grueling three-year battle against 24 of Mr. Silverstein’s insurers on the property-one that until Monday’s verdict had yielded a nearly uninterrupted string of legal defeats. But with the jury’s decision paving the way for Mr. Silverstein to collect a potential total of $4.6 billion in insurance payouts, the lawyers, paralegals and jury consultants who gathered round the boisterous bar at Megu finally had reason to exult.
At its nadir, the proceedings involved accusations that Mr. Silverstein was trying to exploit the Sept. 11 attacks for personal gain, and reached another nasty crescendo when the judge trying the case barred Mr. Silverstein from the courtroom for violating a gag order on public statements about the proceedings.
Mr. Nussbaum declined to comment beyond saying, “We were very pleased with the verdict.”
For the past three years and three months, Mr. Silverstein has been arguing that the destruction of the World Trade Center constituted two separate attacks, obligating his 24 insurers to double their payout from $3.5 billion to $7 billion.
Earlier this year, he lost a trial against the majority of those insurers, but the most recent jury panel agreed with Mr. Silverstein’s two-occurrence argument, which makes nine of his insurers liable for up to $2.2 billion in payouts, or double the $1.1 billion they would have otherwise owed. An appeal by those nine insurers is likely, however, and Mr. Silverstein still has to go to an arbitration panel before a final amount is decided.
Estimates for the build-out of the commercial portions of the World Trade Center site-which includes five skyscrapers and a sea of underground infrastructure improvements-run anywhere from $9 billion to $12 billion.
And in the wake of Mr. Silverstein’s courtroom loss this spring against the majority of his insurers, when it appeared that he was going to have a maximum of $3.5 billion available for rebuilding, the developer’s future on the site began to seem shaky.
Word leaked out that his landlord, the Port Authority of New York and New Jersey, was drawing up contingency plans for what might happen if the developer was unable to keep up with his $10 million in monthly lease payments, in addition to his obligation to keep pace on the rebuilding effort.
This, in turn, encouraged critics of the rebuilding process, like Robert Yaro of the Regional Plan Association, to begin suggesting publicly that it was time to rethink the entire programming on the site, perhaps to include residential development at the expense of commercial.
But the advent of a potential additional $1.1 billion in Mr. Silverstein’s coffers insulates him from those attacks. To be sure, Mr. Silverstein now has enough to build the Freedom Tower, the first building planned for the site, and likely the next one as well. After that, he will likely proceed by trying to borrow against the equity in those two structures.
This is a strategy that Mr. Silverstein said he would employ even before Monday’s verdict, but one that looks significantly more likely to succeed with two buildings to borrow against, instead of just the Freedom Tower.
“Obviously, this strengthens his position in the overall redevelopment, in that it makes it less likely that those who would want to remove him from the site would be able to do so-because he’s got a significant amount of money,” said an official familiar with the rebuilding effort. “It’s a significant change in circumstances from the day before the verdict.”
The rebuilding official also denied the suggestion that Mr. Silverstein’s recent victory will require people like himself to recalculate the developer’s relative power and influence at Ground Zero.
“I don’t think this changes how people on the inside are dealing with Larry,” said the official. “There were always people yipping from outside, saying we had to get rid of him, but that never got to the point where there were any plans to remove him. This only reinforces the status quo and increases the momentum in moving the project forward.”
The official likewise dismissed speculation that Mr. Silverstein would attempt to use his expected windfall to build several smaller towers on the site, thus preventing other developers from muscling in on his territory.
“He signed numerous agreements, including his lease, to keep the 10 mil square feet on the site, so he’s locked into the buildings laid out in the site plan,” the official said. “He can’t at this point decide to build a smaller building, because he can’t make up that building later on.”
What remains to be seen is how much of that expected extra $1.1 billion Mr. Silverstein will have to use in underground infrastructure improvements, and how much he can spend on the towers. That issue was apparently not made crystal clear in his lease with the Port Authority, and a spokesman for the P.A. said that the two parties are negotiating that very issue right now.
Mr. Silverstein’s apparent legal victory notwithstanding, there are some who still feel that the relatively murky nature of the developer’s lease agreement with the P.A. should open the door to a reconsideration of the programmatic elements of the site.
Jeremy Soffin, a spokesman for the Regional Plan Association, charges that from the moment Mr. Silverstein embarked upon a rebuilding program that departed from a literal rebuilding of the original Twin Towers, it voided his obligation to rebuild 10 million square feet of space. Of course, because Mr. Silverstein’s lease has not been made public, such assertions are hard to verify.
“We’re not rebuilding the Twin Towers exactly as they were, so that immediately opens things up to an interpretation where you can take different positions on what his obligations are,” said Mr. Soffin. “Do you build the exact same square footage, or should you take a fresh look at the market and see what makes sense from an urban-design standpoint?”
Mr. Soffin argues that there isn’t likely to be a demand for the millions of square feet in office space that Mr. Silverstein’s new towers will put on the market, especially given the fact that Mr. Silverstein’s No. 7 World Trade Center, a 52-story tower he is building just north of Ground Zero from separate insurance proceeds, will likely hit the market within two years. Neither of those buildings has any tenants signed yet, he points out. But Carl Weisbrod, president of the Downtown Alliance, a business-advocacy group, argues that the buildings will come online over a long enough period to absorb all the vacancy and more. Mr. Weisbrod also argues that each successive tower that Mr. Silverstein builds on the site will help to create the critical mass necessary to make the site succeed economically.
“As each building gets built, it strengthens the market for the next building,” he said. “It makes it easier to get financing and helps create a sense of place.”
Ms. Wylde of the Partnership for New York City, who said she is currently negotiating with an organization to become the Freedom Tower’s first private-sector tenant, said that she hopes the extra money will help Mr. Silverstein sweeten the pitch for his buildings.
“Assuming they end up with the extra money, hopefully that will help create the incentives necessary to attract tenants to these wonderful new buildings.” Designer Accord at Ground Zero The Observer has learned that on the Wednesday before Thanksgiving, all of the major stakeholders at the World Trace Center Site-the Port Authority, Mr. Silverstein, the Lower Manhattan Development Corporation and the City of New York-signed a series of agreements and memorandums of understanding that officially spell out all of the nitty-gritty architectural and design issues related to the World Trade Center Master Plan.
The final signings, which took place in a conference room at the Port Authority’s headquarters at 225 Park Avenue South, constitute the culmination of several months of negotiations between all the stakeholders and represent a codification of architect Daniel Libeskind’s Master Plan for the site-a revised version of which he presented in early 2003. (Mr. Libeskind was not a signer to the agreements, as he is technically an employee of the LMDC.)
The series of agreements specifies in detail a vast number of the plan’s technical details: the width and connectivity of the streets at the site; the exact footprints of and distance between each of the site’s buildings; the makeup of the site’s below-grade infrastructure, including the below-grade situation of all the truck-loading ramps; and the setbacks required of each of the towers, among others.
Officials close to the negotiations told The Observer that the signing of all these agreements was a necessary precondition for the seemingly unrelated deal between the Port Authority and the city over the issue of lease payments for the use of Kennedy and LaGuardia airports. The official told The Observer that before the P.A. agreed to pay the city some $780 million in back rent and interest, the P.A. had city negotiators agree to resolve all the outstanding issues at the World Trade Center, which the P.A. owns.
“The city wanted the P.A. to pay a reasonable number for its use of the airports, and the P.A. wanted to finalize the master plan,” said the official. “All parties always have a way of using leverage to come to a universal agreement.”
One notable aspect of the agreements pertains to the relationship between the 1,776-foot-tall Freedom Tower, which was designed by lead architect David Childs of Skidmore, Owings and Merrill, and the adjacent performing-arts center, to be designed by renowned architect Frank Gehry, of Bilbao fame. Both buildings are slotted for the north end of the site, and according to the agreement, they will be separated by 60 feet at their base. But in a sign that Mr. Childs is feeling somewhat less territorial about his Freedom Tower compared to this time one year ago-when he famously feuded with Mr. Libeskind over the design of the tower-Mr. Childs and Mr. Gehry have agreed to leave open the question of how much Mr. Gehry’s building will be allowed to cantilever towards the Freedom Tower as they both rise. And considering Mr. Gehry’s predilection for wild undulation in his forms, coupled with the importance of making the Freedom Tower the most distinct, iconic structure at the sight, this is perhaps no small matter to be left in the air. However, by all accounts, Mr. Childs and Mr. Gehry have a longstanding respect for one another’s talents, which should preclude the possibility of another ugly battle over the Freedom Tower’s future.
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