For many years, just about the only person who thought that companies would want to relocate to the World Trade Center site was Larry Silverstein, the scrappy real-estate developer who had a lot of financial reasons to believe so.
When families pushed to preserve the original 16-acre site as a memorial, Mr. Silverstein, who has the right to rebuild most of the site with office towers, pushed back. When the Mayor started talking about the need for more schools and housing in the area, Mr. Silverstein countered that there was nothing more important than making sure lower Manhattan regained its stature as the world’s financial capital.
Then, lo and behold, it did.
At least a little. Say what you will about Mr. Silverstein—an aide to former Governor Pataki once called him “greedy”—but his worldview won out June 14 when JPMorgan Chase announced it would build a 40-story building on Liberty Street and move 7,000 employees there from midtown. In fact, so much had the world turned over the past year and a half that Mayor Bloomberg, once a downtown skeptic, was singing the financial district’s praises.
“Today you have a booming downtown. You have very little space to build buildings in this city,” he said. “Our problem is an embarrassment of riches.”
Still, Mr. Silverstein’s victory over the doubters may have been largely pyrrhic. It is not he who is receiving the $290 million payout from Chase after all, but the Port Authority, which wrested control over the Deutsche Bank property from Mr. Silverstein in a series of exhausting negotiations last year intended to make sure, among other aims, that at least part of the site could be turned into hotels or apartments.
“It is a little bittersweet for Larry,” said Kent Swig, a like-minded real-estate developer who has bought three million square feet of office space in lower Manhattan since the September 2001 attacks in the belief that the market would come back. “When they went out and took back that property through a negotiation, they were saying, ‘We don’t believe the numbers.’ At the same time, they are living those numbers now.”
Mr. Silverstein, through a spokesman, declined to be interviewed. But minutes after the Chase press conference ended, he sent out a press release to reporters—just in case anyone worried he might be sulking about being left out.
“JPMorgan Chase is a tremendous addition to the new Downtown,” the statement read. “Like the Goldman Sachs headquarters and the speedy lease-up of 7 World Trade Center, it proves again that Downtown has re-emerged as the financial capital of the world.”
It may be a little premature to declare that Mr. Silverstein has been vindicated. He still has 6.2 million square feet to lease in Towers 2, 3 and 4, all scheduled to be finished by 2012, and another 475,000 square feet in 7 World Trade Center, which is already completed. But the Chase deal shows just how quickly fortunes can change in real estate, and how the lengthy production cycle requires developers to be thinking one or two economic cycles ahead.
In March 2006, Class A landlords in the financial district were asking for an average of $42.70 a square foot in rent annually and the vacancy rate reached 11.2 percent, according to Colliers ABR, a real-estate services firm. Deputy Mayor Dan Doctoroff testified to the City Council that month that Mr. Silverstein would not have enough money from rents and insurance payments to see through the complete building of the site, and therefore something had to be done.