Mike Sees City Taking Control At Ground Zero

The Bloomberg administration is pursuing a strategy to take over the World Trade Center site that will likely increase pressure

The Bloomberg administration is pursuing a strategy to take over the World Trade Center site that will likely increase pressure on developer Larry Silverstein to abandon his interests in the rebuilding effort, according to a Port Authority source familiar with the city’s position.

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Mr. Silverstein, who headed a consortium that signed a 99-year lease on the site six weeks before the terrorist attacks of Sept. 11, has asserted his right to rebuild without reducing the 10.5 million square feet of office space or 600,000 square feet of retail space that existed in the complex. That condition has vexed rebuilding authorities, who must also set aside property for a substantial memorial, a massive transit hub and a restored street grid on the 16-acre site.

But now, sources say, there has been progress in talks between the Port Authority and Deputy Mayor Daniel Doctoroff about a proposed swap that would trade the 16 acres at Ground Zero, owned by the Port Authority, for the land beneath Kennedy and La Guardia airports, owned by the city and leased to the Port Authority. Those talks are part of an ambitious scheme to wipe the slate clean at Ground Zero, allowing the city to remove many of the conditions written into Mr. Silverstein’s lease with the Port Authority.

It’s a strategy that could drastically alter plans for the site, provided the city can persuade Mr. Silverstein and Westfield America, the American arm of the Sydney-based global megamall developer Westfield, to give up their leases. Port Authority executive director Joseph Seymour has said that talks on the land swap would continue through the spring and reach a resolution by the summer.

Mr. Silverstein has said he doesn’t particularly care if the city replaces the Port Authority as his landlord, but the pressure on him to abandon his claim on Ground Zero is likely to intensify if Mr. Doctoroff has his way at the site.

While there is little more than hushed discussion of the topic, the city would appear to have the option of condemning Mr. Silverstein’s lease if it took over the deed. While there is some disagreement on the matter in legal circles, the Port Authority has asserted that since the bistate agency was created by an act of Congress, neither the city nor the state government can condemn land it controls. If the city held the deed, that would no longer be the case. The leaseholders would have to be given fair market value for the property-which several sources have currently estimated at $1 to $2 billion-but could be compelled to leave if a public benefit would be secured by kicking them out.

That severe approach is unlikely. The scenario laid out by Port Authority sources is more complex: The city would obtain the deed to the World Trade Center, along with a one-time payment still under discussion, in exchange for the land under the airports. The one-time payment that Mr. Doctoroff is proposing-which would reflect back payments on the Port Authority’s lease on the airports-is somewhere around $900 million to $1 billion. Most likely, the city would attempt to buy the leaseholders out of Ground Zero with those funds, rather than forcing their hand with a condemnation procedure.

According to Swiss Re Inc., the lead insurer on the World Trade Center, the insurance proceeds from the destruction of the towers would then revert to the city, after some payouts were made to Mr. Silverstein, the Port Authority and Westfield.

“There are stipulated insurance parties: Silverstein, the Port Authority and others,” said Swiss Re chairman Jacques Du Bois. “What would have to happen is, in buying out Silverstein, they’d have to include that [the city] would have the right to the insurance proceeds.”

That money would then be used to implement Mayor Bloomberg’s plan for lower Manhattan, released last year, and to provide infrastructure improvements in and around the World Trade Center site to attract development of an unspecified nature-but without the specific requirement of 10 million square feet of office space or 600,000 square feet of retail space.

Mr. Doctoroff has attracted criticism from Mr. Silverstein for meeting privately with Swiss Re executives to discuss the insurance payouts expected on the property. Mr. Dubois has suggested that the insurer would offer a more generous insurance settlement if the city were the client rather than Mr. Silverstein; litigation between Mr. Silverstein and Swiss Re over his insurance payout has become that heated.

But in recent appearances, Mr. Silverstein has attempted to highlight his personal connection to the World Trade Center site. As part of a public-relations blitz that is now largely over, Mr. Silverstein appeared on Charlie Rose on Feb. 27 and reminisced about his longtime attachment to the site. “I always say to myself,” he told Mr. Rose, “since I’ve spent this enormity of time and had this major commitment to rebuilding, having suffered what I suffered, what purpose is served by taking me out?”

Mr. Silverstein told Mr. Rose about the day in 1987 that construction was finished on 7 World Trade Center, the only portion of the site that Mr. Silverstein has an uncontested right to rebuild. (Construction has begun, even though no tenant has promised to move in.)

“Looking up at this major building that I had just built, the Twin Towers dwarfed it,” he said. “And I thought, ‘Wouldn’t it be wonderful to some day own that real estate?'”

Five years later, in the final phases of the bidding process for the 99-year lease, Mr. Silverstein was crossing the street at the intersection of Madison Avenue and 57th Street when he was struck by a drunk driver. His pelvis was shattered. The dizzying final days of preparing his company’s bid on the World Trade Center were spent in a hospital bed, surrounded by paperwork and advisers.

“I remember lying there,” he said. “I said to the doctors, ‘Can you reduce the morphine?'”

After a last-minute breakdown in the front-running bid, Mr. Silverstein’s team won by a hair. His son, Roger, and his daughter, Lisa, were working for him in temporary offices on the 88th floor of the W.T.C. north tower. Regular meetings with tenants in the weeks immediately following their July 26, 2001, takeover of the building were held each morning at Windows on the World. But on Sept. 11, Roger and Lisa Silverstein were running late. Meanwhile, Mr. Silverstein’s wife of 46 years had laid down the law: The developer could not cancel an appointment with his dermatologist, even to meet with tenants at his most important property. If the attack had happened just a little later, Mr. Silverstein’s children would likely have been trapped at Windows. As it was, Silverstein Properties lost four employees in the attack, two of whom had just recently been hired.

At a meeting on Sept. 12 with his public-relations adviser, the developer outlined his public statements about the destruction of the World Trade Center.

“It is not hyperbole,” notes from that meeting read, “to suggest that what Larry says and does in the next several days will become part of American history. He needs to display his patriotism, his vision and his humanity.”

But it appears that aside from displaying those qualities, Mr. Silverstein was unclear about rebuilding as of Sept. 12. The notes outline three positions. The first was a vow to rebuild: “It will again stand as a symbol of not only this city but against tyranny and evil.” The second was to rebuild, but to put a distinctly populist cast on the effort: “The WTC is no longer a real estate site that belongs to a corporation-it belongs to the people of this nation. As a result a national crusade will be undertaken that allows us to rebuild this symbol of American pride and determination where the people of this nation are equal partners in this effort.” The third way: “It is inconceivable that we could rebuild a place of commerce on land that has become drenched with the blood of American patriots. It needs to be consecrated much the way Gettysburg and the [U.S.S.] Arizona are now.”

Within days, Mr. Silverstein had dispensed with the third option entirely and publicly vowed to rebuild the Trade Center. What’s more, he has asserted his “absolute right” to be the sole developer of the site, and has asserted a right and an obligation to replace every single square foot of the office and retail space that was lost on Sept. 11.

Payout Unclear

He often repeats that his insurance proceeds-currently tied up in a Jarndyce v. Jarndyce –style lawsuit that will determine whether the attack constituted one or two “occurrences” for legal purposes-are the only independent source of funds for rebuilding. But it is unclear what Mr. Silverstein will receive. His insurers claim that the payout is far lower than he’s been suggesting. If they win their case and a jury rules that there was only one occurrence, the total payout will be $3.5 billion. But Mr. Silverstein’s debt on the site will eat into that significantly. Of course, if Mr. Silverstein wins, he gets just under $7 billion.

When that prospect seemed the likely outcome-the State Attorney General’s office has filed an amicus brief suggesting that the developer’s interpretation of his insurance policy is the correct one-keeping Mr. Silverstein around seemed a necessity. Why forgo all that rebuilding money?

But with Swiss Re’s suggestion that a settlement reached with the city would be more generous than a settlement with Mr. Silverstein, that incentive is weakened. It’s no wonder that Mr. Silverstein is made nervous by Mr. Doctoroff’s private meetings with Swiss Re-though Mr. Doctoroff has claimed that they were nothing more than meetings with parties interested in the rebuilding efforts.

Then, too, Mr. Silverstein has been systematically alienated from key elements of the rebuilding process. His own architects, Skidmore, Owings & Merrill-hired before Sept. 11 to revamp the Trade Center’s public spaces and make them more attractive to tenants-found themselves in the difficult position of having to compete with other firms to develop a public design for the World Trade Center site, even as they were developing their own plans directly for Mr. Silverstein. They teamed up with a group of artists and others to develop a plan.

According to sources familiar with the situation, Skidmore was approached by key members of the Lower Manhattan Development Corp. shortly after the second round of nine plans was introduced to the public, and told that it was time to start working on real site designs with Mr. Silverstein and the LMDC. Skidmore eventually withdrew from the competition, but asked that its partners on the project be allowed to remain in the competition without them. The LMDC then announced that they were being removed from the competition.

Now, Skidmore’s position is unclear. The site design by Daniel Libeskind has been chosen, and the Libeskinds have met with the lead partners on the World Trade Center project at Skidmore and with Stan Eckstut, who is performing an independent study of the site for the Port Authority. Mr. Silverstein has publicly endorsed the Libeskind plan, and it appears that he-through Skidmore-and Mr. Libeskind will work on the project together. The relationship is by all accounts amicable and cooperative, but its ambiguity is telling.

And not everyone on Mr. Silverstein’s team is happy with the current situation. Sources familiar with Westfield’s position have said that in meetings with Mr. Libeskind, they felt “lectured at” about how the retail space on the site should be arranged to contribute to a sense of street life. Westfield is pressing for a large, contiguous (and unpopular) retail space, much like the retail complex below the original Twin Towers.

Not Ready to Deal

While Westfield shares Mr. Silverstein’s agnosticism about who controls the site, the Port Authority or the city, sources said that unlike Mr. Silverstein-who has indicated a willingness to swap some office space on the site for other space nearby-the company would not consider swapping out of the site, where 150,000 PATH passengers passed through its concourse each day.

And though Mr. Silverstein has attempted to avoid difficulty over the Port Authority’s proposal to build a terminal for tour buses on the footprints of the Twin Towers-beneath the proposed “memorial pit” that is central to Mr. Libeskind’s design-the proposal has nevertheless become a hot-button issue.

The Port Authority insists that the hundreds of tour buses expected in lower Manhattan daily when the Trade Center is rebuilt will need someplace to be stowed. The P.A.’s proposal is repugnant to many-including some of the architects working on Mr. Silverstein’s team, as well as bereaved family members and many who have called for the preservation of the tower footprints-but it has become a rallying cry for lower Manhattan residents sick of their bus-choked streets, and for businesses near the site that see the drop-off point as a magnet for business.

What happens at Ground Zero may well depend on when, and how, the place is defined more than how it’s designed. Is it, as Mr. Silverstein has suggested, a symbol of pride that must be rebuilt as the mountain of commerce it once was? Or is it, to paraphrase another option his advisers suggested the day after the terrorist attack, no longer a real-estate site that belongs to a corporation, but one that belongs to the people of the city?

Mike Sees City Taking Control At Ground Zero