By Daniel Geiger
Larry Silverstein has had to endure a lot at the World Trade Center site.
He had to grapple with his insurers in two trials to win the billions that would be necessary for the rebuilding.
Throughout the various impasses and setbacks that plagued the multibillion dollar redevelopment, the Port Authority, which owns the site and is co-developing it, painted him publicly as a greedy developer willing to hold the project captive in order to safeguard his interests. At times, it seemed bent on forcing him out.
Even Mayor Michael Bloomberg, who eventually helped broker the resolution last year that put the site back on track, accused Silverstein of having little “skin in the game,” a suggestion that Silverstein had pulled his equity from the project using insurance proceeds while at the same time seeking public funds to help him finance two commercial towers at the site.
Of all the name calling, mudslinging and posturing that has taken place during the decade of rebuilding at the site, Bloomberg’s comment seemed to sting Silverstein, who normally appears unflappable, the most.
“He completely lost track or didn’t give credit to the fact that by that time he said that, we had invested about eight years of work,” Silverstein said. “To say we had no skin in the game was ridiculous, we had a huge amount. My entire heart and soul was in this. How could you say there was no skin in the game? It bothered me when he said it.”
Sitting in his office high in Seven World Trade Center, with a sweeping view of the bustling progress at the WTC site below, Silverstein looks more perplexed than anything else. He is famous for being a tenacious and indefatigable negotiator. Throughout his years of involvement at the site he has shown steadfast and steely resolve. But if there is one thing that he isn’t, it’s bitter. Silverstein heaped praise on Mayor Bloomberg, crediting him more than any of the many other public officials who have played a role at the site for contributing to its successful outcome.
“Without him, it couldn’t have gotten done, he brought Chris (Ward) to the table and as a result, my firm and the Port Authority are working in unison and that’s why you’re seeing the progress being made,” Silverstein said.
Silverstein even spoke warmly of Chris Ward, the executive director of the Port Authority, who had often excoriated him during public speaking events and in the press when the two were at loggerheads last year. Silverstein was then insisting on some type of financial commitment from the Port Authority that would allow him to secure construction financing for Three World Trade Center, the over two million s/f tower he is planning to build on the east side of the site next to Four World Trade Center, which is already rising.
Having committed roughly $1 billion from its capital capacity to help finance Four World Trade Center, the Port Authority had refused the request. Ward went on the offensive, allowing the impasse to go into arbitration and decrying Silverstein for holding the site hostage; Three World Trade Center’s foundation after all is tied to the infrastructure for the Santiago Calatrava-designed transit hub at the site and one project can’t proceed without the other.
In the end the Port Authority together with the city and state put together a $600 million package of assistance for Three World Trade Center so long as Silverstein can meet certain preleasing targets that will assure its financial stability. Of course Silverstein probably could have already built the tower during the last real estate boom when credit was readily available, had the Port Authority delivered infrastructure to the site and prepared Silverstein’s parcel for development according to original construction schedules. The current arrangement, on the other hand, presents a daunting task. Securing sufficient leasing in the building will be a challenge given the current headwinds in the economy.
Stepping into Silverstein’s perspective, it seems it would be easy to get infuriated at the Port Authority over more than just the consequences of busted timetables. At many points, the Authority seemed absurdly pessimistic about the site’s potential as a commercial hub, even though logic would tell even a casual onlooker that a cluster of thriving skyscrapers was the only way Silverstein could possibly be expected to pay the hundred or so million dollars a year in ground rent at the site. In its resistance to offering support for Silverstein’s commercial development, the Port Authority went so far as to commission a study during the downturn that concluded it would take decades to fill the WTC towers – an assessment that seemed all the more absurd when it leased one million s/f to the media giant Conde Nast at One World Trade Center earlier this year.
“Conde validated everything we have said about the site,” Silverstein said. “I kept telling the world, if we can lease Seven World Trade Center, why can’t we lease all the towers at the site?”
The Authority meanwhile is spending close to $4 billion on the site’s transit hub, a phenomenal sum that surely went a long way toward its recent decision to raise tolls. The hub, though architecturally stunning, will handle a fraction of the commuter traffic of other stations in the city such as Penn Station and Grand Central Terminal.
Silverstein however is not one to dwell on the past.
“I think you have to look forward, you can’t look back,” Silverstein said. “There is still so much to do. Stuff happens and you deal with it and that precludes looking back. Looking back serves no purpose.”
Because Four World Trade Center will largely be filled by the Port Authority, which will relocate its headquarters into the building, most of Silverstein’s focus these days is on finding a tenant to fill a large portion of Three World Trade Center. The building appeared to suffer a setback with the decision in recent weeks that the Swiss bank, UBS, which had been considering a large lease in the property, had decided against a deal.
“We had spent a great deal of time with UBS,” Silverstein said. “And unfortunately, the announcement of a drop in earnings just took the wind right out of their sales.”
Silverstein said he was disappointed, but pointed out that the bank’s abrupt reconsideration was nothing he hadn’t experienced before. In the 1980s when he developed the original Seven World Trade Center, the financial firm Solomon Brothers committed to about a million s/f in the tower only to shift its focus instead to a deal in midtown. Silverstein ended up wooing the financial company Drexel Burnham Lambert only to have the firm collapse as it became embroiled in scandal just days before it was to sign the lease. Solomon unexpectedly then came back to the bargaining table and took a little over the one million s/f it had originally planned.
“You become a manic depressive when you go through that,” Silverstein said. “But when you’re a developer you have to expect these things.”
Although a persistently anemic job market and sluggish economy have begun to stoke concerns that the country may be slipping into another recession, Silverstein said he believed he will lease Three World Trade Center by the time the foundation and base of the building are complete, permitting its construction to proceed without pause. His confidence might seem absurd or even deluded if not for the fact that he has persevered through adversity so many times in the past.
“When things fall apart, they fall apart quickly but they can come together again very quickly too,” Silverstein said. “Look at the banking system, it was in terrible shape in ‘08 and ‘09. They did extremely well in ‘10 and the first part of ‘11, they made a ton of money. The comeback can happen again and when it does and employment starts, everything all of a sudden looks great again. Ultimately we’re going to get there because we always do.”
