Volume 20, Number 7 | The Newspaper of Lower Manhattan | August 25 - September 1- 7, 2010
Downtown Express photos by Milo Hess
Workers at the World Trade Center site last week.
A Conversation with Larry Silverstein
BY Aline Reynolds
Real estate developer Larry Silverstein discusses the progress at the World Trade Center site, his relationship with the Port Authority and the future of the real estate market in Lower Manhattan.
How has Lower Manhattan evolved since before 9/11? How will the new World Trade Center fit into post-9/11 Downtown?
Before 9/11, at night or on weekends, you could walk downtown, and it was like a ghost town. There was nobody here — it was eerie. It was quiet. There was nothing happening. It was deadsville — there was nothing to bring people here for weekends… what you have today is a community that has evolved into a 24/7 community…[the area] will experience a massive increase in the number of people working down here again, because you’re going to have a hundred thousand people who formerly went to the trade center coming back in when these [World Trade Center] buildings are built. That of course brings a whole range of other services that are needed by the hundred thousand people that’ll be working in the buildings. So you put that together with the fact that these buildings contained about half a million square feet of destination and quality retail. The retail will serve the tenants in the buildings. The tenants in the buildings will serve the needs of retailers down below. It feeds on itself — you’ve got the retail shops…also, [which are] hugely important to the residential occupants of the area. That has changed the face and the functionality of Lower Manhattan.
According to Mayor Bloomberg’s 2030 plan, there will be 1.1 million new residents in the area by the year 2030. Why then, at the World Trade Center site, did you prioritize office space over residential space?
We lost 10 million square feet of office space here…additionally, we have here one of the most superb mass transit concentrations in the city…And, what needs mass transit the most is commercial, is business. You don’t need it to the extent for residential as you need it for commercial.
And so, having the opportunity of utilizing this mass transit concentration for business, number one, and number two, recognizing that the sites themselves that would ultimately serve as the sites for each of these buildings were large-scale sites, large footprints — ideal for business, not good for residential utilization…These sites have 40, 50, 60,000 square feet footprints. Much, much too big for residential.
What’s your strategy to pre-lease office space in the future W.T.C. towers? Some worry that you’re pricing your rents too high. Are you considering scaling back the rent prices to attract more office tenants?
Witness the fact that we had an obligation to lease office space here. This building [7 W.T.C.] contains 1.7 million square feet of space. The first lease we signed was 700,000 square feet with Moody’s. And then we followed Moody’s with a series of other leases and other occupants. Today, 7 World Trade Center is a very well-occupied, very successful building. You only do that by giving tenants value — value that they perceive as being real; value that makes them come to the conclusion that it’s a good idea for them to sign a long-term lease. It’s worth it.
[The process which we utilized] to lease this building is the process that we’re going to utilize to lease the other buildings as well. It’s a process pursuant to which you can show tenants the monetary and physical and environmental advantages that come from executing leases in these buildings. So, for example, tenants today are very conscious of their environment. They want to be sure they give their workers first-class conditions in which to function. So, they want to be sure the space is flooded with daylight. They want to be sure that the air quality of the buildings is the best that could be developed. They want to be sure that green technology is utilized in the construction of these buildings. They want to be sure that reusable materials are present in these newly constructed buildings, which shows a sensitivity to the environment…they might even be willing to pay a little bit more in rent to get these features.
Can you give an example of this?
Goldman Sachs moved out of 85 Broad Street in a building that’s only 25 or 30 years old. They designed it for themselves 30 years ago. [Goldman Sachs] decided to move out of that building at 85 Broad Street because technologically and environmentally, they couldn’t retrofit that building to their needs. So they built themselves a whole new building right here on West Street, just a block from us. They occupy that building in its entirety, over two million square feet of space. They did it because they needed the best technology available — the latest technology. They needed environmentally sensitive facilities that people would be sensitive to and would want to work in and be happy functioning in…And so, [Goldman] put all this together and…they came to the conclusion that, from a monetary standpoint, it made all the sense in the world to leave a product that they themselves designed 30 years ago. You would think, how could they do this? But it made economic sense to do it — and so too, the decision that Goldman Sachs made, decisions similar to which Moody’s made, and others will be making in the other towers as well.
Will they all have that option financially to invest?
Maybe not all, but a lot of them. The major ones certainly will, and they’re going to want to take advantage of it.
Besides the “green” advantages, what makes these buildings appealing and profitable to office tenants?
It’s a whole range of cost[-savings] that are terribly important. There are other benefits to being down here: real estate taxes… this is land owned by the Port Authority. It’s a governmental entity. Port Authority does not pay real estate tax. Port Authority has a payment in lieu of taxes, which is a fraction of the conventional real estate tax cost. These benefits are benefits that we receive as a result of leasing this land from the Port Authority. And we, in turn, pass these benefits on to the Moody’s and others who are going to be occupying space in these buildings. Electricity is a different cost basis for tenants in the Port Authority buildings. ‘Cause again, it’s a governmental entity, it has a different cost of electricity; it’s a saving of significance.
What has been the greatest challenge for you in undertaking this development?
The greatest challenge to date is dealing with [changing] political leadership. We have dealt with four governors of the State of New York, five governors of the State of New Jersey since 9/11… Every time a political leader comes into office, he wants to stop and look and examine. That does not bring certainty, that does not bring predictability, that doesn’t give you a feeling of great comfort when everything you do is based upon a timeline that has very distinct requirements for completion of certain phases of a project. You can’t stop and say, “Stop everything, I want to take a look,” and shift gears. ‘Cause you got billions of dollars worth of contracts out there. To stop is horrendous. Sometimes it’s difficult for people who are not business people — people who have not been involved in this kind of project to appreciate the magnitude of lead time that’s required to order steel, to order elevators, to order curtain wall, to make design decisions — huge amounts of time. To come in after the fact, a year later or two years later, and say, “Stop, I want to look at everything,” becomes hugely problematic.
How does working with effective political leaders help you on the development side?
A person who understands the need to get the job done, to move the process forward, to get it finished and get it built. ‘Cause he wants to see this built in his lifetime, as do I want to see it built in my lifetime, as the mayor wants to see it in his lifetime.
Some say that delays and disputes have tarnished your ties with the Port Authority. What is your current rapport with the Port?
My relationship with the Port Authority started in 1980, when we successfully bid for the control of the original site… what we’ve got, after a lot of strife and lots of difficulty, is a conclusion that has been reached. And as a result of this conclusion, and as a result of an agreement that we’ve hammered out just a few months ago, what you see today is progress here at the Trade Center that is really quite significant… At this juncture, everybody has concluded, it’s time to get it done, and that’s exactly what everybody’s dedicated themselves to doing… All you need to do is look to the south, look out the windows here, and you see the level of activity, you see the progress that’s being made. It’s just the tip of the iceberg — six months from today, you won’t recognize [the site].
It sounds like you feel confident and comfortable with the Port now, moving forward.
Very much so, yes.
More than before? How come?
Today, there’s a unity of purpose, there’s a sense of the need and the determination to get on with it and get it done. The divisiveness of yesterday is behind us. The unity of today is apparent in everything we’re doing down here.
Why did you decide to hire Regional Scaffolding and Hoisting Company to do work on an elevator at 4 W.T.C., despite the pending criminal investigations in Tower 5, the former Deutsche Bank building?
The thought here is number one, this contractor is one of the few contractors with necessary experience and capability of doing this work. Number two, vetted by everybody, including the Port — they’ve done work with the Port before. The reality is there are a limited number of contractors who are available for work of this complex nature. At the end of the day, you have to move these things forward... You have to make decisions and move on. You just can’t sit and delay indefinitely on these issues.
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