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January 7, 2002|2:39 PM
Pitched Battle at Ground Zero
by Andrew Rice
The World Trade Center was not always so beloved. A generation ago,
when the Rockefeller brothers—Governor Nelson and banker David—first
devised the idea of two monumental towers, one powerful group stood
implacably opposed: the city’s real-estate developers. Harry Helmsley
and Lawrence Wein, the partners who owned the Empire State Building,
formed a group called the Committee for a Reasonable World Trade
Center. They took out ads in The New York Times arguing that 10
million square feet of government-subsidized office space would
depress the value of their real estate. They sued to stop the
project. They lost.
Now the Twin Towers are gone, and a debate is afoot about what should
replace them. And history has begun to repeat itself.
Ever since the attacks, one developer, Larry Silverstein, has been
tirelessly pushing his plans to redevelop the site. “To do anything
less,” Mr. Silverstein vowed in an emotional speech to business
leaders six days after the attacks, “would be to simply give an
incredible victory to those who sought to destroy our way of life.”
At the time, no one dared dispute him.
That’s changing. A powerful opposition has begun to coalesce in recent weeks and is
questioning whether commercial redevelopment of the site is really the best way to
show up the terrorists. It includes advocates for the
families of those who died on Sept. 11, who have pronounced Mr. Silverstein’s plans
“sacrilegious,” and former Mayor Rudolph Giuliani, who, in his farewell address to the
city, appealed for the site to be preserved from e
conomic development.
Most surprising—at least superficially—and perhaps most dangerous to Mr. Silverstein’s
plans, however, is the steadily growing consensus forming against him within the
city’s real-estate community. Quietly, privately, man
y of Mr. Silverstein’s peers have begun to rethink their initial support for
rebuilding. Now as in the 1960’s, they’re making an argument based on economics—and no
small measure of self-interest. At a time when the recess
ion has cut deeply into the occupancy rate for office space, they say Mr.
Silverstein’s buildings could further depress real estate and actually hinder lower
Manhattan’s recovery.
Their fears haven’t been calmed by Mr. Silverstein’s first moves. He has pledged to
begin rebuilding 7 World Trade Center, the 2-million-square-foot office building that
collapsed after the two larger towers, by this summ
er. With a big insurance settlement in hand, Mr. Silverstein hopes to lure tenants
with deeply discounted rents.
“It’s not good for downtown,” said one lower Manhattan real-estate executive.
“It would just be a repeat of what happened the first time, when Rockefeller built
it,” said M. Myers Mermel, a real-estate investor and the chief executive of
Tenantwise.com. “[The World Trade Center] was a drag on downt
own the first 15 years.”
“You’ll have the same thing [happening],” warned another real-estate executive.
Few developers or real-estate brokers want to say such things publicly; no one wants
to be cut out of a piece of the action if Mr. Silverstein succeeds. “I think that,
sure,” one industry bigwig said recently. “Can I say
that aloud? I think not yet.”
But the anti-redevelopment message has already reached some of the people who count.
“Everyone in the real-estate business has an interest in what happens here, ”John C.
Whitehead, the new chairman of the Lower Manhattan Redevelopment Corporation, said in
a recent interview. “They fear flooding the market
with too much space, which will damage the ability of older buildings to be leased
up.”
Mr. Silverstein’s partisans attribute such sentiments to the usual infighting among
business competitors, and point out that numerous powerful constituencies still favor
redevelopment. Mr. Whitehead, who is Governor Georg
e Pataki’s appointee, and Mayor Michael Bloomberg have both said that portions of the
site should be put to commercial use. The Port Authority of New York and New Jersey,
which owns the land, could lose billions in revenu
e if nothing is rebuilt.
Not rebuilding would also mean that the city sees none of the billions in insurance
money that Mr. Silverstein stands to collect reinvested in downtown. (Just how much
he’s owed is still in dispute.)
“We firmly believe that the best use of that space is an appropriate combination of
commercial development and a significant memorial,” said Steve Solomon, Mr.
Silverstein’s spokesman. “And we believe the future of lower
Manhattan, as well as all of New York, will be best served by redeveloping that site
in that particular manner.”
Signs of Progress
Mr. Silverstein can point to some signs of progress. His lawyers recently argued his
case on the insurance policy in federal court in Manhattan, and he hopes for a
decision on the crucial issue of whether the two planes c
onstituted one coordinated attack or two separate attacks by this summer. If they were
two attacks, as Mr. Silverstein argues, he is entitled to twice the insurance money in
his policy, or about $7.2 billion. In the meant
ime, he has been lobbying Port Authority officials and Mr. Whitehead, whose support he
needs to go forward. His architects have begun to produce drawings of new skyscrapers.
He envisions somewhere between four and six bui
ldings, in addition to a memorial, a museum and cultural attractions.
He says work on 7 World Trade Center, the smallest of the three collapsed buildings,
will begin soon. Usually developers must wait until they have tenants signed up before
embarking on such a large-scale development. But
because Mr. Silverstein’s $860 million insurance policy on that building is not in
dispute, he may just be able to go it alone with little risk to himself. (The
Blackstone Group holds the building’s $383 million mortgage,
which in turn is backed by bonds. It’s not clear whether Mr. Silverstein will have to
pay off the mortgage before rebuilding.)
“He expects to be able to deliver an extraordinarily designed building at very
affordable rental [rates],” Mr. Solomon said.
That terrifies other Manhattan landlords, who are already looking at office- vacancy
rates of around 14 percent, according to Mr. Mermel. And it could just be a harbinger
of things to come if Mr. Silverstein gets his insu
rance money for the rest of the site.
Mr. Silverstein’s legal rights to rebuild the rest of the site remain a complicated
issue. But through a sophisticated public-relations campaign that began almost
immediately after the attacks, he has firmly established h
imself in the public mind as redevelopment’s indispensable man.
Many in the real-estate community warn against underestimating Mr. Silverstein. “Larry
did not fall off the turnip truck,” said Michael Cohen, chief executive of the
real-estate brokerage GVA Williams. “He’s a dyed-in-the
-wool New York real- estate developer, and he understands the market as well as
anybody—and better than most.”
But clearly, opponents of development are gaining momentum. While a month ago, some
sort of commercial development of the 16-acre site seemed a fait accompli, now some
prominent players involved with the plans to revitali
ze lower Manhattan think it’s becoming less and less likely that the Trade Center will
be rebuilt. Mr. Giuliani—indisputably the most popular public figure in the city—will
be a formidable opponent, even out of office. So
me business leaders privately worry that the politics of grief—and the former Mayor’s
vocal backing—have so empowered the bereaved families that they cannot be refused on
their belief that the site should be reserved for
a memorial only.
Proponents of rebuilding argue that, with time, emotions will calm and the economic
rationale for a new office complex will become clear. And that’s why opposition from
his own industry is so dangerous to Mr. Silverstein.
If other developers publicly turn against him, they can turn his justification for a
new World Trade Center—that it will revive the city’s battered economy—on its head.
“It’s going to be very hard for anybody to build on that site any kind of commercial
venture any time in the near future,” said one prominent developer.
Some, like Mr. Cohen, doubt that Mr. Silverstein really intends to build
speculatively. His talk about 7 World Trade Center, they say, is a ploy to demonstrate
his seriousness about rebuilding in the only venue that matte
rs to him right now: the federal courtroom where his insurance dispute is being judged.
“I think Larry is just taking a negotiating position,” the developer said. “I don’t
think he has any intention of building, ever.”
“Who wants to be sitting in their office on top of a graveyard?” said another real-
estate executive. “It’s hard to believe something is going to be rebuilt that’s
commercially feasible on the site. None of us in the indu
stry believe it.”
However, “don’t expect him to do anything stupid,” Mr. Cohen countered. “There’s not a
lot of upside in betting against Larry Silverstein.”
You may reach Andrew Rice via email at: [EMAIL PROTECTED]
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This column ran on page 1 in the 1/7/2002 edition of The New York Observer.
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