Larry Silverstein’s Big World Trade Center Bet Is Paying Off
A few days before 3 World Trade Center opened its doors last week, developer Larry Silverstein sat in his glass-walled office on the 38th floor of 7 World Trade Center, surveying the Downtown empire he’d built over the last 17 years.
The avuncular 87-year-old explained that his company, Silverstein Properties, was the only tenant in 7 World Trade when it opened in 2006. So, despite some recent softening in the Financial District office market, he wasn’t too concerned that 3 World Trade—now 40 percent leased—would eventually fill up with tenants, too. The Richard Rogers-designed, 80-story behemoth just debuted with 2.5 million square feet of office space, plus a still-under-construction corner of the lobby that will serve as a link to the Oculus. Media investment firm GroupM will soon move into 700,000 square feet across nine floors there, and management consulting giant McKinsey & Co. has leased 185,000 square feet, putting the 1,079-foot-tall tower on solid financial footing. Asking rents are in the $80s per square foot.
Silverstein’s firm also finished work two years ago on its 869-foot-tall, 82-story hotel and condominium at 30 Park Place, where Silverstein and his wife Klara, whom he married in 1956 and with whom he has three grown children, just moved into an 80th-floor pad. The Robert A.M. Stern-designed building features a Four Seasons hotel on the first 24 floors, plus a suite of amenities and services provided by the hospitality chain.
But it’s clear the crown jewel of Silverstein’s kingdom is the World Trade Center, where he developed the original 7 World Trade tower in 1987. He acquired the lease for the entirety of the 10-million-square-foot complex from the Port Authority of New York & New Jersey for $3.25 billion in July 2001, only six weeks before terrorists flew planes into the Twin Towers. With the opening of 3 World Trade last Monday, which cost “well in excess of $3 billion,” according to Silverstein, the complex is almost fully restored to its former glory. Four out of five planned buildings are finished, and much of the public space that’s been walled off for construction has been returned to the street.
With the exception of 1 World Trade Center, which was developed and continues to be managed by Durst Organization, Silverstein has overseen the $30 billion rebuilding of the 9.5-million-square-foot office complex. His firm manages 11 million square feet of residential and office property in New York City, and its upcoming projects include a planned 57-story condominium building at 520 West 41st Street on the Far West Side.
In advance of the tower’s ribbon cutting, Commercial Observer sat down with Silverstein to talk about 3 World Trade, the revival of the Financial District, his skateboard and his new apartment at 30 Park Place.
Commercial Observer: How do you feel about the completion of 3 World Trade Center, and how do you think it fits into the overall rebuilding of the World Trade Center?
Larry Silverstein: I’m excited. It’s a building that I think is very handsome, designed by Richard Rogers, who’s a Pritzker Prize-winning architect credited with magnificent buildings around the globe. He’s truly one of the great architects of today. What is really fascinating is to see how well his architectural language works juxtaposed with Mr. Fumihiko Maki’s architectural language across the street. So Maki’s in Tower Four, and Maki is a total minimalist as opposed to what you have here, which is massive. And [it’s like], “Look at me, I’m here, I’m present.” And part of the masculinity of Rogers is defined by the utilization of the structural steel as part of the facade detail.
It’s much more muted?
Yeah. It’s very different, but the two buildings work spectacularly well together. And there they both are, right across the street from Mr. [Santiago] Calatrava’s PATH terminal, the Oculus. And the design of that building is also magnificent. I think it’s probably the most beautiful contemporary terminal building in the United States.
It’s also the most expensive at $4 billion, so let’s hope so.
Oh yes, very expensive. But now that the building is there, you can appreciate it in all its glory and you can see how well it brings together 11 mass transit lines plus the PATH tubes to New Jersey. And all those retail shops, hundreds of retail shops. I think it does it with such elan, such class, such dignity, at such cost. But [what’s most exciting is] the reality of the superb architecture and design and the quality of the materials that were used. The white marble. It’s just an elegant building. I think people today dwell less on the cost and focus more on the magnificence of the real estate. It’s just spectacular.
How do you think the rebuilding of the World Trade Center is going, 17 years on?
I’m thrilled that it’s here, that we’re opening it. It was a long time in coming. We had hoped to have had this site to develop much earlier on. But we took it when we could get it. We took possession of the site when the Port Authority completed its preparations although we did take it and proceed with construction. And so here we are with a finished product. I’m really pleased, because the building is an exquisite piece of real estate. It works spectacularly well with 7 [WTC], with 1 [WTC]; it also was opposite the Ronald Perelman Performing Arts Center, which is going to be finished at the end of next year. The performing arts center will be in place. And that will be a venue for 1,200 seats, or alternatively a 500-seat theater, a 400- and a 300-seat theater that can be operated independently of each other.
Then you look at the neighborhood and realize the residential population has tripled. We’ve leased about 7 million square feet of space down here. What’s extraordinary is we paid $3.2 billion when we acquired the Twin Towers prior to 9/11. You couldn’t replace any of these buildings for $3.2 billion. Seven [WTC] was not a big building. It was only 1.7 million square feet. Significantly less costly than these. Four [WTC] was expensive; three [WTC] was fiercely expensive. Two [WTC] will be hugely expensive. As was 1 [WTC]. And everything else down here.
Speaking of 2 [WTC], you’ve had a hard time developing that building. You’ve missed out on a couple of major anchor tenants. Are you confident you’re going to get an anchor tenant? What does the timeline look like?
At some point, someone’s going to come along. An occupant will present themselves at some point in the not-too-terribly distant future. I’m quite confident it’s going to happen.
Number one, it’s a building that can support 3 million feet of space; it’s large, very large.
Number two, we already have two designs for it. One is designed by Norman Foster, a Pritzker Prize winner, another is designed by Bjarke Ingels.
Both designs are fascinating; they’re both very attractive. The Bjarke Ingels design was chosen by Rupert Murdoch. James Murdoch, his son, was particularly interested in Bjarke Ingels’ design and [wanted him to] design the building because they had made the decision to occupy half the space in Tower Two. The whole lease was fully negotiated out; it was really sad. But he decided last minute—he was upset with the state of the world at the end of ‘15 and beginning of ‘16. It looked like there were some potentially serious financial issues that were presenting themselves. And it was a serious question of whether we were going back down into a financial abyss out of which we had recently come. I remember him calling me on the 15th day of January 2016 telling me he was concerned and it would not be wise to go ahead. So that happened. But nevertheless as a result of it, we came out with a Bjarke Ingels alternate design for the building.
Do you know how much you’re paying in rent for the 2 World Trade site while it sits idle?
I don’t think we’re paying rent on the site. As I recall, the specifics of the ground lease, I think [we don’t pay rent] until such time as we start construction.
Can you tell me about 520 West 41st Street?
It’s the Mercedes-Benz [dealership] site. We’ll have more to talk about that by the end of this year.
But it is going to be condos?
Yes that’s the direction.
It’s an interesting site because it’s on top of the Amtrak tracks so it’s a little bit challenging.
It’s not a little bit challenging, it’s a lot challenging. We’ve got Amtrak and we’ve got [Metropolitan Transportation Authority], they’re both down there. We both have to thread the needle and put our piles down in locations that will not interfere with the tracks.
Have you moved into 30 Park?
We have moved in. And I’ll tell you, it’s unique, because it’s a totally different experience from what we had experienced at 500 Park Avenue at the corner of 59th Street. Really just lovely, spectacular. We’re so high up here on the 80th floor, which is 900 feet up. So it’s very exciting. You can almost see the curvature of the earth if you look hard enough. The view is spectacular and at night, the lights of the city go on and it’s breathtaking. I’m 87, my wife is 85, we’re a bunch of old fogies. A lot of our people are up there [in Midtown and on the Upper East Side], older people. You come down here and it’s a totally different world. It’s young, it’s vital, it’s exciting. What’s so unique about this place is that the residential population down here has tripled in the last several years since 9/11. And on the streets you see baby carriages, you see strollers, you see skateboards, you see everything.
You see this thing up there [gestures to a skateboard screen-printed with a photo of the World Trade Center mounted on the wall of his office]? That’s to enable me to get to work from right there, a block away slightly downhill. My 12-year-old grandson said, “Poppy, let me show you how to use the skateboard.”
Have you skateboarded?
Well, I’ve been looking at it, thinking about it, thinking would this be a good move or not.
You could do one of those motorized scooters.
But motorized scooters have a carbon footprint. Skateboards have no carbon footprint.
Are there any condos still available at 30 Park?
Yes. We have sold all but 15 of the condos out of 159.
And you are purchasing a portion of ABC’s campus on the Upper West Side.
No. We’re purchasing all of it.
Do you know what the final sale price is going to be? We reported more than a billion dollars.
We are subject to a non-disclosure, that’s still in effect. It ain’t cheap.
So you guys just did your first bond offering on the Tel Aviv Stock Exchange. What made you decide to do that?
It’s an interesting location if you want to access inexpensive capital. And so we raised money at a rate of 3.38 percent, which is a good rate for real estate. We decided to try that and see how the bond market operates in Israel—our thought being that if we get comfortable, we like it, it works well for us, it’s the kind of thing we can revisit many times in the future.
And there’s been a lot of discussion over the last year and a half about the softening of the condo market. How do you think that’s affected 30 Park? Or do you think you avoided that?
I think we’re very fortunate at 30 Park. I think the Four Seasons name has been enormously helpful. So at the end of the day, having Four Seasons has been a huge benefit in terms of marketing the apartments. I think we’d probably be much, much slower in sales without Four Seasons. And the exquisite aspect of it is that the condo owners have access to the 24-7 Four Seasons goodies. So you can push a button and you have Four Seasons people at your beck and call instantly. It’s very comforting when you’re 87 and 85.
We also have a top-flight restaurant in the building, that’s Wolfgang Puck’s New York restaurant. Also, the building is beautifully designed by Bob Stern. So at the end of the day, it’s just a question of time until the balance of those units are sold.
There have been a couple of tenants at World Trade Center who have started to sublease their spaces. And there’s so much office space coming online Downtown. Do you have any concerns about leasing up your space or the asking rents holding?
Most of the office buildings in Manhattan are 60, 70, 80 years of age. They’re old, they’re antiquated, and they can no longer provide the technologies provided by major corporate uses. The major corporate users need technology. To try and retrofit technology into their existing quarters means they have to vacate, technology’s installed, and they move back in. The inconvenience is horrendous. Ergo, moving into a brand new building which has all the technology in it the day you move into it makes much more sense.
We’ve leased 7 million square feet of space down here [of 9.5 million square feet] since we started rebuilding. [Tenants have] vacated a lot of space in Midtown. They’re coming to us, to Manhattan West, to Hudson Yards. This is the place where new buildings are being built. The advantage that we have is the best mass transit in the city. You go to Hudson Yards and there’s the 7 line. That’s it. When Hudson Yards gets all built out—and there’s no question it will—and you’ll proceed with the development of Hudson Yards, transportation is going to become a much more serious issue for tomorrow than it is today.
We don’t have that problem. Because it’s right there in the base of our buildings. We’ve got this wonderful, youthful population down here. The young people who live down here are overwhelmingly educated, overwhelmingly well compensated. And the fascinating thing is that 27 percent of the people who live here also work here. It’s the highest live-work ratio in the United States. So you put together this group of new office buildings with the retail shops and the restaurants and a five-star hotel, plus all the activity that you’ve got down here with the parks. It’s really a unique place, particularly for young people.
New office buildings never go sitting empty for very long. Invariably they get leased. It’s just a question of time. So you just have to be patient and I’ve practiced patience for a very long time in my life. I’m confident. When we opened 7 [WTC], we were the only tenant in this 50-story office building. It didn’t take long till we signed a lease with Moody’s for 750,000 feet. And once we signed the lease with Moody’s, everybody else came on board. And the building became a significant architectural and financial success.
With 4 [WTC], when we opened it up, everybody’s looking at everybody thinking, “Who’s coming in?” At the end of the day, we have 400,000 feet left. Along comes Spotify, they look at it and they say they fell in love with the space. And they signed a lease for 400,000 square feet. And now that’s a fully occupied building.
We have 40 percent of the building leased. That’s pretty good. We’ll lease the balance of it with time. The last one we’re looking forward to is 2 [WTC]. So I can look back when I’m 91 or 92 or 93, and say, “My job is finished.”
Then you can retire?
I can retire or do something else.