Sunday Summary: A Clear September Day

It’s a little difficult to believe that it’s been a full quarter of a century since that horrible day in 2001 when al-Qaida terrorists shook America to its very core with the single worst foreign attack on the homeland in the nation’s history.

As dazed New Yorkers began their weary march away from Ground Zero, it was nearly impossible to see anything good that the future would portend. The only thing that seemed certain was that America was poised for war. The dominant feelings were shock and grief. (And, yes, rage.) The suffering was immediate and all-consuming.

It would be a few days before a different attitude would emerge: Something that could best be described as defiance. New York would rebuild. The wreckage would be cleared away. We would rise again.

Few figures served as a greater embodiment of that spirit than Larry Silverstein, the landlord of the World Trade Center when it was attacked. On that very day, Silverstein comforted Mary Ann Tighe with the promise that he, and the city, would rebuild.

Silverstein has sat with Commercial Observer numerous times over the years; a decade ago he delved into the details of his purchase of the WTC lease only weeks before the attack and how he was planning to fix up the icon with the late David Childs. He took us through the actual day of 9/11 from his perspective, and how he began the redevelopment.

Almost immediately, the question of what would be built on the site became a bone of political contention. Plans would be offered and discarded. Spats between the various public and private agencies would make their way into the tabloids. And it would take years before rebuilding would actually be underway in earnest. (Silverstein himself offers an excellent history of his role in all this in his book The Rising.)

Five years ago, Silverstein was still at it. “I think when you look at everything — the problems we faced, the difficulties, all of the naysayers, and God only knows they were there in super abundance telling me when I was making all these mistakes — we look out the window today with a deep sense of pride and maybe a wee bit of satisfaction,” Silverstein told CO.

However, on the 25th anniversary of the attack, we learn that Silverstein wasn’t quite finished.

Earlier this year, Silverstein Properties stunned nearly everyone in the industry (and beyond) with the announcement that the pièce de résistance might well be the long-doubted development of the 2 million-square-foot 2 World Trade Center, which bagged American Express as its anchor tenant and broke ground this summer.

This is quite the feather in the cap of Lisa Silverstein, who took over for her father as CEO in 2023.

“We started talking [with American Express] about five years ago, and it just got more and more intense,” Lisa Silverstein said in an extensive Sit-Down with CO last week. “It was very complex, with the tri-party deal with the Port Authority, but I think it’s bigger than one economic deal. It’s big for downtown. It’s big for the World Trade Center. And it’s a big decision American Express made.”

American Express is settling into a different neighborhood than existed in Downtown Manhattan 25 years ago.

“Lower Manhattan did not come back as the neighborhood that it was on Sept. 10, 2001 — it came back as a much more dynamic and diverse destination,” said Aisling Gregory, the founder at Reverdie Group, who helped reposition the Woolworth Building when he was at Cammeby’s International and worked at Silverstein Properties for 10 years.

While FiDi has significantly less office space than it did back in 2001 (115 million square feet today versus 139 million square feet back then), it also has considerably more apartments and almost three times the number of people living in the area (70,000 residents below Chambers Street today versus just 25,000 in 2001). And, alongside the 2 million square feet of office currently under development, there’s another 3,900 rentals on their way.

The phoenix is still rising.

Office redux

It’s not surprising that the office-to-residential ratio would shift in FiDi given how many buildings in the area were ripe for adaptive reuse as residential.

But, just as the pendulum swings one way, we’re already starting to see it swing the other way.

To wit, a phenomenon that would have seemed unthinkable just a couple of years ago seems to be a real thing: office-leasing bidding wars.

Max Koeppel, of Koeppel Rosen, recently had a 17,610-square-foot office that he was looking to rent at 151 West 26th Street for $56 per square foot. After three companies (two of them AI-focused) expressed interest, offers and counteroffers ballooned the price up to $60 to $70 per square foot.

And, to be clear, this is not shiny, new, Class A space.

However, in recent years even Class B office has hustled to compete for tenants and come out with a lot more amenities than we would have seen in the past.

“What’s changed in real estate is that office space is no longer just an expense on the balance sheet. Your office space, the location and the amenities you provide are all about employee recruitment and retention, and ultimately employee productivity,” said Ryan Kass of Empire State Realty Trust (ESRT). “So our job is to partner with our tenants and help them get and retain top talent. That drives everything we do.”

This hunger for space might also explain why a lot of owners have finally decided the time is right to bite the bullet and sell.

Over the summer, CO observed a flurry of sales and listings. In one two-week period in July we saw BXP selling its ground lease at 7 Times Square, ESRT unloading 1359 Broadway (and getting pretty close to its $225 million asking price), and Property & Building Corporation’s 10 Bryant Park going on the market for $800 million.

And, if SL Green Realty’s sale last week of 110 Greene Street to Natora Group for $226 million is any indication, it will keep going for a while.

But one shouldn’t be tempted into thinking office is the only valuable asset that has been trading. Aby Rosen and Michael Fuchs’s RFR Holding purchased the retail condo that Prada currently occupies at 841 Madison Avenue from JSRE Acquisitions for $57 million, and Mountain View Acquisition (the entity that owns Pastrami Queen and Friedman’s) purchased the home of Barney Greengrass at 541-555 Amsterdam Avenue. (Don’t worry — Barney Greengrass isn’t going anywhere.)

Chh-chh-changes

A lot of people were on the move last week.

The big news was Nadeem Meghji’s departure from Blackstone after less than a year as the solo head of global real estate. (Kathleen McCarthy, who shared the position, left last November.) David Levine and Giovanni Cutaia are taking Meghji’s place.

The abruptness of the departure has not been addressed by Blackstone (and CO’s calls were not returned), but the Wall Street Journal reported that Meghji’s reason was to spend more time with his family.

Coming off jobs at PGIM, Brookfield Asset Management and Innovo Property Group, Dan Fanelli is going to Harrison Street Asset Management as managing director and co-head of its Investor Solutions Group, along with James Choi (previously the firm’s head of Asia based in Tokyo and now bound for the West Coast). And, while we’re talking Harrison, Dan Kim was named a managing director in Chicago with a focus on infrastructure.

After serving as head of the special situations group and head of acquisitions at PIMCO Prime Real Estate, Adam Lerer is headed to CIM Group, where he will be a managing director of investments.

And here’s a big one we heard on Friday: The one and only Paul Vanderslice has been named to head the CRE Finance Council now that Lisa Pendegast has stepped down.

Getting some sun

Charles Cohen is far from finished with New York, but the real estate mogul has set his future sights on Florida with Cohen Brothers Realty Corporation of Florida announcing the planned two-building, 400,000-square-foot Office Center of the Americas (OCOTA) in Dania Beach.

Cohen was not the only New Yorker digging around South Florida last week for deals.

Joe Sitt’s Thor Equities plunked down $62 million for the 11-story, 153,213-square-foot Two Town Center office complex (with another 114,599 square feet in the form of a parking garage) in Boca Raton.

Meanwhile, in Southern California, Ian Schrager and Ed Scheetz secured $116.5 million of bridge debt to refinance the former Standard Hotel, which they are rebranding as the Public Hotel West Hollywood.

Wishing those who observe a sweet new year! See you next week.