The New York Observer
By Andrew Rice
January 7, 2002
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
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 economic 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,
many 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
recession 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 summer.
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
“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 downtown the first 15 years.”
“You’ll have the same thing [happening],” warned another real-estate
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
“Everyone in the real-estate business has an interest in what happens here,
”JohnC. 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
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
George 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 revenue
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
constituted 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 meantime,
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
buildings, 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
insurance 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
himself 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 revitalize
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. Some
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
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
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 matters
to him right now: the federal courtroom where his insurance dispute is being
“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
industry 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.”
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