Former World Trade Center occupants may still be
obligated to pay rent on their offices.
By Devin Leonard
Monday, November 12, 2001
One of the strangest twists to the Sept. 11 tragedy is starting to
unwind. It turns out that former World Trade Center occupants may still be
obligated to pay rent on their office space. Language in numerous leases
ensures that tenants can't break the covenant in the event of a disaster.
And an "act of God" section--standard in many leases--states that they can't
ask for rent reductions in the cases of "war or any matter...beyond the
control of the [landlord]."
Why won't the landlord just break the lease? Well, that's sort of
complicated. Larry Silverstein, the real estate mogul who led a group of
investors in securing a 99-year lease on the World Trade Center in July, is
still on the hook to the Port Authority of New York and New Jersey, the
government agency that built the ten-million-square-foot complex. The Port
Authority is demanding $116 million a year from Silverstein; his creditors
are asking for another $180 million. Plus, Silverstein's lease requires him
to rebuild the World Trade Center, a job that the state of New York recently
estimated would cost $8.2 billion.
So far the 70-year-old millionaire isn't trying to collect rent from his
tenants. "Silverstein is seeking to resolve all tenant rent issues in a fair
and expeditious matter," says Howard Rubenstein, his spokesman. That, of
course, may change. Experts say that as horrific as this disaster was, the
World Trade Center leases are still enforceable and valid. "Just because
he's not sending out invoices doesn't mean the rent isn't due," says M.
Myers Mermel, CEO of TenantWise, an online real estate brokerage.
Perhaps Silverstein is waiting to see how his insurance claims pay out. When
he signed the lease on the World Trade Center in July, he negotiated a $3.5
billion policy. Silverstein argues that his insurers owe him double
damages--$7 billion--because the Sept. 11 attacks delivered him not one loss
but two. His insurers don't seem convinced. One of them, Swiss Re, has filed
a lawsuit disputing his claim.
Silverstein's argument may seem a reach, but so far he's winning the public
relations war--and could very well win the court battle. If the case goes to
trial, a New York City jury or judge might not sympathize with a Swiss
company's attempts to lowball the insurance on the World Trade Center.
Silverstein's tenants at the complex had better hope so. Otherwise, prepare
for New York's latest drama: The Rentman Cometh.
ęCopyright 2001 Time Inc. All rights reserved