Jones Lang LaSalle



NYC 11 18 05 SILVERSTEIN'S VANISHING POINT Peter Slatin
New posturing on all sides of the Ground Zero rebuilding effort may finally be leading up to one vanishing point: the price it will take to ease Larry Silverstein out of some or all of his leasehold.

Spurred on by Mayor Michael Bloomberg's latebreaking but rightminded recent attempts to assert much needed control over the Ground Zero rebuilding process, the Port Authority appears to be stepping up its efforts to speed development effort.

Port Chairman Anthony Coscia noted Thursday that rebuilding has been slow and that it might be worthwhile to see some housing and retail on the site. In discussions taking place far off stage, the configuration and scale of any retail is a huge issue. According to sources, the Port has prepared drawings that basically fill in Cortlandt Street. If these plans are carried out, there will be no view west from Church Street for some 500 feet. This would create a streetwall that is antithetical to the public consensus for a site that, in vision and access, is fully reintegrated into the city's grid. The Port also has prepared plans for two to three below- and above-grade stories of retail along Church, the site's eastern edge.

Silverstein, however, has resisted this, saying he doesn't want any retail that would take space away from the grand lobby space that office landlords and tenants love – but THAT won't be build for years, if ever. (in the meantime, less than inviting construction holes greet thronging visitors.j He also is not interested in permitting the early construction of retail pedestals atop which buildings could later rise.

Silverstein's adamant stance has the earmarks of a classic negotiating tactic. After all, said one seasoned downtown observer, "the more involved Silverstein stays into it, the more it can be perceived that he has a right to major compensation if he has to walk."

Indeed, Silverstein appears to be maneuvering for a high-cost exit while also making a fully credible show as the archetypal New York developer by squeezing out the last dollar from anyone wandering into his orbit. But the vacuum of market demand continues to suck the hot air out of Silverstein's tired insistence on his right to build 10 million square feet of office space at the site. Even as he talks up a resonant vision of the 24/7 commercial, residential and touristed downtown of the future, Silverstein is not budging on what would enable real progress on the two projects in his more immediate control – the nearly completed 7 World Trade Center and the nearly begun (but not really) Freedom Tower.

Despite the best efforts of a team of top-notch brokers from CB Richard Ellis at the gleaming, 52-story, 1.6 million-square-foot 7 World Trade Center, just two tenants have signed on, for a total of barely 50,000 square feet. In late October, rumors swirled through the real estate industry that a back-door deal negotiated directly by Mayor Bloomberg and Deputy Mayor Dan Doctoroff had brought Citigroup into the building for anywhere from 300,000 to 1 million square feet. But hopes vaporized at a heavily attended CBRE market-forecast breakfast when Silverstein's only announcement – illustrated with an adorable slide - was that he had become a proud new grandfather.

That deal, says a source close to the action, has "gone quiet." Citigroup had earlier walked away from a deal at the enormous 55 Water Street, as did Newsweek. In October, the Toy Center also backed out of its own downtown deal, at 100 Church Street.

In the face of a less than compelling market, Silverstein is holding fast to asking rents ranging from $50 to $60 a square foot at the tower. Those numbers would be cut by approximately $10 to $12 by the generous tax and other incentives in place for downtown tenants. That would make them almost competitive with the asking rents at Brookfield Properties' highly amenitized World Financial Center.

Seven World Trade is not the only place where Silverstein is being aggressive on asking rents. At Freedom Tower, one brokerage source who asked not to be identified told The Slatin Report that Silverstein is demanding extremely high rents from a consortium of broadcast networks for leasing rights to antenna space atop the structure. The high rates have further delayed the controversial project and may have even forced the Spanish-language broadcaster to drop out of the bidding.

It is all just business and politics as usual, and perhaps that's a fitting thing for Ground Zero. After all, if these players began cooperating, moved to seek resolution without regard for political favor or personal gain, that would be a violation of the spirit of New York development. By staying this sorry course, at least they are all being true to the history of power struggles and commercial conflict that is an undeniably rich part of the city's legacy. Once in a while, though, one needs an exception to prove the rule.

All sides of the Ground Zero rebuilding seem rooted in stone, but that could be for the cameras.