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Citi Habitats

The Slatin Report

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January 2004
In Rebuild, Silverstein’s "Challenge of Ten Lifetimes"
By Stuart W. Elliott

When the design for the Freedom Tower was unveiled last month at a ceremony downtown, it was Larry Silverstein, along with the mayor, the governor and the building's two star architects who pulled a rope to reveal a nine-foot model of the 1,776-foot tower that will rise at Ground Zero.

The model showed some elements of Daniel Libeskind's plan, but more closely resembled the work of David Childs, the architect employed by Silverstein.

While it was a moment of cooperation, it also appeared to be a victory for the private developer who has found himself thrust into the center of the world's most important public rebuilding process. What has it been like to be in that role?

"It's been a challenge of ten lifetimes," said Silverstein, 72. "The scale of this project. The sheer magnitude of it. The impact that this has had on the psyche not just of New Yorkers, or citizens of the United States, but of the world."

A thin, groomed man who exudes energy in a bouncy, yet well-measured manner, Silverstein is described by many as perennially optimistic as well as relentlessly shrewd.

"His optimism is part of his DNA," said Lisa Silverstein, the developer's daughter and a vice president in the company. "He thinks it's unproductive to be a pessimist. But he's also a realist."

Given the politics surrounding the project, she said her father had to put those qualities to use in a way he hasn't had to before. "The most difficult thing for all of us is dealing with the three-dimensional political chess game non-stop. But I see the light at the end of the tunnel."

Silverstein is also known for taking risks. He has routinely set his sights on ever-higher goals throughout a career that began 50 years ago at his father's small real estate leasing shop. Buying a new building every six months eventually resulted in a 10 million square foot portfolio by the 1980s, followed by his first major construction project, at 7 World Trade Center. Then, the ultimate prize: emerging as an underdog to win the World Trade Center lease with a $3.2 billion bid, six weeks before the planes hit. He completed the transaction, the largest real estate deal in history, from a hospital bed after being hit by a car on the Upper East Side, suffering from a broken pelvis.

"Larry is well known as a significant gambler," said Steven Spinola, president of The Real Estate Board of New York, an organization that Silverstein helped transform into a lobbying group during his tenure as chairman there. "He's willing to roll the dice, and he's usually been right. He's also as 'New York smart' as anyone can be."

Mary Ann Tighe of CB Richard Ellis has called Silverstein "an extraordinary combination of optimism and total shrewdness.''

Of course, nothing could have prepared the developer for the destruction wrought by Sept. 11 and his role in the rebuilding effort.

"Being thrust into this role is something I could never have anticipated," he said. "Nevertheless, I suddenly find myself here. It's a combination of things, it's a challenge and simultaneously a privilege.

"The acts that brought down the towers were an attack on our way of life and our value structures, and in the last analysis we have an obligation to ourselves and our successors to rebuild," he said. "The buildings have to reflect an act of defiance and will."

Currently, Silverstein's days start early, with a workout, and usually last until 7 p.m. Starting Thursday, or, if it is especially busy, Friday, he'll leave for his usual weekend aboard his yacht with his wife, Klara (more on that later). But even if he is away from Silverstein Properties offices at Fifth Avenue and 43rd Street, work surrounding the massive effort to rebuild Ground Zero is never far away.

"It's very intense," said Silverstein. "Nights, Saturdays and Sundays - we're on the telephone all the time. It's not quite 24/7, it's more like 21/7 or 20/7," he said. "I also wake up around 3 o'clock in the morning and think about it."

On a Thursday several weeks ago. Silverstein walked into his boardroom after a particularly hectic conference call on the project. Slightly discombobulated by the call, he quickly gathered himself together and launched into pleasantries with a reporter before talking about what appeared to be his main concern (and the reason for the interview): insurance.

Silverstein is still waging a legal battle against his insurers, claiming that he is entitled to a double payment totaling nearly $7 billion for the destruction of the trade center. The insurers say he should get $3.5 billion, and so far have paid $1.9 billion in claims. Silverstein is arguing that because the two planes hit the towers in separate incidents, he is entitled to a double payout.

"I do believe that a jury will look at the facts and comprehend that when you have two separate planes, hitting two separate towers, at two different time frames, bringing each tower down independently of the other, that constitutes two events," he said.

Would Liberty Bonds be available for the project if the insurance battle was lost, the reporter asked?

"To the extent we needed it, it could be available," said Silverstein. "But for the people of the city and the state of New York, whose battle this is, this is the only money that is available, the money from the insurance company, for the purposes of rebuilding."

Already, enough money is in the bank to build the Freedom Tower, which is expected to cost $1 billion, though the total cost to build out the entire Trade Center, which will include five buildings totaling 10 million square feet, will be more than $6 billion, Silverstein said.

While much of the focus has been on the office component, Silverstein agreed with concerns from city government and other quarters that developing downtown into a 24/7 neighborhood was "enormously important."

"Battery Park still has land available for 3,000 units of housing," Silverstein said. "There is not a doubt in my mind those sites are going to be acquired and developed. There are also plenty of other sites that can be developed for residential purposes."

The area's transformation into a round-the-clock neighborhood will also be accomplished through retail and cultural venues.

"We'll have the performing arts center there," Silverstein said. "As far as retail, there will be boutiques, big boxes, little boxes, every nature and description of retail operation."

An underground people mover, which will run from the new Broadway-Fulton stop to Battery Park City, will include destination retail down there such as never existed before.

Meanwhile, Silverstein's 7 World Trade Center, also destroyed as a result of Sept. 11, saw the first steel beams for tenant floors of the building hoisted last month. For the past 13 months, construction teams have worked on the first 10 floors, which will be used for a Con Ed substation that provides electrical service to lower Manhattan. The building's offices start on the 11th floor.

The 52-story, 1.7 million-square-foot office building, scheduled to open by the end of 2005, does not have an anchor tenant. Silverstein said the marketing of the building will be launched in the third quarter of this year. "Right now, its still too early," he said.

Silverstein first learned of the attacks when an associate, Geoffrey Wharton, called him on a cell phone from the lobby of the Trade Center building, and Silverstein watched on television as the two towers collapsed. Four of his employees were killed, and Lisa Silverstein has said the deaths took a toll physically and mentally on her father.

But, in a display of his shrewdness, Silverstein was already delving into complex legal strategies by the next morning. According to Steven Brill's new book, After: How America Confronted the September 12 Era, Silverstein told several people who had called in offering sympathy the day after the attacks that he was going to prove that the two planes crashing into the towers had been two separate instances and that would entitle him to double the money for rebuilding. He also called the his architect, Childs, and told him to start sketching out plans for "a whole new place."

Silverstein would soon pledge to rebuild "given good health" and with cooperation from the local and federal government. While the project will likely stretch until 2015, Spinola said the developer's age is a moot point. "In the real estate industry in New York, being in your early 70s, it's not uncommon to be planning for the next decade or so," he said.

In addition to daughter Lisa, who is in her 30s, Silverstein also has a son, Roger, who works for the organization dealing with downtown leasing of commercial office space. Silverstein hired John "Janno" Lieber this past April as director of development for the Ground Zero site. Lieber, a former senior vice president of Lawrence Ruben Co., managed the $800 million development of the Port Authority Bus Terminal.

Outside of work, Silverstein's passion is his yacht, which he still refers to as his "boat", said Lisa Silverstein. Nearly every weekend, Silverstein will go to wherever his yacht is located, whether "New York, the Cape, Canada or the Islands," said Lisa.

The yacht, whose name Lisa didn't want to give out of privacy concerns, was built by the developer 13 years ago, "but is so state-of-the-art, people think it was just built," she said. The vessel functions as Silverstein's "floating couch."

"It's also his psychiatrist. It's where he can get away from everything," she said.

Silverstein has owned a succession of yachts over the past several decades, starting with "Last Penny" more than 20 years ago, and they have grown as the size of his buildings have grown. They also serve as a great place for family to get together. "I basically grew up on a boat," said Lisa. "Now I bring my kids on board. Every few years the boats get a little bigger. He says he needs a bigger boat because there are more of us."

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Copyright 2003-2004 The Real Deal.