Larry Silverstein
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Larry A. Silverstein (born 1932 in Bedford-Stuyvesant in Brooklyn, New York) is a billionaire real estate investor and operator and the head of Silverstein Properties, a real estate development group. Silverstein is also a member of New York University's Board of Trustees. Silverstein is the developer and leaseholder of the World Trade Center towers that were destroyed in the September 11, 2001 attacks.
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[edit] Background
Larry Silverstein graduated from New York University in 1952, and married in 1956. He also attended classes at Brooklyn Law School. He and his wife, Klara, have three children: Lisa, Roger and Sharon.
Silverstein became involved in real estate, together with his late father, Harry G. Silverstein, and then friend and brother-in-law, the late Bernard Mendik, buying buildings in Manhattan. In 1957, they established Silverstein Properties, as Harry G. Silverstein & Sons, and bought their first building. Mendik and Silverstein continued the business after Harry's death in 1966. In 1977, Mendik divorced Annette Mendik Silverstein, with the business partnership also splitting up at that time.[1] Mendik also cited disagreements over real estate strategies, with Mendik wanting to buy buildings while Silverstein wanted to build.[2]
[edit] Other prominent buildings
While Silverstein is most famous for his involvement at the World Trade Center, his real estate holdings include many other buildings in New York City.
As of 1978, Silverstein owned five buildings on Fifth Avenue, as well as 44 Wall Street, and a shopping center in Stamford, Connecticut.[1] In 1980, he bought the building at 120 Wall Street, which was constructed in 1930. Also in 1980, he renovated the building at 11 West 42nd Street, acquired the lease for the Equitable Building at 120 Broadway.
Other buildings include:
- One River Place (42nd Street west of 11th Avenue)
- Two River Place
- 529 Fifth Avenue
- 570 Seventh Avenue
Silverstein was also involved as a developer of the Ronald Reagan Building in Washington, D.C.
In November 2006, Silverstein agreed to buy the building at 99 Church Street from Moody's for $170 million.[3] Moody's is slated to move its headquarters into 7 World Trade Center in 2007. 99 Church Street, built in 1951, contains 441,000 square feet of space.[4] Depending on market demands, the building may continue to be used as office space or or as a mixed-use structure, which would also include apartments.[4]
[edit] World Trade Center lease
[edit] 7 World Trade Center
In 1980 Larry Silverstein won a bid to lease and develop the last undeveloped parcel from the Port Authority of New York and New Jersey to build 47-story 7 World Trade Center.
[edit] World Trade Center
During the 1990s, New York was suffering from the effects of Black Monday (1987) leading to high vacancy rates at the World Trade Center. George Pataki became governor of New York in 1995 on a campaign of cutting costs including privatizing the World Trade Center. A sale of the property was considered too complex, so it was decided by the Port Authority to open a 99-year lease to competitive bidding. [5]
In January 2001, Silverstein, via Silverstein Properties and Westfield America, made a $3.2 billion bid for the lease to the World Trade Center. Silverstein was outbid by $50 million by Vornado Realty, with Boston Properties and Brookfield Properties also competing for the lease. However, Vornado withdrew and Silverstein's bid for the lease to the World Trade Center was accepted on July 24, 2001, seven weeks before the buildings were destroyed in the September 11, 2001 attacks. This was the first time in the building's 31-year history that the complex had changed management.
The deal was described in a press release on July 24, 2001:
- "Silverstein Properties, Inc., and Westfield America, Inc. will lease the Twin Towers and other portions of the complex in a deal worth approximately $3.2 billion – the city's richest real estate deal ever and one of the largest privatization initiatives in history. [6]"
The lease agreement applied to World Trade Center Buildings One, Two, Four and Five World Trade Center, and about 425,000 square feet of retail space. Silverstein put up only $14 million of his own money [7]. Silverstein was also given the right to rebuild the structures, should they be destroyed. [8]
[edit] September 11, 2001 attacks
[edit] Dispute with Insurers
As a private developer with a 99-year lease on the World Trade Center, Silverstein insured the property. Following the September 11, 2001 attacks, he sought payment for the destruction of the towers as two incidents. The two dozen insurers held that it was one incident. If it were considered to be a single incident, the payout would be $3.55 billion and if it were two incidents, it would be $7.1 billion. Silverstein sued the insurers. In October of 2006, the U.S. Court of Appeals for the Second Circuit upheld a Southern District verdict by a jury that the attacks must be considered a single occurrence. Yet, the same court also upheld a victory in the second phase of trial which was awarded to Mr. Silverstein in which temporary insurance policies in effect when the buildings were destroyed did require that the attack to be treated as two occurrences. Thus, nine insurance companies will pay double the approximately $1 billion in coverage under their policies.[9]
On December 6, 2004, a federal jury ruled in favor of Silverstein giving him an additional $1.1 billion from nine insurers, declaring it to be two "occurrences". [10] However, in a previous trial, a different federal jury delivered a mixed verdict which highly favored insurers on April 29, 2004 [11]
At dispute in the trial were interpretation of standard forms used in the application for property insurance and when particular insurers saw which documents.[12]
In total, Silverstein was awarded nearly $5 billion in insurance money following the destruction of the Twin Towers [13]. He plans to use some or all of the settlement to rebuild. [14] The World Trade Center had a total of 24 insurance policies. In 2007, 6 years after the attacks, Silverstein and the Port Authority of New York and New Jersey filed a $1 billion lawsuit ($250 million in unpaid claims and $750 million in damages) against Royal & Sun Alliance Group Plc and its U.S. affiliate.[15]
Silverstein's lease with the Port Authority for the World Trade Center requires him to continue paying $102 million annually in base rent.[16] He is applying insurance payments toward the redevelopment of the World Trade Center site.[17]
[edit] Negotiations to rebuild at the World Trade Center site
Silverstein had the legal right to rebuild office buildings including the Freedom Tower at the World Trade Center site and while the site is unoccupied, he continues to pay $10 million per month in rent to the Port Authority of New York and New Jersey. After several months of negotiation, in April 2006 he yielded some of those rights back to the Port Authority.
Ground was broken on the construction of the Freedom Tower on April 27, 2006. [18] Lack of financing had prevented construction from commencing earlier. The proceeds of the insurance payments from the destruction of the previous buildings alone were insufficient to cover the cost of rebuilding all the planned buildings.
After the September 11, 2001 terrorist attacks, the United States Congress approved $8 billion in tax-exempt Liberty Bonds to fund development in the private sector at lower-than-market interest rates. $3.4 billion remained unallocated in March 2006 designated for Lower Manhattan, with about half of the funds under the control of Mayor Michael Bloomberg and the other half under the control of Governor George Pataki.
Negotiations were held to obtain concessions from Silverstein in exchange for allocating the Liberty Bonds to the World Trade Center rebuilding. The concessions were to give back to the Port Authority rights to build and operate the Freedom Tower and another office tower, a share of the insurance payments, and not to contest the allocation to the Port Authority of Liberty Bonds. The Port Authority, a public agency, already has the ability to issue its own tax-exempt debt. The Port Authority will have its proposal in final form in September 2006. In return, the Liberty Bond funds were allocated to Silverstein and government agencies will be anchor tenants in his three office towers. This allows construction to commence.
In March of 2007 Silverstein appeared at a rally of construction workers and public officials outside of an insurance industry conference to highlight what he describes as the failures of insurers Allianz & Royal and Sun Alliance to pay $800 million in claims related to the attacks. Insurers cite an agreement to split payments between Mr. Silverstein and the Port Authority as a cause for concern.[19]
In summary, Silverstein retains rights for Towers Two, Three, and Four. The Freedom Tower (designated as Tower One) will be owned by the Port Authority as well as Tower Five which may be leased out to another private developer and redesigned as a residential building.[20]
[edit] 9/11 conspiracy theories
9/11 conspiracy theorists believe that 7 World Trade Center was deliberately destroyed. Conspiracy theorists cite the 2002 PBS documentary America Rebuilds, in which Silverstein said: "We've had such terrible loss of life, maybe the smartest thing to do is pull it. And they made that decision to pull and we watched the building collapse." Silverstein's spokesperson, Dara McQuillan, said in September 2005 that by "pull it" Silverstein was referring to the contingent of firefighters remaining in the building, and confirming that they should evacuate the premises.[21][22]
[edit] References
- ^ a b Silverstein Properties, Inc. - Company History. Fundinguniverse.com.
- ^ Salmans, Sandra. "Putting together city's biggest apartment deal", New York Times, January 28, 1985.
- ^ Hess, Diane. "Moody's to sell headquarters to Silverstein", New York Business, November 21, 2006.
- ^ a b "In Brief", Newsday, November 22, 2006.
- ^ Goldberger, Paul (2004). Up From Ground Zero. New York: Random House, p.28. ISBN 1-4000-6017-6.
- ^ 'Governor Pataki, Acting Governor Difrancesco Laud Historic Port Authority Agreement To Privatize World Trade Center' Port Authority Press Release, July 24, 2001
- ^ 'Double Indemnity: Was the WTC disaster one incident or two?' Alison Frankel, The American Lawyer, September 3, 2002
- ^ Goldberger, Paul (May 20, 2002). "Groundwork: How the future of Ground Zero is being resolved.".
- ^ Hamblett, Mark. "Circuit Resolves Distribution Of 9/11 Insurance Proceeds", New York Law Journal, October 19, 2006.[1]
- ^ Starkman, Dean. "Jury Rules for Silverstein on Trade Center Insurance", Wall Street Journal, December 7,2004, p. A11.
- ^ Starkman, Dean. "Jury's Decision Leaves Rebuilding of World Trade Center in Turmoil", Wall Street Journal, April 30, 2004, p. A1.
- ^ Jenkins, Jr., Holman. "The Importance of Being Larry", Wall Street Journal, March 6, 2002, p. A17.
- ^ . 'Charges Of Greed Surface Following Breakdown Of WTC Talks', NY1 News, March 15 2006
- ^ [2] 4.65 billion reasons why I should rebuild
- ^ WTC Developer to Get Additional $12.5M Payment from Insurer TIG, Commercial Property News, Barbra Murray, March, 2007
- ^ 2001 Annual Report. PANY (2002, April 23).
- ^ WTC Developer to Get Additional $12.5M Payment from Insurer TIG, Commercial Property News, Barbra Murray, March, 2007
- ^ Construction Begins at Ground Zero, Washington Post, April 28, 2006
- ^ Silverstein Lashes Out Against WTC Insurers, Special to the New York Sun, March 13, 2007
- ^ Freeing us from Freedom Tower Nicole Gelinas, City Journal, Autumn 2006
- ^ State Department Report: "9/11 Revealed?".
- ^ World Trade Center Building Performance Study, Chapter 5: 7 WTC. FEMA (2002, May).
