World Trade Center siteConstruction crews have been working feverishly at the World Trade Center site in anticipation of the 10th anniversary of the Sept. 11 attacks later this month.
But when families and friends of the victims gather there for the commemorative ceremony and the opening of the National September 11 Memorial, they will also see major progress at many of the buildings around them.
Indeed, lately — after years of delays and political infighting — steel has been rising rapidly at the 16-acre site.
Just to the north of the memorial, attendees will see the new $3.2 billion 1 World Trade Center, the most expensive office building ever constructed in the city, built to about the 80th floor. To the east, they will see the construction at three additional tower sites.
While much has been written about the progress at ground zero in a piecemeal fashion, this month, The Real Deal takes a closer at look how all of the pieces fit together — and how the finances pencil out for the developers.
1 World Trade Center
The Port Authority expects the 105-story, 2.6 million-square-foot 1 World Trade Center (3.1 million square feet when including loss factor) to be completed in 2013 — at a cost of $3.2 billion, or about $1,250 per square foot. That price is far above the norm for Manhattan: the 1.1 million square feet in the super-modern 11 Times Square cost about $1,000 a buildable foot. In another example, the Related Companies said last spring that it was offering to build an office tower for a tenant for $700 per foot. But unlike other modern office towers, 1 World Trade is being constructed with an unprecedented level of durability to withstand attacks. The Port Authority is not trying to find tenants on its own, however. The Durst Organization agreed last August to partner with the agency, and make a minimum investment of $100 million for a reported 5 percent equity stake.
Of course, the headline-grabbing deal for the building was the 1 million-square-foot lease inked in May by Condé Nast for floors 20 to 41, starting in its first year at about $60 per foot. But it was not the first. In 2009, China Center’s Vantone Industrial inked a 190,810-square-foot lease for floors 64 to 69, starting at $80 per square foot, for a business and cultural center. In addition, the U.S. General Services Administration is expected to lease 300,000 square feet, and the state’s Office of General Services is expected to take additional floors. The leasing agent is Cushman & Wakefield.
From 2007 through the 2011 budget, the Port Authority has spent or allocated $1.9 billion on the building, an analysis of Port Authority annual reports shows. The tower’s price tag has jumped from $2.8 billion, estimated in 2008, to $3.2 billion today. One source, who is not involved in the project but did a back-of-the-envelope calculation, estimated it would take blended rents of about $110 per foot for the project to break even.
4 World Trade Center
The 72-story, 1.8 million-square-foot office tower at 150 Greenwich Street, another Silverstein tower, is currently under construction and is expected to be complete by 2013. At press time, it had steel rising above the 37th floor.
Earlier this year, Silverstein exercised a 2006 option for the City of New York, which pledged its support as a way to push development forward, to lease 580,000 square feet at $56.50 per square foot. If a higher-paying private tenant comes along, Silverstein can tear up the city lease. In addition, the Port Authority has already committed to leasing 600,000 square feet in the tower for its headquarters. The office leasing agent is CBRE. Westfield and the Port Authority control the first four floors of retail, which will have a total of 78,600 square feet.
The $1.81 billion price tag for Tower 4 comes in at about $1,000 per square foot of office space — about 20 percent cheaper than 1 World Trade. Silverstein isn’t paying a penny out of pocket for the building; instead, he’s using $1.36 billion in Liberty Bonds and $450 million in insurance proceeds.
5 World Trade Center
The 1.5 million-square-foot office tower planned for the site of the former Deutsche Bank building at 130 Liberty Street, across from the Trade Center site, is on hold. Silverstein sold his rights to the property back to the Port Authority in 2006. There is no financing in place and no tenants are lined up.
2 World Trade Center
The 88-story, 2.4 million-square-foot tower at 200 Greenwich Street, controlled by Silverstein Properties through a 99-year ground lease, is one of three office projects in the WTC redevelopment that’s currently on hold. That’s largely because Silverstein doesn’t have any tenants lined up, and likely doesn’t want his new buildings to undercut each other when it comes to wooing tenants. The current plan is to construct the site to ground level by the end of the year, and then await a market recovery.
While Silverstein controls the office space at Tower 2, Australian retail giant Westfield Group and the Port Authority control the building’s underground retail space. And they are actively hunting for tenants. Once an office building is constructed, there will be an additional 90,000 square feet of retail on the first four floors.
No public or private financing is lined up. In August 2010, Silverstein reached an agreement with the Port Authority stating that the tower would receive no public support, and that all funds from insurance and Liberty Bonds that had been allocated to it were redirected to Towers 3 and 4.
3 World Trade Center
Silverstein owns the rights to build the 80-story, 2.8 million-square-foot office tower through another 99- year lease, at 175 Greenwich Street. But like Tower 2, the office portion of the building is on hold. However, the August 2010 agreement with the Port Authority required Silverstein to build a three-level retail podium using insurance proceeds. The 65,900-square-foot, above-ground retail podium is being built now and is expected to be at street level by the end of the year. It will be controlled by Westfield and the Port Authority. Silverstein will move forward with an office building once he finds a tenant, with a possible completion of the tower in 2015.
The Port Authority had hoped in 2008 that Merrill Lynch would take the entire building, but the investment bank backed out as the market tumbled. UBS had been in talks in June to relocate its Connecticut division to 800,000 square feet in the building, but also backed out, the Wall Street Journal reported last month. CB Richard Ellis is the agent for the building.
The building has complex financing triggers, which rely on Silverstein raising $300 million in private funding. It also has a condition that he pre-lease 400,000 square feet of office space and secure $1.3 billion of Liberty Bonds and taxable debt before starting construction. The public support is capped at $600 million, divided equally between contributions from the Port Authority, the city and the state.
In July, the Westfield Group signed an agreement to form a joint venture with the Port Authority for 345,000 square feet of retail above- and belowground, with the potential for another 90,000 square feet in Tower 2. The joint venture is expected to cost about $1.45 billion, or more than $3,300 per square foot for the entire 435,000 square feet. Brokers estimated that tenants would have to pay, on average, more than $200 per foot to support the construction costs, and that asking rents could be anywhere from $200 to $500 per foot (see “The ‘malling’ of Manhattan”).