Who’s minding the stores at new WTC?

With all the fuss over the memorial at the World Trade Center site, what’s getting overlooked is a tussle over who will develop its pricey retail components.

In May, Sheldon Silver, the speaker of the New York State Assembly, brought to light that the rights for the first bid on the retail management of the Lower Manhattan site were held by shopping center operator Westfield America.

The revelation, which came about during a hearing held at 7 World Trade Center concerning the progress of Ground Zero rebuilding, raised a few eyebrows.

Prior to September 11, trade center retail brought in average sales of $900 per square foot annually. Stores included Ann Taylor, Au Bon Pain, Banana Republic, Coach, Krispy Kreme, Radio Shack, Sbarro, Sephora, Thomas Pink, Tourneau, and Victoria’s Secret.

“The thing about the old trade center, it was not the greatest architecture, but just like the rest of the building, it was filled up with good tenants,” said an industry insider. “It was one of the top-grossing malls in the country.”

Apparently, in December 2003, Westfield paid the Port Authority of New York and New Jersey, which controls the retail portion of the Lower Manhattan redevelopment, $1 million for first offer rights. Those rights allow Westfield to make the first bid on the management of the retail portion of the project.

The deal took place at the same time that Westfield America was paid $140 million to relinquish their retail rights to the then-destroyed trade center, according to company documents.

“I know of no other offer like this,” said New York State Assemblyman Richard Brodsky of the deal. “It is the opposite of competitive bidding — and is intuitively not a good policy.”

Yet Westfield America’s agreement may not be the last word. Talk to different parties, and who controls retail at the site — the shopping center operator, the Port Authority or World Trade Center leaseholder Larry Silverstein — remains unclear.

“We are still in control of the retail and we are still pursuing the retail,” said Port Authority spokesperson Steve Coleman, who noted that the Authority controlled the trade center retail prior to September 11, and does so in other Port Authority buildings, such as the George Washington Bridge Bus Station located in Washington Heights.

But, according to an industry insider, an April 2006 “conceptual framework” document between Silverstein Properties and the Port Authority gives Silverstein the right to develop retail. Silverstein will be designing and building Towers 2, 3 and 4, where the majority of the retail will be located.

It says, “Larry, go get yourself a retail partner and you can develop the retail,” the insider said.

A read-through of the framework makes it clear that any of the three parties could eventually end up with the retail assignment.

“The Port Authority can also develop the retail themselves and it would never go out to Westfield,” adds the source.

Currently, the Port Authority is moving ahead as if they had complete control, and working with consultants Jones Lang LaSalle and Tishman Speyer to come up with their own pricing and footprint strategy.

But even Port Authority officials are not clear on what would happen if Westfield’s first right to bid was rejected, and how high the pricing bar would be.

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Perhaps the retail piece would then be handed over to Silverstein, who might bring in a higher bid from a third party, but the conceptual agreement leaves the resolution of these details up in the air.

Design elements are also loosely defined; for example, whether the retail portion along Cortlandt Street is built in an enclosed galleria — or as an open, mixed-use, street-level retail complex — has not yet been decided.

In addition to Towers 2, 3, and 4, the high-traffic retail areas planned for the WTC site will be at Church and Liberty streets, said Coleman of the Port Authority.

Across from Liberty Park and near the PATH Station will also be very high traffic areas; the Port Authority expects 250,000 people to come through the PATH station after it’s been open a couple of years. The city, meanwhile, has its own concerns.

The City Planning Commission made clear in a memorandum signed by chair Amanda Burden in 2004 that it did not agree with several provisions outlined in the final World Trade Center Master Plan, the foundation for the current design work being undertaken by Silverstein Properties.

In March 2004, the Commission prepared a visual plan detailing that the site should “extend Dey and Cortlandt Streets as real streets through the site,” called for “no escalators or skylights in public open spaces,” “25-foot sidewalks on primary streets, and 15-foot sidewalks on secondary streets.”

The Commission also asked that the setbacks through Greenwich Street be widened to a minimum of 15 feet, to allow for a view through the open-air corridor formed by the buildings and reduction of street-level wind tunnels.

The Commission’s recommendations were accompanied by a letter addressed to then-LMDC chairman John Whitehead and then-president Kevin Rampe (Rampe is now chairman), and also called for pedestrian-friendly street designs and a minimum of 50 percent street-level retail.

The Commission reminded the LMDC that because the trade center plan requires an override of local law or regulation — the plan actually contains three overrides — the commission can “recommend approval, disapproval, or modification,” of the plan “pursuant to the provisions of subdivision 3 of section 16 of the NY State Urban Development Corporation Act.”

It is not clear if any one party will have the last say or whether the city has the power of law behind it if the designers opt for an enclosed galleria along Cortlandt.

But, according to Jennifer Falk, a spokesperson for Mayor Michael Bloomberg, the November 2004 redevelopment agreement between the city and the Port Authority provides the city with “sign-off” when it comes to issues with the WTC streets.

“The city has been working closely with the Port Authority and other entities involved in rebuilding the World Trade Center site to put in place retail that will service the area’s existing commercial and residential communities, while at the same time, making sure that the plan reintegrates a rebuilt World Trade Center site into the greater Lower Manhattan community,” she said.

Westfield America declined to comment on how their role in the retail development might affect the pace of design and construction at the much-delayed project, but it seems likely that if the company does get the bid for the project, they are likely to build out the space in line with some of their current projects.

For example, Westfield America’s San Francisco Centre, expected to open in September of this year, is considered an urban mixed-use retail space.

That 1.5 million-square-foot project, undertaken in partnership with Forest City Enterprises, is similar in scope and design challenges to the trade center site because it incorporates the historic façde of the Emporium, originally built in 1896.

The $440 million project is also situated in the center of San Francisco, and will be linked to the local BART subway system, facilitate traffic of 25,000 pedestrians daily, and host two very large anchor stores, Nordstrom’s and Bloomingdales.

The San Francisco Centre retail line-up includes Bebe, Borders, Banana Republic, J Crew, Landau and a number of restaurants — a preview of what might happen at the trade center site.

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