Larry Silverstein Flees the ‘Old Fogeys’ of Midtown
Posted June 15, 2018 2:23 p.m. EDT
NEW YORK — Why, after 33 years of living in a Park Avenue high rise, has New York developer Larry A. Silverstein decided to leave Midtown for Lower Manhattan?
“It was full of old fogies,” Silverstein, 87, said recently about his longtime home. He was sitting in his corner office on the 38th floor of 7 World Trade Center, beneath a wall-mounted skateboard emblazoned with an image of the downtown skyline — a housewarming gift from his employees. Behind him, three humidifiers crowded his desk, misting at full blast.
“I felt it was a wonderful opportunity to come down to an area we had just finished, with a population that is all young,” said Silverstein, who has been instrumental in the rebuilding of the World Trade Center complex.
Last month, he and his wife, Klara, moved into an 80th-floor penthouse at 30 Park Place, an 82-story limestone tower completed by Silverstein Properties in 2016. Their roughly 6,200-square-foot, four-bedroom apartment comes with a terrace overlooking his office — not to mention most of Manhattan, New Jersey and parts beyond. He bought the full-floor unit for $32.6 million.
“If you look far enough,” he said, “you can see the curvature of the Earth.”
Silverstein isn’t the typical empty nester looking for a change of pace. As the chairman of Silverstein Properties, his move downtown into a building just minutes from the World Trade Center site is an endorsement of an area that remains a work in progress. With the opening this week of 3 World Trade Center, his firm’s third completed office tower at the site, he sees another chance to raise the profile of Lower Manhattan. The area south of Chambers Street that includes Battery Park City and the financial district has undergone major changes since 2001, roughly tripling its population to 61,000, according to Jessica Lappin, the president of the Alliance for Downtown New York, a business-improvement organization. The median age of residents there is 32, she said, about five years younger than the median age in Manhattan. For Silverstein, who signed a $3.2 billion, 99-year lease for the World Trade Center just six weeks before the Sept. 11, 2001, attacks, it has been a difficult road. After construction began on 3 World Trade in 2010, for instance, it was delayed repeatedly by financing issues. It is now 40 percent leased, with GroupM, an advertising media company, signed on as the anchor tenant. Silverstein’s final tower, 2 World Trade, was stalled in 2016 after the publisher News Corp. backed out of lease negotiations. Its construction site, recently disguised with lively street art, is a reminder of the long haul ahead. After years of disputed insurance claims and more than a decade of political wrangling over subsidies and financing with the Port Authority of New York and New Jersey, which owns the 16-acre site, about 7 million of the proposed 10 million square feet of commercial space has been rebuilt.
Meanwhile, in the nearly 17 years since the attacks, other pockets of the city also have redeveloped, adding competition for both the residential and commercial markets of Lower Manhattan.
In the first quarter of this year, 818,391 square feet of commercial space was leased downtown, the least of the city’s major office markets, said Richard Persichetti with Cushman & Wakefield, a commercial brokerage. The average commercial rent was $59 a square foot, about 23 percent cheaper than Midtown. The quarter finished almost 40 percent below its average over the last 10 years, he said, and “could point to signs of concern.” In May, though, leasing looked stronger, he said.
Lower Manhattan “has a residual perception as a back-office location,” said M. Myers Mermel, chief executive of TenantWise, a real estate advisory firm, adding that office space downtown leases for around $25 a square foot less than comparable space at Hudson Yards in Midtown, despite having more transportation options. Many prospective tenants still view Midtown as the premier area for office headquarters, he said, while others may have reservations about relocating so close to the site of the attacks. Companies are also eyeing the newly rezoned Midtown East, where a slate of new projects is expected, he said.
The residential market in Lower Manhattan is also changing. “It’s a market in transition, from 9-to-5 to 24/7,” said Jonathan J. Miller, a New York real estate appraiser, referring to pockets of the area that can still feel isolated on nights and weekends. In the first quarter, the median sales price in the area fell to $1,105,000, a 31 percent drop from the same period in 2017 — the steepest decline of any submarket in the borough, according to a Douglas Elliman report. The decline reflects, in part, a large number of new luxury condo sales that closed last year, pulling this quarter’s numbers down. But that doesn’t account for the entire drop-off, said Miller, who prepared the data. “I think it’s a reset, just like in the greater market,” he said, referring to the softening of prices at the top of the market.
There are other challenges. Frances Katzen, an agent with Douglas Elliman, said quirks to buying in parts of the area have scared away some clients. In Battery Park City, the land is owned by a public authority that charges developers a payment in lieu of taxes, which can inflate monthly carrying costs. For instance, condos in Battery Park City listed for an average of $1,523 a square foot, practically the same as in Murray Hill, according to Gabby Warshawer with CityRealty, a real estate data website. But the average combined cost of common charges and taxes in Battery Park City was $3,466 a month, about $1,000 more than the Midtown neighborhood.
But new condo developments, like Silverstein’s 30 Park Place, are in a different class. Located on the cusp of the more affluent downtown neighborhood of TriBeCa, the 157-unit project has just 18 unsold units left (sales began in 2014), with an average price of around $7.2 million, said Rob Vecsler, president of Residential Development at Silverstein.
The tower, designed by the firm of Robert A.M. Stern, has a Four Seasons hotel at its base, which offers its services to condo residents. The remaining units range in price from $6.7 million to $30 million for the smaller penthouse above Silverstein’s.
“It’s been a relatively strong sales pace, given the overall market,” Vecsler said, acknowledging that the ultraluxury market has been softer.
To help entice buyers, the developer agreed to pay a total of $20.5 million toward residents’ common charges over five years, lowering the fees from $2.20 a square foot to 84 cents a square foot, Vecsler said.
With that perk set to expire in 2022, some owners are concerned that their monthly carrying costs will increase significantly, said Jonathan Helfer, a partner at Katz & Matz, who represented a buyer in the building. But Silverstein isn’t worried. The tower’s allure is in the Four Seasons amenities, he said, and carrying costs will not be out of step for the neighborhood, which has several new luxury towers. It was a characteristic response from a developer who has faced setbacks at nearly every stage of the World Trade Center redevelopment.
After a recent tour of their 80th-floor apartment, Larry and Klara Silverstein stood on a private terrace overlooking the site’s mammoth towers. Helicopters whirred above and below.
“In the beginning, people thought we were crazy,” Klara Silverstein said about their move, calling it “a complete departure” from their longtime Midtown home and its views of Central Park. But it has brought them closer to their daughter, Lisa Silverstein, an executive vice president at Silverstein Properties, who lives in the tower with her family. It has also meant a much shorter commute for Larry Silverstein, who is spry at 87, but not bold enough to ride his new skateboard to work.
Plus, it takes time to change people’s minds, Larry Silverstein added, wryly. “It’s only been 17 years.”