Cover Story

The Saving of Ground Zero


To the degree that it’s possible for a 102-story building to take a city by surprise, One World Trade Center snuck up on the New York skyline. For years the project, conceived in the throes of tragedy, has been debated, negotiated, renamed, redrawn, hailed as a beacon, and maligned as a boondoggle. It wasn’t until recently, though, that it presented itself as an immutable fact, beginning to replace the void above Ground Zero with steel and reflective glass. Designed to commemorate lost life and recapture lost revenue, the half-completed skyscraper is both a nationalistic statement—it was formerly known as the “Freedom Tower”—and the centerpiece of a speculative real estate project.

From his headquarters high above 42nd Street, about three miles to the north, real estate developer Douglas Durst has been keeping watch over One World Trade’s rise. “I think it’s going to be quite spectacular,” he says one sultry July afternoon, sitting in a room decorated with photographs of his forbears in the family real estate company. Looking south over the majestic spread of Manhattan, One World Trade was wrapped in midsummer haze, and the air was thick with irony. If anyone in power had listened to Durst years ago, the vastly expensive tower would not exist.

“My argument was that building these highly subsidized buildings was harmful to the economy overall,” Durst says. And while many of his peers said the same thing after Sept. 11, only Durst—a canny, cerebral 66-year-old introvert in a business of mellifluous promoters—took out newspaper ads calling One World Trade “the legacy of poor planning and decision-making.” At the time public officials were saying they had a patriotic obligation to rebuild, no matter how much it cost and whether or not Manhattan needed all the office space. Durst’s unemotional skepticism seemed almost heretical.

So it is not hard to understand why people involved with the redevelopment process let out a collective gasp when, last summer, the arch-critic bought a $100 million interest in One World Trade Center from its owner, the Port Authority of New York and New Jersey. Soon after the developer came to this agreement, which calls for him to oversee the building’s construction, leasing, and eventual operations, the magazine publisher Condé Nast agreed to occupy half the building, and Durst’s turn began to appear very profitable. In explaining his reversal, Durst says One World Trade was going to be built anyway, and someone was going to make money off the government’s colossal expenditure. So he figured it might as well be him.

This, in a less literal sense, mirrors the progression the entire city of New York has followed over the 10 tumultuous years since the terrorist attacks. After cycling through the stages of grief, from denial (“I can’t believe they’re not there”), to anger (“We’ll build taller!”), to bargaining (“But who’s going to build it?”), to depression (“Will anyone build it?”), the redevelopment process has reached its inexorable endpoint: acceptance. This may not be the commemoration everyone imagined, but now it’s here, and it’s time to buy in.

Reaching this conclusion took a long struggle among clashing, sometimes irreconcilable, ideologies. The 16 acres occupied by the destroyed complex were not simply a graveyard or a pilgrimage site but immensely valuable real estate. There was no blueprint for how to proceed with a project that was unprecedented in its combination of scale, complexity, expense, and heated political and symbolic import. Yet in the traumatized and galvanized days of 2001, it seemed possible that the obstacles might be swept aside, and that a city famous for developmental deadlock—an inability to mobilize the kind of civic ambition that created places such as Rockefeller Center and Central Park—might unite in favor of a single vision.

It didn’t quite turn out that way, but the redeveloped Trade Center site—whose centerpiece, the memorial to the victims of 9/11, will be unveiled next month—is still an astounding achievement, and one that was far from inevitable. If the memory of the Twin Towers now belongs to the world, the story of how they have been replaced is entirely of New York: a tale of power, capital, shifting allegiances, and hallowed ground.

 

The question of rebuilding arose almost as soon as the Twin Towers collapsed. “You had dozens of competing interests and the incredible emotion around the site,” says George Pataki, New York’s governor at the time of the attacks.

Pataki took an early lead role by virtue of his sway over the Port Authority, an agency he jointly administered with the governor of New Jersey. But others with a plausible claim included Larry Silverstein, a developer who just weeks before its destruction had signed a deal to lease the complex; insurers, who would potentially have to pay for rebuilding; and the people of New York and their new mayor, Michael Bloomberg, who actually had little legal authority over the land, since it belonged to the Port. (Bloomberg is the founder and majority owner of Bloomberg LP, which publishes this magazine.) Then there were the families of the dead, who overwhelmingly advocated for preserving the entire site as a memorial—an idea that received much sympathy but little serious consideration. “Despite all the rhetoric, all the outbursts of civic cheer, this was always going to have to be a commercial development,” says Mitchell Moss, a professor of urban policy at New York University.

That decision was made, in effect, on Sept. 12, 2001, when Howard Rubenstein, the veteran New York publicist, presented a memo to his client, Silverstein. Rescue workers were still searching for survivors, but the developer was already reviewing his options under his 99-year, $3.2 billion lease. Rubenstein proposed two possible statements: One said it was “inconceivable that we could rebuild a place of commerce on land that has become drenched with the blood of American patriots,” while the other promised a “national crusade” to erect a new complex. Silverstein immediately selected the second course and within days was telling associates he planned to rebuild.

Many others looked at the wreckage and saw an opportunity, and with remarkable swiftness the debate settled on a set of parameters that Alexander Garvin, its initial planner, refers to as “the givens.” One given was that, as much as the Trade Center was mourned, it wouldn’t return in its old form, as two monoliths set in a soulless concrete plaza that blocked off city streets. A second, determined by Pataki as a concession to the victims’ families, was that the footprints of the towers would be preserved for a memorial, pushing all redevelopment to the perimeter. This proved difficult to reconcile with the third given, which was that any eventual plan would have to reproduce 8 million to 10 million square feet of the office space lost in the attack.

“We were stuck with these restrictions,” says Roland Betts, a Manhattan property owner who was an influential voice on the board of the Lower Manhattan Development Corp. (LMDC), the state agency created to oversee the process. Intensive office development was a given because of the requirements of the Port Authority, which finances its public works through bonds tied to the reliable cash flow from things such as tolls and airport fees. At the time it came down, the World Trade Center had finally become profitable after three decades of existence, and Silverstein’s lease called for a $120 million annual payment. “I don’t think it was driven at that point by a commercial expectation in terms of the Port Authority’s $120 million,” says Chris Ward, the agency’s executive director. Many others, however, say the Port Authority’s need for cash was a paramount consideration. “It’s a monster,” Betts says, “and the beast has to be fed.”

To make the constraints more palatable, those overseeing the project sought to give it a grandiose aesthetic justification. “We were not going to make it into just another office development,” Pataki says. “We had to do something dramatically different.” In 2002, the LMDC invited some of the world’s most eminent architects to propose competing master plans for the site.

The winning architect, Daniel Libeskind, was not the most famous or experienced entrant. But he appealed to the moment, presenting his design in a speech that invoked cherished American values. Libeskind also had well-placed fans, including Victoria Newhouse, wife of Condé Nast Chief Executive Si Newhouse, who introduced him to the colorful Manhattan attorney Edward Hayes, a law school friend of Pataki’s. Hayes became the architect’s lobbyist. “He would never have been appointed without me, and I would have not gotten involved in it without her,” Hayes says. When an LMDC committee, chaired by Betts, wanted to give the commission to another team led by Rafael Viñoly, Hayes placed an early morning phone call to the governor and helped to convince him to overrule the decision.

Pataki was particularly taken with the Libeskind plan’s ascending spiral of buildings, which culminated at its northwest corner with an angular, 1,776-foot structure—what would have then been the world’s tallest skyscraper. The governor introduced it as the Freedom Tower. Pataki, a Republican who appeared to have higher ambitions, called for laying the building’s cornerstone in 2004, ahead of the GOP Convention in New York, and completing it by 2008.

What lay ahead, instead, were years of legal wrangling and recriminations. “We only got to a point of seeing real progress when everyone came to understand that it was about the work and not about us,” says Anthony Coscia, who was then chairman of the Port Authority’s board. “But for a while, everyone took turns saying, ‘Oh my God, I am going to be the hero of rebuilding Lower Manhattan.’”

 

Fairly or not, Larry Silverstein ended up being cast by his critics and much of the press as an enemy of aesthetics. The developer contended that, according to his lease, he had the right to dictate what would be developed in the commercial portion of the site, and he didn’t let anyone forget that as citizens pored over architectural renderings—a diversionary exercise, in his opinion. “Did a lot of time get wasted in those endeavors?” Silverstein asks. “The answer is yes.”

We were sitting in a sales office at Seven World Trade, the last building in the complex to fall and the first to be rebuilt, overlooking a stunning panorama of cranes, girders, and construction activity. It was hard to say which is the bigger wonder: the progress or the fact that Silverstein, 80, is still involved in it. “I kept hearing this from everybody: failure, failure, failure, failure,” he says. And yet, a decade into the complicated ordeal, Silverstein is still on the job, making grandfatherly jokes about “having halfzheimers, as opposed to Alzheimer’s,” but looking curiously unaged since the fall of 2001. Since then he had fought a successful legal battle for $4.6 billion in insurance money, while reconstructing Seven World Trade, which sits just north of the former site of the Twin Towers.

“Notwithstanding everybody’s assurances [that] no one would occupy [Seven World Trade] … I finished the building, I leased it, I financed it for 40 years,” Silverstein says. “All in the face of that smoldering mess across the street.”

Silverstein guarded his territory jealously. When Libeskind produced his plan for the Freedom Tower, the architect wrote in his book Breaking Ground, Silverstein told him, “I don’t want you touching my building.” The developer disputes that wording, but agrees that Libeskind understood “the substance” of his attitude. A forced partnership between Libeskind and architect David Childs, Silverstein’s choice to design the Freedom Tower, came to much-publicized grief, and in 2005 the building was forced into a total redesign because of security concerns. “The only way David would do it [was] independently,” Silverstein says, “without any collaboration with anybody.”

Around this time the redevelopment completely stalled as Silverstein, a famously stubborn negotiator, tangled with the Port Authority over his timetable and financing. Pataki declared that the developer had “betrayed the public’s trust,” while a key aide called him “greedy.” An analysis prepared by the New York City Economic Development Corp., after gaining access to Silverstein’s finances, found that the developer had already spent $1.7 billion, through rent to the Port Authority, settlements with various lenders, and huge payments to his own company. It estimated that Silverstein and his partners had already recovered most, if not all, of their initial investment.

Seth Pinsky, who prepared the study and has since become president of the EDC, says, “The breakthrough came when we started to ask the question, what if Larry Silverstein isn’t acting irrationally, and there is an economic explanation for why this project isn’t moving forward?” The remaining funds available to Silverstein appeared to be sufficient to build only two more towers at most—not the five envisioned in Libeskind’s master plan. Finally seeing an opening to exert their influence, Michael Bloomberg’s aides forged a back-channel alliance with Anthony Coscia and New Jersey’s appointees on the Port Authority board. Silverstein’s side complained of “Soviet-style” confiscation but eventually reached a settlement under which he gave up the rights to two buildings, including the Freedom Tower.

Most observers think Silverstein cut himself the best possible deal, taking the three most economically attractive parcels on the site while ridding himself of the gargantuan and politically freighted Freedom Tower. (The Port Authority actually paid him a $20 million fee to let it go.) A follow-up agreement, negotiated after the collapse of the credit markets in 2008, calls for the three buildings to be paid for with a mix of insurance, $2.6 billion in tax-free federal bonds, and private financing, some of which the Port Authority will guarantee. Four World Trade Center, the first of Silverstein’s new towers, is already going up and will be partially occupied by the Port Authority. The others will proceed in stages, once they get lease commitments from large tenants.

The career of Libeskind, the original Freedom Tower architect, has flourished in the years since the LMDC plucked him from relative obscurity, and he says he is satisfied with his contribution, setting the master plan. Silverstein commissioned three star architects—none of them Libeskind—to design his new buildings. “Just because there is a division of talents,” Libeskind says, “does not mean there is not unity of soul.”

Other onetime Silverstein foes told me they now take a similarly charitable view, saying he ended up doing many things right, if not always willingly. Silverstein is proud of his three new buildings, which he calls “significant works of iconic architecture.” Whether they’ll repay the investment, though, remains questionable. When I ask whether the buildings could be profitable, considering what Silverstein described as their “hugely costly” construction expenses, the octogenarian demurs. “The only thing I can tell you,” he says, “is let’s talk again in 2016.”

 

One World Trade’s finances are even more problematic. “You’re building it at a rate of $1,400 a foot in a marketplace where the rents can barely support $500 a foot,” Anthony Coscia says. “It’s half memorial, half office building, and tenants don’t pay you for their building to be a memorial.” After Pataki left office in 2007 the Port Authority shifted course on many issues, starting with the name. “It had to be depoliticized,” says the agency’s real estate broker, Tara Stacom of Cushman & Wakefield. “This building needed to be about commerce, it needed to be about exciting the interest of corporations.”

Pataki still calls it the Freedom Tower. “In my mind, we had a One World Trade Center,” he says. “A lot of my friends and thousands of brave New Yorkers died there.”

By 2009 the steel framework of the new One World Trade Center was ascending, and the Port Authority solicited bids for a private partner in the development. Several major developers bid, including Douglas Durst, who had once told the New York Times that the city’s real estate market would be just fine if the project were abandoned.

If Silverstein is the model of a certain type of developer—a self-made man who says much and reveals little—Durst defies caricature. He was born on third base, spent his youth trying to steal second, was a longhair at U.C. Berkeley, and owns one of the largest organic farms in New York State. He comes from a family known for its strong, though adaptable, principles. Seymour, Durst’s father and predecessor in the three-generation family real estate firm, was a threadbare dresser who erected a clock on a building on Sixth Avenue that counted the national debt and used to compose tiny advertisements for the bottom of the New York Times front page—one-liners that often decried the evils of misgovernment. In the 1960s, Seymour opposed the Twin Towers on the grounds that they were likely to glut the market with subsidized office space, a prediction that largely came true. When Douglas thought he saw the government repeating the same mistake, he started an organization he called the Continuing Committee for a Reasonable World Trade Center.

Silverstein isn’t surprised the building he began ended up in the hands of one of its most strident critics. “Doug Durst is not the only one. There were others after this as well,” he says. He shared a story about his old friend Seymour, who amassed much property around Times Square back when the neighborhood was seedy. “He was an extraordinary guy, a beautiful human being, and a first-class developer in his time,” Silverstein says. “And I remember Seymour vilifying, litigating, doing everything he possibly could to prevent any kind of public development [in] Times Square.” Through the 1980s and ’90s the government tried to redevelop the area using incentives and eminent domain. “After his death, of course, his son came along and took advantage of exactly the things that his father argued against,” Silverstein says.

Durst is happy to concede a certain parallel. “It’s similar to Times Square,” he says of his latest investment. In the 1990s he built a headquarters for Condé Nast in Times Square only after a state-sponsored developer stalled out. Durst isn’t opposed to public assistance in all forms. But he says he shares his father’s conviction about the superiority of the private sector.

So, given Durst’s distaste for government subsidy of massive commercial real estate projects, have his opinions about the merits of building One World Trade Center changed?

“They haven’t,” he replies. “We are where we are, so …”

The way Durst’s deal with the Port Authority is structured, it doesn’t really matter whether or not it was worth it for the government to sink $3.2 billion into One World Trade Center. Though Durst has invested $100 million, his ownership percentage won’t be determined until the building is close to fully leased, and its value can be assessed by a complicated formula. In effect, the size of his interest will float with the market. “So if I had thought it was uneconomic, and I were right, then we would get a bigger percentage of a less valuable building,” Durst says. “Really, we’re indifferent as to whether we get 12 percent of a building that’s worth $1.8 billion or we get 8 percent of a building that’s worth $2.1 billion.” As of now, he says One World Trade looks to be worth about $2 billion, the Port Authority’s target, which would give him 10 percent.

Durst suggests the arrangement will earn him a less-than-thrilling return but says the investment is worth it, considering the limited risks involved. The deal allows his company to stay active at a time of reduced building activity, as he hands responsibility on to the next generation. “One World Trade,” Durst says, “is my way of leaving future growth for the organization.” The firm will receive millions in supplementary fees for overseeing the construction as well as cuts of the building’s cash flow that escalate if it attracts tenants paying rents above a base level.

Port Authority chief Ward estimates that since Durst got involved, the developer has found $30 million in construction cost savings on One World Trade, which would entitle him to $21 million in fees. Some still question whether the project is trying to do too much, currently constructing two skyscrapers totaling 5 million square feet of office space, which won’t be easy to rent out in a recession, in addition to the other buildings planned.

Yet Durst brought something other than his expertise to One World Trade. “He had the key,” Silverstein says, “and the key was Condé Nast.” Under the company’s lease with Durst in Times Square, signed in 1996, it was paying rents far below the market rate, and Si Newhouse was looking to strike another bargain. “They were actually looking at the World Financial Center” next door, Durst says, “and Si saw One World Trade Center coming out of the ground.” Much had changed since his wife’s advocacy for Libeskind. Newhouse was thinking about overhead, not aesthetics, and he was quite comfortable with Durst as his landlord. Durst won the bid; Condé Nast signed the lease.

“It may be one of the most significant changes in the commercial center of New York—not just since Sept. 11, but for decades,” says Carl Weisbrod, an LMDC board member. One of the project’s original aspirations, the creation of a vibrant, economically diverse business district, was advanced in a single stroke. The rate Condé Nast is paying, while comparable to its deal in Times Square, around $60 a foot, is well above average for the neighborhood. No one expects the $3.2 billion tower to return the public investment, at least any time soon, but Ward told me that the building would start generating positive cash flow within a decade.

 

On a hot July day, I met a hard-hatted Ward at the bomb-resistant base of One World Trade, a windowless, 60-foot slab of reinforced concrete that Durst and the building’s architects are still struggling to disguise. We rode a series of construction elevators up to the 64th floor, where lathers were at work around the thick core, twisting rebar. When you considered its 700,000 square feet of underground space, Ward said, “this was building a building on top of a building, on top of a train station.” Fitting the building out for Condé Nast has meant significant changes in its design, most notably an enormous exhaust duct for the company’s kitchens on the north face of the building, which will somewhat disrupt David Childs’s vision of a smooth skin of glass.

We clambered up an outside staircase to Floor 70, where we reached a windswept landing, more than 800 feet up, and took a vertiginous look over the railing. The complex was taking shape much as Libeskind had laid it out: at its center were a pair of sunken fountains, approximately set over the location of the original towers, surrounded by young white oaks—the memorial designed by Michael Arad and Peter Walker. The legacy of Sept. 11 lives on not only there but in the fine print of Durst’s agreement with the Port Authority, which states that if anything cataclysmic ever happens again, the agency “would assume full control of any rebuilding process.”

The fountains shimmered as they underwent testing ahead of their unveiling next month, for the 10th anniversary of 9/11. “They’ll be about what it was,” Ward said, “and now this will just be the future.” I tried to envision the scene below one day: willowy assistants from Vogue flirting with bankers from the new Goldman Sachs building just across the street; Ground Zero tourists gazing upward; commuters passing beneath the soaring trusses of the Santiago Calatrava-designed train station. For all the money and emotion expended, the final given is that there’s no dictating what will happen in this new place. Its identity will be defined only over time, by the uneasy mingling of the memory of the dead and the unpredictable interplay of the living.

Rice is a Bloomberg Businessweek contributor.

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