I arrived the other morning at Kathryn Wylde’s office on Battery Park Plaza feeling a little like Diogenes—except that, instead of searching for an honest man, I was looking for someone, anyone, with something remotely nice to say about Larry Silverstein. Wylde, the savvy, estimable head of the Partnership for New York City, doesn’t dislike Silverstein. She counts him among the Partnership’s members and portrays him as a man whose project to rebuild ground zero—a project about which, she said, he’s “sincerely passionate”—has been enormously complicated by the politics of the process. But even so, Wylde went on, “he has a reputation in the industry of being a great partner after you’ve made a deal with him, but for being extremely difficult to make a deal with, of being extremely stubborn, of being terrified of leaving any money on the table.”
Wylde offered this assessment a few days before the fateful events of March 14. Before the midnight collapse of Silverstein’s negotiations with the Port Authority provided the latest dismal chapter in the ongoing fiasco-cum-farce that the restoration of ground zero has become. Before George Pataki, Michael Bloomberg, Chuck Schumer, and every other politician and bureaucrat with a taste for a lusty pile-on had denounced Silverstein as an abject greedhead who was manifestly more interested in padding his pocketbook than in serving the public interest.
Well, duh. For more than four years now, in every setting, Silverstein has behaved like a real-estate developer, nothing more and nothing less. His avarice (or, if you prefer, his vigilant protection of his fiduciary self-interest) has been apparent since he first registered in the public consciousness, with his infamous lawsuit against his insurers on the grounds that the attacks on the Twin Towers constituted two discrete events. (A suit that, though partially successful, was bogus on its face, at least if you credit the careful account in Steve Brill’s book After: How America Confronted the September 12 Era.)
So let us stipulate from the outset that Silverstein’s primary fealty is to the bottom line. But let’s also acknowledge that he’s far from the only villain in this story. (Any sensible list, of course, would start with Pataki and would extend to include the Port Authority and the Lower Manhattan Development Corporation.) Then let’s put aside the blame game and turn our attention from past to present. Let’s analyze the situation today for what it is: a game of power poker, in which both sides are playing the cards they’ve been dealt and the stakes are, quite literally, as high as the skyline.
Silverstein’s trump card has always been his 99-year World Trade Center lease, which he signed six weeks before 9/11. Though the Port Authority owns the land comprising ground zero, Silverstein’s lease gives him the right to rebuild all 10 million lost square feet of office space. If not for that piece of paper, Pataki, surely, would have got rid of Silverstein long ago. But the lease is solid, and Silverstein, who has used it relentlessly to get his way on countless matters, clings to it as if his attitude were “You’ll have to pry it from my cold dead fingers.”
The weaknesses of Silverstein’s hand are many, however. There’s his Tales From the Crypt appearance, his pushy manner, and his tendency to overreach (his proposal that he get a 5 percent development fee for building the Freedom Tower, which could add more than $100 million to its cost, for instance), none of which inspires public sympathy. More to the point, there’s the sense, even among those inclined to support him, that he’s bitten off more than he can chew. “There has not been enough money in the pot for him to rebuild, and everybody’s known it for three years,” Wylde said. “And he refused to make any deal that would’ve allowed some others to come in with more resources. That’s where he lost the crowd.”
Certainly, Silverstein’s greatest vulnerability is on the question of his financial wherewithal. It’s an issue that City Hall and the Port Authority have been hammering on for weeks, bolstered by a study undertaken by the city that predicts that Silverstein is likely to run out of money in 2009, leaving behind, as Bloomberg put it, “a half-finished set of buildings or vacant sites.” Silverstein’s people dispute all this in voluminous, and sometimes even convincing, detail. Yet given the lack of demand so far for space in Silverstein’s recently completed 7 World Trade Center tower (just one major tenant has agreed to a term sheet), it’s hard to imagine that the developer isn’t a wee bit nervous that he might, in fact, be in over his head.
What Silverstein cannot say out loud, given the political sensitivities involved, is that if his project is economically tenuous, the fault lies elsewhere: with the Freedom Tower. Outside the governor’s office, there’s near-universal agreement that the tower—vast, expensive, iconic, incendiary (it’s the architectural equivalent of a bright-red flag being waved at a charging bull), and thus possibly unrentable—is the biggest single obstacle to the rebuilding of ground zero. And yet not only is Pataki insistent that it be erected, he’s insistent that it be erected first, placing a huge strain on Silverstein’s limited resources. (Even the notoriously impractical Daniel Libeskind suggested that it not be put up until much later.)
No wonder, then, that Silverstein would be happy to off-load the Freedom Tower onto the Port Authority. But it’s also no wonder that he resents being asked to cough up maybe $1 billion of his insurance proceeds in the bargain. Increasing that resentment, I suspect, is that Silverstein knows that the Port Authority has no intention of building anything like the Freedom Tower as it’s currently conceived. “The Port Authority has told the governor that they wouldn’t move into the Freedom Tower as it’s now designed,” I was told by someone close to the rebuilding efforts. “And they told him that if they take it back, it’ll be to redesign it yet again.”
All of which brings us to the game that Pataki is playing. All along, the governor’s ardor for the Freedom Tower could be explained only in terms of his putative candidacy for the Republican presidential nomination. To Pataki’s way of thinking, the tower would be a vivid symbol of his post-9/11 leadership (which, he believes, however improbably, rivals Giuliani’s). With less than nine months remaining in his term, Pataki knows that the decisions about what gets built at ground zero will belong to his successor. But he’s desperate to have at least some demonstrable signs of progress that he can tout on the campaign trail.
In setting the March 14 deadline, Pataki made a rational assumption: that Silverstein would be so frantic to get hold of the $1.7 billion in Liberty Bonds the governor was dangling in front of him, and so relieved to shed himself of the Freedom Tower, that a deal was inevitable. But Pataki bet wrong, for Silverstein apparently presumed that the governor was so hell-bent on breaking ground on the tower that his people at the Port Authority would accede to virtually any demand, no matter how egregious. Silverstein, too, bet wrong—at least for now.
The question is how much longer both sides will continue to throw ever larger stacks of chips into the pot. When the Port Authority challenged Silverstein last week either to build the Freedom Tower or “move out of the way,” the unstated threat was that it would attempt to find him in default on his lease. Though Silverstein replied that he had every intention of breaking ground on schedule next month, he’s almost certainly bluffing: For him to do so without the Liberty Bonds in hand would be borderline suicidal, since completing the tower would consume the vast majority of the insurance money he has at his disposal. Pataki is gambling that fear of this prospect will force Silverstein back to the table.
Pataki’s ardor for the Freedom Tower can be explained only in terms of his putative presidential campaign.
It may turn out that Pataki, however, is overplaying his hand. If the Port Authority finds Silverstein in default, the entire matter will inevitably wind up in court—and could easily be mired there for the duration of Pataki’s term. Silverstein has amply demonstrated that he has little fear of litigation. He also seems remarkably immune to public opinion. He might well reason that it makes more sense to employ a courtroom stall until Pataki is gone, wagering that whoever replaces him will arrive in office panting for a compromise that will end the ground-zero stalemate.
But Silverstein’s endgame strategy is every bit as precarious as Pataki’s. Silverstein at the moment is paying $10 million a month in rent on buildings that don’t exist, a figure that is slated to rise come July. A drawn-out lawsuit would only further deplete his pool of capital. And there’s no guarantee that the incoming governor—especially if it’s Eliot Spitzer—will be any more accommodating than Pataki and the Port Authority are being now.
Indeed, after spending much of the past four years currying Pataki’s favor, Silverstein finds himself today in the worst place imaginable: utterly without allies, and with an emerging, determined, and possibly lethal enemy in Bloomberg, who mused last year during the campaign that “it would be in the city’s interest to get Silverstein out,” and now suddenly seems engaged enough in the contretemps around ground zero to do something about it.
Like all arch-capitalists, Silverstein is no doubt reassuring himself that he is standing on principle. And, to a great extent, he is. But Silverstein should keep in mind that, although Pataki’s time in office may be short, he himself, at 74, is playing against the clock as well. Last year, he was quoted in the Wall Street Journal as saying, “What do I have to show for the last five years of my life? Not very much.” Unless Silverstein swallows his pride and caves—taking something like the deal that the Port Authority offered, which, despite its imperfections, is still pretty sweet for him—he may have little more to show for the next five, too.
For the city, of course, such an outcome would hardly be a tragedy. That ground zero remains a mess nearly five years after 9/11 is an embarrassment, a disgrace. But there is one consolation: More and more, it seems we may be spared a downtown skyline dominated by a monument to bombast that’s a prime target to boot.