Larry Silverstein Totally Explained

Everything about Larry Silverstein totally explained

Larry A. Silverstein (born 1932) is an American billionaire real estate investor and operator and the head of Silverstein Properties, a real estate development group. Silverstein is also a member of New York University's Board of Trustees. Silverstein was the leaseholder of the World Trade Center property at the time of the September 11, 2001 attacks and currently oversees its reconstruction.

Early years

Silverstein was born in Bedford-Stuyvesant, Brooklyn, New York. He graduated from New York University in 1952, and married in 1956. He also attended classes at Brooklyn Law School. He and his wife, Klara, have three children: Lisa, Roger and Sharon.
Silverstein became involved in real estate, together with his late father, Harry G. Silverstein, and then friend and brother-in-law, the late Bernard Mendik, buying buildings in Manhattan. In 1957, they established Silverstein Properties, as Harry G. Silverstein & Sons, and bought their first building. Mendik and Silverstein continued the business after Harry's death in 1966. In 1977, Mendik divorced Annette Mendik Silverstein, with the business partnership also splitting up at that time. Mendik also cited disagreements over real estate strategies, with Mendik wanting to buy buildings while Silverstein wanted to build.

World Trade Center lease

7 World Trade Center

In 1980 Larry Silverstein won a bid to lease and develop the last undeveloped parcel from the Port Authority of New York and New Jersey to build the 47-story 7 World Trade Center.

World Trade Center

During the 1990s, New York was suffering from the effects of the 1987 stock market crash leading to high vacancy rates at the World Trade Center. George Pataki became Governor of New York in 1995 on a campaign of cutting costs, including privatizing the World Trade Center. A sale of the property was considered too complex, so it was decided by the Port Authority to open a 99-year lease to competitive bidding.
In January 2001, Silverstein, via Silverstein Properties and Westfield America, made a $3.2 billion bid for the lease to the World Trade Center. Silverstein was outbid by $50 million by Vornado Realty, with Boston Properties and Brookfield Properties also competing for the lease. However, Vornado withdrew and Silverstein's bid for the lease to the World Trade Center was accepted on July 24 2001, seven weeks before the buildings were destroyed in the September 11, 2001 attacks. This was the first time in the building's 31-year history that the complex had changed management.
The deal was described in a press release on July 24 2001:
ť "Silverstein Properties, Inc., and Westfield America, Inc. will lease the Twin Towers and other portions of the complex in a deal worth approximately $3.2 billion – the city's richest real estate deal ever and one of the largest privatization initiatives in history."

The lease agreement applied to One, Two, Four and Five World Trade Center, and about of retail space. Silverstein put up only $14 million of his own money. Silverstein was also given the right to rebuild the structures, should they be destroyed.

Other projects

While Silverstein is most famous for his involvement at the World Trade Center, his real estate holdings include many other buildings in New York City.
As of 1978, Silverstein owned five buildings on Fifth Avenue, as well as 44 Wall Street, and a shopping center in Stamford, Connecticut. Moody's is slated to move its headquarters into 7 World Trade Center in 2007. 99 Church Street, built in 1951, contains of space. Depending on market demands, the building may continue to be used as office space or as a mixed-use structure, which would also include apartments.

September 11, 2001 attacks

Dispute with insurers

As a private developer with a 99-year lease on WTC1, WTC2, WTC4, and WTC5, Silverstein insured the buildings. The insurance policies on these four buildings were underwritten by 24 insurance companies for a combined total of $3.55 billion in property damage coverage.
   Following the September 11, 2001 attacks, Silverstein sought to collect double the face amount of that coverage (~$7.1 billion) because, he contended, the two separate airplane strikes constituted two occurrences within the meaning of the policies. The insurance companies took the opposite view. Because some of the policies contained certain limiting language and some did not, the court split the insurers into two groups for jury trials on the question of whether their policies were subject to the “one occurrence” interpretation or the “two occurrence” interpretation.
   The first trial resulted in a verdict on April 29, 2004, that 10 of the insurers in this group were subject to the “one occurrence” interpretation, so their liability was limited to the face value of those policies, and 3 insurers were added to the second trial group. The jury was unable to reach a verdict on one insurer, Swiss Reinsurance, at that time, but did so several days later on May 3, 2004, finding that this company was also subject to the “one occurrence” interpretation. Silverstein appealed the Swiss Re decision, but lost that appeal on October 19, 2004. The second trial resulted in a verdict on December 6, 2004, that 9 insurers were subject to the “two occurrences” interpretation and, therefore, liable for a maximum of double the face value of those particular policies ($2.2 billion). The total potential payout, therefore, was capped at $4.577 billion for buildings 1, 2, 4 and 5.
   In 2007, Silverstein and the Port Authority of New York and New Jersey filed a lawsuit against some of its insurers for failure to pay out insurance proceeds following the 2004 verdicts, and that litigation was settled in late May, 2007. Silverstein's lease with the Port Authority for the World Trade Center requires him to continue paying $102 million annually in base rent. He is applying insurance payments toward the redevelopment of the World Trade Center site.

Negotiations to rebuild at the World Trade Center site

Silverstein had the legal right to rebuild office buildings including the Freedom Tower at the World Trade Center site and while the site is unoccupied, he continues to pay $10 million per month in rent to the Port Authority of New York and New Jersey. After several months of negotiation, in April 2006 he yielded some of those rights back to the Port Authority.
   Ground was broken on the construction of the Freedom Tower on April 27 2006. Lack of financing had prevented construction from commencing earlier. The proceeds of the insurance payments from the destruction of the previous buildings alone were insufficient to cover the cost of rebuilding all the planned buildings.
   After the September 11, 2001 terrorist attacks, the United States Congress approved $8 billion in tax-exempt Liberty Bonds to fund development in the private sector at lower-than-market interest rates. $3.4 billion remained unallocated in March 2006 designated for Lower Manhattan, with about half of the funds under the control of Mayor Michael Bloomberg and the other half under the control of former Governor George Pataki.
   Negotiations were held to obtain concessions from Silverstein in exchange for allocating the Liberty Bonds to the World Trade Center rebuilding. The concessions were to give back to the Port Authority rights to build and operate the Freedom Tower and another office tower, a share of the insurance payments, and not to contest the allocation to the Port Authority of Liberty Bonds. The Port Authority, a public agency, already has the ability to issue its own tax-exempt debt. The Port Authority will have its proposal in final form in September 2006. In return, the Liberty Bond funds were allocated to Silverstein and government agencies will be anchor tenants in his three office towers. This allows construction to commence.
   In March of 2007 Silverstein appeared at a rally of construction workers and public officials outside of an insurance industry conference to highlight what he describes as the failures of insurers Allianz & Royal and Sun Alliance to pay $800 million in claims related to the attacks. Insurers cite an agreement to split payments between Mr. Silverstein and the Port Authority as a cause for concern.
   In summary, Silverstein retains rights for Towers Two, Three, and Four. The Freedom Tower (designated as Tower One) will be owned by the Port Authority as well as Tower Five which may be leased out to another private developer and redesigned as a residential building.

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