By Peter Grant
Some of the biggest names in business and politics gathered last
month at the Westfield World Trade Center's opening gala. They
dined at downtown's new Eataly and watched singers John Legend and
Leslie Odom Jr. perform in the spacious transportation hub named
the Oculus.
There was one notable exception: Larry Silverstein, the private
developer most closely associated with the rebuilding of the World
Trade Center complex and owner of two of the three office buildings
on the site today.
Mr. Silverstein in 2001 was close friends with Frank Lowy, the
Westfield Corp. chairman when they decided to jointly bid on the
World Trade Center. They took control less than two months before
the Sept. 11 terrorist attack destroyed it.
One of the casualties in the rebuilding process was Messrs.
Silverstein and Lowy's friendship. Their interests, which were
aligned when they bought the complex, diverged during the
rebuilding.
Mr. Lowy, 85 years old, who built his company in Australia
before taking it global, expressed regret in his 2015 biography, "A
Second Life," over how the friendship deteriorated. By the end of
the rebuilding, he said, "nothing was left of what we had."
He and Mr. Silverstein remain key stakeholders in the rebuilt
site, and they say their relationship remains cordial.
In an interview, Mr. Silverstein played down their
disagreements, saying he didn't attend the Westfield opening
because he was in Europe. "Stuff happens all the time," he said.
"You always have issues that arise and that have to be
handled."
Asked about his friendship with Mr. Lowy, Mr. Silverstein said:
"I respect Frank and have great affection for him and his
family."
But they no longer time spend time on each other's yachts like
they did when they were friends. Mr. Silverstein no longer sits on
the board of one of the Westfield companies.
The story of how their friendship faded shows the high stakes
and behind-the-scenes passions that shaped the rebuilding of the
World Trade Center. The transformation of ground zero into new
commercial towers, memorials and a transportation hub involved
frequent battles among politicians, businessmen, victims' loved
ones and numerous others.
Before they met, Messrs. Lowy and Silverstein both had storied
careers in their respective businesses. A Brooklyn native, Mr.
Silverstein, 85, developed and managed over 40 million square feet
of real estate during a career that spanned more than 50 years.
Mr. Lowy was born in what is today Slovakia, lost his father to
Auschwitz, survived Nazi-occupied Europe and fought in the 1948
Arab-Israeli War. After reuniting with family in Australia, he
built Westfield, starting with a deli outside of Sydney. Now the
family controls malls in Australia, New Zealand, the U.S. and
Europe worth more than $50 billion.
The two men became friends in the 1980s and 1990s through their
mutual interests in real estate, boating and Israel. Mr. Lowy
purchased an apartment on New York's Park Avenue in the same
building in which Mr. Silverstein owned a unit.
They decided to join forces when the Port Authority of New York
and New Jersey put a 99-year lease of the World Trade Center on the
block.
"I recognized that what I knew about office space, I didn't know
about retail," Mr. Silverstein recalled. "I thought about it for
maybe for a minute."
In July 2001 on the World Trade Center plaza, Mr. Silverstein
and representatives of Westfield ceremonially accepted the keys of
the complex that they had purchased in a deal valued at $3.2
billion.
"Neither of us had a clue as to what was about to befall us,"
Mr. Silverstein said.
Both firms were devastated by Sept. 11. Among those killed were
four Silverstein Properties executives and a Westfield vice
president.
As the companies began thinking about rebuilding, they realized
that their interests no longer aligned. Mr. Silverstein, who led a
group that put the biggest piece of equity into the deal, embraced
a plan that would restore the street grid back to the site that had
been cut off from the rest of the area by the old World Trade
Center.
Westfield wanted to rebuild what it had bought: a mall of more
than 600,000 square feet. The Lowys were concerned that a street
grid could fragment the retail as well as the rest of the site.
Moreover, the separate lease that Westfield had signed for the
retail space gave it control over the part of the site where
rebuilding would most likely occur.
In 2003, Westfield sold its lease back to the Port Authority, a
deal which returned to the company its $140 million investment. At
the time the rebuilding process was bogged down as groups fought
over money, design, control and how to best honor those who
died.
Westfield executives also recognized that it didn't make sense
for an Australian company to play a major role in something so
fraught with emotions and politics. "We wanted to step out of the
middle and let the Port Authority, the city and the other
constituents decide what they wanted to build," recalled Peter
Lowy, Frank's son and the main driver of Westfield's New York
strategy.
But Westfield didn't leave completely. It paid the Port
Authority $1 million for a right to return to the project once
others made major design and development decisions. Westfield also
continued to act as a consultant to the Port Authority on retail
matters.
Friction between Westfield and Mr. Silverstein was rekindled as
the mall giant began negotiating a new deal with the Port Authority
to take over the retail space. Westfield proposed more retail space
than planners had been considering.
"They didn't seem to be able to conceptualize what we were
talking about, " Frank Lowy said in his biography. He declined
further comment through a Westfield spokeswoman.
Mr. Silverstein declined to comment on his discussions with
Westfield.
In the end, Westfield became comfortable with a scaled-back plan
that created 365,000 square feet of retail space in the Santiago
Calatrava-designed Oculus and Silverstein office buildings.
The companies of the two former friends still work together, as
occupants in the same buildings. A strong mall will help lure
office tenants. Higher office-space occupancy means more
shoppers.
"Here we are 15 years later," Mr. Silverstein said. "It's a
win-win."
Write to Peter Grant at peter.grant@wsj.com
(END) Dow Jones Newswires
September 10, 2016 09:13 ET (13:13 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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