An excerpt from TRD's forthcoming book about the men and women at the heart of the city's rise from an unspeakable tragedy.
TRD
New York
The following is an excerpt from The Real Deal about the new era of New York skyline shapers, the men and women who were at the center of the city's rise from the depths of 9/11 to its current position as the world's financial and cultural center and playground for the world's super-rich.
It includes never-before-seen perspectives from the city's biggest tycoons on how they built, seized, and lost their fortunes, and then did it all again, on a skyscraper scale.
On the morning of September 11, 2001, Kent Swig was rushing to an appointment at 2 World Trade Center with his bankers at Lehman Brothers. Swig had a busy day ahead. It was his son's eighth birthday, and the family was headed to a magic show that evening. The New York City mayoral primary was also underway, and Swig had intended to vote before work, but he had gone to the wrong polling place.
Now, as she walked down the stairs toward the subway on that clear day, she worried she would be late for her meeting. It was only when she entered the station and headed toward the platform for the 4 train that someone informed her that a plane had crashed into one of the World Trade Center towers and that “all hell had broken loose downtown.”.
Of course, there would be no meeting between Swig and his lenders that day.
Thousands of people died in the rubble of the World Trade Center. The United States was at war. And nothing in the center would ever be the same again.
In the following weeks, some developers would become the center of attention in ways they never imagined.
Larry “Energizer Bunny” Silverstein had started as a broker in the Garment District in the 1950s and built a portfolio with his father and his then brother-in-law, Bernie Mendik. He had taken control of the WTC site just six weeks earlier, after a protracted bidding war with Vornado, Brookfield, and Boston Properties. Silverstein’s $3.2 billion deal to secure the lease for the 11 million-square-foot complex was the largest transaction in New York City history. It had catapulted him to the top of the developer hierarchy.
“I’m thrilled,” he told The New York Times after the deal was announced. “I’ve been looking at the Trade Center for years, thinking, ‘What a great piece of real estate, how exciting it would be to own it.’ There’s nothing else like it in the world.”.
Now he had become one of the key faces of the disaster. His prized new buildings had been reduced to rubble. The land he had fought so hard to gain control of had become a graveyard. Silverstein, like everyone else, was in shock. But he was also pragmatic.
“I ran into him. I was about to go to a place for dinner, and I bumped into him on the street on the Upper East Side,” said Mary Ann Tighe, the city’s top office leasing agent and a key player in the post-9/11 downtown rehabilitation, recalled in The Real Deal about Silverstein. “We were standing across from each other, and I started crying. And he hugged me and said, ‘Honey, I’m going to rebuild.’ It was 6 o’clock on the night of September 11.”
Silverstein said the attacks gave him a sense of determination.
“It’s funny, but I don’t remember the focus [of my thoughts at the time], other than the disaster, and the magnitude of the problems we were facing as a result of it,” he said in a 2011 TRD
For many of the other downtown property owners who would eventually partner with the city's recovery, the magnitude of that day's disaster wiped out any thought of business. It seemed almost as if the world was ending.
Steve Witkoff was in his office in the old Daily News building on 42nd Street and could see smoke billowing from the towers through his windows. At 9:59 a.m., he watched in horror as the South Tower collapsed, followed 29 minutes later by its twin tower next door.
Witkoff rushed to the Bronx to pick up his children from Riverdale Elementary School. Shortly after returning home, he received a call from Bo Dietl and Mike Ciravolo, two old friends who were retired NYPD detectives. They suggested heading downtown to help, which is how Witkoff ended up standing on a mangled piece of steel, hanging from a rope until 5 a.m. the next morning, holding the end of a long rope tied around a firefighter's belly with a meat-sniffing dog digging through the wreckage of the massive pile of debris, searching for survivors.
Witkoff had seen New Yorkers go through hardships before. But what he would see in the days after September 11 was far beyond anything he had experienced.
Born in the Bronx and raised on Long Island, Witkoff began his career in the late 1970s as a lawyer at Dreyer & Traub, fresh out of Hofstra Law School. As a junior associate, he spent 90 hours a week working on real estate deals. But, like Steve Ross, he had longed to get in the game himself.
"Every day you were representing these swashbuckling types who were entrepreneurs at heart," Witkoff said of his clients, such as Peter Kalikow, Arthur Cohen, and Howard Lorber. "They felt like rock stars to me.".
Witkoff made his first property purchase in 1986 at age 29, borrowing $15,000 from his father and partnering with his Dreyer colleague, Larry Gluck, on a $240,000 building in Washington Heights. They financed it, much like some of the deals they had worked on for clients, by obtaining a loan backed by the government-sponsored Federal Home Mortgage Loan Corporation, Freddie Mac. Witkoff and Gluck soon left the law firm and established themselves as Stellar Management—the name a combination of Steve and Larry—in a 150-square-foot office in Park Place.
By the time the market began to decline in 1989, Witkoff and Gluck owned 10 properties in Uptown. Unable to sell them—they had originally intended to be “businessmen”—they realized they would have to learn the ins and outs of real estate, including how to deal with frozen pipes and work with Albanian survivors to save money on repairs.
Washington Heights at that time was still plagued by drug trafficking, gangs, and violence, and Witkoff, a natural talker, approached many of its tenants and heard firsthand about tragic deaths and the struggle to make ends meet. He recalled a young mother who had liked him inviting him to her apartment for sex because she needed money to buy food for her children (he gave her the money and declined the offer). He discovered that another family was living illegally in the basement because they couldn't pay the rent. (Witkoff moved them into an apartment.).
He learned to use a gun and began carrying an Uptown in his gym bag. He spent New Year's Eve in 1991 in the basement of a building at 124th Street and Madison Avenue, helping his plumber with a sewer backup. For years, he kept a copy of the book "Tough Jews," a romanticized account of Jewish gangsters, on his desk.
Witkoff and Gluck debuted downtown in 1994. They realized they could buy a foreclosed office building around the corner from their headquarters for $4 million—less than $20 per square foot—and relocate there would save them money on rent. Witkoff separated from Gluck in 1997, and by 2001, he was a major player in the area. He owned as many as 10 buildings there, including the magnificent Woolworth Building, a 60-story, terracotta-clad tower that was once the tallest skyscraper in the world.
Now, several of his properties were right in the middle of what now looked like a war zone.
After that grueling night on the pile, Witkoff entered the ornate lobby of his $146 million trophy, with its cathedral-like ceilings, bronze fittings, and elaborate glass mosaics, and was shocked to find exhausted firefighters, police officers, and other first responders stretched out on virtually every inch of available floor space. Their clothes were covered in ash, and their hands were raw from digging through the rubble, he recalled, making a striking picture against the tower's marble floors and rich red carpet.
Witkoff was so moved that he carried an American flag to the top of the skyscraper (the elevators were out of service) and raised it. He moved a generator, vowing to keep the building open no matter what. For the next 30 days, the building served as a staging area and housed much of the 10th District and first responders from other areas.
When the full extent of the tragedy became clear—Osama bin Laden's al-Qaeda terrorists had killed nearly 3,000 people, traumatized the city, and pushed the United States into war—Witkoff began attending funerals and doing everything he could to help. He made a conscious effort to block out thoughts of how the tragedy might affect his empire.
He had bought almost all of his buildings at an extremely low cost, and most of his tenants had long-term leases. When President George W. Bush visited the site on September 14, he put his arm around a firefighter and addressed the first responders through a megaphone. The Woolworth Building loomed in the background, and Witkoff stood a few feet away, a guest of Police Commissioner Bernie Kerik.
“I decided it was beneath me to worry about my business,” Witkoff said. “I remember thinking, ‘This can’t be about business.’ And I was deeply inspired. It was, ‘What can I do?’ The guys in uniform are going up these stairs to rescue people, and they all died. They didn’t go home to their families. That’s when I remember thinking, ‘I can’t do enough.’”.
However, when the city began to assess the damage, the devastating destruction of property emerged as one of the most obvious and costly consequences. Downtown had lost 15 million square feet of space, with nearly 13 million square feet destroyed and more than 2 million square feet declared structurally unsound as a result of fires, falling debris, and building collapses.
An additional 11 million square feet were damaged, and roughly half would be taken off the market for at least a year. The World Trade Center/World Financial Center submarket totaled 40 million square feet, according to JLL, and half of that had been eliminated by the attacks.
The future of the center was uncertain. A toxic cloud would linger in the air for months. Tenants looking for new space looked elsewhere. The overall office vacancy rate for the area, 6.2 percent in August 2001, would rise to 15.6 percent in the following weeks.
The psychological impact of those two enormous towers collapsing also made people reconsider what was possible. Throughout the city, and around the world, some even began to question whether there was a future for skyscrapers.
Gene Kohn, founder and president of the architecture firm Kohn Pedersen Fox, predicted to Scientific American that there could be a pause in skyscraper construction "that would last up to a decade.".
Related had launched sales at the Time Warner Center just a month before 9/11. William Mack, Related's equity partner in the project, received an early indication of how the attacks might affect its marketing efforts. One of its tenants threatened to pull out of another Mack-owned building in Pittsburgh.
At 64 stories, the USX Tower was the tallest skyscraper in the city. Before the attack, Heinz had been on the verge of signing a 15-year lease to occupy the top three floors. Now, the food processing giant backed out. What, Mack was asked, if the terrorists brought down your building next?
“That’s when I said, ‘Who’s going to Pittsburgh?’” Mack recalled.
Mack's guarantees weren't enough. Heinz went elsewhere.
“So it’s difficult to put yourself in people’s shoes. There was a great fear that anything that was a skyscraper would collide with airplanes, and safety couldn’t be accommodated,” he recalled.
Years later, looking back, Ross, of Related, would downplay his own fears, stating that by then he knew it would happen.
“Of course it was stressful,” Ross said. “You’re reading articles in the newspaper and thinking, ‘Will there ever be another skyscraper in New York?’ You know, you’re wondering what’s going on in the world. You react to that. But you don’t break down.”.
Ross and Mack still had 163 condominiums left to sell in Time Warner. And company executives admitted that several buyers had asked for time to reconsider. A friend of Mack's, who had intended to buy, informed him that his wife refused to live above the 15th floor. He wasn't the only buyer they lost.
However, slowly, the city's real estate market began to show its resilience.
In November, Related announced that more than $45 million in condominium contracts had been signed since the attacks, bringing the total to $105 million. A drag compared to what was expected before the attacks, but a positive sign nonetheless.
The most daring condo market player has also returned. In late November, a group led by Donald Trump beat out three other bidders to a $115 million contract for the 169-room Delmonico Hotel, an Upper East Side property at 59th Street and Park Avenue. Built in 1928, the property was converted into apartments by William Zeckendorf Jr. in 1975, then converted back into a hotel by different owners in 1991 (Zeckendorf still used the penthouse as a pied-à-terre).
Trump's deal, wrote Charles Bagli of the Times, was a sign that "the real estate market hasn't crashed." Trump, Bagli noted, was planning to transform the Delmonico into a condo-hotel, "not unlike" the Trump International Hotel and Tower across town at Columbus Circle. Trump would eventually name the development, perhaps unsurprisingly, Trump Park Avenue.
Weeks after 9/11, Michael Bloomberg, founder of the financial services firm Bloomberg LP, was elected the 108th mayor of New York City. The rise of a billionaire technocrat to the top job would have a profound impact on the direction the real estate market would take.
Short, thin, with thin lips and a receding hairline, and always sloppy in his attire, the new mayor might have seemed robotic or wooden. Yet, in the months following the greatest tragedy in New York history, there was something profoundly comforting about Bloomberg's composure.
A frontrunner before the attacks, Bloomberg poured $73 million of his own money into his campaign, outspending his opponent by five to one. He argued that New York needed a seasoned business executive to rebuild, and voters embraced that argument. One of his first tasks would be to develop a plan for the devastated Lower Manhattan.
Bloomberg's predecessor, Rudy Giuliani, and New York Governor George Pataki had announced plans to create the Lower Manhattan Development Corporation to oversee the reconstruction of the World Trade Center site.
Two months later, in February, City Council approved a zoning permit for the first new project in Lower Manhattan since the attacks. The permit went to residential developer Glenwood Management and its gray-haired, octogenarian president, Leonard Litwin. Glenwood planned to build a 45-story residential tower with 288 apartments, office space, and ground-floor retail at Liberty, William, and Cedar Streets. Industry had planted its flag downtown.
In December 2002, Bloomberg entered the ballroom of the Regent Hotel on Wall Street, a majestic Greek Revival landmark that once housed the New York Stock Exchange.
Taking his place at the front of a roundabout, he addressed the city's business leaders, revealing his vision for the future of downtown in a breakfast speech to the Association for a Better New York.
The “sick” financial center that largely shut down at night would be transformed into a collection of neighborhoods—a vibrant 24/7 “urban village” with housing, schools, libraries, and movie theaters, he said. West Street would be transformed from a six-lane highway into “a tree-lined promenade, a Champs-Élysées… for Lower Manhattan.”.
Bloomberg told the business elite that he would create a larger Battery Park and entirely new parks above the mouth of the Brooklyn Battery Tunnel, which runs from the Battery Maritime Building to the South Street Seaport. There could be baseball fields, an outdoor skating rink, and floating gardens.
He envisioned 10,000 new apartments south of Chambers Street in two new neighborhoods, one near Fulton Street and a second south of Liberty, built around a new park. He also called for tax breaks to attract foreign businesses and direct transport links to nearby airports.
“We’ve underinvested in Lower Manhattan for decades,” Bloomberg said. “It’s time to put an end to that, to restore Lower Manhattan to its rightful place as a global center of innovation and make it a city center for the 21st century.”.
The plan was priced at $10.6 billion. But with $21 billion on the way from the federal government, 9/11-related insurance money, and recently authorized Liberty Bonds for new downtown housing, it wasn't a pipe dream.
“In the future,” Bloomberg declared, “Lower Manhattan must become an even more vibrant global center of culture and commerce, a community to live, work, and visit for the world. It is our future. It is the world’s second home.”.
Covering the speech, the Times noted that Bloomberg had devoted only 20 seconds of his 31 minutes to the WTC site.
He didn't need to. That happened on December 18 at a large indoor event in the Winter Garden, the glass-enclosed, tree-lined atrium at the edge of the Ground Zero site, when some of the world's leading architects presented their visions for the site. Daniel Libeskind's proposal to build five skyscrapers, including a modern, crystalline centerpiece with a towering structure to be called Freedom Tower, would be selected as the winner in February 2003. The footprints of the original towers would be transformed into a memorial.
When the planes crashed, Kent Swig had just completed the renovation of his Bank of New York building and was preparing for a major buying spree. After the attacks, he decided to wait and see how things developed.
However, he had made a major real estate move. In 2002, Swig and his wife, Liz, proved they possessed the necessary $100 million in liquid assets and moved, with their two young children, into a 16-room, five-and-a-half-bathroom duplex at 740 Park Avenue, the city's most prestigious co-op.
Every morning on her way to work, Swig would nod to tycoons like Ronald Lauder, Steve Schwarzman, and David Koch. Liz decorated the Upper East Side apartment with "funky art and color-coordinated candies," according to a press report. She was featured in a 2003 New York Magazine article exploring how to have a successful dinner party, alongside Diane von Furstenberg, Tina Brown, and Joan Rivers.
To celebrate her brother Billy Macklowe's birthday, Liz sent several hundred pounds of slate, wildflowers, and climbing gear, and served trout wrapped in foil. The menu was superimposed on a photograph of a shirtless Billy, a well-known nature lover, dangling from a cliff. Swig and Liz spent weekends at a 4-acre waterfront estate in Southampton and embarked on surf trips to Australia.
In the summer of 2003, Swig stopped waiting. He had come to the conclusion that he might be looking for an opportunity for transformation.
He announced that 48 Wall was 96 percent leased and that he had refinanced the $55 million loan on the property.
Swig commissioned a study that found that by 2000, more than 34 buildings in Lower Manhattan, representing nearly 13 million square feet, had been converted to residential use, creating an even deeper shortage of high-quality office space in smaller buildings. If he could replicate what he had done at 48 Wall, there would be huge demand.
Swig was still perplexed by the price difference between Midtown and Downtown, a chasm that, after September 11, had become even more vast.
“I watched a massive tragedy unfold and said, 'I'm in this area, what the hell is going on?' I looked at my business plan and said, 'Does it make sense? Yes.' The perception has dropped even further and nothing has changed.”.
That summer, Swig followed his instincts and paid $52 million for 5 Hanover Square, a 25-story office tower built in 1962. He announced plans to transform it into a “boutique-style luxury office complex,” complete with upgraded restrooms and new elevators, Italian travertine marble floors, and a fully glazed facade. Within weeks, the building had attracted several new tenants and was 98 percent leased.
In November, Swig and his partner David Burris teamed up with Iranian émigré and diamond magnate Asher Zamir to buy 44 Wall Street, a jewel built in 1927, for less than $200 a square foot.
He pressed on, buying the 36-story 80 Broad Street and another 25-story building next door. He took 110 and 130 William Street. These were the go-go, subprime, pre-bubble days of low interest rates and readily available credit. Swig, easily backed by Lehman Brothers, had his fill, and then some. When he finished, when Swig ordered his assistants to throw away the incoming bid sheets because he didn't want the temptation, he had a portfolio exceeding $3 billion.
“I went and bought everything I could,” he recalled. “I started in 2003 and bought until January 2006. I bought every property I could afford. I was buying buildings for less than $198 a foot. I never paid more than $198. Land was trading at that time probably at $250 a foot. So, either I bought the land cheap and got a free building, or I bought a building and got a free lot, but nobody was doing that. Everyone looked at me like I was a fool.”.
“The market was mine,” he added. “Nobody was doing this. Anything that moved, I bought. He literally bought every building. If one came up, in three days, he’d buy it. When brokers approached me and said, ‘Here are eight buildings, 3 million square feet. Pick any you like,’ I’d say, ‘I’ll have it all.’”.
