Thursday 18 January 2018

First skyscraper opens its doors at World Trade Centre

The 72-storey building known as 4 World Trade Centre has opened for business, but 40pc of its floor space has yet to be leased
The 72-storey building known as 4 World Trade Centre has opened for business, but 40pc of its floor space has yet to be leased

David Levitt

THE first skyscraper at lower Manhattan's World Trade Centre opened with two days of ceremonies to mark the renewal of the area after its destruction by terrorists. When the fanfare subsides, the task will be filling the 40pc of the tower that's empty.

"We feel a real sense of accomplishment for having made it to this place," said Janno Lieber, president of the company that built the 72-storey 4 World Trade Centre.

It means the site is "really becoming part of New York again."

He predicts the property's allure for companies will shine through as the construction fences come down. Lieber's firm, a unit of developer Silverstein Properties, has to fill a million square feet of offices.

The only tenants at the 2.3 million-square-foot 4 World Trade tower are two government agencies that committed to the project in 2006 to help jump-start rebuilding at Ground Zero.

As the World Trade Centre takes its first steps toward once again becoming a vibrant office district, it faces "a very competitive environment" that probably will remain for the next few years, said Michael Cohen, tri-state regional president of brokerage Colliers International.

The first tower's debut and the completion in January of 1 World Trade Centre will add 2.4 million sq ft of unleased space, testing a downtown market that's already contending with more than 6 million sq ft of offices left behind by shrinking financial companies.

OUTCOME

"This is the thin end of the wedge of a large supply of class A space that will be accumulating in the Trade Centre area," Cohen, in an interview, said of 4 World Trade.

"At the end of the day, supply and demand will determine what that space trades for. You have three of the city's most deep-pocketed and sophisticated landlords that will be going toe-to-toe. I look forward to observing the outcome."

Silverstein Properties, whose chairman is Larry Silverstein, is competing for tenants with Douglas Durst, who teamed with the Port Authority of New York and New Jersey to build 1 World Trade Centre.

About 45pc of that skyscraper's 3 million sq ft are unspoken for.

The third landlord is Brookfield Office Properties, whose Brookfield Place complex just to the west has about 2.7 million sq ft of former Merrill Lynch space that's unrented.

The tenants that have committed to leases at 4 World Trade are the Port Authority, owner of the Ground Zero site, and New York City, which plans to move its Human Resources Administration there.

"You hear tales of all kinds of tyre-kickers, but I haven't heard of a solid deal," said Cohen, who isn't involved in the leasing effort.

The job will get easier once the skyscraper opens and the public gets to see it as a vital, functioning office property, Lieber said.

More than 2,700 people died when terrorists crashed hijacked jets into each of the twin towers of the original World Trade Centre in September 2001.

The attacks destroyed both skyscrapers plus four nearby office buildings and a hotel. In addition to 1 and 4 World Trade Centre, plans for the site call for two more office towers, a transit hub designed by Santiago Calatrava, a 9/11 museum and a performing arts centre. A memorial to the victims opened in 2011.

Larry Silverstein, who leased the original towers from the Port Authority just six weeks before the 9/11 attacks, said he's confident the process will be similar to what happened at 7 World Trade Centre, a building that's almost fully rented to tenants including Moody's Corp., music-rights company BMI and Mansueto Ventures, publishers of Fast Company and Inc magazines.

Office demand in lower Manhattan – an 83 million-sq ft market – has been accelerating, data from CBRE show. In the third quarter, agreements were signed to rent 1.53 million sq ft, up 40pc from the previous three months.

REVAMPING

The availability rate as of October 31 was 14.6pc down from an eight-year high of almost 16pc at the end of June.

Other prominent downtown buildings with large vacancies include 180 Maiden Lane, where AIG is leaving about 800,000 sq ft. Goldman Sachs' former headquarters at 85 Broad St. has 637,000 sq ft available.

Last month, JPMorgan Chase & Co. agreed to sell 1 Chase Manhattan Plaza, a 2.2 million-square-foot tower. The bank, which occupies about half of the building, intends to leave most of that space by the end of 2014.

Brookfield is revamping its namesake complex, the former World Financial Centre, to appeal to the city's growing technology firms.

For their money, 4 World Trade Centre tenants would get offices built around a reinforced concrete core, following safety standards put in place after 9/11. New York Harbour, the Hudson River and Brooklyn and Manhattan bridges are visible from floor-to-ceiling windows.

Fumihiko Maki, the tower's Pritzker Prize-winning architect, aimed for a "quiet, dignified" presence, out of respect for the September 11 Memorial and Museum, which is across the street from the building's entrance.

Construction of the tower cost $1.67bn, with about $1.2bn of that paid for with tax-exempt Liberty Bonds.

The government leases are pledged to cover debt service on those bonds. An insurance payout, which Silverstein spent almost six years litigating, covers almost all the rest of the building cost.

Much of the $4.6bn settlement was used to pay rent to the Port Authority under Silverstein's 99-year net lease, which continued even after the towers were destroyed. Insurance proceeds of $852m are being split between 4 World Trade Centre and 3 World Trade, according to a 2010 agreement with the agency.

The base is being constructed at that planned 80-storey skyscraper.

That tower, and another Silverstein is developing at 2 World Trade Centre, won't be built to their full heights until there's enough leasing in place to make them financially viable, according to the agreement. GroupM, a division of WPP, the world's largest advertising company, is in talks to be the main tenant at 3 World Trade Centre, with about 515,000 sq ft of offices.

COMPLEX

At 4 World Trade, the Port Authority will pay rent starting at $65 a square foot under a 30-year lease for 601,000 square feet, according to a 2011 offering memorandum for the Liberty Bonds.

The agency, which built the original Trade Centre complex in the 1960s, said in September that it may seek to sublease as much as a quarter of its space.

New York City is renting 582,000 square feet starting at $56.50 a square foot. Together the city and the Port Authority will pay $65.3m a year through 2026, equal to the debt service owed on the bonds over that time.

The last of the bonds mature in 2051. Liberty Bonds, federal loans authorised by Congress after 9/11 as part of a $21bn lower Manhattan recovery package, also were used to fund projects such as Goldman Sachs's new headquarters at 200 West St and 1 World Trade Centre.

That skyscraper is getting ready to open in January, when the Durst Organisation expects its 1.2million sq ft anchor tenant, Conde Nast Publications, to start fitting out its space.

Tara Stacom, the Cushman & Wakefield executive vice chairman who is working with Durst to market the property, has touted it as the Centrepiece of site, offering tenants the "instant status" of a world-famous address.

Neither 1 nor 4 World Trade Centre has an advantage, said Michael Shenot, a managing director at brokerage Jones Lang LaSalle, who has done work for the Port Authority.

"They're all wonderful products," he said. "This is where the art of the deal, as Donald Trump once said, comes in. How do you get the prospective tenant to say yes". (Bloomberg)

Irish Independent

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