3 World Trade Center

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A New Deal to Develop Ground Zero

A New Deal to Develop Ground Zero

Dec 18, 2007
By By: Charles V. Bagli | New York Times | The New York Times

The Port Authority of New York and New Jersey is expected to approve a deal Tuesday that would bring an international shopping center operator back to ground zero to help build retail space in the buildings and tunnels under construction on the 16-acre site.

Under the terms of the deal, the operator, the Westfield Group, would buy a 50 percent stake in about 490,000 square feet of retail development and invest more than $600 million in creating the shopping areas, said government officials and real estate executives familiar with the agreement.

Stores would be located at street level and above in three planned office towers along Church Street, as well as in the two-story concourses linking the site with subway lines and the PATH commuter rail station.

The original shopping space at the World Trade Center was a highly successful underground mall, in no small way because of the 150,000 commuters and tourists streaming past the storefronts and restaurants every day on their way to the towers.

But critics and many downtown residents complained that the old configuration robbed the neighborhood of street life, leaving it a ghost town after sundown and on the weekends. After the complex was destroyed on Sept. 11, 2001, planners, neighborhood groups and eventually the Port Authority insisted that the new stores would be built at street level and extend up as high as the fourth floor, as well as underground.

The developer who is building the three towers on Church Street, Larry A. Silverstein, has already incorporated those ideas into his designs for the buildings.

The retail spaces in the concourses will run west from Church Street to the World Financial Center. The entire retail complex, which will be 60,000 square feet larger than what was in the old trade center, is expected to cost more than $1 billion.

The Port Authority declined to discuss the deal, which is on the agenda of its board meeting on Tuesday. Westfield did not returns calls seeking comment.

“We have a strong interest in the retail that’s going in there,” said Julie Menin, chairwoman of Community Board 1 in Lower Manhattan. “We want stores that will serve a 24/7 community, not just tourists and office workers, and an active street presence.”

The deal would allow the authority to reduce its risk at the complex and still split the net operating revenues with Westfield, the officials and real estate executives said.

If it is approved as expected, the deal would mark Westfield’s return to the World Trade Center site at a time when both the new PATH station and the Freedom Tower, the tallest tower on the site, are under construction. Under a timetable for the rebuilding of the trade center site, the Port Authority is supposed to turn over the eastern side of the property to Mr. Silverstein by the end of the year so that he can start building his three office towers.

Westfield, which is one of the world’s largest mall operators, with 119 shopping centers in four countries, was Mr. Silverstein’s partner in July 2001, when they leased the trade center from the Port Authority. But the complex was destroyed weeks later. The rebuilding plans became embroiled in complex and often acrimonious negotiations between the Port Authority, Mr. Silverstein, civic groups, community leaders, transportation experts and city and state officials.

To reduce the squabbling, the Port Authority negotiated a settlement with Westfield in 2003 to buy back its retail rights at the site. At the time, Westfield favored rebuilding the underground mall. The company feared that the street-level retail favored by others would not generate average sales of $900 a square foot, as the trade center did in 2000. The authority paid Westfield $140 million, which represented the company’s original investment and about $15 million in interest. In an unusual element, the authority also gave Westfield a right to buy back into the complex. Other developers, including Related Companies, had sought to take over the retail.

But rather than offer those development rights to the highest bidder, the authority decided to negotiate a new deal with Westfield, which apparently has changed its views of the complex. The authority has about $200 million in insurance money to rebuild the retail space.

 

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