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Seven’s Up For Silverstein

Seven’s Up For Silverstein

Aug 01, 2007
By By: Adam Piore | The Real Deal | The Real Deal

For months, the glamorous parties atop Larry Silverstein’s new 7 World Trade Center have attracted A-list celebrities like Lindsay Lohan, Drew Barrymore and Naomi Campbell.

Since no one has yet signed a lease for the top floor, Silverstein has been renting it out for A-list galas in recent months, charging a hefty $25,000 a day.

While A-list corporate tenants are proving a bit more elusive at the top, they are slowly and steadily moving in on lower floors.

The rebuilt 52-story, 1.7 million-square-foot office tower at the foot of Ground Zero is now two-thirds leased, with a directory that includes Moody’s Investors Service, the law firm Darby & Darby P.C., Ameriprise Financial and Mansueto Ventures, publisher of Fast Company and Inc. magazines.

It’s too early to characterize what the building’s eventual tenant profile will look like. But real estate insiders expect a continued influx of financial services firms, with many saying that soaring Midtown rents will likely drive a growing number Downtown in the months ahead.

“They’re going to get across the gamut, all types of users,” Frank Doyle, managing director of leasing at Jones Lang LaSalle, said. “Right now, financial services and law firms are leading the market, and that’s what they’re getting.”

The building’s first tenant was actually a nonprofit — the New York Academy of Sciences. They leased 40,000 square feet on the 40th floor and took possession in September 2006.

But the first big “get” was financial services giant Moody’s, which signed a 20-year lease for 15 floors that same month and is currently in the process of relocating. Comprising 590,000 square feet, the Moody’s deal was the largest lease signed in Manhattan in 2006.

A few months later, Moody’s realized that it was growing faster than expected and signed up for two additional floors, increasing Moody’s total commitment at 7 World Trade Center to 670,000 square feet.

Sources say Moody’s is paying in the low $50s for the bulk of their space, while the New York Academy of Sciences is paying in the $50s.

Arthur Skelskie, Moody’s vice president of global real estate, said the location — with its proximity to other financial institutions — made sense for the company.

“The safety features are state-of-the-art, and all of that was very important to us,” Skelskie said. “We want this to be our headquarters location for a long time. We don’t want to be moving anytime soon.”

The floor plates, which are open, have no columns. That supported Moody’s unusual specifications for a build out.

“Our business demands that our analysts have confidentiality and an ability to concentrate. So we have a high proportion of offices relative to work stations,” Skelskie said.

Doyle said the large open floor plates make 7 World Trade perfect for other financial service firms that need large trading floors — though hedge funds and private equity firms usually prefer smaller floor plates, like those offered in the General Motors Building or Lever House.

A preference for Midtown is only one of several potential challenges in luring more tenants. Concerns about future terrorist attacks and memories of the original 7 World Trade Center’s demise — it was hit by debris from the falling North Tower and collapsed late in the afternoon on Sept. 11 — could prove too unsettling for some.

But for others, 7 World Trade Center is akin to Midtown’s “county-club” office towers, such as 712 Fifth Avenue, with its tony, exclusive culture.

“It’s not too much of a stretch to say it’s the best building Downtown and certainly in the top tier of buildings in all of Manhattan,” said Howard Nottingham, executive managing director at Studley. “If a Midtown tenant can get over the hump of a location Downtown, it’s a very attractive alternative for virtually any type of tenant, because of the quality of the building and the price relative to Midtown.”

And like most exclusive locations, its neighbors are a selling point.

Goldman Sachs recently began construction next door on West Street, between Vesey and Murray streets, of a $2 billion, 43-story world headquarters with a huge trading floor. The building is being financed in part with $1.65 billion in tax-free bonds and more than $115 million in other incentives.

Merrill Lynch is already at World Financial Center. And JP Morgan Chase & Co. has signed on to occupy Ground Zero’s Tower 5, a 1.3-million-square-foot office tower that will have as many as seven large trading floors when it opens around 2013.

Neil Goldmacher, a principal at Newmark Knight Frank, said the construction that surrounds 7 World Trade is “going to be a bit of a logistical mess down there for a while, but only thorough 2013.”

It’s the sky-high Midtown rents, however, that could be the biggest driver of new tenants.

Dara McQuillan, marketing and communications director for Silverstein Properties, said lease rates at 7 World Trade have been as low as $50 a square foot, but in less than a year, the top floor space is now projected to fetch $80 a square foot.

That’s a far cry from rates on the top floors in Midtown, which have crested well over $100 a square foot — and in some cases above $140 a square foot — which may be the key to 7 World Trade finding a tenant at its top.

Lawyer Andrew Baum, managing principal at Darby and Darby, said his firm originally intended to stay in Midtown, but was not offered the opportunity to renew its lease at 805 Third Avenue.

“Things are getting very difficult for law firms in Midtown Manhattan,” he said. “We were thrown into the market in April 2006, and the difference between what we could get in Midtown and what we could get here was so striking that this didn’t turn out to be a difficult decision for us.”

A bird’s eye view

Nor is that all he likes about 7 World Trade. Speaking by phone from his office on the 41st floor, Baum confided that he was gazing up the Hudson with a pair of binoculars. Then he began gushing about his view.

“I have a two-river view, the East River up to Triborough Bridge and the Hudson up to the George Washington Bridge,” he said. “I can see out to the Rockaways; my view south is unobstructed past the Verrazano Bridge. It’s a jaw dropper. It really is. We’ve got nine-foot ceilings and windows that run floor to ceiling. The feeling is just very open and sunny and light.”

There is, though, the historic hurdle of Sept. 11. It’s a consideration, but not an insurmountable obstacle.

“The Ground Zero stuff and the ‘will it rent?’ is all just ancient history now,” Simon Wasserberger, senior vice president at CB Richard Ellis, said. “The fact that you can be in arguably the best building in New York City that is available at half the rent it would be at Midtown is incredibly compelling.”

Goldmacher agreed that the issue of Sept. 11 fades with every passing year and is no longer really a consideration.

“There’s a real shortage of trophy-quality space in Manhattan, and I’m sure the space will be absorbed by quality tenants. Rome wasn’t built in a day; 7 won’t get leased in a day. It takes a time, it’s a huge building. But it’s the only new building you can lease in Lower Manhattan.”

Top-flight amenities

Constructed at a cost of $700 million, amenities are one of 7 World Trade Center’s strong suits.

The building itself is one of the first “green” skyscrapers in New York City, set up for rainwater collection to irrigate the park across the street, and finished with energy- and heat-conserving glass to reduce lighting and air conditioning costs.

That makes it easier to forget the area’s dark past and simply focus on 7 World Trade Center’s vistas of New York Harbor, the Statue of Liberty, Battery Park, Midtown and the rest of the city.

And Silverstein has managed to use the views as part of his marketing efforts, pulling in celebrities for top-floor galas.

Calvin Klein had its Fashion Week after-party there last fall, decking out the space with clusters of sleek white couches, shag carpeting, bars and light installations. For a fragrance launch in November, Valentino created an urban garden with 50,000 roses. Christian Dior recently created a wraparound runway.

Chad Kaydo, the editor of the event-planning magazine BiZBash, reportedly anointed 7 World Trade “the space of the year.”

Naomi Campbell, Donald Trump Jr., Lindsay Lohan and Drew Barrymore are just a few of the big names to make appearances.

Men’s Health magazine sponsored a contest that had hundreds of people sprinting up and down the building’s 52 flights of stairs. Hollywood has even filmed a movie on the premises: “Perfect Stranger,” with Bruce Willis and Halle Berry.

“We figured the best way to market this building would be to have people come in and see it,” McQuillan said.

Safety measures reinforce 7 World Trade Center

Lessons learned from Sept. 11 and other terrorist events contributed to the design of 7 World Trade Center, which Larry Silverstein bills as the “safest building in the United States.”

The lobby features an art installation from Jenny Holzer that hides a blast-proof wall built on springs strong enough to protect the interior of the building from the impact of a car bomb.

The cable net walls at the front of the lobby are composed of triple-laminate super-tensile cables that are taut like a tennis racket. They’re designed by an Israeli engineer based in Tel Aviv who has spent the last few years designing bomb-proof buildings.

“We wanted to make it safe in a way that didn’t terrify people,” said Dara McQuillan, marketing and communications director for Silverstein Properties.

To enter, employees pass a security desk and then swipe a personalized identification card through a reader. The card routes the information to a central computer, which sends an elevator to pick individuals up and deliver them to their floor — there are no buttons in the elevator; it proceeds automatically to the employee’s floor.

While the core of most buildings is composed of plasterboard, Silverstein used two-foot-thick reinforced concrete — capable of absorbing about 12,000 pounds per square inch. That’s about the same specifications used in the core of military and nuclear installations.

Rather than trusses, the building uses huge steel beams, coated by a new kind of cement fireproofing that won’t flake off. The emergency stairs are twice as wide as regular staircases, to accommodate rescue workers toting heavy equipment.

The stairwell is pressurized, to keep smoke out of the area, with LCD strips to lead the way down. And the stairs exit out into the street, instead of into the lobby, as they did in the twin towers, precluding a repeat of the pandemonium created on Sept. 11.

 

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