After the destruction of approximately 10 million square feet of office and retail space in the World Trade Center (“WTC”) on 9-11, the Port Authority of New York and New Jersey (“PANYNJ”) needed to consider a wide range of redevelopment scenarios. With their ground lease to Silverstein Properties still in place and low demand for office and retail space in the area in the wake of the attack, PANYNJ was seeking to begin replacement of the office and retail project as quickly as possible. One of their first goals was to renegotiate the ground lease terms with Silverstein Properties to make sure they were incentivized to develop quickly. For the negotiation process, it was important for the PANYNJ to understand the likely timing of development and the likely financial returns to the developer under different scenarios.
RESGroup examined the market, economic and financial implications for office, retail and hotel uses on the site. A retail market analysis was completed to estimate the amount of retail that could be supported under the reconstruction plan for the office towers. A detailed and flexible financial model was created to allow the Port Authority to estimate what the developer could afford to pay in potential lease payments assuming various scenarios for phasing, absorption, insurance proceeds, and a variety of public/private partnership relationships. This model was used as a tool for negotiating with Silverstein Properties for the portions of the site retained in the ground lease, as well as the decision to release Silverstein Properties from the responsibility to develop 1 World Trade Center, which was developed by PANYNJ.
As a result of this experience, RESGroup was subsequently retained by the Lower Manhattan Development Corporation (“LMDC”) to develop strategies for redevelopment and revitalization of the Fulton Street Corridor in downtown New York City. Later in the WTC redevelopment RESGroup was a part of a team retained by the Rudin Center to understand PANYNJ’s financial return on their investment in the WTC. The findings estimated that the Port Authority would recoup between 97.4 and 98.6 percent of its spending on the site. Sources of revenue included insurance proceeds, post 9/11 federal funding, revenues from One World Trade, ground lease payments from Silverstein Properties, payments by Westfield for retail rights, and income from the potential sale of the 5 World Trade Center site.
