WFD Westfieldc Stapled

By Peter Grant 

Some of the biggest names in business and politics gathered last month at the Westfield World Trade Center's opening gala. They dined at downtown's new Eataly and watched singers John Legend and Leslie Odom Jr. perform in the spacious transportation hub named the Oculus.

There was one notable exception: Larry Silverstein, the private developer most closely associated with the rebuilding of the World Trade Center complex and owner of two of the three office buildings on the site today.

Mr. Silverstein in 2001 was close friends with Frank Lowy, the Westfield Corp. chairman when they decided to jointly bid on the World Trade Center. They took control less than two months before the Sept. 11 terrorist attack destroyed it.

One of the casualties in the rebuilding process was Messrs. Silverstein and Lowy's friendship. Their interests, which were aligned when they bought the complex, diverged during the rebuilding.

Mr. Lowy, 85 years old, who built his company in Australia before taking it global, expressed regret in his 2015 biography, "A Second Life," over how the friendship deteriorated. By the end of the rebuilding, he said, "nothing was left of what we had."

He and Mr. Silverstein remain key stakeholders in the rebuilt site, and they say their relationship remains cordial.

In an interview, Mr. Silverstein played down their disagreements, saying he didn't attend the Westfield opening because he was in Europe. "Stuff happens all the time," he said. "You always have issues that arise and that have to be handled."

Asked about his friendship with Mr. Lowy, Mr. Silverstein said: "I respect Frank and have great affection for him and his family."

But they no longer time spend time on each other's yachts like they did when they were friends. Mr. Silverstein no longer sits on the board of one of the Westfield companies.

The story of how their friendship faded shows the high stakes and behind-the-scenes passions that shaped the rebuilding of the World Trade Center. The transformation of ground zero into new commercial towers, memorials and a transportation hub involved frequent battles among politicians, businessmen, victims' loved ones and numerous others.

Before they met, Messrs. Lowy and Silverstein both had storied careers in their respective businesses. A Brooklyn native, Mr. Silverstein, 85, developed and managed over 40 million square feet of real estate during a career that spanned more than 50 years.

Mr. Lowy was born in what is today Slovakia, lost his father to Auschwitz, survived Nazi-occupied Europe and fought in the 1948 Arab-Israeli War. After reuniting with family in Australia, he built Westfield, starting with a deli outside of Sydney. Now the family controls malls in Australia, New Zealand, the U.S. and Europe worth more than $50 billion.

The two men became friends in the 1980s and 1990s through their mutual interests in real estate, boating and Israel. Mr. Lowy purchased an apartment on New York's Park Avenue in the same building in which Mr. Silverstein owned a unit.

They decided to join forces when the Port Authority of New York and New Jersey put a 99-year lease of the World Trade Center on the block.

"I recognized that what I knew about office space, I didn't know about retail," Mr. Silverstein recalled. "I thought about it for maybe for a minute."

In July 2001 on the World Trade Center plaza, Mr. Silverstein and representatives of Westfield ceremonially accepted the keys of the complex that they had purchased in a deal valued at $3.2 billion.

"Neither of us had a clue as to what was about to befall us," Mr. Silverstein said.

Both firms were devastated by Sept. 11. Among those killed were four Silverstein Properties executives and a Westfield vice president.

As the companies began thinking about rebuilding, they realized that their interests no longer aligned. Mr. Silverstein, who led a group that put the biggest piece of equity into the deal, embraced a plan that would restore the street grid back to the site that had been cut off from the rest of the area by the old World Trade Center.

Westfield wanted to rebuild what it had bought: a mall of more than 600,000 square feet. The Lowys were concerned that a street grid could fragment the retail as well as the rest of the site.

Moreover, the separate lease that Westfield had signed for the retail space gave it control over the part of the site where rebuilding would most likely occur.

In 2003, Westfield sold its lease back to the Port Authority, a deal which returned to the company its $140 million investment. At the time the rebuilding process was bogged down as groups fought over money, design, control and how to best honor those who died.

Westfield executives also recognized that it didn't make sense for an Australian company to play a major role in something so fraught with emotions and politics. "We wanted to step out of the middle and let the Port Authority, the city and the other constituents decide what they wanted to build," recalled Peter Lowy, Frank's son and the main driver of Westfield's New York strategy.

But Westfield didn't leave completely. It paid the Port Authority $1 million for a right to return to the project once others made major design and development decisions. Westfield also continued to act as a consultant to the Port Authority on retail matters.

Friction between Westfield and Mr. Silverstein was rekindled as the mall giant began negotiating a new deal with the Port Authority to take over the retail space. Westfield proposed more retail space than planners had been considering.

"They didn't seem to be able to conceptualize what we were talking about, " Frank Lowy said in his biography. He declined further comment through a Westfield spokeswoman.

Mr. Silverstein declined to comment on his discussions with Westfield.

In the end, Westfield became comfortable with a scaled-back plan that created 365,000 square feet of retail space in the Santiago Calatrava-designed Oculus and Silverstein office buildings.

The companies of the two former friends still work together, as occupants in the same buildings. A strong mall will help lure office tenants. Higher office-space occupancy means more shoppers.

"Here we are 15 years later," Mr. Silverstein said. "It's a win-win."

Write to Peter Grant at peter.grant@wsj.com

(END) Dow Jones Newswires

September 10, 2016 09:13 ET (13:13 GMT)

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