The agency is looking to divest itself from its real estate holdings
The Port Authority is hoping that a potential sale of One World Trade Center may generate as much as $5 billion for the agency, but in order for any sale to move forward there are some serious emotional and real estate hurdles that will have to be surpassed, Crain’s reports.
Built at a cost of $3.8 billion, the office tower is only 70 percent leased so far, and last year generated just $13 million for the agency, which as Crain’s notes, indicates a 0.35 percent return on their investment. If the tower does sell for what executives at the agency are hoping will be close to $5 billion, it would make it the priciest office building sale in the United States.
But there are several potential problems at hand. Since the Port Authority will entertain both domestic and foreign buyers, it’s likely that key real estate players from countries like China and Saudi Arabia will want to bid on the building, and that in turn might inflame sentiments, Crain’s posits. Beijing-based company Anbang’s purchase of the Waldorf Astoria Hotel for $1.95B two years ago prompted President Obama and other political leaders to not stay there. And Saudi Arabian company the Olayan Group recently showed its purchasing power in the U.S., when it bought the former Sony headquarters at 550 Madison Avenue.
Foreign investors will likely play a big role in a potential sale and some are worried that investors from Saudi Arabia for example, where 15 of the 19 terrorists were from in the 9/11 terrorist attacks, will not sit well with most people.
Virginia Bauer, a current member of the board of directors at the 9/11 Memorial, who lost her husband in the terrorist attacks told Crain’s that firms from around the world should be invited and that the property be sold to the highest bidder.
“What makes America and the city so attractive is our tolerance and respect for all,” she told Crain’s.
Then there’s the fact that the Durst Organization purchased a $100 million interest in the building. Once the tower is fully leased, which is anticipated to be sometime in 2019, Durst will have an ownership stake in the property. Durst will have the right to match any offer by another buyer and will also have the right to reject an offer prior to its ownership taking effect.
It’s possible that some of the largest real estate firms in the city like Silverstein Properties (who own other properties at the WTC complex), Related Companies, and Brookfield Properties may want to partner with foreign companies to purchase the building, and some PA executives Crain’s spoke with said the current market was the ideal time to start the process of selling the building.
There are questions of security at stake as well. The building is currently manned by the Port Authority police, and probably is a large part of the operating income of the building. It’s possible that a new buyer does away with this force and gets the New York City police to take over, which in turn may be a source of tension between the two agencies.
Taking into account all the potential obstacles, many executives at the PA have argued that the agency should hold on to the building and that profits will begin to show in the coming years as the building gets fully leased out and becomes more valuable. But that might not fit within the agency’s overall goal of divesting itself of its real estate interests and focussing solely on infrastructural improvements.