One-on-One with Larry Silverstein - Part 2
October 02, 2018
EisnerAmper Real Estate Services Group Partner Lisa Knee interviews Larry Silverstein of Silverstein Properties in the second part of a four video feature. In this segment, Silverstein shares the origins of his legendary real estate empire and talks about developments beyond the World Trade Center.
LK: Let's start talking about your first acquisition in 1957 with your father on East 23rd Street. I remember reading that you had some pretty creative leasing and lending opportunities that you were talking to the tenants about. Can you tell us about that acquisition and what it was like?
LS: First, we were real estate brokers and we were doing leasing of loft space and store spaces and industrial space in the rag and garment district of low Manhattan and it was a hand-to-mouth existence. We were not doing well at all financially and I finally said to my father one day we're going to starve to death unless we become owners because owners make the money, brokers don't. And so we tried to buy something, we tried to buy a building and we had zero resources of our own so that took a good deal of creativity. But we followed the example of some people that just bought the Empire State Building. They bought it with 5,000 investors sitting around the metropolitan area from New York and maybe different parts of the country and all came together for $5,000 investments and $10,000 investments in the Empire State Building. So we followed that route and we tried to emulate what they were doing successfully and most much to our amazement, we succeeded in finding 20 people who each put in $10,000 for an investment in this building down at East 23rd Street. It was not a very good building, matter of fact, it was not a very good building at all. It was a poor building and terrible condition that needed everything. So what we did was go in and whitewash as much space as we can get possession of. Put electric lights, just the regular incandescent lighting in it. We scraped the floors to make them look lighter and brighter and cleaner. Put simple fluorescent light in the lobby and the most amazing thing was we ended up leasing all the vacant space in that building in a relatively short period of time at rental rates that far exceeded our best anticipations of what we could do. With the success of the releasing effort, we were able to refinance and able to give everybody back their money and still retain ownership of the building. Everybody thought that was wonderful. They said find another one. So with the success of that, we went out to find another one and we did and the results were pretty similar. And so that was a sea change in our lives because suddenly money became available to us that enabled us to buy larger buildings and do more and much more extensive renovations and alterations and so forth. We went from minor alterations and renovations to much more major ones, to gut rehabilitations finally to building buildings. It doesn't take long before you get addicted to the fascination and the interest of the dynamics of new development of high-rise buildings and once you get into this quality and this class, it makes everything else minor. This has been the story of our lives for the last 30 years.
LK: So tell us a little bit about the project you’ve been working on outside the World Trade Center complex, such as Silver Suites and the Four Seasons?
LS: Four Seasons developed in a very interesting way. They had a piece of land that they had bought down in the Disney park in Orlando Florida. They came to us and suggested that we might have an interest and joining with them to build the new hotel in the Disney park in Orlando on the piece of land that they had acquired. So I ended up going down and looking at it and it was I think ’07 ’08 actually it was around ‘08 and ‘09 and those were terrible years, the world was sort of collapsing around us. But the more we looked at the site the more I said to myself that the world doesn't stand still even though everything was sort of crashing around us and financial impact was significant. I felt it was just a question of time until we reach a bottom of the market that the world starts to come together and starts to come up again as it usually did. In the past, and I felt this would be no different, the market started to improve we were able to get financing and once you get construction financing for a project. We had the equity and able to go up, able to build it. We finished I think in ’15, last year. We finished the largest Four Seasons Hotel in the entire chain worldwide. It has 445 rooms and its turn out to be an incredibly successful hotel in the Disney park and the room rates that were achieving are far greater than anything they expected to achieve, let alone my expectation. So it's done very well, it's worked out very well, and we're very happy with it. We decided to, since we were doing one Four Seasons, might as well do another right here in New York. The hotel is in place and it should open I think in August of this year.
JK: O.K., great.
JS: The condos will be available about the same timeframe up above. So we've sold about, we've sold about seventy to seventy-five percent of the condos above the hotel, which has done very well and we’re very pleased with that with that. We've covered our debt, we've covered our equity, and so it's a very comfortable position in which to be.
LK: You are a real estate giant here in New York and you have substantial investments throughout the US and overseas. Notably you have a $2.2 billion dollar investment in China for financial services hub and you've invested heavily in Poland. Given today's global insecurity and the financial markets, are there still places that you're willing to go look out outside of New York?
LS: At this moment, we've got a number of things going in diverse areas and so there are some places we're looking at which we’ll talk about later on.
LK: Are you going to share? You’re not sharing?
LS: On another occasion.