It’s hard to think of a New York City building more laden with symbolism than the Freedom Tower, also known as One World Trade Center: The 1,776-foot-tall is a triumphant symbol of life after death, a toast to the city’s post-9/11 resilience.
For the Port Authority of New York & New Jersey, though, the $3.8 billion building is a financial ball-and-chain.
Last year, the Port Authority’s revenue on the 3-million-square-foot, SOM-designed Freedom Tower was $13 million, a measly 0.35 percent return on investment, according to the Citizens Budget Commission.
The Port Authority wants to sell the Freedom Tower—which could be worth as much as $5 billion—to the highest bidder within 2017. If it goes for that price, the tower will be the most expensive office building ever sold in the U.S., but observers told Crain’s that the sale will almost certainly be fraught with complications.
In a demonstration of good faith—or xenophobia—the families of 9/11 victims, the agency’s own police force, and even the federal government, which maintains U.S. Customs and Border Protection offices in the building, would probably oppose a sale to, say, a Middle Eastern buyer.
Because of its symbolism and location, the building is still a terrorist target. One World Trade Center’s $121 million annual operating budget includes security, though the Port Authority doesn’t make its security spending figures public.
A buyer may cut those costs to afford the hefty mortgage, although there are few buyers flush enough to even consider buildings like One World Trade. (Since 2008, there have been only 12 buildings sold for more than $1 billion in New York.) TIAA, CalPERS, and large local real estate firms like Related, Silverstein Properties, and Brookfield Properties are expected to bid on the property, by themselves or in partnership with a foreign entity.
Bidders, however, would compete with the Durst Organization, which bought a $100 million stake in the tower six years ago. The building is expected to be fully leased in 2019, at which point Durst would take an ownership stake in the tower. That means Durst gets to be the first to match any bid and would have veto power over any deal before its ownership is fully vested. If there was a buyer within the next two years, Durst would need to be bought out for the transaction to continue.
In 2014, the Port Authority declared that it would sell off its real estate holdings to refocus on transportation, its original mission. Given the roadblocks to a sale, though, some officials are urging the agency to wait until the tower is fully leased, which would inject revenue and lead to a higher valuation (it’s 70 percent full now). Alternatively, officials say the Port Authority could offload less fraught assets, like Brooklyn’s Red Hook container terminal, first.