It’s been almost two years since Condé Nast’s 3,400 employees moved into One World Trade Center. At the time, only 58 percent of its 3 million square feet of space was leased, but the hope was that the media company’s presence and perceived confidence in the $3.8 billion tower would attract more tenants. This didn’t quite pan out, as it’s still one third empty, and the Port Authority continues to drop $3 million a month to cover Condé Nast’s old lease (this amounted to $47.6 million in 2015 alone).
Due to these issues, along with the fact that the tower only brought in $13 million in revenue last year– a mere 0.35 percent return on its investment–the cash-strapped Port Authority has made plans to sell One World Trade Center for as much as $5 billion. As Crain’s notes, this would be the highest price ever paid for an office building in the country.
Selling the building may not be so simple. First off, the pool of investors with that much cash on hand is small; only 12 buildings in the city have sold for more than $1 billion over the past eight years. Then there are issues tied to the emotionality of the site. The Port Authority police, who monitor the building, and families of the 9/11 attacks, “would likely oppose a sale of the property to wealthy investors from the Middle East,” a group that has been steadily purchasing big-deal real estate in New York, totaling $6.5 billion in just the past 18 months.
Whoever decides to bid for the property–foreign or domestic–will have to contend with the Durst Organization, who owns a $100 million interest in the building and therefore has the right to block any potential deal. Plus, their investment will be converted into an ownership stake in 2019, when the tower is expected to be fully leased, so any sale between now and then means Durst would have to be bought out.
Security is yet another obstacle. The agency doesn’t disclose what it spends on security, but last year the total operating cost for the building was $121 million. An investor may want to cut that budget, or turn operations over from the Port Authority Police to the NYPD, a move that would exacerbate already existing tensions between the two groups.
Port Authority Chairman John Degnan told Crain’s: “Ownership of One World Trade is not a part of the Port Authority’s mission to advance transportation infrastructure in the region. This asset will be monetized and the proceeds used for that core mission. The only question is how and when to proceed in a manner that ensures that the maximum return is yielded for reinvestment in facilities that do serve the agency’s core mission.”
- The Port Authority Paid $47.6M in 2015 to Cover Condé Nast’s Move to One WTC
- Today’s the Day: Condé Nast Moves into One World Trade Center
- Don’t Forget, One World Trade Was Supposed to Be the Greenest Building in America
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