Today I have read in the news that the deconstruction of the Deutsche Tower, the unique survivor of the 9/11 attack, will be finished next month.
http://news.yahoo.com/s/ap/us_toxic_tower
We could question how rests of the airplane or human bodies could end up in the roof of the Deutsche building. However the most interesting aspect is that it is called the “toxic tower”. Where did the toxic elements (asbestos, etc.) come from? From the 2 WTC. So it was contaminated, as already known. This serves as an introduction to the history of a brilliant investment.
In February 2001 the Port Authority (PA) of New York initiated a bidding procedure for leasing the WTC. The initial winner was Vornado Realty, but later it quit. Then the lease was assigned to Silverstein Properties, and the contract was signed in a record time of 3 months in July 2001. Under the terms of the contract, Silverstein would obtain the rentals from the tenants and pay to PA under the lease during 99 years; Silverstein invested only $14mill. But sometimes experts also make mistakes: Silversein forgot checking if the building was asbestos contaminated. However, if it had done so, he would have known that a lot of money could be required to repair it, or even worse, that he could have been obliged to demolish the buildings, and the lease would have not been ever signed.
Well, the story continues. At the time of the signature, Silverstein signs an insurance contract with 24 companies for a total value of 3,5 billion, and PA allows him the right to build again the buildings in case of sinister and to be the beneficiary of the insurance. So, let’s see: I do not put money, I am not the owner, I rent the building (paying rentals in the future) but the insurance proceeds are for me; and just in case I include in the clauses a terrorist attack as cause for the damage. Brilliant!
Unexpectedly less than 4 weeks later some crazy guys hit the WTC with planes. But business is business. In less than 2 weeks after the attack, Silverstein began discussing with the insurance companies if there were 1 or two attacks; the discussion being not trivial: in case of two attacks he gets double the insured amount.
Some years later he partially won and total proceeds were $4,5 billion (not twice the expected amount though). By the way the settlement act with the insurance companies was announced by the NY governor, Elliot Spitzer, in 2007 (it’s pure coincidence that he was one year later the main actor in a prostitution scandal) The money would be used to build the new WTC, much cleaner (no asbestos please) and with much higher rentals than before. In an act of pure altruism, Silverstein agreed to give part of its insurance proceeds and the rights on the new 1 tower to PA; well in exchange he got public funds to build the rest of the towers, and obtained that public agencies signed rental contracts in “his” buildings, but that is peanuts.
Let’s not forget WTC number 7. This building collapsed on 9/11, without being hit. Silverstein was the owner of that building, and he had a nice insurance too, cashing more than double the construction costs. That the WTC 7 included among its tenants the Secret Service, the CIA and other public agencies is a mere coincidence.
Silverstein and his two sons were very fortunate on 9/11; they arrived later to work at the WTC
Conclusion: I would buy shares of Silverstein Properties. This people are very smart and lucky; the pity: it’s a private company.
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