Episode 36: Larry Silverstein - Chairman of Silverstein Properties

0:00This week on Generating Alpha, I'm joined by Larry Silverstein, the legendary New York City real estate developer. As the founder of Silverstein Properties, Larry has been a driving force behind some of the city's most iconic projects, with a portfolio that includes over 40 million square feet of office, residential, and retail space. His career is a testament to resilience, vision, and a deep, enduring commitment to the city he loves. Larry's story is intertwined with New York's history, from his early days making formative deals to his monumental role in rebuilding the World Trade Center site after 9-11.

0:32He's a figure who has not only shaped skylines, but also embodied the spirit of persistence and renewal. In this episode, we'll explore Larry's early life and the deals that defined his career, his monumental acquisition and rebuilding of the World Trade Center, and his perspective on risk, legacy, and the future of New York. We'll uncover the lessons he's learned from decades at the pinnacle of real estate and how he continues to build it for tomorrow. If you enjoy this episode, please follow the podcast and rate it five stars on Spotify, subscribe to the YouTube channel, and share it with anyone who you think might find it valuable.

1:03I really enjoyed this conversation, and I hope you guys enjoyed listening. Thank you. Thanks for coming on the podcast, Larry. I really appreciate it. Okay. My pleasure. So I want to start off at the beginning, where I usually start. So tell me a little about your childhood and education. What was it like, and were there any early experiences that you think really shaped the kind of person you are today? I'd say one of the most important aspects of my upbringing was family values. My parents inculcated a set of values in me and therefore my sister as well, which I think have lasted me my life, the duration of my life.

1:51and wonderful values, spectacular values. I suppose one of the ones that hits me constantly, and I tell this to my employees all the time, treat people exactly as you would expect them to treat you. So arrogance, totally unacceptable. Nastiness, I get it. I mean, things that's just simple, logical, relevant aspects of life. They inculcated in me and my sister. And that has lasted me my entire life. Number one. Number two, my father was a pianist, a classical pianist, and a good one. so he would put us to sleep every night with Chopin etudes, mazurkas, waltzes, sonatas, you name it, right? And invariably, it was Chopin because he loved Chopin.

2:54He also loved Beethoven, so we got a little Beethoven. He also loved Liszt, we got a little Liszt. He also loved Brahms, we got a little Brahms. But classical music was something that reigned in our home every single night. and so we were constantly being put to sleep with classical music so we grew up with a love of classical music that's lasted all my life because i found a very early time when when wqxr came on board with classical music i mean i turned it on in the morning and stayed on all day this is exactly the way our lives start today uh and we've been married now 69 years which is quite a long time and we're finally getting to know each other but nevertheless it's uh so my wife and i first thing in the morning on goes wqxr and it doesn't go off until we are ready to go to sleep sometimes if there's beautiful music on we even go to sleep with the radio playing it's fabulous so so these are two aspects that have given me um some wonderful aspects to live by and with.

4:09Incredible. And I'd love to kind of take a moment to speak on your early career. During your early career, were there kind of one or two projects that you think really shaped your approach and your perspective? What were they? Well, I'd say the first thing was watching my father would come home every night and discuss what went on by day with us over the dinner table at night. And we heard the various aspects of his business life. His business life was that of a real estate broker who leased space to clients. And that space was located in the crummiest part of the city you could expect that existed at that time.

5:00and it was a hand-to-mouth existence as a result of it. There was never any money. It was just a very difficult time. We couldn't afford a car. Our occupying was not very good. The location was terrible. And so it was really tough. But I remember the dollar, making a dollar was crucially important and spending wisely was also crucially important. And so you grow up with those realities and they never leave you. They certainly never left me. And so I'd say that's basic tenet in our lives was to work your tail off to make the dollar. Once you made it, spend it wisely, not foolishly. and the third thing I suppose is to the extent you can put something aside for the rainy day because it's always going to come and tell me the story of your first real estate deal I've heard it before and it was really inspiring well because it was a hand-to-mouth existence I remember telling my father that being a real estate broker was not the way I wanted to lead my life I said I want to get hang on a second I said I want to marry when we have children and can't do that without making a decent living and I said this is not a decent living this way I'm going to starve to death so it's important we become an owner how do you become an owner when you have no money so pretty simple except that the day we had this discussion was the day on the front page, I think it was the Wall Street Journal or the New York Times, I forget which, there was an article featuring the sale of the Empire State Building to two people.

7:07One was Harry Helmsley, a real estate broker, a prominent one. The other was a lawyer by the name of Lawrence Sweeney. So these two gentlemen bought the Empire State Building. And the way they bought it was by going to 5 ,000 individuals who invested$5 ,000 each to become a limited partner in the ownership of the Empire State Building. So I remember saying to my father, I said, look, these guys just bought the Empire State Building. Can we buy a building using the same concept? So he said, can you figure it out? So I did. And as a result of figuring it out, we ended up buying our first building.

7:53It was a crummy old building in a crummy part of the city at that time. Today it's a terrific part of the city, but then it was awful. So we bought this crummy old building by going out to 25 people to invest$10 ,000 each. in the acquisition of this building. And it worked. We were able to buy it. And miracle of miracles, but we bought it. And then another miracle of miracles, we worked our tails off to, for example, the space in the building, heavy vacancies, vacancies all over. And the building looked bad. It was bad. The space was filthy. It hadn't been cleaned. I mean, it's just sort of languishing, vacant, languishing space.

8:42unimproved, looked like hell, smelled like hell, and everything bad about you can think of. So first thing my father said was, you know what, let's get a spray paint, a spray paint, white, all over this place. It'll look better. So did that. Next thing we did was get a window washer to clean the windows because the windows hadn't been washed in, I don't know, 30 years. Next thing we also did was get a floor scraper to scrape the floors because the floors were filthy and they had GAP on them. It must have been 50 years of GAP. It just looked like hell. So he scraped the floors. The most amazing thing happened.

9:17The floors turned out to be the most beautiful hardwood floors you can imagine. So suddenly the place began to look better. I remember going down Canal Street to buy Army-Navy surplus fluorescent light fixtures. So he bought used fluorescent light fixtures, put it in the back of a cab, took it up to the building and asked the superintendent to hang the fluorescent light fixtures in the space. All of a sudden, the space began to look like decent space. The result was we rented it for twice what we thought we could get. And the net result is we could pay out distributions of 1 % a month, which is a 12 % annual return to the investors.

10:00They were thrilled. They said, find another building. This is terrific. So that was our first. We went out and bought the second. It was a bigger one. bought a third which is a big one every building we bought bigger bigger bigger and then finally one day the banks would never lend us fifteen thousand dollars that we desperately needed in order to buy this first building they called and they said you know what we like what you're doing forget about going to investors come to us and we'll give you whatever you need to buy the buildings you want to buy so that was a sea change in our lives and everything improved to ever have to.

10:39And as your projects got bigger and bigger, you eventually developed your first project, which was Seven World Trade Center. And on the opening day of Seven World Trade Center, you stood on the roof and you saw the Twin Towers and you were like, wouldn't it be really cool to own these one day? Tell me about the story of how you came to sign a 99-year lease on the Twin Towers six weeks before 9-11 happened. Well, in 19, I think it was 1999, 1999, Governor Pataki called and said, we've decided to sell the World Trade Center. Would you be interested in buying it? And I said, yes, because I remember what it was like being on the roof of the original seven World Trades and looking up and seeing those magnificent towers.

11:28I said to myself, wouldn't it be fantastic if I got all those one day? So instantly I said Of course, I'd be interested in buying them. So as it turns out, I think there were 27 bidders who were chosen to bid for the Trade Center. Of the 27, as days went by, the 27 came down to five, and I was one of the five. And then became four. And then the final, final, final, final, three bidders. and I was one of them. The other two were major, huge public real estate investment trusts. Huge buildings, huge trusts. They have huge amounts of real estate. I was a pipsqueak. They were massive because they were public companies, right?

12:19Traded on the York Stock Exchange. So, wow. So everybody said, Silverstein, forget it. But I knew something they didn't know. And that was public companies have limitations, legal limitations, that prevent them from doing certain things. And so, as it turns out, when the bids were finished, I got a call from J.P. Morgan, representing the Port Authority, to sell, find the sale of the buildings. and I was told that my bid of$3.2 billion was short by$50 million. The winning bid was$3.25 billion. And the underbid, the second underbid, was$3.15 billion. So$50 million separated each of us, right? Now,$50 million is a huge amount of money, but when you find when you're trying to buy something 3.2 billion or 3.25 billion it's a rounding error 50 million dollars becomes a rounding error sounds crazy but that's the reality as it turns out the legal legal problems that who was the winner Steve Steve Roth of Hornado if I'm correct.

13:53A tornado. Yeah. So they found that they could not do a, sign a 99-year lease. They could do two 50-year leases, but they could not sign a lease of 100-year lease or a 99-year lease with the Port Authority, plus a whole range of other things. So that's why they couldn't promote the deal. And when the Port Authority, when J.P. Moore came to me and they said, would you still be interested in the trade center. And I said, why do you ask? They said, because Vornado cannot close the deal. So I said, I'm going to call Vornado to check on that, to verify what you're telling me. Of course, to me, it sounded ridiculous that the first-class company, major company, all the money in the world to invest, they couldn't buy it.

14:42So I called Steve Roth, and he confirmed the fact that they were not going to make the deal. It was going to collapse. and they were given 21 days to begin with. And if this is on the 19th day and it became obvious to him and it became obvious to the port, it was not going to work. So when I heard that, I went back to J.P. Boyd and I said, yes, we'd be interested. And that's how we ended up buying the deal. And six weeks later, September 11th happened. Take me through the day of September 11th in your shoes. What was your reaction when you kind of first learned of the attack? What did the following days look like leading up to what would become an eventually a 23-year rebuilding effort?

15:27Well, the day of the attack was just a horrendous experience because my first fear, a massive fear, was that two of my children, my daughter Lisa, my son Roger, were on their way down to the temporary headquarters we had on the 91st floor of the North Tower. And when I saw what was happening on the South Tower, I said, oh my God, this is, this is, was it the South? No, the North Tower was the first one to go down. So the second one was the South Side. In any event, I was petrified. And because there was no cellular communication, all of a sudden, there was no way to know if they were okay. As it turns out, they got there.

16:23They were on their way to work. Roger was on his way. And he got downstairs just in time to see the horror of burning the building, burning, and people throwing themselves out the window. And he turned around and got out of there as quickly as he could, and he was okay. Lisa was on her way down the West Side Highway. She was stopped by the police, and she explained who she was and so forth. So they ended up bringing her to the office, the midtown office, the main office. So fortunately, my two children were okay. The problem was we had so many employees working out there, and the question was who survived and who didn't.

17:12And so we started getting calls from spouses, and they said, we need to know, is our loved one safe or not? So invariably what they did, because the phones were becoming extremely difficult, was they came to the office and they said, we'd like to wait to hear what results you have. And so they came, we put them in that conference room. And after a while, the number of people came to find out what about their spouses was brutally difficult. Some of them, some of them were deemed to be extremely fortunate because their spouses came back to work in the town and they were fine. But for those who sat and waited, The longer they waited, the worse their fears, and ultimately became obvious to them that they lost their spouses.

18:06And so we lost a total of four employees, and the four employees had eight kids among them, and so we provided for the education of those kids. But the true tragedy was that almost 3 ,000 lives were lost on that day. That was the most horrendous experience because after 9-11 and the issue of could you rebuild, should you rebuild? If so, do you rebuild on that site? And there were a huge number of discussions all over the place. And the simple issue was I started getting calls from the families because they heard that I was ready to rebuild and prepared to rebuild on the site. And so they called, they asked for appointments, and even though it was not my obligation to meet with them, because it was the state, the state had taken responsibility for that aspect of it, I decided I couldn't say no, so they asked for an appointment I gave it to them.

19:15They would come, and they would talk about it, and they'd say, you know, our loved one was vaporized because of the intense heat, so therefore we have no remains of our loved one. without remains you can't have a burial without a burial you can't have closure therefore our loved one is down there someplace vaporized but he's down there someplace and therefore you cannot build any place on that site so i finally said you know just i finally said you know understand what you're going through but at the end of the day we have to be good new yorkers and do what needs to be done. We need to be good New Yorkers, provided you don't build anywhere on that site will be a good New Yorker.

20:01It was just a horrible time, a terrible experience, but we had to get by and so we did. It's such a powerful story. And while many people would have given up, you rebuilt in what would be eventually over two decades long effort. And that leads me to my next question. What do you think has made you successful in real estate? Do you think it's just your drive, your persistence? Do you think it's being able to fight with the big guys, a David versus Goliath type of story? What do you think has made you successful?

20:31Perseverance is one thing. A desire to accomplish is another. I always enjoyed challenges. And so the more challenging the opportunity, the more I look forward to and enjoy it. and determination is another aspect. And when people said it was unaccomplishable, I looked at it and I said, why is it unaccomplishable? So I take you back to the first Semelot Trade Center that we built on land that owned by the Port Authority, which I acquired the rights to build on the Keystone site, I acquired the rights to build a new seven world trade center back in 1980. And the rights were to build a million square foot building, 40 stories, 25 ,000 square feet on the floor.

21:40So once I signed the lease with the Port Authority, giving me the right to build a million-foot building. I took myself off to visit with a friend at J.P. Morgan, a senior friend, a gentleman named Jim Boise. And I said to Jim, I said, Jim, I've just signed a lease giving me the right to build a million square feet office building here at the Port Authority. I said, can you use it? He said, Larry, I could use two million feet. Can you make the building bigger? And I said, make the building bigger? I said, I don't know. I'm going to find out. I turned around and went back to the Port Authority.

22:21And I said, I need to build a two-million-foot building. They said, you're crazy. It can't be done. I said, why not? They said, because we have a substation, a Conrad substation in the base of the building. He said, all of the piles to support a million-square-foot building are in place. everything is there ready to go with the millions there's no way to get Con Edison permission to go into that area and drive new piles and so forth because maybe electricity goes out in Lowman and of course all the electricity for Lowman comes from that location net result is I took myself off to Con Edison it took me I think I forget three months four months five months to convince them to allow me to build it, to build a two million square foot building instead of a million square footer.

23:16It doubled the benefit to the board authority because now they got ground rent for a two million foot building instead of a million. They loved it. I loved it because profitability doubled for me. And so there we had people said, it could never be done. And I did it. I succeeded building a two million foot building. Incredible. What do you think makes real estate so special for you? it's a it's an opportunity which is different in each instance you're dealing with different people different pretty bright people people who have a who are challenged just as you are in some cases they were people who felt that I was I represented a threat to them other people thought I was It'd be fantastic in terms of helping me accomplish my goals.

24:10I mean, it varies from project to project, but each project was totally different from the other. And each project turned out to be bigger than the other. So it was a pretty exciting existence. For sure. And over your career, New York City has changed dramatically. What do you think has changed the most in New York, for better or for worse? Well, I was alive and well and working my tail off to build office buildings, to build High Rise Residential. I am back in 1984 I acquired a square block on 42nd Street between 11th Avenue and 12th Avenue 42nd and 41st Street it took me it took me sort of 1980 what was it 1984 that I acquired it It took me until I think 1989, about five years, to get it rezoned.

25:25And then we found ourselves in the middle of the worst real estate depression. By the end of 1993, 1994, things began to improve. So I built an apartment house there, and it turned out to be very successful. And I built a second one later. So the block today holds 2 ,300 families, rental families. And it's like a neighborhood unto itself, a square block. And we've got tenants who've been living there for 10 years, 15 years, 18 years. It's really a family enclave and something we're very proud of. It was an era when you could build in New York because circumstances in the city favored development.

26:12and ultimately we had ourselves God's name, Michael Bloomberg extraordinary leadership and he encouraged development to a degree that was fabulous so being here having extraordinarily good leadership in the city in the form of a mayor made all the difference in the world it was a wonderful time the 80s the 90s turned out to be extraordinary time 2010, 2015. Just remarkable. We don't have that. We haven't had that leadership with the rivalry of the Tsipraso administration. We didn't have it. We're now looking forward and also living with the Adams administration. He's been trying the best he can.

27:07He's been

27:14his desires, which are centrist, have been thwarted by a leftist city council. And his ability, therefore, to accomplish much in the city of Newark has really been extraordinarily limited because of some of the problems presented by a left-leaning city council. Centrism works. Extremism, too far to the left, too far to the right. does that work? So what's going to happen in this Mondami administration? I have concerns. Only time will tell, but his complete lack of experience, I find very, very troubling. And some of his basic concepts, being a socialist, troubles me as well. So what the future is going to hold, hard to know.

28:05But just as I've gone through every conceivable downturn over the last, I don't know, 60, 65 years that I've been in this business doing this, every time the downturn changed back into an upturn, the city has come out of these downturns stronger, better, more functional than ever. So I say to myself, we've come through some terrible times. We're not looking forward to, I don't know if we're going to have a good time or a bad time going forward with the new Mandami administration, which I suspect will happen. I think he'll be elected. End result is what's going to happen, don't know. But I do believe at the end of the day, New York will survive and do bigger and better than ever.

29:00going through. Push through the downturns and yeah, revert to the mean. If something goes down, then something will go up. Yeah. You're 94 years old today. What is the key to living a long, successful and fulfilling life? Well, the first thing I say to everybody, most important decision you make in your entire life is to marry the right spouse. Because with the right spouse, there is an entity you can't accomplish. The wrong spouse ends up in a disaster, ends up in divorce. It's a waste of time, waste of energy, waste of everything. So marry the right spouse. Make sure you share the basic common values.

29:40Make sure you know each other fully. And before you say, I do, understand the realities of the person you're in the process of getting married to because it's the single most important decision you can ever make. With the right spouse, there is anything you can't accomplish. And I'm now married for 69 years. So my credibility level is pretty strong in this regard. Yes. Terribly important, right? Terribly important. And you find yourself working together to make a family, have good lives, produce good people. And as you go forward in your life, make sure you give back. Make sure you work to make the world a better place than the way you found it.

30:31The city is the same with wherever your environment takes you. And this is one last question I ask every single one of my guests. I'm 16 right now. If you'd give one piece of advice, whether it be career, life, any kind of advice to a 16-year-old today, what would it be?

30:50Whatever it is you set your sights on. Whatever it is, your goal becomes a crucial issue. Whatever it is that you decide to do with your life, give it everything you've got. Work your tail off to make it happen. Because if you do, if you work intelligently, if you use good common sense, if you treat people the way you expect them to treat you, if you respect people, if you have a sense of rational judgment in what you hope to accomplish and use a high degree of intelligence with which to accomplish it. If you've given everything you've got, you should succeed. That's very wise advice from a very wise person.

31:46Thank you, Larry, for doing this. I really appreciate it. It's been an honor. You're very welcome. You're very well. Good luck to you.