Larry Silverstein: Insurance Profit Motive?

 

What about an insurance motive? Professional conspiracist and radio host Alex "New World Order” Jones claims that Silverstein walked away with a profit of $500 million after building 7’s insurer, Industrial Risk Insurers, paid its $861 million policy!

This shouldn’t need to be said, but the fact that IRI didn’t dispute the $861 million claim should make it perfectly clear that Silverstein didn’t “admit” to destroying his building.

And lest you think that IRI’s management somehow benefited by turning a blind eye to Silverstein’s “crime,” consider that IRI did contest Silverstein’s lawsuit over his Twin Towers insurance claim.

No. Insurance companies have a funny way of making sure that insured parties don’t destroy their skyscrapers, collect the claims, and drive into the sunset with a truckload of cash. A clause in Silverstein’s WTC 7 policy required him to begin rebuilding within two years, and lenders required that the new building have as much square footage as the old (and they complained mightily when the plans came up short in that department).

The cost of the new building? Over $700 million.

Hey, that still leaves Silverstein with a tidy profit of around $161 million, right?

No. There was the small matter of the existing $489.4 million mortgage, which Silverstein paid off with the insurance settlement, leaving him with a shortfall of $328 million heading towards construction of the new building.

The City of New York, desperate to see rebuilding begin downtown, saved Silverstein a bundle in financing costs by offering over $400 million in tax-exempt Liberty Bonds, which the Bank of New York guaranteed.

That move gave Silverstein and his backers the freedom to do something unheard of in recent New York real estate history: start construction of a skyscraper without a major (or minor) tenant on board. And when the building opened in 2006? Still no major tenants. In May, WTC 7 finally got its first possible major tenant when Moody’s Investor’s Service signed a nonbinding letter of intent to occupy 15 floors. More recently, other sizable tenants have signed on.

Sources: “Even as Construction Begins, a New Trade Center Tower Faces Obstacles” New York Times, January 16, 2003. “7 World Trade Center Gets a Major TenantOfficial World Trade Center SiteThe Building Everyone Will Date But No One Will Marry


For much more on WTC insurance issues, see WTC Insurance Issues