The Port Authority of NY & NJ
Interview with Patrick J. Foye,
Executive Director, PANYNJ
June 24, 2014
Judith Dupré: You’ve said that the government is not good at real estate development, but—
Patrick J. Foye: It’s not a core competence.
JD: It’s not a core competence, okay, but the Trade Center site has been for more than a decade the most important construction site in the city and, arguably, in the world. I’m curious to know how the World Trade Center benefited the Port Authority?
PJF: The Port Authority has been in the World Trade Center real estate business since the ‘60s, when Governor Rockefeller and his brother, David Rockefeller, CEO/Chairman of Chase Manhattan Bank, a big downtown institution, decided that downtown needed a shot in the arm. There was discussion—east side, west side—where to put the World Trade Center. The Port Authority took it on and took on PATH at the same time.
JD: The PATH and the Trade Center were concurrent deals?
PJF: Yes. The PATH was once a nearly bankrupt privately-owned commuter operation called Hudson & Manhattan. The Port Authority through the PATH subsidiary took it over as part of a New York-New Jersey deal.
While real estate development is not a core competency, building, and designing and operating very complicated construction projects really is a core competency. By real estate development, I don’t mean the construction and design or management of a construction site; what I mean is the leasing function of Class A office space in a hyper-competitive market like Manhattan.
The Port Authority addressed that issue by bringing on Durst as partner, the property manager and asset manager, which I think was a smart thing to do. Durst has provided significant value to the Port Authority in real estate development as, for instance, Larry Silverstein does it or Scott Rechler does it, or SL Green or Vornado or Gary Barnett—fill in any one of the great New York City developers.
Sure, most of our other operations and facilities are transportation-related. There are a couple of exceptions. They’re relatively small in scope and don’t approach the size or scale of complexity or dollar amount of the World Trade Center.
JD: Right, but what was the benefit to the Port Authority?
PJF: Oh, the benefit to the Port Authority of redeveloping the World Trade Center, sure, look, we had just leased One World Trade to Silverstein when 9/11 happened, literally weeks later, and as I said, we went into the World Trade Center real estate business in the ‘60s. There was not only a national imperative to develop the site, there was the Port Authority as a significant land owner.
In addition to the national imperative to rebuild, the Port Authority had its own institutional imperative. First and foremost, 84 members of the Port Authority family were murdered on 9/11, and a significant investment had been destroyed.
JD: What do you mean by national imperative—rebuilding the site to heal the nation’s psyche?
PJF: Yes, the national psyche and also to make the point that when horrible things like this happen, the nation is going to rally together. In those famous words, everybody in the country was a New Yorker in the period after 9/11. There was a consensus, there were lots of varying points of view as to what would be rebuilt, and when, where, in what order, and what would look like, but there was, I think, consensus from day one that rebuilding was what ought to happen. Leaving a gaping hole would have been a sign of failure on a monumental scale. There was no choice but to rebuild.
PJF: The democratic process unfolded. There was lots of discussion, and delays related to the democratic process and work, but also delays related to the extreme complexity of designing this project. What we have today is, I think, an extraordinary success on every level.
JD: You’re moving to 4 WTC in the fall.
PJF: I think the return to the Port Authority’s long-time home is an exciting event. We’re seeing increased leasing momentum occurring now. I think over the long term, after the building is stabilized, we will look at whether it makes sense for other institutional real estate owners to own more of [One WTC] than the Port Authority. I think when the building stabilizes from an income point of view that will be looked at. Obviously, the Legends deal, and Durst deal, and the 50/50 deal with Westfield suggests an appropriate willingness to consider reducing our real estate development investment and recycling those funds into transportation. I think we’ll continue to do that.
JD: I was going to ask why you divested to Westfield, but you’re saying that it was a logical, natural progression for the Port?
PJF: Yes, we’re not retail operators, so bringing Westfield in was a logical thing. It’s more complicated than this, but we got into Westfield at 600; we’re getting out at 812. In a relatively short period of time, that’s a handsome return. I think the retail at the World Trade Center is going to be mind-blowing and it’s going to have among the highest per square foot of any retail in the country. . . so that’s all good for the building, all good for the area, good for New York and also good for the Port Authority. I think it will reflect well also on our investment in One.
JD: Would you describe yourself as a diplomat, a taskmaster or banker?
PJF: All of the above. I’m a native New Yorker. I’ve spent most of my life in the private sector—a recovering lawyer, senior executive at a big real estate firm, I ran a not-for-profit. I’ve been in public service, which I’ve loved, and I think I plead guilty to all the foregoing.
JD: Who taught you the most about the art of negotiation?
PJF: Yes, I think my high school debate coaches, a guy name Ed Brophy and John Sexton, who’s the president of NYU. I learned a lot of it at Skadden, Arps and that’s basically what I did. I was a deal lawyer, a merger and acquisitions associate partner. I learned a lot at AIMCO, a big S&P 500 real estate investment trust. My professional career has been about making business deals, many of them complicated. I spent three years in Europe doing the same.
JD: What does it take to succeed in negotiations at the World Trade Center site? What’s the number one thing? It’s more than money, isn’t it, or is it only money?
PJF: No, I think perseverance, I think creativity, I think integrity is important, especially when you’re in a situation where, you know, World Trade Center is a site where you’re making agreements and doing deals with a cast of characters, which changes, but many of the players continue for years and decades.
PJF: In a situation like that, having a reputation for personal and institutional integrity is important because you’re dealing with the same players and it’s not a one-off transaction where I just sold you a crate of tomatoes and I will never see you again. It’s a long term commitment.
JD: Has there been measurable change in the way the Port conducts business since 9/11?
PJF: Good question. First, I wasn’t at the Port Authority for 9/11. I’ve been here since the end of 2011. Second thing I’d say, I think that 9/11 has had a profound impact on the Port Authority, 84 people killed, the executive director killed, the city, state, region and country in a state of crisis—it’s changed the place in a very profound way.
On the other hand, just to go back to your question directly, the Port Authority was a lightning rod for criticism before 9/11, and is a lightning rod for criticism in today’s newspapers. I think the Port will continue to perform and advance its mission in the face of criticism that just comes with being an important institution as it is.
JD: It comes with the territory.
JD: Is it a given that One World Trade is a terrorist target?
PJF: Look, I think, unfortunately, in the world which we live in, every high profile asset around the country and around the world is a potential target. That’s unfortunately what the last 10 years have shown us. The last word is be prepared, be vigilant.
JD: You’ve had to provide additional layers of security.
PJF: That’s right, but it’s not only us. The whole world changed after 9/11 from a security point of view. The World Trade Center site was attacked twice, in ’93 and on 9/11. I think security, the security industrial complex, whatever you want to call it, has been most acutely felt here. It’s a significant financial commitment for us on an operating basis every year.
JD: What is the Port’s annual budget?
PJF: Well, operating budget, our revenues are going to be close to 4.5 billion dollars.
JD: I’ve seen six.
PJF: It depends how you measure it. If you look at just operations, it’s headed toward 4.5 billion dollars. If you look at capital as well, and that’s an unusual way of looking at it, but if you take operations and capital, it’s north of six.
PJF: On the way to 4.5 billion dollars is a good number. In 2015, we’ll probably spend a number like $800 million on security, a shockingly high number, but given the demands of the 9/11 world, not surprising.
JD: How has the WTC benefited the city as a whole?
PJF: I think it’s played a major part in the revitalization of downtown. The original World Trade Center buildings and the area were in some ways cold and distant, sterile, I guess, is the word that city planners would use...the elimination of the streetscape and the super block, and these two imposing buildings were very institutional in their own way. Downtown, as a result of federal, and state and Port Authority investment post 9/11 and the national imperative to rebuild the site...you’ve got tens of thousands of people living downtown that weren’t there.
There’s a night life and a street life. Battery Park City is thriving, and the Hudson River Park, and the introduction of thousands and thousands of multifamily housing units, and the repurposing of old office buildings into residential. It’s a thriving, vital area in a way that it wasn’t in the years before 9/11.
JD: What has the Port's ethical mandate been at the World Trade Center? Is there one or is it merely let’s get this rebuilt as well as we can?
PJF: No, I think that this institution takes ethical stewardship really importantly. There’s been vigorous integrity monitoring. I’m not going to say that they’ve caught every instance of wrongdoing, but I think their record is pretty good working with outside third party independent inspector general types, I guess the phrase that’s used, including with respect to NWBE fraud. I think they’ve been vigilant and successful. That’s something that we take very seriously.
JD: There are a lot of checks.
PJF: There are checks and balances and there are checks and balances on the checks and balances.
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