Real Estate

Tough sell: Mystery surounds value of World Trade Center mall

Mall operator Unibail-Rodamco-Westfield, which said it plans to unload most or all of its US shopping centers by the end of 2023, might find the World Trade Center retail complex anchored by the Oculus a hard sell.

While it’s too early, and maybe unfair, to speculate on the WTC mall’s value before URW even makes a formal offering, the fact is that it’s struck many real-estate players and New Yorkers as a disappointment since it opened in 2016.

Industry insiders are snarking  — although not by name — that the serpentine, 365,000 square-foot WTC shopping complex might fetch much less than the $1.4 billion that Westfield paid the land-owning Port Authority for the master lease. Westfield was acquired by Paris-based Unibail-Rodamco in 2017.

An ownership change would have implications for all of Downtown, which lags Midtown in overcoming the pandemic’s effects.

“We are at an important crossroads,” Downtown Alliance president Jessica Lappin said. “There’s great potential there. There are challenges with the way the space was designed, but an opportunity for change can be a catalyst.”

Apple store
The Oculus, its centerpiece, is mostly leased on its two levels to stores like Stuart Weitzman, Kate Spade, Cole Haan and Apple.
Getty Images

The mall overall has about 80 tenants. The Oculus, its centerpiece, is mostly leased on its two levels to stores like Stuart Weitzman, Kate Spade, Cole Haan and Apple. Eataly, H&M and a few other large stores draw crowds to Four World Trade Center.

But certain enormous parts of the complex remain depressingly dark — especially the 75,000 square-foot retail base of Three World Trade Center. Two large restaurant deals there collapsed four years ago. (The office towers above the retail space at both Three and Four World Trade, which are nearly full, are separately owned by Silverstein Properties.)

The mall doesn’t have a single sit-down restaurant, only a “Gansevoort Liberty Market” food court and a few “fast-casual” spots — in glaring contrast to  Brookfield Place next door, which boasts a half-dozen of them.

Most storefronts in the long, marble-clad West Concourse and in the southernmost leg of the South Concourse, remain shockingly empty.

Oculus at One World Trade Center
The mall doesn’t have a single sit-down restaurant, only a “Gansevoort Liberty Market” food court and a few “fast-casual” spots.
Steve Cuozzo

Meanwhile, Westfield and URW have shrouded the performance of the Trade Center mall in secrecy.

Westfield spokesman Zach Eichman said, “We don’t release details on the performance of specific assets.” The Real Estate Board of New York, which tracks retail space and rents on streets all over the five boroughs, doesn’t keep data on malls,

Asking rents are rumored to be as low as $200 per square foot after over-optimistic “asks” of $500 when the mall opened.

Adding to the uncertainty: the often prickly Port Authority, which owns the land, must approve any sale “with the prior written consent of the Port Authority,” an agency spokesperson said.

Shoppers at the mall.
Asking rents are rumored to be as low as $200 per square foot after over-optimistic “asks” of $500 when the mall opened.
Xinhua/Sipa USA

Retail-industry analyst Hitha Herzog, the chief research officer of H Squared Research, said that in any case, the mall’s value couldn’t be established based only on how much space is vacant.

“That’s just one of many factors,” she said. “What it comes down to is if net income is drying up and if there is a loan that is about to come due and it’s more than the actual asset value.”

Although Unibail valued its US malls at  $13.2 billion last year, the Wall Street Journal reported that analytics firm  Green Street valued them at only $11.4 billion.

Most investment-sale brokers ran for cover when asked to comment. One who was willing to speak, albeit guardedly, was legendary dealmaker Woody Heller, who now has his own firm, Branton Realty.

Heller said that Santiago Calatrava’s famously controversial design was a plus for a future owner. “Nobody will underwrite it based on its current financial performance but on the physical drama and astonishment of the structure,” he said.

Moreover, “Its sales volume will benefit not from stabilized [future] office occupancy but by the return of tourism.”

The Oculus at the World Trade Center
Westfield and URW have shrouded the performance of the Trade Center mall in secrecy.
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Most retail brokers wouldn’t comment either.

But Brandon Singer, founder and CEO of  brokerage MONA, said the complex’s “design flaw is their biggest challenge. It’s confusing. I do this for a living and I still can’t figure out”  the maze of corridors and escalators that lead only to more escalators.  

“Certain things have been relatively successful,” he said. But he added that Westfield’s refusal most to hire outside retail brokers “in the most broker-friendly city in the world” — dimmed chances for a full  lease-up. (CBRE briefly repped Westfield a few years ago. It still reps the office space in Silverstein’s towers.)

Singer recently helped bring Trinity Boxing Club to 20 Vesey St., “which looks right into the Oculus,” he said.

Of its soaring roof and dinosaur-like ribs, he said, “I think the design was beautiful but was almost too much. They went too crazy for what it is.”

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