Volume 22, Number 02 | The Newspaper of Lower Manhattan | May 22 - 28, 2009

News Analysis

Downtown Express illustration by Ira Blutreich

Governors Paterson and Corzine are expected to put more of their weight toward Chris Ward, far left, on the Port Authority side of the “seesaw,” but Mayor Bloomberg and Assembly Speaker Sheldon Silver are already leaning more toward World Trade Center developer Larry Silverstein.

The ups and downs of the W.T.C. talks to come

By Josh Rogers

Thinking of the World Trade Center impasse as a seesaw might be a good guide to predicting how a negotiated agreement will end up.

On opposite sides of the seesaw are two equally weighted adversaries — W.T.C. developer Larry Silverstein and the Port Authority, run by executive director Chris Ward. Both sides have offered some insights into their positions in interviews over the last few weeks, but the final outcome is more likely to be determined by the balance of power.

Each needs heavy friends to get more control and the balancing will begin Thursday afternoon, May 21 at a meeting at Gracie Mansion.

Perhaps the two heaviest weights involved based on their current political standing — Mayor Mike Bloomberg and Assembly Speaker Sheldon Silver — uncharacteristically are working together, standing in roughly the same seesaw spot with most of their weight on the Silverstein side but with a lighter foot helping the Port. Silver called for a meeting of all of the parties two weeks ago and Bloomberg immediately praised Silver’s ideas while inviting everyone to Gracie Mansion.

The two other players, Governors David Paterson and Jon Corzine, share control of the P.A., and are highly unlikely to put more of their weight on Silverstein’s side.

New York governors traditionally select the Port executive director and Paterson brought Ward in last year to figure out a realistic timeline to build most of the components of the World Trade Center (the Performing Arts Center and Tower 5 are only long-term hopes). For Paterson to move squarely to Silverstein’s side now, he would also have to acknowledge in effect that he thinks he made a mistake in putting Ward in charge.

The New Jersey contingent of the Port has long resisted efforts to devote more resources to the W.T.C., favoring projects that benefit the Garden State more directly like a new commuter rail tunnel to Midtown. Corzine almost certainly will stay closer to the Port than Silverstein. His spokesperson declined to comment Wednesday.

The Port, which is building One W.T.C., has offered to help Silverstein get $800 million in loans to finish Tower 4 at the southeast corner of the site, which together would add about 5 million square feet of office space to the market in about five years. Those who have come down on the Port’s side of the issue have pointed out that Silverstein Properties recouped most of its investment in the W.T.C. six years ago and assert the Port shouldn’t subsidize a private developer in order to build an office building completely on spec.

In an interview a few weeks ago, Ward said the Port would only help Silverstein build 4 W.T.C.

“We have to find a way to bridge this gap, but it can’t be a second tower,” he said prior to Silver’s calling for a summit.

He proposes building retail structures or podiums at Towers 2 and 3 (which neither side is trying to build now) that would allow stores to open at the site long before those towers would be built on top.

On the other side, Janno Lieber, president of Silverstein’s World Trade Center Properties, said before the downturn, there were credible, long-term preditcions that the city would need 60 million square feet of office space, and even if those are overly optimistic by 20 or 30 million, there will still not be nearly enough to meet the demand. He said there will be practically no new green office space in 2013 when Lieber expects Tower 4 to open or in 2015 when Tower 2 could be finished with Port help.

“The idea that there won’t be any market [then], doesn’t make any sense based on history,” Lieber told Downtown Express.

In a prepared statement, he said the financial help would be a “backstop” to secure loans which the developer would repay.

Lieber said “the huge issue” is the infrastructure that Silverstein Properties needs to finish building the towers — a Vehicle Security Center and Greenwich Street itself, which will have office doorways to Towers 2 and 4.

“Where is the infrastructure,” Lieber asked. “Will the infrastructure be there in time for us to finish that building (Tower 4), open it and operate it…The schedule has fallen apart yet again.”

The security center, which will be built by the Port, will be needed in a year or two to run delivery trucks onto the construction site under the building in order to fit out the offices, which will be important to attracting commercial tenants. Construction on the V.S.C. is stalled because of the long-delayed demolition of the former Deutsche Bank Building, which is owned by the Lower Manhattan Development Corp. Candace McAdams, a Port spokesperson, said “we are in the process of developing workarounds to ensure the V.S.C. stays on track.” 

The next piece to building Greenwich Street is constructing an underpinning structure to support the No. 1 train, which runs through the site. The Port recently completed the design for the underpinning but the Metropolitan Transportation Authority needs to sign off on it and it is still reviewing the plans.

Outside of the Port, there appears to be increasing skepticism that the retail podium idea could be implemented easily.

McAdams, the Port spokesperson, said they are “developing contingencies” for retail construction designs.

But Seth Pinsky, a key Bloomberg official who sided with the Port three years ago during the last major W.T.C. impasse, said it would be difficult to design the podiums, assuming officials committed to leaving the store structures alone for enough years to attract desirable tenants.

“But even then, I think you’re going to find lower rents, and it’s an engineering challenge to develop something like that,” Pinsky, now president of the city’s Economic Development Corp., told Downtown Express. “It can’t be all upside for Larry Silverstein and all downside for the Port, but we also don’t want to see something that’s bad from the perspective of planning in Lower Manhattan.”

Pinsky prepared a 2006 report for the mayor outlining the financial problems Silverstein would have trying to rebuild five towers at roughly the same time. The problems led to the Port and Silverstein renegotiating their 99-year lease for the W.T.C. Under the 2006 agreement, Silverstein relinquished control of the least viable towers, the Freedom Tower (now called One W.T.C.) and Tower 5. Silverstein also agreed to transfer a proportional amount of his insurance money and tax-free Liberty Bonds to the Port so it could build two of the towers.

The city and the Port committed to leasing 600,000 square feet each in Tower 4. One factor that may be troubling the P.A. is that at the same time Silverstein is asking the Port to take on more risk, he is also not willing to exercise his lease option with the city because he is expecting to get tenants to pay a lot more than the $59 per square foot rent he agreed to three years ago.

Many civic groups and local residents following the recent developments have expressed wariness for using public money to support a private developer, which could tip the seesaw a little more the Port’s way.

With little if any negotiations over the last two weeks, there is no expectation that a final deal could be reached in a meeting scheduled to last only an hour. The best that could be hoped for Thursday is a framework in which negotiations can proceed, two of the parties to the summit said.

And with Bloomberg and Silver allied and with their support among their respective constituencies high, they should be able to get the seesaw to balance close to where they want it — a commitment to build Towers 2 and 4 as Silverstein wants, but with the developer putting more at risk. Paterson and Corzine may be able to ease the Port’s risk more than the mayor and Silver would want, but they’ll be hard-pressed to put Tower 2 on hold if that’s their plan.

With reporting by Julie Shapiro

 


 

 


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