Volume 22, Number 15 | The Newspaper of Lower Manhattan | Aug. 21 - 27, 2009

Downtown Express photos by J.B. Nicholas

Chris Ward, top, executive director of the Port Authority, and Janno Lieber, president of World Trade Center Properties, brought their long-running dispute about financing W.T.C. redevelopment to the City Council Wednesday.

Port says clock on Silverstein will start this week

By Julie Shapiro

The Port Authority could finally finish excavating the eastern chunk of the World Trade Center site this week, a milestone that is at least 13 months overdue.

The Port has been digging up the land along Church St. for years and finished the southernmost piece, where developer Larry Silverstein is building Tower 4, earlier this year. But the Port has still been paying Silverstein the $300,000-a-day late penalty while finishing the sites for Towers 2 and 3 just to the north.

Chris Ward, executive director of the Port Authority, announced the impending accomplishment at a hearing City Councilmember Alan Gerson held Wednesday. But this is not the first time Ward announced the tower sites were ready — he made a similar proclamation last fall, even though a wall supporting the No. 1 subway box ran through the western side of the sites.

Silverstein refused to accept the sites last fall, and an independent arbitration panel ruled that the Port had more work to do.

On Wednesday, Ward said that this time, “We believe we’ve met the requirements,” though he added, “Mr. Silverstein may dispute that.”

When the sites are truly complete, the clock will start ticking for Silverstein to build his three office towers. A 2006 agreement between Silverstein and the Port Authority gives Silverstein five years to build the towers, or else he loses them.

“The Port Authority’s obligations under the 2006 agreement are fully fulfilled,” Ward said at the hearing. “Mr. Silverstein is free to build today. He is free to build next week. He is free to build at any time he so chooses.”

However Silverstein cannot build the towers immediately because the frozen credit markets mean he cannot get financing. The Port and Silverstein have been locked in a dispute over this fact for much of the past year. Silverstein wants the Port to backstop the financing for two of the Church St. office towers, 2 and 4, while the Port thinks Silverstein should put up more of his own money. The Port wants to see shorter retail-filled buildings in place of two of the towers until the market improves, while Silverstein is willing to accept only one retail podium. The mayor sided with Silverstein, while the governor sided with the Port Authority.

After negotiations between the parties earlier this summer went nowhere, Silverstein moved related discussions about the site’s timetable into formal arbitration. Silverstein is seeking to recoup all $2.75 billion paid to the Port in rent and insurance proceeds since 9/11, based on the Port’s inability to deliver key infrastructure, such as the PATH hub and vehicle security center, a rebuilding source said two weeks ago. That money would then allow Silverstein to build the towers without the Port’s help.

Apart from the arbitration, the Port and Silverstein met privately before Gerson’s hearing, hoping to unlock the impasse in another way, but they could not have made much progress since neither backed away from their criticisms at the hearing.

When Gerson pressed Ward to backstop more financing for Silverstein’s towers, Ward said the Port has already offered enough and would have to sacrifice other projects to take on more risk at the W.T.C.

“The market is telling us they shouldn’t rise,” Ward said. “To build into a market that private capital will not enter means that you are effectively building socialized office space.”

Janno Lieber, president of Silverstein’s W.T.C. Properties, sitting off to the side, stifled a laugh at the “socialized” phrase.

Testifying later, Lieber said Silverstein’s financing difficulties are a national problem and have nothing to do with the viability of new, green office space Downtown, which he predicts will be in high demand five years from now.

Lieber outlined Silverstein’s current offer to the Port Authority, which would allow two of the Church St. towers to rise: Silverstein would put up $75 million in cash and would raise several hundred million dollars privately. Under most circumstances it would be impossible to raise that much money right now, but if Silverstein gave investors first priority on the repayment of the debt, then it would be possible to raise the money, Lieber said.

The problem is that the Port Authority does not want to give private investors that first-priority spot. In a letter to Silverstein Aug. 3, Gov. David Paterson said the proposal would put too much of the risk on the public sector. “That is something I just cannot accept,” he wrote.

At Wednesday’s hearing, City Councilmember John Liu also questioned whether Silverstein’s request was reasonable.

“If it was so easy, why would the Port Authority be reluctant to do that?” Liu asked.

Lieber replied that the Port was overstating the risk and he said the mayor also agreed. He added that while the Port Authority would be taking on some risk, they would also stand to benefit no matter what happened to the towers. If the office space was lucrative, the Port would receive about one-third of the benefits through a partnership with Silverstein, Lieber said. And if Silverstein defaulted on the towers, then the Port would have sole ownership of the assets, Lieber said.

“We’re not looking for a handout,” Lieber said. “We’re looking for a partnership.”

At the conclusion of Gerson’s hearing, the Port Authority and Silverstein were no closer to seeing eye-to-eye. Gerson implored both sides to reach at least the outlines of an agreement by the eight-year anniversary of the attacks next month.


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