At World Trade Center Site, A Widening DivideSep 01, 2009
On this, the eighth anniversary of the Sept. 11 attacks, there is plenty of progress to be seen at the World Trade Center site.
The steel skeleton that will support the National Sept. 11 Memorial & Museum is nearing completion. Excavation for the state-of-the-art underground vehicle security center is underway on Liberty Street. One World Trade Center, the largest of the four massive planned office towers, rises more than 100 feet above street level, and a second tower follows closely behind.
Still, the fully realized renewal of those 16 acres in the heart of Lower Manhattan remains very much in question.
A collapsed credit market, blown construction deadlines and opposing assessments of Lower Manhattan’s commercial strength have conspired to put the site’s owner, the Port Authority of New York and New Jersey, at seemingly irreconcilable odds with its largest leaseholder, developer Larry Silverstein. Even the state’s three most powerful politicians-the governor, the speaker of the Assembly, and the New York City mayor-tried and failed to break the deadlock.
“That we are where we are after this much time,” Speaker Sheldon Silver said, “is an embarrassment to our city, our state and the nation.”
How did we get to where we are? The Trib looks back at a nearly year-long stalemate that, at this writing, knows no end.
SEEDS OF CONFLICT
In a most public mea culpa, the Port Authority admitted in June 2008 that its projects at the site were years late and billions of dollars over budget. Among them are the 1,776-foot-tall 1 World Trade Center, the iconic PATH transit hub, a complex infrastructure of utilities and tunnels, and extensions of Greenwich and Fulton Streets that will crisscross the site. The agency also admitted that it could not turn over construction-ready land to Silverstein for his three planned office towers along Church Street by its June 30, 2008, deadline. Just as the Port Authority released new project deadlines in October, the credit market collapsed. Suddenly unable to secure construction loans for his towers, Silverstein claimed that were it not for the Authority’s delays, he would already have the money in hand.
“The Port Authority has not made good on its promises under the 2006 agreements,” Silverstein wrote in a July letter to all involved in the rebuilding. “If not for the Port’s failures, the project would clearly be much, much further along, and we would have had the opportunity to finance in a much more positive economic climate.”
In his letter, Silverstein said he planned to seek arbitration against the Port Authority for the delays if a financing agreement for the towers couldn’t be reached. Port Authority executive director Christopher Ward responded by saying he believed the Authority was in the right, and it was “unfortunate” that Silverstein had chosen to “walk away from the negotiating table.”
“As the 2006 [agreement] makes clear, the Port Authority is meeting all of its obligations, and we look forward to a quick arbitration decision should Mr. Silverstein continue down this legal path,” Ward said.
Silverstein did just that, and last month filed for an arbitration hearing against the Authority. He will argue that the Port Authority violated the terms of the two entities’ 2006 development agreement by falling behind on its infrastructure projects. That same agreement imposes a five-year time limit on Silverstein to build and open all three of his towers, or he loses them to the Port Authority. The five-year countdown began ticking on Aug. 24, when the Authority finally turned over the last of the three sites for Silverstein’s towers.
A draft report by the Lower Manhattan Construction Command Center, which became public last month, supported Silverstein’s claims that the infrastructure work is lagging. Port Authority officials insist that the projects are on schedule.
“The dates are wrong,” a Port Authority spokesman said. “Our comprehensive analysis, completed every month, shows we are on schedule to meet the completion dates we released last October.”
WORTH THE RISK?
In addition to the issue of missed deadlines, another disagreement between Silverstein and the Authority stands in the way of progress.
With credit unavailable in the private market, Silverstein and the Port Authority have been locked in a months-long spat over financing for the developer’s towers. The Authority has repeatedly refused Silverstein’s demands that they guarantee construction loans for at least two of his towers. The Authority said it would not guarantee loans without significant private sector investments.
In his latest offer, Silverstein promised the Authority one third ownership in the towers if he could tell private lenders that they had first priority when the time came to repay the loans, but the Authority has insisted that it come first in line when the loans come due.
“The market is telling us that [the towers] shouldn’t rise, that there isn’t a market for these two buildings,” Ward said during a City Council hearing last month.
Exposing the Authority’s portfolio of other transportation projects in the region to “any increased risk,” he said, would be irresponsible. “To build into a market that private capital will not enter means that you are effectively building socialized office space.”
Janno Lieber, Silverstein’s senior executive in charge of World Trade Center construction, said during the same hearing that the company “wasn’t looking for a handout,” and blasted the Authority for rejecting the proposal.
“We’re looking for a partnership,” Lieber said. “They say that they want us to raise money in the [private credit] markets. This is the one way that can be done, and they’ve rejected it.”