Port Authority, Silverstein Reach Tentative Deal for WTC Towers
The months-long squabble over building delays and financing at the World Trade Center site may finally be at an end. A tentative agreement was announced Thursday between the Port Authority and Larry Silverstein on financing for two of the developer’s office towers at the site.
The Port Authority, New York City and New York State have each agreed to contribute $200 million in public money to guarantee loans for construction of Silverstein’s Towers 3 and 4 if the developer can raise $300 million on his own for the projects. Silverstein would also be responsible for pre-leasing approximately 400,000 square feet of office space in Tower 3 at a rate of $60 per square foot before he can begin its construction. The two sides formally announced they had agreed on the “conceptual framework” of a deal Thursday afternoon after the Port Authority’s monthly board meeting.
“We’re in a position where the parties are all on the same page relative to how to bring this transaction to closure, and within the next 120 days, we expect to have agreements that will do exactly that,” Port Authority board chairman Anthony Coscia said. “We’re talking about a transaction that amounts to over $3 billion in construction, and a transaction of that magnitude has an enormous amount of detail that needs to be flushed out.”
At a joint press conference held at Governor David Paterson's Midtown offices later Thursday afternoon, both Paterson and Mayor MIchael Bloomberg said they expected this latest pact between the Port Authority and Silverstein would be the one that finally delivers a completed World Trade Center.
"We're trying to create a new atmosphere of cooperation and coordination between the Port Authority and Silverstein Properties," Paterson said, highlighting provisions in the deal that will set up new lines of communication between the Authority's construction crews and those working on Silerstein's projects. "Both sides have tried to draw up an agreement that serves the interests of both the public and private sectors."
Mayor Bloomberg also hailed the new agreement, pointing out that the long-awaited beginning of construction on Tower 3, as well as key elements of the Port Authority's $3.2 billion transportation hub adajcent to it, will translate into thousands of construction jobs at the site.
"This really is great news for our city's economy, and it really will spur our continuing recovery from the national recession," Bloomberg said. "In very short order, thousands of [workers] in our still hard-hit construction industry will be at work in the eastern half of the World Trade Center site."
"We're finally going to fill that hole in the ground," the mayor added as the press conference ended.
According to a joint statement from Silverstein and the Port Authority, the agency’s entire $200 million contribution will be put towards a $390 million guarantee for construction loans, while the city and state’s contributions would be divided between equity investments in Tower 3 and the loan guarantee. Silverstein would not be allowed to collect profits on the tower until the public guarantees are repaid. The deal also directs the 78-year-old developer to use the remaining insurance money he collected after the destruction of the original Twin Towers for construction of Towers 3 and 4 and ground rent payments to the Port Authority.
“This is great news for New York,” Silverstein said in a statement Thursday afternoon. He thanked Governors Paterson and Chris Christie of New Jersey, Bloomberg and Assembly Speaker Sheldon Silver for “their determination to make sure Downtown re-emerges as a world-class neighborhood—for the business and residential community, and for visitors who will be drawn to the Memorial and everything Downtown has to offer.”
"Today marks a real turnaround," said Silverstein's president of World Trade Center construction, Janno Lieber, at the Governor's press conference. "I believe we now have a clear path to a full rebuilding that'll deliver on the promises we all made to New Yorkers."
The two sides had been locked in a bitter and largely inert negotiation since late in 2008, when Silverstein discovered that he could not privately secure loans for the construction of the three massive towers he had hoped to build along the eastern half of the World Trade Center site. He blamed the Port Authority, which owns the 16-acre site, for taking too long to turn over the land for the towers, and asked the agency to help guarantee loans for two of the towers. The Authority, skeptical that Lower Manhattan’s commercial real estate market would support a sudden influx of new office space, maintained it wanted to wait until the market recovered before risking its balance sheet on speculative private development.
More than 15 months of offers and counteroffers ensued, culminating in an arbitration panel’s order in January that the two sides hammer out a new construction deal on their own for the eastern half of the site, or risk having the panel do it for them. Though they missed the March 12 deadline the panel had assigned, both sides were optimistic that they were nearing an agreement.
“This is an enormously complex and expensive project,” Port Authority Executive Director Christopher Ward said Thursday afternoon when asked why it took the two sides so long to reach an understanding. “The world moved dramatically from where we were in 2006 [when the first construction agreement was finalized] to where we are today.”
During the Authority’s board meeting, Catherine McVay-Hughes, who chair’s Community Board 1’s World Trade Center Redevelopment Committee, congratulated the two sides for bringing about an apparent end to their stalemate. But having seen past plans for the site grind to a halt, she reminded agency officials that many have grown weary of what she called "broken promises."
“We would like to see the largest stalled construction site in the city finally rebuilt,” McVay-Hughes said. “Everyone is watching to make sure that it will happen this time."
By Matt Dunning