April 21, 2009

Port Authority of New York proposes postponing construction of two towers

NEW YORK

The owners of Ground Zero, locked in a new round of heated talks with a private developer about how and when to build office towers at the World Trade Center site, have proposed indefinitely putting off two of three planned skyscrapers until the real estate market recovers, officials familiar with the negotiations said.

One analysis prepared for the Port Authority of New York and New Jersey predicts World Trade Center developer Larry Silverstein wouldn’t be able to finish building all three towers he plans for decades, with the last tower finished by 2030.

Silverstein and the Port Authority have been talking on and off for months about rewriting a three-year-old agreement that gives the developer rights to build three out of five towers planned at the Sept. 11, 2001, terror attack site.

In a failing economy where developers have found it impossible to obtain financing for new projects, Silverstein last fall asked the Port Authority to back financing for two of his towers, three officials told The Associated Press, speaking on condition of anonymity because the talks are confidential.

The Port Authority about a week ago agreed to back about US$800 million in financing for one tower already under construction, where the Port Authority has agreed to lease space once it’s completed.

The other two towers shouldn’t be built until there is enough demand for commercial office space downtown, the Port Authority has said.

An analysis of Silverstein’s plan by the Cushman & Wakefield real estate brokerage projected that while two of Silverstein’s towers could be built by 2013, a third would not be built until 2030 and fully leased until 2036. A second tower that hasn’t been built yet wouldn’t be fully leased until 2025, the brokerage says.

The agency says it needs clarity on a rebuilding schedule to prevent delays on other interconnecting projects, like the Sept. 11 memorial and a multibillion-dollar transit hub. All the planned projects on the site have been delayed multiple times since they were announced in 2003.

“The Port Authority’s obligation is to rebuild the site in the public interest based on the economic reality today,” the agency said in a statement. “That starts with keeping the memorial and the other public infrastructure on the timeline and budget we’ve committed to, and it extends to building the right amount of office space to meet what is now a very different market downtown.”

Janno Lieber, who oversees the trade centre site for Silverstein, said the developer wants to build all the towers as quickly as possible, “as we all promised the public so that downtown could realize its potential.”

Silverstein has not formally rejected the port’s proposal. Both sides need a new deal, in which Sept. 11 insurance money was split to pay for the towers. Silverstein has paid about US$800 million in rent since 2001 for the undeveloped space and has collected over US$100 million in development fees. The Port Authority is paying Silverstein US$300,000-a-day late fees for not excavating all the land Silverstein needs to build on. The lease requires Silverstein to build his three towers by 2013 or forfeit rights to them.

Associated Press

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