Silverstein Wins Dispute With Port Authority Over WTC Excavation

Larry Silverstein has won a spat with the Port Authority over the sites for his Towers 2 and 4 at the World Trade Center site, likely costing the Port Authority more than $20 million in delay penalties.

An arbitration panel ruled that the Port Authority did not fully excavate and prepare the two excavated sites for Silverstein Properties, violating the terms of its agreement with the developer, according to a joint statement between Silverstein and the Port Authority.

The dispute focused on whether a wall that the Port Authority added to the excavated site needed to be removed, among other issues.

Given that the Port Authority will have to pay continuous penalties, $300,000 a day, from October 5 to present, the agency will owe at least $20 million in additional penalties. Silverstein, however, has been paying rent on the site during all of this time, which comes out to about $215,000 a day for all three sites (for Towers 2, 3, and 4).

Full statement and a summary of the ruling below.

STATEMENT BY

THE PORT AUTHORITY AND SILVERSTEIN PROPERTIES

ON ARBITRATION DECISION REGARDING WTC SITE 2 AND 4

“The arbitration panel ruled that work must continue on World Trade Center sites 2 and 4 in order to complete the Port Authority’s site turnover obligations, and as a result the panel reinstated liquated damages effective to October 5. In anticipation of this ruling, the Port Authority and Silverstein Properties had already begun working cooperatively to resolve the outstanding issues that remain.

“The arbitration process quickly resolved this dispute, working exactly as intended, and we appreciate the hard work and professionalism of the three-member panel. Both parties remain 100 percent committed to delivering on our shared commitment to rebuild the World Trade Center. We are also pleased that in their ruling the arbitrators recognized the joint cooperation that has and will continue to exist between the Port Authority and Silverstein Properties in resolving the myriad of complex construction issues that have arisen and will inevitably arise as construction moves forward.

“The Port Authority also has informed Silverstein Properties that it will not meet its December 31, 2008 deadline for the final site turnover obligations, which include tracts of land for Towers 2 and 3 that abut the Number 1 subway box and temporary World Trade Center PATH Station. We will work jointly to resolve the issues that will cause this last deadline to be missed.”

ARBITRATION DECISION SUMMARY AND CONCLUSION

With respect to Site 4, by changing its plan for excavation under and support of
the subway box, and by erecting the soldier pile wall, the PA has neither completed the East Bathtub Preparatory Work nor delivered Site 4 in Construction-Ready Condition.

With respect to Site 2:
Caissons. Lack of MTA approval for installation of the caissons prevents Site 2 from being in Construction-Ready Condition.

Access. SPI’s claim of being denied uninterrupted access is rejected
under the conditions now prevailing at the site.
Void. SPI’s claim with respect to the void is sustained; the PA is obligated to remove the bracing materials and other construction remnants and to backfill the void.

Rock bolts. The PA is required to “burn off’ the rock-bolt projections in the North Slurry Wall of the East Bathtub.
· Tie backs. The work having been completed, this problem is moot.
· Rock Ledge. For lack of sufficient evidence, the panel does not rule, but
instead assumes that if there is a problem the parties will work it out without further assistance from the panel.
Demobilization. Since that process has now been completed, the issue is
moot at this time.
The panel finds and concludes that due to the conditions on the sites as
discussed above,
1. The PA’s October 5, 2008 Certification of Final Site Completion for Site 4 did
not effectively constitute a final turnover of Site 4.
2. The PA’s October 5, 2008 Certification of Partial Site Completion for Site 2
did not effectively constitute a partial turnover of Site 2.
3. A certificate of partial completion of Site 2 or of final completion of Site 4 may
not properly be issued until the conditions identified in this decision have been
cured or otherwise agreed to by the parties.
4. Liquidated damages owed by the PA to SPI have continued to run since
October 5, 2008, and must be paid promptly by the PA, with applicable
interest to the date of payment.
5. As noted above, the PA is charged with paying the fees and expenses of the
arbitrators.
Final note.
The panel notes that in developing the design for the redevelopment of the World Trade Center, and in preparing the MDA and its related agreements, the parties have admirably cooperated in facing and resolving many of the conflicts and problems that arose. We commend them in this effort. Now that they are into actual construction, that level of cooperation must not only continue but increase, particularly in communicating with respect to problems as soon as they arise, so that efficient and practical adjustments and solutions can be developed with minimal difficulty. Through a continued and applied spirit of cooperation throughout the construction process, the PA and SPI should be able to complete as quickly as reasonably possible the entire redevelopment project, not only as a revitalized commercial center for New York City, but also as a symbol for the entire nation of the indomitable American spirit and its determination to rise above and overcome the tragedy of 9/11.

 

Silverstein Wins Dispute With Port Authority Over WTC Excavation