World Trade Center developer Larry Silverstein has rejected the latest offer by the Port Authority of New York and New Jersey to resolve a financing impasse at the troubled project, leaving the 78-year-old landlord and the public agency at odds as Mr. Silverstein is threatening to bring the matter into arbitration.
Mr. Silverstein on Thursday sent a letter to the Port Authority, which owns the trade center site, officially spurning the agency’s offer to help finance Tower 4 and part of Tower 2, which would be a speculative office tower larger than the Empire State Building. The proposal was not financially feasible, Mr. Silverstein said, as it called for him to round up $625 million in subordinate debt, which he said is impossible in this environment.
“[T]he proposal would make the project unfinanceable and would make it highly unlikely that the office towers, retail and other important components of the WTC’s East Bathtub would be built any time soon,” he wrote.
Of course, this wasn’t the way the Port Authority had hoped this round of talks would end. After Mayor Bloomberg publicly lambasted the bi-state authority for its intransigence, top Port officials planned to round up political support for a new proposal from the other players involved, with the hope of pressuring Mr. Silverstein into accepting the deal. (In recent weeks, Mr. Silverstein’s insistence that he build two towers at the site has enjoyed the support of Mr. Bloomberg and Assembly Speaker Sheldon Silver, dramatically strengthening his hand.) That did not happen, as Mr. Silver told The Times that the new proposal did not move the ball forward, and the city stayed relatively neutral.
Now, arbitration seems like a likely next step. Mr. Silverstein’s camp says it will be eligible to begin binding arbitration Monday, though they have not committed to commencing the arbitration at that time. Should the developer take that step, he would contest that the Port Authority is in violation of its lease for a number of reasons, particularly for the substantial delays on common infrastructure. A three-person panel would hear the arguments, and Mr. Silverstein is hoping for a large monetary award, though it’s anyone’s guess how wide-ranging the panel will be in its decision.
In response to Mr. Silverstein’s rejection letter, the Port Authority’s top officials, executive director Chris Ward and chairman Tony Coscia, criticized Mr. Silverstein’s lack of a new counteroffer, and called for him to put up more of his own equity. Under Mr. Silverstein’s proposals, he would put up to $75 million toward the towers, an amount that is less than he would receive in development fees.
What is most discouraging about your letter is that it continues to demand that the public fully subsidize two private office buildings that the private market is unwilling to undertake and will sacrifice critical public transportation projects in favor of speculative office space. It is unrealistic of SPI to demand this extraordinary level of public subsidy and it is not going to happen – not when the region has so many pressing transportation needs and when our revenues continue to be impacted by the severe economic recession.
Mr. Silverstein’s rejection letter is below.