Silver Cracks the Leadership Whip at World Trade Center; Bloomberg Calls a Summit

There’s been something of a leadership vacuum in the saga of the World Trade Center lately. The Port Authority, which owns the site, and Larry Silverstein, who is responsible for developing three of the site’s four towers, have been at a new impasse that threatens to further delay key portions, including the PATH hub, the retail, the 9/11 museum and other key infrastructure.

In the three weeks since the two sides presented their markedly different proposals to move forward at the site, real estate executives and others involved in rebuilding downtown had been patiently waiting for Mayor Bloomberg or Governor Paterson to step up and address the issue in an attempt to force a solution. Neither emerged with any strong calls for a solution, and a lengthy legal battle between Mr. Silverstein and the Port Authority appeared the next likely step.

On Friday morning, Assembly Speaker Sheldon Silver—perhaps the state’s most powerful political figure, but not someone with an official say in the World Trade Center development agreement—finally filled the void.

Mr. Silver said he has “grown weary of the unfulfilled commitments, the recalcitrance, the slowing of progress at the World Trade Center site,” and he is “fed up with the stall, and I’m exasperated by the current state of the World Trade Center project.”

“If we allow the impasses to go on another few weeks, another few months, the failure will belong to all of us,” he said at a Downtown Lower Manhattan Association breakfast. “So there must be no more stalled negotiations, no more arbitrations.”

He called for a compromise solution that involves the immediate construction of two of Mr. Silverstein’s towers, adding that “all of the stakeholders must share that risk.”

The speech immediately sparked some signs of progress. Less than three hours after Mr. Silver’s remarks, Mayor Bloomberg called for a meeting at Gracie Mansion next week for all the stakeholders: Governor Paterson, New Jersey Governor Jon Corzine, the Port Authority, Silverstein Properties and Mr. Silver.

 

MR. SILVER’S PROPOSAL IS a solution that comes closer to Mr. Silverstein’s plan than to the Port Authority’s. Mr. Silverstein wanted the Port Authority to back the financing on two towers, one of which has no tenants. The Port Authority offered only to commit to financing part of one tower, in which it was a tenant, and called for Mr. Silverstein to use up all of his insurance money to build the common infrastructure where the other two towers are planned.

The Port Authority contends it simply does not have the financial capacity to back two towers without sacrificing numerous other public projects in the region, such as airport upgrades and a new rail tunnel under the Hudson River.

To Silverstein Properties, the public sector is obligated to help carry out the completion of the site, as Lower Manhattan’s recovery is a public good. Further, there are legal obligations that the public sector has missed, given that there have been substantial delays on the Port Authority’s portions of the infrastructure.

The most basic question to be addressed next week is how many towers will be built, a sensitive subject not only because of the high cost of backing the financing of a second Silverstein tower (the 2.8 million-square-foot Tower 2 is excepted to cost around $2 billion), but because of the effects on the real estate market.

When the original World Trade Center towers were built, they were seen as a drain on the Lower Manhattan market, flooding the area with far too much space, and the Port Authority is wary about making the same mistake twice, as are surrounding landlords, who would see lower rents in their buildings. Still, there is not much new supply planned in the office market right now, and given that the tower would not be finished until 2014 or so, Messrs. Silver and Silverstein have argued that the office market is bound to have come back by then to a point where the space is in demand. 

Silver Cracks the Leadership Whip at World Trade Center; Bloomberg Calls a Summit