Is There Life After Larry?

More than three months into an impasse over the financing for the World Trade Center, officials and executives involved with the project are increasingly contemplating a new scenario: a long-term stalemate in which private developer Larry Silverstein does not build his office towers.
The fight has led the Port Authority, which owns the site, to craft a plan to essentially build around the private developer should two of his 85-foot-deep sites stay fallow.
The plan, which the Port Authority has been working on since late spring, would be a drastic step, and would change the design of major Port Authority-built components to allow the site to function without Mr. Silverstein’s towers.
That would mean changes to the (at least) $3.2 billion PATH station, which sits in the middle of the “east bathtub,” flanked by the sites for Mr. Silverstein’s Towers 2 and 3. The current design has ventilation, safety equipment, exits and structural support built into the Silverstein towers. All would need to be moved elsewhere, much of it within the PATH station, according to multiple officials involved.
The plan would also call for a major redesign of the Vehicle Security Center and roadway that allows deliveries throughout the site, along with a bus parking garage planned in the east bathtub, according to a Port Authority official. Designs around the Freedom Tower (known now as 1 World Trade Center) would have to change in order to allow for deliveries to get to the building; and the site’s power plant, planned to be within Tower 2, would also need to be pushed elsewhere.
If all of this is indeed physically possible (the Port says it is, but it entails major alterations, and others involved have not gotten a detailed look), it would surely mean additional costs, perhaps in the hundreds of millions, according to others familiar with the general plan. And then there are potential legal complications, as Mr. Silverstein has already challenged much smaller changes to the site’s plan, saying design tweaks made without his permission violate the lease.
FOR MONTHS, MR. SILVERSTEIN and the Port have been battling as they try to craft a new financial agreement. The developer does not have the money to build three massive office towers with no private tenants and claims the agency owes him damages for delays.
But by not starting construction on his two largest buildings, Towers 2 and 3, the stalemate threatens functionality in much of the rest of the 16-acre site, which is a tangle of interwoven infrastructure. Components such as the PATH hub, a crucial service roadway, and a bus parking lot are heavily dependent on buildings rising in the east bathtub based on the current design.
At the same time, Mr. Silverstein and his deputy, Janno Lieber, seem to be girding for a long fight. The two have threatened to initiate binding arbitration against the Port Authority to receive money awarded for the agency’s delays, a process they expect to take months. Should they go to arbitration, the issue of dates and obligations would likely still be unresolved.
The sides are very far apart—the Port Authority has offered enough money to build one tower, but Mr. Silverstein insists on two—and have barely moved during weeks of intense talks. After the Port Authority had put together a new two-tower offer last week, Mr. Silverstein rejected the proposal as spurious, saying it was not financially feasible, a claim other officials involved support.
And as the fight grows into a prolonged stalemate, it seems to get increasingly difficult to find a resolution. The Port is delayed in officially delivering the sites for Towers 2 and 3, but once it does, Mr. Silverstein will begin paying rent (it’s currently being abated), drawing down the insurance money intended for rebuilding. Meanwhile, every day that the towers do not rise is another that the Port Authority will not take in rent or money from retail, drawing down on the hundreds of millions of dollars the agency was expecting over the next decade.
This has left others involved frustrated—Mayor Bloomberg and top aides have been desperately trying to craft a resolution, to no avail—as neither side is willing to budge on seemingly irreconcilable points (for Mr. Silverstein, that means two towers; for the Port Authority, it does not want to further divert money from transportation to speculative real estate).
“They’re headed for a train wreck,” said a city official.
Is There Life After Larry?