"I have directed the Port Authority to develop designs that will permit the complete construction of the public components of the site"--including the WTC Memorial--"independent of your private development," Paterson wrote to SPI CEO and chairman Larry Silverstein. "This will ensure that, should you and the Port Authority not be able to reach an agreement, the site will no longer be subject to the fate of the real estate market or these negotiations." Paterson asked SPI and the Port to meet this Wednesday and send him a progress report on negotiations by August 12.
Reiterating the Port's position, Paterson said SPI's Tower 4, currently under construction, is "economically viable" with public support. However, he wrote, "there is no immediate market for Towers 2 and 3" and he would only endorse public financing on the two towers if SPI provides "enough private capital--whether in the form of equity, subordinated debt or some combination of the two--to make certain that the deal will contain private market discipline and real private sector risk."
The governor wrote that the $75 million of conditional equity SPI has offered to commit is "clearly not adequate." Last month, the Port said it would backstop financing on Towers 2 and 3 only if SPI could come up with $625 million.
Paterson's letter proposed that SPI commit its 9/11 insurance proceeds immediately to building Tower 4 and the bases of Towers 2 and 3. He asked SPI to cooperate with the Port to redesign Tower 3 to accommodate more retail. At the same time, Paterson wrote that he was asking the Port to offer SPI rent relief on Towers 2 and 3 "until the market returns."
In a statement, SPI president Janno Lieber says, "we appreciate Gov. Paterson's effort, and we will study his suggestions thoroughly." But he adds, "Unfortunately, our initial review indicates that these ideas will not likely put us on a path to a two-building solution," which SPI has advocated along with Mayor Michael Bloomberg and Assembly Speaker Sheldon Silver, whose district includes Ground Zero.
"These ideas also don't address the principal issue: the Port's chronic failures at the site," says Lieber. "Every project for which the Port Authority is responsible has fallen years behind schedule and billions of dollars over budget, hindering the entire WTC rebuilding effort. In fact, we believe that the Port is already far behind even the new, delayed schedule executive director Chris Ward presented to the Governor only 10 months ago." Calls to the Port Authority for comment were not returned by deadline.
Silver issued a statement of his own after the Associated Press broke the story, expressing concern "that the path outlined by the governor today will result in yet another standstill at the World Trade Center site and many more years of delay. For the nearly eight years since the attacks, I have worked to return Lower Manhattan to its place as the third largest central business district in the nation and to build a more vibrant, 24/7, mixed-use community that is better and brighter than ever before. The path suggested by the governor will not get us there."
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
