GlobeSt.com will provide more information on this breaking story as details become available.
NEW YORK CITY-A panel arbitrating the dispute between Silverstein Properties Inc. and the Port Authority of New York and New Jersey says the authority does not owe SPI billions of dollars in damages and rent relief over construction delays at the World Trade Center redevelopment site. At the same time, the panel voided SPI's obligation to forfeit all three of its planned towers at Ground Zero if the completion on any one of them is delayed, and ordered both sides to work out a new construction timetable within 45 days.
The three-member panel, which had been considering the latest Ground Zero dispute since SPI brought the matter to arbitration this past August, gave neither side a complete victory. In ruling that the Port Authority had met its obligations to SPI under the 2006 Master Development Agreement, the arbiters denied the developer a reported $2.75 billion in damages over delays at Ground Zero, along with rent relief totaling nearly $800 million. "SPI must continue paying its full rent for development rights to Towers 2, 3 and 4" at Ground Zero, the Port says in a statement.
According to the New York Times, the panel found that SPI had not proven that "any action or inaction" by the Port had "actually delayed or damaged" the developer in constructing the three office towers at 150, 175 and 200 Greenwich St. Quoting the arbiters' ruling, the Times reported that witnesses for SPI had acknowledged that construction of the three towers could proceed "if the funding problem did not exist." When the dispute went to arbitration last summer, SPI maintained that the Port's delays in turning over construction-ready land jeopardized the developer's ability to line up construction financing or anchor tenants before the credit markets collapsed in late 2008.
At the same time, the panel relieved SPI of its obligation under the MDA to turn over all three towers to the Port if construction is not completed by the current schedule's 2014 deadline. It also turned down the Port's request for an order requiring SPI to move forward immediately with construction on all three towers. Moreover, the panel held open the possibility of rent adjustments for SPI, deferring a decision on these and other questions "until a later date."
Further, according to the Port's statement, "The panel ruled that SPI may be entitled to have the schedule for completion of the towers adjusted, but the extent of the adjustment, if any, cannot be determined until a time in the future when more is known about the actual progress of the towers and of the infrastructure." In ordering both sides back to the negotiating table to devise a new timetable, the panel ruled that SPI and the Port "should first attempt to agree on what structures are to be constructed by SPI and when...if there is to be a change in the plan that alters either party's rights and obligations as established by the MDA, then the new plan and schedule should so provide and should accommodate that change."
In a statement, SPI president and CEO Larry Silverstein says the panel's order to work out a new timetable is "a welcome development for New Yorkers--especially those living and working Downtown--who have waited long enough for the neighborhood to be completely restored. I'm ready to work with the Port Authority 24/7 to hammer out a deal that assures that the World Trade Center is fully rebuilt as quickly as possible." He adds, "Rebuilding the World Trade Center is critical to the future of the city, the state and the region." That's a view shared by Mayor Michael Bloomberg and Assembly Speaker Sheldon Silver, who each issued statements urging SPI and the Port to work out a new schedule as quickly as possible.
The Port says it's "grateful" to the arbitration panel for issuing "a responsible decision that protects public resources while creating a positive environment in which the visible, daily progress on the site can continue moving forward." A spokesman for the Alliance for Downtown New York says the BID has no comment as yet.
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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.
