WTC Exceptionalism

WTC Exceptionalism

Is the World Trade Center site (né Ground Zero) special, or is it just another piece of Manhattan real estate? That appears to be the major point of contention between the Port Authority of New York and New Jersey and Silverstein Properties, both of whom are still in the middle of a bitter fight over who should finance the two remaining towers at the site.

Both sides made their case today at a special hearing of the City Council, with Christopher Ward, the Port Authority’s executive director, arguing it is not his agency’s place to be building speculative office towers in a down economy that could impact the surrounding market, while Janno Lieber, president of World Trade Center Properties, claimed the authority was reneging on prior commitments to ensure a timely completion of a site unlike any other in the world.

The hearing is part of a larger saga stretching back to the spring, when new concerns began to arise about when the site—including SOM’s One World Trade Center, Michael Arad’s memorial, Snohetta’s museum, Santiago Calatrava’s PATH station, and three commercial towers along Greenwich Street—might be completed or occupied and at what cost. The timing and cost of completing the massive 16-acre project overseen by near-countless agencies had been ballooning since day one, but the collapse of the economy, and particularly the credit markets, added new uncertainty.

Struggling for financing on Norman Foster’s Tower 2 and Richard Roger’s Tower 3, developer Larry Silverstein sought assistance from the Port Authority, which balked for a number of reasons. Mayor Michael Bloomberg called a summit in May, attended by Governor David Paterson and Assembly Speaker Sheldon Silver, one of the state’s most powerful politicians who also represents Lower Manhattan. No agreement could be reached at this or a second summit in June, though Silver and Bloomberg threw their weight behind Silverstein, who threatened to sue. Paterson later stepped in, though on the side of the authority. Two weeks ago, Silverstein conceded slightly, pursuing arbitration, which is expected to take some months.

Today’s hearing may have little impact on what appear to be stalled negotiations, but it did provide some insight into what has been going on behind the scenes.

Ward began by outlining progress at the site. Despite scepticism from Alan Gerson, the local council member holding the hearing, Ward promised that 80 percent of the above ground portion of the memorial would be complete in time for the September 11 tenth anniversary, including the reflecting pools, wall of names, memorial plaza, and many of the trees. The underground portion and the Snohetta museum would still be under construction for another year or two, however, and the entire memorial site would have to be closed at time to make way for site construction. Asked by Gerson if it would be "more open or more closed," Ward insisted on the former.

As for the two unbuilt towers, Ward pointed to the original World Trade Center as a clear example of why the Port Authority should not again be financing a commercial real estate project, as Minoru Yamasaki’s Twin Towers sat largely empty for decades, depressing the surrounding market. Ward emphasized that his agency was not opposed to supporting Silverstein’s two towers—“There’s a moral commitment to making sure downtown does not remain a scar,” he said—but that the private sector must make some form of financial commitment as well. “The market must agree that this is the right thing to do.”

Furthermore, Ward argued he had already expended a great deal of resources at the site, upwards of $11 billion committed to the construction of Tower One and Tower Four—designed by Fumihiko Maki and already under construction—the PATH station, the memorial, and acres upon acres of site infrastructure. To spend much more, at least without a commensurate commitment from Silverstein, would be to jeopardize the remainder of the authority’s capital budget.

But in the view of some, including Gerson, Lieber, and Silverstein, the Port Authority had promised to complete the project no matter the economic or extenuating circumstances. “This is about replacing what was,” Gerson said, reminding Ward that for many New Yorkers, the World Trade Center is more than just office towers but also a symbol. (That said, Silverstein made similar commitments to build at all costs when he first promised to rebuild at Ground Zero.)

Lieber echoed Gerson’s argument that the World Trade Center is special and therefore must be completed in a timely manner. “It’s bad for the community,” Lieber said. He also emphasized that his company had contributed billions of dollars in rent to the Port Authority, a significant stake that the developer felt was not being considered when the authority refused to provide financing for the final two towers. “We would lose our equity, we’d be wiped out, and the Port Authority would own the buildings,” Lieber said.

He also said that Silverstein had agreed during the prior negotiations to raising hundreds of millions of dollars so long as its lenders would be paid back first, a deal, according to Lieber, the Port Authority declined. (Ward had already left and could not be reached for comment. The agency’s press office did not return requests for comment.) Lieber said it would likely fall to the arbitration to settle the dispute, and while no arbitrator could force one party to build or invest in a project, it could award monetary damages, which could then help Silverstein finance the remaining towers.

Part of that argument is that the Port Authority has been dragging out its delivery of the sites for those towers, leading to $300,000 daily payments to the developer, an offset on his rent for not having the parcels ready more than a year ago. Ward announced today that the Port Authority would soon be making the transfer, possibly within days, thereby weakening Silverstein’s complaint both in public and at the negotiating table. “At that point, he’s free to build at anytime, as per our 2006 agreement,” Ward said.

A Silverstein spokesperson said after the hearing that, even if the parcels are turned over shortly, what really matters is the infrastructure throughout the vastly interdependent site, which remains behind schedule and continues to create delays. As Lieber put it, “We don’t need to know how much new concrete has been poured, as they keep telling us. We need real milestones, like when these buildings will actually be completed.”

As always, the fate of the World Trade Center remains in question. While two towers are rising, though at uncertain rates and with uncertain tenants, two more remain unbuilt and in the balance. While neither side sees eye to eye, they both look to the future:

“Why aren’t they rising? The reason they’re not rising is there’s neither tenant nor financing," Ward said. "The market is telling us these shouldn’t rise. Building into a market, you’re essentially building socialized office space. It will create problems for years to come.”

“The problem is not that these buildings don’t have a future,” Lieber said, referring to Tower 2 and Tower 3. “Why invest three to four billion in a PATH station if downtown’s business center has no future? Same goes for One World Trade Center. What’s good for the goose is good for the gander.”