By Josh Rogers
Community Board 1 chairperson Julie Menin and her fellow members are supporting Stringer’s call to let the Independent Budget Office examine the numbers and produce a report before March 14, the date Gov. George Pataki set for the Port and Silverstein to resolve their financial issues.
The I.B.O. is also working on its annual budget analysis for the City Council by March 6. The agency’s director, Ronnie Lowenstein, said she can meet Stringer’s deadline but her office will not have the time to look at all of the financial analysis that has been done by the parties – most notably the one commissioned by Silverstein.
Lowenstein, in a telephone interview, said the most important thing is to come up with a solid estimate for what the future World Trade Center office rents will be and that will be the key to figuring out which side is closer to being right.
“We don’t have a horse in this race so our estimates won’t be biased,” Lowenstein said. She said her office does have the city’s analysis but is not interested in seeing Silverstein’s documents because the focus will be on estimating rents, not critiquing reports. The I.B.O. is a non-partisan agency and Lowenstein was hired by a board made up of appointees of the borough presidents, city comptroller, public advocate and City Council.
Menin said she isn’t concerned the I.B.O. will not be looking at both sides’ numbers.
“There’s really a narrow question as to what the real estate market will be,” she said. “You don’t need to know anyone’s take. The facts are the facts.”
Stringer said “there will still be many questions” after the budget office report but it will answer some and should help break the logjam. “There hasn’t been a resolution and I can only see the I.B.O. evaluation as being helpful,” he said in a telephone interview.
The city argues Silverstein will not have enough money to build Towers 3 and 4 on Church St. because he has already spent too much of the insurance money he has collected and he is wildly optimistic about the rents he thinks he’ll collect at the Freedom Tower and Tower 2, the first two planned buildings at ground zero. The Port is in the best position to develop Towers 3 and 4 since they have the ability to float tax-free bonds, according to the city analysis.
Silverstein argues he will be able to collect much higher rents in new offices with large floor plates compared to Lower Manhattan’s most modern offices — the World Financial Center, built 20 years ago.
Both sides now agree Silverstein has less than $2.9 billion in insurance money left, having spent about $1.7 billion mostly to buy out creditors, make rent payments to the Port Authority, and on attorneys in insurance lawsuits. In an interview with Downtown Express in January, Silverstein repeatedly said he had $4.65 billion in insurance money, but in a recent point by point rebuttal of a city report, Silverstein Properties challenged virtually every city assertion except for the current insurance proceeds estimate.
A city official who worked on the report said it was “surprising and relieving” Silverstein accepted the insurance number. The official briefed Downtown Express on the report, but he insisted on anonymity because the mayor’s office did not authorize him to speak for attribution.
Janno Lieber, Silverstein’s senior vice president, said: “We’re not spending the money on ourselves. The vast majority of the insurance money goes to rent to the Port Authority.”
The city estimates that about $500 million of the $1.7 billion in Silverstein expenditures have gone to the Port, which owns the site. Silverstein signed a 99-year lease for the Trade Center complex in 2001, less than two months before the buildings were destroyed.
Dep. Mayor Dan Doctoroff told Downtown Express that the city may have made a mistake signing onto the W.T.C. master plan to build five office towers totaling 10 million square feet. He now thinks about 700,000 square feet at Tower 3 or 4 should be for apartments and about the same number should go to a hotel, leaving about 8.5 million square feet of offices at the site.
“We were prepared to be patient,” Doctoroff said in a recent telephone interview. “Maybe we were a little optimistic, but that was a year and half ago. Now is the time to recognize the reality of the situation.”
He said Silverstein will not have the money to build out the site with or without the $1.67 billion in tax-free Liberty Bonds the city controls. Silverstein and the city dispute whether the city analysis assumes Silverstein will have the bonds, but the I.B.O. report is not expected to resolve that discrepancy.
Doctoroff said if Silverstein builds the Freedom Tower and Tower 2, the Port builds Towers 3 and 4 – that, along with the new train station, will help create an economic momentum to make it easier to build Tower 5. He said the city was open to having Silverstein develop the last building, which will be on the Deutsche Bank site on Liberty St.
“If four buildings are built, the retail is built, the memorial is built, we believe we can do the last building commercially,” he said. The Deutsche building, now owned by the Lower Manhattan Development Corporation, is being demolished carefully because it is contaminated. Before a new building is built there, an extensive underground truck delivery ramp system must be constructed.
Doctoroff said he is not blaming the Port or Silverstein for not having the Church St. sites ready for construction. The Port is still designing the site’s eastern bathtub and expects to have the Tower 2 site ready for construction in the middle of 2007 and Towers 3 and 4 ready in mid-2008. Steve Coleman, a P.A. spokesperson, said several weeks ago that there may be a chance to speed up the bathtub construction by six months.
Doctoroff said a faster timetable is important. “We are trying to inject a real sense of urgency along Church St.,” he said “There won’t be enough money for buildings 3 and 4 if we continue the way we are now.”
Lieber said Silverstein will be ready to build sooner if the Port is able to fulfill its most optimistic timeline. “We are confident we will be able to keep pace with their work, We began 7 World Trade Center as soon as the site was given to us and we finished it on time,” he said, referring to the Silverstein building across the street from the site that was also destroyed on 9/11. Silverstein has had trouble attracting tenants to the building and the mayor has said it is because the asking rents are too high.
The city official requesting anonymity pointed out that in one document, Silverstein said Tower 3 construction might not begin until the last day of 2010 and Tower 4 at the end of 2011 – more than three years behind schedule.
Silverstein officials did not want to refute the assertion on the record but one said it is misleading for the city to cite those dates because it was a far-fetched, worst-case scenario and was only submitted in response to city questions about whether the developer would be able to make use of the Liberty Bonds.
Doctoroff said if Silverstein agrees to relinquish control of Sites 3 and 4 in exchange for reducing his rent to the Port Authority, he should turn over some of the insurance money tied to those two sites. The two sides are discussing how much of the insurance money Silverstein owes the Port Authority for the retail that was destroyed on 9/11. The agency bought back control of the retail from Westfield America, a former Silverstein partner, a few years ago.
Jim Connors, the Port’s director of W.T.C. redevelopment, speaking at a recent C.B.1 meeting said “the insurance money, which is potentially available — some of it is in the bank, some of it is not — is a joint pot of money for both the office and the retail, so there would need to be a splitting of those dollars between the office and the retail projects.
Naturally he thought the Port may be the best one to develop Church St. “There are 3.8 million square feet in Towers 3 and 4,” he said. “We think there’s not a market right now for 3.8 million square feet of office space right now in Lower Manhattan. We think the Port Authority needs to use the occupancy that it controls in order to build out this site really in one phase — that’s the goal.”
He was less willing to endorse the city’s call for apartments in one of the towers. “Clearly there’s a strong market for residential today, whether it makes good sense to put residential use so close to the nexus of a transit hub from an urban economics perspective, I think that’s a pretty valid question,” Connors said.
So Silverstein now finds himself battling the Port and the mayor, and he no longer has as strong an ally in Gov. Pataki – who shares control of the Port Authority with New Jersey Gov. Jon Corzine. One powerful friend he appears to be holding onto is Assembly Speaker Sheldon Silver, who released a statement mostly in support of Silverstein this month.
“A plan is in place and that plan should be carried out,” Silver said. “Changing our focus at this point can only serve as a deterrent to those companies considering whether or not to make Lower Manhattan their new home…. As I have said in the past, we should start with the Church Street corridor to provide retail space that will attract businesses and shoppers back to Lower Manhattan.”
With reporting by Ronda Kaysen
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