Mayor calls island trial move ‘dumb’

By Josh Rogers

Volume 22, Number 37 | The Newspaper of Lower Manhattan | January 22 – 28, 2010

Silverstein claiming victory too in WTC dispute

Both sides claimed victory in the World Trade Center dispute after an arbitration panel ruled Tuesday on some issues, but ordered the parties to negotiate a new rebuilding schedule in 45 days.

W.T.C. developer Larry Silverstein, who was asking for a few billion dollars in damages from the Port Authority for numerous violations of their 2006 Master Development Agreement (M.D.A.), received no money Tuesday, but the panel voided the provision that would have awarded the development rights to the three most viable tower sites back to the Port if the buildings are not completed on time – which is virtually impossible at this point.

The confidential decision first came to light in a Crain’s article Wednesday afternoon, prompting each side to quickly release statements praising the decision.

A source sympathetic to each side spoke to the Express on the condition of anonymity. Both sources agreed that the arbiters ruled that the Port’s work preparing the infrastructure to allow Silverstein to begin construction was inadequate, but the Port source, quoting from the decision, said the panel ruled the authority had “not acted in bad faith” and that “much has changed” to move infrastructure work along since Chris Ward took over as executive director two years ago.

The arbiters ruled the Port had also gone “well beyond” its requirements in the ’06 deal, according to this source. The Port had offered financing help for Silverstein to complete Tower 4, which is currently under construction at the southeast corner of the site, but had refused to offer much help for him to begin Tower 2, at the northeast corner. Each side had agreed in principle to put off building the third Church St. tower, No. 3, until the real estate market rebounded.

The source sympathetic to Silverstein said even though the panel commended Ward, it also said “the schedule the Port Authority has been telling the public for the last eight years is bogus and they’ve asked them for a new schedule….This is after all the hoopla in ’08 about a new schedule.”

Last year, two unlikely allies who tried to mediate the dispute, Mayor Mike Bloomberg and Assembly Speaker Sheldon Silver, accused the Port of intransigence in the negotiations.

Subsequently Bloomberg, in an exclusive interview with the Express last October, said every city lawyer who had looked at the development agreement had determined that “Larry has everybody by the proverbials” and could delay activity at the site for many years unless there was a compromise. The mayor had taken the Port side before the 2006 agreement was signed, but switched sides in last year’s stalemate.

Although Silverstein no longer has the threat of losing all three of his sites if one building is completed late, the source sympathetic to the Port said the developer will be under negotiating pressure over the next 45 days nonetheless.

“He doesn’t have that anvil hanging over his head, but he does have to keep paying rent for buildings that don’t exist,” he said.

According to the Port statement, Silverstein was “denied” damages, but the Silverstein statement said the decision on damages was deferred to a later date. Most news organizations Wednesday described the decision as a defeat for Silverstein because he was not awarded money.

The statement from Silverstein read in part: “In this decision, the arbitrators directed us to work out a new plan to finish the WTC project quickly. That’s 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….

“My goal is – and always has been – to rebuild what the terrorists destroyed on 9/11. I remain absolutely determined to see the World Trade Center become the centerpiece of the new world-class mixed-use community that is emerging Downtown – the greenest and most exciting place to work, live and visit in our wonderful City.”

The statement from the Port Authority read in part: "The Panel denied SPI’s request for relief from its rent obligations to the Port Authority, meaning that SPI must continue paying its full rent for development rights to Towers 2, 3 and 4. The Panel determined that the Port Authority was not in material breach of the MDA, denying monetary damages to SPI….

"The Port Authority is grateful to the 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."

Both sources said they did not know if their side would want the mayor, the governors of New York and New Jersey and Silver to help in the negotiations over the next 45 days as they did last year.

Below are the full statements issued by each side:

STATEMENT BY SILVERSTEIN PROPERTIES ON

SECOND WORLD TRADE CENTER ARBITRATION DECISION

January 27, 2010 – The World Trade Center arbitration panel ruled yesterday that, due to construction delays at the site and other issues, the Port Authority and Silverstein Properties must work together to create a new collaborative plan and schedule for the project and report back to the Panel in 45 days.

The Panel ruled:

-In light of infrastructure delays to date, a new schedule for both the Port Authority’s infrastructure and for Silverstein’s tower development should be agreed upon through discussions to take place over the next 45 days.

-The Panel denied the Port Authority’s request that Silverstein be required to move forward immediately with construction of all three Greenwich Street towers.

-Silverstein’s cross default obligations under the 2006 Master Development Agreement are eliminated. This is the provision that would confiscate all three of Silverstein’s towers if any one was delayed in being completed.

-The panel deferred a number of issues until a later date, including the possibility of adjustments to Silverstein’s ground rent or any other monetary damages.

World Trade Center developer Larry A. Silverstein said:

“I greatly appreciate the hard work and professionalism of the members of the arbitration panel. They did a huge amount of work in a very compressed timeframe.

“In this decision, the arbitrators directed us to work out a new plan to finish the WTC project quickly. That’s 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.

“Rebuilding the World Trade Center is critical to the future of the City, the State and the region. As Governor Paterson, Mayor Bloomberg, Speaker Silver and other government, civic and business leaders have all recognized, we need a new generation of green, high tech buildings to make sure Downtown remains a world-class business district that will keep great companies here and attract new jobs. It means 10,000 construction jobs today and tens of thousands of jobs tomorrow.

“7 World Trade Center – the last tower to fall on 9/11, but the first to be rebuilt – is a great model that shows how a World Trade Center project can be built when everyone works together. It was built on time and on budget, fully financed and leased, and become a great commercial and critical success.

Statement by The Port Authority of NY and NJ on World Trade Center Arbitration Decision

January 27, 2010—Yesterday, the World Trade Center Arbitration Panel reached a decision in the latest arbitration that Silverstein Properties (SPI) initiated against the Port Authority of New York and New Jersey. In view of SPI’s public statement on the decision, and to clarify the record, the Port Authority issued the following statement on the ruling.

"The Panel denied SPI’s request for relief from its rent obligations to the Port Authority, meaning that SPI must continue paying its full rent for development rights to Towers 2, 3 and 4.

"The Panel determined that the Port Authority was not in material breach of the MDA, denying monetary damages to SPI.

"The Panel terminated the cross default remedies called for in the Master Development Agreement (MDA), relieving SPI of the loss of rights to Towers 2, 3 and 4 if any one of those towers is not completed under the current MDA tower schedule.

"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.

"Lastly, the panel directed the Port Authority and SPI to return to the negotiating table and attempt to agree on a schedule for completion of the Port Authority’s infrastructure elements and SPI’s towers and that the parties should first attempt to agree on what structures are to be constructed by SPI and when, and 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. The Panel asked that the parties report back to them in 45 days.

"The Port Authority wishes to thank the members of the Panel for their hard work in reviewing and digesting an enormous amount of information.