PA finally out of parry's way
THE latest talks between the Port Authority and Larry Silverstein finally yielded some progress. The PA has committed to firm deadlines for the work it must do to allow Silverstein to develop commercially viable office space at Ground Zero.
Yesterday's agreement between the Port Authority (which owns the World Trade Center site) and Silverstein (who owns the right to re-develop it) mostly just firms up some details of an April deal. Under that deal, Silverstein retained the right and responsibility to build and lease out three office towers at Ground Zero, but the PA took over the financial responsibility for building the Freedom Tower and finding tenants for it.
Since Silverstein would now be erecting fewer buildings, he'd reduce his ground rent to the Port Authority and give up third of the remaining $3.4 billion in tax-exempt Liberty Bonds, awarded by the federal government after 9/11 to rebuild.
But the April agreement left some loose ends. A key one was a provision forcing Silverstein to default on all three of his Ground Zero towers should he for any reason miss a construction deadline. Under yesterday's deal, Silverstein will still adhere to strict construction deadlines, but he's won an extra year's grace period for any delays.
Most important, this deal holds the PA itself responsible for delays. The authority has agreed to pay fines of $300,000 a day if it fails to turn over to Silverstein the land for the three commercial office towers by newly set deadlines: the sites for towers 3 and 4 by the end of next year and the site for Tower 2, the largest of Silverstein's trio, by mid-2008. (Plus, the PA has formally agreed to lease one-third of the office space in Tower 4, giving Silverstein some cash flow as he finds tenants for the rest of the space.)
The Port Authority's agreement to hold itself to penalties that could cost it as much as $9 million a month is significantsince, for the past five years, it has collected Silverstein's Ground Zero rent without having to do much of anything. Now, the authority finally has a financial incentive to move quicklyor at least less slowly.
This is good newsbecause the faster Silverstein can build his three towers, the better for Ground Zero and New York City. Why? Silverstein's three towers, unlike the Freedom Tower, will likely be commercially viable. Despite a few trendy design elements, they're really just going to be normal office buildings (and their most gimmicky features may well disappear as they move from the drawing board to real life). Plus, the three towers will arise closest to Lower Manhattan's major thoroughfares and to its transportation hubs, making them attractive to corporate tenants.
Moreover, Silverstein's three towers won't have to bear the burden of the symbolic 1,776-foot height that Gov. Pataki has imposed on the Freedom Tower.
While the success of the Freedom Tower depends on tenants' overcoming their fears about working in "that building," the success of Silverstein's three towers depends only on New York's economythat is, will it be strong enough in 2012 (when construction should finish) to support their 6.2 million square feet of new office space? But that's the risk that Silverstein, like any developer, takes.
Real progress on Silverstein's towers is important .for another reason: The Freedom Tower's fate remains far from certain. Earlier this week, PA Chairman Anthony Coscia made headlines by confirming that he'd resign rather than force Port Authority employees to work in the tower after having experienced the horror of 9/11.
That outburst didn't do much for the tower's prospectsand though the PA's proposal is to line up lease agreements from state and federal agencies instead, it's not clear that those employees will want to work in the tower, either. Plus, too large a government presence will scare away the private-sector tenants that Downtown really needs. (Corporate execs who rent class-A space don't want to work in what's seen as a government office building.)
The best thing for the Freedom Tower would be for New York, and the Port Authority, to just leave it alone for a while. Perhaps after, say, another three years, when visible development is taking place on Silverstein's towers, rationality would at last prevail at Ground Zero: The new governor and the Port Authority could let the private sector start from scratch on a commercially viable office buildingrather than a skyline landmark designed by committee.
Now that the Port Authority is allowing progress on the rest of the site, rethinking the ill-starred Freedom Tower is at least an optionfor, on paper at least, the Freedom Tower can no longer hold up the rest of Ground Zero.