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World Trade Center Developer Fighting Government Over Cost Of Towers

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Astor Kitsimble
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« on: July 07, 2009, 11:06:13 am »

World Trade Center Developer Fighting Government Over Cost Of Towers

First Posted: 07- 7-09 07:57 AM   |   Updated: 07- 7-09 08:04 AM
NEW YORK (AP) -- The private developer of the World Trade Center site threatened Monday to go to an arbitrator unless he and the site's owner quickly settle a months long impasse over how much each should pay to build office towers at ground zero.

Larry Silverstein, who wants to rebuild three office towers at the site of the Sept. 11 attacks, gave the Port Authority of New York and New Jersey two weeks' notice before he would go to an arbitrator to resolve issues with his lease.

Terms of the 2006 lease require Silverstein and the Port Authority to go to arbitration before going to court.

The two sides have been squabbling for months about how quickly to build the office towers and how much each should pay to do so. Silverstein has asked for the agency to front as much as $3.2 billion in financing to build two of the three towers; the agency has said it would back financing for one.

Interventions by Mayor Michael Bloomberg, Assembly Speaker Sheldon Silver and two governors who control the Port Authority have failed to reach an agreement.

Silverstein said the arbitration notice is "designed to inject a renewed sense of urgency to these discussions."

"One way or another, we must take any and all steps necessary to resolve, once and for all, the disputes that have arisen as a result of the Port Authority's continued and admitted delays," he said.

Silverstein said the agency won't meet construction deadlines that were set in a lease agreement to build a multibillion-dollar transit hub, a vehicle security center and support for a city subway line. The earliest deadlines for that are two years away, when the agency would be in default on the agreement.


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Astor Kitsimble
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« Reply #1 on: July 07, 2009, 11:06:55 am »

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« Reply #2 on: July 07, 2009, 11:07:20 am »

If the case went to arbitration, Silverstein would seek financial damages from the agency for delays.

The Port Authority has said it can't use billions in government money to back Silverstein's private project, even though the project is on the public land it owns. The executive director, Christopher Ward, said an arbitrator's ruling wouldn't resolve how many towers the agency would agree to finance, which is not an issue written into the latest lease.

"That is why the Port Authority has offered several different proposals that would give Mr. Silverstein the ability to build a rational amount of office space while protecting scarce public resources for the public projects on the site," Ward said.

The agency has said it wouldn't be able to pay for other projects like a rail tunnel serving Penn Station or improvements to LaGuardia Airport if it guaranteed financing for Silverstein towers.

The impasse threatens to stall construction of a half-dozen projects on half of the site, including the transit hub and office towers, all surrounding the Sept. 11 memorial.

The two sides haven't spoken directly in more than two weeks, when meetings spurred largely by city officials stopped. They have spoken behind the scenes to Bloomberg administration officials. The city doesn't own the 16-acre site in lower Manhattan but has agreed to lease office space in one of Silverstein's towers.

The mayor has been more critical of the Port Authority's position in the talks; he called Silverstein's move Monday "one step closer to stalemate."

"Unfortunately, not everyone has worked as hard as necessary to find a solution," Bloomberg said. "No one disputes that the Port Authority is engaged in many projects important to our region, but pitting those projects against the development of the World Trade Center site creates a false choice."
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Astor Kitsimble
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« Reply #3 on: July 07, 2009, 11:09:17 am »

Port Authority paying Larry Silverstein $21.5 million but has yet to seek 'development' tipsBY Douglas Feiden
DAILY NEWS STAFF WRITER

Updated Tuesday, April 14th 2009, 10:09 AM


 
Talaie/Bloomberg
 
Larry Silverstein, with artist's rendition of Freedom Tower. Silverstein is collecting $500,000 monthly checks, which will continue until the middle of next year.
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The Port Authority is paying Larry Silverstein $21.5 million to develop the Freedom Tower - even though he has absolutely no role in building the 1,776-foot icon, the Daily News has learned.

More than two years after the builder lost control of the planned 102-story tower at Ground Zero, he is collecting $500,000 monthly "development fees" - and the checks will keep flowing until mid-2010, documents show.

The giveaway - $15.25 million so far and an additional $6.25 million in the pipeline - is costing bridge and tunnel commuters the equivalent of 2.7 million George Washington Bridge tolls or 12.3 million PATH fares.

It stems from a September 2006 master development agreement - inked by the city, state, Port Authority and Silverstein - aimed at halting five years of feuding, runaway costs and budget-busting delays at the World Trade Center site.

The deal called for the developer to surrender the city's tallest skyscraper to the PA and take responsibility for building three towers on Church St. As part of the complex transaction, the agency agreed to pay Silverstein so-called development fees.

In exchange, his company was required to "make itself available only as and when specifically requested by the Port Authority," according to a clause in the 2006 Freedom Tower Development Agreement.

'We are abiding by it'

The PA has never made such a request. Agency officials confirm that Silverstein is receiving development fees even though he's done no work on the building since the deal was thrashed out more than two years ago.

"It's part of the content of the master development agreement, and we are abiding by it," said PA spokesman Steve Coleman.

Silverstein defended the Freedom Tower fees, noted they were approved by all parties, and claimed they are "dramatically below market" - 1% of the then-estimate of the project's cost.

"Over the past three years, the Port Authority has elected not to utilize our services," his spokesman said.

"We believe our expertise in office tower construction would be of tremendous value in getting the 1 World Trade Center project back on schedule, and our team remains at the Port's disposal."

The agreement also states that the fees won't be raised due to construction cost hikes or delays.

That caps Silverstein's payday at $21.5 million - even as the price tag for the Freedom Tower, $2.15 billion in 2006, has soared to $3.1 billion, and its original 2008 occupancy date was yanked back to 2014.

The pact was forged after bitter negotiations over who would build which towers and on what terms at the 16-acre site. It got so ugly that state officials branded Silverstein "greedy" and a "betrayer of the public trust."
http://www.nydailynews.com/real_estate/2009/04/14/2009-04-14_dream_job_for_silverstein_freedom_tower.html
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« Reply #4 on: July 07, 2009, 11:09:58 am »

(Page 2 of 2)

In that politically charged climate, Silverstein was forced to relinquish 33% of his development rights at the site - while quietly extracting fat development fees in return.

The payout is similar to a corporate "breakup fee," in which one company pays another - not to provide a service, but simply to walk away without suing after the collapse of a planned deal, two people familiar with the 2006 talks said.

Another analogy: alimony payments.

Silverstein also has drawn from insurance proceeds to pay himself $54.7 million in management fees and development fees up to $87.5 million for his three Church St. towers, which the pact also permits, records show.

Though his three signature buildings - including one that will dwarf the Empire State Building - haven't been built, funded or leased, Silverstein already has collected $142.2 million in fees on them - with a cool $68 million still to come, data show.

He has been charging the project an average of $2.5 million a month as he races toward a grand tally of $210.2 million in projected fees, mostly from the insurance payout, a News analysis found.

The agreement says the cash enables him to "pay certain expenses associated with development of the World Trade Center site."

Silverstein said the money goes toward "the enormous cost of running a $7 billion project that is now in its eighth year," paying for "dozens of highly skilled professionals, equipment and overhead, as well as the cost of creating and occupying a state-of-the-art, 40,000-square-foot design and construction studio."


http://www.nydailynews.com/real_estate/2009/04/14/2009-04-14_dream_job_for_silverstein_freedom_tower.html?page=1#ixzz0Kafp1oJ0&D
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