The latest round of painful negotiations between the Port Authority of New York and New Jersey, which owns the World Trade Center site, and Larry Silverstein, who owns the right to re-develop it, has finally yielded some important progress: the heretofore unaccountable Port Authority must meet firm deadlines in doing its part to allow Silverstein to develop commercially viable office space at Ground Zero.
Thursday’s agreement between the Port Authority and Silverstein mostly just firms up some details of an April deal. Under that earlier agreement, Silverstein retained the right and responsibility to build three office towers at Ground Zero, but the Port Authority took over the financial responsibility for building a fourth 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 one-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. One of the most important 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, Thursday’s agreement holds the Port Authority 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 established 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. In addition, the Port Authority 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 significant, since 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 quickly—or at least less slowly.
This is good news, for the faster Silverstein can build his three towers, the better for the fate of Ground Zero, and New York City. Why? Silverstein’s three towers, unlike the Freedom Tower, are likely to 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.
Unlike the Freedom Tower, moreover, Silverstein’s three towers aren’t supposed to be “skyline icons,” so they won’t have to bear the burden of the symbolic 1,776-foot height that Governor Pataki has forced the Freedom Tower to bear even before it’s built.
While the success of the Freedom Tower depends on tenants’ overcoming their fear about working in “that building,” the success of Silverstein’s three towers depends only on New York’s economy—that is, will it be strong enough in 2012 (when construction should finish) to support their 6.2 million square feet of new office space? That’s the risk Silverstein, like any developer, takes.
Real progress on Silverstein’s three towers is important for another reason: the Freedom Tower’s fate remains far from certain. Earlier this week, PA chairman Anthony Coscia made headlines when he confirmed that he would rather resign than force Port Authority employees to work in the tower after having experienced the horror of 9/11.
His assertion didn’t do much for the tower’s prospects—and though the PA’s proposal is to line up lease agreements from state and federal agencies instead, it’s not clear that their employees want to work in the tower either. Plus, too large a government presence will scare away the private-sector tenants that downtown really needs, as corporate execs who rent Class-A space don’t want to work in what’s perceived 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 awhile. Perhaps after another three years, say, when visible development is taking place on Silverstein’s three towers, rationality will at last prevail at Ground Zero, and the new governor and the Port Authority will let the private sector start from scratch on a commercially viable office building, not a skyline landmark designed by committee.
Now that the Port Authority must allow progress on the rest of the site, rethinking the ill-starred Freedom Tower is at least an option—for on paper, at least, the Freedom Tower can no longer hold up the rest of Ground Zero.