Wednesday, April 15, 2009

Dream job: $21.5M - to do nothing at all!

Port Authority paying Larry Silverstein $21.5 million but has yet to seek 'development' tips

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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."

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."

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