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Port Authority Loses Arbitration Regarding Trade Center Delays

Port Authority Loses Arbitration Regarding Trade Center Delays

Dec 12, 2008
By By: Henry Goldman and David Levitt | Bloomberg | Bloomberg

The Port Authority of New York and New Jersey must pay about $49.5 million in penalties to developer Larry Silverstein for failing to meet an Oct. 5 deadline on work at the World Trade Center site, an arbitration panel ruled.

The authority, which owns the 16-acre tract in lower Manhattan, will also miss a Dec. 31 deadline for final site preparation for Towers 2 and 3, the agency and Silverstein said in a joint statement. The authority’s contract with Silverstein calls for penalties of $300,000 day for missed deadlines.

“It might sound as if the Port Authority is being forced to pay a lot of money, but Silverstein Properties pays $215,000 a day in ground rent,” Silverstein spokesman Bud Perrone said.

“The penalty was always intended to make up for the loss of rent plus the cost of delay” as well as an incentive to get work done on time.

Silverstein plans to build three towers comprising 6.2 million square feet (576,000 square meters). The skyscrapers are part of a more than $12 billion plan to construct a new World Trade Center, with offices, stores and a transit hub sharing space with a shrine to Sept. 11 victims and a memorial museum.

Although the Port Authority contended that it had completed site preparation Oct. 5 for Towers 2 and 4, Silverstein disagreed and the arbitration panel agreed with him, ordering the agency to pay the penalties, which total $49.5 million dating back to July 1.

The agency earlier missed a Jan. 1 deadline on other work that wasn’t completed until Feb. 17, incurring another $14.5 million in penalties, Perrone said.

The authority wouldn’t estimate when the work would be completed, spokeswoman Candace McAdams said. “We’re working with them, and we’ll continue to work with them to get the remaining issues resolved so we can move forward,” she said.

 

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