Merrill Jumps Ship on New Development

Conflicts between Larry Silverstein, developer of the ground zero site and the Port Authority may lead to massive lawsuits and even further delays on the project after Merrill Lynch, charter tenant of the site, bails out.

by James R Lindamood

Attorneys may smell blood in the water, after Merrill Lynch decided to end negotiations to occupy space in the new World Trade Center. Merrill Lynch had decided to move their corporate headquarters to an office block that is to be constructed at ground zero.

Larry Silverstein, the developer of the office towers to be located at ground zero, may be forced to file suit against the Port Authority after reports were delivered by Port Authority executives that didn't cite either a budget or a timeline for completion. As a result of the lack of specificity in the report, Merrill Lynch, the charter tenant of the ground zero site, has elected to back out of their proposal to occupy the site.

Christopher Ward, the director of the Port Authority of New York and New Jersey, delivered a report that may make it very difficult for Mr. Silverstein to secure funding and completion bonds for the site. Since Mr. Silverstein is contractually bound to deliver the project on time and on target, if he fails to meet the time line for even one of the buildings he could default on all three.

There is really only one option available to the Port Authority if they want to avoid a lawsuit, according to real estate attorneys who watched the proceedings. They will be forced to renegotiate the the agreement with Mr. Silverstein, allowing him more flexibility in his 2013 delivery dates. Mr Ward will be delivering a far more detailed proposal before the beginning of October, including a set schedule for completion of the site's infrastructure.

There is hope that this will entice the major tenants to jump back on board. Janno Leiber, president of WTC Properties, World Trade Center Properties, Janno Lieber, said in a statement that it is "focused on working with government to resolve the design and construction issues identified by the Port Authority in its recent report to the Governor, as well as ongoing uncertainties about the Port Authority's schedule to complete vital site infrastructure."