Gargano has high hopes for WTC breakthrough.

The fallow World Trade Center site may not be devoid of office development for much longer.

In a conversation with REW, Port Authority vice chairman, Charles Gargano, voiced confidence that the WTC development plan presented to Larry Silverstein last week will lead to an agreement and usher a speedy start to the long-stalled rebuilding of the site.

The plan presents Silverstein with two options, one of which features what was a widely anticipated divvying of the site's various development parcels. As part of that option the one many expect Silverstein to opt for--Silverstein would surrender ownership of the Freedom Tower and Tower 5 to the Port Authority but retain control of what are considered the site's most commercially viable developments, Towers 2, 3, and 4.

The deal in many ways resembles the one that Silverstein and the Port Authority seemed close to striking on March 16, the deadline Governor George Pataki had set for both parties to come to an agreement. That deal failed in part, according to executives at the Port Authority, because Silverstein and Port Authority couldn't agree on how much money Silverstein would contribute to build infrastructure at the site and because Silverstein attached conditions on the amount of insurance money the Port Authority would receive to develop the Freedom Tower.

After talks dissolved in March, a visibly irate Gargano, along with other Port Authority executives, accused Silverstein during a press conference of negotiating in "bad faith."

"One of the issues about the insurance payout that I was pretty hot about a month ago was that Larry wanted to hold [his share of the insurance money] and if there was any reduction in his appeal [launched by the insurers] the PA would have to take the reduction," Gargano told REW. "That wasn't fair and I was really ticked off about it, but he took that off the table, which is good."

According to written reports, the new plan asks Silverstein to pay for $140 million worth of infrastructure and give the Port Authority $970 million of insurance money to build the Freedom Tower. The Port Authority is offering in return to lease up to 600,000 s/f in Tower 4 and possibly an undisclosed amount of space in Tower 2 as well, a commitment that would greatly help Silverstein finance the buildings. Mayor Michael Bloomberg and Deputy Mayor Daniel Doctoroff have questioned Silverstein's ability to afford the redevelopment of the site.

"One thing we have discussed is to have the executive chamber of the Port Authority going to the Freedom Tower and then the remainder of the space [that the Port Authority would need] would go to Tower 4 or Tower 2," Gargano said.

Some real estate experts have alleged that, because Towers 2, 3, and 4 are the most commercially viable--because of their large floor plates and better proximity to transportation--private companies and not government institutions should tenant them. Gargano said that the Port Authority's offer to take space in any of those towers was not mandatory and was only offered to help Silverstein fund the developments.

"If he wants to fill it up with, say, a financial institution and wants the whole building, that's fine," Gargano said. "We're only making that commitment so he would have no difficulty with financing and could begin development of it as soon as the bathtub is completed. It's not mandatory, if he needs us we'll be there."

The other choice Silverstein has, according to the two-option proposal, is a $50 million payment to surrender all but Tower 5. Though some critics of the Port Authority have claimed the deal's two options give it the appearance of being an ultimatum, Gargano said that the Port Authority is willing to negotiate on either proposal, something it didn't seem as willing to do in March when, according to Silverstein, it abruptly cut off negotiations just before the midnight deadline. Silverstein said at the time that he had expected the two sides to negotiate through the night and was surprised when the Port Authority ended their meeting.

"Silverstein Properties is now analyzing this very complicated deal and, of course, there's always negotiations that go on with these things until it's completed, but we're confident that this is a good proposal," Gargano said. "If Silverstein comes back with some concerns, we'll look at them."

In the weeks that followed the failed March negotiation, it had been reported that the Port Authority became mired in internal bickering between its New York and New Jersey factions. Gargano stressed, however, the solidarity within the Port Authority as well as between it and the city and Governor Pataki and New Jersey Governor Jon Corzine with respect to the deal it offered last week.

"It should be made clear that this is something that Governor Pataki has been able to get 100% support from Governor Corzine and Mayor Bloomberg and the Port Authority," Gargano said. "The public sector is united on this proposal."

Because Silverstein has shown a willingness to abandon previous deal breaking requests, according to Gargano, an agreement may be forged as soon as the end of the week.

"According to Larry Silverstein, he could start construction of the Freedom Tower in a couple of days as soon as an agreement is reached," Gargano said. According to the deal, Silverstein would develop the Freedom Tower for a development fee of 2.5% the cost of the building.

"We have covered so many of these items over and over, sometimes the public is less patient or wants to focus on the negative," Gargano said. "We have a board meeting on Thursday, my fingers are crossed."