06/04/2008 05:12 am ET | Updated May 25, 2011

Ground Zero Developer Offers To Redesign Building For Merrill Lynch: Why It Might And Might Not Happen

The AP's Amy Westfeldt reports on the attempts to lure Merrill Lynch to the World Trade Center:

Dangling millions of dollars — sometimes billions — in incentives to big companies to become part of the latest megaproject is often the cost of doing business in the city's development market.

But the lure of big business reached a new level when a developer last week offered to redesign a building in the hope that Merrill Lynch & Co. would agree to move to ground zero. The government extended deadlines for two towers at the World Trade Center site to allow developer Larry Silverstein to build wider trading floors Merrill has sought.

The offer didn't seal a deal with Merrill Lynch, but it showed industry watchers how far governments and developers will go in an economic downturn to commit skittish tenants to big, sometimes uncertain projects.

"It's realistic," said Kathryn Wylde, president of the Partnership for New York City business group. "Things are slow because the economy is uncertain. Major prospective tenants are waiting to see how things roll out."...

Merrill Lynch negotiated with Silverstein last fall to move into a ground zero tower designed by British architect Richard Rogers, and also weighed a move to midtown before dropping out of talks for each site. It renewed negotiations with Silverstein this spring, once again seeking changes to the tower's design to accommodate trading.

The Port Authority of New York and New Jersey, which owns the trade center, agreed to extend the deadlines for two of Silverstein's towers to "allow us to find out: Can we secure a huge financial institution downtown?" said executive Chris Ward.

"We needed to make sure that Merrill had a window of negotiation," he added. "The economics will be the economics. We just wanted to open up the six-month window and leave it that."

Merrill Lynch declined comment on its plans. Critics questioned whether such an incentive _ even a redesigned building, instead of a tax break _ is a sound one for Merrill Lynch, which currently has office space in a building just west of ground zero.

"Should this all go through, they'll decide to move across the street," said Bettina Damiani, project director at Good Jobs New York, a government watchdog group.

She said many companies prioritize transportation options and the location of their labor force over incentives like those the city and state offers.

"To give away the fiscal store to companies for the short-term, press-release hit ... shouldn't be at the expense of the city's fiscal future," she said.

The New York Post's Steve Cuozzo, meanwhile, speculates that Merrill's entertaining of the offer could represent some dark maneuvering:

Having redesign flexibility is necessary for Merrill to even consider moving to Tower 3 - but it does not guarantee the firm will decide to do that.

In asking the PA to extend construction deadlines, Silverstein presumably found Merrill's interest to be sincere - not a ploy to gain leverage with its current landlord, Brookfield Properties, in talks over renewing Merrill's World Financial Center lease, which is up in 2013.

Merrill, represented by Jones Lang LaSalle's sure-handed Peter "Big Rig" Riguardi - who's also an adviser to the PA - could lead Silverstein on a merry chase. The firm is already deep into talks with Brookfield to extend its WFC lease until 2018.

Besides the cost to Merrill of moving to Ground Zero, there are a lot of other "ifs" to factor in.

There's no telling how Merrill's inevitable request for subsidies beyond those already available to it if it moves to the WTC site will play at City Hall and in Albany.

Nor is it easy to believe that even slightly altering Tower 3's current design won't mess up plans for Tower 4, the new PATH terminal and the memorial - all of them linked in a Gordian knot of subterranean infrastructure.

With so many imponderables, it would not seem out of the question for Silverstein and the PA to one day declare yet another postponement beyond mid-2013. If that happens, who can guess when anything might be finished?

None of this means a Merrill Lynch deal for Tower 3 is not worth pursuing. But Silverstein and PA chiefs Anthony Coscia and Christopher Ward are going to need a lot of luck.

Read Cuozzo's entire analysis here.