The Board of Commissioners of the Port Authority of New York and New Jersey voted unanimously today for a new financing scheme for the completion of office tower 3 World Trade Center, but stopped short of issuing a $1.2 billion loan guarantee.
The plan retains most of the funding provisions in the original 2010 agreement between the Port Authority, which owns the 16-acre site, and Silverstein Properties, which is developing it.
Under the terms decided on today, the amount needed to complete the project will not be guaranteed by the Port Authority, a significant political defeat for the developers.
Instead, the Board’s agreement makes several relatively minor changes to the existing agreement, including a $10 million increase in the existing public sector support to be used for any potential cost overruns to the project, and other measures designed to speed the flow of funds to finish construction on the tower, which is currently stalled. The structure’s nine-story base is finished, and its design calls for a total of 80 floors.
Today’s vote over whether to adopt the re-vamped financing package comes after months of wrangling among the agency, the developer and the public. At issue was whether to increase the share of private financing in the project’s capital stack to protect the agency from financial risk, or to expedite completion of the tower by providing more money from the agency’s coffers. Some board members have argued that the World Trade Center project is a diversion from the agency’s core mandate of maintaining transportation infrastructure in the region.
“We remain confident that we will nail down a construction financing package that will allow us to complete the project,” Larry Silverstein, whose development firm Silverstein Properties has controlled the site since 2001, said in a prepared statement following the announcement of the new financing plan.
Scott Rechler, who has been chairman of the Port Authority’s board since succeeding former chairman David Samson in the wake of the George Washington Bridge scandal, has been a staunch proponent of issuing a $1.2 billion loan guarantee to Silverstein properties.
“I do believe, for the Port Authority, finishing the World Trade Center is part of our mission,” Mr. Rechler said. “And we as an agency can’t rest until that mission is accomplished.”
While Mr. Rechler was not able to garner the votes for the guarantee, he did vote in support of today’s proposal, which should nonetheless expedite the project.
Of course, there are detractors. Many have criticized the amount of public money spent on the World Trade Center sites and questioned how wise it would be to tie up additional Port Authority funds building an office downtown, where a glut of office space has risen recently.
“I have not been a supporter of Mr. Silverstein’s,” said William Schuber, chairman of the Board’s finance committee. “This is it. I will not support any other amendment on [Mr. Silverstein’s] part for him on this deal.”
The advertising and media giant GroupM is so far the lone tenant signed up to lease space in the still-unfinished building. GroupM’s 515,000-square-foot office will comprise 20 percent of the total office square footage in the 80 story tower, according to a spokesman for Silverstein Properties.
The building’s ability to attract more tenants currently looks relatively strong. According to a report released by CBRE earlier this month, the pace of year-to-date office leasing in Downtown Manhattan was 38 percent higher than this time last year.
Time Inc. also recently announced a move in to a new headquarters in lower Manhattan, further underscoring the area’s palatability as an office destination for an increasingly diverse cross-section of industries.
Once complete, the post 9/11 reincarnation of the 16-acre World Trade Center site is slated to include 1.2 million square feet of office space and 440,000 square-feet of retail space in this tower, One World Trade and 4 World Trade. One and 4 World Trades have both struggled to secure tenants, as reported.
Silverstein Properties could not be reached for additional comment.