With 3 WTC Financing Finally a Done Deal, What Comes Next?

The $2 billion skyscraper development at 175 Greenwich Street in Lower Manhattan is now on track to reach its 80 stories. It will total 2.8 million square feet once completed in 2018, Mr. Silverstein confirmed at the event.

The Liberty Bond deal followed a $340 million round of financing through federal Recovery Zone bonds, negotiated by Sen. Chuck Schumer in January, to ensure the tower could continue to rise.

Mr. Silverstein successfully tapped the bond market again in October after the Port Authority of New York & New Jersey rejected the developer’s request for more backstop financing in exchange for a commitment to pay additional fees—abandoning a potential $1.2 billion loan guarantee on the development.

The Port Authority, which owns the 16-acre World Trade Center site, delayed its vote on the tower’s financing in April and renegotiated with Mr. Silverstein throughout most of the summer. The parties later agreed to a deal that required the developer to go with more private funding than he had initially been required to take on.

Silverstein Properties issued the latest round of bond financing through the Liberty program, which was created as part of a federal economic package to aid New York City’s recovery from the terrorist attacks of Sept. 11, 2001.

Goldman Sachs placed about $1.1 billion of the senior bonds, which are due to mature in 30 years at a yield of 5 percent, Bloomberg News first reported. The bonds are backed by rents and are secured by a mortgage on the property, according to Silverstein Properties.

The developer has invested more than $600 million of insurance proceeds in the project. An additional $55 million in cash equity from Silverstein Properties and $210 million from New York City and State will go to funding the development.

The unfinished structure is about 20 percent leased to its first and so far only tenant, GroupM, as of November 2014. The New York-based advertising giant signed a 20-year lease for 516,000 square feet on nine floors of the building in December 2013.

Not everyone is unequivocally bullish on the new addition to Lower Manhattan’s office renaissance. Moody’s Investors Service Vice President and Senior Credit Officer Bill Fitzpatrick noted potential complications for the World Trade Center tower going forward, including a lack of stabilized income with 73 more floors to build and 80 percent more office space to lease.

“While we expect that 3 WTC will benefit from its position in the dynamic Downtown New York office market, ultimately its success will be a function of the market’s capacity to absorb high levels of new supply in the WTC towers,” Mr. Fitzpatrick told Mortgage Observer by email.

“A key risk factor is the feasibility of completing construction and lease up within the timeframe contemplated in sizing reserves and funding backstops,” he said. “Pre-leasing of approximately 20 percent of the building is a mitigant, but major New York office buildings may in some cases take longer than two years to achieve stabilized income, even in healthy markets.”

Still, those concerns may appear small in the grand scheme of things. Mr. Silverstein, who signed a 99-year lease for the original World Trade Center towers six weeks before they were destroyed, has experienced multiple setbacks over the past 13 years.

In a 2004 lawsuit, the developer alleged that American Airlines and United Airlines were responsible for “reckless security breaches” during the attacks and owed him a total of $8 billion to cover damages. Nearly a decade later, in July 2013, a federal judge ruled that Mr. Silverstein’s investment group, which already collected $4.1 billion from insurers in 2004—just over half of the total amount sought—would not be allowed to collect further insurance payments.

Now, with 3 World Trade Center financially covered from top to bottom and presumably on its way to completion, Silverstein Properties has one last hurdle in that arena: completing the stalled 2 World Trade Center development at 200 Greenwich Street.