The Board of Commissioners of the Port Authority of New York & New Jersey met yesterday for its regularly scheduled monthly meeting.
Amongst items expected to have been decided was the, previously several times delayed, vote on whether to increase a financing package available to Larry Silverstein Properties to help complete construction of the 80 storey 2.8 million tower at #3 World Trade Center, which is expected to cost over US$2 billion in total to build.
Larry Silverstein, the company’s Chairman, was hoping for a package of financing for the building from the Port Authority to be increased from its existing US$200 million to as much as US$1.2 billion.
However the Commissioners remained divided yesterday it seems, and a vote for decision was postponed yet again, with Silverstein saying afterwards that he was “surprised” a positive decision had not been taken.
Since the building still remains less than 25% leased, private lenders have been reluctant to provide interim financing to construct the project. In recent times conventional financial institutions have normally asked for at least 50% pre-leasing performance first.
As a result the developer may now have to bite the bullet and give up a significant equity stake in the property to get it up and running, something thus far Silverstein has been reluctant to do.
After yesterday’s meeting real estate developer Scott Rechler, who doubles as a Vice Chairman of the Port Authority as well in his spare time, and who supported the additional aid to Silverstein, said the PANYNJ will now try to quickly put together some kind of public-private financing model.
Another influential Commissioner, Kenneth Lipper, who was Deputy Mayor under former Mayor of New York Ed Koch stated that in his opinion that is what should have already happened. “It’s where I started out, ” he said, adding “This should be a private-sector deal. The private sector has money available for it if the developer will give up a portion of his equity, as his peer group does, such as Related at Hudson Yards.”
The reference to Hudson Yards, located at New York’s latest new neighbourhood, the Far West Side, even stings a little. There, Stephen Ross’s The Related Companies have brought in a Canadian Pension Fund as an equity partner to get their project off the ground. As an enormous new development it could some day even vie with the World Trade Center itself, if the Port Authority and Silverstein Properties do not now quickly get their act together and finish the job – in what after all ought by now already to be the Western hemisphere’s premier real estate development pure and simple, re-created twelve years after the 9/11 tragedy.
Silverstein already has an anchor tenant for #3 World Trade Center, advertising company GroupM who have taken 515, 000 square feet of space, and he must be anxious now to somehow get construction moving again which has so far been frozen at the eighth floor.
Rechler tried to put a positive spin on the meeting yesterday even though the vote was postponed, saying “There have been a lot of zigs and zags but ultimately we have been successful, ” and also praising Silverstein for “meeting the hurdles that have been put in front of them.”
It is not quite clear precisely what Rechler meant by that, however. Silverstein himself also said in a statement after the meeting, “having agreed to the requests conveyed by Port Authority leadership, we are surprised that the discussions did not yield a successful resolution. We remain committed to working with the Port Authority to reach an agreement that accomplishes our shared mission of building 3 WTC.”
Accordingly, dear reader, if you should have a spare US$1 billion lying around, certainly a joint venture arrangement to build this fantastic building might be a great way for you to spend it.