After losing out on loan guarantees, Larry Silverstein does get some good news too.
Now that the Port Authority of New York and New Jersey has decided not to provide Silverstein Properties with public loan guarantees for the new 3 World Trade Center, the firm is planning on seeking private investments for the project.
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The new 80 story tower will cost $2.3 billion to construct and will replace the one destroyed in the September 11, 2001 attacks.
The Port Authority owns the property where the World Trade Center is located.
Its commissioner, Kenneth Lipper, told Bloomberg, “It’s not the public who should pay for this. I believe the financing will be available in the private markets.” Lipper opposed the loan guarantees.
A Loan guarantee, however, does not mean that public funds are used to finance a project. Just that the body which issues the guarantee obligates itself to cover a loan in case of a default. But the Port Authority sees it as a risky venture and a threat to the agency’s credit rating.
Silverstein is now expected to take the next 90 days to put together a new financing plan for the project.
Lipper believes that private financing is best saying, “It’s where I started out. 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.”
3WTC has failed to sign any new tenants since last December when GroupM agreed to lease 550, 000 square feet there, or 20% of the total. The building’s office space is currently only 25% filled.
But a new boom in the leasing of office space in lower Manhattan, it is hoped, will increase demand for rentals at 3 World Trade Center. This would help Silverstein to raise the capital which he needs to finish the project.
In other good news for Silverstein, the remaining $150 million of $4.6 billion in insurance payments that he received for the building destroyed on 9/11 is expected to be freed up for use on the development. Under a previous agreement that money was only to be used to cover possible cost overruns at a later stage of construction. But such overruns are less likely now that the project’s retail podium has been completed and this is the most complicated part of the structure.
Under the 2010 agreement on the construction of 3WTC, Silverstein Properties was to receive $600 million in cash for the project from New York City, New York State and the Port Authority. But it first needed to raise on its own $300 million in equity or mezzanine debt and pre-lease at least 400, 000 square feet of space. The deal with GroupM covered the latter.
Silverstein is now free to raise $1.3 billion in Liberty Bonds which are not a government obligation but tax-exempt bonds sold on the private market.
Construction of the new tower has currently stalled at only the eight floor.
Founded in 1957 by its President and CEO Larry Silverstein, Silverstein Properties Inc. is a privately held real estate development, investment and management firm based in New York. The company develops and acquires office, residential, hotel, retail, and mixed-use properties.
The firm took out a lease on one, two, four and five World Trade Center in New York just weeks before the September 11th attacks.
