NEW YORK CITY—The Port Authority of New York and New Jersey is expected to again postpone a vote on providing a subsidy for 3 World Trade Center at a board meeting on Wednesday, according to Crain's New York Business.
The Port Authority's decision to hold off on considering the financing arrangement—in which the agency would provide a loan guarantee on the tower—shows that the deal has not gained the support of the bi-state agency's board of commissioners. It also is seemingly a blow to Silverstein Properties, the tower's developer, which has been feverishly working to get the tower built so it can complete a lease with an anchor tenant it has tentatively secured for the property, media and advertising company GroupM.
“Over the past month we felt we had made substantial progress on the terms of a 3 World Trade Center agreement,” says Larry Silverstein, chairman, Silverstein Properties. “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.”
The developer now must try to source financing from the private sector for the $2.4 billion tower—a task it has for months said is unfeasible at a time when lenders have remained reluctant to provide money for speculative office buildings.
For months, top Port Authority executives, led by the Port Authority's vice chairman Scott Rechler and executive director Pat Foye, have praised the merits of providing a $1.2 billion loan backstop, which would put the Port Authority on the hook for that amount if Silverstein defaults on the tower. Those executives say that such a default is highly unlikely and that the deal would allow the Port to collect tens of millions of dollars of rent from the soaring new building and also allow it to sell the property's valuable retail space and collect over $130 million.
In recent weeks, Rechler, who also is chairman and CEO of RXR Realty, negotiated a 15% profit share for the Port Authority in the new tower, giving it a cut of the building's earnings as an added incentive. But opposition on the board, led by Kenneth Lipper—a former Wall Street executive who was appointed last year to the Port Authority by Gov. Andrew Cuomo—has continued to delay the deal. Lipper contends that Silverstein built the tower on its own and that the Port Authority's mission is transportation infrastructure, not real estate development.
In April, the Port Authority tabled a vote on the financing due to that opposition, pinning the hopes of the tower's proponents on this May vote. If a private sector arrangement can be reached, Port Authority executives say they could immediately call a special vote on the tower deal in the coming days or weeks and still give Silverstein enough time to close a 515,000-square-foot lease with GroupM.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
