NEW YORK CITY—After a healthy dose of controversy and the raising of questions over the Port Authority of New York and New Jersey's role, the agency has decided to scrap plans to provide a $1.2 billion financial guarantee that would allow a new tower to rise at the World Trade Center site and, instead, it will pursue a deal to finance the soaring building with private funds.
A PANY/NJ spokesman tells GlobeSt.com, “We've been pursuing two tracks, along with developer Silverstein Properties: a restructuring, based on an agreement reached in 2010—in which the Port Authority pledged to provide a $200 million backstop for the new building—or a public/private partnership. We have reached a point, based on recent conversations, where we're confident that we can put together a deal based on a public/private partnership rather than restructure the deal.”
He adds candidly, “It's not clear what that's going to look like; there are a number of private businesses interested and we're talking to all of them. But when we can announce that, we will. Meanwhile, our focus is to get 3 World Trade Center built and to reduce the risk to the Port Authority.”
Speaking at a Port subcommittee meeting on Wednesday morning, Scott Rechler, the Port's vice chairman, suggested a reinsurance firm could take on the risk that the Port initially was contemplating. “We have had some interest, whether it's reinsurance or others ... some of the largest financial players in the world.”
The Port was expected to vote on the tower financing at a board meeting Wednesday afternoon but will now postpone that vote to try to arrange the private-sector deal. Executives at Silverstein Properties have for months said that raising the necessary funds for the new tower privately has been unfeasible at a time when lenders have remained reluctant to provide money for speculative office buildings.
In a written statement, Larry Silverstein, the chairman of Silverstein Properties, appeared to express some continued uncertainty whether the private-market deal that Rechler proposed would be achievable.
“Having agreed to the requests conveyed by Port Authority leadership, we are surprised that the discussions did not yield a successful resolution,” Silverstein stated. “We remain committed to working with the Port Authority to reach an agreement that accomplishes our shared mission of building 3 WTC.”
Rechler says he is certain that a financing package could be arranged in time to finish a key leasing deal Silverstein has tentatively struck with advertising and media firm GroupM, which has committed to take 515,000 square feet in the new tower.
"I have a very high degree of confidence that we will be able to implement a public private partnership that achieves our objectives and achieves the objectives of the project [and] that will be funded in time to bring GroupM to Lower Manhattan," he says.
For months, top Port Authority executives, led by Rechler and the Port's executive director Pat Foye, have championed the merits of providing the $1.2 billion loan guarantee, which would put the Port on the hook for that amount if Silverstein Properties defaulted on the tower. Rechler, who is also a prominent landlord in the city as chairman and CEO of RXR Realty, and Foye said that such a default would be highly unlikely and that the larger guarantee would allow the Port to collect tens of millions of dollars of rent from the new building much sooner and also allow it to sell the property's valuable retail space and collect over $130 million.
In April, the Port tabled a vote on the financing due to opposition, pinning the hopes of the tower's proponents on this May vote. If a private sector arrangement can be reached, Port 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 out the 515,000-square-foot lease with GroupM, which has the right to cancel the deal after June.
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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.
