NEW YORK CITY—As he is wont to do, major developer Larry Silverstein has set a new record. The World Trade Center builder has sold $1.6 billion of tax-exempt bonds to finance the construction of 3 World Trade Center, the largest-ever unrated deal in the municipal market, according to Bloomberg News.
Goldman Sachs Group Inc., which managed the offer, sold about $1.1 billion of senior bonds maturing in 30 years at a preliminary yield of 5%, or about 1.9 percentage points above benchmark debt, according to data compiled by Bloomberg.
“This is an exciting time and yet another important milestone for the new World Trade Center and Downtown,” says Silverstein in a statement to the press. “It means that we have now secured all the financing necessary to complete 3 WTC and open the building in 2018, making it the fourth tower to open at the WTC. In 2006, 7 WTC opened and is fully occupied while the first office workers began moving into 4 WTC on Monday and will be followed next week by the first tenants at One WTC.
About $280 million of junior bonds due in 2034 and 2040 drew initial yields of 5.3% and 5.5%, respectively. The sale also included $231 million of 30-year subordinate debt priced at a preliminary 7.25%. Top-rated 30-year municipal bonds yielded 3.09% Tuesday, after setting a 21- month low of 2.78 percent on Oct. 16.
"They paid more yield than anything of its size in the market right now," says Daniel Solender, head of munis at Lord Abbett & Co.
The 69-floor tower's issue has been delayed by several factors for over a year. The Port Authority of New York & New Jersey—which owns the 16-acre World Trade Center site—earlier this year expressed serious reservations about guaranteeing the debt while Silverstein waited for municipal borrowing costs to decline.
Bonds for 3 World Trade Center are backed by tenant leases and rents and secured by a mortgage. New York City and the state will contribute $210 million and the Port Authority will let Silverstein use $159 million of insurance proceeds from a $4.6 billion payout after the Sept. 11, 2001, terror attacks.
About 20% of the building is leased. Advertising firm GroupM is the only tenant in the 2.5 million square-foot tower, which is expected to be finished in 2018.
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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.
