Port Authority Focusing on Private Capital for Silverstein’s 3 WTC Building
- Jun 03, 2014
The Port Authority of New York and New Jersey met on Wednesday and revealed a change in its approach to the financing for Silverstein Properties Inc.’s development of 3 World Trade Center, as first reported by Bloomberg News and The Wall Street Journal. Instead of guaranteeing a $1.2 billion loan for the $2.3 billion construction of the 2.5 million-square-foot tower, the Port Authority will focus its efforts on securing more private investment for the project.
The Port Authority and Silverstein had been working on the matter via a two-pronged approach. The first involved reconstructing the financing deal hashed out in 2010 and the second involved working with private investors to bring capital into the project.
“As we moved closer to the board meeting we started having very, very positive conversations with different private investors that leads us to believe that all of us are very confident that we can move forward with private capital investments versus restructuring completely the 2010 deal,” Anthony Hayes, assistant director of media relations with the Port Authority, told Commercial Property Executive. “So right now all of the focus is on these private investors that have expressed interest and we are going to move forward to piece together a deal that–with the primary goal reducing the risk to the Port Authority–gets the necessary capital in so that Tower 3 can be built and GroupM can move downtown.”
Media and technology company GroupM has pre-leased 515,000 square feet of office space at 3 WTC, under a 20-year agreement.
The news is not what Silverstein had expected. Larry Silverstein, chairman of Silverstein Properties said in a prepared statement, “Over the past month we felt we had made substantial progress on the terms of a 3 World Trade Center agreement. 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 Port Authority’s decision was a result of the fact that, as Scott H. Rechler, Port Authority vice-chairman, said during the meeting, “Some of us have concerns relative to risk associated with greater public participation than is currently in place.” Per terms of the 2010 agreement, public support would kick in once Silverstein met three conditions: a pre-lease of at least 400,000 square feet at a minimum of $65 per square-foot; raise $300 million of equity and/or subordinated mezzanine debt; and raise $1.3 billion in Liberty Bonds/taxable debt issuance. The new proposed agreement called for an increase in mezzanine and debt equity contribution to $450 million and for the Port Authority to become co-obligor to $1.2 Billion in senior secured debt.
But instead of voting on the proposed agreement, the board decided it would focus its efforts on, as Rechler added, “trying to develop a hybrid proposal that implements private sector funding, reduces the Port’s exposure, and enables us to move forward with the development of 3 World Trade Center.”
The Port Authority isn’t talking specifics on the subject of just how much financing the organization and Silverstein will seek from private investors. “In terms of exact numbers and exact time frames, we’re going to continue negotiating those details,” Hayes told CPE.
3 World Trade Center is scheduled to make its debut in 2017 and all parties remain committed to making it happen. “This has been a very collaborative process with the Silverstein organization and we expect it to continue that way,” Hayes said.