Port Authority Votes to Advance Construction of 3 WTC
- Jun 27, 2014
Silverstein Properties’ $2.3 billion development of the 2.5 million-square-foot 3 World Trade Center office tower takes a long-awaited step forward as the Port Authority of New York and New Jersey’s board of commissioners green lights a revision of the 2010 financial agreement between the two parties.
The Port Authority’s stance on the financing of 3 WTC, or Tower 3, has changed since 2010: it now wants to increase private-sector investment, thereby decreasing the agency’s exposure. The new arrangement does just that. Silverstein will have to take on the task of raising approximately $1.3 billion of senior fixed-rate bonds, sans its requested and much-debated $1.2 billion loan guarantee.
Additionally, the modified agreement will solidify approximately $300 million in WTC site revenue for the Port Authority, and provide the agency with $14 million in savings through its returning of two floors totaling roughly 76,400 square feet on its existing lease at Tower 4 to Silverstein.
For Silverstein, the biggest benefit of the new agreement is the permission to use $159 million of escrowed Tower 2 insurance proceeds to finance the construction of Tower 3. And aside from previous commitments, the Port Authority’s financial support will end there. As much as $50 million of the sum will be made available immediately, paving the way for vertical construction of 3 WTC to resume.
The balance of the financing structure outlined in the new deal remains the same. Silverstein will raise $300 million in mezzanine debt and/or private equity and receive $463 million in insurance proceeds and $210 million in state and city funding.
“After months of public debate and constructive discourse of the Port Authority’s Board of Commissioners, we have reached an agreement that strikes the right balance of public sector support with private sector commitment,” Scott Rechler, Port Authority vice-chairman, said in a press release on the news.
Silverstein, the Port Authority and, indeed, the New York commercial real estate market, can breathe a sigh of relief, as the revival of construction will allow Silverstein to complete development of 3 WTC in time for anchor tenant GroupM to move into its 515,000-square-foot digs in the building. After all, per its 20-year lease agreement, GroupM didn’t have to wait forever for its space to reach completion; the media and technology company’s retreat would have been a major setback all around, to say the least.
“I appreciate the leadership of Port Authority Vice-Chairman Scott Rechler and other members of the Board who have partnered with us to fulfill the vision we all share–a fully rebuilt World Trade Center at the heart of a vibrant new Downtown,” Larry Silverstein, chairman of Silverstein, said in a prepared statement. “We remain confident that we will nail down a construction financing package that will allow us to complete the project and create an ideal environment for GroupM employees and other dynamic, creative companies who are making their home at the new World Trade Center.”
Construction of 3 WTC will recommence in the third quarter, and if all goes as planned, the tower will open its doors in 2018.