The Port Authority of New York and New Jersey is seeking to bring more private money into a financing package to help Larry Silverstein build 3 World Trade Center in lower Manhattan after commissioners balked at providing a $1.2 billion loan guarantee.
The agency is working toward a public-private partnership on the tower that would reduce its risk, Vice Chairman Scott Rechler said at a Port Authority meeting in New York. The agency yesterday canceled a vote on a financing package that included the loan guarantee.
“We spent the last three months looking at private-sector alternatives and we’ve had some interest, from reinsurers or others, from some of the largest financial-services players in the world,” Rechler said. “Recent developments have given us confidence this can be achieved.”
Silverstein sought help from the Port Authority in financing the 80-story tower, which is stalled at eight floors. In the past several months, private capital providers have become more open to considering investing in the project because of continued economic improvement and evidence of “robust” office leasing in lower Manhattan, Port Authority Director Patrick Foye said at a press conference after the meeting.
“This whole discussion and negotiation began in the context of a belief that the private sector was not able several months ago to provide financing,” he said. “It is now the case, and we discussed this in public in April, that there were discussions with multiple private-sector parties for a significant private-sector role” in addition to investment from Silverstein’s company.
Last month, when the board said it wanted a deal that better protected the authority’s finances, Silverstein and outside investors were encouraged “to put their hands up,” Foye said.
Neither he nor Rechler named any potential investors for the $2.3 billion project.
In an e-mailed statement yesterday, Silverstein said his company, Silverstein Properties Inc., was “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 World Trade Center.
The authority and Silverstein are looking beyond the banks that traditionally have funded office construction for “someone who was willing to be somewhat more creative in structure,” Rechler said.
“The traditional financial market for construction loans of this nature still doesn’t exist,” Rechler said at the press conference.
Office leasing in lower Manhattan has exceeded the five-year average in each of the past 12 quarters, CBRE Group Inc. said in an April report. Deals announced since the end of March include Time Inc.’s 700,000-square-foot lease for a new headquarters at Brookfield Place, across the street from the World Trade Center.
Port Authority Commissioner Kenneth Lipper said he was pleased with the plan to bring in private investment and that Silverstein is interested in the process. He pronounced the $1.2 billion loan guarantee dead.
“I always believed the private market would take care of this,” Lipper said yesterday. “The private sector has money available for it if the developer will give up a portion of his equity, as his peer group does.”
He cited as an example Stephen Ross’s Related Cos., which sold a portion of its interest in its $20 billion Hudson Yards development on Manhattan’s far west side to Oxford Properties Group, an arm of the Ontario Municipal Employees Retirement System.
Silverstein’s bid for financing help from the Port Authority, which owns the Trade Center site, put pressure on the commissioners to demonstrate fiscal responsibility after a scandal involving lane closures at the George Washington Bridge exposed the agency’s dysfunction.
Lipper argued that committing public money to the real estate project would divert the agency further from its primary mission of operating tunnels, bridges, airports, bus stations and shipping terminals in New York and New Jersey.
Plans for 3 World Trade Center call for 2.5 million square feet (230,000 square meters) of offices. About 20 percent of the building is leased to advertising firm Group M.
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