By: David M Levitt | Bloomberg
Larry Silverstein said he plans to restart construction at lower Manhattan’s 3 World Trade Center, stalled at eight stories, following a new financing agreement with the Port Authority of New York and New Jersey.
The deal takes $159 million of insurance proceeds that had been held in escrow until the building was finished, and makes the money immediately available, Port Authority Executive Director Patrick Foye said at a press conference yesterday. Silverstein said he plans to “immediately jump-start vertical construction” of the 80-story skyscraper.
The agreement enables Silverstein to resume building while denying him the $1.2 billion of loan guarantees he has sought for a year, meaning he has to still come up with additional funds to complete the tower. Bond-market conditions are more favorable now for the developer to raise debt without a government backstop, Foye said yesterday. Lower Manhattan’s leasing market has also shown improved demand.
“They’ve already done outreach to the market,” Foye said. “Based on favorable changes to the muni markets we believe that to be the case, and in the weeks and months ahead, they will be going ahead.”
As much as $50 million of the insurance proceeds will be released immediately to continue construction of the tower above the eighth floor, including the ordering and fabrication of steel, Foye said. The Port Authority owns the trade center site.
Three World Trade Center’s main tenant is the advertising firm GroupM, which has a June 30 opt-out clause in the lease it signed in December. The company remains “very committed to the site,” Port Authority Vice Chairman Scott Rechler said at the meeting yesterday.
“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,” Silverstein said in an e-mailed statement.
Opposition to the $1.2 billion backstop, led by authority Commissioner Kenneth Lipper, centered on the risk the agency was assuming by guaranteeing Silverstein’s bonds. Lipper yesterday said the new deal “meets the criteria of no new net debt for the authority.”
The arrangement adjusts a 2010 agreement that entitled Silverstein to about $600 million of public funds, from the city, state and the authority, as long as he leases at least 400,000 square feet, raised $300 million of equity or high-interest mezzanine debt, and sold $1.3 billion of tax-advantaged Liberty Bonds.
The $159 million of insurance proceeds is left over from the $4.6 billion payout from the Sept. 11, 2001, terrorist attacks. Silverstein had signed a 99-year lease for the original twin towers six weeks before they were destroyed.