NEW YORK CITY—With the future of 3 World Trade Center in jeopardy, the Port Authority of New York and New Jersey has thought of another possible source of construction financing—on which the organization’s board will vote during a meeting on Wednesday.
The Port Authority board of commissioners will consider releasing more of the funds paid by the insurers of the original Trade Center after the complex’s destruction on 9/11, according to Crain’s New York Business. Roughly $150 million of insurance money that has been held in a reserve fund could be converted into cash that would help developer Larry Silverstein pay for the construction of the 2.5 million-square-foot, $2 billion tower.
The building is capped at eight-stories and Silverstein has worked in recent months to line up private-sector financiers for the project in time to complete a major leasing deal at the building with GroupM. The media company has agreed to lease 20% of the tower’s space, but time is running out on that deal.
GroupM has the right to cancel its lease, which is for about 515,000 square feet, after June 30. The injection of money that is now being looked at by the Port Authority could be seen by the tenant as a key sign of progress that could persuade it to remain patient and give Silverstein more time to arrange the necessary funds to build the tower. Representatives of Silverstein Properties declind to comment.
The transfer of the insurance money, which was won in court by Silverstein against the WTC’s insurers, is being proposed by the Port Authority’s vice chairman, Scott Rechler, who has led efforts to try to work out a deal to fund 3 World Trade Center, whose construction he has said would largely finish the rebuilding of the WTC site.
Earlier this year, Rechler negotiated a deal in which the Port Authority would provide a guarantee for up to $1.2 billion of the tower’s financing and in return receive tens of millions of dollars of fees and other major perks. But the arrangement met resistance from the Port’s board.
Rechler, who also has led efforts to reform the Port after the Bridgegate scandal, changed tack and has focused on helping Silverstein try to secure private financing instead. The $150 million is being used as a way to hopefully buy Mr. Silverstein more time to raise more than a billion dollars of private money for the tower.
Silverstein already has spent the approximately $460 million in insurance money that was earmarked for 3 World Trade Center building its below-ground space and an eight-story podium that now stands at the site. That space is being used for retail, which is not owned by Silverstein, and also mechanical systems for the PATH hub next door.
At least 400,000 square feet of pre-leasing at 3 World Trade Center is needed for Silverstein to qualify for the financial backing being provided by the Port, the city and state—according to an agreement reached between Silverstein and the Port in 2010—making the GroupM lease crucial to the tower’s construction.