NEW YORK CITY—In a unanimous vote Wednesday, the Port Authority of New York and New Jersey‘s board of commissioners voted up a plan to allow construction to proceed on Silverstein Properties Inc.’s 3 World Trade Center. The agreement, which taps into $159 million of previously escrowed insurance proceeds, $50 million of which will be released immediately, appears to resolve longstanding uncertainty over financing of the 80-story office tower at the World Trade Center redevelopment site.
The agreement minimizes the amount of senior debt SPI will need to incur on the 2.5-million-square-foot 3 WTC, while also limiting the Port Authority’s exposure to the same level that was set in its 2010 agreement with SPI. The developer expects to raise $300 million in mezzanine debt and/or private equity, as well as $1.2 billion to $1.3 billion of senior fixed-rate bonds. The remainder of the capital contribution includes $463 million in insurance proceeds, as well as $210 million in state and city funding.
Along with enabling SPI to begin construction on the tower in the third quarter, with a targeted completion date of 2018, the deal also assures that anchor tenant GroupM will retain its 515,000-square-foot commitment there. For the Port, the agreement puts the authority in line to receive $300 million in rental revenues, while also saving it $14 million as it reduces its lease at the tower from 15 floors totaling about 600,000 square feet to 13 floors totaling 520,000 square feet.
At Wednesday’s meeting, executive director Patrick Foye noted that the improving climate for leasing in Lower Manhattan has drawn investor interest in the area. “Leasing activity in May was more than double the five-year average,” Foye said Wednesday.
Larry Silverstein, chair of SPI, says in a statement, “The past few months have demonstrated that it was a good idea to bet on Downtown’s revival. This area has become the hottest office market in New York, at the center of a 24/7 live-work-play community.”
Accordingly, Silverstein says he appreciates “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.” He expresses confidence that a financing package will be nailed down “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.”