NEW YORK CITY-Five months of negotiations between SilversteinProperties Inc. and the Port Authority of New York and New Jerseyhave culminated in a plan to provide SPI with up to $1.6 billion inpublic financing on the developer’s World Trade Center towers. Thedeal was ratified Thursday at a meeting of the Port’s board ofcommissioners.

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Originallyannounced in broad outline on March 25, the agreementwas to be hammered out during a 120-day period of negotiationsbetween SPI and the Port. The late-July timeframe to completenegotiations came and went without an agreement being ratified, adelay that led to published reports speculating on whether the dealwould be announced before the ninth anniversary of 9/11.

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In a statement from the Port, the development plan ratifiedThursday is said to allow “the rational phase-in of the site’soffice towers with financing risk shared among all stakeholders.”That translates into varying levels of public backstop for SPI’sthree towers, including essentially none on the planned Tower2.

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The Port is providing up to $1 billion in credit support on thedebt service for the two-million-square-foot tower, which has been60% pre-leased to the Port as headquarters space and to the City ofNew York. Currently under construction, Tower 4 is scheduled forcompletion in 2013, at roughly the same time as the 1,776-foot 1World Trade Center.

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Tower 3 will be built to at least podium level, and the Port,the city and New York State will each kick in up to $200 milliontoward its completion if SPI meets certain triggers. These includepre-leasing of 400,000 square feet of the tower’s 2.1 millionsquare feet, raising $300 million of equity and/or mezzanine debtand selling $1.3 billion of tax-exempt Liberty Bonds. Provided allthese things occur, Tower 3 will open its doors in 2015.

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On both towers, a “cash trap” is in place requiring SPI to payback the public stakeholders before taking any profits. As for thelargest of SPI’s planned towers, Tower 2 will be built to streetlevel, but construction of the 2.3-million-square-foot propertywill be tied to market demand and will receive no publicbackstop.

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Following the Port board’s approval, SPI chairman and CEO LarrySilverstein issued a statement calling the vote “fantastic news forNew York.” He adds, “Downtown has emerged as one of the world’smost exciting mixed-use neighborhoods, offering an unparalleledblend of high-tech office space, retail, residential living andcultural attractions. This agreement will ensure that we continuethis momentum with a new generation of cutting-edge, greenskyscrapers becoming available starting in 2013.”

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The Alliance for Downtown New York similarly applauds theagreement. “With full financing of the site’s office towerssolidified, completion of Towers 2, 3 and 4 is now ensured,” sayDowntown Aliance chairman Robert Douglass and president ElizabethBerger in a statement. “Today’s vote will create an even biggerreason for local, national and international companies to moveDowntown.”

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The Port calls the development plan a continuation of the“momentum” established with its recent deal for theDurstOrganization to take a minority stake in 1 WTCand the letterof intent for Conde Nast to relocate into about one million squarefeet there.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.