WTC Finance Deal Gets Done

NEW YORK CITY-Five months of negotiations between Silverstein Properties Inc. and the Port Authority of New York and New Jersey have culminated in a plan to provide SPI with up to $1.6 billion in public financing on the developer’s World Trade Center towers. The deal was ratified Thursday at a meeting of the Port’s board of commissioners.

Originally announced in broad outline on March 25, the agreement was to be hammered out during a 120-day period of negotiations between SPI and the Port. The late-July timeframe to complete negotiations came and went without an agreement being ratified, a delay that led to published reports speculating on whether the deal would be announced before the ninth anniversary of 9/11.

In a statement from the Port, the development plan ratified Thursday is said to allow “the rational phase-in of the site’s office towers with financing risk shared among all stakeholders.” That translates into varying levels of public backstop for SPI’s three towers, including essentially none on the planned Tower 2.

The Port is providing up to $1 billion in credit support on the debt service for the two-million-square-foot tower, which has been 60% pre-leased to the Port as headquarters space and to the City of New York. Currently under construction, Tower 4 is scheduled for completion in 2013, at roughly the same time as the 1,776-foot 1 World Trade Center.

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 million toward its completion if SPI meets certain triggers. These include pre-leasing of 400,000 square feet of the tower’s 2.1 million square feet, raising $300 million of equity and/or mezzanine debt and selling $1.3 billion of tax-exempt Liberty Bonds. Provided all these things occur, Tower 3 will open its doors in 2015.

On both towers, a “cash trap” is in place requiring SPI to pay back the public stakeholders before taking any profits. As for the largest of SPI’s planned towers, Tower 2 will be built to street level, but construction of the 2.3-million-square-foot property will be tied to market demand and will receive no public backstop.

Following the Port board’s approval, SPI chairman and CEO Larry Silverstein issued a statement calling the vote “fantastic news for New York.” He adds, “Downtown has emerged as one of the world’s most exciting mixed-use neighborhoods, offering an unparalleled blend of high-tech office space, retail, residential living and cultural attractions. This agreement will ensure that we continue this momentum with a new generation of cutting-edge, green skyscrapers becoming available starting in 2013.”

The Alliance for Downtown New York similarly applauds the agreement. “With full financing of the site’s office towers solidified, completion of Towers 2, 3 and 4 is now ensured,” say Downtown Aliance chairman Robert Douglass and president Elizabeth Berger in a statement. “Today’s vote will create an even bigger reason for local, national and international companies to move Downtown.”

The Port calls the development plan a continuation of the “momentum” established with its recent deal for the Durst Organization to take a minority stake in 1 WTC and the letter of intent for Conde Nast to relocate into about one million square feet there.