Deal Phases in Office Tower Development, Provides Certainty and Shares Financing Risk Among All Stakeholders
The Port Authority Board of Commissioners today authorized a series of agreements (collectively known as the “Development Plan”) that will ensure the full restoration of the entire World Trade Center site. The agreement builds on significant momentum at the WTC site, following construction progress site-wide and recent announcements of a transaction with the Durst Organization and a Letter of Intent with Condé Nast.
The Development Plan follows closely the framework outlined on March 25, 2010, announced by the Port Authority, Silverstein Properties, the City of New York, and the States of New York and New Jersey, calling for the immediate restoration of the east side of the site to at least street level, the rational phase in of the site’s office towers with financing risk shared among all stakeholders, and the completion of the WTC Transportation Hub without significant additional cost or delay.
The Board’s action follows months of negotiations between Silverstein Properties, leaseholder of WTC Towers 2, 3 and 4 – and the Port Authority, the site’s owner, over how to phase and finance the three planned office towers on the eastern half of the site.
Specifically, the Development Plan provides for:
- Tower 4: The continued construction of the two-million square foot Tower 4, which is scheduled for completion in 2013. The Port Authority is providing credit support for a portion of the of the debt service not covered by the rent payable under the City of New York T4 Space Lease, with 1.2 million square feet of the tower already pre-leased to the Port Authority for its headquarters and the City of New York. The $1.81 billion project will be funded by approximately $1.36 billion of Liberty Bonds and $450 million of insurance proceeds.
- Tower 3: The immediate construction of Tower 3, initially to podium level funded entirely by insurance proceeds and, should SPI meet certain private market triggers, continued tower construction to completion in 2015. The tower’s financing will be private-market driven through a 400,000 square foot pre-lease condition, a requirement to raise $300 million of equity and/or unsupported, subordinated mezzanine debt and the need to secure over $1.3 billion of Liberty Bond and taxable debt, with capped public support of $200 million each from the Port Authority, the City of New York and the State of New York.
- Tower 2: The immediate construction of Tower 2 to street level with the flexibility to start construction of the office tower based solely on market demand and no public support.
- All insurance proceeds and Liberty Bonds previously allocated to Towers 2, 3 and 4 would be committed to Towers 3 and 4 to make them more economically viable.
- A “Cash Trap” to ensure that the public stakeholders get paid back before SPI collects profits from the net cash flows of Towers 3 and 4.
- The 9/11 Memorial, One World Trade Center and the public infrastructure continue to progress on their current schedules.
The Development Plan represents a modest improvement to the capital capacity impact on the Port Authority discussed with the Board in March 2010. Moreover, it avoids billions of dollars in potential Port Authority losses due to expensive WTC Hub workarounds and the loss of future ground rent and retail revenue had restoration of the east side of the WTC site ceased. The capital capacity impact is now projected to be $1.1 billion to $1.3 billion through 2016. The higher amount of this range is based on a “worst-case” assumption that the entire $200 million Port Authority T3 backstop would be drawn down should T3 be built above the podium level.
The full impact of the Development Plan already has been accounted for in the agency's capital planning efforts, and will not result in any further deferment of agency projects.
Port Authority Chairman Anthony R. Coscia said, “Today’s agreement is a major milestone in the redevelopment of the World Trade Center site. It will allow us to continue the effort we began four years ago to rebuild the World Trade Center, and it protects the public resources this agency needs to build and modernize the transportation facilities critical for the region’s growth and prosperity.”
Port Authority Executive Director Chris Ward, “This agreement caps a two-year effort to restructure, rationalize and, above all, provide a renewed level of certainty over the development of the World Trade Center site. It will make certain the entire site is rebuilt while sharing the risk among all stakeholders in a way that protects our limited public resources. We very much look forward to working with Silverstein Properties on this new partnership, and wish to thank Governor Paterson, Governor Christie, Mayor Bloomberg and Speaker Silver for their leadership on this issue.”
The agreement follows significant progress at the World Trade Center site over the past year:
- Construction of One World Trade Center (1WTC) has reached the 36th floor, and is scheduled to be completed in 2013.
- The Port Authority and the Durst Organization recently announced a joint venture with Durst to become the agency’s private sector partner and invest $100 million of equity into 1WTC.
- The Port Authority also recently signed a Letter of Intent with Condé Nast for approximately one million square feet of office space in 1WTC.
- All of the steel to build the 9/11 Memorial has been installed with the two signature reflecting pools fully formed on the Memorial Plaza and lined with granite tiles.
- The Memorial Plaza remains on schedule to open on the 10th anniversary of the 9/11 attacks.
- The WTC Transportation Hub is picking up speed with all of the 54 signature Santiago Calatrava designed arches for the Hub Connector now installed, and with additional Calatrava arches and giant plate girders being installed on the Hub’s mezzanine level to support the PATH Hall roof and the Memorial Pavilion above it.
CONTACT: The Port Authority of New York and New Jersey
Steve Sigmund or Ron Marsico, 212 435-7777
The Port Authority of New York and New Jersey operates many of the busiest and most important transportation links in the region. They include John F. Kennedy International, Newark Liberty International, LaGuardia, Stewart International and Teterboro airports; AirTrain JFK and AirTrain Newark; the George Washington Bridge and Bus Station; the Lincoln and Holland tunnels; the three bridges between Staten Island and New Jersey; the PATH (Port Authority Trans-Hudson) rapid-transit system; Port Newark; the Elizabeth-Port Authority Marine Terminal; the Howland Hook Marine Terminal on Staten Island; the Port Authority Auto Marine Terminal; the Brooklyn Piers/Red Hook Container Terminal; and the Port Authority Bus Terminal in midtown Manhattan. The agency also owns the 16-acre World Trade Center site in Lower Manhattan and is a partner in the Access to the Region’s Core tunnel project.