By Crain's New York Business | Crain's New York Business
The Port Authority board faces a huge decision at its April 23 meeting: whether to alter its agreement with Silverstein Properties for the construction of 3 World Trade Center. Naysayers charge that Silverstein is asking for a better deal than it got in 2010, when the authority, city and state provided $390 million in backstop financing. They also warn that the authority is deviating from its core duty of maintaining the area's transportation infrastructure.
But the renegotiated deal now ready for a board vote would not impair the Port Authority's ability to carry out that mission—and even may improve it.
Here's the quandary: Despite recently finding an anchor private-sector tenant to occupy 515,000 square feet in the skyscraper, Silverstein can't get a construction loan to erect the 80-story tower. So the developer wants authority backing for $1.2 billion in tax-exempt bonds to help finance the speculative office building.
The Port Authority would gain the right to foreclose on the 3 WTC property within 90 days if Silverstein defaults. That is no small benefit, as the agency would get a $2 billion asset for half-price. Silverstein also would have to secure $450 million in private financing, up from $300 million in the current deal; those investors would further encourage the developer to fill the tower rather than continue holding out for sky-high rents at the World Trade Center complex.
This is hardly a better deal for Silverstein Properties. Rather, it is the only deal the developer can make to complete the project on time and secure the legacy of its principal, 82-year-old Larry Silverstein. And the Port Authority is now poised to realize big benefits.
The new bonds, backed by the right to foreclose, would replace $200 million in riskier financing that the agency signed on for under the 2010 deal. The authority would also reap $329 million in cash. And the influx of tenants would increase ridership on its money-losing PATH system and sales at new retail developments tied to the trade center and transit hub. The Port Authority would become more able, not less, to fulfill its mission of investing in the region's bridges, tunnels and other transportation infrastructure.
Fears that 3 WTC would create a glut of office space, depressing rents at the complex, are overblown. Leasing activity downtown is heating up. And tenants would not occupy the tower before 2019, by which time the authority's signature building, 1 World Trade Center, should be full.
By approving the deal at its board meeting next week, the Port Authority would strengthen its financial position and enhance the promising future of lower Manhattan.
