By Holly Dutton
A New York state development agency approved the sale of as much as $1.8 billion in bonds for developer Larry Silverstein’s 3 World Trade Center tower, a deal delayed for more than a year after the Port Authority of New York & New Jersey balked at guaranteeing the debt.
Silverstein is issuing the tax-exempt bonds for the 80-story tower through New York’s Liberty Development Corp., a subsidiary of the state’s economic-development agency. Goldman Sachs Group Inc. (GS) will manage the sale. The tower is scheduled for completion in 2018.
“The World Trade Center is a reminder of the resilience and determination that defines us as New Yorkers, and today we are taking another step forward in rebuilding it for the future,” said Governor Andrew Cuomo.
In June, the Port Authority approved a financing agreement that allowed Silverstein to use $159 million of insurance proceeds to finish the tower, which was stalled at eight floors. The agreement didn’t include $1.2 billion of loan guarantees that the developer sought under a previous plan opposed by some Port Authority board members. The agency owns the 16-acre World Trade Center site.
Bonds for 3 World Trade Center, which will be issued in three classes, will be secured by a mortgage on the building, tenant leases and rents. In addition to the debt and insurance proceeds, the development will also be financed by $55 million of equity from Silverstein, $210 million from the Port Authority and contributions from the state and New York City. Advertising firm GroupM is 3 World Trade Center’s main tenant.
Bud Perrone, a spokesman for Silverstein, said the bonds would be sold this month.
Opposition to the loan guarantees, led by authority Commissioner Kenneth Lipper, centered on the risk the agency was assuming by guaranteeing Silverstein’s bonds and its use of debt capacity for non-transportation projects. The Port
Authority runs the New York City area’s three major airports, four bridges, two tunnels, marine ports, two Manhattan bus stations and the PATH train.
The bonds will be issued as part of the federal Liberty Bond program, created to help revive Lower Manhattan with $8 billion of tax-exempt financing. New York’s Liberty Development Corp. previously issued $2.3 billion of Liberty Bonds for the World Trade Center redevelopment. Goldman Sachs sold more than $1.6 billion of the bonds to finance a new headquarters downtown.
Critics said the program helped pay for luxury apartments while shortchanging affordable housing and gave away $650 million in financing for a Bank of America tower in midtown.