Larry Silverstein is asking the government to cut him a better financing deal at Silverstein Properties’ unfinished 3 World Trade Center. Executives at the development giant told government officials the firm needs more favorably-structured municipal bond financing to resume construction on the 80-story, 2.5 million-square-foot Lower Manhattan tower.
The initial funding package was put together in 2010.
“There are a number of potential modifications to the 2010 agreement that could both enhance the public sector position and benefit the overall project,” Scott Rechler, the Port Authority’s vice chairman and also CEO of RXR Realty, told the Wall Street Journal. “It is only prudent for us to consider those alternatives.”
According to the Journal, the 2010 deal that Silverstein struck with government agencies stipulated that the developer would finance the building with $464 million in insurance proceeds and other funds; $210 million in grants from the city and state; $300 million in tax-exempt mezzanine bonds; and $1.3 billion in a mix of Liberty and stimulus bonds. The government agencies committed to back $390 million of that $1.3 billion in debt. And this January, Senator Chuck Schumer announced that he was able to secure $340 million in federal bonds via the Recovery Zone Bond program for the tower.
Silverstein is now in talks to raise more private capital in exchange for tweaks to the government debt guarantee, people familiar with the discussions told the newspaper. Four-fifths of the tower remains vacant — though it did secure a branch of advertising giant WPP as an anchor tenant last month — and it has only risen eight stories so far.
In 2013, the municipal bond market had its worst year since 1994, with a loss of 2.55 percent for a key bond index. While prices have bounced back slightly in January, the tax-exempt market remains a difficult ones for issuers.
“There’s demand but it’s tempered demand right now for munis,” Robert DiMella, co-head of MacKay Municipal Managers, told the Journal. “They are not going to be able to come with just any structure and think the market will absorb it,” he added about the 3 World Trade financing. [WSJ] – Hiten Samtani