- Real Estate
- Under Cover
- Special Editorial
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BY DAVID STANKE | The Port Authority is on the brink of ensuring that the World Trade Center will be restored some 17 years after the its complete destruction. This is not a bold accomplishment, and given the history of indecision and misdirection, it should also be no surprise that the Port is about to blink.
If the Port provides a loan guarantee to Silverstein Properties Inc., the developer will proceed with the construction of W.T.C. 3 and in a few years, the site will have three completed office buildings, three contiguous blocks of retail attached to an iconic transportation hub, and the economic and spiritual center of Lower Manhattan will be fully operational (although still not complete).
If the Port blinks, the W.T.C. will be mired with two stalled buildings and segmented retail.
The P.A. is debating whether to expand an existing loan guarantee for S.P.I. on W.T.C. 3 to $1.2 billion, about one half the cost of the building. In exchange, Silverstein would pay interest and fees to the Port, increase equity in the building to $500 million, and give the authority a foreclosure option. Under best circumstances, the P.A. will earn fees for the guarantee and lose nothing. Under worst circumstances, they will get a $2-billion, architecturally-significant building with an anchor tenant in the best location south of 35th Street for 50% of the cost. Silverstein would suffer an intolerable loss of both their equity and $500 million in insurance proceeds, under this scenario.
The loan guarantee would ensure that the site would be largely functional within four years, leaving just one office tower and the cultural center on hold. Connections with surrounding buildings and communities, and three blocks of retail would be open. It would ensure that, 17 years after the destruction of the W.T.C., the spiritual center of Lower Manhattan would be back. Better late than never.
Often there are divisions at the Port between appointees of New York and those of New Jersey, but in this case, two New York appointees are battling, according to the New York Times. While Scott Rechler, the Port’s vice chairperson, is negotiating these guarantees with S.P.I., another board member, Kenneth Lipper, opposes the plan because of the risk it adds to the authority’s financial position and because he wants the P.A. to invest in a bus terminal modernization in Midtown. And so it is with the Port. Words come out one side, contradictory words come out another.
The W.T.C. was the target of a direct attack on the continental U.S. by foreign enemies, but the obligation to restore the site is considered by Lipper to be just a “patriotic gesture” and a “vanity project.” Excuse me sir, but to neighbors of the site, rebuilding the W.T.C. is a moral obligation of this country— the Port Authority’s moral obligation.
As a residential neighbor of the W.T.C., I am in favor of accelerated completion of the site.
The loan backstop is a good financial bet. While there is office space available in surrounding buildings, there are regular announcements of companies interested in making the move Downtown, Time Magazine being the latest. As properties become available, they will fill, because the rents are competitive and the facilities will be first class.
W.T.C. 3 will not be available for 4 years, by which time the current space nearing occupancy should be largely occupied: W.T.C. 1 is already 55% occupied while W.T.C. 4 is 60% full. For reference, W.T.C. 7 has 1.7 million square feet and was empty when it was completed in 2006 but was 100% leased at high rates by 2011, at a time when the rest of the W.T.C. was still a stagnant wasteland.
Completion of W.T.C. 3 will remove uncertainty concerning future construction. The Westfield Group has indicated that it will not take the W.T.C. 3 retail space until the tower is complete, delaying another $150 million payment to the P.A. The removal of uncertainty will be a major selling factor for both the P.A. and Silverstein as they market available office space.
The loan guarantee benefits New Jersey as well as New York. New Jersey residents will have expanded job opportunities in New York with convenient and efficient transportation. Peripheral businesses, both commercial and residential, will thrive across the Hudson River.
The states of New York and New Jersey have already mismanaged the reconstruction of the W.T.C. by approving excessively expensive plans, by delaying action.
The governors may not like the current position, but but we are in it because of their predecessors. Getting W.T.C. 3 built will help cover 13 years of mistakes. Pulling back now will simply expose the P.A. to the full weight of the previous excesses.
Government in some way subsidizes all private enterprise; it’s just that some get more subsidies than others. The question is, whose friends are going to get subsidized and how? S.P.I. has operated under the reverse subsidy (i.e. penalty) of P.A. indecision and inaction for too long. The loan guarantee is just balancing the ledger.
Perhaps, Gov. Christie is against W.T.C. development because it will compete with projects across the river, or maybe he just wants to punish somebody. The scope of pettiness within the decision-making corridors of the P.A. have been completely exposed by the George Washington Bridge scandal.
Ironically, the P.A. was originally given the site because it could accelerate development of a new commercial center to revitalize the then stagnant Downtown. Now, it should be pretty clear to the casual observer that the Port Authority can’t execute in a reliable, predictable, manner. It is the Great Oz. Sounds emanate from behind the smoke and mirrors. But we in the audience never really know who is behind the sound. We are prisoners of obscurity in a Downtown interrupted.
David Stanke lives near the World Trade Center and often writes about Downtown.