Silverstein needs a guarantee from the Port Authority of New York
and New Jersey to secure a $1.2 billion construction loan for 3
World Trade Center. On Wednesday, the agency's board will vote on
whether to approve that guarantee, part of a deal that would provide
hundreds of millions of dollars more to the Port Authority and allow
it to foreclose on the $2.4 billion tower if Silverstein cannot pay
debt service costs.
But Silverstein's deal, even with the concessions to the Port
Authority, has become entangled in a fierce debate within the agency
over its mission, including whether it should be in the real estate
business at all.
Those questions have emerged since the so-called Bridgegate scandal
erupted earlier this year. Operatives loyal to Christie's
administration caused massive traffic jams on the George Washington
Bridge in September, an alleged act of political retribution against
a local New Jersey mayor who did not endorse Christie for
The controversy has led to scrutiny of every corner of Port
Authority operations, as well as the resignation of the agency's
deputy executive director and board chairman, both Christie
Most pertinent to Silverstein, it has also led to open debate at the
authority — something in which it has not frequently engaged — and
to the creation of an internal oversight committee examining
operations, governance and political meddling.
Critics have charged that rebuilding the World Trade Center area,
which stalled for years after the September 11, 2001 terrorist
attacks decimated the site, has taken too much time and energy away
from other projects that are more critical to its bi-state
The rebuilding of the World Trade Center "opened the door" for an
expansion into areas outside the agency's mission, said Robert Yaro,
president of the Regional Plan Association.
While the RPA was originally in favor of the authority leasing the
site, the association had also hoped the Port Authority would sell
the land, he said on Monday during a meeting of the Port Authority's
new oversight committee.
"The only thing to do now is to finish the project," he said, adding
that the agency should then get out of all other extraneous
Port Authority commissioner Kenneth Lipper has lobbied openly and
repeatedly against the Silverstein loan guarantee. Acting Board
Chairman Scott Rechler has said he supports it, however.
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At least three board members from each state must approve
Silverstein's agreement for it to pass. If it fails, the original
2010 deal would remain in effect, and construction of the tower
could be indefinitely delayed. Silverstein has so far been unable to
raise the senior debt in part because the market for letters of
credit had dried up because of the recession.
Silverstein has made progress on two of the other four planned
towers at the site. The "Freedom Tower" at One World Trade Center is
slated to open later this year, and the smaller 4 World Trade Center
opened in November.
He has already spent about $500 million of insurance proceeds to
build the lower eight floors of 3 World Trade Center under the 2010
agreement because some of the below-ground infrastructure there was
needed to support a Port Authority transit hub.
"To have a dark stump, ad infinitum, sit in the middle of our reborn
downtown is going to be incredibly discouraging to potential
tenants, to residents, to shoppers, to tourists," said Janno Lieber,
Silverstein's head of construction at the site, about what's at
stake in Wednesday's vote.
Under the revised agreement, which the parties have been negotiating
for at least nine months, Silverstein would pay up to about $100
million over many years for the credit enhancement from the Port
Authority — something he has never paid the agency for before,
according to two sources with knowledge of the deal who requested
anonymity because of its sensitive nature.
Once the space is open, the agency is also slated to receive a $230
million payment from retail operator Westfield America, as well as
additional ground rent of at least $70 million.
(Reporting by Hilary Russ; editing by Richard Chang)
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