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Port Authority Said to Seek Cash From Silverstein in WTC Deal
By David M. Levitt
March 26 (Bloomberg)
The Port Authority of New York and New Jersey demanded that developer Larry Silverstein put up cash before it gives him financial assistance to build at the World Trade Center site, a person familiar with the matter said.
Silverstein is being asked to put equity into the project after he sought agency guarantees for construction financing on two of the three towers he wants to build there, said the person, who asked not to be named. Negotiations are ongoing.
The dispute threatens to stall redevelopment of Ground Zero just when the project is moving forward. Steel for the Freedom Tower, which is among four skyscrapers planned for the site of the Sept. 11 terrorist attacks, is rising above the sidewalk. The authority’s request may be difficult for Silverstein to fulfill since credit is scarce, said Stephen Blank, principal researcher for the Urban Land Institute in Washington.
“Substantially everyone has the same refinancing problem coming up in the next couple of years,” said Blank. “People are guarding liquidity in every way they can. That does not say that if Larry’s team goes to his traditional sources, he can’t get the deal done. It’s just a more difficult environment.”
Silverstein spokesman Dara McQuillan declined to comment. Silverstein and the authority are in talks over the agency’s inability to make the Trade Center site ready for construction, another spokesman, Bud Perrone, said in a statement.
‘Private’ Talks
Port Authority spokeswoman Candace McAdams declined to comment. Authority Director Christopher Ward said today the agency is in private negotiations with Silverstein on how “to shape the site to meet the market, and deliver the necessary infrastructure and office space.”
Asked if there is a limit to the authority’s capacity to financially assist Silverstein, Chairman Anthony Coscia said: “Yes.”
“The Port Authority is not recession-proof,” Ward said. “Mr. Silverstein understands that and respects that, and will strike a bargain to bring on the site as the market sees fit.”
Silverstein and his partners are responsible under a 2006 agreement with the authority to build three towers for about $6 billion. The agency, owner of the 16-acre Trade Center site, is building and financing the 1,776-foot, $3.1 billion Freedom Tower.
Financing Guarantee
Silverstein asked the authority to guarantee his financing to limit his need to tap commercial lenders.
The authority has agreed to spend $8.4 billion on trade center projects, out of a total $29.5 billion 10-year capital budget, and is reluctant to spend more.
The agency has committed $2.6 billion to an $8.7 billion rail tunnel across the Hudson River, which could double commuter rail capacity from New Jersey and New York. It has also been asked to take over the Moynihan Station rail terminal project.
Backing Silverstein would require more than just a promise to pay. The authority would have to set aside the money to cover bonds that are issued, the person said.
Silverstein pays the agency $79 million a year from a $4.5 billion insurance settlement from the terrorist attacks. He and his partners, including New York real estate investor Lloyd Goldman, received $98 million from the insurance, leaving them with almost no equity in the three-skyscraper project.