The Port Authority of New York and New Jersey will sell up to $1 billion of taxable bonds this summer to help finance construction of One World Trade Center in lower Manhattan.
Upon completion, the building will be the tallest in the United States and home to media giant Condé Nast. Construction of the building is set to finish by the end of 2013.
The bi-state agency’s board Wednesday approved the bond sale and a 25-year, $2 billion lease agreement with Condé Nast, publisher of Vogue, Vanity Fair, the New Yorker, and other national magazines. Following the board meeting, Port Authority officials and representatives of Condé Nast signed the rental contract on site at One World Trade Center.
Citi will be senior manager on the taxable bond deal. The authority already sold $1.6 billion of municipal debt to construct the skyscraper and to fund retail development and infrastructure needs at the site. Officials anticipate those funds will run out in about two months and the upcoming sale will help finance $1.3 billion of construction costs through the first quarter of 2012, according to Port Authority treasurer Anne Marie Mulligan.
The agency plans to issue the bonds as taxable securities since One World Trade Center will serve as a commercial real estate development. Condé Nast will lease more than one million square feet of office space, or one-third of the property. It will relocate from its midtown Manhattan location sometime in 2014.
Port Authority executive director Christopher Ward told the board Wednesday that the Condé Nast lease puts One World Trade Center “on a firm economic footing going forward.”
In March 2009, China Center New York LLC signed a lease to occupy more than five floors, or 190,810 square feet. China Center New York helps Chinese companies expand in the U.S. The skyscraper has 1.8 million square feet of office space available for rent.
Along with the $1 billion of taxable borrowing, the board approved amendments to its bond resolution. The agency may now issue bonds for WTC development with maturities beyond 35 years and sell bond series in amounts over $500 million.
The authority in October sold $850 million of bonds for One World Trade Center and other infrastructure needs at the site. Officials chopped the transaction into two equally sized series to stay within the $500 million limit, which gave investors pause.
“It raised questions in the marketplace and among the investment community,” Mulligan said Wednesday during a finance committee meeting. “Removing this limitation would only apply to the consolidated bonds issued for the World Trade Center projects and would enable the Port Authority to achieve greater transactional efficiencies and support the execution of the complex financings for these projects.”
The agency’s total WTC borrowing capacity is $4.5 billion.
Ward touted Condé Nast’s ability to attract other businesses to the site and to downtown Manhattan, and said other midtown Manhattan companies and international businesses are expressing interest in the skyscraper. The Condé Nast lease is the largest tenant agreement in lower Manhattan in 25 years, “signaling to the entire real estate market that One World Trade Center is New York’s first address for premier corporate tenants,” Ward told the board.
Condé Nast will occupy floors 20 through 41 and generate $2 billion of rental income for the Port Authority over 25 years. The lease has an option to renew.
One World Trade Center will run 1,776 feet high and offer 71 stories of office space. The building will include 550,000 square feet of retail space and an observation deck, and will connect to mass transit hubs. It is the centerpiece high-rise building of the city’s redevelopment plan for the World Trade Center site. The World Trade Center was devastated by the Sept. 11, 2001, terrorist attacks.
