Six years after the Sept. 11, 2001, terrorists attacks, all the Liberty bonds created by Congress to help New York City recover have been allocated and most have been sold. In the aftermath of the attacks, Congress passed the Job Creation and Worker Assistance Act of 2002 authorizing New York State to sell $8 billion of bonds that would not be included under its private-activity bond cap allocation. What’s left at this point is $2.59 billion of bonds to be sold by the New York State Liberty Development Corp. on behalf of Silverstein Properties Inc. to help finance the construction of three office towers at Ground Zero — $701.6 million to be sold by the New York City Industrial Development Agency on behalf of the Port Authority of New York and New Jersey to help finance the construction of the 1,776-foot-tall Freedom Tower, and $50 million to be sold by the IDA on behalf of the Moinian Group to partially finance the construction of a W Hotel and condominium project near the World Trade Center site. Moinian plans to market its Liberty bonds in about a month, said the firm’s general counsel, Harry Dreizen. The remaining bonds for Ground Zero projects must be sold by Dec. 31, 2009, but neither Silverstein nor the Port Authority have set dates. The Freedom Tower is slated to be completed in 2011. Silverstein’s three towers will cost about $7 billion to build and will use a combination of Liberty bonds, insurance proceeds, and traditional financing, said Janno Lieber director of World Trade Center development for the firm. Silverstein plans to market the bonds in the next year or two, according to Lieber. “You want to utilize the money you have on hand which is the insurance payments, before you start the interest clock ticking,” he said.
Seven World Trade Center, which was also built with Liberty bonds, is now 75% occupied, he said. “The one thing that the period since 9/11 has taught us is do not underestimate New York’s economy,” said Lieber. “New York’s economy came back like gangbusters, and then we didn’t have enough class-A office space to accommodate the first-class companies with the first-class jobs that want to be in New York.”Construction on two of the towers is scheduled to begin in January and all three are expected to be ready for tenants in 2012. Although most of the bonds financed projects in lower Manhattan, other commercial projects financed with Liberty bonds include the $650 million new headquarters building for Bank of America at One Bryant Park in Midtown, the Atlantic Terminal office building in Brooklyn, and the InterActiveCorp’s headquarters in Chelsea. “The investment, particularly in the Bank of America building,was a critical investment in bringing a new major financial institution’s headquarters operation to New York,” said Kathryn Wylde president of the Partnership for New York City, an organization representing local businesses. Wylde said she thought the commercial and residential real estate market could not have recovered as quickly as it did without the Liberty bonds. “The market has been strategically reinforced by the investment of Liberty bonds in a variety of projects around the city,” she said. “The proof of the wisdom of those investments, is the strength of the lower Manhattan market.” Office vacancy rates in downtown Manhattan have fallen to almost pre-9/11 levels, according to research by Cushman & Wakefield Inc. The office vacancy rate downtown in August was 6.9%, according to Cushman. In the second quarter of 2001, the downtown office vacancy rate was 6.5%, which increased to 13.4% in the second quarter of 2002.The state allocated $1.6 billion for housing in Lower Manhattan which was split between the New York State Housing Finance Agency and the New York City Housing Development Corp. Although both agencies sell bonds to provide financing for developers who set aside a portion of the development for low and moderate-income housing, there was no such restriction on these bonds that financed almost entirely market rate, luxury housing. The HFA used its bond allocation to provide financing for 2,287 units of housing at eight projects while the HDC used its allocation to finance 2,489 units of housing at six projects. Although the HDC’s housing was market rate, it set aside fees generated from the Liberty bond transactions to help finance affordable housing at six other projects. The program has been criticized as benefiting larger, well-connected companies.“It’s certainly been a boon to developers particularly to ones that already had access to financing and capital,” said Bettina Damiani, director of Good Jobs New York, a government watchdog group.
