The Port Authority of New York and New Jersey does not expect to go to market with $701 million of Liberty bonds to help finance construction at the World Trade Center site before the Dec. 31 expiration of their authorization, a spokesman said yesterday.
The agency, which has “no plans to access Liberty bonds this year,” is trying to get their authorization extended, said spokesman Steve Coleman.
“The Port Authority has asked for our help in extending the Liberty bonds and we are supportive and fully intend to help,” Ilan Kayatsky, spokesman for Rep. Jerrold Nadler, said in an e-mail.
The authorization was extended once before, in 2004, as progress at the site went more slowly than originally anticipated. Progress is still slow going and the Port Authority is in negotiations with Silverstein Properties Inc., which holds a lease to the site, over its development and financing.
The Port Authority was allocated the bonds under a federal program enacted by Congress to revitalize New York City following the Sept. 11, 2001, terrorist attacks. The federal government authorized $8 billion of private-activity bonds to be sold outside of New York State’s annual cap. The New York City Industrial Development Agency would issue the bonds on behalf of the authority to partially finance the $3.1 billion, One World Trade Center project.
Silverstein Properties was allocated $2.59 billion of bonds to help finance the construction of towers 2, 3, and 4 on the site. Those bonds are to be issued through the Liberty Development Corp., a subsidiary of the Empire State Development Corp. It’s not clear when they could be sold.
Silverstein Properties has been in private negotiations with the Port Authority to try to secure financing for the project since the credit crunch and weak economy have made traditional financing more difficult. According to a Port Authority official, Silverstein Properties has proposed that the authority sell bonds backed by lease revenue on one of the towers and that the agency would make debt service payments if revenue fell short.
“We are not asking the Port Authority for money,” Janno Lieber, president of World Trade Center Properties, said in a statement. “We are asking them to backstop our financing, which will allow us to obtain conventional financing so we can build these towers.”
Port Authority officials yesterday reacted to press reports and a study by real estate firm Cushman & Wakefield that said the approximately 10 million square feet of office and retail space to be constructed on the site might not be fully occupied until 2036 due to market conditions.
The agency’s proposal is to build the necessary infrastructure and platforms to support the towers so that they can be built out as the market develops for the office space, according to a Port Authority official.
Authority executive director Chris Ward said yesterday that study supported their proposal.
“Using the Port Authority’s balance sheet to build a speculative office building without the market to meet it, without tenants who would end up filling that market, becomes potentially financially risky, destabilizes the real estate market, provides a building with no tenants moving over downtown at a time when the market has yet to fully recover,” Ward said.
“We’ve advanced a plan that we think is financially responsible,” said Port Authority chairman Anthony Coscia. “The reason why we’ve been careful about each step that we’ve taken is to be sure that we safeguard the credit quality of the Port Authority and that we invest money in downtown in a way where we can ensure that it will not have a negative effect on us financially.”
Standard & Poor’s analyst Joseph Pezzimenti said the uncertainty at the World Trade Center site should be looked at in context of the Port Authority’s entire operation which includes ports, airports, bridges, tunnels, and mass transit.
“Their major revenue is really their aviation,” Pezzimenti said. “The World Trade Center ... is a large capital project, but given the fact that [the Port Authority] does have such a diverse portfolio of essential public goods that kick off revenues, that kind of offsets other parts of their business.”