Real estate developer Larry Silverstein, who holds the rights to build on Ground Zero, is asking the state and city for permission to sell $3.3 billion worth of so-called Liberty Bonds to help finance the office towers that are supposed to rise on the site. He must be required to make some very big promises to get them.
Gov. Pataki and Mayor Bloomberg must use every bit of leverage they can apply to persuade Silverstein to surrender his near total control over building the mega-project. And, critically, they must insist that Silverstein forfeit the bonds if his development scheme doesn't meet the tightest possible schedule for construction.
Created by the federal government after 9/11, the bonds are a critical economic development tool that must not go to waste. If Silverstein falters for a minute, he must lose them. And there is great concern he will falter because his plan to build 10 million square feet of office space in five buildings around Ground Zero is economically dubious, even if he does receive all the proceeds of the insurance he had on the World Trade Center.
Just two months before 9/11, Silverstein leased the twin towers from the Port Authority, giving him control of the entire site. After lengthy and continuing court battles, he stands to collect a maximum of $4.6 billion in insurance money. But he already has spent $1.4 billion of the money, leaving at most $3.2 billion to pay for the five buildings, just one of which, the Freedom Tower, is projected to cost $2 billion. He needs the Liberty Bonds to help pay for the remainder, the bulk, of the construction.
The difficulty is that there is very little demand for office space in lower Manhattan, let alone 10 million square feet of it. Silverstein's spanking new tower across from Ground Zero, called 7 World Trade Center, sits vacant, and he has yet to sign a tenant for the Freedom Tower that is supposed to be the centerpiece of the development.
Silverstein says a new marketing program for 7 World Trade Center and state and city financial incentives for tenants will soon produce major lease signings, demonstrating that many big businesses will be interested in lower Manhattan. He'll have to forgive our skepticism, first, because the area is rapidly going residential and, second, because state and city officials say Silverstein's financial projections may be wildly optimistic. They question whether he would be able to charge rents that are high enough to meet the cost of construction and repay debts, making it impossible for him to sell the Liberty Bonds.
Pataki, Bloomberg and the Port Authority have been trying to pressure Silverstein to reduce his role at Ground Zero. Their aim is to speed construction all around the site, including major retail development and some housing. That is clearly the way to go, but it requires persuading Silverstein to limit himself to one or two buildings and to surrender the remainder of the development rights.
The governor and the mayor have leverage right now because Silverstein needs the Liberty Bonds. They must use their power to full advantage and, at all costs, they must not give the bonds to Silverstein without the power to demand their return the moment he falls behind schedule.
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- bill 12-09-2005 8:27 pm
Just two months before 9/11, Silverstein leased the twin towers from the Port Authority, giving him control of the entire site. After lengthy and continuing court battles, he stands to collect a maximum of $4.6 billion in insurance money. But he already has spent $1.4 billion of the money, leaving at most $3.2 billion to pay for the five buildings, just one of which, the Freedom Tower, is projected to cost $2 billion. He needs the Liberty Bonds to help pay for the remainder, the bulk, of the construction.
The difficulty is that there is very little demand for office space in lower Manhattan, let alone 10 million square feet of it. Silverstein's spanking new tower across from Ground Zero, called 7 World Trade Center, sits vacant, and he has yet to sign a tenant for the Freedom Tower that is supposed to be the centerpiece of the development.
Silverstein says a new marketing program for 7 World Trade Center and state and city financial incentives for tenants will soon produce major lease signings, demonstrating that many big businesses will be interested in lower Manhattan. He'll have to forgive our skepticism, first, because the area is rapidly going residential and, second, because state and city officials say Silverstein's financial projections may be wildly optimistic. They question whether he would be able to charge rents that are high enough to meet the cost of construction and repay debts, making it impossible for him to sell the Liberty Bonds.
Pataki, Bloomberg and the Port Authority have been trying to pressure Silverstein to reduce his role at Ground Zero. Their aim is to speed construction all around the site, including major retail development and some housing. That is clearly the way to go, but it requires persuading Silverstein to limit himself to one or two buildings and to surrender the remainder of the development rights.
The governor and the mayor have leverage right now because Silverstein needs the Liberty Bonds. They must use their power to full advantage and, at all costs, they must not give the bonds to Silverstein without the power to demand their return the moment he falls behind schedule.
- bill 12-09-2005 8:30 pm [add a comment]