The proposed agreement will allow four office towers to be built, although one will be delayed indefinitely because of the poor economy. The tentative arrangement was announced by the Port Authority of New York and New Jersey following a board meeting Thursday.
"We are in a position where the parties are all on the same page," Port Authority Chairman Anthony Coscia said.
The parties will have 120 days to negotiate details of the deal announced Thursday. The agreement will then be presented to the Port Authority board for final approval.
Construction is under way on 1 World Trade Center, a memorial and a transit hub, but other planned towers have been stalled in a dispute over financing.
The plan calls for the immediate restoration of the east side of the WTC site to at least street level, the completion of Tower 4 by 2013 and the phase-in of Towers 2 and 3 over time. All other projects, including the 9/11 Memorial, One World Trade Center, the WTC Transportation Hub and other public infrastructure, will continue moving forward.
The proposed development plan is the result of negotiations between the city, Silverstein Properties, the Port Authority, the States of New York and New Jersey over how to finance and build the three office towers on the east side of the WTC site, the parties said in a joint statement today.
Under the proposal outlined Thursday, Silverstein Properties is responsible for building Towers 2, 3 and 4 while the Port Authority will develop One World Trade Center and Tower 5, in addition to the WTC Transportation Hub, the 9/11 Memorial, the Vehicle Security Center, Greenwich and Fulton Streets, retail development and related infrastructure.
The agreement strikes an important balance between the redevelopment goals, financial risks and rewards between the public and private sector, the parties said in a statement. To protect public interests, mediators developed private development benchmarks.
Developer Larry Silverstein applauded the tentative agreement.
"Today’s agreement between my company and the Port Authority will accelerate the rebuilding of the World Trade Center. This is great news for New York," he said in a statement. "I'm grateful to Governor Paterson, Mayor Bloomberg, Speaker Silver, Governor Christie and all their hard-working staff members for their determination to make sure Downtown re-emerges as a world-class neighborhood – for the business and residential community, and for visitors who will be drawn to the Memorial and everything Downtown has to offer."
The proposed development plan and framework would include the following key elements:
- Tower 4: With about 60 percent of the tower being pre-leased to the Port Authority and City of New York, the Port Authority would provide a master lease for the project supporting the issuance of Silverstein’s Liberty Bonds to finance a portion of the tower's construction costs. Any Port Authority payments made under the master lease would be reimbursed by Silverstein Properties.
- Tower 3: The immediate construction of the Tower 3 transit and retail podium, with the construction of the office tower to follow so long as Silverstein Properties hits the following private-market triggers: (1) Raises $300 million of private unsupported equity, (2) Pre-leases 400,000 square feet of the office tower, and (3) Obtains private financing for the remaining cost of the tower without a full public backstop.
To help Silverstein Properties obtain this private financing without a full public backstop, it would receive a capped public backstop of $390 million from the Port Authority, New York State and New York City, together with $210 million of equity from the City and the State of New York, with each public entity’s contribution limited to a total of $200 million.
Any payments under the backstop would be reimbursed by Silverstein Properties and the public sector entities would also have a future Tower 3 capital events participation. The City’s contribution is to be paid for using foregone revenues that will not be collected if the tower does not go forward. Until the public backstop is removed, Silverstein Properties would not be entitled to take profits out of Tower 3.
- Tower 2: The Tower 2 site would be built to at least street level under a plan to be jointly developed by the Port Authority and Silverstein Properties. This plan would preserve flexibility for the future development of the office tower driven by market demand.
- Insurance: Silverstein Properties would use its remaining insurance proceeds toward the construction of Towers 3 and 4 and the payment of ground rent to the Port Authority.
- Liberty Bonds: Silverstein Properties would use all of its Liberty Bonds for Towers 3 and 4.
- Construction Partnership: Silverstein Properties and the Port Authority would jointly develop a plan to better integrate their construction teams given all of the interrelated work on the east side of the WTC site. This would include a more formal process of information-sharing, decision-making and schedule development and implementation, as well as reciprocal mechanisms relating to delay to provide investors, lenders and tenants with reasonable certainty of timely project delivery.
State Assembly Speaker Sheldon Silver, whose district includes the trade center site, praised the agreement.
"It is a great statement that we will rebuild lower Manhattan,'' Silver said, adding, "I think it's a deal that works for everybody. The taxpayers are protected.''