3 WTC and the Port Authority’s big voteBy
In the ongoing debate over the future of the Port Authority, Wednesday looms as a potential turning point as the PA’s board gathers to vote on the fate of a loan for 3 World Trade Center. With leasing at a near standstill in his 4 WTC (and in the PA’s 1 WTC), Larry Silverstein has once again come to the Port Authority for a multi-billion-dollar loan guarantee for an office building, and for once the Port Authority board is showing signs of fighting back. With politicians, transit advocates and Port Authority reformists watching, Wednesday’s vote could be a monumental one; it will definitely be newsworthy.
The immediate controversy at Ground Zero has come about due to Silverstein’s desire to keep building up. It’s not currently an easy one to fulfill as, according to an article in the Wall Street Journal, the other two WTC buildings — both constructed either with PA money or with PA loans — aren’t exactly filling up. “Neither One World Trade nor 4 World Trade has signed a lease with a private office tenant in nearly three years,” Eliot Brown reported. “Between them, that leaves more than 2.5 million square feet of unleased space—double the size of the Chrysler Building—at a time of contraction of the big banks that are among such buildings’ likelier prospective tenants.”
With an increased attention on the desire to refocus the Port Authority on its transportation mission, Kenneth Lipper, an investment banker on the PA board, has led the charge against another tax giveaway to Silverstein. “We can’t have these peripheral distractions,” he said, calling the construction projects “an inappropriate investment” for the Port Authority.
In a column in yesterday’s Times, Joe Nocera expanded on this concept:
Whether or not building commercial skyscrapers was the right way to rebuild Ground Zero, what can be said for sure is that the Port Authority has shown, yet again, that it doesn’t belong in the real estate business. One World Trade Center is the most expensive high-rise building ever built in America, and it is costing the Port Authority a fortune. Only 55 percent of its 2.6 million square feet has been leased, and most of that is at a significant loss. Meanwhile, 4 World Trade Center, which was developed by Silverstein, has only 60 percent of its space leased. As The Wall Street Journal pointed out recently, between the two buildings, there is more than 2.5 million square feet of unleased space at Ground Zero.
So why in the world would the Port Authority be willing to back another $1.2 billion in loans to help Silverstein build 3 World Trade Center? Yet on Wednesday, that is exactly what the Port Authority board is supposed to vote on. Silverstein needs the loan guarantee for a simple reason: The market is saying that, with all that empty office space, this is not the time to be building another skyscraper downtown…This time, somebody on the board has finally stood up and said, “Enough.” That person is Kenneth Lipper, an investment banker and a former deputy mayor of New York, who was appointed to the Port Authority board last year by Gov. Andrew Cuomo of New York.
“There is simply no reason for the Port Authority to step in,” he told me on Monday. “The private sector is appropriately saying, ‘Not now.’ ” But he also had another objection, one that heralds back to the original purpose of the Port Authority. “Our role is to develop the transportation infrastructure of this region. We have more infrastructure needs than we can finance through our revenue base. As a result, we are triaging necessary transportation improvements to finance what will be an empty building.”
How this ends is anyone’s guess. While Lipper is leading the opposition, some PA board members seem willing to hand over a blank check to Silverstein, and Sheldon Silver, for one, is putting pressure on the board to approve the funding request. Silverstein and his team believe the loan will eventually be paid back down the line when the PA can realize revenues from these new office buildings, but between Ground Zero, Hudson Yards and a potential East Side rezoning effort, it’s not yet clear that all the square footage flooding the market over the next few years will go quickly.
Meanwhile, in the aftermath of the George Washington Bridge scandal, an independent panel has urged the PA to shed its shackles of governor control. PA doings should be public and books transparent. One way to start would be, as Lipper suggests, to refocus on transit and transportation at the expense of another World Trade Center building that may not be all that necessary.