The downtown office market might be coming to the rescue of 3 World Trade Center.
Not that any new leases were signed at Larry Silverstein’s planned, $2.3 billion tower since media firm GroupM inked for 550,000 square feet in December.
Rather, dramatic leasing momentum nearby has created what industry sources say is a more favorable financing environment over the past six weeks.
The new climate makes it more likely that Silverstein can secure a construction loan without the loan guarantee he’s so far failed to wrest from the distracted Port Authority.
The more receptive mood on the part of institutional lenders might matter more than a possible PA move, reported by Crain’s New York Business, to let Silverstein tap $150 million in insurance proceeds to help him build the 80-story 3 WTC, which is stalled at the eight-story “podium” level. The funds had been “lock-boxed” for use only in the event of construction cost overruns.
If the step is approved at a PA board meeting Wednesday, Silverstein would need to borrow slightly less for the project. It also would signal to GroupM, which is antsy over the possible scuttling of the new tower where it planned to move, that progress is being made.
Early this year, PA commissioner Ken Lipper and some journalists put a damper on Silverstein’s plea to the PA by touting a nonexistent office “glut.” Their argument was, why build a new, 2.5 million square-foot skyscraper if buildings nearby were going dark?
In fact, downtown’s availability rate of 13-plus percent was due mainly to the sudden addition of 1.5 million square feet of as-yet-unleased space at just-finished 4 WTC, and still wasn’t much higher than Midtown’s.
And, as we’ve reported, downtown leasing is on fire. Deals recently completed and in the works will lower availability to around 11 percent. Tech firm Media Math has a near-done lease for 120,000 square feet at Silverstein’s 4 WTC. Kids Creative just signed a downtown record, $90-plus per square foot lease at the PA’s and the Durst Organization’s 1 WTC.
At Brookfield Plaza, Time Inc. signed for over 700,000 square feet, and a relocation there by Bank of NY Mellon is near certain. Hudson’s Bay Co. will probably take around 450,000 square feet at Brookfield’s One Liberty Plaza.
But the PA board postponed a vote on Silverstein’s loan-guarantee pitch three times because PA vice-chairman Scott Rechler, a major proponent, didn’t have enough votes to approve it.
A lot is surely going on behind the scenes that’s known only to those privy to the media-insulated, PA-Silverstein hotline. But it would seem pointless, and spiteful, for commissioners to reject letting the developer tap $150 million of his own insurance funds.
For one thing, we’re told, the idea originated not with Silverstein but with PA board members who don’t want 3 WTC to remain an unfinished eyesore.
They’re also wary of losing tens of millions of dollars in additional ground rent Silverstein would pay the agency if 3 WTC is built. Failure to complete the skyscraper would also wipe out tens of thousands of square feet of commitments, which Westfield America controls. That, too would deprive the PA of rent to be paid by Westfield.
The $150 million would not likely be needed for cost overruns, since construction on the project’s retail podium, its most complicated and risky portion, is already completed.
Under a 2010 agreement, the financing structure for 3 WTC called for Silverstein to spend nearly $500 million in insurance money to build the podium. He must still raise $300 million in equity and/or mezzanine debt, a milestone that would trigger a $600 million backstop by the state, city and the PA.
For the remaining needed $1.3 billion, the GroupM lease satisfied a prerequisite for Silverstein to tap Liberty Bond financing.
Liberty Bonds are not a government obligation but tax-exempt bonds sold on the private market. It is that portion of the package that, even with the advantage of offering lenders a higher return, has so far eluded Silverstein.
American Apparel’s board is booting Chief Executive Dov Charney over alleged sexual-harassment antics, but the back-room brawling hasn’t laid a glove on its Manhattan business. The sportswear chain is staking out a hot Upper East Side corner, and plans to soon open at the coveted south corner of Trump Plaza at 1030 Third Ave. at 61st Street.
The 3,500 square-foot space previously occupied by Lobel’s Kitchen boasts wraparound windows and greater visibility than at its current spot three blocks north, which will close. The Trump Organization was represented by Douglas Elliman’s Dana Commercial Group of Gary Dana, Rick Dana and Adam Kramer.
Gary Dana said, “It’s more prominent than their old corner,” which is set back from the sidewalk and has less pedestrian traffic. He said the asking rent was $245 a square foot. Brokers at Millennium Real Estate, which repped American Apparel, didn’t return a call.
The lease means that at Third Avenue at 61st Street, where three of four corners remained embarrassingly vacant two months ago, only one now remains dark. In a deal brokered by Douglas Elliman’s Faith Hope Consolo and Joseph Aquino, Infinite Beauty recently signed for the corner space at 1031 Third Ave.
Meanwhile, the Dana team is bringing a popular Brazilian women’s sportswear chain to the city for the first time. Aquamar, which has 20 stores in Rio de Janeiro, signed for 3,100 square feet at 444 Broadway between Broome and Grand streets.
The Dana team co-brokered the deal with the landlord’s agent, Ripco’s Richard Skulnik. Gary Dana said the asking rent on the heavily trafficked Soho stretch was $350 a square foot, although the tenant paid less.