If the besieged Port Authority is to get out of the real-estate business to concentrate on its “core” transportation mission, the worst way to do it is to stop 3 World Trade Center in its tracks.
Killing 3 WTC would not only deprive the agency of $500 million in desperately needed short-term revenue from developer Larry Silverstein, but drastically reduce the future value of the PA’s $7.7 billion investment in the entire WTC site.
A fully or mostly built WTC can be a cash cow for the PA. But a half-finished one is a worse albatross around its neck than the blood-sucking, $4 billion-plus PATH terminal.
Leaving 3 WTC in its current unsightly state would make it near-impossible for the PA to sell the land under Silverstein’s sites in the future — a potential windfall for the agency — and also drag down the value of 1 WTC, in which the PA owns the majority stake.
Silverstein wants the PA to guarantee a $1.2 billion construction loan. The PA board is to vote on it Wednesday.
But why — given the agency’s fiscal and political woes — should the Port Authority risk a Silverstein default?
Because, thanks to an iron-clad foreclosure provision, default would let the PA swiftly take back Silverstein’s $2.4 billion tower for half price (because Silverstein will have put in $450 million and the disproportionately expensive lower portion is already built). The PA could then sell it for a huge profit in an age when Manhattan land and development rights have never been so dear.
“Getting out of real estate” isn’t as easy as simply leaving Silverstein in the lurch. After the PA sold him a 99-year lease in early 2001, the complexities that followed 9/11 forced the agency and the developer into a tormented, inescapable partnership.
The PA can, and should, make a lot of money off of it — money that can and should be used to help pay for airports, tunnels, bus terminal improvements, PATH trains and port facilities.
But if certain PA execs were motivated by real-world economics — rather than by politics, publicity or expediency — they’d suggest more rational and lucrative steps than leaving 3 WTC an unfinished eyesore.
The PA could, for example, sell its 80 percent stake in 1 World Trade Center to its very able 20 percent partner, the Durst Organization. Or it could offer it for sale on the open market once it’s fully leased, as it likely will be within a year.
Yet no one on the PA board is known to have suggested the idea.
Or, down the line, the PA can sell the land beneath Silverstein’s three tower sites — worth $25 billion in rent through the year 2100. The PA could sell the ground lease for a lump sum or a series of large payments — but it won’t find many takers if 3 WTC remains a useless, 7-story stump.
What about the short-term benefit of guaranteeing Silverstein’s loan?
The $500 million the PA stands to receive includes some funds too complex to discuss here, but most of them are easy enough to grasp: Once 3 WTC opens, Silverstein must pay the agency much higher rent — $25 million a year vs. $5 million now. Plus, the PA will collect $131 million from retail operator Westfield when the tower is completed.
The PA can kiss the half-billion bucks goodbye if it scuttles 3 WTC today — and only digs itself deeper into a hole.