The New York Post

The Bond Buyer January 15, 2003, Wednesday

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Developer's Building Gets Liberty Bonds Silverstein Lauds 7 World trade OK

By Ryan McKaig

In a move officials said signifies the first step toward rebuilding the World Trade Center site, the New York City Industrial Development Agency yesterday approved $400 million in Liberty bond financing to help finance the construction of 7 World Trade Center.

"The New York Liberty bond program is a major tool for securing lower Manhattan's position as the financial capital of the world," said IDA president Andrew M. Alper in a prepared statement released after the board voted yesterday. Larry A. Silverstein, the developer of 7 World Trade Center, which is expected to cost $1.2 billion, hailed the IDA's decision in a statement released yesterday as a "great day for lower Manhattan and New York. Today's action by the IDA assures that construction of the new 7 World Trade Center will go forward, the first building to be rebuilt at the World Trade Center site ."

The project, which is expected to begin in May, will replace the original 7 World Trade Center, which was destroyed along with the Twin Towers in the devastating Sept. 11, 2001, terrorist attacks. Silverstein owned the land and the 7 WTC building and held a 99-year lease on the Twin Towers, which was signed just weeks before they were toppled. Silverstein will finance the construction of 7 WTC with the tax-exempt bond proceeds and money he received from insurance he had on the original building.

The decision to sell tax-exempt bonds for Silverstein was delayed until yesterday in order to provide better public notice on the development. There were also questions about the cost of the new building and the amount of insurance proceeds available to the developer. The 52-story tower, which will feature 1.7 million square feet of office space, is the second commercial project the IDA has approved for Liberty bond financing since the program's inception last March, and the first in lower Manhattan. The IDA board in September approved $113.9 million in Liberty bonds for a 10-story office tower in downtown Brooklyn whose anchor tenant will be The Bank of New York.

In all, New York City and state can collectively issue $8 billion in Liberty bonds through the end of next year. Of the $8 billion, $6.4 billion is slated for commercial projects, with the remaining $1.6 billion available for residential projects.

Along with the New York City IDA, three other issuers are empowered to sell the special private-activity bonds, which are not subject to the federal alternative minimum tax or the state's private-activity volume cap. The other issuers are the New York City Housing Development Corp., the New York State Housing Finance Agency, and the New York Liberty Development Corp. Congress approved the Liberty bond program to help spur redevelopment at the 16-acre World Trade Center site.

Although officials expect the program to play a significant role in rebuilding lower Manhattan, it has drawn relatively light interest from developers, according to sources at the administering agencies. Five projects have been approved for a total of roughly $853 million, but two of the issuers -- the New York City HDC and the New York Liberty Development Corp. -- have not yet approved any projects.

Bettina Damiani, project director for Good Jobs New York, an advocacy group, praised the IDA for approving Liberty bonds for 7 WTC, but warned that city and state officials need to do more than physically rebuild destroyed office space to repair the heart of the financial district. Noting that there is already empty office space in lower Manhattan, Damiani said local leaders need a comprehensive job-creation and retention strategy to ensure that buildings financed with Liberty bonds are not left partially vacant.

The Liberty bond program has become a key point of discussion in the ongoing effort to rebuild lower Manhattan. At an economic conference yesterday sponsored by New York City Comptroller William Thompson and the New York City Partnership, one prominent developer said that Liberty bonds could play a major role in the city's rebirth by financing the construction of affordable housing. "New York does not need any more market-rate rental housing," said Stephen Ross, chairman and chief executive officer of the Related Companies. He added that Liberty bonds could also be useful in building expanded laboratory space, a move he predicted would help lure biotech firms to Manhattan. Ross defined affordable housing as housing for families making between $100,000 and $200,000 annually. The Related Companies received roughly $100 million in Liberty bond approval by the state HFA last year to build a residential rental tower in downtown Manhattan. The New York City Council and various community groups criticized the deal because it called for the state to provide tax-exempt financing for a residential tower lacking a major affordable housing component.