Silverstein to be reimbursed $98M of WTC investment

Real Estate Weekly, Dec 3, 2003 by Peter Moore

Larry Silverstein reportedly will be reimbursed much of his reserve funds he invested six weeks before terrorist slammed jets into the Twin Towers of the World Trade Center. The New York Times reported Nov. 22 that Silverstein and his co-investors would receive $98 million, about 80 percent of the $125 million they invested in equity in 2001. The 99-year lease with the Port Authority was valued at $3.2 billion. The investors along with the Port Authority, who owned the buildings, are using insurance proceeds to pay off GMAC Commercial Mortgage Corporation, Silverstein's lender, a reported sum of $563 million.

Silverstein and his partners will retain their 99-year lease and play a large part in the redesigning of the area. A new collaborative design for the Freedom Tower, the brainchild of architects David Childs and Daniel Libeskind, is scheduled for release next month.

Howard Rubenstein, a spokesman for Silverstein, released a statement the day the Times article appeared, saying that Silverstein was rightfully entitled to the funds he used as collateral for a loan to make a down payment on his lease.

"The GMAC reserves that are being returned to his companies were established to secure the GMAC mortgage loan," Rubenstein said. "Now that the mortgage loan has been satisfied, there is no reason for the security for that loan to remain tied up in escrow accounts earning minimal interest."

According to Rubenstein, the days of Silverstein seeing a return on his Ground Zero investment are a long time in the future.

"When it comes time to refinance the project, Mr. Silverstein's companies likely will have to put up the same or more amounts of security for those new loans," Rubenstein said. "In the interim, as part of his agreement with the Port Authority, Mr. Silverstein is committing 100 percent of all future business interruption proceeds to the project. As a result of this commitment, Mr. Silverstein and his investors likely will not see any return for a decade."

Following the Times article, a state judge issued a gag order on all participants in the anticipated deal. PA spokesman Greg Trevor declined to comment, citing the gag order. Silverstein has been deadlocked in a battle with the trade center insurers since the attacks. The leaseholder claims the two planes striking the towers constituted two separate disasters and should result accordingly in a $7 billion insurance payout. The insurers claim the strikes were one disaster and are offering $3.5 million.

The insurers have paid out about $1.9 billion to date.

The Times also reported the Port Authority has reached an agreement to buy out Westfield America, which operated the retail mall at the trade center, for $140 million.