Larry Can Wait

Larry Silverstein may be in a better negotiating position than people think. Sure, he is paying the Port Authority more than $10 million a year for 16 desolate acres that yield no manna, but a year ago, Silverstein said he would not need to begin drawing on the $3.5 billion in Liberty Bonds—the center of this whole dispute, remember--until 2009. “Applicant anticipates a series of Liberty Bond closings in 2009,” his April 13, 2005, Liberty Bond application states, in response to a question about when the applicant wants the proceeds from the bonds to be available.

In other words, Silverstein thought he could get by on his insurance proceeds, paying the rent, erecting much of both the Freedom Tower and Tower Two, and beginning design work on subsequent structures, for another three years. And at the time the application was submitted—days before the old design was scrapped—Silverstein was operating on a different timeline, under which the first tower would go up at the end of 2009, about a year before current projections.

Nor should the lack of tenants at 7 World Trade Center, which will open in May, be taken too seriously. According to an April 11, 2005, report by Merrill Lynch, Silverstein put away $57.1 million to pay off interest for the first two years to buy time for leasing up. Merrill guesses that the break-even rent at 7 WTC is really in the low- to mid-30s, meaning that, if desperate, Silverstein can drop his asking rent by another $15-20 a square foot, attract more customers, and still pay off his debt on that tower.

Silverstein's finances are sort of a black box. Mayor Bloomberg claims to have penetrated it and sees bankruptcy looming. But on the basis of this application, Silverstein appears financially strong enough to wait until he gets the deal he wants.

-Matthew Schuerman