Financial 411: A Warning From Boston About the Developer of 15 Penn Plaza

Every day this week, there has been more discouraging news about the housing sector -- and today is no different. Nearly one in 10 households with a mortgage is late making its monthly payments. And another 4.6 percent are already in foreclosure. But the report from the Mortgage Bankers Association did have some possible signs that the pace of foreclosures could be slowing.

"The problem loans, the seriously delinquent loans -- meaning loans in foreclosure, loans 90 days or more past due, loans going into foreclosure -- all those measures dropped," said Jay Brinkmann, the chief economist with the Mortgage Bankers Association. "Ultimately," he added, "the housing story is an employment story." Only when there is a consistent increase in employment will the housing market improve.  

Speaking of jobs, weekly applications for unemployment benefits fell last week -- more than had been expected. It was the first drop in a month. And while that's a positive development, investors were still cautious on Wall Street today, pushing markets down. The Dow fell below 10,000, eventually ending the day at 9,985. The Nasdaq was down 23 points at 2,119, and the S&P 500 was down 8 points to close at 1,047.

Redevelopment in Downtown and Midtown Manhattan

The parties responsible for redeveloping the World Trade Center site inked a new agreement today. Larry Silverstein and the Port Authority have had plenty of fights over the years, but both sides say the $1.3 billion pact means a new neighborhood of office towers will start to rise soon. WNYC's Matthew Schuerman has the details.

Give us a rundown of the money involved, and what it will be used to build.

Well, that $1.3 billion, some of that is basically a break on the rent that Larry Silverstein has been paying to the Port Authority, which actually owns that property. And that's just because it's taken so long for him to actually get the buildings up and start generating revenue from rents. And then some of that is basically a backstop the Port Authority has given, so that Larry Silverstein can take out loans and issue bonds to finance the towers.  

Larry Silverstein, some of the politicians involved, they put out statements today -- they're very happy, they're applauding the deal. But we've seen breakthroughs before that ended in wrangling and delays. So are there more potential obstacles ahead?

Nothing too obvious. The further along we get in the construction process, and the more money we seem to throw at this, I would say the less likely it is that it'll get derailed. But you know, this project has been a big source of frustration for politicians and the public, and I should say a big source of employment for lawyers and journalists, actually, too, so who knows?

And the construction schedule, what is it?
 
Already things are rising there, you know One World Trade Center is up around the 40th floor or so. You can even see a little bit of another building rising above ground. The first office tower that Larry Silverstein will open is supposed to open in 2013, and then the other two that Larry Silverstein owns will really depend on whether or not there is the commercial demand for that space.

And that's not the only commercial building news. It just so happens there's another plan emerging this week, to build millions of square feet of commercial space in the West 30s. The Vornado company just got permission to build an office tower known as 15 Penn Plaza. If that does get built, and the World Trade Center site also gets office towers, how is that going to change the landscape for commercial real estate in the city?

I've talked to a couple of analysts about this today, and they really see these buildings as in direct competition for the same types of tenants. They are brand new office towers with wide floor plates. They are being build by world-class architects -- Rafael Pelli in the case of 15 Penn Plaza, and Norman Foster and Richard Rogers at the World Trade Center. We have a vacancy rate of 12 percent, so it very well may end up that 15 Penn Plaza, being right near a major transportation hub, would sort of poach some of the tenants that could be going downtown.     

Now there's a twist to the Penn Plaza story. Boston Mayor Thomas Menino has apparently been in contact with Mayor Michael Bloomberg to warn him about working with the builder, Vornado. Adam Regusea, a reporter at NPR member station WBUR, explains.

"Vornado is one of the partners in a deal to redevelop the site of the old Filene's department store in downtown Boston. It's a very, very high-profile parcel in the city, which Vornado and their partners actually demolished in 2007, with the intention of building this big, mixed-use tower there. Then the financial crisis hit and Vornado's financing fell through and what we've been left with since then is really what people in Boston kind of think about as their own little Ground Zero. It's this awful and persistent hole in the ground, right in the city's old retail core. So Mayor Menino in Boston is looking at this Vornado project that you guys have in midtown, and saying, 'Hey, you guys have money to build Empire State Building the sequel, but you can't fill up this hole that's sucking the life out of our downtown?'"

And we do we know if we have a response yet from Bloomberg? What happens now?

Certainly nothing that we've heard. It's worth mentioning that the two mayors do have a relationship. They've worked very closely on the issue of gun control, and of course, Bloomberg is from Boston originally, so who knows how powerfully that tugs on his heart strings.  

Protesting at the Empire State Building

Staying with real estate, we have one last bit of news for you this evening. Some Catholics are angry the Empire State Building has decided not to honor the 100th birthday of Mother Teresa by lighting the building's top in blue and white. They'll be protesting outside the tower this evening. On this day one century ago, the famous nun was born.