Liberty Bonds & Reconstruction of Lower Manhattan

What are Liberty Bonds

After the wake of the horrific attacks on September 11th, lower Manhattan lost roughly 13 million square feet of office space.  The estimated costs for this rebuilding effort was $20 billion on the low end up to $50 billion on the high end.  Estimates for the World Trade Center alone were $7 billion.  Such a huge undertaking required enormous amount of financing.  This proved challenging for many real estate developers as there was no equity in the buildings and due to the risks associated with the loans, they came with high interest rates.  This is where the government stepped in to assist New York with getting back on her feet.

Congress Passes Liberty Bond Legislation

Congress took a proactive measure and passed the Job Creation and Worker Assistance act in 2002 which included many provisions to assist in the rebuilding of lower Manhattan.  The Liberty Bond legislation created a pool of $8 billion in tax-exempt financing from which New York City could extend to developers.  This has allowed commercial developers to secure financing at a much lower rate, with the expectation that once the projects are complete, the loans will be converted to fixed rates, and the rents secured from the buildings will be used to pay down the loans.

Requirements for receiving Liberty Bonds

Like the recent bailout offer from the government, the Liberty Bond has a lot of oversight in order to reduce the risk of fraud.  Below are just a few of the requirements for receiving financing under the Liberty Bond:
  • Bond must be issued prior to January 1, 2005
  • Minimum of 95% of costs must be used for qualified project costs
  • 50% or more of bond proceeds must be used for rehabilitation purposes

Tim Ord
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