Critics second-guess agency’s management of prime land
By PRADNYA JOSHI
April 14, 2005
The MTA should be one of the city's most sought-after landowners. But
critics say the cash-strapped agency has not made the right moves to quickly
cash in on the value of its two side-by-side parcels of land on the far West
Side of Manhattan.
Just north of the Lincoln Tunnel entrance in Manhattan sit the West Side
rail yards on a 13-acre site, which the Metropolitan Transportation
Authority decided to allow the New York Jets to develop. Another site is the
adjacent Eastern Rail Yard, which New York City's budget office last year
estimated would bring in $1.7 billion to the city's coffers over the next 30
But observers such as neighborhood activists and policy groups say the MTA
board should have held a more rigorous bidding process for both plots.
For example, an MTA appraisal said the West Side yards could fetch nearly
$923 million. However, the board agreed last month to sell development
rights to the Jets for $250 million. That bid was far less than two
competing offers, including a $400-million bid from Cablevision.
Observers say the MTA is also making a mistake if it allows the city to also
give away the Eastern Rail Yard without any public bidding.
"I think their obligation is to sell [the lands] at the highest possible
price," said Richard Ravitch, a former MTA chairman who has been critical of
the deal with the Jets.
However, the MTA board says it has made the right decisions for the agency.
As part of the vote to allow the New York Jets to build a stadium on the
West Side, it said it planned to hold on to 4.4 million square feet in
development rights to sell at a future date.
One estimate provided by MTA adviser Newmark & Co. says the MTA could sell
those rights for as much as $1 billion - far more than the $440 million that
six real-estate firms had offered last month.
The Jets stadium and decision to hold on to the rights is a "better deal all
around," said Jim Simpson, an influential MTA board member who heads up the
agency's real-estate committee.
"If we don't do this now, that site may sit for another 20 years empty,"
But unlocking those air rights won't be quick or simple. In addition, the
agency may find itself in a sticky situation competing with the city's plans
for the Eastern Rail Yard development rights.
"They're now counting on being able to sell millions of square feet of
development rights at the same time the city is also trying to sell
development rights in the same area," noted Jeremy Soffin, spokesman for the
Regional Plan Association. "There are no guarantees, and ... a lot of people
have questioned whether the demand is there yet."
The MTA could get a windfall if the real-estate developers who eventually
flock to the West Side pay the MTA for those extra development rights so
they can build their new office towers taller than what their blocks are
Transferring rights to adjacent properties is fairly common, and the City
Council last year completed an extensive rezoning of 59 blocks on the West
Side in hopes of attracting new office towers and residences to the blocks
around 10th and 11th avenues and north of 34th Street.
Still, the MTA faces many hurdles in getting developers to bid up those air
rights. For starters, although the real-estate market remains hot in New
York now, many experts expect it will cool down as interest rates rise.
"Competition to build will be less in a higher interest-rate environment,"
noted Myers Mermel, chief executive of TenantWise Inc., a company that
advises clients on commercial real-estate deals.
Another problem: The sudden availability of development along 10th and 11th
avenues may result in a glut of space after construction of the No. 7 train
extension is completed, which is expected in 2010. Experts don't expect
office buildings to begin construction until after the line is completed,
and only then will bidding begin for rights.
But those who support the MTA's plans say the public must be patient when it
comes to seeing the profits of the land deals. "People are confident in the
development potential of Manhattan, but recognize that this is going to roll
out over the next 20-30 years," said Kathryn S. Wylde, president and chief
executive of the Partnership for New York City, a nonprofit group of
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