The West Side Rail Yards—It’s Alive!
Eliot Brown Jan. 19, 2010, 12:13 p.m.
The Related Companies, the real estate giant that built the Time Warner Center, is nearing an agreement to commit to building over the West Side rail yards, an oft-delayed project that could be Manhattan’s single biggest development.
The firm envisions $15 billion of new office, hotel and apartment towers on a 26-acre site near the Javits Center.
Related, led by billionaire Miami Dolphins owner Stephen Ross, was conditionally designated to develop the site by the yards’ owner, the M.T.A., back in 2008. The firm now faces a Jan. 31 deadline to sign a contract and put down a deposit of more than $40 million, a step it now seems poised to take after earlier delays related to the economy.
Staring at a similar deadline 12 months ago, Related—understandably reticent to commit to payments worth $1 billion amid a lending drought and a global recession—successfully lobbied the M.T.A. to put off the cutoff date for a contract by a year, hoping the economy would improve substantially.
Apparently still keen on the deal, Mr. Ross is now looking to buy himself some more breathing room, effectively setting down a “Related Cos.” placeholder on the property until better times, when he would be committed to return. According to multiple people familiar with the discussions, Related has agreed to sign a contract consenting to the land sale, putting up the deposit needed to do so.
But, according to those indivduals, the firm would be required to close on the deal and commit to its 99-year lease and payments worth $1 billion only once the local economy improves and hits a set of “triggers”—quantifiable measures like improved unemployment and commercial vacancy rates.
There are still other outstanding issues to be hashed out between Related and the M.T.A. before a contract is signed, but people familiar with the discussions expressed optimism that the deal would be made, characterizing the remaining issues as lengthy paperwork.
Should a contract indeed be signed, it would represent an unusual display of forward motion in the sullen economy, which has caused landowners across the city to scrap or pull out of development plans.
Still, it would push the question of when-or if-the West Side rail yards will actually be developed to an uncertain point in the future, welding the M.T.A.’s ability to make money on the property to a set of economic indicators.
In a joint statement, M.T.A. and the developer said they were finalizing the deal. “M.T.A. and Related are working diligently to finalize the transactional documents,” the statement said. “We look forward to completing the contract and moving into the next phase of this exciting development.”
The air above the West Side rail yards, two 13-acre squares between 10th and 12th avenues, have proved a glimmer in the eyes of planners for years. In the 1980s, the Reichmann real estate family and Gulf and Western had plans to move Madison Square Garden and develop the area, a dream that later fizzled as the Garden decided to stay put.
The current vision is an outgrowth of the Bloomberg administration’s bid to host the 2012 Olympics, as the mayor fought to build a football stadium for the Jets on the West Side rail yards, a battle he lost nearly five years ago. When that failed, the city pushed for a mixed-use development scheme for the site, and with a rezoning approved by the City Council last month, the site can give rise to more than 6,000 apartments and 6 million square feet of commercial space in a larger far West Side redevelopment that’s been compared in scope and ambition to London’s Canary Wharf.
Related, which built the Time Warner Center and numerous luxury and below-market-rate residential buildings around the city, was conditionally designated to be the site’s developer in May 2008.
Since, Related, which is partners with Goldman Sachs on the project, has spent considerable money on the would-be development as the real estate market collapsed around it. Should it put down the deposit, the firm will have paid $60 million in costs to the M.T.A. and the city, on top of its private spending on the project.
Even if the economy improves and Related is obligated to start paying rent, it would need to find tenants willing to take a chance on a new part of town (33rd Street and 11th Avenue is hardly a prime location right now). The Bloomberg administration is paying $2 billion to extend the No. 7 line to the area, but, for now, there are not many office tenants on the market wanting big blocks of space anywhere, let alone a new building in an unproven area. Related has said it expects it would need at least one major anchor tenant for retail, hotel and office components in order for the firm to build a platform over half the rail yards, at a cost of up to $1 billion.
Times, of course, are different than they were back in 2007, when developers like the Durst Organization, Vornado Realty Trust, Tishman Speyer and Brookfield Properties lined up to bid on the yards. Back then, there were three major corporate tenants tentatively committed to put headquarters on the West Side, and a fourth that was very interested.
All three-News Corp., Morgan Stanley and Condé Nast-have since scaled back their ambitions or at least put them on hold. As for the fourth: It was Lehman Brothers.