Vornado Had Outsize Role in Penn Station Development, Lawsuit Claims

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A lawsuit is trying to throw the Pennsylvania Station megadevelopment off the rails.

Community groups and tenants of a building that would be demolished under the project sued Empire State Development (ESD) on Wednesday, accusing ESD of breaking environmental regulations to push the renovation of Penn Station forward. The suit also claims ESD is allowing Vornado Realty Trust, the owner of much of the land slated for development, to improperly influence the redesign’s funding plan.

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Penn Community Defense Fund, ReThink NYC, the City Club of New York and the residents of 251 West 30th Street want the courts to nullify ESD’s July approval of the general project plan and its environmental impact statement, according to documents filed in New York County Supreme Court. The Real Deal first reported news of the lawsuit.

“We recognize that something has to be done about Penn station. The question is whether this is the way to do it,” Charles Weinstock, an attorney for the community groups and residents who filed a suit to get documents related to the project in September, told Commercial Observer. “We’d like to stop the project in its tracks and replace it with one that respects the character of the neighborhood while at the same time restoring Penn Station to build a station commensurate with its importance as the largest transit hub in North America.”

A representative for ESD declined to comment, and a representative for Vornado did not immediately respond to a request for comment. 

ESD’s general project plan outlines how it will fund the redesign of Penn Station through the construction of 10 new office buildings in the area surrounding the historic transit hub. By selling the development rights of those assets and collecting payments in lieu of taxes on the newly constructed properties, ESD claims it will collect $4.1 billion to upgrade the station. 

But the suit criticized ESD for failing to lay out how the general project plan would actually cover the state’s share of the ​​$7.5 billion price tag. It also claimed that ESD violated New York state law when it separated the environmental review of the general project plan from the review of the entire redesign of Penn Station to hurry up the approval process.

The complaint slams Vornado — which owns five of the eight sites likely to be redeveloped around the station — for playing a “dominant role” in the creation of the general project plan. A brief set to be filed in court and shared with CO claimed Vornado executives and ESD officials exchanged more than 1,000 emails over the development, and Vornado split the costs with ESD to hire the consultants and lawyers who worked on the general project plan.

Steven Roth’s Vornado expects to benefit from the general project plan, as it would allow the firm to build up to 18.3 million square feet of office space and 1,256 apartments and secure a tax break of as much as $1.2 billion

The suit isn’t the first time the plan’s funding has been called into question. A week before ESD approved the general project plan, a report from the watchdog group Reinvent Albany claimed that it fell about $3 billion short of the funds required.

Celia Young can be reached at cyoung@commercialobserver.com.