We first heard rumblings of an impending MTA real estate transaction back in March when The Wall Street Journal reported the authority’s interest in offloading its Midtown office space. Today, those rumors grow louder as The Times discusses the how the authority is looking to sell the buildings it owns at 347 Madison Ave. in an attempt to generate at least $150 million in revenue.
What I feared earlier this year would emerge a one-time attempt to cash in seems to be morphing into a long-term plan to consolidate office space. The authority purchased the three buildings on the block 44th and 45th Sts. over the span of 12 years. According to The Times, the authority paid $11.9 million for 347 Madison in 1979 and a total of $36 million for the two neighboring buildings in 1991. While the authority considered selling in 1998 and 2005, with the commercial real estate market on the upswing and the authority’s finances heading south, now may be the ideal time for either a sale or as “long-term lease.”
Charles V. Bagli reports:
Transportation officials are hoping that a developer will pay top dollar for the properties, three 20-story office buildings that form the eastern blockfront between 44th and 45th Streets. A buyer could demolish the structures and erect a modern skyscraper, and could also buy unused development rights over Grand Central Terminal and build an even taller tower than might otherwise be allowed. “The point is, it’s a valuable asset,” said Jeffrey B. Rosen, the transportation authority’s director of real estate.
The decision comes as developers are beginning to shake off a three-year hibernation following the collapse of a speculative real estate boom in 2008. Investors are once again buying office buildings, while developers are looking to revive dormant projects or start new ones. The three buildings might look bland and unappealing, but the allure is their location in a prime office district next to Grand Central, a workday entry point for executives coming from New York’s northern suburbs. The Yale Club is on the same square block.
Mr. Rosen said a sale, or possibly a long-term lease, would happen this time. Jay H. Walder, the authority’s chairman, has streamlined departments, cutting 3,500 positions in the last year from its New York City Transit, Metro-North Railroad and Long Island Rail Road operations. The authority is also evaluating its space needs at 26 other buildings it owns or leases.
As Bagli notes, the MTA’s recent cost-cutting measures have gutted the Madison Ave. buildings. Approximately 20 percent of the job cuts were at the MTA’s headquarters, and the remaining 873 employees are likely to be moved to 2 Broadway, Transit’s current headquarters in Lower Manhattan which houses 4200 MTA workers. Noticeably absent from the article and the MTA’s plans is any talk of the controversial 370 Jay St. building in Downtown Brooklyn.
In an ideal world, the MTA would be able to consummate a sale and generate would some sources say would be “substantially” more than $150 million in order to avoid a fare hike or service cuts later this year. Going forward, the MTA would reduce its costs by cutting down on its physical footprint as well. The savings wouldn’t be that steep, but they wouldn’t be insignificant either.
Of course, questions abound. Does it make sense to move Metro-North operations away from Grand Central? Would the authority be able to rent space in Midtown for the commuter rail administration at cheaper rates? Could they find a buyer willing to pay top dollar right now? None of these are insurmountable obstacles, but I have a sneaking suspicion a deal won’t materialize overnight.