When the MTA rehabilitated the Columbus Circle complex at 59th St., the project, like many others, was delayed and overbudget. By the time the rehab wrapped in 2010, there was no formal ribbon cutting or acknowledgment of the project’s end. It was just done, and the MTA had a shiny new station at its disposal.
With the new station came a new retail opportunity. The corridor underneath 8th Ave. contains approximately 11,500 square feet of retail space outside of fare control, and the 13 stores gave the MTA an opportunity to show that they can encourage high-quality retail. Yet, since open the station, the only thing that’s happened was an RFP issued in mid-2012. Now after fits and starts, the MTA is set to award a master lease to the space to a group headed, in part, by a former MTA real estate executive.
In materials distributed to the Board’s Finance Committee this week, the MTA has unveiled that an entity called Drop By at Columbus Circle has won the bidding to take over the maser lease for the space. The lease will run for 20 years with a 10-year option held by Drop By, and rent payments with start at over $700,000 a year with Drop By owning, by year three, 20 percent of operating income over $2.775 million. The breakpoint will increase periodically over the term of the lease, and Drop By will have the ability to sell digital advertising in the space once the MTA’s current deal with CBS Outdoors expires.
So who won? Drop By is a joint venture between Susan Fine, the former MTA Director of Real Estate who was responsible for the retail revitalization at Grand Central, and 40 North Properties, an investment company held by Howard Glatzer. The MTA doesn’t explicitly address the appearance of a conflict of interests in award Fine’s group the lease but notes that Drop By’s bid offered the highest guaranteed base rent. She has also worked in the private sector for a while since leaving the MTA.
With the lease situation cleared up, the MTA has high expectations for the space. According to the Board materials, the MTA expects “retail uses of the level of quality generally prevailing at other high quality shopping malls associated with transportation facilities in New York City, such as, by way of example, the below-grade retail concourses at Rockefeller Center and the up-to-date terminals at the New York area’s major airports.” The MTA also expects Drop By to fulfill the promises of its RFP as it installs air conditioning in the circulating space and corridor underneath 8th Ave. in the station complex.
It’s interesting that the MTA’s points of comparison here are airports and Rockefeller Center but not Grand Central. It seems a more modest goal for Columbus Circle. Still, it’s clear that Drop By, between the long-term commitments and promised capital upgrades, has higher goals in mind. And those goals matter because the MTA is undergoing a similar process with a more important piece of real estate in Lower Manhattan.
As the Columbus Circle RFP process took a little bit longer to resolve than the agency would have hoped, the Fulton St. Transit Center is set to open to the public in June. It won’t be fully completed by then, and it’s unlikely that any of the retail spaces will be in use. But the MTA wants a similar master lease executed with one entity responsible for filling the spaces there. Think, then, of Columbus Circle as a test run. If the MTA can find a tenant here willing to invest in an underground space, it may be even easier to convince potential investors to look at the Fulton St. Transit Center as a bigger and more visible opportunity.