Well, this latest Hudson Yards development is not very good news for the MTA.
In a turn of events that one could call shocking or not shocking at all, the $1 billion deal between the MTA and Tishman Speyer for the rights to the Hudson Yards has fallen apart. The word first broke via a press release issued by MTA spokesman Jeremy Soffin:
Late this afternoon, negotiations between the MTA and Tishman Speyer over the development of the Rail Yards on Manhattan’s Far West Side reached an impasse. The cause of the impasse was Tishman Speyer’s attempt to change a central deal term in an effort to postpone the closing on the Eastern Yard until the Western Yard was satisfactorily re-zoned. This demand changed the economics of the proposed deals and the certainty of payments to the MTA. The MTA remains committed to developing these unique and very valuable parcels of land.
For those who have been following progress on the negotiations, this collapse came just short of a month after the two sides missed a deadline for a conditional agreement. Now, while a Tishman Speyer deal remains a faint possibility, it’s back to the drawing board for an MTA facing the prospects of a significantly lower dollar amount for the rights to the Hudson Yards space.
Charles Bagli of The Times has all the details. From the prospect of Tishman Speyer, this deal was fraught with problems from the get-go. The real estate and development company could not find any tenants for their five planned office buildings, and they were not sure of the fate of the cost overruns of the 7 line extension, a frequent topic here at Second Ave. Sagas
Meanwhile, this deal could spell more fiscal problems for the financially-troubled MTA. Bagli reports:
But if the authority reopened negotiations with another bidder, it would almost certainly mean that it would get less money for the rights to the property, real estate executives said.
Developers who a year ago would have gleefully bid any price for a building or a project are now delaying or abandoning projects in New York and elsewhere as the economy has slowed and many lenders have balked at financing real estate projects in the wake of the credit crisis.
At the same time, the sudden setback in the development of the railyards is a very public embarrassment for everyone involved, including the developer, whose reputation may be at risk; the authority, which was counting on the money for its capital budget; and the Bloomberg administration, which had made the transformation of the once-industrial West Side a centerpiece of its two-term mayoralty.
On one hand — the very obvious hand — this collapse is bad news for the MTA. They will lose out on another $10 million a year, and the fate of the Hudson Yards is once hazy. They’re in the middle of constructing a 7 line extension to, literally, nowhere without a stop in the one area that’s actually populated and needs a subway stop at 41st St. and 10th Ave. The Bloomberg Administration is bound to put pressure on both parties to work out a deal since part of Mayor Bloomberg’s legacy rests on it, but it won’t be that easy.
On the other hand, some good could emerge from this impasse. First, the MTA should be pressure on the Bloomberg Administration to guarantee all funding for the 7 line extension. That should include any cost overruns and a fully functional station at 41st St. and 10th Ave. Building a shell now will only lead to higher costs in the future.
Next — and this won’t happen — the MTA should consider whether or not the 7 line extension is worth it now if the land rights are up for grabs again. The MTA could use the money being spent on that extension on Second Ave. or even on routine maintenance. While I know the city is funding the part currently under construction, having a subway line go nowhere will help no one.