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.
23 comments
When I used to visit 347 for meetings quite often between 2001 and 2005, I was surprised to find the deplorable state of the office space inside which the public does not see. I would not have wanted to work there. The entire building was dingy, dark and neglected. with the exception of the public spaces like the hearing room. I figured they were thinking of selling it then, otherwise they would have fixed it up. Don’t know how it looks today, but with MTA mismanagement, I wouldn’t be surprised if all of it has since been renovated, because that is exactly what happened at 370 Jay.
The building never was very attractive inside when I visited it or worked there between 1970 and 1987. But several years before it was abandoned, virtually every floor was thoroughly renovated. True, much structural work was needed like new windows, etc, but the interior space never looked so good for its entire existence until the year before it was abandoned.
An explanation also was never given as to why the MTA never tried to sublease some of the floors since they are not using it themselves. I believe the building is city-owned and not MTA owned, so there may have been some sort of stumbling block, but I still don’t see why some type of deal couldn’t have been worked out with the City.
The MTA is always crying for funding so why do they not use what they have intelligently?
From the last time I was there, it hasn’t been substantially renovated. I think the idea is that a developer would buy it with an eye toward tearing it down.
BrooklynBus, in your second/third paragraphs, you’re referring to 370 Jay, not 347 Madison, right?
Correct. I should have been clearer. I was referring to 370 Jay.
“The entire building was dingy, dark and neglected. ”
Kinda like 90% of the subway stations the MTA oversees, no? Self-entitled bums who think they have a lifetime job making $70k just to show up. Doesn’t exactly make them want to actually clean the floor or paint the walls. I’d love to see the homes of MTA employees. Kid spills milk on the floor and it sits there for a week or two.
Personally, I’d like to see the homes of folks who think it’s ok to drop food on the ground without picking it up or who chuck empty soda bottles into the tracks. Do you think they have empty food containers lying all over their apartments?
Maybe so. You never know, unless they have a wife to keep them in line.
I don’t know if it’s quite 90%. They’ve done a decent job in rehabbing most of the stations in midtown and some others. It’s when you go to the Grand Concourse or even Ben’s Station at 7th Avenue and see the peeling and dusty paint, you get that dark and dingy feeling.
I also don’t think it’s fair to lump all MTA employees into a single category of lazy. There are many dedicated hard working people there who put in a full days work, and even some who go beyond the call of duty and take their jobs home with them. Then there are the ones you talk about who spend their entire career making “$70K” just by showing up, although now I think by now there are many making $100K and do little more than just show up. (Those are the ones the MTA should be going after.) But isn’t that true in any bureaucracy? I don’t know how different the MTA is.
Painting is done by contractors, not employees.
I smell another Atlantic Yards fiasco here; prime real estate sold at well under market value. 347 Madison has a private corridor into Grand Central for crying out loud, but if the MTA tries to sell as quickly as possible they’re going to get screwed again.
The MTA will get screwed again but someone will be making loads of cash under the table when they sell it below market value.
Outside of Atlantic Yards, the MTA has been a seller in numerous real estate deals where they’ve gotten market value. Atlantic Yards was an outlier because of the pressure the Mayor put on the authority to sell at a below-market rate, and a different set of folks were in charge when that deal went down years ago. Beyond innate skepticism, is there anything else to suggest the authority would settle for a below-market sale? Based on the documents the authority released today, I would say no.
Wasn’t there also a controversy about Hudson Yards (if that’s what it was called, the ones around 10th and 11th Avenue) being undervalued?
The controversy was over guaranteed payments and closing dates, not the valuation. They’re selling that land for $1 billion but with caveats for when payments are due and again under pressure from the mayor.
Now I remember, something about not receiving payment for something like 25 years. Never made sense to me when they are so financially strapped today.
Didn’t they evaluate the options back in 2005? One of them had to be to redevelop the site for recurring revenue in perpetuity.
If the Metro-North proximity to Grand Central is such a concern, why does a sale of the buildings have to be an all-or-nothing type of deal? Are 341 and 345, combined, too small to be attractive to a potential buyer?
I would also hope that the proceeds from a sale would go towards a capital fund and not an operational fund. Transforming one asset to another wouldn’t trouble me as much as pissing it away on six months of direct trains from Whitehall St. to Astoria, after which the MTA would have nothing to show for it. The operational folks can still enjoy the savings on former HVAC and other building maintenance costs.
In the long term, renting the building out is better financially. Then they can buy a muich cheaper building in the outer boroughs.
It would be much more helpful to small businesses if the MTA didn’t sell property in big chunks, but instead sold buildings one by one or rented out space in large buildings. But is it even possible to do this? (I’m being honest, not sarcastic.)
It would seem to me that the three buildings are worth more when sold as a single unit than if each were to be sold separately. They are each not very wide, and put together, one huge skyscraper could be built in their place.
If a big developer is willing to put more money for all three together than small developers are separately, then it’s a different thing. The magic of capitalism is that the MTA can still put the properties up separately and then sell to one developer if he’s willing to be the highest bidder on all three.
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