As the MTA has tried to become a leaner organization over the past few years, we’ve heard repeatedly about its attempts at slimming down its real estate portfolio. The MTA owns or leases a lot more space in this city that most people realize, and a good portion of that space is redundant or underused. So the authority has engaged in a process to identify what it can off-load and what it must keep.
Last April, we heard rumors of a sale of the MTA headquarters building on Madison Ave. in the 40s. A sale today may not be in order, but the MTA is hoping that, by 2014, it will be turning a profit off of its midtown holdings. Reuters has more:
The cash-poor Metropolitan Transportation Authority of New York in the next few months will begin the process of putting its Madison Avenue headquarters in midtown on the market by issuing a Request for Proposals, an official said on Monday…”We expect to vacate possession of these buildings to a developer in 2014 at the latest,” Jeffrey Rosen, director of real estate, said at a finance committee meeting.
…How much the three buildings on Madison Avenue, whose location is highly desirable because it is just two blocks west of Grand Central Terminal, will bring depends on what air rights are transferred to any new office tower expected to be built on the site. Selling the three buildings outright would generate at least $150 million before taking into account the transfer of air rights that would allow a developer to build a higher office tower, the authority estimated in April 2011, when it first announced the buildings would be sold.
New York City zoning laws would allow a “minimum zoning floor area” of 376,575 square feet, the MTA estimated last year. The maximum would be 542,268 square feet, although there might be a possibility to acquire more air rights.
The new twist here concerns direction. While the MTA once debated selling the building, they know want to lease the space it’s on. It may take longer to realize the economic gains from such a set-up, but the authority believes it can make more than $150 million on such an arrangement. If so, that’s shrewd ownership that shows the MTA isn’t just looking for a quick economic fix, as I feared when they first put out feelers for interest in the space.
Of course, I may be getting ahead of myself. The MTA doesn’t plan on signing over the space in any form until 2014, and a lot, as we know, can happen in two years. As this process begins, though, the authority will consolidate its headquarters in space it leases at 2 Broadway, a hop, skip and a jump away from the TA’s once-glorious building at 370 Jay St.
And so the MTA’s real estate world inches toward a consolidation. The authority is still discussing a deal for that Jay St. space with New York City and New York University, and the neighborhood is rooting for such a deal. Now, as the East Side Access project brings a large tunnel to the MTA’s current front door, the authority is eying a move away from Midtown all in the name of economic efficiency. It’s been a long time coming, if it gets here at all.
10 comments
They really need to update that picture with all the old equipment
Just wondering… does the MTA, a state agency, pay property taxes to the city? If not, I’d imagine NYC would support such a sale, so the property can start generating some tax revenue.
No it does not. Indeed, the MTA’s tax exemption cost the City over $750 million last year according to the Independent Budget Office. For a list of other exempt entities (including private companies like Madison Square Garden), see: http://ibo.nyc.ny.us/cgi-park/?p=365.
All told, while the City property tax is expected to bring in about $17.6 billion in 2012, 42 percent of all the tax revenue the City expects to collect, exemptions in the code total 13.5 billion for the same fiscal year, an increase of $1 billion from 2010 alone.
I personally believe that the MTA, as a public non-for-profit service provider should receive the exemption, however many other exemptions are nothing short of abusive and should be eliminated (which doesn’t even scratch the surface of what’s wrong with the property tax in this City…but that discussion is for another time on another blog).
While this sounds good, there are many more parts of the puzzle, and for as large a footprint as the MTA needs in office space, it may not ne that much. For example, does MTA own the space or does it lease it? If it’s owned, then there are no rent payments, so selling the space may do nothing more than enable it to pay for acquisition (lease) of new space.
If the current space is leased, the question then is how far away can the MTA reasonably re-locate? What are the drivers? Example, can the MTA lease office space in Jamaica (or SI..the irony) and save lots of $ or is that too far?
Can MNR lease office space in SoBro savings tons of $ or will they simply move into other space in East Midtown (not much of a savings).
So whilst the idea sounds good, there are many other parts that either are addressed in a plan yet to be disclosed or haven’t been thought through.
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I don’t think the MTA knows what it wants to do itself. The original plan was to move headquarters to 2 Broadway to consolidate office space. Then they scrapped that idea after 9-11. Then they were talking about renovating and moving back into 370 Jay. Then they scrapped that idea. Now they are going back to their original plan of using 2 Broadway. Meanwhile they constantly waste money by constantly moving their people from one location to another. I have a friend who was moved to 2 Broadway from another location only to be moved back two years later and now they want to move her back to 2 Broadway a second time and she hasn’t even changed departments!
Not that it matters, what department is she in.
I am friendly with people who work for a furniture retailer who have stores in the NYC area. I know of one store manager who was transfered between three locations within the past year. So I understand what you are getting at.
347 Madison is a beautiful building and a nice complement to the Roosevelt Hotel across 45th–is the MTA selling it to be torn down? What are the other 2 buildings?
They also have 345 & 341, and my guess is that their intent is to sell for development purposes. That’s a whole block of prime property, and developers should be salivating when these come to market. Plus any new development would retain direct access to GCT, a huge plus for the Scarsdale (and soon Muttontown!) playahs!
If they need a lump sum for some reason, it’s also possible they can securitize the future revenue of the building and get a similar-sized lump sum today. If you accept the potentially risky assumption that the distant future revenue of the building will greatly exceed near-term revenue, it may not be a bad move, particularly if in the future building costs will be covered.
Generally, I like the idea of the MTA keeping properties and profiting from them. Of course, our wanker politicians probably don’t.