Benjamin Kabak

Renderings show dramatically wider concourses and a reimagined Grand Central as part of the Midtown East rezoning.

There’s a bit more to say about Midtown East rezoning, especially in light of some of the Grand Central renderings the Daily News published earlier this week, but for now, I’d like to direct you to Stephen Smith’s post on the transit impact. As he’s argued in the comments here, he says on Next City that “Transit is not an issue when it comes to Bloomberg’s Midtown East rezoning.”

The argument is one I’ve pushed before as well. Essentially, there is a significant amount of transit capacity arriving in Midtown in the form of East Side Access and transit capacity on the whole shouldn’t be any sort of barrier to the rezoning effort. In fact, there’s going to be more capacity than demand along certain routes. Smith writes:

According to the Department of City Planning, the rezoning is realistically expected to yield 3.8 million square feet, net, of new office space — enough room for, the department estimates, 15,000 more office workers. Contrary to some press coverage, the rezoning will actually be relatively small. For comparison’s sake, around 25 million square feet of new offices alone, with millions more in housing and hotels, are zoned to rise at Hudson Yards.

Meanwhile, there is an enormous amount of new transit capacity coming to Midtown East, many times that provided by the one new Hudson Yards station on the 7 train…With an estimated 200,000 weekday riders, the $4.5 billion [Second Ave. Subway] project will divert many more commuters from the most crowded segment of the Lexington Avenue line than the rezoning will add. Next up is East Side Access, the Long Island Rail Road’s $8.4 billion effort to bring its trains to a cavernous terminal of its own near Grand Central, estimated to host 162,000 rides each weekday and set to open in 2019. Its projected ridership alone dwarfs the impact of any new buildings in the area. Most commuters heading to the new LIRR terminal will be diverted from Penn Station, from which many of them rode the E train to the east side, meaning that space will free up on that service as well…

Short of rebuilding the Third Avenue el or finishing the Second Avenue subway, it’s hard to imagine what other transportation improvements critics could want out of the rezoning. There may be other reasons for opposition, but anyone who takes a cursory look at the infrastructure under construction in the neighborhood can’t help but conclude that it’s slated for way more extra capacity than 15,000 office workers could ever fill. Simply put, transit is not an issue.

There are certainly discrete areas where transit is an issue. Without the rezoning, East Side Access won’t connect directly to the subway. But East Side Access itself won’t impact the subways because the vast majority of riders coming from Long Island won’t need a subway connection. Rather, the issues focus around Grand Central’s passenger flow. Crowding on the subway platforms may reach critical conditions without upgrades, but it’s already a situation that should be addressed, as I wrote this week, Midtown East rezoning or not.

There are plenty of legitimate reasons to put a temporary halt on Midtown East rezoning if the major players feel it is appropriate, but Mayor-elect Bill de Blasio Dan Garodnik, the area’s councilman, have both vowed to move it forward. Any opponents who cite transit as an issue though are using something that isn’t a true overarching problem as a crutch.

With the Midtown East rezoning on hold, so too are needed upgrades to the Grand Central transit infrastructure.

Shortly after 5 p.m. on Tuesday, November 12, 2013, the third term of Mayor Bloomberg effectively drew to a close. It may still be seven weeks before Bill de Blasio takes over, but when the City Council decided to block the Midtown East rezoning plan and the mayor withdrew it from consideration, Bloomberg’s hopes for one final signature effort to reshape New York City died. It’s yet another sign that New York will have trouble competing with global forward-thinking cities over the next few years and decades, but it’s also an initiative likely to be back on the table by mid-2014.

The coverage of the death of the Midtown East rezoning has ranged from bleak to not. Charles V. Bagli of The Times sees it as a sign of changing political winds, but once Mayor de Blasio realizes the need for revenue, the rezoning efforts will be back with a vengeance. Dana Rubinstein sees it more as a pause than a full stop with various stakeholders calling on city leaders to “get it right” rather than to get it fast, Jill Colvin struck a similar chord. I’m not inclined to see this as anything other than a temporary setback though I worry about the short- and long-term implications as New York can’t seem to build transit expansions in a timely and cost-efficient manner and can’t rezone an area to encourage growth.

The politicians struck a conciliatory tone in their various statements. Christine Quinn — remember her? — and Dan Garodnick issued the word from City Council”

“Creating new jobs in East Midtown – and across all of New York City – is essential. We can and should do more with the commercial corridor around Grand Central,” they said in a statement. “However, a good idea alone is not enough to justify action today. We should rezone East Midtown, but only when we can do so properly. After extensive negotiations, we have been unable to reach agreement on a number of issues in the proposed plan. Among other issues, we remain concerned with the price, methodology and timing of the air rights to be sold by the City for the District Improvement Bonus. We are also concerned with the certainty and funding level of the needed infrastructure improvements, which includes both above and below grade needs…

We are committed to making the best decision for this community and all New Yorkers. We want to see development in the area that is both responsible and encourages growth that keeps us competitive with other cities. But, with so many outstanding issues, there is no good reason to rush the proposal through.

We can achieve all of the goals set out by the Bloomberg Administration and do so in a way that respects the interests and perspectives of all of the stakeholders – the community; the workers who will populate and serve the new and expanded buildings in East Midtown; the landmarks in the area and the developers who support the current proposal.”

The mayor too, despite licking his wounds, recognized that a Midtown East rezoning is inevitable. “This will unfortunately cost the area hundreds of millions of dollars in badly needed subway and street improvements and $1 billion in additional tax revenue—as well as tens of thousands of new jobs that would have been created,” he said. “The inability to reach a consensus on the plan’s details is regrettable, but it was encouraging that nearly everyone involved in the process recognized the need for the area to be rezoned to ensure that it remains competitive with other business districts around the world, and we appreciate the time that Speaker Quinn, Council Member Garodnick, and Council staff put into this issue. We are glad to at least be leaving the next administration a blueprint for future action.”

But what about transit? Now that I’ve sufficiently buried the lede, though, let’s talk about these infrastructure improvements. In this statement, Bloomberg specifically highlighted some transit upgrades for Grand Central. “We have a financing agreement in place to pre-fund $100 million in mass transit and public space improvements before any new development could begin,” he said, “but that funding was predicated on future development, which now will not occur.”

It’s all well and good that Midtown East had a significant amount of money available for necessary Grand Central upgrades. After all, this isn’t a project the MTA would advocate for on its own quite yet, and Mayor Bloomberg has successfully championed other projects that benefit developers and growth. But why do we have to tie Grand Central improvements into Midtown East, other than due to the finances of the work?

As it stands now, Grand Central at peak hours is packed. There’s very little room on the IRT platforms, and even with trains arriving fairly frequently, crowding can reach dangerous levels. On the mezzanine level, the fare control setup is a mess, and navigating between the Lexington Ave. line and the Flushing line is a major hassle as well. These upgrades should happen regardless of the outcome of Midtown East, but they won’t because money is repeatedly an issue.

So we’re stuck. The City Council hasn’t yet acted to encourage developers to replace subpar office stock with new, taller buildings that can compete on a global scale with cities challenging New York for global dominance, and we won’t have transit upgrades because no one will invest in that carrot without a stick. It’s likely a temporary overall setback, but it makes me question why these proposals have to be so intertwined.

The MTA is finally set to award a master lease for the Columbus Circle retail space. (Photo: Metropolitan Transportation Authority / Patrick Cashin)

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.