Second Ave. Sagas

Category: 7 Line Extension

  • A deal for Related but with terms attached

    The MTA Board voted yesterday to approve yet another iteration of a contract with Related Companies for the rights to develop the Hudson Yards area. If all goes according to plan, this deal will eventually net $1 billion for the MTA, but as work continues apace along the 7 line extension, the money from Related is no sure thing. In fact, the contract contains terms and conditions that may eventually allow the real estate developer to back out entirely.

    The details are complex. Related’s payments won’t kick in until the economy improves. You can wade through a lenghty PDF document if you want to explore the fine print, but The Observer’s Eliot Brown has it all in bullet-point form. While the contract will soon be signed, the deal won’t close until, says Brown:

    • Midtown office space availability rates hit 11 percent, according to brokerage CB Richard Ellis. While the current rate is at 14.8 percent as of March, 11 percent is relatively achievable, as according to CBRE numbers, midtown averaged well below 11 percent between 2005 and 2007.
    • Manhattan co-op and condo sales price achieve an average $1,200 a square foot for a sustained period (it’s slightly more nuanced than this). The fourth quarter of 2009 saw an average price of $1,051, according to Miller Samuel. The rate has cracked $1,200 a foot in three separate quarters in the last cycle, hitting a peak $1,322 a foot in the second quarter of 2008.
    • The architectural billings index must pass 50 for the commercial sector. It’s currently at a bit below 45, and was last over 50 in early 2008.

    On the one hand, these conditions appear to be reasonable demands for a deal of this magnitude. After all, Related shouldn’t just fork over $1 billion if it doesn’t feel as though it can fill the office space. The developers appear to want tenant guarantees before closing as well, and that’s no sure thing considering the costs, location and amount of time it will take to construct the support platform over the rail yards and the buildings in the complex.

    On the other hand, this deal jeopardizes the MTA’s position. Related could back out without payments or the company could opt to wait years before sending the MTA any money. Meanwhile, the work on the 7 line will continue, and it seems quite likely that the one stop at 34th St. and 11th Ave. will open years before the majority of the Hudson Yards development is even under construction. The stop at 41st and 10th Ave. then should become more of a priority because it will make this project more worthwhile in the short term.

    It makes development sense to build out to areas underserved by transit that are ripe for growth. But it makes even more sense to spend dollars that aren’t unlimited on improving transit options in heavily-congested areas of the city. The wisdom of this project continues to remain tenuous at best.

  • City’s tab for 7 line extension coming due

    One of the more appealing aspects of the 7 line extension has involved the identify of those footing the bill. While the MTA clearly does not see this extension as a priority, Mayor Bloomberg pledged $2.1 billion in city money both because the Hudson Yards area is Manhattan’s last frontier and because the Mayor’s real estate buddies would benefit. Today, Adam Lisberg reports that taxpayer dollars will go toward the project starting in 2011, and the city’s to fund this extension could come under some limited scrutiny.

    So far, Lisberg notes, the city’s payments for construction bonds have come in the form of revenue from developer fees and investment income, but with Related yet to sign a deal, the development dollars have tried up for now. Instead, the city will have to put between $31-$46 million toward the project next year, and as New York is facing spending cuts, few are happy with the prospects of a 7 line extension bill. Still, this was the mayor’s decision through and through, and he’ll have to live with it. Now, if only we could see that station at 10th Ave. and 41st St. built too.

  • As Related deal nears, REBNY pushes for federal assistance for 7 line

    With the city and the MTA at an impasse over the fate of the 7 line station at 41st St. and 10th Ave., real estate lobbyists and politicians are making a last-ditch effort to secure a federal grant for the badly-needed station. As Michael Howard Saul of The Wall Street Journal detailed today, officials from the Real Estate Board of New York and City Council Speaker Christine Quinn are going to meet with Vice President Joe Biden in the hopes of convincing the rail-friendly veep to find some of the $500 million the city needs to build this station.

    “I don’t expect we will be leaving the White House with a check in our hands,” Steve Spinola, president of REBNY, said. “But it would be nice if we can identify a structure to move forward that will, in effect, make sure this station actually gets built.”

    As we know quite well, the city is ponying up the $2 billion it costs to send the 7 line from its current terminus along 41st St. between 7th and 8th Aves. to 34th St. and 11th Ave. Original plans called for a station at 41st St. and 10th Ave. that would service the crowded Hell’s Kitchen area, but when costs spiked, the city scraped plans for even a shell station. It took REBNY nearly two years to grow interested in this project, but now the real estate board — which announced its support for this second station in February — calls the no-build plan a “terrible, terrible mistake.”

    Meanwhile, the city and REBNY are at odds over the project’s timing. Saul has more:

    Mr. Spinola said a report commissioned by the board suggests supporters have roughly a year to secure funding before it’s too late. But the city believes the time frame is closer to two weeks.

    The administration plans to move forward with the next set of contracts on the project, and turning back to build a second station after these contracts are issued, would result in tens of millions of wasted dollars, an official said. “We’re open to talking about what happens if someone finds additional funding, but we’re certainly not going to hold up the project hoping that happens,” said Andrew Brent, a spokesman for the mayor. “A 10th Avenue station would be nice, but the MTA and state budget problems are well-known, and the city is in no position to step in to pay for that, too.”

    If federal funds can be secured, Mr. Spinola said, officials in the Bloomberg administration told him there’s a “strong desire to find another $250 million” in city funds.

    Somehow, someway, the $250 million should materialize. In the grand scheme of development in New York City, that’s not a significant amount of money, and both the MTA and the city are making an expensive and nearly uncorrectable mistake by not building this station at 41st St. and 10th Ave. Hopefully, smarter heads will prevail.

    I also want to note that REBNY has dropped the ball on this one. The city killed the station in August of 2008, and the powerful real estate board sat on its hands for nearly 18 months. Now, time is of the essence, and it’s unclear if the money will come through. Had the lobbying begun when the station was shelved, the funding would have been easier to secure and could have been in place already.

    A Related deal — but no payment — nears

    Meanwhile, as REBNY races against the clock, Related and the MTA seem ready to announce a deal for the Hudson Yards development rights. The new deal seems to have a catch though. Michael Grynbaum reports:

    Under a deal unveiled Monday, Related would commit to the project with a $21.7 million down payment. But the company would not have to close on the project — and therefore start paying the 99-year lease — until after the city’s real estate market improves…

    Under the plan, Related would commit to a 99-year lease on the 26-acre railyards for $1 billion, the original price. But three specific measures of the real estate market, including average prices for Manhattan co-op and condo sales, must be met before the company would be forced to close on its contract; in the earlier plan, Related would have had to close within 150 days of signing…

    After signing the contract, Related will still have to post another $21.7 million in the following 12 months. But the new plan allows the developer to post a promissory note in lieu of cash.

    The MTA praised the restructured deal because it maintains the price tag negotiated during better times. Yet, I still fear that Related isn’t actually going to build much for a while. The area will benefit from the station at 34th St. and 11th Ave. eventually, and the city should be encouraged to build out transit to underserved areas. But for now, this is still a very expensive project at a time when funds are tight, and the fate of the station that could have an immediate impact on the surrounding area is very much in doubt. Still, misguided subway expansion is better than none at all, and one day, the MTA will get its $1 billion.

  • Report: 7 line costs ‘trending above’ budget

    Eventually, this cavern will be the new terminus for the 7 train at 34th St. and 11th Ave. (Photo courtesy of MTA Capital Construction)

    As the Tunnel Boring Machines continue their march toward 41st St. and 8th Ave., the 7 line extension is slowly, slowly taking shape. Yet, this city-funded subway extension, built for the benefit of real estate developers along Manhattan’s final frontier on the Far West Side, may be facing another hiccup. According to a report in the Daily News this morning, engineers are concerned that costs are exceeding the budget, and still no one knows who will pay for the overruns.

    For this tortured project that may not be the best use of city subway construction funds, cost overruns have continually been a thorn in its side. Due to an increasing price tag, planners had to shelve plans to build a badly-needed station at 41st and 10th Ave., and even a station shell that would allow for future expansion was deemed too costly. We witnessed a shocking lack of planning for the future, a problem that has plagued the New York City subways for the better part of eight decades.

    Today, the problem is one of rising costs and a budget set years ago. According to a report from the engineering firm McKissack + Delcan, costs are “trending above” the $2.1 billion budget for the 7 line extension. The Daily News says that “costs are rising partly because it is taking longer than anticipated to obtain easements and title to property needed for ventilation, signal, communications and other systems.” Pete Donohue has more:

    The consulting firm hasn’t determined the size of the developing deficit, but Assemblyman Richard Brodsky (D-Westchester) called the situation a “huge, unresolved mess.”

    “The MTA is looking at a project no one has the money to complete,” Brodsky said. “The city’s broke. The state’s broke. The MTA’s broke.”

    The 1.5-mile extension – from Times Square to 34th St. and 11th Ave. – wasn’t in the MTA’s plans, but was sought by Mayor Bloomberg to spur development. In September 2006, the MTA agreed to build it after City Hall pledged up to $2.1 billion for construction. City and transit officials never signed an agreement fixing responsibility for cost overruns. At the time, some transit advocates and officials feared the MTA would wind up diverting money from more worthwhile projects to the No. 7 line extension.

    Andrew Brent, a spokesman for Bloomberg, said yesterday, “If it becomes clear at some point that overruns are unavoidable, we’ll address how they would be covered then.”

    For now, the MTA’s official documents list the project as on budget, and that won’t change until the authority’s own internal assessments are complete. Clearly, those this is bad news. The city is broke; the MTA is broke; and only, say, a stimulus grant at this point could close the budget gap.

    Meanwhile, as West Side developers call for the station at 41st and 10th Ave., the MTA could soon face a funding crisis for Mayor Bloomberg’s pet subway project. The authority shouldn’t be expected to pick up the overruns, and if one capital project has to be delayed until the money is there, it should be this one. It is, arguable, the worst use of $2.1 billion one would find in the city today.

  • How the Olympics ruined the 7 line extension

    With the winter games unfolding in Vancouver this weekend, I keep thinking about how, had the Mayor’s bid in 2005 to secure the Summer Olympics for New York City been successful, the next great gathering of international athletes would have been ours. And then I start thinking about how the 7 line project — one now destined to serve residents of a real estate complex not yet built or even paid for — got its start in Bloomberg’s desires to see the Olympics come to New York. It was that same desire and the subsequent loss of the games to London that has led to the downfall of the station at 41st and 10th Ave.

    We know the project’s recently history fairly well. The project’s design phase started in 2002 when Bloomberg launched his plan to develop Manhattan’s last great frontier, the Hudson Yards land. At the time, the Mayor hoped to lure the Jets from New Jersey with a stadium that would also serve as the home for the 2012 Summer Olympics. In June 2005, amidst massive public protest, the state legislature failed to guarantee financing for the stadium, and a few months later, the IOC, citing that failure, awarded the Olympics to London.

    Still, the 7 line extension did not die with the Olympics. Originally, the project’s timetable was an aggressive one. Project Design Completion was due to be wrapped up by December 2006 with construction beginning that year and revenue service in time for the Olympics in 2012. Today, the MTA still lists TBD as the Project Design Completion date. Construction started on December 15, 2007, over a year later than originally anticipated, and revenue service is right now scheduled to start during December of 2013. The MTA will miss those Summer Olympics by a good 17 months.

    Over the course of project’s history, the City and MTA have fought over nearly every aspect of it. The City, the primary funding partner for this extension, refused to fund cost overruns and an expensive station stop at 41st and 10th Ave. The MTA has had trouble securing a deal for the land rights to the Hudson Yards area, and the current $1 billion offer from Related is on borrowed time, already one month past the anticipated closing date.

    What though would have happened if the Olympics had come to New York? For that, we hit the maps. Take a look at the map below. It is an excerpt from a special map the MTA printed in 2005 showing the potential locations for all of the Olympics events. (To view the map in full, click here.)

    Any Olympics plan for the city included heavy usage of the Far West Side. The Javits Center would have hosted six key events, including weightlifting, fencing, wrestling and table tennis, and the planned West Side stadium would have featured some track-and-field contests and the soccer matches. To ensure capacity for those events, the city would have needed a subway stop at 34th St. and 11th Ave. and probably would have paid to build the one at 41st and 10th as well. Instead, the costs skyrocketed, and we’re left with REBNY’s protests, years too late.

    So far, progress along the 7 line remains on target. According to the latest update from Capital Construction, the tunnel boring machines have excavated nearly 40 percent of the planned 9500 feet. The two TBMs are mining north of the 34th St. station cavern, and northernmost machine has passed under all three Lincoln Tunnel tubes, the more delicate part of the drilling. By the end of next month, we’ll have an update on the projects budget and timeline.

    Meanwhile, we can remember when the Olympics nearly came to New York. Enthusiasm amongst city residents was decidedly mixed, but the subways would have benefited once the athletes all went home.

  • Years late, REBNY throws support behind 7 station

    The fourth post in Second Ave. Sagas’ history arrived on November 29, 2006. In it, I reported the news that the planned station along the 7 line extension at 41st St. and 10th Ave. might be axed due to rising costs. It was the first we heard of any change in the city’s plans, and over the next few years, the MTA and New York City engaged in some good old fashioned political wrangling. Even Sen. Chuck Schumer threw his hat into the ring. After the MTA shot down a proposal from the city to go 50/50 on the station, the two officially killed the planned stop on September 19, 2008, a good 17 months ago.

    In the intervening months, I’ve checked in on the progress underneath 11th Ave. as the tunnel boring machine slowly makes it way toward Times Square. I’ve written extensively on the need for a stop at 41st. and 10th and the folly of building the extension without even a shell of a station. Transit advocates and those plugged into the urban planning community understand the need for the station now and if that’s not feasible, then at least provisions for a shell. Building nothing now would ensure nothing in the future because the costs will be just too high.

    Yet, until just last week, we had few vocal allies in this fight. The people who needed the station and stood to benefit most — the real estate owners in Hell’s Kitchen and the residents there — were silent until last week when Mary Anne Tighe, the head of the Real Estate Board of New York City, spoke out in favor of the stop. Now, suddenly realizing that this station won’t exist, Tighe and REBNY are preparing to throw their weight behind a public campaign to urge the city to build something at 41st and 10th Ave. Where were they two years ago?

    Charles V. Bagli profiled their efforts in The Times yesterday. The group has launched a new website/online petition called Build the Station and hope to use the same lobbying prowess that resulted in the federal government’s decision to move the Khalid Sheikh Mohammed trial in this subway oriented effort. “We think it should have two stops,” Steven Spinola, president of REBNY, said. “There is substantial growth already taking place near 10th and 41st. For them to quietly let the station evaporate, without anyone telling anybody, is a mistake.”

    Based on Bagli’s story, REBNY is going to push the feds for money to fund this station, but it sounds as though REBNY is nearly too late to make a difference:

    The station’s status is not exactly news, however. City and transit authority officials say that the station was eliminated from the plans more than two years ago, and it was not a secret. There were newspaper articles and protests by elected officials, including Senator Charles E. Schumer and Representative Jerrold Nadler. The city and the authority did retain an “option” with its construction contractor to build the second station, but that expired in September 2008.

    For now, the plan is to continue to cut a tunnel from 34th and 11th to the current No. 7 terminus at Times Square. The tunnel will pass by 41st and 10th, where the second station was to be built…

    Mr. Spinola said developers like Joseph Moinian and Larry Silverstein and tenants in some of the new towers on 42nd Street had long understood that the station would be built. The board, in fact, is so eager to see plans for it resurrected in these financially trying times that it says local landlords may be willing to provide some cash, say $50 million of the $800 million cost.

    As Bagli notes, unsurprisingly, some developers care more about this station than others, and Related, the company trying to purchase the land rights atop the Hudson Yards, just wants its promised stop at 34th St. and 11th Ave. completed.

    Many have long urged real estate developers to get involved, and the idea that those who stand to benefit the most should pay for some of the infrastructure improvements is not a new one in the public discourse. It has, however, often been met with contempt by landowners who don’t want to pay for improvements that won’t be realized for years down the road. If REBNY can truly convince someone, anyone, to fund this station, it would be a minor miracle. But then again, if the Moynihan Station can draw in $267 million for a bunch of staircases, why can’t this station, one in the path of oncoming construction and trains, get the money?

    The city, of course, remained as obstinate as ever. “A 10th Avenue station might sound nice,” a spokesman for the mayor said to Bagli, “but the MTA and state budget problems are well known, and the city is in no position to step in to pay for that, too.”

  • Real Estate developers lobby for sensible 7 extension

    As the 7 line extension’s tunnel boring machines continue their treks toward the existing sections of the route, the elimination of a stop at 41st St. and 10th Ave., killed for lack of funds, has become a sore point for the project, and now, real estate developers are calling upon the city and MTA to act sensibly. As Lori Weiss noted in The Post, Mary Anne Tighe, the head of the Real Estate Board of New York, believes the long-discarded stop should be built. She wants the MTA and city to anoint it a shovel-ready project so that it would be eligible for stimulus funds. However, others say there just isn’t money — some estimates put the price tag at $500-$800 million — available for it.

    I’ve long wondered why the real estate lobby hasn’t been more vocal on this issue. New developments line 42nd St. far west of any current subway route, and Related is planning on constructing a building at 41st St. and 10th Aves., right above the new 7 line tunnel. It’s still not too late for the city and MTA to set this project on a better path, but time is short. Construction of a station there after the fact will be even more costly than it will be today, and as I’ve said in the past, this station would greatly improve the utility of this expensive subway extension.

  • At Hudson Yards, a two-month extension for Related

    As the Tunnel Boring Machines continue their march from 34th St. and 11th Ave. to Times Square, the MTA and Related are still hashing out their $1 billion deal for the development rights to the land above the Hudson Railyards. The deal, originally set to be signed in January with its first payment this month, has been given an additional 60 days, according to a report in The Observer, and as the real estate markets continue to struggle, the future of this deal is still not set in stone.

    According to Eliot Brown, the MTA and Related have agreed to extend the deadline to sign the contract from January 31 to March 31, and he says that the real estate executives “have recently been expressing confidence that they indeed expect to sign the contract once the documents are ready.” Meanwhile, Goldman Sachs, one of Related’s funding partners, has dropped out of the deal, but Related says that will not impact their ability to pay the money owed to the MTA.

    Brown has more:

    A bit more info about the contract with the M.T.A. is in a memo from the agency, obtained by The Observer, sent late Friday to the M.T.A.’s board. The memo says that Related has until March 31 to sign the contract, when it will have to plunk down $21.75 million and trigger another $21.75 million in payments over the following year. (The whole deal is valued at a $1 billion transaction for the MTA in today’s dollars; the entire 12 million-square-foot mega-development, if built out fully, would run an estimated $15 billion.)

    Should Related, led by Stephen Ross, indeed sign the contract by March, it would then obligate itself to close on the deal once the economy improves to the point where it hits a set of quantifiable triggers that include commercial vacancy rates, according to multiple people familiar with the deal. Thus the true test of whether or not the deal for the rail yards will happen is at that point—when Related must close on the deal and commit to the full 99-year lease (and the $1 billion in payments) or back out.

    THE PROCESS HAS become considerably more drawn out and far more uncertain than imagined at the economy’s peak, when the M.T.A. was first soliciting bids for the site. The M.T.A. had planned for the $1 billion to start rolling in, and budgeted accordingly in its capital plan. Now Related must find major tenants willing to leap over to the far West Side and be anchors for a new giant complex of hotels, retail and office towers. And the development must have a certain critical mass of tenants to get going: the platforms alone for the two 13-acre rail yards are estimated to cost up to $1 billion, meaning a promised set of occupants is needed to get financing.

    For the agency, this delay is obviously a fiscal inconvenience. It has been nearly two years since Tishman Speyer originally agreed to buy the land, and the MTA could see another $1 billion deal disappear at a time when they most need the money.

    Meanwhile, the 7 line extension continues onward. The subway extension will be built, and at the rate Related is going, it will open well before the bulk of the Hudson Yards development takes place. At least those who eventually build there will have a subway line. Whether the extension is still the best use of city spending on transportation expansion remains an open question.

  • At Hudson Yards, waiting for Related

    As workers continue to forge ahead with the 7 line extension, the new stop at 34th St. and 11th Ave. remais on target to open in 2013, but will there be anything above ground besides the Javits Center? That’s long been the hot button question surrounding the city’s efforts at developing the Hudson Yards land. This weekend, Crain’s New York tried to answer it. The business trade took a look at six key projects, and among them are many transit-related developments. Moynihan Station and Atlantic Yards have garnered the headlines, but what of the Far West Side?

    As Crain’s reminds us, February should witness a major milestone in the future of this project. That month, Related’s first $43.5 million payment of its $1 billion deal with the MTA is due after the two sides agreed on a one-year extension in 2009. “We’re working diligently with the MTA and expect to meet the deadline,” a company spokeswoman said to Andrew Marks. Meanwhile, others with vested interests in the area believe something will happen but not until after the 7 line opens. “The opening of the subway means that something will get built there,” Jon McMillan, whose company TF Cornerstone Inc. owns development rights along West 37th St., said. “Once we’ve got the 7 line here, it will be, ‘If you build it, they will come.’”

    In the past, I’ve called the 7 line work the Subway to Nowhere because of the costs and nature of the project. The city dropped plans — which factored heavily into Mayor Bloomberg’s PLANYC proposal — to build a stop at 41st St. and 10th Ave. where residents actually need subway access and are banking on substantial development to make this costly subway extension worthwhile. Still, if developers in the area are optimistic, that’s reason for hope for Manhattan’s last frontier.

  • The parable of the 7 line extension

    The 7 Line extension — that glorious city-funded boondoggle of a subway extension — reached a milestone this past week. After a few months of drilling, the second of the project’s two tunnel boring machines broke through the southern wall of the 34th St. station cavern. The two TBMs have finished digging out a combined 2900 feet of track from 26th St. on north that will be used for storage, and Phase I is now complete. The project remains on target for its December 2013 opening.

    “It’s been a half century since City government expanded its subway system, but that drought will soon be at an end,” Mayor Michael Bloomberg said. “Too often, government falls victim to the temptation to abandon long-term infrastructure projects amidst short-term downturns, and that’s why big things never get done. The redevelopment of the Hudson Yards has been talked about for decades, but with the expansion of the number 7 line, its potential will finally be realized.”

    “This week’s milestone is a clear indicator that the MTA is delivering on a major expansion project that will increase capacity within our transit system and generate economic growth in a vastly underserved area,” MTA Chairman and CEO Jay H. Walder said. “Much like our joint efforts to improve bus service throughout the city, this partnership between the city and MTA will benefit New Yorkers for generations to come.”

    The press-release back-slapping by the MTA heads and various city leaders continued as you would expect. For those so inspired, read it here. Manhattan Borough President Scott Stringer, City Council Speaker Christine Quinn and House Rep. Jerrold Nadler all added their praise for the project. The 800-pound gorilla in the room, though, was completely ignored.

    “Today’s announcement of the completion of the first phase of the Number 7 Line extension is a major milestone in the expansion of New York’s aged infrastructure,” Nadler said. “For too long we have not made the necessary investments to update our transportation network. This project, which will open the economic potential of the Far West Side, is one of many such projects we need to do to prepare New York for continued growth. I look forward to the successful completion of this project and future investments in our infrastructure.”

    Left unsaid were qualms about present investment levels in our infrastructure. In a way, the 7 line extension and this moment in the sun for the project represent the perfect complement to the wall-to-wall coverage of of the MTA’s budget crisis. Here is a project in which the city has given $2.1 billion to transit, and yet it is one of the most flawed expansion projects under construction. Despite the Council’s approving a rezoning measure for the Far West Side yesterday, there has been no progress on the Hudson Yards development.

    Meanwhile, the City was hesitant to cover cost overruns on the project and shelved even just a $500 million shell for a badly-needed station at 41st and 10th Ave. Why? Because real estate developers looking for handouts and bonuses to increase their land value wouldn’t have benefited nearly as much as Related, the company in charge of constructing something at Hudson Yards, will when the 7 line opens ahead of their development.

    Call me a cynic, but there’s something wrong about the city’s funding priorities when it comes to mass transit. Bloomberg is happy to pay for an extension that will benefit his real estate friends, but when it comes to contributing to operating expenses and ensuring that the economic driver of the city can continue to offer adequate service levels, he and his third-term administration are nowhere to be found.

    One day, the 7 line extension to nowhere will open, and one day, it might actually be an extension to somewhere. For now, though, the TBMs trundle forward with 42nd St. in their sights. Hopefully, the MTA will be able to pay for the extra operating costs this new line will incur when it opens in four years. Don’t expect the city to help out.

    After the jump, some TBM pictures. Click to enlarge. The video above is courtesy of Mayor Bloomberg’s YouTube channel. (more…)