September-October 2004

MTA to sell $1B in land, including 5M sf on West Side

By Jennifer Benepe
http://www.therealdeal.net/issues/September-October_2004/1095818572.php

The announcement by the New York Metropolitan Transportation Authority this past month that it will sell a large amount of land to finance future capital construction has the real estate community guessing about what property will be sold and for how much.

The problem is that the MTA doesn't know either."We're doing an inventory of everything there, what the value is, and what we would get if we sold it," said Tom Kelly, a spokesperson for Peter Kalikow, MTA chairman.

Published reports have put the amount of land to be sold at $1 billion, but Kelly said the agency was still looking carefully at what unused land, right-of-ways, and land adjacent to MTA bridges and tunnels that have no real purpose could be sold.

The biggest pieces for sale will involve the rail yards along Manhattan's West Side and land in Downtown Brooklyn for a Nets stadium, but most of the parcels will likely be small ones."Some of that property people may have taken as their back yards," said Kelly. "Are we talking about 50 extra feet on both sides of an MTA property? We don't know."The extent of the task is daunting. According to an MTA document, the agency "possesses billions of dollars of real estate physical assets, including over 14,000 properties, nearly one thousand stations, and over 1,000 right-of-ways, and numerous bridges and tunnels."

As detailed in their 2003 financial report, the MTA owns $124 million of land, and $10 billion in buildings and structures, both making up well over a third of the agency's total fixed assets.

According to a senior member of the real estate group, the MTA advertises available property in the local newspapers, such as the New York Post and New York Newsday, but there is no schedule or notification system for large-scale property disposals.

The MTA's hottest properties are a pair of rail yards on Manhattan's far West Side which are potential sites for a multibillion dollar sports arena and mixed use development.

While developers don't want the tracks themselves, the air rights are expected to have hefty price tags. While the proposed Jets stadium is to be built over the western rail yards, the eastern rail yards land would be sold and used to house over 10.7 million square feet of mixed commercial, residential and cultural buildings, and a park land about the size of Bryant Park.

Once decking over the yards is completed, the eastern rail yards are estimated to yield 5.7 million square feet of development space. Currently the land is valued at $812 million, a price tag of $159 per square foot.

But this valuation has been questioned by city and state officials, who say it does not represent the number that developers will pay once the amelioration of the surrounding area has been completed. The price is more than likely to double or more after the city has completed the decking, built street improvements, added the No. 7 subway line extension and completed new commercial zoning.

Despite government wrangling, developers' interest in the properties is strong. Once the plan moves forward, the city's Economic Development Corporation will offer three major mixed office and residential development parcels for bid. These will be built close to the proposed park and cultural building, which would raise the value of the land.

"I would love to be involved down there, though it is too preliminary to know whether we can get the density we want," said Peter Murray, vice president of Loewen Development, a private firm that has developed 15 properties in the city over 12 years. Zoning densities are projected with a FAR, or floor area ratio, of six and over.

A bill introduced in the New York Assembly by Speaker Sheldon Silver in July attempted to subject the MTA sale to the land-use review process that other city properties must undergo before a sale is completed. The bill would have allowed the city council, community boards and the public to weigh in on the sale of the land, but the bill has languished in the Senate and is unlikely to pass, according to city and state officials.