The Metropolitan Transportation Authority board authorized Chairman Thomas Prendergast to negotiate with New York City officials over a dispute regarding the proposed 99-year lease of its former Madison Avenue headquarters to Boston Properties.
The sides differ over the allocation of a payment-in-lieu-of-taxes, or PILOT, provision to the long-term ground lease involving 341, 345 and 347 Madison Avenue and 45 East 44th St. Boston Properties, the firm of real estate magnate Mortimer Zuckerman, wants to build a skyscraper on the parcels, which total 25,000 square feet.
The MTA, one of the largest municipal issuers with $36 billion in debt, moved its entire operations to 2 Broadway in lower Manhattan early in 2015. It expects the deal to provide about $1 billion overall and $430 million for its capital programs. The city wants a piece of the action.
“We’re continuing to negotiate with the city in an attempt to reach a fair and equitable resolution that provides the MTA with the anticipated level of funding from the development,” Prendergast said at Wednesday’s board meeting in its current headquarters.
The MTA board, which tabled the lease agreement in February, passed it by an 8-3 vote and authorized Prendergast to seek alternatives if the lease deal falls through. Polly Trottenberg, the city’s transportation commissioner and a Mayor Bill de Blasio appointee to the MTA board, voted against it as did board members Michael Kay and Allen Cappelli.
Loose ends include whether the authority can transfer its tax-exempt status to a private concern, which would make payments in lieu of taxes.
The PILOT is part of a compensation package that includes a $25 million upfront payment, ongoing base rent and a percentage of retail revenues, and on-site transit improvements to adjoining Grand Central Terminal. MTA chief financial officer Robert Foran said PILOT revenues would also help the MTA recover costs of moving to 2 Broadway.
The New York City Planning Commission must issue a special permit.
While critics accuse the city of coming to the table late in the game, Trottenberg said MTA improperly moved to collect the entire PILOT with no agreement with the city.
“It’s not to say that the city isn’t ready to put some value on the table, but it’s always been some give and take. In this case there was not a formal agreement,” she told reporters. “The MTA just basically went ahead and made this allocation and the city disputes their right to do that.
“If you look at previous real estate deals of this nature between the city and state entities like the MTA, there’s always been an agreement,” she added. “It’s a complex deal as are all these traditional deals, if you look at Atlantic Yards, Hudson Yards or these large real-estate deals.”
