No Plans for N.Y. MTA to Sell Bonds Against Hudson Yards Lease, But Option Remains

New York's Metropolitan Transportation Authority doesn't plan to sell bonds against a lease of Hudson Rail Yards to Tishman Speyer Properties LP, but the option will remain on the table, chief financial officer Gary Dellaverson said yesterday at the MTA's board meeting.

The authority faces an approximately $2 billion to $3 billion shortfall in its current capital plan which runs through the end of 2009 due to construction cost escalation, executive director and chief executive officer Elliot Sander said yesterday.

"The program has some shortfalls in it and we will not be able to fund all of the projects in it," Sander said. "We're in the process of reconciling what we will be able to complete and what we will move forward into the next capital plan."

The MTA expects to get $1 billion from the developer at net present value over the 99-year period of the lease that will help fund the authority's capital program.

"We don't expect to bond the lease," Dellaverson said. "We expect to use cash flow to meet the [MTA's capital] needs which would be our preference."

Under the deal's structure, the lease can be bonded, he said.

The Hudson yards are split into to two 13-acre parcels west of Pennsylvania Station. Together the two parcels are expected to yield about 12.3 million square feet of mixed-use development.

The MTA and the developer signed a conditional designation letter in the early morning hours yesterday before the board meeting, which is a step toward entering into a contract to sell development rights on the land and enter into the lease The letter was signed with a seven-day escrow period during which the developer has put $11 million into an escrow account while it negotiates with the MTA and New York City over infrastructure and legal issues.

The Hudson Yards Infrastructure Corp. sold $2 billion of bonds in 2006 to finance the extension of the Number Seven subway line and other infrastructure improvements. The HYIC is authorized to sell a total of $3 billion of bonds.

 

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