New York's Metropolitan Transportation Authority has delayed for one month a vote on an exclusive pre-agreement for a 99-year lease of its former midtown Manhattan headquarters to Boston Properties.
City officials say loose ends exist to the so-called triple-net lease of the 25,000-square-foot property at 341-347 Madison Avenue, including whether the authority can transfer its tax-exempt status to a private concern, which would make payments in lieu of taxes.
Boston Properties, the firm of real estate magnate Mortimer Zuckerman, wants to build a skyscraper there.
"The city's ready to commit, but the issues are significant," said city transportation Commissioner Polly Trottenberg, who also sits on the MTA board. "There is a real question we need to work through, and I'm not saying that we can't, but whether the MTA can just transfer its tax-exempt status to a private company for a 99-year period, whether that can work."
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 that a deal for its former headquarters would provide about $1 billion overall and $430 million for its capital programs. The authority would also get a percentage of retail revenues.
Supporters of the move say leasing and getting a percentage of the revenues insulates the authority from the risk of selling at an inopportune time.
About 10 years ago, the MTA set out to sell its excess properties. Meanwhile, development around transit hubs is a rising trend nationally. Boston Properties, for instance, also wants to build office space over Back Bay Station in Boston.
The Madison Avenue transaction, which would include infrastructure improvements around nearby Grand Central Terminal, would also require a special permit from the city's Planning Commission and state environmental agencies as well as MTA board signoff.
"It's important that we move forward because the finances that derive from this transaction go to our capital program," said MTA Chairman Thomas Prendergast. "I do believe there's a sense of urgency that we need to get this done as quickly as possible and hopefully by the next board meeting."
Board member Norman Brown warned both parties to move quickly to close up the loose ends.
"One month, no month, next month, it has been a long time and we could have discussed at any point along the food chain here," said Brown, the legislative director for the New York State Council of Machinists. "You give up a month, you've given up 8% of the value for a year. Leverage changes within a month. It's not a free month."
MTA Chief financial Officer Robert Foran said the authority could bond against the $430 million, funding it from retail "ground rent" and other revenues. "At this point in time we do need that money. It is an important part of our capital program," he said.
