New York’s Metropolitan Transportation Authority, the biggest U.S. mass-transit operator, may sell its Manhattan headquarters for about $150 million, the agency’s real estate director said.
Selling the three buildings on Madison Avenue in Midtown would reduce the agency’s real estate holdings and cut costs to help close a projected 2012-14 deficit of $649 million, Jeffrey B. Rosen said in a telephone interview. The properties sit on a lot of about 25,000 square feet (2,300 square meters) between 44th and 45th Streets.
“At this moment we have an opportunity, driven by measures that this administration is taking to cut costs,” Rosen said. “We’ve achieved very dramatic reductions in administrative payrolls, and that’s created vacancies across our properties. This is the most rational way to consolidate operations.”
Buyers would probably be interested in tearing down the buildings and erecting a new office tower, hotel or both to capitalize on the site’s proximity to Grand Central Terminal, Manhattan’s rail link to its northern suburbs, said Robert Knakal, chairman of Massey Knakal Realty Services, a New York-based property broker.
“This is at least the third time and maybe the fourth time this has been put out to bid,” said Douglas Durst, whose Durst Organization built the nearby One Bryant Park skyscraper, home to the main New York offices of Bank of America Corp. The properties never sold “because the MTA’s corporate people decided they didn’t want to move,” he said.
The agency is more likely to complete a deal this time because of its economic straits, according to Durst, who said he is interested in bidding on the buildings for possible development.
A buyer might be able to increase the value of the property by obtaining air rights associated with Grand Central. Those rights are controlled by Argent Ventures, a New York-based real estate development firm, said Jeremy Soffin, an MTA spokesman. Argent obtained the rights from successors to the Penn Central Railroad, which went out of business in the 1970s.
Those rights offer “many possibilities for development of this site that we’ll be exploring moving forward,” Soffin said in an e-mail.
A call to Argent principal Andrew Penson seeking comment wasn’t immediately returned.
The MTA has a $12.1 billion fiscal 2011 budget. It raised its projected 2012-14 deficit from an earlier estimate of $233 million because of lower investment returns, Robert E. Foran, its chief financial officer, said in November.
From April 2010 to September of this year, the MTA will have reduced the annual rent it pays under office-space leases by more than 12 percent, or about $2.5 million, Rosen said.
The agency bought 347 Madison for $11.9 million in 1979, Rosen said. In 1991, it purchased 341 Madison for about $12.3 million and 345 Madison for $23.8 million. The ground floors of the buildings, two of which are 20 stories and the other 15, are occupied by tenants including sandwich-shop owner Cosi Inc. and retailer J. Crew Group Inc.
‘True Triple Play’
“Selling our Madison Avenue buildings is a true triple play, allowing us to raise capital funds, avoid costly renovations and make better use of our office space downtown,” Jay H. Walder, the MTA’s chairman and chief executive officer, said in a statement.
The New York Times reported the sale plan earlier today.
Rosen said he hopes to have the sale completed as quickly as possible, and “certainly” within three years. Some employees at the buildings would be moved to 2 Broadway, while the agency seeks to keep some Metro-North Railroad workers in the area for its proximity to Grand Central Terminal, he said.
A solicitation for bids for brokers is pending. Rosen calculated the “conservative” estimate of $150 million by multiplying $400 per square foot by 375,000 feet, which is the zoning amount allowed for the facilities.
It’s a good time to sell Manhattan office properties, said Peter Hauspurg, president of brokerage firm Eastern Consolidated Properties Inc., a New York-based investment sales brokerage.
“That’s super-prime space that’s much better occupied by guys paying $80 a foot in rent,” he said by telephone. “There’s plenty of stuff in Brooklyn or the Wall Street area that could really use those guys as tenants. Let the hedge fund guys who commute in from Greenwich to Grand Central pay the money, and have it trickle down to the tax rolls.”