Grand Central Terminal Owner Penson Sues NYC Over Air Rightsby , , and
Developer SL Green seeks to build nearby office tower
Penson wants $1.13 billion, claiming illegal zoning deal
The real estate investor who owns Grand Central Terminal is suing New York City and developer SL Green Realty Corp. over plans to build a huge office tower nearby.
Andrew Penson claims Mayor Bill de Blasio, the City Council and developer SL Green Realty illegally deprived him of air rights worth hundreds of millions of dollars in approving plans for One Vanderbilt, a midtown skyscraper designed to be taller than the Empire State Building. Penson is seeking $1.13 billion from the city and $475 million from SL Green, in a lawsuit filed Monday in Manhattan federal court.
Penson’s company, Midtown TDR Ventures LLC, bought the 102-year-old commuter rail terminal in 2006. Because Grand Central is a designated landmark, the property came with valuable "transferable development rights" or "air rights," which can be sold to permit nearby projects to be bigger than would otherwise be permitted under local zoning laws. The value of such rights can be “greater than the land itself” because of higher returns for upper floors, Penson said.
In May, SL Green reached an agreement with the city to permit construction of the 1.6 million square-foot tower, which will stand 1,501 feet tall. The agreement allowed for zoning changes in the immediate area that allowed for additional bulk. SL Green also agreed to make $220 million in transit upgrades in and around Grand Central Terminal. Penson argued the deal effectively renders his air rights worthless.
"The City’s ‘zoning’ took from Midtown the entire value of the Grand Central TDRs and transferred over $475 million of that value to SL Green, for no purpose other than to reduce SL Green’s costs and increase its profits in constructing an office tower that it was going to build anyway," Penson said in his complaint.
Jonathan Rosen, a spokesman for SL Green, said the One Vanderbilt project “won the support of a broad coalition of transit advocates, community leaders and elected officials through a rigorous public review process because of the project’s unprecedented commitment to improving the commutes for millions of New Yorkers and bringing state-of-the-art office space to a revitalized East Midtown.”
The deal is "critical" to helping New York compete as a global business and finance center and to improving the city’s public transit and infrastructure, Wiley Norvell, a spokesman for Mayor de Blasio, said in a statement.
Demolition of buildings on the site is already under way, Jeremy Soffin, another SL Green spokesman, said Tuesday. The tower is scheduled to be completed by 2021.
“This is a classic violation of the Public Use clause of the Fifth Amendment of the Constitution -- taking the property of a private citizen for the benefit of another private citizen without any public purpose,” Midtown’s lawyer, David Boies, said in the complaint.
The case is Midtown TDR Ventures LLC v. City of New York, 15-cv-07647, U.S. District Court, Southern District of New York (Manhattan).