Tishman, MTA on road to deal

Real Estate Weekly, May 7, 2008 by Daniel Geiger

The Metropolitan Transportation Authority reached a formal agreement to have Tishman Speyer develop the western portion of the West Side rail yards and said that the same agreement would be completed this week for the eastern half of the yards as well.

But both deals are contingent on ongoing negotiations between the city and the developer over what types of infrastructural improvements will be made by the city at the site, which occupies the 26 acres between 31st and 33rd Streets stretching from 10th to 12th Avenue.

The MTA's chief financial officer, Gary Dellaverson, said that he had tried to facilitate an agreement on the infrastructure issues by inviting the city to participate in a marathon negotiation between the MTA and Tishman Speyer last week. But Tishman Speyer and the city couldn't come to an understanding and an $11 million payment that the developer was scheduled to give the MTA to formalize its deal to build millions of square feet of commercial and residential space on top of the rail yards will instead be held in escrow for a seven day period to allow an infrastructure agreement to be reached.

Dellaverson said, "I think they'll reach an agreement, it's in their interest, it's in our interest, it's in the city's interest, I do not believe this will derail at this point, deals that make sense for everyone more often than not get done."

If it doesn't however, it would appear to throw the MTA's billion-dollar deal with Tishman Speyer into jeopardy. Tishman wants the city to make sewer, water and other upgrades at the site as well as complete the expensive task of raising the streets surrounding the yards so that they meet the higher grade level of a platform that the developer has to build over the working train tracks below and on top of which the development will sit. "If you were going down 33rd street and there was a platform there, you'd need a rope to get to it, the street has to be re-profiled so that you have a flow and not a walled moat for a development," Dellaverson said.

It's not clear what the cost of the infrastructure improvement would be, but Dellaverson said that the city expected to spend about $3 billion to cover the infrastructure costs and to fund part of the No. 7 subway extension.