The Real Deal New York

SL Green shakes lawsuit over air rights at Grand Central

New owners at the terminal helped settle the complaint

August 10, 2016 10:49AM
By Kathryn Brenzel

Rendering of One Vanderbilt in Midtown (credit: KPF) (inset, from left: Marc Holliday and Andrew Penson)

Rendering of One Vanderbilt in Midtown (credit: KPF) (inset, from left: Marc Holliday and Andrew Penson)

SL Green Realty says it has shaken a pesky lawsuit that threatened to stall the construction of its massive office building near Grand Central Terminal, One Vanderbilt.

The REIT announced on Wednesday that it has settled a lawsuit filed by the owner of Grand Central, Andrew Penson, which alleged that the office landlord and the city rendered his 1.2 million square feet of air rights useless when it rezoned the area. The settlement was made possible, in part, by the recent sale of a stake in Grand Central to Michael Dell’s MSD Capital, according to SL Green TRData LogoTINY.

“We’re pleased that the new ownership of Midtown TDR Ventures shares our commitment to development in East Midtown and worked with us to quickly reach this agreement,” Marc Holliday, CEO of SL Green, said in a statement. “With demolition nearly complete and work already underway on public improvements, One Vanderbilt is well on the way to becoming a reality.”

A representative for SL Green would not provide details on the settlement but indicated that it involved an “immaterial” dollar amount. Penson did not return calls for comment.

MSD bought a stake in the terminal last month for $63 million. The size of the ownership stake is not clear, and public records indicate that it was sold by Lehman Brothers Holdings, which was part of a group of investors that bought the terminal in 2006 for $76.5 million. The group of investors is headed by Penson, and it’s not clear if he still has an interest in the terminal. A representative for MSD did not immediately return a call seeking more information.

Penson filed the lawsuit against SL Green and the city last year, alleging that by rezoning a five block stretch that included the developer’s One Vanderbilt, the city rendered his air rights over Grand Central worthless. He estimates that the air rights were worth $1.1 billion. SL Green filed a motion to dismiss the lawsuit, arguing that it could potentially delay the project’s progress, which would in turn hold up its $220 million investment in infrastructure — a promise it made to the city as part of the rezoning of the “Vanderbilt corridor.” A spokesperson in September called the lawsuit Penson filed “frivolous.”

Councilman Dan Garodnick, a major proponent of rezoning Midtown East, said the settlement has cleared the path for “SL Green and others to take advantage of this opportunity to tie critical infrastructure improvements to private sector growth.”

Lawsuits are a fairly common tactic to stall development. In fact, SL Green threatened to file a lawsuit that would have blocked or held up the sale of Stuyvesant Town to the Blackstone Group, the New York Times reported. But one of Stuy Town’s sellers gave a $10 million go-away-payment to SL Green.

So far, SL Green hasn’t announced many tenants for the 65-story office tower. In 2014, TD Bank inked a lease for 200,000 square feet in the building, starting in 2020.

MENU