The Real Deal New York

Brookfield out at Hudson Yards, but maybe not forever

February 27, 2008 03:21PM
By Alec Appelbaum

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Brookfield Properties’ withdrawal from the bidding for the Metropolitan Transportation Authority’s Hudson Yards on the far West Side looks more like a twist in a long-evolving story than the abrupt end of an ambitious effort.
 
Of the five development teams that submitted bids last fall to buy the air rights over the West Side Rail Yards from 30th to 33rd Street, only Brookfield declined to submit a revised bid yesterday after the MTA changed the terms of the project. Yet Brookfield also left open the possibility of a future deal.

“We hope to continue a dialogue with the MTA and the city about the entire development of the West Side,” said Melissa Coley, vice president of investor relations.

Brookfield remains deeply involved in the far West Side. Just east of Hudson Yards, it’s planning a 5.4-million square-foot project, zoned for office and mixed usev(and dubbed Manhattan West). That project, for which the company disclosed a $105 million predevelopment loan in its February earnings release, has grappled with huge construction costs.

The release describes it as “a $600 million project,” but Coley told The Real Deal that projections now show the deck alone costing $630 million. What’s more, the prospects for a new Moynihan Station that would back up to Manhattan West look rockier than ever.

“This is a different economic environment than it was last summer,” Coley said.

With so much already invested in the area and the economy softening, Brookfield’s shareholders might have seen a winning bid as simply too risky, now that the MTA wants a developer to lease the Hudson Yards land for 99 years and face possible rent increases.
 
“Their stock price is low, and Vornado’s stock price is low,” says a far West Side development expert in contact with Brookfield’s advisory team.
 
Vornado Realty Trust, however, has the cushion of a bidding partner, with privately-held Durst Organization, as well as the security of Conde Nast as an anchor tenant.

“I just think it’s hard for public companies to do this,” the source said.

Brookfield won a lot of attention for what was always a long-shot bid at Hudson Yards, earning praise for its plan’s mix of architectural styles and a design that attempted to weave the mega-project into the urban fabric.

Coley, indeed, refused to say goodbye to Hudson Yards. She said “no comment” when asked if Brookfield would get back into the area, potentially as a partner to another developer, if economic conditions change.

Brookfield’s bid, which violated MTA guidelines by preserving the street grid through the site rather than creating a platform, drew praise from civic groups and could end up influencing the site’s eventual design. Brookfield’s design team included the firms that designed the High Line, the elevated park that has been driving up property values in West Chelsea, so it could remain active in negotiations about how the Hudson Yards site connects to the park.
 

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