MTA announces Related as Hudson Yards developer

May 19, 2008 01:56PM

The MTA announced it has reached a tentative $1.054 billion deal with the Related Companies, and financial backer Goldman Sachs, to develop Hudson Yards, following Tishman Speyer’s abandoned deal last week.

Mayor Michael Bloomberg lauded the deal.

“Today’s announcement that the MTA will award Related Companies, in partnership with Goldman Sachs, the development rights for the West Side Rail Yards is great news for the city,” Bloomberg said in a statement. “Despite the setbacks of the last few weeks, we are certain that Related and Goldman will realize this tremendous opportunity to develop what is really the only large parcel of undeveloped space left in Manhattan.”

Bloomberg said the extension of the No. 7 subway, a sticking point because of uncertainties about funding for cost overruns, made the area attractive as a “vital new mixed-use community of residential, commercial and office space a truly transit oriented development.” As The Real Deal reported last week, the city gave Tishman assurances before the deal was abandoned that “the money will be there before [Mayor] Bloomberg leaves office” for the No. 7 subway line’s extension to the site’s western edge.

Stephen Ross, Related’s chairman, and Jeff Blau, its president, said in a joint statement: “We have always believed that the West Side Yards present a unique development opportunity to shape the future of our City. Related and Goldman Sachs are proud to have been selected to create New York’s next great neighborhood, the Hudson Yards.”

Related had initially been seen as a leading candidate to develop the massive site until its anchor tenant, News Corp., dropped out of the project in March. Related planned about 4.6 million square feet of commercial office space and more than 5,000 apartments, while Tishman Speyer planned about 8 million square feet of office space and 3,200 apartments.

Last week, The Real Deal reported that residential uses could present a safer way to ensure that a deal got done immediately, rather than holding out for a potentially more lucrative bid that relied on a commercial anchor tenant.

Related also plans 565,000 square feet of retail, a 265,000-square-foot hotel, and 200,000 square feet of cultural and community space. About 55 percent of the site will be open space.

Related’s $1.054 billion bid is about the same as what Tishman offered. The MTA’s deal with Tishman, which also lost its anchor tenant when Morgan Stanley dropped out, collapsed after the developer asked to change the terms of its deal.

Metropolitan Transportation Authority Executive Director and CEO Elliot
G. Sander said: “The revenues from this development are critical to
funding the MTA’s capital needs, but we made it clear that we would not
settle for anything less than a fair deal.”

Extell Development and a joint venture of the Durst Organization and Vornado Realty Trust had expressed interest in bidding again on the project.

Brookfield Properties dropped out before the second round of bidding, but remains heavily invested in the area. Just east of Hudson Yards, it’s planning a 5.4 million-square-foot project, zoned for office and mixed-use (and dubbed Manhattan West). Pre-construction work on the deck has begun, with plans to start construction next month and finish by as early as 2013.

A special meeting of the MTA board has been called for this Thursday to seek required approval of the deal.

Governor David Paterson said in a statement, “This agreement highlights
the resilience of public-private partnerships in the face of the
national economic downturn that we are experiencing. An alliance
between Related Companies — one of the country’s premier real estate
firms – and Goldman Sachs – a global financial leader — will lay the
foundation for a reimagined far West Side that will expand the Midtown
business corridor and further strengthen the city and state economies.” TRD