Grand Central owner fights SL Green, city for communications related to rezoning

City's largest office landlord says request is too broad, burdensome

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

The owner of Grand Central Terminal’s air rights is demanding documents between the city and SL Green Realty to discover what he says is the motivation for rezoning a five-block stretch of Vanderbilt Avenue.

Andrew Penson, the owner of Grand Central Terminal, is duking it out with the city and SL Green[TRData] over communications detailing the rezoning of the “Vanderbilt Corridor.” In September, Penson lobbed a lawsuit against the two, alleging that his 1.2 million square feet of air rights over the terminal were rendered worthless by the “Vanderbilt Corridor” rezoning, which enabled SL Green to move forward with plans for its 64-story office skyscraper, One Vanderbilt[TRData].

As part of the discovery process leading up to trial, Penson requested a slew of documents related to One Vanderbilt and communications between the city and the developer. He’s alleged that the city rezoned solely to increase SL Green’s profits. Both the developer and the city rejected the requests, saying they were “overly broad” and “unduly burdensome” and in some cases violated attorney-client privilege. Instead, SL Green agreed to provide two documents: its application for a special permit to build One Vanderbilt and its confidentiality agreement with Penson related to the air rights.

“That position is simply untenable,” Penson’s attorney, Richard Ziegler, wrote in a letter to Judge Paul Gardephe. “This is a significant case involving important public policy issues, including whether the city’s rezoning and issuance of a special permit vitiated the City’s landmark preservation policy.”

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Marc Wolinsky, an attorney for SL Green, told The Real Deal that it would set a dangerous precedent if developers who benefitted from rezoning were required to recompense neighbors who were adversely affected by the legislation. He said the allegation that no public benefit came from the rezoning of Vanderbilt Avenue is ridiculous: SL Green is constructing $220 million of improvements in the Grand Central area, including a new transit hall for the Long Island Rail Road.

In its own response, the city points to legislative records and hearings held by the Department of City Planning as the only documentation needed to show that rezoning benefits the public. A City Law Department spokesperson said in an e-mail that “these are normal issues that arise in the course of litigation” but declined to comment further on the case.

Representatives for Penson declined to comment.

The battle over discovery is the latest chapter in Penson’s lawsuit against the city and SL Green. Penson alleges that the city stripped his property of value by essentially giving SL Green free development rights. The developer had considered at one time, buying Penson’s air rights, which he estimates to be worth $1.1 billion. Penson purchased Grand Central in 2006 for $80 million, he claims, expecting to be able to sell the more valuable air rights.

In May, the City Council approved rezoning the “Vanderbilt Corridor,” which paved the way for SL Green’s 1.6 million square foot tower and is a prelude to a larger rezoning effort in Midtown East. City Council member Dan Garodnick has publicly said he believes the full Midtown East rezoning plan will be passed in 2017. The second phase that allows owners of landmark buildings to sell up to 4 million square feet in unused air rights across the district at market rates. The city will take a 20-40 percent cut and earmark the funds for transit and infrastructure improvements.