Madison Square Garden Swap: An Inside Job

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Steve Roth’s Big Deal

The story on the Madison Square Garden flip in the current issue of the Observer showed how Steven Roth, chairman of Vornado, would win big if the deal goes through. We have since learned that the idea for moving the Garden goes all the way back to 2003, and that it wasn’t Roth who thought of it, at least according to one insider’s account, but rather two executives at the state economic development agency in charge of the redeveloping the Farley Post Office, the back end of which may one day make way for the arena.

According to Peter Waldt, at the time a vice president of the Empire State Development Corporation, he and Jeff Ellenbogen, project manager at the same agency, were talking one day about the post office project. Waldt, in an e-mail to us, writes that Ellenbogen told him:

since construction costs were rising with inflation, $30-40 million per year was being added to the funding gap – creating a need to find other sources of funds. We were looking at the site plan when he said, ‘You know, I’ve always though it was interesting the way that M.S.G.’s footprint fits inside the Farley Building.’ My response was, ‘You know, moving M.S.G. to Farley makes a lot of sense.’

Waldt and Ellenbogen, through intermediaries, eventually got their idea into the hands of Stephen Ross, chairman and CEO of The Related Companies, who had worked with the postal service before. “Steve Ross did a reality check (i.e., would it fit?) and got some renderings done. They went to M.S.G. with the concept and were told Steve Roth had the balance of the site sewn up.” Waldt, in turn, mentioned the idea to Vornado’s Roth later that year. The two eventually teamed up to submit a joint bid on the redevelopment project to the E.S.D.C.

Way back in October 2004, Charles Bagli mentioned that the joint bid included a possible move by the Garden. The two Steves would renovate Farley (with the help of a few hundred million from the state) and, if negotiations with the Garden were successful, move the arena to the Ninth Avenue side of the post office complex. On the site of the old Garden, they would raise a few spiffy skyscrapers and give the Tenderloin area a shot in the buttocks. Oddly, newspaper stories failed to pick up on this idea, nor did the E.S.D.C. mention it when it chose the Related/Vornado bid over those put forth by Boston Properties and a Tishman Speyer-Jones Lang LaSalle partnership. And yet the Garden swap seems to have been an essential part of the Farley redevelopment all along, a means to make the project more lucrative to the developers, but only if the developers included Steve Roth.

Ironically, Waldt has since gone to work for Cushman & Wakefield, which is advising the Garden in the deal. He is not, he told us, involved in those negotiations.

-Matthew Schuerman