With the economy sinking around him, Stephen Ross and his Related Companies have successfully delayed purchasing development rights to the West Side rail yards by a year, as the M.T.A. sent out a statement this evening announcing a one-year extension of the “conditional designation” period.
With financing near impossible to come by, particularly for speculative $15 billion developments, Related told officials it was unwilling to proceed with the initial schedule for the 26-acre site. An agreement from May called for Related to pay a $43.5 million deposit upon signing a contract, starting the clock for far more payments that would ultimately total about $1 billion. Related would also have to invest an estimated $2 billion in platforms over the rail yards before erecting buildings over them.
The agreement thus shifts judgment day on the rail yards—when Related officially would sign on to the project and the agreed-upon $1 billion in payments to the agency—to a year from now.
Related will pay the agency $8.6 million “in exchange for the extension,” though it can use some of that to fund the company’s efforts on a needed rezoning of the western half of the property.
Of course, things aren’t all bad on the West Side. Last month, Related met with potential tenant Condé Nast, according to a person familiar with the meeting. Condé, an initial anchor tenant with the Durst Organization in its bid for the rail yards, is apparently still looking to possibly occupy a new building once its lease expires in 2019—though more on this in tomorrow’s Observer.
It’s worth noting that Mr. Ross—Related’s chairman—was apparently able to come up with hundreds of millions of dollars for a football team. He just finished the purchase of the Miami Dolphins, also for a price of just over $1 billion. While details of the deal are not public, the Miami Herald reported that Mr. Ross defered payment on less than one-third of the $550 million spent to complete the sale.
Full statement from the M.T.A. below.
The Metropolitan Transportation Authority (MTA) today finalized an agreement with Related Companies/Goldman Sachs to extend the partnership’s period of “conditional designation” as developer of the MTA’s East and West Side Rail Yards for up to an additional year. Due to the economic downturn and collapse of traditional commercial lending, the parties were unable to reach final contractual terms by January 31, the end of the existing designation period. Nonetheless, the MTA and Related/Goldman remain fully committed both to the Eastern Rail Yard and Western Rail Yard projects and the business terms of the deal. The agreement provides the MTA with a non-refundable payment of $8.6 million in exchange for the extension (up to half of which may be used to offset expenses incurred by MTA, the City and the developer regarding, principally, the continuation of the zoning and ULURP process). In addition, the MTA and Related/Goldman agreed on a set of revised provisions to guide our contractual negotiations during the extended designation period. While the extension is up to a year, both parties are committed to moving forward as quickly as possible, and the planning process continues to advance.
Elliot G. Sander, Executive Director and CEO of the MTA said, “Today’s agreement acknowledges current economic realities without derailing our partnership on this important site for New York’s future. The development team made their commitment to the project clear and this new understanding keeps us on the path to obtain the funding critically needed for the MTA’s current capital plan.”
Stephen M. Ross, Chairman and CEO of Related Companies said, "The development of Hudson Yards is critical to the future of New York. Today’s agreement creates the flexibility needed in light of current market conditions, while ensuring that we can continue to collectively move forward with the necessary planning approvals and pre-construction logistics. When the markets rebound and with zoning in place, New York City will be poised to build a vibrant new mixed-use community at the rail yards."
*This story initially said that Related told officials it was unable to raise money to pay a $43.5 million deposit. It has been corrected to say that Related told officials it was unwilling to proceed with an earlier schedule, which included the deposit but also called for substantial subsequent investment.