Roth Rescue: Garden Swap For Moynihan

Steven Roth lost the deal to lease the World Trade Center five years ago this month. He lost it, the

Steven Roth lost the deal to lease the World Trade Center five years ago this month. He lost it, the press concurred, because he pushed too hard, for too long, and annoyed the sellers.

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Mr. Roth will not want to lose out on the deal he is now negotiating: persuading the Dolan family, owners of Cablevision and Madison Square Garden, to move the arena one block west to Ninth Avenue to make room for a slate of towers and concourses where the arena now sits, blighting everything in its sightlines.

The move—announced in the press but not yet finalized—has the potential to transform the dog-eared West 30’s into another gleaming tribute to corporate gigantism, à la Times Square or Rockefeller Center. Imagine: the Garden torn down and replaced with state-of-the-art skyscrapers. Massive billboards advertising new underwear brands. The latest stock prices zipping along L.E.D. strips.

And at the rate things are going, Mr. Roth may have his real-estate utopia long before the dust settles on the reconstruction of Ground Zero.

The Farley Post Office would re-emerge as Moynihan Station, named after the late Senator who was its biggest champion, a new glass roof dripping sunlight all the way down to the train platforms. The Garden would then go on the west end of Farley, along Ninth Avenue, drawing office tenants further into Hudson Yards (who needs the Olympics for that?). One of the biggest urban-planning decisions of last century—tearing down Penn Station—would provide the setting for this century’s first great victory.

“What they see as the big thing here is not the Garden,” one real-estate industry source told The Observer. “The Garden is just a sideshow to what is the re-creation of an entire area. If the Garden was on the other side of Farley, you’ve got an amazing block on top of an amazing transportation center. You can basically create a whole new neighborhood.” Once cleared of the Garden, the land along Eighth Avenue will be able to hold five million square feet of office space, thanks to the city’s recent West Side rezoning.

The apparent success of the arena flip, first reported last week by the Crain’s New York Business Web site and since confirmed to The Observer, marks a reversal both for Mr. Roth’s company, Vornado Realty Trust, and the Related Companies, headed up by Stephen Ross.

It was some time ago—last July, in fact—that the two were awarded co-developer rights that would turn the Eighth Avenue end of the Farley Post Office into a train station and the Ninth Avenue end into offices, a hotel and shopping concourse.

The Garden flip would be the sweetener. As late as last December, Mr. Ross didn’t think the deal had much chance. He gave odds of “less than 50-50” during a luncheon given by the New York University Real Estate Institute. Then he turned to Michael Fascitelli, Vornado’s wunderkind president, who grumbled and then decided to give it even odds.

“Cablevision is difficult to negotiate with,” Mr. Ross said.

A knowing laugh went up from the audience. It was Cablevision that had given Mayor Bloomberg such a hard time about the Jets stadium last year—and, depending upon whom you listen to, may have taken what was considered a done deal and rendered it to the dustbin.

Both Messrs. Roth and Ross declined through spokespeople to comment for this story. So did representatives from Cablevision, the owners of Madison Square Garden. Almost immediately after the Crain’s story, Steve Sakwa, a Merrill Lynch analyst, upped his price target for Vornado stock by $6 a share.

Vornado, he wrote in a research note, “stands to benefit by raising rents on its existing 5.5 million square feet of office space surrounding Penn Station given the potential to revitalize this area a la Times Square in the early 90s.”

Remember Monopoly? You buy up all the properties around Penn Station and then you buy Penn Station? You put hotels everywhere and no one can get by you without landing somewhere on your strip? Welcome to Mr. Roth’s world.

Mr. Roth started buying property near Penn Station in 1997, at a time when the land was undervalued. All told, Vornado spent just over $1.2 billion for nine properties. The key player in these deals was Mr. Fascitelli, former head of Goldman Sachs’ real-estate investment division, whose high compensation prompted analysts to issue warnings on Vornado’s stock when he was first hired in 1994. Mr. Fascitelli earned $35 million in salary, bonuses and stock from 2002 to 2004, according to the company’s 2005 proxy statement. He is also sitting on $243 million worth of exercisable stock options.

“Mike came out of Goldman Sachs and has been focused on the financing aspects and acquisitions, and Steve Roth has been more involved in operations,” said Peter Malkin, a member of the partnership that owns the Empire State Building, and the guy who sold One Penn Plaza to Vornado in 1998. “They bought up all the property around the Garden, and now they are filling in the doughnut. It took a huge concentration of capital, and Vornado, being a public company, had that.”

But Senator Daniel Patrick Moynihan had been working to transform the Farley Post Office into a train station since the early 1990’s, and it still hadn’t been done by the time Mr. Roth made his deal with Mr. Malkin to acquire the Penn Plaza properties.

The project had become a favorite of civic groups such as the Municipal Art Society and the Regional Plan Association, who believed the new Penn Station could match or exceed Grand Central Terminal’s restoration in terms of architectural accomplishment and economic impact.

Still, moving the Garden to the west side of Farley could have negative consequences for the design of the train station.

“We’re either getting ready for a very big party or a very big fight,” said Kent Barwick, president of the Municipal Art Society. “These are high-quality developers and high-quality architects, but the private developers—if I were a private developer, I would have to keep an eye on the bottom line.”

The bottom line has already put in doubt popular renderings created in 1999 by David Childs—who would later go on to snatch the Freedom Tower byline from Daniel Libeskind—which called for a glass roof on top of the eastern half of Farley and a stepped concourse so that sunlight would fall all the way down to the train platforms underground.

Mr. Childs also sketched in another skylight above a hall connecting the east and west halves of Farley, a skylight that swooped up into the sky like a giant potato chip. “The goal is not just to bring light to the waiting room,” said Alexandros Washburn, the president of the Pennsylvania Station Redevelopment Corporation from 1996 to 2000, who began the Farley planning. “The goal is to bring light all the way down so that when you get off the train, you are oriented to light; you are oriented to New York.”

When Related and Vornado won the contract last July, they brought in their own architects, James Carpenter and Hellmuth, Obata and Kassabaum. But very quickly they were replaced again with Mr. Childs, who had been a personal friend of the late Senator.

Mr. Washburn mocked up a sketch of what the station would look like if the arena were to be moved to Ninth Avenue for a presentation before the Municipal Art Society in January. The drawing shows the arc of the arena bulging out into the central “intermodal hall,” crowding out much of that “orientation to light.”

Mr. Childs also designed a long, street-level concourse running along what would be 32nd Street, extending from the intermodal hall to Ninth Avenue and providing a mid-block entrance. Both the arena and the concourse cannot exist on the same level at that spot.

The Empire State Development Corporation, the state agency in charge of the station project, wouldn’t respond to questions, saying only: “All parties are going forward with the development of Moynihan Station as planned, without delay. All of the essential elements are in place and we are working together. We cannot speculate on the potential impact of agreements that may exist between private parties.”

Maura Moynihan, the late Senator’s daughter, who has founded a group called Friends of Moynihan Station, says that a lot of good could come of the Garden deal, assuming that it would end up improving not just Farley but also the surrounding neighborhood. At the same time, she suspects that the negotiations may end up taking a long time, putting a project already delayed even further behind schedule.

“Why don’t you just start now on the station?” she asked. “Why not just divide it up into two projects? Please, please, please—I keep praying for getting just one shovel in the ground.”

Roth Rescue:  Garden Swap  For Moynihan