Behind The Bidding: Durst-Vornado Tried to Hang On; Extell Was the Lowest and Highest; Brookfield Sat Tight

In the beginning, there were five teams that included the city’s biggest developers vying for the West Side rail yards. Today, the board of the Metropolitan Transportation Authority, the yards’ owner, voted to negotiate solely with Tishman Speyer over acquiring and developing the 26-acre site.

Gary Dellaverson, the MTA’s CFO, talked at today’s board meeting about the bidding that was closely watched for months even though few people beyond those directly involved knew what was really going on. According to Mr. Dellaverson and an MTA summary handed out to board members:

After the second-round of bids were taken in February—Brookfield Properties did not submit a second bid but wanted to have the ability to be brought on as a co-developer—Related Companies dropped its bid for the eastern rail yards, trying to stay in the running for just the western.

Extell Development, with a second-round bid of $1.15 billion, the highest, refused to agree to pay sales tax on the site which could run hundreds of millions of dollars (not included in the $1.15 billion figure). That refusal led to their dismissal.

With Tishman Speyer and a team of Durst Organization and Vornado Realty Trust remaining, the MTA took another round of bids, which came in at $1.004 billion from Tishman and $892 million from Durst-Vornado. The MTA began negotiations with Tishman, though the Durst-Vornado folks came back Sunday night with another offer, this one just about $39 million shy of Tishman’s.

Unmoved, the MTA continued down the road with Tishman, and last night, once again, Durst-Vornado came back with a tweak that would shift risk on $10 million. Again, denied, and this morning, the MTA board declared Tishman the victor.

Other nuggets of info from the board meeting and the agreement approved by the board:

  • The first-round bids in October were as follows (in net present value), according to a summary from the MTA—Extell-$598 million; Tishman-$819 million; Brookfield-$908 million; Durst-Vornado-$1.015 billion; Related-$1.049 billion.
  • The second round bids, in February—Durst-Vornado-$842 million; Tishman-$897 million; Related-$943 million; Extell-$1.15 billion.
  • It seems Tishman has less office space than they once planned. Based on an MTA rundown of the second-round proposals submitted by the developers in February, Tishman wants about 8 million square feet between five buildings (3.19 million square feet on the western yards and 4.86 million over the eastern)
  • The cost of building a platform over the rail tracks is now estimated at over $2 billion! That cost will be borne by Tishman, and comes on top of the $1 billion they will pay the MTA.
  • The MTA now has a whole lot more incentive to build the No. 7 line extension, the 1.5-mile route that will connect the rail yards with Times Square. Should the train not get completed by 2020 (well after its current target completion date), the whole deal for the project is off, and the MTA will have to refund the deposit and rent paid by Tishman. Many have raised questions about the project’s pricetag, which has remained at $2 billion for five years or so, though the MTA eliminated a shell for a second station last year.
Behind The Bidding: Durst-Vornado Tried to Hang On; Extell Was the Lowest and Highest; Brookfield Sat Tight