Tuesday, November 27, 2012

Hudson Yards Shovel-Ready


In a critical breakthrough for Hudson Yards, the MTA board is expected tomorrow to let Related Companies start $50 million of preliminary work on its Coach headquarters tower before the developer closes on its 99-year lease of the 26-acre site from the agency.

In exchange, Related will give up its right to defer closing until three citywide economic “triggers” have been met. The company founded by Stephen M. Ross also will commit for the first time to a firm closing date: June 1, 2013, although both Related and the MTA say it will likely occur sooner and possibly by this Dec. 31.

The agreement is anything but a technicality. Despite a recent blizzard of coverage touting the rail-yard project as an epochal achievement for Mayor Bloomberg, Related has yet to start building the Coach tower more than a year after a photo-op at which Ross, Bloomberg and Coach CEO Lew Frankfort said construction would start by this past summer.

“There’s been a lot of smoke. This is fire,” MTA director of real estate Jeffrey B. Rosen said yesterday.

MTA chairman Joseph Lhota recently told Realty Check that Related wanted unspecified “amendments” to its 2010 agreement with the MTA, which has yet to close.

The changes are not to the roughly $1 billion long-term lease, but mainly to the timetable. Related needs more time to wrap up contracts with its financial partner, Oxford Properties, and with Coach, other possible tenants and construction lenders.

Related’s 2010 agreement with the MTA didn’t allow the developer even to begin site preparation until the lease closed.

But Related needs to get moving immediately on the 47-story, 1.7 million-square-foot skyscraper at 10th Avenue and West 30th Street — a so-called “terra firma” site. Towers planned for later will rise from a platform Related must build over the two rail yards between 10th and 12th avenues and 30th and 31st streets.

Coach, which is buying 750,000 square feet of office space, needs to move in by mid-2015 when leases elsewhere expire. Two other possible tenants, L’OrĂ©al and German software giant SAP, are also said to have firm deadlines for moving into their space.

An MTA spokesman said the agreement — approved yesterday by the agency’s Finance Committee and to be voted on by the MTA board tomorrow — lets Related begin excavation and foundation work at once, but not above-ground construction.

Related must complete the preliminary work before the tower can actually start to rise. The new agreement gives Ross wiggle time to put infrastructure in place so he can build in earnest once Related closes on the lease.

Prior to yesterday’s agreement, Related could have put off the closing indefinitely until three citywide economic recovery milestones were met — involving office vacancy rates, condo apartment prices and architectural billings.

Both Related and the MTA admit those markers have not been met and might not be for another year or more.

Additionally, the MTA said that when the closing takes place, Related’s payment obligations “will be adjusted so the economics for the MTA will be as if the closing were happening now.”

Related said work at the site was “imminent” following expected MTA board approval this week.

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