Wall Street Journal
July 24, 2013
The nondescript wedge of land on the corner of Houston Street and Broadway is populated by parked trucks, chain link fencing, a produce stand and a subway staircase: an unglamorous pocket on the northern lip of luxurious Soho.
But for the Metropolitan Transportation Authority, the parcel at 19 East Houston Street suddenly looks like a payday.
The MTA announced plans on Monday to sell off the 6,190-square foot lot to an arm of Madison Capital, a real estate investment firm, for nearly $26 million.
“We had not predicted anything like this kind of money for this … somewhat oddly shaped triangular parcel down in Soho,” Jeffrey Rosen, the MTA’s director of real estate, told members of the agency’s finance committee on Monday. “This is a splendid result.”
Part of the deal is a $13 million parking lot on E. 20th Street, which Madison will purchase and turn over to MTA to house the trucks it currently stores on Houston Street.
All told, the deal is a nearly $40 million value for the perennially cash-strapped transit agency. It’s the latest move in the MTA’s efforts to fund infrastructure building by selling off underused tracts of land it has controlled for decades, Mr. Rosen said.
“This is a real home run for us,” Mr. Rosen said.
The MTA, working with the New York City Economic Development Corp., has been planning to off-load underused property for years, trying to trim expenses and generate money for its capital needs.
In some cases, as with the little lot on Houston, that will mean selling off parcels that were part of the subway system before the MTA even existed.
The Houston Street parcel is owned by the city, and dates to a different era of the subway system, when private companies with public concessions built and operated the earliest divisions of the system.
The MTA will sell a small, triangular parcel of land on the southeast corner of Houston and Broadway for nearly $26 million.
Under the terms of the master lease created between the city and the MTA, the land is controlled by the transportation agency now; in addition to the produce stand, the parcel is used as a staging area for trucks used for emergency response when problems arise in the subways.
Those trucks will be relocated to the lot on East 20th Street, which Madison is under contract to purchase, Mr. Rosen said.
“Madison Capital looks forward to creating an exciting commercial development on Broadway and Houston Street at the gateway to Soho,” J. Joseph Jacobson, a partner and founder at the firm, said in an email message.
The MTA likely will not receive every last penny of the nearly $26 million sale price, though.
That’s because New York City pledged $250 million toward the MTA’s $24 billion capital spending plan for 2010 to 2014, the account of largely borrowed funds that pays for everything from maintenance of the subway’s rails and cars to expansions like the Second Avenue subway.
Under the terms of the city’s contribution, it could recoup some of those funds if the MTA sells off some of the old, formerly city-owned properties absorbed into the MTA when the agency was created in the 1960s.
The sale would still need land-use approvals from the city, and a new development would need to comport with landmarking restrictions in Soho. The MTA’s terms also require the new owners to maintain the existing access to the B, D, F and M train station at Broadway-Lafayette, as well as ventilation for the station below.
Meanwhile, the MTA expects to end 2013 with a roughly $141 million surplus, Chief Financial Officer Robert Foran told the board of directors on Wednesday.
There will also be cumulative deficits of about $140 million through 2016, he said, but in February, the MTA expected deficits of $325 million over the same period.
Revenues have risen thanks in part to the rebound in the city real estate market, which has boosted one of the tax subsidies that supports the agency. Internal cost cutting has yielded more than $800 million in recurring annual savings, and is on pace to hit $1.3 billion by 2017, Foran said during the mid-year budget update.
But there are still risks ahead. The agency faces sharply increasing “uncontrollable” expenses, including for retiree health care, pensions, and paratransit. Those expenses can’t be easily altered without outside assistance, including from the state legislature.
The is also planning to hold its unionized workforce to three years of no net increase in their compensation — a key area of contention with organized labor as negotiations with MTA management on a new deal has stalled.
Also vital to the MTA’s budget are previously scheduled rounds of fare increases in 2015 and 2017, expected to bring in around $500 million annually apiece in new revenue.