Southern Brooklyn

MTA Gets Screwed In Real Estate Deal

370 Jay Street. Photo by Allan Rosen

THE COMMUTE: Folks it’s been a busy transit news week. Issue 1 — (Wait — that’s the McLaughlin Report)

1. The MTA Board finally votes to dispose of 370 Street, but not everyone is happy.

2. Former Governor Paterson was appointed to the MTA Board.

3. Bus riders spoke up at the Transit Riders Council’s Bus Forum.

4. Quarterly routine “bus service adjustments” were announced for July 1, 2012.

(We’ll cover the first two items today and the last two tomorrow.)

Disposal Of 370 Jay Street

The city will give away prime city real estate built in the late 1940s to NYU for use as an urban science center. It originally housed city department, the Board of Transportation.

While the building, which the city owns, will not be sold to NYU, the city will be allowing NYU to use the building for the same price currently paid by the MTA: $1 a year. Additionally, the city is also paying NYU $15 million in tax relief and funding to take over the property. The building, consisting of 459,000 square feet, will be worth close to one billion dollars a half a billion dollars or more after the $345 million in renovations NYU intends to make. Giving the building away could possibly be justified if NYU were part of the City University, but NYU is a private institution.

The move by the city is being hailed as a major achievement. I believe it is an outrage. Everyone is happy that this eyesore abandoned for the past 10 years will now become productive real estate, but should that be the only concern here? What about the city’s needs regarding transportation? Only TWU local 100 believes that this is a poor decision by the mayor:

“Before the MTA gets into the business of using its public assets that belong to New York City transit riders to create an epicenter of technology in academia, the MTA should use that public asset to create an epicenter of excellent transit service in New York City,” said TWU President John Samuelsen.

The union believes the MTA should reoccupy 370 Jay and sublease part of 2 Broadway, which is costing taxpayers and the MTA $23 million a year. The lease for Jay Street, $1 per year, was part of a larger agreement leasing the entire subway system to the New York City Transit Authority and later the MTA to operate the subways.

Business As Usual

When Joe Lhota took over as MTA Chairman, I stated that, when the fate of 370 Jay Street is determined, we will know if he will make a difference or if it will be business as usual. At that time, I asked if the MTA will make a good deal or will be screwed like they were with Hudson Yards and the Atlantic Yards since the press was giving the wrong impression that the MTA owned the property.

We do not know how much of a say Lhota had in this decision. All we know is that the MTA rejected NYU’s initial offer to pay the MTA $20 million to move its communications equipment. The MTA held out for $50 million. They could not stay in the building any longer because they could not afford to renovate it after bungling the renovation of 2 Broadway, but will remain in the basement. On the record, Lhota is satisfied with the deal.

If the renovations are more expensive than NYU expects after inspecting the building, they could instead decide to demolish 370 Jay if the city does not object. They can then erect a high-rise similar to the Marriott next door since they have plans for additional buildings in Downtown Brooklyn anyway. The property could then be worth several billion dollars a billion dollars or more. No money for the MTA and no money to improve transportation. Yet, politicians such as Borough President Marty Markowitz, who is always criticizing the MTA for providing inadequate service and cutting service, are praising this deal as great for the city. Perhaps great for the city, but not great for the MTA.

A Better Deal?

Most likely the first floor will be used for retail. Doing otherwise would not be wise since the neighboring area is being redeveloped and prime retail space could fetch a mighty buck. Who will benefit from this — the city or NYU? Since the building is not being sold, the city should retain rights to the first floor if it will indeed be used for retail purposes. If Mayor Bloomberg cared about improving transportation, he would allow the cash-strapped MTA to profit from this retail space by receiving the rents generated so that they see income year after year. Another alternative would have been to have sold the building outright to NYU, giving a portion of the proceeds to the MTA.

Cuomo Appoints Paterson To MTA Board

In other news this week, Governor Cuomo appointed former Governor Paterson to the MTA Board to replace departing member Nancy Shevell. Paterson was largely responsible for the MTA’s largest service cuts in history by severely cutting transit funding and Cuomo is being criticized for his choice. I’m not going along with the pack on this one. Although it was a political choice and choosing someone with more transit knowledge would have been preferable, Paterson has a chance to redeem himself. As governor, he had other concerns, such as balancing the state’s budget. As a board member, improving transportation will be his only priority.

Shevell had trucking experience, as did former board member James Simpson in the 1990s. I attended board meetings every month back then when I was in New York City Transit’s executive offices. I was not at all impressed with Simpson, and Shevell was not in the news for challenging any of the board’s decisions like board member Capelli often does. There is a big difference between operating a trucking firm that moves goods and a passenger transportation system. Paterson has the opportunity to ask tough questions of the MTA. Let us hope he surprises us and his critics are proven wrong.

The Commute is a weekly feature highlighting news and information about the city’s mass transit system and transportation infrastructure. It is written by Allan Rosen, a Manhattan Beach resident and former Director of MTA/NYC Transit Bus Planning (1981).

Comment policy


  1. The numbers in the first paragraph cant possibly be right. $345 mil renovation and a $1 billion value. The numbers make no sense at all.

  2. I might have been a little overly generous in the estimates. They were corrected. Anyway, what’s a half billion dollars among friends?

  3. I think you need to keep slashing that number. At half your saying that the building would be worth more than $1,000/sf. Not happening. EVER.

  4. Great article Allen. It is a shame that the MTA will not see one penny from this transaction. It could have saved them billions yet they squandered the opportunity. Hopefully people will remember that the MTA are the people that give buildings away, the next time the fare goes up.

  5. What would you say the land is worth? $30 million?  What would you say the square footage of the existing building is worth? (I don’t know current real estate values in the area now, but in 1980, it was about $10 a square foot.  So what’s it worth now $20, $30, $50 a square foot?) Then there is the $345 million in renovations that NYU intends to invest?  Won’t they get back at least if they decide to sell? What do you think the building would be worth?

  6. Except, this time I don’t think the MTA is to blame.  I don’t think they really had much of a say.  It was entirely Mayor Bloomberg’s decision.  He is the guilty party here.

    If they get screwed selling their Madison Avenue headquarters which they own, then it will be their fault.

  7. $345 million renovation just doesnt make sense either. That comes out to $750/sf. For that money you can build the most luxurious building you have ever seen. As far as the value goes assuming its just a vacant box that needs to be built out inside i cant see this selling for more than $100-200/sf. Say i have no idea what im talking about and it sold for $250/sf thats only $115 mil. So again the numbers are off. To give you an idea Google bought a building a building a couple years ago that takes up a square block in Chelsea and it came out to roughly $650/sf for PRIME real estate.
    How can this even come close to that.

  8. The Crain’s article I linked states NYU will spend up to $750 a square foot to renovate the building.  That’s how I arrived at the $345 million.  I agree that it sounds excessive.  I believe the MTA was considering renovation at about $200 million and rejected that because it was too expensive.

    I agree that it might make more sense to tear the building down and erect one twice as high, which is what I guess NYU will end up doing when they actually cost out the price of renovation.  That’s why it even makes less sense to give the building away. 

    You have to consider the potential of the land and that it is prime real estate, less expensive than Chelsea, but don’t forget land values in Downtown Brooklyn are growing.  The Marriott and MetroTech have made the area much more desirable and I hear that Fulton Street is also being redeveloped with the 99 cent stores being pushed out.  Then there also is the Albee Square redevelopment. 

  9. Just for a heads up…. Meeting on restoring B64 portion to Coney Island

    “Assemblyman William Colton’s fight to restore the B64 bus route will be up for discussion tonight at a local council meeting.

    The proposal will be brought up during the Bensonhurst West End
    Community Council meeting being held at the Harway Terrace Community
    Room, opposite John Dewey High School. The meeting is set to begin at
    7:30 p.m.”

    from news12

  10. I know.  I will be there.  For anyone else interested, the address is here. 

    The building is usually locked so just wait a few minutes for someone to let you in.

  11. I just went through the article and it says they have 6 months for due diligence and would spend “up to $750/sf”. That in the real world means nothing. They can back out of the deal anytime and spend a fraction of that if they wanted. No one is going to spend that type of money to renovate. They can tear it down and put up a brand new building for less than that. I never said its a bad location i was just pointing out that the numbers dont make sense in comparison to prime Manhattan real estate. Downtown Brooklyn has been changing for the last 10 years now and it couldn’t get any worse than it was before that. I am very aware of whats going on downtown but i would not call this location prime. Its a good spot depending on what its used for.

  12. Allan, The number that you quote for the yearly rent on 2 Broadway is far too low. In Walder’s report dated 4/21/2011 (MTA Office Space Portfolio Right-Sizing Business Plan) The MTA quotes the yearly costs as $35.1M plus $25.3 in financing lease payments. When you add on the cost of the huge private workforce and the fact that they have to rent a floor of a parking garage, (2 broadway has no garage) the actual yearly cost of 2 Broadway is $63M a year, as it states in

  13. I’ve seen several press accounts quoting the $23 million figure. Perhaps as you say, there are other considerations, so different sources are quoting different numbers. I woud also like to learn the correct length of the lease. It originally was sold to the Board as a purchase, not a lease. After the deal was made, it was referred to in the press as a 99 year lease. Then it became a 50 year lease. Now some say it is a 30 year lease. There really needs to be more accountability and transparency. The public deserves to know what it costs, for how long, and if the terms allow subleasing. The politicians need to get on this now. The story cannot forever be changing.

  14. “Facts” at the MTA are constantly changing. That is why it is good to use their own figures, it makes it hard for them to weasel out of. There are only two possibilities…are they lying now or were they lying then? Numbers, like truth, should be written in stone. However, they are maleable and subject to change at the MTA. It is all done to fit the message. You are right Allan, the public deserves to know the truth and there should be far more transparency at the MTA. Another strange numbers game has been the NYU’s rising cost of the Jay St. renovation. It started at $100M complete with artists renderings. Then for no apparent reason it doubled and went to $200M. Now, everyone in the press are quoting this $345M figure. What game is a foot here?

  15. To Local Broker:

    Agreed the deal is not final.  Yes, they could back out. I only see that as happening if the City does not give them permission to tear down the building and erect a new one if that is what they decide they want to do.  I doubt it that under the current deal, they could just do that on their own without City permission since the City did not sell them the building. If they do want to demolish the building, that would give the City the opportunity to change the terms and renegotiate forcing NYU to pay something for the property. In turn the City could then give some of that money to the MTA if it so desired. 

    A new taller building would have much more value, therefore the deal is worth more. Yes, the amount stated for renovation is probably the maximum they are willing to pay and they could end up just paying a fraction of that. Most of the inside has already been gutted. To make classrooms, all they need are some room dividers. The rest would be for new windows, new facade and solving any structural problems. The renovation does not have to be major if it is too expensive. 

  16. If I remember correctly, the MTA priced new windows in the 1980s at about $85 million.  When all bids came in over $100 million, they decided not to do the windows.  I also think they later estimated a structural renovation at about $200 million. I have no idea what they already spent on the renovation in the 90s in which all but about 3 or 4 floors were renovated.  Those floors do not need major  renovation again for offices or classrooms. 

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