Sunday 15 September 2019

In New York, $35m buys an apartment - or Grand Central

Sale of the century: The iconic Grand Central Station has been sold for in the region of US$35m, a sum that stems from the terms of a centuries-old lease
Sale of the century: The iconic Grand Central Station has been sold for in the region of US$35m, a sum that stems from the terms of a centuries-old lease

Danielle Moran

For $39m, you could buy an eight-bedroom mansion in the heart of New York's Upper East Side. Or if you're the Metropolitan Transportation Authority (MTA), you could buy Grand Central Terminal, one of New York's greatest icons, and still have $4m to spare.

Last Thursday, the New York state-run transportation agency's board approved the purchase of Grand Central and Metro-North Railroad's Harlem and Hudson line from a holding group, Midtown Trackage Ventures. The transaction is estimated to cost about $35m, a sum that stems from a centuries-long lease agreement the agency struck in the early 1990s.

MTA Chief Development Officer Janno Lieber called the price "a no-brainier, from a financial standpoint." He's right. Especially in a real estate market that's known for being among the most expensive in the world. There are 46 homes currently for sale in Manhattan for at least $35m, including five at more than double the price, according to Zillow Group Inc.

It's also a steal by commercial standards: 1 Vanderbilt Avenue, a new-construction office building next door to Grand Central, is projected to cost more than $3bn.

Peter E. Stangl, who served as the chairman and chief executive of the MTA when the original lease was signed, said it makes sense for the authority to own instead of rent. Its option to buy the terminal expires in 11 months.

"Obviously to actually have control of property that you are managing, operating, maintaining and investing in is important," said Stangl, who initiated the restoration effort at the terminal that hinged on the long-term lease agreement. "Before we started investing, we negotiated a long-term lease to protect our investment, knowing that someday we wanted to acquire it."

The MTA said the purchase price is based on the value of rent it committed to pay under the terms of the 280-year lease, discounted at a "highly favourable" rate. Metro-North has been paying an annual rent of $2.4m.

Built by the New York Central Railroad, Grand Central first opened in 1913 and attracts about 750,000 visitors a day, making it the city's most visited destination after Times Square. The terminal was designated a landmark in the 1970s after a conservation effort spearheaded by former first lady Jacqueline Kennedy Onassis. Stangl said that fight could be ingrained in the MTA's decision to purchase the building.

"It's deep-seated in the psychology of the MTA that you don't want to deal with that fight against a wrecking ball again," he said.

With assistance from Daniel Taub

(Bloomberg)

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