[NYguy]

http://www.observer.com/2009/real-es...nifest-density

Manifest Density

By Eliot Brown
July 28, 2009

...amid the rubble, Related is still plodding away on its $15 billion plans for the rail yards, a tremendously complicated project that would be larger than the World Trade Center and that has been dubbed a 21st-century Rockefeller Center. Related is in the midst of the city’s onerous public-review process, and executives now say they expect to sign a development contract in January with the M.T.A., the site’s owner.

This puts Related, one of the city’s largest developers, in an uphill battle to transform an unproven area that the economic crisis has pushed far back to the fringes. Numerous competitors expressed deep skepticism that Related’s commitments are realistic, and the first step would be a platform atop half the rail yards costing around $1 billion, a number that demands tremendous confidence in the project’s future.

Leading the project for Mr. Ross is Jay Cross, a wiry, relatively demure native of Canada who joined Related in June 2008. The public face of the Jets’ failed effort to build a stadium on half of the rail yards during New York City’s 2005 bid for the 2012 Olympic Games, Mr. Cross now is left to try to sell the idea of the small city-within-a-city at the rail yards to the local community, elected officials and potential tenants and investors.

“We’ve always believed that it’s a long-term, great project,” he said, adding what has become a standard line these days with large projects: “They’re going to go through ups and downs.”

Related’s vision for the site, which runs between 30th and 33rd streets and between 10th and 12th avenues, includes 13 towers resting on two massive platforms atop a Long Island Railroad storage yard. The tallest buildings, and probably the first to rise, would be on the eastern-most part of the site, where there would be both a hotel tower and office buildings, with a giant retail complex in the vein of the Time Warner Center (though almost twice the size).

In all, if it is ever built out to plan, the project could produce well over 5,000 apartments and about 6 million square feet of commercial and retail space, amounting to a development 50 percent larger than Rockefeller Center.

To get started and to build the first of the two platforms, Mr. Cross said that Related would need a set of major tenants signed on to take office, hotel and retail. “If we have an anchor store and an anchor office tenant and a hotel commitment, then I think we’ve got enough commitment to go with phase one,” he said.

FROM THE TIME WORK on the first $1 billion platform starts, Mr. Cross estimates it will take four years to be ready with a first building, putting 2015 as the earliest delivery.

“We’re talking to people—we’ve made presentations to all the major brokerage houses and we’ve talked to some tenants in particular,” he said, declining to name names. “No one’s making major growth decisions.”

In headier times, Rupert Murdoch’s News Corp., Si Newhouse’s Condé Nast and the pre-recession Morgan Stanley each agreed to move their headquarters to the rail yards before separately pulling out. Now, just who would eventually trek out there is anyone’s guess, as no one is talking about 2015 right now (though Condé was still pondering the move as of earlier this year). But, if the economy stabilized, it seems reasonable to think that a diversified media concern like News Corp. could again be interested in anchoring a re-imagined West Side.

Also, a number of large law firms have lease expirations six or seven years out—Simpson Thacher & Bartlett, for one—and perhaps financial firms, if they ever grow again, would want the prestige of a large headquarters.
On the department store side, Nordstrom’s, currently with no New York presence, has for years been on the lips of landlords with big chunks of retail space (Related, of all landlords, just landed a Nordstrom’s Rack in its building on Union Square).

More than anything else, the battle Related faces is to convince any of these businesses to take the first dive in the cold water of an untested district that is in many ways still the wild west of Manhattan (it’s deserted at night and prone to Dust Bowl–strength winds). All this at a time when the local economy and workforce continue to shrink.

Such a task spawns pessimism.

“If they do build the 7 line, it’ll provide some transportation and eventually the area will get developed,” said a major New York landlord. “I wouldn’t want to bet any money that Related will do it.”

“No one believes this will happen,” said Joe Restuccia, a member of the local community board, which this week issued its official recommendations on the plan (more infrastructure investment, more affordable housing and less density, among other concerns). Large-scale development in New York is far more gradual than the current project calls for, he added. “Long-term, is this going to work? In some version, yes,” he said.


LESSONS FOR RELATED CAN be divined from the history of another large chunk of prime Manhattan real estate once owned by the M.T.A.

In 1985, the agency first designated Mort Zuckerman’s Boston Properties to develop an office tower on the site of the Coliseum exhibition center by Columbus Circle. It quickly hit hurdles: litigation, an economic downturn, the loss of a financial partner, another downturn. Boston hung on for nine years in on-and-off renegotiations before the deal ultimately collapsed, in 1994. (A decade later, a building finally did rise: Time Warner Center, co-developed by Related, and anchored commercially by its namesake.)

On the West Side, the most relevant question is whether Related will indeed sign on the dotted line with the M.T.A. Such an act—due to happen by Jan. 31, per Related’s agreement with the agency—would subject the company to rent worth $1 billion over a 99-year lease, an amount reached near the real estate market’s peak and one that adds substantial pressure to start building.

Mr. Cross, for his part, insists Related expects to commit at that price by January, even in the recession, as the opportunity to control the land is tremendously valuable and the rental payments aren’t all that painful.

“We think that we can complete the transaction without having to go and immediately start building buildings, so it still proves to be a long-term good hold,” he said. “It’s not a small price to pay in the sense that it’s tens of millions of dollars a year. But it is a relatively affordable price in the context of a 12 million–square–foot development.”

“It’s not a question of delay, delay, delay,” Mr. Cross added. “We believe fundamentally that the market will come to us sooner rather than later.”