370 Jay Street, taken in 2006 before the scaffolding was erected.

THE COMMUTE: The MTA is short of cash. That is no secret. Albany is partially to blame for that, as Ben Kabak has written about endlessly in SecondAvenueSagas.com. But have the MTA’s real estate deals been in the best interest of the public or in the best interests of the real estate industry? Over the years real estate and banking interests have been the most prevalent occupations of MTA Board members. At the Brooklyn Public Hearing for the service cutbacks held in March 2010, a small group of protesters raised signs critical of the MTA’s deal to sell Atlantic Yards for below market value. In 2009, a lawsuit was filed to that effect. But it was hardly the only questionable land deal under the MTA’s watch.

Hudson Yards

Several years ago, the MTA entered into a deal to sell the air rights over the Long Island Rail Road yards near Penn Station. Although fair market value was received in that deal ($2 billion), the MTA has been criticized for the payment terms allowing the developer to hold onto much of the cash for 30 years.

The Sale of its Midtown Headquarters

We can only wonder how the MTA’s latest proposal to sell three adjacent properties at 341, 345, and 347 Madison Avenues will turn out and if it is best to sell these as a single entity as the MTA has proposed, or if a better deal could be struck if the properties were offered as three separate sales? Would a single developer have to pay more if there is increased competition?

Two Broadway

This is not the first time the MTA has thought about vacating its midtown Manhattan headquarters. When 2 Broadway was acquired at the southern tip of Manhattan, the MTA’s original plan called for purchasing that property to enable the MTA to stop the cash drain from its short term leases at 50 separate locations. That was the rationale used to sell the idea to the MTA Board.  It seemed to make sense because a property owned by the MTA would have some equity should the MTA ever decide it no longer needed that property, and with real estate values on the rise, the MTA could make a killing.

Don’t ask me how it happened but somehow a purchase turned into a 99-year lease instead. I am not a real estate expert, but I fail to see the advantage of trading 50 leased properties for a single leased property in one of the most expensive areas of Manhattan, especially when the tenant (the MTA) still has to pay the massive renovation cost to adapt the building to its needs. Further, the renovations, over budget and behind schedule, have been the subject of questionable practices, including accusations of mob ties – enough to launch more than one investigation.

The plan was to locate all the MTA’s agencies at 2 Broadway. Then came 9/11, and centralization of all functions no longer seemed like such a great idea. That resulted in half the building remaining vacant for years. After much criticism, in order to fill the bulding, the MTA decided to move employees from 370 Jay Street and 130 Livingston Street, a building the MTA built in the early 1990s a few blocks away, to 2 Broadway, resulting in half of both those properties becoming empty. In a continual game of musical chairs, 370 Jay was entirely vacated by moving the rest of the personnel into 130 Livingston with the Command Center and Revenue relocated to elsewhere.

370 Jay Street

The Transportation Building, more commonly known as 370 Jay, was to be sold and demolished, but in another about face, the MTA has recently started talking about the possibility of moving some back offices back to 370 Jay when it can get funding to perform additional renovation work that it presently cannot afford.

The result is that the building has remained vacant or underutilized for 10 years, an eyesore shrouded with scaffolding for many years – much to the chagrin of Borough President Marty Markowitz. He has criticized the MTA for this on more than one occasion . Although the building is owned by the city, the original home of the Board of Transportation before the creation of the New York City Transit Authority in 1953, it is leased to the MTA for one dollar a year. It would seem to be in the best interests of the MTA and the city to revise the terms of the lease to enable the leasing out of some floors to outside parties to generate revenue if the MTA does not want to use the building at the present time.

Although in need of some repairs such as new windows and a new façade, the building is structurally sound, and only two years before being vacated, interior renovations were completed on virtually every floor. In fact, the interior space is in much better shape than 347 Madison which the MTA has allowed to deteriorate for years.

The MTA, in a third about-face, is now reconsidering 2 Broadway to move most of its headquarter operations, with the exception of Metro-North, which is likely to remain in Midtown. Will the MTA get a good deal in leasing new space for Metro-North? Only time will tell.

The Howard Building vs. 345 Adams Street

I would like to conclude with a personal anecdote to further prove how the MTA has not always acted in the public interest. In 1981, when I was hired to work in its headquarters for Buses, then known as Surface, in East New York, I attempted to get Surface to relocate to Downtown Brooklyn where its Rapid Transit headquarters was located. It would have been more functional to be centrally located, but Surface wanted autonomy from headquarters and was quite content being located miles away. I did some research at the time, and learned that 345 Adams Street, the building directly behind 370 Jay, was vacant and available at $7 per square foot and had more than ample space to house the MTA’s bus headquarters.

The MTA also had just concluded negotiations for leasing the Howard Building, a former clothing factory, a quarter-mile from 370 Jay. That space was leased for $12 a square foot and the MTA had just started occupying the building. It had required extensive renovations to convert it from a factory to an office building. On the other hand, 345 Adams was already office space and was ready to go, even containing 50,000 square feet of computer space that the MTA needed.

Besides the fact that 345 Adams was a better deal, its location would have permitted overhead bridges to be constructed across the narrow dead end Pearl Street, in effect making it an extension of 370 Jay. Yet, the real crime was yet to come. After pouring all that money into renovating the Howard Building, for its 10-year duration, until the completion of 130 Livingston, employees were constantly shuttling back and forth for the quarter-mile between the two buildings all day long to attend meetings.

I would make the trip at least three times a week and each time could count 30 others whom I would recognize doing the same. Executives would make the trip by MTA car rather than walk. The amount of lost labor productivity was incalculable.

I later learned that the MTA may have leased the Howard Building because the real estate agent getting the commission for unloading this undesirable property in a manufacturing districtwas a close relative of the then MTA Chairman. Incidentally, the agent from Cushman-Wakefield who was assigned the task of swaying the MTA toward 345 Adams Street was fired for not being able to make what his bosses thought was an easy sale.

The question now is what is going on behind the scenes as the MTA seeks to dispose of its Midtown Manhattan properties? Given the MTA’s sordid history of real estate dealings, one must wonder, as I asked two weeks ago, is Jay Walder really “making every dollar count”?

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).

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  • Anonymous

    I might want to add all the spaces that were formerly used as retail storefronts such as the one underneath the Sheepshead Bay station. It used to be the Submarine sandwich shop. Now it and others are abandoned. These spaces could be a vast source of rental income. The MTA definitely deserves the reputation for repeatedly acting in the height of stupidity. They waste space, money and our time. That’s the MTA, going your way. Where? They don’t know and they don’t care.

    • Allan Rosen

      In the same light, look at all the retail space that remained vacant for three years in the redeveloped Coney Island Terminal. Perhaps the shops that were there before, weren’t the nicest looking, and I do not know who the MTA was hoping would move in, but at least it was rented. If after six months they could not find the tenants they desired, they needed to make changes to their proposed leases, by either lowering the rent, shortening the lease terms, or do what was needed to get the space rented. There is no excuse for three years of lost revenue.

      • Anonymous

        Oh how true. Thank you Allan. BTW. I just learned tonight that soon when one wants to replace a metrocard that’s about to expire the MTA will start charging for that. They mismanage their money and want to keep taking our money to compensate for it. Something needs to be done to stop all this. Has anyone on the higher level of decision making here been fired? If not they should be.

        • Allan Rosen

          I can’t think of any higher-ups who were ever fired for mismanagement or incompetence. One was demoted, and several were forced out when they fell out of favor. It is difficult to prove mismanagement because when something goes wrong, you can usually blame someone in another department. Two senior level officials that I know of were fired for sexual harassment or charges that were sexual in nature.

          • Anonymous

            That’s quite a small handful of people who have been actually caught. Considering what you most truly suggest, that the blame gets spread around, it’s a wonder anything positive gets accomplished.

          • Allan Rosen

            The blame usually gets shifted with everyone blaming someone else. If it’s a serious matter either the MTA IG or NYS Comptroller will investigate.

            The agency works best when there is a crisis like 911, where everyone chips in and works together and the internal politics temporarily stop.

      • Anonymous

        I wonder what the numbers are of the unused retail space on MTA property. I know of the one underneath Sheepshead Bay Station and another at Kings Highway (which may only be empty now because of the renovation).

        • Allan Rosen

          That info should be available under Freedom of Information.

  • Guest

    Just for the record, the MTA didn’t sell “Atlantic Yards.” It sold development rights to the Vanderbilt Yard, 8.5 acres of a 22-acre project known as “Atlantic Yards.”

  • http://secondavenuesagas.com Benjamin Kabak

    It’s tough to say the MTA has “botched” the sale of 347 Madison when it hasn’t even sold the building yet, no?

    • Allan Rosen

      It’s debatable, but questions have arisen regarding how the property is being put up for sale. Even if you do not count it, but instead count 370 Jay which they have been sitting on instead, you still have five. Not to mention how they handled renting the retail space in the renovated Coney Island Terminal.

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  • ajedrez

    One question: I’m going to assume that the rents for the Surface building in East New York were cheaper than the $7 per square foot available in Downtown Brooklyn, but would it be cheaper to have the employees go back and forth to have the lower rent in ENY, or have them go directly between the 2 buildings, at a higher rent?

    • Allan Rosen

      First, there was no rent at the Surface building in East New York. It is a bus depot owned by the MTA or the City.

      Second, I am not sure if I can answer your question because the situation wasn’t the same as what existed between the Howard Building and 370 Jay Street where you had hundreds of people who needed to be in close contact with each other. At that time Surface was operating pretty much independently from Subways at Jay Street and there were less than 100 people who would have had to be relocated so there wasn’t that much travel between the sites.

      The purpose of the move I proposed was really for improved functionality of the organization since there was no reason for Surface to be a separate entity of NYCTA. Eventually, it was done after much political in-fighting. Upper management of NYCT are all located at 2 Broadway. Mostly, only depot functions are located in the East New York location today.

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