From Crain's: Developers with Anchor Tenants Have the Edge

Crain's New York Business reports today that the three developers who have lined up anchor tenants for the rail yards site, Related, Durst/Vornado and Tishman Speyer, have an advantage in the eyes of the MTA.

Crain's' Theresa Agovino reports:
The three leading contenders have each bid about $1 billion for the yards, sources say, and all have the deep pockets to finance the project. But insiders say the MTA may push for the three to join forces so it can keep all the tenants and avoid disappointing any of the politically connected developers. The MTA plans to make a decision in the first quarter, although that deadline could be extended, according to a spokesman for the agency.

"I think they will try to get us all to work together, if possible," says an executive at one of the developers.

 While it's apparent that the rail yards site will look different from any of the proposals unveiled in November, it's hard to picture how a collaboration between the three frontrunners might pan out.  The new rail yards would be  new mega-corporate district developed from scratch, housing Conde Nast, News Corp and Morgan Stanley, and a host of architects and planners with competing visions.

Complete article (unavailable online to nonsubscribers) after the jump. 

3 bidders take lead at rail yards


The three development teams that have lined up major tenants are the front-runners in the high-stakes competition to develop the Hudson Rail Yards.

Tenants bring credibility and increase the ability of a developer to obtain financing, giving The Related Companies, a joint venture between Tishman Speyer and Morgan Stanley, and a partnership between The Durst Organization and Vornado Realty Trust the inside track. Extell Development Co. and Brookfield Properties are considered long shots.

Companies covet the parcel, which is owned by the Metropolitan Transportation Authority, because the 26-acre site is the last large development site in Manhattan. The size of the site will allow the builder to create an entire new neighborhood and leave an enormous legacy in the city.

The three leading contenders have each bid about $1 billion for the yards, sources say, and all have the deep pockets to finance the project. But insiders say the MTA may push for the three to join forces so it can keep all the tenants and avoid disappointing any of the politically connected developers. The MTA plans to make a decision in the first quarter, although that deadline could be extended, according to a spokesman for the agency.

"I think they will try to get us all to work together, if possible," says an executive at one of the developers.

Not possible, insist others. Forging partnerships would be overwhelmingly complicated by the conflicting concepts and designs for the site. For example, Related views the site as a media industry center, anchored by its tenant News Corp. Meanwhile, Tishman Speyer/Morgan Stanley says that the area is perfect for constructing the large buildings with megatrading floors desired by financial firms. Morgan Stanley plans to erect its headquarters at the location.

The Durst/Vornado venture has Conde Nast Publications as a tenant, so a partnership with Related might make sense. But some real estate executives worry that if Related or the Durst/Vornado partnership wins the Hudson Yards bid, there's a risk of one or two developers having too much control of an area. Vornado and Related are already partners in developing Moynihan Station nearby. Others counter that such a scenario would give the neighborhood more cohesion.

Those conflicting views illustrate how difficult a decision will be. One fact is certain: Once a developer is selected, the plan will be revised to address concerns and possibly add portions of other proposals.


Center stage

News Corp. will sponsor activities such as concerts and movie screenings that will draw the public to the site, says Stephen Ross, Related's chairman. "News Corp. activates the space," says Mr. Ross.

He says that programs at the site would be broadcast around the world, putting New York's waterfront at center stage.

Still, some don't relish the "Neighborhood by News Corp." concept, suggesting Hudson Yards shouldn't be a corporate branding opportunity, especially for a figure like the company's controversial chairman, Rupert Murdoch.

The Durst/Vornado bid also comes with a tenant, but Conde Nast isn't the proposal's strategic focus. "We've envisioned parks surrounded by buildings." says Rafael Pelli, an architect working on the project. "We worked hard not to think of this as just an office complex."

The plan calls for more residential space than any of the other contenders' plans. An elevated walkway and a proposal for an airport-like people mover to ferry individuals from Penn Station to the site using existing underground tracks are other features of the bid.

However, the plan wouldn't keep all of the High Line, the now-defunct rail system that rings the yards. Retaining the entire structure is a major community objective, so there would be pressure from activists on the Durst/Vornado team to alter its plan.

The Tishman Speyer/Morgan Stanley proposal also doesn't retain the entire High Line, so it would face the same lobbying effort. Affordable housing is also very important to the community, so activists may push the MTA to demand that Tishman Speyer/Morgan Stanley add more units. Of the major contenders, it is offering the fewest residential units with 3,000, including about 300 designated for affordable housing. The partnership says it is flexible.

Jerry Speyer, chairman of Tishman Speyer, says it is important to recognize that the project can play a key role in keeping companies, especially those in the important financial services sector, in New York in the midst of an office space shortage. The partnership's plan calls for more office space than any other. Morgan Stanley would build a 3 million-square-foot tower, and Mr. Speyer says a similar structure could also be erected for another financial services firm.

Although considered long shots, the Extell and Brookfield proposals were lauded by some community members for their public benefits. Extell's plan offers more public space than any other. Brookfield's proposal, which strays from the MTA's guidelines, was praised for blending into the neighborhood.


DEVELOPERS' COMPETING OFFERS

DEVELOPER Brookfield Properties
TENANT None
OFFICE SPACE 6.3 million sq. ft.
RESIDENTIAL SPACE 4.4 million sq. ft.
PUBLIC SPACE 15.4 acres

DEVELOPERS The Durst Organization/Vornado Realty Trust
TENANT Conde Nast Publications
OFFICE SPACE 5.4 million sq. ft.
RESIDENTIAL SPACE 6.4 million sq. ft.
PUBLIC SPACE 15.6 acres

DEVELOPER Extell Development Co.
TENANT None
OFFICE SPACE 5.8 million sq. ft.
RESIDENTIAL SPACE 5.6 million sq. ft.
PUBLIC SPACE 19 acres

DEVELOPER The Related Companies
TENANT News Corp.
OFFICE SPACE 5.7 million sq. ft.
RESIDENTIAL SPACE 5.3 million sq. ft.
PUBLIC SPACE 15 acres

DEVELOPERS Tishman Speyer/ Morgan Stanley
OFFICE SPACE 10 million sq. ft.
RESIDENTIAL SPACE 3 million sq. ft.
PUBLIC SPACE 13 acres
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