UPDATE 1-NY Hudson Yard developer gets extension on deal

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NEW YORK Feb 3 (Reuters) - New York's Metropolitan Transportation Authority on Tuesday has given the partnership developing its 26-acre midtown Manhattan rail yards up to another year to finalize a deal, citing the credit crunch.

The Related Companies, a private developer, and investment bank Goldman Sachs and the authority are all still committed to the $1 billion project for apartments and office space, the MTA said in statement.

"Due to the economic downturn and collapse of traditional commercial lending, the parties were unable to reach final contractual terms by Jan. 31, the end of the existing designation period," the authority said.

As a penalty, the MTA will keep an $8.6 million payment, though the developer for now is spared a much bigger immediate down payment.

"Today's agreement creates the flexibility needed in light of current market conditions, while ensuring that we can continue to collectively move forward with the necessary planning approvals and pre-construction logistics." Stephen Ross, chairman of the Related Companies, said in a statement.

The Related Companies and Goldman Sachs stepped in to take over the planned project after developer Tishman Speyer withdrew in May 2008.

The MTA, the nation's biggest mass transit authority, hopes to get $1 billion from all its real estate projects, including a new basketball arena at its Brooklyn Atlantic rail yards for the Nets, who now play in New Jersey. (Reporting by Joan Gralla in New York; Editing by Leslie Adler)