New York's MTA to seek bidders for Madison Ave site

Mon Feb 27, 2012 5:57pm EST

Feb 27 (Reuters) - The cash-poor Metropolitan Transportation Authority of New York in the next few months will begin the process of putting its Madison Avenue headquarters in midtown on the market by issuing a Request for Proposals, an official said on Monday.

The MTA, which runs New York City's subways, buses, commuter lines and key bridges and tunnels, owns three pre-war buildings located next to each other on Madison Avenue between 44th and 45th Streets.

"We expect to vacate possession of these buildings to a developer in 2014 at the latest," Jeffrey Rosen, director of real estate, said at a finance committee meeting.

Headquarters and business services workers would be transferred to 2 Broadway in downtown Manhattan, which the authority occupies under a net lease. This arrangement obliges the Metropolitan Transportation Authority to pay rent, taxes, repairs and the like.

How much the three buildings on Madison Avenue, whose location is highly desirable because it is just two blocks west of Grand Central Terminal, will bring depends on what air rights are transferred to any new office tower expected to be built on the site.

Selling the three buildings outright would generate at least $150 million before taking into account the transfer of air rights that would allow a developer to build a higher office tower, the authority estimated in April 2011, when it first announced the buildings would be sold.

New York City zoning laws would allow a "minimum zoning floor area" of 376,575 square feet, the MTA estimated last year. The maximum would be 542,268 square feet, although there might be a possibility to acquire more air rights.

Rosen said the authority was planning to increase how much the three buildings could fetch by offering a ground lease instead of a sale. Under such an arrangement, the MTA would lease the property, including the building, usually for many decades.

At the end of the lease, the authority would become the owner of the land and whatever was built at the site. That is one reason why a ground lease could be more profitable than a sale.

"We anticipate that a ground lease would yield substantially more than a sale on a present value basis," the authority said last year.

The authority will face at least one competitor when it puts the three Madison Avenue buildings on the market.

Nearby 350 Madison Avenue also is for sale. The building, at the southwest corner of 45th Street and Madison, is owned by Kensico Properties and is being marketed by Jones Lang LaSalle Inc.

Kensico just completed an extensive renovation on the 25-story building, whose street-level retail tenant is men's and women's clothing store Paul Stuart. The building is 76 percent occupied.