UPDATE 2-NY: Hudson Yards pact cuts risk builder will quit

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By Joan Gralla

NEW YORK, May 22 (Reuters) - New York's Metropolitan Transportation Authority on Thursday said its new $1 billion pact with two developers for midtown rail yards cuts the risk that the builders will walk away from the deal.

On May 13, Tishman Speyer, the original developer for the 26-acre Hudson Yards, withdrew, forcing the biggest U.S. mass transit agency to reopen bidding for the last big undeveloped tract in Manhattan in a cooling real estate market.

The new developers, Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) and Related Companies, matched Tishman Speyer's terms but got the agency to let them delay paying rent for up to two years on vacant land, said Gary Dellaverson, the agency's chief financial officer.

That could cost the MTA as much as $43 million, but "this encourages performance in a difficult market rather than encourages a cheap walk," Dellaverson said at a board meeting.

The agency dropped the first developer because Tishman Speyer wanted to delay closing until all of the industrial site on Manhattan's far west side was rezoned.

"The Tishman Speyer issue was about the ability to not perform," Dellaverson said. Referring to the new deal, he continued: "This is about performance under any circumstances. If Tishman had agreed to this we would have done the deal."

The multibillion-dollar Hudson Yards project includes around a dozen office and apartment skyscrapers, a plan that opponents say is far too dense. There would be almost 4,800 apartments and 5.5 million square feet of offices.