Friday, August 31, 2007


by Juan Gonzales for the NY Daily News
When the City Council approved the massive Hudson Yards development project in 2005, it gave the Bloomberg administration permission to condemn and acquire several parcels of land on Manhattan’s far West Side.

One of those parcels is a city-owned block along 42nd St.’s Theater Row, between Dyer and 10th Aves. The buildings there would be torn down to facilitate construction of the No. 7 line subway extension and eventually a new station on the site.

But the Council was never told the city had no intention of condemning the site.
The city had quietly decided last fall to sell it to one of this town’s biggest real estate developers, Stephen Ross, for the price of a song: $100,000. If it sounds like a sweet deal, Ross must have thought so: He and his partners, TRM Associates, paid $107 million for the lease rights to the property, and sources say they plan to build a 60-story building there.

Ross, chief executive of the The Related Companies, is a close friend and former business partner of Deputy Mayor Daniel Doctoroff. He bought the site’s lease in early November in a federal bankruptcy court settlement from the partnership that controlled the block for 25 years. Among the small buildings on the block are the former West Side Airlines terminal and two off-Broadway theaters, neither of which produces much rental income.

But the block’s real value is its development potential, thanks to the city’s decision to build a new subway station that will have four escalators and two elevators emptying into it.
On the surface, it smacks of a back-room agreement. The city issued no press releases on its deal with Ross, and the settlement papers weren’t filed with the city Finance Department until Jan. 18 - the night before the Council’s vote. Bloomberg aides said last week that the lease sale was a private transaction, and that City Hall had no favorites.

But according to documents in the bankruptcy case, the Ross group won City Hall’s support as far back as July.

At the time, several developers were feverishly bidding to win control of the site. Theater Row Phase II Associates held the site’s lease but was in bankruptcy and owed the city nearly $14.5 million - making City Hall’s approval a necessity. The Theater Row group, headed by William Condren, had bought the site’s lease in 1980 for just $450,000.

After the sale, the Condren group paid the city $9.5 million to settle its debt, and walked away with a profit of nearly $100 million. One of the developers who competed with Ross for the lease was Robert Gladstone of Madison Equities LLC. His lawyers have charged in court papers that the negotiating process was unfairly skewed in favor of the Ross group.

Madison Equities points to an unpublicized July 22 agreement among the city, Condren and one of the partners in the Ross group, in which the city agreed to back the Ross partnership.
“There was never really a conversation between our side and the city,” a Madison Equities source said last week. David Burger, Condren’s attorney, scoffed at the claim and said Gladstone is a sore loser. As for Bloomberg officials, they insist their only concern from the start was for Condren to pay his debts. They added that the Ross group was the only suitor to agree to provide the city all the easements it needed to build the subway and the new station underneath the site.

“It not only cleared up a longstanding dispute, but it provided the city with money it was owed,” said Michael Sherman, spokesman for the city’s Economic Development Corp., and “will allow the No. 7 subway extension to be completed.” But at the Council, all were shocked to learn about the secret sale of a property it had just approved for condemnation.

“It’s very surprising,” said Council's Speaker Christine Quinn, who took part in marathon talks with City Hall over the Hudson Yards plan. “When you don’t make complete disclosures, for any reason, it raises questions.”

Ross recently built the giant Time Warner headquarters at Columbus Circle. His side wouldn’t confirm plans to build a 60-story skyscraper. Jeff Blau, Ross’ second in command, would say only that it will be a “mixed use” commercial and residential structure.

Given the close relationship between Doctoroff, the city’s economic development czar, and Ross, it’s natural to ask if the deputy mayor had anything to do with the transaction. Doctoroff, once a co-owner of the New York Islanders with Ross, did not return calls for comment.

“Neither Doctoroff nor the mayor had anything to do with this,” said one city official involved in the deal. “[Doctoroff] is recused from any decisions involving Ross.
“It was a team decision,” the official said.
Post a Comment