$1B deal in NYC to develop West Side rail yards collapses

Tishman Speyer Properties -the owner of Rockefeller Center and the Chrysler Building -and the Metropolitan Transportation Authority couldn't complete the deal they reached in March to redevelop the 26-acre rail yards, considered one of the city's last, best building opportunities, the transit agency said.

Negotiations "reached an impasse" Thursday after Tishman Speyer sought to postpone closing the deal on one half of the rail yards until the other half was rezoned the way the developer wanted. The rezoning would need approval of City Council in a process likely to take years.

"This demand changed the economics of the proposed deals and the certainty of payments to the MTA," the agency said. "The MTA remains committed to developing these unique and very valuable parcels of land."

Agency spokesman Jeremy Soffin said in a statement later that negotiations had broken off and that Tishman Speyer no longer has development rights to the property.

Tishman Speyer spokesman Robert Lawson said Thursday that the developer had been negotiating "in good faith" with the MTA for weeks.

"We still hope to be able to complete this deal and reach an agreement that satisfies the needs of everyone," Lawson said.

Tishman Speyer won a five-month bidding war over some of the city's biggest developers, offering just over $1 billion for a 99-year lease for the rail yards on either side of 11th Avenue between 30th and 33rd Streets.

Urban planners had said the expansion on Manhattan's far West side was crucial to the city's future, as developers sought to create a third major business district in the city and a residential waterfront community that would transform a dreary neighborhood dominated by warehouses.

The governor, mayor, and several other politicians joined developers Rob and Jerry Speyer in March for a news conference next to the yards, proclaiming that decades of waiting to develop the far West Side had ended. The Speyers unveiled a scale model for four skyscrapers, thousands of apartments, parkland and a cultural center.

On Thursday, deputy mayor for economic rebuilding Bob Lieber called the collapse "very disappointing" but said the city was committed to helping redevelop the land.

Tishman Speyer had made a preliminary payment of $11 million for rights to the land while final terms were negotiated, the MTA said.

The developer then sought to change a major point of the deal, which would postpone payments on the section of yards east of 11th Avenue until the western side of the yards was rezoned, the MTA said. The agency, which operates the nation's largest mass transit system, had said it needed immediate payments for the land to help plug its own budget holes.

Several other obstacles had threatened the development. Tishman Speyer had the right to walk away if the MTA didn't go through with a promised extension of a subway line to the river. Tishman Speyer also hadn't said how it would finance over $2 billion it would need to build a platform over the yards, where Long Island Rail Road trains are parked near Penn Station. And the developers had no anchor tenant for the proposed office towers.

The MTA didn't say whether it would reopen discussions with the other developers that had bid on the property last fall, including Related Cos. and a joint venture of The Durst Organization and Vornado Realty Trust.