In a move that could open the door to more transit-oriented development, the board of New York’s Metropolitan Transportation Authority on Thursday approved the $35 million purchase of Grand Central Terminal, and the Metro-North Railroad’s Harlem Line and Hudson Line.
The MTA, one of the largest municipal issuers with roughly $41 billion in debt, is buying the properties from private holding company Midtown Trackage Ventures, LLC. Midtown had acquired assets that once belonged to Penn Central Transportation, the railroad whose 1970s’ bankruptcy and liquidation led the MTA to assume management of regional rail operations.
The acquisition ends a 280-year lease that gives the MTA a one-time window of opportunity to buy the assets. The window closes in 11 months. The price equals the net present value of the estimated rental stream the MTA had been paying under the lease, discounted at 6.25%.
According to the MTA, Metro-North Railroad will have unencumbered control and responsibility of its operating environment by owning the properties for the first time.
The deal will further give MTA Long Island Rail Road clear control of the East Side Access terminal it is building beneath Grand Central.
It also enables the MTA to capture full value of improvements made through transit-oriented development projects and other public-private partnerships along the rail lines as communities push for such projects.
“This was a no-brainer, from a financial standpoint,” said MTA Chief Development Officer Janno Lieber. “We had to exercise the option to purchase or remain a tenant for another 270-plus years. And the interest rate environment – and the $500,000 discount offered by the seller – means it’s cheaper to buy it now than to pay rent for all that time."
Iconic Grand Central is one of the city’s most popular tourist destinations. New York Central Railroad built the terminal, which opened Feb. 2, 1913. That railroad had built the Hudson and Harlem lines in the 19th century.
New York Central later merged with the Pennsylvania Railroad to create Penn Central Transportation in 1968. Penn Central went bankrupt in 1970. It leased the rail assets to the MTA two years later, and the assets passed to the American Financial Group, then American Premier Underwriters.
Conrail, the railroad the federal government created to save freight service on Penn Central and other bankrupt Northeast railroads, took over commuter rail operations in 1976, and the system took its current form in 1983, when the state, through the MTA, formed Metro-North.
In 1994, the MTA signed the current 280-year lease with American Premier Underwriters through Feb. 28, 2274, that included this option for purchase in 2019.
Also on Thursday, the board approved the MTA's agreement with the city for a city-subsidized "
Board member David Jones, who lobbied for the program and is chief executive of nonprofit Community Service Society of New York, called for expanding the program to seven-day and 30-day MetroCard payment plans. "Many low-income people are incapable of affording the seven-day or the 30-day fare," he said.
The board also approved the retention of law firm Skadden, Arps, Slate, Meagher & Flom LLP and its addition to the panel of board-approved outside counsel.
