Port Authority Considers Selling Air Rights Over PABT

The Port Authority of New York and New Jersey has entered into negotiations to sell the air rights to Vornado over the bus terminal at 42nd and 8th Avenue to build a 1.3 million sf office building and to expand the bus terminal to permit 23 additional gates.

The deal would also mean hundreds of millions of dollars in proceeds that could go to other Port Authority projects.

Though the existing terminal is a far cry from its seediest days during the 1970s and 1980s, its mid-20th-century architecture remains uninspiring by any objective measure. Under the new plan, a gleaming rectangular tower set back from the outer edges of the existing facility will rise from the building's northern section at 8th Avenue and 42nd Street.

Overall, 1.3 million square feet of office space and 55,000 square feet of retail space would be built. If Vornado and the Port Authority cannot agree on a deal by October, the agency will be able to seek other bidders, Sigmund said.

"It's a hot market," Sigmund said. "We'll be doing what we're supposed to be doing: using the real estate development potential here to invest in transportation."

The arrangement follows several years of contentiousness between the Port Authority and Vornado after a prior, similar deal for an office tower atop the terminal went awry. Vornado sued the Port Authority, accusing the agency of breaking an agreement. The new deal requires the New York-based realty company to drop its outstanding litigation.

This has the makings of a very profitable deal all the way around. The Port Authority gets to leverage the bus terminal, which sees more than 200,000 customers come through on a daily basis, and Vornado gets a deal on a building in a very high traffic and high profile location. It would also sit across the street from the nearly completed NYT building. The deal would also end contentious litigation over an earlier deal that fell through.

The addition of bus gates will proceed even if the deal again falls through. The Port Authority currently loses money on the bus terminal despite the prime location and foot traffic. The Port Authority subsidizes bus terminal operations to the tune of $86 million a year. This deal would not only reverse the revenue flow, but would free up assets for use elsewhere in the system.

Now, if New Jersey Transit could do a similar deal for its Secaucus Transfer boondoggle, then we'd have a much more stable transit system that is better funded and more self sufficient.