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Thread: Article - Owner of Grand Central sues developer and city for $1.1 billion over air rights

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    Article - Owner of Grand Central sues developer and city for $1.1 billion over air rights

    When he bought Grand Central Terminal nine years ago, Andrew S. Penson figured that the unused development rights, or air rights, over the country’s busiest train station were worth a fortune.

    The soft-spoken real estate investor, however, failed to come to terms with a developer next door who needed them, or to sell even one square foot of more than a million square feet of those rights.

    On Monday, Mr. Penson filed a $1.1 billion lawsuit in United States District Court in Manhattan that argued that the administration of Mayor Bill de Blasio, a Democrat, the City Council and the developer, SL Green Realty Corporation, had deprived him of his property rights when the city gave SL Green permission to build a 1,501-foot tall office tower, without having to buy any air rights from him.

    The lawsuit involves complex questions of zoning, constitutional law, politics and potential conflicts of interest, but it boils down to what always matters most in New York real estate: millions and millions of dollars.

    It is the latest chapter in a dispute that has festered for years, with supporters of Mr. Penson describing SL Green as politically connected, while critics of Mr. Penson dismiss him as a speculator.

    The city designated Grand Central as a landmark in 1967, partly to block a proposed office tower that would have risen overhead.

    The designation, the city argued in United States Supreme Court, was not an unconstitutional taking of land because the unused development rights over the terminal could be sold to nearby developers.

    But Mr. Penson’s lawyers argued in the suit that by granting SL Green the rights to build a tower “for free” that is twice as big as had been permitted by zoning, the de Blasio administration and City Council had rendered Grand Central’s air rights “worthless.”
    Read more at: http://www.nytimes.com/2015/09/29/ny...ir-rights.html

    An interesting read on a topic we all studied in planning school. The lawsuit likely isn't going anywhere, but I'm pondering how things would change if the Supreme Court did fully side with Grand Central. Again, isn't going to happen but what would the implications be in the world of planning.
    The content contrarian

  2. #2
    Cyburbian dvdneal's avatar
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    This is just one of those, I'm sorry he didn't want to buy your rights to transfer and decided to use other city incentives to get his development done.
    Back to the question, what if this kind of case wins? It could make every TDR case weird. There would be no city incentives to get public improvements because the city would get sued for not requiring people to buy rights elsewhere. What's that, you want to help save out wetlands by making a massive public investment in our preservation project as previously allowed by code over a massive private investment buying some farmers floodplain rights, although both are helpful, we can't allow that anymore, the Grand Central case screwed that up.
    I don't pretend to understand Brannigan's Law. I merely enforce it.

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    Unfrozen Caveman Planner mendelman's avatar
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    Can Penson et al really claim a takings? Unless the rezoning completely removed all of Penson's air rights 'value' by 'upzoning' all or most properties that could buy his air rights so that they didn't need them, I say this is a bit of a stretch of a case.

    That's an interesting case of purposely or accidentally thwarted speculation.
    I'm sorry. Is my bias showing?

    Every day is today. Yesterday is a myth and tomorrow an illusion.

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    Cyburbian MacheteJames's avatar
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    I'm torn on this one. On the hand one, the plaintiff is another scummy speculator of the kind that are destroying the ability of middle class people to remain in this city.

    No one owes him anything. For zoning to remain in place as-is, in perpetuity, in New York City of all places in preposterous. Ever seen the Fifth Element? That is Manhattan's eventual destiny - hyperdensity. The sooner we are honest about how to mitigate the impacts of supertall structures in this city on the sidewalks, streets, views, and transit, the better off we will be.

    On the other hand, this move to rezone in the absence of a Comp Plan is typical DCP. They don't plan, they zone. If they had a *plan* backing up the rezoning, they'd look a lot less culpable. Appointing the ultimate real estate insider as the head of the planning department was going to lead this kind of thing eventually, it was just a matter of time.

    I recommend reading the first 20-30 pages of the complaint, it's very interesting.

  5. #5
    Cyburbian
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    Can someone explain exactly what air-rights are in this case? I thought it was the ability to sell "the air" over your property up to a certain altitude but it sounds like the cranes and whatnot for his neighbor's building would be going in his space?

  6. #6
    Unfrozen Caveman Planner mendelman's avatar
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    Quote Originally posted by stroskey View post
    Can someone explain exactly what air-rights are in this case? I thought it was the ability to sell "the air" over your property up to a certain altitude but it sounds like the cranes and whatnot for his neighbor's building would be going in his space?
    It's more about transfer of development rights.

    As I understand it, in NYC one can transfer (aka sell) the remaining air rights or zoning rights you have for your property under the underlying zoning district allowances. This is a historic preservation incentive and a way to deflect takings concerns.

    Basically - you have Grand Central Station which has been determined to be a cultural and historical landmark. You have been told, because of that, you can't build on top of it or remove and build new. So as compensation, you can sell/transfer the zoning rights you have (existing 10 story Station, but zoning allows up to 50 stories on your property) to a property owner nearby and now they can build a 90 story building and your landmark property has been preserved and you still get a bunch of 'value'.
    Last edited by mendelman; 08 Oct 2015 at 12:48 PM.
    I'm sorry. Is my bias showing?

    Every day is today. Yesterday is a myth and tomorrow an illusion.

  7. #7
    Cyburbian MacheteJames's avatar
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    Quote Originally posted by stroskey View post
    Can someone explain exactly what air-rights are in this case? I thought it was the ability to sell "the air" over your property up to a certain altitude but it sounds like the cranes and whatnot for his neighbor's building would be going in his space?
    The speculator - the Plaintiff, I mean - is making the case that the city's allowance of additional density on a nearby site makes his air rights essentially worthless. Apparently, he had a pending deal with the developer of the other site for a TDR, but that developer worked out a deal with the city to get additional density onsite. Therefore, that developer no longer needed the Grand Central TDR for the additional density he wants. The speculator only bought the Grand Central property because of the TDR rights, so now he has an asset that he doesn't want.

    TDR in the original Penn Central instance was and is just a backdoor way to get historic preservation by preserving property rights and avoiding a takings claim, as mendelman said.

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