New York MTA’s $35 million “no-brainer”

Written by William C. Vantuono, Editor-in-Chief
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Grand Central Terminal’s main waiting room.

In 1626, Peter Minuit and Peter Schaghen of the Dutch West India Company purchased Manhattan Island from the Lenape Native Americans for 60 guilders’ (roughly $1,120 in 2018 U.S. dollars) worth of goods. Minuit conducted the transaction with Seyseys, Chief of the Canarsees, who accepted the merchandise in exchange for an island that was mostly controlled by the Weckquaesgeeks. Nearly 400 years later, the New York Metropolitan Transportation Authority—for a mere $35 million—is purchasing Grand Central Terminal and Metro-North Railroad’s Harlem Line and Hudson Line from Midtown Trackage Ventures LLC, a private holding company.

The MTA’s purchase will terminate a 280-year lease that gives the agency a one-time window of opportunity to buy the assets; the window closes in 11 months. The purchase price, MTA says, “is equal to the net present value of the estimated rental stream the MTA had been paying under the lease, discounted at a highly favorable rate of 6.25%.”

Midtown Trackage Ventures LLC had acquired assets that once belonged to Penn Central Transportation Co. (a 1968 merger of the New York Central and Pennsylvania Railroads), the railroad whose 1970s bankruptcy and liquidation led the MTA to assume management of the regional/commuter rail operations now known as Metro-North.

The Hudson and Harlem Lines are former New York Central. Another Metro-North main artery, the New Haven Line, traces its heritage to the New York, New Haven & Hartford, which became part of Penn Central in 1969.

“Owning the properties means that for the first time, Metro-North will have unencumbered control and responsibility of its operating environment,” the MTA said. “The MTA’s ownership of Grand Central Terminal will [also] give MTA Long Island Rail Road clear control of the East Side Access terminal being built beneath Grand Central. MTA ownership of the Harlem Line and Hudson Line means that the public can now capture the full value of improvements made through transit-oriented development projects and other public-private partnerships along the rail lines as communities advocate for such projects in the years ahead.”

Grand Central Terminal, described as “an iconic landmark and one of the most visited destinations in New York City,” was built by the New York Central and opened on Feb. 2, 1913. The NYC had previously built the Hudson Line and Harlem Line in the 19th century.

Penn Central declared bankruptcy in 1970 and leased the rail assets to the MTA in 1972. Those assets passed to the American Financial Group, then American Premier Underwriters. Commuter rail operations were assumed by Conrail in 1976; the system took its current form in 1983, when New York State, through the MTA, formed Metro-North.

In 1994, the MTA signed the current 280-year lease with American Premier Underwriters, through February 28, 2274; the lease included an option for purchase in 2019. “This longer lease term was advantageous to secure the MTA’s investment in the redevelopment of the terminal in the late 1990s,” MTA said. American Premier Underwriters sold the ownership rights to Midtown Trackage Ventures LLC in the early 2000s. Metro-North has been paying an annual rent of $2.4 million.

“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. 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. Equally important, this transaction secures for the MTA control over development rights along the Harlem Line and Hudson Line, which will allow us to help local jurisdictions implement high-quality transit oriented development for generations to come.”

“This marks a new chapter in the railroad’s history and eliminates a quirk that had lingered quietly in the background as Metro-North has established itself,” said Catherine Rinaldi, President of Metro-North. “By becoming the true owners of the infrastructure that we have long maintained on behalf of the people of New York, we are asserting Metro-North’s permanence as an institution dedicated to public service.”

Grand Central Terminal in the 1930s. Photo courtesy of the New York Transit Museum.

The MTA’s Hudson Line ownership will extend to 2.2 miles north of Poughkeepsie Station on the Hudson River, on the former NYC “Water-Level Route” that once saw premium long-distance passenger trains like the legendary 20th Century Limited. This point, where Metro-North train dispatchers hand off control of train movements to Amtrak, is at Milepost 75.8, representing its distance from the bumper blocks at Grand Central. Tracks north of this point are owned by CSX.

The portion of the Harlem Line being acquired by the MTA extends as far north as Dover Plains, N.Y. The MTA previously acquired the segment of the line from Dover Plains to Wassaic, N.Y., in 1990 when Metro-North extended the Harlem Line tracks northward over this five-mile segment.

1909 drawing of The Purchase of Manhattan Island.

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