Redevelopment Wrecks: New York City, New York

New York City, New York

The New York Stock Exchange (NYSE), a private corporation, was looking for a location in lower Manhattan on which to build a new headquarters for its operations, obviously a large-scale proposition.  NYSE envisioned a gleaming 900-foot skyscraper above its new stock-trading floor, and eventually decided on a site across the street from the company’s current location.  Inconveniently for NYSE, this set of residential and commercial properties was already owned and occupied by others.  Among them, J.P. Morgan Chase owned two office buildings, Rockrose Development owned an apartment building, and the Wilf family owned two other properties.[1]

In January 2001, the New York City Economic Development Corp. began the process of condemning the apartment building at 45 Wall Street.  In support of its actions, the agency touted the “public benefit” the City would derive from enhancing Manhattan’s position as a worldwide financial center, and the theory that NYSE’s departure from the city’s financial district would be detrimental to the city and state economies.[2]

The tenants’ association of 45 Wall Street challenged the development agency’s public use determination, but in October 2001, a state appeals court agreed with the agency’s findings, citing the public benefit of increased tax-revenue and economic development.  Amazingly, the court found that the “proposed project will incidentally confer a private benefit,” even though the agency’s sole rationale for supporting the condemnation was to facilitate construction of NYSE’s new facility (which is anything but incidental to the overall project).[3]

In the wake of the September 11, 2001, terrorist attacks, the NYSE project stalled.  Indicative of the fluctuations of the real estate development industry, the Giuliani administration was unable to find a developer willing to build a skyscraper in lower Manhattan.  The City still possesses some of the properties originally requested by the NYSE, in the hopes that a new facility of some kind may eventually be built.  Meanwhile, the NYSE has decided that it no longer wants the property, leaving the City and its taxpayers left holding the bag.[4]  The redevelopment agency finally gave 45 Wall Street and the two office buildings back to their owners, forfeiting a $22 million deposit on its purchase agreement.  The City also lost $1 million a month in rent until 45 Wall Street was fully leased.  At the end of the day, the City and its redevelopment agency estimated a loss of $109 million—taxpayer money—on this ill-fated deal that in no way benefited the public.[5]  The City’s misadventures underscore the highly risky nature of redevelopment and why it is best for taxpayers that governments do not play the role of real estate speculator.

[1] Eric Herman, “NYSE Building Site May Cost City More,” Daily News (New York, NY), Dec. 22, 2000, at Business 93.

[2] See In re Application of Fisher, 730 N.Y.S. 2d 516, 516-17 (N.Y. App. 2001).

[3] Ibid.

[4] Andrew Rice, “NYSE’s Chairman Unplugs His Plans for a New Exchange,” The New York Observer, Dec. 3, 2001, at 1; and see, Dec. 2005.

[5] Charles V. Bagli, “45 Wall St. Is Renting Again Where Tower Deal Failed,” The New York Times, Feb. 8, 2003, at B3.