Grand Central Terminal Owner Sues NYC for $1B

MANHATTAN (CN) - The owner of New York's Grand Central Terminal filed a $1.1 billion lawsuit against the city, claiming it gave the unused "air rights" for the registered landmark to a real estate developer for free and without a purpose.

In a lawsuit filed Monday in Manhattan Federal Court, Midtown TDR Ventures and Midtown GCT Ventures said they expected to be able to sell Grand Central's transferrable development rights, or TDRs, to sites within the Vanderbilt Corridor, a row of properties along Vanderbilt Avenue, at market prices.

New York City's zoning laws preserved landmark owners' interests in their unused "air rights", which are "the pre-existing rights to build on the site, by allowing the rights to be transferred to neighboring sites to enable those sites to be developed at greater height and density than otherwise would be permitted," Midtown's lawsuit says.

The TDRs, or air rights, were made "worthless," however, after the city's planning department "worked privately with SL Green [Realty Corporation] to develop a change to the local zoning laws ... allowing it to construct its office tower without having to buy a single Grand Central Terminal TDR," according to the lawsuit.

The office tower is One Vanderbilt, a project SL Green has been planning since December 2011, whose construction has yet to begin, the complaint says. It is expected to be one of the tallest buildings in the world, according to Midtown.

While the old zoning required a developer to make public transit improvements and acquire TDRs, Midtown says the new zoning calls only for infrastructure upgrades. The lawsuit calls the rezoning illegal "spot zoning ... accomplished 'for the benefit of individual owners'" and says "it was tailor made for One Vanderbilt."

"The city's 'zoning' took from Midtown the entire value of the Grand Central TDRs and transferred over $475 million of that value to SL Green, for no purpose other than to reduce SL Green's costs and increase its profits in constructing an office tower that it was going to build anyway," the complaint states. "This is a classic violation of the Public Use clause of the Fifth Amendment to the Constitution - taking the property of a private citizen for the benefit of another private citizen without any public purpose."

Midtown seeks a declaration that the change of zoning is invalid. Alternatively, Midtown wants fair compensation for its TDRs, which it says is more than $1.1 billion. "Prior to the rezoning, the TDRs' appraised value was $880 per square foot within the Vanderbilt Corridor," according to the lawsuit. The complaint also seeks $475,000 from SL Green for unjust enrichment.

Midtown is represented by Boies, Schiller & Flexner LLP and Jenner & Block LLP.

The New York City mayor's office did not respond to a request for comment, but spokesman Wiley Norvell said in a statement that the One Vanderbilt project "is critical to helping New York City compete as a global center of finance and business."

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