Six weeks after the Metropolitan Transportation Authority selected Tishman Speyer Properties to build a vast complex of office towers, apartment buildings and parks over the railyards on the West Side of Manhattan, the deal has fallen apart.
Gary Dellaverson, the authority’s chief financial officer, said the negotiations foundered Thursday afternoon after Tishman Speyer insisted on changing the terms of the $1 billion development, which both parties had agreed to on March 26.
The change would have substantially slowed the flow of millions of dollars in annual rent and fees to the authority and introduced a note of uncertainty about the pace of construction at the 26-acre site, which straddles 11th Avenue between 30th and 33rd Streets, he said.
“We were unable to reach a meeting of the minds,” Mr. Dellaverson said. “At this point, there is no agreement between Tishman Speyer and the M.T.A. The M.T.A. remains committed to the development of the West Side yards.”
Robert Lawson, a spokesman for Tishman Speyer, said, “This is a highly complicated deal and we have been negotiating in good faith with the M.T.A. for several weeks.”
“We share the same goal as the M.T.A. and the city, to transform Hudson Yards into a successful and vibrant community,” he added. “We still hope to be able to complete this deal and reach an agreement that satisfies the needs of everyone.”
Mr. Dellaverson said he had agreed to a request from Tishman Speyer, which controls Rockefeller Center and has projects in India, China and Brazil, for a meeting on Monday, which seemed to leave open at least a faint possibility that the deal could be put back together. But he also said that the authority was considering whether to reopen negotiations with one or more of the four other developers who had bid nearly $1 billion each for the development rights.
But if the authority reopened negotiations with another bidder, it would almost certainly mean that it would get less money for the rights to the property, real estate executives said.
Developers who a year ago would have gleefully bid any price for a building or a project are now delaying or abandoning projects in New York and elsewhere as the economy has slowed and many lenders have balked at financing real estate projects in the wake of the credit crisis.
At the same time, the sudden setback in the development of the railyards is a very public embarrassment for everyone involved, including the developer, whose reputation may be at risk; the authority, which was counting on the money for its capital budget; and the Bloomberg administration, which had made the transformation of the once-industrial West Side a centerpiece of its two-term mayoralty.
“It would be a real tragedy for the city if the project did not proceed now,” said Douglas Durst, who had bid for the property in partnership with Steven Roth, chairman of Vornado Realty Trust. “The M.T.A. must find a way to keep the momentum going.”
Deputy Mayor Robert C. Lieber also expressed disappointment that the deal had fallen apart. “It’s very disappointing that six weeks after the M.T.A. picked its proposal from a pool of viable competitors, a deal with Tishman Speyer could not be worked out, but our commitment to transforming the Hudson Yards into a vibrant, mixed-use district remains unchanged,” he said. “We will do everything possible to keep the redevelopment process moving forward.”
But critics of the deal said that it should never have been made, especially since the financing for a key element for West Side development, the extension of the No. 7 subway line, had not been resolved. At the same time, plans for the expansion of the nearby Javits Convention Center had collapsed. And given the sour real estate market, critics said the developer was getting an inexpensive development option.
“This deal was unhealthy from the get-go,” said Assemblyman Richard L. Brodsky. “It never met the needs of the M.T.A.’s capital plan. The 7-line commitments were never sustainable. And in the end, every single West Side project is in various state of collapse.”
Still, Jerry I. Speyer, chief executive of Tishman Speyer, is flying from Milan, where he is meeting with investors, to London on Friday to meet with Mayor Michael R. Bloomberg, according to one city official, who requested anonymity. Mr. Speyer’s son, Rob, who is also in Milan, had overseen the negotiations, clashing with city and state officials before ultimately withdrawing from the deal, the official said.
