New York City is in the midst of two mammoth publicly funded redevelopment projects, neither of which I’ve been covering here because they’re not sports-related, though they are sports-adjacent: The ongoing Hudson Yards project at the far western edge of midtown Manhattan got its start as a way to finance a New York Jets stadium that never happened, while a few blocks to the east, Govs. Andrew Cuomo and Kathy Hochul have both pushed for approving new skyscrapers around Penn Station as a way to pay for redoing that train station, which is almost entirely underground after Madison Square Garden was built atop it in the 1960s. (Both would result in billions in red ink for taxpayers, according to independent projections.)
Now, though, there’s been renewed talk of possibly connecting the two megaprojects in a way that’s very sports-related: Tearing down the current home of the Knicks and Rangers and building a new one a few blocks west on the last big plot of undeveloped Hudson Yards land. (Or virtual land: Right now it’s air space over an open cut rail yard.) I spent the last couple of weeks looking into this possibility for my friends at Hell Gate, the scrappy home of top journalists who don’t even have the pretense to put on collared shirts for a New York Times photo shoot; the whole story is a lot, as I write there, but here are a few quick takeaways:
- MSG sits on land owned by Amtrak, but it is also required to have a special “operating permit” from the city to allow an entertainment venue of more than 2,500 seats. After its first 50-year stint, the operating permit was renewed by the city council for another decade; time having flown, though, that means it now expires next July 31, and people who want to see the Garden relocated so that a new Penn Station (or a new old Penn Station) can be built in its place are so excited they’re making fake drone videos scored to soft jazz.
- Crain’s New York reported that Related Cos., the developer in charge of Hudson Yards, approached MSG about moving there and was turned down. (Sources: “an MSG representative.”) Neither Related nor MSG responded to my multiple requests for comment on this; Hochul’s office said that while the governor’s Penn Station plans “do not preclude moving MSG in the future when its useful life has expired,” there are “other more pressing priorities.”
- Tearing down a recently renovated arena and building a whole new one would cost a buttload of money: The state estimated $8 billion last year, though much of this was for land acquisition and building a new Penn Station; arena construction costs were a marginally more reasonable $2 billion.
- Since nobody involved is dying to spend even $2 billion on a new arena, seeing a way forward for a new MSG requires a whole lot of wishcasting: If Related boss (and Miami Dolphins owner) Stephen Ross decides that an arena is a better use of space than more office buildings in the post-office era, and if the city agrees to tear up its Hudson Yards financing plan that relies on payments in lieu of property taxes from those as-yet-unbuilt office buildings and instead okay a lesser-taxed arena, and if Hochul decides that enough public space advocates railfans would be mobilized to vote for her reelection if she put a recreated Penn Station on the table, then maybe it’s possible for an MSG relocation to work. Someone would still need to come up with that $2 billion for the new arena, though, plus a couple billion to rebuild the 1910-vintage Penn Station, plus whatever would be needed to bail out Hudson Yards’ public revenue shortfall, so New York taxpayers’ sea of red ink could end up getting even deeper.
- The city council says any plan to address MSG’s operating permit will require going through a months-long land use process, which, uh, somebody should probably get cracking on that since next July 31 is less than a year away, especially what with days getting shorter and all.
The takeaway: This is all still extremely speculative, so much so that the only rendering in existence of a possible Hudson Yards MSG looks like it was carved from a block of cheese. It does, however, have all the elements of an epic sports arena battle — dueling billionaires! convoluted finances! terrible bro-y roots rock! — so it’s worth keeping an eye on, which Hell Gate and I both plan to do.
Neil
Wouldn’t the new arena be a few blocks WEST of the current? Paragraph 2 says east.
I could a financing scheme that couples a new arena with the “Penn South” addition for NJ Transit.
Argh, yes, “west,” thanks, fixed.
Not sure what you mean about a financing scheme coupling an arena with Penn South. How would one help the other?
To tie a private benefit (new Garden) with the public benefits of an expanded Penn Station – grouping the funding together
Moving MSG doesn’t really do anything to make Penn South easier, though. In fact, it could make it harder, since it would require more money that would have to come from somewhere, and Penn South is already struggling for funds.
I mean, call me crazy, but how about tearing down MSG, rebuilding Penn and letting Dolan figure out the rest?
Dolan owns MSG, so the state can’t tear it down. The city could deny it an operating permit renewal, though.
Like every super rich guy, he lobbies like crazy. Republicans,/Democrats, Albany/NYC. So yeah it makes since to tell him to stick it, just as it did 9 years ago, but they extended his permit then and won’t do anything he’s not on board with.
Why would MSG want to move? It strikes me as being in a good location for transit and activity.
Finally had a chance to read the linked HG article. Well done, Neil, it’s good.
I get that there are weird things going on with the Dolans. When aren’t there? And that rich people aren’t like us and can often not follow the rules and not only avoid prosecution but end up way ahead of the game by doing so.
I also understand that he/they owns MSG itself and not the land under it, and that this is not unusual in NY or other major cities. “Air Rights” may not be a thing everywhere, but they generally are in places where real estate is shockingly expensive.
But… I’m not clear why anyone (regulatory body, corporation, government or ordinary New Yorker) would or could “owe” James Dolan and his affiliated companies anything other than the money he has recently invested in “upgrades” to MSG (which, yes, mostly involved completely gutting the interior and building a new arena within the horrific exterior)?
Is there some agreement the city (or whomever) has that guarantees MSG be made whole on decisions it made knowing full well that the operating permit has an expiry date?
If there was an undertaking by the city that the OP would be renewed for a prescribed period if he met certain conditions then that would (or could, depending on the conditions) be a contractual obligation.
If MSG decided to invest $1bn in renovations without any successor agreement with the city AND knowing full well that the existing permit expires within a decade then I don’t see what recourse they have?
You can’t sue (successfully) for tortious interference if your contract to use the space at full capacity has actually ended.
One of the fundamental problems of building on or over a leased parcel of land is that the builder/developer spends a lot of money on something that may have a finite end date should the land/air rights owner decide s/he does not want to renew the lease. Sometimes termination payments are negotiated up front, but I’m not aware of any such stipulation with respect to MSG/Penn Station etc.
If the city denies MSG an operating permit renewal, Dolan still owns the building (or airspace… or structure created in the airspace), he just can’t sell more than 2500 tickets to any event there. He still has use of the facility but his ‘exemption’ to the 2500 capacity rule has expired. Contracts and leases expire. It behooves both parties to any contract or lease to avoid issues that arise when an expiry date arrives… in residential or commercial real estate this is generally referred to as “tenancy at will”, meaning no lease or contract is in effect and the parties may (but are not required to) continue the existing contract for a defined or open ended period.
From where I stand, if the permit expires Dolan is not required to ‘forfeit’ any assets… he simply has to abide by the rule that the existing operating permit allowed him to avoid.
Why should he or his companies be compensated for this? Surely they cannot claim they signed the original agreement under duress, or the 2013 permit/extension for that matter?
I agree MSG should move. But any talk of compensating the Dolans for their “losses” should at very least begin with a negative number (the $600m Ed Koch ‘accidentally’ gave them in tax breaks). It should move from there to what the Dolans are actually “losing”. If the city wants the architectural abomination that is MSG IV to be gone, then yes, he needs to be compensated for the actual market value of the structure he owns that will be demolished (less $600m in lost property taxes). What the ‘new’ building costs and whether it is built on someone else’s air rights or actual land is not the city’s problem.
If Dolan ‘wants’ to remain in Manhattan, then it is up to him to locate an appropriate parcel and build on or over it.
Nobody owes Dolan anything, in the real, legally enforceable sense. What he does have is 1) the threat, idle or not, of moving the teams, and 2) the threat of using his ownership of the surface rights/air rights/whatever (I’m still trying to get a look at the paperwork) over Penn Station to be a huge pain in the ass w/r/t whatever Hochul wants to do there. Plus, I guess, 3) a whole lot of well-paid lobbyists.
None of this precludes the city council from letting Dolan’s operating permit to expire and padlocking the Garden if he sells more than 2,500 tickets. But given that the state legislature has let him collect over half a billion dollars in tax breaks rather than simply pass a bill to repeal them, it doesn’t seem all that likely that there’s the stomach in local political circles for telling him to hit the bricks.