The Paper of Wreckage

The 'Times' Bulldozes Its Way to a Sweetheart Land Deal You Will Pay For

"It's clearly being done because the Times is so influential," said Stern.

Robert McChesney, a communications professor at the University of Illinois, said the deal "gives the appearance of impropriety" and will undermine the Times' ability to criticize similar arrangements between government and business.

"This is a similar thing with the Los Angeles Times three years ago with the basketball arena, the Staples Center," he said, recalling how the L.A. Times staff rose in opposition upon learning that the paper and the arena had shared advertising profits from a magazine issue devoted to the arena. He said it was comparable in the sense that both papers were benefiting from deals with officials they cover closely.

"Journalism has an extraordinary amount of power in any community," said McChesney, author of the book Rich Media, Poor Democracy. "I think there's a concern there regardless of the best wishes or good will of the people involved in The New York Times."

He said the deal undermines the Times's ability to criticize other corporate-retention deals. "To be consistent, they have to back off on an important public policy issue, or they have to be hypocrites," McChesney said.

Times spokeswoman Mathis responded: "This real estate transaction does not compromise the independence or credibility of the Times editorial voice or the integrity of the Times reporting in any way. Our business and news functions operate separately." She said Times editorials have recognized the "judicious use of incentives." In addition, she said, "as long as these kinds of incentives continue to exist, it is incumbent upon us, as a publicly held company, to seek the benefit of those incentives for our shareholders."

She described the deal as "fair" because the Times risked the "uncertainties" of the condemnation process and "agreed to build regardless of the condition of the real estate market, which is unusual."

Replied Barnett: "What risk?" He said the Times will become its own anchor tenant.

Pointing to a string of other midtown land deals, opponents of the deal assert that the Times and Forest City stand to get the property for as little as a third of its value.

Sidney Orbach, who owns a 16-story office building on the site with two of his brothers, pointed to the selling price last year of a lot across the street on Eighth Avenue between 41st and 42nd streets. It's half the size of the property the Times covets, but developer Paul Milstein's family bought it at auction for $111 million.

Real estate experts usually judge property values in terms of the cost per square foot of usable space permitted to be built on the site. The Milstein deal works out to $180 per square foot compared to $62.50 for the Times deal, he said.

The Times replied that the other deals were priced at the time the owners took title to the land, while the price of the Times deal factors in the risk the company faces in getting possession.

W. Tod McGrath, a professor of real estate finance at the M.I.T. Center for Real Estate, said that even when the developers' risks, demolition costs, and such amenities as a subway improvement were considered, they were getting "at least a 25 percent discount" on the property.

McGrath said a recent appraisal found costs "in that part of town" to be between $100 and $140 per square foot, compared to $62.50 for the Times deal.

"It seems as though it's a good deal for the Times and Forest City," McGrath said.

The Times noted as much in a December 14 article. In the 14th paragraph of an 18-paragraph story, it said that as a result of the cap, "the city is likely to forgo millions in future revenue."


On Hold

image
Sidney Orbach in his 16-story building
photo: Stefan Hester

On February 19, a Manhattan appeals court postponed condemnation proceedings until it decides if the deal violates a state law that says property can be condemned only for a "public purpose."

The opponents also opened up a second front with a "taxpayer" lawsuit at state supreme court in Manhattan. Most of it was dismissed on April 1, with the possibility left open for the case to be renewed once the opponents get access to documents being withheld.

In asking to have the suit reinstated, current owners of the site, including a company Barnett controls, contend that city and state economic development officials fraudulently concealed the truth about the project's cost to the public, even from the mayor's office. Petrasek's affidavit was filed in response.

She said she told Deputy Mayor Robert Harding and Anthony Carbonetti, Mayor Rudolph Giuliani's chief of staff, about the deal's cost to the city in a meeting on December 11.

Documents show that in 2000, EDC president Michael Carey sent memos to City Hall saying that "initial property appraisals indicate a property value well below $75 per square foot," the value of the Times' initial offer. That implied the city would not have to subsidize the land deal.

A preliminary agreement hammered out the deal's financial terms in May 2000. With negotiations continuing the following year, a city memo noted, "Current estimates of this cost far exceed original projections, thus representing a huge upfront cost for the developers." The "huge" cost above $85.6 million would eventually be covered by taxpayers, though.

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