City Comptroller John Liu says Mayor Bloomberg should reopen a sweetheart deal struck in 1998 by the Giuliani administration with the Marriott hotels corporation that, he claims, will end up costing the city $345 million.
“This is one of worst deals since Manhattan was sold for $24,” Liu said.
The back story: in 1982, when Times Square wasn’t in such good shape, the city agreed to lease land in along Broadway to Marriott on which the company would build the big hotel that now sits on the parcel, the Marriott Marquis. In the deal, Marriott agreed to pay rent equivalent to a percentage of the hotel’s annual revenue. After 70 years, or in 2057, Marriott could buy the land for fair market value.
In 1998, the Giuliani administration cut the original 70-year lease in half to 35 years, meaning that the deal ends in 2017. The deal also deleted the payments based on a percentage of revenue in favor of straight property tax, and gave Marriott a decade rent-free. In 2017, Marriott could then buy the parcel for $19.9 million.
That may seem like a lot of money, but today, the parcel is worth $193 million. So, Marriott will get it for a relative pittance in four years, Liu says.
“The EDC betrayed its fiduciary responsibility to act in taxpayers’ interest,” Liu says.
“The clock is ticking — the lease set to expire in less than four years would let the Marriott Marquis purchase one of the hottest pieces of New York real estate for ten cents on the dollar compared to its value today.”
Not surprisingly, the Bloomberg administration disputes the findings, saying notably that Liu is undervaluing the contribution that the Marriott Marquis made as a “major catalyst” for economic development in Times Square. And Liu is oversimplifying the difference between the $19.9 million and the $193 fair market valuation.
“In addition to providing more than 1,500 jobs and hundreds of millions in tax dollars, the hotel has proven a catalyst for economic growth and played a critical role in the area’s revitalization in recent decades,” says Patrick Muncie, a spokesman for the city’s Economic Development Corp. “This renaissance is celebrated as one of the greatest urban economic development achievements in history, and it didn’t happen by accident or without encouraging private investment.”
Liu wants the Bloomberg administration to re-open the 1998 agreement and try to get a new deal that isn’t quite so one-sided. That might be a steep climb, but Liu says Marriott owes about $3 million for a missed interest payment, and failed to keep proper records at one point.
A spokeswoman for Host Hotels, the new corporate name for Marriott, also wasn’t happy with Liu. “The Comptroller’s office did not understand the Marriott Marquis hotel deal, and its audit report is wrong on all counts. The Hotel has paid an estimated $1 billion to the City and State in rent, taxes and acquisition costs since the project began, including every penny owed under its ground lease.”