New idea to revamp Penn Station would pay billionaire Dolan $500 million

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James Dolan, the cable baron who owns New York̵[ads1]7;s Madison Square Garden arena, will be paid $500 million under a new proposal to rebuild the dilapidated Penn Station rail hub beneath it.

The plan, announced by Italian infrastructure company ASTM on Wednesday, involves paying the amount to Dolan for his Hulu Theatre, located next to Madison Square Garden. Developers would then demolish the theater to open up space in the notoriously cramped station, creating a main hall with a ceiling 55 feet high.

Fixing Penn Station has become one of New York’s most agonizing civic endeavors since the original was demolished in the 1960s. The station is a gateway to Manhattan and handles more daily passengers than the three New York area airports combined.

But any payment to Dolan could turn out to be politically charged. He most recently drew the ire of New Yorkers by using facial recognition technology to ban perceived enemies from the Garden. The billionaire has long been reviled by activists who decry his place as a bad neighbor.

ASTM estimated their plan would cost $6 billion — or $1 billion less than a rough alternative design presented this week by New York Gov. Kathy Hochul, which would leave Hulu in place.

Peter Cipriano, managing director of ASTM North America, rejected the suggestion that a payment to Dolan could be interpreted as “a giveaway,” saying Dolan’s MSG Entertainment would also pay for other contributions to the proposed project, including new exterior cladding for the 1960- the number. vintage arena.

“It’s private property in New York City. The only way forward for this project is to gain control of some of the property. . . There’s no giveaway,” Cipriano said.

Patrick Foye, a former head of New York’s Metropolitan Transportation Authority who has since joined ASTM, said the $500 million price was the result of robust negotiation: “Just to be clear: we wanted to pay less, they wanted have more – like any negotiation. And we reached a price.”

James Dolan, center, at a New York Knicks game inside Madison Square Garden

James Dolan, center, at a New York Knicks game inside Madison Square Garden © Brad Penner/USA Today Sports/Reuters

MSG Entertainment declined to comment on the $500 million figure, saying, “Recognizing that the decision on which plan moves forward is not ours to make, we look forward to working with all key stakeholders to improve Penn Station.”

An official from the MTA, which has a central role in the redevelopment, expressed skepticism about ASTM’s cost estimates and the need to pay public money to Dolan to close the theater.

More generally, the official complained about the private company’s attempt to force its way into the competition after a preliminary design contract had already been awarded. “They have offered an unsolicited proposal for a design that is already underway,” this person said.

The design favored by the MTA and spied by Hochul on Monday would place the main train concourse near Seventh Avenue, contrary to the ASTM plan. Its supporters believe it would avoid the need to remove the theater.

The long-running effort to overhaul Penn Station entered a new phase with Hochul’s recent realization that it was no longer possible to rely on revenue from as many as 10 new office towers around the area to fund the project.

Instead, both proposals would leverage state and federal funds, including those from President Joe Biden’s Inflation Reduction Act.

The ASTM plan would be a public-private partnership in which the Italian company would have a 50-year contract to operate the station and make a $1 billion equity investment. In return, it would seek $250 million in annual payments, upon completion, to be shared by Amtrak, the station’s owner, and its two main tenants, New Jersey Transit and the Long Island Rail Road.

ASTM and its partners, which include architect Vishaan Chakrabarti, the former chief of urban planning in the Bloomberg administration, are calling for an open competition for proposals — something the state says is already well advanced.

Chakrabarti and other architects have drawn up plans that would remove the garden entirely to restore Penn Station’s grandeur and open the corridors to natural light. But even some who supported that approach now believe it may be unrealistic — especially after Dolan undertook a $1 billion renovation. Removing Hulu, a 5,600-seat venue that also sits above the train tracks, would be a less dramatic option.

“We’re excited to compete,” Foye said. “We want an open, competitive process.”

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