Vornado's Loss on Port Authority Tower Is Bus Riders' Gain

Vornado Realty Trust will now pay four times as much for air rights over the Port Authority Bus Terminal than it would have under an earlier agreement abandoned four years ago, according to a deal announced today

“I’m sad,” Vornado’s Chairman and Chief Executive Steven Roth said after a press conference at the terminal this morning. “Let’s not talk about the past. But the answer is that what we are paying for the air rights is in sync with where commercial rents are.”

In other words, he can afford it. Otherwise, why bother renegotiating the deal?

Vornado and a partner, Ruben Companies, will pay roughly $500 million over the length of the 99-year-lease, the Port Authority of New York and New Jersey said. The 1.3 million-square-foot building will rise 42 stories over the north end of the terminal, using air rights transferred from the south end, according to Frank DiMola, deputy director of development at the Port Authority. The exact height was not available.

The earlier deal, which newspapers have valued variously at $110 million to $130 million, was struck in 2000, but was called off in 2003, apparently because of the poor economy. Since then, the real estate market has rebounded and even Eighth Avenue, once the tawdry edge of Times Square, has become respectable.

The revenue will pay for renovations at the terminal--making the brick interior a bit brighter, improving pedestrian circulation, adding bus gates—as well as pay for part of a $545 million bus garage that the Port Authority wants to build somewhere on the West Side.

Mr. Roth said that ground would be broken in two years and the tower would be completed in 2013.