Stephen Ross: The Last Master Builder
Image: Ethan Hill/Redux for Forbes
taring across Manhattan’s last untamed strip, the rows of sleek silver commuter trains sliding along the island’s only active rail yard, the Related Companies’ Stephen Ross points to the future.
His finger moves faster, toward the eventual home of 6 million square feet of sparkling office space, divided between three towers; toward 5 million square feet of residential space, a mixture of affordable housing, luxury rentals and high-end condominiums; toward 1 million square feet of retail space, including a movie theater and a department store. He gestures at the future home of the hotel, the public school, the 14 acres of parks and open space. All on a 26-acre platform over a working rail hub. From scratch.
If he can pull this off (current estimate: Ten years and at least $12 billion), Hudson Yards will become the most significant private development project in Manhattan since John D Rockefeller Jr spent $250 million (more than $3 billion in today’s terms) to create the 22-acre Rockefeller Center in the 1930s, expanding and recentering America’s largest and densest city. “We are revitalising an area of our city that had long been underused,” says New York Mayor Michael Bloomberg. “When it’s complete, it will be one of New York City’s great neighbourhoods.”
In some ways, the stakes are even higher than that. Ross may own some 60 percent of Related, which currently owns and manages a property portfolio valued at $15 billion, but the Hudson Yards transcends money. Using every real estate trick he’s learned over his 71 years, Ross is trying to demonstrate that even in a hub of unions, regulation and bureaucracy, private developers can still accomplish grand things.
“When you look at the rail yards today you have to have vision,” he chuckles, watching the trains during a blustery Friday in February. “A lot of vision.”
Nestled against the Hudson River, Hudson yards' once-thriving shipping piers had no ships—New Jersey now hosted the port—and the once-teeming garment district to its south had few garmentos. In the 1980s the Metropolitan Transit Authority carved out train yards but also had the foresight to construct them in a way that would one day allow for platforms and buildings over the open-air tracks.
When Bloomberg took office in 2002, he came with an idea that seemed recession-proof: Bring the 2012 Olympics to New York City and put the Olympic stadium on the Yards.
A coalition quickly developed: Bloomberg’s economic development deputy Daniel Doctoroff led the Olympics effort; Ross would develop the surrounding real estate; the New York Jets, led by a new president, Jay Cross, would help finance the $2 billion stadium, which the team would use after the Olympics decamped.
Unfortunately for them, New Yorkers weren’t particularly keen on paying for a congestion-inducing football stadium, and state politicians voted down the project in 2005. The Olympics went to London just in time for the global financial meltdown.
Olympic failure, however, generated a commercial by-product. Bloomberg had already proposed a $2 billion subway link to the area, as well as a tree-lined boulevard between 10th and 11th avenues—people in theory would be able to get to the area and possibly want to stay. Equally important, he had muscled through rezoning to allow development in this “last frontier available in Manhattan,” as the city’s planning department has referred to the far west side of the island. “The office market in midtown was becoming tight,” says Corinne Packard, a real estate professor at NYU who once helped lead the city’s Hudson Yards efforts, “and there was worry that because prices were sky-rocketing firms were leaving the city.”
New York’s largest commercial real estate developers placed bids to develop it: Brookfield Properties, Extell Development, Tishman Speyer (with Morgan Stanley), the Durst Organization partnered with Vornado Realty Trust—and the Related Companies. Related had secured News Corp as its anchor tenant (earning its proposal the nickname “Murdochville”), but the night before the second-round bid was due, the media giant pulled out. Ross yanked his proposal, and Tishman Speyer ultimately won the bid.
Two months later the deal fell apart, and on Thursday, May 15, 2008 the MTA put the land back up on the block. Ross, smarting from the loss, lunged at the opportunity. The company enlisted Goldman Sachs as an equity partner and placed a new bid, sans anchor tenant. “We essentially moved into the office and didn’t leave until the deal got done,” recalls Jeff Blau, the president of Related Companies and Ross’ right- hand man. By Monday morning a press conference announced the new deal: $1 billion for a 99-year-lease. The timing couldn’t have been worse. Four months later Lehman Brothers filed for bankruptcy, credit markets seized and the bottom dropped out of the real estate market. Related, due to formally sign the lease, got an ex- tension. “We spent all of 2009 getting the property rezoned and getting the details in place with the MTA—behind-the-scenes work we had to do anyway,” says Jay Cross, the former Jets president who Ross recruited to lead Related’s Hudson Yards initiative after the stadium project collapsed.