MTA pays Extell $82M for Harlem site to extend subway

Apparently, it can sometimes pay to hold out against the MTA.

The Extell Development Co. has sold a large site in Harlem to the Metropolitan Transportation Authority for $82 million, a more than 80% premium over what the agency believed the property was worth, internal MTA documents show.

The agency had considered using eminent domain to get its hands on the site, which is at 160 E. 125th St and is critical for the next leg of the Second Avenue subway. But dragging Extell into court to try to seize the site would have been a risky strategy and possibly jeopardized federal funding for the $7.7 billion project, according to the documents.

“Acquiring these interests via negotiated acquisition will avoid a condemnation process that would likely have been significantly more expensive,” reads a summary of an April meeting of the MTA’s finance committee.

And that drawn-out process could have delayed “arguably the most critical improvement to public transportation for the residents of East Harlem in over 100 years.”

Initially, the MTA appraised the 1.6-acre site at Lexington Avenue, which for decades had a massive lion, the luxury builder finished ab out 30% below its target, suggesting it gave way less ground than the M TA. green-lighted the residential project, which will someday have a new subway by its front door. An Extell spokeswoman had no comment by press time.

For about two years the two sides haggled over the site, which will have an entrance to one of three new stations for the updated Q line, which will extend from East 96th Street. On April 26 the MTA’s board voted to approve Extell’s offer, the summary shows.

The transaction closed two days later, according to a deed.

PathMark supermarket, at $45.4 million, the documents show.

But Extell, whose president is prolific developer Gary Barnett, pushed back on that estimate and instead claimed it was worth much more, $114 million, MTA records show.

In 2014 Extell paid $39 million for the property, and then two years later spent $21 million to buy out PathMark’s lease, meaning the firm had invested $60 million to acquire the site. But the PathMark store actually extended into a next-door lot on the block that Extell still controls, so the $21 million lease payment wasn’t for 160 E. 125th St. alone.

Because Extell sought $114 mil lion and ended up with $82 mil

Extell’s site has unique characteristics, the MTA says. It sits next to the 4,5 and 6 subway lines that run under Lexington. And the MTA plans to construct underground connections between thos e lines and the East 125th Street station.

As part of the deal, Extell also agreed to allow the MTA to construct ventilation shafts on the next-door parcel it still owns, 167 E. 124th St., which Extell acquired in 2014 for $10 million. The site, which is at Third Avenue and once contained a post office in addition to the PathMark, is slated for a 15-story, 543-unit residential tower, plans show. Last month the cit y’s Planning Commission

Last month MTA officials began eminent domain proceedings against landlords who own a cluster of buildings at Second Avenue and East 120th Street, several of which are controlled by the Pecora family, a local developer. Once condemne d and razed, those sites would become a staging area for tunnel-boring machines and then folded into the new East 116th Street station, plans show. The third station is planned for East 106th Street.

In March, in his new budget, President Joe Biden earmarked $497 million for the new subway project, which currently has a $7.7 billion price tag, a hefty $800 million increase from earlier estimates. The balance of the $3.4 billion for the subway is expected to come from grants from the Federal Transit Authority. But the M TA still needs to sign a formal agreement with the agency before it can access the funds, an action that the Extell deal will make easier, transit officials say. ■