The owner of New York City's Madison Square Garden Arena could get paid $500 million through an Italian infrastructure company's new proposal for rebuilding the Penn Station railway hub lying beneath it and creating a new main hall for the cramped facility.
The development company, ASTM, announced a plan that would involve paying the money to Madison Square Garden owner James Dolan to purchase the Hulu Theater, which is next to the arena, so that it can be demolished to open up space in the cramped Penn Station, a gateway into Manhattan that handles more passengers daily than New York City's three airports combined, reports Financial Times.
ASTM's plan calls for creating a new main hall for Penn Station, including a 55-foot-tall ceiling at the facility, which has been a problem for the city since the 1960s, when the original facility was torn down.
The above-ground part of Penn Station was torn down in the years between 1963-1966 to make room for Madison Square Garden. When it first opened in 1910, the hub was heralded for its architectural features, but in later years, the structure became dilapidated because of bad alterations and poor maintenance, according to the New York Preservation Archive Project.
However, the proposed payment to Dolan is controversial, as he has come under fire in recent years, most recently by angering New Yorkers when his company, MSG Entertainment, was using facial recognition technology to ban attorneys and staffers involved in lawsuits against him from entering the Garden and other properties he owns.
Overall, ASTM says its plan will cost $6 billion, coming in at $1 billion less than another design presented this week by New York Governor Kathy Hochul, which would involve leaving the Hulu Theater in place.
ASTM North America Chief Executive Peter Cipriano has denied suggestions that paying Dolan for the Hulu Theater is a "giveaway," as MSG Entertainment will also be paying for contributions to the plans for Penn Station, including exterior cladding going on its 1960s vintage arena.
"It’s private property in New York City," Cipriano said. "The only path forward for this project is to acquire control of some of that property."
Patrick Foye, a former head of New York’s Metropolitan Transportation Authority (MTA) who is now with ASTM, added that the $500 million for Dolan came after a period of negotiations.
MSG Entertainment declined to comment on the payment, saying that the decision on which plan goes forward is "not ours to make."
"We look forward to collaborating with all key stakeholders on improving Penn Station," the company said.
The MTA, which is maintaining a role in the Penn Station project, said it is skeptical about the need to pay public money for Dolan to shutter the Hulu Theater, with an official to the project saying the authority is also in doubt about the cost estimates from ASTM.
Additionally, the official complained that the private company is trying to force its way into the project by offering an "unsolicited proposal" after a preliminary design contract for it has been awarded.
The MTA favors the design backed by Hochul, which would place the main train hall close to Seventh Avenue and eliminate the need to remove the Hulu Theater.
The overhaul efforts came into a new phase after Hochul acknowledged that it's not feasible to depend on revenue coming from up to 10 new office towers near the site for funding.
Both ASTM's plan and the one backed by Hochul will tap into state and federal funding, including money from President Joe Biden's Inflation Reduction Act.
Under the ASTM plan, a public-private partnership would be formed, allowing the Italian company to have a 50-year contract to operate Penn Station while making a $1 billion equity investment.
ASTM would also seek $250 million in annual payments that would be split by Amtrak, which owns the station, and its two main tenants, the Long Island Rail Road and New Jersey Transit.
ASTM and its partners, including architect Vishaan Chakrabarti, the head of city planning under former Mayor Michael Bloomberg, say they want an open proposal competition.
Chakrabarti and other architects have drafted a more dramatic plan that would remove Madison Square Garden to allow Penn Station's corridors to be open to natural light and restore its former grandeur. However, many are saying that is unrealistic after Dolan has spent $1 billion to renovate the Garden.