All data from NYC OpenData | Highlighted properties are effecetd by the Midtown East Rezoning. Grand Central Station and One Grand Central Place are in red.

Anthony Malkin and Andrew Penson are tied together by two of the city’s most iconic pieces of real estate — The Empire State Building and Grand Central Station.

When Malkin Holdings rolled the Empire State Building into a REIT earlier this year, Penson and a few of the other 3,000 shareholders tried to holdout. Their lawsuit was evenutually dismissed, and the transition went through with the approval of 80 percent of the building’s ownership.

The two are at odds again, this time over the city’s East Midtown rezoning plan. Both want it to happen, but both want it under their own terms.

Penson’s company, Midtown Trackage, controls Grand Central Station and the 1.3 million square feet of air rights above it. His foil, Malkin, owns the building across the street — One Grand Central Place, a 55-story building constructed in 1929.

Malkin wants to redevelop and will soon be in the market for air rights. He’s exactly the type of builder the city hopes to help with its planned rezoning, which aims to rejuvenate the area’s aging office stock.

“It will never be redeveloped under current zoning law,” said Malkin at a City Council land use hearing Oct. 22. His building exceeds current zoning limitations, meaning even a renovation would have to be approved through ULURP. “Its design will not satisfy larger, higher density tenants which otherwise would be attracted to its superb location,” Malkin said.

He supports Midtown East as it’s currently proposed, which includes an option for developers to purchase air rights directly from the city at a set cost of $250 per square foot. The money raised by these sales would be used to help improve the transportation infrastructure of the area.

Penson says this price is far too low.

“The city is leaving a tremendous amount of money on the table for the benefit of a couple of developers,” Penson said to the City Council. He’s in a unique position since his company isn’t looking to build. All he wants to do is unload the air rights he’s sitting on.

“Penson is an anomaly,” said Lawrence Longua, a professor at NYU’s Schack Institute of Real Estate. “Most of the interests involved are developers.”

Penson suggests that air rights in the district could be valued at a rate higher than the land value. “Air rights create the top of the building,” he said. “The most valuable part of the building.” At the hearing, he didn’t mention that his company will be competing with the city to sell the Grand Central air rights. The higher the city valuation, the more Penson’s company stands to make.

“Whether he’s being altruistic or not, I don’t know,” said Longua. “But it happens to benefit him.”

The city derived its rate from a study by Landauer Valuation, a subsidiary of Newmark Grubb Knight Frank. Malkin Holdings is a client of that realtor. The study concludes that air rights in the Midtown East district should be set at about 60 percent of the average land value, or $250 per square foot.

Midtown Trackage commissioned studies by two different real estate consultants, Jerome Haims Realty and HR&A Advisors. Both are longstanding reputable firms, the latter is run by Carl Weisbrod, the former president of the city’s EDC and a member of de Blasio’s new transition team. Neither study recommends specific prices, but both suggest the value should be at or near that of the underlying land — more than $400 per square foot in most cases.

Other observers agree that the city valuation is too low, but think the price shouldn’t be set at all. The market should dictate it.

“Why would you put a cap on it?” Longua asked. “If I’m selling, I’m going to try and get the highest possible price.”

Penson needs East Midtown to go through. His company hasn’t sold any of its air right stash, because development in the neighborhood has been too onerous, and zoning restrictions prohibit the transfer of rights beyond immediate lots. These are some of the same reasons the area has seen so little development in recent years, and are among the issues the city’s planned rezoning tries to fix.

But the city-sold zoning credits create competition for Penson, pushing down the price he hopes to charge builders like Malkin.

At the moment, it looks like the City Council may suspend the dispute until next year, with Councilman Garodnick raising a number of objections to the current plan, including the $250 valuation rate. The Council must vote on the proposal before Nov. 19. If it is shot down, the process will likely begin over again next year, after de Blasio and the new Council take office.

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