ASTM, is an Italian developer which specialized in partnering with governments to build and run major infrastructure, like highways. It is now proposing an ambitious project to redevelop Penn Station and Madison Square Garden without moving or shutting down either one. Since earlier this year, ASTM’s North American construction subsidiary has been aggressively offering their plan as an alternative to a plan being pursued by the three railroads which use Penn Station: Amtrak, which also owns the station; New Jersey Transit; and the MTA–owner of Metro North and the Long Island Railroad. In an exclusive and extensive interiview with Straus News, he fired back at the recent criticism of his plan from a top MTA executive.
Peter Cipriano: It’s like a Pentagon sized building. It's just this vast, vast site and a vast building. So it can be hard, I think, for folks to comprehend the scale of what we're trying to do in the design. People think about a front door. We've got a front door to a house. Where the hell is the front door, it's just so big, it's really big. And we're proud of that, because we really accomplish more for less money than the MTA plan. But it's a monster.
Straus News: Of course they say they don’t believe your numbers and that you just made a lot up? [See interview with head of MTA construction: https://www.chelseanewsny.com/news/mta-s-pres-of-construction-gives-wide-ranging-interview-on-penn-station-rebuild-plans-DX2660050]
Cipriano: Because their stated number is 7.1 [Billion dollars]. And our stated number is $6 billion. So I suppose if you were able to just question our number and say no, no, they’re really 8. That's a good trick. I like that. Anybody could do that as it happens.
Straus News: People seem dazed and confused by the competing claims.
Cipriano: They are. It’s regrettable. From our perspective, people are dazed and confused because there is a lot of misinformation coming from the other side. And so, for example, to the question that you just posed, that's false. Our figure $6 billion is based on that enormous pile of documents behind you. We have done more design and engineering and diligence on this than anybody in 50 years, any outfit, any attempt. This is not just some desk review, such as Vishaan (Chakrabarti, the architect working with ASTM), drawing a pretty picture. He's done that already. This is a real construction exercise. The development exercise. So our $6 billion is a hard number, for this stage of design. And one other point, it's been asserted by the MTA that maybe we're missing a bunch of things like federal requirements. Also totally, totally untrue. The $6 billion is inclusive of the hard costs to construct this. Soft costs like the designers fees, legal fees, and all those things. My fees as a developer, the lawyers, bankers, and then all of the federal requirements are absolutely baked in. I used to work at the FRA (Federal Railroad Administration) in a senior role, and I worked for the Secretary of Transportation. I oversaw the various programs that would be used to build this building. Whether it's our plan, or the MTA’s plan, believe me, I am very well versed in the federal requirements, and they're baked into our numbers. So the MTA, unfortunately, has never actually seen any of the backup documentation to our figure.
Straus News: Why is that?
Cipriano: They haven't wanted to. They've declined repeatedly the opportunity to meet and to kick the tires on this, which we hope changes. That's been their position. Amtrak, not the case. They've been very open and cooperative and a participant. Really a great partner. And the same goes for NJT. I understand the MTA has its own way that it wants to do this and so they haven't been interested in looking at our stuff. They've seen what you've seen in, you know, press articles and things. I could show you behind the $6 Billion [estimate] is a multi, 1000-line-item document. It's very, very high quality work and it IS cheaper. The reason it's cheaper than their approach is really all in design
[There are two dramatic differences between between the ASTM and MTA designs. One is that the MTA replaces a large bridge and structure that connects Madison Square Garden to Seventh Avenue to open space for a continuous mid block train hall between 31 st and 33d streets, where a taxiway, derelict since 9/11, now runs. ASTM leaves the bridge and build’s atriums on either side. The other major difference is that ASTM would buy the Theatre on the Eight Avenue side of Madison Square Garden, demolish it and build a large train hall there.]
Cipriano: By leaving the bridge alone, we've avoided a lot of unnecessary costs. I shouldn't say--unnecessary is a subjective term. We think that the cost here isn’t worth the squeeze. Taking. out the theater is a much less expensive proposition than taking out the bridge. And when you take out the bridge it costs more money than taking out the theater. As you can see, we've day lit the north and south sides of the taxiway. So for another billion and a half I can get you a continuous glass atrium here. But Jim Dolan [owner of Madison Square Garden] still got to have. a plank through there, under the glass atrium, which ipso facto means that you're blocking the day light from the actual train station. It's just an illogical choice. And this complicated mess of a site is at the end of the day, a function of choices. You know, it's like a jigsaw puzzle. Do I getrid of this? Do I get rid of this? Do I get rid of this? Do I get rid of this? Do I get rid of it all? infinite resources, infinite opportunities. But we all have limited resources. So we're trying to apply them in the most impactful way. This [The MTA plan] is not the most impactful way. So that gets you to $7.1 billion. And then I point out that the opposite is actually true. So the $7.1 billion that the MTA cites? We believe it's actually much more than that. Because, as they've they've been very public, they are making certain assumptions about financial contributions from The Garden. They're looking for the bridge to sort of be contributed. And then I think demolished and rebuilt. at the Gardens expense. And they're looking for some other things like the plaza corners [on Eighth Avenue], and stuff like that. So if you consider the possibility that they will fail to extract all of those things from MSG, and you'd have to add all those costs to their $7.1 billion.
[ASTM says that as part of its plan it has negotiated to pay Madison Square Garden $450 million for the theatre and other property, while the MTA says the Garden should contribute property it needs for the renovation of Penn station and pay some costs for reconstruction that directly benefits The Garden, like improving truck access.]
Straus News: So you are saying that $450 million cost exists either way and just is not being counted in the MTA plan?
Cipriano: Correct. So there in lies a fundamental disagreement. We all have the chance to disagree at the moment. I think there'll be clarity once the ULURP process is concluded.
[under the city’s Uniform Land Use Review Process Madison Square Garden is seeking a new permit to operate its 20,000 seat arena. The old permit expired last month. The MTA has asked the City Council, before it completes action later this month, to support the concessions it is seeking from The Garden.]
Cipriano: It's been the MTA’s view from the beginning that they could extract concessions from the Garden, in the manner that the city extracts, and the MTA actually extracts, concessions, or agreements, cooperation, from developers, like one Vanderbilt, that built right into this building. Give me new escalators [to the Subways]. That's great policy. We all agree with that. It makes sense. Vertical developers benefit from the transit system. New stuff’s coming out of the ground. There should be good cooperation with MTA. I think Jamie [Torres Springer] and Chairman [Janno] Lieber, have done an outstanding job setting that standard. This site, though, it's not analogous to that. MSG is not trying to do a greenfield development there. It's just a renewal of their permit. That's one. And two, if you look at the scale of considerations that the. MTA is seeking here, it's vastly greater than anything they've sought from a new office tower. I mean, we're talking one to $2 billion in contribution. It's pretty unprecedented. We think it's legally specious. That's always been our view. And I'm talking like from before I even met the folks at MSG. It's always been my observation. That's not going to work. You're not going to do that. You're going to blow an opportunity and will end up building nothing. Right now, that's just a disagreement on approach. Our view is that in order to build things in New York, if youwant someone's property, you have to pay them for it. That's just the way it is. And by the way, if the MTA goes to a judge, of course, I'm sure they'll win condemnation proceedings. And they'll get what they need for the improvement of the civic space. But the judge is going to tell them that they have to pay MSG fair market value. So you end up at the same place. I'm just not aware of any seizures of private property for public use. I think if that existed, then the city would probably be doing it all the time. We have a lot of needs. So that's the disagreement. So yes, it's $450 million, not $500 million. And we get the theater, we get all the property on Eighth Avenue. And what we need at the taxiway.
Straus News: and you don't take the MTA view that they, the Garden, should actually pay for some of this work like, like the truck access?
Cipriano: What we've done right now is priced everything that we do, as I explained to you. The $6 billion. We've priced every aspect of our projects, including the loading dock improvements, which I think people find exciting. And we've built a financial model that assumes, conservatively, that all of those costs are part of the project, if you will. And that's how you get. to that $250 million availability payment, you've heard me talk about.
[The availability payment is the fee ASTM would collect for fifty years after the project is complete to maintain and operate the station and repay the borrowing done to pay for the construction.]
Cipriano: That being said, we we can identify all of the touch points in our project that would create a meaningful direct benefit to MSG. And I can see a pathway to MSG contributing all or part of the cost of those additives, and it will actually bring the effective project cost down. Because then you're introducing MSG’s contribution.
We just haven't done that yet. Because you really need to do that productively with them.
And I feel that it ought to be done with not just me doing it with MSG. We [The railroads and MSG] should all be in the room together doing it. And it's something that's not best done in the newspapers. So if you think about it that way, our cost comes down.... So yes, of course there's MSG money in this. I think I know where the money ends up landing. I don't know the scale of it yet. I know that what the MTA wants is way unrealistic. But yeah, MSG will definitely contribute something here in the fullness of time and it'll be fair work for everybody.
Straus News: How did ASTM first land on the idea that it should pursue a project around Penn Station renovation?
Cipriano: So it was just totally, you know, out of our imaginations, I guess. We’ve become. known as a global infrastructure firm, based out of Italy, but here in New York, we're very much a New York firm. ASTM acquired Halmar, this civil contractor, which is as New York a company as it gets. Actually, I think that Halmar is the MTA’s biggest contractor....So we're a really New York team. And through the acquisition from ASTM, getting into this p3 space, right? If you think about p3, around most of the country, it's been the toll road model. There's been the airports, like LaGuardia. So we were just thinking, you know, what is a natural p3 project? Where in our region could we create a p3 that we think really would add value to everyone in a big, big way? Because there is always this fair question about is the p3 worth the extra cost, the return on equity and all this stuff? Is there a value for money? Are you getting something and it just felt to us like a natural fit. I will add, I've been thinking about the station for a long time, as many on our team have. I wrote my master's thesis on the station. We're all Penn Station obsessives. And the thing about this building is it's one of the biggest, most intractable infrastructure problems in the country.
In the country, I'd say, certainly in New York City, but really in the country. It's wildly expensive to resolve. You've got the country's most active train station, under the country's most active arena, with an office building, and a theater all sandwiched on top of each other with interconnected systems. And whatever you deign to do here to make it better, you have to keep all these things open and functioning at the same time. So it's open heart surgery on a live, awake, patient. It's super, super risky. Risk is not a good thing for the public sector when it comes to construction. And moreover, jurisdictionally, where would you even apply the risk of this site because Amtrak owns it. But MTA and NJT are two major tenants who actually accoun for a majority of the ridership. And then you have the political equation, which is that even though Amtrak owns it, New York has a sort of unofficial ownership over it as do New York Governors, which is understandable. So you throw all this in, and you say, and how do you figure out who's even in charge, even if you wanted to make this new, and money was no object who the heck's in charge? And I think the answer to that question is, well, it's clearly it's tough to decipher. And it's the very reason why the station has been in a derelict state for 50 years. It's because of this confusion....That's where the station is. So the P3, one, it derisks. It takes takes all this massive lump of risk and moves it off the public sector. Puts it on private a entity. Two, it solves the sort of finger-pointing problem. The who's in charge problem...One guy is in charge. I take the risk from you. But if I'm going to take the risk from you, you’ve got to let me call the shots. That's right, standard p3 model. And then, I think lastly, on this unique site, you've got the three public entities down below that I just talked about. But then you also have two publicly traded companies [MSG and Vornado Realty Trust, owner of 2 Penn Plaza] up above and you have to deal with them to rebuild this building. You have to deal with them, meaning, you know, make them go away. Buy them out. Resolve, nitpicky little construction issues. Whatever ‘deal with them’ means in your version, you have to deal with them. And the public sector isn't so great at that. That's a very clumsy interaction for three transit agencies to have to co manage, very clumsy. ... by bringing a developer in, you streamline all that. And so our view was, all those boxes, check, feels like a great p3. But we knew that no one would believe us if we just said it.
We're going to have to demonstrate. Really showing the world. So I'm not just telling you, or claiming we can do this, we're trying to show we really can do this. We really have worked these things out with Madison Square Garden, for example. Whereas the railroads have not worked anything out with Madison Square Garden. So that was how we came to the p3.
Straus News: When did you begin to talk to Madison Square Garden?
Cipriano: 2021.? It was a cold call effectively. I just I came out of my last job, joined ASTM and knocked on the door of Madison Square Garden and said, ‘Hey, would you sell us the theater if we came up with a plan to redo Penn Station?’ They thought I was crazy in the beginning. Absolutely. The first step was building the critical business to business relationship between ASTM and an MSG because you can't do anything here without their cooperation, some kind of cooperation. In order to get an above grade station. If you're happy with it being a basement, then you need them less. Then it's just a question of what am I doing down down there. But if you want to do anything up here, you need these guys. So 2021 was basically getting to knowthem. Them learning about our firm and what we do and what our intentions were here. And what came of that was an appraisal of the theater an understanding on this $450 million what it would get. Understanding how their building works. And what everything fromwhat we would have to accommodate through design. But also through the period of construction. What does it mean to keep the arena active during this construction project? That's a big undertaking. And we knew we had to phase that in and we had to price that in. You do pay a little more to do that. It's cheaper to build things in an empty field than it is underneath a busy arena.
Straus News: this has created the odd situation where ASTM has negotiated a deal, including price, with Madison Square Garden while the MTA by its own description is barely talking to MSG?
Cipriano: Our view is that that is a function of the MTA choices. The approach that the MTA has taken here is an adversarial one that, ‘you will give us this stuff.’ ...That creates an interesting dynamic. Whereas I showed up and said, ‘I want to improve the station, I’m willingto use private capital, to buy the property, can we make that work?’ Different outcome.