DiNapoli: MTA Not Maximizing Potential
Of Real Estate Portfolio
Audit Finds Lax Record-Keeping, Hundreds of Vacancies at MTA-owned Properties
The Metropolitan Transportation Agency (MTA) is missing significant opportunities to save money and generate greater revenues through its vast real estate portfolio, according to an audit New York State Comptroller Thomas P. DiNapoli released today. DiNapoli’s audit found the MTA routinely spends more than $25 million a year on rent without assessing whether some of its vacant properties can meet its office space needs. The MTA also did not have a strategic plan for marketing its real estate holdings, and had not met the Public Authorities Law reporting requirements to publish a list of the holdings until June 2010.
“Millions of New Yorkers rely on the MTA,” DiNapoli said. “Those New Yorkers can’t afford to pay more while the MTA ignores potential cost savings. But that’s exactly what has happened here.
“Before making drastic service cuts and talking about fare hikes, the MTA has to maximize the value of its real estate holdings by advertising their availability and ensuring that it’s receiving market-rate rents for prime properties. The MTA should also publish a full list of its real estate holdings as required by law and let New Yorkers know how it’s going to capitalize on these assets.”
The audit, which covered the period between January 1, 2005 and August 31, 2009, is the latest DiNapoli effort to identify cost-saving opportunities for the MTA, which this week implemented a series of service cuts that are disruptive to the commuting public.
Auditors found that the MTA generates revenues of $199 million a year from real estate-related activity but has the potential to earn much more. The agency owned 600 vacant rental units as of March 2009, including six large retail spaces in the 42nd Street/Sixth Avenue subway station, but only three vacancies had been advertised on the MTA’s web site. One property had remained unoccupied for 14 years. In addition, current tenants in MTA-owned properties were not charged interest or late fees on overdue rent or charged increased rents when the lease expired.
The MTA had also lost $1.7 million in rental revenue, in addition to paying a $625,000 penalty to a tenant because the MTA could not meet certain provisions in the lease. There was no evidence that the MTA conducted a study assessing its ability to meet the lease provisions before accepting the request for the provision. Auditors also found that the MTA could improve the accuracy and completeness of its database for tracking real estate holdings.
Additionally, DiNapoli’s audit found:
- Non-government tenants owed the MTA a total of $9 million in rent during the audit period;
- The MTA did not effectively market the space above certain properties (known as ‘air rights’), despite estimates that the rights could generate more than $12 million in revenue;
- Six large rental units in the 42nd Street/Sixth Avenue subway station at Bryant Park had been vacant since 2004;
- The MTA does not ensure its rents are competitive with market values and does not charge interest and late fees when appropriate;
- Two of the agency’s buildings—one vacant and one nearly-vacant—cost more than $6 million to maintain; and
- More than one-quarter of the MTA’s occupied rental units sampled were not rented through the required competitive rental processes.
DiNapoli recommends that the MTA:
- Create a single MTA real estate portfolio management system that comprises information from all five existing databases;
- Develop a strategic marketing plan to properly advertise its available spaces; and
- Improve rent collection by charging interest and late fees.
The MTA called DiNapoli’s audit a timely one, and agreed that the agency must explore new ways to generate revenue through its real estate holdings.
Click here to download a copy of the full audit, which includes the MTA’s detailed response.