Photo: YouTube/Marriott Eastern
NEW YORK (Reuters) – New York City’s chief financial officer said on Tuesday the city stands to lose as much as $345 million because of a past sweetheart deal, uncovered during an audit, with the Marriott Marquis hotelin the heart of Times Square.Marriott in 1998 renegotiated its lease with the city, shortening it by 40 years, reducing the rent, and giving the hotel the option to buy the property for $20 million when the lease expires in 2017.
That would enable the Marriott to buy the Times Square property for about $173 million less than the prime real estate is worth today, said New York City Comptroller John Liu, calling the deal “disgraceful”, “wasteful” and “lopsided.”
The city is also losing nearly $172 million in reduced rent because of the “secret” agreement, struck during former Mayor Rudy Giuliani’s administration, with the city’s economic development agency, Liu said.
“I don’t begrudge the Marriott. They got themselves a great deal,” Liu said at a press conference in front of the hotel.
Instead, Liu, a Democrat and possible mayoral candidate in November, faults the New York City Economic Development Corp.
Liu has audited the EDC before and has long said the agency wields too much power. The agency awards city funds and tax breaks to promote economic development under a nearly $1 billion contract with the city, for which it hasn’t been held accountable, he said.
Liu’s audit “fails to measure the significant impact the Marriott Marquis has had on the Times Square area and New York City overall,” EDC spokesman Patrick Muncie said in a statement.
The hotel has provided more than 1,500 jobs and “hundreds of millions in tax dollars” and “played a critical role in the area’s revitalization,” it said.
Host Hotels and Resorts, owner of the New York Marriott Marquis, said Liu’s office misunderstood the deal and that his audit “is wrong on all counts.”
“The hotel has paid an estimated $1 billion to the City and State in rent, taxes and acquisition costs since the project began, including every penny owed under its ground lease,” the statement said.
Liu’s audit found that the Marriott had not kept all of its financial records for the past six years – an alleged violation of its lease agreement with the city.
Liu called on Mayor Michael Bloomberg’s administration to use that supposed contract breach as an opening to renegotiate the lease and make the terms more favourable to the city.
If not, the city could find a different tenant, Liu said.
The Marriott’s original lease was signed in 1982, but it asked to renegotiate in 1998, Liu said. He accused the EDC of breaching a fiduciary obligation to ensure that the revised lease was in the best interest of city taxpayers.
Liu also said the Marriott owes the city $3.6 million of interest on unpaid rent.
(Reporting by Hilary Russ, editing by Chris Reese)
Copyright (2013) Thomson Reuters. Click for restrictions
Business Insider Emails & Alerts
Site highlights each day to your inbox.