President Bush in his most recent State of the Union address said that he wanted to support the development of an "ownership society" where every American stands to benefit from the pride of owning something, whether it be a strong investment portfolio or a ranch with lots of brush to clear. In New York, D.C., and elsewhere, this ownership society includes the giant real estate conglomerates that hold a great deal of power in how our cities are shaped. If only we were all so lucky (or unlucky perhaps) to play Monopoly with real buildings ...

Comparing two train stations -- Pennsylvania Station in Midtown Manhattan and Union Station at the foot of Capitol Hill -- it is evident that the commercial real estate game can be quite lively. But before we dive into this, we should key you in to some inside information about the future of New York's deservedly maligned passenger rail gateway. What does Penn Station have to do with the nation's capital? Well, there isn't any direct impact on D.C. to speak of, but there are some interesting D.C. connections, which illustrates the complexity of the world of property moguls.

So on to the news! According to an informed DCist source, Vornado Realty Trust looks poised to clinch one of the hottest real estate development contracts in recent New York City history: the future Moynihan train station at the Farley Post Office on Eighth Avenue between 31st and 33rd streets, across the street from Madison Square Garden and Penn Station. Of course, there are still many what ifs out there.

Our Big Apple source, who is familiar with the discussions, says Vornado will probably be selected for the daunting task of trying to honor the legacy of the Empire State's late distinguished senator, Daniel Patrick Moynihan (pictured at left). Looking at the real estate game there, that makes sense.

A Somewhat Brief Summary: The grand old Pennsylvania Station, designed by McKim Mead and White was torn down in the 1960s and replaced with bland Cold War comfort architecture, i.e. Madison Square Garden and beneath it, the new Penn Station. Moynihan, throughout his career in public service, made architecture and urban planning one of his intellectual pursuits, driving and coordinating political support for the redevelopment of Union Station and Pennsylvania Avenue, among other projects in New York and Washington. Lamenting the loss of the old grand Penn Station, Moynihan set his eyes on redeveloping the historic Farley Post Office as a new showcase train terminal for New York City. With the political will now well-established, various private-public development agencies and real estate interests, along with the city of New York, have been analyzing different proposals as to how to make Moynihan's vision a reality. But the realities of competing property interests and the transportation realities themselves (Amtrak, with free rent at Penn Station is staying put ... Sorry folks! ... but New Jersey Transit would move into Moynihan), especially in cramped Manhattan, has made this process especially difficult.

The Players:
Vornado Realty Trust with The Related Companies -- A self-described "fully integrated real estate company," Vornado owns and/or manages about 87 million square feet of real estate, mainly in New York and the D.C.-area, but also Chicago's Merchandise Mart. Vornado's Charles E. Smith Commercial Realty division in the D.C. area "owns and manages 13.9 million square feet of office properties and manages an additional 8 million square feet of office and commercial properties for other owners." This includes Crystal City (at right, in this image from Charles E. Smith's website), buildings in downtown Washington (including the Transportation Department headquarters), Rosslyn, Courthouse, Tysons Corner and Bethesda, among other suburban locations. (Charles E. Smith Residential, a giant in D.C.-area apartment and condo development and management, is part of Archstone-Smith.)

For the Moynihan project, Vornado has partnered with The Related Companies, which was behind the development of the Time Warner Center on Columbus Circle in Manhattan.

Boston Properties -- The Boston-based developer has been considered the top choice for its transportation design, but its experience with transit-retail components seems to be a secondary concern, which could be a problem. In recent D.C. news with the property owner, Boston Properties' Washington headquarters recently moved into 901 New York Ave. NW, adjacent to Mount Vernon Square and the new Convention Center and across the street from whatever will fill the rubble-strewn expanse at where the old Convention Center used to be. It also holds 1330 Connecticut Ave. and 1333 New Hampshire Ave. near Dupont Circle, Metropolitan Square across from the Treasury Department, Market Square North, Capital Gallery near L'Enfant Plaza and many other suburban holdings.

Jones Lang LaSalle, with Tishman Speyer -- One of the world's largest real estate holders, Jones Lang LaSalle's flagship property in D.C. is Union Station with its flourishing retail center. JLL's redevelopment of the once-deteriorating Union Station -- with its partners Williams Jackson Ewing and Benjamin Thompson Associates -- has been regarded as perhaps the best example of a public-private partnership in the restoration of a historic public structure. Additionally, JLL steered the restoration and retail expansion of Grand Central Terminal in Manhattan, another highly regarded transit-retail case study. In terms of D.C. office space, JLL scored some top leasing services contracts last fall for 80 M St. SE (adjacent to the proposed baseball stadium in Near Southeast) and 1800 K St. NW (in the heart of Gucci Gultch). Additionally, JLL has the retail complex at 2000 Pennsylvania Ave. NW in its holdings. (In an odd side note, in the early 20th century, this DCist's family grew up in one of the rowhouses that forms the 2000 Pennsylvania complex. But all that remains is Kinkead's restaurant and this kitschy marketing rendering of Grandpa Grass' boyhood home at right.)

For the Moynihan Station proposal, Jones Lang LaSalle partnered with Tishman Speyer, a firm involved in D.C.'s One Metro Center.

So Back Up to New York. If you couldn't have guessed, train stations themselves don't actually turn a profit. Like movie theatres, the big profits come from the concessions, making transit-retail very important for the success of any transit hub. Union Station in D.C. -- where the property interests are controlled by JLL -- serves as a national model for successful transit-related developments. That food court down in the basement (currently under renovation), along with the restaurants and shops upstairs bring in a lot of cash, taking in $685 per square foot. JLL probably has countless school groups from across the nation (drawn to the free "Yummy! Yummy!" Bourbon chicken samples) to thank for this.

From what we hear, while the transit-retail proposal from Jones Lang LaSalle-Tishman Speyer for Moynihan Station is perhaps the strongest vision for what could be (which would give Jones Lang LaSalle a strong commercial hold at either end of the Washington-New York rail corridor), it lacks what Vornado has plenty of already: sought-after real estate around Penn Station.

Vornado says it "is committed to long-term asset enhancement" at Penn Station. And that seems logical. With the Jets stadium and associated development slated for the nearby Hudson Yards, Vornado has significant vested interests in its current holdings in western Midtown. Trying to keep competitors from gaining a foothold near Penn Station is in Vornado's best interest. And the future returns on Vornado's investment could be enormous. With enhanced transportation connections to New Jersey (through the Access to the Region's Core proposal) planners envision increased commercial development around the future Moynihan station as a Manhattan hub for increased numbers of New Jersey-based commuters. This of course is a very expensive proposal, so the politics with this are complicated.

While the development authorities in the Moynihan deal seem to be concerned with signing a deal that will be the most financially stable and easy-to-execute, once the plan goes public, others may become concerned whether Vornado's plan for Moynihan station is really in the interest of the late senator's vision for the proposed transit hub. And it seems that Vornado has the option to do very little with the Penn Station yards themselves. Under New York City zoning regulations, 1 million square feet of air rights above the rail yards could be simply transferred to Vornado's adjacent properties, where new skyscapers could rise.

There is still a probability that a hybrid plan could emerge, working in elements from the Vornado, Boston Properties and Jones Lang LaSalle proposals, but that seemsit would be unlikely now considering the strange commercial and politial bedfellows that would result.

So What About Union Station? We've already noted the success of D.C.'s Union Station as transportation and commercial hub. With Red Line access and connections to Virginia's and Maryland's commuter rail networks, Union Station serves as a regional transportation hub and also as a locus for commercial real estate development in the District. With height limits in place across the city, buildings can't rise too tall, so Washington's central business district must spread out.

And Union Station, much like the future Moynihan-Penn Station complex, is likely to attract more and more development, whether it is ready or not to handle it. While the money and political will is currently pretty sparse for transportation improvements to better connect the region's core to its suburbs and exurbs, transportation planners have said improvements will have to be made eventually.

Much like the New York-New Jersey proposal for new trans-Hudson train tunnels (Access to the Region's Core) to increase capacity in and out of New York City, the ever-growing Washington metropolitan area may need to refocus its efforts on improving commuter rail to Baltimore and far-out places like West Virginia, where many D.C. commuters are moving to in search of cheaper housing prices. With the prospect of more and more people going in and out of Union Station, the real estate that surrounds it should become increasingly valuable. Of course, then again, people seem content to sit in traffic than sit on a train. But unless the U.S. government moves out of Washington, people will continue to flood the city in the years and decades to come. And they need places to work and shop before they head back out to their suburban and exurban homes.

Real estate interests know this, and there's been a lot of activity around Union Station, but not at the level of what could come to the Moynihan-Penn Station development. The Securities and Exchange Commission is in the process of settling in its new headquarters at Station Place next to Union Station. Republic Square, rising on Massachusetts Avenue in front of the giant Government Printing Office (which will likely be converted to private commercial use in the coming years), is the latest large-scale building rising in the North Capitol Street corridor. Couple that with development rising around the New York Avenue-Florida Avenue-Gallaudet University metorail station and residential and commercial investment in the H Street, North Capitol Street and Florida Avenue corridors, and the commercial district around Union Station will continue to be inundated with people.

And what about the Union Station rail yards themselves? One project, Burnham Place, could include 2 million square feet using air rights above the Union Station yards north of H Street. While there has been talk for the past few years of selling the air rights above the yards, which strech well north of H Street, that isn't necessarily the best move at the current time. Our source says that just like with the Penn Station yards, excavating an active rail yard is complicated and in some cases cost-prohibitive. And with parcels of land available in Southwest, near Southeast and in the New York Avenue/North Capitol Street corridors, it'd make better sense to snatch up those parcels first, or so says the conventional wisdom.

While New York as a city is considerably different than D.C., it seems like through transit real estate, we're all facing, and will continue to face, similar development dynamics. Let the Monopoly game continue ...