Penn Central Sells Off

One year after the Penn Central Transportation Co. wheezed into bankruptcy, its court-appointed trustees have put up for sale its blue-ribbon real estate holdings along a ten-block stretch of Madison, Vanderbilt, Park and Lexington avenues in midtown Manhattan. Up for bids is the land under 22 buildings, including the Waldorf-Astoria, the Pan Am Building and the corporate headquarters of ITT, Union Carbide, Manufacturers Hanover Trust Co., Bankers Trust Co. and the Chemical Bank. These companies have leased the buildings, in some cases well into the 21st century, but eventually the buyers of the land will get control of the buildings too.

Richest Deal. On paper, the offering had the potential of becoming the richest real estate deal since Railroad President lames Gadsden bought part of Arizona and New Mexico from Mexico's President Santa Anna. Penn Central spokesmen suggested that they might collect as much as $1.2 billion, but others were doubtful. Says one top Manhattan developer: "Some of the parcels are good income producers and should be snapped up by institutional investors. Others have value only to those who are prepared to spend millions to buy out existing leases and construct new buildings."

Beyond that looms the question of what the Penn Central can do with any money that it collects. The properties are burdened with mortgages totaling $435 million. Not only the mortgage lenders but also the Penn Central's other creditors will clamor for repayment, and the tangles are sure to keep platoons of lawyers well fed for years.

Not the least puzzling aspect of the deal was its very abruptness. As recently as last March, the Penn Central trustees told the U.S. Department of Transportation that the bankrupt company would benefit more from the $21.3 million in annual rental income that the parcels produce than from selling the land. Only two weeks ago, in the course of announcing the transfer of a subsidiary named Pennco to a consortium of 53 banks in return for cancellation of a $300 million debt, the trustees reaffirmed their opposition to the sale of the Manhattan properties.

More Aid. The Penn Central, however, has been under pressure from Congress to divest itself of its nontrans-portation assets. In fact, divestiture was a condition that the Government attached to a promise to guarantee $125 million in loans last winter. Now it seems that unless higher freight rates and more stringent work rules are approved this summer by the Interstate Commerce Commission, the company will need more such aid to continue operating. Congress might not grant the aid if the company still clings to its fancy real estate in midtown Manhattan.

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