The New York City Council’s vote Wednesday that Madison Square Garden must within 10 years cease operating at its current site above Penn Station, its home for 45 years, is not good news for an arena that is just completing a nearly $1 billion transformation, but also does not mean that MSG must vacate the premises by 2023. 

As reported by the New York Times yesterday, the Council voted 47 to 1 to extend the Garden’s special operating permit for merely a decade, not forever, as the owners of the Garden had sought.  

Madison Square Garden's Lease at Penn Station Limited To 10 Years By City Council

Still, the vote is hardly an eviction notice, but rather the council voted on a zoning permit for MSG to operate an arena that has 2,500 seats or more (Madison Square Garden’s capacity is about 20,000, adjacent Theater at Madison Square Garden holds about 5,600). MSG owns the building and the land, a source familiar with the situation tells, so if the arena did not exist at its current site, MSG would still have the right as the land owners to build an office building and/or run a business there with no special permit requirement. 

Beyond that, the Council’s vote is not set in stone. MSG, Federal, state, and city government, railroad entities, and other parties would all have to come to terms before The Garden would have to move to its fifth home since opening in 1879. Ironically, moving the Garden had been contemplated as an option by owners for at least a decade, with MSG ultimately opting to renovate its current home rather than move to a new location. If the Garden indeed ceases operating as an arena at its current site 10 years from now, the return on investment (ROI) on the transformation would be a tough nut to crack at about $100 million per year. 

The Council’s vote takes a bit of the bloom off the rose for the World’s Most Famous Arena, which will complete its massive three-year renovation project by the 2013-14 NBA and NHL seasons. Much of MSG's transformation focuses on ways to drive revenue while improving the fan experience. The renovated Garden project includes several major brand partners in what typically are long-term partnerships in the arena business, with 20-year deals not being uncommon. 

JP Morgan Chase is the venue's first "marquee" partner, and Delta Air Lines, Coca-Cola and Anheuser-Busch have signed on as "signature" partners. For those corporate partners, there are 58 Madison suites that are 40% larger and half the distance to the events, as well as seats in the arena bowl, 20 event-level suites that offer a lounge/entertaining atmosphere, and 18 remodeled ninth-level Garden suites. There will also be several new all-inclusive club spaces: the 1879 Club presented by JPMorgan, the Delta Sky360° Club on the event level and the Madison Club on the seventh floor.

The Garden declined to comment on Wednesday’s development, but provided the following statement: “Madison Square Garden has operated at its current site for generations, and has been proud to bring New Yorkers some of the greatest and most iconic moments in sports and entertainment.   We now look forward to the reopening of the arena in fall 2013, following the completion of our historic three-year, nearly billion dollar transformation, which will ensure our future is as bright as our celebrated past.”