NOTE 7 — PROPERTY AND EQUIPMENT
In 2009 and 2008, there were no sales of any major facilities.
On March 30, 2007, we sold the James A. Farley building in New York City to the Empire State Development Corporation (ESDC), for $190 million and additional proceeds of up to $55 million, contingent upon the achievement of certain development and leasing criteria by the developer of the property. The Postal Service continues to conduct retail and carrier operations at this facility under the terms of an interim lease with a 2009 annual rental of $5.5 million. Once the carrier operations are relocated to other facilities, we will continue to conduct retail and some administrative functions in a smaller portion of the building under a 99-year lease, with a rental fee of $1 for the lease term. The Postal Service has an option to require the building owner to change the legal structure of the building ownership into condominium units, with the Postal Service being given the right to purchase the space subject to the 99-year lease.
We accounted for the transaction under the deposit method under the provisions of ASC 360 (formerly FAS 66, Accounting for Sales of Real Estate). The gain will not be recognized and the asset will not be removed from our accounting records until the lease and other continuing involvement in the building have expired. In conjunction with this sale, from the funds ESDC paid us, $10 million was set aside for an environmental clean-up fund. Our environmental liability is limited to $10 million and is included on our balance sheet under trade payables and other accrued expenses.
In October 2009, we executed an amendment to our March 2007 lease agreement. The amendment reduces our leased space from 883,150 square feet to 213,930 square feet and reduces our annual rental payment to an average of $1.6 million per year through 2014, at which time we will occupy our permanent space under the 99-year lease referenced above.
