This Thursday’s meeting of the Manhattan Borough Board marks another step in the closely watched public review process that will determine the future of East Midtown. In January, the Department of City Planning certified the Greater East Midtown Rezoning proposal and the final step will conclude later this year at the City Council.
Under the leadership of City Councilmember Daniel Garodnick and Manhattan Borough President Gale Brewer, REBNY served on the East Midtown Steering Committee with a distinguished group of civic and community leaders. This group worked together to craft a rezoning framework that will encourage new development to fund much needed transit infrastructure and public realm improvements. The plan also provides our treasured East Midtown landmarks with an opportunity to transfer their unused development rights to fund their ongoing maintenance, operations, and missions. This framework helped shape the rezoning proposal that was certified by City Planning this year.
While we are generally supportive of the City’s proposal, we have concerns whether the plan will generate sufficient development to fund much needed public improvements—like mass transit upgrades—and result in the creation of a vibrant 21st century global office district. We believe the plan is encumbered with several regulations that will inhibit development that will generate the revenue for public improvements.
To start, the built conditions and market of East Midtown is an environment that is challenging and costly for new development. As a mature market area with virtually no vacant sites, new development opportunities will occur slowly over time and only when the leasing circumstances in individual buildings and market conditions in the area combine to make new development economically feasible. Therefore, we think it is important to highlight a few fundamental issues that need to be addressed to ensure that the rezoning achieves its stated goals.
The City has introduced a floor price for the sale of landmark development rights. We believe that the floor price—both as a concept and the stated appraised value—will discourage transactions and undermine the stated planning goals of the rezoning.
The proposed floor price of $393 per square foot seriously overstates the value of air rights in East Midtown. The air rights transactions that the City analyzed in their market study did not adequately account for the significant constraints on residential and hotel development in the plan. Since these have much higher values than air rights used solely for office use, this information taints the valuation process and the results of the analysis.
The concept of the floor price would result in a minimum $78 per square foot contribution to the City. While the City has stated that they wish to collect a twenty percent contribution based on the sales price, the inaccurate and inflated floor price of $78 per square foot will result in a much higher percentage based on actual market value. This will discourage air rights owners from selling with such a large percentage of the sales proceeds going to the improvement fund, and will result in less money for transit infrastructure and public realm improvements.
We have urged the City to remove the concept of the floor price and allow for the market to determine the price and set the contribution at a rate lower than 20 percent.
Another fundamental issue that threatens the viability of the rezoning proposal is the constraints on what constitutes a qualifying site for new development. While we support the goal of creating new Class A commercial office space on the avenues, it is important to note that as-of-right development on midblock sites or the enlargement of existing buildings would accomplish many of the goals of this rezoning at a lower cost and a more rapid pace. Such projects can offer equally appealing development opportunities as new construction on avenues and have lower opportunity costs. New development on the midblock or enlargement would result in more rapid development, revitalize East Midtown, and would generate the funds needed for public realm improvements sooner.
It is imperative that the community and elected officials retain all of the properties within the proposed boundaries, including the east side of Third Avenue. Third Avenue has lower land costs than Park and Madison Avenues and provides some glimmer of hope that new avenue development, as envisioned in the plan, can occur.
There is simply no planning rationale for excluding the east side of Third Avenue. Not only is it an established commercial corridor, but its transit access makes it one of the most well-connected corridors in New York City.
REBNY welcomes and supports the efforts to revitalize our city’s most important office district. This rezoning is needed to invigorate development in East Midtown, while also funding much needed public infrastructure. We believe the aforementioned changes will strengthen the proposal and will help keep New York City on competitive footing with other world cities.
In other REBNY news:
At our Residential Sales Agent Boot Camp Seminar on Thursday, March 7th, 9:00 to 11:00 a.m. in the REBNY Mendik Education Center (570 Lexington Avenue, Lower Level), Jeff Appel, Antonio del Rosario of Town Flatiron LLC, and Renee Fishman of Halstead Property, LLC will share their expert insight on third party internet leads and how they impact the residential brokerage business. Register online at rebny.com.
Jonathan J. Miller, CRE, CRP, of Miller Samuel Inc., will give the keynote address at our 19th Annual Residential Management Leadership Breakfast on Thursday, March 9th from 8:00 to 10:00 a.m. at the New York Hilton Midtown (1335 Avenue of the Americas). The event will honor outstanding leaders in residential property management: John McDermott of Ogden CAP Properties, LLC, who will receive the Residential Management Executive of the Year Award, and Gene Boniberger of Rudin Management Company, Inc., who will be presented with the Residential Management Community Service Award. Tickets are available for purchase on rebny.com. Contact Cindy Ramotar at [email protected] for information on sponsorship and patron opportunities.
Hear from Nadeem Meghji, Blackstone’s Senior Managing Director in the Real Estate Group & Head of Real Estate Americas, at our Members’ Luncheon on Wednesday, March 15th from 11:45 a.m. to 2:00 p.m. at the New York Hilton Midtown. “The $100 Billion Interview” will be moderated by James D. Kuhn, President of Newmark Grubb Knight Frank. Visit rebny.com to register for this networking event sponsored by CBRE, Donald Zucker Company, Eastern Consolidated, Extell Development Company, Jamestown, and Fried, Frank, Harris, Shriver & Jacobson. The winner of the 2016 Most Promising Commercial Salesperson of the Year Award will also be announced at the luncheon.
On Thursday, March 23rd from 5:30 to 8:30 p.m., our Inside Secrets of Top Brokers and Industry Leaders Seminar, “The Art of Resale – The Devil is in the Details,” will be moderated by Barbara Fox, President of Fox Residential Group Inc. and feature panelists: Mirza Avdovic of Keller Williams NYC; Ginger Brokaw of Brown Harris Stevens Real Estate; Jamie Heiberger, “Attorney At Law” with Heiberger & Associates, PC; Deanna Kory of The Corcoran Group; and Brian Lewis of Halstead Property, LLC. Register on rebny.com to attend this event at the REBNY Mendik Education Center.