The City Planning Commission has voted to up the cost of air rights transfers in the special Midtown Manhattan district that includes Broadway’s theaters, The Real Deal reports. Currently, when developers purchase air rights from theaters between West 40th and West 57th Streets from Sixth to Eighth Avenues, they pay $17.60 per square foot to the Theater Subdistrict Fund. Transferable development rights can usually only be used for adjacent properties, but the city created the special district in 1998 to help the theater industry thrive amid sharply rising real estate prices; within the district, air rights can be moved more freely in a larger area outside the usual “arms length” restrictions.
As a result, the district’s air rights have become more valuable to developers. Boston Properties, for example, added almost 160,000 square feet of theater air rights to its office building at 250 West 55th Street. Similar to brokerage fees, property buyers and sellers negotiate over who pays the fund contribution when they close each deal.
The Department of City Planning, believing the fund contribution that developers pay to be undervalued, proposed an increase, and Wednesday the commission voted in favor–with one abstention–of a hike comprised of the higher of 20 percent of a property’s sale price or 20 percent of $347 per square foot. According to Commissioner Kenneth Knuckles, the department’s analysis showed the proceeds from previous transfers of development rights (TDRs) to be “well below 20 percent of their value.” Knuckles said, “These changes to the methodology will align with the original intent of the 1998 text amendment.”
The one abstaining vote belonged to Fred Cerullo, who said there is no proof that the current price-per-square-foot formula falls short of the fund’s original goals and called the measure “extreme:” “The floor price, which was never part of the original formula, needs to be more thoroughly analyzed in the context of an ever-changing marketplace. Floor prices have the potential of raising activity in a down market, as opposed to letting the market drive itself.”
Next the issue heads to the City Council for a vote; it could face resistance from the Real Estate Board of New York (REBNY) which called the vote “ill-advised” due to the risk of diminishing the resources available for the city’s beloved theaters.
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Neighborhoods : Midtown West