(Article originally appeared at the Hallmark Abstract Service blog)
Development rights, aka air rights, are an extremely valuable commodity on the New York City real estate scene!
And it’s the fact that Stuyvesant Town possesses over 700,000 square feet of development rights that some feel helps to explain why Blackstone Group, as part of its deal to purchase this iconic property, was willing to maintain 4,500+ units at Stuyvesant Town for those individuals and families who qualify for low and middle-income housing.
In July 2014, the first line of an article titled ‘Everything you ever wanted to know about NYC air rights*! (Interactive Map)‘, addressed the asterisk in the in the following way… ‘*But may have been too far in the shadow of a huge residential skyscraper to know to ask!’
The article described a map that was created by The Municipal Arts Society of New York that was designed ‘to alert New Yorkers of the potential for skyscrapers to rise where none now exist‘.
The key term that was mentioned in this prior article that also appears to relate to the Blackstone Group purchase of Stuyvesant Town is, transferrable air rights.
According to an article at The Wall Street Journal titled ‘The Stuyvesant Town Deal Sweetener’ the authors describe an ‘inducement that went unmentioned at Tuesday’s announcement: Blackstone has New York City’s backing to sell the 80-acre property’s large cache of unused development rights to developers elsewhere in Manhattan.‘
Below is an excerpt from the article with a link provided to read it in its entirety.
It provides insight that many of us are not privy to concerning how government, politics and commercial real estate come together in order to make a deal that serves the purposes of all involved…
‘Behind Blackstone Group LP’s $5.3 billion deal this week to buy the sprawling Stuyvesant Town and Peter Cooper Village complex was a widely praised agreement to reserve 5,000 units for low- and middle-income residents.
But the accord also contained an inducement that went unmentioned at Tuesday’s announcement: Blackstone has New York City’s backing to sell the 80-acre property’s large cache of unused development rights to developers elsewhere in Manhattan.
The benefit could be worth hundreds of millions of dollars for Blackstone and clear the way for creation of as many as 1,000 apartments, real-estate executives said. Still, the value heavily depends on where exactly the rights could be sold. They could be worth far less.
The incentive offers a window into why Blackstone may have agreed to a deal to preserve middle-income housing that was viewed as a low-cost win for the city—one far cheaper for City Hall than plans proffered by other developers that have vied for the property.
Under the deal, the city is giving about $225 million of benefits to Blackstone through a loan and an uncollected tax. In exchange, Blackstone agreed to keep 4,500 apartments available to residents making up to $130,000 a year for a family of three and another 500 units for those earning up to $63,000 annually. The company also agreed to never build on the leafy East Side property.
A spokesman for Mayor Bill de Blasio said the development-rights agreement “represents a commitment to work with the new owner, which has agreed not to develop any of the open spaces within the complex and protect its affordable housing.” He added “any proposal would be subject to a full public review,” including a City Council vote.
Asked why it wasn’t included in Tuesday’s announcement with the mayor and Blackstone executives, the spokesman said there was no specific proposal up for approval.
Development rights—also known as air rights—are a hotly contested jewel sought by Manhattan developers. Every property has its own allocation of air rights based on zoning, and for those buildings that haven’t used all of them, the rights can be sold to others looking to build vertically. But such sales are generally restricted to properties on the same block…‘ Read the full article at The Wall Street Journal here.
Michael Haltman is President of Hallmark Abstract Service in New York.
