Blackstone’s $5.3 billion purchase of Stuy Town also bought the firm a jumbo 700,000 square feet of air rights that could wind up being “just the tip of the iceberg” in Mayor Bill de Blasio’s plan to preserve and build affordable housing in the city, according to one expert.
News of the air rights in Stuy Town — and new owner Blackstone’s claim over them, along with the 110-building property, was reported in the Wall Street Journal last week.
While the value of the air or development rights wasn’t clear since it depends where they’d end up, commercial real estate attorney Michael Greenberg, also founder and CEO of the Level Group brokerage firm, predicted many more similar arrangements in the future as the city looks for creative ways to get those elusive units of affordable housing.
In Stuyvesant Town, this meant preservation, and if air rights are transferred elsewhere, possibly new affordable housing.
Blackstone and its partner in the Stuy Town deal, Ivanhoe Cambridge, have gotten the city’s support to transfer the Stuy Town air rights since the owner has made a commitment not to build on the property’s open spaces or its existing structures.
“What’s unusual is that it’s rare for the city to allow it — there have been requests for them to allow the transfer to sites that are not contiguous or to other neighborhoods even,” said Greenberg.
Noting the mayor’s ambitious plan for affordable housing, Greenberg predicted that if the city got creative with ways to transfer air rights, “he might be able to jumpstart his campaign promise and get pretty close to accomplishing it. It’s an insight to how the mayor’s thinking in a non-traditional way.”
According to Wiley Norvell, a spokesperson for the mayor, any transfer that resulted in residential use would be subject to mandatory inclusionary zoning, which means at least 25-30 percent affordable housing.
“This,” said Norvell, “represents a commitment to work with the new owner, which has agreed not to develop any of the open spaces within the complex and to protect its affordable housing, and to study opportunities to transfer those existing rights elsewhere.”
Greenberg, who said he’s worked with air rights his whole career, pointed out that this issue “is much bigger than Stuyvesant Town,” considering that there are currently millions of square feet of unused air rights in the entire city.
“If you create affordable housing units and lose others you net zero, which doesn’t help,” said Greenberg.
“This sets a precedent. This might be the tip of the iceberg as to how they plan in the future (for affordable housing).”
Typically, he said, air rights are worth about “half of what the underlying land is worth. It’s a little higher in places where you can monetize it for a higher price, but 50 percent is the rule of thumb.”
Of course, with air rights typically just transferred to nearby lots, cooperation of the city to allow them to be used farther away is what would likely spur the interest of developers.
Greenberg gave the example of the High Line Transfer Corridor as an occasion where the city allowed landowners to transfer development rights beyond contiguous lots to accomplish a particular policy goal.
“Here, it appears that the areas of the city where the new owners of Stuy Town can transfer their air rights is less defined,” he said. “But this concession to the owners of Stuy Town is clearly an outgrowth of the High Line program and a nod to its success in achieving a particular policy goal of the city, which in that case was the development of the neighborhood around the High Line. Here, the goal is preservation of existing affordable housing units and, perhaps, at least in part, the transfer of development rights to areas where new units of affordable housing can be developed.”
While none of the information regarding the air rights or development rights was mentioned during the hour-long press conference in Stuyvesant Town announcing the change in ownership last week, Norvell noted that the development rights in Stuy Town are nothing new. They have existed as a right of the owner, despite going unused, since Met Life owned the property.
Additionally, even with the city’s blessing, to utilize that right, Blackstone will still have to go through what any other landlord would: a months-long ULURP process and getting input from the local community board, the City Council and borough president. By doing this, Stuy Town’s air rights would be used up, even if the property is sold again.
“The incentive” of the development rights, noted the Journal article, “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.”
It also went on to note that any attempt by an owner of Stuy Town to use those rights within the complex would be near-impossible, unless the owner doesn’t mind having tenants and elected officials storm the management office with pitchforks.
“It would have been worse than a war,” Martin McLaughlin, a political consultant who advised a prior Stuyvesant Town owner on community relations, was quoted as saying.
When asked for comment, Christine Anderson, a spokesperson for Blackstone, reiterated that the owner is committed to preserving “the physical character of the community.”