Does the proposed Midtown East rezoning incentivize Pfizer to skip town?

Council debates pharma giant's site, air rights price floor at Tuesday hearing

New York /
Jun.June 20, 2017 04:08 PM

The density boost that the Pfizer headquarters will automatically get under the Midtown East rezoning means that the pharmaceutical giant has a great reason to leave the neighborhood— and maybe the city.

“We’re almost, in a weird way, incentivizing them to sell and leave town,” Council member David Greenfield said during a hearing on the rezoning proposal on Tuesday. “Everything else we’re doing, we’re capturing some value back…I still don’t understand why this is the exception to the rule.”

Under the rezoning, the Pfizer site — buildings at 219 East 42nd Street and 235 East 42nd Street — will change from allowed floor area ratio (FAR) 10 to FAR 15. This means that if the owner of the buildings decides to knock down the current towers and rebuild a modern office, they will be able to build towers with an FAR of 15 without contributing to the public improvement funds. Any size above that — up to an FAR of 21.6 — would require the owners to buy air rights from a landmarked air rights site nearby.

Edith Hsu-Chen, the city’s Department of City Planning’s Manhattan director, said the reason that the Pfizer sites are automatically getting an FAR leg-up is that most of the surrounding buildings already have an FAR of 15. She said that the sites should have been included in a zoning change in 1982 that upped the FAR of the other buildings.

But Greenfield noted that Pfizer plans to sell its headquarters by the end of 2017. He asked that the city take steps to assure that Pfizer isn’t planning to move to New Jersey or “god forbid” Connecticut. The company reportedly plans to keep its headquarters in Manhattan but will move some of its employees to other locations in the tri-state area.

During the hearing held by the City Council’s subcommittee on zoning and franchises, the proposed $393 floor price for landmarked air rights in Midtown East once again became a point of contention. Council member Dan Garodnick took aim at the requirement that 20 percent or $78.60 per square foot of air rights sales be contributed to a public realm improvement fund.

He questioned whether the Department of City Planning is concerned that developers will try to “game the system.” One way would be to misstate the value of an air right deals to avoid transfer taxes, which would be a form of fraud.

Hsu-Chen said the minimum requirement — she objected to the term “floor price” — is more of a tool to ensure that the public is getting a fair cut in these sales. The minimum contribution is a way to ensure transparency — that includes perfectly legitimate deals that involve more complicated transfers than all-cash transactions, such as land trades or joint-ventures. When further questioned, Hsu-Chen and other DCP representatives couldn’t provide a specific example of such deals.

“It seems to me that it might only inhibit transactions than getting the public anything,” Garodnick said.

He said keeping the minimum contribution to a percentage of the sale — 20, 25 or 30 percent — would be a more effective way of keeping tabs on the air rights deals. REBNY’s Michael Slattery later said that such a contribution rate would similarly discourage transactions.

This was the strongest criticism that the council member has leveled against the proposed floor price, joining the laments of the Real Estate Board of New York and other public officials. It follows a telling bill that Garodnick introduced earlier this month, that would require the city to audit every air rights sale in Midtown East once it’s rezoned. The city proposed a similar audit in the Theater District after tossing a required floor price for air rights sales in the area in February.

Garodnick also noted the difference in estimates for the appropriate price for air rights in Midtown East. A city-funded appraisal put the price at $393, while REBNY put the price at $179 per square foot.

“It really raises the question of how professional appraisers could come to such wildly different conclusions,” Garodnick said.

The proposal seeks to change zoning rules along 78 blocks in the neighborhood in order to modernize the area’s aging office building stock. The rezoning is expected to create 6.5 million square feet of new commercial space in the next two decades. Tuesday’s hearing was the latest step in the city’s land use review process. Earlier this month, the City Planning Commission unanimously approved the rezoning.

Tuesday’s hearing rehashed many concerns that have already been raised during the Uniform Land Use Review Process (ULURP), including the inclusion of residential properties on the East Side of Third Avenue and the specificity of the transit projects that will benefit from the proposal.

Greenfield requested that the language surrounding the public improvement fund be clarified to ensure that a future “wacky” mayor can’t allocate the money to areas outside of Midtown East or the adjacent sites and will be used to the already identified projects in the district. He said the language needs to be specific and direct to assure that the improvements that are promised now will eventually get done.

“The one thing government is good at is killing good ideas,” he said.


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