Houses of the holy
A look at the religious institutions lobbying to get inside the pearly gates of a rezoned Midtown East and cash in on air rights — and their spiritual counterparts who’ve already sealed deals around NYC
The evangelist preacher Billy Graham is fond of saying that “God has given us two hands — one to receive with, and the other to give with.” But three Midtown religious institutions that want to cash in on the city’s Midtown East rezoning proposal are finding that their hands are tied. St. Patrick’s Cathedral, St. Bartholomew’s and Central Synagogue between them have just over 2 million square feet of unused development “air rights,” which could be worth anywhere from $400 million to $1.1 billion, according to widely varying expert views.
These fabled places of worship were hoping that the Bloomberg administration’s proposed rezoning would finally allow them to reap the material rewards of these rights, but have found themselves just outside the pearly gates.
The proposal aims to revitalize the 74-block area from 39th to 57th streets between Second and Fifth avenues. As The Real Deal and others have reported, the plan would incentivize qualifying developers to tear down old buildings in the business district and construct modern skyscrapers by allowing them to build higher by purchasing air rights from the city, through a “district improvement bonus” fund created to make neighborhood improvements.
The plan is slated to go through the public review process, known as ULURP, this spring and, if approved, would allow developers to purchase building permits under the new rules in 2018.
The plan also calls for a so-called “Grand Central Subdistrict” between 39th and 49th streets, in which developers would be able to purchase air rights from owners of landmarked buildings anywhere within the subdistrict as long as they first buy a chunk of the rights through the city’s fund.
But St. Patrick’s, St. Bart’s and Central Synagogue lie just outside the subdistrict’s borders, so they would remain subject to current city law, which restricts the sale of air rights for landmarked buildings to adjacent lots (or, with a special permit, to properties across the street). Unfortunately for the three holy houses, they are surrounded by other landmarked buildings, or by developments unwilling or unable to purchase the rights, so they cannot easily cash out.
Moreover, the rezoning proposal makes the institutions’ air rights even harder to sell, according to Lawrence Graham, chief administrative officer of St. Bart’s, and a former executive vice president at Brookfield Office Properties.
“It’s one thing to change the law and cause no harm,” Graham said. “But the city will sell air rights that are essentially better than our rights.”
Graham said under the current proposal, developers will not be interested in buying their air rights. “Why would you come through a church if you could go to the city and avoid special permits and a long process?”
In on the action
Rachaele Raynoff, a spokesperson from the City Planning Department, which is overseeing the administration’s proposal, said that these religious institutions can take advantage of a special landmark transfers program that allows them to sell their air rights to developers across the street in a kitty-corner transaction.
For the most part, however, sources say landmark transfers involve a lengthy and costly public approval process — up to $750,000 — and are considered too much of a hassle.
“Most developers, if it requires a ULURP, avoid it like the plague,” said Robert Shapiro, an assemblage expert who has put together parcels for Harry Macklowe’s Drake Hotel site and the Crowne Plaza Hotel in Times Square.
So, hamstrung, the three institutions are pushing the city to offer them the same selling rights as landmarked buildings inside the subdistrict.
“We all have slightly different views, but for the most part, our interests are aligned,” Graham said. “What we don’t want is to be perceived as fighting the effort to update the Grand Central District. We think that’s necessary.”
Graham said the solution that would be the easiest for the city to implement is the creation of a special subdistrict akin to the Grand Central subdistrict.
Joseph Zwilling, a spokesperson for the Archdiocese of New York, which controls St. Patrick’s, said the church is “in continuing contact with the city and remains hopeful that they will take their good plan and make it even better.”
Still, the real estate industry is closely watching the drama unfold.
Robert Von Ancken, an appraiser with Newmark Grubb Knight Frank commissioned by the city to determine the value of Midtown East air rights, said that “there is some movement” on the issue.
But Mike Slattery, senior vice president of research at the Real Estate Board of New York, said that the city has been “firm so far” on its proposal. Religious institutions were hopeful, he said, that the city would tweak its stance as it did for the 1998 creation of the Theater subdistrict, which allowed Broadway theaters to sell air rights to sites located anywhere between 40th and 57th streets and Sixth and Eighth avenues.
“The expectation was that a similar mechanism would be incorporated here,” he said.
Meanwhile, NYU’s Furman Center for Real Estate and Urban Policy is also brainstorming for alternative solutions to the air rights debate with city officials and developers.
Ideas floated have included borough-wide air rights transfers and the establishment of a central “air rights bank,” which would allow the owners of air rights to sell them to a bank and thus see an immediate return on their rights, said Vicki Been, the center’s director. Developers could then purchase the rights from the bank when needed.
The cost of air
How much these air rights would actually trade for if the churches and synagogue were able to sell them is also up for debate.
While some have suggested that these air rights could go for as little as $200 per square foot, one attorney specializing in land use and zoning, who declined to be named, put that number as high as $450 to $550 per square foot. That would mean the combined rights of the three religious organizations could be worth as much as $900 million to $1.1 billion.
Von Ancken cautioned that prices can vary “depending on where you are and on the transferability.” As a rule of thumb, he said that air rights tend to sell for about 60 percent of the value of land.
In an effort to put the current air rights debate into context, The Real Deal looked at those three religious institutions lobbying the city hardest to alter the proposal as well as others that are involved in the debate or that have sold air in the recent past in the city. Read on below.
Central Synagogue (652 Lexington Avenue)
Dubbed New York’s first “megashul” by the Wall Street Journal, Central is the longest continually serving synagogue in the city. After a freak fire in 1998, the 14,064-square-foot Neo-Moorish building at East 55th Street and Lexington Avenue was restored in 2001.
The Reform Jewish temple has roughly 155,000 square feet of available air rights, according to the real estate data website PropertyShark. Those rights would be worth somewhere between $31 million and $85 million if they could be sold freely, based on experts’ estimates ranging from $200 to $550 a square foot. But the rezoning proposal, Graham said, essentially “drew a line around” the synagogue excluding it from the Grand Central subdistrict, and unless the city’s policy changes, there aren’t any “receiving sites” to purchase those air rights.
“So they are basically without an option,” said Slattery.
David Edelson, the synagogue’s president, said that Central has supported the lobbying efforts spearheaded by the churches. “We strongly support the initiative being taken by the Archdiocese and St. Bart’s,” he said.
He said while the synagogue does not have a developer lined up, the majority of proceeds from any future sale of air rights would go toward “the upkeep of our beautiful building.”
Central’s congregation of over 2,400 households includes real estate bigwigs like Jerry Speyer, Kent Swig and Bill Rudin.
“It’s like a who’s who of commercial real estate in there,” said Howard Grufferman, a vice chairman at Colliers International Tri-State, who is not a member of the congregation.
But he said even the combined influence of the heavy hitters in the congregation isn’t likely to sway the city. “Selling air rights is a difficult thing.”
St. Patrick’s Cathedral (631 Fifth Avenue)
The seat of the Roman Catholic Archdiocese of New York, this 48,550-square-foot building was completed in 1878 and has been the site of Requiem and memorial masses for icons such as Babe Ruth, Vince Lombardi, Joe DiMaggio and Andy Warhol. It currently sees 5.5 million visitors a year, and last year, church officials announced a three-year, $175 million restoration.
Located on Fifth Avenue between 50th and 51st streets, the Neo-Gothic building has over 1.2 million square feet of available air rights, according to Property-
Shark. These could be worth between $240 million and $669 million; however, the church lies half a block east of the Grand Central subdistrict.
Shapiro, the assemblage expert, said the church has no options to sell its rights under the current proposal.
“Where are they gonna go?” he said. “Nearby, you’ve got Rock Center that has all the air rights in the world. You could put [the rights] on top of Saks, but Saks sold their own development rights to the Cohen Brothers [Realty Corporation’s] buildings.”
All of the eligible nearby properties have “no need for air rights,” Zwilling said.
“This is why it is so important to these religious institutions and other landmarked owners to be able to offer them to developers in a wider area. It would help with the revitalization of Midtown and be beneficial to these three houses of worship as well.”
St. Bartholomew’s (325 Park Avenue)
This Byzantine-style Episcopal church, located between 50th and 51st streets, was completed in 1918 and landmarked in 1967. It is located one block north of the Grand Central subdistrict.
St. Bart’s has some 646,299 square feet of available air rights, which could be worth between $129 million and $355 million. Of the three Midtown East institutions profiled here, it has the most pressing need for funds.
“Their building is in need of considerable repair,” said Von Ancken. In 2012, the outgoing rector Rev. William Tully told the New York Times that the restoration work could cost $30 million.
The church has been attempting to sell its air rights for some time. In 1991, a state Supreme Court decision upheld the state landmarks law and forbade the church from making a $100 million air rights deal with Paris-headquartered developer HRO International, thus ending a long and contentious battle which saw the church lose a large portion of its endowment and congregation. (HRO was planning to erect a 59-story tower at the site of the church’s community center.) Graham said the “church was split right down the middle” on the decision to sell to HRO.
He said that the church has not received any viable offers for its air rights this time around, though he estimated they would be worth about $200 per square foot.
Christ Church (520 Park Avenue)
Located at the corner of Park and 60th Street, this United Methodist church was built in 1931.
In 2005, brothers Arthur and William Lie Zeckendorf agreed to pay a then-record $430 per square foot for roughly 70,000 square feet of the church’s air rights. Prior to the deal, $200 per square foot was considered a premium price for air rights. (The Zeckendorfs also paid the private Grolier Club $7 million for their rights at $430 a square foot in 2006.)
Last month as TRD went to press, the transaction with Christ Church was reported to have finally closed after lengthy delays at a much higher $600 per square foot, setting a record and netting the church $40 million.
In December 2012, the Zeckendorfs filed a building permit for a skinny 51-story, 30-unit condo tower at 43 East 60th Street designed by Robert A.M. Stern, the architect who designed their 15 Central Park West.
Saint Thomas Church (1 West 53rd Street)
In 2007, megadeveloper Hines bought a development site at 53 West 53rd Street from the Museum of Modern Art for $125.5 million.
Roughly two years later, nearby Saint Thomas — which is located between Fifth and Sixth avenues and was completed in 1914 — sold Hines an additional 275,000 square feet of air rights for the construction of the so-called MoMA tower at 53 West 53rd Street. The air rights went for roughly $22 million, or a rate of $80 per square foot — unusually low for the area.
Hines also purchased 136,000 square feet of air rights for the project from the University Club down the block for $10.88 million, also at $80 per square foot.
Neighborhood residents attacked the church’s decision to sell, saying that the 1,050-foot planned tower, to be designed by Pritzker Prize–winning architect Jean Nouvel, was out of character with the area and would block views.
But Michael Sillerman — a partner at the law firm Kramer Levin Naftalis & Frankel who was involved in the transaction — noted that “we don’t really have an effective mechanism to allow individual landmarks to get the benefits of their unused air rights.”
Due to a lack of financing, the project — which is expected to include a hotel, luxury condos and galleries — has yet to break ground.
Church of Saints Cyril & Methodius and St. Raphael (502 West 41st Street)
This Hell’s Kitchen church was built in 1902 and is located between 10th and 11th avenues and is the city’s only Croatian-
American parish. Until 1974, it served a largely Irish-American congregation, including the late Senator Daniel Patrick Moynihan.
This summer, Gary Barnett’s Extell Development paid $16.46 million for the church’s 140,000 square feet of air rights, or $118 per square foot.
Barnett told TRD in August that he plans to build a 40-plus-story residential tower just to the east of the church at a site on which Extell signed a 99-year ground lease with the estate of the late landlord Sol Goldman.
Islamic Cultural Center of New York (1711 Third Avenue)
Located between East 96th and 97th streets, the Islamic Cultural Center was designed by Skidmore, Owings & Merrill and completed in 1991 for $14 million.
In 2004, the mosque issued a 99-year lease to the Related Companies and also sold the developer its 524,250 square feet of air rights.
Related used the rights to build One Carnegie Hill, a 41-story luxury tower with 479 rental and cond-op units. (The developer also built a 63,000-square-foot community center for the cultural center in the new building as part of the deal.)
Related qualified to purchase the air rights because it owned the neighboring 522-unit rental tower the Monterey, which it put on the market in January, hoping to get between $250 million and $300 million.
Representatives from the Islamic center and Related did not respond to a request for comment.