Property owners line up for Garment District tax break
GFP Real Estate, Morton Frucht to preserve space for fashion manufacturing tenants
Garment District landlords GFP Real Estate and Morton Frucht are the first to apply for tax incentives the city is offering to retain fashion-industry manufacturing jobs in the neighborhood.
GFP Real Estate, controlled by the Gural family, is seeking a tax abatement valued at roughly $17 million over the 15-year term of the agreement for a pair of buildings the company owns off of Eighth Avenue.
And Frucht stands to receive approximately $4.24 million in tax benefits over 15 years at his building at 327 West 36th Street.
Both landlords have agreed to retain approximately 100,000 square feet worth of manufacturing tenants in their buildings. But the New York City Industrial Development Agency’s program ties the tax benefits to the overall size of the building – not the amount of fashion industry space they’re preserving.
The IDA reasons that landlords who have a significant portion of their building leased to tenants outside the garment manufacturing industry have probably made improvements to their building to attract those tenants, so they need a larger economic benefit to incentivize them to keep fashion tenants in place.
“We strategically structured this innovative program to maximize the amount of preservation of garment production space in the Garment District and encourage more property owners to apply for it,” IDA spokesperson Stephanie Báez told The Real Deal.
Mayor Bill de Blasio in June announced a plan that has long evaded city planners to lift restrictions in the Garment District that require landlords to rent space on the side streets to fashion industry tenants.
Landlords – many of which flout the current law – have long pushed to have the rule changed, which would allow to them to legally rent space out to higher-paying tenants.
As part of the plan, City Hall offered up to $20 million in city funds to buy a building for manufacturers and offered a property-tax abatement for landlords who set aside at least 25,000 square feet in their buildings for manufacturers.
The New York City Industrial Development Agency program offers landlords a tax benefit of $1.00 per square foot for retaining up to 25,000 square feet, which steps up incrementally to $4.00 per square foot for 100,000 square feet.
In exchange for the tax benefits, the landlords agree to cap rents at $35 per square foot.
The IDA estimates that for the $21.5 million it’s offering in incentives, the city will gain more than $49 million.