Grand Central Tech and Milstein’s technology venture plans $52M life sciences hub in Midtown
Partners say 160K sf project is not feasible without public assistance
The Midtown technology campus launched earlier this year by Milstein Properties and Grand Central Tech is looking to get in on the biotech and life sciences craze.
Company, the venture the two formed earlier this year to manage Milstein’s 1.1 million-square-foot office building at 335 Madison Avenue, now plans to convert the top 15 floors of a nearby building on East 43rd Street into a $51.8 million life-sciences nerve center, an application for public assistance shows.
“As a building, 6 East 43rd Street is an ideal location for a life sciences hub,” read a note included in Company’s application with the New York City Industrial Development Agency. “Our location enables us to easily serve not only New York City residents from all five boroughs, but also the major research institutions, hospitals and donors whose involvement is critical to life sciences endeavors.”
Company plans to renovate the top 15 floors of 6 East 43rd Street into 90,000 square feet of office space and 72,000 square feet dedicated for wet labs. The latter will cost $200 per square foot to build out, or double the cost to build out the traditional office space, according to Grand Central Tech’s calculations.
But at rents of $65 per square foot for the traditional office floors and $85 per square foot for the wet lab space, Company projects a rent shortfall of $3.2 million per year. So the venture is requesting tax abatements and exemptions estimated to cost the city $36.56 million over 11 years. (During that time, the project is expected to generate $66.73 million in benefit for the city.)
“Given the costs outlined above . . . this project will require a 24-year tax abatement to reach break even,” documents in Company’s application state. “The project simply will not happen without the financial assistance required.”
Milstein family scion Michael Milstein teamed up with Grand Central Tech co-founders Matt Harrigan and Charles Bonello in 2014 to launch the business accelerator, headquartered at the former headquarters of Facebook at Milstein’s 335 Madison Avenue.
The New York City Economic Development Corporation in 2016 provided Grand Central Tech with a $2.5 million grant – with Milstein Properties kicking in an additional $5 million – to build a 40,000-square-foot tech hub in the building, which the Milsteins had once considered tearing down and redeveloping.
Instead, they unveiled plans earlier this year to invest $150 million to renovate the property, setting aside 250,000 square feet for startups and 700,000 square feet to larger tenants. There will be about another 150,000 square feet of retail and amenities.
Harrigan confirmed Company was in talks with the city for the East 43rd Street project and said he hopes the joint venture “will be a leader in building a bright future for life sciences here in New York.”
The biotech and life sciences industries are indeed being touted as the next new high-growth sector of the city’s economy.
In late 2016, Gov. Andrew Cuomo announced his administration would invest $650 million to help grow the industries throughout the state. And Mayor Bill de Blasio unveiled a similar $500 million initiative that includes building a life sciences campus, similar to the Cornell-Tech campus on Roosevelt Island.
Real estate investors, meanwhile, have latched onto the idea, though the industry faces challenges in New York City — namely, the expensive costs of building out space and finding the proper zoning.
Taconic Investment Partners and Silverstein Properties are spending $20 million to convert a former industrial building at 619 West 54th Street into a life sciences center, and Related Companies and Vornado Realty Trust are courting similar tenants at their redevelopment of the Farley Post Office building near Penn Station.
Alexandria Real Estate Equities, the California-based real estate investment trust specializing in biotech lab and office space, announced last week that had reached an agreement with the city to develop a third tower at its East Side life-sciences campus.
The company also recently paid $75 million to buy a former warehouse in Long Island City — which a local business group is touting as a prime location for the biotech industry — and earlier this year teamed up with David Werner to buy Pfizer’s Midtown East headquarters for $365 million.