You might recall that this newsletter in August discussed Dennis Friedrich and Ric Clark’s request for tax breaks to subsidize their purchase of RXR’s office building at 1000 Woodbury Road in Nassau County.
Their argument to the county’s industrial development agency was that the building was 40 percent vacant, had been neglected and needed $8 million in renovations to attract tenants, which would benefit the county.
Without the tax breaks — $570,000 initially plus a cap on property tax increases over 15 years — the $31.5 million plan wouldn’t pencil out, according to the applicants, both former Brookfield executives.
The IDA this month granted the tax breaks, which include a two-year freeze on property taxes, followed by three years of 1 percent increases and 10 years of 2 percent increases, Newsday reported.
It is unclear what would have happened had the IDA said no. Perhaps RXR would have sold the 288,000-square-foot building for less, or to another buyer for the same amount ($23.5 million). Perhaps Friedrich and Clark would have gone ahead with their purchase at the contracted price. They have not said their financing depends on the tax breaks.
One thing is certain: RXR did not appreciate the buyers’ lawyer telling the IDA, “This office building has been kind of neglected and has not had a lot of money put into it.”
That was categorically untrue, RXR’s David Garten told Newsday. He added that RXR had sold its 11 other buildings in the area: six to the Feil Organization for $37 million in 2018, one to Rockefeller Group International for $10 million in 2021, and four last year to Aresco Management, Dunkirk Realty, TZ Realty and KRW Realty Advisors for $59 million.
Not one of those deals apparently required tax breaks from Nassau County. In fairness, two came before interest rates skyrocketed and one of those preceded the rise of remote work. But still, nearly all distressed office sales are made without such tax breaks.
It’s possible that 1000 Westbury Road would have limped along for years had the IDA turned down the buyers’ request, and that the tax breaks will speed up renovations. But the IDA had no way to know.
The agency was operating at a disadvantage because it didn’t know whether the applicants were bluffing, or what RXR would have done if Friedrich and Clark had walked away.
This information asymmetry is an unfortunate reality for IDAs, which provide a chunk of the $11 billion in subsidies awarded annually by New York state. What IDAs do know, however, is if they never granted any tax breaks, the state government would disband them.
Some good-government groups say that should have happened long ago.
What we’re thinking about: Is the Safe Hotels Act’s primary purpose to make hotels safer or to raise operating expenses for nonunion hotels? Send your thoughts to eengquist@therealdeal.com.
A thing we’ve learned: The vacancy rate of apartments in Connecticut is 3.5 percent, among the lowest in the nation.
Elsewhere…
At a hearing about Bruce Eichner’s controversial project across from the Brooklyn Botanic Garden, his lawyer was asked if removing underground parking from the plan would save money, allowing for more affordable rents.
Studies have found that providing parking indeed raises housing prices, but in this case, the difference is negligible, lawyer David Rosenberg told City Council member Crystal Hudson. The building must include a basement level regardless, and the project will only use the excess space there for parking.
That’s still far less parking than is normally required; a proposed rezoning allows for a reduction.
If the project provided the full amount of parking required by zoning, extra levels would have been needed and the cost would have been much greater, resulting in less affordable rents, Rosenberg explained.
The exchange between the lawyer and Hudson helps explain why even if parking minimums were eliminated as proposed by the City of Yes, developers would still include space for vehicles in many projects.
Closing Time
Residential: The priciest residential sale Thursday was $11.75 million for a 4,100-square-foot townhouse at 25 Perry Street in the West Village. Joshua Wesoky of Compass had the listing.
Commercial: The largest commercial sale of the day was $50 million for 52 condominium units at 500 West 45th Street, aka “Bloom on 45th.” Xin Development Group International sold the units to BH3 Management.
New to the Market: The highest price for a residential property hitting the market was $9.3 million for a 3,429-square-foot condominium at 230 West 78th Street on the Upper West Side. Frans Preidel of Brown Harris Stevens has the listing.
Breaking Ground: The largest new building application filed was a proposed 21,978-square-foot, 33-unit residential project at 262 East 197th Street in Fordham. Ariel Golshan of AG Engineering filed the permit.
— Matthew Elo