What Sold?
Recently, a small two-story retail building at 28-30 West 37th Street, which is situated on a 49’ x 100’ lot in the MSMX rezoning, sold for $18MM. Prior to the rezoning, this building/land would have been worth $5MM on a good day (assuming we were still in the time period when hotel construction had halted). Now, its value has almost tripled.
What Is the Zoning?
The site falls within the newly created MSMX zoning district, which allows for a 15.0 FAR as-of-right and up to an 18.0 FAR with MIH compliance. A developer can construct approximately 85,894 buildable square feet on this lot, although building something that large would likely result in more than 99 units, triggering increased construction wage requirements.
According to the plans filed with the DOB, there are going to be 95 units with an average floor area 900 SF – not terribly efficient when using a 680 DUF (dwelling unit factor, a since outdated tool). The building ‘could’ have supported 126 units, but instead, the city is losing out on approximately 30 units.
What Does This Mean for Land Values?
The developer spent $18MM for the site and applied for demolition and NB (new building) permits while under contract, allowing the development to begin construction on day 1. If the developer moves forward with utilizing the full FAR, which the NB application suggests, that puts their basis at $210/BSF.
What Does This Mean for Other Property Owners in the Area?
If your site can support more than 99 units, your land value greatly drops off unless it is possible to build multiple towers on the subject lot to avoid wage requirements. The key factor that developers are looking at these days is 40’-50’ wide sites that allow them to stay under 99 units.
If developers are going to look for larger sites, they will likely need to purchase the land at a lower basis or pick up IH certificates.