HUDSON SQUARE — The air rights Hudson River Park aims to sell to a developer are worth less than the developer committed to paying, according to an appraisal firm hired by the Hudson River Park Trust.
The air rights deal would have the developers who own the St. John's Terminal at 500 Washington St. pay the Hudson River Park Trust $100 million, which the Trust will use to repair the decaying pilings holding up Pier 40.
In exchange, the developers, Westbrook Partners and Atlas Capital Group, would be allowed to build an additional 200,000 square feet at their site, where they want to erect a five-building complex of condos and retail, with some affordable and senior housing and potentially a hotel or office building.
The appraisal was first reported by Crain's.
According to a document obtained by the Villager which outlined the findings of the appraisal, the air rights in a vacuum are worth more than $100 million. But taking into consideration factors specific to this deal, the value decreases to a little under $75 million.
Those factors include the facts that the air rights from Pier 40 can only be sold to that location, that the developers are not getting certain bonuses like higher density there or at different site in exchange for the affordable housing they are building and that air rights in general are being sold for less in Manhattan than the pier 40 ones are valued at. The $100 million was also divided by the value of the land itself.
The appraisal also noted that because the 421-a tax break no longer exists, the best use of the property for the developers is now market-rate condos. Their initial plan included rentals, which would have gotten them the tax break.
The development project requires a zoning change, so it now has to go through a city process known as a Uniform Land Use Review Process, or ULURP. That process is expected to begin early next week, with a certification by the City Planning Commission.
Previous discussions about the amount of air rights to sell to the developers mentioned 250,000 square feet, more than is included in this deal. At a July board meeting, the directors expressed resistance to selling "all of the identified air rights as part of this [St. John's Terminal] transaction."
"I expect we may have future need for air rights on Pier 40," one director said.
Deputy Mayor Alicia Glen noted at that meeting that there has never been an agreed-upon figure for the specific amount of air rights. The directors agreed that "in the future the board will have a discussion about the amount of air rights" that exists, and how much should be sold.
While the $100 million figure was included in an announcement about the project from the city, the Trust's Board of Directors will ultimately vote to decide how much they will ask of the developers for the square footage.
The property is co-owned by Westbrook and Atlas Capital Group, after Westbrook bought out a third owner, Fortress Investment Group. Fortress' involvement in the deal was a sticky matter because Michael Novogratz, the head of Friends of Hudson River Park, was a top executive at the firm.