Neighborhood Focused PlatformTM (NFP) Whitepaper Development Site Advisors® 2 / Neighborhood Focused PlatformTM Table of Contents 04 Neighborhood Focused PlatformTM - Letter from the founders 06 A Fresh Look at FRESH by Lev Kimyagarov (as published by the Commercial Observer) 08 The Two Bridges Project Explained by Lily Luo 10 Hudson Yards: The Catalyst for the Midtown East Rezoning by Nathan Persky 12 The Special Clinton District and Affordable Housing by Scott MacWhinnie 14 “Inwood – The Best Kept Secret of Manhattan” by Michael Musto 16 Lights, Camera, Action: A Bright Future for Sunset Park by Elana Kapul 18 Red Hooked by Development Site Advisors® 20 The Northern Brooklyn Development Market by Development Site Advisors® 22 The East New York Rezoning by Development Site Advisors® 24 The Northern Bronx Development Market by Howard Cohen 26 The Queens Development Market by Rubin Isak 28 The Architects Take: MIH Zoning by Andrew Setiawan & Tianran Xu developmentsiteadvisors.com / 3 Neighborhood Focused PlatformTM Letter from the founders When we formed development site broker expertise, also makes it advisors®, we wanted to create a their business to meet with every firm that truly added value to its developer in their respective areas, clients and marketplace. Zoning who is building, what is being built, in New York City is the single what zoning changes are on the most complicated aspect of the horizon, know what condos are real estate industry; which is why selling for, what apartments rental Development Site’s stand alone, rates are, retail rents, office rents, outside of traditional residential community facility rents, industrial and commercial real estate buckets. rents, where cap rates are along We are the only firm in NYC solely with every other data metric in their focused on this sector and more area. importantly, We Know Zoning®. In our first whitepaper, our Truly understanding zoning is only Neighborhood Focused Platform™ possible going street by street and brokers shine and demonstrate neighborhood by neighborhood, their expertise. If you are a which is why we came up with developer, use this paper to help our Neighborhood Focused decide where your next project Platform™ (NFP). We carved NYC should be. If you are an owner up into 14 distinct areas, based in one of these areas, get smart on proprietary datapoints, where on the current events of your each broker is an expert on zoning neighborhood; knowledge is power. in each neighborhood throughout We hope the entire marketplace the city. Each Neighborhood uses this valuable whitepaper as a STATEN Focused Broker™, aside from go-to resource. Lev Kimyagarov Rubin Isak Managing Principal, Co-Founder Managing Principal, Co-Founder 4 / Neighborhood Focused PlatformTM NORTH BRONX SOUTH BRONX NORTHERN MANHATTAN ST E W N A ST T A T E A N A T T MANH A QUEENS WEST MANH NORTH QUEENS DOWNTOWN MANHATTAN NORTHERN BROOKLYN DOWNTOWN SOUTH QUEENS BROOKLYN BROOKLYN EAST BROOKLYN SOUTH ISLAND developmentsiteadvisors.com / 5 A Fresh Look at FRESH (as published by the Commercial Observer) LEV KIMYAGAROV, MANAGING PRINCIPAL, CO-FOUNDER The Food Retail Expansion to Support Health These zoning bonuses are found clustered in (FRESH) Program was implemented in 2009 as 4 areas of the city: Harlem, the Bronx, Eastern a zoning program through the Department of Queens (Jamaica, Hollis, St. Albans, and Baisley City Planning (DCP) and a tax incentive program Park), and northeast Brooklyn. The zoning bonuses through the New York City Economic Development are not applicable in all of the areas that are Corporation (NYCEDC) to address the disparity of eligible for the FRESH tax incentives. Many sites lie access to quality food in large swaths of the city. outside these zones and outside the focus of many These underserved areas were experiencing higher buyers. instances of diet-related disease and in an attempt The lesser known financial incentives conferred by to remedy this, the city incentivized the renovation the NYCEDC include: or construction and operation of quality grocery 1. Sales tax is completely waived for eligible stores in the underserved areas. expenses incurred by the purchase of materials Speaking from our own experience, clients are to construct, renovate, or equip quality grocer most interested in the zoning benefits conferred by facilities. DCP that are achievable in the FRESH Zones: a 1:1 2. A one-time deferral of mortgage recording tax square foot bonus for eligible grocery store square relating to the project’s financing, from 2.85% footage above 6,000 SF and up to 20,000 SF. There to 0.30%, a nearly 90% discount are two other benefits in addition to the added ZFA: reduced parking in certain instances and grounds 3. Stabilization of building taxes based on pre- to increase the height of the building to fit the improvement assessed value for 25 years. A additional ZFA (subject to DCP approval). phase-out of the benefit begins in year 21 and continues through year 25 at 20% each year. In year 26, building taxes increase to full amount. Speaking from our own experience, clients are most Not only do the financial incentives decrease the interested in the zoning benefits conferred by DCP upfront cost, but the significantly reduced tax that are achievable in the FRESH Zones: a 1:1 square burden can make a grocery store financially viable foot bonus for eligible grocery store square footage in-place of more valuable ground floor retail. The above 6,000 SF and up to 20,000 SF. NYCEDC tax incentives only require a minimum 6 / Neighborhood Focused PlatformTM investment of $1MM and 5,000 SF dedicated to There are just over 4,600 commercial zoned sites food retail. The qualifying supermarket tenant with lots between 6,000 SF and 20,000 SF that lie does not have to be on the ground floor, a creative in both FRESH Zones and Opportunity Zones. The stacking plan that combines the ground floor cheaper cost of capital through Opportunity Funds lobby portion with a second floor area will allow a as well as the deferred and reduced capital gains developer to take advantage of a high-traffic retail tax coupled with the substantial tax breaks that corridor while obtaining FRESH Program bonuses can be obtained from the FRESH Program points as well. towards lower startup costs. NOI is higher due to There is now a unique opportunity to stack the greater density and stabilized taxes over the next benefits of various programs in order to create 25 years meaning a higher sellout at the end of the value in a tight market. One possible combination hold period. for a developer looking to hold a property long According to our analysis of data from the New term is combining the tax benefits of NYCEDC’s York City Industrial Development Agency (IDA), the FRESH Program with the tax benefits of the new count of FRESH Program sites has been trending Opportunity Zone Program. upwards while the timeframe between the IDA closing date and grocer operations commencement There are just over 4,600 commercial zoned sites is trending downwards. The FRESH Program is with lots between 6,000 SF and 20,000 SF that lie seeing renewed interest after a lull from 2014 to in both FRESH Zones and Opportunity Zones. 2016. Interest is now on par once again with 2013, the difference being that the timeframe between closing on the tax incentive agreement to grocer The Opportunity Zone Program benefits long term operation is considerably less. ownership and the areas in which both FRESH and Opportunity zones are found are rental markets, The NYCEDC’S FRESH program has incented they go hand in hand to synergize with one nearly 700,000 SF of new or renovated space in another. A project built using capital raised from an FRESH zones and has preserved or created nearly Opportunity Fund can take advantage of the FRESH 1,600 jobs. All parties benefit, developers, the Program to achieve tax benefits on both sides. If neighborhood, and the city as a whole. Doing well the asset is held for at lease 10 years, there would by doing good. be no capital gains tax burden on the profit after disposition. While no program currently has the power to magically turn a bad deal into a good deal, there is clear value to the FRESH Program that would set a property apart from other non-FRESH area properties, holding all else constant. developmentsiteadvisors.com / 7 The Two Bridges Project Explained BY LILY LUO, DIRECTOR Bounded by South St to the projects consisting of four towers south, Brooklyn Bridge to the that would achieve over 2,700 new west, East Broadway to the north, residential units in Two Bridges and Montgomery Street to the east, LSRD. The projects include a 1,008 we enter Two Bridges. This waterfront foot rental tower at 247 Cherry enclave, a majority of it in an R7-2 Street by JDS Development Group, zone, is home to a community that a 798-foot dual-tower project at 260 is predominantly in the low- and South Street by L+M Development moderate-income bracket. Partners and CIM Group, and a 730- Within these streets, we have a foot building at 259 Clinton Street. A smaller, five-block area bounded by total of 690 units will be allocated as Cherry St, South Street, Montgomery affordable units and 30% of the 690 Street, and Market Street. This locality would be set aside for seniors. was designated as the Two Bridges When the approval went through, Large-Scale Residential Development Manhattan Borough President, Gale (LSRD) in 1972. LSRDs are Brewer, and the New York City developments that involve several Council file a lawsuit challenging zoning lots that are planned together the decision, claiming that the as a unit and are subject to special “Developers be required to provisions that are designed to allow apply for a special permit and for greater site planning flexibility undergo ULURP because of and to achieve more efficient use the project’s ‘massive scale’ of scarce land.