An Evaluation of the Costs and Benefits of New York City’s Hudson Yards Redevelopment Project Michael Meola Eric Kober Kei Hayashi March 13, 2019 An Evaluation of the Costs and Benefits of New York City’s Hudson Yards Redevelopment Project Michael Meola Eric Kober Kei Hayashi March 13, 2019 Executive Summary: • The City’s goal to transform the Hudson Yards District from a largely vacant, underdeveloped transportation and distribution zone into a vibrant mixed-use, medium to high density district of workers, residents and visitors is being achieved ahead of projections, with over 30 million square feet of new development completed or in construction since the rezoning in 2005 • The $3.5 billion infrastructure investment that the City made, or has committed to fund, through Hudson Yards Infrastructure Corporation (HYIC) bonds to facilitate this transformation is paying off as the essential first step to attract vast private investment in the District that otherwise would not have occurred • Tax abatements in Hudson Yards are consistent with long-standing City practice to stimulate development where it is not occurring, and have contributed to the viability of commercial development in a previously fringe location • City payments to cover interest on HYIC’s bonds from 2007 to 2018 totaled $358 million; it is now estimated that future revenues from the District will not only pay off the bonds but will generate more than $21 billion in net revenues to the City • The opening on March 15th of the Related/Oxford Hudson Yards Project, the largest in the City’s history, built over the MTA Rail Yard on a billion-dollar privately funded platform, is the symbol of this remarkably successful public/private development that evidences the enormous strength of the City’s economy • The MTA has received over $1.2 billion for its property over the MTA Rail Yard and retains valuable development rights that it will be able to sell in the future • Additional benefits to the City include extension of the No. 7 Subway Line and a new Bella Abzug Park that serves all New Yorkers and visitors and that is maintained at no cost to the City, both funded by the City out of future revenues from the District, new cultural and educational facilities, and over 3,000 new affordable housing units (28% of all new housing) 1 BJH Advisors, LLC | 224 Centre Street, 6th Floor | New York, NY 10013 The map below, from the HYIC 2017 Official Statement, presents the Hudson Yards Financing District (HYFD) outlined in red, and identifies the major infrastructure investments. Exhibit 1: Hudson Yards Financing District (HYFD) Credit: HYIC 2017 2 BJH Advisors, LLC | 224 Centre Street, 6th Floor | New York, NY 10013 1. Introduction Fourteen years after the New York City Council approved the comprehensive rezoning of a vast swath of the Far West Side of Manhattan that has become known as the Hudson Yards District, a look at the skyline reveals a burgeoning forest of new towers. During the period from the rezoning in 2005 through early 2019, over thirty (30) million square feet of new office, residential, hotel, retail, cultural and educational buildings have been completed or are in construction within the district. See Table 1. An additional over twenty (20) million square feet of new buildings are in planning. See Table 2. The No. 7 Subway Line (No. 7 Line) was extended into the area to a new station at West 34th Street and Eleventh Avenue. During 2018 No. 7 Line entries at the 34th Street station averaged approximately 8,800 per day, ranking it among top 1/3 of stations in terms of usage, even before many of the new buildings are fully occupied.1 The Metropolitan Transportation Authority’s (MTA) John D. Caemmerer West Side Storage Yard (MTA Rail Yard) has been decked over by the Related Companies and Oxford Properties for the first section of their enormous Related/Oxford Hudson Yards Project on the Eastern Rail Yard, including office, residential, retail, hotel, 5 acres of public open space, the Vessel, and non-profit venue The Shed. The second phase, the Western Rail Yard, will bring additional residential and commercial space, a public school, and another 5 acres of public open space. This has already involved a private investment of $16 billion, toward an anticipated $26 billion total project cost, with $3 billion needed just to construct the platforms covering 26 acres of the MTA Rail Yard without any public subsidy or support. Other private developers have also invested billions of dollars in dozens of commercial and residential projects throughout the District. The first phase of a new boulevard and park system, Hudson Boulevard and Bella Abzug Park2 was completed in 2015, and an expansion to double its length is in planning. The Hudson Yards/Hell’s Kitchen Alliance, a business improvement district (BID), was formed to provide services to the district and to pay for the maintenance, public programs, and management of Bella Abzug Park3. 1 Daily ridership at the 34th Street Station provided for 2018 by MTA New York City Transit. 2 The former Hudson Boulevard Park was renamed Bella Abzug Park on March 1, 2019. 3 BIDs, controlled by district property owners, have authority to assess property, in addition to the City’s real property tax, to pay for district services. 3 BJH Advisors, LLC | 224 Centre Street, 6th Floor | New York, NY 10013 Table 1: Completed and In Construction Development Category / Name Address SF Units Completion 10 Hudson Yards 501 West 30th Street 1,900,000 NA 2016 55 Hudson Yards 380 11th Avenue 1,300,000 NA 2018 30 Hudson Yards 500 West 33rd Street 2,800,000 NA 2019 35 Hudson Yards 560 West 33rd Street 150,000 NA 2019 Hudson Commons 441 9th Avenue 700,000 NA 2019 1 Manhattan West 391 9th Avenue 1,900,000 NA 2019 Hudson Spiral 509 West 34th Street 2,575,000 NA 2022 50 Hudson Yards 427 10th Avenue 2,500,000 NA 2022 Office 13,825,000 Shops at Hudson Yards 500 West 33rd Street 1,100,000 NA 2019 Manhattan West Retail 391 9th Avenue 240,000 NA 2020 Retail 1,340,000 36 Hudson Hotel 449 West 36th Street 20,000 40 2006 Element 309 West 39th Street 140,000 345 2006 Lord & Moris 305 West 39th Street 30,000 80 2007 Wyndham Garden Inn 341 West 36th Street 80,000 225 2008 Candlewood Suites 341 West 39th Street 85,000 190 2009 Hampton Inn 337 West 39th Street 70,000 185 2009 Holiday Inn Express 343 West 39th Street 75,000 210 2009 Four Points 326 West 40th Street 100,000 250 2009 Fairfield Inn 330 West 40th Street 100,000 245 2009 Staybridge Suites 334 West 40th Street 130,000 310 2010 Distrikt 342 West 40th Street 65,000 155 2010 Yotel 570 10th Avenue 235,000 670 2011 Tryp 345 West 35th Street 90,000 170 2012 Cachet NYC 510 West 42nd Street 80,000 100 2012 Fairfield Inn 325 West 33rd Street 120,000 240 2013 Courtyard 307 West 37th Street 100,000 220 2013 Homewood Suites 312 West 37th Street 120,000 300 2014 Cassa Times Square 515 9th Avenue 40,000 90 2014 EVEN 321 West 35th Street 60,000 150 2015 DoubleTree 350 West 40th Street 180,000 610 2017 Four Points 444 10th Avenue 48,000 150 2017 POD 42nd Street 400 West 42nd Street 210,000 510 2017 Aliz 310 West 40th Street 140,000 280 2017 Hilton Garden Inn 330 West 37th Street 125,000 250 2018 Crowne Plaza 320 West 36th Street 100,000 250 2018 Staypineapple 337 West 36th Street 40,000 90 2018 Optima 333 West 38th Street 35,000 80 2018 Spring Hill/Fairfield Inn 338 West 36th Street 200,000 570 2019 Courtyard 461 West 34th Street 240,000 400 2019 Pestana 350 West 39th Street 200,000 610 2019 Equinox - 35 Hudson Yards 560 West 33rd Street 330,000 220 2019 Unnamed Hotel 342 West 39th Street 80,000 175 2019 Arlo 351 West 38th Street 125,000 500 2021 Pendry - Manhattan West 440 West 33rd Street 70,000 160 2021 Hotel 3,863,000 9,030 Olivia 315 West 33rd Street 580,000 340 2005 Hudson Crossing 400 West 37th Street 210,000 260 2005 Orion 350 West 42nd Street 510,000 550 2005 Atlantic Project 521 West 42nd Street 95,000 70 2005 Atelier 635 West 42nd Street 430,000 480 2006 38Nine 502 9th Avenue 30,000 40 2008 455 W 37 455 West 37th Street 440,000 400 2008 Emerald Green 320 West 38th Street 720,000 570 2009 Silver Towers 600 West 42nd Street 1,050,000 1,360 2009 505 W 37 505 West 37th Street 810,000 840 2010 Townsend 350 West 37th Street 170,000 210 2010 Unnamed 552 West 43rd Street 10,000 10 2010 MIMA 440 West 42nd Street 865,000 650 2011 Mantena 433 West 37th Street 100,000 100 2012 Crystal Green 330 West 39th Street 220,000 230 2013 Lana 511 9th Avenue 150,000 114 2014 Sienna 37 321 West 37th Street 80,000 80 2015 SKY 605 West 42nd Street 890,000 1,180 2016 555 Tenth Avenue 555 10th Avenue 620,000 600 2016 Eugene - Manhattan West 401 West 31st Street 590,000 840 2017 Skylight House 411 9th Avenue 12,000 25 2017 Madruga Project 445 West 35th Street 120,000 120 2017 Lewis 411 West 35th Street 190,000 190 2017 Henry Hall 509 West 38th Street 240,000 220 2017 15 Hudson Yards 545 West 30th Street 775,000 390 2019 Lalezarian Project 515 West 36th Street 320,000 250 2019 35 Hudson Yards 560 West 33rd Street 580,000 140 2019 Unnamed Project 441 West 37th Street 20,000 11 2020 Residential 10,827,000 10,270 Signature Theatres 480 West 42nd Street 75,000 NA 2012 Success Academy HY 500 West 41st Street 90,000 NA 2017 The Shed 545 West 30th Street 205,000 NA 2019 Cultural / Educational 370,000 Source: BJH TOTAL 30,225,000 19,300 Sources: HYIC OS 2012, 2017, NYCDOB, NYCDOF, NYC City Map Buildings under construction in blue.