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Midtown East Rezoning Plan Released
Practical Law Legal Update w-000-7399 (Approx. 4 pages)
Midtown East Rezoning Plan Released
by Practical Law Real Estate
| Published on 19 Nov 2015 • New York |
The East Midtown Steering Committee of New York City recently issued its proposal for the rezoning of the 73-block area around Grand Central Terminal (East Midtown Subdistrict). The rezoning plan would offer both economic and building incentives for developers that contribute to public space enhancements or infrastructure improvements in the East Midtown Subdistrict.
Update: On January 3, 2017, the Department of City Planning announced that the Midtown East zoning proposal will enter the uniform land use procedure (ULURP). The ULURP takes approximately seven months and will require City Council and Mayoral approval.
In late October, the East Midtown Steering Committee of New York City released its proposal for the rezoning of the 73-block area surrounding Grand Central Terminal in an effort to incentivize development. The proposal would affect properties from roughly East 39th Street to East 57th Street between Fifth Avenue and Third Avenue.
Background
The East Midtown Steering Committee was created by Mayor Bill de Blasio and Planning Commission Chairman Carl Weisbrod in September 2014, with Borough President Gale Brewer and City Councilman Dan Garodnick serving as co-chairs.
The goal of the rezoning effort is to ensure the area's continuing prominence as a world-leading business district. Nearly half of all commercial buildings in Midtown East are at least 50 years old. The plan seeks to encourage the development of new state-of-the-art commercial buildings to attract businesses, expand the city's tax base, and create permanent jobs while also benefitting the community by improving public spaces and upgrading transportation infrastructure.
The proposal also addresses environmental intiatives by mandating the development of energy-efficient green buildings. For more information on green buildings, see Practice Notes, Green Buildings: Laws and Practices and Owning and Leasing Green Real Estate.
Highlights of the Plan
Under the rezoning proposal, the city would provide developers with incentives, such as increased height allowances, expanded density assessments, floor area ratio (FAR) bonuses, and relaxed minimum setback requirements if certain criteria are met. Some of the key highlights of the proposal follow:
District Improvement Fund
To qualify for benefits, developers must contribute to a District Improvement Fund. The amount of the contribution is determined according to the square footage of the development. The funds would be used to finance infrastructure improvements and the development of aesthetic public spaces. Use of the funds would be overseen by a newly created government entity.
Payment-in-Kind Option
In lieu of monetary contributions to the District Improvement Fund, developers would have the option to make a payment-in-kind by constructing public improvements and receiving a credit for their expenditures.
Landmark Development Rights
The rezoning proposal would allow developers of qualifying projects to purchase development rights from landmark buildings through an expedited review process without a special permit.
Many landmark buildings have ample unused air rights because they are significantly under maximum height threshholds established for high-rise commercial buildings. Current regulations allow the transfer of unused air rights from one property to another directly adjacent building.
The proposal would allow for transfers of air rights to nearly any building located in the East Midtown Subdistrict. The Steering Committee estimates that landmark buildings could transfer nearly 3.5 million square feet of air rights under the plan, encouraging enormous growth in this district and new development.
However, 20-40% of the proceeds of the sale of the air rights would be deposited into the District Improvement Fund. Opponents of the proposal include several landmark building owners who object that the assessment amount is unfairly high, which undercuts the plan's goal of aiding historic preservation.
Sustainability Requirements
To receive the development incentives, the rezoning plan requires that developers exceed energy efficiency requirements under the New York City Energy Conservation Code by 15%. The proposal's sustainability requirements would be roughly equivalent to a gold designation under Leadership in Energy and Environmental Design (LEED) standards.
Practical Implications
If approved, the East Midtown Steering Committee's proposal will have significant implications on development in New York City. Commercial real estate counsel should be aware of the impact these proposals may have on their clients' businesses. The proposal is currently under review by the City Planning Commission and other city agencies. If approved, the proposal would begin the city's formal rezoning process.
For more information, see the amendment of the rezoning plan.