Creating Value Out of Air

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In 2015, one of our long-time partners was looking to divest themselves of a portfolio of parking garages in Manhattan. One of them, 110 E 16th Street, happened to be located in one of New York’s most coveted, vibrant and undersupplied condo submarkets, Union Square. Offering a rare combination of character and commercial convenience, the area’s diverse amenities range from flagship retail and world-class restaurants to boutique stores and neighborhood eateries, not to mention the widely popular Greenmarket, featuring up to 140 regional farmers, seafood purveyors, and bakers in peak season.

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As one of Manhattan’s busiest transit hubs, Union Square provides access to expeditious travel throughout the city and direct access to New Jersey and Brooklyn via 10 subway lines, over 10 bus lines, 15 Citi Bike stations, and the PATH. Adjacent to some of Manhattan’s most popular neighborhoods, it is also a short walk to Flatiron, Gramercy Park, Greenwich Village, and the East Village, to name a few.

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From a fundamental perspective, the supply and demand dynamics in Union Square were attractive, as the new residential pipeline in the immediate area was extremely limited. In fact, at the time of underwriting, there were no residential developments within a five-block radius of the project. Businesses, particularly in tech, have been pouring into Union Square, drawn by the wealth of local amenities and transit options. Facebook, eBay, Netflix, Hulu, and Adobe have set up offices in the neighborhood; and Microsoft recently announced it would consolidate all its New York offices into one flagship space in Union Square. Consequently, new development has been heavily focused on office and retail, creating a great opportunity to deliver high end condo product.

Currently sitting on our lot is a 196-space public parking garage, both an eyesore and environmental nuisance that contributes to traffic and congestion on the block. By replacing the garage, our project will accomplish several things: make 16th Street safer for pedestrians, provide additional housing to the transit-rich neighborhood, and improve and enliven the streetscape.

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Upon acquisition, our first order of business was to acquire additional development rights (up to 36,000 SF) from two adjacent lots on 15th Street. One was the Lee Strasberg Film & Theatre Institute, and the other a landmarked former Century Association building. The landmarked building was particularly interesting, as it gave our proposal the possibility to double the as-of-right height maximum in the area.  The light and air easement would provide residents with permanently unobstructed views, making those additional floors some of the most desirable residences in the downtown market. Shifting the permitted bulk away from 15th Street will also benefit the city, preserving the intimate, historic feel of the block.

In our upzoning negotiations, we settled on a direct purchase of air rights from the Strasberg Institute, happy to support one of the area’s most storied and important cultural institutions first-hand. The process with the landmark building was markedly more involved and required a special permit, allowing us to purchase the air rights in exchange for restoring the landmark to its original condition and ensuring its long-term upkeep. After getting approval from its owner, we underwent a two-year ULURP entitlement and approval process with multiple stakeholders, including the local community, Community Board 5, City Council, and finally the Department of City Planning and the Landmarks Preservation Committee. We addressed concerns from each along the way, ensuring the building would be a welcome addition to the continuously evolving neighborhood. During the entitlement process, the city expressed a need for an affordable housing component in our proposal. Recognizing this as a reasonable concession, in-line with our own values, we committed a capital contribution to two affordable housing developers to help fund future projects.

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During the entitlement and permitting process, which took over two years to complete, we continued to operate the parking garage, using the in-place income to mitigate costs. This also gave us the flexibility to wait out the pandemic, monitor the market, and find a more advantageous time to start development.  Though the process was lengthy and complicated, we were deeply satisfied with the end result: delighted to contribute to the city and community while adding tremendous value to our future building. Today, we’ve regrouped and restarted our design process, excited to deliver an elegant, contextual building harmonious with the architectural character of Union Square.