St. Bart’s and the Value of Air
Karsten Strauss Nov. 28, 2012, 8:30 a.m.
St. Bartholomew’s Church, 325 Park Avenue, finds itself at odds with Mayor Michael Bloomberg’s plan to rezone midtown to allow for taller buildings in that it will have to compete with the city when it brings its air rights to the auction block.
As a designated landmark, St. Bart’s must endure a laborious special permit process that could make their air rights less attractive to developers and building owners, said church chief administrative officer, Lawrence Graham. “We love that we’re a landmark but we don’t want to be put at a disadvantage by the city,” Mr. Graham said.
St. Bart’s controls roughly 600,000 square feet of air, worth a conservative $200 per square foot, he explained, putting total value at about $120 million. The church will now try to negotiate some leeway from city officials to increase its competitive edge when selling the empty space above its dome—which requires repairs that an influx of cash could finance, said Mr. Graham. “We will certainly reach out to other people—the community boards and elected officials. We will try to get our view heard by people.”
What Are ‘air rights?’
On an island like Manhattan, where space is at a premium and it’s impossible to manufacture more, air rights are a valuable and complicated commodity. With it a developer can build up higher, creating more real estate and value.
But exactly how do they work?
According to Theresa M. Nygard – senior vice president with KTR Real Estate Advisors – the typical way that air rights are traded is in a zoning lot merger, which requires developers in negotiation to have lots that abut by ten feet. Imagine, Ms. Nygard said, that building A abuts building B, which abuts building C. Building A can transfer its air rights to C as long as B is part of the deal. An air rights deal can become increasingly complicated the more buildings or lots are on the table, Ms. Nygard explained. Even more complications can arise if certain plots have different zoning regulations, she added.
St. Bart’s, and other landmark places of worship in New York, already have a tad more leeway when it comes to selling their air rights in that they are not required to adhere to the 10-foot abutment rule, Ms. Nygard said. They are also able to transfer rights across the street from their lots and diagonally across an intersection.
Price is a somewhat tricky aspect of the buying and selling of air. “Traditionally the thinking is that air rights should sell for a fraction of the dirt square footage,” Ms. Nygard said. However, since Manhattan square foot valuations can rise in the upper floors of buildings, making an accurate appraisal is a less than exact science, she said.
Unsophisticated sellers may be so enthusiastic to receive payment for the air above their heads that developers have been known to purchase air square footage for lower than market value, Ms. Nygard said. On the other hand, driving too hard a bargain could convince buyers to acquire those rights from other neighbors, leaving a potential seller with, literally, nothing but air. “It’s very much a poker game.”