City Strikes Pricey Deal for Pre-K at Extell’s UES Condo Tower
The New York City School Construction Authority has leased the ground floor of Gary Barnett’s 30-story condominium building on the Upper East Side for a pre-kindergarten program, according to public records.
The agency, which develops and leases on behalf of the city’s Department of Education, inked a 15-year deal for 11,492 square feet at the base of The Kent, Extell Development Company’s 83-unit condo project at 200 East 95th Street at the corner of Third Avenue. The DOE will open a public pre-kindergarten in September in the Beyer Blinder Belle-designed building, according to a spokesman for the SCA.
Although it’s still under construction, the Kent is set to open at the end of 2018 and currently has apartments for sale ranging from a two-bedroom, two-bathroom unit asking $2.5 million to a five-bedroom, four-and-a-half-bath pad for $8.4 million.
Howard Kesseler of Newmark Knight Frank represented the SCA in the transaction, and it’s unclear if Extell had a broker. Kesseler didn’t immediately respond to a request for comment. A spokeswoman for Extell did not respond with a comment.
The city will pay $1.97 million annually ($171 a square foot) for the first five years of the lease, per the memorandum of lease on file with the Department of Finance, $2.17 million ($188 a square foot) annually for the following five years, and $2.38 million ($207 a square foot) for the 10th through 15th years of the lease. Asking rents for educational and medical space in Manhattan averaged $47 a square foot in 2017, according to data from CBRE.
While the rent seems expensive, schools have few alternatives when it comes to leasing space in pricey areas of Manhattan and Brooklyn. Commercial Observer recently talked to private school administrators about the struggle to find affordable locations to rent or buy in Brooklyn, and the public school system faces similar financial pressures as it hunts for space to expand throughout the five boroughs.
David Lebenstein, who heads C&W’s not-for-profit advisory group and handles deals for the SCA in the outer boroughs, said the rent might be justified if there’s a usable basement in addition to the 11,492 square feet stated on the lease.
“My gut tells me that they got a usable basement with high ceilings and some light and that it’s probably really 22,000 square feet, so that’s how they can justify it,” Lebenstein said. “It’s priced like retail, there’s no two ways about it. We did deals [for the SCA] all over Queens and it’s $30 to $50 a square foot, and rents are similar are in Washington Heights and Harlem.”
He added, “There are not a lot of options. They had a pressing need in this district, and they were probably oversold on whatever pre-k they had and needed more school seats.”
The pre-k lease comes as Mayor Bill de Blasio is aggressively expanding the city’s public pre-kindergarten programs. When the mayor took office in 2014, he announced that he would offer free, full-day pre-k for every 4-year-old in New York City. Then in April 2017, he rolled out universal pre-k for 3-year-olds, which would serve an expected 62,000 children.