NYC Grants $100M in Tax Breaks to Two Struggling Manhattan Office Buildings
The breaks aim to help the owners of aging office property finance major renovations
By Rebecca Baird-Remba January 23, 2024 6:13 pm
reprints
The New York City Industrial Development Agency (NYCIDA) greenlighted two tax abatements totaling nearly $100 million for a pair of struggling office properties at 850 Third Avenue in Midtown and 175 Water Street in the Financial District.
These are the first properties to benefit from Mayor Eric Adams’s new M-CORE (Manhattan Commercial Revitalization) program, designed to help aging and vacant office buildings in parts of Manhattan finance major renovations. The abatement can last for up to 25 years, and only buildings built before 2000 located south of 59th Street (excluding Hudson Yards and the area around Pennsylvania Station) are eligible to apply. Owners must plan to invest at least 75 percent of the building’s assessed value as part of the renovation.
The New York City Economic Development Corporation (EDC), which oversees the program with NYCIDA, said it received 11 applications for M-CORE renovations in the first round of submissions last year. At an IDA board meeting on Tuesday, the city approved giving a $58 million tax exemption for HPS Investment Partners to upgrade 850 Third Avenue and give 99c LLC $41 million in tax breaks to do the same at 175 Water Street. News outlet The City first reported on these two M-CORE applications.
At 850 Third, HPS plans to use the tax break to finance a slew of upgrades to the early 1960s glass tower, which currently is roughly two-thirds vacant. Those upgrades include updates to the lobby and ground-floor retail space, new amenity spaces, and energy efficiency upgrades to the windows, elevators, and electrical heating and cooling systems, EDC senior associate Weston Rich said during Tuesday’s meeting.
HPS said it plans to finance the $63 million renovation using investor equity. In exchange for the tax break, HPS must lease 5,000 square feet to a child care provider and at least one floor of the 21-story, 575,000-square-foot property as an incubator for growing companies.
Then in the Financial District, 175 Water owner 99c wants to finance a $150 million renovation for the 31-story property, which it picked up for $252 million in October 2022 from Vanbarton Group. The building has been 100 percent vacant after insurance giant AIG departed for 1271 Avenue of the Americas in Midtown in 2020.
The extensive revamp will include a full gut renovation of all the interiors, a new rooftop pool, a new four-story retail space on the ground floor, new tenant amenities, new energy-efficient building systems, and a renovation and enclosure of the public plaza on the ground floor, EDC’s Sophie King said during Monday’s meeting.
“Aging and vacant office space is hurting landlords, small businesses, and ultimately the future economic success of our city,” NYCEDC President and CEO Andrew Kimball said in a statement. “M-CORE will provide a critical shot in the arm for commercial real estate by facilitating the upgrade of underperforming offices into the amenity-rich space that today’s workers demand.”
The second application round opens Tuesday and closes in April. Applicants must not only demonstrate the need for tax incentives — namely by having significant vacancy — but must also have long-term plans for Local 97 retrofits, active ground-floor retail and a willingness to operate or lease to incubators for smaller companies.
Rebecca Baird-Remba can be reached at rbairdremba@commercialobserver.com.
