The Theater Subdistrict zoning that provides for air rights transfers within an area around Broadway has enabled prominent theaters to be preserved while providing funds for other theater-related uses.
The 15-year-old zoning plan allows landmarked Broadway theaters to sell and transfer air rights within the district, and not just on the same block or across the street as with regular zoning. The subdistrict is generally encompassed by West 40th and West 57th Streets between Sixth and Eighth Avenues.
In addition to sustaining the theaters through the income from the sale of their transferable air rights, commitments can be made to use portions of the new buildings for legitimate theater purposes; there’s also a specific contribution per transferable foot that is deposited into the Theater Subdistrict Fund.
So far 473,546 square feet of transferable development rights (TDRs), commonly called air rights, have been sold and generated a contribution of $6,421,880 to the fund for an average of $13.56 per TDR.
The first contribution was set at $10 per TDR and increased to $14.91 in 2006 and $17.60 in 2011. The zoning text requires a rejiggering of the contribution by City Planning no more than once every three years, but not less than once every five years based on the assessed value of the subdistrict. For instance, after the average assessed value jumped from $105.60 per foot in 2006 to $124.63 in 2011, it provided the basis for the rise in the contribution.
Air rights expert Robert Shapiro of City Center Real Estate says that while the transfers within the large district have created larger buildings, they have also preserved the low-rise theaters that would otherwise have no way to monetize the value of their air rights.
“These districts expand the use of the air rights from historical landmarks which can otherwise only transfer [TDRs] on the same block or across the street,” Shapiro said of air rights around the city. “It’s a commodity with an ever-increasing value as they originally sold for $85 a foot and now they are $500 a foot.”
In the Theater Subdistrict in 2008, Boston Properties paid $211 per TDR or $33,310,560 to the Schubert Organization for 157,636 feet for its new office tower at 250 W. 55th St. The development fund itself received $2.35 million from Boston Properties.
Just a year ago, Joseph Moinian and Starwood purchased 24,100 feet of air rights for about $225 each from the Shubert Organization’s Shubert and Booth theaters for the development of a hotel at 237 W. 54th St. According to public records, Shubert received $5,420,500 while the development fund received $424,160.
Tim Tompkins, president of the Times Square Alliance, the area’s business improvement district, said he believes the arrangement has “totally achieved” its purpose.
“The transfers have given the theater owners an opportunity to have some extra funds to renovate their theaters and allowed Times Square to continue to grow in a way that continues to feed the tax base of the city without causing any adverse effects on the residential neighborhoods,” Tompkins said.
After building up a war chest of over $5.6 million at the beginning of 2009, the Theater Subdistrict Council — the not-for-profit that administers the fund — began making various grants. It awarded $1.26 million in 2009, $2.15 million in 2010 and $1.3 million in 2012. Recipient organizations have included the Apollo Theater Foundation, Learning Through an Expanded Arts Program, the Roundabout Theatre Company, the Signature Theatre Company and Rosie’s Theater Kids.
Currently, a project proposed by Steve Witkoff and partners at 701 Seventh Ave., which will include retail along with a Marriott Edition Hotel, is in the process of permissions to receive 10,300 square feet of TDRs from the Booth Theatre and 34,688 square feet from the Plymouth Theatre.
Another 58,214 square feet from the Majestic Theatre and 1,182 square feet from the Broadhurst Theatre are in the process of being transferred to the upcoming Roseland Ballroom residential rental proposed by Algin Management. This site runs midblock from 239 W. 52nd St. to 242 W. 53rd St. and has also merged lots with the Virginia Theatre (now known as the August Wilson Theatre) at 245 W. 52nd St.
Meanwhile, Gary Barnett’s Extell Development has taken over a project that was being assembled by Boston Properties and the Related Companies at 750 Eighth Ave. that was to include an office building over a 406-space garage. In this case, the Boston/Related team had already agreed to purchase TDRs from the Shubert Organization’s Broadhurst Theatre, and was also buying the small building at the northeast corner of 45th Street housing the Frankie & Johnnie’s Steakhouse, which the Shuberts also own. Additionally, the developers had planned to purchase 120,319 square feet of TDRs from the Jacobs, Booth and Broadhurst theaters.
In order to complete the project, Barnett is likely now renegotiating the purchase of these TDRs and the finished development could also be changed from an office tower to become a hotel or residential condos.