Super-Tall Stalled

Plan for Lower Manhattan’s Highest Residential Tower Put on Hold

In what may be a harbinger of the decades-long  Lower Manhattan real estate boom coming to an end, the planned “super-tall” residential tower at 45 Broad Street (near Beaver Street), in the Financial District, has been put on hold.

In a story first reported by the online architecture and design journal, Dezeen, developer Madison Equities acknowledged that, “due to short-term conditions in the Lower Manhattan market, we have decided to delay on constructing the building in the near future.”

This comes after years of delays in clearing the lot, which was acquired by Madison Equities in 2014, and preparing to break ground. (Preliminary work on the foundation began 2016, but was halted and restarted several times.) The design, by architectural firm by CetraRuddy, called for a building 1,115 feet high, which would make it the second tallest building in Lower Manhattan (behind only One World Trade Center), and the tallest residential spire south of Midtown. The building was originally slated to welcome its first residents sometime in 2018.

The vertiginous plan was made legally possible by a controversial plan to install glass-enclosed elevators at two neighboring subway entrances (on Broad Street, between Wall Street and Exchange Place). Agreeing to fund this amenity earned the developer a 20 percent bonus in terms of allowable floor area, which translated into an additional 71,000 square feet of space within the building, spread over many additional floors.

The plan, “involves putting in accessibility on a subway station,” at the corner of Broad Street and Exchange Place, observed Mr. Ehrmann. “It might sound cruel on the face of it, but really, the developer just asked, ‘well, we want 70,000 square feet of extra” space in the building, “so what we can do that might let you consider that?” Mr. Ehrmann continued that the developers came up with their own answer: “put in an elevator on Broad Street at Exchange Place.”

Community Board 1 (CB1) initially opposed this arrangement, enacting a resolution in 2016 that noted, “any 13-foot-tall structures anywhere along Broad Street would destroy the historic view corridors” and that the structures would leave only a narrow sidewalk passage, approximately ten feet wide, between the glass cubes and the adjacent buildings. The following month, the Landmarks Preservation Commission (LPC) overruled CB1 and approved the plan.

Next came the City’s Uniform Land Use Review Procedure, which brought the issue back before CB1 in January, 2018. By that time, residents of nearby apartment buildings had begun to raise objections to the plan based on public safety. Noting that 45 Broad is within the “frozen zone” of heightened security that surrounds the New York Stock Exchange (which is considered an alluring target for terrorists), these residents voiced fears that a bomb would turn the glass elevator shelters into sources of deadly shrapnel.

This led to a combative meeting of CB1, where critics of the plan (mainly local residents and preservationists) and supporters (mostly advocates for the disabled) took turns pleading their respective cases. After more than a dozen advocates on both sides had made their arguments, CB1 enacted a new resolution, saying that it “does not oppose” the plan, but adding two conditions. First, CB1 asked that counter-terrorism experts at the New York Police Department (NYPD) further study the potential risk cited by the scheme’s critics. And second, the Board urged that the Metropolitan Transportation Authority (which oversees the subway system), “and the applicant work to create an elevator bulkhead that blends with the contextual historical architecture of the neighborhood as has been done in the past.”

The resolution concluded that, “while CB1 remains disappointed over the aesthetic element of the two subway elevators, we acknowledge the important human rights issue and prioritize the [disabled] access that would be provided by the elevators.”

The New York Police Department subsequently pronounced itself satisfied that the proposed elevators and their glass shelters would not pose a heightened risk to public safety. CB1’s second caveat, about redesigning the elevator structures to be more consistent with the surrounding, historical architecture, appears not to have resulted in any changes to the developer’s plan thus far.

After CB1’s January, 2018 resolution, the next legally required step was for the plan to be reviewed by the City Planning Commission (CPC), which held a hearing the following month. At that session, 11 supporters of the proposal spoke (including three members of the developer’s staff), and one critic rose to argue against it. In April, 2018, the CPC issued its determination, finding that, “the Commission believes that the grant of the special permit is appropriate and merits the full 20 percent floor area bonus as requested.”

One aspect of the plan that largely escaped public scrutiny was the comparative values of what the Madison Equities was offering, and what they stood to receive. The developer estimated that the two elevators would cost approximately $20 million. This is much higher figure than one quoted in September, 2015, by Andrew Inglesby, the assistant director of government and community relations at the Metropolitan Transportation Authority (MTA), who estimated the cost of installing such an accommodation at $5 million. But the price of apartments at a directly adjacent building, 15 Broad Street, indicate that creating the subway elevators may be a very profitable investment for the developer, even at the higher cost of $20 million. One apartment at 15 Broad Street, which offers 1,857 square feet of space, recently sold for $2,537,625, or $1,366 per square foot.

Of course, not all of the 71,000 extra square feet that would be created at 45 Broad Street as a result of the developer agreeing to pay for two new subway elevators would go into apartments. Common areas and utility spaces would necessarily consume some of this space. But if even two-thirds of that extra square footage could be monetized at the same price as the recent sale at 15 Broad Street, then the developer would realize a return of more than $64 million on an investment of $20 million. If the MTA’s cost estimate of $5 million proved closer to the mark, then the rate of return on this outlay, instead of three-to-one, would jump to a multiple of 12.

In spite of this generous public subsidy, Madison Equities appears (at least for the time being) unable to make the project work. There is no indication as to whether the planned subway elevators (on which work has yet to begin) will ever be completed.

But the developer of 45 Broad Street is not alone in facing crippling headwinds in the Lower Manhattan property market. Work has halted on another nearby super-tall residential tower, at 125 Greenwich Street (near the corner of Albany Street), where multiple construction contractors walked off the job last May, and filed liens against the developers for some $40 million in unpaid fees. This prompted several lenders — most prominently, the United Overseas Bank — to file notice with New York courts that they are owed $199 million in mortgage payments. That bank’s overall loan to the developers of 125 Greenwich is more than $450 million, and it is only one of half a dozen creditors.

Much of this discord at 125 Greenwich appears to stem from a slowing market for condominium apartments in Lower Manhattan, where ample supply (generated by the conversion, in recent years, of dozens of former office buildings to residential use) has led to slack demand and falling prices. The 125 Greenwich development team estimates the project’s total worth (with more than 250 apartments, and some 13,000 square feet of retail space at its base) to be somewhere between $850 million and $1 billion, but realizing such a valuation may prove to be an elusive goal. And with fixed costs and debt topping out at more than $800 million, the margin for error on such a project is slim.

Elsewhere in the Financial District, the vacant lot at 111 Washington Street (near the corner of Carlisle Street) remains the site on unrealized development schemes. It is being shopped for sale with an asking price of $260 million. The owners, father-and-son team Fred and Richard Ohebshalom, bought the 11,000-square-foot site of a former parking garage during foreclosure in 2011, for $57.5 million, then spent millions more assembling air rights from nearby properties on Washington and Greenwich Streets, which added more than 200,000 square feet to the parcel’s potential buildout, brining its total zoned potential to 360,000 square feet.

The Ohebshaloms quickly announced plans for a 30-floor luxury residential tower, which was to be completed by the end of 2014. When work never began on that project, they announced a grander plan, for 51-story apartment building, containing 429 apartments.

But all is not well in the House of Ohebshalom, which may translate into an opportunity for prospective purchasers. In March, 2017, the son sued his father for trying to sell the property for $148 million, a price that the aggrieved young man described in court documents as “woefully deficient.” (This would represent a 43 percent discount from the original asking price of $260 million.) The suit also alleges that the father had threatening to sell 111 Washington Street at the reduced price, “in a bad-faith effort to extract concessions,” from his son.

A week later, the younger Ohebshalom filed a second suit, accusing his father of having defrauded him by draining millions of dollars from trust funds controlled by the elder Ohebshalom, theoretically for the benefit of his son.

In the meantime, the site remains empty. The only activity at 111 Washington Street for several years appears to have been its use as a storage facility for portable toilets that the Port Authority needed for construction workers on the nearby World Trade Center site.