Air Rights Go For Record $450 per Square Foot
The Nederlander Organization owns 9 of the 40 Broadway theatres, which makes it the second largest landlord on Broadway after the Shubert Organization, which owns 17. One of these nine is the Neil Simon Theatre, which is located at 250 West 52nd Street, between Broadway and 8th Avenue. Due to a zoning law break that was passed several years ago, Broadway theatre owners have the ability to sell the air rights above their landmark theatres – that is, literally the air above their buildings by the square foot. The reason for this ability to sell air is due to the landmark status of the theatres; most of the old Broadway theatres were built at a time when Times Square consisted mostly of three or four story buildings. Now that the area is predominantly made up of skyscrapers often in the realm of 20 stories high, the landlords of Broadway theatres were faced with a situation where they owned the air above their theatres but were unable to build into it. Therefore, a relaxed law allowed a marketplace for these air rights, so that the owners could profit from their real estate without violating the sanctity of the old theatre buildings. Of course, the landlords do not have an interest in demolishing the theatres, but they do have an interest in making millions of dollars off of selling air.
Though the Neil Simon Theatre is on 52nd Street, the law allows the theatre owners to sell their air rights to anyone in the theatre district, defined as the West side of Manhattan from 40th to 57th Streets. Therefore, the buyer for these air rights is a consortium – made up of Soho Properties, MPH Real Estate, and Hampshire Hotels Group – that plans to use the rights to build a skyscraper on 7th Avenue between 40th and 41st Streets. The new hotel will cost $300 million, and rise to 29 stories, or 400 feet, high. Additional purchases of air rights in recent years have gone for quite a lot of money, but $450 per square foot is a record. Specifically, the almost 20,000 square feet of air was sold for $8.9 million. When the air rights were first made available, there was not much interest, and they would sometimes sell in the range of $100 per square foot. More recently, the Shubert Organization has sold air rights for $225 per square foot, with pending transactions in amounts over $300 per square foot. However, this recent Nederlander deal of $450 per square foot is the highest air rights sale yet by a Broadway theatre.
Sale Benefits Theatre, Both on Broadway and Beyond
The ability for Broadway landlords to sell their unusable air rights is a sort of payback for the landmark status of their buildings, allowing them to make money off their valuable property without destroying the buildings. This money often goes to much needed repairs of the buildings, so that they can keep them in beautiful condition for the variety of plays and musicals that rely on the old buildings to be in a good state. However, there are also other tangential benefits to the theatrical community at large. Any buyer of theatrical air rights must additionally contribute to a fund to foster the development of new theatrical work. This fund is overseen by the Theater Subdistrict Council, who meet regularly to decide how to allocate the money. For every square foot purchased of theatrical air rights, the buyer must donate $17.60 to the fund. Thus far, the fund has dispersed around $5 million for theatrical development.