An owner approached me several months ago looking for advice on his property at 180 East 94th Street. The property was a 3 and a half story building containing a nail salon and two fair market residential units above, including a duplex with a roof deck.
His property had been on the market for a while with an asking price of $2,500,000. A buyer had offered $2,000,000, which he was considering accepting. He wanted to know if I thought it was a fair price.
After looking into the situation, I realized something unique: for a small, side street property it had substantial air rights. Because the property was located within 100 feet of the corner, it benefited from a C2-8 (R10 equivalent zone) with a floor-to-air (FAR) ratio of 10 times. Most mid block properties typically have a 4 times or under ratio.
The total buildable square footage is calculated by multiplying the total lot area by the FAR. In this case the lot was only 25.3' x 36.6', but with the 10 times multiple it had about 9,290 of buildable square feet (BSF). The existing building was only about 3,147 SF, so it had about 6,144 SF of air rights.
It was clear that someone wasn't going to build 10 stories on this small lot. In these situations, we look for assemblage opportunities to expand and create a larger site. In this case, the owner of the adjacent corner lot had no interest in selling.
Except in unusual circumstances such as Midtown West's Theater District, or if a property is individually landmarked (not just in a historic district), air rights can only be transferred to an adjacent property which overlaps by 10 feet.
In this case, with the corner property not cooperating, there were only two other options: the property to the east on the side street and a property on Third Avenue, which this seller happened to own as well. The property to the east did not benefit from the 10 times zoning, so there wasn'tpotential there. However, the owner's building on Third Avenue was a prime recipient for these rights as avenue development sites are almost always more valuable.
Thus, it was my recommendation that he sell his building without the air rights and transfer his air rights to his Third Avenue property for the future. We were confident that we could find a user to purchase the existing property in the $1,700,000 - $1,800,000 range. We estimated that the value of the remaining air rights would be worth as much as $1,250,000 one day when Third Avenue was ready for development. Over time, we felt the seller could net more than a million dollars more than selling the property in its entirety for the $2,000,000.
Ultimately we sold the property this month in an all cash transaction valued at $1,800,000 without the air rights. The sale price equates to $645.86 per square foot. The buyer was represented by Jeff Buslik and Staci Goodman of Adams & Co. “This was a win-win for the buyer and seller as the buyer did not have a need for the air rights. He will use this for his growingbusiness office,” Buslik said.
With this all in mind, when you're buying or selling, don't immediately discount the value of the air rights even if you don't plan on using them.