The Full Nelson

449 Washington Street – Rezoning Gives a $1m Boost in Value

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When I started in this business in the late 1990s, I witnessed first hand the impact that a rezoning could have on an area. Back then flee markets and parking lots lined Sixth Avenue north of 23rd Street. It was zoned for manufacturing use, so building ground up was not economically viable.

In an effort to stimulate the area, City Planning rezoned these blocks in 1999 to C6-4X, which allowed for high density residential. Shortly thereafter, several thirty story towers seemed to go up overnight, completely transforming the area. Without question, the land values more than doubled as a result. Owners of smaller properties on the side streets also benefited, as new retail and residential brought life to the area.

Today, property values are still greatly impacted by zoning changes. Nick Petkoff and I recently sold 449 Washington Street in TriBeCa with the help of Douglas Elliman, who represented the buyer. The property is a 25' wide loft building with a curb cut, a recording studio, and a caretaker's unit. Under the previous M1 zoning, only a small apartment was allowed for the owner's use.

In October of last year, City Planning rezoned the surrounding area to C6-2A, giving it full residential use. Before this, the best offers we received were in the mid $5m range. Shortly after the change, we received multiple bids in the mid $6m range. Ultimately, the price was driven up to $6,900,000 where it closed. A residential condo converter purchased it for $840/SF.

Smart buyers would be wise to track potential rezoning. If you have the patience to land bank, it can be very lucrative. Of course the risk is that the rezoning does not come through. I've seen individual properties pulled out of a rezoned area, so you must watch these proposals closely. I'd recommend having good land use counsel on board to get the best information.

To track proposed rezonings, you can visit: http://www.nyc.gov/html/dcp/html/about/prarch.shtml. As you will see, the city has several substantial initiatives on the table. Bloomberg's administration has helped transform the NYC landscape by taking under utilized areas and recreating them for the benefit of the community. It has greatly improved the city where we live while improving property values in the process.

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