IDA: If you build it, they’d better come.
The city’s Industrial Development Agency (IDA) this morning approved a controversial tax-incentive package to encourage development of a snazzy New York Diamond Tower on 47th Street.
While critics charged that the new building would merely “poach” existing tenants from older buildings in the city’s ancient Diamond District, interim IDA Chairman Joshua J. Sirefman asserted that the tower would instead keep diamond-related enterprises from abandoning the old area altogether.
“Not only will the creation of a 21st-century facility provide an opportunity for industry growth, it will ensure that the site, which is in the heart of the District and is an attractive location for other commercial or residential uses, remains diamond- and jewelry-related, helping to keep the Diamond District intact,” Mr. Sirefman said in a press release.
According to the IDA’s rather rosy written analysis of the deal, the project would also generate between $134 million and $149 million in revenues for the city over 20 years.
But in order to take advantage of up to $49.6 million in approved tax benefits, tower developer Gary Barnett of Extell Development must first live up to certain occupancy standards.
If, for instance, he “fails to fill at least 65 percent of the new building with diamond- and jewelry-related occupants and at least 20 percent with businesses that are new to or expanding in the city,” the developer gets no breaks to speak of.
Read the IDA’s full announcement after the jump.
– Chris Shott
NYC INDUSTRIAL DEVELOPMENT AGENCY TO FACILITATE CREATION OF DIAMOND TOWER IN MANHATTAN AND HELP SIX INDUSTRIAL AND NOT-FOR-PROFIT GROUPS EXPAND
Board Also Approves Post-Closing Resolution to Extend Terms of Agreement with MetLife
New York City, November 14, 2006 – New York City Industrial Development Agency (IDA) today approved financing assistance for the construction and development of a state-of-the-art diamond and jewelry center in Manhattan’s 47th Street Diamond District, as well as expansion projects for four not-for-profit groups and two industrial companies. New York City Capital Resource Corporation (CRC) approved additional assistance for one of the not-for-profits. In addition, the IDA Board approved a post-closing amendment that extends Metropolitan Life Insurance Company’s commitment to Long Island City and New York City in light of potential relocation of some of its employees. IDA and CRC are administered by the New York City Economic Development Corporation.
IDA Board granted preliminary approval to Extell Diamond Tower LLC for performance-based financing assistance in connection with the development and construction of the New York Diamond Tower, a fully integrated, state-of-the-art diamond center proposed for 47th Street in Manhattan. Benefits will be provided on a “sliding scale” dependent on the level of occupancy by businesses that are within the diamond and jewelry industry and businesses that are new to, or expanding in, New York City. If 85% of the building is filled with diamond and jewelry industry-related occupants and 50% with businesses that are either new to or expanding in the City, the developer would be eligible for City and State tax benefits equaling $49.6 million, of which $37.5 million would be provided by the City. Those benefits would include $28.9 million in real estate tax benefits, $9.2 million in sales tax exemptions for construction materials and a $11.5 million mortgage recording tax waiver. Extell will not receive any benefits if it fails to fill at least 65% of the new building with diamond and jewelry-related occupants and at least 20% with businesses that are new to or expanding in the City. The total cost of the project is estimated at $434 million, and it is expected to provide a net economic benefit to the City of $10.8 million in connection with construction and between $134 million and $149 million in connection with on-going operations.
“New York City’s diamond and jewelry industry is a valuable contributor to the New York City economy, and yet its backbone, the 47th Street Diamond District, has seen little investment over the past 30 years,” said Interim IDA Chairman Joshua J. Sirefman. “Our goal is to preserve and expand the District, which faces increasing national and international competition. Not only will the creation of a 21st Century facility provide an opportunity for industry growth, it will ensure that the site, which is in the heart of the District and is an attractive location for other commercial or residential uses, remains diamond and jewelry-related, helping to keep the Diamond District intact.”
The IDA Board also approved a post-closing amendment to modify the terms of an existing agreement with Metropolitan Life Insurance Company based on possible changes to the company’s New York City operations. The amendment extends the requirements relating to MetLife’s occupancy in Long Island City by three years, calling for the company to keep at least 85% of its Long Island City facility occupied through June 2008 and at least 30% occupied through December 2014. Under the original agreement, the company would have been able to vacate 15% of its space immediately, 30% in April 2007 and 100% in June 2011. The amendment also extends MetLife’s commitment to keep its headquarters in New York City to 2026 from 2021. The company agreed to make a one-time repayment of $5 million to IDA if its occupancy in Long Island City falls below the level now required. In addition, the company agreed to forfeit the approximately $13.4 million in remaining benefits from its original agreement.
“The new agreement with MetLife extends the life of the company’s commitment both to Long Island City and New York City generally at no additional cost to the City,” said Sirefman. “Not only did the company commit to keeping a significant presence in Long Island City through 2014 and in the City through 2026, the City is no longer obligated to pay more than $13 million in benefits still owed.”
Inwood House is a not-for-profit organization that provides youth development, pregnancy prevention and family support services for pregnant and parenting teens in foster care. The organization will use approximately $8.4 million in tax-exempt bond financing and a mortgage recording tax waiver of $245,000 to renovate, improve, equip and furnish an existing 22,500-square-foot building on East 82nd Street in Manhattan. Renovations include improvements to floors that currently house 34 expectant teen mothers and conversion of the basement and first floor into a Family Learning Center that will include classrooms, a computer lab and meeting and counseling spaces. The administrative offices will also get a technology upgrade as part of the renovation. The project, which is expected to cost about $10.2 million, will retain approximately 55 jobs and create 15 new positions.
IDA approved approximately $8.8 million in tax-exempt bond financing for The Studio School on West 95th Street in Manhattan. The not-for-profit co-educational school, which serves students from nursery school through grade 8, will use bond proceeds to refinance two loans used to acquire and renovate two existing adjoining brownstones, as well as fund additional renovation, equipping and furnishing of the new facility. The school has experienced tremendous growth in the last several years and has outgrown its existing space. The project, which is expected to be completed by September 2007, will cost about $8.8 million and will allow the school to add four new positions to the staff of 16.
IDA approved approximately $42 million in tax-exempt bonds and a mortgage recording tax waiver of about $1.2 million for Vaughn College of Aeronautics and Technology. The not-for-profit, private, four-year college, which provides education in engineering technology, management and aviation, will use the bond proceeds to refinance existing IDA bonds and construct, renovate and equip an approximately 46,400-square-foot residential hall on the College’s campus in Queens. Proceeds of the earlier bond issuance totaled $22 million and were used to construct and equip classroom and engine testing space, as well as a hanger structure and public assembly area and lab space. The residence hall will allow the school to increasing overall enrollment by 200 students housed in the dormitory, while maintaining its current enrollment of local commuter students.
CRC approved approximately $7 million in tax-exempt bonds for Poly Prep Country Day School in Brooklyn. The not-for-profit co-educational private school, which serves students in nursery school through grade 12, will use the bond proceeds to finance and refinance the renovation and equipping of its lower school building, as well as construct and equip an 18,400-square-foot addition to the lower school that will house the administrative headquarters, academic space and other school-related programs. IDA also approved a mortgage recording tax waiver of $196,000 for the project. Total cost of the project is expected to be about $15.5 million and will create and retain more than 44 jobs.
Mondial Automotive Inc. and Kal-Bros Inc. will receive sales and real estate tax benefits of about $2 million and a mortgage recording tax waiver of about $78,000 to acquire and renovate a new building on 15th Avenue in the College Point section of Queens. The manufacturers and distributors of electrical automotive and non-automotive components maintain that in order to continue to grow and remain competitive in the industry, additional and better space is needed. The companies explored several locations in New Jersey, but IDA benefits will allow them to remain in New York City. In addition to tax benefits, the companies may also qualify for about $61,000 in discounted energy from the Business Incentive Rate program and about $111,000 from the City’s Energy Cost Savings Program. The $5.4 million project will allow the companies to retain 27 jobs and add 11 new ones.
“The breadth of projects approved today by the IDA Board exemplifies the Agency’s commitment to helping a diverse array of companies and not-for-profits expand throughout New York City,” said IDA Executive Director Kei Hayashi.
The New York City Industrial Development Agency provides financing assistance to businesses, including small industrial and manufacturing companies and not-for-profit organizations. IDA is a conduit agency that issues tax-exempt industrial revenue bonds to assist eligible commercial, industrial, not-for-profit and other qualified entities to finance expansion opportunities. IDA also offers qualified companies abatements on sales, real estate and mortgage taxes. To request information and details on IDA programs, call (212) 312-3600 or e-mail email@example.com.