The Times Square Marriott Edition at 701 Seventh Avenue has set a new record for the purchase price of Theater District air rights, paying $409 per square foot for 44,968 square feet of air rights, according to city records. The air rights, purchased by a development consortium led by the Witkoff Group, from the Booth and Gerald Schoenfeld theaters, will allow the new mixed-use development on the corner of Seventh Avenue and 47th Street to rise to 500 feet, bringing the building’s total square footage to 269,892 square feet.
The sale marked the first time that air rights in the Theater District Transfer District, which was created by the city in 1998 to allow landmarked theaters to cash out on their unused air rights, had surpassed $400 per square foot, according to an analysis performed for the Observer by TenantWise, a real estate services and advisory company.
Just recently, a second deal transferring air rights from the Broadhurst Theater to the site of the former Roseland Ballrooom, on West 52nd Street, also broke the $400 barrier, according to TenantWise, closing at $400 per square foot. (Earlier air rights transfers to the Roseland parcel, where a 58-story tower is slated to rise, came at much, much lower cost, with a 2008 sale of air rights from the Majestic Ballroom trading at $257 per square foot.)
The soaring cost of air rights in the Theater District Transfer District, which allows developers to build extra-tall buildings on the West Side of Manhattan between 40th and 57th streets, mirrors record highs that have been seen across the city, with the price-per-square-foot record topping out at an astounding $3,868, paid by Vornado for 3,936 square feet of air rights to enable the construction of a super-tall luxury tower, to be designed by Robert A.M. Stern at 220 Central Park South.
In Manhattan, the average price for air rights rose 47 percent in 2013 from the previous year, as The Wall Street Journal reported last week, increasing from an average of $207 in 2012 to $305 in 2013.
When the theater transfer district was first created, air rights could reportedly be acquired for less than $100 a square foot—”no one was buying them,” Robert Shapiro of City Center Real Estate told The New York Times in December, explaining that now, “there is a feeding frenzy going on in development in New York.” At the time, experts estimated that pending air rights transfers would go “well above $300.”
The most recent transfers to 701 Seventh Avenue bode well for financial health of the Shubert Organization, the owner of 18 Midtown playhouses: The transfer of 10,300 square feet of air rights from the Booth Theater at 221-231 W. 44th netted $4.2 million, while the Schoenfeld, formerly known as the Plymouth, transfer of 34,668 square feet of air rights from 234-236 W. 45th to the Times Square Marriott site bringing in $14.1 million.
The joint-venture developers on the mixed-use project at 701 Seventh Avenue are the Witkoff Group, Winthrop Realty Trust, Lorber’s New Valley LLC and Mark Siffin’s Maefield Development. The site itself was acquired for $430 million in 2012, as The Commercial Observer reported at the time. The development, a collaboration between high-end hotelier Ian Schrager and Marriott, is one of a handful of projects pushing the once-gritty, now Disneyfied district into more high-end territory. (Casualties of this transition include Sbarro’s, Tad’s Steaks and Pig & Whistle.)
Both the Witkoff Group and the Shubert Organization declined to comment on the air rights transfers. But Myers Mermel, chief executive of TenantWise, called the record-setting sales prices “a terrific development for the Theater District.”
“It goes to help fund the operation of these theaters. The rising market is setting a new standard as far West as Eighth Avenue,” Mr. Myers said. “The sales show the real benefit of these transfers districts.”
Mr. Mermel said that such transfers districts can be instrumental in helping landmarks pay the bills, while opening up development in a more strategic fashion than blanket upzoning. It is expected that part of Mayor Bill de Blasio’s new affordable housing plan will involve some liberalization of the current limitations governing air rights transfers—a move that has been supported in the past by both Housing Preservation and Development director Vicki Been and City Planning Commission chair Carl Weisbrod. A recent study by NYU’s Furman Center, of which Ms. Been was the former director, found that more flexible air rights policies could unlock thousands of units affordable housing.