New Schools, 59-Story Tower To Rise at 57th St. and Second Ave.
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Reviving a development model from the 1970s, the city will permit a private developer to build a soaring residential tower on a low-rise, under-utilized city-owned site in Midtown in exchange for hundreds of millions of dollars that will be used to build at least two new city schools.
The developer, the World-Wide Group, has made an agreement with the city for a 75-year lease of a 1.5-acre site on East 57th Street and Second Avenue, and it will make payments to the city worth $325 million. The developer will raze the two existing schools on the site, P.S. 59 and the High School of Art and Design, build two new schools that will accommodate more students, and develop a 59-story apartment tower and a long, four-story band of retail stores.
The city will issue about $130 million worth of bonds to build the schools through its educational construction fund, but the debt will be paid back with the developer’s payments. The profit from selling the development rights is so great, according to city officials, that it will pay for capital improvements of other city schools around the five boroughs.
The executive director of the educational construction fund, run by the Department of Education, Jamie Smarr, said the city is now looking for additional, similar deals.
“Because our capital needs are so great versus the available resources, we are looking to greatly expand this model,” Mr. Smarr said.
He said the conditions of the existing schools, P.S. 59 and the High School of Art and Design, are among the worst of any in Manhattan. Last year, with the support of the schools’ principals, the city sought proposals from private developers to replace the schools and capture the development rights available at the site. World-Wide Group was the highest bidder, according to Mr. Smarr.
Because the planned development will occur on an as-of-right site, it does not require approval by the Planning Commission or the City Council.
The developer has met with the local community board and is in the final stages of planning and an environmental review. Construction on the schools is scheduled to begin in the first quarter of 2008, and should take about two years. The developer’s lease payments will also pay for a temporary facility that will house the students during construction and will serve as a working school for about 20 years.
A partner at World-Wide Group, David Lowenfeld, said the developer was attracted to the opportunity to recreate “an eminently forgettable area,” and he cited the value of having nearly 200,000 square feet of retail on one of Manhattan’s busiest crosstown streets. One of the retail spaces could house a Whole Foods or another supermarket, according to the existing plans.
The residential tower, designed by architects from Skidmore, Owings & Merrill, would be about 450,000 square feet. It would contain 320 residential units with rental apartments on the lower floors and apartments for sale up above. The residential tower would be separated from the schools by a courtyard. According to the plans, 20% of the rental units would be “affordable” and the developer would build 30 “affordable” units off-site under the inclusionary housing program.
The planned development is just a few blocks from the headquarters of Bloomberg LLP and One Beacon Court, a project by Vornado Realty Trust that mixed luxury apartments with ground floor retail, and that was fantastically successful, according to real estate experts.
Mr. Lowenfeld, a former executive director of the city’s Industrial Development Agency during the Koch administration, would not rule out switching to commercial development of the tower, but he said he favored residential. An office tower would require a zoning change and approval by the Planning Commission and the City Council.
World-Wide Group has built about 1,350 residential apartments in Manhattan, and was a partner in the development of the mixed-use Worldwide Plaza on West 50th Street.
This will be the 16th time the city has leveraged real estate assets to build schools using the educational constructional fund, but the model has been dormant since the 1970s. Last year, the city signed a 75-year lease with a private developer to build a junior high school and a residential building on 91st Street and First Avenue on the site of an old, vacant school.
In the 1970s, the city leased the site of 3 Park Avenue to a developer who built a 42-story commercial tower with a public school in its base. The Verizon Building at 375 Pearl Street and the adjacent Murry Bergtraum High School, near Police Headquarters, is also a product of the same program.
In the 1990s, a city study identified several possible sites suitable for similar development plans, including PS 9 on 84th Street and Columbus, PS 6 on 84th Street and Madison, PS 290 on 82nd Street between First and Second Avenues, and PS 51 on 45th Street between Tenth and Eleventh Avenues.
One of the problems with the program, according to Mr. Smarr, is that it only benefited schools in Manhattan, where real estate values are higher and zoning allows denser development. But in the last few years, real estate values have soared in the outer boroughs, and the city is now seeking proposals from developers for a school site in Park Slope, according to Mr. Smarr.
The local City Council member, Daniel Garodnick, said he would be closely following the project as it moves towards construction.
Mr. Smarr said that the public benefit should outweigh any concerns about the height of the building or disruption during construction.
“We are getting three new schools, and the affordable housing component,” Mr. Smarr said. “The public amenity is so great, it overwhelms whatever natural concerns someone might have over the scale of the tower.”
Deputy Mayor Daniel Doctoroff called the project a “win-win.”
“It’s a terrific example of what the public and private sectors can achieve when they work together for the benefit of the community,” Mr. Doctoroff said. “At the same time, this project will generate a financial return for the city that can be used to support school construction and renovation elsewhere.”