Eight-Figure Tax Break to Spruce Up Vacant FiDi Office Tower
The administration of Mayor Eric Adams has decided to confer a tax benefit of more than $40 million on an empty office tower in the Financial District. This largesse is being offered in exchange for a promise by the owner of 175 Water Street to undertake extensive renovations aimed at transforming the vacant structure into top-quality commercial space and filling it with prosperous office tenants, thus sparking financial frisson that will boost the local economy.
At Tuesday’s board meeting of the New York City Industrial Development Agency (IDA)—a non-profit corporation that seeks to stimulate development by allocating government subsidies—the discussion focused on plans by developer WSA Waterfront (which purchased 175 Water Street in October, 2022, for $252 million) to attract tenants from the newly imagined “FACT sector” of the real estate market. The acronym refers to “fashion, arts, creative, and technology,” but a web search for this neologism found not a single reference anywhere on the internet—and one IDA board member confessed he had never heard of it.
WSA Waterfront plans to spend $150 million on refurbishing the building and tricking it out with new-fangled amenities, like podcast studios and makerspace facilities. The proposed tax abatement of $41.3 million can be viewed either as subsidizing 26 percent of the cost of the renovation project, or rebating 16 percent of the total price that the company paid for the building.
But, cautioned IDA’s Sophie King in her presentation, “without the financial assistance provided by the agency, the company indicates they would not initiate the project as proposed and would seek an alternative development approach that would not result in the same activation of the building and surrounding neighborhood.”
The tax subsidy WSA Waterfront is seeking is not the only generosity the building will receive from the public. Under a controversial zoning change enacted in 2016, multiple buildings along Water Street are now permitted to enclose plazas and arcades (created as a public amenity, in exchange for which developers were allowed to erect buildings that were larger and taller, and therefore more valuable), creating new retail space. In the case of 175 Water Street, this entitlement will allow the owners to privatize and monetize 3,315 square feet of new retail space. The value of this square footage can be approximated based on the asking rent of a nearby vacant storefront, at 130 Water Street, which is being offered at $125 per square foot per year. This translates into slightly more than $400,000 in additional revenue for the owners of 175 Water Street.
In exchange for this support, WSA Waterfront predicts that inside of three years they will populate the building with firms paying their 741 employees an average wage of $99.41 per hour. (The source for this projection was unclear.) The IDA predicts that these jobs will result in $244 million in benefits to the local economy. At the end of the discussion, the IDA board voted unanimously to approve the proposed tax subsidy for 175 Water Street.