[NYguy]

NY Post

SCHOOLS 'DEVELOP' $TRATEGY

By ANGELA MONTEFINISE
October 15, 2006


The city is looking to capitalize on a booming real estate market by leasing the air rights over schools in exchange for new buildings or the cash to construct them.

"We are actively looking at air rights all over the city," said Jamie Smarr, executive director of the Department of Education's Educational Construction Fund, which handles the leases.

The city has been leasing school air rights since the 1970s, but it wants to do more of it, at a higher price, in a hotter market.

Last week, the DOE announced its latest project under the plan - the reconstruction of PS 59 and the HS of Art and Design on Second Avenue and East 57th Street.

Developers World-Wide Group signed a 75-year lease and will pay a total of $320 million in that period. As part of the deal, they will also replace the schools with new, larger buildings and develop a 59-story tower with retail and 320 residential units.

There have already been 12 projects using the leasing of air rights, 11 in the 1970s. They created 4,500 apartments and 1 million square feet of office space, Smarr said. The projects have leases of 75 or 99 years and pump $20 million into the fund every year.

Steve Spinola, president of the Real Estate Board of New York, called the program "a natural," saying most schools are not built to the maximum size allowed, leaving leftover development space, or air rights.

Under the program, the city issues bonds to developers to rebuild and expand existing school sites alongside residential, commercial or office space.

The developers pay annual rent and fees to the city at a negotiated rate based on the market. The funds help pay back the bonds and, once the debt is paid off, go toward the DOE's capital budget.