Fund Closes $4.2B Deal for School Build
By Natalie Dolce
Last updated:
June 18, 2008 11:09am
NEW YORK CITY-The New York City Educational Construction Fund has closed the first phase of an agreement with the World Wide Group LLC to construct two new schools here in conjunction with a 59-story--up to 715 feet in height--residential and retail tower at 250 E. 57th St. at Second Ave.
Anderson Kill & Olick PC represented the Fund in the transaction, negotiating the lease and development agreements encompassing all facets of the project, including the financial terms, design and construction, insurance and indemnity.
In June 2006, the Fund revealed that it had designated locally based World Wide Group to be the developer for the redevelopment here, which currently houses the High School for Art and Design. The project will include a new high school designed by Skidmore Owings & Merrill.
The project will also include a new elementary school, approximately 200,000 sf of retail space, and a 488,000-sf, 300-unit residential tower containing affordable and market-rate housing. In 2006, plans were to begin construction in late 2008. James Cullen, head of Anderson Kill's real estate and construction practice, tells GlobeSt.com that they hope to start construction by September.
As GlobeSt.com previously reported, the mixed-use project is expected to cost $500 million, and Cullen tells GlobeSt.com that that number is very much "in the ballpark". The High School for Art and Design will gain 40% more space than it has at present, incorporating an art gallery to display students' work and significant upgrades to its studios and labs, according to a prepared statement.
Under the development plan, as GlobeSt.com previously reported, the developer will receive a 75-year lease of the air rights within which the apartment tower and retail space will be constructed. The income from this lease will finance the construction of the new schools, also being undertaken by the developer.
The two schools will not tap into taxpayers dollars, and the lease will produce a 75-year stream of income that may be used for similar public school projects, according to a prepared release. In total, the air rights lease agreement has a capital value in excess of $4.2 billion.
As GlobeSt.com previously reported, in the first phase of construction, World Wide will focus on redeveloping the High School of Art and Design and Public School 59, the two schools currently located on the site. Phase II will focus on the mixed-use component of the project. An estimated 20% of the 320-residential units will be affordable housing. Phase II can not start until Phase I is completed, so the anticipated completion date for Phase II is 2015.
According to information found on the Fund's website, the current school facilities on the site date back to the 1950s and are outmoded. Cullen tells GlobeSt.com that it is "ironic that it houses the High School for Art and Design."
The project would require the temporary relocation of P.S. 59 to another site for nearly three years during construction of the new school facilities, however Cullen tells GlobeSt.com that the High School for Art and Design would remain in its current facility until construction of the new school facilities is complete.
The temporary relocation site for P.S. 59 is located at 213 E. 63rd St. between Second and Third avenues. Cullen explains that the temporary relocation site wasn't previously a school, it was turned into a school and "that site will continue to serve as permanent swing space, if other schools need to be renovated or overhauled."
He explains that the air rights leases are "a boon to New York City on multiple fronts--educational infrastructure, housing stock and livability. We are very pleased to have the opportunity to help the City maximize its air rights assets."
This is the second new development commenced by the Educational Construction Fund in the last 18 months, the first being a similarly structured deal to build a new 540-seat 80,000-sf $45-million middle school and 241,000-sf apartment and retail complex on East 91st Street that includes 155 cooperative apartments.
Anderson Kill & Olick, P.C. represented the Fund in both transactions. Construction for the project began in April 2007, GlobeSt.com has learned. That mixed-use development by the DeMatteis Organizations and the Mattone Group is expected to reach "substantial completion" by early 2009.
Copyright © 2008 ALM Properties, Inc.
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