RFP RESPONSE MPA GSA Fleet Management Site
Mencher & Pendharkar Associates
Table of Contents 1. Executive Summary 2. Context 3. Building Programming 4. Main Tenant: MakerspaceNYC 5. Other Potential Tenats 6. Feasibility Analysis 7. Benefits Case
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Executive Summary We are Mencher & Pendharkar Associates, a New York City-based private development company.
We hereby submit this redevelopment proposal in
response to the RFP issued by the NYCEDC on March 25, 2020, for 870 Third Street in Brooklyn, New York.
The proposed development site is located in the neighborhood of Sunset Park, Brooklyn. A former GSA property, it is slightly larger than 33,000 square feet, with
one empty warehouse which was constructed in 1961. It has an FAR of 2.0 and is
zoned M3-1. The site has limited pedestrian accessibility and may require some remediation before its redevelopment, given the years of heavy automobile use by its previous tenant.
Proposal:
Our redevelopment proposal fulfills NYCEDC’s development goals of creating a hub for small scale manufacturing, maximizing job density and incorporating a publicly
accessible space that benefits the local community. Our proposal will provide economic and social benefits above and beyond those sought by the NYCEDC.
We propose the development of a 5 to 6 story building which utilizes an FAR of
5.0, which will be achieved through a rezoning of the site. The salient features of
our economic development proposal include a 7000 square foot green open space along 2nd Avenue. We have designated 115,000 square feet for manufacturing and
office space that will support more than 800 green jobs. We also propose rooftop farms which will provide benefits to the community while helping to lower energy costs. In addition, our proposal of anchor tenant as Makerspace NYC, and our careful selection of other potential tenants, preferring MWBE and locally-owned firms, reflect our commitment to the equity goals of the NYCEDC.
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Benefits: We anticipate a multitude of community and sustainability benefits. First, we expect greater access to jobs and connections in this innovative district through
our anchor tenant’s training programs. The building will adhere to the most
competitive standards of energy efficiency and offer multi-purpose space for
public use, which can be used for community programs, in addition to the shared garden on the roof of the building. To support these benefits, we also propose 20,000 square feet of rentable retail space on the first floor.
Feasibility:
Moreover, our financial analysis, discussed herein, demonstrates the economic feasibility of our proposal. We make use of available incentives from EDC and the City of New York to minimize project costs, and invest the surplus back into
improving the streetscape, walkability and attractiveness of the public component
of the project. We are excited at the opportunity to contribute to the redevelopment of this vibrant area, and we thank the NYCEDC for taking the time to consider our proposal.
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Context The site to be redeveloped, 870 Third Street in Brooklyn, is located in Sunset Park, a neighborhood in southwest Brooklyn located within the Southern Brooklyn Industrial Business Zone. The site was formerly owned by the U.S. General Services Administration and used for Motor Pool activities. It is Zoned M3-1, which is for heavy industrial and manufacturing use, and has a parking requirement. The FAR is 2.0, and the lot is 33,804 square feet, allowing for a buildable area of 67,608 square feet. Currently on the site is a 13,630 single-story warehouse building, built in 1961, which is classified as an E-9 warehouse.
Neighborhood:
Sunset Park is a diverse neighborhood. As of 2019, the ethic makeup of the area was 40% Latin or Hispanic, 29% Asian and 26% White. The median household income was $57,870 (while the NYC average was $61,920). The local poverty rate was 22.1% (while the NYC average was 17.9%). Within a 15-minute walk of the development site are Industry City, Liberty View Industrial Plaza, the South Brooklyn Marine Terminal, the Gowanus Generating Station, and Sunset Park, the 24.5 acre park from which the area gets its namesake. Industry City is a 16 building former industrial development covering 35 acres which has recently been redeveloped into office, manufacturing, commercial and event space.
RFP Goals:
The economic development goals set out by the RFP are threefold:
• Develop a hub for small-scale manufacturing focused on green processes and technologies; • Maximize density of blue and white collar jobs per square foot; and • Include a publicly accessible space with the option for community programming.
The RFP Requirements include (1) Sustainability goals, (2) specific design details, and (3) feasibility and economic impact considerations. As to sustainability, the RFP seeks a proposal that is pedestrian and micro-mobility accessible, that includes small-scale sustainable manufacturers (who employ green processes and technologies), and that complies with Coastal Zone Boundary requirements. As to the design details, the RFP seeks a development with devoted space for community use, integration into the existing urban fabric, and building programming to allow for both blue and white collar businesses. As to the feasibility and economic impacts of the development, it must create new, quality jobs, and seek to attract local businesses to relocate there.
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Challenges: We have identified a variety of challenges presented by the goals of the RFP. These include (1) the limited buildable square footage on the site given the current zoning; (2) developing a feasible mix of manufacturing and small businesses on a relatively small site; (3) available incentives; (4) neighborhood integration (area has mixed character); (5) the site is somewhat isolated, bordering a large parking lot; (6) may need to remediate site (increased costs); and (7) somewhat limited transit options near the site.
Bush Terminal
Industry City
SITE
Brooklyn Waterfont
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Redevelopment Proposal In formulating our proposal, we first established a set of approaches and goals. These include: (1) maximize buildable square footage by seeking a rezoning; (2) complement the existing built environment; (3) create an inviting open space for the public; (4) integration of green technology (up front costs); (5) improve existing transit infrastructure (including sidewalks, a new bus stop, and micromobility docking; (6) involve the community in decision making to extent possible; (7) identify potential tenants while constructing the project (immediate rents upon completion) based on RFP requirements; (8) hire for (M/WBE) to perform 30%+ of construction work.
The first key component of our proposal is to seek a rezoning of the parcel, from its current zoning of M3-1 to M2-4 (the same zoning as nearby Industry City). The present zoning of M3-1 allows for an FAR of 2, resulting in a maximum buildable area of 67,608 square feet on the site. M3-1 also has a parking requirement of one car space per 300 square feet. Since each car requires 300 square feet of space for parking and circulation, the parking requirement translates to one square foot of parking per square foot of buildable space. This only allows for a building similar to the size of the current structure on the site, and thus an economic development project designed to achieve the goals in the RFP would not be feasible under the current zoning.
If the site is rezoned to M2-4, the FAR will be 5 and thus the maximum buildable area on the site will increase 150% to 169,020 square feet. Additionally, there is no parking requirement under M2-4, further enabling us to maximize development on the site. And, more buildable square footage will permit us to build a higher building, allowing for higher floors with water views to be rented at a premium. There are various incentives available which make our proposal financially feasible. The first incentive which we intend to pursue is through the Industrial and Commercial Abatement Program administered through the NYC Department of Finance. It provides abatements for property taxes for periods of up to 25 years. The site is within the Brooklyn Industrial Business Zone, and is thus eligible
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for tax stabilization on building and land taxes for up to 25 years through the NYCIDA Industrial Program, administered through the NYCEDC. Additionally at the municipal level, we can seek an incentive through the NYC Relocation and Employment Assistance Program administered by the NYC Department of Finance. That program provides that to the extent jobs are relocated to Brooklyn, there is a 12-year tax credit of $3 per job per year for each job relocated.
We also plan to seek incentive zoning bonuses similar to nearby 25 Kent Avenue in Williamsburg. That development was granted additional 2.5. buildable square feet in exchange of developing 1 each square foot of space dedicated for manufacturing uses. Such incentive zoning would allow us to recoup costs of construction and maintenance of manufacturing space through leasing the additional area to uses which command higher rents.
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Building Programming We are excited to propose a transformative mixed-use building on the site, which we hope will develop into a hub for small-scale manufacturing on the Brooklyn waterfront. The building will utilize most of the buildable square footage under the 5.0 FAR, which the rezoning would allow for. A tremendous amount of thought and research around the context and history of the waterfront as well as city’ vision for its future will be considered while designing and defining the redevelopment. The overall design situates a five to six-story industrial and commercial building within the existing block, that is respectful to current and prospective neighbors in terms of height, massing, ground-level circulation, open space design and landscaping. Total Manufacturing space : 75,000 sq. ft. Total Office space : 40,000 sq. ft. Total Retail Space : 20,000 sq. ft
Rooftop Urban farm and solar panels Fifth Floor Office and coworking spaces Fourth Floor Manufacturing firms Third Floor Manufacturing firms Second Floor Anchor tenant, Programmable space First Floor Open plaza, retail spaces
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First Floor The first floor will accommodate an inviting and dynamic 7,000 square feet of open space adjacent to Second Avenue. The large open space would be flexible and can be adapted to a multitude of activities. We plan to partner with local community organizations like the Brooklyn Arts Council, which can showcase the work of local artists in this space, providing them with a large audience, and benefitting from the potential of future waterfront development.
Second Floor
At the second floor, the front face of the building will house an adaptable space which can function in various forms, such as a meeting space for community board meetings, weekend local markets to showcase things made in the Sunset Park neighborhood or as an installation space for artists, or for the tenants themselves. The main tenant would occupy half of the remaining floor space, including workshop and training spaces. The other half will have two tenant spaces.
Third, Fourth and Fifth Floor
Third, fourth and fifth floors will all have flexible rentable spaces, which can be divided or adjoined per a tenant’s space requirements, ensuring efficient space utilization. The fifth floor will have an open floor plan, with coworking spaces. This kind of workplace design is more suited for firms where the nature of the work involves more desk work and less prototyping or machine use.
Rooftop
The roof space will be leased out to urban farms such as Gotham Greens, which can supply food to upcoming hotel and retail scenes on the Brooklyn waterfront. The remainder of roof space will house solar panels to help offset some of the energy costs of the building.
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Representative images for types of spaces we imagine for the project
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Main Tenant: MakerspaceNYC Recognizing the importance of providing the community benefits requested in the RFP, we have partnered with Makerspace NYC, who will be our main tenant. Makerspace NYC is a community-oriented organization. Its facilities house many machines and tools including those for high-tech manufacturing. In addition, they offer training and apprenticeships, which would benefit young members of the community as well as the local workforce. Some of the demands of the community for the Industry City rezoning included a high-tech manufacturing hub and a high-tech school. We believe, by signing Makerspace NYC as our main tenant, we are respecting those demands. Moreover, their facilities are well positioned between a workshop and community spaces for interaction and support. During times of COVID pandemic, the makerspace locations were closed to the public and were manufacturing PPEs for health workers. There are ample examples of Makerspaces around the US supporting local businesses by equipping them with new tools and technologies. We imagine Makerspace NYC to fulfill that role and bring the benefits of Sunset Park’s developing innovation district to this community.
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Other Potential Tenants In seeking other tenants, we will aim to attract minority- and women-owned businesses (MWBE) and locally-owned and operated businesses. Some of the potential tenants which satisfy these requirements and have expressed interest in the project include • Ambrosia, which focuses on the concept of circular economy, and creates products from food waste. • Radiator Labs, which turns old radiators into smart heating devices. • HOWgood, which analyzes food chains worldwide, and manages large scale databases helping businesses optimize their carbon footprints. • Other than these, we’ve initiated talks with 19 former tenants from Bush Terminal, which had to vacate their spaces in the terminal to make space for EDC’s ‘MadeInNYC’ initiative. EDC is helping these tenants find spaces around the neighborhood. Most of them are run by local owners, with local workers and supply networks. Some of them have expressed interest in buying out space in our building.
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Feasibility Analysis Expected rents: We expect to lease out retail, manufacturing and office spaces at similar rents to what Industry City offers currently, or the rents which EDC charges for newly built spaces at Bush Terminal. The expected rents are $15-20 per sq. ft for Manufacturing spaces, $25-40 per sq. ft for Offices and around $35 sq. ft. for Retail spaces. Demolition Costs: We’ll need to demolish the existing warehouse on the site. We expect the demolition to cost around $200,000. Other than this, the following soft costs factor in additional risks and improvements.
Firstly, since the site has been covered by asphalt for a long time and used for motor pool activities, we need to factor in the costs for any soil remediation if needed. Secondly, we also factor in costs for lobbying for the desired rezoning, which if we go by the experience of Industry City, could be a long and difficult process. Thirdly, as mentioned later in this report, we intend to follow green building design principles, in line with the idea of a green manufacturing hub. Thus, we have factored in the costs of additional building improvements.
Benefits sought:
Ground Lease: Foremost, the agreement with EDC for a $1 ground lease forms the most important part of our analysis, on which the feasibility of the project, along with all its community benefits would depend. ICAP benefits: We also expect to receive tax benefits under the ‘Industrial and Commercial Abatement Program’ (ICAP). Since we’re leasing more than 10% of the spaces for retail use, as per the ICAP benefit schedule, we expect to receive a 100% tax abatement for 11 years, after which partial abatements continue until the 15th year after building completion.
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Feasibility Analysis : Spreadsheet Sample Stabilized Year Residual Value Model
5/6/2020
Median Market Rents in Sunset Park Use Sample Stabilized Year Residual Value Model Office 25-40 5/6/2020 Retail Median Market Rents in Manufacturing 15-20 Sunset Park Use Office 25-40 Economic Development Interventions: City and State Programs Retail Industrial and Commercial Abatement Program Manufacturing 15-20 NYCIDA Industrial Program PILOT Tax Abetment Economic Development Interventions: City and State Programs Industrial and Commercial Abatement Program NYCIDA Industrial Program Category: All PILOT Tax Abetment
Real Estate Tax Assumed rents Proposed FRates Number of Jobs 40,000 -5 30 320 35 20,000 -5 35 67 Real Estate Tax 75,000 -5 20 429 Assumed rents Proposed FRates Number of Jobs 40,000 -5 30 320 35 20,000 -5 35 67 75,000 -5 20 429
Lot Area Maximum Buildable Area Category: All
General Assumptions Lot Area Office Area Maximum Buildable Area Manufacturing Area Retail Area General Assumptions Total Area Office Area Manufacturing Area Value Projection per Unit (by NSF) Retail Area Potential Rent (Annual) - Office Total Area Potential Rent (Annual) - Manufacturing Potential Rent (Annual) - Retail Value Projection per Unit (by NSF) Total Annual Rent Potential Rent (Annual) - Office Less Vacancy Potential Rent (Annual) - Manufacturing Potential Rent (Annual) - Retail Less Full Real Estate Taxes Total Annual Rent Less Other Operating Costs Less Vacancy Plus Real Estate Tax Abatement Stabilized Net Operating Income Less Full Real Estate Taxes Less Other Operating Costs Capitalized Value Plus Real Estate Tax Abatement Stabilized Net Operating Income Cost Projection Per Unit (by GSF) Demolition costs Capitalized Value Hard Costs Soft Costs Cost Projection Per Unit (by GSF) Land Cost Demolition costs Total Development Cost Hard Costs Soft Costs Cost of Capital (Debt Service + Return) Land Cost Total Development Cost Total Upfront Costs Cost of Capital (Debt Service + Return) Residual Value Total Upfront Costs Residual Value
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Net to Gross Ratio
85% 85% 85%
Net to Gross Ratio
85% 85% 85%
Vacancy Rate
5%
Total Opex as % of Rent Vacancy Rate Improvements as % of TDC
35% 5% 15%
Total Opex as % of Rent Cap Rate Improvements as % of TDC
35% 5.0% 15%
Cap Rate
5.0%
Soft Costs as % of Hard
20%
Soft Costs as % of Hard Weighted Avg Cost of Cap'l
20% 10%
Weighted Avg Cost of Cap'l
10%
Amount per Unit
Amount per GSF
Amount per Unit
Amount per GSF
Amount per NSF
33,804 169,020 Amount per
NSF
1,200,000 1,500,000 700,000 3,400,000 1,200,000 (170,000) 1,500,000 700,000 (675,000) 3,400,000 (515,000) (170,000) 101,250 2,141,250 (675,000) (515,000) 42,825,000 101,250 2,141,250
33,804 47,058.82 169,020 88,235.29 23,529.41 158,823.53 47,058.82 88,235.29 23,529.41 25.50 158,823.53 31.88 14.88 21.41 25.50 (1.07) 31.88 14.88 (4.25) 21.41 (3.24) (1.07) 0.64 13.48 (4.25) (3.24) 269.64 0.64 13.48
(195,000) 42,825,000 (31,764,706) (6,352,941) (1) (195,000) (38,117,648) (31,764,706) (6,352,941) (3,888,000) (1) (38,117,648) (42,005,648)
269.64 (200.00) (40.00) (0.00) (240.00) (200.00) (40.00) (24.48) (0.00) (240.00) (264.48)
317.22 (235.29) (47.06) (0.00) (282.35) (235.29) (47.06) (28.80) (0.00) (282.35) (311.15)
(3,888,000) 819,352
(24.48) 5.16
(28.80) 6.07
(42,005,648)
(264.48)
(311.15)
819,352
5.16
40,000.00 75,000.00 20,000.00 135,000.00 40,000.00 75,000.00 20,000.00 30.00 135,000.00 20.00 35.00 25.19 30.00 (1.26) 20.00 35.00 (5.00) 25.19 (3.81) (1.26) 0.75 15.86 (5.00) (3.81) 317.22 0.75 15.86
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Benefits Case Community Benefits
Our vision for the redevelopment will dramatically improve the current site conditions. Beyond the inviting open space, the newly constructed building will have an attractive exterior, in kind with the local typology, and site design that will provide a warm and welcoming pedestrian experience. The buildings will be positioned to visually define the street edge. The projects will incorporate attractive, high-quality native landscaping, lighting, and exterior signage.
Sustainability Benefits
We will incorporate multiple sustainability measures in the project to exemplify a green manufacturing hub. First, we would adhere to New York City’s Local Law 86 requirements, even though we are not mandated to do so. Local Law 86 requires projects which receive more than $10 million in NYC funding to follow green building practices and incorporate green building elements. Since we propose to sell the roof space to urban farms and solar installations, we cut off passive heat gain and loss, bringing down the energy use.
Along with green building elements like living walls, we would install scooter charging stations on each floor, making it easier for tenants to carry their own scooters from the subway station which is otherwise a fifteen minute walk from the site.
In addition, we will lobby for a CitiBike station to be located adjacent to the site. This would help the tenants and future workers make use of the upcoming 26-mile Brooklyn Waterfront Bikeway which will pass right in front of the site. We also plan to approach the DOT and MTA and persuade them to extend the existing bus network to Second Avenue, given the scale of future development on the waterfront.
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Final Thoughts We firmly believe in the goals set out by the NYCEDC in the RFP, and are confident that our proposal, which makes use of available incentives, caters to community needs, and maximizes potential jobs through careful building programming and tenant selection, will result in strong economic benefits for the area and stakeholders. We are excited at the opportunity to contribute to the redevelopment of this vibrant area, and we thank the NYCEDC for taking the time to consider our proposal. Thank You.
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