235-foot Kips Bay residential tower moves forward with air rights deal

Excel Development Group is building a 23-story tower in Kips Bay. Rendering by GF55 Partners, map photo by Google

New renderings revealed for Excel Development Group’s 155-unit project on East 33rd Street

By Adam Pincus

A Queens developer is pushing ahead with a 235-foot-tall residential tower mid-block between Second and First avenues following the acquisition of air rights and a city rezoning, city filings show. 

Mikhael Heletz of Forest Hills-based Excel Development Group expects to construct a 155-unit, 123,000-square-foot high-rise that will replace four low-rise walk-up buildings. The tower will sit next to another 23-story building which has frontage on First Avenue.

Of the 155 units, 40 of those will be permanently affordable and 115 will be market rate. There will also be 6,400 square feet of ground floor retail. The building is being designed by the architecture firm GF55 Partners. 

Last month, the developer closed on a $2.75 million deal for development rights and a separate $11.2 million purchase of the fourth and final property for the assemblage.

The project illustrates cross currents within the Manhattan real estate market. Even as insiders say air rights prices have declined, the neighborhood has seen tremendous medical development which is driving interest in housing. In addition, institutional real estate investors have targeted the area for major residential acquisitions. For example Blackstone paid $620 million in late 2016 for the 894-unit Kips Bay Court and more recently a few blocks south, aan Israeli development firm purchased a residential site at 368 Third Avenue for $64 million last year.

Excel Development owns four properties from 339 to 345 East 33rd Street, purchased between August 2015 and December 2018, for a total of $26.3 million. In late 2016, the developer filed plans to demolish those buildings, but that filing was withdrawn in February the following year. The buildings currently remain standing. 

In December, the developer paid $2.75 million for 12,246-square-feet of development rights from 337 East 33rd Street. That air rights deal comes to about $225 per square foot, but with the additional value from the upzoning, the effective price per foot is less. In addition, the purchase includes an easement and a cantilever over the neighboring property.

Air rights broker Robert Shapiro, of City Center Real Estate, who was not involved in the transaction, said prices for transferable development rights have gone down generally in Manhattan. 

“The value of air rights have greatly diminished in the last year,” he said, pointing to the oversupply of condominium units and weak sales. 

In addition to buying the air rights, the project won the crucial support of the city’s Department of City Planning and the City Council, which approved the zoning change that would allow for the 23-story building. The zoning filings were made by Greenberg Traurig’s Deirdre Carson.

The zoning change approved in August — which includes 421-a and Mandatory Inclusionary Housing bonuses — allowed the developer to effectively double the size of the building.