20.3.12
Williamsburg Gains Inclusionary Housing
The Full Story below makes note of the $50M construction loan secured by LCOR to develop a large assemblage in Williamsburg at 250 North 10th Street. Being new development on empty lots, it's the kind of story that we at Cubed Advisory like to hear about. We could back out the numbers to estimated cap rates, construction cost/SF, unit cost etc., but there is another story buried in the numbers of this one.
Inclusionary housing.
Although not explicitly mentioned in the article, there is just no other way to take a 50,000+/-SF lot like 2050 North 10th, with a FAR of 2.7 and turn it into the 185,000SF development cited in the Full Story below. 185000SF is however what one gets if the site is developed to max out the inclusionary housing bonus and bring the FAR up to 3.6 (yes it doesn't work out exactly, but given rounding, mech shafts, etc. it's close enough). In the particular zone that 250 North 10th is in, developed inclusionary housing SF comes back at 125% bonus SF. For example, if one builds a 500SF inclusionary unit, one gets a 750SF floor area bonus above what the FAR would allow. This backs out to the inclusionary housing accounting for 20% of the total development.
Since inclusionary housing is mandated to rent at a less than market rate, there is clearly a trade-off here. Currently NYC caps rent for apartments in this zone at approximately $21/SF, while LCOR is looking to rent units in the mid $50s/SF- call it $55/SF. With 20% of the SF earning $21/SF and the remaining earning $55/SF, the blended price works out to $48/SF.
That's 12% less $/SF in rent (bad) over 33% more floor area (good) bringing in 16% more gross income- or roughly $1.3M annually (very good). Do we even need to mention what low income housing tax credits can do for this deal (really very very good)?
Which is the better story in the Full Story below? $50M construction loan or a $1.3M increase in revenue through smart use of zoning? Chicken and egg?
Labels: development, inclusionary housing, LCOR, multifamily, Williamsburg
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