THE IMPACT OF HUDSON RIVER PARK ON PROPERTY VALUES FALL 2008 EXECUTIVE SUMMARY

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1 THE IMPACT OF HUDSON RIVER PARK ON PROPERTY VALUES FALL 2008 EXECUTIVE SUMMARY

2 BOARD OF DIRECTORS Douglas Durst Ben Korman Ross Graham John Krevey Co-Chairs Matthew Mayer William J. Zwart Francis X. McArdle Treasurer Vince McGowan John Doswell David Redden Secretary Steven Salsberg Richard Dadey Arthur Schwartz Assistant Treasurer Douglas E. Sarini Robin B. Shanus Assistant Secretary David Tewksbury Tim Tompkins Robert Trentlyon Peter Tully Madelyn Wils Joshua Zamir A. J. Pietrantone Executive Director Tobi Bergman Meta Brunzema Albert Butzel James Capalino Cynthia Coulson Tom Fox Arthur E. Imperatore Jr.

3 Introduction Following the decay and marginalization of the West Side of Manhattan along the Hudson River throughout the 1970 s and 80 s, several projects were proposed to revitalize the region. In 1990, the Westside Waterfront Panel proposed the construction of Hudson River Park while suggesting two unconventional financing models to supplement limited public funding for new parks: 1) setting aside three commercial nodes within the park that would generate rental income, and 2) capturing a portion of the appreciation in value of properties adjacent to the park. After pledges of $100 million each from the City and State, the completion of the Master Plan and the Environmental Impact Statement, construction of the Hudson River Park began in 1997, and the Greenwich Village section of the Park was completed in The Chelsea Piers was the first of the three commercial nodes to be developed in the Park but little has been done to quantify or capture appreciation in adjacent property value, the other revenue source recommended by the Westside Waterfront Panel. Projecting that the revenue generated by the three commercial nodes (including the redevelopment of Pier 40) would not be sufficient to cover maintenance and operating costs as the Park continues to grow, Friends of Hudson River Park (Friends) commissioned this study as an initial step in securing a portion of the value added to properties adjacent to the Park. The study set out to determine to what extent the completed section of the Park impacted adjacent property values and recommend a mechanism to capture a portion of the appreciated value attributable to the park. < The Greenwich Village esplanade, and Bow Notch Bridge, 2006 > The Greenwich Village esplanade and piers under construction, 2001 Cover and Photo: Tom Fox

4 Findings 1. Approximately 20% of the value of properties within two blocks of the Greenwich Village section of the Hudson River Park can be attributed to the park. As 20% of the value of buildings sold in the area from is $48.5 million, and less than one quarter of the total number of properties in the area actually changed hands, one can extrapolate that the creation of the Park has added up to $200 million in value to all the properties in the affected area in that timeframe. 2. The initial public investment in the Greenwich Village section of the Park was $75 million. 3. The announcement of the intent to build the Park in 1990 had no appreciable impact on the value of real estate in the adjacent area. Prices began to rise only when construction of the Park began in Adjacent property prices increased sharply following the 2003 completion of the Greenwich Village section of the Park, suggesting that the completed Park contributed Photo: Shelley Seccombe < Derelict piers lined the Greenwich Village waterfront blocking river views and access, 1977.

5 substantially to the City s tax revenues. 5. The Park had an especially dramatic impact on adjacent condo sales, prices of which increased by 80% following completion of the Greenwich Village section in 2003 (as opposed to 45% in neighboring areas to the north and south). 6. Other factors contributing to the increase in property values might include: the introduction of premium residences (e.g., buildings designed by architect Richard Meier were erected), the landmarking of adjacent areas, and the removal of derelict piers and municipal facilities along the waterfront. 7. Other public revenue generated from the construction of the Park not quantified by the report might include: increased real estate transfer taxes due to increased sales activities in the revitalized areas, income taxes from wages paid to workers in constructing the Park and buildings in the neighboring areas, and sales taxes on materials and building supplies. Certain photos provided courtesy of Hudson River Park Trust < Today there are active and passive recreation opportunities on the waterfront for people of all ages.

6 Hypothesis The Study Methodolgy The study began with the hypothesis that Hudson River Park significantly increased the value of adjacent properties and sought to test this hypothesis by analyzing sales data from the neighboring regions and the City as a whole. A review of general literature on the subject indicated that an increase of property values of 10% 20% could be expected in neighborhoods abutting an open space or public park. The study identified the area bordered on the south by Canal Street, on the north by 14th Street, and three blocks inland from the Hudson River Park waterfront to be the Primary Study Area (when quantifying the value added by the Park, the smaller area directly opposite the Park from Clarkson to Gansevoort Streets was used). The Comparison Areas were from Chambers to Canal Street to the south and 14th to 59th Street to the north, as the Hudson River Park had not yet been constructed in these areas. The study analyzed data from 1990 to 2005, focusing particularly on the benchmark dates of 1997 (when construction on the Park began) and 2003 (when construction on the Greenwich Village section of the Park was completed). The Real Estate Board of New York (REBNY) provided data on all real estate transactions in Manhattan from 1990 to The study also examined data on co-op and condo sales during this period collected by Miller Samuel real estate consultants, and from the New York City Real Property Assessment Databases for 1997 and < The study identified the area 3 blocks in from the Hudson River Park as the Primary Study Area. > Hudson River Park at twilight, 2005 Photo: Shelley Seccombe

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9 The Analysis With this data, the study tracked average real estate prices in the Primary Study Area and in the Comparison Areas from 1990 to 2005 ( Average Price per Square Foot was the basic unit of measurement), and then compared the magnitude of increase in value in those areas over the same period. Initially, the study limited its analysis to building sales only, but this data did not provide a rich enough basis of comparison because condominium sales in the Comparison Areas were much higher than in the Primary Study Area, and one or two large building sales in a year could radically skew the findings. Thus, the comparison of prices was limited to the most recent data available for the last three years (2003, 2004, and 2005), condominium and building sales were tracked separately, and clearly outsized transactions were withheld from the study. Finally, a regression model (Hedonic or Proximate Econometric Model) was applied to the data incorporating the variables of Price (property value) and Distance from the Park to determine how much of the value of properties within three blocks of the Park should be attributed to the Park. < Enjoying the sunset on the Village waterfront, 2006 > Rebuilt Piers 45 & 46, 2007 Photo: Luca Vignelli

10 Discussion of Results From 1990 to 2005, property values throughout Manhattan increased steadily, but since 1997 the increase in values on the West Side south of 57th Street has outpaced Manhattan as a whole. Values in Greenwich Village have increased 300% in the sixteen years since the plan for the Park was announced, compared with 200% for all of Manhattan. Values in Greenwich Village increased 55% from 2002 to The number of building sales in the Primary Study Area remained relatively consistent from 1990 to 2003, but increased dramatically in 2004 and Meanwhile, the average sale price of buildings increased 135% from 2003 to 2005, compared with 110% in the Comparison Areas. Likewise, the average sale price of condominiums in the Primary Study Area increased 80%, as compared with 45% in the Comparison areas. Miller Samuel condominium data from 2006 suggests that the average price per square foot for a condominium in the Primary Study Area has risen to 20% 35% higher than average prices in the Comparison Areas. The Hedonic Model (which was applied only to building sales, not to condominiums) indicated that up to 20% of the value of properties within three blocks of the Park (between Clarkson and Gansevoort Streets) is attributable to the Park, with the greatest increases in percentages of value attributable to the Park occurring in the years from , and on the second block in from the Park (one block off West Street). > Bryant Park was converted from a dangerous eyesore to a well-used park with the support of surrounding property owners. Photo: Jim Henderson

11 As expected, the construction of the Hudson River Park has had an appreciable and documented positive impact on real estate values of neighboring properties. However, because revenue from the current commercial nodes within the Park will not sustain maintenance or capital replacement as the Park expands and ages, new sources of funding must be secured to overcome the projected shortfall. Otherwise, the Park will begin to decay and adjacent property values will consequently begin to drop (as illustrated by comparable situations at Union Square Park, Bryant Park and Central Park). The Bryant Park case is a particularly clear example of property values diminishing when the Park fell into disrepair and recovering only when the restoration or the park was complete and funding to maintain the Park in premium condition had been secured for the long term by establishing a Business Improvement District (BID). The Hudson River Park should likewise establish a maintenance fund to prevent decay in the future, and rather than relying solely on government allocations to maintain the Park, or on private charitable contributions, should consider drawing on the resources of the neighboring regions. After reviewing a variety of alternatives to capture a portion of the appreciated value, Friends recommends that a public review and approval process to establish a Business Improvement District (BID) for the Hudson River Park, through which adjacent property owners would be assessed a fee and the funds dedicated specifically to the maintenance and programming of the Park be initiated. While the economic and political viability of such a financing mechanism remains to be fully explored, the principle of assessing neighboring property owners seems sound, as these landowners benefit most from the added value of the Park and stand to lose the most if the Park were to fall into disrepair. Next Steps > Photo: David Shankbone The Union Square Partnership (USP), was formed in 1984 and became a model for other park restorations.

12 A Hudson River Park Business Improvement District There are many Business Improvement Districts (BIDs) in New York City where property owners pay into a fund to enhance maintenance and programming. The benefits of the BID are easily illustrated by the success of comparable initiatives in Bryant Park and Union Square Park. Revenue generated in the Hudson River Park BID could be used for overall Park operation, maintenance and capital replacement and/or targeted to improvements in the neighborhoods generating the revenue, i.e., Tribeca, Greenwich Village, Chelsea and Clinton, so participants see tangible benefit from BID payments. In addition, BID funds could be used to leverage, or match, other sources of public funding. Establishing the Hudson River Park BID will be challenging given the number of residential properties in the target area and the varying neighborhoods. SEGMENT 7 SEGMENT 6 SEGMENT 5 From W.44th St. From W.25th St. From Horatio St.. to W. 59th St. to W.44th St. to W.25th St. Clinton Chelsea NYC Sanitation NYC Passenger Ship Terminal Ferry Terminal NYC Tow Pound Javits Center H U D S O N R I V E R P A R K M A R > Rather than relying solely on government allocations to maintain the Park, or on private charitable contributions, the Hudson River Park

13 Currently, commercial property owners fund the majority of BIDs in New York City (although both the Union Square and Bryant Park BIDs include some residential property). Friends is aware that there could be an impact on low-income residents and long-standing small business owners who lease nearby facilities which will require special consideration. There are concerns that the BID could be used as a rationale to reduce public maintenance funding for the Park. Also, given the increased prices paid for properties, and the increased taxes already being paid due to Park proximity, residents might see the BID fees as an additional burden. However, without the creation of a BID the Hudson River Park will have to compete with other parks for limited funding and/or expand development in the Park to pay for maintenance. Otherwise the Park will deteriorate from insufficient maintenance and lack of capital replacement funds. Friends SEGMENT 4 SEGMENT 3 SEGMENT 2 From Clarkson St. From Chambers St. From Battery Pl. to Horatio St. to Clarkson St. to Chambers St. Greenwich Village Clarkson St. Tribeca World Trade Center Site NYC Fire Dept NYC Sanitation I N E S A N C T U A R Y 32 Hudson River Park Pile Field Marine Sanctuary Bike Path Municipal Commercial Not Part of Park should establish a maintenance fund by drawing on the resources of the adjacent neighborhoods as well.

14 believes that the establishment of the BID will provide the third of three elements of park funding anticipated when the Park was first recommended: public funding for the initial capital, funds generated within the park itself and funds resulting from a public investment in the Park supporting the long-term maintenance and programming. The NYC Department of Small Business Services (SBS) has a seven-month statutory process for vetting BID applications. Based on the results of this study, strong community support for the Hudson River Park and our understanding that projected revenue generated in the Park will not meet maintenance and programming needs, Friends will initiate the process to further analyze needs and opportunities in preparing an application for the establishment of a Hudson River Park BID to submit to SBS so a public review and approval process which includes local Community Boards, the City Planning Commission, City Council and Mayor can begin. Photo: Shelley Seccombe > Property values and the quality of life in Greenwich Village have been enhanced by the creation of the Hudson River Park. Photo: Luca Vignelli

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16 Commissioned by Friends of Hudson RIver Park 311 West 43rd Street Suite 300 New York, NY T F