|Science, Industry and Business Library (SIBL) in the former Altman building|
Did you know it ultimately cost the New York Public Library (NYPL) 25% more that it expected to build its new Science, Industry and Business Library (SIBL) when it bought part of the old B. Altman department store on Fifth Avenue? When it had mostly raised funds for the project in late 1991 it expected it to cost $80 million not the $100 million it ultimately cost.
SIBL Space Now Sold Off Cheaply
Was the Science, Industry and Business Library building worth the $100 million it cost the public when it was finished in 1996? At the time, the public and donors paying for the library were led to believe it was a spectacular achievement. But there is some startlingly underreported news, again about how things don’t always play out according to described plans, and it casts doubt on the proposition that it was worth what it cost: Last summer, sixteen years after the completion of this $100 million investment that (at least five years in the works!), the NYPL sold off most of the SIBL library space at a very substantial loss. See The Real Deal: Five floors of Madison Avenue offices nets $60.8M for the New York Public Library, June 22, 2012.)
The NYPL sold off five of SIBL’s six floors, 140,000 square feet or 87% of the library if you consider that square footage for SIBL is stated as an overall 160,000 square feet, for just $60.8 million. That means that something on the order of at least $25.2 million of what was spent on SIBL went down the drain. More went down the drain if you think in terms of inflation or what $100 million could have brought simply by being conservatively invested. The Real Deal’s Reported:
The New York Public Library has sold five floors of a Madison Avenue building for $60.8 million, according to the New York Post. The third through seventh floors of the Science, Industry and Business Library at 188 Madison Avenue near East 34th Street was purchased by the Church Pension Group, which will use the space as its headquarters. The space comprises 140,000 square feet and only the fifth floor is currently occupied.What might the library want to say to all its donors and the taxpayers whose huge $100 million investment has just been swept into the dustbin?
Should we simply ascribe the huge loss to the passage of time, thus being able to write it off? To me, 1996 doesn’t seem that long ago: 1997, only a year later "The Lion King" premiered on Broadway, an event that seems fresh in my memory that led to Julie Taymor’s recent involvement with “Spider-Man: Turn Off the Dark.”
Besides, if you own real estate and, particularly if you are willing to wait a little while isn’t its value supposed to go up? At the end of this article we will come back to the question of whether fair value is being received for the SIBL space being sold and at the same address a few mysteries. They may be an explanation as to why SIBL would be sold off at less than its true value.
Larger Plans Afoot
SIBL was underway in 1991 when the real estate market was in a trough. By contrast, 2012 was supposed to have been a pretty good year for NYC real estate and particularly commercial real estate in the Midtown South neighborhood where SIBL is located. Why is the library being sold off at such a substantial loss?
The Real Deal article tells us:
The sale is part of the library’s four-year-old initiative to sell real estate and raise money for its $1 billion master renovation plan.“$1 billion master renovation plan?” Most people have only heard that getting rid of SIBL is part of NYPL’s Central Library Plan, a plan to take 380,000 square feet of library space and reduce it down to 80,000 square feet of library space by selling off the 160,000 square foot SIBL, together with the 139,000 square foot Mid-Manhattan Library and demolishing the 80,000 square feet of research stacks under the Central Reference Library at 42nd Street and Fifth Avenue and then putting squeezing what’s left of those two sold libraries in where the research stacks were removed.
The Central Library Plan has not been priced yet. . . It isn’t even fully designed yet and NYPL executives haven’t even decided what they might want in the way of having books in the new library but so far they have estimated, subject to increase, the cost of reducing this library space down from 380,000 to 80,000 square feet will be at least $350 million. Largely because of Mayor Bloomberg’s specifications, New York City taxpayers will be paying at least $150 million of that cost. But the $350 million plus figure does not include the losses that the NYPL is incurring by selling off SIBL at so low a price. It should.
The New York Post “exclusive” from which The Real Deal story derived referred to the “master renovation plan” slightly differently and as going back to 2008: “The library announced in 2008 plans to sell some real-estate as part of a $1 billion master renovation plan.” Does the Post think that NYPL plans to sell real estate unveiled in 2008 will involve that much NYPL real estate being sold off?
The Times apparently never reported the sale of SIBL or the substantial loss being incurred but approximately one month before the news of the sale appeared in the Post and the Real Deal, the Times, paving the way for it, published an editorial praising the Central Library Plan of which this sale would be a part: A Library for the Future, May 8, 2012. (These Times articles from around the same time were more critical of the plan but not in terms of how library space was being wastefully sold off: Shh! Scholars Fight Over Library Plan, by Ginia Bellafante, June 8, 2012 and Public Library Head Faces Critics of Renovation Plan, by Robin Pogrebin, May 22, 2012 )
How We Paid For SIBL
Of the $100 million cost of the Science, Industry and Business Library, about half ($50 million) was paid for by charitable (tax-deductible) contributions made for the public's benefit and the rest was publicly financed by the city, the state, the federal government and even New Jersey indirectly had a hand in financing the library (the New York State contribution was delivered through the Port Authority of New York and New Jersey). The exact contributions of the taxpayers through these respective governments changed somewhat as the project maneuvered through to completion under the guidance of New York State real estate developer and NYPL trustee Marshall Rose. Mr. Rose was put in charge of the supervision of the entire real estate holdings of the NYPL by Vartan Gregorian, who became the NYPL’s president in 1981. Mr. Rose has continued to handle the NYPL’s real estate ever since, even during a period of time that he was chairman of the NYPL’s trustees.
The Times reported the following breakdown with respect to the funding April 6, 1993:
• New York City has pledged $10 millionThe above is in line with previously reported figures (and figures reported afterward) except that in 1991 it was reported that there would be $55 million in tax-exempt bonds, probably issued by the Dormitory Authority. Brooke Astor was another donor in the news.
• The state $7.5 million
• Project officials are trying to raise $7 million from the federal government, although only $1.9 million has so far been secured.
• $25.5 million in long-term debt will be financed by bonds issued by the State Dormitory Authority.
• The largest single private contribution, $7.5 million, was made by Lewis and Dorothy Cullman. (The 80,000-volume circulating library on the ground floor was to be named for them.)
Favorable Times Coverage For SIBL
|Click to enlarge|
The Times was reporting things like the following:
The most spectacular example of public-private enterprise is SIBL, the $100 million Science, Industry and Business Library that opened to great fanfare recently in Manhattan.(See: Adopting Branch Libraries, July 15, 1996.)
The new $100 million library, which occupies roughly 160,000 square feet in the former B. Altman building, is the largest single project the library has undertaken since the construction of its landmark main building was completed in 1911. It unites all of the library's various collections of scientific, technological, mathematical and business material, which had been divided between 42d Street and the library's West Side annex, and places them in a new environment that is itself a showpiece of technology.(See: Grandeur and Modernity in New Library, by Paul Goldberger, April 24, 1996.)
It was considered big. In an editorial whose title alludes to SIBL’s proximity to Macy’s the New York Times praised the new library as follows:
The new outlet is the library's biggest single undertaking since the main Research Library, at Fifth Avenue and 42d Street, was built. The New York Public Library's president, Paul LeClerc, calls it the largest public-private collaboration of its kind -- not just in New York but anywhere.(See: Miracle on Madison Avenue, May 11, 1996- The real estate industry has also sought to move Macy’s out of its building to turn it too into a real estate project.)
Interestingly, the Altman department store was built in 1906, just five years before the main research library. The Mid-Manhattan Library was similarly created making use of a former department store, the building that housed Arnold Constable.
|Mid-Manhattan Library, before there was scaffolding, the former Arnold Constable Department store|
Was there an unforeseen turnaround, a sudden change in the concept of what libraries should be, the advent of digitalization such that abruptly, after only sixteen years, large libraries were no longer desirable and very small libraries are instead preferred? Looking ahead in 1996 the prediction was against this:
"There is so much hype about electronic resources that if you allow yourself not to think about the future carefully, it's easy to believe it will be one without books," said William D. Walker, who is Andrew D. Mellon director of New York Public's five research libraries. "We're making an enormous investment in new space to hold future print collections. The book is an invention that will be difficult to bump by any technology."(See: Moving Bits, Bytes and Books To the Library of the Future;A New Branch Offers Data in Old Forms and New, by Bruce Weber, April 5, 1996.)
In point of fact, public demand for physical books at the New York City libraries is up.
An Elucidating Digression Into Library Building and Real Estate Games In Brooklyn
The idea that significantly smaller libraries were suddenly to become the fashion would take some time to get around. Until recently the real estate industry and developers saw libraries in a somewhat different light.
selected Enrique Norten of TEN Arquitectos in Mexico City to build a 150,000 square foot library across from the Brooklyn Academy of Music. The library was seen in terms of bigger real estate ambitions, the “sleek, all-glass, Enrique Norten-designed building is a main feature of the city’s plan to surround the Brooklyn Academy of Music with a Lincoln-Center-style campus that includes new housing and cultural institutions.” (See: Bruce to the rescue? Library courts Ratner for big cash infusion, by Ariella Cohen, September 2, 2006, The Brooklyn Paper)
|Library New York Times, August 15, 2006|
|2005: Proposed theater shown next to library.|
2007, the year that this “big” Brooklyn Public Library project was abandoned was the same year that the Donnell Library sale-for-shrinkage deal was announced. That’s when the fashion swung from building big libraries to selling city libraries and shrinking them.
The idea of having an Enrique Norten-designed library across from BAM persisted, however. It became (or maybe remained a chess peice) in a game of real estate development manipulation.
The Times article announcing the demise of the plans for the big Enrique Norten-designed library contained this:
Plans now call for a new headquarters for Danspace Project, which commissions and presents contemporary choreography, to be built at Ashland Place and Fulton Street, with a 20-story residential tower on top. A formal request for proposals went out to developers in February, and responses are due on May 18. David Walentas, the developer behind much of the Dumbo area of Brooklyn, said he would submit a proposal.The above, with its reference to a request for proposals (“RFP”- a form of bid that is often used to get around the bids having to actually and truly be honestly competitive) totally obscures from the public what happened. What happened should be a red flag for the public about what kind of improper real estate transactions are now being tolerated, nay intentionally structured, by library and city officials. . .
Mr. Walentas said he would consider being part of a revised library project that would also include private uses. He declined to elaborate.
. . The proposed library is now supposed to be included in the Walentas Two Trees Development BAM South project, but as became clear at City Council Land Use Committee hearings June 4th, Walentas got the right to build this property by bidding for city-owned property against nobody on an RFP for the right to build a “parking garage”: A “parking garage” (!!!), not the 300 units of housing now proposed to be built there together with the library and a great deal of other cultural space in a building that will be almost as tall as the Williamsburg Savings Bank building.
|Presenting the BAM South Porject at June 4th City Council Hearing. Image of BAM South alongside Williamsburg Savings Bank on screen, developer Jed Walentas on right|
|Walentas project at 180 residential unit size- At the June 4th hearing the developer said the city directed him to use the architect|
|The Walantas Two Trees development fully grown to 300 unit size from the "parking garage" RFP|
Am I the only person who has noticed that for a measly $26.5 million dollars, Two Trees is getting land that should be worth a around $65 million dollars? For the $20 million they are paying the city plus the lot worth $6.5 million they are transferring to BAM, they will be getting land with 371,000 buildable square feet. At an average market value of $150-$175 a square foot for a lot like this it would be worth $65 million dollars on the open market. Two Trees will be paying the equivalent of only $71 a buildable square foot for space that is predominantly valuable residential and commercial space.I haven’t checked Shahn Andersen's calculations but the calculations were for when the project involved 180 residential units. Increased to the 300 residential units now proposed the discrepancy between the benefit the developer is getting and what the developer is paying for it is far more extreme.
Why doesn't the city ask for RFPs for this space, or open up it up to competitive bidding? The people getting short changed on this deal are us, the taxpayers. As mayor, Michael Bloomberg has sure pushed through a lot of projects that seem to benefit private developers more than the taxpayers.
This is why City Council Member Tish James was entirely on target when, at that June 4th city council public hearing, she zeroed in with questions about the lack of public benefit the developer was delivering in building the project. Among other things, the value being discarded by the city could surely fund city libraries instead of being being handed out as gifts to real estate developers. Instead we find things are to the contrary, with the mind set library officials now have of selling off libraries to generate real estate deals; approving the BAM South projects stands to put the continued existence of the historic Pacific Branch Library in significant jeopardy.
Back to SIBL’s Sale
When all these real estate games are being played with library property it is important to ask whether proper value was obtained when the SIBL space was sold off. Maybe not. There are already significant and clear questions whether appropriate and full value was obtained when the Donnell Library was sold in 2007. See: Monday, May 27, 2013, More Thoughts On Valuation And What The NYPL Should Have Received As Recompense For The Public When It Sold The Donnell Library. It almost certainly wasn't.
Sale of the five-story 97,000 square foot Donnell netted the NYPL only $39 million while the 7,381 square foot penthouse in the 50-story building going up on its former site is being offered for $60 million.
It is hard to find comparables for and to judge what a vacant commercial condominium space like the SIBL space should sell for. The price of commercial space is generally affected by leases. If the property is affected by low-rent paying leases its value will be brought down. High rent paying leases will bring the value up. Low interest rates like we’ve had in recent years bring prices up, but for commercial space generally prevailing cap rates can also help keep prices down. If the purchaser of vacant space is buying space to occupy the space themselves as was the case when SIBL’s space was sold to the Episcopal Church’s Church Pension Group, prevailing high rents for leases in the city will tend to also drive up the price that will be paid for the commercial condominium property.
That being said as background, the sale of 140,000 square feet for $60.8 million comes to $434.29 per square foot. Information available from one brokerage firm says that for 2011 the average sale price, per square foot for commercial space in an office building was $701 while “the first three months of 2013 average price per square foot for the purchase of an office building was $703.”
If you go back and watch a contemporaneous pertinent Stoler Report episode: The Stoler Report: “The Office Market in New York” June 8, 2012 (taped May 10, 2012) you will hear the real estate experts on that show describing the market back then as strong but taking a pause in its growth. They also mention that the market was showing particular strength in Midtown South, the real estate area from the 30s to the teens between Fifth and Lexington where SIBL is located. The Empire State building on the block next to SIBL’s gets cited.
|SIBL and Empire State Building in background|
What induced the Episcopal Church’s Church Pension Group to take the space? The Real Deal article says that the Pension Group:
. . . plans to sublease its existing offices at 437 and 445 Fifth Avenue upon moving into the Madison Avenue property.That means that their existing lease was not up and that the deal they were offered on SIBL was good enough to induce them to incur the extra transaction costs of moving and subleasing. Did they have a sublease clause allowing them to sublease? At a higher rent?
That might be the an excellent place to end this article, but I won’t.
Let’s progress to one more mystery. The State Dormitory Authority issued tax-exempt bonds to finance SIBL. Why is it that when information about SIBL seems to have been furnished to the news media by the Dormitory Authority that SIBL’s space is reportedly cited as being larger? More like 200,000 feet rather than the generally recited 160,000 square feet?
Rebuilding buildings doesn’t always make them safer. Soon after SIBL opened there was a fire in the building that started in what were the fur vaults of the old Altman department store. Reporting on that fire the Times reported:
The Science, Industry and Business Library of the New York Public Library occupies nearly 200,000 square feet on the eastern end of the building. Opened with great fanfare in early May and hailed as something of a technological marvel, the library serves 3,000 visitors a day.(See: Fire on 34th Street Snarls Traffic and Shuts Library, by Janny Scott, August 24, 1996)
Similarly, this Times article reporting about Dormitory Authority financing uses a higher square foot figure:
The Dormitory Authority is also helping finance a $125 million project creating the Science, Industry and Business Library in 213,000 square feet on the lower eight floors of the Madison wing, scheduled to open later this year. CUNY's move, also authorized by state legislation and financed by public funds, will fill 375,000 square feet of Altman's remaining space, making CUNY the building's major occupant.(See: Neighborhood Report: Midtown; Domino Real-Estate Deal Cleared, by Bruce Lambert, August 6, 1995.)
The answer may be hidden in this Times article about real estate lawyers. It says that Gordon Davis, lawyer and former City Parks Commissioner (from 1978 to 1983) was working for the NYPL “which is looking for tenants to occupy expansion space in the new Science, Industry and Business Library at Madison Avenue and 34th Street.” (See: Lawyers Who Mold The Shape of a City, by David W. Dunlap, February 25, 1996.)
Did (or does) the NYPL own “expansion space” in SIBL, perhaps 40,000 to 53,000 square feet making up the difference between generally reported 160,000 square foot size of SIBL and these larger figures? It raises many intriguing thoughts. It also provides another place to end this article. . . .
. . . . If the Central Library Plan goes through and what is left of the SIBL and Mid-Manhattan libraries are crammed, after demolition, into small space occupied by the research stacks of the Central Reference Library, there will be no `expansion space’ for the resulting much smaller library.
That should remind everyone of what is true of all the libraries around the city: Once they are sold off for these real estate deals it will be virtually impossible for the public to get them back. (Even harder if they are sold off at below market prices.)