Real Estate Tax Incentives

As a neighborhood, Lower Manhattan has it all… it is home to some of the world’s most prestigious companies like Goldman-Sachs and Conde Nast. It has great transportation (which will get better with the new Calatrava designed Fulton Street Train Station), high end retail like Tiffany and Hermes and great food options with rents which have historically been about half the price of the mid-town equivalent.

With all this going for it, it may surprise you that Lower Manhattan has struggled attract and maintain office tenants since the ‘90s.

In 1995, the Lower Manhattan Economic Revitalization Program put into motion an incentive program called the Commercial Revitalization Program (CRP) which provides real estate tax abatements, utility reimbursements and other incentives to encourage businesses to occupy space in Lower Manhattan. Following the horrific acts on the World Trade Center on September 11th, 2001, this program was extended and is now on the books through 2013.

The CRP offers businesses located south of Chambers Street, a $10 per square foot rent credit. There are minimal qualifications that must be met by both landlord and tenant (see www.nyc.gov for details), but essentially tenants get a credit of $10/s.f. paid out over 5 years. This is a credit in the form of lower real estate taxes to the building that are passed on to the tenant. There are also benefits with respect to the commercial occupancy tax paid to the city for tenants paying more than $250,000 annually in rent.

Practically speaking, if you are a 40,000 s.f. tenant, this could be worth over $700,000 to your firm — $400,000 (40k x $10) in rent abatement and forgiveness of the 3.9% commercial occupancy tax for 3-5 years, would be worth another $300,000 or so given current market conditions.

Our question…who doesn’t want to save $700k?

The other key program in existence (though not relevant to Lower Manhattan) is the Relocation Employment Assistance Program (REAP) which grants city tax credits against a company’s business income tax. These credits are worth about $3,000 per qualified employee per year for 12 years. To qualify for REAP benefits, an eligible business must relocate from outside New York City or from below 96th Street in Manhattan to the eligible area, which consists of above 96th Street in Manhattan or to any of the other four boroughs – Brooklyn, the Bronx, Queens, or Staten Island.

Again, practically speaking, let’s say you’re a 100 person tech firm and you move to DUMBO in Brookyln, as a lot of tech firms are doing. This could be a $300,000 benefit per year for 12 years. We recently worked with a tech firm that did just this and they were able to achieve a single digit rent.

There’s a host of other benefits the City makes available to New York business owners – especially those who have more than 100 employees. As a medium to large sized business, you’re valuable to the city’s economy. The scope and range of incentives available are evidence of just how valuable businesses are to the city. A great resource for information and guidance in the world of incentives is the New York Grant Company (www.nygrants.com) as well as the City’s website referenced above.

In short, Lower Manhattan and the outer boroughs have and are, experiencing a rebirth and resurgence. Financial Incentives are available and knowing what’s what will be to your advantage. Don’t leave money on the table. Get acquainted!

Sources:
New York Grant Company nygrants.com
The Downtown Alliance downtownny.com