MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Angela Fontaine, Partner, Real Estate — Calderwood & Harkness LLP
FROM: Grace Nakamura, Associate, Real Estate — Calderwood & Harkness LLP
DATE: March 20, 2026
RE: Zoning and Land Use Analysis — 450 West 34th Street, New York, NY 10001 (Block 754, Lot 42, Borough of Manhattan)
MATTER NO.: 1026-00003
CLIENT: Briarwood Family Office LLC
STATUS: Privileged and Confidential — Attorney Work Product
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I. EXECUTIVE SUMMARY
This memorandum presents the zoning and land use analysis for the property located at 450 West 34th Street, New York, NY 10001 (Block 754, Lot 42, Borough of Manhattan) (the "Property") in connection with the prospective acquisition by BFO 450 West 34th LLC (to be formed as a Delaware limited liability company and wholly owned by Briarwood Family Office LLC ("Briarwood" or the "Client")) from Meridian Gateway Holdings LLC ("Seller" or "Meridian") for a purchase price of One Hundred Twenty Million Dollars ($120,000,000). The purpose of this memorandum is to evaluate the zoning classification applicable to the Property, assess the conformity of existing uses and building bulk, identify potential development rights, and highlight issues that may bear on the Client's acquisition strategy and post-acquisition repositioning plans.
The Property is located within the C6-4 general commercial zoning district as designated on the Zoning Map of the City of New York. The C6-4 district is a high-density commercial classification that permits a broad range of commercial, residential, and community facility uses, consistent with the Property's location in the Hudson Yards / Penn Station corridor of Midtown Manhattan.
Key Findings. The existing mixed-use building — comprising approximately 186,400 gross square feet across fourteen (14) stories plus a cellar, originally constructed in 1928 and substantially renovated between 2016 and 2020 — constitutes a conforming use under the current C6-4 zoning designation and is built below the maximum allowable floor area for the lot. Based on our preliminary analysis, unused development rights of approximately 14,850 square feet exist on the zoning lot, calculated as the difference between the maximum allowable floor area of 201,250 square feet (at 10.0 FAR) and the existing gross building area of 186,400 square feet. If certain cellar and mechanical space deductions are confirmed, the unused development rights could be materially higher, potentially reaching as much as 32,850 square feet. These unused development rights may represent significant additional value and optionality for the Client.
This analysis was coordinated with Halcyon Planning Associates LLC (principal: Mark Espinoza, AICP), the buyer's zoning and land use consultant, located at 250 West 57th Street, Suite 1430, New York, NY 10107. Mr. Espinoza has been engaged by the Client to provide independent zoning and land use consulting services, including a detailed zoning floor area calculation and review of Department of Buildings ("DOB") records. His findings to date are consistent with the conclusions set forth herein.
Our findings should be confirmed with an updated ALTA/NSPS survey to be commissioned from Clearview Land Surveyors Inc. and should be reviewed against DOB records, including all alteration permits associated with the 2016–2020 capital improvement program. A separate violations and compliance memorandum addressing outstanding DOB, Environmental Control Board ("ECB"), Department of Housing Preservation and Development ("HPD"), and Fire Department of New York ("FDNY") matters is forthcoming and will be prepared by the undersigned as part of the broader due diligence workstream.
II. PROPERTY DESCRIPTION
A. Location and Tax Lot Information
The Property is located at 450 West 34th Street in the Borough of Manhattan, City and State of New York, with a mailing address zip code of 10001. On the City's tax map, the Property is designated as Block 754, Lot 42, Borough of Manhattan. The Property fronts on the south side of West 34th Street between Ninth Avenue and Tenth Avenue, within the broader Midtown West / Hudson Yards neighborhood. The surrounding area is characterized by a mix of high-density commercial development, institutional uses, and increasingly residential and mixed-use properties associated with the ongoing redevelopment of the Hudson Yards district.
The Property's lot area is 20,125 square feet as set forth in the existing survey prepared by Clearview Land Surveyors Inc. dated March 2, 2011, which was obtained in connection with the Seller's original acquisition of the Property. Because the existing survey is now over fifteen (15) years old, we have recommended that the Client commission an updated ALTA/NSPS Land Title Survey from Clearview Land Surveyors Inc. (or another qualified surveyor acceptable to the Client's title insurer) to confirm the lot dimensions, lot area, building footprint, encroachments, easements, and other survey-related matters. Until such updated survey is received and reviewed, all lot area calculations and related zoning analyses herein are preliminary and subject to adjustment.
B. Building Characteristics
The improvements on the Property consist of a single mixed-use building containing retail, office, and residential rental uses. The principal building characteristics are summarized as follows:
Building Class: Mixed-use (retail, office, residential)
Number of Stories: Fourteen (14) stories above grade plus cellar
Year Built: 1928. The building underwent a substantial renovation completed between 2016 and 2020, during which Seller expended approximately $14,200,000 in capital improvements. The renovation included modernization of building systems (HVAC, electrical, plumbing, elevator), renovation of common areas and lobby, and improvements to certain tenant spaces.
Gross Building Area: Approximately 186,400 square feet
The composition of the building's floor area is broken down approximately as follows:
Current Occupancy: The building is approximately 87.4% occupied overall, broken down by component as follows: retail is 100% occupied; office is approximately 81.2% occupied (with vacancy concentrated on Floors 8 and 9); and residential is approximately 94.7% occupied (reflecting two (2) vacant units out of thirty-eight (38) total units). The office vacancy and upcoming lease expirations in the commercial component have been identified by the Client as a value-add repositioning opportunity and are discussed further in Section IX below.
C. Current Ownership
The Property is currently owned by Meridian Gateway Holdings LLC, a New York limited liability company managed by Victor S. Papadopoulos and Elena K. Rosenberg. Meridian acquired the Property on April 14, 2011 for a purchase price of $68,500,000, as reflected in the deed recorded in the Office of the City Register, New York County. Seller is represented in the transaction by the law firm of Hargrove, Pettigrew & Sloane LLP, with Rebecca Tran serving as lead counsel. Due diligence requests for zoning-related documents, including the Certificate of Occupancy, DOB permits, and any Board of Standards and Appeals ("BSA") filings, have been transmitted to Ms. Tran and are discussed further in this memorandum.
III. ZONING DISTRICT CLASSIFICATION
A. Applicable Zoning District: C6-4
The Property is located within the C6-4 general commercial district as designated on the Zoning Map of the City of New York (Zoning Map Sectional Map No. 8c, as amended). The C6-4 classification applies to the entirety of the zoning lot encompassing the Property based on our review of the current zoning map available through the New York City Department of City Planning ("DCP") Zoning and Land Use Map (ZoLa) online database.
C6-4 is a high-density commercial district that permits a wide range of commercial, residential, and community facility uses. The district is designed to accommodate major commercial office buildings, large retail establishments, hotels, residential buildings, and mixed-use developments. C6-4 districts are typically mapped in central business areas and major commercial corridors throughout Manhattan, including portions of Midtown, Lower Manhattan, and Upper Manhattan, and are characterized by their generous floor area ratios and the absence of off-street parking requirements for most commercial uses. The Property's location in the Hudson Yards / Penn Station vicinity of Midtown Manhattan is fully consistent with the C6-4 district's intended character and the types of development typically found in such districts.
As a C6-4 district, the Property is subject to the regulations set forth in the New York City Zoning Resolution ("ZR") governing C6 districts generally, as modified by the specific "-4" height factor designation. The "-4" suffix indicates that the district is a "height factor" district, which permits the use of a tower form with no absolute height limit, provided that the building complies with the applicable sky exposure plane requirements and floor area ratio limitations. Alternatively, development may proceed under the tower-on-a-base regulations if certain conditions are met, as discussed further in Section IV.E below.
B. Applicable Zoning Resolution Provisions
The principal provisions of the New York City Zoning Resolution applicable to the Property include:
• Article III — Commercial District Regulations, including ZR §§ 31-00 through 39-00, which establish use regulations, bulk regulations, accessory off-street parking and loading requirements, and other development standards for commercial districts.
• Article VII — Administration, including provisions governing certificates of occupancy, non-conforming uses, non-complying buildings, and other administrative matters.
• Article I, Chapter 2 — Definitions, including the definition of "floor area," "zoning lot," and other terms of art relevant to this analysis.
• Article II — Residence District Regulations, which may apply to the residential component of the mixed-use building to the extent incorporated by reference in Article III.
Special District Overlays. In addition to the base C6-4 zoning, it is necessary to determine whether the Property falls within any special purpose district established by the City that would impose additional or modified regulations. The two special districts of primary relevance given the Property's location are:
(i) Hudson Yards Special District (ZR Article IX, Chapter 3) — The Hudson Yards Special District encompasses a large area generally bounded by West 30th Street to the south, West 43rd Street to the north, Seventh/Eighth Avenue to the east, and the Hudson River to the west. However, the boundaries of the Special District do not encompass all properties within this general area, and the precise boundary line must be verified against the Special District map.
(ii) Garment Center Special District (ZR Article I, Chapter 2, Appendix J) — The Special Garment Center District is mapped in portions of Midtown Manhattan generally between West 35th Street and West 40th Street, Broadway and Ninth Avenue, and imposes certain restrictions on the conversion of manufacturing space.
Based on consultation with Mark Espinoza, AICP, at Halcyon Planning Associates LLC, the Property at 450 West 34th Street does not appear to fall within the Hudson Yards Special District boundary, although the Property is in close proximity to that boundary. The Property also does not appear to be located within the Garment Center Special District, which generally lies to the north and east of the Property's location. However, given the significance of these determinations and the potential regulatory implications of special district inclusion, we recommend that this finding be confirmed with final survey results and through a formal DCP zoning lot certification or equivalent verification from DOB. Mr. Espinoza has agreed to undertake this confirmation as part of his ongoing engagement.
IV. FLOOR AREA RATIO (FAR) AND BULK ANALYSIS
A. Permitted FAR
The C6-4 zoning district permits the following maximum floor area ratios:
Under the C6-4 regulations, a mixed-use building containing both commercial and residential uses may generally develop to the maximum permitted FAR for each use, subject to applicable height factor or tower-on-a-base requirements. In practice, for a mixed-use building in a C6-4 district, the combined total floor area is governed by the applicable district maximums, and the total FAR for all uses combined shall not exceed 10.0 unless a floor area bonus is applicable (no floor area bonuses have been identified as applicable to the Property at this time). We note that certain Inclusionary Housing bonus provisions may be available in C6-4 districts that could increase the residential FAR to as high as 12.0 under designated areas with Mandatory Inclusionary Housing ("MIH") programs, but no such designation has been identified for this zoning lot and no such bonus is currently being utilized at the Property.
B. Maximum Allowable Floor Area
Based on the lot area of 20,125 square feet (as shown on the existing survey, subject to confirmation by updated survey), the maximum allowable buildable floor area on the Property is calculated as follows:
Lot Area: 20,125 SF × Maximum FAR: 10.0 = Maximum Allowable Floor Area: 201,250 SF
This figure represents the maximum zoning floor area ("ZFA") that could be developed on the Property as-of-right under the applicable C6-4 zoning district regulations, without the benefit of any floor area bonus or transfer of development rights from an adjacent lot.
C. Existing Built Floor Area
The existing gross building area ("GBA") of the building on the Property is approximately 186,400 square feet, as described in Section II.B above. It is important to note, however, that the zoning floor area ("ZFA") may differ — and in many cases does differ — from the gross building area. Under the Zoning Resolution's definition of "floor area" (ZR § 12-10), certain categories of space are excluded from the ZFA calculation, including but not limited to:
(i) Cellar space — Floor space in a "cellar" (as defined in ZR § 12-10, meaning a space with more than one-half of its floor-to-ceiling height below the "curb level" or "base plane") is generally excluded from the ZFA calculation, subject to certain exceptions for specific uses.
(ii) Mechanical space — Floor area used exclusively for building mechanical equipment (HVAC, electrical, plumbing risers, elevator machine rooms) is excluded from ZFA under ZR § 12-10.
(iii) Other deductions — Certain other spaces may be deductible depending on the specific circumstances, including stair and elevator bulkheads, loading berths, and other categories defined in the Zoning Resolution.
The cellar level at the Property encompasses approximately 18,000 square feet of storage and mechanical space. If the cellar qualifies for full exclusion from the ZFA calculation — which will depend on grade-level measurements and the relationship of the cellar floor-to-ceiling height to the curb level — then the existing ZFA could be as low as approximately 168,400 square feet (i.e., 186,400 SF GBA minus 18,000 SF cellar). Additional mechanical deductions on upper floors could further reduce the ZFA figure.
Halcyon Planning Associates LLC is currently undertaking a detailed ZFA calculation based on DOB-filed plans, architectural drawings, and field measurements to determine the precise ZFA of the existing building. This calculation is essential to accurately quantifying the unused development rights on the zoning lot. Pending receipt of Halcyon's final ZFA determination, we present the analysis below using both the GBA figure and the potential reduced ZFA figure as bounds:
We recommend that no final conclusions regarding unused development rights be relied upon until Halcyon's detailed calculation has been completed and reviewed.
D. Unused Development Rights (Air Rights)
As summarized above, the unused development rights — commonly referred to as "air rights" — on the Property are estimated as follows:
Based on GBA: 201,250 SF (maximum) − 186,400 SF (existing GBA) = 14,850 SF of unused development rights.
Based on estimated ZFA (assuming full cellar exclusion): 201,250 SF (maximum) − approximately 168,400 SF (estimated ZFA) = approximately 32,850 SF of unused development rights.
The precise quantum of unused development rights is pending confirmation by Halcyon Planning Associates LLC. The implications of these unused development rights for valuation and post-acquisition strategy are discussed in greater detail in Section VII below.
E. Height and Setback
In C6-4 districts, buildings may be developed pursuant to either the height factor regulations or the tower-on-a-base regulations, as set forth in ZR §§ 35-23 and 35-64, respectively.
Under the height factor regulations applicable to C6-4 districts, there is no absolute height limit. Instead, building height is controlled by the sky exposure plane, which establishes a sloping plane above a specified base height at the street line, beyond which the building may not penetrate. The base height for the sky exposure plane in C6-4 districts on a wide street (West 34th Street being a wide street) is 85 feet, with the sky exposure plane rising at a ratio of approximately 5.6:1 above that base height. Buildings that set back sufficiently from the street wall can rise to any height, provided they remain within the sky exposure plane.
Under the tower-on-a-base regulations (ZR § 35-64), buildings may be developed as towers with no sky exposure plane limitations, provided that the building provides a base that occupies a specified minimum percentage of the lot frontage and rises to a minimum and maximum base height, and provided that the tower portion of the building does not exceed a specified percentage of lot coverage.
The existing building on the Property is fourteen (14) stories in height with an estimated height of approximately 175 feet above curb level. The building was constructed in 1928, well before the adoption of the current Zoning Resolution in 1961. As a pre-existing building, certain height and setback characteristics that may not conform to current C6-4 sky exposure plane or tower regulations would be grandfathered as lawful pre-existing non-compliant conditions under ZR § 54-00 et seq. (the "non-complying building" provisions). Under these provisions, a non-complying building may continue to exist and may be maintained and repaired, but any enlargement, extension, or reconstruction must comply with current bulk regulations.
The updated ALTA/NSPS survey and DOB filings should be reviewed to confirm whether the existing building complies with the applicable sky exposure plane or tower regulations, and if not, to document the nature and extent of any non-compliant conditions. Halcyon Planning Associates LLC has been asked to provide a detailed height and setback compliance analysis as part of their engagement.
F. Lot Coverage and Open Space
C6-4 districts do not impose lot coverage restrictions for commercial buildings developed under the height factor regulations. Accordingly, the commercial and retail portions of the building are not subject to any maximum lot coverage limitation.
The residential component of the building (Floors 10–14, 38 units) may be subject to open space ratio requirements if applicable under the Quality Housing regulations (ZR § 28-20 et seq.) or the height factor residential regulations. However, because the building was constructed in 1928 and the residential use has been continuously in place (or was reestablished as part of the 2016–2020 renovation under applicable permits), the residential component is likely grandfathered under the non-complying building provisions of ZR § 54-00 et seq. No open space deficiency is apparent based on our preliminary review. The Halcyon analysis will confirm whether any open space requirements apply to the residential component and, if so, whether the existing building is compliant or grandfathered.
V. USE GROUP ANALYSIS
A. Permitted Use Groups in C6-4
Under the New York City Zoning Resolution, permitted uses in commercial districts are organized into "Use Groups" ranging from Use Group 1 through Use Group 18. C6-4 districts permit uses within Use Groups 1 through 12, which encompass a broad range of residential, commercial, community facility, and select manufacturing and light industrial uses. This wide range of permitted uses is one of the most advantageous characteristics of the C6-4 zoning for the Client's purposes, as it provides significant flexibility for retenanting, repositioning, and potential change-of-use scenarios, as discussed further in Section IX.
The mixed-use configuration at the Property encompasses the following use categories, each of which is analyzed below for conformity with the C6-4 use group regulations.
B. Retail Component (Floors 1–2, approximately 28,600 SF)
The ground floor and second floor of the building are occupied by retail tenants, comprising approximately 28,600 square feet. The current retail tenants are as follows:
(i) Harmon & Voss Retail Partners LLC — Ground floor, approximately 14,200 square feet. Lease expiration: November 30, 2032. The tenant operates a general retail establishment (apparel and accessories).
(ii) Solstice Wellness Studio Inc. — Second floor, approximately 14,400 square feet. Lease expiration: March 31, 2029. The tenant operates a wellness and fitness studio facility.
The retail uses fall within Use Group 6 (general retail and service establishments) under the Zoning Resolution. The Solstice Wellness Studio operation, as a fitness and wellness facility, may also be classified under Use Group 9 (which includes certain recreation and entertainment uses, including gymnasiums and health clubs). Both Use Group 6 and Use Group 9 are permitted as-of-right in C6-4 districts. No special permits, variances, or other discretionary approvals are required for the operation of these retail uses at the Property. No use compliance issues have been identified with respect to the retail component.
C. Office Component (Floors 3–9, approximately 97,300 SF)
Floors 3 through 9 of the building are devoted to office use, comprising approximately 97,300 square feet. The current office tenants are as follows:
(i) Ridgepoint Consulting Group LLC — Floors 3–5, approximately 41,700 square feet. Lease expiration: August 31, 2030. The tenant operates management consulting offices.
(ii) Calderon Specialty Insurance Digital Media Corp. — Floors 6–7, approximately 27,800 square feet. Lease expiration: January 31, 2028. The tenant operates a digital media and content production company with general office operations.
(iii) Various tenants — Floors 8–9, approximately 27,800 square feet total. Lease expirations range from 2027 to 2029. These tenants operate general business and professional offices. Floors 8 and 9 reflect the majority of the building's current office vacancy, with an overall office occupancy rate of approximately 81.2%.
Office uses fall within Use Group 6B (business offices, professional offices, and related uses) under the Zoning Resolution. Use Group 6B is permitted as-of-right in C6-4 districts without limitation. No issues have been identified with respect to the zoning compliance of the office component.
D. Residential Component (Floors 10–14, approximately 42,500 SF, 38 Units)
Floors 10 through 14 of the building contain thirty-eight (38) residential rental units, comprising approximately 42,500 square feet of residential space. The residential component is approximately 94.7% occupied, with two (2) units currently vacant.
Residential uses fall within Use Group 2 (all types of residential uses, including multi-family dwellings) under the Zoning Resolution. Use Group 2 is permitted as-of-right in C6-4 districts.
Importantly, in mixed-use buildings containing both residential and commercial uses in C6-4 districts, the Zoning Resolution imposes a vertical stacking requirement under ZR § 32-00 et seq. Specifically, residential uses must generally be located above commercial uses within the same building, and commercial uses may not be located above residential uses (with limited exceptions for certain accessory uses). The Property's vertical configuration — with residential on Floors 10 through 14, located above all commercial uses on Floors 1 through 9 — is compliant with this vertical stacking requirement. No zoning issues have been identified with respect to the residential component's location within the building.
We note that the regulatory status of the residential units (i.e., whether any units are subject to rent stabilization, rent control, or other housing regulation) is a separate matter that will be addressed in the residential lease review and rent regulatory compliance memorandum being prepared as part of the broader due diligence. The zoning analysis herein addresses only the land use and zoning compliance of the residential use.
E. Cellar / Storage / Mechanical (approximately 18,000 SF)
The cellar level of the building, comprising approximately 18,000 square feet, is used for building storage and mechanical equipment. These are accessory uses that are customary and incidental to the principal uses of the building (retail, office, and residential) and are permitted under the C6-4 zoning without restriction. No separate use group analysis is required for accessory storage and mechanical uses.
F. Use Group Compliance Conclusion
Based on our preliminary analysis, all existing uses at the Property appear to conform to the C6-4 use group regulations. No non-conforming use issues have been identified. Each of the principal uses (retail, office, and residential) falls within a use group that is permitted as-of-right in the C6-4 district, and the vertical configuration of the building (with residential above commercial) complies with the applicable mixed-use stacking requirements.
Halcyon Planning Associates LLC has confirmed this assessment based on their independent review of DOB Certificates of Occupancy and alteration permits on file for the Property. Final confirmation will depend on review of the current Certificate of Occupancy, as discussed in Section VI.C below.
VI. NON-CONFORMING USE AND NON-COMPLYING BULK CONSIDERATIONS
A. Non-Conforming Use Analysis
As detailed in Section V above, all existing uses at the Property appear to be conforming uses within the C6-4 zoning district. The building has been in continuous mixed-use occupancy (retail, office, and residential) consistent with the permits issued in connection with the 2016–2020 renovation program. There is no evidence that any of the existing uses were established in violation of the applicable zoning regulations or that any use has been discontinued and subsequently resumed in a manner that would extinguish non-conforming use protections.
Accordingly, the non-conforming use provisions of the Zoning Resolution (ZR § 52-00 et seq.), which govern the continuation, extension, and discontinuance of uses that do not conform to the current zoning district regulations, do not appear to be implicated at the Property. No evidence has been found of non-conforming uses that would be subject to the discontinuance or amortization provisions of the Zoning Resolution. This is a favorable finding for the Client, as non-conforming use status can impose significant restrictions on the ability to modify, expand, or reestablish a use after a period of discontinuance, and the presence of non-conforming uses can create uncertainty and risk in the context of an acquisition.
B. Non-Complying Bulk Analysis
While all uses at the Property appear to be conforming, the building's bulk characteristics (height, setback, rear yard, and floor area) must also be evaluated for compliance with current C6-4 regulations. The building was constructed in 1928, more than three decades prior to the adoption of the current Zoning Resolution in 1961. Accordingly, certain bulk characteristics of the building may not comply with current C6-4 regulations. Any such non-compliance would be grandfathered as a lawful pre-existing non-complying condition under ZR § 54-00 et seq., which provides that buildings that existed lawfully prior to the effective date of the Zoning Resolution (or prior to a subsequent amendment that rendered them non-complying) may continue to exist and may be maintained, repaired, and structurally altered, subject to certain limitations.
The key limitations applicable to non-complying buildings under ZR § 54-00 et seq. include the following:
(i) Enlargements and extensions of a non-complying building must comply with all applicable current bulk regulations and may not increase the degree of non-compliance.
(ii) Reconstruction after damage or destruction is generally permitted if the damage does not exceed a specified threshold (typically 75% of the building's value), subject to certain conditions and time limitations.
(iii) Change of use within a non-complying building is generally permitted provided the new use is a conforming use and does not increase the degree of any bulk non-compliance.
At this stage, the specific nature and extent of any bulk non-compliance at the Property have not been fully determined. The updated ALTA/NSPS survey and Halcyon's height/setback compliance analysis will be necessary to identify any non-compliant conditions with specificity. Potential areas of non-compliance for a 1928 building in a C6-4 district may include rear yard depth (if the building extends closer to the rear lot line than the current minimum rear yard requirement), sky exposure plane penetration, and certain setback requirements.
Additionally, the 2016–2020 renovation ($14,200,000 in capital improvements) must be reviewed to determine whether it triggered any full compliance obligations with current zoning regulations. Under DOB practice, alterations are classified as follows:
• Alteration Type 1 (Alt-1): A major alteration that involves a change of use, egress, or occupancy, which typically triggers full compliance with the current Building Code and Zoning Resolution for the portions of the building affected by the alteration.
• Alteration Type 2 (Alt-2): An alteration that involves multiple types of work not constituting an Alt-1 or new building permit.
• Alteration Type 3 (Alt-3): A minor alteration involving one type of work (e.g., plumbing only, electrical only).
If the 2016–2020 renovation was classified as an Alt-1, it is possible that certain zoning compliance obligations were triggered for the affected portions of the building. DOB alteration permits should be obtained and reviewed to confirm the alteration type classification and to identify any zoning compliance conditions imposed in connection with the permit approvals. Halcyon Planning Associates LLC is currently reviewing DOB records for alteration type classification and any resulting zoning compliance requirements and will report its findings.
C. Certificate of Occupancy
The Certificate of Occupancy ("C of O") is the official document issued by DOB that identifies the permitted uses and occupancy of a building. A current C of O that accurately reflects the building's existing mixed-use configuration (retail, office, residential) is essential to confirming zoning compliance and is a standard requirement in the due diligence process for a commercial real estate acquisition of this magnitude.
We have included the current Certificate of Occupancy on the due diligence request list transmitted to Seller's counsel at Hargrove, Pettigrew & Sloane LLP (Rebecca Tran). Upon receipt, the C of O will be reviewed to:
(i) Confirm that the C of O reflects the current mixed-use configuration of the building, including retail on Floors 1–2, office on Floors 3–9, residential on Floors 10–14, and cellar storage and mechanical in the cellar.
(ii) Confirm that the occupancy classifications and use descriptions on the C of O are consistent with the actual uses and occupancy of the building.
(iii) Identify any conditions, restrictions, or limitations imposed on the C of O.
(iv) Determine whether the C of O was amended in connection with the 2016–2020 renovation to reflect any changes in use, occupancy, or egress.
Any discrepancies between the C of O and the actual use and occupancy of the building could trigger DOB enforcement action, result in violations, or require amendment of the C of O prior to or after closing. Such discrepancies could also affect the Client's ability to obtain financing for the acquisition, as lenders typically require confirmation that the building's current use is consistent with the C of O as a condition to closing. We will report on the C of O review promptly upon receipt of the document from Seller's counsel.
VII. UNUSED DEVELOPMENT RIGHTS / AIR RIGHTS
A. Quantification. As calculated in Section IV above, the unused development rights on the Property are estimated as follows:
Maximum allowable floor area: 201,250 SF (20,125 SF lot area × 10.0 FAR)
Existing built floor area (GBA): 186,400 SF
Unused development rights (based on GBA): approximately 14,850 SF
As noted previously, the unused development rights may be materially greater if cellar space and mechanical deductions reduce the zoning floor area below the gross building area. Halcyon Planning Associates LLC has been engaged to provide a precise ZFA calculation and confirmation of the quantum of unused development rights. Until that calculation is complete, the 14,850 SF figure should be treated as a conservative estimate, with the possibility that unused development rights could be as high as approximately 32,850 SF.
B. Value Considerations
Unused development rights ("air rights") in the Midtown West / Hudson Yards corridor of Manhattan can command significant per-square-foot prices, particularly in high-density zoning districts such as C6-4 where the development potential is substantial. The value of air rights is influenced by a number of factors, including the specific zoning district, the location of the property, the physical feasibility of utilizing the additional development rights (through vertical or horizontal expansion), the transferability of the rights to adjacent lots, and prevailing market conditions for new development in the area.
Based on market data available to Halcyon Planning Associates LLC and our own review of publicly reported comparable transactions, air rights in the vicinity of the Property have transacted in the range of approximately $200 to $400 per square foot, depending on location, zoning, and transferability constraints. The upper end of this range is typically associated with air rights that are transferable to sites with active development plans and strong market demand, while the lower end reflects air rights with more limited transferability or practical utility.
At an illustrative midpoint of $300 per square foot, the estimated 14,850 square feet of unused air rights at the Property could represent approximately $4,455,000 in incremental value. If the unused development rights are ultimately determined to be closer to 32,850 SF (reflecting cellar and mechanical deductions), the implied air rights value at $300/SF would be approximately $9,855,000.
The Client should consider whether the proposed acquisition price of $120,000,000 (equating to approximately $643.78 per square foot of GBA) appropriately reflects the value of these unused development rights, either as a component of the purchase price or as separately quantifiable upside. The air rights value analysis should be integrated into the Client's overall investment underwriting and reflected in the Purchase and Sale Agreement negotiation, potentially through provisions that allocate a portion of the purchase price to development rights or that provide the Client with representations and warranties regarding the existence and quantum of unused development rights.
C. Transferability. Under the New York City Zoning Resolution, the transferability of unused development rights from one zoning lot to another is subject to significant restrictions:
(i) As-of-right transfers within a single zoning lot. Unused development rights may be utilized as-of-right for development on the same zoning lot from which they are generated. If adjacent lots are merged into a single zoning lot through a Zoning Lot Development Agreement (discussed below), development rights can be shifted within the merged lot. The definition of "zoning lot" under ZR § 12-10 permits multiple tax lots to be treated as a single zoning lot for zoning purposes under certain conditions.
(ii) Transfers to adjacent lots. Under general zoning provisions, unused development rights from a zoning lot may be transferred only to adjacent zoning lots (i.e., lots that share a common lot line or are across a street from each other), and such transfers typically require the execution of a Zoning Lot Development Agreement and recordation of a restrictive declaration.
(iii) Landmark transfers (ZR § 74-79). A more flexible transfer mechanism is available for properties that are individually designated New York City landmarks. Under ZR § 74-79, unused development rights from a landmark building may be transferred to a "receiving site" that is either adjacent to the landmark lot or located across the street, or in certain cases, to non-adjacent lots within the same block or across the street from the same block, subject to City Planning Commission special permit approval.
(iv) Special district provisions. Certain special districts (e.g., the Theater Subdistrict, the East Midtown Subdistrict) have established their own mechanisms for the transfer of development rights, but these provisions are specific to the special districts in which they apply and are not generally available.
The Property does not appear to be individually designated as a New York City landmark, and therefore the more flexible landmark transfer provisions of ZR § 74-79 would not be available to the Client absent a future landmark designation (which would be a discretionary action by the Landmarks Preservation Commission and is not within the Client's control). Accordingly, transfer of unused development rights to non-adjacent parcels would not be available under current circumstances.
The primary mechanisms by which the Client could realize value from the unused development rights are therefore: (a) as-of-right development on the existing lot, through a vertical addition (rooftop expansion) or horizontal extension of the existing building; or (b) transfer of development rights to an adjacent lot through a Zoning Lot Development Agreement, if an adjacent lot owner is interested in acquiring additional development rights.
With respect to option (a), the physical and structural feasibility of adding additional stories to a ninety-eight-year-old, fourteen-story building would require a detailed engineering and structural assessment. The 1928 construction may or may not accommodate additional vertical loading without significant and potentially cost-prohibitive structural reinforcement. This is a physical/engineering question beyond the scope of this zoning analysis, but it is relevant to the practical value of the unused development rights for on-site utilization.
D. Zoning Lot Development Agreement (ZLDA)
If adjacent lot owners are interested in acquiring the Property's unused development rights, the Client could enter into a Zoning Lot Development Agreement ("ZLDA") pursuant to ZR § 12-10 to effectuate such a transfer. A ZLDA is a private agreement between the owners of two or more tax lots that merges the lots into a single zoning lot for zoning purposes, thereby permitting the allocation and transfer of floor area between the lots. A ZLDA must be recorded against all affected lots and is binding on successors and assigns.
The feasibility and value of a ZLDA would depend on several factors, including:
(i) The identity of the adjacent lot owners and their current and planned uses of their properties.
(ii) The extent to which adjacent lots have utilized their own development rights and whether they have a need or desire to acquire additional floor area.
(iii) The applicable zoning district(s) governing the adjacent lots, which may differ from the C6-4 district applicable to the Property.
(iv) Market demand for development rights in the immediate area.
We recommend that Halcyon Planning Associates LLC review the adjacent lot FAR utilization and development potential as part of its ongoing engagement. If there are adjacent development sites with active or planned construction that could benefit from additional floor area, the Client's unused development rights could command significant value through a ZLDA transaction. This analysis should be completed promptly so that its conclusions can be incorporated into the Client's acquisition underwriting and negotiation strategy.
VIII. SPECIAL PERMITS, VARIANCES, AND OVERLAYS
A. Special District Overlays
As discussed in Section III.B above, the Property must be confirmed as not falling within any special purpose district that would impose additional or modified zoning regulations. Based on our preliminary review with Mark Espinoza at Halcyon Planning Associates LLC, the Property does not appear to be located within the following special districts:
(i) Hudson Yards Special District (ZR Article IX, Chapter 3) (ii) Garment Center Special District (ZR Article I, Chapter 2, Appendix J) (iii) Any other special purpose district established by the City Council or the City Planning Commission
However, the Property is in close proximity to the Hudson Yards Special District boundary, and the precise boundary must be verified against the official Special District map on file with the Department of City Planning. If the Property were determined to fall within the Hudson Yards Special District, additional regulations could apply, including modified FAR provisions, mandatory affordable housing requirements, specific urban design and streetscape requirements, and other development controls. We have flagged this as a priority confirmation item for the updated survey and DCP zoning map verification.
B. Existing Special Permits or Variances
Our due diligence request list, transmitted to Seller's counsel at Hargrove, Pettigrew & Sloane LLP (Rebecca Tran), includes a specific request for copies of any Board of Standards and Appeals ("BSA") special permits, variances, authorizations, or other discretionary approvals that may have been granted with respect to the Property, whether currently in effect or historically issued. BSA determinations can impose ongoing conditions and restrictions on a property that run with the land and bind subsequent owners, and it is essential to identify any such determinations as part of the zoning due diligence.
To date, no special permits or variances have been identified for the Property based on our preliminary review of publicly available BSA records. However, BSA records can be incomplete or difficult to locate, particularly for properties with a long history such as this one (constructed in 1928). We will confirm this finding through a formal BSA records search, which Halcyon Planning Associates LLC has agreed to conduct.
C. Landmark or Historic District Status
The Property does not appear to be individually designated as a New York City landmark by the Landmarks Preservation Commission ("LPC"), nor does it appear to be located within a designated historic district under either the City's landmarks law or the National Register of Historic Places.
This determination will be confirmed through a review of LPC records and the National Register database. We note that the absence of landmark status, while potentially limiting the transferability of unused development rights (as discussed in Section VII.C above), also means that the Client would not be subject to the regulatory requirements of the landmarks law with respect to exterior alterations, signage, and other modifications to the building's façade and visible elements. In a landmark-designated building, any exterior alteration (including rooftop additions, signage installations, and storefront modifications) would require a permit or certificate from the LPC, which can add time and expense to renovation and repositioning plans.
IX. IMPLICATIONS FOR POST-ACQUISITION OPERATIONS AND REPOSITIONING
A. Permitted Uses — Flexibility for Retenanting
One of the significant advantages of the C6-4 zoning designation for the Client is the broad use group flexibility it affords for retenanting and repositioning the commercial space within the building. C6-4 districts permit Use Groups 1 through 12, which encompass virtually all categories of residential, commercial, and community facility uses that the Client might wish to accommodate in the building, including:
• General and specialty retail (Use Group 6)
• Restaurants and eating/drinking establishments (Use Groups 6 and 12)
• Business and professional offices (Use Group 6B)
• Medical offices and health-related facilities (Use Groups 3 and 4)
• Hotels and transient accommodations (Use Group 5)
• Entertainment and recreation uses (Use Group 8 and 9)
• Community facility uses including schools, museums, and houses of worship (Use Groups 3 and 4)
• Certain light manufacturing and custom fabrication uses (Use Group 11)
This flexibility is particularly relevant in light of the current office vacancy on Floors 8 and 9, as well as upcoming lease expirations that will provide repositioning opportunities. Specifically, the Calderon Specialty Insurance Digital Media Corp. lease on Floors 6–7 expires on January 31, 2028, and the Solstice Wellness Studio Inc. lease on the second floor expires on March 31, 2029. The various smaller office tenants on Floors 8–9 have lease expirations ranging from 2027 to 2029. These expirations will give the Client the opportunity to retenant these spaces with a broad range of uses that are permitted as-of-right under the C6-4 zoning, without the need for discretionary land use approvals.
B. Change of Use Considerations
If the Client contemplates converting any commercial (office) floors to residential use as part of a repositioning strategy, such conversion is generally permitted as-of-right in the C6-4 district, since residential use (Use Group 2) is a permitted use. However, several important considerations apply:
(i) DOB Alteration Permits. Conversion of office space to residential use would require DOB alteration permits, and in most cases would be classified as an Alteration Type 1 (Alt-1), which triggers compliance with the current Building Code for the affected portions of the building. This could require upgrades to egress, fire protection, plumbing, and other building systems.
(ii) Certificate of Occupancy Amendment. An amended C of O would be required to reflect the change in use and occupancy classification for the converted floors.
(iii) Residential Bulk Compliance. The residential component of a mixed-use building must comply with applicable residential bulk regulations, including minimum unit sizes, open space ratios, and other standards. These requirements must be confirmed for the specific floors proposed for conversion.
(iv) Mandatory Inclusionary Housing (MIH). If the conversion triggers a discretionary land use action (e.g., a zoning map amendment, special permit, or authorization), the MIH program may be triggered, potentially requiring a portion of the residential units to be designated as permanently affordable housing. However, if the conversion is carried out entirely as-of-right, MIH would not be triggered. Based on our current analysis, no discretionary action would be required for an as-of-right residential conversion within the existing building envelope.
(v) Vertical Stacking. The Zoning Resolution's requirement that residential uses be located above commercial uses in mixed-use buildings (ZR § 32-00 et seq.) must be maintained. If the Client converts certain office floors to residential use, the remaining commercial floors must remain below the residential floors. This would constrain the conversion options — for example, the Client could not convert Floor 5 to residential use while retaining Floors 6–7 as office, as this would result in a commercial floor above a residential floor.
Importantly, no discretionary land use approvals (ULURP, BSA) would be required for as-of-right residential conversions within the existing building envelope in the C6-4 district. This is a significant advantage that supports the Client's flexibility in pursuing a range of repositioning strategies.
C. Signage. The building generates ancillary income from, among other sources, signage. The building's total ancillary income from antenna/telecom, signage, and parking is approximately $2,640,000 annually. Signage in C6-4 districts is governed by ZR § 32-60 et seq. and the supplemental sign regulations in ZR § 32-64 et seq.
In C6-4 districts, illuminated signs and advertising signs are generally permitted, subject to size, location, height, and illumination limitations specified in the Zoning Resolution. The maximum permitted surface area of signs, the height at which signs may be displayed, and the types of illumination (flashing, non-flashing, digital, etc.) are all regulated. Specific limitations vary depending on whether the sign is an "accessory sign" (identifying a business located on the premises) or a non-accessory "advertising sign" (displaying content unrelated to a use on the premises).
As part of our due diligence, we will review:
(i) Any existing DOB signage permits and confirm their current status. (ii) The specific provisions of any signage agreements or licenses contributing to the ancillary income stream. (iii) Compliance of existing signage with current ZR sign regulations, including any non-conforming sign conditions.
D. Mechanical Equipment and Antenna
The ancillary income stream also includes revenue from rooftop antenna and telecom installations. Rooftop antenna installations are typically permitted as accessory uses to the principal building uses, and their installation generally requires DOB work permits and compliance with applicable building code provisions. Telecom installations on rooftops may also require review under Federal Communications Commission ("FCC") regulations and applicable lease or license agreements.
As part of the due diligence, we will confirm that:
(i) All DOB permits for existing antenna and telecom installations are current and in good standing. (ii) The installations comply with applicable zoning regulations regarding rooftop equipment, including any height or setback limitations that may apply to rooftop structures. (iii) Any new or expanded antenna installations contemplated by the Client would require additional DOB approvals or zoning compliance review.
X. PROPERTY TAX / ASSESSMENT IMPLICATIONS OF ZONING
This section is provided for coordination purposes with the real property tax analysis being prepared under separate cover. The existence of unused development rights on the Property — estimated at a minimum of 14,850 square feet and potentially as high as 32,850 square feet — may have implications for the City's assessment methodology and the assessed value assigned to the Property.
Under New York City's real property tax assessment system, the Department of Finance assesses commercial and mixed-use properties in Tax Class 4 using the income capitalization approach, the comparable sales approach, or a combination thereof. The existence of significant unused development rights can be a factor in the assessed value, as assessors may attribute additional value to a property based on its development potential, even if that potential has not been realized.
The Property's current tentative assessed value for Fiscal Year 2026/2027 is $48,200,000, and the annual real estate taxes for Fiscal Year 2025/2026 are $2,640,000. These figures should be reviewed in the context of the unused development rights to determine whether the City's assessment is appropriately reflecting or over-reflecting the value of the air rights.
We recommend coordination with Edgemont Nash & Co. LLP (Laura Siddiqui, CPA), the Client's tax advisor, and Halcyon Planning Associates LLC to evaluate whether the current assessment appropriately accounts for the unused development rights and whether any tax certiorari proceeding or assessment challenge may be warranted. This analysis will be addressed in the separate real property tax memorandum.
XI. OPEN ITEMS AND RECOMMENDATIONS
A. Outstanding Diligence Items
The following items remain outstanding and are required to finalize the zoning and land use analysis:
1. Updated ALTA/NSPS Survey. Commission an updated ALTA/NSPS Land Title Survey from Clearview Land Surveyors Inc. (or another qualified surveyor acceptable to the Client and the Client's title insurer) to confirm the lot area (reported as 20,125 SF on the 2011 survey), building footprint and dimensions, encroachments (if any), and easements. The survey should specifically identify the Ashford Partners LLC easement recorded at Liber 4823, Page 112, and depict its location relative to the building and improvements. The updated survey is also critical for confirming compliance with height, setback, and other bulk regulations.
2. Zoning Floor Area Calculation. Halcyon Planning Associates LLC is to provide a detailed zoning floor area ("ZFA") calculation that distinguishes the ZFA from the gross building area, accounting for cellar exclusions, mechanical deductions, and other adjustments required under the Zoning Resolution's definition of "floor area" (ZR § 12-10). This calculation will confirm the precise quantum of unused development rights and is essential for valuation, underwriting, and negotiation purposes.