The New Rochelle Industrial Development Agency approved a request from Capelli Enterprises to modify their agreement with regard to Trump Plaza of New Rochelle, clearing the way for a deal with Sound Shore Medical Center to lease 23,000 square feet in the largely vacant space on the first two floors of the building.
The lower two floors comprise 140,000 square feet of space. The New York Sports Club has leased 45,000 square feet. With final negotiations underway with Sound Shore Medical Center for 23,000 square feet and a second potential tenant considering 11,000 square feet, the day when Trump Plaza's lower two floors would be more than 50% occupied is now visible on the horizon.
Under the terms of the modifications last night the agreement between the NRIDA and Capelli-Enterprises will be modified to say "retail and commercial" rather than just retail, extending the current sales tax exemption until 2016 and adjust the amount eligible for the sales tax exemption to account for the additional cost to ready what would have been retail space as commercial space.
The major change which occurred at last night's meeting was NRIDA agreeing to allow Capelli-Enterprises to lease the space to commercial tenants. Under the terms of of the original deal, the NRIDA required retail tenants only. As a result of the vote last night, Capelli has the option to lease to retail or commercial tenants.
Capelli also sought and received an extension of the sales tax exemption, set to expire this month, to 2016. The extension is worth about forty to fifty thousand dollars, money Capelli spokesman Joseph Apicella says can be used to help attract desireable tenants to New Rochelle.
"New Rochelle has to compete with other communities in the area that offer this benefit," said Apicella.
The value of the sales tax exemption is calculated by estimating the cost to build out the space for tenants. Capelli uses the figure of $50 per square foot. With 95,000 square feet currently vacant that comes out to $4.75 mm. Of that $4.75 mm, Apicella estimates that 40% would be for building materials or about $1.9 mm.
The sales tax in New Rochelle is 8.375%. That money goes to New York State which then gives New Rochelle back 2.5% of the taxable amount of the transaction. On $1.9 mm at 2.5% that would come out to be about $47,500.
Contained in the package given to IDA Board Members was a report from Cushman-Wakefield, the leading real estate firm in Westchester County which showed that the commercial vacancy rate in the county stands at 17% with New Rochelle almost 50% higher, in the mid-twenties. Rents have flatlined and there has been a "negative absorption" rate in Westchester for the past 8 years.
City Manager Charles B. Strome endorsed the move to allow commercial tenants in Trump Plaza.
"Retail was the desire of the City but it may have been unrealistic," said Strome. "We have been players in the inability to fill this space."
Apicella conceded that Trump Plaza was not working as a retail structure but resisted the notion that retail was never a viable option noting that the market conditions in 2006 were very different than they are today. He added that allowing commercial did not preclude retail and that Capelli would be happy to lease to a retail tenant at market rates.
Capelli expects that there will be 3-4 employees per square foot in the commercial space, creating jobs in New Rochelle which is a key rationale behind the IDA structure. Based on that rate, the Sound Shore Medical space would mean somewhere between 69 and 92 jobs.
The debate on the Capelli petition became animated with IDA Member David Lacher asking many questions but ultimately the vote to approve the petition was passed unanimously.
There were two particularly interesting points that Talk of the Sound intends to explore further next week with New Rochelle City Manager Charles Strome and New Rochelle Development Commissioner Michael Freimuth. One is increasing the amount of commercial space in New Rochelle's blend of retail, commercial and residential space. The other is the positive financial impact, for the City of New Rochelle, of having locked in 2006 market rates in a PILOT (payment in lieu of taxes) program on the Trump Plaza deal. More on that next week.
The changes last night still require that the street-facing space be reserved for retail tenants. A sign in the window of Trump Plaza indicates a wine store is coming soon.