Attention—If You Own or Finance Office Buildings in Manhattan South of 59th Street, Continue Reading...

The Manhattan Commercial Revitalization Program (“M-CORE”) was launched by the New York City Economic Development Corporation (“NYCEDC”) and New York City Industrial Development Agency (“NYCIDA”) on May 11, 2023, with the goal of increasing commercial tenant occupancy in aging Manhattan office buildings south of 59th Street. M-CORE will provide potential real property tax abatements, partial mortgage recording tax exemptions and sales and use tax exemptions for owners who upgrade their buildings. The program is likely to be competitive, with the NYCIDA considering applications for buildings representing up to 10 million square feet of combined eligible office space. For context, this amount represents approximately 4% of the 255 million square feet of underperforming office space in Manhattan, which is about half of the Borough’s total office space. As we have seen with other governmental programs, if you want to apply, it is perhaps better to get into the program early before allocated funds run out.

The main aims of M-CORE are to incentivize building owners to invest in their properties and thereby improve the quality of Manhattan’s office stock, create desirable workspaces which attract businesses, make necessary upgrades to comply with Local Law 97 and add ground floor uses to support the vibrancy of the City’s business districts.

In addition, higher tenancy rates through M-CORE will benefit the City through increased property tax revenues which fund City services, increase street activity, which improves safety and supports small businesses and increase public transit ridership.

Getting to the nuts and bolts of M-CORE, below are the potential program benefits, project eligibility criteria and selection criteria the NYCIDA will use for projects. NYCIDA will begin accepting pre-applications for the program on June 8, 2023, with a final deadline slated for a date to be determined in August, 2023.

The potential benefits to program participants include:

• Land and building taxes for existing improvements may be stabilized and project improvements may be abated for up to 20 years with a phase out of 20% per year over the final four years of the period.
• Waiver of 8.875% sales and use tax on materials used to renovate or equip buildings with updated facilities.
• Mortgage recording tax related to project financing reduced to 0.3%.

A large number of buildings in Manhattan may be eligible, with the following initial criteria:

• Building Location: Manhattan, South of 59th Street (excludes Hudson Yards Financing Area and Penn Station Area GPP).
• Building Age: Built prior to 2000.
• Building Size: At least 250,000 gross square feet.
• Minimum Capital Investment: 75% of the project location’s current assessed value per the NYC Department of Finance for the most recent available year.

NYCIDA will select projects based on the following criteria:

• Scope and budget of transformative improvements.
• Tenant attraction plan.
• Project readiness.
• Compliance with local laws, including Local Law 97.

There remain many unanswered questions about M-CORE as the pre-application opening approaches. Our Real Estate Group is monitoring the program’s rollout and are available to help with applications, program analysis and any questions that may arise. We are happy to see this first movement from New York City to offer some assistance to the office market and we remain optimistic that the program will be implemented in a manner beneficial to office owners and the City.