New York’s Schools Seize a Chance to Expand
The New York Times 12/21/2010
By JULIE SATOW
After the Norcor Management Corporation bought the Sunnyside Jewish Center in Queens in 2006, it demolished the synagogue in expectation of building residential housing on the site. But like so many projects, the plans were dashed in the wake of the real estate crash, and the parcel has sat vacant for years.
Now, the School Construction Authority is in talks to buy the site and build a 379-student primary school on the land, located at 45-46 42nd Street. The new building, which would open in 2014, is in New York City’s most congested school district and would help ease overcrowding at nearby public schools.
“The downturn in the real estate market has afforded us some new opportunities,” said Lorraine Grillo, president of the School Construction Authority, which is financed jointly by the city and state, “including residential developments that stalled and are now available for us to acquire.”
The proposal in Queens is in the midst of a public review process, and must be submitted to the mayor and City Council for final approvals.
The education sector, and especially the School Construction Authority, has become big business in the world of New York City real estate. As residential condominiums, office towers and other private sector projects have faltered, the authority has swooped in to take advantage of lower construction costs, amenable landlords and available land to pursue an aggressive expansion.
This year, the S.C.A. has built a record 26 new facilities, creating room for 17,500 students. The authority, which oversees the building and maintenance of the city’s nearly 1,700 public schools, is in the second year of an $11.7 billion five-year capital plan, to run from the 2010 to 2014 fiscal years. The city Department of Education is lobbying for an additional $4.4 billion that would put it on track to have added nearly 124,000 seats from 2003 to 2013.
“The S.C.A. is the biggest game in town,” said Richard T. Anderson, the president of the New York Building Congress, a construction trade group. “In terms of actual construction, the S.C.A.’s five-year capital plan is the largest agency program in the city,” he said.
The education sector accounted for more than half of all construction starts in New York City from May 2008 to the end of last April, a pattern that is expected to continue, according to the building congress. In addition to traditional public schools, the number of charter schools in the city has surged to 125 in 2010, from just four in 1999, according to the New York City Charter School Center, and several private schools have been in the market for new buildings. At the postsecondary level, the City University of New York, New York University and Columbia University are all planning major expansions.
“Working with the School Construction Authority is a great opportunity, especially in this market,” said David Lowenfeld, the executive vice president of the World-Wide Group, a developer. World-Wide broke ground in May on a $700 million mixed-use building at 250 East 57th Street at Second Avenue that will house two public schools, expected to open in 2012. The building, designed by Skidmore, Owings & Merrill, also includes 38,000 square feet of retail space that has been leased to a Whole Foods Market. A second phase of the project will include an additional 74,000 square feet of retail space and a 660-foot residential tower with rental units and condominiums. World-Wide is leasing the air rights from the city to build the residential part of the project, and these lease payments are paying for the construction of the schools.
With so much money available for publicly financed schools, large construction firms that once eschewed public sector jobs in favor of private projects are now angling for the work.
“There are no new commercial office buildings being built, but there are a lot of schools in the works, so we have gone back and focused more on the S.C.A.,” said Charles Murphy, a senior vice president at the Turner Construction Company and the general manager of the New York office. Turner is building four schools for the School Construction Authority, which now makes up about 12 percent of the company’s work in New York, up from zero during the real estate market peak, Mr. Murphy said.
“All of a sudden, marquee construction firms that would only do projects that were $15 million and above are bidding for S.C.A. jobs,” said Louis J. Coletti, the president and chief executive of the Building Trades Employers’ Association, the largest contractor association in the state.
All this competition has been good news for the construction authority. “We have seen the cost of building stabilize, and we are attracting a number of high-end general contractors who are now bidding on our projects,” Ms. Grillo said.
In addition, she said, “landlords seem more willing to work with us, as they recognize the value of a city tenant.” In downtown Manhattan, for example, “we have been able to find a lot of rental properties in office buildings; if the market was hotter, these landlords might not have been so willing to rent us the space.”
In addition to new schools financed by the construction authority, charter schools, private schools and universities are also rapidly expanding. This year, 27 new charter schools — which are public schools that are mostly privately financed — opened, and only one closed, the charter school center said. Civic Builders, one of the largest developers of charter schools, is building or about to build 440,000 square feet of space, said David M. Umansky, the firm’s chief executive.
Private schools have also been eyeing real estate. The all-girl Brearley School recently acquired three buildings on the Upper East Side, and a school founded by the Blue Man Group theater troupe recently purchased the Seamen’s Church Institute building at the South Street Seaport, where it will provide a new nursery and elementary school. Columbia University is expected to begin work next month on an adjunct campus north of 125th Street near the Hudson River, while New York University is starting a 25-year expansion plan. And there are a number of construction projects at the City University of New York, including a new Science Building at Lehman College and an expansion of John Jay College.
There are signs, however, that the School Construction Authority’s spending spree may soon be over. The city and state are both facing looming deficits, and have financed the authority’s five-year capital plan only through the 2012 fiscal year. The city is estimating a deficit of $2.4 billion next year, and last week Mark Page, the director of the Office of Management and Budget, asked that various city departments, including the Department of Education, submit proposals to shave 20 percent a year from their capital spending. The state is facing a projected deficit next year of more than $9 billion.
Still, said Mr. Murphy of Turner, by the time the School Construction Authority begins winding down its work, either because of a lack of city and state money or because the need for new schools has eased, the rest of the real estate market should be rebounding.
“By the middle of the decade, around 2013 or 2014, I see an increase in private sector construction,” he said. “So in the short term, the S.C.A. funds are there to help us through this year and next, and then other parts of the industry will begin picking up.”