The New Business Of N.Y. Shuls: Air Rights

Synagogues in Manhattan are getting a facelift — and it’s commercial developers who are delivering a potent injection of cash.

Destined to be the largest synagogue constructed in Manhattan in 50 years, Lincoln Square Synagogue’s state-of-the-art, 52,000-square-foot shul is being funded in part by a land swap with real estate developer American Continental Properties Inc.

Meanwhile, Congregation Shearith Israel, also on the Upper West Side, is making headway in its ongoing struggle to build four floors of luxury condos and a penthouse above a new community house adjacent to the synagogue. In addition to generating income to offset upkeep, the nine-story high-rise will also provide a direct, enlarged entrance to the synagogue, which will be wheelchair accessible.

And most recently, The Ramaz School, on East 85th Street, announced plans to raze its Lower School building, which is physically connected to Kehilath Jeshurun Synagogue (KJ), a congregation best known as a bastion of Modern Orthodoxy on the Upper East Side. In its place, Ramaz is in negotiations with an undisclosed commercial developer to erect a 28-story high-rise building that will border the synagogue, of which the upper 18 floors will be carved into 53 residential condos.

Estimated costs for the Ramaz project — including improving the synagogue, demolishing the old school building and synagogue house, relocating the students for two years and constructing the new building — weigh in at a staggering $80 million. So who’s footing the bill?

That’s where the deal with the developer comes in. “The costs will be offset by about half by the developer, who will pay us for air rights,” says Rabbi Haskel Lookstein, senior rabbi of KJ and principal of Ramaz, who confirmed that a developer has been chosen and a contract should be signed in the coming weeks.

Call it “divine profits” if you’d like. The common denominator linking the three Manhattan synagogues — KJ, Shearith Israel (known as the Spanish Portuguese synagogue) and Lincoln Square — is an eagerness on the part of synagogues to sell off unused development rights, popularly known as air rights, to help fund construction and improvements. “Air rights” is the phrase commonly used to refer to “unused development rights.” According to the 1961 Zoning Resolution, a property owner can sell unused development rights attributable to his or her land to an adjacent property owner, allowing the buyer to build a taller building next door.

“Synagogues are becoming more savvy,” says development rights expert Caroline Harris, a zoning attorney with Troutman Sanders. “They’re suddenly realizing that they actually own a real estate asset instead of thinking that they just own a sanctuary.”

For KJ, the developer’s cash will not only fund a portion of the new building, but will also give the synagogue an opportunity to update its electrical and HVAC systems, without having to shut down the building for a prolonged period of time. “While you have the construction crew in one part of the house, you might as well have them in the other parts of the house,” says Shelly Friedman, a land-use lawyer for Kehilath Jeshurun, who is also representing Shearith Israel.

Assuming it gets the necessary zoning variances to move forward with the project, KJ will retain its Gothic-Moorish architectural character but the synagogue will have its lighting modernized, its floor replaced and its roof reinforced. Perhaps most importantly, the heating and air-conditioning systems will be revamped. “Women will not freeze in the summer, which they tend to do,” says Rabbi Lookstein, referring to the fact that the balcony, where the women sit, is colder than the rest of the sanctuary.

The new building will free up much-needed space for the growing congregation, which has seen its membership more than double in size in the past 25 years to nearly 3,000 members. It will house synagogue offices on the third and 10th floors, as well as create dedicated spaces for teen, beginner and intermediate minyanim. And the daily morning minyan will be relocated to the cellar of the new Lower School building, allowing the synagogue to expand its lobby and improve circulation flow, limiting the shoulder-tugging as congregants make a unified exodus from the sanctuary on busy Shabbat mornings and holidays.

Since the sale of air rights won’t cover all costs, fundraising from within the KJ/Ramaz community is already under way. About two-thirds of the estimated $45 million remaining cost has already been raised, confirmed Rabbi Lookstein. “The actual building will not be reflected at all in [Ramaz] tuition,” he says, noting that he hopes to secure additional donations for the school’s endowment, in order to keep tuition from rising excessively.”

Still, the funding to be provided by the sale of air rights should not be underestimated.

This is part of a citywide trend, Harris says, particularly in Manhattan, where real estate is a precious commodity and undeveloped land is scarce. Synagogues aren’t the only ones selling off air rights — Fordham University and other nonprofit universities, churches, hospitals and even cultural institutions like Lincoln Center have all been involved in these somewhat contentious deals.

Manhattan’s still-booming real estate market is a driving force behind this trend.

“Owners of small buildings want to exploit the possibility of capitalizing on the market by selling unused development rights while holding onto income-producing property,” Harris says. “Developers want to acquire them because they are often less costly than land. There’s huge pressure because not much land is available.”

Synagogues, especially, fare well in selling off air rights, since many face pressing financial needs and have not utilized the full square-footage allotted to them. This strategy is especially attractive for Orthodox synagogues, which serve a congregation that must be within walking distance of shul, and therefore can’t just pick up and move to a bigger site 20 blocks away.

“What would Shearith do if it found a great site in Brooklyn?” asks Friedman, a land-use lawyer. In the past, institutions that grew out of bounds would build a bigger building nearby. Now, they have to grow in place.

“The usual migratory pattern of institutions has kind of ended,” he says. “In Manhattan, there’s no place to go.”

In the case of Shearith Israel, the air-right sale is a clear win-win, since the shul, which is a landmark building, would have a tough time gaining city approval to renovate and therefore sought out other ways to ease the circulation flow.

Harris calls the sale of air rights “the best of both worlds.”

“It’s an ideal compromise for a church or synagogue,” she says. “They can maintain the facility and still get an income from the sale.”

But not everyone is so rosy about the deal. Neighbors and conservation groups are mounting their opposition to Ramaz’s proposed high-rise, calling it a “towering monster.”

“We’re mostly concerned with breaking the envelope of height,” says Lo van der Valk, president of Carnegie Hill Neighbors, an Upper East Side community group. Although zoning allows for a maximum height of 210 feet, Ramaz’s proposed building would be 355 feet — with 13 of the residential floors exceeding zoning requirements. “It’s damaging to the fabric of Lexington Avenue,” van der Valk says.

Both Shearith Israel’s and Ramaz’s buildings exceed zoning limitations, and therefore require variances approved by the city’s Board of Standards and Appeals to go forward with the plans. Hearings have not yet been set for either synagogue.

“The opportunity to build a larger building is a boon to the developer, and a great opportunity for the not-for-profit,” says Harris. “But it often puts the congregation, which generally sees itself in a do-gooder position, in an awkward, contentious relationship with the community around it. Those sensitivities need to be borne in mind when a synagogue or church is selling development rights.”

Shearith Israel’s proposed nine-floor building is significantly shorter than originally intended, a compromise reached after vocal opponents — including the late ABC News anchor and across-the-street neighbor Peter Jennings, as well as Upper West Side preservation group Landmark West! — complained that the new high-rise would blemish the architectural character of the surrounding historic district. Shearith Israel submitted a revised application to the BSA, which is now under review.

The local community board turned down Ramaz’s proposal in July, but the school is now waiting for BSA approval. “It’s kind of like pushing through new zoning laws through the back door,” van der Valk says.

There’s no conspiracy here, says Friedman, who maintains that the synagogues are experiencing a growth in membership, spurring the desire to sell air rights when the market is hot. “Both synagogues are using property they’ve owned for a very, very long time,” he says. “It’s not part of an excessive real estate plan.”

Without the variance, he adds, there would be no possibility for a reasonable return on the investment. A hypothetical 34,337-square-foot building constructed in strict accordance to zoning regulations would produce a negative return, according to a feasibility study conducted by real estate consulting firm Robert B. Pauls, LLC.

Critics remain unconvinced. The biggest concern, they say, should Ramaz obtain the variance, is that it would set a precedent for other nonprofits, who will want to build higher, too. “As soon as one gets it, others look like idiots if they don’t get it,” van der Valk says. “It’s a domino effect.”