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A money-losing hotel in Tribeca is seeking a zoning variance to permit the construction of one additional story that would boost the property’s value by $31 million (or more than 50 percent over its current worth).
The construction of the Warren Street Hotel – which opened at 86 Warren between Greenwich Street and West Broadway in 2024, on what had been a parking lot – had been a fraught undertaking. As documents filed with City regulators explain, the original plan for a three-level cellar had to be scaled back to a single basement, because excavations for 86 Warren’s foundation caused neighboring structures to begin shifting on their foundations, cracks to appear in their walls, and ground water to infiltrate their bottom levels. The loss of the additional two levels of basement at the Warren Street Hotel scotched plans for a fitness center and events venue, both of which the operator, Firmdale Hotels, says are integral to its brand and business model, as well as being essential sources of ancillary revenue.
These concerns did not move officials at the City’s Department of Buildings (DOB) when the developer asked for permission to increase the structure’s height and bulk to make up for space lost in the scaled-back basement, because doing so would have caused the design to violate zoning laws about the maximum elevation and number of interior square feet allowed in Tribeca.
For more than two years, Firmdale has operated the Warren Street Hotel (where the 69 rooms start at $1,165 per night), but argues in official filings that it is losing money, saying, “these unique conditions prohibit the owner’s ability to realize a reasonable rate of return on a building compliant with... zoning regulations.” The calculation offered in support of this assertion is that the Warren Street Hotel, based on its current income stream, is worth $59.5 million (a figure derived using a real estate metric called the “cap rate), which is significantly less than the $86.8 million invested in developing it.
Firmdale says that the increased income generated from the 2,921 square feet created by adding a new 12th floor would boost overall revenue enough to raise the Warren Street Hotel’s value, as calculated by the cap rate, to $90.7 million. The construction cost of the additional floor is estimated at $2.9 million, which would translate into a return on investment of slightly more than 1,000 percent. (A separate way of comparing these figures is to say that the Warren Street Hotel’s value, relative to its development cost would go from a negative rate of return of 31 percent to a positive rate of 0.6 percent.)
The next step is for Firmdale to appeal the DOB’s refusal to grant permission to increase the building’s height and square footage by adding a new floor. The only agency with the authority to overrule the DOB is the City’s Board of Standards and Appeals (BSA). But the four criteria for such relief are narrow: Firmdale must show, first, that the variance they are asking for is minimal: increasing the height of a 134-foot building by 14 feet, and increasing floor area by roughly 5.3 percent of the building’s current space. Second, they must establish that the hardship for which they are seeking assistance is not “self-created.” Third, they need to show that the proposed changes would result not in a windfall (or a “greater than minimum acceptable return”), but instead amount to “the minimum required to grant the owner relief.” And finally, they have to demonstrate that “there is no reasonable possibility that the development of a building in strict compliance with the use requirements of... the Special Mixed Use Tribeca District will provide a reasonable return.”
“The proposed enlargement fits within the character of the community,” Firmdale concludes in its appeal to the BSA. “Buildings of comparable bulk and heights are prevalent in the area immediately surrounding the premises, so the addition of a singular 12th floor would not impact the character of the neighborhood… The proposed scenario enables reasonable, productive use of the site, without being overreaching or excessive.”
Matthew Fenton
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