So I’m familiar with a project in a major U.S. city where the local government has agreed to give a big name developer more FAR in return for incorporating performing arts space into their development, which is mostly condos, apartments and some retail. The developer would much prefer to install a health club or restaurant into the project rather than some not-for-profit, but the city stands in the way of greater cash flow from more view space up top.

From the city’s standpoint — the mayor wants to expand arts facilities in a neighborhood at the edge of an arts district, promoting a major attraction in the city and creating a more vibrant community. But what a pain for the developer: putting some prominent theatre or dance company into space that could provide better cash flow with chain dining or another “swingles” workout gym. Sure they gain a lot more from the additional FAR, but performing arts space won’t help market the building and by itself won’t help enhance the NOI numbers when they plan to flip the building in a few years.

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