3.20.18 – Google buys Chelsea Market from Jamestown for $2.4 billion; was valued at $795 million in 2011

As reported by the New York Daily News on 3.20.18:

No need to Google the new owner of the Chelsea Market: It’s Google.

The multi-national technology company spent $2.4 billion to purchase the nearly 1.2 million square foot Manhattan complex in a deal finalized Tuesday with previous owner Jamestown, L.P.

The seller will continue to manage the market’s popular ground floor food hall and retail outlets, visited by more than 6 million people annually.

“This purchase further solidifies our commitment to New York, and we believe the Manhattan Chelsea Market will continue to be a great home for us and a vital part of the neighborhood and community,” said Google Vice President for Real Estate and Workplace Services David Radcliffe…

The Wall Street Journal reported Jamestown will retain the branding rights and intellectual property of the Chelsea Market, with an eye toward opening similar operations in other cities.”

In August, 2011, The Real Deal reported on Jamestown’s purchase of Chelsea Market:

Having closed on its acquisition of the remaining stakes in the Chelsea Market building at 75 Ninth Avenue, Georgia-based real estate firm Jamestown Properties now owns the entire property, valued at $795 million, according to public records filed with the city today.

Jamestown, an investor in the property since 2003, recently bought out Angelo Gordon & Co., Belvedere Capital Real Estate Partners and Chelsea Market developer Irwin Cohen (note: correction appended) for $225 million and aims to add a 300,000-square-foot tower to the building, to be used for office space and a hotel…

Cohen purchased the debt on the property for less than $10 million in the early 1990s.

Jamestown’s development scheme includes a nearly 250,000-square-foot Office Space Addition On 10th Avenue side above the High Line and a 90,000-square-foot Hotel On The Ninth Avenue side. As part of the deal, Jamestown will have to contribute more than $16 million into the High Line Improvement fund and would build public restrooms and an event space for the popular attraction.

Asking rents for retail tenants in the concourse of Chelsea Market are more than $100 a square foot, according to news reports. The office space above rents for around $50 per square foot.

— Posted on 3.21.18, backdated to 3.20.18

2.9.18 – Report: IC received December, 2017’s second biggest outer-borough loan

As reported by The Real Deal on 2.9.18:

The biggest outer-borough loan of December took place right along Brooklyn’s waterfront on the aptly named Water Street.

The $217 million loan from M&T Bank and the Brooklyn Bridge Park Development Corporation to Midtown Equities for its Empire Stores project took the No. 1 spot on December’s list of loans in the outer borough, followed closely by Bank of China’s $196 million loan for Industry City…

…[The Industry City loan] was split into two mortgages: one for about $133 million and the other for about $63 million. The owners received about $48 million in mezzanine financing as well. The owners applied for a rezoning last year to move forward with a planned $1 billion redevelopment of Industry City that would grow it from 5.3 million to 6.6 million square feet, and they plan to use the loan for redevelopment and leasing costs.”

Read the full story here in The Real Deal.

— Posted by JVS on 2.9.18

12.8.17 – Reports: IC gets $244 in new funding from Bank of China and SL Green

On Dec. 1, The Real Deal, a publication specializing in the real estate industry, reported that Industry City had secured a loan of $196 million from the Bank of China and SL Green. (Note: emphasis added.)

“The loan consists of two mortgages—one for roughly $133 million and one for roughly $63 million, according to property records,” The Real Deal reported. “The owners also received about $48 million in mezzanine financing, and the overall funding was split between Bank of China and SL Green, according to Justin Weiner of Belvedere Capital.”

The report continued: “Industry City’s owners — Jamestown, Belvedere Capital, Cammeby’s International and Angelo, Gordon & Co. — plan to use the funds for leasing and redevelopment costs, and Robert Verrone of Iron Hound Management advised them on the deal, Weiner said.”

The full story can be read here.

RELATED REPORTING:

On Dec. 4, Commercial Observer reported that SL Green and the Bank of China had collectively invested $647 million in Industry City’s redevelopment – including the $244 million in new money reported above.

The Commercial Observer report included the following:

“The $244 million upsize will be used to continue the momentum at Industry City over the last four years,” Andrew Kimball, the chief executive officer of Industry City, told Commercial Observer. “The new financing will help position the property for the next phase of development, allowing us to bring new spaces online, create new amenities, make infrastructure improvements and ultimately continue to drive leasing and job creation.”

The full story can be read here.

FURTHER BACKGROUND:

In a July 2017 report written for Progressive City, Queens College urban studies professor Tarry Hum provided background on the role international financing has played so far in IC’s redevelopment. Excerpts are below, in italics:

In March 2015, Jamestown Properties and their joint venture partners announced an “eye popping” $1 billion dollar investment to transform Industry City into an innovation ecosystem. The investment is contingent on a city rezoning to permit non-manufacturing uses such as a hospitality center with two hotels and meeting space, university-based academic facilities, and expanded retail…

In the meantime, Jamestown Properties needed a fast infusion of capital to keep Industry City afloat. Under Andrew Kimball’s leadership at the city-owned Brooklyn Navy Yard, the complex was able to leverage $250 million in public funds for $750 million in private investment that included transnational capital. The Brooklyn Navy Yard was New York City’s first project to receive EB-5 investments, one of five employment-based categories established by the 1990 Immigration Act to offer permanent residency to professionals, investors, and priority workers…

After flying to China to personally promote his Brooklyn Navy Yards project, Kimball secured $60 million dollars through the EB-5 program, which he described as a “gift from the gods.” Chinese transnational capital (this time in the form of a bank loan) similarly provided a lifeline for Industry City. A few months after announcing their $1 billion investment, Jamestown Properties recapitalized their outstanding debt with a massive $403 million loan from the Bank of China (as the senior lender) and SL Green Realty, a major Real Estate Investment Trust, financing a mezzanine loan. At the December 2015 closing, Jamestown received $220 million with the remaining $183 million to be distributed over time as Industry City is renovated and leasing goals are met.

Read the full story here at Progressive City.

— Posted on 12.8.17 by JVS

12.4.17 – Commercial Observer: “Industry City Ups Its Tab to $647M”

As reported by the Commercial Observer on 12.4.17 (note: emphasis added):

Financing additional development at the site, Bank of China and SL Green are upsizing their loan for the Industry City complex in Sunset Park, Brooklyn by $244 million to $647 million, according to an announcement by the ownership group—which includes Belvedere Capital, Jamestown and Angelo Gordon & Co.

“The $244 million upsize will be used to continue the momentum at Industry City over the last four years,” Andrew Kimball, the chief executive officer of Industry City, told Commercial Observer. “The new financing will help position the property for the next phase of development, allowing us to bring new spaces online, create new amenities, make infrastructure improvements and ultimately continue to drive leasing and job creation.”

Bank of China and SL Green already contributed $403 million to the six-acre property, which was first established as a cargo terminal in the 1890s. After the facility fell into disuse in the middle of the twentieth century, a coalition of commercial developers converted the site into 6 million square feet of commercial space beginning in the 1980s.

Read the full story here in the Commercial Observer.

— Posted on 3.2.18 by JVS, backdated to 12.4.17

12.22.15 – Commercial Observer: “Good News Facility Brings Industry City Loan to $403M”

As reported by the Commercial Observer on 12.22.15 (note: emphasis added):

Bank of China and SL Green Realty Corp. have upped their $220 million loan on Industry City to $403 million as part of a “good news facility” that came with the deal, Commercial Observer has learned.

The massive recapitalization exceeds earlier expectations. CO initially reported the loan topping off at $320 million in October, while the sponsors and lenders were in discussions about additional funding if certain renovation and leasing goals are met.

A $220 million portion of the loan was provided at closing, on Dec. 4, and the remaining $183 million will be provided over time as the property is redeveloped and leased-up, said Iron Hound Management Company’s Robert Verrone, who worked on the deal…

The 6-million-square-foot complex, formerly known as Bush Terminal, was originally securitized across two CMBS deals with a $250 million note in the Goldman Sachs-sponsored conduit GCCFC 2007-G11 and another $50 million note in the Citigroup-sponsored conduit CGMR 2008-C7.

The original borrowers, Rubin Schron of Cammeby’s International and AbrahamFruchthandler of FBE Limited, defaulted on mortgage payments in January 2011 and the $300 million in debt was reconsolidated into a $190 million A-note and a $110 million B-note in April 2012.

Read the full story here in the Commercial Observer.

— Posted on 3.2.18 by JVS, backdated to 12.22.15

10.26.15 – Commercial Observer: “Industry City to Get $220M From Bank of China and SL Green [Updated]”

As reported in the Commercial Observer on 10.26.15 (note: emphasis added):

Sunset Park’s Industry City is about to get a lot more than just Brooklyn Flea and Smorgasburg this season.

Bank of China and SL Green Realty Corp. are lining up a $220 million loan to recapitalize existing debt on the massive redevelopment project, which boasts 6 million square feet of commercial space across 16 buildings, according to a person with intimate knowledge of the deal. The loan is slated to close in the next few weeks and the sponsors and lenders are in discussions about a “good news facility,” which would allow for additional funding on top of the $220 million, that person said on the condition of anonymity.

Bank of China will fund the senior portion of the financing and SL Green will provide the remainder in mezzanine debt. The specific breakdown of the debt was not disclosed.

The previous financing on the waterfront property between Second and Third Avenues in Brooklyn totaled $300 million and was securitized in the commercial mortgage-backed securities market. The larger part of the financing made up a $250 million note in the Goldman Sachs-sponsored conduit GCCFC 2007-GG11 and a $50 million note in a Citigroup-sponsored conduit CGCMT 2008-C7.

The original borrower, a group of investors led by Rubin Schron of Cammeby’s International and Abraham Fruchthandler of FBE Limited, defaulted on the loan in January 2011 and the debt was later split into a $190 million A-note and a $110 million B-note in April 2012, according to commentary from the special servicer. The following year, a new borrower entity—with additional sponsorship from Jamestown Properties and Angelo, Gordon & Co.—assumed the loan and further modified it.

Since the new owners, which also include Belvedere Capital and Cammeby’s International, took over the former Bush Terminal in 2013, they have been in the process of redeveloping and leasing out the space to tenants in creative fields as part of a $1 billion plan.

Read the full story here in the Commercial Observer.

— Posted on 3.2.18 by JVS, backdated to 10.26.15

9.17.13 – “Industry City Investors Hope ‘Made in Brooklyn’ Lures Tenants”

As reported by The Wall Street Journal:

An investor group is betting the growing popularity of New York’s Brooklyn borough will help it resurrect Industry City, one of the largest privately owned industrial properties in New York.

The group, which includes Jamestown LP, Belvedere Capital Real Estate Partners and Angelo Gordon & Co., gained a roughly 50% stake in the 16-building complex by agreeing to inject $35 million and assuming part of the $300 million in debt. That’s a tremendous undertaking considering the property, which has 6 million square feet of space, was appraised at just $136 million last year, well below the $570 million it was pegged at in 2007, when longtime owners Abraham Fruchthandler and Rubin Schron borrowed the $300 million against the properties, according to Trepp, a real-estate research firm.

The cash injection is part of a complex loan restructuring that is expected to encourage the new owners to invest more money in the property and provide a lifeline to Messrs. Fruchthandler and Schron, who remain part of the ownership group. For the new investors, the deal pays off only if they can significantly raise the property’s value.

The arrangement is a reminder that even in strong commercial property markets such as New York, where properties in some places are fetching high prices, lenders are still cutting deals to persuade investors to put up fresh cash to turn around troubled properties. “The market is getting better,” but some properties still carry far more debt than they are worth, said Keerthi Raghavan, a commercial-mortgage-backed securities analyst with Barclays PLC. “Borrowers need to be given very aggressive modifications to make it work.”

Jamestown has had success transforming industrial properties and is known for turning a former National Biscuit Co. plant in Manhattan into New York’s popular Chelsea Market, which is home to Google and Scripps Networks offices and includes a popular food market.

To turn around Industry City, Jamestown and its partners will need to significantly boost occupancy and lure top tenants. Their plan is to do this in part by appealing to the growing number of “Made in Brooklyn”-branded companies, which include everything from bakers to brewers to technology firms…

The new landlords said they intend to lease ground-floor space to tenants who both manufacture and sell their products at the property, a plan that worked well at Chelsea Market. 

“What is interesting is a sort of redefining of what manufacturing is,” said Andrew Kimball, a former chief executive of the Brooklyn Navy Yard Development Corp. who was hired by Jamestown and is now chief executive of Industry City. “You’ve got a tremendously well-educated creative class that wants to make cool things again near where they live.”…

Industry City will have competition from other properties. But demand from companies who want to set up shop in Brooklyn is so strong there is a waiting list of tenants interested in leasing space at the nearby Brooklyn Navy Yard, Mr. Kimball said…

With the decline of manufacturing in recent decades, much of the property was rented for storage space, yielding relatively low rents in the range of $4 a square foot annually. Other manufacturing space in the area runs as high as $12 a square foot, according to Michael Phillips, chief operating officer with Jamestown…

The property’s value tumbled after the financial crisis, and efforts to convert the space to office and other uses stalled. Occupancy slid to around 60%, from 87.2% in 2007, and the property’s loan went into default in 2011. Superstorm Sandy delivered another blow by flooding parts of the property last year.

But things are starting to look up. Jenifer Howard, a MakerBot spokeswoman, said Industry City was chosen out of a desire to remain in Brooklyn and because the property was able to quickly accommodate the fast-growing company. “We were very dedicated to remaining in Brooklyn,” said Ms. Howard.

Read the full story here.

— Posted by JVS on 2.15.20, backdated to 9.17.13

1.31.11 – “Setback for Historic Warehouse”

As reported by The Wall Street Journal:

Real-estate developer Rubin Schron is in talks to restructure about $300 million in debt backed by a 35-acre piece of Brooklyn’s historic industrial waterfront that he has been trying to turn into an artists’ haven.

A group led by Mr. Schron purchased the property, which had been part of the massive Bush Terminal complex, starting in 1986. Located near the Gowanus Expressway, it was packed with century-old industrial buildings, some of which he planned to convert into artist lofts, office space and other uses.

Beginning in 2007, Mr. Schron took out loans that ultimately totaled about $300 million which were converted into commercial mortgage backed securities, according to Realpoint. Soon after that the recession hit the outlook for his property, named Industry City, worsened. So far only about 600,000 square feet of its 6 million square feet of space has been converted and only about 400,000 square feet of that is occupied. The property’s occupancy has also dropped to the 60% range from 87.2% in 2007, according to Realpoint and a copy of the loan’s prospectus…

Mr. Schron’s group, which today includes Abraham Fruchthandler, anticipated when the initial loan was made that the property could generate an annual net operating income of about $37.9 million as they released space at higher rents, according to Realpoint. Instead the property’s net operating income for the six months ended in June 2010 was about $5.8 million. During that same time period, debt service was about $9.6 million, according to Realpoint…

Mr. Schron’s group is in default on the $300 million in debt, according to Realpoint, a credit-rating firm and a unit of Morningstar. The debt was reported 30 days delinquent earlier this month by the special servicer charged with managing the loan, according to Realpoint…

Industry City has been working to raise its profile among artists. Michael Connor, the curator of a temporary art space called Marian Spore that was located in one of Industry City’s buildings, said he paid no rent. Rather, in exchange for occupying the space, Mr. Connor helped market the property to artists and others. “There’s a good kind of community that is beginning to build there,” Mr. Connor says.

Read the full story here.

— Posted by JVS on 2.15.20, backdated to 1.31.11