What Really Happened at Brooklyn Tower

What Really Happened at Brooklyn Tower?

Contrary to the headlines, it’s not all over for Michael Stern at his Brooklyn supertall. The JDS boss had been battling behind the scenes to save his marquee project – his lender Silverstein Properties had scheduled a UCC foreclosure auction June 10, but the auction was canceled at the 11th hour as both parties hinted at an upcoming settlement.

This week, PincusCo reported that a Silverstein-controlled entity, 9 Dekalb Holdings 1 LLC, had taken control of the retail, 400 rental units and unsold condos in a transaction valued at $672M. That was interpreted by many as curtains for Stern, a developer whose hyperambitious projects and relative youth make him a favorite hate-watch for the industry.

But though Stern is down, he isn’t out. What took place at the property, sources familiar with the settlement told The Promote, wasn’t a straight transfer: Rather, it was a debt restructuring, and Stern is still in the mix.

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Brooklyn Tower(cont.)

JDS reached a joint-venture agreement with Silverstein, sources said: JDS kicks in additional equity to stay in the project and has a hope note, and Silverstein becomes the majority partner w/ shot-calling authority. A “kumbaya agreement,” is how a source described it, with a rejigged waterfall. (Tangent: To understand how elaborate waterfalls in big-ticket CRE can get, peek an old one for JDS’ 111 W 57th St. here)

Some color: Silverstein had issued a $240M mezz in ‘19, and took full control of the debt stack late last year when it bought the $424M senior debt from Otéra Capital (Caisse subsidiary 🇨🇦 ). The loan matured a year-and-a-half ago, but the cost of buying a new rate cap was prohibitive for JDS, and the firm defaulted when the loan came due. To free up funds around that time, Stern had tried to sell the rental portion of the tower for $600M+, but that didn’t take.

The partners – and that’s what they are now – have their work cut out for them: The only construction work remaining is the tenant build-outs for the tower’s retail portion, and New York’s rental market is robust. But over half the tower’s condos remain unsold.

(Bonus: This tower has as memorable a cast of characters and dealmaking history as any in the country. If new to it, catch up here.)

White Knight at Brooklyn Boondoggle?

With Steve Ross empire-building in South Florida, his protégé Jeff Blau is busy shaping his own legacy from HQ: Related Cos. is angling to take over Brooklyn’s biggest boondoggle, the Pacific Park (fka Atlantic Yards) megaproject, per TRD.

The project’s developer, Greenland USA 🇨🇳 (which took over from Bruce Ratner’s Forest City Ratner) , defaulted on its debt last year, and its lenders, Fortress and Nick Mastroianni’s U.S. Immigration Fund, moved to foreclose. That auction has been repeatedly delayed though – any new owner would need the blessing of New York state, which has helped fund the project and has suffered seven lifetimes worth of headaches because of it.

Rescuing the project (3,200 resi units, 900 affordable) would necessitate a five-tool 🏏 player: huge balance sheet, experience in messy public-private stuff, technical chops to develop over active train tracks, a fundraising behemoth and an expert spinner of narratives. Related, with Hudson Yards and Columbus Circle on its resumé, fits that bill as well as anyone.

Hotel Horrors

Actively making a city worse does eventually hurt the bottom line. A nearly 3K-key 🗝️ hotel complex in San Francisco has seen its appraised value fall by more than $1B, per Kroll data cited by the SF Business Times. The complex, anchored by the city’s 2 largest hotels, Hilton San Francisco Union Square and Parc 55, was recently valued at $555M, compared to a $1.56B valuation when the $725M CMBS debt on the property was issued in ‘16. The borrower, REIT Park Hotels & Resorts, had stopped making payments last year, framing its intention to peace out as "the ultimate removal of these hotels from its portfolio" 👏 👏 👏

The loan’s special servicer Wells Fargo has tapped Eastdil to sell the properties – the receiver has until just before Labor Day to find a buyer, or the properties go into nonjudicial foreclosure.

Not an easy task: RevPAR in SF is down more than 37% from ‘19.

Quickies

• 🎥 How the Preqin deal makes Larry Fink private RE’s Anna Wintour 

• Syndicator/spitter Patrick Carroll arrested on felony charge

• Namdar & the Great Neck cousins in talks to surrender (already!) office building to lender (read our snapshot of the “billionaire bottom feeder” here)

• Inside WeWork’s lease restructuring marathon  

• Kushner lands $295M construction loan (Apollo, RXR) for Jersey City megaproject

• Boston Properties upping office bet at Reston Town Center

• Beacon Capital makes Chicago’s priciest office acquisition in 2+Y

• Tides faces more foreclosures in Dallas  

Unquotable Quotes

Programming note: The Promote is off on Friday 7/5- we’ll see you back here on Monday. It’s my first Fourth as an American 🇺🇸 , and I feel fortunate to be in the mix with all of you. (An essay on my perspective here.)