Wooing National Tenants, Seeking Big Rents - Are These Storefronts Worth $120 Per Square Foot?
By Lore Croghan
Brooklyn Daily Eagle
On Sunday, Marty Markowitz was crowned King of Brooklyn on Atlantic Avenue. The other days of the year, the princes of New York City real estate are busy trying to make a buck on a mile-long segment of the retail corridor stretching from Brooklyn Bridge Park nearly to Barclays Center.
Big players like the Cayre family's Midtown Equities and Joseph Sitt's Thor Equities are vying with mom-and-pop property owners to win retail and restaurant tenants for sites on the Brooklyn Heights, Cobble Hill and Boerum Hill span of the thoroughfare.
There are three retail-oriented development projects at the intersection of Boerum Place – and Midtown Equities, the developer tapped to renovate DUMBO's historic Empire Stores warehouses, is involved in one of them. A few blocks away, the owner of a popular Cobble Hill whiskey bar is constructing an apartment building with space for a new restaurant for himself plus room for a store. High-profile Thor is looking to lease a prime location, 292 Atlantic Ave., on the corner of Smith Street, and also rent out empty storefronts at Atlantic Gardens, a brightly-painted row of townhouses purchased for $23 million in May.
“It's unbelievable how much the street has changed,” said Michael DeVito, 85, who owns three row houses across Flatbush Avenue from Atlantic Terminal shopping center, where Target draws multitudes of shoppers. “There are no words to describe it.”
DeVito bought 547 Atlantic Ave. in the 1960s, when he lived in Flatbush, because it had a garage where he could park the truck for his electrical contracting business. He later bought 545 and 549 Atlantic.
“There were quite a few years this area was no good,” recalled DeVito, whose son is now in charge of the contracting firm. “Now it's a great place – but it's a new world. It's for high-tech, educated people.”
There's a vacant storefront at 549 Atlantic Ave. He's pondering: Should he find a tenant – or sell the building?
“I'm deciding what's best for my children,” said the octogenarian, whose properties are just up the block from vacant Atlantic Gardens spaces at 535, 537 and 541 Atlantic Ave., for which it's said Thor wants $120 per square foot.
'IFFY' BLOCKS, BUSTLING BLOCKS
In case you missed it, the Borough president's “coronation” was part of Atlantic Antic, a gargantuan street fair the Atlantic Avenue Local Development Corp. has staged every year for the past four decades to promote area businesses.
Despite countless positive changes the development group and the Atlantic Avenue Business Improvement District have fostered, pockets of the mile-long corridor remain problematic places to land tenants.
Take the block between Nevins Street and Third Avenue, where Nancy Cogen just closed The Melting Pot, her 41-year-old batik shop at 492 Atlantic Ave., because machines needed for this type of fabric-making are no longer being manufactured. Allen Barcelon and other brokers have been searching to find a commercial tenant for Cogen, who owns the row house, which has lawyer's and dentist's offices and an alcohol rehab facility as neighbors.
“I'm kind of worried a little bit,” said Barcelon, who heads Boerum Hill Realty. “It's an iffy block, not good for fashion, not good for food service.”
Such a shame, said the former chef, who's active in the Boerum Hill Association – because the 1,200-square-foot storefront would work well for a restaurant. It's not near a church, so liquor could be served. It has a back yard for outdoor seating. And the tenant would be allowed to use most of the 1,200-square-foot basement.
“But I don't think a restaurant will survive there,” he said, pointing out the short lifespans of now-shuttered Atlantic Avenue restaurants such as Hopeland. “It would be like an island in the middle of nowhere.”
The asking rent is $6,500 per month, which comes to $65 per square foot per year for the ground floor if use of the basement is calculated as a freebie.
“We've got our little challenges,” said Barcelon, who thinks Cogen's Atlantic Avenue block and others between Bond Street and Fourth Avenue have “a long way to go.”
Barclays, though super-busy, doesn't generate much foot traffic on this part of Atlantic Avenue because Flatbush Avenue stands in the way, he said.
“It's like the Mississippi River – no one wants to cross it,” he said. “People who go to the stadium are not going to Boerum Hill.”
Forbidding Flatbush Avenue creates a “border vacuum” that cuts off this section of Atlantic Avenue from Barclays, he said, citing a phrase coined by urban visionary Jane Jacobs.
In contrast, he said, the Atlantic Avenue block between Bond and Hoyt Streets has turned into a thriving collection of fashion, design and furniture boutiques. A new tenant, Swedish luxury clothing maker Gant, is building a store on that block at 357 Atlantic Ave., next door to a recently-arrived fragrance shop, Atelier Cologne.
COMING RIGHT UP: COMFORT FOOD AT 333 ATLANTIC AVE.
Smith Street habitues know Michael Tsoumpas as a man with an incredibly eclectic whiskey collection, which he serves up at a Cobble Hill bar called Char No. 4 that has made quite a splash (yes, that's a drinkers' pun).
He's also a developer – and he's constructing a 22-unit rental apartment building at 333 Atlantic Ave. with a 4,000-plus-square-foot, two-level ground floor and basement space for a new restaurant.
The new eatery will be a Brooklyn version of Murray Hill restaurant Penelope, which he and his wife Jennifer Potenza own, Tsoumpas told Eye on Real Estate. The E. 30th Street and Lexington Avenue nosh spot is named after their 20-year-old pet turtle.
“It's a comfort food place with a Montauk/Cape Cod feel to it,” he said. “It's not a foodie restaurant.”
The Atlantic Avenue version probably won't use the name Penelope, said Tsoumpas, who bought the development site from St. Vincent's Services for $3.675 million in December 2011.
The new building will have a second duplex commercial space, 2,500 square feet in size; he thinks a nice clothing retailer would be a good complement to his restaurant. If that space winds up being used for a restaurant, he will be involved in it so the two eateries in the building will be “symbiotic,” he said.
He's in the process of choosing a leasing agent to market the retail space. The brokers he has been talking to told him the rent could go as high as $125 per square foot.
Excavation is underway at the site. If he's lucky, construction will be done in 15 months, he said. The former Park Slope resident plans to use one of the new apartments there as a pied-a-terre.
A VIEW FROM THE BRIDGE
In February 2012, St. Vincent's Services – which is now known as the William M. Casey Foundation – did another noteworthy real estate deal on Atlantic Avenue. It signed a 49-year lease that turned the parking lot beside its historic building at 66 Boerum Place into a development site. Robert Cayre of Midtown Equities – Empire Stores' redeveloper – is the manager of the LLC that acquired the site through the long-term lease, city Department of Finance records indicate.
The new building there will be a three-story “education center and retail space,” according to a sign on the construction fence. Workers behind the fence are now digging a deep hole for the cellar of the 62,800-square-foot building. Cayre's partner in the LLC, Alex Adjmi of ACHS Management Corp., has a project rendering on his website showing a glass building with a glowing cylindrical entrance.
There are two other retail projects at that intersection:
* National tenants Pier 1 and Retro Fitness have signed leases at 252 Atlantic Ave., which will be a 48,750-square-foot, two-stories-plus-basement retail building called Atlantic Galleria. Construction has stopped because steel beams are being delivered from Canada, and it should take another three weeks before they arrive, Adir Cohen, director of leasing and acquisitions at developer Renaissance Realty Group, told Eye on Real Estate. Construction should be finished at the end of 2014.
He's been trading letters of intent with more than a half-dozen national retailers for the remaining 13,500 square feet of ground-floor space. Asking rents are $100 per square foot for a smaller space and $80 per square foot for a larger space. Pier 1 will occupy the second floor of the building and Retro Fitness the cellar; their rents are lower than those asking rents, though “not substantially” so, he said.
Cohen acknowledged that he's competing with neighboring developers for national, credit-worthy tenants – but said his project has an advantage that no other can claim.
“It's the only property on Atlantic Avenue that can be seen from the Brooklyn Bridge,” he said.
* Right next door to Renaissance Realty's site, at 262 Atlantic Ave., another retail building that's two stories tall with a basement is planned.
The developers are investors from Laundry Capital, which owns self-service laundry chain Clean Brite. An LLC whose president is Laundry Capital general counsel Oren Sauberman bought the property for $3.9 million in 2011.
Work has not yet begun at the site. Tenants will be able to take possession of the space in the planned 28,111-square-foot building in first-quarter 2015, marketing material from the project's leasing agent, Ripco Real Estate, indicates.
BBP BOOSTS FOOT TRAFFIC
On the Cobble Hill-Brooklyn Heights end of Atlantic Avenue, foot-traffic generators like Trader Joe's, Barneys Co-op and Urban Outfitters mingle with Middle Eastern gourmet goodie sellers such as Sahadi's and Damascus Bread and Pastry Shop. And visitors heading to the southern entrance to Brooklyn Bridge Park further swell the foot traffic, shop owner Greg Schmitz said.
A further boost to the avenue is expected when the crisis is resolved at 150-year-old Long Island College Hospital, which SUNY Downstate Medical Center officials have been trying for months to close. LICH's real estate, located on and around Atlantic Avenue, could be worth nearly $1 billion, according to published reports. A judge recently ordered SUNY to include community groups in deliberations to determine LICH's fate.
Schmitz and his partner Lee Dillon are looking for a tenant for the retail space in 140 Atlantic Ave., a brick row house Dillon's family has owned since the 1970s. The couple is closing their card shop, Fusion Designs Gallery, which occupies the space, because most of their revenues come from wholesaling the charming greeting cards that Dillon designs.
A lot of restaurants have looked at their space, but they decided they don't want food tenants.
“We've gotten a lot of offers,” Schmitz said. “We're waiting for the right tenant to come along.”
According to a marketing flyer from leasing agent Massey Knakal Realty Services, the asking rent for the 1,000-square-foot space is $8,250 per month, which works out to $99 per square foot per year.
Their greeting cards – many of which are decorated with winsome portraits of neighborhood cats and dogs – will be available online and at nearby retailers such as Papel on Court Street.