Prime Spaces To Open in DUMBO, Enhancing A Variety of Portfolios
By Lore Croghan
Brooklyn Daily Eagle
The Jehovah's Witnesses' $375 million deal to sell six key properties to big-time developers will be a godsend (pardon the pun) to DUMBO that will enable the neighborhood to play a key role in the creation of the Brooklyn Tech Triangle, real estate executives and civic leaders said.
“This will be a game-changer for DUMBO and will jump-start the Tech Triangle,” said Timothy King, managing partner of CPEX Real Estate.
“DUMBO is already maxed out,” King said. “It's very difficult for tech firms to find any sizable footprint in DUMBO.
“A 15,000-square-foot space is non-existent. We field calls all the time for tenants of 100,000 to 250,000 square feet that want to be in DUMBO. We offer them alternatives in other neighborhoods.”
New York City-based developers RFR and Kushner Companies announced Monday that they're in contract to buy the six buildings – which have a total of 1.2 million square feet of commercial space – from the Watchtower Bible and Tract Society of New York Inc.
They're expected to close in September on the five industrial buildings in the portfolio: 117 Adams St., 175 Pearl St., 55 Prospect St., 81 Prospect St. and 77 Sands St.
The sixth building, 30-story hotel 90 Sands St., is expected to remain occupied until 2017, when its sale closes, according to the New York Post, which broke the story of the pending DUMBO property sales in advance of the developers' announcement.
RFR and Kushner said they will partner with Asher Abehsera's firm, LIVWRK Holdings, to redevelop the Witnesses' buildings. For eight years he was the general manager of the Walentas family's Two Trees Management Co., the dominant developer in DUMBO.
“We identified the Watchtower properties in DUMBO as a key target for active commercial uses for the 'innovation economy' as part of our Tech Triangle study,” said Tucker Reed, president of the Downtown Brooklyn Partnership.
The Partnership, together with the Brooklyn Navy Yard and the DUMBO Improvement District, unveiled new initiatives on June 18 to meld the three locations into a hub for technology firms. But vacancy among existing DUMBO office properties is a miniscule 1.25%, according to published sources.
With the new push underway to promote the Tech Triangle, “the Jehovah's Witnesses, who are extremely savvy, saw this as the right moment to sell the buildings,” said Robert F. Hebron IV, a partner at Ingram & Hebron Realty. “The timing was absolutely perfect.”
Office space is so scarce in DUMBO that landlords are trying to get small tenants to end their leases early and free up space for larger businesses to expand, Hebron said – but this deal is a signal to really big tech firms that there will be room for them in the neighborhood.
The Sands Street hotel has small rooms and “Spartan” amenities, a source said. If the purchasers decide to use it as a conventional hotel they will need to combine rooms into larger units and spruce up the amenities.
The other properties are zoned for industrial use, meaning they can be converted as-of-right into hotels. The Jehovah's Witnesses are in the process of phasing out their use as printing plants, administrative offices and sites to house medical and dental clinics.
Several of the buildings are connected by aerial walkways – and have killer views of the Statue of Liberty, the Brooklyn Bridge, New York Harbor and the skyscrapers of Lower Manhattan.
“They're amazing properties, with incredible locations and enormous value,” said Bill Ross, director of development marketing at Halstead, who noted there was “enormous competition” by some of the largest real estate firms in New York to be chosen as the purchasers.
Real estate brokers are amped up about the prospect of the industrial buildings being turned into open-plan, high-ceilinged “collaborative work environments” for tech and creative firms.
“I have no doubt the buildings will rent rapidly and bring an infusion of talent and disposable income to the neighborhood,” King said.
“If they are used for office space, they'll be gobbled up quickly,” predicted Ross – who said DUMBO will benefit from real estate taxes that will be generated by the now tax-exempt buildings, and payroll taxes for new workers who will spend money in the neighborhood.
Just as the sale by the Jehovah's Witnesses of the Bossert Hotel on Montague Street will boost the economy of Brooklyn Heights, the sale of the buildings in DUMBO will give “a huge economic boost” to that neighborhood, Ross said.
Last year's $81 million sale of the iconic hotel – which the religious group had been using to provide lodging free of charge to the faithful – was a milestone in a long-running campaign to divest itself of its Brooklyn properties to prep for a move upstate.
The Witnesses' other high-profile deal to date was the sale of 360 Furman St. for $205 million. The building, now known as One Brooklyn Bridge Park, was converted into condos.
The creation of fresh office space in DUMBO will draw additional retailers to the neighborhood, King predicted.
“There will be hundreds of hungry workers looking for the next hot lunch spot,” he said. “There will be strong demand for new retail to accommodate the workers, from additional dry cleaners to casual restaurants to new bars.”
King doesn't see the arrival of high-powered RFR – whose portfolio of 100 properties, principally in Manhattan and Germany, includes the famed Seagram Building at 375 Park Ave. – as a competitive threat to Two Trees. Kushner is no slouch either; the firm, headed by Ivanka Trump's husband, Jared Kushner, acquired almost 1 million square feet of commercial real estate in New York City and New Jersey last year.
“This will enhance the value of Two Trees' portfolio,” King said. “What's good for DUMBO is good for the Walentas family.”
Two Trees exec David Lombino declined to comment on RFR's and Kushner's pending purchase of the Witnesses' building portfolio. Public relations reps for RFR and Kushner declined to elaborate on their plans for the buildings they're purchasing. The Witnesses' spokesman did not return a call by deadline.