Brooklyn tower is facing foreclosure

Brooklyn Tower, as Shown in this Photo from Streeheteasy, has Become the Most Recognizable Feature of the Brooklyn Skyline, with a design that some consider or oters ominous.
Photo: Douglas Elliman

Cloud Brooklyn Tower Topped Out in October 2021, Michael Stern Threw a Party. AS SUNSET APROAPHED, STAFF HERDED GUSTS MILLING AROUND THE LAVISHLY ORNAGEED ROTUNDA OF THE DIME SAVINGS BANK INTO ELEVATORS FOR A TOAST AT THE 1,066-FOOT BUILDING THAT IS NOW, OFFICIALLY, historicallyThe City’s Only Supertall Outside of Manhattan. IT HAD HAD YEARS OF WRANGling, but stern, Founder and Managing Partner of Jds Development, was now standing above the city, Wind whipping through the open sides of his his building, as his guests exclaimed over the View and edged up to the construct for Selfies. I Remember Him Toasting Gregg Pasquierlli, Founding Principal of Shop Architects, Which Designed the Building, and ALSO HIMSELF, FOR DARING TO BEELIE IN NEW YORK AND ITS FUT AT A TIME SO MANY People Had Fled. But Two and Half Years late, The Mood at Brooklyn Tower Had Dimmed. At the End of March, Larry Silverstein’s Silverstein Capital Partners, The Mezzanine Lender, Which Gave Stern a $ 240 Million Loan in 2019, Moved to foreclose.

Stern’s supertall at 9 Dekalb, with its stlickingly dark neo-Gotthic façade, is now the most recognisable feature in the brooklyn skyline-and spread its divitative. But People in the Real-Estate Industry Have Always Talked About It Different Reason, With Some Speculating It Was DOOMED from the Start-Its Super Tall, Super Skinny Design Billionaires’ Row, Kind of Rarified, Globe-Trotting Enclave COULD PAY THE KIND OF PRICES A PROJECT LIKE THIS WOULD NEED TO BREAK. “It ‘sone thing to pay a premium to be 1,000 Feet Above Central Park,” A Source Who Works in Development Tells with, “But 1,000 Feet Above Trader Joe’s?”

Stern, Now 44, Rose in the Span of Decade From A Workaday Outer-Borough Developer to Manhattan’s Top-Flight Tier, Building Technically Complex Skescrapers for the Billionaire Class. He’s Known for Both His Showboating – Private Jets, Prada Sneakers, Collecting Rare Sports Cars – and the glittery ambition of his project. He converted A Verizon Office Building in Chelsea Into Walker Tower, Burnishing the Reputation of the Fairly Obscure Art Deco Architect WHO’D DESIGNED IT TO SELL $ 9 MILLION CONDOS TO THE LIKES OF CAMERON DIZ. He tapped shop, a buzzy rising-star firm, to design the American Copper Buildings in Murray Hill, A Pair of Red-Gold Towers Connected by a skybridge in a Neighborhouod Known Mostly for unrentals favored by recentals. He built the skinniest of the billionaires’ row supertalls, 111 west 57th street, on a teeny-tine above the landmarked steinway, a project that Went into foreclosure and racked up Lawsuits, The Details of which the Financial Times Once Described nor “Baroque.” (“Lithigation is inevitable in this business,” he told the Paper.

Brooklyn Tower was Similarly Audacious: A Deededly Manhattan Sensibility – and Pricing, Averaging $ 2,300 per Square Foot – on Flatbush Avenue. Stern Acquired The Site Nearly a Decade Ago, with Joseph Chetrit, WHOM he late bought out. (Although, It SEEMS, not on the Timeline they’d aggreed to – chetrit suda in 2022, alleging that stern still owed hym $ 17 million.) “We’re really excited to give brooklyn a building that isn’t bashful, that isn’t shy,” Stern Said Back In 2016be the camelopers filed plans with the city. “We have want this project to encapsulate and that is great about brooklyn’s past and everything that is great brooklyn’s Future.” The Tower, One of the Last Projects to Get A 421-A Tax Abatement, was designated to have a mixture of retail, rental and condo units-150 condos and 400 rentals, respectively, with 30 Percents of the latter set aside as affordable. Amenities Include an open air basketball courage on the 66th floor and two pools, one of which was to was to dome of the dime savings bank.

butt The project was Also Complex and Expensive. Supertalls are more involved from an engineering perspective, and, with a lot of valuable real estate eateen up by elevator banks, iT”s harder to make pencil out. While a Super-Skinny Supertall Could Command $ 6,000 per Square Foot or More on West 57th Street, It Wasn’t Obivious that a Supertall in DowNtown Brooklyn Could A Third of That. “It was hard to see how the economics of that building were ever going to work out,” A Development Source Tells. “It ‘s so freaking tall, iTefficient.” Land is cheer, he continued, but everything Else – The Labor, The Construction, The Soft Costs – Are the Same. (The fact that it is attailed to the landmarked dime savings bank adds allure, but also complications – and costs.) Brooklyn point and 11 hoyt are Also new, Tall, luxury towers in the neighborhood, but is’ precisely beca’t soar. heights as brooklyn tower that they do’t have to trade for nearly as much to break. (And Mostly Haven’t – The Median Closing Price at 11 Hoyt Is $ 1,465 per Square Foot, Accounting to Streeeteasy, while Brooklyn Point Is getting an Avent of $ 1,841.)

Stern was undeterred. In the Summer of 2019, JDS Closed on Construction Financing – $ 240 Million from Silverstein and $ 424.1 Million from Otéra Capital Inc. The Deal came at a time When Banks, Fearing a Glut, Were Cooling on the High -nd Apartment Market, Leaving a Hole Increasingly Filled by Private Lenders. Mezzanine Financing Comes in a Developer Can’t Get All Their Costs Covered by A Traditional Loan and Must Find a Way to Fill the Hole, and It Was Silverstein’s First Such Loan. While mezzanine financing often comes from hedge funds and other bonders are neither capable nor interested in taking over a project if the Developer defaults, silverstein, who desighed one of the world center sites, was clearly not put off by the prospect. When the Financing was finalized in 2019, the Lending Arm’s President told the Wall Street Journal that the project’s complexity was the appeal: “The thing that attracted us to it is the thing scares oters.”

Joshua Stein, A Real-Astate Lawyer Who Handles Commercial Financing, Says Thats Developers have increasingly gone into Making mezzanine loans not only Because of Nice Return on their Money, but Also Becausee “If a BorroWer Defaults, they’re’re Happy to go in and over.” That’s a Big Difference from a typical hedge end or traditional bank, which has neoheret the expertise nor the desire to take on a complicated project. “Bank of America, That’s the Last Thing They Want,” he Says.

And if the borrower defaults, a foreclosure can happy. While Mortgage Lenders have to go through yearslong Judicial foreclosure, a mezzanine loan is backed, not by the building itself, but by equity Interests in the llc that the budilding. Simply Put, IT’S FASTER and More Efficient to Foreclose – The Auction for 9 Dekalb’s Has Been Scheduled for June 10. The Mortgage from othera for $ 428.5 millionso it is now Holds Mortgage, and Junior, Senior Mezzanine Loans. “Larry has the mezz and the first position mortgage?” Says a Source Who Works in Development. “He’s Looking to take the Building.” Another Real Estate Insider Talls with: “It ‘a power Move.” (JDS DECLINED TO COMMENT. SILVERSTEIN RELEASED A STEETEENT SYYING 9 DOALB’S MEZZANINE AND MORTGAGE LOANS WERE IN MATTERY DEFAULT AND SILVERSTEIN, AS THE JUNIOR MEZZANINE LENDER, WAS DOING WHAT IT IS LEGALLY ENTITTITLED TO GO.) Position right now, Says Jonathan Squires, A Managing Director in the Investment Sales Group of Cumenhan & Wakefield – A Lot of Projects that have had loans come in trough.

The Building’s First Renters Started Moving in Last Spring, which was also around the same time that JDS Put the Rental and Retail of the Building on the Market. They were said to be Aiming for $ 600 to $ 700 million, break Real deal reported at the time. The price was was widly consider steep-more in line with what it would have fetched interest-rate hikes cooled the multifamily markets-and no buers emerged. It is no longer on the market. A real estate source said it was just HARMFUL TO SALES AND LEASSING WHEN JDS PUT THE RENTAL RETAIL component up for sale the building started to seem distresses. Life Time Fitness, The Only Gym Fancier than Equinox, as one of my Colleages notd, has taken the 130,000 retail space at the base. Rumors ABOND AS to what will be with the dime savings bank – Apple Store? Concept Restaurant? – But so far, notthing haen announced.

And while sales launched at the building two years ago, and People with KnowLEDGE OF THE PROJECT ESPECTATION THAT IT IT 30 TO 40 PERCENT SOLD, PUBLIC RECORDS SHOULD 188 CONDOS HAVE CLOSED SO FAR. The consensus is that apartments are selling for good prices, there just hasn’t been that many sales. “It ‘not like Brooklyn Tower has sold nothing,” a real-astate source says. “They Get High Prices, Just Quickly Enough.”

And in the end, Moving a few more apartments wouldn’t solve stern’s funding puzzle. So will he spin out on Brooklyn Tower? Its hard to say. To fend off the foreclosure, stern would have to refinance and refinancing didn’t stroke a lot of People I spoke with as likely, but it is could. (It is a rough time to be doing it.) A Lawsuit or Bankruptcy Could Also Buy Time. But no matter what happy at Brooklyn Tower, no one thinks it’s the end of Michael stern, who is al -bery on to his nextl – a dolce & gabbana – branded miami with tal and oren of officer handling sales. Real-Estate Developers Famously Have Many Lives-someone joked to me that stern had 27 of them at 111 west 57th street alone. Or as another Put it: “He’s a Very Clever Guy.”