Brookfield signs $175M refi loan with Wells Fargo for office in Downtown Brooklyn

Brookfield Properties through the entity Forest City Jay Street Associates, LLC as borrower signed a refi and rehab construction loan with lender Wells Fargo valued at $175 million for the office building at 351 Jay Street in Downtown Brooklyn, Brooklyn.
The deal closed on March 25, 2022 and was recorded on April 13, 2022. The prior lender was Wells Fargo which held debt that had an original loan amount of $200 million, which covered this and three other properties. The property has 978,544 square feet of built space according to PincusCo analysis of city data. The loan price per built square foot is $178 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)
The owner acquired the property on December 7, 2018, for $204.2 million, from Forest City Realty Trust. The signatory for Brookfield Properties was Ketan Patel. The signatory for Wells Fargo was Brianne Hanifin. The Real Deal first reported the deal, which is part of the rebranding of 351 Jay Street, along with 2 and 3 MetroTech Center, as Brooklyn Commons, and a $50 million investment into renovations.

Prior sales and revenue

The 978,544-square-foot property generated revenue of $41.9 million or $43 per square foot, according to the most recent income and expense figures.

The property

The 351 Jay Street parcel has frontage of 325 feet and is 215 feet deep with a total lot size of 69,875 square feet. The zoning is C6-1A which allows for up to 6 times floor area ratio (FAR) for commercial and up to 2.43 times FAR for residential. The city-designated market value for the property in 2022 is $156.8 million.

Violations and lawsuits

The property was not involved in any lawsuits or bankruptcies in the past years. In addition, according to city public data, the property has received 19 DOB violations and $3,260 in OATH penalties in the last year.

Development

For the tax lot building, it received its initial certificate of occupancy on August 26, 2015. There are no active new building construction projects or major alteration projects with initial costs more than $5 million on this tax lot.

The neighborhood

In Downtown Brooklyn, the bulk, or 36 percent of the 26.8 million square feet of commercial built space are office buildings, with residential elevator buildings next occupying 29 percent of the space. In sales, Downtown Brooklyn has 1.3 times the average sales volume among other neighborhoods with $365.7 million in sales volume in the last two years and is the 10th highest in Brooklyn. For development, Downtown Brooklyn has 2.9 times the average amount of major developments relative to other neighborhoods and is the 7th highest in Brooklyn. It had 2.6 million square feet of commercial and multi-family construction under development in the last two years, which represents 10 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of four of the five commercial properties representing 1,135,680 square feet of the 1,150,080 square feet. The largest owner is Brookfield Properties, followed by Willoughby Owner LLC and then MDG Design + Construction. There is one active new building construction project totaling 261,092 square feet. It is a 290-unit, 261,092-square-foot R-2 building developed by John Evans with plans filed December 30, 2021 and it has not been permitted yet.

The majority, or 97 percent of the 1.2 million square feet of built space are office buildings, with residential elevator buildings next occupying 2 percent of the space.

The borrower

The PincusCo database currently indicates that Brookfield Properties owned at least 45 commercial properties with 39,602,166 square feet and a city-determined market value of $5.8 billion. (Market value is typically about 50% of actual value.) The portfolio has $9 billion in debt, with top three lenders as Wells Fargo, JPMorgan Chase, and Athene Annuity And Life Company respectively. Within the portfolio, the bulk, or 87 percent of the 39,602,166 square feet of built space are office properties, with residential elevator properties next occupying 10 percent of the space. The bulk, or 86 percent of the built space, is in Manhattan, with Brooklyn next at 13 percent of the space.

Surrounding

Within a 400-foot radius of 351 Jay Street, PincusCo identified seven commercial real estate items of interests occurred over the past 24 months.
Of those seven items, one was in new building development. It was a new building permit application filed on December 30, 2021 for a 227,976-square-foot R-2 building with 290 residential units at 55 Willoughby Street.
Of those seven items, one was for major renovation including a certificate of occupancy change. It was an initial temporary certificate of occupancy issued on August 17, 2020 for the $4.5 million renovation of zero-square-foot B building with N/A residential units at 2 Metrotech Center.
One of those seven items was a sale which Lonicera Partners bought the 27,175-square-foot, eight-unit office building (O5) on 47 Willoughby Street for $48 million from Trans World Equities on January 12, 2022.
Of those seven items, four were loans above $5 million totaling $125.9 million. The most recent of the four was Willoughby Owner LLCC which borrowed $37 million from Investment Property Exchange Services secured by the 27,175-square-foot, eight-unit office building (O5) on 47 Willoughby Street on January 21, 2022.

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