Clipper Realty nearly doubles city rent on 342K sf lease in Downtown Brooklyn

The city's Human Resources Administration and Environmental Protection arranged a lease for 353,000 sf at 250 Livingston Street (Photo: Google)

Lease originally signed in 1997 started with rents under $20 per foot

By Adam Pincus

UPDATED 5:53 p.m., Apr. 25: David Bistricer’s Clipper Equity will nearly double the rent two city agencies are currently paying for 342,496 square feet at 250 Livingston Street in Downtown Brooklyn, to $14.94 million per year, city documents show.

The city’s Human Resources Administration and the Department of Environmental Protection have negotiated the 10-year lease at the 12-story building located between Bond and Hoyt streets. The lease is expected to start in August 2020, with an average rent of about $43.62 per foot, according to city calculations. The lease includes the right of termination after five years.

The current rental payment is about $7.7 million per year, according to a PincucCo Media analysis of U.S. Securities and Exchange Commission records for a 2016 lease renewal and Clipper Realty’s prospectus.

The deal highlights the soaring growth in Downtown Brooklyn’s property values since the original lease was signed in 1997 when office rents were under $20 per foot. The neighborhood is undergoing rapid growth, for example across the street at 11 Hoyt Street, Tishman Speyer and Vanke are developing a 481-unit condominium building. And Tishman has another project under construction a block west, rising above the old Macy’s & Co. building, with an address of 181 Livingston Street know as The Wheeler.

Despite the sharp rise, the new deal in some ways could be viewed as below market. In the SEC filing from 2016, Bistricer’s firm said it had signed a deal at 141 Livingston Street that would escalate to about $50 per foot in 2020, and noted there would be an $8.5 million bump if the 250 Livingston deal were signed at that level. Instead, the deal was closer to $42 per foot, yielding a bump of about $7.2 million.

“The lease that is expiring was set almost two decades ago, hence very low expiring rent,” David Bistricer, company CEO, said in an email. “[The] new rent is below market.”

Bistricer purchased 250 Livingston Street (also known as 240 Livingston Street) along with several adjacent parcels and the nearby office building 141 Livingston Street, in 2002 for $25.6 million, city records show. Bistricer sold the adjacent parcels in 2005 for $25 million to Schlomo Karpen, who constructed a 27-story rental building with two towers at 236 Livingston Street, which opened in 2010.

When Bistricer bought 250 Livingston, it was five years into the lease first signed in 1997. The total building was measured at about 294,000 square feet. Between 2003 and 2013, Bistricer converted space on the top four floors to 36 residential apartments, totaling 26,800 square feet. The city leased the remaining 267,000 square feet.

While the commercial space has not been enlarged, the building was re-measured using the Real Estate Board of New York’s standards, which increased the measurement of the office portion of the building by about 32 percent, from 267,000 square feet to 353,000 square feet. At the same time, the rent has grown from under $20 per foot to $42 per foot.

Clarification: The original version of this story relied on figures from U.S. SEC filings, which said the leased space was approximately 353,000 sf, which resulted in an approximate price per square foot of $42.00. After publication, a representative from the city provided the figure of 342,496 sf as the lease size.