H&R REIT acquires majority interest in Gowanus dev site in deal valued at $76.5M

H&R REIT through the entity Hr Dc Smith Street Owner Lp acquired majority interest from Downtown Capital Partners and All Year Management through the entity Smith Street Owner LLC for the development parcel at 459 Smith Street in Gowanus, Brooklyn, in a deal valued at $76.5 million.
The deal closed on February 22, 2024 and was recorded on March 11, 2024. The property has zero square feet of built space and 570,489 square feet of additional air rights for a total buildable of 570,489 square feet according to a PincusCo analysis of city data. The sale price per buildable square foot is $134 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 Commercial Observer reported on the partial interest sale yesterday.
The seller bought the property on July 21, 2017, for $48 million. The signatory for Downtown Capital Partners and All Year Management was Meredith Katz. The contract date was February 22, 2024. This is a large vacant site adjacent to the Gowanus Canal. According to the Wall Street Journal, Gary Katz’s Downtown Capital Partners acquired an interest in a portfolio of All Year Management properties. All Year Management, founded by Yoel Goldman, was placed into bankruptcy and tied up in additional litigation. There is a restrictive declaration dividing the tax lot 200, which is that tax lot that sold, into four tax lots. The illustration in city records does not outline the tax lots, but the large city filing indicates a large-scale development plan.

Prior sales and revenue

Prior to this transaction, PincusCo has no record that the buyer H&R REIT had purchased any other properties and has no record it sold any properties over the past 24 months.
The seller Downtown Capital Partners had not purchased any other properties and sold three properties in one transactions for a total of $22.9 million over the same time period.

The property

The parcel has frontage of 353 feet and is 420 feet deep with a total lot size of 165,840 square feet. The zoning is M1-4/R7-2 which allows for up to 2 times floor area ratio (FAR) for manufacturing and up to 3.44 times FAR for residential. The city-designated market value for the property in 2022 is $3.1 million. The most recent loan totaled $61 million and was provided by Downtown Capital Partners on September 28, 2023.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the property for the past 24 months. In addition, according to city public data, the property has not received any significant violations in the last year.

Development

On the lot, there is one active new building construction project for a 496-unit, 421,918 square-foot R-2 building. The project was submitted by Yoel Schwimmer and filed by Yoel Schwimmer with plans filed November 16, 2021 and permitted May 17, 2022.

The neighborhood

In Gowanus, The bulk, or 46 percent of the 9.2 million square feet of commercial built space are industrial buildings, with elevator buildings next occupying 19 percent of the space. In sales, Gowanus has 2.1 times the average sales volume among other neighborhoods with $605.4 million in sales volume in the last two years and is the 7th highest in Brooklyn. For development, Gowanus has had very little major development activity relative to other neighborhoods.It had 766,589 square feet of commercial and multi-family construction under development in the last two years, which represents 8 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of four of the eight commercial properties representing 19,241 square feet of the 88,069 square feet. The largest owner is Nyc Department Of Housing Preservation And Development, followed by International Baptist Church and then All Year Management.
On the tax block, there were five new building construction projects totaling 1,416,703 square feet. The largest is a 496-unit, 421,918 square-foot residential (R-2) building submitted by Yoel Schwimmer and filed by Yoel Schwimmer with plans filed November 16, 2021 and permitted May 17, 2022. The second largest is a 333-unit, 308,273 square-foot residential (R-2) building submitted by APT Developers and filed by Y S with plans filed December 24, 2021 and permitted May 4, 2022.

The majority, or 72 percent of the 88,069 square feet of built space are industrial buildings, with retail buildings next occupying 22 percent of the space.

The seller

The PincusCo database currently indicates that All Year Management owned at least 46 commercial properties with 397 residential units in New York City with 404,863 square feet and a city-determined market value of $76.3 million. (Market value is typically about 50% of actual value.) The portfolio has $130.6 million in debt, with top three lenders as Downtown Capital Partners, Signature Bank, and Dime Community Bank respectively. Within the portfolio, the bulk, or 51 percent of the 404,863 square feet of built space are walkup properties, with elevator properties next occupying 25 percent of the space. They are all located in Brooklyn.

Direct link to Acris document. link