22.6.12
[Update] Sweet News On the Waterfront

In the Full Story below we find the conclusion to a story we posted on back in March.  Two Trees has purchased the Domino Sugar site for $185M.  The Katan Group seems to be unwilling to let it go, but short of a specific term of contract, it is looking like a done deal.
That is a shockingly cheap price at only $40/SF buildable.  Even so, it is still a likely break-even for the sellers (CPC and Katan) who owed their lenders in excess of the $130M or recorded debt.  The low $/SF buildable price is a bit of a discount that takes into account the condition of the site.  As we mentioned in our blog post of March, there is enough work to do to get the site 'shovel ready' to last at least a year.  A year and a half would not be surprising at all. Because of this, the project carries a large cash burn before it can begin to make it's money back.  It will be an interesting project to watch going forward for the same reasons we brought up previously, of funding, tax breaks, waterfront development, etc.
At Cubed Advisory, we are expecting the construction bill to top $1B and likely push $1.5B by the time it is done.  Our Cubed Advisory 'back-of-the-napkin-estimate' is suggesting that residential is going to occupy around 2.8MSF with only 1.8M - 2MSF of that producing rents that will sustain the development.  Expect as much retail as possible to be packed into the site to carry some of the financial load.  Given the dearth of proper grocery facilities to serve the ever burgeoning Williamsburg neighborhood, a Whole Foods or similar brand would surely flourish and provide a solid rental income.

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13.3.12
Sweet News On the Waterfront
Big news from Brooklyn... maybe.  The Community Preservation Corporation and it's partner, the Katan Group, may or may not be looking to sell the Domino Sugar Factory.
Per the Full Story below, all or part of it is being shopped around.
How much of it? For how much? To Whom?
Originally purchased in 2004 for just under $56M, CPC and Katan spent several years and an unknown sum of money pushing the M3-1 zoned lots of 774600SF through a variety of levels of city and state government.  As of May last year, they succeeded in having the entire parcel rezoned as R8 with a small lot on the east side of Kent Avenue made into an R6.  The total buildable SF now stands at over 4.6M.
To put those numbers in some kind of context, the ground area is equal to 3 full size midtown blocks and the buildable SF is enough for 1.75 Empire State Buildings.  The CPC Katan partnership planned to fill this volume with 2200 housing units and several hundred thousand SF of commercial and community facility space.
So what is it worth?  How much can it make?  At Cubed Advisory, we help many clients figure out exactly that.  In this case though, the analysis goes much deeper than blog post math.  One needs to balance the potential earnings of the site against the cost of construction, which in this case includes significant infrastructure and an enormous amount of demolition.  Hazardous material remediation is a factor as the existing structures are full of asbestos.  Lower returns from 220 low income housing units cemented into the rezoning deal can be balanced by possible tax incentives.  Possible city partnerships for waterfront development? Correct balance of rental/condo mix?  The number of variables grows very quickly.
As potentially the first significant Brooklyn development after the condo crash and coming in on the run up of a hot rental market- expect this project to dictate the pace and price point of development in Brooklyn.  Provided of course that deep enough pockets can be matched to the ambitious amount of SF to build.


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