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.
Labels: Community Preservation Corp, CPC, development, Domino Sugar, Katan, Two Trees, Williamsburg
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. Labels: Community Preservation Corp, CPC, development, Domino Sugar, Katan, Williamsburg
2.3.12
Multifamily Unsticks the Stuck
683 Fourth Avenue in Brooklyn has been an empty lot and a typically stalled project since 2007. As land purchased by Issac Katan in 2005 with plans to build 16 units of condo and then hitting financial problems by 2006, the project followed a common trajectory of many condo jobs of the time. But, as the Full Story below tells us, good news is coming in the form of 'Greenwood on Fourth' developers.
Greenwood intends to take the existing plans, and build out the structure (currently a 421a approved basement) as a 16 unit multifamily.
Here at Cubed Advisory, we are always in favor of seeing stalled condos restarted and turned into productive and currently lucrative multifamily projects. With currently solid rents across the city, low vacancy and a general shortage of units on a per capita basis, multifamily is a no brainer. Our back of the napkin analysis estimates that the land, development and construction cost are valued around $8M. This number could be lower with savings realized for the extant basement and complete predevelopment work. Given the neighborhood comps, it seems unlikely that Greenwood will be able to realize their $45/SF rental target, with mid $30s being a more likely number for well done new development in the immediate area. This will provide a cap rate of almost 5% to just over 6%. Certainly beating the likely debt load and setting up the new development for long term success.
Multifamily construction > condo!
Labels: development, Greenwood on Fourth, Katan, lots, multifamily, Park Slope