One Brooklyn Bridge Condo Demand `Killed’ as NYC Market Slides

November 3, 2008 at 4:48 pm Leave a comment

Nowhere is the high-water mark of New York real estate more visible than the former Jehovah’s Witnesses distribution facility at One Brooklyn Bridge Park.

The 14-story condominium complex shattered the borough’s price ceiling when real estate entrepreneur Elizabeth Stribling agreed in March to pay $6.05 million to live there. Now, two- thirds of the 449 units in the 1.2-million-square-foot building remain unsold, testament to the financial excesses brewed up across the East River in the Wall Street canyons framed by One Brooklyn’s floor-to-ceiling windows.

“We were killed,” said Robert Levine, chief executive officer of RAL Companies & Affiliates LLC, who masterminded the $550 million waterfront project with views of the Brooklyn Bridge and the Statue of Liberty, along with amenities such as virtual golf, a movie theater and a planned 85-acre park. “We have negotiated and done some contracts, but people are clearly much more aware of the current economy.”

So are his backers. Levine’s partner in the Brooklyn Heights development, 10 blocks south of the Jehovah’s Witnesses headquarters that abuts the Brooklyn Bridge, is a $300 million fund run by American International Group Inc.’s real-estate investment unit, a business that is itself on the block as New York-based AIG sheds assets to pay an $85 billion government loan.

Wall Street Layoffs

Just when sales at One Brooklyn should have taken off after New York real estate’s annual June-August lull, Lehman Brothers Holdings Inc. went bankrupt, Merrill Lynch & Co. was forced to sell itself and Congress authorized a $700 billion bailout of the nation’s financial system. About 160,000 New Yorkers may lose their jobs, including 45,000 in finance and related businesses, according to an estimate by Governor David Paterson.

The result: Stribling Marketing Associates, exclusive broker for the property, has sold just 18 units since March, compared with an average of 14 a month in each of the prior 10 months. Levine, 56, is seeking about $1,684 a square foot for the most expensive unit, triple the average price in Brooklyn and higher than the $1,240 average for Manhattan’s Upper East Side.

The building itself is among the most eye-catching on the waterfront, occupying roughly the same space as the Chrysler Building, the art deco skyscraper on 42nd Street in Manhattan, according to www.mrofficespace, a real estate data site.

One Brooklyn faces a particular challenge because it’s cleaved from the rest of Brooklyn Heights by the Brooklyn-Queens Expressway, said Cliff Finn, director of new development marketing for the New York real-estate brokerage Citi Habitats. The Robert Moses-era beltway spews fumes and noise 24 hours a day from cars and trucks heading between the Verrazano Bridge and La Guardia Airport. The nearest subway, at Brooklyn’s Borough Hall, is more than eight blocks away and accessible by shuttle bus.

Not `Prime’ Heights

“I didn’t consider that to be prime Brooklyn Heights,” said Finn. “If it’s not enough of a discount from Manhattan, they are going to have a little bit of a problem.”

Buyers at One Brooklyn can expect to pay anywhere from $525,000 for a 782-square-foot studio overlooking the highway to $7.75 million for a 4,600-square-foot penthouse with wraparound views, four bedrooms and terraces that approach 1,000-square-feet.

They can pick from about 40 different floor plans in the 1928 building, most including 14-foot-high ceilings, oversized doorways and towering circular columns that flair out at the top like mushroom caps, part of the building’s original support structure. Built as a warehouse, the structure housed light manufacturing businesses until the Jehovah’s Witnesses bought it in 1983 and used it to package and ship religious literature, according to Richard Devine, a spokesman for the group.

“The construction is very, very high quality and that’s what drew us to it,” said Theresa Ortolani, a fashion and portrait photographer who paid $575,000 in July for a 900-square-foot studio with her stuntman husband, Ian McLaughlin. “We love being on the water and the proximity to Manhattan.”

`My Manhattan’

Stribling, who founded the closely held New York real-estate brokerage Stribling & Associates in 1980, chose her penthouse apartment during a tour with Levine even before he bought the building. She is combining two units into a 3,400-square-foot, three-bedroom apartment with a library, three fireplaces and a wrap-around terrace.

“This is the most dynamite view I’ve seen,” said Stribling, who plans to move to Brooklyn from her Upper East Side Manhattan townhouse. “It’s like I’m looking over my Manhattan.”

Levine bought One Brooklyn for $205 million in June 2004 through 360 Brooklyn Investors LLC, a joint venture with the AIG real estate fund. It was envisioned as an anchor for Brooklyn Bridge Park, whose sports fields, kayaking docks and bike path will replace the otherwise barren waterfront below the Brooklyn Heights Promenade. The park is scheduled to be 90 percent complete by 2010, Levine said.

Wine, Salmon Tartare

The purchase and development of 360 Brooklyn, named for the project’s address at 360 Furman Street, was funded by $290 million in mortgage debt and $40.2 million in mezzanine funding from Deutsche Bank AG, according to public records on the New York City Department of Finance Web site. Mezzanine loans typically carry higher interest rates and are for shorter time periods than first mortgages. John Gallagher, a Deutsche Bank spokesman in New York, declined to comment.

Stribling’s marketing company invited brokers from Brooklyn and Manhattan to tour One Brooklyn’s five model units on Oct. 29 over wine and salmon tartare. The tour ended with coffee and dessert in a $2.9 million-dollar, four-bedroom apartment overlooking the water.

Equally impressive to the brokers may have been a tweak to push more sales. Agents who sell a second unit now stand to reap a commission of 4 percent, up from the standard 3 percent, and the fee rises to 5 percent for subsequent sales, said Evelyn Cole, one of Stribling’s on-site sales managers.

Levine said he recently backed out of plans to buy the Bossert Hotel, a Brooklyn Heights landmark also owned by the Jehovah’s Witnesses, after agreeing to pay $85 million. He said he’s not interested in cutting prices at One Brooklyn.

“We work very hard to maintain the price integrity of our properties,” he said. “I have not ever greatly reduced the price to move a unit.”

By Sharon L. Lynch & Jonathan Keehner
Bloomberg

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