- NY REAL ESTATE COMMERCIAL
- Updated October 3, 2013, 8:58 p.m. ET
Deal Will Transform Dumbo
Jared Kushner Closed on Five Properties, Plans to Convert Them Into a Tech HubNewYork-Real Estate | Find New $LINKTEXTFIND$ »
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- LAURA KUSISTO
For four years, a cluster of properties near the foot of the Manhattan and Brooklyn bridges in Brooklyn has been the subject of debate about the neighborhood's future: Should it be a burgeoning commercial district or a luxury residential area?
A partnership including Jared Kushner, a 32-year-old real estate developer and technology investor, closed on Wednesday on five of six properties in a $375 million deal and he said they plan to convert them into a hub for technology companies. The Watchtower properties are being sold by the Jehovah's Witnesses, one of the largest properties the church has sold as it relocates its headquarters upstate. An agreement to sell the sixth building would close in 2017.
The 1.2 million-square-foot complex will be at least 50% offices, said a person familiar with the matter, with bigger and pricier spaces aimed at more mature companies than most in the neighborhood.
Close Ramsay de Give for The Wall Street Journal
The building at 175 Pearl St. is part of a complex that will be converted into a hub for technology companies.
The partners would undertake a roughly $100 million renovation of the buildings, accommodating up to 5,000 bikes, creating outdoor roof space, allowing for 150,000 square feet of retail space occupied almost entirely by Brooklyn companies and installing state-of-the-art Internet connectivity. Mr. Kushner, chief executive of Kushner Companies, said the developers would work with the city to try to convert some area streets into pedestrian plazas.
"We saw these buildings as an opportunity to really create a great campuslike environment," Mr. Kushner said.
To many neighborhood observers, the plans for the complex would solidify the transformation of Dumbo—one of Brooklyn's main office districts—from its status in the early 2000s as an offbeat neighborhood for startups into a high-profile office destination that competes with neighborhoods like Flatiron and Chelsea.
"Dumbo will become more official, more formal and more professionalized by these tenants," said Chris Havens, a commercial broker who worked for five years at Two Trees Management Co., the largest property owner in the area. "It's turned from a village into a town."
Rents at the tech campus would be in the mid-$50s per square foot, according to people familiar with the matter. That would make them about double the rents in the rest of Dumbo, and about $10 below rents for hip Manhattan spaces.
Jared Kushner, above in February, sees 'an opportunity to really create a great campus-like environment' in Brooklyn's Dumbo neighborhood.
Mr. Kushner said he and his partners, RFR Realty and LIVWRK Holdings, a real-estate startup by Asher Abehsera, a former Two Trees' executive, weighed whether the complex should include more housing or office space. "We would make more money if we did the whole thing as residential, but we would have less fun," Mr. Kushner said.
The decision to focus more on office space is likely an easier sell to the community. Mr. Kushner and his partners would need to rezone parts of the property they would convert to residential use, which requires approval from the local City Council member, Stephen Levin.
Mr. Levin said he hasn't been briefed on the details of the plans but said Mr. Kushner seemed savvy about the need for more office space in the area.
The area under the Manhattan and Brooklyn bridge overpasses was once one of Brooklyn's main manufacturing hubs, home to firms like Arbuckle Brothers and makers of the Brillo pad. The cobble-stoned neighborhood went into steep decline in the late 20th Century as companies moved their operations out of the city, but it began experiencing a residential revival in the 1970s when artists started moving in. By the 1980s, a few companies began moving in, and today the area has some 1.8 million square feet of office space.
"Dumbo has not been this tight since 1945, since World War II," Mr. Havens said.
The history of the Jehovah's Witnesses site mirrors Brooklyn's industrial decline. The printing facility, operated through much of the 20th century, was once the largest in the city, producing hundreds of millions of Bibles, books, magazines and pamphlets, according to Richard Devine, a church spokesman. The organization closed its printing operations in the city in 2004 as large-scale modern equipment demanded more sprawling facilities.
The organization's plans for a new campus upstate became known in 2009. Since then developers and community leaders have speculated about the future of the printing site, the most prominent development opportunity in an area dominated by landmarked funky warehouse buildings.
The city also recently announced a deal with a developer to convert the Empire Stores, vacant warehouse buildings in Dumbo, to retail and about 300,000 square feet of office space.
Two Trees executives said they aren't concerned about competition with a huge block of new office space because rents for newer spaces are significantly higher and their buildings tend to appeal to smaller companies. "We're at zero vacancy. If Dumbo continues to become a home for these types of company, I think supply contributes to that perception," said David Lombino, director of special projects at Two Trees. "A rising tide lifts all boats."