City in Talks on Future of Big Site For Building in Downtown Brooklyn
BY DAVID LOMBINO - Staff Reporter of the Sun
December 14, 2006
While the city's master plan for downtown Brooklyn was originally spawned to create soaring commercial towers, the city is now negotiating with two private developers to build a $500 million project that would be predominantly residential and retail.
It would be the first major site developed in the area since the city rezoned downtown Brooklyn for increased commercial development two and a half years ago. The project would contain a cavernous retail base that could accommodate a large big-box store such as Wal-Mart, according to sources familiar with the deal.
If finalized, the large site known as Albee Square at the intersection of Flatbush Avenue and Willoughby Street would contain more than 800 apartments, 20% of which would be "affordable housing"; as much as 100,000 square feet of office space, and 500,000 square feet of retail space designed for an anchor tenant, according to a source familiar with the plans. The lot is currently occupied by the Gallery at Fulton Street, which is a shopping mall, and a large parking garage.
Developer Joseph Sitt of Thor Equities would flip the site he purchased for a reported $25 million in 2001 to a partnership between PA Associates/Acadia Realty Trust and Avalon Properties, according to a source familiar with the deal. The new owners could construct up to 1.5 million square feet of mixeduse space under the recently up-zoned plans. Financial details of the transaction were unavailable, but real estate experts said Mr. Sitt would stand to make a fortune, as real estate values in the area have skyrocketed.
The city owns the land underneath the site and Mr. Sitt controls the development rights. Sources familiar with the negotiations said the city's Economic Development Corp. is unsatisfied with the offer for the land it owns and had hoped to see more office space in the plan.
The president of the Real Estate Board of New York, Steven Spinola, said negotiations between Mr. Sitt and the city and the buyers are entering the final phases.
"The city is encouraging the office space, and the retail needs to be done," Mr. Spinola said. "The residential obviously is the surest thing."
About two years ago, the Bloomberg administration passed an ambitious rezoning plan for downtown Brooklyn, currently the third largest commercial district in the city, that envisioned as much as 5.4 million square feet of new commercial space and about 1,000 new units of housing, mostly along Livingston Street. While the market for new commercial buildings is red hot in Midtown Manhattan, no private developer has ventured into downtown Brooklyn since the rezoning to build a large office building.
Nearby, at the planned $4 billion Atlantic Yards project in Prospect Heights, developer Forest City Ratner drastically cut back on plans to build office space, and increased the number of planned apartments.
A spokesman for the Economic Development Corporation, Andrew Brent, said yesterday that indications from the private sector seem to favor mixed-use development of residential, retail, and commercial space than large stand-alone office buildings with anchor tenants.
In 2004, speculation circulated that Wal-Mart was eyeballing the Albee Square site for its first New York City store. Because the site would be as-of-right, the world's largest retailer would not need approval from the City Council, which has been critical of Wal-Mart's treatment of employees.
The executive director of sales for Halstead Brooklyn, William Ross, said the large retail space with room for a lot of parking would be "the least objectionable space in all of Brooklyn for a Wal-Mart."
Pointing to four large apartment buildings going up nearby along Gold and Myrtle Streets, Mr. Ross said the Albee Square development is the latest sign that Flatbush Avenue is undergoing a residential transformation. The city has committed up to $500 million to improve the area's parks, open space, infrastructure, and to pave the way for the Atlantic Yards project.
"Downtown Brooklyn was rezoned two years ago, and nothing happened. Now, everything is happening at once," Mr. Ross said.
Mr. Ross said developers' calculations in downtown Brooklyn are crystal clear.
"You make twice as much selling condos as you do renting office space," he said.
An executive director for Cushman & Wakefield, Glenn Markman, said the demand for commercial space in downtown Brooklyn is growing, despite the loss of the Albee Square site to mostly apartments.
"I don't think that this is a sign of weakness in the marketplace," Mr. Markman said. "It just takes a while for the commercial market to attract the tenants that we're hoping to get. If that transaction is concludes, it is another positive sign for downtown Brooklyn."
-------------- A spokesman for the president of Brooklyn, Marty Markowitz, said negotiations should be concluded quickly so that Brooklynites could begin enjoy the benefits of new development.
A spokesman for the president of Brooklyn, Marty Markowitz, said negotiations should be concluded quickly so that Brooklynites could begin enjoy the benefits of new development.
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