Monday, May 23, 2011

Big Brooklyn project gets go-ahead

A massive, federally owned building, vacant for 11 years, finally gets a builder to redevelop it. Advocates predict it will bring blue-collar jobs to the Sunset Park waterfront.

Salmar Properties has been selected by the city to develop a 1.1 million-square-foot warehouse in Brooklyn's Sunset Park, officials announced Monday. The Bloomberg administration hopes the project will spur the revitalization of the city's languishing manufacturing industry.

The project, which sources said will cost about $10 million, will eventually create 1,300 permanent industrial jobs and 400 construction jobs along the Brooklyn waterfront, according to the city's Economic Development Corp.

The federally owned building, known as Federal Building #2, has been among the largest vacant structures for sale in New York. It has been shuttered since 2000.

EDC President Seth Pinksy said in a statement that finding a developer “represents an important step forward in the Bloomberg administration's efforts to stabilize and expand the critical industrial sector.” Mr. Pinsky also said the city has plans to roll out additional industrial initiatives in the coming weeks.

Rep. Jerrold Nadler, a West Side congressman whose district also includes Sunset Park, has been pushing for action on Federal Building #2 for years.

“I am delighted that this major waterfront property will soon become a significant part of Brooklyn's revitalized manufacturing district,” he said in a statement.
 “I am very pleased that Congresswoman [Nydia] Velazquez and I have been able to assist in facilitating the long-awaited reincarnation of this federal building.”.

By Shane Dixon Kavanaugh / Crain's New York Business
May 23, 2011 3:30 p.m.

An Empty Warehouse Holds Dreams of Industrial Jobs

At 1.1 million square feet, Federal Building No. 2, is the largest vacant structure for sale in the city.

To hear it described by one broker, the football-field-long former Navy warehouse off the Brooklyn waterfront inspired awe from all but a few of the prospective buyers invited on a tour of the long-vacant site last month.

But that awe, said the broker, Chris Havens, the chief executive of Creative Real Estate Group in Brooklyn, quickly dissolved into skepticism as the financial realities of the World War I-era building became clear.

At 1.1 million square feet, the 94-year-old edifice in Sunset Park, commonly referred to as Federal Building No. 2, has one of the largest floor plates in the borough and may be the largest vacant structure for sale in the city. The city’s Economic Development Corporation is marketing it for the federal government, with the goal of filling it with light manufacturing operations.

Potential owners are realizing that with such superlatives come expensive challenges.

“I love big, vacant buildings, and I think they’re exciting,” said Mr. Havens, who toured the eight-story structure with dozens of developers, brokers and curiosity seekers. “It’s dramatic, and you imagine what could happen in a building that size. The problem is it’s not worth anything, and one of the big brokers who was there that day actually said that it’s worth ‘less than zero.’ ”

Since issuing a request for proposals in December, the development corporation has received bids of $500,000 to $10 million from six potential buyers. Each has offered different ways to hurdle financial obstacles that include the building’s enormous renovation costs, a wide floor plate that limits light and air at the center of the structure, zoning limitations, and property taxes of $1 million a year, which the federal government is exempt from paying.

An earlier effort by the federal government to sell the building, in 2006, was derailed two years later after the winning bidder, Time Equities, pulled away in the face of economic turmoil. The group, which invested $1.5 million in engineering and architectural fees before abandoning its plans, did not submit a follow-up proposal, said the company’s chairman, Francis Greenburger.

“Our reading of the market hasn’t really changed,” Mr. Greenburger said, “and we just feel like it would not be appropriate for us to get back in when we didn’t have the conditions we need to move forward. Time Equities’ original proposal included the possibility of bringing a Target store to the site in addition to industrial tenants. “Our experience in the market today is there’s little construction financing available and, certainly for larger projects, it’s almost nonexistent,” he said.

But successful development of buildings like Federal No. 2 could help stem an exodus of industrial jobs in the city, which have fallen to about 100,000 in 2008, from a peak of 960,000 in 1959, according to the federal Labor Department. The recent rezoning of 50 blocks in Greenpoint and Williamsburg to residential from industrial left hundreds of businesses without a home in the city, said Leah Archibald of Ewvidco, a north Brooklyn business advocacy group.

“There are a lot of displaced industrial tenants right now,” said Nick Halstead, a project manager for the Economic Development Corporation, which is overseeing a multifaceted plan for Sunset Park that includes a new freight rail line. “Space gets expensive in certain submarkets so we’re trying to hold this down as one big area for affordable industrial use.”

Broadening the building’s appeal for prospective tenants has been a central challenge for the Clarett Group and Industry City Associates, two of the developers that submitted bids late last month.

Bruce Federman, a partner at Industry City, said that altering the concept of light manufacturing to include technology start-ups and art studios was needed to generate demand for a space that few expect will command more than $8 a square foot. Under the Industry City proposal, only 25 percent of the building would be immediately leased, and the remaining space would be marketed after further renovations — including larger windows to allow for more air and light, a new roof and the installation of up to 16 new elevator cars.

“It’s not what we used to know from the modern era of garment distribution,” Mr. Federman said of light manufacturing. “It has to include crafts, artisans, creative commercial users, graphic artists and computer users who use space in a manner not commonly fit into manufacturing.” .

The building was erected quickly during World War I as a Navy warehouse and later used as a uniform depot during World War II, according to city records. Before being shuttered in 2000, it housed Food and Drug Administration laboratories and a New York Police Department gang unit, among other government agencies. A few relics from before the building closed, like a photo of a young Bill Clinton and a 1988 Mets poster, are still tacked to the walls.

Initially, speculation that the building would be rezoned for residential use, as happened in former industrial sites in Williamsburg, drew intense interest from a handful of developers, said Yossi Hackner, managing director for Sholom & Zuckerbrot Realty in Queens. Those potential buyers fell by the wayside, however, after city officials renewed their vows to maintain the area’s M3-1 zoning, a narrow designation that allows for woodworkers, food and beverage distributors and medical supply companies, among other groups.

Josh Keller, executive director of the Southwest Brooklyn Industrial Development Corporation, said Sunset Park’s large population of Mexican and Asian immigrants were in need of jobs, not homes. According to his advocacy group’s research there were some 2,000 industrial businesses in Sunset Park and the nearby areas of Gowanus and Red Hook in 2005.

“Believe me, employment isn’t what it could be because of the circumstances nationally, and in New York, with its relatively high unemployment rate,” Mr. Keller said. “So if you ask me what we need right now, it’s employment and getting people back to work.”

By Jotham Sederstrom / The New York Times
Originally Published: March 30, 2010