Brooklyn's tallest skyscraper is finally set to rise. The project's developer Michael Stern on Tuesday closed on a $664.1 million loan package that would enable his company to fund his 1,066- foot-tall apartment tower in downtown Brooklyn, according to people familiar with the deal.
Otéra Capital Inc. and Silverstein Capital Partners provided the loan, these people said, ending Mr. Stern's long saga to find financing that had contributed to delaying the start of construction for years.
Aboveground construction is expected to begin this summer and end by 2022, Mr. Stern has said. Upon completion, the project, known as 9 DeKalb Avenue, would be the borough's tallest building by a considerable margin.
Extell Development's Brooklyn Point, which is under construction a block from 9 DeKalb and recently topped out at 720 feet, is the tallest — for now.
Mr. Stern's SHoP Architects- designed tower will include about 425 rental apartments, roughly 30% of which will be capped below market rates. The project also boasts 150 condominiums and 120,000 square feet of retail in a part of Brooklyn that has seen a flurry of high-rise apartment construction in recent years.
Foundation work is under way. Mr. Stern said his firm, JDS Development Group, is considering raising additional funds for the project through the federal opportunity zone program, which grants tax benefits to investors in qualifying projects in certain low income census districts.
Mr. Stern swiftly rose from relative obscurity to become one of New York City's most prominent developers during the past decade. He also is building a 1,431-foot-tall luxury condominium tower in Midtown Manhattan, in addition to several other projects. He and the investment firm Ark house Partners recently formed a joint venture to develop real estate in designated opportunity zones.
The loan closing caps a year slong search for funding. Part of the delay stems from the project's complexity: It will be built above a landmark former bank building, and a tenant at an office property on the site didn't move out until last year.
Developer Michael Stern's long saga to find financing has ended with a loan.
The delay also speaks to the broader challenge of financing ambitious construction projects when many banks are skittish about the future of the high-end apartment market. JDS and its then-partner Chetrit Group bought the land for the development between May 2014 and December 2015, and initially financed the project with a loan package from Kushner Cos. and Fortress Investment Group.
In 2017, that package was refinanced with loans from Bank OZK and Melody Capital Management. When Melody's loan matured in 2018, investment firm Madison Realty Capital bought the note, granting Mr. Stern crucial time to continue negotiations involving a construction loan, according to people involved in the arrangement. Mr. Stern eventually bought the Chetrit stake.
The project marks the first construction loan issued by World Trade Center developer Silverstein Properties Inc.'s new lending business, which was launched in late 2018, as banks are increasingly shying away from big construction loans, leaving an opening for private lenders.
BY KONRAD PUTZIER