Introduction
Brodsky Organization and Avery Hall Investments established a joint venture to develop the property at 499 President Avenue in Gowanus, Brooklyn. The project comprises an investment real estate venture to transform the property into an attractive, sustainable housing or mixed-use development location. The project scope covers the phases of land acquisition, planning and approval, construction, and completion. The joint venture intends to produce an outstanding construction that matches market trends and expectations in the Gowanus area by harnessing the abilities and assets of both partners.
Construction Financing
Table 1: Sources and Uses Chart.
The development at 499 President Avenue in Gowanus, Brooklyn, is being funded through various means. The Brodsky Organization donated equity to the site acquisition, while Avery Hall Investments contributed equity to pay design and permitting fees. Furthermore, M&T Bank and the Bank of New York have offered a $155 million construction loan, with M&T Bank explicitly paying the building expenses, as indicated in Table 1 above. The Bank of New York’s second construction loan is designated for soft costs, such as architectural and engineering expenses, as shown in Graph 1 above. Other sources of finance are used for financing fees, contingency reserves, and other project expenditures.
The involvement of two banks in the 499 President Avenue Development funding can be traced to various factors. Firstly, the endeavor to spread risk across several financial institutions lowers a single lender’s exposure. Second, merging the lending powers of both banks enables more significant loan amounts. Furthermore, various banks may have varied financing requirements and terms, allowing flexibility and perhaps better terms for the construction project. TheBrodsky Organization’s assistance in getting construction finance for the 499 President Avenue Development was most likely substantial.
Brodsky Organization, an experienced and recognized real estate investor with an extensive portfolio of successful projects, offers reputation, competence, and liquidity. Lenders frequently examine the developer’s competence and financial standing when considering loan applications. The Brodsky Organization’s brand and prior performance gave lenders confidence in the project’s viability, market potential, and capacity to manage and execute the development effectively, as exhibited in the construction loan Table 2 below.
Table 2: Construction Loan Table.
Use and Marketability
The site re-zoning and the City’s participation in the 499 President Avenue Development shaped the project significantly. The neighborhood’s re-zoning, known as the Gowanus rezoning, lasted several years and was completed in late 2021. This re-zoning was critical since it enabled the region to be transformed and supported the building of additional housing units, which were exceptionally affordable housing.
The re-zoning required an extensive review process that included participation from several stakeholders and local departments. Its goal was to address community issues, stimulate long-term growth, and assure harmony with the neighboring area. The project’s estimated Floor Area Ratio (FAR) would depend on the individual zoning rules, with an anticipated 322,000 square feet and a 7-story building.
The FAR establishes the density and size of permissible buildings in proportion to the total land area. Including affordable apartments at 499 President Avenue may improve its marketability in terms of rental prices and desirability. The availability of cheap flats is consistent with the city’s aim of growing an affordable housing supply and may attract a broader spectrum of renters. Catering to a varied clientele and addressing the area’s desire for affordable housing may improve the building’s marketability. Regarding marketability, 499 President Avenue’s provision of affordable housing might have a similar effect as 625 Driggs in Williamsburg. However, the particular rental prices and attractiveness would be determined by various criteria such as location, facilities, size of units, and market demands.
Joint Venture/Roles and Responsibilities
The partnership terms for the 499 President Avenue development within Brodsky Organization and Avery Hall Investments might involve a 50/50 investment split, sharing of profits through a waterfall agreement, authority to make decisions outlined in the partnership conditions, established duties and obligations, and regulations for an exit strategy. Essentially, Brodsky and Avery Hall are likely to have a 50/50 stake in the project; therefore, both parties are in charge of the assemblage.
Risks/Mitigants/Rewards
Establishing flexible lease terms as a remedy to a depressed rental marketplace during lease-up might be one possible mitigant. The project might attract more tenants and reduce the expense of re-leasing after the first year by offering a two-year lease term rather than the conventional one-year period, as exhibited in the construction loans table. This mitigant helps minimize the risk of prospective rental market troubles while increasing the project’s returns by lowering turnover and related costs.
Conclusion
Finally, the joint venture involving Brodsky Organization and Avery Hall Ventures for developing 499 President Avenue in Gowanus, Brooklyn, is an exciting opportunity. The proposal receives construction finance help from two banks, features a combination of market-rate and affordable homes, and coincides with community rezoning initiatives. The project can create a profitable and significant development in the bustling Brooklyn market by carefully evaluating dangers, solid relationship interactions, and market demand.