The Real Deal New York

Dumbo’s Empire Stores breaks asking rent record: PHOTOS

November 05, 2013 04:00PM
By Adam Pincus

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A trio of developers rehabilitating Empire Stores, the Civil War-era warehouse building in Dumbo, are asking an eye-popping $90 per square foot for roof-top office space, a figure that several unaffiliated brokers said was a record for the borough.

The Cayre family’s Midtown Equities, in partnership with White Plains-based real estate investment firm Rockwood Capital and Brooklyn-based developer HK Organization, is redeveloping the four- and five-story structure at 55 Water Street fronting the East River.

Brothers Jack and Michael Cayre, principals with Midtown Equities, along with project architect Jay Valgora of STUDIO V Architecture, walked The Real Deal through the former coffee warehouse to discuss the $150 million project. The developers are asking about $65 per foot for the converted office space.

The developers, beating out nine other firms vying for the project, inked a deal on Sept. 4 with the city’s Brooklyn Bridge Park to lease the building for 95 years and convert the vacant brick and timber warehouse into a modern office and retail structure with a one- and two-story glass addition on the roof of the building.

The developer’s rent starts at about $1.5 million per year, Jack said.

The developers plan to add the 70,000-square-foot rooftop addition to the building, for a total of 360,000 square feet of office space, and about 75,000 square feet of retail space. The construction is set to start next year and be completed in 2015.

At taking rents 10 percent below the ask, the building would generate roughly $26 million in annual revenue, according to TRD estimates. Midtown Equities declined to comment on that projection.

The rooftop asking rent is not the only record in the building, insiders said. The joint venture signed a lease with Brooklyn-based home décor retailer West Elm for 10,000 square feet of ground floor retail on one corner of the building, as well as 140,000 square feet of office space that several industry sources said was done at the high $40s or low $50s per square foot.

“I think the West Elm [office lease] is a record for a deal and [the roof space] is a record for an ask,” said Chris Havens, the head of commercial property for Brooklyn-based brokerage aptsandlofts.com, speaking about Brooklyn office rental rates. However, the West Elm transaction is more important because it sets a marker for large deals, he said.

“It says Brooklyn is worth $50 per square foot,” Havens said.

Tim King, principal with CPEX Real Estate, a commercial brokerage, said taking rents are often in the range of about 80 percent to 90 percent of asking rents.

“They will meet and exceed the numbers. Brooklyn is on fire, and prices are reflecting that level of interest and activity,” King said, although he noted that free rent and tenant improvements impact the taking rent. Havens and King are not affiliated with the project.

Another insider active in the area was skeptical the project would hit near its asking price, but declined to comment on the record.

The remaining retail space has not been spoken for, but Michael said his group was speaking with dozens of potential restaurateurs. The current plan calls for about three restaurants as well as a large market space similar to the open floor plan of the Italian food marketplace Eataly, located at 200 Fifth Avenue in the Flatiron District. The food retail in Empire Stores will face the park, and asking rents are about $150 per square foot.

On the Water Street side, the developers plan to lease to non-food tenants such as apparel and furniture retailers, and the asking rent is $125 per foot. Michael said they are not talking with large chain stores and instead are focused on leasing to local firms, though he declined to identify them.

“We are going to try very hard not to” lease to large companies, he said.