Midtown Equities, HK Organization recapitalize Empire Stores in $420M deal

Sponsors buy out partner Rockwood Capital, land $280M AIG loan

TRD New York /
Feb.February 12, 2019 04:30 PM

Empire Stores at 53-83 Water Street in Brooklyn and Jack Cayre (Credit: Empire Stores Dumbo and Urban Land Institute)

The owners of Dumbo’s Empire Stores have recapitalized the office-and-shopping complex in a deal that values the property at nearly $420 million.

Midtown Equities and the HK Organization bought out the majority stake previously owned by partner Rockwood Capital, and then refinanced the centuries-old former warehouse with a $280 million loan from AIG, sources told The Real Deal.

“It’s a 100-percent fully stabilized property,” said Aaron Appel of JLL, whose team secured the financing for the sponsors. “I think it’s the most unique office asset in New York City. It’s a generational hold for the sponsorship.”

Representatives for Midtown Equities, HK Organization, Rockwood Capital and AIG could not be immediately reached for comment.

Rockwood, the Midtown East-based private equity firm, sold its majority stake to Joe Cayre’s Midtown Equities and Harry Kotowitz and Howard Klaus’s HK Organization for shy of $420 million, sources with knowledge of the transaction told TRD.

A Cushman & Wakefield team of Adam Spies, Doug Harmon and Kevin Donner advised Rockwood on the sale. The brokers couldn’t be reached for comment.

The AIG loan comes with a term of 15 years and has a coupon in the low-to-mid 4 percent area. It replaces a $250 million loan M&T Bank provided the sponsors in 2017.

Appel’s JLL colleagues David Sitt, Jonathan Schwartz, Adam Schwartz, Keith Kurland, Jackson Sastri and Eliott Zeitoune worked on arranging the financing.

Empire Stores, situated along the East River waterfront in Dumbo, has been one of the bigger success stories in Brooklyn’s emerging office market. Tenants like West Elm, United Technologies, social-media company Laundry Service and advertising-company 72 and Sunny call the office floors home.

Retail tenants include West Elm’s home décor outlet, J. Crew and a 22,000-square-foot food hall operated by the company behind Time Out New York magazine.

Midtown Equities, Rockwood Capital and HK Organization beat out a field of nine other developers in 2013 to lease the complex at 58-53 Water Street for a term of 96 years from the state, which owned the property since the 1970s.

The former coffee and sugar storehouse had sat empty for years, and the sponsors had commitments for 80 percent of the space at the time they placed their bid.

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