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RedSky and partner to sell several properties amid “uncertainty” over valuations

JZ Capital says it’s taken on a “much more direct role” and aims to speed up projects

18 India Street in Brooklyn and RedSky Capital’s Benjamin Bernstein (Credit: ICSC and Google Maps)
18 India Street in Brooklyn and RedSky Capital’s Benjamin Bernstein (Credit: ICSC and Google Maps)

The investment firm backing most of Williamsburg’s prime retail real estate said it will look to sell several properties over the next two to three months. And the company has taken on a more active role managing the portfolio amid concerns that it could be difficult to cash out at projected values.

JZ Capital Partners changed course on Wednesday and announced it would not take a significant write-down on the real estate portfolio it owns with Brooklyn’s RedSky Capital, as it had forecasted several weeks earlier. The private equity firm had said in October said that it could write off as much as a third of the valuation of its $443 million share of the portfolio.

In addition to some of Williamsburg’s best retail properties, JZ Capital and RedSky own an office redevelopment in the neighborhood, large development sites in Greenpoint and Downtown Brooklyn and a number of properties in Miami.

But on its Wednesday earnings call, JZ Capital said its new appraisal came back with only a minimal difference in valuations. But board members still had doubts as to whether the properties could be sold at those levels.

“The board believes that significant uncertainty remains as to whether the real estate portfolio could be realized at these values,” read the chairman’s statement.

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Wednesday’s pivot, however, does not rule out future write-downs.

“We believe investors remain in the dark about valuations and further write-downs would not be surprising,” Myrto Charamis, an analyst at Numis Securities who covers JZ Capital, wrote in a note Wednesday.

Representatives for JZ Capital could not be reached, and a spokesperson for RedSky declined to comment.

RedSky has been one of the most aggressive buyers in Brooklyn and beyond during this last boom cycle. But the company paid top dollar at the height of the market for many of its properties, and falling retail rents have called into question just how much value remains, as The Real Deal reported last week.

JZ Capital said it would put “several” of its properties up for sale in the next 60 to 90 days and that it is accelerating the timeline to cash out its investment — estimating it could take 24 to 36 months to maximize the value of the portfolio.

The company said it’s also taken a “much more direct role in the day-to-day management of both RedSky Capital and the real estate portfolio.”

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