Anatomy of a deal: 470 Vanderbilt Avenue

The roller-coaster ride of one Brooklyn mega-deal

Apr.April 01, 2014 07:00 AM

The second-priciest office building transaction in Brooklyn’s history closed last month.

The basic facts about how Chicago-based American Landmark Property partnered with RXR Realty to pay GFI Development and Starwood Capital $194.5 million for a long-term leasehold covering the 650,000-square-foot building at 470 Vanderbilt Avenue in Fort Greene have been widely reported. But the telling details — when the individual players first met, the meeting locations (including high-end restaurants like Le Marais), and the nail-biting, 11th-hour wire transfers — have been kept under wraps.

This month, The Real Deal mapped out the anatomy of the deal, providing a blow-by-blow account of how the mega-lease purchase came to fruition. The roller-coaster transaction, which nearly collapsed earlier this year, involved some of New York’s biggest real estate players, including RXR, GFI, the Carlyle Group, Paramount Group, the estate of Sol Goldman, Eastdil Secured, Carlton Group and Meridian Capital Group. Following are some of the key moments along the way.

1. February 2000:
The private equity giant the Carlyle Group inks a 77-year ground lease at 470 Vanderbilt Avenue with the property owner, the estate of Sol Goldman, with a plan to convert the manufacturing building into a telecom hub. The plan flops.

2. November 2007:
GFI comes in as Carlyle’s partner, buying a $45 million stake in the property with plans to convert it into an office building. The deal was first discussed during a meeting in 2006 between Carlyle’s former managing director Tom Ray and GFI executive Steven Hurwitz.

3. October 2009:
Solidifying the office plan, the city’s Human Resources Administration, represented by Peter Hennessy (now of Cassidy Turley, then of JLL), signs a term sheet for a 20-year, 400,000-square-foot lease. But as part of the agreement, HRA wants a green light from the local community board and $150 per square foot in tenant build-outs to be paid for through its own rent stream, not by the city. GFI agrees to contribute $58 per square foot, but the $45 million balance still needs to be financed.

4. Spring 2010:
Anticipating the HRA lease will be approved, GFI’s lender, Canadian Imperial Bank of Commerce, reaches out to Lance, a specialty finance firm headed by CEO Richard Podos. Lance, located in the Chrysler Building, provides financing for tenant build-outs, which are badly needed at the former manufacturing space.

5. June 2010:
Throwing a wrench into the owners’ plan to stabilize the building, the community board rejects the plan during a meeting at the Fellowship Hall of Brown Memorial Baptist Church in Clinton Hill. (The board cites parking problems and negative impact on the neighborhood.) HRA announces that it will no longer take the space. A source said GFI at the time thought the deal might be “dead.” However, just three months later, in September, the community board reverses course and approves the project after its concerns are addressed.

6. Spring 2011:
After numerous conference calls involving the owners and lenders, HRA’s lease firms up. The agency’s commitment hinges on $45 million in bond financing arranged by Lance, which will be paid for through its rental income. The deal gives the owners their anchor tenant and satisfies HRA’s requirement of not footing the build-out bill.

7. Summer 2011:
GFI reaches out to Barry Sternlicht’s Starwood to replace Carlyle — which wants to exit the deal — as its equity partner. Starwood’s interest is stoked by the promise of the HRA lease stabilizing the property.

8. Sept. 20, 2011:
All hands are on deck, as multiple transactions need to simultaneously be finalized. The complicated deal with HRA closes, and, in a parallel transaction, Starwood purchases a 78-percent stake in the building for $54 million. About a half dozen sub-transactions fall into place on the same day, including changes to the lease to reflect the new ownership of GFI and Starwood and an approximately doubling of the site’s first mortgage to $130 million. At least 20 people strategize on an afternoon conference call to go over final details. All of the day’s events occur under the pressure of a looming 5 p.m. deadline for multiple wire transfers between the buyers, sellers and lenders involved in the deal. (The city’s annual rent payment for the HRA lease is about $8.6 million for 2014, but jumps to $12.2 million in 2016, insiders said.)

9. Oct. 29, 2012:
Hurricane Sandy strikes, damaging one of HRA’s current offices at 180 Water Street. The agency is forced to move out of the Lower Manhattan location, speeding up its relocation into 470 Vanderbilt.

10. November 2012:
Weeks later, with the building stabilized, conversations begin to percolate between Starwood and GFI about selling the full leasehold.

11. January 2013:
After interviewing multiple investment sales brokers, Starwood and GFI tap Eastdil Secured’s Adam Spies and Doug Harmon, Manhattan power brokers, to market the property. Spies and GFI’s Hurwitz begin tours for potential buyers. American Landmark is one of the first to take a look.

12. May 2013:
During a meal at the Midtown kosher steakhouse Le Marais, GFI’s Hurwitz and Marcos Alvarado of Starwood agree on American Landmark as the buyer. About a month later, American Landmark signs a contract to buy the lease from Starwood and GFI.

13. October 2013:
After securing extensions to sort out complex loan issues and find an equity partner, American Landmark gets dangerously close to losing its $10 million deposit, and taps ubiquitous moneyman Howard Michaels of the Carlton Group to find it financial partners.

14. January 2014:
Carlton Group gets a preliminary commitment for $43 million in preferred equity from the German firm, the Paramount Group, which owns a significant Manhattan office portfolio, to get the deal back on track. The commitment is later reduced to about $35 million.

15. Early February 2014:
Eastdil’s Spies also begins looking for more equity to get the sale done. Spies meets with RXR’s Scott Rechler and Frank Patafio at RXR’s 1330 Sixth Avenue office to see if the firm wants to buy in. About 10 days later, Rechler agrees.

16. Feb. 28, 2014:
American Landmark, led by CEO Yisroel Gluck, and RXR — who contributed more than $50 million in equity — along with Paramount, close on the $194.5 million purchase, which includes $142 million in JPMorgan Chase debt arranged by Meridian Capital Group’s Ronnie Levine and Reuven Hellman. The new owners are paying approximately $3.5 million a year to Goldman’s estate, sources said, which still owns the property.

17. April 2014:
The new owners plan to capitalize on 470 Vanderbilt’s location near the Barclays Center. The goal is to target tech and creative tenants to fill the office space and lease up the retail space.


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