Time is ticking for multifamily developers trying to score a tax break on projects, but Steve Witkoff likely isn’t sweating it.
Witkoff and Apollo Global Management broke ground on their project at 565-589 Fulton Street last week, the New York Post reported. The work on The Brook qualified the developers for the 421a tax abatement program, set to expire on June 15.
To qualify for the 35-year tax benefit, a percentage of the apartment units need to be income-restricted. The Downtown Brooklyn project’s 592 units will be 30 percent affordable.
Permits for the project call for a 600-foot-tall tower with 37,000 square feet of commercial space. Architecture firm Beyer Blinder Belle is designing the development.
Sources confirmed to The Real Deal last month that the developers were looking to land a $420 million construction loan. Public records did not reveal if a loan was in place.
Walker & Dunlop were recruited to help secure the financing. Witkoff did not immediately respond to request for comment.
The 51-story project started as a joint development between RedSky Capital and JZ Capital, which began assembling properties in 2012. Signs of trouble emerged in 2019 when JZ stunningly announced a portion of the firms’ shared portfolio could be written down by between $50 million and $150 million.
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In March 2020, the project’s $154.6 million loan, provided by Apollo, went into default. Eight months later, Witkoff joined the development; RedSky and JZ are reportedly no longer involved.
While Witkoff and Apollo can breathe a sigh of relief, many in the real estate industry are fretting as 421a is only days away from its demise. The governor’s proposed replacement for the tax break was dropped from budget negotiations in March and never gained adequate support.
Tenant advocates argue the program is a giveaway to developers and fails to create enough truly affordable housing. Real estate and construction groups say multifamily development will fade without a tax abatement, while multifamily project financing has dried up in recent months.
[NYP] — Holden Walter-Warner