JEMB Lands Fresh Capital Stack for Brooklyn’s Tallest Office

Four years after topping out Brooklyn’s office skyline, JEMB Realty pulled off a financial reset at 1 Willoughby Square, bringing in partners and refinancing a tangle of construction-era debt to keep control of the 35-story tower.

The 500,000-square-foot Downtown Brooklyn building was recapitalized through a complex transaction that included new equity, splitting the tower into condos and a $125 million mortgage from Deutsche Bank, according to Bisnow and a recent Fitch Ratings report.

Among the latest round of investors is Edmond Safra, a member of the Safra banking family, alongside Adnane Mousannif’s AVRS Partners and KSR Capital principals Abraham Kassin and Morris Sabbagh.

The Deutsche loan is tied to the lower portion of the building and includes a $75 million A-note sold into a CMBS conduit. JEMB executives Joseph, Morris, Jacob and Louis Jerome are listed as sponsors on the financing, along with the new partners.

The sponsors also kicked in $68.5 million in fresh equity, according to Fitch, used largely to retire $179.5 million of existing debt, cover closing costs and seed a nearly $10 million reserve.

As part of the deal, the tower was split into two condo units: floors one through 21 and floors 22 through 35. Only the lower unit carries the Deutsche debt, while the upper floors are debt-free for now. Fitch flagged the layered capital stack as a potential risk, noting remaining EB-5 mezzanine debt and $65 million in convertible loans tied to the joint venture.

JEMB said the building is being repositioned with a spec suite program, including prebuilt offices as large as 10,000 square feet. The landlord recently signed CorePower Yoga to a 5,000-square-foot flagship retail lease on the ground floor and expanded Rubenstein Law into a 10,000-square-foot office on the 21st floor.

The recap comes against a tough backdrop for Brooklyn offices.

Downtown Brooklyn’s vacancy rate stood at 21.1 percent at the end of the third quarter, well above the citywide average, Fitch reported. The Willoughby Square tower is 53.5 percent occupied, though the portion tied to the CMBS loan is nearly full, anchored by the city’s Albee Square Montessori Public School, which leases 86,000 square feet.

— Holden Walter-Warner