Repositioning Properties for Success

In the beginning of 2001, with the economy in a downturn, the owners of the Woolworth Building, a 1,000,000 square foot historic landmark building in New York’s Downtown Financial District, were facing vacancies and several million dollars in payables. The tower, 15% of the building, was vacant.

REalta Group was brought in as the Asset Manager to formulate a plan to lease-up the building, propose a use for the tower and work out the payables. Then came September 11, 2001, and the situation got worse. The Woolworth Building is located only 2 blocks from the World Trade Center site.

Then new tenants came in, including New York University, Brown University, Moneyline, the General Services Administration and The New York City Police Pension Fund. Below grade levels were developed into a parking garage. The payables were paid, and new interior construction of more than $15,000,000 was completed.

The mortgage was refinanced in excess of the original amount and continues to provide distributable cash flow. The tower of the building (approximately 110,000 square feet) was sold in 2012 to a developer for condo development.

Today REalta Group oversees all asset management aspects of this historic building including construction, on-site management, negotiating leases, budgeting, interacting with tenants and overseeing extensive preventive maintenance, including the building’s decorative terracotta facade. The base of the building (850,000 square feet) is 99% occupied with rental rates in the high $50s per square foot. All of this was accomplished in the pursuit of one goal, to ensure that the Woolworth Building maintains its stature as an icon in the market.

Industry City at Bush Terminal is a 6.5 million square foot complex of industrial, office and retail space in a bustling creative business hub that is comprised of over 30 acres of historic Bush Terminal along Brooklyn’s Sunset Park waterfront in New York City. Industry City is one block from the 36th Street stop on the D, N, and R subway lines; one stop to the LIRR and two stops to Manhattan. The site is also two blocks from the Gowanus Expressway exit on the BQE.

Commercial Real Estate Management: Industry City

Bruce Federman oversaw the repositioning of the asset, driving NOI from $26 million to $41 million in a 5-year period. Additionally, the team repositioned and restructured the loans governing the subject’s assets. Industry City houses a diverse mix of businesses that encompass traditional industries such as textile and other light manufacturing, data centers and warehousing, as well as a growing base of creative businesses. Owned by Industry City Associates, the 16-building site has undergone extensive capital improvement and modernization, including newly renovated lobbies, automatic passenger elevators, new energy-efficient double-glazed windows, updated lighting and electrical service.

Commercial Real Estate with Industry City

Industry City offers commercial real estate leasing opportunities featuring units ranging from 500 to 150,000 square feet. Industry City’s wide variety of units contain fully integrated sprinklers, have easy freight access, multiple loading bays and over-sized freight elevators, 200 pounds per square foot heavy floor loads, 12- to 14-foot ceiling heights, and extensive electrical and fiber optic capacity. The highly flexible space, including pre-built and build-to-suit possibilities, has competitive pricing, on-site management, 24-hour security, ample parking, and rent payable by credit card. Additionally, Industry City Associates began developing a creative workshop community in 2009 by building 30,000 square feet of creative studios for rent, conducting various creative events such as film screenings and art installations and holding Brooklyn’s Fashion Weekend, a bi-annual exposition showcasing the work of local and international fashion designers. As of December 31, 2011, the creative workshop program has grown to over 125,000 square feet.

The Bush Terminal site has tremendous historical significance for New York City and helped establish Brooklyn as a major seaport destination on the Brooklyn waterfront.

Industry City Bush Terminal History

Constructed by Irving T. Bush starting in 1895, the site expanded to be the largest multi-tenant industrial property in the United States. At one point, the site employed as many as 25,000 workers in shipping, warehousing and manufacturing for the textile, automotive and machinery industries, among others.

Bush Terminal contributed to the war effort during World War I and World War II, and housed illustrious tenants including Topps, which produced baseball cards at the facility. Bush Terminal operated through 1974 and was renamed Industry City in the mid 1980s.

The Future of Industry City Bush Terminal

Dedicated to preserving Bush Terminal’s industrial heritage and innovative spirit while providing a destination where 21st century businesses can prosper, Industry City has launched a full-scale 10-year renovation plan that will include repaving the streets that separate the property’s buildings, bulkhead renovation to the buildings that line the Brooklyn waterfront, installation of overhead power distribution and buss ducts, and a complete modernization of the property’s 150 elevators.

Asset managed since 2007 by REalta, this 640,000 square foot office complex is comprised of four buildings joined together by a common atrium. Coming out of the recession that started in 2008, the office market had generally experienced high vacancies, and this property was more than 50% vacant. In 2014, the office market in southeastern Michigan started to experience a significant revitalization with positive absorption.

In order to change the view of the property for both the brokers and the end users, the property needed to be repositioned and given a facelift to be re-presented to the marketplace in a fresh new way. First Center offered an excellent Value-Add opportunity. In Q4 2015, REalta was able to source a third party institutional investor to purchase the note on the property at a discount (as well as the Troy Industrial Portfolio mentioned below) and bring fresh capital to the property in order to reposition and fund the improvements and tenant-related costs. REalta spearheaded improvements at First Center which includes repaving the parking lot; painting of the building’s exterior in fresh vibrant colors; new vestibules and entranceways; revamped common area space with the focal point at the center of the atrium which work includes demolition of fountains, new flooring and furniture; and redo the secondary hallways with new flooring, wallpaper and lighting.
In October 2017, less than 2 years after the property was recapitalized, the property was sold to a significant healthcare company in Michigan who wanted to consolidate its operations into First Center and make the property its new Headquarters. The sale represented a significant profit to the ownership group.

Before obtaining certificate of occupancy, the office space was fully leased to two tenants: Genius Media, an Andreessen Horowitz-backed internet company and a co-working operator. These leases were signed with the highest per square foot rents ever achieved in the Gowanus. In July of 2015, less than 18 months after purchasing the property, they sold the fully-occupied building for $73 million.

In June of 2014, Bruce Federman his partners at LIVWRK bought the property for $21.50 million, then a submarket record. They embarked on a $16 million gut-renovation targeting TAMI tenants. Midway through construction, the ownership group signed Tesla Motors as an anchor tenant. Tesla is using the space as a showroom, repair facility and office. It is their largest east coast location.

As of January 2018. the construction is complete and they have signed leases with Starbucks, NYU-Langone and Stink Digital, a digital media agency whose clients include Facebook, Adidas and Google. Ownership is in talks for the remaining 30,000 sf with various tenants.

REalta Group has been the owner’s representative for 5600 Fishers Lane in Rockville, MD, for almost ten years. The property consists of a 1,300,000 square feet single-tenanted office building entirely occupied by the U.S. Department of Health and Human Services, and two adjoining parking lots.

REalta Group, involved from the acquisition with the management and operation of the building, played an integral role toward the redevelopment plan and entering into a joint venture with a well-known land developer, JBG Companies, with grassroots in the DC market. The joint venture was able to finalize lease negotiations with the government for a 15-year lease renewal. This paved the way for the partnership to work on the complete renovation of the existing 1,300,000 square foot building as well as construction of a new 500,000 square foot building on a portion of one of the parking lots, which has also been 100% leased through the government.

As part of the renewal, ownership agreed to completely renovate the building and transform it into a sustainable, Class A trophy office building.

The 18-story building has undergone a complete modernization including a curtain wall re-skin, all new building systems, and the introduction of a 14-story atrium. New cores were built within the atrium to provide the facility with a wide-open floor plan within a 65-foot-wide office building to afford direct access to natural light for nearly 100% of the office space. The facility attained LEED Gold status. The total budget for these projects was approximately $300,000,000.

As asset managers who were also investors in the Portfolio, REalta was directly engaged with management and leasing. The Net Operating Income increased by $4,000,000 along with significant property upgrades. REalta employed a hands-on strategy including ongoing capital investments to assure the properties continue to provide upgraded facilities for the tenants’ use. A new initiative was implemented to controls real estate tax increased. These ongoing capital improvements and cost controls, particularly with respect to real estate tax increases, have produced increased rental rates and occupancy levels, and therefore, additional cash flow.

500 and 750 Stephenson are two office buildings that are 70,000 and 140,000 square feet respectively. The properties were purchased in 2019 with low occupancy and in the need of major capital improvements in order to reposition the buildings and be able to re-tenant the spaces. REalta Group, as the manager, handled the planning process and executed on significant improvements including painting the exterior of the building, new parking lot and sidewalks, and completion of interior renovations. The interior renovations include the lobby, common areas, restrooms, interior wayfinding and signage, and the creation of first-floor amenities such as a tenant lounge, 24-7 self-service micro-market, and a conference room. The renovations were recently completed and the market feedback has been very positive. The building is now well-positioned for lease up to prospective tenants.

The Acme Hampton Roads Portfolio is a 1,320,000 square foot Class A office portfolio located in the heart of the Hampton Roads in Virginia. The portfolio is composed of 22 properties that are multifaceted for both large or small tenant requirements. The current tenant roster boasts businesses that have a local and national presence across many different disciplines. After ACME acquired the portfolio in 2019, REalta Group was hired as the Asset Manager for the portfolio to preserve and protect the assets and its value. The properties are adjacent to major interstates and roadways which makes accessibility very easy and desirable to tenants. Hampton Roads continue to be a rapidly growing market that is centrally located on the east coast and features excellent local amenities.

After approximately two years of project pre-development, the developers of Soho Mews needed an experienced owners’ representative to expedite their project.

To ensure that schedules were met, REalta Group organized the project, interacting with the entire project team on a daily basis. REalta Group participated in the construction process to ensure the job would be completed on budget and on time.

REalta Group worked through the landmarks and city planning council approval process, and participated extensively in budget review bidding and awarding for construction and marketing. REalta Group supervised the preparation and completion of the condo offering plan, prepared the project budget for the construction lender, and negotiated the terms of the construction financing. REalta Group worked directly with sales and marketing to brand and market the building, including weekly sales meetings, and was involved in all sales negotiations through completion and closing.

All 68 units of this luxury condo development were successfully sold for an average price per square foot of $1,700. The loan was paid off and all equity returned after selling the 44th unit. The other 24 units have been sold and represent a substantial profit to the developers of the project.