Team # 13 1869 1885 1960s 2013 2017 1

Empire Stores is built Empire Stores reopens Midtown Equities wins RFP Empire Stores abandoned as a raw goods warehouse as a raw goods 3 4 6 8 2 2 11 19 20 22 13 15 Appendix Financing Opportunity Market Analysis Building Analysis Table of Contents Operational Issues Development Vision Executive Summary Executive Summary Development Impacts Planning & Entitlements Neighborhood Overview Neighborhood 2

JLL Retail Office Name: Museum Leasing: Location: Mixed Use Programs: 476,642 SF Architects: $137,700,000 Project Area: Project Type: Empire Stores S9 Architecture HK Organization Perkins Eastman Midtown Equities Rockwood Capital Project Overview Brooklyn, New York Development Cost: Studio V Architecture Development Team: 55 Water Street, DUMBO Park Development Corporation and the development team that has reimagined the site as a creative community hub. location as one of the few waterfront office spaces primes development as a key driver of economic growth in New York City. The Empire Stores is a credit to the collaboration of the Private-Public Partnership between the Brooklyn Bridge Empire Stores desperately needed capital investment and community support to prevent its demolishment. The transformation of the Empire Stores into a successful anchor for and its it was a final attempt to preserve a it was a final attempt to preserve s industrial seminal landmark of Brooklyn’ fires waterfront. Plagued by multiple from and extensive structural damage Hurricane Sandy in late 2012, the of the The idea for the redevelopment of Empire Stores has a storied history final multiple failed RFPs. When the RFP was issued by the Brooklyn Bridge in 2012, Park Development Corporation an innovative vision for reinvigorating an innovative vision for reinvigorating through the empty coffee warehouses contemporary design. The redevelopment looking prioritizes public space with views skyline. across the river at the Manhattan ater Street in the at 55 Water Street in the River waterfront Under the Manhattan DUMBO (Down section of Brooklyn. To Bridge Overpass) the Empire honor the 150-year history of proposed Stores, the development team Empire Stores is an adaptive-reuse Empire Stores in Brooklyn, New York. complex located re-opened in This former warehouse 476,642 SF of Class A 2016 and is now and cultural space. This six- retail, office, is located on the East story development Executive Summary Executive

1869 1885 1960s 2013 2017

Empire Stores is built Empire Stores reopens Midtown Equities wins RFP Empire Stores abandoned as a raw goods warehouse as a raw goods Neighborhood Overview of Brooklyn’s bustling commercial and industrial waterfront in the late 18th and early 19th centuries. After manufacturing and shipping declined in the 1970s, DUMBO’s vacant warehouses attracted “People used to call Brooklyn a artists drawn by cheap rents and large walled city because warehouses open floor plates. Sensing potential, formed a wall along the Brooklyn developer David Walentas of Two Trees waterfront. Now, all that’s left are Management Co. purchased a large Empire Stores and the Red Hook swath of DUMBO’s building stock in building where Fairway used to be” the 1980s, transforming the industrial David Lowin, waterfront into an upscale residential Brooklyn Bridge Corporation and commercial neighborhood. DUMBO has become one of the most dense arts districts in New York City, filled with non-profit institutions and art galleries DUMBO, an acronym for Down Under the attracted by its industrial era authenticity Manhattan Bridge Overpass, is bounded and architecture. The DUMBO Archway, by the Brooklyn Bridge, Brooklyn Heights, a traditional connection between and Vinegar Hill neighborhoods. As its warehouses and the waterfront, has name suggests, the Manhattan Bridge become a popular location for film shoots, towers above the neighborhood. It is no art exhibitions and live music. In 2007, coincidence that two major bridges cross DUMBO’s historic district status was over DUMBO; because of its strategic officially awarded by the New York City location for importing goods to New York Landmarks Preservation Commission. City, the neighborhood was at the heart This district spans between John Street 3 on the north, York Street on the south, 8 minute walk from the York Street F Bridge Street on the east, and Main station, 9 minutes from the High Street/ Street on the west. 95 of the buildings in Brooklyn Bridge A and C lines, and a this district also received landmark status. 5 minute walk from the convenient but underutilized East River Ferry. Compared More recently, the neighborhood has to the planning of neighborhoods like attracted a tech workforce as part of the Hudson Yards formed around major larger Brooklyn Tech Triangle Plan that transportation arteries, DUMBO’s lack of encompasses DUMBO, the Brooklyn convenient transportation has made its Navy Yard, and Downtown Brooklyn. office supply less attractive than that of Incentivized by government initiatives other areas. such as New York City’s Relocation and Employment Program (REAP), tech firms have both relocated to and sprouted in DUMBO. With companies in the TAMI Opportunity sectors (Technology, Advertising, Media The history of Empire Stores reflects and Information), DUMBO now offers the coming of age of Brooklyn, New many of the same development and York City’s largest borough. Built on employment opportunities as Manhattan. a late-18th century landfill, the site on Waters Street contained ship outfitting However, DUMBO suffers from a lack of industries in the 1830s. In 1869, James pedestrian accessibility due to the two Nesmith, a merchant, replaced the bridges and major transportation networks early onsite warehouses with the large cutting through the neighborhood. For Empire Stores building, which was example, the route from the subway to used for storing raw products including Empire Stores requires navigating heavily spices and coffee; “stores” referred to trafficked streets. Empire Stores is an

4 the building’s storehouses. Though it Ever since, many have recognized appears to be a single, monumental Empire Stores’ redevelopment potential, building, the Empire Stores are in fact with the 1977 Fulton Ferry report noting seven warehouses separated by solid that since the 1960s, it was “considered schist walls, framed with lumber sourced ideal by a developer for... a complex from America’s primordial forests. The including a restaurant and an arcade building, which had originally included a with stores, similar to Ghirardelli Square dock, is representative of the waterfront in San Francisco.” Since then, many landscape that gave Brooklyn its redevelopment proposals have come and nickname as the “walled city.” gone, including plans in 1991 and 1999. The buildings sat vacant for another thirty years.

“People had been talking about doing something here for decades. If this one hadn’t worked, I’m not sure there would have been another one. I think it might’ve been headed into becoming… a ruin. This might’ve been its last chance at a new life.” - In the early 20th century, the coffee- Pat Arnett, Silman magnate Arbuckle brothers purchased Empire Stores to serve as a storage facility for their unroasted beans, part of a In 2002, it seemed like things were sprawling 11-block complex. With the rise finally turning around. Developer Shaya of trucking and the decline of shipping, Boymelgreen, a fixture of New York real the structure became abandoned in the estate, had taken on Empire Stores’ 1950’s, and after brief ownership by redevelopment with a $140mm plan to Consolidated Edison Electrical Company, convert the derelict warehouse into an Empire Stores was designated a historic office and retail mecca. Boymelgreen landmark in 1977 as part of the Fulton brought on Jay Valgora, a preeminent Ferry Historic District. waterfront architect in New York City, who proposed a sensitive glass and steel rehabilitation that celebrated and “The Empire Stores are superb modernized the historic complex. David examples of the vernacular and Walentas of Two Trees Management functional architecture of the third Co, who vied for development rights but quarter of the 19th century” was ultimately outbid, did not believe Fulton Ferry Historic Report, 1977 Boymelgreen could achieve the rents to justify his vision, and he was right: in 2006, the Empire State Development One year later, it came under the purview Corporation ended their partnership of the New York State Office of Parks, with Boymelgreen after the project had Recreation and Historic Preservation. languished for years. 5 When the final RFP was issued in 2012, to the waterfront - recalling Brooklyn’s it seemed like a make or break moment “walled city” - and would benefit from to preserve a seminal piece of Brooklyn some public access across the length of waterfront history. That year, Hurricane the site. BBP translated these concerns Sandy had severely compromised into program requirements including the structural integrity of the complex, 3,000 SF of public rooftop access, and combined with years of sinking public access across the building, public foundations and tilting walls, Empire restrooms, and designated park storage Stores was on its last legs. Although space. A glass rooftop addition was also Boymelgreen had failed, his mixed-use considered, and after receiving approval program was lauded by the community from the State Historical Preservation and became written into the park’s 2005 Office, was indicated as a possibility in General Project Plan, drafted while his the RFP. development was in its initial stages. The GPP cemented a mixed-use office and Development Vision & Team retail concept into any future plans for the site, including the 2012 RFP. When Midtown Equities was looking for a partner to bring onto their Empire “Whenever people walking through got Stores RFP submission, longtime to the roof, they caught their breath. Brooklyn developers HK Organization’s The view was amazing.It became very expertise in historic preservation stood important that there would be public out as a perfect complement to their own access to the roof. That amazing view extensive retail experience. Midtown’s should be something that all the public recent transformation of an abandoned should share” Miami rail yard into a live-work-play David Lowin, neighborhood paired well with HK Brooklyn Bridge Corporation Organization’s strong local track record of project management and construction in DUMBO. Midtown Equities took the lead Before issuing the 2012 RFP, the on the project, and the sponsors brought Brooklyn Bridge Park contacted on Rockwood Capital as a limited equity developers they thought might be partner. A real estate investment firm interested, led site walkthroughs, and representing institutional clients including spoke with public and civic entities. pension funds, insurance companies, The RFP stipulated that in addition and sovereign wealth funds, Rockwood’s to generating revenue, the site would focus on long term civic value and contain a exhibit telling the story of sustainable design made it an ideal joint- Brooklyn’s industrial waterfront history, venture development partner. financed at the developer’s expense. During community advisory meetings held In preparing their RFP, the developers by the park, the museum concept was organized a design competition well received. Meeting participants also to reinvent the space. Because noted that the length and orientation of Boymelgreen’s 2002 proposal was so Empire Stores essentially forms a wall well received by the community, the team 6 Image : Diagram showing cut for public space Studio V In their RFP, the developers utilized an decided to employ the architect who had unheard-of tactic: the developers secured developed the original plans, Jay Valgora a 20-year lease from their proposed of Studio V. To respond to the RFP anchor tenant, furniture maker West Elm, requirement for public access across the including both a 140,000 SF office to length of the building, Valgora developed serve as their new global headquarters the idea of creating a slice through the and a 11,000 SF ground floor retail building: a public courtyard that would act lease. While other developers’ RFP as the “Commons” to function as a social proposals included letters of intent, the condenser and tie the different programs team went one step further by locking in together. This “cut” from the street side one of the few major tenants in DUMBO to the waterfront formed the public core at the time. A display of capability of the design, and tied together the and confidence, it not only gave their surrounding park and its many amenities response a competitive advantage, but with the site. also allowed the developers to bid more aggressively: with the anchor tenant secured, much of the development risk “[The developers] promised the most had been eliminated and a benchmark for community space. That slice through leasing expectations was set. This tactic the building open 24/7 was a huge had a profound impact on the bidding war selling point. It was something that that ensued between the developers and brought you to the water rather than Two Trees Management Co after BBP keeping a giant wall to the water.” narrowed down the ten RFP responses Paul Evans, Silman to these two finalists. Once again, the finalists included David Walentas of Two Trees Management Co., and once again, Walentas was outbid. Midtown Equities’s team offered “significantly” more money 7 than Two Trees, not only because of the Midtown Equities record-breaking numbers they already The real estate investment platform achieved with West Elm, but also their of the Cayre family, Midtown Equities prescient optimism regarding rent has a portfolio of over 100 properties expectations. across asset classes and major domestic markets, including some of New York City’s most revered addresses. The “Having worked in that area for so developer’s long-term hold perspective long, [Two Trees] were skeptical that translates into a focus on well-crafted and the numbers in DUMBO were going well-maintained buildings that stand the to go up as much as Midtown clearly test of time, with projects including One thought they were” World Trade Center, 141 Fifth Avenue, as David Lowin, well as office, mixed use, residential, and Brooklyn Bridge Corporation retail developments across Brooklyn.

HK Organization HK Organization (HKO) founders Harry Before signing the ground lease, the Kotowitz and Howard Klaus have a Brooklyn Bridge Park received a personal combined experience of more than guarantee from Joe Cayre, the patriarch 50 years in the real estate industry, of the family-run Midtown Equities developing millions of square feet across office, performed due diligence on the commercial, residential, and industrial developers, and negotiated the ability to assets. Beginning in the early 2000s, exercise recognition agreements with the HKO has played an instrumental role in largest tenants. the development of Downtown Brooklyn, the Brooklyn Tech Triangle, and DUMBO, Development Team developing some of the neighborhood’s first luxury apartments. The developers Brooklyn Bridge Park Corporation are well-versed in historic building With its operating mandate of financial preservation and adaptation, with projects self-sufficiency, the non-profit Brooklyn including the Smith Gray Building and 99 Bridge Park Corporation oversees and Gold Street in nearby Vinegar Hill. maintains the Brooklyn Bridge Park. Located along a 1.3-mile stretch of Rockwood Capital Brooklyn waterfront bounded by Atlantic With offices in New York and California, Avenue and Jay Street, the 85-acre Rockwood Capital invests across the park was designed by Michael Van multifamily, retail, office, hotel, and Valkenburgh Associates, a renowned data center spaces. On behalf of their landscape design firm, and includes many institutional investors, the highly six piers containing public spaces and experienced team at Rockwood has residential developments. The first phase invested approximately $32 billion in real of the park which bounds Empire Stores estate funds and separate accounts, with was opened in 2010, and to date more a focus on sustainable buildings that than 90% of the park is complete. deliver dependable cash flows to their members. 8 in historic preservation and rehabilitation, Silman has worked with leading architects across all property types to support forward-thinking design that celebrates the past and present.

Market Analysis

“All of the web-based tenants had started in DUMBO because the space was so cheap, and had a coolness factor that those kinds of companies liked. A lot of the companies were becoming more mature and looking for better office Image: Interior view (Studio V) space. And this building is clearly the best building in that market.” Studio V Architects David Lowin, One of the most prominent waterfront Brooklyn Bridge Corporation architecture firms in New York City, Studio V also has extensive experience across adaptive reuse, historic rehabilitation, and transit oriented development projects. With the arrival of Etsy’s HQ in DUMBO These include Hallets Point, an adaptive Heights in 2014, many believed that reuse neighborhood-scale project; a the neighborhood was poised to rival masterplan for historic Richmond Town on Manhattan’s Midtown South as New Staten Island, one of the most complete York City’s next tech office frontier. Its historic campuses in New York City; and inventory of 4.1 million square feet is the Tanks at Bushwick Inlet Park, an composed almost exclusively of brick adaptive reuse project that transformed and beam spaces - industrial lofts with former oil tanks into a garden, oyster modern improvements - an increasingly farm, and art and performance space. popular office type for creative companies In addition to Studio V, the project design and some financial services firms. was supported by S9 Architects and DUMBO’s waterfront location and original Perkins Eastman. 19th century buildings had already made the neighborhood attractive to young Silman Structural Engineers professionals: the area’s median age Since its founding in 1966 as a one- is 35 with only 22% of households with person practice, Silman Structural children. Within a population of 62,000, Engineers has expanded to four offices 97% of DUMBO’s workforce is white with more than 23,000 structural collar employees, with a median income engineering projects completed. A leader of $155,00 within the 25-44 age group. 9 The million dollar question: would a tech 50%, average DUMBO office asking hub materialize? rents have effectively flatlined, averaging an increase of 1% per year through At the beginning of the 2010’s, a series 2015-2020. Though DUMBO’s current of plans heralded Brooklyn as the asking rent of $62/PSF is the highest in destination for New York City’s growing Brooklyn, it has a vacancy rate of 28%. tech office tenants, and a rivalry ensued While several recent large-scale Brooklyn between Manhattan and Brooklyn for office developments have outperformed the burgeoning market. Buoyed by expectations, including Empire Stores as recent HQ leases by WeWork and well as Boston Properties’ tech-centered MakerBot, the Brooklyn Tech Triangle, Dock 72 at the Brooklyn Navy Yard, other a 2013 workforce development initiative developments have not been so lucky. In anchored by Downtown Brooklyn, the meantime, “Silicon Alley” has risen DUMBO and the Brooklyn Navy Yard, to prominence in Manhattan’s Flatiron sought to increase the attractiveness of district, which, coupled with the recent the area for a tech workforce. While the opening of Hudson Yards, reinforced demand for office space in the Brooklyn Manhattan’s dominance in the New York market experienced steady growth up City tech office market. While DUMBO until the mid-2010’s, the remainder of the and Midtown South’s asking rents nearly decade tells a different story. According to overlapped earlier in the decade, by 2020 The Real Deal, Brooklyn’s office market they had diverged, with a 20% premium has recently “gone from underserved on the latter’s asking rents. to bloated,” with the product coming online in the last half of the decade facing a drying pool of tenant demand. In the past five years, as its amount of available space has spiked more than 10 Financing have high initial expectations for profit.

JV Structure “We were trying to save the building. Midtown Equity, HK Organization, and Even if we saved the building and Rockwood Capital, signed a joint venture made no money on it, it was still agreement wherein Midtown would going to be good for us.” contribute 10% of the equity in their David Lowin role as the development sponsor, and Brooklyn Bridge Corporation Rockwood would contribute 90% of the equity as the capital partner. For their construction and project management BBP also earns payments in lieu of taxes services, HKO received a nominal share (PILOT) from the developers, as well as of interest in the development. payments in lieu of refinancing and state taxes, which would otherwise be collected Ground Lease by the city (PILOMRT and PILOST, The equity partnership negotiated a respectively). 96-year ground lease with the Brooklyn Bridge Park Development Corporation Construction Loan beginning in October 2013 and expiring The developers secured a $95 million in 2109. The agreement involved an initial construction loan from M&T Bank, lease acquisition payment of $26mm, covering the complex, two-year long followed by annual ground lease rents historic rehabilitation project. The loan starting in year four at $1.5mm with financed approximately 70% of the total annual 2.25% increases. A participation development costs, including the initial rent clause of approximately 8% began lease acquisition payments, as well as to reap significant benefits for the park construction and leasing costs. Though in 2019, when the 8% share of NOI there were slight delays, the complex exceeded the stipulated ground rent, construction proceeded without major although this was wiped out in 2020. delays or budget increases. Following Over the life of the lease, ground rent Sources % psf Total Cost payments are projected to contribute Developer Equity 31% $96 $42,400,000 a net present value of $60mm towards NEH Grant 0.2% $300,000 the park’s maintenance and operations, Construction Loan 69% $214 $95,000,000 suggesting an opportunity cost of capital Total 100% $311 $137,700,000 of around 4% for the BBP (if participation rent is not considered) and a net income Uses % psf Total Cost of approximately $86mm. Though Land Acquisition 19% $59 $26,000,000 this ground rent is considered low in Closting Costs 1% $5 $2,000,000 comparison to typical ground leases - Financing Costs 3% $11 $4,700,000 underwriting standards generally call for Soft Costs 8% $25 $11,000,000 ground leases to be less than 15% of Leasing Expenses 25% $79 $35,000,000 EGI, and Empire Stores does not exceed Hard Costs 40% $124 $55,000,000 3% $9 8.5% of gross revenues (see Appendix: Construction Interest $4,000,000 Total Uses 100% $311 $137,700,000 Table 1).The Brooklyn Bridge Park did not 11 the approval of entitlements, designs, regarding business continuity and and with a few signed leases in place, the building’s waterfront proximity by Midtown Equities’ estimated the land installing 24/7 backup generators and value at north of $100mm, approximately flood prevention technologies. Known as $20mm more than the valuation of BBP’s “redundancy,” the generators convinced ground lease revenue and 250% greater potential internet-reliant tenants that they than the total initial equity in the project. would avoid disruptions in case of any natural disasters, and the developers’ NEH Grant flood prevention techniques also satisfied A $300,000 grant from the National lender insurability concerns. Flexibility Endowment for the Humanities (NEH) proved to be another key lease up went towards supporting a display strategy. When multiple tenants were showcasing the maritime legacy of the interested in the rooftop space, the Brooklyn waterfront and the story of developers satiated companies like the Brooklyn Bridge Park development, 72andSunny, who had vied for the space, curated by the Brooklyn Historical by offering complimentary employee Society. memberships to SoHo DUMBO, the member’s club that was signed to the Leasing Strategy rooftop. The operators of SoHo House had a prior relationship with Midtown Equities stemming from their tenancy in “the West Elm [office lease] is a a Midtown building in the Meatpacking record for a deal…It says Brooklyn is District. When SoHo DUMBO requested worth $50 per square foot.” a private entrance, the developers Chris Havens, aptsandlofts.com reassigned an elevator intended for office tenants to be used exclusively by the club. When leasing began in late 2014, Empire Stores’ anchor lease with West Elm at Despite these negotiations, the $46/PSF shattered the rent ceiling for developers failed to attract their ideal mix Brooklyn offices and set a benchmark for of brand-name office tenants. Though the development. The rooftop asking rent they piqued the interest of firms such as of $85/PSF also broke records, though Tesla, disagreements over economics the developers included free rent clauses ultimately dissolved a number of deals. and large tenant improvement packages During negotiations, these firms may in many leases. A number of tenants have sensed that Empire Stores’ high also took advantage of New York City’s asking rents did not reflect DUMBO’s Relocation and Employment Program relatively untested fundamentals. Despite (REAP), in which companies relocating tenant reservations, the developers to Brooklyn from other locations in the signed a strong mix of office tenants city are eligible for a yearly tax credit of in the advertising and tech sectors, $3,000 per employee for 12 years. achieving 80% lease up by the end of construction. In March 2018, 10 months In the wake of Hurricane Sandy, the after opening, Empire Stores became developers addressed concerns fully leased with the signing of Time Out 12 Market as the food hall operator. of the asset. In fact, according to David Lowin, the Cayre brothers often visit the Refinancings + Buyouts site with their children and remark on The project was refinanced in 2017 with handing Empire Stores down to the next a $250mm loan from M&T Bank, and generation: again in 2019 with a $280mm loan from AIG, giving Empire Stores an estimated valuation of $415mm. The 2019 loan has “Michael and Jack [Cayre] have kids a term of 15 years and a coupon in the in grade school who they bring to the low 4% range. This refinancing, which site all the time and talk about how represents a 320% increase in value of ‘one day this will all be yours’” - the developers’ initial equity investment, David Lowin, allowed Midtown Equities to buy out Brooklyn Bridge Corporation Rockwood’s stake for $40mm. This mutually agreed upon exit corresponds to the typical investment duration for a The ground lease is set to expire in 2109. fund manager like Rockwood, who had While it is unknown whether the state will already experienced strong returns due renew its contract with the BBP and thus to the project’s unexpectedly strong the developers, there is no exit strategy performance, and allowed Midtown on the developers’ immediate horizon. greater control of the project that they had As the lease term begins to expire, BBP spearheaded. plans to be in communication with the state regarding its intentions for the site. Performance to Proforma Without a clear understanding of the The project outperformed all expectations state’s plans in the years leading up to and as of 2018, achieved an in-place the ground lease expiration, the value NOI of more than $21mm, approximately of the site from an investors perspective 15% higher than both the developers’ may begin to decline. With the success of and public partner’s initial projections for the park and its 5 million annual visitors, 2018. As of 2019, retail rents ranged from the state appears incentivized to continue $60/PSF to $160/PSF. On the low end of this ground lease in perpetuity. this spectrum are parts of the Time Out Market and West Elm retail space, while ground-floor restaurant tenants pay the Planning & Entitlements highest prices. Office rents range from $47/PSF to $80/PSF, achieving numbers unheard of in the Brooklyn office market Brooklyn Bridge Park just a few years prior. On the rooftop, As a key piece of the city-state effort to SoHo DUMBO brings in a whopping transform 1.3 miles of Brooklyn’s former $200/PSF. industrial waterfront, Empire Stores is the product of two decades of civic planning. Exit Strategy Much of the land that became the Midtown Equities’ acquisition of Brooklyn Bridge Park was owned by the Rockwood Capital’s equity suggests the Port Authority, whose plan to redevelop developer is planning on a long term hold the site as a residential neighborhood 13 similar to Battery Park City was the site from the state, which administers vehemently opposed by local residents. the ground lease. The BBP in turn Following a decade of government and subleases the site to the developers, and community involvement, the Downtown both the park’s ground lease from the Brooklyn Waterfront Local Development state and Empire Stores’ sublease share Corporation was established to explore the same expiration of 2109. other possibilities for the site. With funding from the New York State Legislature, a masterplan for the Brooklyn Bridge Park Historic Designations was forged in 2000. The Brooklyn Bridge Part of the Fulton Ferry Historic District Park Development Corporation (BBPDC), since 1977, the building is on both the led by an 11-member board appointed by National and State Registers of Historic the Mayor and Governor, was formed to Places, and is owned by the state, realize this vision, and in 2005, New York which exempts it from city Landmarks State’s General Partnership Plan (GPP) Preservation Committee (LPC) oversight. formally laid out the plan for the park. Instead, it is under the purview of New While the city and state agreed to fund York’s State Historic Preservation Office the construction of the park, operating (SHPO). Although the BBP considered costs were to be financed through onsite applying for historic tax credits, they revenue-generating developments. The ultimately chose not to, believing that the park designated five sites, including glass addition atop the structure would Empire Stores, as part of this operating exempt Empire Stores from approval. mandate. In 2010, Empire Stores were transferred from the Empire State Special Scenic View District Development Corporation (ESDC) to The GPP enables the park, including the Brooklyn Bridge Park Development Empire Stores, to override certain local Corporation (BBPDC) who put together municipal codes, including zoning the RFP. The Brooklyn Bridge Park leases requirements. Although it is not bound 14 by its designated M1-3 and MX-2 Building Analysis zoning, Empire Stores conforms with the park’s Special Scenic View District, which prevents the park buildings from obstructing the Manhattan skyline views from the adjacent Brooklyn Heights Promenade.

Land Swap Empire Stores was involved in a land swap stemming from a 2011 lawsuit filed by the Brooklyn Heights Association, Landmark Conservancy and others claiming the National Park Service violated federal laws by removing Image : Existing building layout (Midtown Equities) the Empire Stores and the Tobacco Warehouse from protected parkland. As Though it appears as one continuous a result, the sites were “swapped” with brick structure, Empire Stores is a a parcel of city-owned land adjacent to collection of 7 contiguous 4 and 5 story the park that was developed into various warehouses separated by solid fieldstone protected parkland uses, including public schist partitions. Ranging in width from bathrooms, an educational center and 45 feet on the west side to 75 feet wide outdoor amenities. on the east side and spanning an entire block, the total footprint is about 75,000 Entitlements SF. Original ceiling heights ranged from As a historic landmark rehabilitation, the 10 ½ feet to more than 12 feet. The developers were concerned that their facade is constructed from two foot thick designs would face extreme scrutiny and load-bearing walls of brick masonry, with potential delay due to the sensitive nature the original grid of columns, girders, and of the project. To alleviate their concerns, joists framed with pine lumber. In order while the developers negotiated their to connect the separate warehouses, lease with the park and finalized their the Silman team identified cracks in the architectural designs, the Brooklyn Bridge schist partitions between warehouses Park served as a conduit between the where new openings could link the developers and SHPO. This clear line buildings. This modified the original of communication between BBP, the architectural scheme, which called for developers, and both SHPO and LPC, carving a plethora of openings, in order gave the developers confidence that their to preserve more of the building’s original designs would be approved in a timely character. The State Historic Preservation manner. Although LPC did not have Office (SHPO) reviewed the drawings jurisdiction over the designs, they were as the project was being designed. The consulted during the process. rehabilitated building has 476,642 gross SF and 442,151 rentable SF as a result of a two story addition added to the existing 330,000 gross SF. 15 outdoor terraces for office tenants are “Studio V’s proposal was brilliant - also located on this floor with views of the way they created a slice through the East River bridges and Manhattan the building to create engagement skyline. from the sidewalk street to the waterfront...a big move, bold move, Cultural Programming and I think it really paid off.” A 3,200 SF second floor exhibition Pat Arnett, Silman space served as a satellite location of the Brooklyn Historical Society. The exhibition space, which does not pay rent, is funded by a $300,000 grant from the National Endowment for the Humanities that resulted in “Waterfront”, a long- term multimedia and interactive exhibit showcasing Brooklyn’s waterfront history, as well as the history of the building and the Brooklyn Bridge Park.

Retail Empire Stores features 65,082 SF of rentable retail space, with tenants including West Elm, Sugarcane, Cecconi’s, FEED, J Crew, and Shinola. Time Out Market New York, a collection of iconic New York food vendors, is the largest retail presence at Empire Stores with 520 indoor and outdoor seats across three floors. In addition to food stalls, three bars, a stage for cultural activities, and a rooftop terrace complete this immersive space.

Image: Interior courtyard (Studio V) Office Empire Stores features 377,929 SF of rentable office space. In addition to serving the West Elm HQ, other Public atrium office tenants include Newell Brands, Partly inspired by public programming 72andSunny, WMG, and SoHo DUMBO. along the High Line, the Studio V’s Because of their preexisting relationship courtyard “cut” is framed by an exterior with SoHo House as their landlord stair that connects retail spaces on the in the Meatpacking District, Midtown ground floor to the roof. Restaurants Equities brought in SoHo House a tenant and a beer garden on the top floor are to Empire Stores, where they have a arranged around a rooftop terrace and rooftop space complete with a pool. SoHo green roof facing the waterfront. Private DUMBO was a great attraction for other 16 tenants considering office space in the The initial building survey revealed rotting building. timber piles, a compromised foundation, and deteriorating brick window arches. Adaptive Reuse Challenges The reports also indicated a large crack Empire Stores survived many challenges in the northwest corner of the building to its structural integrity since its contributing to its structural vulnerability. construction in 1869-1885, including Sidewalk bridging was installed to protect multiple fires. After the park transferred passersby from falling bricks, and to ownership from the city to the state bring the building up to code, Silman’s in 1978, Silman Structural Engineers engineers designed a new foundation. became involved with caring for the As the building was slowly sinking into building. The firm’s founders added the river, the new foundation would be new anchors and steel to roof repairs partially pile-supported with a matte and assisted with the adjacent Tobacco slab. Helical mini piles were designed to Warehouse, a similar brick structure. In a assist with the settlement of the building. major snowstorm in 2001, a large section Supports, reinforced with these piles, of the Tobacco Warehouse collapsed were poured under and into the existing and the building was slated by the city brick walls. for demolition. Local preservationists protested, and the dilapidated building was rehabilitated into St. Ann’s To address tilting walls on the western Warehouse. Empire Stores faced similar end of the building, new beams threaded structural challenges: in 2012, Hurricane through the existing 3’ thick masonry Sandy flood surges reached six feet walls to bear on the new foundation. inside the building, pushing in boarded Exceptional care was taken by the up windows, knocking over columns, engineers to preserve the original timber and exacerbating its deteriorating framing the building, with the survey team foundations and collapsing walls. After documenting every original piece. Any winning the RFP, Midtown Equities called damaged timber frames were swapped Silman Structural Engineers after seeing out and replaced with steel framing. At the firm’s name across the building’s the time of the survey, it was noted that preservation documents. the timber was in “good enough shape” that the building was tied together (except for the western end tilting away). The “This was such a beautiful example new addition of stainless steel rods at of the warehouse architecture that the corners helped tie the walls together was the entire Brooklyn waterfront and back to the structure. Original 120 years ago - and almost all were timber ceilings were maintained when knocked down. There really was a possible. Timber removed during the desire to save that, and it was how construction of the new interior courtyard we got our foot in the door.” replaced damaged and missing elements Pat Arnett, Silman elsewhere in the building. All of the exposed timber through the building today is from the original structure - no new timber was brought in for this project. 17 The original columns were spaced very Another point of innovation and cost close together. To create open floor savings in the project was the design plans attractive to potential office and of rectangular glass windows that were retail tenants, the developers wanted the set back on the brick walls instead of column spacing to be farther apart. The within the 437 existing (formerly open air) engineers designed a transfer grid that arched openings. This decision preserved spread the loads of 4 columns to just one the integrity of the masonry wall and column, allowing for a more open floor saved $300,000. In addition to preserving plan. the masonry shell and stone schist partitions, Empire Stores has preserved the existing iron shutters on the facade. Original historic details from it’s coffee warehouse history such as coffee chutes and hoisting wheels are also retained throughout the building.

Sustainability and Resiliency Features The original facade shell, stone shists (aside from new openings cut in to link Image Above: New Helical Mini Piles (Silman) the warehouses), and interior timber Image Below : New rectangular glass windows framing were kept. Aside from preserving over existing arched openings a historic icon, rebuilding with the original

18 Compared to repairing the building’s shutters, this proved to be the most cost effective flood mitigation solution. Stored when not in use, the fence is tested twice a year. An onsite generator installed on the fifth floor behind the historic facade ensures continued power in case of natural disasters and emergencies. The backup generator is able to run 24/7 and given Water Street’s elevation, trucks can deliver fuel to the generator during catastrophic floods such as Hurricane Sandy.

Image : Courtyard stair leading to the rooftop structure allowed for reduced energy and cost savings compared to new ground up development.

LEED Silver Status LEED status was granted based on the building’s many sustainable features, including recycled bricks and original timber reuse. The building’s green roof reduces the urban heat island effect, and stormwater is collected in a cistern that helps irrigate the public park. Even though the building’s historic designation exempts it from meeting energy codes, the design team analyzed the building’s Image : AquaFence deployed around Empire thermal energy, and its enhanced roof Stores insulation, high performance windows, green roof, and 3’ brick walls exceeded energy code requirements. The design’s exposed brick walls and timber ceilings Operational Issues reduced costs by necessitating less insulation. The lease up of the food court presented Flood Resilience & Continuity a challenge to the developers. Originally To protect the building from flooding, intended to be run by the operators of the the AquaFence retractable flood wall Gansevoort Market in the Meatpacking was purchased to wrap the building. District, the market sat vacant for ten 19 months as the parties negotiated terms. Development Impacts Eventually, the partnership did not work out and both sides mutually agreed to terminate the lease. Midtown Equities instead signed with TimeOut Market “Empire Stores is emblematic of nearly one year after opening Empire Brooklyn’s transformation from Stores. This impaired the performance lapsed industrial powerhouse into a of smaller retailers who struggled growing creative sector.” without the significant foot traffic that Jay Valgora, Studio V an active food court would bring to the development, and led to several premature retail closures. The Empire Stores redevelopment preserves a seminal part of the Brooklyn Prior to the pandemic, the Brooklyn waterfront by bringing it into the 21st Historical Society merged with the century. This success story in adaptive Brooklyn Public Library (BPL) and reuse contributes to the vitality of the became the Center for Brooklyn History Brooklyn Bridge Park, augmenting the at Brooklyn Public Library. Due to local economy and providing a new operational redundancies, BPL recently public gathering space. Located on a decided to consolidate facilities by prominent site bordering Brooklyn Bridge discontinuing the Empire Stores location. Park, Empire Stores offers views of the The development team is currently Manhattan skyline and Brooklyn and looking for another operator to provide a Manhattan Bridges through its large similar cultural function at Empire Stores. brick arches, interior courtyard stair, and publicly accessible roof terrace. Empire Due to the restrictions in place to Stores brought a surge in activity to the maintain public safety during COVID-19, park and St. Ann’s Warehouse, and has the site’s retail and office tenants have contributed to the development of the been impacted heavily. The developers DUMBO waterfront as a vibrant mixed are currently facing tenants requesting use corridor. Empire Stores has been deferrals and breaking their leases, recognized with numerous awards, and we anticipate difficulty retenanting including the NYC x Design On the the building without significant rent Boards Awards (2017) and Urban Land concessions. Notably, however, Empire Institute’s Awards for Excellence in Stores’ anchor tenant, West Elm, has Development (2018). performed exceptionally well during the pandemic. Still, the developers recently With its record-breaking rents, many renegotiated 2020’s ground rent payment developers hoped that Empire Stores to the park to be deferred across a 6-7 would be the catalyst for transforming year period. Joe Cayre provided a second the DUMBO office market. Empire personal guarantee to support this Stores contributed to a spike in average amendment to the leasehold payments. neighborhood asking rents between 2014-1, and using its rental rates as a baseline for their own adaptive reuse projects, investors began paying record 20 sums for DUMBO buildings, spurring Empire Stores is a testament to the a redevelopment frenzy that expected fruitful collaboration between developers to replicate Empire Stores’ numbers. and public partners. This effort to However, the unique combination of reimagine a neglected cornerstone factors that made Empire Stores so of Brooklyn’s industrial history has successful proved irreplicable: its iconic redefined the waterfront while preserving warehouse architecture, waterfront its legacy. Although the pandemic location and seamless integration presents significant near-term operational with the Brooklyn Bridge Park, which challenges, the building’s compelling welcomes 5 million visitors annually. With design and location will remain attractive its singular presence, Empire Stores to new tenants and programs regardless assuaged major reservations regarding of industry. Once the health crisis DUMBO’s pedestrian inaccessibility. Yet subsides, the unique conditions that have its successors were not so lucky: lured positioned Empire Stores a resource for by expectations set by Empire Stores, the DUMBO community indicate that the developments including Kushner & development will continue to be a relevant Co.’s Watchtower portfolio were unable and dynamic waterfront asset. The key to to emulate Empire Stores’ success. As its success, Empire Stores’ irreplicability rental rates flatlined in the last half of the suggests that it once again will flourish. 2010’s and a supply glut hit the market, the disadvantages of DUMBO won out and the neighborhood did not become the tech hub that many had hoped for. Instead of a harbinger of things to come, Empire Stores was an outlier.

For Midtown Equities, however, Empire Stores was a watershed moment. The developer, who had been active in New York City for years prior, shot to fame. Empire Stores was one of the first projects in which Midtown, traditionally a limited partner, served as the general, more active partner. Its success at Empire Stores ushered in a series of other landmark adaptive reuse projects for the developer, including the Battery Maritime Building. Midtown has continued its relationship with Rockwood Capital by repositioning historic One Broadway as a creative office and retail space, complete with a rooftop terrace - a must in every Midtown office project since Empire Stores.

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23 Interviews

Ken Hart, Veracity Partners. Zoom Call: October 21st, 2020.

Pat Arnett, Principal at Silman. Zoom Call: November 3, 2020.

David Lowin, Executive Vice President of the Brooklyn Bridge Park Corporation. Zoom Call: November 6, 2020.

Paul Evans, Senior Engineer at Silman. Zoom Call: November 3, 2020.

Mehul Patel, Chief Operating Officer at Midtown Equities. Zoom Call: November 10, 2020.

Jay Valgora, Principle, STUDIO V Architecture, PLLC. Zoom Call: November 4, 2020.

Alvin Kong, previously Associate at Midtown Equities, Zoom Call: November 16, 2020.

Jenna Santoro, Development Manager at Midtown Equities, Phone Call: November 16, 2020.

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