Downtown Brooklyn Office Gets $152M Refi

PCCP LLC has funded a senior loan for the recapitalization of a vintage Class A creative office property. The funding will also assist the owners with lease-up efforts.
41 Flatbush Ave.
41 Flatbush Ave.

PCCP LLC has provided a $152 million senior loan for the recapitalization and lease-up of 41 Flatbush Ave., 270,000-square-foot, 10-story office building in downtown Brooklyn.

The owner-borrower is a venture of Quinlan Development Group, of Manhattan, and Building and Land Technology, of Stamford, Conn. The venture acquired the former warehouse/storage facility in 2014 and then invested more than $30 million to convert it into Class A creative office space.

Originally known as The Pioneer Building, the structure was completed in 1896 and served as the headquarters of an auction house. It features Neoclassical architecture, a limestone-clad facade, floorplates of about 27,000 square feet, and 13-foot slab-to-slab ceilings. The property is within a five-minute walk of 12 subway lines and the LIRR.

As part of the renovation, Quinlan and BLT updated the building’s facade and installed elevators, a modern, tenant-controlled HVAC system, windows and a landscaped rooftop amenity. The building is currently in active lease-up and has more than a half dozen retail or office tenants.

One of those tenants is the digital media company and podcast network Gimlet Media, according to Yardi Matrix data. In early February, Gimlet agreed to be acquired by music streaming service Spotify for a figure reported to be about $230 million.

Creative goes mainstream

PCCP sees this loan as a favorable opportunity given the experience of Quinlan and BLT on similar infill projects,” John Randall, a partner with PCCP, said in a prepared statement. “As New York City continues to gain momentum as a technology hub, Brooklyn is a borough that offers tenants lower rents, a young tech-savvy workforce, and a variety of retail and amenities.”

Last summer, CPE interviewed Olive Hill Group exec Tim Lee about creative office space and the amenities that landlords want to be able to provide to help their tenants attract Millennial and Gen Z workers.

Based on a statistical sample, availability for office space in Brooklyn rose slightly, by 0.8 percentage points, to 15.3 percent, versus 2017, according to a year-end 2018 report from Colliers International.

It appears that subleasing is a significant market factor, with 240,000 square feet at the Navy Yard’s Building 77 and 46,000 square feet at 55 Water St. in DUMBO coming onto the market. Sublet availability quadrupled, from 0.7% in 2017 to 3.0% in 2018, also per Colliers.

Image courtesy of PCCP