Related Nears Rescue Deal for Stalled Brooklyn Housing Project

Work on Brooklyn’s massive Pacific Park project, stalled since late 2023, could soon resume as Related Companies edges closer to a rescue deal.

Jordan B. & Han-Gwon Lung
August 28, 2024

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Good morning. The ambitious Pacific Park project in Brooklyn, which was approved nearly 20 years ago but has been delayed since 2023, may soon rise from the ashes.

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URBAN PLANNING

Related Nears Rescue Deal for Stalled Brooklyn Housing Project

Work on Brooklyn’s massive Pacific Park project, stalled since late 2023, could soon resume as Related Companies edges closer to a rescue deal.

Some background: Pacific Park was supposed to transform Brooklyn with 16 high-rise buildings and over 6,000 residential units, 30% of them affordable. Yet, after nearly two decades, only eight buildings and the Barclays Center are done.

Rescue plan: Chinese developer Greenland defaulted on loans, halting work in late 2023. Now, Related is in talks to partner with U.S. Immigration Fund and Fortress Investment Group, who hold $300M in site debt. The goal: restart construction by late 2025, pending MTA approval.

The challenge: One of the biggest hurdles is the May 2025 deadline to complete 2,250 affordable housing units. Missing this deadline could trigger fines of $2,000 per incomplete unit per month. The project also faces the complex task of building over an active Long Island Rail Road yard, which requires meticulous coordination with the MTA and state agencies.

Zoom in: Community leaders are cautious about Related taking full control. They argue that bringing in multiple developers could increase accountability and ensure that the project meets its long-delayed commitments. There’s also concern that the state might waive penalties for late units to expedite progress, a move that could spark backlash from local residents.

➥ THE TAKEAWAY

Looking ahead: Pacific Park has become a symbol of the challenges large-scale urban developments face, especially those involving foreign investment. The pullback of Chinese capital has left several U.S. projects, including one in Los Angeles, in limbo. Related’s entry into Pacific Park is seen as a potential lifeline, but success is far from guaranteed.

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✍️ Editor’s Picks

By the numbers: Overall, US CRE distress remains below pre-pandemic levels, averaging $2.1B quarterly in 2023, signaling a return to normalcy.
Trends unveiled: Commercial property prices slipped 1.0% in July, but improved compared to last year, while industrial properties enjoyed a 9.1% Y-O-Y price gain.
IPO Ice Age: Market turbulence continues to delay September IPOs, as companies consider waiting until 2025 amid uncertain election and Fed rate decisions.
Sky-high HQ: Citadel, a $63B hedge fund, is proposing a 54-story glass tower in Miami. The project includes 1.7 MSF and a 212-room hotel for good measure.

🏘️ MULTIFAMILY

Summer rivalries: Overland Park, KS, surpassed Minneapolis in July on RentCafe’s national renter rankings and took back the top spot with 50% more listing views and 30% more saved searches.
Luxury living: Murphy Development Group is planning the One Winnetka residential complex in downtown Winnetka. The complex will consist of 59 units from $7K—$12.5K per month.
Value-add blues: Western Wealth Capital defaulted on a $29.5M loan for a Dallas apartment complex, amid pandemic-era financial struggles and foreclosures.
Skyline aspirations: Urban Builders Collaborative is planning a 16-story, 119-unit multifamily building near Miami’s Culmer Metrorail Station amid record South Florida apartment construction.

🏭 Industrial

Industrial giants: The 1 MSF industrial segment shines with net absorption growth, as vacancies hover around 6.1%. The sector faces high demand from automation-driven companies.
Gold mine: Two Class A industrial properties in Middletown, PA, sold for $215.4M to EQT Exeter and MDH Partners.
Chicago success: Sixth Street invested $250M in Plymouth Industrial REIT (PLYM) for a 65% stake in a $500M capital partnership.
Data dealmaking: The data center M&A submarket is rebounding, and its 2024 total could reach a record $40B+, driven by $36.7B in closed deals and $7.1B in pending agreements YTD.
Lights, Camera, Brooklyn: Developer Bungalow Projects and Bain Capital are planning a 300KSF movie studio in Bushwick that will cost $50M, set for 2027 completion.

🏬 RETAIL

Retail revamp: Macy’s Inc. (M), owner of Macy’s and Bloomingdale’s, thrives in 2024 after a national restructuring, drawing more shoppers after closing 30% of traditional stores.
Auto parts pivot: Advance Auto Parts (AAP) sold Worldpac to Carlyle for $1.5B in cash, aiming to improve its performance amid declining revenue and profits.
Merger madness: The FTC vs. Kroger and Albertsons continues, with the FTC insisting that the $25B merger would create a 5K-store giant with a 36% market share.
East meets West: The Stonestown Galleria in San Francisco beefed up its Asian presence with new leases for trendy restaurants, part of the mall’s redevelopment plans.

🏢 OFFICE

Downtown decline: From 2019 to 2023, the US office market saw a record 52% value decline in central business districts (a $557B loss), even as suburbs and core-adjacent neighborhoods thrived.
It’s almost time: According to a CBRE survey, American office-using companies are planning to expand their office space, with 38% anticipating growth as the sector’s contraction slows down.

📈 CHART OF THE DAY

According to CoStar, the Twin Cities multifamily market is enjoying strong performance, with 3.8K units absorbed in Q2, nearing peak pre-pandemic levels while greatly surpassing 2015–2019 averages.