Exclusive: Greenland Forest City sells two "100% affordable" buildings to CA-based Avanath Capital, which touts "Barclays I" and "Barclays II" in "Pacific Heights." Funding to help build railyard platform?
Developer Greenland Forest City Partners (GFCP) has sold leases to two "100% affordable" towers, 535 Carlton Ave. (B14) and 38 Sixth Ave. (B3), to Avanath Capital Management, an Irvine, CA-based investment firm that "acquires, owns, renovates, and operates affordable, workforce, and value-oriented apartment communities across the U.S."
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(Update May 23: Avanath did, two days before my original post, announce vaguely on Twitter that it has "added two new affordable housing assets in New York," with its Executive VP for Acquisitions quote-tweeting it to cite "601 units in two, Affordable towers adjacent to the Barclays Center." So I was wrong to originally state that no public statements were issued; there were no official press releases.)
Avanath's web site includes pages for each building, unwisely dubbed Barclays I and Barclays II and claimed to be within "Brooklyn's desirable Pacific Heights neighborhood." That odd locution partly echoes both the Prospect Heights neighborhood and the project name Pacific Park (formerly Atlantic Yards). Maybe it'll be fixed.
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| 535 Carlton, at right |
The pages do not mention the larger Pacific Park project, much less ongoing construction nearby, or the project's limited open space (which applies only to 535 Carlton).
Two towers (B12, B13) are under construction just east of 535 Carlton, and the railyard directly north is the site for three future towers, should it get the second phase of the two-block platform over the MTA's Vanderbilt Yard, used to store and service Long Island Rail Road trains.
It's unlikely that sale of such leases--the sites are technically owned by the state--require an approval vote by Empire State Development (ESD), the state authority that oversees/shepherds the project. But legal documents likely require ESD consent.
A firm in growth mode; a seller needing cash?
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| Part of Avanath's roster |
Avanath, founded in 2007, says the plus symbol in its logo (below right) signifies its “above and beyond” commitment to serving residents, investors, and the larger community. ("Avanath" combines the names of the children of founder Daryl Carter.)
With no public statement yet, the motive for the sale remains unclear, but it's not unlikely that Greenland USA, the dominant partner in GFCP, needed cash to spend on the first phase of the platform over the Vanderbilt Yard, which is expected to start soon, and would support three towers.
(I queried both Avanath and GFCP yesterday. Avanath didn't respond. GFCP confirmed the sale, but didn't answer other questions, such as whether the sale would support the platform.)
Greenland and Forest City built the two towers, plus the condo building 550 Vanderbilt, as 70%/30% partners. Later, Greenland bought out all but 5% of Forest City's share. So a sale delivers funds as well to Brookfield Asset Management, which in 2018 absorbed original developer Forest City Ratner/Forest City Realty Trust and operates that portfolio under Brookfield Properties.
At a neighborhood meeting May 9, Greenland USA's Scott Solish was asked how the platform would be financed. He paused for several beats, as if carefully considering the appropriate level of candor. "Greenland will be financing the platform," he said.
The platform, in two phases, was in 2019 estimated by a Greenland executive to cost more than $200 million, a figure that has likely increased.
To raise money after Greenland took over nearly all of Forest City's share, GFCP in 2019 sold development leases to TF Cornerstone for the B12/B13 sites on the southeast block and to The Brodsky Organization for the B15 site (662 Pacific, aka Plank Road) across from the arena. That raised $199 million.
GFCP also partnered with Brodsky on B4 (18 Sixth, aka Brooklyn Crossing), thus lowering its costs. Beyond the platform, it also needed to pay for upgrading the Vanderbilt Yard and to make payments for development rights over the two-block railyard. None of that spending generates immediate returns.
In 2016, it made the first of 15 annual payments of $11 million a year for development rights, and has kept up with payments.
Greenland, as master developer, is still on the hook to deliver the project's required 877 remaining units of affordable housing--could Avanath be a future partner?--by May 2025.
Now, as the updated infographic (above) shows, the project is being increasingly dispersed among different owner-operators and developers. Forest City, which built 461 Dean before its deal with Greenland, sold that building to Principal Global Investors.
New Avanath focus on luxury?
These two buildings, with 65% of the units aimed at middle-income households--many earning nearly or at least six figures (535 Carlton, 38 Sixth)--may not seem a perfect fit for Avanath.
Its web site states:
Families with incomes of $30,000 to $80,000 represent the largest segment of the rental housing market. We regard the ability to serve this market as a social, cultural and financial opportunity.
New buildings would presumably offer a landlord advantage over older ones, but both 38 Sixth and 535 Carlton--which opened in 2016-17--have periodically faced residents' complaints regarding adequacy of building services. (See Google reviews for 535 Carlton.)
Looking at Avanath's web sites
A page offering building photos somehow depicts (right) 38 Sixth without a large new building, 662 Pacific (B15, aka Plank Road), directly across the street.
Avanath also aims at "workforce housing" serving households earning 80% to 120% of Area Median Income (AMI). These buildings have 30% low-income units, 5% moderate-income ones--plus 50% for households earning up to 165% of AMI, and 15% for those earning up to 145% of AMI.
Avanath's pages for these buildings (above right) tout "LUXURIOUS URBAN AFFORDABLE APARTMENT LIFESTYLE IN BROOKLYN, NY," with a seeming focus on the potential middle-income tenants.
After all, for those tenants, such apartments may be discretionary. The low-income units were sought by tens of thousands of people in the city's housing lottery.
Such low-income units are surely not hard to fill, should a tenant depart, but GFCP has, for years, had to offer incentives such as a month's free rent to fill middle-income units, since those rent levels--even though increases are governed by rent-stabilization, as is tenure of occupancy--are comparable to some units on the open market.
At this moment, the 535Carlton.com web site persists, as does a new KnockRentals.com site for the building. Same for 38Sixth.com and a new Knock Rentals site.
It might make some sense for Avanath to refer to 38 Sixth (above right) as "Barclays I," even as an internal placeholder, since the tower flanks the arena.
But it makes no sense to call 535 Carlton "Barclays II," other than as an internal placeholder.
After all, since two other towers (461 Dean, 18 Sixth) flank the arena, and another (662 Pacific) is across the street, while 535 Carlton is one long block away.
The page regarding floor plans cites upper-bound rent levels that are slightly higher than first advertised, apparently reflecting increases from rent stabilization: studios up to $2,173, one-bedrooms up to $2,708; two-bedrooms up to $3,260; and three-bedrooms up to $3,814.
That said, middle-income units have come with discounts.
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| From Avanath web site; photo omits B15 |
When it’s time to venture out, explore the excitement just outside your door in Brooklyn, NY. Barclays I – 38 6th Avenue is ideally located in vibrant Pacific Heights, Brooklyn surrounded by world-class dining, shopping, culture and convenient transportation that gives you access to everything that makes New York the world’s greatest city. Some of the major attractions of this sought after community include: Prospect Park, the Brooklyn Public Library, the Brooklyn Museum, and Barclays Center – home of basketball’s Brooklyn Nets. But you’ll also enjoy the walkable tree-lined charm and beauty of the area’s historic brownstone architecture, one-of-a-kind mom and pop shops, and a lively bar/brewery scene. Discover your new neighborhood and all it has to offer using the map below.
The page for 535 Carlton (above left) is not quite ready for prime time, since it contains text transposed from 38 Sixth that has not yet been proofed, and thus still mentions that latter building.
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| 535 Carlton, from the south, via Avanath web site |
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