Judgment day came for Michael Stern’s Brooklyn Tower on Monday, but the developer avoided the worst case scenario for the infamous Downtown Brooklyn development.
The auction scheduled for 9 DeKalb Avenue for Monday morning was called off at the last moment, Crain’s reported. The auction was scheduled for 10 a.m., only for lender Silverstein Properties to release a statement at 10:30 a.m. that revealed settlement talks were taking place with Stern’s JDS Development.
It was the latest twist in the ongoing Brooklyn real estate saga.
Stern’s JDS and Joseph Chetrit’s Chetrit Group purchased the lot in 2014. The following year they purchased the Dime Savings Bank building next door for $90 million before starting construction at the assemblage. Stern bought out Chetrit in 2018 for $60 million and took sole control.
The 1,067-foot tower was projected for completion in 2022. It includes 130,000 square feet of mostly occupied retail space, 417 rental units and 143 residential condominiums.
Stern in March defaulted on a $240 million mezzanine loan tied to the property, and Silverstein, the holder of that debt, commenced a UCC foreclosure. Silverstein purchased the senior debt only a month earlier, possibly to protect its position as a secondary lender.
Mezzanine foreclosure auctions don’t tend to draw much interest from the mezzanine lender since the victor is on the hook for the senior debt; Silverstein was expected to make a credit bid on the property owner entity, then take control of 9 DeKalb. For his part, Stern was expected to find a way to avoid losing control of the building.
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The battle for Brooklyn Tower may only be second in real estate circles to the design of the property, which has been compared to everything from Darth Vader to Sauron in “The Lord of the Rings.”
Where one ring was to rule them all in the latter, it’s unclear yet who will ultimately rule Brooklyn Tower.