Special Report: Industry City
The recent announcement of a $1B injection of cash into 30-acre Industry City has us thinking about how the massive complex on the Sunset Park waterfront got to this point, and what's in its future.
For a refresher, Chelsea Market owner Jamestown Properties, along with Belvedere Capital, Angelo Gordon and Cammeby’s International, bought the massive 16-building, 6M SF complex in August 2013, and FBE Ltd got involved. The Atlanta-based real estate and management firm bought a 49.9% stake in the property’s mortgage, then owned by Ruby Schron and the Fruchthandler family. (The $300M mortgage went into default in 2011, only to be restructured a year later.)
In one year, by fall 2014, 24 out of 144 elevator cars had been automated and half of the 18,000 windows on the property had been replaced. Li-Lac Chocolates, the first tenant since the recapitalization, set up shop in September. So far, the Jamestown-led partnership’s dropped about $75M into the property with the aim of attracting a mix of manufacturing and “innovation economy” jobs in tech and other creative industries. About 850k SF have been leased since Jamestown and its partners took an ownership stake, but Industry City says 59% of the space is still underutilized.
In contrast, at its peak in the 1910s, Industry City handled as much as 10% of NYC's steamship traffic. It was launched in 1895, when developer Irving Bush bought the land to build a warehousing and manufacturing center. Over time, Bush added a railroad spur and a dock for big cargo boats. By 1910, all 16 of the buildings were built and it reached its current 6M SF footprint.
If you were a kid in the 1950s or '60s and collected baseball cards, there’s a pretty good chance they were made by the Topps company at Bush Terminal. In 1956, one of the biggest explosions in the history of the city shook the terminal when dockworkers using a torch for maintenance work caused a fire that spread to a stockpile of tons of explosives. Ten people were killed and one of the piers was destroyed, but the buildings stayed intact. In 1961, Harry Helmsley led an investment group that bought the terminal. It probably wasn’t his best investment; by the mid-1970s, activity slowed to a trickle and the city had the piers filled in. Tenants left in droves. The space either wasn’t absorbed or was taken by storage tenants that commanded much lower rents. The complex was renamed Industry City in the '80s.
When the Jamestown partnership took over, there was quite a mess to clean up. On top of 30 years of neglect, Superstorm Sandy had dumped about 20 million gallons of water into several of the complex’s basements. About a quarter of the usable space was vacant, and more than a third was used for storage and warehousing—a long way from the magic white collar/blue collar combo with almost 20,000 new jobs the owners hope for within the next 12 years.
Jametown's $890M financing plan (with tenants eventually covering about $150M) sets the development apart from other big repurposing projects along the waterfront like the Brooklyn Navy Yard and the Brooklyn Army Terminal, which receive public funds. But with the nearly billion dollars in cash infusion comes strings: the developers want the city to rezone the area to allow for more retail, a university campus and even a hotel. The plan also asks for $115M in public funds for infrastructure. The proposal aims for a full transformation of the property within 12 years, but Jamestown president Michael Phillips has said it'll take more like 30 years without the rezoning. The feds have no formal influence over that rezoning, but congressman Jerrold Nadler's a proponent of bringing ports and rail freight jobs back to the city, and his district includes part of the site. He and Rep. Nydia Velazquez, whose district covers the rest of it, reportedly met with the mayor last week to talk about the site. The owners' vision of a hip tech mecca with a manufacturing component may not jibe with what the congressional veterans want.