Developer Of Brooklyn's Tallest Office Tower Brings In New Partners
Four years after developing Brooklyn's tallest office tower, JEMB Realty Corp. has executed a complex transaction to refinance its construction loan and retain control of the 35-story 1 Willoughby Square, Bisnow has learned.
A scion of the Safra banking family is among the new investors in the 500K SF building, which also secured a $125M mortgage from Deutsche Bank last month tied to its lower floors, according to a Fitch Ratings report.
JEMB Realty executives Joseph Jerome, Morris Jerome, Jacob Jerome and Louis Jerome, along with Edmond Safra, Adnane Mousannif, Morris Sabbagh and Abraham Kassin, are the sponsors of the new mortgage, of which a $75M A-note was sold into the Benchmark 2026-V20 CMBS conduit loan, according to Fitch.
As part of the recapitalization of the property, the sponsors put in a combined $68.5M in equity, which will go toward paying off $179.5M of the building's existing debt, plus fund closing costs and a nearly $10M reserve fund.
JEMB confirmed to Bisnow that Safra and Mousannif's AVRS Partners and Kassin and Sabbagh's KSR Capital are new investors in the building, which is being repositioned with spec suites as big as 10K SF on some floors.
Led by Morris Bailey and Joseph and Morris Jerome, JEMB also announced it signed CorePower Yoga to a 5K SF flagship retail lease on the ground floor and Miami-based Rubenstein Law to a new, expanded office lease. Rubenstein Law moved to a 10K SF office on the 21st floor, a JEMB spokesperson said.
“One Willoughby Square is now fully capitalized, refinanced, and has a strong team in place,” Morris Jerome said in a statement. “With new partners and a new leasing team, we now have a significant amount of capital committed to an aggressive pre-built and leasing campaign. With a fresh prebuilt program, we’re reintroducing this asset with renewed energy and momentum.”
The spokesperson declined to comment on the specifics of the recapitalization. Kassin, Sabbagh and AVRS Partners didn't immediately respond to a request for comment.
JEMB landed a $235M construction loan from Canadian lender Otéra Capital in 2018 for construction of the 498-foot 1 Willoughby Square. The building was geared toward creative tenants that were growing in Brooklyn at the time, but the borough's office market hasn't recovered nearly as quickly as Manhattan's.
Downtown Brooklyn has a 21.1% office vacancy rate, far higher than New York City's overall rate of 13.5% at the end of the third quarter, according to Fitch. The full 1 Willoughby Square building is 53.5% occupied, although the portion tied to the CMBS loan has 95% occupancy — its largest tenant is the city's Albee Square Montessori Public School, which leases 86K SF across six floors.
The recapitalization of the building included splitting it into two condo units — floors one through 21 and floors 22 through 35 — according to Fitch and the New York City Register. It also included a complex web of equity and debt that Fitch flagged as a potential risk.
The $125M Deutsche Bank loan was recorded on Dec. 30 for Unit 1, while Unit 2 now has no debt attached to it, according to city records. Otéra, which has since been rolled into La Caisse by its pension fund parent company, released its mortgage tied to both units.
It is not clear if La Caisse accepted a discounted payoff, although there is more debt tied to the new joint venture that doesn't appear in city records.
Fitch's report states that JEMB is still on the hook for $10M in senior mezzanine EB-5 debt on the property, and as part of the recapitalization there is additional, subordinate debt tied to the new ownership venture. Six convertible loans totaling $65M, some of which were originated by the sponsor, also financed the joint venture, according to Fitch.
That would suggest the building's total debt is now $190M. Unit 1 was appraised for $191M.
A spokesperson for La Caisse didn't respond to a request for comment.
The recap gives JEMB a new lease on life for 1 Willoughby Square. In addition to the spec suites, the landlord is offering floors 22 through 35 — the new Unit 2 — as a “jewel box in the sky” to tenants seeking premium space with unobstructed views of Brooklyn and Manhattan.
