Williamsburg Slated For New Rental Tower

By
• LAURA KUSISTO

The developer of Williamsburg's massive Edge condo project is moving ahead quickly with a 500-unit luxury rental on the waterfront, which could be Brooklyn's most ambitious new residential project since the recession.

Douglaston Development, which built the Edge, has taken the lead on developing a nearby site at 3 Northside Piers. It plans to break ground on the $300 million project by March.

Enlarge Image

Close

Claudio Papapietro for The Wall Street Journal

A luxury rental tower is slated for the Williamsburg waterfront in Brooklyn, in the foreground. At center are two Northside Piers condo towers and at left, the Edge project.

The vacant lot directly on the Williamsburg waterfront has been in limbo for several years. It was initially supposed to be the third condo in the Northside Piers development, but the plan was axed after the first two buildings were plagued for a time by sluggish sales and price cuts.

The first two Northside Piers buildings were developed by a partnership of Toll Brothers Inc., L&M Development Partners and RD Management LLC. For the third building, Douglaston will now take the lead, with L&M and RD remaining as minority participants.

Toll Brothers won't participate in the third tower, saying it is focusing on smaller condo projects in Dumbo, Gramercy and the Upper East Side.

"The Williamsburg market is strong, but for most of us developers, it's not a place where we were making a lot of money. There's so much product, competing for price against each other," said David Von Spreckelsen, a senior vice president at Toll Brothers.

For Douglaston, taking over the Northside Piers project marks a remarkable turnaround given that just 10 months ago its own condo project, the Edge, was another of Williamsburg's waterfront white elephants.

"After the collapse of Lehman and the collapse of the stock market, we suffered for two years," said Jeff Levine, a principal at Douglaston.

But since January the Edge, which actually consists of two buildings with 565 market-rate condos, has quickly turned around. Condos there have been selling at a rate of about 30 units a month and it is now about 70% sold.

FXFOWLE

A rendering of the planned tower in Williamsburg.

Plans for the 40-story rental project resemble the shiny condos that rose on Williamsburg's waterfront during the dying days of the boom. It will likely feature a swimming pool, lounge, aerobic and weight-training room, screening room and business center.

Some developers now have sworn off these types of massive luxury projects, saying they're out of step with the chastened times.

But Mr. Levine said demand for Brooklyn rentals well outstrips supply, especially because there's been little development for the past few years.

"The rental market in Williamsburg is through the roof," he said.

Units at the new rental are expected to rent for $55 to $60 a square foot, which works out to about $3,000 for a one-bedroom. Williamsburg's median rental price has climbed steadily over the past year, to $2,909 for a one-bedroom in September, according real-estate company MNS.

To be sure, Douglaston has at least one major hurdle to clear, as it is still in the late stages of negotiating with lenders on the project.

For now, Douglaston has delayed plans for a third condo tower in its Edge project, which was planned for the site currently occupied by Smorgasburg, a weekly food market, and the Brooklyn Flea. Mr. Levine said the economy isn't stable enough to move forward with a major condo project.

Steve Kliegerman, president of Halstead Property Development Marketing, said he sees a flurry of activity behind the scenes, as developers prep for large new residential projects in Brooklyn. But this time around, most of these buildings are poised to go rental.

He and others say rentals carry fewer risks if the economy enters a double-dip recession, because every year the developer has a chance to renew apartment leases at a higher rate.

"When you're doing a rental, if you don't succeed, you have the second, third and fourth years to get back into the ball game," said Mr. Levine.

Write to Laura Kusisto at laura.kusisto@wsj.com