Real Estate

Brooklyn Tower Foreclosure Averted as Stern, Silverstein Enter Settlement Talks

Brooklyn Tower auction postponed amid settlement talks over $240M loan default with Silverstein Properties.

By Tal Alexander

6/10, 17:19 EDT
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Key Takeaway

  • Michael Stern's JDS Development avoided foreclosure on Brooklyn Tower as settlement talks with lender Silverstein Properties commenced.
  • Stern defaulted on a $240 million mezzanine loan, prompting Silverstein to initiate a UCC foreclosure auction, which was called off last minute.
  • The 1,067-foot Brooklyn Tower includes 130,000 sq. ft. of retail space and 560 residential units; its future ownership remains uncertain.

Brooklyn Tower Auction Postponed

Judgment day for Michael Stern’s Brooklyn Tower was averted at the last moment as the scheduled auction for 9 DeKalb Avenue was called off. The auction, set for Monday morning, was halted due to ongoing settlement talks between Stern’s JDS Development and lender Silverstein Properties. This development is the latest twist in the ongoing saga surrounding the Downtown Brooklyn property, which has faced numerous challenges since its inception.

The Complex History of Brooklyn Tower

Stern’s JDS and Joseph Chetrit’s Chetrit Group initially purchased the lot in 2014, followed by the acquisition of the Dime Savings Bank building for $90 million in 2015. Stern later bought out Chetrit’s stake for $60 million in 2018, taking full control of the project. The 1,067-foot tower, which includes 130,000 square feet of retail space, 417 rental units, and 143 residential condominiums, was projected for completion in 2022. However, financial difficulties arose when Stern defaulted on a $240 million mezzanine loan in March, leading Silverstein to initiate a UCC foreclosure.

Broader Implications in Real Estate

The postponement of the Brooklyn Tower auction is emblematic of broader trends in the real estate market, where financial distress and foreclosures are becoming increasingly common. Similar scenarios are unfolding across the industry, as seen with Aby Rosen’s RFR Holding and Charles Cohen’s Cohen Brothers Realty. Both firms are grappling with significant financial challenges, including defaults on substantial loans and impending foreclosures. These cases highlight the precarious nature of high-stakes real estate investments, particularly in a volatile economic environment.

Market Dynamics and Developer Strategies

The ongoing struggles of developers like Stern, Rosen, and Cohen underscore the complexities of navigating the real estate market. Rising interest rates, financial mismanagement, and market fluctuations have contributed to a wave of defaults and foreclosures. For instance, RFR Holding has faced multiple defaults, including a $224 million mortgage on 522 Fifth Avenue and an $80 million mortgage on a Gowanus development site. Similarly, Cohen Brothers Realty managed to temporarily halt a $534 million foreclosure by Fortress Investment Group, but the long-term outcome remains uncertain.