JV Breaks Ground on Brooklyn Mixed-Use Project
- Aug 13, 2019
Construction officially broke ground today on the first phase of 22 Chapel St. in downtown Brooklyn, a mixed-use development that will feature 180 apartments, retail and community space, along with the headquarters for one of the joint venture partners, START Treatment & Recovery Centers. Delshah Capital and OTL Enterprises teamed up with START to develop the 20-story, 166,976-square-foot building.
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Located between Flatbush Avenue Extension and Jay Street, 22 Chapel St. will include 135 market-rate units and 45 apartments—or 25 percent of the total number of units—that will be part of the Affordable New York Housing program.
“This mixed-use project is important because it will provide affordable housing to a growing area of Brooklyn where affordable housing is scarce and provides START with a revenue stream that allows us to continue providing critical services to the community,” START’s CEO Lawrence S. Brown, Jr., MD, told Multi-Housing News.
“This project sets a new paradigm in how not-for-profits and the private sector should work together to continuously improve the future of our city,” added Michael Shah, founder & managing partner of Delshah Capital.
Designed by CetraRuddy, the project will also include 2,030 square feet of retail; 15,000 square feet of community space; and 15,000 square feet for START’s headquarters. Building amenities will include a rooftop pool, children’s playroom, fitness center and 88 subterranean parking spaces. The project is expected to be completed within 27 to 30 months.
“We expect the building staffing, services, amenities and finishes to be competitive with new ‘luxury’ buildings in Manhattan, but our targeted rents are high 60s per square foot for the market-rate units, which we believe to be affordable for working class families,” Shah told MHN. “We believe that is a significant value proposition for families priced out of Manhattan’s market or desiring to be part of the up and coming downtown Brooklyn neighborhood.”
START, New York’s largest independent drug treatment agency, acquired the building—a former two-story marine training center—in 1983 under a New York City program that allowed nonprofits to lease properties for $1 a year for 30 years, and exempted them from city and state taxes. After 30 years, START became the owner and entered into a joint venture with Delshah and OTL in 2018 to develop the site. The location is in a federal Opportunity Zone, according to Yardi Matrix data.
In January, the developers received a $62 million construction loan from Bank OZK, according to Yardi Matrix. EverWest Real Estate Partners also provided the JV with a $40.5 million mezzanine loan, the Commercial Observer reported.
More NYC Projects
Founded in 2006, Delshah is a New York City-based real estate private equity and assessment management firm that invests in real estate equity and debt instruments mainly in Manhattan and Brooklyn.
Other New York City projects for Delshah include the renovation and repositioning of 138 Ludlow St., a 1920-vintage, six-story walk-up apartment building on Manhattan’s Lower East Side. The building, purchased in January 2018, includes 27 rental apartments and street-level retail. It is located near 130 Orchard St., which Delshah also repositioned.
Another project is the conversion of a historic five-building medical facility located in the Morningside Heights neighborhood of Manhattan into a luxury rental community. In January 2018, Delshah secured a $130 million construction loan from Square Mile Capital Management to finance the conversion of the 200,215-square-foot project at 30 Morningside Drive that will feature 205 apartments.
Delshah and OTL Enterprises, a Manhattan-based construction management and real estate development firm, have worked together in the past including the development of a luxury condominium building at 225 W. 17th St., in Manhattan’s Chelsea neighborhood.