What All Year’s Flip Says About Gowanus—and Yoel Goldman
In July 2018, Yoel Goldman bought a two-acre plot of land shouldering the Gowanus Canal for $61 million.
The sale surprised Sean Kelly, an investments sales broker at Ariel Property Advisors, but not because of the price. The family that sold to Goldman had held it for decades, watching it grow in value. “It’s kind of a head scratcher,” Kelly said. “You’ve seen the market mature so much and you’re right on the cusp of such growth, why would you sell?”
What didn’t surprise him was that the parcel traded again for $95 million six months later, a markup of 55 percent. “It’s two acres in the north half of Brooklyn,” Kelly said. “That’s not something you come by very often.”
In February, Goldman’s All Year Management entered into contract to sell the site, a 95,000-square-foot lot at 313-331 Bond street, which stretches the length of Union Street from Bond Street to the Gowanus Canal. The buyer is reportedly Simon Dushinsky and Israel Rabinowitz’s Rabsky Group, according to The Real Deal.
The deal is significant because it’s the first trade in Gowanus since the city released the draft proposal for the area’s rezoning in late January, thus setting the bar for pricing in the neighborhood. “People will use it to anchor some of the underwriting assumptions they’re going to use,” Dan Marks, an investment sales broker at TerraCRG, said.
It also bought Goldman time in Tel Aviv, where he’s been facing liquidity problems that have sent his bonds into steep decline. The cash from this deal puts him in the clear through November 2019, when his first principal payment on the bonds is due.
But the transaction has raised some eyebrows, especially in Tel Aviv. “He sold the last available asset that he could extract equity from,” said a partner at an Israeli financial firm. “In our view what he did was sacrifice the long term for the short term.”
The deal is structured so that the buyer is releasing $34 million immediately, which Goldman can put to use in any way he sees fit. The buyer will then pay an additional $46 million when the deal closes in August, which will pay down the $46 million in loans against the property. (Goldman has a $30 million senior loan on the property from Centennial Bank and a $16 million mezzanine loan form Sherwood Equities.) Finally, the buyer then has the option to pay an additional $15 million, or Goldman will keep a 12.75 percent stake. However, that final sum is contingent on the passing of the rezoning within three years.
The structure is also a head scratcher, for some. “It’s not typical for someone to release a deposit, let alone a deposit that’s that substantial,” Ariel’s Kelly said.
However, the pricing on the deal is in line with expectations for the area now that the draft proposal has been released, said Jonathan Snider of Sherwood, the mezzanine lender on the property. “The value change is based on the draft proposal, which specifies what each site receives if the rezoning goes through,” Snider said.
In 2018, nine development sites sold in Gowanus for an average price of $337 per buildable square foot, according to data from TerraCRG. In the most expensive deal by square footage, Aby Rosen’s RFR Realty paid $115 million for a site with 280,000 buildable square feet at 160-225 Third Avenue, or $411 per square foot. Under the current rezoning, the Bond Street site, with 185,000 buildable square feet comes out to $513.
Under the rezoning guidelines released by the city in January, however, the site could go up to roughly 400,000 square feet of mixed-use space, putting the price at $237 per square foot — a very reasonable figure, per Kelly. Particularly given its location, to the west of the canal. “It’s sandwiched between the best brownstone neighborhoods in Brooklyn,” he said.
Of course, the rezoning still hasn’t passed, and questions remain about the cost of the cleanup along the Gowanus Canal, but it’s typical for prices to go up as more information is released prior to a rezoning, said TerraCRG’s Marks. That’s especially the case for Gowanus, which has been gearing up for a sweeping change in the area for decades.
“If you look at a history of the comps that have traded in Gowanus, you start to see peaks and spikes in activity,” Marks said. “Those are always happening after new information is released about the rezoning.”
So if it’s such a sweet deal, why did Goldman sell? While there’s no way to know his intentions, the outcome is clear: the sale solved his cash problem in Israel, for now.
Goldman’s liquidity issues became apparent late last year. In November, he closed a 90-day preferred equity deal for $29 million with a 9.75 percent interest rate. The deal was secured by three developments, The Delmar in Long Island City, the Dean in Crown Heights, and another Gowanus development site he owns, on Smith Street. At the time, he was in negotiations with Mack Real Estate Group for financing for the second phase of his 900-unit Bushwick development.
Goldman eventually secured the financing for the Bushwick project from Mack in February, but at a much higher cost than they originally negotiated, per reports he made to the Tel Aviv Stock Exchange. Also in February, he lent $16.3 million to the Israeli arm of his business to cover an interest payment on the bonds, and announced he would buy back roughly $10 million in bonds.
With the Bond Street sale, combined with the Bushwick financing, Goldman has some breathing room. On the day that Goldman announced the Gowanus deal, All Year’s four bond series shot up an average of 10 percent, though two of the four bonds are still trading in junk bond range. (The company’s worst performing bond shot up 15 percent, ending the day at 55.18 cents, and its best increased 2.27 percent to 87.93 cents.)
That’s why some people saw the deal as a rescue. “We heard Rabsky took the role of the white knight,” the Israeli financial executive said.
The bonds have continued on an upward trend since. Earlier this week, Goldman announced that he’d signed his first office tenant to the William Vale hotel, news that the market welcomed.
All Year did not respond to request for comment.