Werner Deal for All Year’s Brooklyn Portfolio is Back On
David Werner Real Estate Investments has re-entered into contract with All Year Management to buy a portfolio of Brooklyn apartments, putting the deal back on track after it nearly derailed in May, Commercial Observer has learned.
Werner agreed to buy a 68-building portfolio for $302 million in two separate transactions, one scheduled to close in July and the other in November, according to documents filed with the Tel Aviv Stock Exchange. The first tranche of the deal includes 45 buildings at $176.6 million, and the second comprises 23 buildings at a purchase price of $125.8 million.
The terms of the deal have changed since the two firms first entered into contract in March, when Werner agreed to acquire a 74-building portfolio for $346 million, just before the pandemic began to upend the global economy. In May, as the closing deadline approached, Werner attempted to back out, claiming that All Year had violated the terms of the agreement, which All Year denied, according to TASE documents. The two firms soon resolved to extend the closing deadline for 60 days, until July 5, to allow them enough time to renegotiate.
“COVID hit the fan; every deal got renegotiated,” a broker with knowledge of the deal told CO. “It worked out how people could be comfortable to bring it to the finish line.”
Under the terms of the new deal, All Year will contribute up to $29.6 million in preferred capital, at the buyer’s discretion, from the proceeds of the sale, according to the TASE filing. The capital will carry a 6 percent interest rate and mature in June 2021, with two 12-month extension options at higher interest rates.
In addition, it will be the buyer’s responsibility to facilitate the assumption of existing loans. Should the lender reject the loan assumption request, the purchase price will be reduced by 50 percent of the loan’s early repayment penalty.
The proceeds of the sale will work out to $53 million for All Year if Werner does not activate the preferred capital option, according to the documents.
The portfolio is valued at $312 million, above the purchase price, according to a recent assessment filed on TASE. The properties include multifamily buildings concentrated in the neighborhoods of Williamsburg, Bedford-Stuyvesant, and Crown Heights. The original deal included 611 multifamily units and 18 retail units, at properties including 607 Franklin Avenue, 65 Kent Avenue and 1323 Bedford Avenue, though it was not clear which eight buildings had been dropped from the portfolio.
All Year declined to comment.