Capstone and BH3 Take Reins at 141 Willoughby, Planning Resi Conversion

After foreclosing on 141 Willoughby Street and taking control of the building, BH3 Management and Capstone Equities have announced plans to transform the Brooklyn office building. 

The brand-new building, which was only finished in 2023, is now slated for a partial conversion to residential after Savanna failed to monetize the asset. Capstone paid $86 million in real property transfer and real estate transfer taxes, according to Capstone and property records after the firm purchased the building’s defaulting debt in January, foreclosing on Savanna.

Savanna acquired the industrial property in 2014 for $28 million, landing a $264 million construction loan from PIMCO in 2021 to erect the existing structure.

But with leasing slow, Savanna defaulted on the loan and Capstone bought the debt from PIMCO in January before initiating a Uniform Commercial Code foreclosure for the equity interest in June, Commercial Observer previously reported.

The vacant 24-story building will feature 200 rental apartments alongside 110,000 square feet of office and residential space, according to Capstone and BH3, with work scheduled to begin in 2026.

“141 Willoughby Street presents a truly unique blank slate upon which to reimagine a newly developed institutional-grade asset,” Adam Falk of BH3 said in a statement. “By introducing high-quality residences, including much needed affordable housing, together with fully customizable commercial space, we have a special opportunity to deliver a balanced, mixed-use property that will meet steadily rising demand in Downtown Brooklyn. This area is an increasingly attractive option for both residents and commercial users seeking a walkable and dynamic district that is also minutes from Manhattan by train.”

Floors two through seven will remain customizable offices, with each floorplate spanning 22,000 square feet for about 110,000 square feet in total. A representative for BH3 and Capstone did not provide the amount of square feet reserved for retail.

The conversion follows two different market reports cited by Capstone and BH3 that show that office vacancies in Downtown Brooklyn are down, while asking rent on residential space has risen five percent on a year-over-year basis.

New York City requires that 25 percent of the apartments be deemed affordable.

The apartments will be studios, one-, two- and three-bedrooms with spaces that can serve as home offices or dens to accommodate remote workers.

Mark Hallum can be reached at mhallum@commercialobserver.com.