Madison Realty Capital’s Whale of a Deal

By Scott Baltic, Contributing Editor

A seven-story, 400,000-square-foot industrial property in Brooklyn is Madison Realty Capital’s latest acquisition in the New York City borough.  Known as the Brooklyn Whale Building, it commanded $82.5 million in an off-market acquisition, the buyer announced Tuesday.

MRC plans to continue and expand the previous owner’s repositioning of the full-block industrial building into a “premier creative/tech office destination.”

The Brooklyn Whale Building, acquired by Madison Realty Capital.

Located at 14 53rd St. in the Sunset Park neighborhood’s new 22-acre waterfront park, the property is undergoing more than $8 million in renovations intended to create “a state-of-the-art office hub” aimed at mid-size companies in the technology, media and creative arts sectors, as well as garment industry and back-office tenants.  Updates include energy-efficient windows, new elevators, a new roof, improved power infrastructure, a new lobby with concierge desk and spaces for amenity shops. Completed in 1918, the building was later the headquarters for the Whale Oil Co.

The building is currently 79 percent occupied. “Current tenants/uses include creative tenancy, a healthcare company, showrooms, some fashion industry tenants and media tenants,” an MRC spokesperson told Commercial Property Executive.

Aaron Jungreis of Rosewood represented both the seller and buyer in the transaction.

“We anticipate strong interest once the renovations have been completed, given the high demand and short supply of quality affordable office product in Brooklyn, particularly for creative and tech tenants,” Joshua Zegen, co-founder and managing principal of MRC, said in a statement. “Sunset Park has historically demonstrated strong and consistent occupancy and rental rate performance. But this area’s transformation over the last few years has now positioned it among the hottest office neighborhoods in New York City.”

Last March, MRC announced the purchase of  29 Ryerson St., a 250,000-square-foot warehouse building near the Brooklyn Navy Yard that MRC plans to convert to Class A creative office space.

A 2015 Office Market Update by Sperry Van Ness highlights Brooklyn as one of 10 noteworthy office markets nationwide, noting that recently, “the burgeoning tech sector has fueled demand for flexible office space with less traditional formats.”

The report points out that with TAMI (technology, advertising, media and information) tenants driving downtown Brooklyn’s office vacancy below 4 percent, developers are looking at other neighborhoods. Sperry Van Ness calls out industrial space in Sunset Park as among “the next hopeful TAMI magnets.”