L&L Holding JV Buys Terminal Stores in NYC for $880M

By Barbra Murray

Terminal Stores

Terminal Stores, an historic former warehouse complex now housing office space and a smattering of retail, is under new ownership and destined for redevelopment. A joint venture of L&L Holding Co., Normandy Real Estate Partners and an institutional investor advised by J.P. Morgan Asset Management recently closed the acquisition of the 1.2 million-square-foot property from Waterfront New York and GreenOak Real Estate Advisors LP, in an $880 million deal.

Terminal Stores sits at 224 12th Ave. (or 261 11th Ave.), stretching a full block in West Chelsea. Peter Sibilia, co-head of the Northeast Region, Real Estate Americas at J.P. Morgan Asset Management, described the project in a prepared statement as “neighborhood-defining, transformational and irreplaceable real estate.”

Originally developed in 1891, the multi-height building was converted into office and self-storage space at the hands of previous owner WFNY in 1983. In 2012, the office component underwent renovation and it now counts Uber Technologies Inc. and cosmetics company L’Oréal USA as tenants. The property also features a commercial arcade known as the Tunnel, which offers restaurant, gallery and showroom space where railroad tracks once took center stage.

Commercial real estate services firm CBRE’s Darcy Stacom and Bill Shanahan represented WFNY and GreenOak in the Terminal Stores transaction, while the L&L joint venture relied on internal representation. L&L and partners did, however, have assistance securing financing to supplement the $520 million in equity contributed by the group. A CBRE Debt & Structured Finance team—consisting of James Millon, Tom Traynor, Ethan Gottlieb and PJ Finley—arranged a $650 million loan for the acquisition and pre-development of the asset through a Blackstone Mortgage Trust Inc.-led consortium that includes co-lenders Apollo and Goldman Sachs.

In with the old, in with the new

The L&L partnership’s redevelopment of Terminal Stores will be an adaptive reuse undertaking. “The Terminal Stores is a magnificent property that echoes the rich history and authenticity of New York City, while also speaking to the area’s current vibrancy and limitless potential,” David Levinson, chairman & CEO of L&L Holding Co., said in prepared remarks. “Demand for offices, showrooms, event space, eateries and high-end galleries continues to grow.”

The redevelopment project will involve 500,000 square feet of space currently serving as self-storage. The team will remake the segment into a premier office and retail spot while respecting the property’s historic architecture, which is highlighted by red bricks, as well as mill and heavy timber construction. 

L&L and Normandy are old hat at transforming historic properties into successful mixed-use destinations. In the big scheme of things, they are ahead of the curve. According to a third quarter 2018 report by CCIM Institute, “AdRu is in the early stages of its development life cycle. It will be a key source of both redevelopment and investment opportunity in the coming years.” Currently, adaptive reuse projects account for 1 to 2 percent of all commercial real estate space in the U.S. CCIM expects the figure to increase to 4 percent within the next five years, due in no small part to the shuttering of stores and malls and the fact that e-commerce and artificial intelligence will increasingly render many properties obsolete.

“This means that, as a property segment percentage of total commercial space, AdRu will likely surpass other recognized non-core property types such as self-storage,” per the CCIM report.

Image courtesy of L&L Holding Co.