Photo of construction site with Brooklyn Bridge visible in the background

Brooklyn real estate appears to be in a tailspin — with two of the biggest players in the scene recently declaring bankruptcy. Within the past month, DuPont Street Developers LLC and Evergreen Garden Mezz, LLC — a holding LLC of Brooklyn real estate giant All Year Management — have both filed for Chapter 11 bankruptcy. 

In DuPont’s length 36-page bankruptcy petition, they claim to have as much as $100 million in liabilities, with a similar amount of assets. 

A huge portion of their liability stems from secured claims: DuPont’s own financing vehicle, DuPont Street 1 submitted a secured claim of $57 million. Another DuPont entity, DuPont Realty NY LLC, has an unsecured claim for $3 million. This claim is currently under dispute. 

Other notable claims come courtesy of the consulting firms GZA and Interior Development Consulting. GZA has filed a mechanic’s lien worth $367,435, while Interior Development Consulting has an unsecured claim for $650,000.

This is not the beginning of DuPont’s legal trouble. In 2018, an involuntary petition for bankruptcy was filed against the company, with creditors alleging to default on $4.4 million. This petition was ultimately dismissed. 

Evergreen’s own bankruptcy petition also reports as much as $100 million in liabilities, with a similar amount of assets. The only creditor mentioned in their petition is the lender MERF REIT, who have submitted a secure claim. 

Both Brooklyn developers are notable in their individual right, owning two of the most locally famous buildings. At the center of All Year Management’s contention is the striking Denizen apartment complex located in Bushwick

Boasting 911 units and a massive 1.2-million-square-feet that spans two blocks, the complex describes itself as having “unmatched amenities, sweeping greenspaces, a private rooftop paradise, and exquisite apartments.” All Year Management sued Mack Real Estate to avoid the foreclosure of $65 million in mezzanine debt on the Denizen. 

Mezzanine debt materializes when a hybrid debt issue is subordinated to an additional debt issue from the same issuer. Mezzanine debt is considered one of the riskiest forms of debt.

This move only bought All Year Management a limited amount of time with Evergreen Garden Mezz, LLC filing for Chapter 11 bankruptcy protection three weeks later. 

Right next door in Greenpoint, DuPont Street Developers LLC owns the old Nuhart Plastics building. Done in a memorable curved moderne architecture style, the building has become a site of recent controversy as well: The building is a superfund site that contains dangerous chemical waste from its days as a plastic factory. Residents for years have been anxious about the nearby hazardous waste, frequently bringing their concerns to local government. 

All Year Management had been set to clean and demolish the site in 2018, but to no avail. The $55 million dollar deal reportedly fell through when DuPont Street Developers was unable to provide a clean title. 

New Brooklyn developments come to a halt

Not content to let existing Brooklyn developments hog the spotlight, new developments within the borough are having an increasingly tough time taking off as well. 

The latest development to get the axe was the large-scale expansion project planned for Industry City. The developers behind Industry proposed that the new development would bring 20,000 jobs to the area. 

The expansion was heavily opposed by local progressive groups, Uprose and Protect Sunset Park, who claimed the project was a luxury mall that would only hasten gentrification. They also claimed that job estimates were inflated. 

This grassroots support was enough to sway the areas councilman, Mr. Carlos Menchaca, to deny the city’s needed approval to rezone the area. 

Coupled with Amazon’s infamous HQ2 pullout from Queens in 2019, and a local unemployment rate higher than the national average, business leaders are increasingly worried that New York City is sending out a message it is not open for business. 

“The continued dominance of e-commerce in every aspect of our lives, which has only been heightened during the pandemic, will continue to fuel the need for last-mile logistics companies — and the spaces to service them.”

Dan Marks, TerraCRG

Brooklyn’s industrial roots are reflected in current construction

That is not to say all is lost within Brooklyn real estate. The one shining bright spot has been the rise of e-commerce. A need for distribution centers is creating a firestorm in which already-constructed industrial units are being leased left and right.

Brooklyn is uniquely situated to take advantage of this rise in e-commerce for two very important reasons. 

First, Brooklyn has a ton of already built and abandoned industrial spaces. Traditionally, Brooklyn has always been the blue-collar brother to white-collar Manhattan. Its proximity to Manhattan and its waterways turned the once-independent city into an industrial hub. Famously, the sugar industry flourished here. 

Then, beginning in the 1950s, industry began to move away from Brooklyn due to the construction of the highway system. Brooklyn’s proximity to Manhattan was no longer needed as goods could be shipped at a much greater distance. 

In the first of two ironic twists, this same highway system is now revitalizing Brooklyn. When leasing a space, a retailer’s main goal is to hit their quota of last-mile distribution centers, and Brooklyn’s vast highways provide easy access to the NYC area.

“The continued dominance of e-commerce in every aspect of our lives, which has only been heightened during the pandemic, will continue to fuel the need for last-mile logistics companies — and the spaces to service them,” said Dan Marks, partner at Brooklyn real estate agency TerraCRG.

Marks continued, “As such, we expect industrial sales activity to remain strong in 2021, provided the inventory is there to meet demand.”

The second ironic twist? The major retailer behind this push is Amazon, which just three years pulled its controversial HQ2 development from Queens. Amazon alone is leasing 1.2 million square feet in Brooklyn. 

Related reading: California Community Sues to Stop Construction of Possible Amazon Warehouse

By the mid-2010s, Brooklyn led the country in warehouse-to-residential and warehouse-to-office conversions that quickly became popular in urban areas across the country.

Hoping to one day challenge Manhattan, the first office buildings built in decades broke ground around this time as well. Now, Brooklyn finds that its best forward into the future may be through searching through its past.