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Wall Street Journal / Biz - Money

Developer Reaches Tentative Deal for Union Financing of Crown Heights Project

Developer Ian Bruce Eichner, who has hit numerous highs and lows in his 40-year career in real estate, has taken a big step toward his latest dream: a $500 million, 1.2 million-square-foot, residential project in Crown Heights.
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Peter Grant and

Katherine Clarke

Veteran developer Ian Bruce Eichner, who has hit numerous highs and lows in his 40-year career in real estate, has taken a big step toward his latest dream: a $500 million, 1.2 million-square-foot residential project in Crown Heights that would set aside half of its units as affordable housing.

Mr. Eichner has a tentative deal to obtain construction financing for the project from the AFL-CIO Housing Investment Trust, he said, which is a mutual fund that invests for union pension funds. As part of the deal, the project would only use union workers, a major goal for organized labor in a city that is losing its status as a union town.

Mr. Eichner, who is partnering on the project with Lincoln Equities Group, said the venture is “about 10 days away” from closing on a deal to pay about $75 million for the land, which consists of about 3 acres at Franklin Avenue and Montgomery Street. The venture wants to build four buildings that would range in number of floors “from mid-20s to the mid-30s,” said Mr. Eichner, who heads Continuum Co.

The venture has begun talks with the city planning department to begin a rezoning process that would enable it to build that high. Part of the plan would be to earmark about 800 units for below-market rents, which would make the development one of the city’s largest such affordable projects on private land.

“We’re seeking an up-zoning, assuming this is something the city wants,” Mr. Eichner said. “Early indications from the local elected officials are that this is exactly what they want to see.”

A Planning Department spokeswoman said the department hasn’t yet received a formal application for the project.

The project will still be scrutinized by the local community board, which has been tough on developers in the past. Mr. Eichner said he is planning a “robust” effort to include the community in terms of recruiting workers and tenants for the project.

The deal marks the latest sign that the Brooklyn development juggernaut is continuing even as New York’s rental market is softening. If all goes well, the Continuum-Lincoln venture would break ground in the first quarter of 2019, Mr. Eichner said.

The development would mark the latest chapter in Mr. Eichner’s eventful career as a real-estate developer, which began in Park Slope, Brooklyn, during the 1970s. By the late 1980s, he was developing Manhattan skyscrapers but several of his projects—including CitySpire and the office tower at 1540 Broadway—ran into financial problems during the real estate crash of the early 1990s.

Mr. Eichner rebounded. In the real estate boom leading up to the 2008 crash, he developed the giant Cosmopolitan Resort Casino on the Las Vegas Strip. That project ran into trouble after the crash and was eventually taken over by its lender, Deutsche Bank AG .

In the most recent recovery, Mr. Eichner’s biggest project has been the luxury condominium at 45 East 22nd St. named Madison Square Park Tower. About 75 of the units have sold, with about 20 left, Mr. Eichner said.

Median rents in Brooklyn rose to $2,460 a month in the third quarter of this year, up 0.6% from the third quarter of 2016, according to StreetEasy.com. That marked the slowest growth rate since 2011, StreetEasy said.

The AFL-CIO Housing Investment Trust, which has about $6.1 billion in assets under management, invests for about 400 union pension funds. If the deal being negotiated is finalized, the developers will likely do a bond financing through the New York Housing Development Corp. and the trust would buy the bonds, Mr. Eichner said.

The trust only invests in projects that use 100% union labor. Lately nonunion shops have been doing more construction work in New York.

The Crown Heights project would counter that trend. “There’s obviously an awful lot of private residential work in the last few years that has gone nonunion,” Mr. Eichner said.

Theodore Chandler, the chief operating officer of the trust, confirmed it had given the venture a “letter of interest” to provide financing for the Crown Heights project with the amount to be determined. “We’re very much looking forward to potentially being a part of the financing.”

Write to Peter Grant at peter.grant@wsj.com

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