Everybody Wins, or Thanks for Calling:
Cheers to Brooklyn Brewery’s Relocation!
Real Estate Board of New York Most Ingenious Retail Lease Submission
Nathaniel Mallon
Verada
PART 1
Nathaniel Mallon expertly navigated the complex needs of private parties and public entities, overcoming the tenant’s complicated multi-use requirements while meeting the required light manufacturing FAR component for a new development, securing Brooklyn Brewery’s option to purchase its new Williamsburg headquarters with a lease – without plans or DCP approval.
1 Wythe, Brooklyn, NY (Williamsburg)
Proposed New Location for Brooklyn Brewery
78,000 SF Building Proposed
Brooklyn Brewery Leased Space, 41,000 SF
PART 2
Brooklyn Brewery, a pioneer of the American craft beer revolution, founded in 1988, is set to relocate its headquarters, brewery, and taproom before its existing lease expires in January 2025. In November 2022, Verada Retail’s Nathaniel Mallon announced that the brewery had signed a 30-year lease, with options, to remain in the area indefinitely, moving just four blocks from its current location on North 11th Street to a now vacant lot at 1 Wythe Avenue. The new location will allow Brooklyn Brewery to stay in the neighborhood where it has been for the past 35 years. Developers will break ground at 1 Wythe early this year, with plans to open the doors of the new location in the summer of 2024.
Finding a new location for Brooklyn Brewery was complicated due to the tenant's need for a mixed-use space. To accommodate the company’s vision, Mallon had to find a location that included retail space with a tasting room; rooftop space for a large beer garden and full-service restaurant; outdoor sidewalk and street seating; event space for private functions; manufacturing space for research and development (R&D), brewing, production, and canning; warehouse space with a loading dock; and office space for the Brooklyn Brewery team. Finding such a location in Brooklyn, particularly in the Greenpoint/Williamsburg area, proved to be nearly impossible due to zoning restrictions.
The deal to secure a new site was not without obstacles, but Mallon leveraged his experience, market understanding, and creative thinking to execute the lease and bring together the efforts of the landlord, including his architect, project manager, and counsel; the tenant with its respected architect and counsel; community leaders; lenders with their respected counsel; and various public entities, including the Department of Building, Department of City Planning (DCP), and City Planning Commissioners.
The new location features 41,000 SF, zoned for light manufacturing and commercial use, across the entire lower level and first and fourth floors of the three-sided building's total 78,000 square footage. The space will keep the industrial feel of the neighborhood that patrons have come to know and love with cement floors and high, open ceilings, but will include some new additions as well. With 250 feet of frontage on North 15th Street, which has been proposed as a pedestrian walkway connecting Bushwick Inlet Park to McCarran Park, the location will feature walls of operable arched windows and doors, an exciting upgrade that will create an even more open and airy feel as well as sidewalk and street seating for over 300 patrons.
The brewery’s current footprint at 79 North 11th Street, which opened in 1996, occupies 26,000 SF, so the new location will be substantially larger and will almost double its current number of employees. Of the indoor space at 1 Wythe, 5,000 SF will be used for the brewery’s new offices; 17,000 SF for research and development, the brewery, and warehousing; and 14,000 SF for retail. The new location will also feature a stunning 5,000SF outdoor rooftop beer garden and restaurant that will seat 300 guests offering enviable views of Brooklyn and the Manhattan skyline.
PART 3
Mallon first met Eric Ottaway in the Spring of 2019, shortly after beginning his career in commercial real estate. Keith Rubenstein of Somerset Partners hired Mallon to lease a large warehouse in the Bronx, and Mallon thought the location would be perfect for a brewery. He reached out to multiple breweries to discuss the space, including Robin Ottaway, president at Brooklyn Brewery. Robin Ottaway declined the space, stating, “We are the Brooklyn Brewery, not the Bronx Brewery. Call us back when you get something in Williamsburg.” Shortly after, Mallon was representing the owners of a large warehouse on Wythe Avenue, directly across the street from what would become the new brewery site, so Mallon reconnected with Robin Ottaway and set up a property tour with his brother and CEO Eric Ottaway in Spring of 2019. Although advanced stage letters of intent were exchanged, the space was not the right fit for Brooklyn Brewery’s new home. Mallon and Eric Ottaway, however, continued to communicate and explore other potential collaborations, such as partnerships, purchasing new facilities, and leasing. During the COVID-19 pandemic, Mallon informed Ottaway that the time was right for an investment due to decreasing prices in Williamsburg.
After initial discussions with Brooklyn Brewery outlined budgeting constraints, Mallon went on the search for a space within Brooklyn – more specifically, within the Greenpoint/Williamsburg area – for the brewery to move. He was looking for a single space that included office, retail, manufacturing, warehouse, restaurant, outdoor, and event space. Mallon noted that if he could find a space with a giant rooftop that would allow for a beer garden and full food and beverage (F&B) service, it would be “The Place.” With COVID-19 still raging, and a ban on all indoor dining still in effect, the ability to operate outdoors in some capacity was and still is a major priority. Finding such a space in Brooklyn, particularly in the Greenpoint/Williamsburg area, proved to be nearly impossible. After vetting multiple sites, he concluded he would need a more creative solution for Brooklyn Brewery. Mallon thought of 1 Wythe – a two story empty warehouse in Williamsburg. In 2021, he became aware of 1 Wythe’s partnership group restructuring with an influx of new investment and capital and thought this could be a good opportunity for the brewery.
Mallon then set a meeting with the principles of 1 Wythe: Shlomo Karpen and Nachman “Norman” Strulowitz. To consider the brewery for 1 Wythe, the landlord needed a prospective tenant who could meet new FAR requirements introduced by the city as part of a plan to modernize outdated industrial zones. Because the property is a designated Industrial Business Incentive Area (IBIA) in the Greenpoint/Williamsburg Industrial Business Zone (IBZ) of Brooklyn, the landlord can increase the maximum FAR with City Planning approval. Therefore, the landlord needed a tenant who could use 13,500 SF of light industrial space permitted by this new plan.
After discussions with both the landlord and tenant, Mallon submitted a letter of intent on behalf of the tenant in Q3 of 2021. After several months of flushing out the major business points, a lease was issued in January 2022 with no approved building plans. However, the landlord would not break ground without a lease agreement, so one had to be executed before construction.
To ensure that both landlord and tenant had a clear understanding of the scope of work, Mallon advised a formal design process to establish a detailed set of plans and specifications. Key considerations to promote a smooth process and clear guidelines for the work included:
- Establishing a detailed set of reference plans and specifications for the work to be done; specifically outlining what is included in the landlord's base work (paid by the landlord) and the landlord's additional work (to be paid by the tenant). These reference plans, which took more than three months to develop, were used to sign the lease and establish estimated economic terms
- Designating a specific listing of items in the landlord's work that can be performed without interfering with the progress of the tenant's work
- All reference plans, including changes to reference plans that affected the premises or building, were to be submitted to the tenant for review and approval prior to submission to any governmental agency
- Mutually agreeing on construction timelines and deliverables with defined outside delivery dates and penalties
- Mutually agreeing that final approved plans would dictate most business points as business terms were based on rentable square footage, including rent, TI money, taxes, CAM, and the option to purchase, which is based on a predetermined cap rate according to year 7 NOI
The building standards, including floor loads and HVAC tonnage, were clearly outlined by DOB code for an office building. The capacities that were to be part of the landlord’s base work were determined, and any work required to achieve additional capacities above these levels were to be considered the landlord’s additional work.
Lease negotiations which took 9 months were headed by Mallon, who began this transaction as a tenant representative and ended in dual representation. A lease was executed with the following approved lease terms:
Term: 30 years
Lease Options: Two 10-year options
Rent Schedule: Rent is based on a blended rate for the multi-use space for the first three years. Commencing in year four, the base rent will be adjusted based on the actual square footage and will increase per lease year thereafter.
Option-to-Purchase: The tenant will have the one-time right to purchase the premises as a commercial condo after seven years of paid rent at a predetermined cap rate.
Commencement and Possession Date: Upon delivering the premises to the tenant with all the agreed upon base landlord work and additional landlord work substantially completed, the tenant can commence the tenant's work without material interruption.
Free Time and Rent Commencement Date: The date that is one year from the Commencement Date. A reduction in rent payments on a day-for-day basis shall be applied if the landlord has not obtained the required TCO and building permits for the tenant's access to the premises by the end of this one-year period.
Tenant Improvement Allowance: The landlord shall provide a tenant allowance less the agreed upon cost for the landlord to complete any additional landlord work.
Representation and Warrants: Parties agree that the lease ownership principles have no representation or warrants. The brewery is responsible for the lease regardless of whether it can: occupy or use the space; obtain permits or a certificate of occupancy; receive approval for a brewery, which is zoned M3 (this space is zoned M1/M2); or obtain a liquor license, which is a standard contingency in any Brewery lease.
Rooftop Access: To reach full allowable occupancy on the fourth-floor outdoor space, an exterior staircase, which Mallon suggested, needed to be designed as an emergency egress to connect the four the fourth-floor outdoor terrace to street level.
1 Wythe Photo Renderings Detailing North 15th Street & Approved External Staircase
Approving these uses and plans has not been easy. To expedite the process and ensure Brooklyn Brewery’s new location is ready by January 1, 2025, Mallon directed Ottaway to ownership's zoning attorney and leaned on his community and the political ties. Ottaway, in addition to acting as the brewery’s CEO and general manager, is an integral part of the Brooklyn community, serving as co-chair of Mayor Eric Adams’s Industrial Working group, which is focused on redefining the city’s industrial needs and opportunities post-pandemic.
Demonstrating exceptional broker acumen and thorough negotiating – prior to construction and during the completion of tenant and construction plans – Mallon was able to secure a lease for 41,000 SF. In fact, the Department of City Planning just approved the final building plans on January 17, 2023. Ottaway reflects, "Good things happen when vibrant communities come together creatively, and our new location will allow us to foster more of those opportunities well into the future. A special thank you to our broker, Nate Mallon, who found us our new home and put together a deal that works for all."
PART 4
Securing a lease prior to construction significantly impacted the success of the project. Mallon's ability to navigate and overcome complex logistics; steward a lengthy, in-depth lease; secure a 4 party SNDA agreement; and use his relationships and connections to secure the lease before construction, was key to getting this deal done and will ultimately benefit both the tenant and landlord in terms of lowering building and financing costs while accommodating multiple needs and equally important time constraints. Comments from Eric Ottaway clearly express why this deal qualifies for this award:
“Getting the 1 Wythe transaction done relied upon four key factors: (1) understanding our complicated needs (industrial, retail, office, warehouse); (2) understanding the landlord’s needs (a manufacturing tenant to fulfill zoning requirements and an anchor lease to improve financing); (3) navigating the dynamics of negotiating a lease for an unbuilt building still undergoing DCP review; and (4) having the vision to put together two very different parties with a shared challenge.
“I first met Nate four years ago when he presented a nearby property to us. While that transaction ultimately didn't work, it provided the foundation for our eventual deal at 1 Wythe. In fact, without that failed transaction, the 1 Wythe deal probably would not have happened … Nate was able to really understand our needs in depth by studying why the transaction didn't work. Equally important, he also learned our approach to deal making and our negotiation style.
“The 1 Wythe building had been approved by the DCP with a significant amount of ground floor industrial space to qualify for the IBIA incentive, and an entire floor below ground. Finding an industrial tenant that could occupy that kind of building was going to be a challenge. He also knew that completing a lease for a yet-to-be built building still undergoing DCP review was going to be a monumental task.
“All that being said, Nate understood that both sides had a unique opportunity to fulfill each other's requirements and timing for a deal. The landlord needed an early anchor tenant to improve his financing and to fulfill his industrial tenant requirement, and we needed a space in the neighborhood with a unique combination of industrial, warehouse, retail, and office, that avoided a big lease overlap.
“Ultimately, his understanding of all these issues and his ability to navigate two very different negotiating and legal styles to construct a deal both parties were happy with says a lot about his ability as a real estate broker.”
Equally elated about Brooklyn Brewery’s future prospects in the neighborhood is Evergreen: Your North Brooklyn Business Exchange, an organization that champions manufacturing, creative production, and industrial service businesses in North Brooklyn and beyond and manages the Greenpoint/Williamsburg and North Brooklyn industrial business zones. Evergreen’s Executive Director Leah Archibald shares: “We are thrilled that Brooklyn Brewery is going to be able to stay here in Williamsburg and expand [its] facility in the Greenpoint-Williamsburg industrial business zone. This is exactly what we hoped the IBIA zoning tool would accomplish, allowing for additional commercial growth in exchange for creating space to retain local manufacturers in our community.”
Everyone wins, or thanks for calling. Cheers!
