Barings, Bank OZK fund $385m construction financing for Brooklyn multifamily project

Barings is providing $75m in mezzanine financing for the development of 470 Kent Street.

Barings and Bank OZK last week closed a $385 million financing package on behalf of Naftali Group and Access Industries for the development of 470 Kent Avenue, a planned waterfront multifamily development that is one of the last sites of its kind in Brooklyn’s Williamsburg submarket.

The financing is split between a $310 million senior loan originated by Bank OZK and a $75 million mezzanine loan from Barings. The project is Naftali Group’s third of this scale in New York over the past two years, said Miki Naftali, chief executive officer and chairman of the New York-based development and investment company.

Jonathan Neff, a managing director at Barings Real Estate, said the Charlotte-based firm was attracted to the opportunity to lend on the project given its location in South Williamsburg and the perception that this would be a trophy-type project. Additionally, the loan was the manager’s first with Naftali Group.

“One of the biggest attractions for us was the ability to work with a strong and experienced sponsor like this,” Neff added. “We also believe there are tailwinds for the multifamily sector within New York City, and we believe there will continue to be long term demand for this type of product here. We are also pleased to be a part of the solution for the need for additional housing in the area.”

Barings considered either originating the entire loan or focusing solely on the mezzanine component. “Our decisions are typically market-driven. If the senior component of the stack is more efficient, we have the ability to pair up with a senior lender, as we did in this situation, and structure a mezzanine component,” Neff said.

The loan’s structure contains a unique wrinkle. “What is interesting about this execution is that we structured it as a pari passu funding between the senior lender and the mezzanine lender,” Neff said. “This means that once construction draws commence, instead of the traditional sequential funding in which the mezzanine lender would go first, the senior and mezzanine loans are funded together. This is a more attractive solution for the borrower and an example of some of the creative financing solutions we have the ability to deliver.”

Naftali Group acquired the site, adjacent to the Brooklyn Navy Yard, in 2020. The site is on the corner of Kent Avenue between South 11th Street and Division Avenue and is close to the East River, with access to the South Williamsburg Ferry Terminal and a number of trains.

Plans are to build a trio of towers which will include more than 645,000 square feet of space and 561 housing units, of which 25 percent will be designated as affordable. There will be an additional 19,000 square feet of commercial space across the buildings, which could reach as high as 22 stories. Naftali Group has already broken ground, with delivery slates for 2025.