Eliot Spitzer Is Rolling Up His Sleeves at His New Williamsburg Development
It all happened so fast. On March 10, 2008, almost exactly 10 years ago, The New York Times published a story linking then-Gov. Eliot Spitzer to a prostitution ring. Two days later he resigned, saying he “did not live up to expectations” and would take responsibility for his conduct. Spitzer, now 58, had been up until that day rising steadily in Democratic circles for taking on Wall Street abuses and pushing for ethics reform, and he had set his sights on the presidency. That dream was shattered just 14 months after his inauguration.
In the years that followed, the Upper East Side politico sought rehabilitation through a broadcast media career, ran for public office again, narrowly losing a race for city comptroller in September 2013, and finalized his divorce. Again at a crossroads, he returned home to his family’s real estate business as his father Bernard Spitzer was ailing. He had avoided working in the industry when he was growing up, unlike another native son born into a developer family who later pursued politics at its highest levels who shall remain nameless.
Bernard and Eliot didn’t talk real estate when he was a child. “We sat around the table and talked about politics,” Spitzer said of his father, who passed away in November 2014.
Instead of cashing out and retiring to the Caribbean, he transformed Spitzer Enterprises’ portfolio, which consists of seven residential properties including 800 Fifth Avenue and 985 Fifth Avenue at a total of 1.5 million square feet, by selling the Crown Building for $1.78 billion and unloading condo units in the Corinthian for $147 million. He then teamed up with Related Companies to develop a 1.5-million-square-foot site at Hudson Yards and is nearing completion on commercial properties in Washington, D.C., and an 857-unit rental complex on three acres in South Williamsburg for a total of another 1.5 million square feet.
The $700 million Brooklyn project may be Spitzer’s largest gamble. He’s building three luxury rental towers of mostly studios and one bedrooms at 420 Kent Avenue that he hopes will cater to a “younger demographic with a little more hair than me.” The first tower should open by July and the remaining two should come online the following January. They will be the latest addition to a bustling Brooklyn waterfront that has sprouted a decade ago when Williamsburg’s first condo The Edge began selling units.
Dressed in a hard hat, Buffalo Sabres windbreaker, khaki pants and hiking shoes, Spitzer said he’s much happier now. His daughters, a Stanford University School of Medicine student, a city public school teacher (with a Princeton University degree) and a Harvard Law School grad and lawyer for a city-based nonprofit, visit him often. “I’m very proud of all of them,” he said, although he declined to speak further about his personal life. (Those include his resignation as governor.) On a wintry February morning, he was bounding through the concrete core of his rental project and showing off the “extraordinarily expensive curtain wall,” “floor-to-ceiling views,” and 360-degree views from its roof, which he declared “exciting.” He uses that word a lot these days.
Commercial Observer: What is your typical day like?
Eliot Spitzer: Typical day? Read the comics. Read the sports pages. I’m in my office [on Fifth and 57th Street] by 7:30 a.m. but here in Williamsburg usually three times a week.
Look at this. [Pointing to a terraced balcony on the seventh floor.] This will be somebody’s apartment. If you looked down a week ago, there was a barge here. We had to put in the bulkhead along there. There’s going to be an esplanade along the waterfront.
Are you building the esplanade?
Oh yeah. Oh yeah. We’re building it. That little spit of land there, [however], is not ours. I wish we could build [on the property] the city owns where it juts out.
Can you get it?
Well…the city is fighting with those guys about who really owns it. It’s complicated. We’ll clean it up. I wish we owned it. [Points to men doing work on the property line at the end of the river.]
You can see where we put in the sheeting. You can see where the lattice work is down there. That’s the rebar where we’ll pour in a concrete top. And we’ll do the planting and create the esplanade.
[Pointing toward the Domino Sugar Refinery.]
That’s the first Domino building that Two Trees is building, 325 Kent. That one is open. And under the bridge, that’s a park that will open on Memorial Day weekend. I spoke to Jed [Walentas at Two Trees Management Company] two weeks ago, and he said that will be open probably by Memorial Day. It is going to be amazing because the whole center of gravity of Williamsburg will shift down a bit. It will be like Brooklyn Bridge Park in the summer. It’s going to be beautiful.
Is he giving you advice about how to build here?
I don’t know if we give each other advice. Their family has been building for 60 years. They’ve done a great job with Domino.
They transformed Dumbo…
They were ahead of the curve. One of the hardest things is to be ahead of the curve. When you come in after an area has been discovered, you can still do extraordinarily well, and it’s great and exciting. But figuring out what the next location is and having the vision to buy it up the way the Elghanayans did with Long Island City [is pretty amazing].
How do you think the Walentases will do here?
I think they’ll do great. As will we. There’s a difference between somebody who needs to build condos, co-ops or whatever, and sell them in a two- or three-year time frame. You’re subject to the vagaries of the momentary market. If you’re building an asset and you’re going to hold it for 50 years, then you ride out the momentary ups and downs. And the long-term trend line is going to be the city is going to be dynamic. This is going to be an asset that you’ll want to own for a long time.
The last developer [Community Preservation Corporation] of the Domino Factory site near you had problems financing it. Was that because of the recession?
I have no idea. People say that what’s at least as important as how much you pay is your capital structure. If you’re overly leveraged, if you need to service your debt, then you get into trouble. If you’re equity heavy as we tend to be—and always have been—then you take the good with the bad. And say we’re here for the long term, you wait and assets appreciate and you do very well. One exception, the Corinthian [at 330 East 38th Street] my dad built in 1987, sold half of it, kept half of it. But we build rentals because rentals are long-term investments. We build quality, we maintain them, take good care of them.
What about your building’s design? Why did you choose Eran Chen from ODA?
Eran does several things that are critical: He believes in integrating his buildings into the community in which they reside—helping the community grow as an organic whole; he has an aesthetic that is at once challenging, creative and satisfying, as is evident from these towers; and he designs buildings from the inside out—meaning that he realizes they have to be functional, livable and work as living spaces. Plus, he is a great guy to work with or have a drink with.
Who are going to be your tenants?
I don’t like to use the word, but it’s millennials. Some may be in media but also finance, law, technology and banking. And someday there will be restaurants and bars up and down Kent Avenue. If you come here on the weekend, you see how busy Smorgasburg is. My daughters are in the city, and they come to Williamsburg on the weekends.
Why South Williamsburg?
We got a flyer that this site was available. And you look at this view—who wouldn’t want to live here? The other cool thing about out here is the amount of office space being built. You walk up to the Navy Yard and see what Billy Rudin [of Rudin Management Company] is building up there. There’s easily over 1 million square feet of commercial space being built that is drawing serious companies.
Are you worried about supply with the abundance of rentals coming online soon?
It’s all good. The more the better. It makes this more and more of a community. I don’t want our building to be an isolated node in South Williamsburg. I want Kent Avenue to be an entire thoroughfare of residences, restaurants and activity. If you’re owning for 50 years, I want this community to develop.
You may need a little help from transit. What do you think of the streetcar project that would link Brooklyn and Queens along the East River?
It’s a great idea. I think the notion of having transportation from Red Hook to Astoria it’s great. I always said when I was in government and since, transportation is what builds urban areas…We need those types of transportation facilities.
Is the ferry in the same boat, no pun intended?
I think you’ve seen it going up and down. The ferry literally docks right there. At Schaefer Landing. A lot of people use it to go to Lower Manhattan and 34th Street. It’s all great.
What about the L-train shutdown, which will happen next year?
Look, with the L train shutdown, everybody is worried about it, and it will be disruptive for some period of time. But the J and the M are right here. The bridge is right there. The aesthetics of this place are crazy. You have the activity on the river. You have the subway going across. If you were here at night and you saw the FDR Drive with the lights going up and down, it’s like art in motion. And when you see the Manhattan skyline at night, it’s totally cool.
We might see a congestion pricing plan this year. Should Albany do it?
Look, when I was governor [from 2007 to 2008], we came close to getting congestion pricing. [Former Mayor] Mike [Bloomberg] was pushing it. We had a vote up in Albany; I won’t give you the boring details. He was having trouble getting Republican support because the Republican suburban state senators, not surprisingly, were opposing it because they were saying, “Hey, this is our constituency that is going to have to pay the additional tax going into the city.” We cobbled together the support for it.
Yeah, they should do it. They need the revenue. It’s the right idea. It’s been the right idea for many years. Whether it will happen, that’s more complicated.
What can the mayor do with the Metropolitan Transportation Authority and other forms of transit?
The MTA is controlled by the state. I think he’s pushing. He’s pushed the ferries a fair bit to his credit. And I think with the [the streetcar, the Brooklyn-Queens Connector] he’s behind it. City Hall is pushing it and getting on board. These are things that take longer than you want because you need to clear a lot of community boards, a lot of local concerns, and that’s democracy. It’s not easy, but hopefully it will happen. The 7 line is what made Hudson Yards possible. Extending the 7 to that part of western Manhattan was critical.
The mayor and governor have been sparring over the MTA. What can they do to work together to make a better transit system?
The primary responsibility lies at the feet of the state. The state controls and funds the MTA and there has been significant underinvestment, poor management and the consequence of that has been deteriorating service, delays that are very frustrating and that needs to be remedied. That means a significant investment over time and careful management and detailed management, and those are things that need to be done and executed on by the state.
People are underestimating the traffic the L shutdown is going to create around here, aren’t they?
It could be. It’s going to be a 15-month period. It’s not a moment, but it’s not an eternity. People will survive the same way they did with the Second Avenue subway when it was disruptive. But now if you look at the consequence, you have a whole big piece of the East Side of Manhattan being developed in a new way—a lot of restaurants, a lot of building. Some people love it, some people don’t, but the Second Avenue subway was critical to that the same way the 7 line was. That’s what transportation does. It’s bizarre.
When I was in college [at Princeton University]—I’m talking about 1980—I wrote in an urban economics class a paper that mapped the growth of the New York City subway system and the growth of various communities, and not surprisingly there was a connection. You extend the subway, you extend the city. It is almost like a law of physics.
Is there any role for developers in maintaining and improving the subway system? This has been debated.
We should all pay our fair taxes, and that’s what property taxes are for.
What about sponsoring subway stations?
It’s happened—it’s fine. There’s One Vanderbilt. They’re doing a significant transportation update with entrances to Grand Central [Terminal]. All that is good and fine. You get a bonus, you pay for it, you contribute to the local economy, that’s what should happen.
As someone who is a former governor and whose project includes affordable housing units, what do you think are the major issues with public housing and what can be done?
There’s no question that [the New York City Housing Authority] is in a state of crisis both because the quality of housing stock is in disrepair, having suffered from significant underinvestment over many, many years—probably decades—and because there is an increasing demand for housing stock. Without getting into personnel decisions—I’ll leave it to those in office and those who want to point fingers at individuals—how do you go about rebuilding NYCHA housing? That is what the city and state need to undertake, probably a 20- to 30-year plan to rebuild beginning with the oldest housing stock. But it’s probably beyond repair. When you look at the condition and read about the condition of the basic infrastructure for these houses—heating, HVAC systems, elevators, stairwells—you begin to think the better approach is to upzone some of the properties and open spaces that are within NYCHA’s footprint, build several times higher than existing structures and move residents from older buildings to newer buildings, and then tear down the old structures. Over several decades—this is a multi-year process—you rebuild the entire housing stock. You get newer stock, higher-quality, better layouts, better amenities, retail, parking, the sorts of city apartments you want to live in. And I think that’s a much better approach than to try to Band-Aid over what are probably irreparable problems with existing buildings.
Is the plan the mayor has to lease parcels on NYCHA properties to developers part of this?
It’s a first step, and he deserves credit for trying to move in that direction. The larger trade here is, yes, in the short term we’re filling in open space, but we’re building new modern housing, then tearing down old housing that’s decrepit. Over time you can transition footprint to footprint and really build greater volume, greater numbers, more housing that is far better quality, and it can be done economically.
The mayor has been touting his affordable housing plan, and Affordable New York is an important component of that. What needs to be fixed in the revamped 421a program?
The problem with 421a is that it’s highly inefficient. If you run the numbers of cost per unit of housing, the city gets it really is not a good investment. You could take those same tax dollars lost by virtue of 421a abatements, use them for instance to fund bonds, and it would give the city much more capital to build additional housing that it would then have in perpetuity.
Look, it’s really the developers who benefit from 421a. The city also benefits because it gets some housing. Speaking as somebody in government for a number of years, when I look at the tradeoffs, 421a is not the best way to generate and stimulate and create housing stock the city needs.
What would your father think of this project? It’s outside the scope of your family’s business.
It is, and it isn’t. On the surface, [it isn’t] because my dad primarily built in Manhattan, and he built five structures around Central Park—buildings that were in their time the definition of elegance and quality. And so coming to Williamsburg, across the bridge is a different level, but it is also something that he firmly believed in. You build the highest quality in the most exciting part of the city. And Williamsburg and Brooklyn needless to say are just that. The views from Kent Avenue are spectacular, the architecture is exciting, I think he would be proud of it, and he’d love the project.
What has he meant to you?
My dad was a member of the generation that literally built New York and transformed it into the city we love so much. In addition, he was a spectacular intellect and an inspiration.
As Williamsburg fills in where’s the next place to build?
I wish I had a magic wand to designate it or discern where to be. That’s the great question everybody asks. The exciting thing about New York is there are always multiple neighborhoods that are on the cusp or are developing in great ways. Queens is having a moment where values are going up very rapidly. There’s significant demand. The Bronx is a hotspot and is proximate to Manhattan. There’s great transportation, and it provides great views. There’s a lot of exciting stuff going on at the Bronx shoreline; in Queens, in Astoria and Sunnyside, a lot of projects are on the drawing board. Those are locations people talk about. And there’s always the return to quality. I’ve always believed 110th Street is going to someday be one of the great vistas and great residential streets in New York City. The views from 110th Street south are spectacular. Harlem is culturally and economically so diverse and exciting these days.
You seem to be having a lot more fun doing this than public sector work. Am I wrong?
They’re fun in their own way.
Everyone in Albany seems so miserable.
I think you’re right about that. There’s not a lot of joy in Albany. There’s a lot of backbiting, misery, cynicism and angst. Somebody asked me not too long ago what’s the difference between doing what I’m doing as a developer and politics. I said politics is 99.9 percent talk and only one-10th of one percent action. And most of the talk is negative. In real estate, there’s probably 30 percent talk and 70 percent action. And something comes out of the ground, it’s tangible, it’s real. Hundreds of individuals are working on the job site. I’m there all the time. It’s rewarding, it’s satisfying, and it’s great fun. Public service is public service and to be applauded and rewarded. Hats off to those who do it.
What are you doing 10 years from now? Would you return to politics?
I wish I knew, but frankly I hope I’m doing what I’m doing now because I’m enjoying it. It’s productive. I’m way too young to think about retiring. I’m only 58. So I’m hoping 10 years from now you, and I will be having a conversation about an exciting project somewhere else in New York City.