Jamestown’s Michael Phillips on Pairing Food With Development

‘I think one of the things that we’ve always been focused on is communities that become self-generative and not ones that are subsidized by one thing.’

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Food is at the heart of Michael Phillips’s commercial real estate portfolio.

The principal and chairman of Jamestown Properties is a longtime board member of the James Beard Foundation, a nonprofit aimed at elevating the people behind America’s food culture. The food scene has played a prominent role at Jamestown’s many adaptive reuse projects over the past two decades, including Manhattan’s Chelsea Market and its Industry City campus in Brooklyn, which it owns as part of a joint venture with Belvedere Capital, Angelo Gordon & Co. and GIC.

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“The food space is a great love of mine and is what makes our real estate so dynamic,” Phillips said. “We are a very place-focused company focused very much on small business and individualism and high-quality food.”

A native of Palo Alto, Calif., Phillips has become a force in New York City’s commercial real estate and also helped Jamestown scale globally. Jamestown expanded into Europe in December 2019 by acquiring Groot Handelsgebouw, one of the largest multi-tenant buildings in the Netherlands, and now has a European portfolio worth more than $1 billion.

Phillips spoke with Commercial Observer at Jamestown’s Chelsea Market offices about the firm’s leasing progress at Industry City, the areas where he might invest in the U.S. in 2024, and further international expansion plans.

The interview has been edited for length and clarity. 

Commercial Observer: What has leasing activity been like at Industry City and what types of tenants are you attracting? 

Michael Phillips: Leasing has been really strong there. I think we caught a lot of the movement toward Brooklyn, which slowed a bit before COVID but then really went into full force as Brooklyn became a really lively and occupied place when Manhattan was a bit less occupied, and that trend has continued. We have over 50 food businesses there. We have over 70 media and production companies there. We have over 500 artist studios and creative workshops. There are five principal courtyards and two boulevards, and there’s food themes and liquor themes with one called Distillery Row. Each one of these neighborhoods within the broader construct has a theme. There is a Japanese food hall, and there are Middle Eastern grocers along with the main food hall, and then there’s even a Costco with $1 hot dogs.

Michael Phillips
Michael Phillips. Photo: Sasha Maslov/for Commercial Observer

As far as the office spaces there, you recently inked leases with Aanika Biosciences and NYU’s Martin Scorsese Virtual Production Center. What is the potential for more life sciences or film production tenants to take up shop at Industry City

We have 70 production companies there now, including FilmRise and a bunch of film companies, but I think life sciences definitely has high potential. Our goal is to be a very design-led multigenerational community. Whether it’s the Nets practice facility and their offices or the Hospital for Special Surgery clinic that’s embedded there or big event production companies, it’s really about creating this ecosystem of connectedness. We think life sciences certainly should be a part of it, and we’re certainly a great receiving point for that. We have great fiber lines running and we have great power delivery, so there’s a lot of value in terms of how people scale up businesses.

How would you compare Industry City to Chelsea Market both in terms of execution and success?

Chelsea Market was 16 years old when Industry City started, so it was a similar approach to arts culture, food, grittiness, imperfection and this idea of a place where we feel comfortable and that we’re attracted to not necessarily because of its architecture. The idea that they are not always clean and modern, and can be a bit humble and messy, is what they share in common. They have similar ethos, but Industry City is on steroids and is humble and accessible in a way that Brooklyn can offer or Queens can offer that Manhattan can’t really offer in the same way. 

Industry City is like 10 Chelsea Markets and is so much bigger and it’s so much more varied and allows us to be a lot more creative about incubating small businesses using space in alternative ways. And what started as just a low-cost provider turned into an aspirational place and kind of the heart of what I would call the south side of Brooklyn. Part of that is this whole trend of singles and young people starting out in Greenpoint or Williamsburg, but as they start to have kids and families they migrate to the south side, to Park Slope, to Sunset Park, to Cobble Hill, to Carroll Gardens, because the schools are more proximate. 

And what we’ve done there uniquely is really leaning into families, so it became during COVID the green kind of safe place for people to be.

Industry City and Chelsea Market are examples of turning industrial into office use, which would certainly be challenging in today’s market. Do you see potential perhaps for the opposite happening where maybe some struggling office properties are transformed into industrial?

I think it’s a lot about the bones and it’s about your basis — and, with a low basis and great bones, you can do a lot of things. If you have substandard bones and a high basis, that’s a bit of a challenge. I think a lot of office properties that are repositioning — whether it’s to residential or logistics or last mile or innovation manufacturing — still require the capital stack to get some adjustment about where value really is. For some of those buildings, the questions include: Is the land value really what it’s worth? And what is the land value in a world where the total absolute driver for that sector is different than it once was? So what’s the zoning overlay that allows the shift?

You partnered with Google at Chelsea Market when it was still a young company, and it has since significantly grown its New York City presence. Do you still see a climate for young tech startups to grow their footprint in New York? 

I see a lot of proptech and a lot of fintech companies and fashion tech companies expanding here. There’s a series of incubators and accelerators that are fostering that kind of experience. I think New York has really worked hard to create a culture of serial entrepreneurship here, and having real venture capital offices based here, investing too, has created a stickiness to that startup culture. 

Obviously, there’s always a dialogue about the cost of space and the cost of salaries and people and how far your funding goes between rounds and how fast can you accelerate before you have to sell down more rounds. But it’s undeniable that both ends of the spectrum of the age cohort of the workforce want to be in cities and really love New York. Despite whatever headlines one may read, whether it’s the last 10 years of your career or the first 10 years of your career, people are all saying they want to be around here. 

Michael Phillips
Michael Phillips. Photo: Sasha Maslov/for Commercial Observer

With interest rates stabilizing, are you looking into more acquisitions in 2024? What types of properties are you focusing on?

We’re very interested in distressed properties or future development opportunities. We are always interested in the boroughs, and I think that is even more the case now because Queens and the Bronx and even Staten Island have a much stickier community base. 

I’m always looking at mixed-use and the opportunity to do something of scale that’s meaningful. I think one of the things that we’ve always been focused on is communities that become self-generative and not ones that are subsidized by one thing — i.e., office that subsidizes small retail on the ground — but how do you create something that’s aspirational and becomes self-generative? So, certainly, residential. We have some prototypes that we’re working on and we’ve delivered one, which is a kind of rental product that’s very much geared toward a more sophisticated audience who maybe aren’t living full time in the city that they are working in.

And, then, at the other end of the spectrum, we’re working on a hospitality living product called “Scout Living,” which is really focused on the disintermediation between traditional hotel and Airbnb. So, micro one- and two-bedrooms, and that product is called Scout Living. Both of those first prototypes are in Atlanta, and our goal in New York is to find sites for those as part of verticals of other projects. I was thinking today about a project in Brooklyn that I would love to get my hands on.

You launched an augmented reality experience at One Times Square in summer 2022. What plans do you have going forward for virtual reality features across your portfolio

I think we’re very focused on both augmented and virtual, and we are in the process of building out a pretty big program for that at Pier 57, which I think will be very interesting. We are always interested in the technological interface of [blockchain-driven] web3 and how we create a more dimensional experience for people to communicate about the physical environment in the metaverse or in the virtual. 

We are launching a series of salons, and the first one will be March 19 with specialists in AI and in virtual and experiential retail experiences. It’s at the core of our innovation strategy, whether that’s ways to communicate to the workforce or ways to enhance your traffic and data capture or energy solutions we really believe in, including digital twinning of our assets for energy maintenance and deferred maintenance calculations. 

You are also very active internationally. What types of global markets and property types are you focused on now outside the U.S?

We have a large project in Rotterdam called Groot Handelsgebouw, which is actually the largest building in the Netherlands. And we also have another one in Portugal that is called the IDB Lisbon. We have projects in Scotland, projects in Germany, in Milan, and in Italy, and in Spain. We have residential, mixed-use, office and logistics, and in Latin America we’re building workforce for-sale housing in Chile, Colombia and Peru.

How would you describe the barrier for entry in global markets for a company like Jamestown compared to other commercial real estate owners?

We all believe that real estate is hyperlocal, and we all think that it’s about having teams on the ground. We have really focused on developing that talent on the ground, but also on having a very unique approach to what we do. There’s a million ways to do anything and everyone has their approach. So, for us, it’s about showing up in a real collaborative way with talented people and working with municipalities and zoning overlays to get the best result for the real estate.

How are the global investors you were working with viewing the U.S. and New York in particular in terms of potential future opportunities?

Everyone is feeling pressure on their net asset values, and everyone’s feeling worried about another political cycle in the U.S. If you aren’t a U.S-based investor, it is important to be mindful of too much leverage as we see a lot of investors wanting to buy 100 percent equity, which really shifts the return metrics and tends to be a longer-term hold. I think some are more opportunistic, obviously, around distress. I think everyone is feeling overweighted in office.

To close on a lighter note, what do you enjoy outside of the office?

I just sailed across the Atlantic in November, from Africa to the Caribbean. I found that really satisfying, and it had been a goal for a long time. So that was a nice way to kind of hit the reset after a challenging year. I also love design, and I obviously love the food space, art and music. 

I’m having a love affair with New York. When you see incredible block parties and holiday decorations and the cultural community showing up and a real commitment to New York from young and old people who are really energized, it really reminds me of why you never bet against New York and why, as flawed as it is and as challenging as it is to live in, it just feeds you from an energy perspective. I’m always struck by just how bright everybody is and how switched on they are. 

I was getting my hair cut recently and I was exchanging a music playlist with a 25-year-old kid who was telling me about a Ghanaian singer from the ’90s, and I downloaded all this incredible African music. I thought, you know, maybe that happens everywhere else in the world, but I feel like here there are fewer boundaries, and I feel like New Yorkers really love engaging with each other in a way that is very unique.