The Real Deal New York

Eliot Spitzer talks 420 Kent, the state of the rental market, putting up his own equity and partnering with Related

Former Gov. is building a 857-unit rental complex on the Williamsburg waterfront
By Katherine Clarke | April 20, 2017 10:50AM

Eliot Spitzer and a rendering of 420 Kent Avenue (Credit: Getty Images and ODA)

Eliot Spitzer’s Spitzer Enterprises is gearing up to market its biggest project since the former governor returned to the family company in 2014.

The $700 million, 857-unit rental complex, at 420 Kent Avenue in Williasmburg, is designed by ODA’s Eran Chen. The complex comprises 762,000 square feet of space, with 20 percent of units designated as affordable. The former governor bought the 2.8-acre site in August 2014 for $165 million and later scored a $330 million loan from Starwood Capital Group to begin construction last year. The first building is slated to launch in 2018, marketed by Dave Maundrell of Citi Habitats.

Spitzer likely has plenty of his own capital left to invest, after selling the famed Crown Building on West 57th Street for $1.8 billion in 2015. In February, The Real Deal revealed that Spitzer and the Related Companies are joining forces to build a 1.4 million-square-foot apartment-and-office development on a pair of adjacent sites they own in Hudson Yards. Related signed a contract in September 2013 to buy its site at 517 West 34th Street for an undisclosed price, while Spitzer paid $123 million to assemble his site next door.

Spitzer hopped on the phone with TRD this week to mark the launch of marketing at 420 Kent, but was cagier about the Related deal. Read on for a closer look:

Tell us about 420 Kent. It’s enormous….
Its scale is part of it, but its beauty is what is most distinctive. Eran Chen of ODA has designed three towers clad in a beautiful curtain wall. They’re geometric and they have cantilevers that create this fascinating complex of images. We wanted to create something that would contribute to the skyline of Brooklyn. We are pouring the ninth floor of the first tower on Thursday. That will top out in two or 2.5 months. We’re moving quickly on the larger tower, pouring part of the third floor. That will top out by the end of the year, I’d say.

Rendering of 420 Kent Avenue (Credit: ODA)

I heard you’ve resisted the typical developer impulse to value engineer…
Well, in that case that’s probably a huge mistake on my part. Check back with me in five years and see if I’m still doing the same thing.

What’s the science behind the unit mix?
Dave Maundrell gave us guidance on what the Williamsburg market is seeking and it’s primarily studios and ones, with a few twos as well. It’s increasingly a community that’s not commuting into Manhattan.

Does that mean you’ll be rolling out crazy amenities?
Two outdoor pools on the seventh floor, overlooking the Manhattan skyline. Indoor space for yoga, gyms, dining facilities, an outdoor volleyball court. It will just be stock full of the space that people want in these kinds of buildings.

It’s like an amenity arms race these days…
I’d prefer to use a more passive image. It’s healthy competition, put it like that. Each chapter of my life, I lived by a very simply mantra — competition works. Competition produces higher quality, better products and that’s what makes capitalism work.

The rental market has been down. What’s your outlook?
The rental market is rock solid. If there are momentary periods of slight oversupply, so that the rents that are obtained flatten or dip a little bit, that’s healthy for the city. But the structural demand for housing continues still — there’s still a shortage of housing in New York City, so adding to that supply is good for renters. In the long-term, the value accretes to these units because we’re providing something that’s good quality and that there will be demand for.

What are you projecting in terms of rents here?
We haven’t set them yet. We want to wait to see how the market is performing when we launch about a year from now.

Are you going to be going up against the Domino Sugar Factory project?
I don’t know exactly when their first units will come to the market. They topped out on their first building a couple of months ago. I think it helps us enormously that the entire neighborhood waterfront is going to be developed — it will create an esplanade all the way from South Williamsburg up to North Williamsburg of continuous parks and high-end buildings and jogging trails.

Are you of the same school of thought as your father as far as holding assets long-term?
Yes, that’s why I’m building rentals and not trying to satisfy a condo market that’s a bit more volatile and where timing is more critical to the business model. We want to build high-quality rentals, own them, maintain them and watch the value accrete. It hasn’t been easy to find land that can be bought at a price that permits that.

Rendering of 420 Kent Avenue (Credit: ODA)

Do you have partners on this project?
Just my brother and my sister. It’s a family endeavor, as it most often has been. We’re not interested in having 10 hedge funds or insurance companies come in and take most of the equity. We rarely go below 50 percent of ownership in a project. In this case, it’s 100 percent.

You’re partnering with Related at Hudson Yards. What can you tell me about that?
Nothing yet. In due course.

I imagine it will be rentals?
All I’ll say is that, in deference to Steve Ross, I root for the Miami Dolphins when my team isn’t playing.