Crain's New York Business by crains-new-york-business

ASKED & ANSWERED How large developments will change post-pandemic PAGE 7

CRAINSNEWYORK.COM

OPTIMISTIC VIEW Knotel said it was thriving— weeks before it filed for Chapter 11 PAGE 3

FEBRUARY 22, 2021

SMALL BUSINESS

City business leaders decry uptick in crime Drug use, homelessness and other quality-of-life issues cited as the main problems

JENNINGS-O’BYRNE is the co-founder of a venture-capital fund focused on women of color.

BY BRIAN PASCUS

T TECHNOLOGY

CLOSING THE GAP I KARJEAN LEVINE

Black-owned startups will get more funding if minorities are better represented in the VC industry

BY RYAN DEFFENBAUGH

INSIDE: Most Active Venture Capital Firms PAGE 10

VOL. 37, NO. 7

NEWSPAPER

n nine years, Donnel Baird has grown his Brooklyn startup into a green-energy powerhouse, retrofitting thousands of urban buildings. This month the company landed a $63 million investment backed by Goldman Sachs and American Family Insurance. The 39-year-old entrepreneur grew up in an

See VC GAP on page 23

OUT OF OFFICE

THE BEST PLACES TO GRAB A BITE RIGHT NOW PAGE 27

he city’s business community is sounding the alarm that a rise in crime across the five boroughs is not merely perception but instead a worrisome reality. “We are very, very concerned,” said Tom Grech, president of the Queens Chamber of Commerce. “Broadly speaking, there’s been a spike, and it’s the quality-of-life stuff that’s damaging business.” Grech named public urination, drug use, homeless encampments and physical altercations as the quality-of-life issues that most affect business owners. He described weekly reports from his members attesting to homelessness and graffiti plaguing Long Island City and robberies and burglaries occurring in the daylight hours in southeastern Queens. Between 2019 and 2020, New York City saw a 97% rise in shootings and a 45% increase in murders, according to Police Department figures. As crimes like subway murders and knife slashings garner headlines and create a negative perception, it is the petty crimes and quality-of-life issues that most concern business owners across the boroughs. See CRIME on page 6

WHO OWNS THE BLOCK

Historical site in antislavery fight wins protection PAGE 13

FROM THE NEWSROOM | FRED P. GABRIEL JR. | PUBLISHER/EXECUTIVE EDITOR

FOOD & BEVERAGE

Crain’s to recognize diversity and inclusion champions

Blue Apron back to losing customers

DIVERSITY AND INCLUSION are critical at every company, but particularly important in New York. The city, home to 8.6 million people and 800 different languages, is one of the most diverse on the planet. It stands to reason that firms that embrace a diverse workforce will attract and retain top talent. Companies that don’t won’t. With that in mind, Crain’s is pleased to announce an award and recognition program dedicated to this crucial issue. Our Excellence in Diversity and Inclusion awards will highlight and celebrate individuals, companies and organizations—in both the priFIRMS THAT vate and public sectors—for their efforts to chamEMBRACE pion this important cause. We’ll be recognizing individuals and compaA DIVERSE nies in five categories: Diversity Champions (companies); Emerging Leaders (individuals); WORKFORCE Top D&I Officer (individual); Board Heroes (indiWILL ATTRACT viduals); and Civic Diversity Heroes (individuals). AND RETAIN The deadline for nominations is March 12. To TOP TALENT enter a nomination, go to www.crainsnewyork. com/excellenced&i. Finalists will be disclosed in a special issue June 21. Winners will be announced at an awards reception in July and recognized in an issue appearing the week after the event. If you’ve been pushing hard to move the diversity and inclusion needle at your company—or know someone who has —or if you work at a company that has been innovative in its approach to creating a diverse and inclusive workforce, please consider filling out a nomination form. We believe these awards will provide real-life examples that serve as inspiration for many. Crain’s is committed to promoting businesses where diverse perspectives and experiences are welcomed and respected. We’re equally committed to highlighting individuals who are leading the charge.

fter a pandemic-driven spring surge, meal-kit delivery company Blue Apron lost customers for a second straight quarter to end 2020. The Lower Manhattan firm— which sends weekly boxes of recipes and ingredients to cook for dinner—ended the year with 353,000 customers, down from the near 400,000 it had in June, according to quarterly earnings released last Thursday. Blue Apron’s year-end customer total was only about 2,000 higher than at the start of last year, despite social-distancing mandates that prompted many customers to buy food online. Blue Apron’s share price was down about 15%, to $8.81, by the time trading closed Thursday. There were some positive morsels for Blue Apron’s leadership to offer investors. Its current customers are ordering more boxes and spending more for premium options, boosting net revenue 22% compared to the last three months of 2019 up to $115.5 million. Its net loss of $12 million was down from $22 million during the fourth quarter of 2019. The company pinned the lack of customer growth on decreased marketing, which it said was necessary because of labor shortages in

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VIRTUAL EVENT Time: 4 to 5 p.m. CrainsNewYork.com/ MarchNYNSummit

BLOOMBERG

its warehouses. After reopening a shuttered facility in Texas and hiring more employees elsewhere, the company is better positioned to chase new customers, officials said during a recent investor call. “We expect that the ongoing changes in consumer behavior as a result of the pandemic will continue to some extent, even after the direct impacts of the pandemic end,” Chief Executive Linda Findley Kozlowski said. Blue Apron will “drive additional demand by stepping up our marketing and continue that higher investment throughout the year,” Kozlowski added. The company projects its revenues will rise about 25% year over year for the first three months of 2021, though still with a net loss.

Lockdown boost The pandemic has at least temporarily reversed the fortunes of the struggling company. Blue

Apron was once valued by private investors at $2 billion and reported more than 1 million customers when it filed for an IPO in June 2017. By last February its customer count was 350,000, and the company told shareholders it was exploring “strategic alternatives,” including a potential sale. Then much of the country went into lockdown in March, and Blue Apron’s share price jumped from around $2 to $16 by the middle of the month. In July the company reported its first profitable quarter in three years as a public company. The metric to watch for Blue Apron has always been how fast customers cycle in and out. The meal-kit business is competitive, with Amazon, HelloFresh and a long list of startups offering free meals and discounts to lure customers. Each is angling in a market that totals only $3 billion in annual U.S. spending, according to research firm Packaged Facts, compared with the $350 billion Americans forked over at restaurants each year before the pandemic. Blue Apron’s customer total fell by 39,000 between July and September, but HelloFresh added 800,000 customers. HelloFresh, which is based in Germany and trades on the Frankfurt Stock Exchange, has not yet released yearend results. ■

REAL ESTATE

REBNY president blasts de Blasio administration’s emissions policies BY EDDIE SMALL

MARCH 18

BY RYAN DEFFENBAUGH

he de Blasio administration is holding the real estate industry to stricter environmental requirements than it adheres to itself, James Whelan, president of the Real Estate Board of New York, wrote in a blistering letter to the mayor. “The city of New York is holding private building owners to standards it could never meet because the city’s commitment is a percentage reduction of emissions across its entire portfolio,” Whelan wrote, “not a hard cap for each building as it imposed on the private sector.” Whelan addressed the letter to Dan Zarrilli, chief climate policy adviser, and Kate Gouin, acting director of the sustainability office. The scathing words come in response to their stated opposition to a proposal in Gov. Andrew Cuomo’s budget that would let building owners buy renewable energy from solar and wind plants upstate to avoid paying penalties or investing in

more expensive sustainability expenditures under the city’s Climate Mobilization Act. Zarrilli and Gouin said in a recent statement to Politico that the city doesn’t “have time to backtrack on the work to confront our climate crisis,” a comment that Whelan said was “particularly striking.” “If only your policy response

expects from private landlords. “Despite the city’s continued insistence that private buildings be made more efficient,” Whelan continued, “the mayor has no plan to retrofit the city’s own buildings.” The Climate Mobilization Act calls on New York to lower its greenhouse gas emissions 40% by 2030 and 80% by 2050, and it has long attracted the ire of REBNY. The City Council passed a bill expanding the law’s emissions requirements to rent-regulated buildings over objections that it would be unaffordable for landlords. “The state’s proposal provides a sensible solution to the otherwise unworkable law you purport to champion,” Whelan wrote. “The simple truth is that until there are more sources of renewable power available, building owners who have been recognized as leaders by participating in your own Carbon Challenge program will not be able

“EFFORTS TO UNDERMINE THE CITY’S LEGISLATION ARE SHAMEFUL” backed up this rhetoric,” he wrote. “In fact, last year the mayor and council did just the opposite by enacting a measure to provide beneficial treatment to a particular type of fossil fuel system used in buildings.” Whelan went on to write that the city has delayed implementing its own emissions law and releasing key data on it, and also argued that the city is not abiding by the same environmental requirements that it

to comply with this law.” Mayor Bill de Blasio, did not back down from the administration’s support of the law, saying landlords should step up to meet its goals instead of trying to buy their way out of it. “Efforts to undermine the city’s world-leading building retrofit legislation are shameful,” spokes woman Laura Feyer said, “and do nothing to clean the air that New Yorkers breathe, end the carbon pollution that is heating our planet or create the jobs needed for our green recovery.” Environmental groups including the Natural Resources Defense Council and the Urban Green Council wrote a letter of their own to Cuomo objecting to the proposal, saying it would fundamentally alter and undermine the city’s law. “We support flexible compliance options for building owners covered by the law,” according to the letter, “but those options must prioritize energy efficiency—especially in affordable housing—and reflect stakeholder input.” ■

Vol. 37, No. 7, February 22, 2021—Crain’s New York Business (ISSN 8756-789X) is published weekly, except for bimonthly in January, July and August and the last issue in December, by Crain Communications Inc., 685 Third Ave., New York, NY 10017. Periodicals postage paid at New York, NY, and additional mailing offices. Postmaster: Send address changes to: Crain’s New York Business, Circulation Department, PO Box 433279, Palm Coast, FL 32143-9681. For subscriber service: call 877-824-9379; fax 313-446-6777. $3.00 a copy; $129.00 per year. (GST No. 13676-0444-RT) ©Entire contents copyright 2021 by Crain Communications Inc. All rights reserved. 2 | CRAIN’S NEW YORK BUSINESS | February 22, 2021

COMMERCIAL REAL ESTATE

SARVA

OFFICE CLOSED

BLOOMBERG

Weeks ahead of Knotel’s bankruptcy filing, its founder said the company was thriving

BY NATALIE SACHMECHI

mol Sarva is no stranger to disaster. During his varied career, the entrepreneur has had a knack for starting new ventures as the world around him was falling apart. He opened Virgin Mobile’s New York City office the morning of 9/11 and in 2007 debuted his smartphone company, Peek, days before Lehman Brothers went belly-up and kicked off the financial crisis. So when the Covid-19 pandemic devastated his flexible-office

startup, Knotel, he was in familiar territory. Whether he knew Knotel was doomed or he was simply hoping for a miracle, he continued to tell the public that everything was fine as his company was on the brink of bankruptcy. “Companies will be trying a lot of different experiments as they get going [after the pandemic]. And as companies start making those decisions, they’re going to be shopping with us,” he told See KNOTEL on page 26

“IF WE HAD KNOWN EVERYTHING WOULD SHUT DOWN, WE WOULDN’T HAVE HAD SO MUCH INVENTORY ON HAND” FEBRUARY 22, 2021 | CRAIN’S NEW YORK BUSINESS | 3

REAL ESTATE

Small Manhattan landlords second-most likely in U.S. to default, study says BY EDDIE SMALL

with a risk score of about 48.9. The average risk score for all counties was 50.2, and the average risk score for the 100 largest counties was 43.6, the report said.

wners of single-family rental properties are more at risk of defaulting on a mortgage in Manhattan than almost anywhere else in the country, according to a new study from RealtyTrac. The study focused on three factors to determine which counties across the nation face the highest risk of defaults: the percentage of properties in the county that are rentals, the county’s unemployment rate and how leveraged the county’s rental properties are. New York County’s risk score was about 70.6 out of 100 based on the criteria, putting it behind only Mohave County in Arizona, which had a risk

leveraged and simply don’t have the financial strength to weather this storm.”

Eviction bans

“ALMOST 90% OF SINGLEFAMILY-RENTAL LANDLORDS ARE SMALLER INVESTORS” score of 77.2, RealtyTrac reported. Brooklyn was fairly high as well, taking 13th place among the top 100 counties, with a risk score of about 60.9. Queens took 28th place,

Rent relief

BUCK ENNIS

Rick Sharga, RealtyTrac executive vice president, said the eviction bans that federal, state and local governments have enacted in response to the Covid-19 pandemic are partially responsible for the elevated foreclosure risks. “The longer the eviction bans are in place, the higher the likelihood that these landlords are going to default on their mortgages, declare bankruptcy or be forced to sell off properties at distressed pricing— which could have a negative impact on local housing markets,” Sharga said in a statement. New York state passed a law at the end of 2020 halting most Covid-related evictions until at least May. The law allows landlords who own fewer than 10 units to avoid Covid-related foreclosures until May as well. The state also is working on roll-

ing out another rent-relief program managed by the Office of Temporary and Disability Assistance. Multiple advocacy groups have said landlords should be able to apply to the program directly to speed up the process. The OTDA supports the idea as well, Commissioner Mi-

chael Hein said at a recent hearing. “There’s a misperception that most landlords are corporations or institutional investors,” Sharga said. “The fact is that almost 90% of single-family-rental landlords are smaller investors who own fewer than 10 properties, are often highly

The RealtyTrac study reaffirms that New York landlords are in dire need of rent relief, according to the Community Housing Improvement Program, a landlord advocacy group. “An eviction moratorium without compensation to mom-and-pop property owners creates an unbearable financial burden as they use their personal savings to provide free housing for their tenants,” CHIP Executive Director Jay Martin said in a statement. “The government must get rent-debt relief out the door as quickly as possible.” ■

TECHNOLOGY

REAL ESTATE

Local Robinhood rival Public raises $220 million at billion-dollar valuation

Amazon heads back to Long Island City; this time for a delivery station

BY RYAN DEFFENBAUGH

AMAZON, WHICH CANCELED plans to build part of its second headquarters in Long Island City, wants to put a delivery station in the neighborhood. The e-commerce giant has signed a lease for about 20,000 square feet at 38-50 21st St. in the Queens neighborhood, it announced last Tuesday. It plans to open the delivery station there during the second half of the year. “We are excited to continue to invest in the state of New York with a new delivery station in Long Island City,” Amazon spokeswoman Emily Hawkins said in a statement. Developer George Xu purchased 38-50 21st St. from Wachovia Development for $13.6 million in 2007, according to property records. Xu did not respond to a request for comment.

AP IMAGE

ublic.com, a Lower Manhattan–based competitor to hit stock trading app Robinhood, has raised $220 million in funding at a valuation of $1.2 billion, the company said last Wednesday. Online brokerage Public describes itself as an investing social network that has more than 1 million members. The new investment round comes weeks after Robinhood was embroiled in controversy over its decision to restrict trading on stocks that had spiked in value, most notably that of GameStop. Members of the Reddit group that fueled the GameStop surge, WallStreetBets, threatened to leave Robinhood following the decision. Investors—including top venture capital firms Accel and Greycroft— are betting Public can win over those disgruntled users, even if it means cutting off a major source of revenue for Public. On the day Robinhood restricted trades—Jan. 28—Public tweeted that it would double the free stock slices it offers members when they refer others. The following week Public said it would no longer participate in the controversial practice of payment

for order flow, in which brokerage apps such as Robinhood are paid to route deals through market-making investment firms. As those relationships—and the incentives they create—drew scrutiny following the GameStop bubble, Public said it would only route trades directly to exchanges.

Virtual tip jar The move will put the company at the mercy of its users’ generosity. Trading on Public is commission-free, so the company has instead introduced the virtual equivalent of a tip jar for the money it moves.

4 | CRAIN’S NEW YORK BUSINESS | February 22, 2021

“Direct routing to the exchanges is more expensive, and therefore we’re turning what used to be a revenue stream into a cost center,” Public’s coCEOs, Leif Abraham and Jannick Malling, wrote about the decision. “We’re optimistic that the difference will be offset by the optional tipping feature.” Public has raised $310 million from investors since launching in 2018. The firm’s celebrity backers include entertainer Will Smith, pro football player J.J. Watt and pro skateboarder Tony Hawk. Within the app, investors can post their latest trades and offer commentary on the market, connecting with other traders in the process. The new funding will go toward adding features to the app, according to the company, including cryptocurrency and pre- and post-market trading. ■

On a tear Amazon famously announced in late 2018 that it planned to develop part of its second headquarters on the Long Island City riverfront, and the company just as famously announced in early 2019 that it would abandon those plans in the face of community opposition. The e-commerce giant has made a number of real estate deals in

New York since then, and in recent months the firm has been on a tear in terms of setting up delivery stations. The company recently confirmed that it plans to open a 336,350-square-foot delivery station in Red Hook, at 640 Columbia St., and a 151,000-square-foot station nearby, at 280 Richards St., next year. It also announced in January that it plans to open a 139,700-square-foot delivery station at 511 Barry St. in Hunts Point, the Bronx, and a 190,000-squarefoot delivery station at 66-26 Metropolitan Ave. in Middle Village, Queens, this year. It also signed a lease for 975,000 square feet last year at Staten Island’s Matrix Global Logistics Park. The firm’s activity is a reflection of how well industrial real estate in New York has held up amid the pandemic, particularly when compared to the struggles of the city’s residential, retail and office sectors. Firms leased more than 2.2 million square feet of industrial space during the third quarter of last year and about 870,000 square feet during the fourth quarter, according to CBRE. — E.S.

POLITICS

AG’s office backs down from $810M fraud investigation into TLC

BUCK ENNIS

tate Attorney General Letitia James has backed down from an $810 million lawsuit against the Taxi and Limousine Commission a year after accusing the agency of fraud pertaining to the pricing of yellow cab medallions. The attorney general’s office said it believes the relief package proposed last year by the New York Taxi Workers Alliance is the best way to resolve the long-standing fiscal issues plaguing medallion owners. “This proposal would provide a fiscally fair and responsible way to support the recovery of the taxi medallion industry by guaranteeing loans written down to no more than $125,000—which is why I have been working with the city to approve it since last year,” James said. The attorney general’s office told Crain’s that a lawsuit against the city and the TLC would draw out the process for months, or possibly years, and the bailout package is the most efficient way to quickly support the needs of the cabdriver community. Some observers are flummoxed by the attorney general’s decision to drop its investigation into the TLC’s alleged role in inflating the price of medallion loans and profiting from the practice. “That’s an idea, a suggestion, not legislation,” said Christopher Lynn, TLC chairman from 1996 to 1998,

“I ALWAYS HAD THE FEELING THEY NEVER REALLY WANTED TO KNOW ANYTHING” speaking of the New York Taxi Workers Alliance proposal. “What’s that got to do with legal proceedings? How is that consistent or inconsistent with illegal conduct?” Lynn said.

Notice of claim The attorney general’s office noted it has never filed a complaint and never filed a suit against the TLC. What it issued last February was a “notice of claim” to Comptroller Scott Stringer, stating its intent to file a lawsuit against the city and the TLC.

$125K

The letter accused the TLC of artificially inAMOUNT the flating the price New York Taxi of taxi licenses Workers Alliance beginning in plan aims to 2004, permitreduce the debt ting collusive of all individual bidding and medallion loans failing to disto, with the city close that the as a backstop price of licenses outstripped their underlying value. The attorney ESTIMATED net general’s decicost to the city sion not to folover 20 years, low up on the according to the allegations alliance struck some cabdrivers as a slap in the face. “She writes a nice letter,” said Carolyn Protz, a member of Yellow Taxi United and a medallion owner for 33 years. “I always had the feeling they never really wanted to know anything.” Serious accusations in the attorney general’s notice of claim remain unresolved. James accused the TLC of fraud, unjust enrichment and violations of two state laws relating to fraudulent practices. She also had sought injunctive relief to halt the TLC from continuing what was called “unlawful conduct” relating to the taxi medallion market. “The AG’s office is not known to be reckless. They wrote those things because they looked at the evidence and deemed them to rise to the level,” Lynn said. “They don’t make stuff up.” The TLC did not respond to a request for comment. The attorney general’s office did not respond to requests to clarify the status of actions taken against the TLC. It is not clear if, or when, the attorney general’s office stopped its investigation. “They continued with more interviews last year,” said Bhairavi Desai, executive director of the New York Taxi Workers Alliance. Desai added that she had put the attorney general’s office in touch with a number of her drivers. At the time of the February 2020 announcement, the attorney general’s office stated that “funds recovered will go toward restitution for medallion owners.” With the $810 million recovery action apparently off the table, struggling medallion owners now have only the alliance plan to fall back on. That plan seeks to reduce the debt of all individual medallion

$75M

JAMES

AP IMAGE

BY BRIAN PASCUS

loans to $125,000 and have the city function as a backstop, Desai said. “If the medallion is still delinquent and goes up for sale, the city would go in and place a minimum bid on whatever is left on the $125,000,” she said. “If no one bids higher, then the city would spend the money to purchase the medallion and then turn around and resell it to recoup the money.” Desai estimated a net cost to the city of $75 million over 20 years. She said her risk model assumed a worst-case scenario including a foreclosure rate at 5%, 6,000 outstanding loans and the resale value of the medallion never exceeding $75,000 over 20 years.

Support and opposition The New York Taxi Workers Alliance plan has received public support from Stringer and U.S. Sen. Chuck Schumer. It is not clear where Mayor Bill de Blasio stands on the proposal. Some medallion owners oppose the proposal. “I don’t think there’s anything in that plan that will persuade the entities that have these loans—hedge funds, banks—to go ahead and lower them,” said Sergio Cabrera, a medallion owner and member of Yellow Taxi United. “They bought them at a certain price and expect to get a return on them. They hold the keys to solve this puzzle.” Cabrera wondered why the city is not supporting a different proposal set forward by former Councilman Ritchie Torres—now a member of Congress—which would seek a $250,000 guarantee for every medallion. “Why is this not the right one?” Cabrera asked. “How did they come to these conclusions?” ■

Plan, manage, succeed. Our tailored solutions help hedge funds, private equity firms, broker/dealers and RIAs reach their goals. grassicpas.com/financial-services

February 22, 2021 | CRAIN’S NEW YORK BUSINESS | 5

CRIME FROM PAGE 1

New York has to find an acceptable way to grow Dan Doctoroff Chairman and CEO, Sidewalk Labs INTERVIEW BY JANON FISHER

an Doctoroff has seen New York City in its most desperate times. As Mayor Michael Bloomberg’s deputy mayor of economic development and recovery, he helped the city rebound after 9/11 and then the Great Recession years later. He also sees a way out of the current pandemic-imposed budget crisis and a way forward for the city through smart approaches to health care and development. Doctoroff, head of urban innovation company Sidewalk Labs, will be the guest speaker at the March 3 Crain’s New York Business forum.

It is less a financial crisis than it is a budgetary crisis leading to a quality-of-life crisis. It’s an acceleration of stuff that was happening before Covid. I believe very strongly that cities have to grow. Growth is really important because when you grow, you have the money to actually invest in improving the quality of life, which helps to attract more people. Obviously you have to invest that money wisely. You have to be able to accommodate the growth, and in some cases we have not done that in the city, and that is provoking sort of a lack of trust in growth itself. The way in which we’ve grown has undermined people’s trust, and therefore there are all of these restrictions on growth. That’s the essential paradox that New York faces, and we face it at a time when we actually really need to grow because the budget issues are significant. And so we have to find our way out of that paradox.

Some city planners have advocated for deregulating rezoning, but there is also a backlash currently happening toward development. Where do you stand on the issue?

If you say the greatest imperative is that we’ve got to grow, and then you say for very good reasons people don’t trust growth, how do you actually convince people that the growth is actually going to be fair? That is the way we’ve got to think. Because prices have been rising, people without means are getting pushed farther and farther away from centers of opportunity. When it takes somebody an hour and a half to take two buses and the subway to get to their job, that is a huge liability, and it builds resentment. There are a bunch of things you can do. We tried really hard in the Bloomberg administration to disperse the centers of opportunity, which is why we focused on Jamaica and Long Island City and Brooklyn and

CRAIN’S FORUM WITH DAN DOCTOROFF, CHAIRMAN AND CEO OF SIDEWALK LABS In the wake of 9/11, Daniel Doctoroff, then deputy mayor of economic development, contemplated the same issue we face today: Are cities still necessary? With the redevelopment of the World Trade Center, the High Line and Hudson Yards, among other projects, the answer was a resounding yes. Join Crain’s from 4 to 5 p.m. March 3, when we talk to Doctoroff, now CEO of innovation company Sidewalk Labs, about how New York can come back again. To register for this virtual event, visit CrainsNewYork .com/MarchBizForum.

Harlem and the South Bronx. The growth in jobs actually did occur very disproportionately in those places, compared to Midtown and downtown.

You are the head of innovation company Sidewalk Labs. What are some of the ways you are bridging the equality gap? We’ve seen in Covid just how incredibly disproportionate the impacts have been on Black and brown communities. In particular, our health care system in the city is a patchwork for people who can’t afford it. There are all sorts of new approaches to thinking about health care. We created one at Sidewalk Labs, a company called Cityblock. It’s pioneering a new approach to urban health care, particularly for the poorest and the sickest. It’s based on the underlying philosophy that the social determinants of health are just as important as medical care in terms of improving people’s health care. Do they have access to food? Do they have stability in terms of their

6 | CRAIN’S NEW YORK BUSINESS | February 22, 2021

BUCK ENNIS

You are a student of financial crises in New York City. What is different about this crisis?

housing? Can they get to doctor appointments? A lot of research suggests all these things are really important. We came up with a new care model that involves focusing on the social determinants of health: doing it virtually, doing it in people’s homes, doing it in clinics, connecting all these different providers with a really powerful kind of data model that brings everything together.

Is there anything you wish you’d done differently during your tenure as deputy mayor? We were not ahead of the curve from a housing perspective. That was by far the biggest issue when I look back. We understood the problem, but we just didn’t do enough. We announced a 65,000-unit housing program at the end of 2002. We upped it to 165,000 units in 2006, but in retrospect, it was way too little. We should have dramatically increased the available land for housing. One of the reasons we are in a debt dilemma is basically because the supply of housing has been outstripped by demand. ■

“What we’re seeing right now is homelessness is turning into petty crime,” said Tony Saunders, public safety director for the Bed-Stuy Gateway BID. “Businesses are dealing with it every day. It’s something that we get complaints about.” Saunders described petty larceny and shoplifting occurring in the neighborhood, with burglars taking advantage of darkened commercial properties. He said some robberies go unreported. In Midtown, leadership at the Bryant Park Corp. and the 34th Street Partnership describe a hostile streetscape that has gotten progressively worse for one of Manhattan’s busiest commercial districts. “Bryant Park is a much nicer area, but we did have quality-of-life issues, people with mental problems and drug problems, so we increased security in the park,” said Kevin Ward, vice president of security for Bryant Park and the 34th Street Partnership. “Thirty-fourth street is a different story.” Ward described 34th Street and the surrounding blocks as being overrun by unlicensed street vending—a phenomenon that has proliferated since Mayor Bill de Blasio called off NYPD enforcement last summer—and homeless encampments across Seventh and Eighth avenues, with drug use and assaults among the crimes he’s had to respond to. “Low-level crime really affects Midtown tremendously,” Ward said. “When people come back, hopefully it will improve conditions. But this is our greatest challenge.”

mitting crime is down because the system isn’t responding as it used to.” One low-level crime that has not been enforced, according to business district leaders, is drug use. As executive director of the Sutphin Boulevard BID in Jamaica, Queens, Glenn Greenidge oversees a commercial corridor that is one of the busiest transportation hubs in the city: 15 bus routes come through, the JFK AirTrain makes its connection there to the Long Island Rail Road, together with three subway lines. He said the area is now overrun by drugs. “There is some heroin and some crack, but a majority of it is marijuana. They’re literally blocking the doorways of small businesses,” Greenidge said, adding that drug dealers openly drink and get aggressive with people walking to transportation. “The marijuana is

“IF PEOPLE DON’T FEEL SAFE AS SOON AS IT GETS DARK, THEY WILL NOT COME BACK”

Possible causes When asked what could be the causes of the uptick in crime, the business leaders pointed to actions taken by City Hall and Albany. The 2019 bail reform law abolished cash bail for nonviolent offenders and misdemeanors. In June the City Council voted to transfer $1 billion out of the NYPD in de Blasio’s fiscal 2021 budget. This in turn led the NYPD to cut its street crime unit and homeless outreach unit. “We engaged in political activity, reforms that were needed, but we failed to explain them the right way,” said Richard Aborn, president of the Citizens Crime Commission. “Bail reform was much needed, but it went too far. The pressure was taken off to arrest people.” Aborn further argued that the protests following George Floyd’s murder destabilized the relationship between cops and local communities, and Covid-19 created delays in the prosecution of criminal court cases. “It sent the message there was less risk associated with crime,” Aborn said. “There’s a narrative out there that says the risk of com-

plaguing us.” Flagrant drug use is now a problem in Midtown, said Ward, who emphasized that users on Seventh and Eighth avenues engage in harder drugs like heroin and synthetic marijuana, also know as K2. “People on it get agitated and are prone to violence and assaults,” he said.

A bad rep Although New York is historically in a better place than it was even 20 years ago—burglaries, robberies and grand larceny are all down over 50% from 2001—the concerns about petty crime are leaving business executives to wonder if the city can recover from the perception that New York is dangerous and crime-ridden. “If the streets are not safe, if people continue to be pushed on the subways by the criminally insane, if people don’t feel safe as soon as it gets dark, then people will not come back,” said Jeff Wiesenfeld, a wealth manager and former aide to Gov. George Pataki. Even Gov. Andrew Cuomo’s latest push to legalize marijuana has been met with opposition by members of Midtown’s business community. “The last thing we need in the midst of this drug use is the whole Midtown area to smell like a drug den,” said Dan Biederman, president of the Battery Park Corp. and the 34th Street Partnership. “Legalization of marijuana will make this worse and the perception worse.” ■

ASSOCIATED PRESS

BUSINESS FORUM

ASKED & ANSWERED What will megaprojects look like post-crisis?

BRYAN KELLY Gotham Organization

DOSSIER

INTERVIEW BY EDDIE SMALL

WHO HE IS President of development, Gotham Organization

What are some of the difficulties of moving forward with a large project during a pandemic?

Vacancy rates are higher than historical standards, and while the gross rents have held up, the net rents have been driven down by concessions. This has all happened over nine to 10 months because the mobility of the renter allowed for that paradigm shift. But we think New York City will rebound as usual. It will take several years for concessions to wind down, but the tremendous amount of leasing activity is a reflection that people are starting to trickle back.

Are there any benefits to moving forward with a major project in an environment like this?

We can be one of the only games in town in a few years, delivering one of the newest products in the submarket

AGE 40 GREW UP Kelly lived in Queens until he was 10 years old. Then his family moved to Jericho, Long Island. RESIDES Cold Spring Harbor, Long Island EDUCATION Bachelor’s in communications and journalism, Fordham University

What will the investment sales market look like for the rest of the year? Is Gotham looking to make any major sales or purchases?

FAMILY Kelly is married with two children, one in second grade and one in prekindergarten.

There’s a lot of capital out there, but I don’t think things are going to turn frothy immediately. Activity will likely increase, but I don’t see it being like 2015 or 2016, when we were at the height of the market. Historically, we have rarely sold anything, and we’re not planning to sell anything. We’re going to double our portfolio over the next three to four years as we place all these units, so we’re focused more on building recurring revenue.

GOOD EATS His favorite New York restaurant is Bamonte’s, an old-school Italian joint in Williamsburg. LOCAL TEAM LETDOWN Kelly is a big sports fan, although he said rooting for the Mets, Jets and Rangers can be torturous. RUNNING MAN He ran the New York City marathon in 2013. He got through the first 14 miles at a fairly crisp pace before he says he fell apart.

What role should developers play in the city’s economic recovery?

come 2023 or 2024. We’ve also got some of the greatest construction talent in the country in New York, and with less activity, we will get the benefit of purchasing power. So while revenue may need to be adjusted in the short term, we’re finding that there can be some benefits on the cost side to offset that.

The only way to get out of this is to erect cranes and build buildings in a way that the communities view as equitable. They can create an economic engine that ultimately will generate taxes and revenue and help stabilize the city, not only short term but long term. I think those are the type of things that are going to bring us back to a great old New York. ■

VIRTUAL EVENT | EARLY BIRD PRICING TILL MARCH 10

NYC’s Commercial Real Estate Recovery Forecast Covid-19 has had a profound effect on the commercial real estate market in New York City and could have lasting impact even after the danger of the pandemic passes. During this webcast, Crain’s and local real estate experts will examine the changes in leasing activity, including the decreased demand for office space and the creative ways landlords are redesigning infrastructure to meet a new normal.

Thursday, March 18 | 4-5 p.m.

Speakers

Helena Rose Durst

Principal, The Durst Organization

MaryAnne Gilmartin Founder & CEO, MAG Partners LP

Don Peebles

Chairman and CEO, The Peebles Corporation

James Whelan President, REBNY

Moderator: Natalie Sachmechi, Reporter: Commercial Real Estate, Crain’s New York Business

Register today at www.crainsnewyork.com/MarchNYNSummit For event questions: Ana Jimenez | 212-210-0739 | crainsevents@crainsnewyork.com For sponsorship opportunities: Kate Van Etten | kvanetten@crain.com SPONSORED BY:

February 22, 2021 | CRAIN’S NEW YORK BUSINESS | 7

BUCK ENNIS

ryan Kelly is the president of development at the Gotham Organization, a New York real estate firm that manages 2.1 million square feet of residential space. The company’s projects include The Ashland in Downtown Brooklyn and Gotham West in Hell’s Kitchen, and it recently filed plans for a 47-story, 453-unit tower at 550 10th Ave., near the Lincoln Tunnel. Kelly believes that despite the economic fallout, the city will still have a place for large projects like these after the pandemic—but they won’t look quite the same as they did before.

I think they’ll be different not only because of the pandemic but because the objections that communities were having to major developments before Covid hit are not going away. Major developments are going to have to be job creating and have to have community benefits. No matter what, if there is residential, there has to be an income-based housing component. Developments where the team engages the community upfront will succeed.

chief executive officer K.C. Crain senior executive vice president Chris Crain

EDITORIAL

group publisher Jim Kirk publisher/executive editor

Cuomo needs to learn how to say he’s sorry nursing home population last year during the initial surge of the pandemic. He was criticized initially for forcing homes to admit or readmit elderly patients who had tested positive for Covid-19 and then for underreporting the number of nursing home Covid deaths to the federal government. For most of last year and early this year, Cuomo pushed back against his critics, insisting he did nothing wrong. It was not until recently that he acknowledged that mistakes may have been made, especially after one of his closest aides reportedly told a group of Democratic officials that the administration purposely underreported nursing home deaths because it was afraid of triggering a federal investigation. The governor is reportedly facing investigations now from the FBI and federal prosecutors in Brooklyn, and there are various efforts underway in the state Legislature to shift some of the powers he enjoys when it comes to fighting the pandemic to state lawmakers. A case can be made that Cuomo deserves to be

CUOMO’S FALL FROM GRACE WAS COMPLETELY OF HIS OWN MAKING seems to relish provoking his political colleagues at every turn, many of them in his own party. The sad part of Cuomo’s fall from grace is that it was completely of his own making. The immediate cause of Cuomo’s problems is how his administration dealt with the

EDITORIAL editor Robert Hordt assistant managing editors Telisha Bryan,

Janon Fisher associate editor Lizeth Beltran art director Carolyn McClain photographer Buck Ennis senior reporters Aaron Elstein, Eddie Small reporters Ryan Deffenbaugh, Brian Pascus,

Natalie Sachmechi, Shuan Sim executive assistant Devin Cavallo to contact the newsroom:

www.crainsnewyork.com/staff 212.210.0100 685 Third Ave., New York, NY 10017-4024 ADVERTISING BLOOMBERG

ov. Andrew Cuomo, riding high just six months ago for taking decisive action to deal with the Covid-19 pandemic, is facing what could be the greatest challenge of his political life. A growing number of elected officials, some of whom are fellow Democrats, want to strip him of the emergency powers granted at the beginning of the pandemic— powers that he has for the most part used wisely to curtail the spread of the disease. The pushback, especially from Democrats, is a sign that some state lawmakers have had enough of the autocratic governor who

Frederick P. Gabriel Jr.

sanctioned, but taking this action now would be a mistake. The governor still needs the flexibility to make quick decisions when it comes to regulating public behavior in the face of Covid-19. What Cuomo should have done, and what he needs to do now, is sincerely apologize to the families of nursing home residents affected by his decisions and to the people of New York for playing fast and loose with the figures on deaths at the facilities. He has had the opportunity to do that all along but instead has chosen to dig in and assert that

this entire affair has been blown out of proportion. He has compounded his problems by reportedly threatening some elected officials within his own party for publicly criticizing him. It is more than a little ironic that the person he has most resembled recently has been the politician he railed against for much of last year: Donald J. Trump. It is time for Cuomo to take the high road, finally. Show some humility, sir, and get back to the task at hand: effectively leading the residents who elected you. ■

A smart approach to construction can help achieve clean energy goals

resident Joe Biden has signaled combating climate change will be the touchstone of his new administration—a sea change that will affect an array of policy initiatives, from energy to infrastructure. Gov. Andrew Cuomo has doubled down on transitioning from fossil fuels to renewables to combat the climate crisis, outlining a $26 billion public-private partnership to build 100 renewable projects that pave the way to a net-zero carbon economy by 2050. Achieving those ambitious goals requires an all-hands-on-deck approach. The construction industry can be part of the solution by working with developers and owners to reimagine the entire building life cycle and ensure sustainability is incorporated at every stage of the process, from planning, design and material selection to building operation and en-

senior account executive Kelly Maier account executives Roland Espinosa,

Christine Rozmanich, Laura Warren, Tori Weil people on the move manager Debora Stein,

dstein@crain.com CUSTOM CONTENT senior manager, custom content

Sophia Juarez, sophia.juarez@crainsnewyork.com EVENTS

www.crainsnewyork.com/events events and marketing manager

Michelle Sustar, mstustar@crain.com manager of conferences & events

Ana Jimenez, ajimenez@crainsnewyork REPRINTS director, reprints & licensing Lauren Melesio,

212.210.0707, lmelesio@crain.com

OP-ED

BY ANN KLEE

www.crainsnewyork.com/advertise

ergy efficiency after construction completion. According to the U.N. Environment Program, buildings and their construction account for 36% of global energy use and 39% of all carbon emissions. Many U.S. cities and states have enacted legislation to curb greenhouse gases, but our nation is late to the game. European Union policies have focused on reducing building energy consumption and achieving nearly zero energy buildings for years. The Biden administration is running to catch up, pledging to invest $2 trillion toward building a new American infrastructure and clean energy economy.

Long-term savings The construction industry can reduce buildings’ environmental footprint by bringing expertise in design for energy efficiency and enhanced ventilation, materials selection, logistics and retrofit opportunities, and more. Some argue

that sustainable construction increases short-term expenses, but a true life-cycle analysis can demonstrate long-term savings for building owners. There are even broader opportunities to make an impact, starting with the consumer supply chain, which accounts for more than 80% of greenhouse gas emissions. According to McKinsey & Co., relying on offshore suppliers contributes to this problem and causes bottlenecks in times of crisis, as clients have experienced during the pandemic. Where feasible, the construction industry should source materials in the U.S.—which can minimize delay risks, reduce greenhouse gas emissions and create jobs. Another key emissions-reduction tactic is just-in-time delivery of materials to project sites. Studies show idling trucks waste approximately 6 billion gallons of fuel annually. Minimizing construction waste

also can save clients costs and reduce environmental impact. A new commercial building generates an average of 3.9 pounds of waste per square foot of building area. Contractors should be recycling and reusing materials— which can result in less waste, fewer landfill trips and fuel savings. Adopting a green approach to construction can deliver results for clients’ bottom lines as well as the planet. Companies that don’t adapt will be left behind. This is the time for the construction industry to lead in sustainable development. It will require smart planning, flawless execution and education across the spectrum of stakeholders to ensure the best practices pay significant dividends, both socially and financially, in the long term. ■ Ann Klee is executive vice president of business development for Suffolk, a real estate and construction enterprise.

PRODUCTION production and pre-press director

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www.crainsnewyork.com/subscribe customerservice@crainsnewyork.com 877.824.9379 (in the U.S. and Canada). $3.00 a copy for the print edition; or $129.00 one year, for print subscriptions with digital access. Entire contents ©copyright 2021 Crain Communications Inc. All rights reserved. ©CityBusiness is a registered trademark of MCP Inc., used under license agreement. CRAIN COMMUNICATIONS INC. chairman Keith E. Crain vice chairman Mary Kay Crain chief executive officer K.C. Crain senior executive vice president Chris Crain secretary Lexie Crain Armstrong editor-in-chief emeritus Rance Crain chief financial officer Robert Recchia founder G.D. Crain Jr. [1885-1973] chairman Mrs. G.D. Crain Jr. [1911-1996]

8 | CRAIN’S NEW YORK BUSINESS | FEBRUARY 22, 2021

P008_CN_20210222.indd 8

2/19/21 5:08 PM

OP-ED

BY MARK USTIN

hen someone finally writes the comprehensive story of the pandemic, it probably will read much like a disaster story: first, the tale of a hidden threat revealing itself, then the mad scramble to understand and respond to that threat, and then ultimate victory over that threat after great sacrifice. Like any such story, there will be examples of profound heroism as well as examples of venality, ignorance and neglect. One big difference between the Covid-19 story and other disaster stories will be the length of the disaster and, of course, the sheer magnitude of the human cost. But otherwise the story will look familiar and in some ways has already been written. The one piece that remains unknown at this time is the epilogue. Normally, disaster stories include some kind of coda in which it is revealed that the problems that gave rise to the vanquished threat were subsequently solved so that the threat need never be faced again. That would certainly be the best outcome in this case, and here in New York, we have already seen policymakers apply lessons learned in the early months of the pandemic to address the most recent spike in cases. Our experiences with telehealth, hospital capacity expansion and coordination, and reducing

unnecessary regulations are resulting in some permanent changes that will likely have an enduring, positive impact on our health care system. But where we go from here remains to be seen. Any retrospective review of our response to the coronavirus will face natural tension. On the one hand, there is the desire to hold decision-makers accountable for the impact of decisions made during the crisis. On the other is the related—but by no means identical— need to take a clear look at the decisions made and to determine whether and how they could have been better. The former desire focuses on punishing actors for bad decisions, but it may discourage those actors from fully cooperating with the review. The latter focuses on prospective improvements, rather than determining who bears the burden of previous bad decision-making, but may leave victims of bad decisions without sufficient redress for outcomes that were not their fault.

What went wrong This is a tension that is quite familiar in the health care field. For more than 100 years, hospitals have utilized “mortality and morbidity conferences” to evaluate negative patient outcomes. The concept involves bringing together all the decision-makers involved to identify what went wrong, and why, with an eye toward system improvement.

The conversations are frequently confidential as a matter of law so that participants can feel free to share open, honest accounts and opinions without compromising themselves or their colleagues. At its worst, the system can sometimes be perceived as a mechanism for shielding decision-makers from full accountability. But at its best, it can help uncover medical practitioner mistakes and create mechanisms to avoid the same mistakes in the future. Even more important, it can identify systemic errors that would not necessarily be revealed if practitioners were not willing to engage in an open, honest discussion. Our retrospective evaluation of the pandemic should proceed along that kind of track. It would be remarkable if no mistakes were made by policymakers or medical professionals during the past year. Once the pandemic has ended, we could focus on pointing fingers at the people who made mistakes. It will result in a lot of time spent on the inevitable back and forth between the accusers and the accused—which in the end might just muddy the issues further. Or, instead, we could focus on a coordinated, systematic evaluation of the actions taken by the decision-makers in order to improve such decisions in the future. In order to ensure that the evaluation is unbiased, it should include the input of experts who were not involved in making the decisions. It

BLOOMBERG

Pandemic lessons should focus on progress, not punishment

also should allow the decision-makers themselves, and the stakeholders affected by those decisions, sufficient opportunity to provide their perspectives. This isn’t a new concept. We have seen the same principles at work, including in regard to the 9/11 Commission, charged with unpacking the intelligence failures and other mistakes that led to the World Trade Center attack; the Warren Commission, charged with understanding the assassination of President John Kennedy in 1963; and the New York Factory Investigating Commission, charged with looking into the conditions that led to the deadly Triangle Shirtwaist fire of 1911.

Not all such reviews are successful, but the best ones have led to process changes that have avoided similar mistakes and, in some cases, vastly improved the systems at issue. A similar effort could yield good results here and better prepare us for the next pandemic. But it requires all parties—the decision-makers, other stakeholders and disinterested experts—to agree to forgo accusations in favor of mutually beneficial coordination of effort. It is in everyone’s best interest to make sure that happens. ■ Mark Ustin is a regulatory lawyer and lobbyist in the Albany office of Farrell Fritz.

OP-ED

BY CRAIG DYKERS

ith Covid-19 shuttering buildings throughout the city, it’s time to consider how we build back better and why we must build back differently. While the pandemic exists, “better” means focusing on prophylactics such as adding dictatorial signage or chemical-based sanitation posts. Although crisis-management solutions are important, they are not nearly enough to minimize the increasing amount and impact of public health disasters. Washing your hands more every day will not change this new reality. Furthermore, crisis management often goes against the grain of human behavior. For example, separating people too much to avoid disease transmission also brings collective psychological and civil unrest. In other words: disaster. Instead, it is vital to drastically rethink how we build our cities, how we sculpt their landscapes and, ultimately, how we interact with the world around us. The health of our cities and their

buildings has a direct impact on our ability to fight disease. In the past science, medicine and design have partnered to eliminate afflictions, such as cholera and plague, from society. But these efforts have stopped short when it comes to protecting the air and daylight where we live and work. For many years fresh air has been relegated to mechanical ventilation systems. Similarly, daylight is controlled through glass filters and artificial-light regulations. These inventions have actually facilitated new sicknesses, such as Legionnaires’ disease, demonstrating the potential harm of restrictive design.

Fragile ecosystems It is widely accepted that many viruses are transmitted from wildlife to humans. Yet our own habitats are more rapidly infringing on the places wildlife call home and keep their own diseases at bay. To supply the needs of our growing cities, industrialization is more rapidly consuming fragile ecosystems. Combine this loss of habitat with the continuing loss of natural human habitat and

you have a recipe for a public health crisis. It took Covid-19 to expose the true value of seemingly invisible entities such as air, light and access to nature and how essential they are to healthy lives. The well-being of cities and people is not built on prophylactics or making life more artificial. It is reinforced by supporting the natural conditions of place. The best long-term protection is to strengthen the immune systems of both people and cities by designing buildings and wholeheartedly “building back better” with a holistic habitat in mind. With a new administration in the White House and New York on the cusp of a mayoral election, the time is right to consider how design can truly affect our city. Designers, developers, legislators and municipal leaders can lead this charge. Innovative leadership paired with ambitious legislation has the potential to maximize access to fresh air and daylight for New Yorkers. One way this can be achieved is through credits or incentives given for access to fresh air, integrating nature

BLOOMBERG

Sunlight and fresh air are the best (building) disinfectants

from ground level to terrace to rooftop, using healthy construction materials and promoting exercise through design. These are just some of the ways that promote immunity and health within buildings, helping to avoid communicable diseases globally. Imagine what this city’s best minds can achieve when we are all building toward the same city of the future. When we talk about the environ-

mental crisis, we are no longer talking just about saving energy, rising waters and carbon footprints; it also is about our own health and well-being. Covid-19 has now shouted this message into our well-protected ears, but can we hear it? ■ Craig Dykers is a co-founder of international architecture studio Snøhetta and leads its New York City office.

February 22, 2021 | CRAIN’S NEW YORK BUSINESS | 9

THE LIST MOST ACTIVE VENTURE CAPITAL FIRMS Ranked by number of investments in New York metro area-based startups

FLIP FLOP

WHAT PANDEMIC?

DIGITAL PIE

OK, MAYBE COVID DID HAVE AN IMPACT

In 2019, venture capital invested in New York-area companies soared while falling throughout the country, but last year the U.S. as whole regained the ground it lost and then some.

The amount of venture capital raised by local companies remained near historic highs in 2020, despite the pandemic.

Looking at the entire state, internet deals dominated in the fourth quarter of 2020. Other than health care, IT-related fields take up the vast majority of the pie.

Though local companies raised lots of venture capital in 2020, the total number of deals fell 9.4%.

15%

$ Value in billions

$20B

1.80% Agriculture

4.30% Software (non-internet/mobile)

$17.4B

1000

4.30% Other 888

Mobile and telecommunications

$15B

# Deals

800

12%

11.40% 9%

$10B Health care

12.40%

600 $5B

65.70%

-0.50% New York area

U.S.

-3%

’11’ 12 ’13’ 14 ’15’ 16 ’17’

18 ’19 ’20

400

Internet

’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 SOURCE: PwC/CB Insights MoneyTree Report

RANK

1 2 3 4 5 5 7 8 8 8 11 12 12 12 15 16

COMPANY/ ADDRESS 1

NUMBER OF INVESTMENTS IN METRO-AREA STARTUPS IN 2020

TOTAL VALUE OF METRO-AREA FUNDING ROUNDS (IN MILLIONS) THREE LARGEST METROIN 2020 3 AREA DEALS IN 2020

MOST FREQUENT TYPE OF FUNDING ROUND IN 2020

WEBSITE

SENIOR MANAGEMENT 2

Y Combinator 335 Pioneer Way Mountain View, CA 94041

ycombinator.com

Geoff Ralston President

$185.2 H1, Feather, Squire

Techstars 1050 Walnut St. Boulder, CO 80302

techstars.com

Maëlle Gavet Chief executive

$18.2 Cube, Ergatta, Axle

Lerer Hippeau 100 Crosby St. New York, NY 10012

lererhippeau.com

Eric Hippeau, Kenneth Lerer, Ben Lerer Managing partners

$437.0 Medly Pharmacy, Augury, K Health

Seed

Alumni Ventures Group 788 Elm St. Manchester, NH 03101

avgfunds.com

Michael Collins Chief executive, board chairman

$221.3 Pico, BlockFi, VENN

Seed

Contour Venture Partners 475 Park Ave. S., sixth floor New York, NY 10016

contourventures.com

Bob Greene, Matt Gorin, Managing partners, Owen Davis, General partner

$143.0 Cylera, MovableInk, Wayscript

n/d

Entrepreneurs Roundtable Accelerator 415 Madison Ave. New York, NY 10017

eranyc.com

Murat Aktihanoglu, Jonathan Axelrod Managing directors

Bessemer Venture Partners 285 Madison Ave., Suite 1401 New York, NY 10017

bvp.com

Charles Birnbaum, Alex Ferrara, Bob Goodman, Jeremy Levine, Rob Stavis New York office partners

$815.6 Hyperscience, Forter, Sisense

Series B

FirstMark 100 Fifth Ave. New York, NY 10011

firstmarkcap.com

Rick Heitzmann, Amish Jani, Beth Ferreira, Matt Turck, Adam Nelson, Dan Kozikowski Partners

$782.3 Ro, Hyperscience, Orchard

Series A and C

Hatzimemos Libby Holdings (H/L Ventures) 30 Rockefeller Plaza, Suite 5440 New York, NY 10112

h-l.vc

Eric Hatzimemos, Chairman, chief executive, Oliver Libby, Managing partner

$50.0 Holler, Andie Swim, BlocPower

Tiger Global Management 9 W. 57th St. New York, NY 10019

tigerglobal.com

Scott Shleifer, Partner

$1,612.8 Attentive, VTEX, UiPath

Greycroft 292 Madison Ave., eighth floor New York, NY 10017

greycroft.com

Alan Patricof, Dana Settle, Ian Sigalow Cofounders

$370.6 Medly Pharmacy, Public.com, BetterCloud

Seed

BoxGroup 99 University Place New York, NY 10003

boxgroup.com

David Tisch Founder, investor

$342.4 Ro, K Health, Ramp

Seed

Insight Partners 1114 Sixth Ave., 36th floor New York, NY 10036

insightpartners.com

Jeff Horing, Jerry Murdock Cofounders

$639.0 Bizzabo, Sisense, Augury

Series B

SOSV 1188 York Ave. New York, NY 10065

sosv.com

Sean O’Sullivan Founder, managing partner

500 Startups

500.co

Christine Tsai Chief executive

Mission 10 | CRAIN’S814 NEW YORKSt. BUSINESS | February 22, 2021 San Francisco, CA 94103

Newark Venture Partners 1 Washington Park, seventh floor Newark, NJ 01102

newarkventurepartners.com Dan Borok, Vaughn Crowe, Tom Wisniewski Managing partners

$23.6 Negotiatus, Tire Agent, Nayya

Seed

Pre-seed

Seed

Equity for services, Seed, Series A Series C and D

$30.0 OpenTrons, Looking Convertible note Glass Factory, Lootcakes $4.5 Fakespot, Adapty

$40.1 Meet Cute, Ride Health, ClassTag

Seed

8 8 8 1 1 1 1 1 12 13 14 15 15 27 28 28 28 21 21 21 21 21 21 21 21 21 21 22 2 2 2 2

RAN

Sou ang Hat tha

pital

eals

’20

eport

8 8 8 11 12 12 12 15 1 16 2 16 3 18 4 18 5 18 5 21 7 21 8 21 8 21 8 21 11 26 12 26 12 26 12 29 15 29 16 29 16 29 18 29 18 29 18 29 21 21 21 21 21 RANK

New York, NY 10011

Partners

Hatzimemos Libby Holdings (H/L Ventures) 30 Rockefeller Plaza, Suite 5440 New York, NY 10112

h-l.vc

Eric Hatzimemos, Chairman, chief executive, Oliver Libby, Managing partner

$50.0 Holler, Andie Swim, BlocPower

Tiger Global Management 9 W. 57th St. New York, NY 10019

tigerglobal.com

Scott Shleifer, Partner

$1,612.8 Attentive, VTEX, UiPath

Greycroft 292 Madison Ave., eighth floor New York, NY 10017

greycroft.com

Alan Patricof, Dana Settle, Ian Sigalow Cofounders

$370.6 Medly Pharmacy, Public.com, BetterCloud

Seed

BoxGroup 99 University Place New York, NY 10003

boxgroup.com

David Tisch Founder, investor

$342.4 Ro, K Health, Ramp

Seed

Insight Partners 1114 Sixth Ave., 36th floor New York, NY 10036

insightpartners.com

Jeff Horing, Jerry Murdock Cofounders

$639.0 Bizzabo, Sisense, Augury

Series B

SOSV COMPANY/ 1188 York Ave. ADDRESS New York,1NY 10065

sosv.com

Sean O’Sullivan Founder, managing partner

500 Startups Y Combinator 814 St. 335 Mission Pioneer Way San Francisco, Mountain View,CA CA94103 94041

500.co ycombinator.com

Newark Venture Partners Techstars 11050 Washington Park, seventh floor Walnut St. Newark, Boulder, NJ CO01102 80302

newarkventurepartners.com Dan Borok, techstars.com Maëlle GavetVaughn Crowe, Tom Wisniewski Managing partners Chief executive

13 36

Right Side Capital Management Lerer Hippeau 649 St. 100 Mission Crosby St. San CA 94105 New Francisco, York, NY 10012

rightsidecapital.com lererhippeau.com

Dave Lambert,Kenneth Kevin Dick, JeffBen Pomeranz Eric Hippeau, Lerer, Lerer Managing directors partners

13 28

$2.5 Cohley, Motivote $437.0 Medly Pharmacy, Augury, K Health

Convertible note Seed

Acceleprise Alumni Ventures Group 43 23rd 788W.Elm St.St. New York, NY NH 10010 Manchester, 03101

acceleprise.vc avgfunds.com

Michael Cardamone, James Murphy, Collins Jonah Midanik, Jeff Becker Chief executive, board chairman Managing directors

12 25

$3.1 Firstbase, Motivote $221.3 Pico, BlockFi, VENN

Convertible note Seed

Bain Capital Ventures Contour Venture Partners 632 475 Broadway Park Ave. S., sixth floor New York, NY 10012 10016

baincapitalventures.com contourventures.com

Scott Friend, Matt Gorin, Harris,Managing Merritt Hummer Bob Greene, partners, Partners Owen Davis, General partner

12 23

$513.9 BetterCloud, $143.0 Attentive, Cylera, MovableInk, Justworks Wayscript

Series n/d B

Sequoia CapitalRoundtable Accelerator Entrepreneurs 2800 Sand HillAve. Road, Suite 101 415 Madison Menlo Park, 94025 New York, NYCA 10017

sequoiacap.com eranyc.com

Doug MuratLeone Aktihanoglu, Jonathan Axelrod Global managing partner Managing directors

12 23

$801.8 $23.6 Attentive, Negotiatus,UiPath, Tire Agent, Cockroach Labs Nayya

Series Seed C

Accel Bessemer Venture Partners 500 Ave. Suite 1401 285 University Madison Ave., Palo New Alto, York, CA NY 94301 10017

accel.com bvp.com

Jim Swartz, Arthur Patterson Charles Birnbaum, Alex Ferrara, Founders Bob Goodman, Jeremy Levine, Rob Stavis New York office partners

11 20

$691.0 Melio, Forter, $815.6 UiPath, Hyperscience, Chainalysis Sisense

Series B

Andreessen FirstMark Horowitz 11 Ave., 15th floor 100Madison Fifth Ave. New York, NY 10010 10011

a16z.com firstmarkcap.com

Marc Andreessen,Amish Ben Horowitz Rick Heitzmann, Jani, Beth Ferreira, General partners Matt Turck, Adam Nelson, Dan Kozikowski Partners

11 19

$329.1 Overflow, Cedar, $782.3 Stack Ro, Hyperscience, DigitalOcean Orchard

Seed, Series Series A and AC and C

Coatue Hatzimemos Libby Holdings (H/L Ventures) 930W.Rockefeller 57th St., 25th Plaza,floor Suite 5440 New York, NY 10019 10112

coatue.com h-l.vc

Phillipe Laffont, Thomas Laffont Eric Hatzimemos, Chairman, chief executive, Founders Oliver Libby, Managing partner

11 19

$1,037.0 Attentive, $50.0 Oscar Holler,Health, Andie Swim, UiPath BlocPower

Series Equity Afor services, Seed, Series A

Founders Fund Tiger Global Management 19 Letterman W. 57th St.Drive San CA 94129 New Francisco, York, NY 10019

foundersfund.com tigerglobal.com

Peter Brian Singerman, Keith Rabois Scott Thiel, Shleifer, Partner General partners

11 19

$399.4 Oscar Health, $1,612.8 Attentive, VTEX,Cedar, UiPath Vise

Series AC and D

Gaingels Greycroft 43 23rd St.Ave., eighth floor 292W.Madison New York, NY 10010 10017

gaingels.com greycroft.com

David Beatty, Dana Managing member, Alan Patricof, Settle, Ian Sigalow Paul Grossinger, Lorenzo Thione, Cofounders Peter Steinberg, Managing partners

11 18

$261.8 Hyperscience, $370.6 Orchard, Medly Pharmacy, Bluecore Public.com, BetterCloud

Seed

General BoxGroupCatalyst 434 Broadway,Place sixth floor 99 University New York, NY 10013 10003

generalcatalyst.com boxgroup.com

Joel DavidCutler, Tisch David Fialkow, David Orfao Founders Founder, investor

10 15

$749.5 Health, Ramp Ro, $342.4 Oscar Ro, K Health, Cityblock Health

Series Seed A and C

GV Insight Partners 1489 Roadfloor 1114 Charleston Sixth Ave., 36th Mountain CA 94043 New York, View, NY 10036

gv.com insightpartners.com

David KraneJerry Murdock Jeff Horing, Chief executive, managing partner Cofounders

10 15

$270.6 Labs, $639.0 Cockroach Bizzabo, Sisense, HODINKEE, Tend Augury

Series AB

Primary SOSV Venture Partners 19 W. York 24thAve. St. 1188 New York, NY 10010 10065

primary.vc sosv.com

Ben Brad Svrluga SeanSun, O’Sullivan General Founder,partners managing partner

10 15

$129.9 Lili, Lunchbox Series A note $30.0 Alloy, OpenTrons, Looking Convertible Technologies Glass Factory, Lootcakes

Abstract Ventures 500 Startups San 814 Francisco, Mission St.CA San Francisco, CA 94103 Global Founders Capital Newark Venture Partners Charlottenstrasse 4 1 Washington Park, seventh floor Berlin, Germany 10969 Newark, NJ 01102 Great Oaks Venture Capital RightMadison Side Capital Management 660 Ave., Suite 1600 649 Mission New York, NY St. 10065 San Francisco, CA 94105 NextView Ventures Acceleprise 580 Broadway, Suite 701 43 W.York, 23rdNYSt. New New York, NY 10010 Plug and Play BainN. Capital 440 Wolfe Ventures Road 632 Broadway Sunnyvale, CA 94085 New York, NY 10012 Thrive Capital Sequoia Capital 295 Lafayette St. 2800York, SandNYHill Road, Suite 101 New 10012 Menlo Park, CA 94025 Union Square Ventures AccelBroadway, 19th floor 915 500 University Ave. New York, NY 10010 Palo Alto, CA 94301

abstractvc.com 500.co

Alex Davidof, Christine TsaiRamtin Naimi General partners Chief executive

9 14

$126.6 ChartHop, $4.5 Petal, Fakespot, AdaptyClyde

Series Seed A

globalfounderscapital.com Oliver Samwer newarkventurepartners.com Founder, Dan Borok, Vaughn Crowe, managing partner Tom Wisniewski Managing partners

9 13

$101.8 Life House, Headway, $40.1 Bravo Meet Cute, SierraRide Health, ClassTag

Series A Seed

great-oaks.herokuapp.com rightsidecapital.com

Andy Boszhardt Dave Lambert, Kevinpartner Dick, Jeff Pomeranz Founder, managing Managing directors

9 13

nextviewventures.com acceleprise.vc

David Beisel, Rob Go, Melody Koh, Michael Cardamone, James Murphy, Lee Hower Jonah Midanik, Jeff Becker Partners Managing directors Saeed Amidi Scott executive Friend, Matt Harris, Merritt Hummer Chief Partners

9 12

$355.2 Attentive, Parsec, Code $3.1 Climate Firstbase, Motivote

Seed Convertible note

9 12

$29.1 Owkin, Mira, Axle $513.9 Attentive, BetterCloud, Justworks

Seed Series B

thrivecap.com sequoiacap.com

Joshua Kushner Doug Leone Founder, managing partner Global managing partner

9 12

$658.0 Oscar Health, Cityblock $801.8 Health, Attentive, UiPath, Cedar Cockroach Labs

Series C Series C

usv.com accel.com

Albert Wenger, Andy Weissman, Jim Swartz, Arthur Brad Burnham, FredPatterson Wilson, John Buttrick, Founders Kaden, Nick Grossman, Partners Rebecca

9 11

$354.8 Stash, Stack Overflow, $691.0 Skillshare UiPath, Melio, Chainalysis

Series A Series B

Andreessen Horowitz

a16z.com

Marc Andreessen, Ben Horowitz

$329.1 Stack Overflow, Cedar,

Seed, Series A and

Coatue 9 W. 57th St., 25th floor New York, NY 10019

coatue.com

Phillipe Laffont, Thomas Laffont Founders

$1,037.0 Oscar Health, Attentive, UiPath

WEBSITE

plugandplaytechcenter.com baincapitalventures.com

SENIOR MANAGEMENT 2

Christine Tsai Geoff Ralston Chief executive President

NUMBER OF INVESTMENTS15 IN METRO-AREA STARTUPS IN 2020

14 42

TOTAL VALUE OF $30.0 OpenTrons, Looking METRO-AREA FUNDING ROUNDS (IN MILLIONS) Glass THREEFactory, LARGESTLootcakes METROIN 2020 3 AREA DEALS IN 2020

$4.5 Fakespot, Adapty $185.2 H1, Feather, Squire

$40.1 RideAxle Health, $18.2 Meet Cube,Cute, Ergatta, ClassTag

$89.7 Petal, Vise, Priori $2.5 Cohley, Motivote

Equity for services, Seed, Series A Series C and D

Convertible note MOST FREQUENT

TYPE OF FUNDING ROUND IN 2020

Seed

Seed Pre-seed

Seed Convertible note

Source: Crunchbase; additional research types included are allC venture series plus 11 Madison Ave., 15th floor by Chuck Soder (researcher@crainsnewyork.com). Funded Generalcompanies partners need to be headquartered in the greater New York area, as defined by Crunchbase. Funding DigitalOcean angel, pre-seed, seed and undefined funding rounds. Individual investors are omitted. Only closed deals are publicized through the Crunchbase platform are included, excepting the individual submissions sent by Contour Venture Partners and New York, NY 10010 Hatzimemos Libby. In cases of ties, firms are ranked alphabetically. n/d-Not disclosed. 1--If applicable, the firm's metro-area office is shown. 2--If applicable, metro-area senior management is listed. 3--Sum of deals in which the firm participated, rather than the specific amount the firm invested.

Series A

WANT MORE OF CRAIN’S EXCLUSIVE DATA? VISIT CRAINSNEWYORK.COM/LISTS.

Founders Fund 1 Letterman Drive San Francisco, CA 94129

foundersfund.com

Peter Thiel, Brian Singerman, Keith Rabois General partners

Gaingels 43 W. 23rd St. New York, NY 10010

gaingels.com

David Beatty, Managing member, Paul Grossinger, Lorenzo Thione, Peter Steinberg, Managing partners

General Catalyst

generalcatalyst.com

Joel Cutler, David Fialkow, David Orfao

$399.4 Oscar Health, Cedar, Vise

Series A

$261.8 Orchard, Hyperscience, Bluecore

Seed

$749.5 Oscar Health, Ro,

Series A and C

February 22, 2021 | CRAIN’S NEW YORK BUSINESS | 11

INDUSTRY ACHIEVERS ADVANCING THEIR CAREERS

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WHO OWNS THE BLOCK

BLACK HISTORY SITE WINS PROTECTION, STOPS DEVELOPMENT

227 DUFFIELD ST.

Fate of the cultural center at former abolitionists' home unclear BY C. J. HUGHES 214 DUFFIELD ST. This 58-story apartment building, which at one point in 2015 was Brooklyn’s tallest structure, is a two-inone combination from AvalonBay Communities. The upper floors, entered through the doors at No. 214, belong to Avalon Willoughby Square, a version with standard finishes. An edgier offering, whose lobby has a decorated brick wall, is the tower’s lower floors and is called AVA DoBro. Its entrance is around the corner, at 100 Willoughby St. A 30th-floor gym is shared by both. Studios at Avalon Willoughby started at $2,249 per month this month, when factoring in a discount of two free months of rent.

ABOLITIONIST PLACE PARK (SE CORNER OF WILLOUGHBY AND DUFFIELD) Eager to redevelop a dense area with little greenery, city officials conceived Willoughby Square Park, a 1.15-acre space ringed by new office and apartment buildings. A portion, with lawns and sitting areas, in place of a parking lot and a low-slung commercial building, opened in the summer of 2019. The remainder was to include the property occupied by 227 Duffield, though this month’s unanimous vote by the Landmarks Preservation Commission to protect the property shrinks the park’s footprint. Look-alike buildings at 223 and 225, though, have already met the wrecking ball.

228 DUFFIELD ST. The Sheraton Brooklyn New York Hotel, developed by the Lam Group, opened here in 2010 and was Brooklyn’s first major new hotel since 1998. It has 294 rooms across 23 stories, building records show. Aloft Brooklyn—also a Lam development—opened the next year on an adjacent site: 216. Rising to 24 stories, it has 176 rooms.

227 DUFFIELD ST. This modified 4-story, three-unit Greek Revival– style building was home to abolitionists Thomas and Harriett Truesdell from 1851 to 1863, in a hub of African-American culture with Black churches, schools and literary societies. Ex-slaves often passed through en route to points north. A landmark designation, undermined by a scarcity of records, did not come until this year. In 2015 Samiel Hanasab bought a stake in the property for $439,000, then completed the purchase in 2017 for $149,000, before borrowing $2.3 million against the $1.28 million site. The building, approved for a 13-story, 21-unit development with a 34-car garage, was slated for demolition in 2019.

230 DUFFIELD ST. This 5-story brick building, owned by the not-for-profit Services for the Underserved, is a 50-unit single room occupancy–type dwelling, according to city records. It is for the homeless, military veterans and people with developmental disabilities. Mental health services are available. In 1976 the property, then with different owners, was seized by the city over unpaid taxes, records show, and the building has traded in no-cost transactions ever since.

229 DUFFIELD ST. Perhaps no firm is more responsible for the look and vibe of the modern block as the Lam Group, which owns three hotels there. But this site had a winding road. In 2007 V3 Hotels bought the property for $3 million and mostly completed a 19-story building before putting it on the market. Lam, who snapped up the skinny glassy spire in 2012 for $31.1 million, finished the build-out. Indigo Hotel Brooklyn, a brand owned by InterContinental Hotels, operates a 128-room property there today.

248 DUFFIELD ST. Known as the Offerman Building, this 8-story brick Romanesque Revival structure from 1891 was originally a department store. Fulton Street, 19th-century Brooklyn’s retail heart, is a few steps away. In fact, this building continues through the block and offers an Old Navy and other retailers under its arched facade at 505 Fulton St. Redeveloped in 2007 by United American Land, a firm that often targets historic conversions, the building contains 121 apartments across seven floors. An initial condominium plan was scratched.

237 DUFFIELD ST. The 21-story red-brick BRiQ, which opened in 2019, has 110 apartments—studios to two-bedrooms. CBZ Management, cohelmed by Daniel Gazal, led its development team, which bought the site in 2007 for $9.5 million. In early February the least-expensive market-rate rental in the building, which has 22 affordable units, was a studio for $1,846 per month. CBZ is not officially offering rent breaks to lease the building, which is in a neighborhood where vacancies can be 10%. But it is extending the breaks on a case by case basis, said Gazal’s brother, Victor, who heads up BRiQ’s leasing.

GOOGLE IMAGES/MAPS

4-story building in Downtown Brooklyn vital to the antislavery movement has survived two major brushes with death. One was in 2007, when the city backed off a plan to seize the building, at 227 Duffield St., through eminent domain to create a park. The other was this month, when officials declared it a landmark, scuttling a private apartment project. To understand why preservationists are breathing a sigh of relief, it might help to consider No. 227’s block, which is now packed with high-rises after a 2004 rezoning. “There’s been a stunning transformation here,” said Raul Rothblatt, an activist who has worked to save the building. Its Civil War–era occupants, Harriet and Thomas Truesdell, were active abolitionists. “This should be an attraction as important as the Statue of Liberty,” Rothblatt said. At the time of the rezoning, No. 227, which has three apartments and a storefront, enjoyed the company of similar-size buildings, some of which, like clapboard-sided No. 233, were also thought to be Underground Railroad refuges. A 19-story hotel stands in its place today. Other large hotels are across the street, as is a 58-story apartment building from AvalonBay Communities that’s among the borough’s tallest spires. Long a commercial district—the MetroTech Center office park is a major presence—the area now caters to residents and tourists as well. “It kind of feels like Midtown Manhattan, but it’s also become very residential,” said Victor Gazal, of the Gazal Brokerage Group, which is leasing for BRiQ, a 21-story rental at 237 Duffield. Downtown Brooklyn’s rental market has suffered due to Covid-19, with vacancy rates of 10% now, compared with 2% in better times. Prices are soft as well. The average Brooklyn rent in January was about $3,000 per month, according to Douglas Elliman, down almost 11% from January 2019. Although landmark status might halt development, not everyone thinks of preservation as a net negative. “It keeps a certain integrity and tells a story that needs to be told,” Gazal said, “especially in a neighborhood that’s all skyscrapers.” It’s not clear what will happen next. An associate of Samiel Hanasab, the developer who intended to raze No. 227 for a 13-story, 21-unit apartment building, said Hanasab recently sold the property, though no new deed had been filed. The status of plans to create a Black cultural center at the site, which is valued at $1.28 million, is also unclear. Shawn Lee, daughter of Joy Chatel, No. 227’s former owner, was involved with the center’s creation. She declined to comment. ■

February 22, 2021 | CRAIN’S NEW YORK BUSINESS | 13

REAL ESTATE

HFZ tenants caught in the middle of the developer’s financial woes

FZ founder Ziel Feldman thought he was doing two of his tenants a favor when he rented them two storage units for their belongings while their apartments were under construction. But when the cash-strapped developer failed to pay more than $70,000 in storage bills, Nir Shuminer, who owns Scanio Movers, threatened to auction off everything inside the storage units, according to a lawsuit filed recently in state Supreme Court in Manhattan. Now the developer is suing to block the sale, which it says is commercially unreasonable, and to res-

months, including the foreclosure of four of its Manhattan condominiums by a lender, which the company also sued to block in November. HFZ lost control of the properties last month and has been facing layoffs as well as lawsuits from other lenders on key projects, including the XI. When things started looking bad for the firm, HFZ stopped paying for its own storage spaces at Shuminer’s facility, but it made sure to pay for the units it rented for the tenants, the lawsuit said. Instead of allocating the money to the balances of the two tenant units, the storage company spread the cash across all units rented by HFZ, ignoring the developer’s request that the payment be applied to just the two units, the company claims. In December Scanio sent the developer a memo explaining that it had scheduled an auction to sell the contents of all of its units on Dec. 18 if the company didn’t pay up, but

“JUST HAVE THEM PAY THEIR BILL SO WE CAN ALL MOVE ON” cue its tenants’ personal items before they head to auction, according to court papers. The real estate company has suffered a string of setbacks in recent

FELDMAN

Payment planning BUCK ENNIS

BY NATALIE SACHMECHI

that auction never happened, according to the complaint. “Obviously I hope you pay your bills and we won’t have to auction other people’s items,” Shuminer wrote in an email to HFZ, while also informing the company that it would not be able to buy back the items in the units at auction. On Dec. 29 Scanio let HFZ know that it owed $72,600, or $82,500 if the bill was still outstanding as of Feb. 5, and had scheduled another auction for Feb. 9. To make sure that it got at least

that much, Scanio set the reserve for one of the tenant units at $30,000 and the other for $50,000, focusing HFZ’s entire unpaid balance on those two spaces even though it owed just $31,846 for them. “Scanio is using the tenants’ personal possessions as pawns in his efforts to extract payment on the HFZ units,” Feldman said in the suit. When HFZ offered to pay off the two units individually to keep their contents from being sold, Scanio refused and demanded payments for all units. The developer even asked

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Daniel L. Doctoroff, Chairman & CEO, Sidewalk Labs

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14 | CRAIN’S NEW YORK BUSINESS | February 22, 2021

PRI

to take the items out of the units and give up the spaces, but Scanio declined, the complaint said, asking for its money. “If the builder could pay the open balance in the auction letter for the storage services, then it could take possession of all its storage lots,” Shuminer wrote in a Feb. 9 email to HFZ’s attorney, Christopher Milito. “HFZ is managed by unethical people that take advantage of hard-working businesses as well as their tenants that have been complaining about them for years,” he said in the same message. “It amazes me how much money HFZ is willing to pay for lawyers instead of just taking care of their legal obligations,” he added. “Just have them pay their bill so we can all move on.” The Feb. 9 auction also did not take place. Last Tuesday Justice Louis L. Nock temporarily stopped the sale of the tenants’ items until after a March 18 videoconference between the parties. HFZ Capital Group did not respond to requests for comment, and its attorneys declined to comment. Shuminer did not respond to a request for comment. ■

CIN

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EB.

24!

CORONAVIRUS

Cultural institutions fear being left out of the governor’s reopening plans “NO ONE IS GOING TO GET A COVID TEST THREE DAYS BEFORE SEEING A FILM”

BY BRIAN PASCUS

safety even past 2021.”

Not yet feasible

BLOOMBERG

s the city recently returned to 25% indoor dining capacity, a new sense of optimism that normalcy could be on the horizon is beginning to spread. But for the institutions that make New York the nation’s cultural leader—including Broadway, sports venues and independent movie houses—the reopening is still filled with question marks. “I don’t know if it will be a gradual comeback,” said Charlotte St. Martin, president of the Broadway League. “We don’t have the ability to socially distance. The financial models don’t allow that for us.” Broadway is looking at reopening in the next six to nine months, St. Martin said. Her organization has 44 task forces devoted to everything from health and safety protocols and marketing to union worker protections. The federal Small Business Administration set aside $15 billion in the December round of Paycheck Protection Program funding for theaters and stages, but the money hasn’t been sent to the needy theaters yet because the rules and

eligibility criteria still haven’t been defined, said St. Martin, who added that she hopes the theaters will be able to file applications by the end of this month. Until then it’s a waiting game. “It’s when the governor and the Department of Health for New York state tell us to come back and we are assured it’s safe,” St. Martin said. “It’s that simple.” Stadiums are another issue to

keep an eye on as restrictions are gradually loosened. Gov. Andrew Cuomo announced sports arenas and large entertainment venues may reopen with 10% capacity Feb. 23. Negative Covid-19 tests at least three days before the event and face masks will be required. Although the capacity percentages might increase in New York during the year, it’s not reasonable to expect anything higher than 50%,

said Mark Conrad, an associate law professor at Fordham University with a concentration in sports business. “If people think they’re going to walk in with a ticket like they used to, it may be a real long time for that,” Conrad said, noting that vaccination, testing and temperature requirements might be mandated to enter stadiums. “I think some of this will be permanent for public

The restrictions Cuomo is putting in place for sporting events will not work for every entertainment industry. Although Karen Cooper has retrofitted the Film Forum’s heating, ventilation and air-conditioning system and separated seats a socially distant 6 feet apart, the Manhattan nonprofit movie house’s director realizes the current restrictions don’t make reopening feasible just now. “That is not going to work for the movie theater paradigm. No one is going to get a Covid test three days before seeing a film,” Cooper said. “I assume [Cuomo] is thinking the population needs to be further along before it makes sense to allow us to do this.” ■

AWARD CATEGORIES: n DIVERSITY CHAMPIONS n EMERGING LEADERS n TOP D&I OFFICERS n BOARD HEROES n CIVIC DIVERSITY HEROES Crain’s first annual Excellence in Diversity and Inclusion Awards will celebrate New York City individuals and businesses that lead by example and hold themselves and others accountable for diversity-and-inclusion initiatives. Join Crain’s New York Business in our commitment to celebrate diversity and cultivate a culture of belonging when you nominate a business professional or organization today for the awards program. Finalists will be recognized June 21 in a special issue. Winners will be announced at an awards reception in July and recognized in an issue appearing the week after the event.

NOMINATE TODAY: CrainsNewYork.com/Nominations Deadline to nominate: March 12

February 22, 2021 | CRAIN’S NEW YORK BUSINESS | 15

GREAT PLACE TO WORK?

2021

BRAG ABOUT IT. Is your company a top-notch place to work? Tell us what makes you stand out! The Best Places to Work in NYC awards program recognizes and honors the state’s top employers who show a dedication to their employees’ growth and quality of life. Don’t miss out – this is your opportunity to join the ranks of New York City’s most outstanding companies! Selected companies will be featured in a Crain’s New York Business special feature published in our Sept. 27 issue.

Reasons to participate: 1) Company Pride: Securing a spot on the list can improve employee morale and retention. 2) Public Relations: Selected companies can use the distinction to enhance recruiting efforts and improve reputations. 3) The BCG Insights Report Package: Participating companies will receive the results of an employee survey, which identifies company strengths and weaknesses according to their employees.

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2/18/21 1:05 PM

SPONSORED CONTENT

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MICHAEL LIONSTAR

ARVA R. RICE President and CEO, New York Urban League

Arva Rice has worked tirelessly since the early days of the Covid-19 pandemic to help underserved communities in New York City. She immediately created the African American Family Relief Fund to provide direct cash grants to assist families with rent and utilities, among other bill payments. She started a series of virtual town hall meetings with local, state and federal officials, civil rights leaders and medical professionals to dispel myths and untruths about the coronavirus. Most recently, she and other Black leaders in New York formed a task force to ensure the vaccine is readily accessible to Black New Yorkers and to address concerns about the safety and efficacy of the Covid-19 vaccine.

JOSÉ “TONY” ORTIZ Senior Mobile Markets liaison, City Harvest For the past 15 years, Tony Ortiz has dedicated himself to feeding New Yorkers in need at City Harvest, New York City’s largest food rescue organization. Ortiz oversees the organization’s Mobile Market Program, which includes nine open-air, farmers market-style distributions of free, fresh produce and nutritious shelf-stable food items. Since the start of the Covid-19 crisis, all nine Mobile Markets have remained open and maintained their normal schedules. During this period, the Mobile Markets have distributed more than 3.4 million pounds of pre-bagged fresh produce and shelf-stable items to more than 80,000 families. “I know that people need us now more than ever,” Ortiz said.

LORENZO PALADINO, M.D. Associate professor, Emergency Medicine, SUNY Downstate and Kings County Medical Center During the Covid-19 crisis, Lorenzo Paladino did what he always does—respond to emergencies, whether they be earthquakes, pandemics or other crises. But this time, because of his earlier research on ventilators, he participated in a White House task force that established protocols for how to put multiple patients on ventilators designed for single-patient use. New York was facing the grim prospect of running out of the machines, leading hospitals to contemplate such drastic measures. In addition to his work as an emergency-medicine physician, Paladino is a flight surgeon in the New York Air National Guard’s 106th Rescue Wing.

JULIA M. RAMIREZ Director of patient relations, Memorial Sloan Kettering Cancer Center For the past nine years, Julia Ramirez has helped lead programs to eliminate disparities in health and cancer treatment among immigrants and minority patients—most notably, the hospital’s Food to Overcome Outcome Disparities program. This initiative addresses food insecurity among immigrant and underserved people with cancer by providing weekly food donations at 12 food pantry locations. As demand at the food pantries surged during the Covid-19 pandemic, Ramirez worked with Memorial Sloan Kettering’s leadership and its transportation department to develop a food delivery schedule for redeployed jitney drivers to deliver food resources. Working together, they facilitated donations and resources from food delivery companies and even recruited recently laid-off taxi drivers to assist with regular deliveries.

DANIEL RAMOT CEO, Via Under Daniel Ramot’s leadership, ride-sharing app Via made it a priority to support New Yorkers with safe, efficient and accessible transportation during the pandemic. Via offered a 40% discount to all health care workers, and it partnered with Bowery Mission, a nonprofit that feeds and shelters homeless New Yorkers, and offered free rides to the mission’s employees from 8 a.m. to 8 p.m. Via also began working with a large food nonprofit to power its meal delivery program, and it provided transportation for children in foster care and their chaperones to get to school safely. When workplaces reopened, Via offered a corporate shuttle program for employees.

HOWARD ROTHSCHILD Attorney and president, Realty Advisory Board on Labor Relations Inc. When the Covid-19 pandemic hit New York City in March, Howard Rothschild led the Realty Advisory Board on Labor Relations and its membership in negotiating a number of interim agreements with the labor unions to address the critical concerns of both employees and employers in the building service industry. Among the most important agreements was one that extended health insurance coverage for furloughed employees for up to 150 days, in addition to the regular 30-day extension. Despite the economic damage from the pandemic, Rothschild marshaled industry support to provide these critically needed benefits at great expense to the industry.

DAVON RUSSELL President, Women’s Housing and Economic Development Corporation Davon Russell has committed himself to serving children and families in the South Bronx for the past 23 years. Russell took the Covid-19 crisis head-on. He mustered the resources of the Women’s Housing and Economic Development Corporation’s mental health, social work, case management, Head Start, youth education and home-based child care programs to distribute supplies and information to program participants so they could safely quarantine at home and access services remotely. Russell even hand-wrote notes to accompany grocery store gift cards for families. WHEDco has raised and distributed $180,000 in grocery store cards to more than 800 families and distributed 35,000 meals and snacks to families most in need of emergency food support.

JOHN M. SAMUELS Founder and CEO, Better Health Advisors John Samuels leveraged his knowledge and experience from more than 20 years in leadership roles at top New York City hospitals to respond to the Covid-19 pandemic. He guided hospital and emergency room leaders in managing patient surges, provided guidance to hospital communications teams to reassure non-Covid patients afraid to receive emergency care and helped direct food donations to local ERs. Samuels has also worked with both individuals and businesses to develop and implement Covid-19 strategies, including helping the NY Bluebirds youth baseball organization safely resume operations. Combating misinformation about Covid-19, Samuels developed a free tool kit to help people assess and limit their risk.

BRIGITTE LACOMBE

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JACQUELINE JACKSON

NYC HEALTHCARE HEROES NYC Healthcare Heroes was a citywide philanthropic program launched with a $20 million commitment from the Debra and Leon Black Family, including an initial $10 million donation and plans to match another $10 million in donations to expand its impact. The program successfully delivered more than 400,000 care packages with more than 15 million products—including shelf-stable food, household cleaning and personal care products—over-the-counter medicine, and fresh fruit and nuts, to the New York City professionals who served on the front lines during the Covid-19 pandemic. During its four months of operations, the program served 100,000 health care professionals across the five boroughs and more than 5,000 Emergency Medical Services and disaster services workers.

DAVID ROCKWELL Founder and president, Rockwell Group; founder, DineOut NYC When the Covid-19 pandemic lockdown crippled the restaurant industry, designer David Rockwell came up with a solution to allow for safe dining experiences. During the summer, he launched DineOut NYC, a pro bono initiative that offers restaurants an innovative and modular outdoor dining kit-of-parts, including a dining booth, a sanitation station, wooden decking panels to cover pavements and plant-covered street fencing. These are accompanied by accessory details, such as lighting, umbrellas, fans and planter benches. This adaptable and scalable system laid the foundation for restaurants and bars to reopen quickly and operate under the current health guidelines.

February 22, 2021 | CRAIN’S NEW YORK BUSINESS | S5

THE 2020 EMPIRE WHOLE HEALTH HEROES AWARDS

MARK SCHIENBERG President, Greater New York Automobile Dealers Association As the pandemic intensified during the spring and Gov. Andrew Cuomo ordered New Yorkers to wear face masks, the Greater New York Automobile Dealers Association stepped up to help address the severe shortage of personal protective equipment. Under Mark Schienberg’s leadership, its member dealers purchased more than 500,000 face masks and more than 150,000 face shields. Schienberg and other association leaders personally delivered the PPE to borough halls and emergency management facilities. The dealers association donated face shields and masks to the greater New York chapter of the American Red Cross. It also worked closely with the governor’s office to ensure that auto service departments were allowed to stay open as essential businesses.

MARC J. SHAPIRO, M.S., M.D., FACS, FCCM Professor of surgery, Stony Brook University; assistant chief medical quality officer program director– surgical critical care, Stony Brook University Hospital At the height of the pandemic in metro New York, Marc Shapiro cared for more than 130 ventilated Covid-19 and critically ill patients at Stony Brook University Hospital. Starting March 13, he worked 70 days straight in up to five ICUs. With the help of reassigned surgical residents and fellows and fourth-year medical students, Shapiro cared for his patients without a single fatality. He tirelessly communicated with patients and their family during a time when visitations were prohibited. Often he had to improvise as he drew on more than three decades of practice as an intensivist and surgeon to find novel ways to help patients survive the coronavirus.

S6 | CRAIN’S NEW YORK BUSINESS | February 22, 2021

DIVYA SRIDHAR, M.D. Chief of interventional radiology, NYC Health + Hospitals/Harlem As Covid-19 cases climbed at the Harlem hospital, Divya Sridhar developed protocols and systems to ensure the safety of all patients who came to the interventional radiology department—regardless of whether they had Covid-19. Sridhar ensured that her Covid-19-positive patients got special monitoring during procedures because of their illness. In addition, Sridhar became an active volunteer, working with a colleague to raise funds and deliver care packages to emergency departments and intensive care units throughout the public-health system. “There’s something so special about the responses from our colleagues who feel recognized, remembered and supported,” she said.

WENDY STARK Executive director, Callen-Lorde Since the onset of the Covid-19 pandemic, Wendy Stark has swiftly and efficiently transformed her organization’s operations and care model to support the needs of patients in the LBGTQ communities. Stark has led Callen-Lorde’s work on the front lines: triaging patients, ensuring continued access to care for HIV and other chronic conditions, and supporting homeless residents. By late March, members of Callen-Lorde’s staff were answering the calls of hundreds of patients to determine Covid-19 symptoms and help them access care. Stark built upon Callen-Lorde’s prior experience in responding to infectious diseases and navigating patients through the health care system to ensure the communities it serves did not go without care.

JEFF WHITING Founder, Broadway Relief Project In March Jeff Whiting formed the Broadway Relief Project, a coalition of Broadway costume designers, tailors, stage managers, actors and other Broadway professionals to produce personal protective equipment for the front-line workers at NYC Health + Hospitals. Almost overnight, Whiting transformed his 50,000-square-foot Broadway rehearsal space into a PPE factory to create medical gowns. He enlisted the teams that are normally building thousands of costumes for Broadway shows and more than 400 members from the Broadway community to partner with the New York City Economic Development Corp. In the first 59 days of the crisis, they made more than 51,000 medical gowns, which went directly to front-line hospital workers.

VC GAP

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apartment in Bedford-Stuyvesant, where on many winter nights his parents left the oven on and open to provide heat. That’s the type of multifamily building his company, BlocPower, now targets for installing electrical upgrades. Using software to optimize the process, the company makes energy retrofits more affordable for older buildings, cutting greenhouse gas emissions and creating jobs for local laborers in the process. Building owners bought into the idea, but winning over venture-capital investors wasn’t easy. “Traditional VCs did not give us the time of day,” Baird said. BlocPower did eventually win over top firms Andreessen Horowitz and Kapor Capital as investors, but Baird said he went through about 200 rejections while raising the company’s first investment round. That didn’t surprise Baird, he said, as he knows the dismal numbers for Black startups: Just 1% of the founders of U.S. firms that received venture capital between 2013 and 2017 were Black. “If you believe, as I believe, that human beings have an even distribution of talent regardless of gender or race, then venture capitalists should be investing something like 50% of their money in women and

race and ethnicity to its database for the first time. Yet Black startup founders still received just 2.4% of the $12.3 billion in U.S. venture investment between October and December, according to an analysis of Crunchbase data by Hallo, a jobs recruiting platform focused on diversity. New diversity-focused funds from major firms likely will help get investment to a broader range of startup founders, but they might represent only a small step in addressing larger issues. “Black men represent 2% of venture capitalists, and Black women don’t even rank as a percentage point,” said Jillian Williams, an investment principal at Anthemis, an early-stage startup investor. “There is a relationship to that and the companies that are getting funded.” Williams is the New York lead for BLCK VC, a national effort to double the number of Black men and women in venture investment by 2024. The New York chapter recently partnered with Anthemis and Lerer Hippeau, one of the city’s largest venture investors by deal volume,

“YOU LOOK FOR THINGS THAT ARE UNDERVALUED AND YOU INVEST IN THEM” people of color,” Baird said. “So something is wrong there. It is an extremely unpleasant experience to go and negotiate investment with an industry structurally opposed to investing in me.”

Call to action

TWO-THIRDS of VC investors said the Black Lives Matter movement changed their investment strategy.

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Today a growing group of investors is working to remove the structural opposition Baird described, by changing the look of venture capital itself. Currently only 14% of VC partners are women, and just 6% are Black or Latino. Reform efforts are helped by the growing number of large corporations pledging to invest in racial equity. The unequal distribution of VC investment—which last year totaled a record $156 billion—was brought into the spotlight last year, amid global protests against systemic racism sparked by the police killings of George Floyd and Breonna Taylor. About two-thirds of VC investors said the Black Lives Matter movement changed their investment strategy, according to a survey of 80 investors released by Morgan Stanley in November. SoftBank and Andreessen Horowitz, two of the world’s top technology investors, launched funds dedicated to companies founded by people of color and women. Crunchbase, a platform that tracks venture investment, began adding data about founders’

his roommate at Harvard Business School. The two had been making small angel inPERCENTAGE vestments in of Black men startups for who are venture three years by capitalists; Black that point and women make up decided to forless than 1% malize into a fund, which they could use to channel PERCENTAGE money to diof venture capital verse founders partners who are during the early Black or Latino stages of their companies. Harlem Capital’s goal is to invest in 1,000 diverse founders during the next 20 years. Because investment firms rarely add new partners, Pierre-Jacques said, “the fastest way to change the industry is having these early-stage funds, particularly run by diverse general partners.” Harlem Capital recently attracted a trio of major corporations to its cause. Apple invested $10 million last month. The tech giant also plans to support Harlem Capital’s internship program, aimed at introducing women and people of color to the VC industry. Both Bank of America and PayPal invested late last year in Harlem Capital. Major corporations have pledged more than $45 billion toward racial equality efforts since last year, according to the 100K Pledge, a website that tracks such public commitments.

on an online fellowship program into venture capital for Black professionals in the finance and tech sectors. The program—which BLCK VC plans to present twice each year— hopes to create a pathway to venture investor jobs, particularly as firms pledge to hire more Black and female investors. “A proven effective way to diversify networks, the pipeline of startup founders and, ultimately, investments is to have a more diverse pool of investors,” Williams said.

Economics 101 Technology investors also must reckon with their preconceived notions of what successful startup founders look like, said Gayle Jennings-O’Byrne, a co-founder of the WOCstar Fund, a venture firm focused on companies owned by women of color. “Do we keep doubling down on the same types of founders for innovation, or do we cast a wider net?” Jennings-O’Byrne said. “We are still not doing enough of that in the finance world.” By staying within a narrow focus, she said, investors are missing out on the best returns. That’s part of the opportunity she sees for her fund. “I know these entrepreneurs with

great ideas that are just undercapitalized, and that part is heartbreaking,” she said. “But there is also the capitalist in me—the Wharton grad and JPMorgan investment banker—seeing this arbitrage situation, economics 101. You look for things that are undervalued, and you invest in them.” Jennings-O’Byrne and her co-founder, Pialy Aditya, are raising WOCstar’s first dedicated fund. They have partnered with New York City’s Economic Development Corp. to invest $35 million in startups led by women in the next half-decade. Companies with diverse founders outperform all-white founding teams by 30% when they go public or are acquired, according to an analysis last year of about 20 years’ worth of company data by the Kauffman Fellows Research Center. Diverse firms have less access to venture capital in early stages, the report found, but the companies that do get funding typically go on to raise the most money in subsequent rounds. By overlooking founders from diverse backgrounds, “you are losing out on productivity,” said Henri Pierre-Jacques, a managing partner of Harlem Capital Partners. Pierre-Jacques launched Harlem Capital in 2018 with Jarrid Tingle,

Angel approach BlocPower’s Baird has started to invest in technology on his own. He said he is part of a rising cohort of Black startup founders that is taking their hard-earned success raising capital and making investments in others who look like them. “It’s that founder-to-founder, angel investment that can create and expand a new cohort of Black tech companies,” Baird said. “It’s going to take this wave of Black founders investing in the next wave, who then get introduced to the VCs.” Baird’s first angel investment was in Marine Snow, a song-streaming service focused on social interactions between music lovers. The company was founded by Tony Lashley, an MBA student at Columbia Business School. Baird graduated from the school and now mentors budding entrepreneurs there. Lashley—a former marketing and operations leader at Spotify— said he has taken his “bumps and bruises” in the process of raising money for the streaming platform, which he hopes to take live following a seed-funding round. The really important part of the investment from Baird, he said, is not the money but the potential doors it can open with investors. “The most powerful thing in the venture industry, if not all life, is having access to the right people,” Lashley said. “Women and people of color traditionally do not have the same access that others do. So if one of us has access, it is really powerful to share that access with others.” ■

FEBRUARY 22, 2021 | CRAIN’S NEW YORK BUSINESS | 23

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KNOTEL Crain’s last month. “We’ve never been in such a strong position.” Behind the scenes, Knotel was hemorrhaging cash. And the landlords who rented it space were getting antsy. On Jan. 31, the clock ran out and Knotel filed for Chapter 11 bankruptcy protection. Newmark, one of the company’s shareholders, agreed to acquire Knotel and give it a $20 million cash infusion in an effort to salvage its investment. “Knotel’s liquidity is rapidly dissipating,” John Jureller, the firm’s chief financial officer, said in an affidavit. He said the company was looking for an expedited sale before it burned through the rest of its cash. Newmark had already invested in the startup three separate times, according to Crunchbase: twice in 2018 for undisclosed amounts and once in August 2019 as part of a $450 million Series C funding round led by investment firm Wafra—which put Knotel in the billion-dollar club. Despite being designated as the funding round’s leader, Wafra was responsible for less than 10% of the money raised, said Daniel Adamson, a senior managing director at the investment firm, which has invested in other proptech companies as well. “In some cases, venture investments are outperformers and in some cases underperformers,” Adamson said. “Unfortunately, this one was a disappointment.” Sarva’s plan—similar to rival WeWork’s—was to gobble up as many spaces as he could. Bankruptcy is a fate that WeWork has been able to avoid so far, thanks to multiple investments from SoftBank. Experts have been speculating that with the pivot from traditional offices to a more hybrid model that includes working from home several days each week, companies will be looking for the kind of flexibility that Knotel and WeWork can offer. They just have to weather the pandemic. “We are all pointing toward a future appetite for flexible offices,”

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time, but it’s not a permanent issue,” he said nonchalantly. The company chose to exit some of its spaces permanently, and it negotiated and tried to alter lease structures so it could get through the next few months, according to bankruptcy documents. As for the pandemic emptying Knotel’s spaces? The company would come out on top when things blew over, Sarva said. He sounded oddly confident for someone who would wind up selling his company three weeks later.

Slow beginnings Back in 2015 coworking was becoming more popular among entrepreneurs and startups. Sarva himself was working out of a space he shared with several other businesses when he began flirting with the idea of Knotel with his co-founder, Edward Schenderovich. The company’s name is a conjunction of the words “knowledge” and “hotel,” Sarva said: “where knowledge comes to stay—a place where people gather together, and it has the flexibility maybe of a hotel.” A company could occupy an entire floor of a building for a short period, then expand to another or give up some space if it needed to. At first it was almost impossible to get any landlords on board, Sarva said. “They just questioned whether we were providing any value to companies.” Eventually, he won over 33 W. 17th St., a Gramercy building owned by small-time landlord Norman Kurlan. That’s where the company opened its doors to clients, a roster that would include tech startups Aircall, Cheddar, Current, HotelTonight, Stash and Teachable. Knotel went on to secure deals with the owners of 116 W. Houston St., 1 State St. and 30 Cooper Square.

“IT IS, UNFORTUNATELY, A DIFFICULT TIME, BUT IT’S NOT A PERMANENT ISSUE” said Dominic Harding, head of Savills’ WorkThere Americas New York. “If Amol is able to ride this out, one would think he is in a position to benefit.” Legendary real estate investor Sam Zell has a different view about the coworking business. “Everyone in it has gone broke,” he told CNBC in 2019. By the end of last year, Knotel had become the poster child for office tenants in distress. The company owed millions of dollars to at least 21 landlords who sued to get Knotel to pay. When he spoke with Crain’s, Sarva brushed off the lawsuits, claiming he would eventually come to an agreement with Knotel’s angry landlords. “It is, unfortunately, a difficult

26 | CRAIN’S NEW YORK BUSINESS | February 22, 2021

More landlords were getting on board with the shaky startup, and by the end of 2016 it offered seven locations. Manhattan, the top market in the country for new space leased by flexible-office operators during the fourth quarter of 2019, according to a CBRE report, remains Knotel’s largest market. Flexible office space accounted for nearly 4% of all office leases in Manhattan in 2019. But demand for Knotel spaces was hardly overwhelming: From late 2019 through this year, the company had nearly 800,000 square feet that either was vacant or would become empty. By last year Knotel had more than 100 locations in New York City and more than 4 million square feet of space around the world, but the company still hadn’t turned a profit. Knotel lost $202.3 million in the first 10 months of last year, Business Insider reported, and it lost $223 million in 2019. “We were getting close,” Sarva said. “We were big enough by that point that it made sense to not simply be trying to grow anymore. Now it was an important thing to grow and be profitable.” Except potential profits soured into massive losses last year.

Lockdown city March 11, 2020, was a Wednesday. More than 4,600 people around the world died from Covid-19 that day, and that’s when the World Health Organization officially declared it a pandemic. It was also the day that Sarva realized New York City soon would be locked down. By Friday he officially closed Knotel’s New York offices. He had several meetings that morning with consultants and advisers in which they joked awkwardly about not shaking hands. “We started a series of changes in our business that were just colossal over the course of 2020,” he told Crain’s. “We were looking at a year that was going to be just a record-smashing year for us. [After

the pandemic hit,] it was very probable that our revenue could fall by 100%.” The company started the year with the largest pipeline of space it ever had, Sarva said, adding, “If we had known that everything would have been shut down, we wouldn’t have had as much inventory on hand.” On March 27 Knotel cut nearly half of its 400-person staff through layoffs and furloughs. At the same time it was making other cuts, including giving up space for the first time ever. Knotel secured a $7 million Paycheck Protection Program loan in April. But it wasn’t enough to keep the firm above water. Lawsuits kept piling up from landlords including ABS Partners, BEB Capital, Charter Management Group, RXR Realty and even Brooks Brothers owner Claudio Del Vecchio. Faced with all that legal action, the company was still looking at the bright side. Spokeswoman Icy Chiou said, “Knotel is always evaluating and adjusting our portfolio to best meet the needs of our customers, through Covid-19 and beyond, and we have reached positive resolutions with many owners.” Chiou is no longer with the company. But months of empty spaces and demands for millions of dollars from landlords who were running out of patience began raising eyebrows. The clock was ticking, and Sarva’s promised survival was looking less and less likely.

Bankruptcy Not only did Knotel’s gamble bring on its downfall, but it could have a domino effect on the commercial real estate industry. The company is behind at least 40 commercial mortgage-backed-security loans totaling $2.6 billion, according to analytics firm Trepp. Twenty-five are backed by properties in New York City, and two of those loans are at least 90 days past due: 29 W. 35th St. and 6–8 W. 28th St.

By the middle of last year, Midtown, which was Knotel’s dominant submarket, was deserted. Commercial buildings were reporting occupancies of less than 5%— which grew only to 10% past Labor Day. Still, even with bankruptcy looming, Sarva seemed hopeful. “It has been a super-challenging year, but I think we’re past the worst part of it,” he said. “We’re not yet out of the woods, but I think we survived the most intense challenge, and that gives me a lot of confidence, actually.” Behind Sarva’s rosy outlook, things were getting darker. The firm was already exploring its options, according to bankruptcy papers. In November Knotel hired Moelis & Co. to “serve as its investment banker and restructuring adviser, and to assist [Knotel] in their evaluation and pursuit of strategic opportunities,” Jureller said. Newmark agreed to take matters into its own hands and buy the company through Chapter 11 proceedings. Knotel’s new owner would try to keep many—if not most—of the company’s current employees on the payroll, according to a notice filed this month with the Department of Labor. The sale is expected to close next month, the same notice said. “We look forward to supporting Knotel through this difficult period,” Newmark Chief Executive Barry Gosin said. “We are providing capital to Knotel so it can rightsize its business for the path forward.” “Our restructuring will enable us to strengthen our balance sheet, focus on a rightsized portfolio of locations and maintain relationships with our customer base while continuing to build on Knotel’s differentiated service offering,” Sarva said in his company’s announcement. This is the end of Knotel as Sarva knows it, but his glasses remain rose-tinted. “We continue to believe in Knotel’s potential in the growing flex market,” he said. ■

OUT OF OFFICE MARK’S OFF MADISON LOCATION 41 Madison Ave., with the door on 26th Street HOURS Dinner: 5 p.m. to 10 p.m. Tuesday through Saturday; Brunch: 11 a.m. to 5 p.m. Saturday and Sunday SIGNATURE DISHES Homemade bread basket ($6) Ciabatta prime rib French dip sandwich au jus: Served with homemade potato chips or Belgian fries with garlic aioli, calypso sauce and ketchup ($10) Mark’s classic chopped chicken sandwich: Roasted chicken with bibb lettuce, avocado, onion, tomato, string beans and pears, tossed with Dijon mustard balsamic dressing ($26) Straussie’s bagels and home-cured, oldfashioned lox platter ($24)

ALEX STANILOFF

MARK’S OFF MADISON

Adapting to diners’ casual tastes

Mark’s Off Madison keeps the crowd pleasers but ditches the fancy stuff

stelle’s chicken soup. The O.G. Madison salad. Belgian fries. These dishes were so popular at Freds at Barneys, where Mark Strausman was chef for 24 years, that he brought them with him when he opened a new restaurant farther downtown in November. Even before Barneys filed for bankruptcy in 2019, Strausman had been looking for a new venture where he could exercise creativity in the kitchen. At Mark’s Off Madison, that shows

up in the form of new dishes, such as the prime rib French dip sandwich, and an in-house bakery that makes bagels and European-style breads. But he also sought to be creative on the business side. Looking out from Freds, where the food seemed cheap in comparison to the prices of the clothes on the floors below, he noticed a change among diners. “The world wanted more casual,” he said. But “dinner for two people was always $120. I thought there was

something wrong with that when you just wanted to go out and get something to eat.” He decided to create a place where prices stayed reasonable, toning down the fancy service and keeping portion sizes in check. But “we take the food as seriously as a Michelin- star restaurant,” he said. The in-house bakery was part of both the food and business plan. Strausman figured that it would take a while to perfect bakery operations,

and the Covid lockdown gave him that time. Bakery sales account for more of the revenue than he’d expected, thanks to the bagels, which make excellent takeout options. Strausman serves them at brunch with platters of homemade lox, whitefish salad, Nova salmon or eggs. Even with takeout and 50 outdoor seats, sales so far are only about one-quarter of what he had planned in 2019. Still, he has faith that now that indoor dining is available, patrons will come in, and not just for his Madison salad—chopped greens with Italian tuna, vegetables, legumes and tomatoes—which has a fan following. In the meantime, he is comfortable with reopening slowly. “We’re lucky,” he said. “We have a landlord who understands that the investment put into the space is worth its weight in gold.” — Cara Eisenpress

RESTAURANT NEWS AND NOTES DAGON

DAGON 5 p.m. to 10 p.m. daily The Israeli chef opening this Upper West Side restaurant wants to celebrate the flavors of the Middle East creatively. There’s an array of mezze, such as whipped eggplant with tahini and preserved lemon compote, small plates like hummus with a soft-boiled egg and tomato jam, and main dishes such as harissa barbecue chicken. The owners, also from Israel, are the longtime New York restaurateurs behind Nice Matin, Five Napkin

Burger and a vegan falafel spot that opened on the Upper East Side last summer. 2454 Broadway, Upper West Side

a fish curry from West Benghal. Paneer (a kind of cheese) is grilled at Dhamaka and served as ajwani paneer tikka. 88 Essex St., Lower East Side

DHAMAKA 5 p.m. to 10 p.m. Tuesday through Sunday This new restaurant in the redeveloped Essex Market was planned long before the pandemic as a way to celebrate regional Indian home cooking. The idea, from the owners of successful spots Masalawala, Rahi and Adda Indian Canteen, is to bring Indian food to a larger audience. Dishes include DHAMAKA macher jhol,

HACHI MAKI Noon to 10 p.m. daily Specializing in temaki sushi (hand rolls) and ramen, Hachi Maki is owned by the same restaurateur as comfort food stalwart Good Enough to Eat, which is next door. Fish swimming upstream have been painted on the walls, perhaps aimed at conveying to customers a little lightness and optimism. The temaki come in sets of at least three and

include fillings such as mackerel with pickled and fried ginger, sake-poached shrimp with chili oil and salmon avocado. All the ramen dishes are available vegetarian. Currently there are 19 indoor seats at 25% capacity and 40 outdoors. 522 Columbus Ave., Upper West Side XILONEN 10 a.m. to 9 p.m. daily At this all-vegetarian Mexican restaurant, tostadas are filled with carrots, chilies and pinto beans, and tacos are stuffed with purple potatoes and grilled cheese. Three-quarters of the menu is vegan, as the chef-owner, who is enrolled in a sustainable studies program, aims to convince diners that meat-free eating is delicious. Sourcing is deliberate, with corn from a company that buys directly from

farmers. Eventually, Xilonen will offer an all-vegan tasting menu. 905 Lormier St., Greenpoint PECKING HOUSE Delivery and pickup only 7:30 to 8:30 p.m. Wednesday through Sunday A former sous chef at Eleven Madison Park has gone back to his family’s business, Peking House, to reinvent the nowclosed restaurant as a pop-up offering one dish: chili-fried chicken. It has been buttermilk brined, deep fried and sprinkled with Tianjin chilies and Szechuan peppercorns. Sides include “dirty” fried rice, sweet potatoes with almond pesto and bacon, and roasted Brussels sprout salad. Orders must be placed at peckinghouse.com in advance. 185-23 Union Turnpike, Flushing — C.E.

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