PROFILE
L+M’s secret weapon
The billion-dollar developer, one of only a few straddling the low-income and market-rate worlds, grows despite uncertain real estate climate BY CANDACE TAYLOR n 1998, L+M Development Partners started its first affordable housing project on West 148th Street, between Adam Clayton Powell and Frederick Douglass boulevards. At the time, the vacant block was inhabited solely by boarded-up, graffiti-scrawled buildings, abandoned by their owners in the ’60s and ’70s. In the middle of the block sat P.S. 90, a Collegiate Gothic-style structure built in 1907 by architect Charles Snyder. Unused by school-
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individual apartments during the co-op craze of the 1980s, then moved into small affordable housing projects, and finally into high-profile condo projects like Northside Piers in Williamsburg, the 249-unit Kalahari in Harlem and Brooklyn’s Columbia Commons, which completed a rapid sellout this spring. “Part of the reason I think we’ve been successful in this business is because we have evolved,” L+M CEO Moelis told The Real Deal during an interview last month.
Like all developers, L+M took its share of hard knocks after the financial crisis, with slow sales at Northside Piers and PS90. But L+M has a few key advantages: Unlike most developers, it has its own construction arm, which helps keep costs down and provides an additional revenue stream when times get tough. And, it’s one of only a few firms to do both affordable and market-rate development, often in the same project. “There’s only a handful of people who do both,” explained Toll Brothers’ David Von
L+M CEO Ron Moelis shooting hoops in his new office at 419 Park Avenue South, which the company moved into to accommodate the 40 new employees it’s hired since 2008
“We were very busy right after the crash,” Moelis said. “Affordable housing ... was still good business, because it wasn’t market oriented.” children for 30 years, the building’s windowpanes were broken or missing, and its stone gargoyles tarnished. Trees sprouted amid overturned desks. This spring, a buyer paid $1.13 million for a three-bedroom combination apartment in the P.S. 90 building — restored and converted to condos by L+M. Over the past several decades, L+M’s stature has grown along with the real estate prices in New York City. Since its inception, the company has built more than 8,000 units — or some $2 billion worth — of affordable and market-rate housing in the New York area. Company founders Ron Moelis and Sandy Loewentheil started out flipping
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“Every five to seven years, I think you have to sort of look at what the world is doing, see where the motion is going.” That strategy has served him well. At a time when most development companies are cutting back, L+M is growing. To accommodate about 40 new employees it’s hired since 2008, the company recently moved into a new 8,000-square-foot office at 419 Park Avenue South, Moelis said. L+M is also expanding its operations outside of New York for the first time, Moelis said, with a project in New Orleans and potential deals in San Francisco and New Jersey. The company is also planning to start construction this spring on a new condo in Harlem, one of only a few to rise in the post-Lehman era.
Spreckelsen, who partnered with L+M at Northside Piers. That ability is increasingly in demand, he noted, now that changes to the city’s 421-a tax incentive program require developers to build affordable housing on the site of their market-rate projects, rather than off-site, in order to qualify for tax breaks. Moelis is “a star in the world of affordable housing,” said developer Jonathan Rose, founder of the Jonathan Rose Companies (see related story on Rose on page 26). “He’s one of the industry leaders.”
The ‘messy stuff’ In May 2010, the 42-unit new condominium Columbia Commons hit the market in
Brooklyn, along with its accompanying 95-unit, income-restricted rental portion, the Columbia Hicks Apartments. It was a less-than-promising start. L+M had closed on the financing for the deal in October 2008, just as the Lehman Brothers bankruptcy was wreaking havoc on the real estate market. Neighbors had come out in droves to protest the demolition of the historic Hamberger Christmas Display factory to make way for the project. And as sales started, the project was criticized for having “an unfortunate BQE proximity,” as the blog Curbed put it. Being on the “wrong side” of the highway put it not in desirable Cobble Hill, but in the up-and-coming Columbia Street Waterfront District. So L+M surprised the industry when it announced in May 2011 that the last Columbia Commons unit had gone into contract, making it one of the fastest-selling — if not the fastest-selling — new developments since Lehman crashed. Moelis said he’d initially selected the site because “it was in a desirable school district, and we thought it would hold up.” Still, he was “pleasantly surprised” when the units sold briskly at prices of roughly $700 per square foot — slightly lower than the $750 he’d hoped for when the project was designed, but higher than expected after the market crash. (By contrast, units at Northside Piers sold for roughly $750 per square foot, compared to the projected $900, Moelis said.) Columbia Commons “was a very successful project,” Moelis said. “We made a nice, good return. Not a home run, but for that market, we made good returns.” This spring, he’s hoping for similar success in Harlem. On 116th Street between Malcolm X Boulevard and Fifth Avenue, L+M will soon start construction on a two-building project with 100 affordable rental units and 85 marketrate condos, Moelis said. Because the project is across the street from the Kalahari, it’s playfully called “K2” inhouse, though it doesn’t have an official name or address yet. The company also recently bought the note on a property in Long Island City and is planning a 180-unit 80-20
PHOTOGRAPH FOR THE REAL DEAL BY CHRIS MARTIN