In Conversation With… Brooklyn Chamber of Commerce
June 10, 2009
In Conversation with… Brian T. Coleman
CEO, Greenpoint Manufacturing and Design Center
The Greenpoint Manufacturing and Design Center (GMDC) is the premier nonprofit industrial developer in New York City. Since its inception in 1992, GMDC has rehabilitated six North Brooklyn manufacturing buildings for occupancy by small manufacturing enterprises, artisans and artists. Currently GMDC owns and manages five of these properties, which together represent more than half a million square feet of space.
Progress Express: What makes these properties work for Brooklyn manufacturers and artisans?
Brian Coleman: Small manufacturers want to be in GMDC properties for three reasons: 1) GMDC offers long term stability to the business. Our minimum lease is for five years with an option for five years, that’s generally not available in the market today. A survey of our tenants found that more than half of those businesses had moved two or more times in the five years prior to making their home at a GMDC facility. Most of these businesses come to us having been in month to month or year to year lease arrangements that gave them no stability. 2) Our lease terms are below market. We intentionally set our rates slightly below the market, but the market has been so heated up until recently that our rates have often been much more than slightly below market. Finally, 3) we are benevolent landlords. We care for our tenants, we work with them, and we help them.
PE: Where do GMDC tenants draw their workforce from?
BC: Prior to an extensive survey of our tenants, we always said anecdotally that our businesses hired community residents that surround our facilities as their employees. After the survey we knew this to be fact, and a mapping of the zip codes of the 500+ people that are employed in our facilities shows heavy concentrations directly around the locations of our buildings. The connection to the community, literally by providing residents jobs, is why I believe our facilities are so accepted by the neighborhoods in which they exist. Half of the employees in our buildings live in Brooklyn, and 94% live in New York City.
PE: Why are opportunities like those GMDC offers necessary?
BC: We all know that manufacturing in Brooklyn and New York City is not what it used to be, but we also know that manufacturing is still a viable sector that provides over 80,000 jobs. GMDC provides homes to manufacturers that provide high quality jobs to their workforce. Manufacturing jobs have always provided the immigrant community an entryway to the middle class and GMDC businesses still do. Fifty one percent of the employees of GMDC businesses speak English as a second language, and the average salary of these workers is $40,000 per year.
Brooklyn, particularly North Brooklyn where our facilities are located, has always been a manufacturing center. GMDC’s buildings are a link to this history, but house the modern day urban manufacturer. Our tenants aren’t large scale widget manufacturers churning out a mass produced product, they are small custom manufacturers creating high end products for a local market. Frankly, our tenants are also cleaner and greener than the large scale manufacturers who dominated our city were.
PE: How can this benefit the borough’s economy?
BC: Our facilities are home to over one hundred businesses that employ over 500 people; that in itself is significant to Brooklyn’s economy. Since we know that half of the employees live in Brooklyn, and most of the business owners do too, the salaries and income generated by these businesses are being recycled into the local economy.
We also know that our tenants source much of their goods and services locally in Brooklyn and certainly in New York City; this has another significant local economic effect.
Finally, the actual development of our facilities has significant economic effects on the local economy. An IMPLAN analysis of our latest project, 221 McKibbin Street, showed that the project created 101 construction jobs, $4.4 million in construction wages, and $1.4 million in local, state and federal taxes.
PE: Tell us about some recent historical preservation honors GMDC has received.
BC: Our most recent project at 221 McKibbin Street has been placed on the National Register of Historic Places, which allowed us to rehabilitate the building using a combination of Historic Tax Credits and New Markets Tax Credits. The Brooklyn Chamber of Commerce will be recognizing GMDC at the 2009 Building Brooklyn Awards, giving our 221 McKibbin Street project an award in the category of historic preservation.
Last month at a viewing on Capitol Hill, the National Development Council recognized our McKibbin Street project in the area of job creation. 221 McKibbin competed with over two hundred economic development projects from all over the United States for recognition.
PE: How does an organization like GMDC balance preservation and progress?
BC: Given the very poor condition of 221 McKibbin Street prior to the renovation, GMDC made a significant commitment to preservation in choosing to save the historic buildings. Combining the Historic Preservation Tax Credits with the New Markets Tax Credits created a powerful tool that allowed GMDC to turn dilapidated historic structures into a solid industrial center for small businesses in North Brooklyn Industrial Business Zone. The credits infused over $4 million of additional equity into the project, ultimately making the preservation of the building a key in creating a stable home where manufacturing enterprises can grow their business.
PE: How is that important to Brooklyn as a whole?
BC: Prior to its renovation, 221 McKibbin Street was in a state of extreme disrepair and was largely inactive for several years. The residential population surrounding the building – including middle-income and rental housing on McKibbin Street and public housing on Bushwick Avenue – had little interaction with the property. The renovated building has not only brought new activity and jobs to McKibbin Street; it has created an interaction between the building and this mixed-use block. The building harnesses the creative and productive energy of the area, and demonstrates that not all investments in industrial buildings have to be conversions to non-industrial uses.
PE: Has the economic downturn affected how GMDC operates, and have you learned anything from it?
BC: GMDC operates in a fairly conservative manner. Our Board and I have situated the organization to be in a strong financial position so our conservatism has proved to be a real plus, particularly in the market in which we operate today. Over the last six years we’ve consistently reduced our debt and lowered our carrying costs, a somewhat contrarian approach to what most others were doing. While the rest of the real estate community benefited greatly over the last five or so years, we’ve pretty much stayed on the sidelines because acquisition costs were such that we couldn’t purchase and renovate a building and offer reasonable rents to an industrial user.
Our McKibbin Street project was an exception, but frankly we were only able to purchase the building because it was in very poor condition and therefore the acquisition price was reasonable, particularly for the times. In addition, despite acquiring the building at a decent price, we were forced to leverage tax credits to actually get the project done. We’re hoping we can take advantage of a downturn in the market, but there don’t appear to be any bargains out their yet.
We’ve learned that our careful approach may not have allowed us to participate in the significant upside that many in the real estate industry benefited from, honestly this would have pulled us away from our mission, but we also know at the same time that we’re still standing and we’re strong enough to move forward as the economy improves. Actually this summer we’ll be building out the last 30,000 square feet of industrial space at our Manhattan Avenue facility in order to take advantage of what we believe will be considerably lower construction costs.
PE: What kind of feedback do you hear from GMDC tenants?
BC: Fortunately, most of our tenants are doing ok. A few have suffered significantly, but they appear to be in the minority. Our tenants tell me that they are working for smaller margins, but are happy to accept them in order to continue working and retain their clients and very skilled workers. A very common theme from virtually all of our tenants is that their clients are slow paying. Interestingly, a small group of our tenant businesses seem to be completely immune to the downturn in the economy. These tenants typically produce very high end goods that are still in demand at non-discounted prices. I’m most concerned about how our tenants will be fairing at the end of the year, or early next year, after the work that they have had lined up gets finished and whether or not new work begins to come in. After 9/11 GMDC tenants did ok, but the crisis didn’t really affect many of the businesses until 2003, when their orders were completed and there was no new work available.
PE: What would you like to see GMDC do in the coming year?
BC: As I said, I hope that a downturn in the market may make new development opportunities available to us, but we really don’t see much out there right now. Instead we’ll look inward and continue to make improvements to our existing facilities. We’re embarking on a plan to expand our solar capacity, enlarging what is currently the largest commercial solar power system in the City of New York. In addition, we’re also looking to make numerous energy efficiency upgrades to our existing facilities to both save money and to reduce our carbon footprint.
