What's the Deal? | Eric Brody Shares Insights into 30 Kent Street

How did you get into real estate and eventually become the Managing Partner at ANAX Real Estate Partners? 

My journey into real estate was influenced significantly by my father, who was an architect. In architecture, especially in New York City, the creative process is often constrained by zoning regulations, building codes, and extravagant client visions. This lack of artistic freedom, combined with the high-risk environment of a litigious city, led my father to believe that the rewards of designing were not worth the risks. He often advised me, "Don't ever design...too much risk, you should build and develop" 

I initially started by working for my father's architecture firm, learning the ropes of the city, design, and construction from an engineering and architecture lens before deciding to attend a construction school post-college. This was during a time when many were shying away from construction, but I saw an opportunity. Expertise and trustworthiness are critical in this field, and while dependability comes with time, expertise can be acquired. I immersed myself in the subject, attending classes nightly and applying what I learned in real-world scenarios. This hands-on experience was invaluable and set the foundation for my career as a real estate developer and investor. 

Can you explain what ANAX Real Estate Partners does? 

ANAX Real Estate Partners is a capital advisory and consulting firm, not a developer per se. Although I have developed 40 projects in New York, our focus at ANAX is on providing strategic advice and capital solutions. Our second line of business is when a bank has foreclosed on an asset and decides to complete the business plan but needs more in-house capability. These lenders must decide whether to sell assets at a discount or complete them to capture full value. We help them achieve the latter by bringing projects to completion. 

Our role also extends to supporting developers struggling to raise equity and GP capital, especially as rising interest rates make many projects financially unfeasible. My experience with foreclosures led me to explore data analytics, which revealed significant market insights that contradicted capital market trends. This discovery prompted me to dive deeper into real estate tech, ultimately leading to the creation of a venture fund (ANAX Ventures) and a prop tech podcast (Real Tech Talk). We aim to bridge the gap between domain expertise and technology in the capital advisory space. 

What attracted you to the 30 Kent Street project? 

30 Kent Street is an 80-unit rental project with two retail spaces located on the Greenpoint waterfront. Developing multifamily rentals in New York is challenging unless you have massive scale or operate as a REIT with long-term return expectations. In this case, the land had been owned by a family since the 1980s, benefiting from substantial 

appreciation. The family wanted to partner with a developer but faced difficulties due to the preference of most capital funds for finite deployment periods. 

When they approached us, we saw an opportunity in this irreplaceable waterfront location. We were willing to partner with them without a fixed return in mind, which allowed us to negotiate a favorable land value discount. This arrangement enabled us to develop a rental asset that provided a return on the equity invested. Despite rising interest rates, we successfully stabilized the asset and secured permanent financing, making it a successful project. 

How did you manage to secure financing for 30 Kent Street? 

Securing financing required navigating lenders' focus on loan-to-cost ratios (LTC) and the challenge of recognizing the appreciated value of the land. Fortunately, the land's significant appreciation and its prime location meant we needed less equity for the deal. This allowed us to obtain a standard construction loan from a reputable bank at lower rates. Despite favorable conditions, the project still faced challenges, such as the rising interest rates, which have continued to make executing new deals more challenging. 

What adjustments have you made in response to current market conditions? 

Adapting to current market conditions involves several strategies. First, it's crucial to evaluate projects based on today's reality, considering the true cost of capital and realistic projections. If an asset's underwriting makes sense under current conditions, it's a project worth pursuing. 

Second, we are leveraging technology to improve efficiency and transparency across all stages of development. This includes innovative workflows and technological integrations to streamline investing, construction, and marketing processes. Each project now incorporates these advancements to enhance overall execution. 

Was prop tech implemented in the 30 Kent Street project? 

Yes, prop tech was integrated into the 30 Kent Street project. However, the rapid pace of technological advancement means that what was cutting-edge then may be outdated now. We utilized app-based management systems and advanced access control, but the key is to design infrastructure that can adapt to new technologies as they emerge. 

What are the key takeaways from the 30 Kent Street project? 

Real estate development is inherently challenging and often depends on factors beyond our control, such as timing and market conditions. The key takeaway is that while a well-executed business plan is crucial, external factors can significantly impact a project's success. Developers need to commit fully to their thesis and be prepared to take calculated risks. Being bold and decisive is essential. 

What advice would you give to aspiring real estate developers? 

Development is fundamentally an investment game requiring significant capital. It's challenging to raise funds without first putting your own money at risk. Therefore, having a stable revenue stream is essential. Developing a vision and acquiring the necessary skills and knowledge are equally important. 

Real estate development requires the ability to process complexities and lead effectively. Success hinges on leadership, as developers are responsible for guiding lenders, contractors, and other stakeholders. It's a role that demands care, decisiveness, and a results-oriented approach. In this Machiavellian business, success is measured by completed projects, and being bold in your execution is crucial. 

 

Traded Student Ambassador Program

This interview was conducted through Traded’s Ambassador Program in collaboration with Thomas Deruvo of Ruthger's University

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