Steve Witkoff: NY, If You Can “Make It” Here…

NEW YORK CITY—As the keynote presentation at Anchin’s 5th Annual Construction and Development Forum, Steve Witkoff, the founder, chair and CEO of the Witkoff Group and his wife Lauren, the EVP, sales & marketing at the firm, discussed what it takes to “make it” or build in New York City and elsewhere in the country. The following edited excerpts highlight their Q&A held at the New York Academy of Sciences at 7 World Trade Center in Lower Manhattan on Wednesday.

Lauren: Can you talk about how you built the company?

Steve: I was a lawyer. I met Larry Gluck who is still my very good friend and we started a company called Stellar Management. It stood for Steve and Larry. We started buying in Washington Heights, and the Northwest Bronx.

Those were my proudest moments when the two of us would go up there. We were exceptional landlords. We had no money. It didn’t matter. We lived very modestly. We were just intent on growing this portfolio because we didn’t want to go back and practice law.

The legal degree was fabulous and critical to my career. But I was so enamored with the real estate business. That’s how I started and we just stuck with it and steadily built up our portfolio. Lots of hard work, a ton of luck and here we are today.

Lauren: What’s best strategy for developers in this market?

Steve: You really have to understand data because this is one complicated, sophisticated market. You have to understand who needs what and why. What’s trading out there? What do people want? People are very competitive today. It’s not just the condominium market. It’s also the office building market.

But if you deliver quality products then ultimately those prices sustain themselves.

Lauren: What are some of the most difficult challenges?

Steve: Construction financing is tough to get today. We are a pristine borrower with a 32-year career. Never lost a building. Never missed a payment. Never had a foreclosure. And it’s even getting difficult for people like us. Why? Because the lenders are getting nervous. They see on these kind of condo projects the sale schedules haven’t been extended. Ultimately you will see inventory go down.

Lauren: How does this compare with other markets?

Steve: We look at Miami and it’s a tough market to play in because there is an overhang of so much inventory. But when that inventory burns off—and this gets to knowing the data—people want to be in that marketplace. It’s got a strong arts component, great restaurants, great weather, two hours from New York, capital of Latin America. Yet nobody wants to buy there today because the price points are so low due to the big inventory overhang. But long-term we believe in Miami.

Lauren:  Can you talk about where you see opportunities on the West Coast?

Steve: We bought in West Hollywood and Santa Monica because they are both anti-development areas. Santa Monica might be the toughest submarket in the country to get entitlements and to get building permits. We want to operate if we can in those marketplaces because it creates huge inefficiencies. Do I agree with the anti-development sentiments in these locations? No, I don’t agree with it. I think it’s terrible. But those markets are a developer’s dream if you can get your hands on land and those entitlement packages.

West Hollywood, Santa Monica, they’re a little bit like the West Village. If everybody recalls they downzoned the West Village. We had land at 150 Charles at the time. I thought it [the downzoning] was crazy. But I knew it was going to help us because there would be less supply in the marketplace. It’s wonderful for the resale value of 150 Charles.

Lauren: Can you talk about some of the challenges of building in New York versus in California?

Steve: When you can operate in New York City you learn so much. This is the place where you learn how to please the customer, how to stand behind your product. We delivered 150 Charles five years ago but we still do work on the property. Same as at Madison Square West.

In Los Angeles, weather patterns are great. You don’t have these crazy cold days where you have to shut down your projects. You can’t take as much of a down payment. But the fact is if you don’t deliver right then people are not going to buy. If you do deliver right, the economics are there and the economy is there. We are confident that people are going to buy from you.

At the Edition, the hotel and residence project in West Hollywood, we only have 20 apartments to sell. We sold 16 in 60 days. That’s how fast the product went.

Lauren: People in New York are used to vertical living. But it’s new to Los Angeles. Can you describe how people feel about it?

Steve: As people get older and the kids are gone, we see a lot of people who would rather live in an apartment, not have to tend to a lawn, pool maintenance and so forth. Vertical living is coming everywhere. It’s coming to Detroit.

Laurent:  As part of our West Hollywood project, we incorporated indoor/outdoor living. Was it important to give people used to living in houses a component of outdoor living?

Steve: Every single apartment has windows, big glass doors.

In Santa Monica, the buildings will have a rooftop park. It’s 50,000 square feet of outdoor space on four roofs which are completely interconnected. You can take an elevator upstairs and experience an outdoor barbecue, cinema and dog walk.

Lauren: Where’s the next place you’d like to do projects?

Steve: In Las Vegas, Steve Wynn invited me to dinner. He was so gracious. The first comment he made was it’s hard to build in Las Vegas and he would help me in any way.

I said, “Steve, if you can build in New York you can almost build anywhere.” New York is a tough place to navigate, with the community groups, the ULURP procedures, union labor, non-union labor. That’s the reason we feel comfortable on the West Coast.

[In 2017, the Witkoff Group acquired the Fontainebleau Las Vegas resort and casino from Carl Icahn for $600 million. The firm is renovating and rebranding it The Drew.]

Our development in Las Vegas is named after our son Andrew who died. So this is to us a legacy project and a passion project. It’s going to allow us to do some wonderful and positive things for the community, for kids in distress. And we’re creating what could be 13,000 jobs. Because of the emotion that we’ve attached to that project we have to get it right. It’s a $3 billion dollar project, so we have to let our partners know that we are focused on it and it’s going to get our total attention.