The Closing: James Patchett

James Patchett has been in the room for some of New York City’s most consequential real estate moments in a generation — both megadeals that happened and those that came agonizingly close.

As chief of staff to Deputy Mayor Alicia Glen, he played a key role in the $5.45 billion sale of Stuyvesant Town in 2015 to the Blackstone Group, a transaction that led to the permanent preservation of 5,000 affordable housing units. Four years later, as head of the New York City Economic Development Corporation, he was part of the core team that saw New York lose Amazon’s much-ballyhooed HQ2 campus to Virginia. (On that deal, Patchett tried everything, including some mild espionage.)

His work has also thrust him into controversy. In 2016, he desperately tried to undo a controversial deal that Allure Group had made with the city to get a deed restriction lifted on Rivington House, a Lower East Side nursing home. The deal, which allowed Allure to sell the building as a luxury condo conversion opportunity, was seen as a black mark for the de Blasio administration’s affordable housing mandate.

At EDC, he helped launch the city’s subsidized ferry system, promoted the nascent life-sciences industry and spearheaded the effort to produce protective equipment in the early days of the Covid pandemic.

Now, after seven years in government, Patchett has jumped into the thick of the pending eviction crisis and is investing in the city’s housing future — this time from the private sector.

This April, he became CEO of A&E Real Estate, the firm Douglas Eisenberg and John Arrillaga Jr. founded in 2011 and grew into one of the city’s biggest residential landlords.

The company owns some 15,000 units spread across 250 buildings. Many of the buildings are what’s considered workforce housing or are in some way regulated, making them particularly vulnerable to the city’s rent reforms as well as the fallout from the pandemic.

As Patchett works through the challenges, he’s also raising a new $1 billion fund to invest in housing. During an interview at A&E’s Bryant Park office in July, Patchett discussed the spy-vs.-spy game with Amazon, getting grilled at City Council meetings and the future of New York’s housing market.

Born: November 13, 1979
Lives: Crown Heights, Brooklyn
Hometown: New Jersey
Family: Married, two children

 

How does it feel to be back in the private sector?

It is different. My last 12 months at EDC were essentially the first 12 months of Covid. So that was a very intense period with work that I had never thought I would end up doing there. I was consumed with “How are we going to make enough face masks to make sure that doctors are at the hospital and able to be safe while they are caring for Covid patients?”

It is definitely a change of pace being in the private sector where day in and day out we are thinking really specifically about our buildings and our residents and our investments.

How have Covid and the eviction moratorium impacted the business?

We are super focused on getting as many of our residents as possible signed up for the state’s rental assistance program. We have a lot of residents who mostly speak Spanish, and the state’s resources in Spanish are not that good. The website is incredibly confusing. It is 20 pages you have to click through. Filling out the rental assistance is harder than doing your taxes, and if it is in a different language it is almost impossible.

Do you think you have more or less patience for bureaucracy than the average real estate executive because of your background?

I have more appreciation for how hard it is to be someone in government. On the other hand, it can be shocking to see how long things take that shouldn’t be that complicated. I think one of the main things that I have more appreciation for is just the fact that every government agency is quite understaffed, just because it is always hard to hire and retain people in government, especially during Covid. I just remember that my people were incredibly exhausted and overworked. So I tend to have a lot of sympathy for the individual government employee who has probably got 100 things on their plate and only time for five of them on any given day.

And you may know some of them, right? If you see a problem with the state’s rental assistance program you will be like, “Oh yeah, but Joe is a good guy.”

I may not know the person I am directly involved with, but I may know the commissioner and think highly of them. And so, by extension, I give a little more slack to the person who is on the ground dealing with your application.

I have tried in my time to not have any direct contact with people who I knew in government, just because it is not how I want to approach it.

There’s always been this revolving door between city government and real estate. Do you have any concerns about being part of that?

The expectation can’t be that if you go into government, you can’t ever leave again, which is sort of implicit in the assumption that it is a revolving door. I went into government because I wanted to do the work and I cared about the work. And I left when I felt like I had more than done my duty to my city.

You knew Douglas Eisenberg from the Riverton deal. [The city helped broker the $201 million sale of the 1,200-unit Harlem housing complex in 2015.]

He and I actually spent a fair number of late nights meeting with the tenant’s association in Riverton and talking them through the prospect of doing this large-scale affordable housing preservation transaction. But we had spoken very little in the interim between then and when he reached out to me about possibly joining the company.

I do crave something that is mission-driven, which is why I’m here. I think investing in housing and neighborhoods in this way is incredibly important. It is what I did at Goldman, and I went there because I believed in the mission. And I had an opportunity to go to government, and every day I was working on trying to make the city a better place. I think there is a way to do that in the private sector, too.

In 2017, A&E was facing allegations of tenant harassment and Eisenberg said A&E was going through growing pains. Is that still the case?

I don’t know if it is going through growing pains, but it is definitely growing.

When you own 15,000 apartments in New York City, it is a big job to make sure you are doing right by your residents all the time. It is certainly my top priority to make sure that happens. We have a much more efficient and effective organization than we would have had five years ago. But we are still growing, and that is one of the things that is exciting about it.

Did you ever feel like you were in over your head?

Not really. But that was one of the reasons why I think it is important to have people who come from the private sector working in government. I had done a ton of real estate deals beforehand. I knew how to negotiate terms. I wasn’t going to get bamboozled and make an agreement that didn’t make sense.

I’m sure there are things that I didn’t know, but I felt way more comfortable negotiating the Stuy Town deal than I did trying to navigate politics in my first months at City Hall.

What about Amazon? When you look back at it now, is there anything that you would have done differently?

I’m incredibly proud of the work that we did on Amazon. It was our job to sell New York, and if it had not been for the work that our team at EDC did, there is no way that they would have been serious about New York City.

We gave an incredible tour; we never allowed them to walk from the 7 train to the Long Island City waterfront, which is actually like 15 minutes. But they never figured that out because we took them on a boat and we took them by van, but we never walked.

When we were down to just a few finalists and we wanted to know what our competition was, I had a couple of my team members secretly following the team from Amazon to Penn Station to see what train they got on. So that was how we figured they were also considering D.C., because they took the train to D.C., not to Boston.

Were these interns, or people trained in corporate espionage?

They were not trained spies, but one of them had worked in foreign affairs, so I think she got a little kick out of it.

Tell us about some of your big deals like Stuy Town.

When the time came I ended up negotiating an agreement with [Blackstone] to keep 5,000 units of Stuy Town permanently affordable. I think it is the largest residential complex in the country, and certainly one of the largest residential deals in history. To be able to be directly involved in the negotiations around that was a pretty cool experience.

What’s your takeaway from Rivington House?

I wasn’t involved in that at all.

Did you ask Allure Group to change its plans?

I had zero involvement in the transaction itself or any of the associated dealings with the agency that directly managed it. I was asked to make one phone call to the purchasers after the deal was completed to see if they would consider it and they said no. I think I spent a total of about 15 minutes on it.

Were you surprised when there was a story about it?

The New York Post is never a surprise.

Did you ever get grilled at City Council hearings?

I was definitely very nervous when I started dealing with those kinds of things, but over time you figure out how to handle it. I had great relationships with almost everyone on the City Council, so that helps. When you know the people personally, it makes a big difference.

Was there anything that you felt you left on the table?

One of the things that a predecessor of mine at EDC said was that it is not a marathon and it is not a sprint; it is more of a relay race. You are constantly handing off things from one leadership and administration to the next, because the reality is that things don’t get done in the timeframe of four-year increments associated with mayoral administrations. There were absolutely things that I would have loved to have seen get done. But I think even if I had wanted to see everything I had started get done, I never would have been able to leave.

What are you most proud of during your tenure?

It’s harder to be more proud of anything than I am of the 10 million pieces of personal protective equipment that we produced: face shields, hospital gowns, test kits. This was a time of serious crisis. We built ventilators. There is no doubt that we saved lives during that time. It is not something you usually get to do in economic development.

What do you miss most about it? Your chauffeur?

I did have a driver — that was nice. But it is probably almost certainly people. When you work with 500 people you develop really close relationships, and then when you leave you try really hard to keep your distance to avoid even the appearance of conflict.

Who were your mentors?

I worked for Alicia Glen for 12 years [at City Hall and previously at Goldman Sachs’ Urban Investment Group], so she has certainly been a really important mentor and a great supporter.

And then both of my parents are incredible mentors to me. Whenever I had any management-related questions, my dad was my first call every single time. And my mom essentially restarted her career in finance after taking care of me for almost 15 years, so I look to her for a lot of that entrepreneurial spirit.

How did you meet your wife?

We went to college together, but we hadn’t seen each other in probably eight years. And then I was at a yoga class on the Upper West Side and we did an hour and a half of sweaty yoga. Twelve years later, we are happily married with two kids.

Were you an only child?

I was, and I am. When I was a kid I probably loved nothing more than baseball. My dad used to take me to Mets games at the old Shea Stadium, and I can name every single player on the ’86 Mets. When I lived in Massachusetts, I became a huge Red Sox fan.

I’m currently trying and utterly failing to get my son to enjoy baseball. I signed him up for baseball in a league and got him all the equipment but hadn’t taught him the rules of baseball, basically because we missed the last 18 months. I blame the pandemic.

How do you juggle fatherhood with your busy schedule?

Covid was a huge challenge for every parent. What I did was I just carved out three hours a week. Every Wednesday morning from 8:00 to 11:00 I prioritized that and just made sure that I made up the extra hours after 8 p.m. or on the weekends.

I had my son and one of his friends in our basement teaching them addition and phonics. I think the English language is about the dumbest thing ever — want to teach it to small kids? There are about 18 different ways that you can say the letter “I.” Just trying to teach that and explain why to a 6-year-old is crazy.

Do you have any extravagances?

No. I own one car; it is a Subaru, and I bought it used because my Volvo station wagon that I got from my parents broke down.

What would EDC President James Patchett say if he walked into a meeting and saw A&E CEO James Patchett sitting there?

I think I might ask why I’m not wearing a tie. And would probably say something like, “Why aren’t people paying more attention to you?” Which is to say when you’re at a government organization, the way that people in a president or commissioner role are perceived is almost like a king. I’m not saying that is healthy, but it is a dynamic that happens.