Two Trees bought most of DUMBO for $12 million — and borrowed every dollar

The short answer to how DUMBO happened: one buyer got the entire neighbourhood from one seller on borrowed money, was then blocked by the city for seventeen years, was rescued by a state agency’s rent cheque, and finally got the zoning changed under a different mayor — after which he converted the buildings one at a time, selling each finished project to fund the next. Everything the reels call a “placemaking playbook” sits on top of those four facts, and every one of them is in the public record.

What is not in the record is the total. No independent tally of the hold exists. Asked in 2006 how much he had made, Walentas said “three or four hundred million. I don’t know, really.”¹ That is the most precise figure anyone has published, and it came from him.

Start with the seller

Harry Helmsley was the largest landlord in New York, and what he was holding between the Brooklyn and Manhattan Bridges was the residue of a dead industry. The blocks had been called Gairville, after Robert Gair, the man who invented the folding cardboard box and built a campus of poured-concrete factories to make them in.²⁸ By the mid-1970s Gair was gone, the shoe and soap and coffee manufacturers were gone, and what was left were half-empty lofts collecting about two dollars a square foot a year.²

Six dollars a foot against two dollars of annual rent looks like a three-year payback, and it was not one. The buildings were half empty, the tenants were the last of a departing industry, and the taxes and upkeep on two million square feet of century-old concrete ran against whatever came in — for years afterwards Walentas could pay neither the taxes nor the debt service.¹ The price was low because the only use the zoning permitted had stopped existing, and the use that would make the buildings valuable was illegal.

The buyer arrived in worse shape than the seller. In December 1977 Walentas’s partner J. Frederic Byers III, a W. R. Grace heir who had brought in every wealthy investor Two Trees had, died in a fall from his 14th-floor apartment on East 79th Street, leaving a note that mentioned business problems.^2,4 Walentas paid Byers’s family $1.8 million for his stake, and found himself cash-poor and cut off from investors who now blamed him for the death.²

So the money came from one place. Jane Walentas had been an art director at Clinique; through her, Walentas got Ronald and Leonard Lauder to put $2 million into a Greenwich Village conversion in 1978. When no bank would touch Brooklyn, the Lauders lent him $6 million more. The agreed price was $6 a square foot including roughly $6 million of debt that came with the buildings.² Leonard Lauder’s explanation is the whole underwriting: “Ronald and I were of the mind that you backed people, not institutions. David was good people.”²

Note what that structure means. The most-quoted acquisition in modern New York real estate — two million square feet for twelve million dollars — involved no equity from the buyer that any source discloses. It was a loan from a family and a mortgage assumed from a seller. Which is also why the next seventeen years were survivable: there was very little of his own capital to lose, and, as he later put it, the mortgage company “didn’t even want to foreclose.”¹

What he actually bought

Roughly two million square feet across ten or eleven buildings, including the four Gair buildings, the largest on the waterfront.^3,4 In 2006 the Times described it as most of a twelve-square-block neighbourhood, with nearly all of the remainder bought later.¹ Site control on that scale is the one genuinely rare thing here, and Walentas was explicit about why it mattered: “You had the freedom to create a neighbourhood. In New York. And whatever you did with one building would add value to the others.”²

Even the name was an asset he acquired rather than invented. Walentas had been converting lofts in SoHo and NoHo, and asked an artist what came next. The answer — “Dumbo, Down Under the Manhattan Bridge Overpass” — had been coined by artists precisely to sound ugly enough to keep developers away.^2,6 He adopted it and put it on the buildings.

Seventeen years of being wrong

The use that would make the buildings valuable was illegal.

Washington Street, DUMBO, in April 2017 — the view to the Manhattan Bridge between converted warehouse blocks. For seventeen years after the purchase, the only use the zoning here permitted was the manufacturing that had already gone.Photo: Redd Angelo (Unsplash), CC0, via Wikimedia Commons

Seventeen years of being wrong

The plan failed twice before it worked. Walentas first saw DUMBO as a retail destination, then as a back-office campus for Wall Street firms expanding out of Manhattan.¹ Lehman Brothers Kuhn Loeb agreed to move operations into the Clock Tower at 1 Main Street, and then walked away.³

The city was the larger problem. In 1982 he was designated by city and state as sole developer of the Empire Stores — the derelict Civil War-era coffee warehouses on the waterfront — and of several city-owned sites, with a package of tax breaks and subsidies attached.^3,5 In March 1984 the designation was pulled, city officials concluding he lacked the financing.³ Walentas has always said the real reason was personal: Ed Koch’s deputy mayor Kenneth Lipper was a friend of Byers and a former Two Trees investor, and blocked him over the suicide. Lipper’s answer was that Walentas was simply unfit for the job.² The Times reported him as “anathema at City Hall” during the Koch years.⁴

He called what followed his “Stalingrad phase.”³ For years he could not pay the taxes or service the debt.¹ Every rezoning he proposed was voted down by the community board; the banks quit; his partners quit.⁷ City Limits, looking back in 2013, catalogued what the fight over the Brooklyn waterfront actually involved: investigations, lawsuits, charges of libel, and a steady haemorrhaging of jobs.⁹

The rescue is the part of the story the playbook version leaves out, and it is the most instructive part. By Walentas’s own telling, Governor Mario Cuomo’s office showed him the lever: publicly threaten not to renew the leases of his industrial tenants — who accounted for about 1,700 manufacturing jobs — and the state would find a way to deal. He made the threat. A deal was cut in which existing tenants could renew and the state moved its Department of Labor, 1,000 workers, out of the World Trade Center and into his building.² That 1986 lease ran ten years at $105 million, then the largest ever signed in Brooklyn.³

Read that sequence again. A private landlord used the threatened elimination of industrial jobs as leverage, and the public sector responded by becoming his anchor tenant for a decade. The rent was still cheaper than the World Trade Center, so the state saved money too² — but the survival of the DUMBO position was financed by a government lease, not by the market.

The rezoning, mechanism by mechanism

The Labor Department’s lease expired in 1997. In the same year, the city agreed to rezone.³ That timing is the hinge of the whole story: the building emptied exactly when it became legal to fill it with something worth twenty times more.

The reel compresses this into “lobbied to rezone the area from industrial to residential in 1998.” The record is a sequence of specific, named instruments, and the names matter because they are what an operator actually applies for. The city first rezoned two blocks around the Clock Tower in 1997.⁵ In 1998 a C6-2A district was mapped along Main Street to permit mixed-use conversion. In 1999 DUMBO received Brooklyn’s first Special Mixed Use District, M1-2/R8A — known as MX-2 — which allowed conversion and new construction between the two bridges. In December 2007 the Landmarks Preservation Commission designated the DUMBO Historic District, and in July 2009 the City Council adopted a further rezoning east of the Manhattan Bridge. City Planning counts those actions as having generated over 900 new homes with capacity for 900 more.⁸

The politics had changed as much as the paperwork. Walentas found a warmer reception under Rudolph Giuliani than he ever had under Koch, and the head of the city’s Economic Development Corporation said the quiet part out loud in 1998: “We have already learned the folly of trying to save manufacturing-only zoning in places where people would otherwise be willing to make a serious investment.”⁴ City Limits records the same turn less warmly — by 1997 Walentas had Republicans in City Hall and in Albany, and pushed most of his plan through.⁹

How the first conversion was actually financed

Permission is not capital. Even with the zoning in hand, no conventional bank would lend on the first residential conversion in a neighbourhood that had never had one. Walentas started the Clock Tower with $3 million of his own money and then borrowed $30.7 million from Emmes Capital at seventeen per cent annual interest.⁴

Seventeen per cent is the number to sit with. It is not a development loan rate; it is what you pay when the lender thinks it might end up owning the building. That single figure prices twenty years of scepticism more honestly than any quote about vision, and it is the reason speed mattered: after seventeen years of waiting for permission, the conversion took seven months.⁴

The public sector helped again, quietly. The 124 lofts came with a ten-year city tax abatement that held real estate taxes to $42–$220 a month, against $135–$710 without it — roughly a two-thirds reduction in the carrying cost of owning in DUMBO, applied at exactly the moment buyers had to be persuaded to move somewhere with no shops and no nightlife.⁵ Most units were priced between $220,000 and $980,000. Thirty contracts were signed in the first two weeks, and Jed Walentas — then the project manager, later chief executive — said prices would rise by as much as fifteen per cent on some units in response to demand.⁵ The building sold out that year for about $60 million. (The 1998 reporting counts 124 lofts; a 2002 account says 122.)^3,5

From there the model repeats without outside investors: convert one building, sell it, finance the next. The Lauders had sold out in the late 1980s — Leonard Lauder’s stated reason was that a New York real-estate position carried public-relations risk the family did not want — and Walentas bought out their successors from the mid-1990s.² He also kept trading the position rather than only accumulating it: he redeveloped and sold about 700,000 square feet of the original parcel while buying roughly a million more square feet he had not owned.²

The loss leader, and what it cost

The most-copied part of the playbook is the retail. Walentas hand-picked ground-floor tenants and refused the ones who would have paid most. Asked about it in 2006: “Duane Reade would love to come in here, but we won’t have them. They’d pay whatever we ask, but we don’t need another place that sells Cokes and chips.”¹⁰ Two Trees turned away chain pharmacies and bank branches at what the Observer described as the cost of well-above-market rent.¹¹

The subsidies were real and large. By 2002 he had given half a dozen arts groups a total of 100,000 square feet of free space, and fifteen shops were paying no rent for two years.³ St. Ann’s Warehouse paid nothing at all for its former spice factory; the Galapagos performance venue paid $6.82 a square foot for 10,000 square feet on Main Street at a time when DUMBO space was fetching upward of $24.¹¹ Gleason’s Gym and Jacques Torres came in on free or reduced rent.²⁸ He even paid the transit authority $90,000 in 1998 to reroute the B25 bus so it stopped in DUMBO — and, according to an MTA spokesman, stopped paying the annual fee in 2000, though the bus kept coming.³

Walentas never pretended this was philanthropy. His own formulation: “By enriching the mix downstairs, I’m increasing the value of what’s upstairs.”³ That is the entire economic argument for a loss leader, stated by the person paying for it. It only works if you own the upstairs — which is why site control comes first in the sequence and cheap rent comes second.

The carousel is the same logic at civic scale, and it is where the reel overstates the record. Jane and David Walentas bought the 1922 Philadelphia Toboggan Company carousel at an Ohio auction in 1984 for $385,000.¹³ Jane Walentas then spent between twenty-five and twenty-seven years restoring it, largely by hand.^12,13 It opened to the public on 16 September 2011 inside a transparent acrylic-and-steel pavilion by Jean Nouvel that cost $9 million, given to Brooklyn Bridge Park along with a landscape renovation of the 4.5-acre Empire Fulton Ferry section and a guarantee of the ride’s upkeep for up to thirty years.^12,14 The widely repeated “$15 million restoration” figure appears in no source this brief could verify; what is sourced is $385,000 of purchase and $9 million of pavilion, with the restoration cost never published.

The harvest

Once conversion was legal and the ground floors were interesting, the prices moved fast. By October 2002 Clock Tower lofts were reselling at up to $740 a square foot, according to Karen Heyman of Atco Residential Group; the newly converted Sweeney Building put 87 condos on the market with a third priced above $1 million, and sold twenty-seven of them over a single Columbus Day weekend.³ By 2010 Walentas said the firm “routinely” sold condos at $1,000 a foot and was asking $25 million for the 6,000-square-foot clock loft at the top of 1 Main Street.⁶

His own accounting of the returns, offered casually in 2006, is the only one on the record: three or four hundred million dollars over the whole period, of which “we made $200 million alone on one building last year. Converted it to condos.”¹ By January 2014 Forbes put the Two Trees portfolio at 2.3 million square feet and estimated Walentas’s net worth, after debt, at $1.4 billion — the first billionaire to make his money almost entirely in Brooklyn.²

The cleanest external mark on the land came from a competitor. In October 2013 Kushner Companies, RFR Realty and Invesco Real Estate paid $375 million for 1.2 million square feet across six buildings the Jehovah’s Witnesses were selling in DUMBO — a $37.5 million deposit went down in July.²¹ That is roughly $312 a square foot for unrenovated space, against the $6 Walentas paid: about fifty times, on Forbes’s arithmetic.² Walentas’s reaction was the sharpest thing he said about his own market: a new buyer prices the asset against everything else available in town, while he prices it against what it used to be, “and you get very different results.”² He stopped buying in DUMBO. He had priced himself out.

The record has a stain

Someone was already living in those buildings. Artists had been moving into the vacant floors since the 1970s, sometimes illegally, and the acronym they invented was an attempt to keep exactly this from happening.²⁸ By 2002 the sculptor Tom Otterness had been pushed out of his studio at 55 Washington Street after an internet company took the space at three times his rent; Elliott Arkin, eighteen years at 20 Jay Street and paying $1,500 a month for 2,000 square feet, expected to be gone when his lease ended.³

Jed Walentas has never denied the mechanism. In 2005, describing how many artists squatting in abandoned warehouses had to make way, he said plainly: “certainly we are proponents of gentrification. We’ve dramatically increased everyone’s property value, including ours. Through that process, what some people refer to as ‘character’ can get destroyed.”¹⁹

In November 2009, Two Trees told the artists and non-profits at 25 Washington Street to vacate so the building could become luxury rentals; the company’s answer was that the lease expiry dates had been in the documents all along. Doreen Gallo of the DUMBO Neighborhood Association put the counter-case: “he lures businesses in with incentives and then disposes of them when they’re no longer needed.”¹⁸

The industrial tenants fared no better than the artists, and were used more instrumentally. The 1,700 manufacturing jobs Walentas threatened to evict in the mid-1980s were the lever that produced the state lease; the last manufacturers had left by the time the neighbourhood was rezoned.^1,2 City Limits’ verdict on the wider waterfront is that thousands of entry-level jobs were chased off it with help from political allies and well-paid lobbyists, and that there is no going back.⁹

The formal fights were lost by the neighbours. In June 2009 the City Council approved Two Trees’ seventeen-storey Dock Street tower by 41 votes to 10 with one abstention, overriding the objection of the local member, David Yassky, who argued it would permanently taint the view of the Brooklyn Bridge — a rare thing for the Council to do on a local land-use matter. The trade was a 45,000 square foot middle school and DUMBO’s first permanently affordable housing, twenty per cent of the units.^15,16 Council members alleged during the debate that the School Construction Authority had no intention of building schools in the area and supported the project as a favour to the developer.¹⁶ The DUMBO Neighborhood Foundation sued; the Supreme Court dismissed the petition in October 2010 and the Appellate Division affirmed on 17 April 2012.¹⁷

And the subsidy that defined the brand has an end date. In 2014 Two Trees created a Cultural Space Subsidy giving an initial cohort of seventeen artists and non-profits studios at $1 per square foot a month — a rate one painter estimated saved her about $250,000 over a decade. In spring 2024, with the commercial market weak and a $108 million loan on 20 Jay Street coming due in 2028, nobody was renewed; those who wanted to stay were quoted $2 to $3 a foot by a broker, and the next cohort would pay $1.50. Two Trees’ director of external affairs answered: “we have supported hundreds of artists over the years through below-market rents, in good economic times and bad. And no good deed goes unpunished.”²⁰ Both sentences are true. A subsidy that raises the value of the space around it is an investment, and investments get repriced.

What DUMBO is now, and the one building he never got

Two Trees holds more than three million square feet across twelve DUMBO buildings today.²² The tenants are the ones the strategy was designed to attract: in the fourth quarter of 2025 alone, Cushman & Wakefield logged the architects Bjarke Ingels Group renewing 50,000 square feet at 45 Main Street and Overtime renewing and expanding into 41,891 square feet at 20 Jay Street. Brooklyn’s average asking office rent that quarter was $53.02 a square foot borough-wide.²³ Corcoran’s fourth-quarter report put Brooklyn new-development median prices at a record $1.4 million, crediting strong sales above $2 million in Williamsburg, DUMBO and Greenpoint.²⁴

The Empire Stores never became his. He was designated in 1982, de-designated in 1984, was the sole respondent to the state’s request for proposals in 1997, and pitched a Nouvel-designed hotel and multiplex extending over the East River in 1998 — a plan the community fought and the state did not take.^3,4 In 2013 Brooklyn Bridge Park Corporation ran another competition and Midtown Equities won it, opening about 380,000 square feet of offices and 60,000 square feet of shops in the restored warehouses.²⁷ The single asset that started the whole fight is the one piece of DUMBO the man who assembled the neighbourhood does not own.

The sequel is running now

In October 2012 Two Trees paid $185 million for the Domino Sugar refinery and eleven surrounding acres in Williamsburg — $30 million above its own opening bid.² The site was rezoned in 2014 and the redevelopment now runs to $2.5 billion: four mixed-use towers, the landmarked refinery converted into 460,000 square feet of offices, and public park and plaza across the eleven acres.^22,26 Domino Park opened in 2018 and Domino Square in 2024. The final building, at 280 Kent Avenue, was rising in May 2026 — permits say 1,350 apartments, the approved land-use application 1,262 — of which 315 are affordable at an average of sixty per cent of area median income, plus 105 more built off-site.²⁶

The differences from DUMBO are as instructive as the similarities. This time the rezoning came first and the affordable housing was negotiated into it up front; this time the company could self-finance; this time the public park was in the plan rather than offered as a concession after a fight. What carried over is the shape: buy an obsolete industrial parcel whole, spend on the public realm early, curate the ground floor, and convert the rest over a decade. River Ring, approved by the Council in 2021, is queued behind it.²⁶

What transfers

Site control is the only part that cannot be bought later. Everything else in this story — the retail curation, the free rent, the carousel — depends on owning the upstairs that the downstairs makes valuable. A single storefront operator running the same playbook subsidises a neighbour’s asset. Ask who captures the spillover before you pay for it.

The binding constraint was legal, not financial. For seventeen years the buildings were worth $6 a foot because of a line in the zoning resolution, and they became worth hundreds because that line changed. Underwriting an entitlement play means underwriting a political timetable you do not control — and being able to survive it being wrong for a very long time, which here meant borrowed money, a patient lender and eventually a government tenant.

Cheap money in and cheap rent out are the same trade. Walentas bought with a family loan and an assumed mortgage, and gave away space for years. Both work only because the entry basis was low enough that time was affordable. Raise the basis — as the 2013 buyer next door did at fifty times the price — and the same playbook stops being available, because you can no longer afford to be wrong for a decade.

And a manufactured neighbourhood has a bill attached that arrives later. The artists whose presence made the lofts desirable, the manufacturers whose jobs were the bargaining chip, and the subsidised studios that closed in 2024 are all part of the same ledger as the condominium prices. A case study that reports only one side of it is a brochure.