David Walentas' Two Trees Management Company: A Case of Deliberate Entrepreneurship

Article excerpt

CASE DESCRIPTION

This is an entrepreneurship case in the real estate industry (in a New York neighborhood called DUMBO).

DUMBO is one of the most chic neighborhoods of New York City, specifically Brooklyn, and the revitalization has been a "planned gentrification" as opposed to a "natural gentrification" process. This case primarily focuses on (a) entrepreneurial traits and behaviors in the context of real estate development and (b) relevant corporate strategies-horizontal and vertical integration-for the entrepreneurial firm. The secondary focus is on the resource based view. This is a complex case and it requires some prior understanding of strategy concepts. It will be appropriate as a business policy case for senior undergraduate as well as graduate students. Also, it may be used exclusively as an entrepreneurship case with junior and senior undergraduate students. Considering the length of the case, it needs to be pre-assigned; students must have read the case before coming to the class. Questions about the case should also be pre-assigned to point students' thinking in the desired direction. Actual analytical discussion should take roughly 10 minutes per question discussed, and another 5 to 10 minutes would be enough to provide a case summary in class.

CASE SYNOPSIS

Real estate entrepreneur-turned-mogul David Walentas has deliberately transformed Brooklyn's DUMBO neighborhood, where he holds about 3 million square feet of building space. Walentas has worked methodically to give the deserted area of DUMBO a neighborhood feel. Initially, he allowed artists to move in for very low rent. As artists moved in, so did culture, sophistication, and the need for art-related things. This gave rise to multiple galleries, design studios, and printing services firms in DUMBO. With an increasing population in the neighborhood, the government was more willing to invest in redeveloping State-owned properties in the area. This had strong positive spill over for Walentas' Two Trees Management Company.

At an estimated current going price of $700 per square foot, Walentas' 3 million square feet real estate holdings are worth about $2.1 billion. With development work in DUMBO factory buildings going full-steam, however, Walentas now faces a dilemma concerning his growth strategy. Once these buildings are all leased out or sold, the growth of his company Two Trees Management will stagnate. Thus, despite tremendous success, what the future holds for Two Trees is anyone's guess.

INSTRUCTORS' NOTES

Case Abstract

Real estate entrepreneur-turned-moghul David Walentas has deliberately transformed Brooklyn's DUMBO neighborhood, where he holds about 3 million square feet of building space. Walentas' Two Trees Management Company has added value to the properties in both traditional and novel ways. Traditionally, Two Trees has added value by making infrastructural changes. For example, converting factory buildings to luxury loft apartments has added much value to the buildings. Constructing grand lobbies, modern appliances, concealed wiring, convenient electrical outlets, decorative hallways, wide windows-all these infrastructural changes have added value to Two Trees' properties. However, the value generated from these infrastructural changes assumes a reasonable quality of life in the neighborhood that DUMBO did not have previously. Walentas has worked deliberately to give DUMBO a neighborhood feel. Initially, he allowed artists to move in for very low rent. As artists moved, so did culture, sophistication, and a need for art-related things. This gave rise to multiple galleries, design studios, and printing services firms in the neighborhood. With an increasing population in the neighborhood, both City and State governments were more willing to invest in redevelopment projects. From rerouting Bus 25 through DUMBO, to substantial improvements in the neighborhood park, to establishing a boardwalk by the East River, the governments ' interest and help had strong positive spillover for Two Trees Management. …