Food

Goldman Sachs Backs Brooklyn Flea's New Food Market


Goldman Sachs Backs Brooklyn Flea's New Food Market

Photograph by Adam Golfer for Bloomberg Businessweek

(Corrects characterization of the amount paid by BFC Partners for the purchase of a Studebaker service station in Crown Heights. )

If helping to secure supplies of blood orange-infused donuts and 1960s manual typewriters can be called “doing God’s work,” as Goldman Sachs (GS) Chief Executive Officer Lloyd Blankfein once described his calling, then the firm is on the side of the angels in Brooklyn. Last April, Goldman’s Urban Investment Group put up $25.6 million to renovate a former Studebaker service station on the edge of the Crown Heights neighborhood. The 150,000-square-foot space will eventually house, among other things, a food and beer hall run by Brooklyn Flea.

Goldman’s partner in the venture is Brooklyn Flea co-founder Jonathan Butler. Since he and business associate Eric Demby staged their first event in a schoolyard in April 2008, Brooklyn Flea has grown into a collection of weekend indoor and outdoor markets where vendors sell vintage items, crafts, and all manner of edibles. The venues, all in Brooklyn, draw more than half a million customers each year. To date, more than 20,000 people have applied to be vendors. On a weekend when the weather’s nice and throngs of young couples and families mingle amid stalls peddling terrariums and strawberry-rhubarb ice pops, the business can gross up to an estimated $60,000 from alcohol sales and the $120 to $225 daily fee vendors pay for its 200 stalls.

Word of Butler and Demby’s success has spread to other U.S. cities. “We’ve had a zillion people ask us to expand,” says Demby. “They tell us that the Brooklyn Flea brand has national cachet.”

For now, at least, the pair of Brooklyn residents is sticking close to home. Over the past three years, Brooklyn Flea has supplied food vendors for Central Park’s summer concert series, and since this past fall, some regulars have been invited to set up shop inside a Whole Foods (WFM) store in Lower Manhattan. “There’s a rising consciousness about food, health-wise. People want high-quality food, and they want to know where it comes from,” says Butler. “Our partnership with Whole Foods proves there’s increasing mainstream validation to this.”

Butler, a former vice president for hedge fund development at Merrill Lynch and founder of the popular Brownstoner real estate website, is so confident that artisanal food is more than a passing fad that he spent some of his own money to buy the $11 million building in Crown Heights. (A development company, BFC Partners, footed part of the tab.) Butler says he didn’t tap his Wall Street cohorts to get Goldman to put up the millions more needed to overhaul the space; an e-mail pitch did the trick.

“This is exactly the kind of thing we like to invest in,” says Alicia Glen, managing director of Goldman’s Urban Investment Group, which has poured $2.7 billion into U.S. inner cities over the past decade. “In New York City and Brooklyn in particular, there’s been a healthy resurgence in the residential sector, but that means there’s less space for small businesses and manufacturers.” Placing several vendors under one roof, as Brooklyn Flea’s Crown Heights food hall will do, lowers overhead costs.

Brooklyn Flea’s own expenses have shot up because of the project. The biggest cost of running the operation used to be the $15,000-a-month tab for fielding security guards at its weekend markets. “We sublet our office. We try to stay lean,” Butler says.

The five occupants of the new food hall, scheduled to open toward the end of the year, will be drawn from the network of smart, business-savvy food vendors that Brooklyn Flea has nurtured. Becoming a member of Demby and Butler’s club isn’t easy. “There’s an intense curation process you go through before you’re invited to be a vendor,” says Danny Lyu, who launched his Mexican sandwich stand Cemitas at Smorgasburg, the sprawling food markets Brooklyn Flea operates in the Williamsburg and Dumbo neighborhoods from April to November. “They want to know who you are, what your idea is, and then you have to cook for them before they’ll ever let you in.”

Butler is especially tough. “We’re not looking for the pitch, ‘I make great cookies,’ ” he says. “We want, ‘I found a market for these cookies, and this is what my logo looks like, and this is what my brand is.’ ”

The bottom line: A business that began as a weekend flea market in Brooklyn has garnered national attention and an investment from Goldman Sachs.

Suddath is a staff writer for Bloomberg Businessweek.

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Companies Mentioned

  • GS
    (Goldman Sachs Group Inc/The)
    • $195.45 USD
    • -0.44
    • -0.23%
  • WFM
    (Whole Foods Market Inc)
    • $48.4 USD
    • -0.28
    • -0.57%
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