Articles

Blessed Are the Makers: The Rise and Fall of 3rd Ward

by Mostafa Heddaya on October 16, 2013

The sudden collapse last week of art center and studio/co-working space 3rd Ward unceremoniously revealed the incompetence with which the company was managed and its frighteningly anemic cash flows. But the DIY conglomerate’s rise since 2006 brings up some altogether more challenging questions about the uneasy alliance between businessmen and the “creative communities” they cultivate.

The haphazard process by which two men, Jason Goodman and Jeremy Lovitt, used illegal parties and cheap Brooklyn leases to cobble together a creative empire is a queasy Horatio Alger tale — a parable, if not of ambitious savoir-faire, then of the hubris of frontier gentrifiers. Though many peoples’ lives intersected with 3rd Ward over its seven-plus-year run, none loomed quite as large as the project’s grand architect, Jason Goodman; his long-gone founding partner, Jeremy Lovitt; underground party promoter and frequent collaborator William Etundi; and the real estate investor Matthew Blesso, who in 2010 bought out Lovitt and came to own half the company, only to suddenly flip it at a substantial gain two years later.

Salad days

On October 15, 2010 — three years ago yesterday — a mixed-use residential and studio building at 573 Metropolitan Avenue, which Goodman and Lovitt had leased in its entirety to house their infant 3rd Ward project, was allegedly shut down for code violations that had been uncovered in a raid three months prior. A tipster recently told Free Williamsburg that though the move sent dozens of residential and studio tenants onto the street, Goodman and Lovitt had themselves moved out of their massive lofts ahead of the shutdown, under mysterious circumstances. (The source further alleges that tenants were not directly warned of these risks — that may have been the case, but a New York Post article mentioning the building’s problems was published three months prior to the eviction date.)

The same person further charged that Goods, the twee pop-up restaurant the duo launched across the street, ended up closing shortly thereafter, after allegedly paying many employees with IOUs. Yet though those incidents sound like the symptoms of distressed enterprise, these closures took place as 3rd Ward entered the period of its headiest financial successes — the two hiccups were but minor disturbances in the long arc of the organization’s weird but skyward trajectory.

Two years prior, in 2008, New York magazine profiled the duo’s seemingly unfocused efforts. “Business Plan? What Business Plan?,” reads the headline, followed by the teaser, “The slow, random, party-fueled growth of an East Williamsburg empire.” The author then proceeds to list chronologically the various lines of business in which 3rd Ward was dabbling: First, there was the aforementioned building on Metropolitan, occupied in February 2005; then a design firm called The Build NYC in January 2007; September 2007 brought a partnership with underground party promoter William Etundi to launch ArtistsWanted.org, a platform for artistic “exposure” via fee-based recurring open-call competitions (in the eyes of one participant, “a clusterfuck and a scam“); October 2007 brought a since-defunct listing service for artist studios called GroundedNYC.com; June 2008 saw the launch of Dubai:Brooklyn, another partnership with Etundi (a.k.a. “Danger”) to host “lavish, Burning Man–style raves with bands, fire eaters, and paint-can-wielding street artists,” in that interviewer’s words. 

Better out than in

Though Etundi came into the orbit of the Brooklyn fringe scene via party-promoting activities under his “Danger” alias, today he’s better known as the CEO of See.me in Long Island City, the latest incarnation of the above-mentioned Artists Wanted business, now with a decidedly Silicon Valley flavor. The underlying business model seems to be the same: charge aspiring creatives to participate in contests, updated with some kind of web “community” baked in as a free service. Grumblings about the relative merits of applying the word “scam” to the business abound. At any rate, even before he “pivoted” into this line of business, Etundi’s eyes have firmly been set on the arts-community prize, at least as he imagines it. In November 2010, he participated in a cringe-inducing New York Times roundup of people who “shake things up after dark.” The Times “thanks” Etundi for making “Illegal warehouse parties in Brooklyn … almost a cliché,” and he in turn tells them about his plans for the future:

Instead of hordes of L-train riders paying $20 at the door, he envisions young art patrons paying as much as $250 a head and arriving by limos. Invitations will not only be selective — from 250 to 2,000 — but take the form of questions. “The applications will be a series of cryptic questions that will be judged solely by me and my own cryptic — entropic? — sense of who I want to be at the event,” he said.

The New York Times panegyrics took a more direct turn later in 2010, when the publication splashed the dynamic duo of Goodman and Lovitt on the front page of the Culture section, a fawning profile that opened with mention of the “commendation” the two received from Brooklyn borough president Marty Markowitz for a bicycle program and closed with a lawyer testifying that she was able to use 3rd Ward’s woodworking shop to feel like a “a very complete person,” eschewing the barfly habits of her professional colleagues.

At some point in 2010, Jeremy Lovitt relinquished his stake in the enterprise and apparently moved away with his Chinese fiancée, a decision made in the heady year of that Times profile and a sold-out Gilt sale mythologizing 3rd Ward’s bohemian “early days”:

Founders Jason Goodman and Jeremy Lovitt sold almost everything they owned (including a van and a piano) — and rented a Williamsburg building that they renovated floor by floor … Lavish raves with bands, fire eaters and street artists helped Goodman and Lovitt attract 3rd Wards first members during its first year of business.

The earliest limited liability entity registered in connection with the company, 3rd Ward LLC, was established on February 15, 2006 and remains active, but since 2010 the business has been raising funds under the 3rd Ward Holding LLC entity (a 3rd Ward Photo LLC, apparently a spinoff of the 3rd Ward photography studio business, was created in 2009 and dissolved in 2011). More recently, a 3rd Ward Culinary LLC was formed on January 31, 2012, just days before 3rd Ward was to receive $1.5 million from the city’s Economic Development Corp., a deal announced by Brooklyn borough president Marty Markowitz, last seen heaping praise on 3rd Ward in that 2010 New York Times profile.

Dumpster diving

3rd Ward Philadelphia

3rd Ward in Philadelphia (image via elisedechard.com)

Yet despite this significant influx of cash — in 2012, the company looks to have raised $3 million in equity (in two rounds: one in October for $500,000 and another in December for $2.5 million) on top of the $1.5 million grant from the city  — the company was financially overextended. This drove the firm to seek out the Boston-based investment bank Next Street, which allegedly provided a $1 million loan for the Philadelphia location, according to a 3rd Ward employee post on Reddit, an account verified as accurate by another former employee, who spoke to Hyperallergic on condition of anonymity. David Belt, the developer for the Philadelphia location (the decrepit buildings themselves were apparently provided to 3rd Ward free of charge) is better known as the impresario behind the dumpster pools at The Palms and, more significantly, his involvement with the multi-million dollar Brooklyn Navy Yard redevelopment. The junior architect who designed the Philadelphia renovation at Belt’s firm, Macro Sea, has deleted the project from her online portfolio.

Amid the expansionary turmoil of 2012 was the exit of Matthew Blesso, the investor who came to own 50% of the company in 2010, apparently after buying out co-founder Jeremy Lovitt. On the 3rd Ward page within the website for his eponymous real estate investment firm, Blesso brags about his “instrumental” role in helping 3rd Ward qualify for its first debt facility and the “significant premium” he earned by selling the company in late 2012 to “a who’s who syndicate of prominent venture-capital investors who are planning to continue the company’s growth and expansion but with a revised focus on its scalable education platform.” This “syndicate” apparently consisted of Joanne Wilson, wife of venture capital impresario Fred Wilson, David Belt, and Tony Hsieh of Zappos, among at least 15 total investors (1 investor in the $500,000 round executed on October 25th, 14 in December’s $2.5 million round). Wilson and Belt sat on the 3rd Ward board as of the closure last week. According to a tipster who’s friends with Blesso on Facebook, he posted the following on his page there last week:

It is with great sadness that I learned of the sudden closing of 3rd Ward. After becoming an investor in the Brooklyn-based creative incubator in early 2010, I helped grow the company and eventually owned a 50 percent stake. Unfortunately, a difference in management style with the current owner led to my selling my interest in 2012 to a prominent group of venture capitalists.

As 3rd Ward became a home for so many fledgling creative people, I am sad that that community will now have to find new places to work, learn and create. (Apparently this closing was announced without providing any advance notice to current members or instructors.)

As sad as I am to learn of 3rd Ward’s closing, I am proud to have played a role in helping that community grow and thrive. I met so many great people, many of whom remain close friends. I have been in contact with several members who are currently working on plans to salvage either the company or their spaces and am open to help anyone interested in trying to save the company or the space any way that I can. — with [name redacted] and 19 others.

At face value, there’s nothing noteworthy about Blesso’s narrative, with one exception — in July 2012 he told the Wall Street Journal that he was selling his $8.95 million penthouse loft in Noho because “he is planning a move to Brooklyn to be closer to the headquarters of Third Ward, an arts collective for which he is president.” Three months later, he wasn’t listed — either as an executive or director — on the SEC filing for the $500,000 of equity 3rd Ward sold on October 25 (the next document, filed in December for $2.5 million, lists Wilson and Belt as directors, and Goodman as director and executive). Upon contacting Matthew Blesso’s office for comment, we learned that he is in Panama; after a written query was sent by email to his assistant earlier today, he declined to comment.

Simple economics

It appears that Goodman, despite the recent smearing of his $700,000 “sweet waterfront getaway” in Montauk, likely stands to walk away with a lot less for sticking with 3rd Ward than either Jeremy Lovitt — whose decadent California wedding he would go on to attend in the fall of 2012, according to a source close to Goodman — or Matt Blesso, the expert investor. Goodman’s central fault seems to have been strategic rather than managerial. Beneath all the creative idealism and alleged incompetence, he lacked what Lovitt and Blesso embraced instinctually: knowing when to walk away.

In a January 2013 interview with Smart Planet, Jason Goodman’s last extensive public comment on 3rd Ward, he promised that his company “will be a household name” by 2018. “I wanted to be part of a community that celebrated making,” he tells the interviewer of the ambition he has carried with him since he was a child in Georgia. He also doesn’t dispute the assertion that 3rd Ward has been profitable every year since it opened, and brags about 2012′s financial results — offering the throwaway caution that he hasn’t yet seen “December’s numbers,” but that they’re going to pull in $4 million.

This is a figure so high relative to the previous year’s claimed revenue of $1.5 million that there are few conceivable ways it could have consisted of just operating revenues — that is, membership dues and proceeds from its usual business activities. Equity investments may have been counted, a perfectly legal blurred boundary (the IRS considers equity investments in an LLC as taxable income) yet one that nonetheless seriously obscures the health of the underlying operation. But Goodman’s bravado, as ever, was unambiguous: “I am very confident. We know our business. The user economics are simple.”

With additional reporting by Robin Grearson. (Grearson was an instructor at 3rd Ward through May 2013.)

Update, 3:41pm EDT: This article was updated to reflect Matthew Blesso’s wish, expressed through his assistant, to decline comment.

Update, 10/17: The Blesso Properties website has been down since at least 7am EDT this morning, we have replaced the links to those pages with archive.org and Google cache versions.

  • Subscribe to the Hyperallergic newsletter!

Hyperallergic welcomes comments and a lively discussion, but comments are moderated after being posted. For more details please read our comment policy.
  • davvid

    gross

    • http://firstproofprints.com/ J Redmann

      I’m with you, and it’s a real shame to see such a great place shuttered because of the incompetence of a few people. It also seems obvious that it could be financially viable but I guess that was never the goal.

      • Chris G

        If you income is 50% of your spend you aren’t financially viable.

  • Mostafa Heddaya

    Thanks for this interesting piece of information. Please email me at your soonest convenience: mostafa@hyperallergic.com

  • sandybox

    “Goodman’s central fault seems to have been strategic rather than managerial. Beneath all the creative idealism and alleged incompetence, he lacked what Lovitt and Blesso embraced instinctually: knowing when to walk away.”

    I don’t agree with this line of thinking. Should he have ran 3rd Ward properly as the man in charge, there would be no need to “walk away”. That’s how businesses succeed. It’s not as if no one cared about 3rd Ward. The place had so much goodwill and attention from the community, media, and investors. But management squandered it all through managerial incompetence. If Jason’s only good at ideas and not good at business, he should have hired people who have business sense and listened to them. Instead, the place ended in the worst possible way: shutting down with ZERO warning, leaving their most valued teachers unpaid and members out in the cold.

    • Mostafa Heddaya

      You misread the tone there. I am not in disagreement with you. How businessmen succeed and how businesses succeed are not always convergent strategies.

  • Dale Dougherty

    An excellent article. Thanks for pulling all this information together and answering many questions that I had about how this came down.

  • Peter Weisman

    I sniffed this out very early as grifters grifting grifters grifting “artists” so it closing for me is sort of a “meh, whatever”…. but a business model that asks for money from an artist to “submit work” is truly bizarre. We prey on each other in capitalism, naturally, but the standards for creating and benefiting a community while making a profit seem to be miles above this enterprise. I really want to know if 3rd Ward was ever given the incubator money from Marty Markowitz’ office and whatever came of those funds – was there any oversight on where the $1.5 million went?

  • Chris G

    There are sleazy opportunists in all facets of “business”…if an opportunity sounds too good or give you pause then walk the other way. These guys were clearly fakes and too many people were sucked in.

Previous post:

Next post: