Join The Real Deal at 12:00 p.m. on Wednesday, Sept. 18, for a live webinar with Ira Zlotowitz, founder and president of Eastern Union Funding, as he details the process and benefits of bridge loan syndication and how anyone can participate.
Welcome to the new frontier of brokerages — megateams.
And the soon-to-be-70-agent team headed up by Fredrik Eklund and John Gomes at Douglas Elliman is not the only one out there.
Ryan Serhant’s team at Nest Seekers International is now clocking in at 62 agents, largely in New York, but with several in L.A.
Also in L.A., Compass’ Aaron Kirman and Sally Forster Jones have teams with 50-plus and 25 agents, respectively. And national brokerages like Keller Williams and virtual firm eXp Realty have also been rolling out so-called expansion teams.
Read the full story: The Eklund and Gomes roadshow
Those who forge megateams often get the same critiques lodged against them (largely that the team leader reels in the business but doesn’t handle deals).
But these teams are pumping out a lot of business. Serhant, for example, is a cash cow for Nest Seekers, closing $480.5 million in sell-side deals across Manhattan, Brooklyn and Queens in 2018, landing the No. 2 spot on The Real Deal’s latest ranking of top agents.
But Compass’ Leonard Steinberg said the rise of the superteam blurs the lines between firms and agents in a way that could be “very, very confusing to the consumer” if the model proliferates.
And some states have already stepped in. Last year, the Florida Real Estate Commission — which regulates real estate licenses — began requiring agents to feature the name or logo of their brokerage in all advertising and to make it larger than the team’s name and logo.
Despite concerns, most agents say they expect more superteams going forward.
David Kramer of brokerage Hilton & Hyland in L.A. attributes it to competition within the industry. “The only way to compete is to pool your resources,” he said.
That said, many agents who have teams say they plan on keeping them small.
Adam Modlin — whose eponymous firm has six agents — applauded Eklund and Gomes’ expansion and said, “everyone needs help.”
But he doesn’t view the duo as a competitor.
“The differentiator is they’re reaching out to mass audiences and our clientele is a more bespoke, curated, hand-picked — the 1 percent of the 1 percent,” he said.
It takes four minutes and 35 seconds for a construction elevator to reach the top of Central Park Tower.
The condo project — the tallest residential building in the world at 1,550 feet — topped out Tuesday, 15 years after Extell Development started assembling the site.
“We’ve got unimpeded views in all directions; nobody is blocking our views,” chairman Gary Barnett told a crowd that gathered to see the views from the 107th floor. An audible gasp could be heard as 16-foot curtains dropped to reveal double-height windows with 360-degree views.
With a sellout of $4 billion, CPT is one of the developer’s most ambitious projects to date, and Barnett acknowledged an oversupply of luxury inventory on the market. He said prices are 15 percent to 20 percent below those at 220 Central Park South next door.
“We have to be flexible when we’re selling really large units,” he said. “It’s a more challenging market for sales.”
It’s the holy grail of the residential brokerage world: an agent’s split, gross commission income and marketing budget.
And last Friday, one of New York’s biggest firms saw that privileged information leaked wholesale.
Less than two hours after emails with said information were sent to the Corcoran Group’s agents and staff, the firm shut down its email system while the IT department removed the leaked files from the firm’s server. Agents were warned not to share the highly sensitive attachments — which Corcoran has assured does not contain client information. Over the weekend, CEO Pam Liebman personally contacted the heads of several rival firms, sources said, cautioning them against using the privileged (and allegedly stolen) data.
Corcoran is now investigating what it’s called a criminal incident with the help of law enforcement and a third-party forensic investigator retained by parent company Realogy Holdings. Realogy did not immediately comment on the probe but its outside counsel has contacted several New York firms regarding the leak.
But in the hours and days since, Corcoran’s attempt at damage control has done little to stop agents from sharing what they saw in the emails (even secondhand).
“We’re real estate agents, we’re drama-driven,” said one agent, who spoke on the condition of anonymity. “We’re water cooler talkers.”
Another agent reported some bruised feelings among those who felt they deserved higher splits or marketing allowances based on their performance — even though the firm suggested the emails were doctored.
“We all know it’s accurate,” the agent said.
Regardless, the breach puts Corcoran in a vulnerable position at a time when brokerage firms are competing to attract and retain top-producing agents. In Manhattan, Corcoran is the No. 2 firm with 1,320 agents and $4.53 billion in sell-side deals last year, according to The Real Deal’s most recent firm ranking. And the documents given competitors a better idea of what kind of offer could tip the scales for an agent considering a move.
But in recent years, Corcoran and many other brokerages have lost agents to Compass. In July, Realogy filed a damaging lawsuit accusing the SoftBank-backed brokerage of “predatory” poaching. Earlier this month, Compass said Realogy attempted to sell itself to Compass — a claim Realogy vehemently denied.
Corcoran in 2015 filed a lawsuit accusing Compass of a “multi-front” assault” after 51 of its agents joined the SoftBank-backed brokerage. A Compass job offer was used as evidence in the case, giving a firsthand look at how the brokerage was luring so many agents and managers from competitors.
As of Monday, some of Corcoran’s rivals had taken steps to protect themselves by changing passwords and doubling down on their own security. One CEO said it’s not realistic for Corcoran to retract the information at this point.
“Agents have it, however they have it,” the CEO said. “You can never recover it.”
JPMorgan’s asset management arm reached a deal to sell its Financial District office tower at 195 Broadway for $800 million.
JPMorgan Asset Management signed a pair of contracts to split the property between the fee position and a leasehold on the 1.1 million-square-foot building, sources told The Real Deal.
L&L Holding, which already owns 5 percent of the property, will buy JPMorgan’s 95 percent stake with an investment group made up of Seoul-headquartered Korea Investment & Securities and Samsung, according to sources familiar with the deal.
David Levinson and Rob Lapidus’ L&L bought the 29-story building in 2005 for nearly $266 million. The company has had a revolving door of partners over the years including the GE Pension Trust and Beacon Capital.
JPMorgan bought its stake in 2013, valuing the property at $500 million. A spokesperson for L&L Holding declined to comment and a representative for JPMorgan could not immediately be reached.
As for the ground underneath the property, the iStar-controlled ground-lease real estate investment trust Safehold signed a contract to buy the fee position for $275 million, the company announced in a press release last week.
iStar will lease the office property to L&L Holding and its investors.
A Cushman & Wakefield team of Adam Spies, Doug Harmon, Josh King, Kevin Donner, Marcella Fasulo and Adam Doneger represented JPMorgan in the deals. The brokers could not be immediately reached for comment.
Office tenants at 195 Broadway include Omnicom Media, HarperCollins and Gucci. Nobu Downtown signed a lease last year and opened a 12,500-square-foot restaurant on the ground floor.
JPMorgan and L&L invested $100 million in recent years to renovate the property, which is roughly 90 percent occupied. Two floors at the top of the building are available.
The investors are expecting an initial yield of 5 percent.
For the first time in decades, a presidential candidate is pushing for nationwide rent control.
Democratic contender Bernie Sanders unveiled the key points of his $2.5 trillion housing plan on Saturday, calling for national rent control standards as well as the investment of billions of dollars to end homelessness, overhaul public housing, create mixed-income housing and establish community land trusts across the country.
The release of Sanders’ plan, which is expected to be rolled out in full over the next couple of weeks, could mark a shift in how housing is discussed in the lead up to the 2020 presidential election. Candidates Elizabeth Warren and Julián Castro already released their own housing plans with little fanfare, and during the last Democratic debate, no questions were asked about affordable housing.
But the prospect of establishing nationwide rent control fuels a growing trend in the U.S., which some attribute to a demographic expansion of renters in the past decade and a return of class politics. Though rent control largely fell out of favor after the 1950s, with more than 30 states explicitly banning it, the policy has experienced a recent resurgence. California is poised to implement a statewide cap on annual rent increases just a few months after Oregon approved its own statewide limit. New York just expanded its protections of rent stabilized tenants, stopping short of a rent cap, which is expected to be on the table in some form the next legislative session.
Sanders’ plan would limit rent increases to one and a half times the rate of inflation or 3 percent, whichever is higher. A representative for Sanders’ campaign declined to comment further.
Here’s what Sanders proposed to do:
— End homelessness with $32 billion invested over five years
— Spend $70 billion to repair public housing stock
— Establish community land trusts across U.S. with $50 billion in grants to states, cities and towns to allow more than 1 million households to buy affordable homes in the next 25 years
— Fully fund Section 8 housing
— Build 2 million units of mixed-income housing
— To pay for these changes, implement a wealth tax on the top one-tenth of 1 percent of American households, which is about 175,000 households, according to the New York Times.
Rent control, Sanders style
Sanders’ first attempts to enact rent control as mayor of Burlington, Vermont, failed. Although he was elected in 1981 on a platform of expanding tenants’ rights, measures to enact a tax on rental property speculation and apartment registration was scuttled by the city council, and rent control was voted down in a referendum in 1982. In 1989 the progressive senator’s “just cause” eviction bill was rejected by Burlington voters.
After this “failed foray into rent control,” according to John Davis, co-founder of Burlington Associates in Community Development, “[Bernie] learned from this defeat and moved on, adopting a progressive, multi-faceted housing agenda that did not rely on governmental control of rents.”
Economists and landlords argue that rent control hurts existing housing stock and cools new development. Lawrence White, an economics professor at New York University, said cities should instead focus on easing land-use restrictions to encourage the construction of housing.
“I can see the political attractiveness [of rent control]. There are a lot more tenants than there are landlords out there,” he said. “But it’s just a horrible way of trying to deal with any housing problems.”
He questioned the viability of finding rules that make sense for the whole country.
“Gee, how do you establish rules that apply to Missoula, Montana, to Center City, Philadelphia, to Tampa, Florida, let alone Queens and Brooklyn?” he said. “We have great difficulty administering a rent control program in New York City. I can’t imagine doing it on a nationwide basis. It’s just chaos.”
Lawrence Yun, chief economist with the National Association of Realtors, agreed that “rent control would be a terrible solution” to the affordable housing crisis, adding that it would deter landlords from maintaining existing housing stock.
Roosevelt Institute fellow and CUNY assistant professor of economics J. W. Mason attributes vehement opposition to rent control to an analysis that ignores the significant social and economic benefits of people remaining in their homes.
“It’s practically the first thing you see in an economics textbook: the diagram of losses due to rent control,” Mason said. But the Marxist scholar disagrees with convention. Rising market rents are not attributable to buildings getting better, Mason said, but to the surrounding neighborhood becoming more desirable.
“Rents are a payment for a monopoly due to a legal right, not because of a contribution to production,” he said. “And rent-regulated housing stock in places like New York City and San Francisco is very old.”
A bet on community land trusts
Sanders’ plan also calls for the creation of 2 million units of mixed-income housing and $50 billion in grants to fund the creation of community land trusts (CLTs), in which nonprofits acquire land in order to operate affordable housing on a permanent basis. Sanders helped secure initial funding for a community land trust in Burlington when he was mayor in 1984. That trust — the Burlington Community Land Trust — eventually merged with another to form the Champlain Housing Trust, which is now the largest of its kind in the country.
Nixon Peabody’s Erica Buckley said an infusion of capital on the national level could go a long way in sparking interest in CLTs and getting local governments more comfortable with the model. Cooper Square, New York’s first and most prominent CLT, was formed in 1991, evolving from the neighborhood’s previous efforts to protect itself from Robert Moses’ “slum-clearance” project. Even in New York, where the concept has gained traction in recent years, hurdles remain in the form of funding and local approvals.
Buckley, who previously headed the state Attorney General Office’s Real Estate Finance Bureau, said she’s worked with the Department of Housing Preservation and Development for more than two years to figure out an acceptable ground lease deal for the Interboro Community Land Trust. The AG’s office has set aside funding for CLTs in the past, most recently pledging $8 million in February toward expanding local ones. But more funding sources are necessary, she said.
“While [CLTs] are great — they remove housing from the speculative marketplace — people also think they solve all sorts of problems that they don’t,” Buckley said. “It doesn’t magically create subsidies.”