Andrew Heiberger, in his new office last month, said he plans to recruit “Ivy League” brokers.Andrew Heiberger has decided that Stuyvesant Town/Peter Cooper Village is a neighborhood. Most New Yorkers think of the massive rental housing complex as part of the East Village. But it’s large enough to warrant its own neighborhood, at least according to the 42-year-old founder of Citi Habitats, who largely credits himself with creating the current layout of neighborhoods in Manhattan.
“When I first had Citi Habitats, Manhattan used to be divided into four neighborhoods — Upper East, Upper West, Midtown and Downtown,” said Heiberger. “I came into the business, and I said, ‘This is not how the city works.’ I put out a real estate map that most of the firms are still using today, which broke [Manhattan] into 13 neighborhoods.”
With Heiberger’s new brokerage, Town Residential, he’s at it again. But this time, he’s decided Manhattan has around 20 neighborhoods, including newly desirable areas like West Chelsea, Hudson Yards and Stuy Town/Peter Cooper Village. There are so many, in fact, that instead of listing them all on its website, Town will allow users to “draw their own” neighborhoods with an interactive Google map.
With Town, Heiberger is quite literally trying to redraw the map of Manhattan real estate. At a time when a number of other firms have closed in a still-rocky economy, Town launched last month with well-appointed new offices and big-name managers. With perks ranging from health insurance reimbursement to nutritionists and florists, Town is going head-to-head with Manhattan’s top sales firms in an aggressive bid to nab the city’s best agents.
“I want to be the biggest firm in the city,” said Heiberger, who is looking to hire “the best and the brightest — the Ivy League, so to speak.”
It’s a risky venture, even for a real estate prodigy like Heiberger, who founded Citi Habitats in 1994 at age 26 and sold it a decade later for a reported $49.6 million. Heiberger then tried his hand at development with Buttonwood Real Estate, but he’s banking on the loyalty of his former agents to help fill Town’s 140 desks.
But the industry has changed drastically from Citi Habitats’ early days, before Giuliani and the Internet had unleashed their full impact on the city. For one thing, many firms are reducing their brick-and-mortar footprint, encouraging agents to go virtual and trying out new business models to wring more profit from a tough environment. In a stark reversal from all of that, Town has conventional commission splits and lavish offices. Industry sources said they were surprised to see such a (seemingly) large investment in a traditional-style firm, and noted that it will be difficult to convince top agents to leave established brand-name firms for a start-up.
“There seems to be a pretty strong division between those who completely think Town [will be] a flop and those that think Heiberger is some sort of supernatural force,” said one industry veteran.
“He’s spending way too much money setting this thing up, way too quickly,” the person said. “He’s got to fill a lot of desks, fast. Otherwise he’s going to burn a lot of money before he gets that thing moving.”
But others say Heiberger, with a proven track record for brokerage, is not to be underestimated. At the very least, he’s likely causing headaches for his competitors, especially Citi Habitats CEO (and Heiberger’s former college roommate) Gary Malin and Corcoran’s Pamela Liebman, whose firms are seeded with Heiberger’s former employees.
“I think Heiberger has the Midas touch,” said Antonio Del Rosario, who heads a group at Rutenberg Realty, and who previously worked for Heiberger at Citi Habitats. “I can be very confident that Gary Malin and Pam Liebman are having daily meetings about this.”
Town’s new 16,000-square-foot headquarters at 110 Fifth Avenue is tastefully decorated in sleek gray. The walls are mounted with “Smart Board” interactive whiteboards, and in the “Town Square” kitchen/café area, glass jars are full of candy — including kosher and sugar-free options — from Dylan’s Candy Bar and Papabubble. A second office is located in a ground-floor retail space at 88 Greenwich Street, a condo conversion developed by Buttonwood, and at least two more locations are in the works.
The one thing missing — at least for now — is agents to fill the rows of pristine new cubicles.
Rumors of Heiberger’s new brokerage venture have percolated in the industry for months. Details were kept under wraps until last month, when the firm opened the first two offices with an announcement calculated to make a splash: Heiberger had hired top brokers Wendy Maitland and Reid Price away from Brown Harris Stevens and installed them as company managers, overseeing sales and new development marketing, respectively.
He also hired Bank of America mortgage loan officer Jeff Appel to serve as managing director of corporate training, as well as top Citi Habitats managers Itzaskun “Itzy” Garay and Matthew Van Damm. Hal Gavzie, a manager from Bond New York, also joined the firm, along with Citi Habitats’ Chris Reyes, as director of information technology. Another Citi Habitats alum, Janis Aurichio, is also on board.
Despite key hires from his former company, “there’s nothing Citi Habitats about this business model,” said Heiberger, whose non-compete clause with the firm is now expired.
For one, it’s primarily a sales firm. “Eighty-five percent of the revenues I expect to come from sales,” Heiberger said.
Town’s basic business model, Heiberger explained, is to offer top resources to lure the industry’s most productive agents — “the cream of the crop,” as he put it — as well as talented new recruits from other industries. “In order to attract those people, you have to deliver five- and six-star service, which has to be supported by great office facilities in the best locations,” he said.
To that end, Town offers a number of unusual perks to its agents, or “representatives.” A hotel-style concierge helps set up transportation for apartment-hunting, arrange catering for open houses, and coordinate move-ins. The firm also reimburses agents up to $75 a month for their gym memberships, and contributes $150 a month toward their health insurance premiums. Heiberger says he believes Town is the first firm to offer a health care contribution.
Agents at the firm — which is already a member of the Real Estate Board of New York and operates a VOW, or virtual office website, that allows clients to search exclusives from both Town and other firms — also have access to a network of “Town Experts.” While this group includes some of the usual suspects, such as mortgage experts and title companies, “some are less obvious, like nutritionists and wine [specialists],” Maitland explained. There are also general contractors, social-media specialists, financial planners and even florists.
And the company will not charge representatives marketing or desk fees, which have been on the rise in recent years at large firms like Corcoran and Prudential Douglas Elliman.
“With the kind of people that I’m looking to bring in, I don’t think the $2,500 or $1,900 even really matters,” Heiberger said. “I think it’s the principle. They have to work twice as hard today … and then to get a check and have $2,500 taken out of it is just not a good feeling.”
That gets at the core of his business plan: If he hires only top-producing agents, the firm should make enough revenue to offset the lack of marketing fees, he explained.
“I’m going to make sure that whoever is sitting in that desk is earning enough so I don’t have to charge the fee,” he said.
In order for the plan to work, Heiberger is banking on several key factors. First, the fact that agents are dissatisfied with conditions at their current firms.
“If the economy was still roaring, it would be … difficult to find the top talent and get people to make a change,” Heiberger said. “People are receptive to change right now.”
Second is his own track record. “I think there’s 2,500 or 3,000 people in this business that used to work for me at one time or another, and I only have 140 desks,” Heiberger said. “So I just don’t see it being a problem to find people.”
Building a brand
Heiberger’s high-profile hires include (from left to right) Jeff Appel from Bank of America, along with Wendy Maitland and Reid Price from Brown Harris Stevens.
Heiberger’s success story is indeed the stuff of New York real estate lore. A Long Island native, he sniffed opportunity while working as a real estate broker during summer breaks from law school at the University of Miami. After graduation, he founded Citi Habitats, and a decade later, it had 1,000 agents and staff in 20 Manhattan locations.
In person, the heavyset Heiberger comes across as confident but intense. In a 2006 interview, he described himself as having “nervous energy,” and said he’s “always believed I was going to lose all my money,” even after selling Citi Habitats.
Those nerves were on display when The Real Deal visited Town’s new headquarters last month; Heiberger insisted that Maitland and Price not discuss how many agents had been hired. (According to Town’s website, there appear to be around five agents thus far, though more are being interviewed daily.)
But Heiberger can be an inspiring leader with “an uncanny ability to influence people,” Del Rosario said. “People follow him and trust him — he has the same kind of talent as Barbara Corcoran.”
He’s also “a genius when it comes to brand-making,” Del Rosario added. To raise Citi Habitats’ visibility, Heiberger opened storefronts all over the city — a strategy that wasn’t yet widely used.
“He wanted to have an office everywhere you looked, and he did,” said Michele Peters, a real estate attorney and the owner of now-defunct Weichert Realtors-Peters Associates. “You did see the offices everywhere. He was very good at having that happen.”
Of course, when Citi was founded, there was little competition on the rental front, especially for the lower-price apartments popular with recent college graduates where Heiberger found his niche.
“There were no really huge rental firms,” recalled Paul Purcell, head of Rutenberg Realty, who was president of Douglas Elliman at the time. Purcell said he was impressed — and even irritated — by the up-and-comer, despite the fact that Elliman focused little of its energy on rentals. “I remember asking, ‘Why is he taking market share in rentals?’” he said.
The rest is history: In June of 2004, Heiberger sold Citi Habitats to NRT Incorporated, the Corcoran Group’s parent company. With the windfall, he dropped $8.1 million on a five-story townhouse on East 63rd Street. (He shares the home with his second wife, Robyn, and their two children; first wife Jamie Heiberger-Jacobsen is a well-known real estate attorney.)
Heiberger stayed on with Citi Habitats until 2005, when he left to start Buttonwood, which set up shop at the swanky 712 Fifth Avenue. The firm announced ambitious plans for several new buildings, including Greenwich Club Residences, at 88 Greenwich Street, and One Rector Park, a 174-unit condo development in Battery Park City.
Back to brokerage
That’s when the market caught up with Heiberger. Greenwich Club Residences had hit the market in 2007 with 452 units — a hefty number even by boom-time standards — and there were a large number of units left to sell when Lehman Brothers collapsed.
But asking prices were reduced (some more than 25 percent, according to listings website StreetEasy), and the building is finally almost sold out; there are now only around 14 apartments left for sale, Heiberger said.
Meanwhile, One Rector Park was scheduled to start sales in September 2008, the same month Lehman fell. The lender, iStar Financial, assumed the sponsor role at the project in 2009, with Buttonwood shifting to a passive interest. IStar is now selling the units for around $600 to $700 per square foot — what one industry insider called “Harlem prices.”
Heiberger is not the type to admit to any bumps in the road. He called 88 Greenwich “the most successful condo in Manhattan,” and denied that there was any “trouble” at One Rector Park. He said the agreement with iStar was amicable and noted that he is still a part-owner in the project: “In the end, I think I’ll end up making money,” he said.
Despite the price cuts, Heiberger likely “came out okay” on 88 Greenwich, one new development specialist said, but at One Rector, “I would have to imagine that the equity took a substantial hit.”
Of course, Heiberger may have been playing with other people’s money. In the easy-credit days of the mid-2000s, many developers were not required to put much of their own cash into projects, so Heiberger may not have sustained severe financial losses in the downturn. The company declined to comment on how much money Heiberger put into the projects.
But while many successful brokers aspire to get into the lucrative development business, the opposite is seldom true. In light of this fact, some in the industry say that Heiberger may have returned to brokerage in order to raise cash — or simply get back into the spotlight — after taking a financial hit with Buttonwood.
To reduce overhead, Buttonwood moved from its fancy Fifth Avenue digs to an office on Horatio Street. And in February 2009 — the height of the downturn — Heiberger put his townhouse on the market for $16.85 million. Despite repeated price cuts, it failed to sell, and was taken off the market in May.
Heiberger confirmed that development is now on the back burner, a fact he attributed to market conditions.
“If you call yourself a developer, it’s almost an oxymoron, because there’s not development going on right now, because there’s not financing,” he said. For now, “I’m going to put 99 percent of my energies into building Town. When the climate is right for investment in real estate, then I’ll certainly go back into it.”
He said starting a brokerage had nothing to do with financial problems on the development side: “As an entrepreneur and investor, I see a tremendous opportunity in brokerage at this time,” he said.
Recreating his success with Citi Habitats may be harder than Heiberger realizes, industry veterans say.
While Citi Habitats had almost no competition when it started, Town is entering a crowded marketplace dominated by four powerful sales companies: Elliman, Corcoran, Brown Harris Stevens and Halstead Property. In rentals, Town will now have to contend with Citi Habitats — the brand Heiberger himself built — and newer companies like Bond New York.
In a difficult market, that’s no easy task, as evidenced by the recent closures of major firms like Coldwell Banker Hunt Kennedy and Century 21 NY Metro (see “Brokerage breakups”).
In response to these conditions, a number of firms have also closed offices to cut costs and encouraged agents to work from home. Other brokers have started new firms with alternative commission models, like Ilan Bracha’s new Keller Williams Realty franchise (see “Ilan Bracha, head of Elliman’s top team, departs to start a franchise”).
“It’s the worst time to open up a traditional brokerage,” said Kevin Kurland, the founder of Kurland Realty, who recently launched the 100 percent commission firm Spire Realty. “With a traditional-model brokerage, the operating costs are so high [that] with large offices and extravagant workstations, it’s very difficult to compete.”
The heads of the city’s top firms declined to comment about Heiberger’s new venture, other than to wish him well. Heiberger noted that he and Malin remain good friends.
But principals at some firms said privately that Heiberger may be spending more on Town than is prudent, especially since the firm opened with few agents to bring in revenue. (Maitland and Price have brought a number of their listings and new development projects to Town, including new development condo 33 Vestry Street. They will continue to service them at first, Maitland explained, but will eventually transition to management-only roles.)
“He’s looking very top-heavy right now,” said one brokerage veteran. Though the costs of starting a business are lower in an economic downturn, the source calculated that Heiberger’s overhead costs are still likely to be at least $150,000 per month, with the new office space and pay for high-profile managers.
Some speculated that to be spending at this rate, Heiberger must have financial backing from a deep-pocketed investor. But the company insists that at this point, all of the start-up capital has come from Heiberger himself.
While Heiberger can certainly afford it, he’s taking a risk, insiders said. Heiberger is “trying to do something very big, very fast,” a source said. “Maybe he is just underestimating how different the industry is today.”
Then there’s the issue of attracting successful agents, which is crucial to making Heiberger’s vision a reality. While unproductive agents often move from company to company, it’s difficult to get top-earning agents to leave their firms, where they often enjoy high splits and perks, experts said.
“Good brokers don’t jump ship quickly,” said Purcell, noting that it has taken Rutenberg four years to start attracting experienced agents; at first, the majority of the company’s recruits were new to the industry. “The seasoned brokers get entrenched — it’s hard to get them to move. They complain, but they’re very loyal to the brands.”
That’s especially true since many agents stand to lose money if they leave their firm. Many companies reduce commission splits when an agent leaves before a deal closes. For example, if an agent who receives a 70 percent split leaves the firm while a deal is in contract, he or she might get only 50 percent once the deal closes. Successful agents are likely to have more deals in contract and therefore have more to lose by leaving.
“When you leave a company, you’re basically starting over in business,” said Ariel Cohen, an executive vice president at Elliman.
Heiberger is experienced and “knows the business,” Cohen said, so Town will likely succeed at working with buyers. But high-end sellers, he said, may be hesitant to list their exclusives with a start-up firm.
Ready for change
Town’s niche isn’t entirely unique. Other brokerages, like Core, already tout themselves as having the best customer service and perks for agents. (And yet two of Core’s top brokers –Fredrik Eklund and John Gomes — just joined Elliman.)
Heiberger’s disciples are hoping that Town’s offerings are attractive enough to lure top-earning brokers.
“Change is hard, but I think people are ready,” said Maitland, who got her start at Citi Habitats. “Of course it’s anxiety-provoking. But … we’ve got a really strong support staff here to make that transition easier.”
Heiberger said rather than having to actively recruit agents, “people are calling us.” In addition, he noted, Town representatives are “just as likely” to come from other fields — like banking or law — as they are to hail from competing firms.
While he clearly has his eye on the field’s best agents, he said Town may not be a good fit for some of the industry’s most high-profile figures.
In reference to The Real Deal‘s annual list of top agents, Heiberger said, “I don’t have that sitting on my desk right now making phone calls to recruit. … I might end up with five people off that top-75 list, I don’t know. My business model succeeds if I don’t end up with the top 75.”
The challenges are daunting, but many agree that if anyone can find a way to surmount them, it’s Heiberger.
“The way things were when he built Citi Habitats is not at all where it is now,” Del Rosario said. “But he is an amazing adapter.”