The Real Deal New York

Investment sales ranking finds some firms surging and others stumbling amid tight market

Eastdil, CBRE, Massey Knakal and Rosewood on rise, while Eastern Consolidated, Studley and Besen take hit

March 01, 2014
By Adam Pincus

From left:

From left: Adam Spies, Doug Harmon, William Shanahan and Darcy Stacom

In the last year, the number of New York City buildings sold with the help of a broker shot up significantly, according to an exclusive analysis conducted by The Real Deal.

While the vast majority of prime Manhattan deals have historically been sold through brokers, that was not the case in the outer boroughs, where owners often sell through word of mouth. But in 2013, the portion of buildings sold using a broker rose to 86 percent citywide, from an estimated 65 percent the year before, TRD found. That was despite the fact that the total dollar volume of buildings sales declined slightly in 2013 from the prior year.

This month, TRD reviewed more than 1,200 transactions (not including minority-interest sales) to determine which 30 firms brokered the highest dollar volume of deals in the city, and benefited the most from the shift toward more brokers. We also estimated how much each firm netted in gross commissions and, for the first time, looked at where firms concentrated their activity, as well as who dominated which boroughs.

To do that, TRD compiled data provided by brokerages and obtained from property database Real Capital Analytics.

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The uptick in brokered deals was especially good news for Eastdil Secured, CBRE Group, Massey Knakal Realty Services and Rosewood Realty Group, the top four firms on TRD’s ranking. All saw their deal volume rise significantly.

“We are surprised it did not happen sooner,” said Massey Knakal’s CEO Paul Massey, referring to the increased ratio of deals handled by real estate agents.

But at the same time, several veteran sales firms, including Eastern Consolidated, Studley, and Besen & Associates, saw a steep drop in sales. Each saw double-digit declines year-over-year.

Several insiders speculated that those drops were just the result of a volatile market, but others said some of those firms may have been squeezed by the tight inventory.

Will Silverman, corporate managing director at Studley, said the firm had some deals under contract in late 2013 that would close this year.

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Real estate insiders said the low level of for-sale inventory is increasingly inducing sellers to turn to brokers to try and get the highest possible price on the sale. In part, that’s because brokers are calling owners, suggesting they sell.

“The majority of sellers today are more likely than not to put their properties on the market [with a broker], as they believe a broker will attain the highest and best sales price,” said Jared Epstein, vice president at Aurora Capital Associates, which sold an interest in a retail unit at 100 West 57th Street in Midtown last year.

The competition is not all good for sellers, Epstein added.

“The quantity of and competition between investment sales brokers in this overheated market has many of them over promising, which in many cases leads to under delivering and ruins the opportunity for a reasonable transaction to have taken place,” he said.

The big dogs

Midtown-based Eastdil Secured, a division of banking giant Wells Fargo, maintained its top position in the investment sales ranking for the third consecutive year.

The New York sales group, led by Doug Harmon and Adam Spies, recorded $10.6 billion in sales, a significant 51 percent increase from the prior year. The duo represented the Carlyle Group and others in the $1.3 billion sale of 650 Madison Avenue to a joint venture that included Vornado Realty Trust and the hotel-focused investment firm Highgate Holdings.

The firm raked in an estimated $50 million to $55 million in commissions for its sales, according to TRD’s estimates.

Ranking second was CBRE, which completed $6.8 billion in investment sales, nearly doubling its 2012 total and bringing in an estimated $28 million to $32 million in commissions. The investment sales team at the firm is led by Darcy Stacom and William Shanahan. The two sold the Park Lane Hotel at 36 Central Park South for the estate of Leona Helmsley for $660 million to a joint venture including the Witkoff Group and, again, Highgate Holdings.

Those two giants were followed by firms that focus on smaller deals: Massey Knakal and Rosewood.

Massey Knakal, which is led by Massey and Chairman Robert Knakal, completed $2.47 billion in sales, up 14 percent from 2012 (see related story, “Knakal’s new game plan”). That brought in estimated commissions of $50 million to $55 million. The firm’s broker revenue was on par with Eastdil’s and CBRE’s because commission rates are generally higher on smaller deals.

In fourth place was the much smaller Rosewood, founded by company president Aaron Jungreis. With just 15 brokers and agents, including Jungreis, the firm completed $2.22 billion in sales — up 61 percent from 2012 — yielding an estimated $25 million to $30 million in commissions.

And in fifth was global firm Jones Lang LaSalle, which brokered $1.9 billion in sales, down 8 percent from the prior year. Those deals brought in an estimated $10 million to $12 million in commissions.

Other firms that grew substantially included Cushman & Wakefield (No. 6), HFF (No. 7), Newmark Grubb Knight Frank (No. 8) and Ariel Property Advisors (No. 12), which each saw a jump of more than 40 percent.

Ariel Property President Shimon Shkury said his firm’s growth can be at least partially attributed to going after relatively larger deals. The firm, which was founded in 2011, added additional agents and researchers last year as well.

“Our professionals are growing [in experience], so we can service [larger] deals,” he said.

The greatest dollar-volume increase among the top 30 firms went to RKF, the retail-focused firm. The company saw a six-fold jump to $318 million, driven by pricey sales including the $62 million 434 Broadway, where it represented the buyer.

On the flip side, Eastern Consolidated, which focuses on complex, mid-market deals in Manhattan, saw dollar volume decline by 40 percent to about $802 million. Meanwhile, Studley, whose investment sales office in Manhattan is led by the veteran broker Woody Heller, saw a 31 percent decline, and Besen, which focuses on smaller deals, saw a 33 percent drop.

One possible explanation for Eastern Consolidated’s dip is that the firm primarily focuses on Manhattan, but most of the year’s growth was in the outer boroughs.

Daun Paris, president of Eastern Consolidated, acknowledged that the company’s numbers were down, but said over the past two years the firm has averaged $1.1 billion in sales. In addition, she said despite 2013’s lower sales figures, the company has four times as many deals under contract now, at the beginning of 2014, than it did at the start of 2013.

“We expect to have a very big year in 2014,” said Paris, adding that the company has more than 55 brokers, up from 30 a few years ago. She also noted that it launched a retail leasing division.

Turning to brokers

The fact that some 86 percent of the dollar volume of all deals was done through brokers in 2013 may be the result of brokers canvassing building owners aggressively to sell. That’s largely because of the lack of inventory on the market.

In Manhattan, the use of brokers is the highest, at more than 90 percent.

While insiders said sophisticated sellers typically tap brokers — either formally or informally through an off-market deal — there are times when they simply do a deal directly with a buyer. That tends to be the case if, for example, the buyer and seller have already done business together.

For many deals in the outer boroughs, that remains the norm.

In Brooklyn — which according to Massey Knakal saw a total of $3.6 billion in transactions in 2013 — just $1.4 billion of the deals involved a broker, or 40 percent, according to TRD’s analysis. In Queens, about 56 percent of the $2.3 billion in deals was done with a broker, and in the Bronx, the number was about 74 percent, the TRD analysis found. The rankings do not include sales in Staten Island, where comprehensive data was not available.

The outer boroughs are “an area of major opportunity for everybody,” Massey said.

To get more of the brokered business in the outer boroughs, however, firms are going to have to compete with Rosewood, which dominates in Brooklyn, Queens and the Bronx.

The firm, which specializes in multi-family sales, brokered $337 million in Brooklyn, $348 million in the Bronx and $460 million in Queens.

Rosewood remains an anomaly among the top firms. It has taken on far more established firms like Massey Knakal, which has about seven times as many investment sales brokers and agents, along with national and international public companies.

While TRD has written about Rosewood and Jungreis as the firm gobbled up an increasing share of the investment sales pie over the last few years, the numbers show its growth continues to outpace the competition.

Jungreis handles large portfolio sales — for example the approximately $350 million sale of former Vantage Properties buildings in Queens to affiliates of A&E Real Estate — as well as individual buildings.

He told TRD his goal is to spread his business throughout the boroughs, a contrast to the traditional model where a firm zeroes in on one geographical area.

Only two other firms, Massey Knakal and Marcus & Millichap, had more than $50 million in each of Brooklyn, Queens and the Bronx.

But the outer boroughs are in for a shake-up in 2014.

A batch of new hires in recent years helped boost Newmark’s totals last year, and is helping that firm start 2014 strong. Newmark President James Kuhn pointed to Carol Ann Flint, an associate director, who left Besen to join Newmark in 2011. She brokered an approximately $260 million multi-family portfolio in the Bronx that reportedly went into contract earlier this year.

“We have been trying to find, and have found, some rising stars that are able to go out and bring business that we have been able to execute,” Kuhn said.

“So I think 2014 will be a vibrant year for investment sales. I don’t know what happens in ’15,” he said.

Massey said, “Our outer-borough focus is starting to yield fruit. We are throwing the kitchen sink at the outer boroughs,” to gain more market share.

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