It’s musical chairs at New York City’s new condominium developments.
As sales slow in the economic downturn, developers — hoping to rev up slow sales at their projects — are switching sales and marketing firms faster than you can say “commission.”
This week, The Real Deal reported that Corcoran Sunshine Marketing Group has replaced Prudential Douglas Elliman as the on-site sales and marketing agent for Manhattan House at 200 East 66th Street at Third Avenue. Corcoran Sunshine has also taken over for Elliman at Miraval Living at 515 East 72nd Street and Yorkville’s family-friendly Georgica at 305 East 85th Street.
At Miraval, Corcoran Sunshine is the third sales firm to try to sell units in C&K Properties and Zamir Equities’ condo conversion. Elliman took the project over from the Marketing Directors in September 2007.
“In this market, it’s the nature of the business,” said Howard Lorber, chairman of Elliman.
The sales environment in New York City is vastly different than it was only a few months ago, so it can be hard for developers — and their lenders — to accept that projects may take longer to sell, experts said. That leaves the marketing team as a convenient scapegoat, even if slow sales have more to do with the building or the economy than the brokers.
“When markets are slower and property isn’t selling as swiftly as banks and developers have planned, the first place the developer looks at is the marketing team,” said Shaun Osher, CEO of Core Group Marketing, who said his company has recently been approached “by a number of developers looking for us to take over their projects.”
Developers flip-flopping from one sales team to another is not new.
In 2006, the Witkoff Group and Cipriani Group made headlines when they tapped Elliman’s über-broker Dolly Lenz to market its posh residences in the former Regent hotel, replacing Corcoran Sunshine.
But the tactic is more common in a slow housing market, said Barry Hersh, a clinical associate professor at the NYU Schack Institute of Real Estate.
“That’s very typical in hard times,” he said. “If it’s not selling, what can they do? They can’t tear down the building and rebuild it, so they fire the people who are marketing it and see if they can get some new energy.”
For Elliman, the scenario played out in reverse at Gramercy, the 23rd Street condominium designed by Philippe Starck, where the company’s Shadian Group recently replaced Shvo at the helm of the building’s sales office. Elliman has also recently taken over several projects from Corcoran Sunshine, including TriBeCa Summit at 415 Greenwich Street and Jean Nouvel’s 100 Eleventh Avenue.
Corcoran Sunshine declined to comment for the story.
At Gramercy, developer Victor Homes wanted to try something new to finish up the project, though Shvo had sold 190 of 206 units in the building, said Ran Korolik, a vice president at Victor Homes.
“For the last few, it’s time for a change,” he said at the time.
Often, developers believe they can negotiate more favorable terms — on commissions, broker salaries and other fees — with a new sales team, Hersh said. “They may change firms because they feel they can negotiate a better deal,” he said.
That may have been the case at Manhattan House, a modernist Upper East Side landmark where Elliman had sold $300 million worth of homes over the course of a two-year contract, Lorber said. When the contract expired a couple of months ago, Elliman extended it until the end of this month, he said, but when the developer, O’Connor Capital Partners, allegedly asked for staff and fee cuts, the two parted ways.
Switching brokers isn’t a surefire way to revitalize sales, especially since the economy and building’s features may play a larger role in influencing sales than the specific brokers in charge, said Kathy Braddock, a founding partner in real estate consultancy Braddock + Purcell and the New York brokerage Charles Rutenberg Realty. “Most of these firms know what they’re
doing,” she said. “If [developers] are using Corcoran or Douglas
Elliman, are they going to do something all that different? Probably
For example, Shvo was fired from Chelsea’s 650 Sixth Avenue in August of 2008, just before this fall’s Wall Street meltdown, after selling only 35 percent of the units in a year. The developer, Pentarium, hired Corcoran to replace Shvo. Since then, only one unit has gone into contract, according to Streeteasy.com.
However, there are times when the new firm may sell more units than the previous company by using a different approach, Braddock said. “If there’s a marketing tool that the seller has not seen, that’s a possibility,” she said.
In New Jersey, Halstead Property — which is selling units at Henley on Hudson in Weehawken in conjunction with the developers’ on-site sales team — is planning to try out a new strategy at the 280-unit development, according to Eugene Cordano, Halstead’s director of sales for New Jersey. The development was previously marketed only by the developers, Lennar Urban and Roseland Property Company, and Corcoran Sunshine before that, Cordano said. Halstead will focus on selling the development’s three and four-bedroom brownstones, starting at $1.425 million, he said, focusing on value rather than on the development’s amenities and riverside location and skyline views.
“We’re going to try and recast the development as a value play for the buyer who wants that large home and make that case for them clearly by laying out what you get for the dollar,” Cordano said. “Right now, that’s really what sells. It’s not the beach or the lifestyle.”
Approximately 26 units in the development have been sold, according to a spokesperson for Halstead.
The trend is also occurring with individual resales, with sellers switching brokers in hopes of obtaining better results.
“It’s the dance of the exclusive broker,” Frederick Peters, the president of Warburg Realty, said in a talk today at the Real Estate Academy.
Just as with new developments, “sometimes, the seller just wants a fresh face,” the consultant Braddock explained.
The simple act of switching agents can lend new momentum to a listing.
“There is something that happens psychologically when [a property] is new on the market,” Hersh the professor said. “There’s a rush of energy and activity. If it doesn’t sell, it becomes stale. One way to freshen it up is to have a new marketing team.”