David Behin, a part-owner of new development marketing firm the Developers Group, was understandably concerned when the real estate market crashed two years ago.
With condo sales stalled and few new projects getting built, he was suddenly nervous about the future of the seven-year-old company, not to mention supporting his family.
“I had to figure out where to get new projects from,” Behin recalled.
He started cold-calling bankers and investors and taking them out to lunch, offering to do market research for free, hoping to network and learn which distressed properties were coming on the market. Now it’s finally paying off: In addition to selling new condos, Behin also acts as a consultant for workouts on troubled new developments. That translates into more exclusive sales contracts for his firm once the properties are turned around.
“I’m not a workout specialist, but I can make workouts happen because I can bring the parties together,” said Behin, who has been working on these deals independently, but soon plans to form a team within the Developers Group (which recently merged with another brokerage, the Real Estate Group New York).
As the number of condo projects coming to market has slowed to a trickle, new development marketing firms are facing an identity crisis. Some have virtually disappeared, while others have dramatically altered their business models — and rebranded themselves accordingly — to stay afloat.
Firms like aptsandlofts.com and Core, which until now were known primarily as new development firms, are focusing on resales more. Other new development marketing players, like Behin and the Marketing Directors’ Andy Gerringer, are consulting on workouts at troubled condos.
“New development in New York City has changed completely,” said David Maundrell, the president of aptsandlofts.com. “I’m going to be a different company in two to three years.”
In the early 2000s, a group of boutique firms sprang up to take advantage of the condo fever sweeping across the city. Meanwhile, major firms like Halstead, Prudential Douglas Elliman and others grew their new development divisions.
But the credit crunch has forced them to rethink their approach.
Kelly Kennedy Mack, president of Corcoran Sunshine, said in the fourth quarter of 2009, not a single new development condo opened in Manhattan. Only two projects — Griffin Court Condominium in Hell’s Kitchen and the reconceived Sheffield — launched sales in the first quarter of 2010, she noted.
“[Now] there’s an oversupply of firms that specialize in new developments,” said Jonathan Miller, an appraiser and a limited partner at Condominium Recovery, which converts distressed new condo projects to rentals. “They were built around a market that had projects coming on every day. Some of these firms will adapt, and some won’t.”
Some companies have already faded into the background.
As The Real Deal has reported, the Shvo Group — once one of the city’s most prominent firms — has largely disappeared from the public eye, though it is still marketing one project, 20 Pine.
Others have refused to go gentle into that good night, even if it means changing business models.
Behin, for example, has been working on deals that are far from a residential broker’s usual purview. He recently worked with a stalled Queens project where the developer ran out of money and the bank refused to lend any more. Behin found a new investor, allowing construction to finish.
But it hasn’t been easy to change the perception of the Developers Group as merely a residential brokerage. While Behin already had connections with developers, he said, he had to network aggressively with banks to find out about distressed assets coming on the market.
Moreover, there’s often a delayed payout: Behin sometimes receives a consulting fee or a commission, but often his compensation is receiving the exclusive marketing contract for projects when they start selling again.
“You do a lot of work for free right now, hoping they’ll remember you when times get good,” said Gerringer. A new development veteran who made his name selling bank-owned condos in the early 1990s, Gerringer has been meeting with private equity firms and other investors looking to turn around distressed residential properties.
“I’m trying to be kind of a fixer or middleman to put deals together, with the hope we’re going to be the broker,” Gerringer said.
Both sources noted that these types of deals are just starting to occur, as banks finally stop “extend and pretend” policies for troubled loans.
Warehouse 11, a stalled 120-unit project in Williamsburg, is a good example. Sales there recently started again after the developer, McCarren Park Mews, reached an agreement with Capital One Bank and a third-party financier to buy back the building’s debt.
Aptsandlofts.com, the exclusive marketing and sales agent for the project, was not involved in the agreement, but the firm did market research to help the developer reprice the units, Maundrell said.
He said he isn’t getting involved in workouts the way Behin and Gerringer are, but has changed his business model by “focusing a lot more on resales.”
The shift started when the city’s 421-a tax abatement program expired in 2008, and Maundrell foresaw a resulting slowdown in new development projects.
The brokerage already did a substantial number of rentals, but Maundrell hired agent Jennifer Lee and tasked her with running a new resale division, which now has five people.
He’s also been “encouraging agents to follow up with people they’ve sold to,” so that the company can resell condos when the original buyers are ready to move again, he said.
Another company that’s undergone a recent image overhaul is the boutique brokerage Core. Founded in the early 2000s by erstwhile Elliman wunderkind Shaun Osher, the company quickly gained recognition for its new development marketing in the white-hot condo market. Most people didn’t realize the company also did rentals and resales.
“We’ve been doing resales since day one,” Osher said. “It just so happened that when the new development market was hot and heavy, we were one of the leaders, so people perceived us as a new development company.”
That’s a perception Osher has been working to dispel. He changed the company’s name in 2009 from Core Group Marketing to simply Core. And he’s made an effort to hire brokers who specialize in resales, like Mercedes/Berk alum Christian Rogers and Ogden Starr, a 27-year co-op specialist who joined Core last month. As a result, about half of the company’s deals are now resales, Osher said.
Perhaps the most effective way of changing the company’s image has been the HGTV reality show “Selling New York,” which features Core brokers interacting with homeowners whose apartments they’re trying to sell. “It’s definitely helping the brand recognition,” Osher said.
That certainly seems to be the case: Starr said his first client at Core was a Maine resident who called the firm after watching the show, asking for help selling his home there.
Osher said the company is now mistaken for a new development firm “a lot less” than it was two years ago.