$5B Related, Corcoran Sunshine deal signals industry shift away from in-house sales

Nov.November 20, 2013 03:38 PM

The Related Companies’ unusual decision to collaborate with outside marketing pros at Corcoran Sunshine to sell the residential units at its mammoth Hudson Yards project will be a boon for the new development marketing sector, industry experts told The Real Deal, since it signals a reversal of a recent trend towards marketing big-ticket projects internally.

Related announced the partnership earlier this week, surprising some in the real estate community, since the giant developer has historically handled sales in-house. Going forward, Corcoran Sunshine, the new development marketing wing of the Corcoran Group, will handle about $5 billion worth of projects in Related’s New York City pipeline in partnership with Related Sales, the company’s in house sales division, including the Zaha Hadid-designed 520 West 28th Street condominiums.

Though brokerage executives could be forgiven for quaking at a competitor landing such a plum assignment, industry pros insisted that the news was positive for the sector overall.

“It shows that this short wave of developers who thought that going in-house was more cost-effective and more productive than working with the brokerage community is potentially turning back to the brokerage community,” said Stephen Kliegerman, president of Halstead Development Marketing. “I think it’s a great thing.”

Indeed, the developers of the city’s two most noted residential towers in recent years— 432 Park Avenue and One57 — both opted to use their own in-house brokerage teams to market their projects. (Extell Development, the company behind One57, collaborated with Corcoran Sunshine behind the scenes.) Some high-profile brokers criticized the shift toward in-house marketing as eroding transparency in the marketplace, as The Real Deal reported.

“Developers thought that they would save money and have more control over the branding and sales process if they went in-house,” Kleigerman said. “What developers are finding is that the expertise it takes to develop a brand and marketing platform and a sales strategy for a development are unique and most of those talents do lie within the major brokerage firms.”

For Related, the company’s wide-reaching plans to build in New York City — Hudson Yards is said to be the country’s largest real estate project — as well as nationally and internationally, are likely keeping the company busy, noted Andrew Gerringer, managing director at the Marketing Directors, a new development marketing company. That might be one reason the company has opted to boost the efforts of its in-house sales division with the help of an external company.

“I would assume they have a lot on their plate these days,” he said. “It’s really good to stick with what you’re really good at and they’re good developers. If they can outsource and not have to have a whole staff of people to do [sales], it’s beneficial,” he said.

For Corcoran Sunshine, the assignment is likely a significant boost to its pipeline, which is the largest of all new development companies in the industry. The firm is also marketing projects like the Baccarat at 20 West 53rd Street on behalf of Silverstein Properties.

It will likely push ahead of its closest rival, Douglas Elliman Development Marketing, in terms of market dominance.

Elliman’s new development marketing chief, Susan De Franca, an alumna of Related, had previously vowed to unseat Corcoran Sunshine as the industry’s biggest player after she joined the company two years ago.

“I made a promise to Dottie [Herman, president of Elliman] and Howard [Lorber, chairman of Elliman] when I joined them that I would use my best efforts to grow the largest and strongest new development division in the city,” De França told The Real Deal in an interview this summer. At that time, she told TRD that Elliman projected a total $3 billion in contracts in 2013.

She was not immediately available to comment for this story. Neither Related nor Corcoran Sunshine agreed to comment.

Still, the Related assignment may not be so transformative for Corcoran Sunshine as it initially seems, Gerringer said.

“[The $5 billion in product] going to be over a period of many years,” he said. “It’s not like it’s all coming on today. It’ll be over a long period of time, which is great, because it’s almost like an annuity. You know you have a stream of business.”

While most industry pros agreed that the partnership was a win-win for both Related and Corcoran Sunshine, one broker said Related might have been safer to tap multiple firms to market such a large project as Hudson Yards.

“I do feel strongly that any multi-project developer should work with at least two different marketing firms so they are not exposed,” said Town Residential CEO Andrew Heiberger. “Even the largest marketing company like Corcoran Sunshine can become spread thin or lose focus.”

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