The Real Deal New York

Paydirt: How StreetEasy crushed the fledgling Rebel Alliance

The industry news you need to start your week, and what’s ahead
By Hiten Samtani | September 11, 2017 09:47AM

The Death Star

By sending sales and rental feeds exclusively to REBNY’s fledgling RLS, the big-cheese brokerages hoped to hold StreetEasy siege. But sieges don’t work if one of your own top generals supplies grain to the enemy.

Zillow has played its cards beautifully. As the platform, it simply needs to ensure the largest players are on board. StreetEasy had already notched a victory in July, when Douglas Elliman said it would allow agents to use their marketing budgets to pay the website’s daily rental listings fee. Now, it’s scored another, even more decisive triumph: Realogy, parent to Corcoran Group, Citi Habitats and Sotheby’s International Realty, made a multi-year deal with Zillow to cover StreetEasy’s fee for all its New York agents. The agreement decimates a rebel alliance formed by Corcoran and many other firms that was supposed to show Seattle who was boss.

Zillow must be giddy: Realogy is a national behemoth, and though the deal only applies to New York at the moment, it’s possible the two companies could extend it to other markets in the future.

Consider how REBNY might be feeling. An RLS that is the only source for the listings of the city’s biggest firms is a mouth-watering proposition, one that can lure customers and agents away from established platforms. An RLS that’s simply one source of these listings, much less so.

I keep coming back to the Amazon or Facebook analogies: Booksellers can whinge about Jeff Bezos being bad to them, but if they want readers to buy their books they know they probably need to be on Amazon. Corcoran CEO Pam Liebman was one of the earliest and most visible detractors of StreetEasy’s monetization play; she’s now fallen in line, and is taking a fair bit of shade for it.

And what of the minnow firms? It’s doubtful StreetEasy will even bother negotiating with them – their options are limited to getting into line or dying of invisibility. This position is creating a good deal of fear.

“You dropped the ball with an MLS, now we have to pay extra money to fuckin street easy [sic],” one irate broker wrote in an open letter to REBNY circulating on social media after news of the Realogy-Zillow deal. “You do nothing for the small firm. Do your damn job and get involved.”

Brooklyn’s answer to Stuy Town in play: In 2006, Tishman Speyer and partner BlackRock paid $5.4 billion for Stuyvesant Town-Peter Cooper Village – we all know how that went. The following year, when David Bistricer’s Clipper Equity made a play for Starrett City, a Brooklyn housing complex with nearly 6,000 units that is the country’s largest federally subsidized housing development, government officials were having none of it. Bistricer was offering $1.3 billion, a heady price that advocates at the time said would only make sense if he hiked rents. Wary of creating another Stuy Town situation, the state’s housing chief put the kibosh on the deal.

In 2015, Blackstone and Ivanhoe Cambridge made their move on Stuy Town. What allowed their bid to get the blessing of regulators was their promise to keep 5,000 of the complex’s apartments affordable for at least 20 years.

The entity that handled the Stuy Town sale on behalf of lenders was CWCapital, a special servicer, and the point person for CW was Andrew MacArthur. Last year, MacArthur left to start his own firm, Brooksville, which teamed up with Rockpoint Group on a pair of rentals in FiDi. And last week, the partners teamed up again to buy Starrett City, offering up a far more modest price of $850 million and, following the Blackstone-Ivanhoe playbook at Stuy Town, pledging to keep the complex affordable.

The deal would require state and federal approval, and here’s where it gets iffy: President Trump is one of the current owners of Starrett City, which he’s described as “probably the greatest tax shelter ever made.” His government now has to vet a deal in which he stands to make a windfall.

50 Hudson Yards rendering

Related’s race to 25: In May, my colleague Danielle Balbi first reported that Related was in talks to sew up a $2.5 billion debt and equity package for what is slated to be the country’s priciest-ever office tower, 50 Hudson Yards. At the time, she identified Mitsui Fudosan, the Japanese investor that’s already the majority equity in neighboring 55 Hudson Yards, as the likely equity partner, and Related confirmed this last week, announcing a $1.5 billion senior construction loan for the project as well as the equity injection. Like Pep Guardiola’s 2009 Barcelona squad, Related is executing a tactical masterclass and reaping the rewards (Barcelona won a record six trophies that glorious season, Related has scored over $18 billion in financing for Phase 1 of Hudson Yards). They’ve still, however, got about $7 billion to go.

Chaser: Did you know a preteen Sam Zell had a business selling Playboys to randy kids in the ‘burbs? In a hilarious and provocative Closing interview with TRD’s Kathy Clarke (now at WSJ, we miss her!), Zell reveals this and much more, including his zen about Steve Roth calling him a “bald-headed chicken fucker.” It’s one of the most interesting Closings we’ve done in a long time, and that’s saying something. Check it out here.