Hardhats show their softer side, Heiberger opens up, and top brokers and developers come to terms with the new market: Highlights from TRD forum

May.May 16, 2018 03:36 PM

You’d expect construction bosses to be gladiators, experts at using the bully pulpit to advocate for the hardhats and contractors they represent. More unusual, however, is seeing them apply Churchillian diplomacy on stage. But that’s what the audience at The Real Deal’s 11th annual New York Showcase and Forum got to witness Monday.

In the midst of a discussion about the bitter battle between unions and Related Companies at Hudson Yards, the country’s biggest private development, Lou Coletti, president of the Building Trades Employers’ Association, requested a moment to read a quote aloud. He took out his spectacles, pulled out a paper and delivered a line from “The Darkest Hour,” the Winston Churchill biopic.

“Success is not final, failure is not fatal: it is the courage to continue that counts.”

John Banks, president of the Real Estate Board of New York, elicited another highlight-worthy moment when he came to the defense of Gary LaBarbera, president of the Building and Construction Trade Council of Greater New York. “Anyone who would impugn his integrity, doesn’t know the man,” Banks said of LaBarbera, prompting the union leader to reach over shake his hand, and pat his thigh lovingly. LaBarbera said that his group was ready to come to the table and hash things out with Related. The developer, however, wasn’t buying it.

The event brought together some of the city’s top developers, brokers, construction heads and other real estate professionals, with thousands coming through the Metropolitan Pavilion in Chelsea for a day of panels, exhibitor booths and networking.

Some of New York’s most active developers discussed how New York, despite more than 2.5 million square feet of new office space coming to Manhattan every year, needs to continue ramping up its building.

“If you look at London in the last 20 years, London’s replaced 50 percent of their stock with new office space. If you go to Hong Kong, that number is 80 percent. If you go to New York that number is 7 percent,” said Silverstein Properties’ CEO Marty Burger. HFZ Capital’s Ziel Feldman talked about paths to finance projects such as condo inventory financing – “It’s another way of getting money out the door,” he said.

On the residential side, TRD’s publisher Amir Korangy sat down with Town Residential founder Andrew Heiberger, for his first public appearance since Town went under last month. The two walked on stage to the “Game of Thrones” theme song. Heiberger opened up about why he decided the only move left was the nuclear option, disbanding the brokerage operations of a firm that he said has done over $13.5 billion in sales since its inception.

“There were about 10 percent of the people in our firm doing the lion’s share of the business,” Heiberger said. “And they were at very high splits.” He warned brokers in attendance that the traditional business model of a residential brokerage was no longer sustainable, citing existential threats such as ferocious competition for agents, growing expenses and rising commission splits.

The panel that followed him, which included the city’s top residential broker and executives from leading firms, naturally took issue with Heiberger’s assessment.

“I disagree that traditional brokerage is not a sustainable business model,” said CORE’s CEO Shaun Osher, adding that the most recent quarter was the firm’s strongest in over a decade. “If that were true, none of us would be sitting up here.” But the panelists did acknowledge some new realities in the market, including StreetEasy’s Premier Agent, which Raphael De Niro said had both created headaches – “The fact that I’m co-broking with people from Great Neck on Manhattan rentals is crazy,” he said – and opportunities – “I was not supportive of Premier Agent, [but] I’m changing my philosophy.”

Brown Harris Stevens’ Bess Freedman, however, still isn’t swayed. “It’s like we’re giving them the bullet and putting the gun to our head,” she said of the agent-advertising program.

Warburg Realty’s Clelia Peters said that it wasn’t national encroachment that would affect brokerage commission splits in New York, but rather the impact of a behemoth such as SoftBank, which has invested tens of millions in firms like Compass.

SoftBank’s strategy, she added, is to make landscape-altering bets on the firms they back, so every player would see an impact.

The day wrapped up with a panel in which commercial real estate leaders discussed how the lure of the public markets has changed the game for brokerage.

“I think other brokers have benefited from these public companies and their significant war chests,” said Newmark Knight Frank’s Dustin Stolly.

JLL’s Peter Riguardi said being public allows the firm to compete for the biggest prizes.

“We had some very large, strategic clients that, quite frankly, I think at the end of the day are only considering two firms for certain types for work,” he said.

“I think you mean three firms,” interjected Cushman & Wakefield’s Joanne Podell.

“No, I don’t,” Riguardi replied. “I mean two.”

All photos by Jhila Farzaneh for The Real Deal.

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