Clayton Orrigo on the mansion tax and the market’s “tectonic” shifts

The mansion tax. The proliferation of listings platforms. A softening luxury market. The Real Deal talked to six players in New York City’s residential space about the new pain points they’re feeling in a sector that’s getting squeezed from all sides. Below, Clayton Orrigo of Compass describes the flurry of deals he saw before the mansion tax took effect — and what he expects to happen long-term.

Read the full story — “Tales from the front lines” — here

Clayton Orrigo
Compass

After a career in finance and a stint in the startup world, Clayton Orrigo moved to New York and started a third career in real estate. He now co-runs the Hudson Advisory Team, a nine-agent group at Compass that specializes in Downtown luxury sales, and closed roughly $78 million in New York sell-side deals in 2018, according to TRD’s latest ranking. Before the new mansion tax went into effect in July, Orrigo’s team closed a flurry of deals, including a $19.5 million Tribeca penthouse. Orrigo talked to TRD’s Sylvia Varnham O’Regan about how the tax could impact the market.

In high school, I was the kid who would drive around and look at houses. It was kind of cathartic. I grew up in Rumson, New Jersey. There were all these magnificent homes.

I began working in finance when I was in college at Villanova University. After that, I started doing hedge fund trading and then hedge fund recruiting. This turned into an online recruiting business called Identified. I moved to California in 2009 — more into the tech world — and was there for three years.

We were trying to build a LinkedIn for the younger generation. We raised $20 million. It was a real business. But the reality was, I had some doubts and wanted to make real money.

I came back to New York in 2012. I had always loved real estate. I had met Fredrik Eklund socially — a girl I was dating worked for him — and we started talking. I decided to get into the business. I realized that if I could treat it more like an advisory role, like an investment banker would treat an advisory role to a CEO, it’s the same principle.

I wanted to build something that felt like my own company within another firm. Our ability to be entrepreneurial at Compass is unparalleled. If I’m going to make a bet, why not bet with the firm that’s the most progressive in the industry? Meaning if I go work at Elliman or Corcoran or one of these other firms, I’m not getting equity in the firm. Where’s the potential upside, long-term? It’s not there. At least at Compass, I’ve got equity upside. We’re the Wall Street Journal’s No. 4-ranked team in the city. We’re No. 40 in the country.

This used to be a six-day-a-week job. It’s now seven days a week. Saturdays are no longer free. This is a very significant shift that happened just in the last year. Buyers don’t want to come to open houses any more. They want private showings.

We specialize in selling $3 -to-$6 million apartments. That’s really where the bulk of the business is done. This year, with the mansion tax, we saw a flurry of activity; we’ve had the best three months of my career because we got a ton of deals done in anticipation of July 1.

A lot of buyers held back last year. They thought the market was still going down. When the mansion tax kicked in, it was an additional spur.

Do I think the mansion tax absolutely destroys the market? No, I don’t. I think the additional cost will be borne by both parties. I think more people will wait longer to buy a larger asset, and they will rent longer.

It will be particularly interesting to see how developers and sponsors address their unsold inventory.

Where things get challenging is in the lower part of the market. In the upper end of the market, those clients are easier because the money means less to them. A 10 percent adjustment doesn’t change their life. For someone who is buying a $2 million apartment, that hurts.

[For the sellers who are] buying something on the other side [it all evens out]. The people who are hurting more are [sellers] who are doing single trades.

I don’t think anyone has correlated it to the mansion tax, but there are areas of the market that feel very challenging. Deals are taking longer. I feel like people are taking a real breather right now. The big question is what will happen in September.

I just hired another person in my back office to make sure we have an appropriate infrastructure in place to handle listings for a longer period of time. I don’t have the bandwidth to manage it. I’m having to do more marketing, more selling and more client management — keeping our sellers calm as the tectonic plates below are shifting.