The Real Deal New York

Rental firm Blackstone wins market share, and critics, in Lower Manhattan

Brokerage steamrolls market, but competitors question tactics
By Gabby Warshawer | February 01, 2010 02:02AM
Blackstone Properties CEO Kevin Ellerton
Kevin Ellerton, the CEO of Blackstone Properties, which has snagged a significant market share but also drawn ire from competitors.

At the ripe old age of 24, Kevin Ellerton is managing to become one of the most powerful players in the Lower Manhattan rental game. To hear his competitors talk, he’s also one of the most loathed.

Ellerton is the CEO of Blackstone Properties, a company he started less than two years ago with a high school friend, David Yomtobian. (Ellerton’s company has no relation to the powerful private equity firm the Blackstone Group.)

By Ellerton’s calculations, about half of all brokered rental deals in the Financial District and Battery Park City are inked by Blackstone agents. While executives at other Lower Manhattan firms say that number might be closer to 40 percent, they grudgingly concede that Blackstone has grabbed a formidable share of the rental market in a very short period of time.

“We’ve grown really fast, and we’ve destroyed the market for a lot of other firms,” said Ellerton, adding that the company now has about 70 agents.

The idea for creating Blackstone came in the spring of 2008, when the two former classmates from West Hempstead, Long Island, partnered to rent units at Rockrose’s EastCoast developments in Long Island City. At that point, they were still operating as agents under the license of independent broker Iosif Kushnir.

A couple of months later, Ellerton saw an ad for Dwell95, the luxury Wall Street rental building developed by Joseph Moinian.

“I fell in love with that building, and we ended up becoming one of the top-performing agents there, filling up more apartments than firms with 30, 40 and 50 people,” he said.

That summer he and Yomtobian struck out on their own under the name Blackstone, sublet space at 2 Wall Street, and set about hiring agents. They now have five offices — three on Wall Street, one in Chelsea and one in Midtown, Ellerton said.

Ellerton said he and Yomtobian rolled over the money they made working in Long Island City and at Dwell95 — a few hundred thousand dollars — and also received an investment from Kushnir to launch the firm.

Blackstone’s chief strategy has been to blanket Craigslist with listings; the tactic is one of the things that’s drawn ire from competing firms like Urban Sanctuary, Platinum Properties, New York Living Solutions, Anchor Associates and Bond New York. Ellerton claims that in the firm’s first year, it spent about $1 million on Craigslist ads. Based on $6 an ad, that’s more than 160,000 ads a year, a number that some say seems impossible.

“They over-post on Craigslist,” said Karin Barsegyan, the Downtown managing director for Urban Sanctuary. “People who know the market down there know there simply aren’t as many available apartments as they’re advertising.”

Barsegyan claimed that in addition to posting multiple ads for the same apartment, Blackstone has engaged in duplicitous marketing tactics on Craigslist, such as advertising an apartment for $1,200 that actually rents for $2,400, and not clearly stating that the rental amount is per person, with the assumption the aparment is shared.

For his part, Ellerton said placing multiple ads for the same apartment is a common marketing tactic and that Urban Sanctuary’s agents also place ads with rental amounts predicated on a share. Both firms say they have stopped the practice. While REBNY would not comment on the situation (Blackstone is not a member), its code of ethics states that “no member shall publish or advertise in an inaccurate or misleading fashion.”

Barsegyan said he gives Blackstone credit for expanding so quickly and characterizes them as “young, hungry kids.” He said, however, that right now landlords are “using any broker just to get their units filled.”

Blackstone was temporarily banned from showing apartments at 45 Wall Street.

“When the market turns around, they’re going to realize who acted in a professional way,” he said, noting that he’s heard stories from his agents about Blackstone brokers walking into occupied apartments and showing them to other prospective renters. Ellerton denies that Blackstone agents have tried to show units with tenants in them.

An executive vice president at one of Blackstone’s main competing firms alleges that the firm puts up bait-and-switch ads on Craigslist for apartments that either don’t exist or have already been rented in order to hook customers into seeing other apartments. According to the state’s Department of State, no complaints have been filed against Blackstone for such practices.

The executive, who asked not to be identified, forwarded a Blackstone Craigs-list ad to The Real Dealin which the firm claims it will give a $10,000 check to the 100th person who rented from them as part of a contest. The ad includes photos of people who appear to be winning oversize $10,000 checks from the firm, but in at least one case Ellerton acknowledges that the person photographed was just posing and did not actually win.

Ellerton claimed he was unaware of the gimmick, and that when it was brought to his attention he fired the person responsible for it.

“Sometimes we give too much license to our agents, too much creative freedom,” he said. “A lot of that comes from the fact that we’re inexperienced and we’re 24 years old.”

Meanwhile, Barsegyan and executives at other Lower Manhattan firms noted that Blackstone had temporarily been banned from landlord TF Cornerstone’s new developments Downtown — which include 2 Gold Street and 45 Wall Street — for a couple of days because of complaints about the company.

Ellerton confirmed that Blackstone was briefly banned from showing units in the buildings, but said the incident was prompted by unwarranted complaints from competitors and that Blackstone did nothing wrong.

“We’re hated by our competitors, but we’re loved by our clients,” said Ellerton, who alleges that competing agents are actually the ones engaging in “unscrupulous behavior.”

“We flood the market, and we have a monopoly mind-set, and we’re hated for that,” he said. “A lot of our competitors post fake by-owner ads and then turn around and flag our ads on Craigslist.”

Leasing managers at new development rentals in the Financial District who have worked with Blackstone say the firm’s aggressive tactics have resulted in leasing success.

“They operate by trying to out-advertise their competitors,” said Will Strozier, the leasing manager at 95 Wall Street, who credits Blackstone with renting “a very large proportion” of the building. “If you look on Craigslist it is dominated by Blackstone ads. Because of this, they can continuously keep their agents in the field showing, which ultimately leads to more deals closed.”

Strozier added: “They have become a major player in the Downtown real estate market and are giving some of the more established companies a run for their money. In an already tight real estate market, the competition can become fierce, and this understandably can lead to tension between brokers.”

Greg Brancato, the leasing manager for 200 Water Street, said Blackstone has done more than 50 deals in the building and that “their strong sense of competition” accounts for their quick success.

“They don’t let their clients go with some other agent,” said Brancato. “They’ve been more aggressive than other companies, but you have to be aggressive in this market.”

Ellerton claims that Blackstone has been so focused on expanding that he and Yomtobian are making less money than they did before they founded the company, since all their profits are being rolled back into the firm.

Nevertheless, they’re planning to grow the firm going forward.

“We want to get into sales when the market comes back and expand into other areas, like Chelsea and Midtown,” Ellerton said. “In the end, I think we’re going to make this one of the greatest real estate companies that anyone has ever seen.”

Comments are closed.