While New York real estate brokers may not be licensed to sell properties outside the city, some developers are giving them good money to market out-of-town properties to residents in the five boroughs and overseas.
With a downturn in the sales market being felt more severely outside the borders of New York City, developers are turning to brokers here to tap into their potential pool of purchasers and their international clienteles.
As a result, New York-based brokerages are increasingly working with real estate firms all over the country and world, in places ranging from Jersey City to Houston to Miami to Mexico to Abu Dhabi.
Halstead Property, for example, is marketing a project in Jersey City called A Condo — a loft-style building with 250 one- to three-bedroom units priced from $350,000 to just over $1 million.
“The reason they wanted us was the name-brand recognition of a large firm; they also believed they needed a Manhattan base, and a name that a Manhattanite would recognize,” said Steve Kliegerman, the brokerage’s senior vice president of marketing.
But joining forces with a partner in the city can be tricky for developers working on projects elsewhere — because a New York-licensed broker cannot work out of state unless they are licensed there. (Internationally, the rules vary from country to country.)
In the case of A Condo, the New Jersey firm Classic Realty and New York-based Halstead are both working on sales. Classic Realty is handling the sales office in Jersey City, with Halstead’s New Jersey director of sales, Gene Cordano, who holds dual state licenses, heading up his firm’s effort.
Cordano said the developer of the
project, the Athena Group, wanted to attract both young professionals and empty-nesters from both the city and New Jersey.
In another attempt to attract young New York professionals, West Orange, NJ-based Jordan Baris has teamed up with Fillmore Real Estate, the largest independent brokerage in Brooklyn, to attract buyers across the river to new homes in Newark’s South Ward. The homes are priced starting at $239,000, well below prices of similar starter homes in Brooklyn.
While commission structures can vary in out-of-town deals, in the case of A Condo, commissions accrue to the local agent, and Halstead is paid a referral or marketing fee by the developer. Kliegerman declined to reveal the amount.
Like Halstead, Shvo, which made headlines when it marketed 20 Pine Street and its Armani Casa interiors, is currently marketing projects around the country and globe.
In Shvo’s marketing pipeline are luxury villas with developer Boymelgreen in Houston, Texas; a mixed-use project in Utah; and the private island development dubbed Nurai off the coast of Abu Dhabi. And, there are more on the horizon, said Jason Press, executive vice president of marketing for Shvo.
In most instances, Shvo’s sales teams consist of one or two people from the central sales office and a team of local brokers that they recruit. Shvo also collects a referral fee, but Press said their arrangement is based on performance. He declined to provide more specifics on the commission structure.
The firm also has taken the extra step of becoming licensed out of state in both Texas and Utah. It also acts as the primary broker in Abu Dhabi, where it recently opened an office. Shvo has formed a partnership with Zaya, an Abu Dhabi-based real estate development company, to sell the properties.
Press said Shvo is also in talks to market developments in London, Eastern Europe and some other Middle East locations, and that it is considering a presence in Paris. Members of the firm recently attended a conference in Paris where they conferred with local professionals about the market.
According to real estate experts, it makes sense for New York brokerages to team up with developers elsewhere, especially as the market softens and business here slows down.
Paul Purcell — a partner at Braddock + Purcell who built the Prudential Douglas Elliman corporate development and relocation business, and ran the Corcoran referral group prior to starting his own firm — said the concept of representing out-of-town developers is not new. But, he said, it is
sometimes not as productive as “being physically there or having a representative there.”
As for commission structure, Purcell said the referral fee is commonly 25 percent of the split. So if the total commission in Florida was, say, 6 percent, the referral would be 25 percent of 3 percent, and that amount would accrue to the firm, not the broker. But he said it would not be unheard of for a developer to pay as much as 6 percent, or even more, directly to the referral firm, especially if the market there is hurting.
Prudential Douglas Elliman’s Shemesh Group has partnered with a non-New York developer. Run by managing director Tamir Shemesh, the group’s seven-person team is representing Park Place on the Ocean, a 33-story oceanfront luxury condo development designed by Kobi Karp in Sunny Isles, Fla., just north of Miami Beach. They are marketing the project in New York, nationally and internationally.
The group works with a local sales team at the development to sell the condos. One-bedroom units there start in the high $600,000 range, while three-bedrooms begin at $700,000. The team receives a referral fee for sold units,
Shemesh said. But he declined to reveal the amount.
The development — which is being constructed by Florida
developer Hector Dasso — is expected to be completed in September 2009.
Meanwhile, in an arrangement which was featured on The Real Deal’s Webcast last month, the Bracha Group at Prudential Douglas Elliman was brought on as the exclusive agent for the Canco Lofts development in Jersey City.
And, in April, The Real Deal reported that the Chelsea-based firm Kurland Realty was planning to open a sales center for 200 second homes in a small town in Pike County, Pennsylvania. The Pennsylvania developer, Country Homes, brought Kurland on specifically to target Manhattanites.
In most of these partnerships, the developer expects to tap into the broader advertising reach of the brokerage, Kliegerman said. On the A Condo project, the Athena Group wanted a firm with “a greater reach in terms of advertising.”
Halstead used Google keywords and searches, which Cordano said drove 75 to 80 percent of their traffic.
Although only 15 percent of A Condo’s buyers ended up coming from Manhattan, most were first-time buyers looking for deals.
At an average of $700 per square foot for the one-
bedrooms, the units are “a screaming bargain compared to New York,” said Cordano.