How it feels ...
First-person profiles of New York's top real estate players
The Real Deal
How it feels...
...to go public
Steve Schnall, chairman and president of New York Mortgage Trust
I was 24 years old in 1992 when I started my mortgage brokerage company. I was truly a one-man shop, working out of my Manhattan apartment, trying to make a buck and retain as much as I could, even though I never made any capital.
By 1998, the market was really hot and we had grown to about 40 employees when we decided to move up the food chain into lending. Even though we were doing quite well and growing, we had to leave virtually all of our profits in the company to support our lending needs, which kept growing.
After 12 years of this, I found myself married with kids, and I wanted to monetize what we were earning. Becoming a REIT was the answer. Of course, it wasn't that easy. My investment banker friends warned me of all the frustrations I would encounter, but you're never really prepared for all the false starts. It was false start after false start after false start.
Finally, on June 23, 2004, we went to the New York Stock Exchange and had our first board meeting in one of the ancient and grand conference rooms. Then we went down to the floor of the exchange, where at 9 a.m., I rang the opening bell, and about 300 million people saw it on all the financial networks. That was really exciting. Getting the check was nice, too. I emancipated my life savings, which had been locked up for 12 years.
While I am running a $1 billion public company, I'm still the chairman of the board and still in charge of business. The tricky parts are now dealing with the public and corporate governance. Sarbanes-Oxley is just a nightmare, and working with a board of directors is a bigger deal than I thought it would be. There are a lot of personalities and disparate ways of making decisions. It's not like the old days, when I wanted to do something, and I just did it.
Today we have 800 employees and 15 offices, but it took a dozen years of hard work, and sometimes pain and suffering. Starting something in your bedroom and then moving to the New York Stock Exchange been quite exhilarating.
...to sell out a new development in eight days
Cheryl Nielsen-Saaf, senior vice president at the Corcoran Group
The minute we posted the 148-unit SDS/Procida Clinton West development on the Web in August, the phones started ringing off the hook. I was the marketing broker, and it took five agents to field all the calls. Usually we have just a receptionist answering the phones.
For the next eight days we worked early morning to late evening. It was incredibly exciting, but it wasn't chaos -- we had a system in place. We had people coming in and giving us earnest money, we had packages coming in with earnest money, and we were writing all the contracts ourselves -- usually overnighting them the same day the money came in. We turned contracts over in 12 hours, controlling the whole situation. We were working our butts off and loving every moment of it. People talk about endorphins after running, but this has it beat.
The team, which includes the developer, had thought of every detail in advance to make the process as smooth as possible: the amenities, rational price points and 95 percent financing. Some of the buyers and brokers were familiar with the developer's past projects, which also contributed to the interest. In those few days, some people did back away, but typically they had a friend or relative, or, in some cases, the agent that stepped into their place and bought it.
This experience proved to me what I felt for a long time: the more control of the process the broker has, the easier and smoother things run. As they say: too many cooks spoil the broth. Other key elements include keeping the process as streamlined as possible, offering what the buyer wants, and making the buyer feel happy about what they're getting. And you have to be able to deliver.
I would love to do at least four of these projects a year; one every quarter. There are two more buildings coming on line soon and I can't wait!
...to get fleeced by a client
Barbara Fox, president of Fox Residential Group
Every broker gets screwed at some time or another -- and I've been in this business 30 years! But the most egregious situation I had was 10 years ago with a very high-profile seller on a $6 million property. I was the exclusive broker representing the seller, and it was a very difficult property. It took months and months to find a buyer. Finally, we did, and it was the perfect person -- out of central casting for this building.
When we went into contract, I started to feel very nervous when the seller forced me to sign a brokerage agreement with a willful default clause. That means the seller can pull out of the deal for any reason. I was leery, but because of this seller's profile, the fact I knew they really wanted to sell it, and I had invested so much time to get to that point, I stuck with it.
Two days before the closing, what'd you know? I get a call from my client's attorney, who said the seller had negotiated with the buyer to get out of the deal -- and that was the last time I saw or heard from them again.
Then, they had the nerve to send me a Baccarat crystal candy dish as a consolation prize. I threw it against the side of the building! Just kidding. I immediately gave it away -- I thought it was bad karma.
The beauty of this story is that 10 years ago I sold that same apartment from that scumbag, representing the buyer. I didn't have to go face-to-face or even speak with them. But they were horrible throughout that whole process. Needless to say, I was leery of them throughout the whole deal.
Deals often fall through for legitimate reasons. Our job is to properly serve the client, and when a client is on the up-and-up, you can just mark a fall-through to part of the job. But in this situation, I thought it was very duplicitous. I was representing the seller, and they were screwing me on the side.
...to have a prime property sit vacant
Robert Selsam, Boston Properties senior vice president and regional manager
When we closed on the site acquisition to build the Times Square Tower in October 2000, 60 percent, or more than 600,000 square feet, was leased to Arthur Andersen. When we started building two years later, we watched Andersen evaporate right before our eyes.
We first started reading about the Arthur Andersen fallout from the Enron scandal; then we got calls from the company. Over a period of a few months, we watched the firm disappear, which was really surprising. It had incredibly strong financials -- I remember $12 billion to $14 billion in annual sales, and its credit looked impeccable.
But rule No. 1 is: Don't panic. And we didn't. It all comes down to whether you have confidence in the property or not. And we knew we had a terrific building. It was efficient and well-planned and it had a great location.
The market was not strong at the time, but we had no choice. We came up with a marketing strategy that allowed us to make deals of as little as 5,000 square feet. One of the most creative and successful things we did was to come up with our design-build program for smaller tenants. A firm could come in and we would design, build, and hand over the space to their specs without the hassle of construction. That was a new product at the time. In the end, we did very well.
To tell the truth, there wasn't a lot of nail-biting. One advantage of that situation is that we had time on our side -- construction was just starting. Also, a company the size of Boston Properties doesn't have to worry that one project is going to have a huge impact on the firm.
I don't think that deal taught me a lot. It just reinforced what I knew: You have to keep looking forward and deal with what you have.
...to get a six-figure commission check
Linda Stein, Prudential Douglas Elliman broker
I've gotten several six-figure checks. I can't remember my first one. When you get a big check, it's not glee you feel -- it's a relief you scored. You can show someone 75 apartments and have a board turn-down. Deals fall apart much more than they come together.
I had an enormous deal in Long Island I can't really discuss. I was on the phone five times a day, six days a week for five weeks straight. The deal was signed in the summer, but they didn't want to close until mid-January. It's like being pregnant -- and getting that check is like having a baby. I celebrated by opening two bottles of that rose champagne.
I managed the Ramones for seven years. If one week we had an audience of 40 people and the next week we had 700 people, that's immediate gratification. If you have an encore or hear your song on the radio, that's gratification. There's no gratification in real estate except for getting a check.
If a person of a certain age with an education like mine -- a master's degree from Columbia -- had a job, I certainly would be making six figures, so it's not completely out of whack that I get paid what I do.
And we earn these checks. It costs a lot of money to show these days -- the cost of taxis is so high, I can spend $100 a day on taxis and not get paid. You don't show $9 million apartments and take the subway.
But we don't get checks every week -- it's not like clipping coupons. And sometimes the check is spent by the time you get it. The reality of it is that a lot of it goes to Uncle Sam. Real estate brokers are independent contractors and are responsible for all our deductions. But I did forget to deduct that rose champagne.
...to stand atop a recently constructed skyscraper
Tom Elghanayan, Rockrose Development president
I think that building skyscrapers also must be a very sexual thing to do -- erecting buildings. I think it appeals to people's sensibilities on many levels.
Most of what we do here is complete dog shit. It's tedious, it's tiring. But 5 percent of it is satisfaction in seeing the reality of what you've built -- even if I don't make any money, even though a byproduct of all this is that you usually make a large sum of money.
To tell the truth, I get that satisfaction less and less because the gestation period of building a building -- especially in New York City -- is so long. The amount of obstacles you have to overcome is overwhelming: buying the site, taking possession, getting tenants out and the legal problems with that, zoning, dealing with community groups, and on and on and on. It takes forever. By the time you get a shovel in the ground, you're dealing with the unions. So many things can screw you up.
I really like going to the topping-out parties. They're essentially for the construction workers and these guys are very union, very patriotic kind of guys, so there is a lot of flag waving, and with that comes a real sort of camaraderie and team spirit because everyone knows what a difficult process it is. The whole team really lets its hair down and celebrates.
We're now working on Queens West in Long Island City. We're building a whole community of 3,500 units, and it's taking years and years of remediation and negotiation. But I can't wait to get up there when it's all done.
© The Real Deal/Emma Johnson