Members of the newly minted Cushman & Wakefield manned a panel during the Commercial Real Estate Women of New York’s (CREW) luncheon yesterday at 101 Park.
Paul Massey, president of New York investment sales, his partner Bob Knakal chairman of New York investment sales, and Ron Lo Russo, president of the NY Tri State region discussed how they’ve navigated the transition into one entity, the company’s recent announcement that it is on the auction block, and the current state of the city’s commercial market.
Before the panel started, both Massey and Lo Russo spoke with Real Estate Weekly and expressed optimism for their recent partnership-which became official on December, 31st 2014.
Both Massey and Lo Russo said that there was “excitement” amongst the ranks of the former Massey Knakal camp because they are now able to wield the brand-name power of an entity that is recognized on a global scale.
Lo Russo underscored that point, saying that Cushman & Wakefield is now not only one of the most powerful commercial brokerages in the world, but it can now say it is the biggest in Manhattan specifically.
“It’s going phenomenally well,” said Lo Russo during the panel. “We approached this, not with blind optimism, but more of an understanding that from the get-go when we all met each other we knew we could work out any issue, we could get through anything, and have a lot of fun along the way.”
“I think it’s going extremely well,” he concluded, saying that he looks forward to when the two former individual entities will be under one physical roof.
While the merger allowed both parties to complement each other’s strengths, with Massey Knakal’s local strength giving teeth to the bigger Cushman & Wakefield’s New York footprint, one piece of the transition did pose potential to create problems within the ranks of brokers; territorial assignments.
Knakal addressed his former company’s signature commitment to territories, a practice that often alienated the industry’s best talent.
“Our business is a people business. We don’t produce any product. We don’t manufacture anything,” said Knakal. “Our assets go up and down the elevator each day.”
“That was a cornerstone of our platform,” said Knakal of the territory system which incoming Cushman &Wakefield brokers are now being asked to adopt. “It made us very difficult to hire people from other platforms.”
Despite past struggles to acclimate others who were used to free reign, Knakal discussed how focusing in on a specific radius of territory allowed his brokers to be unwavering experts on specific properties and thus allowed clients to receive the most accurate and thorough information possible before conducting a transaction.
Knakal told the audience that while the merger was being arranged, Cushman & Wakefield felt that Massey Knakal had built a “better mousetrap” and “wanted to keep that mousetrap intac.”
“Our people are only here because they are in a happy platform,” said Massey. “We had every single one of them come with us. I think that speaks volumes.”
“The nice part of the plugin was there hasn’t been a ton of overlap between our debt and our investment sales business between us and Cushman. The people that they do have are fantastic people,” said Massey. “They are embracing the way the territory system has enabled us to grow a business and to continue to grow a business.”
“We’re the largest brokerage firm in Manhattan,” said Lo Russo. “We have the most number of offices in the Tri State area. “We’re the only firm to have offices in both Brooklyn and Queens. I’m tremendously proud of that and we’re actually looking to expand our footprint into those areas organically,” said Lo Russo, stating that Massey Knakal “made that easier by being their already.
“They had the vision and foresight before the rest of us did,” he added. “ I’m wildly excited about where we are about to be going.”
The group said that while the titles of both Massey and Knakal have changed slightly-with Bob now reporting to Paul and both reporting to Lo Russo-, the company’s leadership is approaching the future with a group mentality.
“I sell buildings. That’s always what I’ve done,” said Knakal. “It’s always what I will do, I love doing it so my role really hasn’t changed all that much.”
The panel echoed his sentiments and stressed that not much has changed regarding their day-to-day strategies and operations.
The group also shared that being placed on the open market was not a move that any of them were expecting when the deal was made.
“No, it wasn’t,” said Lo Russo when asked if acquiring Massey Knakal was part of prearranged plan to up the Cushman & Wakefield’s value before its parent, EXOR, put it up for sale.
“It’s no surprise that the added benefit of Massey Knakal comes at an opportune time,” Lo Russo continued.
He pointed out that EXOR and the new-look Cushman & Wakefield found themselves disagreeing on the level of backing that would be put behind the firm’s expansion plans and thus the decision was made to shop the entity out to a what will likely be a new equity firm-type parent.
There are no plans at this time to merge with another real estate player, and Lo Russo would not validate rumors that potential buyers have already been spoken with.
The group also discussed the current state of the local investment sales sector and Knakal expressed confidence in the health of the arena despite the looming shadow of 421-a’s uncertain status.
“It’s a concern but I think you have to look at the hopefully pragmatic approach and viewpoint that the administration will have on these issues,” said Knakal.
“Clearly the mayor has said throughout his whole campaign and throughout his first 14 months in office that he wants to create and preserve 200,000 affordable housing units in the city and in the meetings that we’ve had with the mayor we’ve said ‘you create the right incentives you’ll get 400,000 units, you create the wrong incentives, you’re going to get zero.”
“People just won’t sell for a year, 18 months or two years,” said Knakal when considering the possibility that 421-a might not be renewed this summer.
Knakal made it clear that he would rather see the incentive remain. However, he sees a silver lining to its possible death in the form of a brief drop in property values causing a rise in volume in the available market.
“I think if you look at the position of the investment sales market today, it’s really remarkable,” Knakal said. “2014 was a record year for investment sales in the city. The best year that I’ve ever seen in the 31 years that I’ve been brokering here.”
“Whether you are a pessimist and believe that 2014 is a replay of 1988, a year in which we hit a cyclical peak in volume and a cyclical peak in value, or you’re an optimist and you believe that 2014 is a replay of 1998, when we had a peak in sales and a peak in value, this year will be a great year.”
“Regardless of whether you’re optimistic or pessimistic about the future, 2015 can be a great year,” he said, pointing to the resiliency of the market after both the dip of the late 80’s and the rise of the late 90’s.
Regardless of how the market fairs over the following year, Cushman & Wakefield will likely play a bigger role than ever before in the outcome.