By Dan Orlando
Cushman & Wakefield’s tri-state president Ron Lo Russo dismissed the suggestion that the takeover of rival brokerage Massey Knakal was part of a plan to increase its own market value ahead of a planned sale.
“No, it wasn’t,” said Lo Russo when asked if acquiring Massey Knakal was part of a prearranged selling strategy by its parent, EXOR. “It’s no surprise that the added benefit of Massey Knakal comes at an opportune time,” Lo Russo added.
Last week, news emerged that Italian investment giant Exor plans to sell the global commercial brokerage – although it has ruled out a sale to a competitor such as JLL or CBRE. The development comes two months after Cushman & Wakefield merged with New York-focused commercial brokerage Massey Knakal, cementing its dominant position in the local market.
Lo Russo spoke at a luncheon hosted by the Commercial Real Estate Women of New York (NYCREW), where he shared the stage with his new colleagues Bob Knakal and Paul Massey. The group claimed that being placed on the open market was not a move that any of them were expecting when the deal was made.
While the three executives declined to go into detail about C&W’s planned sale, they had plenty of praise for the synergies created by the merger with Massey Knakal.
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.
“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 there 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 panelists claimed the merger allowed both parties to complement each other’s strengths, with Massey Knakal’s strength in the mid-level investment sales market giving teeth to the bigger Cushman & Wakefield’s New York footprint. But 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 Knakal claimed often alienated the industry’s best talent.
“That was a cornerstone of our platform,” said Knakal of the territory system which incoming Cushman &Wakefield investment sales brokers are now being asked to adopt. “It made it very difficult to hire people from other platforms.”
Despite these difficulties, Knakal argued that focusing in on a specific radius of territory allowed his brokers to be experts on specific properties and thus allowed clients to receive the most accurate and thorough information possible before conducting a transaction.
“Our people are only here because they are in a happy platform,” added 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.”
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 doesn’t expect day-to-day operations to change dramatically.
“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 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, arguing that scrapping the incentive would make it harder to reach the administration’s affordable housing goals.
“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 supply.
“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.”
“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. Cushman & Wakefield will likely play a bigger role than ever before in the outcome.