Chelsea Garden

The skies are grey, the real estate market is cloudy, and the unpredictability of both has never been more apparent. The New York Post’s Katherine Dykstra wrote a story today that featured apartments with outdoor space. Will this will clear the air and give us hope for brighter days ahead?

I still contend that THIS IS THE TIME TO BUY! I say this not because I own a brokerage that relies on transactions, but because of the fundamentals underlying the opportunity for buyers and their ability to transact.

It’s June.

July and August are supposed to get hot.

Let’s see what happens.

Breakfast anyone?

There are more similarities in these two names than one might think. If you’re into numerology, you’d notice that both names are spelled with an unusual combination of a consonant, followed by a vowel, followed by two consonants….you get the idea.

“Be fearful when others are greedy and greedy when others are fearful.” said Buffett. Historically, this has proven to work wonders for him (for the most part). He ranks number 2 in the United States with an estimated net worth of $50 billion.

During the depression, Kelloggs and Post (the cereal companies) took two different paths. James Surowiecki eloquently wrote a piece in this past week’s New Yorker about this. Kelloggs, with their contrarian business model proved to be more successful. As we continue to grow our company organically in this market, I find myself asking mentors about this philosophy. They all overwhelmingly agree with Buffett and Kellogg, although it’s always easier to give this type of advice from the outside looking in.

We are clearly in a buyers market which means that those who are brave (and smart) enough to take advantage of this historic moment, should come out long term winners. My advice, from the inside looking out, is to seize this moment and embrace the opportunites this market brings. I know there will be some echo’s of 1998 to 2006 where the bears were saying “I could have, should have, would have…” 

Don’t be a foolish bear. Be sly like a fox!

In June 2008 I was walking down Fifth Avenue and saw George Soros’ new book “The New Paradigm for Financial Markets: The Credit Crisis of 2008 and what it means.” I bought the book, read it, and thought to myself “whew, let’s hope this guy is wrong”. Unfortunately, he was right on the money, and the global financial and housing crisis is almost exactly as he predicted. The video above from 2006 further validates his foresight. He has been politically outspoken and has provoked some passionate rhetoric from the left and the right. Love him or hate him, one can’t argue with his success and foresight.He is one of the few billionaires (estimated above $9 billion) who’s net worth is growing, not shrinking. I would love to know a few things from him. Namely…….

1) What do you think of the stimulus plan?
2) Can you explain to me why Czech prime minister Mirek Topolaneka calls the plan a “way to hell” that will “undermine the stability of the global financial market”?
3) What is your outlook for the housing market in the next 12 months?
4) When will we hit bottom (if we haven’t already)?

I’m hoping to see a new book from him soon that will answer some of these questions, and more. I’ll certainly be paying attention!

I guess when everyone absolutely must know what you are doing at that very moment things get a little hectic. Now you know what I am doing and maybe I will try again tomorrow!

Now, as I stood waiting for him outside the Upper West Side building where a listing of ours had been on the market for just over six months, I thought to myself, “What’s this guy going to be like? Will he be an inch off the ground? Speaking in tongues? Eyes rolling back in his head? Is he going to want to hug me? What?” Kirk’s experience notwithstanding, I confess to a degree of skepticism.

I’m happy to say, the person I encountered that afternoon defied my somewhat cynical expectations. In my first meeting with Reggie Arthur I was face to face with a warm, gregarious, and firmly rooted gentleman with whom I formed one of those instant connections we happen upon from time to time. We chatted, he cleared, and less than a week later our Upper West Side listing had an accepted, all cash offer that closed in just a little over a month! A coop, no less!!

Now, not only is Reggie an integral part of our team, he’s a friend.

Did you know that it is legally permissible for the sponsor to retain board control in a new development even if only 1 unit remains unsold, as long as it was fully disclosed both in the bylaws and in the special risks section of the offering plan?  The rules change for a conversion that requires a sponsor to give up control of the board after five years or upon the sale of at least 50 percent of the units, whichever occurs first. This is according to New York Real Estate attorney Mark Axinn.

However, should the sponsor give up control of the board of managers, the sponsor cannot designate or nominate the majority of the managers. In this case, the sponsor is not prevented from voting with its percentage of common interest for unit owners who have similar views, as long as the unit owners are not on the sponsor’s payroll or otherwise given money by the sponsor.

In 1973, Barbara Corcoran created what was eventually to become New York City’s top real estate brokerage company. Her entrepreneurial mind, common sense approach to building a business, creativity and tenacity set her apart from the field. She sold the company seven years ago and started applying her creativity and knowledge into other endeavors. She has written two books and is widely considered a pre-eminent expert in the real estate and business world. I had the pleasure of speaking with her about the company she created and eventually sold and the general market.

THE INTERVIEW

Shaun: What was the most challenging part of starting your real estate brokerage company?

Barbara: Coming up with the cash, absolutely, because I was working as a waitress at the time and I lived off of what I earned in tips. Coming up with the cash to start any business was a major obstacle. But fortunately, my (what was soon to be boyfriend), came into the diner. I met him and he gave me the cash to start a brokerage firm. A thousand dollars.

Shaun: That’s a great story.

Barbara: That was a stroke of good luck.

Shaun: So you never became a real estate agent? You started your own company immediately and you never went to work for a firm?

Barbara: I started my brokerage firm in New Jersey immediately because my boyfriend had a friend who was an attorney, and as an attorney he was able to license me. So I just went and took the test. In those days, you have to appreciate 35 years ago, there were no barrier entries at all. If you could walk and talk you could pass the test. And I could do both, so I sailed through it.

Shaun: Is it any different now?

Barbara: Of course. It’s a pain in the neck now. In New Jersey, in New York, any state. Top of the list of course is California where fifteen years after I went to California five times to attend the courses I failed my brokers license five times in a row. I never got to move to California because I already had the Corcoran Group. I wanted to just move to California to just start all over again, but I couldn’t because I couldn’t pass the damn exam. In answer to your question; “Is it more difficult today?” It’s more difficult in terms of education, because you have to take courses and pass the exam, which is a pain in the neck.

Shaun: Did you have a mentor when you entered the industry? Was there someone who inspired you?

Barbara: My mentor, who I never thought of as my mentor, was indeed my boyfriend. And he was instrumental in that he gave me the $1,000 to start me. He took 51 percent of the shares. He was a controlling partner. I ran the business, he invested in it. He was a silent investor.

Shaun: What happened after that?

Barbara: I went along merrily, and grew the business until seven years out he married my secretary and that ended the partnership within one year. I ended it after one year because he wouldn’t let me fire her because he was a controlling partner. That’s how I learned the lesson on what 1 % means. That extra 1%, it’s lethal. I didn’t know that. I was very young and naïve. I’m still entirely grateful that he gave me that opportunity, but very upset that he found my secretary prettier and younger than I was (laughing).

Shaun: I’m sure. Did you then take controlling interest of the company somehow?

Barbara: I announced to him one year later, (it took me a year to build my courage), but a year later when I had enough gumption I walked in and said I was going to end the business and partnership and I had a plan already made on how we were going to do it. It was very simple. We were going to divide the 14 sales people we had at the time, like a football draw and I said “you pick the first one, I’ll pick the second”. He picked the superstar and I picked the medium producer that I knew would make a great partner for me down the road. She had all the traits I didn’t have. I picked my opposite in taking care of the future and in hindsight that was my single best judgment I ever made. And then we divide up the balance of the people. I said to him, “I’ll always let you pick first”. So now, the next question was, who gets to keep the phone number? We had a very snappy number, so he got to pick the number. One of us had to leave the office and one of us had to stay and he said “I’ll stay”. So I got to leave. I got the short end of the stick no matter how you looked at it. But I honestly needed to know that I gave him the best advantage, so that I didn’t have as much guilt about leaving.

Shaun: The name was Corcoran?

Barbara: It was Corcoran Simone at the time. His last name was Simone and my name was Corcoran obviously. So we named it Corcoran Simone. The only reason it didn’t end up Simone Corcoran was we both thought it sounded like one person. Simone Corcoran. His actual name was Simon and his first name was really Ray. When I met him as that handsome boyfriend, he told me his name was Ramon Simon, with an accent on both words. What a difference that made.

Shaun: He got you.

Barbara: He got me, and that was probably the first example of great marketing that I ran into as a real estate broker. I was like, “Ramon Simone….. oh boy, oh boy, oh boy!”

Shaun: One of the more difficult things for me to do was to come up with a name for my company. We picked our names. Cayre, Osher, Real, Estate, C.O.R.E. that’s how we came up with CORE.

Barbara: Is that right? And CORE is so easy to remember. Who cares how you came up with it?

Shaun: This is true.

Barbara: Well, you know the importance of a name. What really makes a difference is whether people can pronounce it. His new company name, because he put his new wife’s maiden name in the front end instead of mine (like overnight), became Pogue Simone. I realized immediately that no one will know how to pronounce it, nor spell it, and I thought that was a stroke of good fortune for me. At least I got to carry my name out.

Shaun: And your name is on it to this day. Corcoran Group is still one of the largest firms still in Manhattan. And it carries your namesake on it. How do you feel about that?

Barbara: Initially when I sold the company it was a source for anxiety. Now I realize that it was a gift. And why I felt that way initially was, I would walk by a store window and see my name, “Corcoran Group”. If I didn’t like the colors they used on the walls to decorate the office I would be annoyed. Is that ridiculous?

Shaun: No, I can appreciate that sentiment.

Barbara: Or if the flowers in the planters to the right and left to the door were not freshly clipped, I would be annoyed and wish my name wasn’t on the canopy above it. So that’s ridiculous, I realized. But when you start your own business, people think of it as a separate entity. When it’s your baby, it’s never a separate entity. It’s an extension of yourself in the same way a child, well maybe not the same way, but very similar to a child. Even though they’re supposed to be independent, you see them as an extension of you, when you’re taking care of them. You know.

Shaun: Absolutely, I feel that all my agents are an extension of me and it’s very important how they represent themselves, because it’s a reflection on me and my company.

Barbara: And you’re so right. Any manager or owner who doesn’t have that exact feeling is never good at their job.

Shaun: The month I started CORE, The Real Deal wrote a story on me, and right next to it was a story on your outlook for the industry. In the article you said “I think the future belongs to small brokers and I’m one of the few people to say that. The big guy clearly has the corner on the money and that’s the downside to being little but the little guy has the corner on creativity”. Can you elaborate a little on that?

Barbara: It’s exactly what it says. I found in growing my business, the larger it became the longer it took for me to execute an idea. And I would get an idea in a minute. I think that was a great forte. I had marketing ideas by the second. So when the company was little I would think of something, traveling to an airport. I’ll give you an example. I’ll give you a few examples. Well, I can give you a million examples. I’ll give you an early example (laughing). I was somewhere parking the car and there was a horse show going on, this is after I left Ray Simone, so I had like seven or eight agents, I walked into the horse show and they had these big gold ribbons, for first place, you know.

Shaun: Right.

Barbara: I said “Wow!” And that day online, when most people weren’t ordering online, I had a hundred gold ribbons delivered to my office the following Monday. By Monday they were on my desk overnight express. I had the idea that I wanted to push my company towards high end sales because we were a mid price firm. At the time, the interest rates in Manhattan were going up, I think almost 17 or 18 percent. I realized the only people that were going to buy property were the very wealthy. And so I realized I was in a bad spot as a brokerage firm, because I was in the middle rung and I was going to be left behind.

So I had to immediately get my sales people to believe they were million dollar sellers, and I used my ribbons to do it. I gave my big pep speech about “You can do it.” One young sales man with no experience went out and got a listing through a contact he knew. Who was a friend of a chauffeur for the Guggenheim Estate on Park Avenue, and he sold it for $1.8 million within two weeks. I awarded him the gold ribbon. That was Ron Rossi who then sadly passed away from AIDS. He was the first salesman that I lost from the AIDS epidemic. But Ron Rossi went in only as he could. When I gave him that gold ribbon it created envy and jealousy within the firm. No one thought that the new kid on the block had the right to be that guy, making that big deal, and I was giving out gold ribbons by the dozens for the next five years. I pushed that company. I’m off point, but the point I wanted to make is, I saw the ribbons at a horse show on Saturday and at the Monday morning sales meeting, I was holding them in the air. I had them custom printed because in the center of each ribbon I had a million dollar sign printed. Anyone who made a million dollar sale, or above, got a ribbon. As elementary as that was, in short order it became that you were almost nobody in the company if your bulletin board wasn’t full of ribbons. The competition was fierce. And so it took me only a day and a half to turn around an idea. That’s a little guy.

When the company got larger I had to work the system. This was my own system that I created, which was usually efficient, because I always had a good eye for efficiencies. But I had to inform the managers what the idea was. Think of who to delegate to. Sometimes it had to be legally vetted. And so idea to delivery was always slow and frustrating, and you even had to play politics of listening, giving audience to the nay-sayers. To be proper at the advisory counsel that I created, where you discuss things and include people. It’s not that it was not all important, but it slowed the process. Year by year my creativity output became slower, even though we were clearly labeled the innovator in the business and had a dozen ideas to everyone else’s number. It was still so frustrating to see that pace slow down.

Shaun: Why did you sell your company?

Barbara: At the time I was selling, I had a six year old son that I gave birth to at 46. I thought I was the oldest mother in the world. Now I have a 3 year old at 59, so I’m really the oldest mother for sure.

Shaun: Children are the best.

Barbara: It’s the best and it puts everything into perspective. So I had two reasons; one although I was spending all the time I could with my son, I was tired when I was with him, because I put 150% into everything I did. Parenting and my business, from the minute I walked in. Even in bed thinking of things, I was 150% in love with my business and I was 150% in love with my son and so that was a conflict. The other reason was my goal from the beginning, which was to be the number one firm. And the minute I could prove myself in market share, which in New York how do you really do that? I simply had more listings on the books in the sellers market when I sold than anyone else. You know, you never really knew what the buildings were worth, but I knew I was number one or two, but I could clearly see I had a good 15% margin over Douglas Elliman’s listings. I realized I was number one, the best way I could measure. And I said “Okay, now what do I do?” I accomplished my goal and I couldn’t think of anything. I thought “Okay, I got to where I wanted to go, and now what? Oh, I guess it’s time to check out.” I decided that month to sell my company, and I had a buyer within a week, and it was closed four months later.

Shaun: Do you have any regrets?

Barbara: I had regrets after I sold the business. Not regretting the decision per say, but regrets that I didn’t think about how difficult the adjustment would be for myself. What I terribly miss more than anything are the people. I had roughly 850 sales people, another 200 somewhat clerical support people, managers, and marketing people. I had a huge family and I had hired not every one of them, but almost every one of them. I had trained at least a third of them and they were my babies. And so, to walk away from a family you raised for 30 years was very difficult for me to make that adjustment. Very difficult. I felt broken hearted, and yet I thought I would feel free. But instead I felt empty.

Shaun: What have been the main changes in the industry since you sold your company 6 years ago?

Barbara: Well, the main change is, there’s been a shift in the population of buyers in the city. More dramatic than when I witnessed it through the years. It was starting, but it wasn’t as dramatic, which is the traffic from overseas. It became more of an international city by far. It became more of a wealthy city by far. Not that those changes weren’t on foot anyway and they were markets that I was always hiring people specifically for, but the percentage of wealthy foreigners coming to the city, I would classify as a dramatic change. I think another change that happened, not that it started when I sold because it certainly started years before I sold, but even to a greater degree became more true, is the caliber of the typical salesperson that came into the field got better by the year. Truly the caliber of the individual, both in terms of education, dedication and hustle. And those are important cards.

Shaun: We are going through a global financial crisis. What is your outlook for the real estate market in Manhattan, short term or long term?

Barbara: It’s nothing more than a blip in a continuous line that keeps going up. I mean will it blip down? I really believe that, I think it’s got to blip down because our worst enemy to the real estate market is not a bad Wall Street as people always say it is. The worst enemy is uncertainty. When people are uncertain, it’s havoc on sales. So the uncertainty is a terrible card right now that’s playing out. But despite that, New York, I’ve learned to believe in heart and soul. There’s always someone who wants it. Let this group leave or that group leave. The families abandoned the city years ago and then they returned back. Corporate America left New York and then that stopped. You know the Japanese came in and then they lost their shirts and then the Taiwanese came in and bought their apartments from them. There’s always someone who wants New York. I used to, for the first maybe four years of my business, worry myself because my initial customer base was corporate America. I had two good accounts. I had Union Carbide and Citibank. They sent me all their trainees, young engineers and young bankers and I’d rent them apartments. Renting them apartments was my blood line. And then Blue Cross and Blue Shield moved out. Union Carbide moved out in those first four years and I’m like “oh no, oh no”. And all the bad comments about New York in the early seventies. And then everyone was wrong. And then after 911 everybody said again “New York, New York, oh poor New York” and then the whole world fell in love with New York. And the international community embraced it.

Shaun: 1987 through to 1993 were really difficult for real estate in the city.

Barbara: I remember when prices first went down, after the stock market crashed and it took 11 years to recoup that loss. And we recouped it in the last three years, so prices tumbled 8 years. But then we recovered within three years, and that is something that’s true about New York and not true about other real estate markets. I never believe when people say, oh New York is different. In the end New York is not so different. But the one difference I do see about New York is it’s much slower to unwind, it happens later here. We recover faster here and when it picks up it runs like gang busters. It makes up the loss over night.

Shaun: Time will tell. Once again, congratulations on all your success.

Barbara: I appreciate it. I wish you luck with your company, even though you don’t need it. But it’s nice to have luck anyway.

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