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February 2009

Housing stock up, vacancy rate down

 


 

 

New York City now has over 3.33 million units of housing stock, the highest number since 1965, and the number of units increased in all five boroughs between 2005 and June 2008, according to preliminary results of the 2008 New York City Housing and Vacancy Survey, released yesterday. New York City's rental vacancy rate was 2.88 percent between February and June 2008, down from 3.09 percent during the same period in 2005. Because the survey includes data only through June, it does not address the impact of the financial crisis on city real estate. The number of rent-stabilized units fell by 17,000 since 2005, the study found. The number of people paying more than 50 percent of their income for rent was 29.4 percent, compared to 28.8 percent in 2005. The survey is conducted every three years and is required by city and state rent-regulation laws.

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All eyes on rentals now


 


From the February issue:
New York City has always been a town of renters. But in the last few years, it was easy to forget that fact, with condo towers selling out in a matter of days and the average price of a Manhattan apartment peaking at a record $1.7 million in the first quarter of 2008, according to Prudential Douglas Elliman. For a time, everyone wanted to own New York real estate, and every broker wanted to sell it. Now that the ensuing wave of job losses has made buying property impossible for many New Yorkers, rentals are suddenly back in vogue. "I wouldn't want to be selling condos now," said Richard LeFrak, the chairman, president and CEO of the LeFrak Organization, one of the biggest rental landlords in the New York City area. LeFrak will soon begin marketing a new 33-story rental tower in Jersey City called Aquablu. Occupancy is set for May or June.

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▶EAST 49th BELOW MRKT 3 BLKS FRM TRAIN 2nd AVE MARCH◀STUDIO

BRAND NEW LISTING - MIDTOWN EAST STUDIO

BELOW MARKET - EAST 49TH STREET & 2ND AVENUE

Contact JAD Realty Group for showing times:

Jeffrey Ditri

610.781.8417












LOCATION:
Midtown East / East 49th Street



DESCRIPTION:
Well maintained, walk-up building
Second floor unit
Separate kitchen including appliances and new cabinetry
Tiled bathroom, new fixtures
Large living space featuring a wall of windows
12' high ceilings
Eastern exposure view, bright
Four storage closets
New hardwood floors
Original crown moldings and detail
Live-in super
Priced below market value
Excellent Midtown east location; near all transportation, restaurants, Murray Hill, Grand Central Station, the Upper East Side, and Central Park

TRANSPORTATION:





LISTED RENT:
$1,395

CONTACT:
Name: Jeffrey
Phone: 610.781.8417






BRAND NEW LISTING - MIDTOWN EAST STUDIO

BELOW MARKET - EAST 49TH STREET & 2ND AVENUE

Contact JAD Realty Group for showing times:

Jeffrey Ditri

610.781.8417
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▶EAST 80S UNDR MRKT ELEVATOR 200 SQFT GARDEN LAUNDRY◀STUDIO

BRAND NEW LISTING - UPPER EAST SIDE STUDIO

EAST 88th STREET - ELEVATOR - LAUNDRY

Contact JAD Realty Group for further detail

Jeffrey Ditri

610.781.8417











LOCATION:
Upper East Side / East 88th Street



DESCRIPTION:
Well maintained, elevator building
First floor unit
Separate kitchen including new appliances and cabinetry
Tiled bathroom, new fixtures
Large living space featuring a southern exposure view
High ceilings
Access to private 200 square foot garden
Two storage closets
New hardwood floors
Recently new renovations
Live-in super
Laundry room in building
Priced below market value
Excellent Upper East Side location; near all transportation, restaurants, Carl Shurz Park, Gracie Mansion, and Central Park

TRANSPORTATION:





LISTED RENT:
$1,650


CONTACT:
Name: Jeffrey
Phone: 610.781.8417


BRAND NEW LISTING - UPPER EAST SIDE STUDIO

EAST 88th STREET - ELEVATOR - LAUNDRY

Contact JAD Realty Group for further detail

Jeffrey Ditri

610.781.8417

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Brand New Listing - East 70S Studio - Granite Kitchen/Marble Bathroom

***BRAND NEW LISTING***

UPPER EAST SIDE STUDIO - EAST 70S

Contact JAD Realty Group for showing times:

Jeffrey Ditri

610.781.8417

 







LOCATION:
Upper East Side / East 73rd Street



DESCRIPTION:
Well maintained, walk-up building
Second floor unit
Newly renovated kitchen including granite counter tops and new appliances
Marble bathroom, new fixtures
Large living space featuring decorative fireplace
Wall of windows, eastern exposure view
Two storage closets
New hardwood floors
Live-in super
Priced below market value
Excellent Upper East Side location; near all transportation, restaurants, Midtown East, Hunter College, and Central Park

TRANSPORTATION:





LISTED RENT:
$1,495


CONTACT:
Name: Jeffrey
Phone: 610.781.8417

***BRAND NEW LISTING***

UPPER EAST SIDE STUDIO - EAST 70S

Contact JAD Realty Group for showing times:

Jeffrey Ditri

610.781.8417

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PICS▶UNION SQUARE E 17 RENT STABILIZED IRVING 2/15◀1 BEDROOM

REDUCED TO RENT - GRAMERCY PARK ONE BEDROOM

IRVING PLACE, RENT STABILIZED UNIT, EXPOSED BRICK WALL

For showing times, please contact JAD Realty Group for more information:

Jeffrey Ditri

610.781.8417

 








LOCATION:
Gramercy / Union Square / Irving Place



DESCRIPTION:
Well maintained, walk-up building
Fourth floor unit
Separate kitchen including appliances and new cabinetry
Tiled bathroom, new fixtures
Living room featuring an exposed brick wall
11' X 11' bedroom, can fit a queen size bed and extra furniture
Two storage closets
Wall of windows in bedroom, bright
Southern exposure view
New hardwood floors
Rent stabilized unit, priced below market value
Excellent Gramercy location; near all transportation, restaurants, Irving Place, the East Village, and Union Square

TRANSPORTATION:





LISTED RENT:
$1,625


CONTACT:
Name: Jeffrey
Phone: 610.781.8417



REDUCED TO RENT - GRAMERCY PARK ONE BEDROOM

IRVING PLACE, RENT STABILIZED UNIT, EXPOSED BRICK WALL

For showing times, please contact JAD Realty Group for more information:

Jeffrey Ditri

610.781.8417

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Repricing accelerates for Manhattan office market

 


Number of blocks of space in Midtown with dramatic rent cuts quadruples



Asking rent reductions that accelerated through the fourth quarter of 2008 continued in January, with prices down by as much as 30 percent from the peak last summer, commercial brokers said.

The number of blocks of space in Midtown with dramatic price cuts quadrupled between September and December, according to a CB Richard Ellis report released last month.

Tenant representative broker Norman Bobrow said he saw repricing all over Manhattan. "This has been going on since September of last year but has accelerated, really accelerated, in December and January," he said. He estimated prices had fallen back to levels last seen in 2005.

The optimism from the inauguration of President Barack Obama on Jan. 20 was quickly dampened two days later by a crushing jobs report that showed the city shed 8,500 private jobs in December and the unemployment rate rose to 7.4 percent, Glenn Markman, executive director at Cushman & Wakefield, said. Each office job loss equates to a loss in demand for about 250 square feet.

Despite the bad news, leasing negotiations have picked up from the near standstill in the fourth quarter of 2008.

"The market had to reduce [prices] because it was too expensive," said Markman, who estimated prices were off 20 to 30 percent from last year's highs.

As an example, he said, in late January he was negotiating a lease with a landlord in a Midtown building who had been seeking as much as $80 per square foot. The tenant occupies the space on a sublease, paying about $50 per foot. But as the economy declined, the landlord reconsidered its high price and will likely settle for about $55 per square foot, or a 31 percent cut from the asking price.

"Look what the landlord gets: certainty," Markman said. "He does not give [tenant improvement] or free rent ... and no downtime for leasing."

Howard Rosenblum, a leasing agent and director at commercial property landlord Kaufman Organization, said owners were aggressively cutting prices by about 20 to 25 percent to attract tenants. But, he said, tenants were still holding off.

"A lot of people are thinking it is going to drop more and don't want to commit," he said. Tenants do not want to pay the steep security deposit and some wonder if they will still be in business in the coming years.

But some tenants who do negotiate are signing leases with prices that are below the rents they paid in the final years of a long-term lease, he said.

Neal Lerner, an independent tenant representative broker who works in the 5,000-to-15,000-square-foot range, said tenants willing to sign leases were opting for shorter terms, like two, three or five years. The bet is that rents will be even lower on the expiration of the lease, and they will get a better deal at that time.

"People tend to stay in place and negotiate shorter commitments from landlords," he said. "They are waiting for a better time when they can take advantage of lower rentals on a long-term basis."


Midtown

Landlords in Midtown have tripled the amount of space aggressively discounted in their hunt for tenants, slashing prices in December by an average of 19 percent, CBRE reported. The quantity of sites being repriced quadrupled from 30 in October to 134 in December, representing 1.74 million square feet that month, the report said.

Despite the steep reductions, the average asking rents dropped by only $1.98 to $78.89 in December, and vacancies rose 1 point to 7.6 percent, the data said.

Some landlords were holding firm in pricing. Bobrow said there were Class A landlords in Midtown who were reluctant to sign leases at discounts. The building owners sought to maintain the high rents in the office towers so that larger tenants negotiating a lease renewal could not point to lower rents and ask for a similar discount.

Landlords "don't want to inch down, they want to hold on to the renewals" at the high prices, he said.


Midtown South

Midtown South had its slowest month in leasing velocity since May 2001. Just 80,000 square feet was signed, representing only 20 percent of the five-year rolling average, CBRE said. The anemic month capped the weakest year since 1993. In 2008, 2.58 million square feet was leased, a level 40 percent below the total for 2007, the data showed.

The district saw vacancies rise in December by 1 point over the month earlier to 8 percent, but asking rents remained steady, dropping just $0.03 to $52.43 per square foot.


Downtown

Leasing activity Downtown remained flat while prices declined moderately, in the only one of the three office markets to see positive absorption, the CBRE data showed.

The district had a net absorption of 270,000 square feet, but for the full year the area had a negative absorption of 1.59 million square feet, compared to a positive absorption of 1.33 million square feet in 2007, according to CBRE.

Average asking rents fell from November to December by $1.51 per square foot to $47.68 per foot, while vacancy rates were steady at 7.4 percent.

Markman said brokers were keeping a close eye on three financial firms that occupy 7.5 million square feet downtown — Bank of America, Goldman Sachs and American International Group.

Bank of America is absorbing Merrill Lynch, Goldman Sachs is moving to a new headquarters in 2010 and AIG may sell some of its buildings for residential use.

"Depending on what the companies look like a year from now, that will have an effect on the marketplace," he said.

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Tenants in position to bargain

Speaking on NBC's Today show this week, the Corcoran Group's founder, Barbara Corcoran, said that most apartments that haven't been sold are turning into rentals, and that tenants are now in the perfect position to bargain. Possible concessions from landlords include several months' free rent, an apartment with a better view or slightly more square footage for the same price.

Watch the interview here:

www.youtube.com/watch

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Biggest price cut of the day


 

770 Park Avenue, #14B

 

The unit with the biggest price cut today in Manhattan is a two-bedroom, three-bath co-op at the

Rosario Candela-designed

770 Park Avenue, according to Streeteasy.com. The apartment, unit #14B, was cut by $2.4 million and is now listed for $7.5 million, down from its $9.9 million listing. The apartment was originally put on the market at $10.95 million in May 2008, and cut to $9.9 million in September. Brown Harris Stevens' Nancy Elias and John Burger are listing the unit, which also has a 45-foot terrace. The $2.4 million cut from the unit is almost double the average price of a co-op in Manhattan, which was $1.21 million in the fourth quarter of 2008, according to appraisal firm Miller Samuel.



Meanwhile, the most expensive unit to come on the market today is a $9.35 million condo at 151 East 58th Street,

One Beacon Court

. The 2,410-square-foot unit has three bedrooms and three baths. Brown Harris Stevens' Linda De Luca and Corinne Vitale are listing the unit. On Monday, a One Beacon Court unit had the

biggest price cut of the day

.

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Luxury stores can't afford Madison Avenue

 

 

“For Rent” signs, like this one at 753 Madison Ave., are becoming a familiar sight along the avenue’s “Gold Coast.”

After more than 30 years on Madison Avenue, the retailer E. Braun & Company is packing up its $3,500 hand-embroidered tablecloths and $2,390 bedding sets and will defect in April for cheaper space on Park Avenue.

And it is not alone. New York’s most elegant shopping corridor, the Gold Coast of Madison Avenue, from 57th Street to 72nd Street, is pockmarked with vacancies as retailers flee sky-high rents. More than two dozen retail spaces are on the market and are either empty now or about to be. Windows that once showcased hand-tooled leather suitcases are now plastered with for-rent signs.

“This is as bad as I’ve ever seen it,” said Alan Victor, a broker who has worked the street for more than four decades and who is an executive vice president of the Lansco Corporation.

Another broker, Gene P. Spiegelman, an executive director at Cushman & Wakefield, said that 13 percent of the retail spaces on Madison Avenue were available either as a direct lease or a sublet. Not included are those with tenants who would move if the right offer turned up.

“There are tenants that say, ‘If you get me a good sublease, I’ll take it and run,’ ” said E. William Judson, a broker who is also the chairman of the Madison Avenue Business Improvement District, a group made up of property owners and retailers. “Some people are thinking, ‘Maybe I’ll either downsize or I’ll close the store.’ If they have a lousy day, they say, ‘Let’s get out of here.’ If they have a good day, they say, ‘Let’s stay.’ ”

Lately, the people who sell $2,400 leather bags and $1,600 satin-and-rhinestone evening sandals are more likely to have bad days. Of all retail chain categories, luxury stores had the greatest decline in sales in 2008, falling 7.5 percent from 2007, according to the International Council of Shopping Centers, a trade group. From 2004 to 2007, by contrast, the luxury sector outperformed all other categories by a wide margin.

The recent holiday season was the worst in four decades for the retail industry. Sales at Neiman Marcus’s specialty division, which includes Bergdorf Goodman, declined 31.2 percent. Tiffany reported that sales in stores open at least a year were down 24 percent.

“If you’re in New York, and you’ve got the financial services industry in a depression, how can you possibly do well in high-level goods?” asked Howard L. Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm.

Madison Avenue has traditionally catered to the wealthy, but until Polo Ralph Lauren opened at the former Rhinelander Mansion on 72nd Street in 1986, most of the shops were private boutiques like E. Braun. In 1998, the stretch on Madison Avenue known as the Gold Coast surpassed Causeway Bay in Hong Kong as the most expensive shopping strip in the world, Cushman & Wakefield reported, with annual rents averaging $550 a square foot. By then, Giorgio Armani had two 16,000-square-foot stores on Madison and Hermès was about to move there from 57th Street.

For many international retailers, a Madison Avenue address was viewed as essential for promoting their brand, even if sales were not robust enough to justify the rent. Often, part of the rent came out of the marketing budget — a practice that brokers say is fast disappearing.

Rents began escalating rapidly a few years ago, after the stores on the Madison Avenue side of the General Motors Building, at Fifth Avenue on 58th and 59th Streets, were expanded and began commanding annual rent of more than $1,000 a square foot, said Benjamin Fox, the president of Winick Realty Group, a New York retail brokerage.

In 2007, fancy jewelers clustered on the avenue, especially between 61st and 64th Streets. They were able to afford higher rents because their costly merchandise could fit into smaller spaces and more revenue could be squeezed out of every inch. Rents skyrocketed to $1,250 a foot or even more. (Even so, Fifth Avenue between 49th and 59th Streets is now ranked as the world’s costliest shopping strip, with asking rents as high as $2,000 a foot. Its luxury tenants share the avenue, however, with shopping-mall clothing chains like Diesel and Abercrombie & Fitch.)

Retailers typically expect their rent to equal about one-tenth of their sales volume. “In a prime location like Madison Avenue, most retailers will change that to 25 percent,” said Joel Isaacs, the president of Isaacs & Company, a retail brokerage. Even under that formula, a tenant paying $1.25 million for 1,000 square feet would need to have nearly $5 million in annual sales.

Today, however, asking rents on Madison and elsewhere are dropping by as much as one-third, brokers say. And many landlords will offer more concessions than before, like additional months of free rent. “If you’re a good retailer and you’ve got a good product, the landlord wants you,” said Faith Hope Consolo, the chairwoman of the retail group at Prudential Douglas Elliman. “The word ‘no’ no longer exists.”

Taking advantage of the softening market, Lalique, which sells crystal goods, gave up its two-level store near 63rd Street — now occupied by the watchmaker Mauboussin — and is moving into smaller quarters five blocks to the south, with lower rent than it would have paid six months ago, Ms. Consolo said.

The astronomical rise in rents did not cause all the impending vacancies on Madison. Some tenants, like the jeweler Graff, have moved to larger quarters nearby. (Hublot, a Swiss watchmaker, recently came close to leasing Graff’s former store but got cold feet and withdrew, said Robert C. Fink, director of leasing for the landlord, the Winter Organization.)

William Friedland, the Gold Coast’s largest property owner, is emptying out a building that houses the restaurant La Goulue and several stores in order to redevelop it.

Frederic L. Barbatelli, a co-owner of E. Braun, said he was moving to be closer to D. Porthault and other Park Avenue purveyors of luxury home goods. But Ms. Consolo, who is offering a Mini Cooper to the broker who snags a lease for E. Braun’s Madison Avenue space, between 63rd and 64th Streets, said the store had been driven out by high rents.

Mr. Victor of Lansco said that lower rents would be good for Madison Avenue. “The market reached a crazy level,” he said. “A lot of people who wanted to look at Madison Avenue couldn’t make it pencil out. This may be a reality check. It will still be high-end, but it will be a healthier Madison Avenue.”

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High rents doom East Village retailers

 


 

Tribe

 

Tribe, the decade-old East Village bar, has closed, one in a slew of area businesses that have recently succumbed to a potent cocktail of skyrocketing rents and lower profits in the economic slowdown.



Tribe's final day was last Thursday, said owner Matt Wagman, senior partner at Riteon, a partnership that operates four other bars in Manhattan. While Tribe drew loyal crowds and "always turned in really nice numbers," the bar closed after negotiations failed with landlord Tara Allmen, who had asked for a "100 percent increase" in rent when Tribe's 10-year lease expired December 31, Wagman said.



Allmen, a physician, inherited the building from her mother, Renée Allmen, along with several other East Village properties, and recently completed renovating the four residential spaces in the building. She called Tribe "an eyesore."



"I want a classier place," she said, adding that Tribe "was not going to enhance the aesthetic of the building."



Asking rent for the space, located at 132 First Avenue at St. Mark's, is $150 per square foot, according to Daniel Wolf, a managing director at Lansco Corporation, who was familiar with the Dimucci Partners listing. Allmen said she is close to inking a deal with a new tenant.



In recent months, many nearby businesses have closed. They include East Village stalwart Love Saves the Day, famous for its cameo in the Madonna film "Desperately Seeking Susan," which announced it would close in January, though a satellite branch in New Hope, Penn. will stay open. Other casualties include Stanton Street vintage boutique Dulcinée, music stores Etherea Records and Mondo Kim's, and 45-year-old shoe repair shop A. Fontana. The East Village neighborhood blog EV Grieve recently counted 21 empty storefronts along Avenue B.



Many businesses in the area are falling victim to slowing sales in the economy, which make it hard to pay steep rents, said Robin Abrams, executive vice president at the Lansco. "A year or two ago, as the area gentrified and there was lots of new development, the asking rents significantly increased," she explained. "New tenants were paying very aggressive rents. With the economy now changing, it's becoming very difficult for [businesses] to survive down there."



But high rents are also problematic for longstanding businesses, like Tribe, which moved to the area when rents were much cheaper and cannot afford to stay when their leases expire, despite brisk business.



Tribe attracted a loyal following and was "pound for pound, one of the greater performers in our portfolio," said Lansco's Wagman, who is listing a retail space in the area. But at just under 900 square feet, the bar fit only 75 people and could only turn a profit with its rent at a certain price point.



"With 800 or 900 square feet, you have to have a cost-structure a certain way or it won't work," he said.



Other examples include Vlada boutique, previously at 103 Stanton Street, which has now been replaced by trendy hair salon Pimps & Pinups. The boutique Shop moved after a decade at 105 Stanton Street to a new location at 94 Orchard Street, and was replaced by the designer boutique Yumi Kim.



Both Shop and Vlada were "good stores," Wolf said, but "couldn't renew because they couldn't afford to pay the rent," he said. Many have relocated to what he calls the "Lower Lower East Side," below Delancey Street, where rents are more in the $50 to $75 per square foot range rather than $100 to $150.



The problem is not limited to the East Village and the Lower East Side. It's so widespread that in June 2008, local politicians introduced the Small Business Preservation Act, sponsored by City Council member Robert Jackson, which would provide more rights for commercial tenants at lease renewal time.



But it's especially noticeable in the rapidly gentrifying East Village, where rents in some spots have quintupled in the past five years, Wolf said, thanks in part to the new Whole Foods and the John Varvatos store that replaced CBGB's on the Bowery. "Five years ago, it was more pipe shops and sex shops," he said. Now, "there are a lot more national tenants. That will bring the rents up no matter what."



That means smaller businesses like Tribe get hit hard, said Wagman, who moved to the East Village in 1988. "One of the great things about the East Village was how many small places like Tribe existed," he said. "Now that the Chipotles and banks and Starbucks have raised the bar, it makes it exceedingly difficult [for smaller places to operate.]"



Rents in the area are softening as the economic downturn strengthens its grip on Manhattan, but many landlords don't seem to have accepted that fact, Wolf said. Many landlords are still asking top dollar, he said.



"We're seeing a big disconnect between what asking rents are and what the deals are getting done at," Wolf said. "Landlords aren't really scared yet."

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Biggest price cut of the day

 


 

Rushmore

 

 

The unit with the biggest price cut today in Manhattan is a five-bedroom, four-bath condo in Extell Development's Rushmore, at 80 Riverside Boulevard and 64th Street. The unit was first listed in September at $8.85 million, and was just cut by $1.36 million to $7.49 million, an 11 percent decline, according to Streeteasy.com. Prudential Douglas Elliman's Ilan Bracha, whose group just split for the second time in two months, is listing the 3,072-square-foot unit.

Meanwhile, the most expensive unit to just hit the market is a $25 million co-op at Ian Schrager's 50 Gramercy Park North, part of the Gramercy Park Hotel. The three-bedroom, three-bath unit is listed by the Corcoran Group's Tim Cass and Trisha Lawton. The 4,235-square-foot apartment has a balcony and terrace.

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Gramercy Park Rent Stabilized One Bedroom Rental

Gramercy Park / Union Square Rent Stabilized One Bedroom Rental

Below Market Value - Irving Place Location

Contact JAD Realty Group to schedule a viewing

Jeffrey Ditri 610.781.8417

jeffrey@jadrealtygroup.com

 








LOCATION:
Gramercy / Union Square / Irving Place



DESCRIPTION:
Well maintained, walk-up building
Second floor unit
Separate kitchen including appliances and new cabinetry
Marble bathroom, new fixtures
Living room featuring an exposed brick wall
11' X 11' bedroom, can fit a queen size bed and extra furniture
Two storage closets
Wall of windows in bedroom, bright
Southern exposure view
New hardwood floors
Rent stabilized unit, priced below market value
Excellent Gramercy location; near all transportation, restaurants, Irving Place, the East Village, and Union Square

TRANSPORTATION:





LISTED RENT:
$1,842


CONTACT:
Name: Jeffrey
Phone: 610.781.8417




Gramercy Park / Union Square Rent Stabilized One Bedroom Rental

Below Market Value - Irving Place Location

Contact JAD Realty Group to schedule a viewing

Jeffrey Ditri 610.781.8417

jeffrey@jadrealtygroup.com

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With incentives, rents are down 10 to 15%

IN this painful economic climate of layoffs and shrinking investments, there is a sliver of positive news: it’s a good time to be a renter in New York City. Prices are falling, primarily in Manhattan, and concessions like a month of free rent are widespread.


 

Amy Baglan and Johnny Muñoz negotiated the rent.


Although it is notoriously difficult to quantify the state of the rental market, rents fell in almost every sector of the Manhattan market last year, according to the Real Estate Group, a New York brokerage. The steepest drop was in one-bedrooms, down 5.7 percent in buildings with doormen and 6.53 percent in buildings without. The only category that rose: rents for two-bedroom apartments in doorman buildings, up just a bit, by 0.61 percent. But these numbers, like most available data, represent asking rents rather than the final price. Anecdotal evidence suggests that some people are negotiating rents as much as 20 percent lower than the original prices asked by landlords. These figures also leave out incentives, like a month of free rent or a landlord’s paying the broker fee, which can add up to real savings.

Fritz Frigan, executive director of sales and leasing at Halstead Property estimates that when these incentives are considered, rents are actually down some 10 percent to 15 percent since the market peak in mid-2007.

“In that really strong market,” Mr. Frigan said, “landlords didn’t have to do anything.” In 2008, that was no longer the case.

In January 2008, Halstead had about 90 listings for which the owner offered to pay the broker’s fee. By the summer, that number had pushed upward, hitting about 450 a month.

“Then, in September or October, the whole thing broke loose,” Mr. Frigan said.

In a one-month period, from Dec. 23, 2008, to Jan. 23, 2009, some 1,700 of Halstead’s 9,000 total rental listings included owner payment of the broker’s fee.

Jimmi Circosta, a vice president and associate broker at Citi Habitats, also saw a big slowdown in the autumn, which he pegs to the collapse of Lehman Brothers in September. “Once that news hit the marketplace,” he said, “it just got really quiet.”

Tom Botts and his wife, Libbie Rice, found all kinds of deals from landlords when they went apartment hunting this winter, and they were able to negotiate a reduction in the rent on the Upper West Side three-bedroom that they finally chose. They also encountered a symptom of the market that was simply unheard of in recent years: their previous landlord offered to lower their rent if they renewed their lease.

“We had a truly un-New York experience with our old landlord begging us to stay,” Mr. Botts, 39, said in an e-mail message. The owner offered a rent reduction of more than 10 percent, but the couple had already found an apartment they preferred and were committed to moving.

It’s impossible to say how often owners are lowering rents to encourage tenants to stay put, but anecdotes are starting to surface. “It’s not a common occurrence,” said Mr. Circosta of Citi Habitats, “but it is happening.”

Mr. Botts, a partner at Hudson Crossing, a travel industry advisory company, and Ms. Rice, 44, who does similar work as an independent consultant, hope one day to buy an apartment for themselves and their children, Tommy, 4, and Camille, 2. But they have decided to hold off for now. “The economy feels too scary,” Ms. Rice said.

They have a lot of company on the sidelines of the sale market.

“It certainly makes renting more attractive when the rental market softens,” said Gary H. Schatsky, a financial adviser in New York. “If people suspect — as most people do — that the New York City sales market will get much softer, and they’re able to rent in the meantime, then being able to negotiate a rental rate puts you in a better position.”

Teresa Hsiao found a kinder-than-expected rental market when she moved to Manhattan from Los Angeles last month.

“I was expecting to live in a box,” she said. She looked at more than 10 apartments and found lots of concessions on nice spaces that added up to substantial price cuts. “Everyone was paying the broker fee,” she said. “They were very flexible on their lease terms. One broker told me: ‘We’ll get it done for you. Just name your price and we’ll do it.’ ”

Ms. Hsiao, 23, and her roommate, David Liu, 24, settled on a two-bedroom two-bathroom apartment in Midtown on the West Side. It was listed for $4,200. They offered $3,650 a month and were accepted. After one month free and a $2,000 signing bonus, the total came to $3,215 monthly, and they did not have to pay the broker’s fee.

“This apartment was definitely a great find and a bargain compared to 1.5 years ago,” Mr. Liu wrote in an e-mail message. “It’s definitely a renters’ market now.”

The creation of jobs is one of the primary ingredients in a strong rental market, and people like Ms. Hsiao and Mr. Liu, who both moved to New York for work, used to be its lifeblood. Now their numbers are dwindling as the city has begun to shed jobs.


 

Libbie Rice and her husband also negotiated their rent.


According to the New York State Department of Labor, New York City lost 49,100 private-sector jobs from December 2007 to December 2008, which helped send the unemployment rate from 5.1 percent to 7.4 percent.

“People assume when sale slows down, rental will pick up, but that depends on what the source of this is,” said Gregory J. Heym, the chief economist at Terra Holdings, which owns Halstead and Brown Harris Stevens. “When you’re losing jobs, the rental market is also going to suffer.”

While prices have started to slide in Manhattan, they are steadier in Brooklyn. Increasingly, however, there are deals to be found, especially in neighborhoods like Williamsburg that have seen a lot of new construction.

Last July, James McGuinness, 23, and his partner, Louis Kerscher, 25, moved into an apartment in Windsor Terrace, Brooklyn, for which the owner paid the broker’s fee. Adrian Cardona, a broker with the company they used, Rapid Realty, says he has seen more owner payments since the summer. “Absolutely,” he said. “They have no choice.”

Patrick McGrath, a managing partner at Taurus, which owns a recently converted luxury prewar rental building in Brooklyn Heights called the Standish, says the Brooklyn market has softened, but not a lot.

“We’re not renting as fast as we would have expected,” Mr. McGrath said. “We’ve had to provide concessions — a free month rent, we pay the broker fee. But rents are around where we expected them to be. We’re in the ballpark.”

Owners with more property — and deep pockets — generally would rather offer incentives than reduce rents because when the market comes back, they start from a stronger bargaining position. But landlords of smaller buildings tend to just lower the rent.

Allison Gill and Hadley Hege, both 22, found that they had some bargaining power when they went apartment hunting late last year. Ms. Gill, a law student, and Ms. Hege, an actress, looked at a two-bedroom apartment in a three-unit building in Cobble Hill, Brooklyn, listed for $2,000. They took it for $1,900.

The rental market in Queens, meanwhile, is relatively stable.

“The prices are not going up,” said Donna Reardon, Queens divisional manager for Prudential Douglas Elliman. “They’re staying the same.” Concessions are still an exception rather than the rule in that borough.

It is in Manhattan, which saw steep price gains in recent years, where the discounts can be substantial now — even on the higher end.

Sara Nuttall, her husband and their 11-year-old twins relocated to New York at the end of last year from Dakar, Senegal, where they paid $2,500 for a five-bedroom house with a garden. They were looking for a three-bedroom apartment and started with a budget of about $6,000 a month.

Senad Ahmetovic, an associate broker and vice president at Halstead, showed them about 35 apartments.

“In my 10 years’ experience, I haven’t seen so many three-bedroom apartments on the market,” Mr. Ahmetovic said. “It just seemed endless. In the past, they weren’t being offered with incentives, because there were so few available at any given point.”

That, it seems, is no longer the case.

“We started to discover that there were incentives there for us,” said Ms. Nuttall, 52. “That made a big difference. It meant we could get something that was a bit nicer, a bit more what we wanted for the same price.”

They eventually settled on a three- bedroom three-and-a-half bath apartment in east Midtown. It was listed for $8,500 but they were able to negotiate the rent to $8,000 a month. They also received a free month of rent, and the owner paid the broker’s fee. Their monthly payment will be $7,400. That $1,100 decline represents a 13 percent decrease from the asking rent, not including the money saved on the broker.

Ms. Nuttall found the apartment in December, always a slow time in the rental market. But seasonal sluggishness does not explain the discounts that she encountered.

“In any last quarter, the rental market always adjusts — vacancies rise and prices dip, every year,” said Gary Malin, the president of Citi Habitats. “This year there was substantially less activity than you would normally see. There was an extra layer of pressure on the rental market — and the world at large — that forced prices down further and vacancy rates higher.”

Some landlords hope that adjusting leases to expire in summer 2010 will get a better price next time around.

Amy Baglan, 26, and her boyfriend, Johnny Muñoz, 28, found a one-bedroom apartment in a prewar building on the Upper West Side at the end of last year. They negotiated a cut of $200 per month in the rent and received a free month. (They connected with the owner on Craigslist and did not use a broker.) But they signed a 16-month lease, which will expire at the end of April 2010.

Mr. Muñoz wondered why his landlady was not offering a standard one- or two-year lease. “Do you want to make sure this is open and available during the prime season of rentals?” he said he asked. She chuckled and said yes, Mr. Muñoz said.

Mr. Muñoz’s landlady may get a boost from the warm weather, but no one knows where the market will be in 2010.

“My assumption would be over the next year that you’re going to see effective rents drop because of the increase in concessions,” said Andy Joynt, a real estate economist at Property and Portfolio Research, an independent research and advisory firm. “We’re forecasting that asking rents are also going to drop,” he added. “We’ll see if that ends up being reflected in the numbers.”

Marc Lewis, the president of Century 21 New York, has seen several recessions in his many years in the business, most recently after Sept. 11, 2001. “But in the past,” he said, “it always felt like it would be a few months and then it would be over. This one, we don’t have an answer yet.”

Many people — including President Barack Obama — are suggesting that the economy is likely to get worse before it gets better. And the rental market is unlikely to strengthen until the economy, and the job market in particular, turns around.

According to the Independent Budget Office of New York City, the outlook is bleak. The agency expects the city to lose 243,000 jobs from the peak of early 2008.

“Let’s hope this is a short-term problem,” said Vicki Been, the director of the Furman Center for Real Estate and Urban Policy of

New York University

. “You know, we prefer more affordable housing, until there’s a downturn. And then we panic.”

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Regulated apartments might see rent freeze

 


 

 

 

Some housing advocates want the city's 1 million rent-regulated apartments to have a rent freeze this year. According to Adrienne Holder, a member of the Rent Guidelines Board, tenants' salaries have dropped or remained the same, and with the down economy, another rent increase can't be justified. Frank Ricci, a spokesperson for the landlords' Rent Stabilization Association, argued that property taxes are going up, so freezing rents would be unfair. Rents for regulated units have increased every year since the Rent Guidelines Board was established in 1969.

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Biggest price cut of the day

 


 

Robert Browne (top) and John Burger (bottom) are listing a unit at 151 East 58th Street.

 

The unit with the biggest recent price cut in Manhattan is a three-bedroom, three-bath apartment at 151 East 58th Street, according to Streeteasy.com. The price of the One Beacon Court unit was cut by 10 percent on Friday. The 3,058-square-foot unit is down to $14.4 million, $1.6 million less than its original $16 million listing in November. Both Brown Harris Stevens' John Burger and the Corcoran Group's Robert Browne are listing the apartment in the

mixed-use building, designed by Cesar Pelli & Associates in 2005

. The building, between Lexington and Third avenues, has 105 residential units, with eight listed for sale and six available for rent, according to Streeteasy.com.



Meanwhile, the most expensive unit to come on the market is a $13.5 million unit at 25 Central Park West at 62nd Street. The 2,767-square-foot unit has three bedrooms, four bathrooms and an 875-square-foot terrace. Stribling & Associate's Cathy Taub, and Corcoran's

Robert Browne

and Chris Kahn have the listing.

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Parent trap trips Corcoran

 




Is Pamela Liebman, CEO of the Corcoran Group, hobbled by her firm's parent company?


The New Year ushered in a wave of misfortune for city real estate brokerages, as a raft of companies announced that they would shed offices or close up shop altogether.

Predictably, small brokerages were hit hardest: Brooklyn Properties closed an office, Domain Properties downsized to a smaller space, and both Upside Residential and Homestead New York announced they would shutter completely.

Meanwhile, medium-sized firms like Warburg Realty and Bellmarc Realty also closed branches. And, as part of that rash of closures, rentals behemoth Citi Habitats shut two branches, and its sister company, the Corcoran Group — one of the two largest and most successful sales firms in the city — announced late last month that it would shutter its Harlem office.

Corcoran was the first of the two big brokerages in the city to close up an office. And like real estate companies throughout the city, the 35-year-old company is weathering a steep drop-off in sales due to the credit crisis and Wall Street layoffs. But unlike its chief rival, Prudential Douglas Elliman, it also faces the challenge of being linked to a parent company that's highly leveraged and drowning in debt.

Corcoran is owned by NRT — the nation's largest residential real estate firm, with brands such as Century 21, ERA, Coldwell Banker and Sotheby's International Realty under its umbrella. NRT, in turn, is a subsidiary of the Parsippany, N.J.-based Realogy Corporation, a real estate and relocation firm which was taken private last year by Apollo Management in a $9 billion leveraged buyout, and which has faltered amid the nationwide housing crisis.

While several of the firms under NRT's umbrella, like Sotheby's, Citi Habitats and Century 21 New York Metro, do operate in the city, none employ as many agents or wield the same dominance over the sales market as Corcoran.

Meanwhile, Apollo's troubles have been widely publicized, as the companies it purchased during an aggressive buying spree at the height of the market struggle under the weight of debt. One of its acquisitions, Linens 'n Things, is now in Chapter 11, and guessing which of Apollo's companies will be next to fail has become something of a parlor game.

Realogy, which was recently downgraded by Standard & Poor's to a CC/Negative rating, one notch above default, and placed on a list of the Global Bond Market's "Weakest Links," is said to be a likely candidate.

How does Realogy's plight impact Corcoran? That's a question the real estate community in New York has been abuzz about, as the mammoth company has closed offices, eliminated staff positions, cut its advertising and marketing budgets, upped the fees paid by brokers and canceled the firm's annual Christmas party. Insiders say Corcoran faces pressure to cut costs and increase profits to help meet debt-service obligations and buoy NRT's flagging subsidiaries.

"[Corcoran] does all sorts of things to create money to help the parent company to pay debt," said a Prudential Douglas Elliman executive who asked not to be named. "It's hard for them to compete when we don't have debt." Like many sources interviewed for this article, the Elliman executive declined to go on the record for fear of damaging professional relationships.

The parent company that once had pockets so deep founder Barbara Corcoran claimed it felt "like having Daddy Warbucks come in" now appears to be a liability.

"It's unfortunate for [Corcoran] that they're part of that company," said a former top Corcoran executive who asked to remain anonymous. "They have a huge company with no money backing them. That's bad."


Parental woes

One of the biggest question marks is what will happen to Corcoran and its sister companies if Realogy fails.

The outcome is nearly impossible to predict, since it rests largely in the hands of Apollo and its lenders — and if Realogy goes into bankruptcy, possibly the courts.

Despite rumors about its future, most visibly on the society blog New York Social Diary — which quickly retracted a story in December that said Corcoran had folded — experts seem to think that the Corcoran Group isn't going anywhere. They say that if it came down to it, the likely outcome of a Realogy collapse would be that Corcoran would be sold and would continue operating.

"I can't imagine for a moment that the company could go out of business," said Barbara Corcoran. "Their sales staff is too powerful."

Paul Purcell, a former president of Elliman and now co-founder of the real estate consultancy Braddock + Purcell, said, "They'd absolutely look for a buyer before they'd liquidate it. In the worst-case scenario, someone would want that brand."

If Apollo allows Realogy to go into bankruptcy, as it did with Linens 'n Things, Realogy would likely be restructured, which may include some of its companies being sold, rather than liquidated, said Donald Wong, the director of corporate ratings at Standard & Poor's.

Since much of Realogy's value is intangible, in market share and brand names, "if you were to liquidate this company, you wouldn't get a lot back."

The CEO of Corcoran, Pamela Liebman, declined to comment for this story.

The other big firms in the city are all privately held. Elliman is owned by CEO Dottie Herman and her partner Howard Lorber. Brown Harris Stevens and Halstead Property fall under the umbrella of Terra Holdings, a privately held real estate services company whose chairmen include heavyweights David Burris, Kent Swig, and Arthur and William Zeckendorf.

So the woes of Corcoran and NRT's other companies are unique in New York because of the debt stemming from their parent company. As Lorber told The Real Deal, "We have no debt."


National ambition

The story of the Corcoran Group began in 1973, when 20-something waitress Barbara Corcoran borrowed $1,000 from her boyfriend and started a real estate brokerage.

By the time the New Jersey native sold the company in 2001 to Henry Silverman's Cendant Corporation (now known as Realogy) for $66 million, Corcoran was perhaps the best-known real estate brand in New York, with some 700 agents. The firm, which generated some $18 billion in sales in 2007, now has nearly 2,000 agents in New York City, Long Island and South Florida, according to the company's Web site. It acquired Citi Habitats in 2004, and has consistently sparred with Elliman for the top slot in the city's real estate market.

In April 2007, just as the nationwide housing downturn was rearing its head, Silverman sold Realogy to Apollo Management for $6.6 billion. With debt of $1.6 billion and other liabilities, the deal was worth nearly $9 billion.

Corcoran, now a best-selling author, columnist and contributor on the "Today Show" and CNBC, said she sold her company to Cendant, in part, because she believed it would keep the company's management intact. "They believed in the management I had put in place," she told The Real Deal. "I knew they'd keep their hands off, and that's exactly what they did."

As a result, the top brass at the company today is largely identical to when Corcoran left. The company is headed by Liebman, who was in her early 20s when Corcoran hired her as a sales agent.

Liebman "had a cool haircut," Corcoran recalled. "She looked the part, she dressed the part and she carried herself with great confidence. I had 10 more senior brokers who were more experienced, and I was thinking, 'How do I get them to let Pam be the boss?'"

Liebman is "a brilliant businesswoman," said one industry veteran and former Corcoran employee who asked to remain anonymous. The source added that the consistency of leadership at Corcoran may be an advantage over Elliman, which has changed hands several times since the death of founder Douglas Elliman in 1972. "There's a better line of continuity at Corcoran," the source said. "There's been a lot of change at Elliman."

Still, Liebman's mettle is now being put to the test, as is that of Herman, who merged Elliman with her powerhouse brokerage Prudential Long Island Realty when she purchased it with Lorber for $71.75 million in 2003.


Home to roost

With the financial meltdown in October, the national housing downturn finally came to roost in New York City.

Manhattan data compiled by the appraisal firm Mitchell, Maxwell & Jackson showed that the volume of contracts signed in September and October plummeted roughly 75 percent from the same period last year. Though brokers say there's been a slight uptick in activity since then, the average number of days on the market in the fourth quarter of 2008 jumped 21 percent from the prior-year quarter, according to Jonathan Miller, president of appraisal firm Miller Samuel and a supplier of data to Elliman. Contract price levels, Miller said, have declined an average of 20 percent since August.

"After October, [New York City real estate] just stopped," said a former Corcoran executive, estimating that revenues at both Corcoran and Elliman may be down some 30 to 40 percent from last year, a figure that may increase to 60 percent by the end of 2009 if the credit crisis continues to ravage the sales market. "There's nothing happening."

Purcell would not speculate on how much any firms' revenue is off, but said firms all over the city are facing "a tremendous cash-flow issue." He explained that a company's profit margins on the average deal are "much less than 10 percent," since commissions, marketing fees and advertising costs cut a wide swath in the proceeds.

Although rentals and low-end sales are showing more activity, the high-end market is particularly stagnant. So in some ways, the city's largest firms — those with the priciest, most-sought-after listings — face some of the greatest challenges.

"I used to envy [large sales firms], and think, 'Wow, how do we do more $3, $4, $5 million sales?'" said one head of a boutique firm that does both sales and rentals. But now the shoe is on the other foot. "I don't know how [they] are going to stay in business if they don't transform that, because [the high-end sales market] is totally dead," the source said, adding, "If we only did sales above $1 million, I don't know what we'd do right now. I'd be in a panic."

In response, some sales firms have started ramping up their rental businesses. Bellmarc and Warburg are beefing up their rental training programs, while Elliman recently announced plans to open a new 15,000-square-foot office specifically devoted to rentals, and hire 50 to 75 new rental agents to staff it.

However, firms that rely heavily on sales revenue may not be able to make up the difference quickly, especially since the proceeds from each rental transaction are much smaller, now that rents and commissions are dropping. "You can't just suddenly shift to being a rental firm," Purcell said.

One X factor is Corcoran's relationship with Citi Habitats. Citi Habitats dominates much of the rental business in Manhattan and has said it's doing more transactions than last year at this time, but it's unclear how its profits impact Corcoran's bottom line, if at all. Corcoran deferred all questions about its rental operation to Citi Habitats, and both companies refused to provide more detail about how their businesses are connected.

In December, Liebman told The Real Deal that Corcoran has reacted to the downturn by "cutting unnecessary expenses," reducing advertising and marketing costs and eliminating back-office positions through attrition and layoffs. "We have eliminated some positions because when you're doing less volume of sales, it's not necessary to have so many people to support the back office," Liebman said at the time.

Elliman has enacted "minimal" cuts, Lorber said. He did not elaborate.


Wagging tongues

If there was one notable thing about the New York Social Diary post on the morning of Dec. 9, it was that it set tongues wagging throughout the industry — even though it was quickly retracted.

Amid the climate of uncertainty and the recent collapse of financial giants like Lehman Brothers and Bear Stearns, there seemed to be a greater willingness to believe that Corcoran could be the real estate industry equivalent.

For Corcoran in particular, one need only look as far as its struggling parent company to understand why any rumor would gain traction, even if most experts say the likely worst scenario would be Corcoran being sold to another company.

Every day seems to bring new headlines about Apollo, headed by buyout specialist Leon Black, and its attempts to restructure the debts of several companies it purchased during the leveraged buyout boom of 2006 and 2007.

Apollo's purchase of Realogy is threatening to turn into a similar mess. Realogy, with struggling subsidiaries in depressed housing markets all over the country, has registered $209 million of losses in the past three quarters. The company announced on Nov. 13 that it is at risk of violating the terms of its bank loan.

In December, Realogy's credit rating was downgraded by Moody's Investors Service to Caa3 from Caa2, meaning it's "likely to go into default in the next 12 months," explained John Rogers, a senior vice president at Moody's. Meanwhile, S&P also dropped Realogy's corporate credit rating to CC/Negative (with D being the lowest), indicating that "Realogy has a very high probability of default," Wong said.

"We think there's a big risk [Realogy] may file for bankruptcy or that they would default on their debt," Wong said.

The downgrades follow an attempted bonds-for-loans debt exchange that failed after Carl Icahn's High River sued, claiming Realogy's attempt to refinance $1.1 billion of debt would hurt its bondholders.

"The current economic crisis, particularly with respect to the housing market, has had a disastrous effect on Realogy's business, operations and prospects," the suit stated. "Due to extreme leverage resulting from the Apollo buyout, Realogy was poorly positioned to withstand any adverse economic developments."

Realogy's total liabilities were $9.875 billion as of its September SEC filing. The lawsuit estimated that Realogy's liabilities exceed its assets by somewhere between $3 and $7.3 billion, depending on the trading prices of its different categories of debt. The suit argued that the attempted debt exchange would only "delay what now appears to be the inevitable failure of Realogy."

Apollo may choose to pump more money into Realogy, but it may also, as in the case of Linens 'n Things, choose to "forgo the initial investment," Rogers said. "If there isn't a good outlook, they're likely to cut their losses."

Still, no one knows what Apollo will do, and surprisingly strong capital raising for Apollo's newest fund, which had been targeting $15 billion, indicates that the company may have more tricks up its sleeve.

And one thing Realogy has going for it that Apollo's other companies do not is that the real estate market, eventually, will rebound, putting its well-known brand names in a good position to profit.

"Corcoran is a market leader in New York City," Realogy said in a statement. "We are very proud of how well-positioned the company is to capitalize on the market when it rebounds — and it will rebound."

Apollo spokesman Steven Anreder declined to comment.


Jewel in the crown

For the past few years, Corcoran has undeniably been one of the brightest spots in NRT's portfolio, especially since the New York market is still stronger than other markets around the country.

"Corcoran was probably their most profitable operating unit in the company, of everything they own," Purcell said.

Corcoran agents are well aware that their company is "the star of Realogy," said Corcoran salesperson Chris Poore.

Still, the company is a drop in the bucket compared to the vastness of Realogy's problems. "The Corcoran Group alone cannot save NRT," said the above mentioned former Corcoran executive.

In fact, Corcoran and Citi Habitats' recent cutbacks likely reflect not just weakness in New York, but pressure from losses in other parts of the company.

Realogy "has companies in Las Vegas and California and other places where the markets are down," the former Corcoran executive continued. "The profits from [Corcoran] go to stem the losses in other locations, instead of reinvesting in profitable regions of the country."

In other words, he said, company bigwigs are "trying to figure out how to put their hands in the dike."

Insiders say the cuts at Corcoran and its sister companies are more severe than at comparable firms, and may have caused some defections.

The yearly marketing fee that Corcoran brokers pay to the company has been increased to roughly $1,800, sources said. In addition to the closure of Corcoran and Citi Habitats offices in New York, there are now only two Corcoran offices in Florida, according to the company's Web site, down from five a few years ago. Some 35 Florida agents from Corcoran have now joined independent Florida brokerage Fite Shavell & Associates.

While every real estate company in New York is cutting expenses, Corcoran may have less say over who is hired and fired because of its corporate leadership. Elliman, for example, "is cutting as well because their profits are off," the former Corcoran executive said. "But they're not making as Draconian cuts because [Herman and Lorber] know all the players."

Hal Gavzie, formerly the senior managing director of rentals for Corcoran, and the leader of the company's entire rental division, was one of a group laid off in November.

Gavzie, who now works at Bond New York, would not comment on the circumstances of his ouster other than to say, "It's pretty obvious across the board in this climate why people are laying people off."

Still, some observers say the move may have been ill-advised on NRT's part.

"I can't imagine that somebody here in New York would let go of their rentals director when it's clear that's the direction the business is going in right now," said a source familiar with the situation, adding that Gavzie does not appear to have been replaced. "If they're making the decision from Texas, maybe they're just looking at a spreadsheet."


Keeping brand name

Cutbacks are not new at Corcoran. When Barbara Corcoran was at the helm of her company, she recalled, she often had to lay off support staff.

"Judicious cutting is just smart business," she said, echoing comments of the real estate CEOs who let staff go in the last month.

But Corcoran was also known for her storied attempts to appease her top earners. During one rough patch, she sold her home and moved into a rent-controlled apartment, "because I had to keep my sales people happy," she said. And she was famous for the massages that brokers received every Monday, even when there were layoffs.

"It was important for morale and you were taking care of your breadwinners," she said of the massages. "More important than the management and the support staff."

But the perks Corcoran gave her top earners are the type of benefits that are no longer in place at the company.

Still, Realogy hopes the cuts will help Corcoran weather the storm and come out leaner on the other side. "The Corcoran Group is one of our most important operating companies with an outstanding group of brokers," the company said in a statement. "The company continues to meet or exceed our expectations. We are very pleased with Corcoran's proactive management of its cost structure, and as a result of the actions it has taken Corcoran is better positioned today than most of its competitors."

Rocky times are undoubtedly ahead. But experts seem to agree that the Corcoran brand is powerful enough that it will continue to exist for the foreseeable future, though it may have a different owner or fewer offices.

Poore, the Corcoran sales agent, put it this way: "Even if Apollo were to go under, Corcoran's going to be fine."

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