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Building in New York City Is a Bitch. But 99 Units Isn’t One

Building in New York City Is a Bitch. But 99 Units Isn’t One

Published on March 12, 2026

Charlie Munger once famously said, “Show me the incentive and I’ll show you the outcome.” If you’re looking for proof, consider the development site at 1800 Park Avenue in Upper Manhattan. 

For background, the troubled parcel has traded hands several times over a two-decade period like an unloved stepchild among some of NYC’s largest developers. In 2007, Vornado Realty Trust acquired the site for approximately $40 million before selling it to Bruce Eichner’s Continuum Companies for $66 million in 2013. In 2017, the Durst Organization acquired it from Eichner for more than $90 million, only to later sell it to David Bistricer’s Clipper Equity for $50 million.  Kudos to the brokers and attorneys involved in each of those transactions—and to David Bistricer, who recently filed plans and is likely to be the one to finally take the project vertical. 

1800 Park Avenue—A Goliath of a Site

The site is irregularly shaped but quite the behemoth, with more than 600,000 buildable square feet supporting 693 apartments, according to The Real Deal. Interestingly, the plans filed by Clipper Equity suggest seven separate structures (as opposed to one larger building), each with 99 apartments. Architecturally, aesthetically and from an efficiency standpoint, this makes little sense.  Multiple buildings mean duplicate cores, elevators, roofs and mechanical systems.

So why do it?  Because incentives matter.

The 100th Apartment Is the Problem

Under New York City’s prevailing wage requirements, developers must pay up to $72 per hour to construction workers, along with additional work-rule and compliance requirements, when building projects with 100 or more residential units. Those costs add up quickly and, according to the New York City Independent Budget Office, can increase housing construction costs by roughly 25%.

Developers, unsurprisingly, optimize around the rule. Instead of one large structure, they explore ways to split projects into multiple properties of 99 apartments each. As one NYC broker put it “developers are spending more time trying to figure out how to subdivide the site to create pads on which they could build 99-unit buildings than thinking about anything else.”

Predictable?  Absolutely.   

Leave rulemaking to legislative neophytes and results like this shouldn’t be surprising. The data bears it out. A Bloomberg analysis from September 2025 found that 28 permits were filed for buildings with exactly 99 units in a single year—more than double the total from the previous

Closing Time: Smoke ‘Em If You Got ‘Em

The party for developers, however, may not last forever.  Currently, the 99-unit threshold applies to individual buildings. But legislators could easily amend the rule so that prevailing wages are triggered when a project or zoning lot exceeds 99 units. That would effectively eliminate projects like 1800 Park Avenue—and countless others—because the total 693 apartments would be considered for prevailing wages.

Close the loophole and you risk killing future development. Leave it and developers will continue building inefficient workarounds. With that uncertainty looming, developers are racing to file these projects made up of 99-unit buildings while the rules remain unchanged. 

You hate to call out legislators—it can feel like punching down. But when incentives are this clear, the outcome should surprise no one.

Sources:

David Bistricer Embraces 99-Unit Playbook

the-impact-of-prevailing-wage-requirement-on-affordable-housing-construction-in-new-york-city.pdf

Six 99-unit buildings planned for Jamaica, Queens

NYC Apartment Construction Wage Requirement Leads to 99-Unit Buildings – Bloomberg

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Albany’s Next Bright Idea: Commercial Rent Control

Albany’s Next Bright Idea: Commercial Rent Control

Published on March 3, 2026

Legislators in Albany are at it again, and their newest target is commercial rents in New York City. 

The proposal isn’t new, but rather a recycled, tired version of ideas that have already decimated segments of the city’s commercial real estate market. If passed, expect higher vacancy rates, declining asset values, and owners forced to choose between economic ruin and deferring much-needed maintenance. Not quite a “Sophie’s Choice,” but still the proverbial choice between a punch in the stomach and a roundhouse kick to the face.  And yet, here we are.

The Small Business Rent Stabilization Act—Innocent Name, Ugly Consequences

Two state legislators, Julia Salazar and Emily Gallagher, want to restrict increases on commercial rents and grant retail tenants automatic 10-year lease renewals. The bill would create a nine-member Rent Guidelines Board—similar to the one governing stabilized apartments—responsible for setting rent increases for commercial properties. 

It sounds benign. Who doesn’t support small businesses?  It isn’t.  What could go wrong with politically appointed individuals dictating commercial rents in the country’s most complex retail market—or allowing underperforming tenants misaligned with neighborhood trends, to remain in place in perpetuity? 

Then there’s the matter of lenders. Many loan covenants impose requirements tied to retail rental income and tenant quality. This proposal appears to overlook the tension between regulated rents and private lending agreements.

Vacancy Rates Are the Rationale

According to Salazar, the justification is the “very high…storefront vacancy rate in New York City,” and the “need to level the playing field for both commercial and residential tenants.” But how would controlling commercial rents solve high vacancy rates? Quite the opposite may occur. The further regulated rents drift from market rates, the greater the incentive for landlords to keep storefronts vacant rather than lock in unfavorable long-term leases.

Sound familiar? It should. New York City is sitting on more than 50,000 vacant rent stabilized units following the 2019 changes to rent laws. There is little reason to believe commercial space would behave differently.     

Do Retail Tenants Need Protecting?

Unlike residential tenants, commercial tenants tend to be more sophisticated. They retain legal and professional counsel. They analyze foot traffic, demographics and neighborhood trends before signing leases. They are not similarly situated to residential tenants and do not require the same level of statutory protection.

Commercial Rent Control Isn’t a New Idea—Just a Bad One

Commercial rent regulation proposals in NYC date back to the 1980s, but they have consistently failed to gain traction. Perhaps the only encouraging aspect of the current proposal is that it, too, appears unlikely to pass. In the State Senate, it has just one co-sponsor of the bill, and Assembly support remains limited. 

That’s the good news. There is, however, reason for caution. 

Like Salazar and Gallagher, NYC’s Mayor Zohran Mamdani is a Democratic Socialist who campaigned on and supports similar proposals. Commercial rent control may not advance, but the broader appetite for price regulation persists. Mamdani recently floated a 9.5% property tax hike to address anticipated budget shortfalls—a reminder that interventionist policy proposals remain firmly in play.

Price controls are not the answer. Let the law of supply and demand dictate pricing. It works.

Sources:

https://www.cityandstateny.com/policy/2026/02/socialists-take-aim-commercial-rent/411572/

https://en.wikipedia.org/wiki/Julia_Salazar#cite_note-14

https://www.reaganlibrary.gov/archives/speech/inaugural-address-1981

https://www.city-journal.org/article/vacant-new-york-city-apartments-rent-control-housing#:~:text=New%20York%20City%20has%20nearly%2050%2C000%20vacant,improvements%20profitably%20*%20Reset%20the%20stabilized%20rent

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AI, Rising Rates, and Rents: What 2025 Has in Store

AI, Rising Rates, and Rents: What 2025 Has in Store

Published on January 13, 2025

AI is Coming For You, Are you Ready?

First it came for the call centers, and I did not speak out—because I wasn’t impacted. Then it came for the executives, and I did not speak out—because I wasn’t impacted. Then it came for the coders, programmers, doctors, lawyers and finance bros, and I did not speak out—because I wasn’t impacted.  Then it came for me—and there was no one left to speak for me.  In 2025, the power of AI and its multitude of applications will manifest itself—are you safe?  Probably not, but it’s not personal, it’s just capitalism at work.

Interest Rates Elevated and Here to Stay

The Fed reduced the overnight lending rate in 2024, but unfortunately the 10-year yield didn’t get the memo. It spiked and remains high in 2025. For troubled landlords, refinancing is a luxury afforded to those with the ability to infuse new capital. With banks all but done with the “pretend and extend” charade, expect more distress in the commercial real estate space. Any unforeseen inflation resulting in the Fed responding with increased rates could prove apocalyptic for certain asset classes. 

Housing Supply Constraints = Higher Rents

With vacancy rates under 2% in NYC and housing supply severely constrained, expect rents to continue to creep higher. Yes, good cause eviction caps those increases but expect landlords to extract every dollar available to them. The City of Yes may—to some extent—mitigate the lack of supply but developers can’t build fast enough in the short term. And don’t expect any legislative changes to the rent regulatory regime to save the day. Looks like mom and dad will need to continue bankrolling junior’s rent until they too break.      

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Peter Hungerford Zigs When Everyone Else Zags: Today’s Ultimate Contrarian Investor of Rent Stabilized Properties

Peter Hungerford Zigs When Everyone Else Zags: Today’s Ultimate Contrarian Investor of Rent Stabilized Properties

Published on October 15, 2024

When top players in any field bet against the trend, it’s always worth paying attention.  

The Struggling Market for Rent-Stabilized Properties

In the current NYC real estate market, rent-stabilized properties are widely seen as a distressed asset class. Some of the largest owners are net sellers, and it’s easy to see why. Rent rolls have stagnated, while expenses, notably property taxes and insurance, are climbing at an alarming rate—reportedly 1.5 times faster than rents. This trend, if left unchecked, suggests a grim outlook, where rent-stabilized properties could theoretically reach a terminal value of zero.

Hungerford’s $180 Million Contrarian Bet

Enter Peter Hungerford of PH Realty, who is taking a starkly different view of the market with his recent $180 million acquisition of a 1,300-unit portfolio, 85% of which are rent-stabilized. While the 40% discount to the previous owner’s purchase price is noteworthy, it’s tough to say whether the portfolio was acquired at a favorable basis without knowing more.

With around 10% of the portfolio’s units currently vacant—split between market-rate and rent-stabilized apartments—there’s a potential opportunity to renovate and boost revenue, particularly with respect to the market-rate units. However, the rent-stabilized units present much more limited upside due to the unfavorable rules related to individual apartment improvements. The question remains and no doubt Hungerford is well aware of the answer: is there enough room to make these units profitable under the current rules?

Hungerford himself has remarked that this acquisition isn’t “really about increasing revenue, as much as operating the properties as a responsible local landlord.” A noble position for sure, but one has to wonder whether his investors are hoping this is simply politically necessary lip service or a quote taken out of context. As an acquisition of this magnitude must have a value-add component to it.

Betting on Property Tax and Insurance Reform: A Risky Wager?

Hungerford points to two of the largest expense items where he believes change may be afoot: property taxes and insurance. Industry-backed groups are lobbying and even litigating for a change to the tax assessment process (link here), but success if far from guaranteed. As for insurance, Hungerford speculates that rising premiums could push the federal government to intervene. Whilst this is an interesting take, it hinges on factors beyond his control. Can this really be the cornerstone of his strategy?

Other Potential Changes Beneficial to Landlords

Looking ahead, there is some optimism that interest rates may have peaked. If borrowing costs decrease, this could drive down cap rates and boost property values. Additionally, the Rent Guidelines Board could opt to align rent increases with inflation, providing some relief to offset rising expenses. There’s even been a proposal in Albany—though not passed and in legislative limbo—that would allow landlords to charge a “first rent” upon tenant turnover if the previous tenant had lived in the unit continuously for more than ten years (link here) These potential changes, while hopeful, are still speculative at best.

Contrarian or Misguided? Sometimes the Wisdom of the Crowd is Simply Wisdom

As much as NYC landlords may hope for favorable changes in property tax laws or federal intervention to backstop insurance premiums, wishing it doesn’t make it so. Contrarian thinking is appealing, but it doesn’t always lead to success. Though hard to say, Hungerford’s basis in these properties and cost of capital may provide a significant margin of safety. Still, he is betting against market sentiment that has led many seasoned landlords to exit rent-stabilized properties at significant discounts. Sometimes, the  wisdom of the crowd isn’t flawed or irrational—it’s simply wisdom.

Sources:

PH Realty Takes Massive Rent-Stabilized Portfolio at 60% Discount (therealdeal.com)

Landlords Say New Law No Help For Vacant Units (therealdeal.com)

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Linda Rosenthal: Hypocrite, Incompetent or Housing Crusader for the Poor? You Decide.

Linda Rosenthal: Hypocrite, Incompetent or Housing Crusader for the Poor? You Decide.

Published on October 9, 2024

Few outside District 67 likely know Linda Rosenthal, the State assemblywoman who represents constituents on the Upper West Side and Hell’s Kitchen, and recent appointee to Chair of the Housing Committee in Albany.  When it comes to NYC’s housing policies, her views matter…a lot.

To some, she is a noble crusader zealously fighting for affordable housing rights for New Yorkers; and, to others, she is a much more sinister character with an axe to grind against real estate developers and the well-off residents of NYC. Which is it…maybe a bit of both?

To her credit, she recognizes that “skyrocketing rents…have left far too many New Yorkers behind,” but beyond that, she is at a loss on how to effectively fix the issue. At every turn, she has made it more challenging for developers to build and was a vocal critic of the now defunct 421-a program. Furthermore, she opposes any form of “means testing” for rent stabilized units—a policy that would free up much needed apartments for low income families and prevent well-off New Yorkers from being afforded the benefits of rent stabilization.

It gets worse: Rosenthal has been living in a five-room rent stabilized apartment on the Upper West Side since 1984 and currently pays $1,573 a month. For context, a similar unit in the building rents for $5,200.  When questioned about the overt conflict of interest, she brushed off the concerns noting “everybody has to live somewhere.” True, but few of us are in a position to control our own rent in perpetuity. As Housing Committee Chair, Rosenthal isn’t New York City rich but the $154,000 a year puts her in the top 20% of all earners in the United States so it’s no wonder a “means testing” approach is off the table under her leadership. It all smells, and not good.

Most disconcerting is Rosenthal’s failure to acknowledge or inability to comprehend the real issue: the lack of sufficient housing (it’s the supply side Linda). Last December, she quipped that she isn’t “worried about non-affordable housing” because “people who have means can buy, rent anything they need in this city.” That may be true for the uber wealthy but ironically not for many average New Yorkers and even an upper middle class assemblywoman making $154,000.  The cavalier “let them eat cake” attitude coupled with a mindset of “as long as I get mines” and a smattering of incompetence makes Linda Rosenthal one of the more ill-informed and dangerous-for-the-city legislators to surface in some time.   

Sources: https://www.wsj.com/articles/wealthy-older-tenants-in-manhattan-get-biggest-boost-from-rent-regulations-11560344400

Exclusive | Linda Rosenthal paying just $1,573 for five room rent stabilized apartment (nypost.com)

Rent-control deal poses conflict of interest for Linda Rosenthal (nypost.com)

Housing ‘have’ Linda Rosenthal won’t let have-nots have a chance (nypost.com)

Linda Rosenthal: 421-a doesn’t create enough affordable housing – City & State New York (cityandstateny.com)

Linda Rosenthal, New State Assembly Housing Chair, on Solving New York’s Housing Crises (westsiderag.com)

Linda Rosenthal – Wikipedia

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Don’t Cry for Argentina, It’s NYC We Should Worry About

Don’t Cry for Argentina, It’s NYC We Should Worry About

Published on October 7, 2024

Argentina isn’t the United States and Buenos Aires isn’t New York City but when it comes to rent regulation, we could learn a thing or two from newly elected President Javier Milei.

Rent Control by Any Other Name Still Doesn’t Work

In 2022—before Milei was elected President, there were approximately 200,000 empty apartments in Buenos Aires due to its strict rent control laws. The so-called warehousing of rent regulated apartments is a natural response from landlords—whether in Caballito or Chelsea—who prefer receiving no rent rather than a nominal amount with disproportionate counterparty risk.

To circumvent the strict rent laws in Argentina, a black market flourished where landlords tried to rent to individuals in their social circles who would agree to pay rents above the restricted amount. Others rented to tourists in US dollars but otherwise kept their apartments unavailable for long term residents. For residents, it was all but impossible to find an apartment.

Does all of this sound familiar, it should as NYC has an estimated 100,000 empty apartments. Turns out economic principles like supply and demand can’t be contained: they cross borders and are multilingual.

Laissez-Faire: Let Supply and Demand Do Its Thing

Since scrapping the rent-control regulations in Argentina, landlords are rushing to put their apartments back on the market, increasing supply by more than 170%.  President Milei is also allowing rents to be priced in US dollars further protecting the rental market against runaway inflation which still stands at 237% (Milei is projecting 18% in 2025).

Still, housing prices in Buenos Aires are stabilizing and at their lowest rate of increase since 2021 as more apartments flood the market. Supply is up, rents are declining, and people can now find apartments in what was once a frozen rental market.

First, There Must Be Pain

Bold measures—akin to the shock therapy enacted by the Russian government in the early 90s—don’t come without unfavorable consequences, at least in the short term. For some, the increased housing costs have made life difficult when coupled with higher food and utility prices resulting from the unwinding of price controls across the Argentinian economy.

Since the elimination of price controls, many are having trouble getting “to the end of the month.”  Milei’s popularity has diminished as well, falling from a 60% approval rating earlier this year to 45% in August. But the right path isn’t always the easiest one; it can be lonely and bumpy along the way.

Eliminate Rent Control and Everyone Wins?

Is it that simple, eliminate rent controls and the markets will do their job? Some say yes, while others claim in the short term there will be an unacceptable level of soaring prices and homelessness. It is difficult to test the hypothesis as rent controls are politically popular to those who benefit from it, and they tend to become entrenched.

But Massachusetts is one such example: the state nixed rent control in 1994 and neither rents nor homelessness jumped especially in those places where the fear was most warranted such as Cambridge. But, in areas of NYC just as in Buenos Aires, prices will go up for many tenants whose rents are absurdly low relative to the free market rent in those neighborhoods. Just ask Congresswoman Linda Rosenthal—who is fiercely opposed to the elimination of rent regulation and, at the same time, developer incentives to increase housing supply—who lives in a three bedroom on Manhattan’s Upper West Side for $1,573. If ever there was a more conflicted politician directing housing policy.

Is NYC Likely to Follow Milei’s Lead in Argentina?

Perhaps the “tear off the band-aid” approach employed by President Milei would be too much of a shock for New Yorkers who would be adversely impacted but an incremental approach could set us on the right course. Replacing rent stabilization across the city and implementing good cause eviction universally would create a uniform regulatory regime across the city and allow for healthier rent increases that better account for inflation. An increase of nearly one million free market apartments on the market would force landlords to compete on price and quality further improving the housing stock and reducing rents for many middle-income folks.

At the same time, city and state officials should continue to create incentives for affordable housing and avoid the disaster that befell the Harlem One45 Project which was voted down by an overzealous rookie City Council member, Kristin, Richardson Jordan, who, it would seem, preferred no affordable apartments to the 458 new ones that would have been created. We all define victory to our constituents differently.

Sources: Harlem Project One45 Withdrawn as Jordan Rejects Last Offer (therealdeal.com)

Argentina Scrapped Its Rent Controls. Now the Market Is Thriving. – WSJ

Argentina Ditched Rent Control. What if NYC did too? (therealdeal.com)

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Living Baseball Legend Re-Defines The Meaning of 50-50

Living Baseball Legend Re-Defines The Meaning of 50-50

Published on September 26, 2024

High praise and hyperbolic accolades are all too common among sports commentators and pundits that they have all but lost their meaning.

Last week, however, the truly remarkable happened in the baseball world: Japanese-born baseball player Shohei Ohtani joined the 50-50 club and is, for now and perhaps always will be, its sole member. He did the undoable by hitting 50 homers (he is currently at 52 as of this writing) and stealing 50 bases in a single season.  And there’s still more baseball to play.

Like Michael Jordan who was pure joy to watch, true poetry in motion, Ohtani may be, as the Marlins manager stated after the game, “the most talented player [he] has ever seen…[and maybe] the best ever to play the game.”

The meaning of “50-50” has changed forever—at least for me.

Sources: Shohei Ohtani first 50/50 player in major league history – ESPN

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For Real Estate Investors, The Fed Funds Rate Matters Less Than The 10-Year Treasury Yield

For Real Estate Investors, The Fed Funds Rate Matters Less Than The 10-Year Treasury Yield

Published on September 24, 2024

Many rejoiced last week when the Fed cut the overnight lending rate by 50 basis points and the stock market responded as expected by breaking record highs.

For mortgages and corporate bonds, the Fed funds rate is less relevant than the 10-year US Treasury yields and they actually ticked higher the day after the Fed’s move. The increase is a reminder that the Fed doesn’t control all borrowing costs.

Longer term yields are largely driven by future expectations as to where rates will be and not where they are now. So, when Fed officials signaled that they were optimistic about the economy and suggested future rate cuts would only be 25 basis points, the 10-year yield increased. A so called “soft landing” may be good for the economy but it means mortgage rates may remain flat or decline at a much slower rate than the Fed cuts.

The 10-year yield is also determined by “term premium” or the amount of extra compensation investors demand to hold longer term Treasurys over short term debt. Investors generally expect a 1% difference between short and long term US Treasuries but sentiment about the future can be fickle, impacting the term premium.

While real estate investors must keep an eye on 10-year yields, they should keep the other focused on the spread lenders charge borrowers above the yield. One-eyed investors ought not invest alone.

It turns out, lenders need to eat too and the borrowing rate is always some amount above the 10-year yield. The good news for borrowers: the extra differential lenders charge tends to shrink when the Fed cuts rates.

For commercial real estate investors, the Fed cuts are a good thing for sure and directionally positive for borrowers but it doesn’t tell the whole story as to where borrowing costs will ultimately land.

Sources: https://www.wsj.com/finance/investing/the-rate-cut-happened-not-all-borrowing-costs-are-going-down-285168ac https://www.columbiathreadneedleus.com/insights/latest-insights/chart-the-fed-funds-rate-vs.-10-year-treasuries

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Property Taxes in NYC are Notoriously High But Not For Everyone: Change May Be Afoot

Property Taxes in NYC are Notoriously High But Not For Everyone: Change May Be Afoot

Published on September 19, 2024

Discussing tax rules and regulations may be about as exciting as watching paint dry but I’ll do my best. Bear in mind, however, that sometimes the most impactful moments, economically speaking, are wrapped in a bundle of boredom. So, pay attention if you own any type of property in New York City.

Overview of NYC’s Property Tax System

For decades, many have correctly pointed out that NYC’s property tax system is fundamentally unfair as it imposes unequal tax bills on similarly appraised properties that bear little relationship to actual market value. For example, have you ever wondered why a $12 million townhouse in the West Village has an astoundingly low annual tax bill while a six-unit fully rent stabilized property in Ridgewood, Queens with a value of $800,000 could be excessively high relatively speaking?

To answer, I need to take you back to 1981 when NYC passed Article 18 of NY’s Real Property Tax Law. The law slotted every building into one of four different tax classes and allowed the use of so called fractional assessments of the property’s market value for purposes of determining its taxable value. Class One properties, or one to three families, are assessed using 6% of their market value while the other three classes are assessed at 45% of their market value.

Calculating Property Taxes in NYC: Two Examples

To illustrate how this works in practice, let’s go back to that $12 million townhouse in the West Village and compare that annual tax bill to a 45-unit multifamily property in Upper Manhattan with a market value of $5 million. To calculate, the city starts with the market value ($12 million/$5 million) and then applies a 6% fractional assessment to the townhouse (i.e., a $720,000 assessed value) as it falls in Class 1 and 45% to the multi-family as it falls into Class 2 (i.e., a $2.25 million assessed value). The varying tax rates are then applied to each of the assessed values so, in the case of the townhouse, ownership would pay approximately 20% of the assessed value or $144,000 and, for the multi-family, 12.5% of the assessed value or $281,250. To me, it doesn’t seem terribly fair that the owner of the $12 million townhouse pays about half in property taxes than the landlord of the $5 million multi-family.

The Benefits of Owning Condos and Coops Built Pre-1974

To further highlight the nonsensical approach employed by the city, one need only look at how they assess condos and coops for tax purposes. NYC compares condos and coops constructed before 1974 (about 98% of all NYC coops) to rental properties built before 1974 which are typically comprised of a bevy of rent stabilized units with market values significantly below any condo or coop. In many cases, this approach leads to the city using market values for coops and condos that are between 50%-80% lower than their true market values.  As a result, these properties are taxed at levels that are completely out of sync with their true market value. 

Enter Tax Equity Now NY to Fight the Good Fight

Fed up with the lack of political progress, Tax Equity Now NY (TENNY)—a coalition of real estate, civil rights, and housing advocacy groups—is taking its push for property tax reform to the courts. In a ruling earlier this year, an appeals court allowed several TENNY claims to proceed with an upcoming court date scheduled to commence on September 17, 2024. The continuation of the case is an acknowledgment by the court that inequities exist, setting the stage for a comprehensive review of the current property tax regime in NYC.

In short, NYC’s property tax system has been an unmitigated disaster for some time and when factoring in the recent rule changes surrounding rent regulation and good cause eviction, ownership of commercial and multi family properties isn’t what it once was. However, with this new TENNY case, pressure may be mounting on city officials and legislators alike for change. We are long overdue for an equitable redistribution of the tax burden among the various property types based more on true market value and less on convoluted tax classifications and fractional assessments impenetrable to all but the few tax attorneys and accountants who no doubt relish these puzzles and the high fees they command. I tip my hat to these professionals but simplicity and fairness are in order your honor. 

Sources: NYC Property Tax Lawsuit Advances: Could It Propel the Five Borough Fair Property Tax Act? | Rosenberg & Estis, P.C. (rosenbergestis.com) New York Court of Appeals Permits Challenge to New York City’s Property Tax System – Gibson Dunn A New York City Property Tax Overhaul? It Could Finally Happen. – Commercial Observer NYC Property Tax Reform Legislation Proposed | Rosenberg & Estis, P.C. (rosenbergestis.com) Tax Equity Now

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How to Value Talent, What Are You Worth?

How to Value Talent, What Are You Worth?

Published on September 18, 2024

No matter the field, top talent is highly coveted, not easily found and costly when you bring them onboard.

The Starbucks Example: A High-Stakes Hire

Take the example of Starbucks which recently poached the CEO of Chipotle, Brian Niccol, and they are paying him a whopping $100 million, the ability to work from home in Southern California and access to a private plane for those occasions when he decides to come to the Seattle office. This sounds excessive, but is it?

Investor Confidence and Market Reactions

Starbucks may have gotten him on the cheap, at least according to investors. When the news broke of his pending arrival, shares in Starbucks shot up 25%, increasing the market cap by $20 billion in a single day—and Niccol hadn’t even started. These are venti-level expectations for one person amongst an employee base of 380,000. That said, if his past performance at Chipotle is indicative of his future at Starbucks, it’s not a bad bet. Under Niccol’s leadership at Chipotle, the stock increased nearly 800%. His record of significantly increasing revenue, profitability, and market share at Taco Bell only adds to his credibility.

Superstar Paydays in Different Industries

Superstar paydays are nothing new. Legendary basketball player Michael Jordan earned $33 million in his final ‘97-’98 NBA season, equivalent to about $60 million today, surpassing even today’s highest-paid player, Steph Curry, who earns $55 million. Jordan’s Nike contract reportedly still pays him $100 million annually. In the financial sector, hedge fund titan Bill Ackman of Pershing Square Capital Management earned over $1 billion in 2020 through performance and management fees. These astronomical figures span multiple industries.

Valuing Top Talent: A Complex Equation

Whatever industry you work in, there’s always the question of how to value and reward top talent. Whether you’re a prospective employee determining your economic worth or an employer making a hire, it’s important to think about these things.

The 80/20 Rule in Real Estate Brokerage

In the real estate brokerage space, it’s often said that 20% of agents originate and handle 80% of the deal volume. If true, brokerages need to find ways to attract this top 20%, but identifying who they are is no easy task. It’s not uncommon for multiple agents to claim sole origination of the same transaction.

Challenges for Boutique Brokerages

As a boutique brokerage, you face the question of whether to home-grow junior agents or hire experienced agents (which is easier said than done). Do you pay a signing bonus for a multi-year lock-up for a superstar and throw in a guaranteed base salary? Perhaps, but that requires an agent to leave behind a more established firm and take a chance on you. It also requires significant capital, which many boutique brokerages may not have. Another challenge is how much of an agent’s success is tied to the brokerage they work for, making the hiring decision even more complex.

Cushman and Wakefield’s Approach to Hiring Talent

Even Cushman & Wakefield—which previously paid significant signing bonuses to relatively unproven junior agents and jaw-dropping figures to megastars like Doug Harmon and Adam Spies—has reportedly pulled back from the practice. Perhaps the old adage that money can’t buy love, loyalty, or happiness holds some truth, or maybe loyalty only lasts for the duration of the contract.

A Different Path Taken By Top NYC Broker

Some were surprised when Bob Knakal—arguably one of the best investment sales agents in NYC—decided to launch his own brokerage rather than accept a lucrative signing bonus from a larger firm, like Harmon and Spies did. It’s possible he missed the window of opportunity, as his departure from JLL came during a significant market slowdown.

The Debate: Ideal Compensation Structures in Commercial Real Estate

I’d love to hear from agents in NYC’s commercial real estate space about the ideal structure from both the agent’s and the brokerage’s perspective. What’s the right mix of fee splits, signing bonuses, and perks?

Source: There’s a New $27 Billion CEO—and He Might Actually Be Worth It – WSJ

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