They pencil out budgets. They organize repairs. They field complaints about noise in the middle of the night. And many of Manhattan’s managing agents — the companies that handle the unglamorous, day-to-day aspects of the real estate business — seem particularly adept at weathering recessions.
Many of the city’s major property management companies expanded during the recession and its aftermath, often by gobbling up smaller firms and poaching clients from their rivals, according to The Real Deal’s ranking of Manhattan’s 20 largest residential managing agents.
For example, FirstService Residential New York, previously known as Cooper Square Realty, is ranked No. 1 by number of units on The Real Deal’s list, after an aggressive expansion. After joining forces with a large publicly traded company and snapping up several other firms, FirstService now has 45,000 units, a leap of nearly 30 percent from 35,000 in 2009, the last time TRD ranked managing agents. FirstService unseated 2009’s top finisher, Douglas Elliman Property Management, which came in at No. 2 this year despite its recent acquisition of Bellmarc Property Management.
TRD compiled its rankings from surveys of property management companies, the Real Estate Board of New York and industry reports. The list includes only “third-party” agents, or property management companies that own less than half of their portfolio; it does not count developers like the Related Companies, which manage the buildings they own.
Other companies that have shown impressive growth include Halstead Management Company, which has soared 51 percent by number of units since 2009, putting it in the No. 7 spot. At No. 13, Century Management is a newcomer to the list, with 7,200 units in 70 buildings.
The company with the most buildings is Andrews Building Corp., which has 350 properties in its portfolio. But the majority of these buildings have less than 100 units, and some much less. Fairly typical is 25 Bond Street, a 30-unit boutique property, said Divya Rashad, Andrews’ managing director.
Despite the growth of some companies, though, the industry as a whole has had a difficult time. Landlords are increasingly opting to manage their own high-rises; many firms have frozen their fees or have drastically cut their prices to keep their clients happy. Some firms have succeeded in grabbing market share by dramatically undercutting the competition’s rates.
“We are adapting” to the new conditions, said David Kuperberg, founder of Cooper Square and now president of FirstService Residential New York. But he said other firms seem to be hurting, adding: “I’m not sure that others are investing in their business.”
Less demand, coupled with consolidation, means the market-share pie is shrinking.
“The market is getting more diverse and consolidated at the same time,” said Brian Peters, the chief operating officer of Rose Associates, which has a property management arm.
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Mergers and acquisitions
Kuperberg started Cooper Square Realty in 1987, managing a 23-unit co-op in Greenwich Village. In 2003, the company became a subsidiary of FirstService Residential, the largest manager of residential communities in North America. Cooper Square changed its name in June, along with several other FirstService subsidiaries.
FirstService has been aggressively expanding in New York City, in part by snapping up other firms. In 2010, it bought Goodstein Management, adding 40 buildings to its portfolio, including the San Remo, the legendary two-towered co-op at 145 Central Park West.
Today, FirstService has 285 Manhattan buildings, up from 200 in 2009, with another 215 buildings in the Bronx, Brooklyn, Queens and Staten Island. Other high-profile buildings it manages include New York by Gehry, a 900-unit rental at 8 Spruce Street in the Financial District.
Elliman is another firm swallowing up other companies. It purchased Bellmarc Property Management in 2010, adding 50 buildings to its roster, including CitySpire at 150 West 56th Street, where a penthouse is famously on the market now for $100 million.
Elliman manages 290 buildings in Manhattan, the firm said, up from 250 in 2009. But its total number of Manhattan units is 38,000, down 14 percent from 44,000 in 2009.
Halstead, too, has made aggressive moves to expand its management portfolio. In 2009, Terra Holdings, the parent company of Halstead and Brown Harris Stevens, bought Penmark Realty and merged it with Halstead. That helped significantly boost Halstead’s unit count: Today, it manages 11,670 units in 131 buildings, a 51 percent increase from 2009, when it had 7,700 units in 80 buildings.
Many of the buildings Halstead manages are new condos, such as One Jackson Square, a 30-unit development in Greenwich Village where sales were handled by the Corcoran Group, which is not in the management business; 110 Third Avenue, an East Village condo developed by Toll Brothers; and the Lucida condo at 151 East 85th Street.
Another big mover is Manhattan-based Century Management, founded in 1971, which did not make TRD’s list in 2009. Mitchell Barry, the firm’s CEO, could not be reached for comment, but according to the firm’s website, current Manhattan properties it manages include the Gramercy Park co-op 130 East 18th Street, and 190 East 72nd Street in Lenox Hill.
Large firms are merging with smaller ones in part to help recapture market share lost now that more building owners are self-managing their properties, industry insiders said. Among these are the many REITs now entering the New York City marketplace. The Colorado-based firm UDR, for example, is ramping up its purchases in New York and now owns and manages the Financial District apartment building 10 Hanover Square, among other buildings.
And current market conditions have prompted many buildings to look around for new managing agents. With material and labor costs going up, complying with city rules like Local Law 11 — which requires buildings to repair their façades — is now a pricier proposition than in the past. Higher prices, combined with difficult economic times, tend to make buildings dissatisfied with their management companies, so they’re more likely to switch firms.
As a result, nearly every city management company has gained and lost buildings over the past few years. Rose Associates, for example, has nabbed some key buildings from its competitors, such as the 142-unit rental tower 2 Cooper Square, which Rose took over from Knickerbocker Management. Rose’s Peters said a long-standing partnership with JPMorgan, an institutional owner, has helped the company add clients.
But Rose, which came in at No. 4 in the rankings, has also lost some buildings. AKAM Living Services took over at the Sheffield, a nearly 600-unit condo at 322 West 57th Street previously managed by Rose. Peters said a short-term stay was the plan the whole time; Rose, along with Fortress Investment Group, came in after Swig Equities lost the property to help convert it from rentals.
In total, Rose is managing more than 22,294 units in 100 buildings, up from 19,360 units and 77 buildings in 2009.
Rose, which started developing buildings in 1925, still controls some rentals that it built, such as the Chelsea Landmark on West 25th Street and Sixth Avenue. Still, less than 20 percent of its 22,294-unit management portfolio is Rose-owned, company officials said.
“I think developing and managing go hand in hand,” Peters said. “You learn things on one side or the other that you can apply to the benefit of everybody.”
Comparison shopping
But there’s another key reason why buildings are ditching their managing agents: price. Sources said the market is currently very price-sensitive, which is one reason FirstService has dominated, while more expensive firms such as Brown Harris Stevens Residential Management have lost ground.
FirstService’s size allows it to give customers deals on everything from yearly fees to electricity costs. Last fall, for example, buying electricity in bulk for all of its buildings allowed the company to offer clients a hefty 17 percent discount, Kuperberg said.
FirstService’s fees are on the low end of the scale, starting at $10,000 a year, allowing for profit margins of 10 to 15 percent, he said.
Indeed, competitors gripe that FirstService and some other firms have grabbed market share by offering clients steep discounts.
For example, FirstService recently added the 244-unit condo 100 United Nations Plaza to its roster, taking over from Charles H. Greenthal Management, which had managed the building since 1988.
Greenthal is far more expensive that FirstService, with fees starting at $60,000 per year per building and going up to a “couple hundred thousand” for some large complexes, according to company president Jonathan West.
At 100 United Nations Plaza, West said, “yuppies from Wall Street and whatnot came onto the board there and discarded the accountant, attorney, and resident manager, as well as management.” Five of seven board members were new, he said, and “they had a whole different philosophy about how money should be spent.”
Greenthal, founded in 1959, came in at No. 3 on TRD’s ranking. Today, it manages nearly 23,000 units in Manhattan, down slightly from 2009’s 24,000. Its building total, too, has fallen a bit from 185 in 2009 to 184 today.
West said the firm has been focused on expanding in Brooklyn and Queens rather than Manhattan.
For its part, Andrews charges a minimum of $12,000 a year. Fees go up by 2 percent annually, though the company decided not to raise its rate in recession-battered 2008, Rashad said. Metal Shutter Houses, an 11-story condo at 524 West 19th Street, has switched from Halstead to Andrews, which Rashad attributed to Andrews’ performance cleaning up after Hurricane Sandy. “We have gotten several new buildings because of Sandy,” Rashad said.
AKAM, which came in at No. 5, has also benefited from below-average fees, sources said. Founded in 1983 by Leslie Kaminoff, 103-employee AKAM manages 21,000 units in 125 buildings, up from 18,000 units in 95 buildings in 2009.
AKAM, which focuses on buildings with 100 or more units, in 2012 started managing the 275-unit condo 120 Riverside Boulevard, which it took over from the Trump Organization, according to President Michael Berenson.
He declined to discuss what the firm charges, though he said the company does increase fees 2 to 5 percent annually. “We have a niche, and we’ve been staying in that niche,” said Berenson, who joined the company in 1987. “We are not everything to everybody.”
Brown Harris saw its ranking by number of units drop to No. 12 this year, down from No. 8 in 2009. At Brown Harris, the residential arm of the major real estate brokerage, fees start at $60,000 per year, said Paul Herman, the management division’s president. Brown Harris manages some of the city’s most exclusive buildings, such as 730 Park Avenue.
Unlike other companies, however, Herman said Brown Harris isn’t planning to try to increase business by buying up competitors. “We didn’t buy companies, and we don’t really advertise,” said Herman. “We’re interested in good business, not more business.”
After all, being part of a major brokerage has its advantages. Brown Harris will be the property manager of the new 16-unit condo 18 Gramercy Park South when it is completed by Terra Holdings principals Arthur and William Zeckendorf.
“This is a very price-sensitive business, but on the other hand, clients are willing to pay for value and good service,” Herman said.
Another firm that slipped in the rankings this year is Orsid Realty, which dropped to No. 8 from No. 7 in 2009. The firm grew, but not at the same rate as some other property management companies: Orsid manages 11,451 units in 141 buildings, up from 10,000 units in 120 buildings in 2009.
Founded in 1955 by Albert Etingin and now run by his son, Maks, Orsid manages buildings ranging in size from eight to 500 units. But its sweet spot is somewhere in the middle, and usually Uptown, such as 470 Park Avenue, a 60-unit prewar doorman building. The company’s fees are in the middle of the pack, starting at around $45,000 a year, said Dennis DePaola, executive vice president at the 65-employee firm, but fees vary depending on the level of service.
“It really depends,” he said, “on how much hand-holding the group is going to need.”
Drastically discounting its rates, DePaola said, wouldn’t allow Orsid to properly serve its clients. As it is, he said, Orsid usually loses money during the first two years it manages a building, because of the time it takes to get settled in.
“We will not [be able to] adequately service the building if we come in really low,” he said.