Delving into the world of residential brokerage, KayoCloud’s Joe Richter sat down with Ryan Serhant to discuss his new firm and the luxury housing market. Is it possible to generate so much exposure, while preserving scarcity in one’s listings? In a wide ranging interview with the Real Estate Daily Beat, the celebrity broker made famous by Million Dollar Listing, addresses this and many others topics.
Joe Richter: The scarcity created by Vornado’s Steve Roth at 220 Central Park South always stood out to me. He was essentially a one man co-op board and would personally interview every prospective buyer. The optics were brilliant and very effective. With all of the exposure you’re able to generate through the media and Instagram, how do you maintain the fear of missing out (FOMO) necessary for sales? How do you protect that?
Ryan Serhant: It’s like what I tell every developer. The most important marketing we can do is sell apartments. You can sit back and be a stickler for your price, but unless you’re on the water or on Central Park, then you’ve got heavy competition. So you’ve got to make deals, and then that’s how you create a fear of missing out by showing people that you’ve got contracts signed. Things are happening, buyers are coming through. And if a buyer does make a low-ball offer, you can say no problem.
Joe Richter: Sales velocity is obviously key.
Ryan Serhant: The person in the relationship who has all the power is the one who cares the least. So if you’re on the sell side and you don’t care if this buyer buys, now the buyer really wants to buy because you don’t care about them. And so you’re the one in that relationship who’s got the power. We just signed a contract for the first resale at 220 Central Park South asking $33 million, Unit 55B. Steve Roth got personally involved in the freaking resale. We should close on that shortly.
Joe Richter: Why do you think he’s getting involved in a resale?
Ryan Serhant: There are Picasso’s in the lobby. It’s a limited building for a certain select group of people, and so they take it very seriously. It’s still a condo – they’re not going to deny people, but they check everything out.
Joe Richter: As you know, things are tough for developers and sponsors out there – condo inventory loans are obviously on the rise. When you sit down with a developer and he’s like, look, Ryan, I love what you’re doing with your new firm, but we’re going to have to talk about the commission. Do you take the hard line and say this is our fee, or is there flexibility in this market?
Ryan Serhant: There’s definitely flexibility. You gotta be willing to negotiate and make deals. There are active buyers. You can wait, but you just gotta do the math on the patience.
Joe Richter: Carry costs are pretty expensive and add up.
Ryan Serhant: You’ve got to see if a developer has something that’s limited. Exclusivity is created by something being finite. 220 Central Park South was finite. It was on the south side of the park, it had the porte-cochere circular driveway, Robert AM Stern –– it didn’t exist. If you liked 15 Central Park West, and you wanted the new one with the runway view of the park, this was your building.
Joe Richter: Regarding Manhattan’s supply glut of condos, Extell’s Gary Barnett recently said that half of his six active projects are in the red. But with that being said, we’ve now seen twelve consecutive weeks with more than 30 contracts over $4 million –– the market is clearly picking up steam. What are you seeing out there and what’s your outlook for the next 12 months?
Ryan Serhant: Everyone loves a deal, but only when they feel safe about them. So the best deals in New York City went into contract last summer, and then closed into the fall and winter. For example, I sold the penthouse at 565 Broome Street for just over $22 million, a 25% discount. We also sold the biggest discount on the market, representing a buyer in a $16.75 million deal for a fully furnished unit at One57, which was 51% off. So that’s when the best deals were taking place, and they’ve now been recorded.
Leases from one year ago are starting to come up. People are starting to realize that maybe they’re not cul-de-sac people, and miss the energy in New York. And their friends are coming back, enjoying the restaurant scene. They are now second guessing, especially as companies begin returning to offices. So they are now coming back and panic purchasing just to try to get the last deal. They are asking me: Can I still get a deal? Are prices still down?
Joe Richter: So you’re seeing a lot of FOMO out there. People don’t want to miss out.
Ryan Serhant: Yes. FOMO is real man! You also have investors who want to take advantage of good deals. You have people buying sight unseen who know that you never bet against New York. The market is doing incredibly well.
Joe Richter: On both the lower-end and higher-end of the market? Any difference there?
Ryan Serhant: It’s across the board. I think 2021 will be the biggest year of my career by far. We sold the most expensive house in the history of Florida for just under $140 million two months ago. We closed on another place in Palm Beach last week, sight unseen, totally virtual for $15 million. We’re putting every townhouse we have on the market into contract. Listings that haven’t been selling for years are now trading.
Joe Richter: The Manhattan townhouse market has been languishing for years and really needed a boost.
Ryan Serhant: We had a townhouse on the market all 2019-20, and the seller got exhausted and said, “screw it, New York’s dead, I’m taking it off the market.” We took it off the market two months ago, and a contract was fully signed last week at a great price in an off market deal. People are asking, is it still available? And I’m like, it was available for three years!
Joe Richter: It’s a New York deal. I love it.
Ryan Serhant: It’s crazy. So the activity we’re seeing is really incredible. And we’re able to attract buyers in a lot of different ways. We have our Studios Team that creates content for everything. They put it out there as a resource to all our agents and they’re crushing it. The views, the clicks, the traffic is just nuts. And so it’s very exciting – it’s a good time for New York.
Joe Richter: From a developer’s perspective when it comes to social media, Instagram, TikTok, and Facebook, some fail to understand the potency of it. I used to hear from some of them that it’s cute, but it’s not how deals are done. Take someone like Gary Barnett [SERHANT. is currently marketing Brooklyn Point and launched sales on an Instagram Live] who still uses a flip phone. How do you explain the value of social to him?
Ryan Serhant: They get it now. It was a struggle in 2013 when Instagram came out. It was a struggle in 2015-16, and then it started to become a little bit more normal. But the proof is in the pudding. These developers are now spending all this money on firms that do social media handling and advertising. They spend a lot. And they’re seeing that when we run these ads on social, people come through.
I just got hired by a developer of a really large project. It was between my new firm and one of the big ones that’s been around for 10,000 years. This developer was 50-50 and didn’t know what to do. But his daughter follows me on Instagram and his son sent him one of my YouTube videos. And he was like, listen, this building is going to be sold to younger people and here’s this broker that’s getting the attention of my kids.
Joe Richter: Running those small New York Times ads in the residential section won’t really move the needle.
Ryan Serhant: Other firms have the developer pay for StreetEasy featured ads and to take out an Architectural Digest ad for $40,000. There are 4 million people that follow me on social media! And then there’s the trickle down from there – who do those people know? I can sell that way and developers totally get it now. They also just spent a year at home with their kids on their phones – they all have social, they’re all on it and see everything. It’s no longer a secret. They understand how important it is.
Joe Richter: At my primary venture, KayoCloud, our machine learning is what our commercial real estate clients are most excited about. There are obviously tea leaves left by an investor based on the actions they take in the market (e.g. acquisitions, dispositions, financing activity), which contrasts to the residential side where most buyers are only going to acquire one, two, or maybe three houses their entire lifetime. To be effective, the data must be exclusively gathered externally to create a profile about your buyer pool. Have you guys explored this at all?
Ryan Serhant: We have a large tech team that we’re hiring people for every month that lead a group that we have called ADX – it’s our amplification data exchange. It puts our listings in front of more eyeballs than anybody else using Foursquare check-ins. It’s a passive data collector and anytime you go out with your phone, they are tracking your steps. So if you go to that brunch spot all the time, SERHANT. can target you with a listing that’s above the brunch spot. We also use census data, API feeds, and information from city agencies to help try and predict where real estate values are going to go up.
Joe Richter: The residential brokerage space has been getting a lot of press recently – especially with the Compass’ IPO. Many have pointed out their artificial growth, as they’ve been the leader in poaching brokers with large signing bonuses and high splits. How do you plan on growing SERHANT. in the next few years? Are you going to be poaching brokers? What’s your recruitment strategy?
Ryan Serhant: To be honest, we don’t need to poach. There’s so many people that come to us from every other firm. We are incredibly selective. I have no need or interest at the moment in rapid scale agent count for the sake of growth. Quality is far more important to me. But listen, if I had billions of dollars, would I also buy success and market share? I mean, I don’t know, probably.
Joe Richter: It worked for Rob Reffkin, right? Masa and SoftBank make it pretty easy.
Ryan Serhant: You can do anything with $1.5 billion.
Joe Richter: Ryan, you should just call yourself a tech company. It’ll do wonders.
Ryan Serhant: Look at Elon Musk, look at Bezos. They’re like, what should I do? I’m going to go to Mars. That’s what I’m going to do because you can do anything when you have that much.
Joe Richter: I mean, think of WeWork. Look how much money they were able to experiment with.
Ryan Serhant: It all comes down to brand and story. Same thing when we are selling apartments. What’s the brand of that building; what’s the story of that listing? If people just bought based on brick and mortar, windows appliances, the whole real estate market would be upside down.
Joe Richter: Creating that narrative is definitely a major factor. On a related note, the New York Times recently ran a story about how residents at 432 Park Avenue are complaining that the trash chute “sounds like a bomb when garbage is tossed.” It was reported that loud noises and leaks are apparently happening at other projects on Billionaires’ Row as well. Are you getting any questions about this?
Ryan Serhant: No one’s ever brought that up to me. I lived in a building with a trash chute for a long time, and you do hear things, but you get used to it. Yes, there are sirens, but this is New York City. There’s certain noise and lifestyle elements that you just kind of have to get used to, but no one’s ever brought up these types of noises to me.
Joe Richter: Thanks Ryan. It was great chatting.
Ryan Serhant: Yes, thanks. Congrats on all your success Joe. Talk to you soon.
*This interview has been edited and condensed for clarity.