EP. 65 // The #1 Sales Broker in the History of NYC w/ Bob Knakal
Today on the show we have a living legend: The #1 Sales Broker in the History of NYC with over $20 BILLION dollars in sales: Bob Knakal, Head of JLL's New York Private Capital Group.
Get ready for an incredible journey into the world of New York City's real estate with the legend himself, Bob Knakal. With over $20 billion in sales, Bob's story takes us from his surprising entry into the industry as a freshman at Wharton to establishing Massey-Knakal —a real estate firm that reshaped NYC's skyline. On today's episode we navigate the challenges Bob and his partner, Paul, overcame in the 1980s, including the lack of technology, to build a firm that leaves an enduring impact on the New York real estate landscape.
Picture this: Manhattan, 1980s, filled with quality professionals laid off and brokers hesitant to venture into the boroughs. Now, imagine two daring men, Bob and Paul, who went against the grain to open offices in Queens and Brooklyn. Yes, that's our story's heroes! Their risk reaped unimaginable rewards, growing Massey-Knakal from a two-man operation to a 150-strong team in just two years. We'll uncover their unique business model, their unconventional approach to offering value to property owners, and how they made a name for themselves in a highly competitive market.
Bob lets us peek behind the scenes of how he utilized the Sandborn map to create a game-changing tool for analyzing and valuing development sites. Ever heard of a real estate deal involving cash, diamonds, and gold? Bob shares this, and more of his most memorable real estate negotiations. Finally, we wrap up with a discussion about NYC's current real estate market, and Bob imparts his wisdom on maintaining work-life equilibrium over the long haul. This episode is a treasure trove of insights from a titan of the industry.
In This Episode:
6:08 Starting Massey-Knakal in the 1980s
15:23 Real Estate Expansion and Success
27:31 Mapping NYC's Real Estate Pipeline
33:30 Memorable Real Estate Negotiations
45:18 Challenges in NYC Real Estate
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Bob Knakal
Guest
00:00
And we have clients who will say to us look, Bob, I will never buy a property from you, but if I ever sell, you'll be my first call and that's OK. I'm OK with that, because you can't be all things to all people. And they actually did a study and showed that our transactions produced prices that were 31% above the rest of the market. Three, two, one go.
David Choi
Host
00:32
All right. Today we probably have one of our most prominent guests ever in Deals and Dollars history, bob Knackle, the number one real estate broker in the history of New York City, in excess of $20 billion in sales and having sold his own brokerage company to Cushman and Wakefield for over $100 million. Bob, it is a true, true pleasure to have you on the show today.
Bob Knakal
Guest
01:02
So great to be here, happy to be with you guys.
David Choi
Host
01:05
Bob, can you kind of just share with us your journey into the real estate industry and how you became the number one broker?
Bob Knakal
Guest
01:13
Sure well, I thank you for the accolades. I think I've sold more buildings than any other broker in the history of New York, or at least as what people tell me. But I don't have the highest dollar volume, that's for sure. But you know I've been. Last Sunday I started my 40th year in this business, which kind of blew me away. It snuck up on me I didn't realize it. But so I'm in year 40 now and have loved every second of it. And I got into it completely by accident. I was a freshman. I'll take you back to 1981. I'm a freshman at the Wharton School, want to be the next Gordon Gekko, like every other Wharton kid. So put my resume together.
01:54
During spring break I drive around Bergen County this is where I grew up in a little town called Maywood. I'm dropping my resume off at every investment bank and commercial bank. I see Come out of a Payne-Webber office in Hackensack. Across the hall I see Coldwell Banker. I walk in with my resume thinking the place is a bank. They called me later that day, just wanting to set up an interview for the next day. So I set up the interview and this is 1981, so I can't look this up, this bank up on the internet. So I go to the library and I look up Coldwell Banker See, it's a real estate company. I'm like, oh shit, I don't want to get into real estate.
02:32
I'm not going to go on this interview, but they were the only ones hiring college kids for the summer, took the job, absolutely loved it. It was a great environment. A bunch of young, hardworking people Seemed like they were having a lot of fun, making a lot of money. I spent my first summer there in what they called the Data Bank program and I was driving around Morris County logging every commercial property I saw. And I went back my second summer and actually ran that summer internship program for them. Third summer I got my New Jersey real estate license and I was what we called a runner back then as an assistant basically to a senior broker A guy named Tom Mulaney who is still a good friend of mine and still working with CB in New Jersey and I was showing space to industrial tenants. And then when I got out of school in 84, I started working with CB in Manhattan.
David Choi
Host
03:33
Wow, it was a complete mistake.
Bob Knakal
Guest
03:36
Complete mistake. If I didn't see Coldwell Banker across the hallway, I probably never would have gotten into the real estate business.
David Choi
Host
03:43
That's absolutely amazing. God had a plan for you, man, and no doubt that's crazy.
Eric Panecki
Host
03:47
So I mean, but you started out, I guess, in commercial real estate at Coldwell Banker.
Bob Knakal
Guest
03:52
Yeah, well, when I got to CB, I showed up my first day on the job, july 16th of 84. Talked to the boss. He's like hey, paul Mass, he just got out of a training program. When you follow him around then he'll show you what's going on here. And at the time CB had about 60 brokers that were leasing office space, 20 that did retail store leasing and there were four people in the building sales group, three of whom had 20 years of experience, paul who just got out of a training program. And it was very clear to us that the guys with 20 years of experience weren't going to spend a lot of time with us. So, literally day two on the job, we're having lunch together and we said look, let's just work together, split everything 50-50, see how that goes. And that was the start of a 30-year partnership. Wow.
Eric Panecki
Host
04:43
That's crazy. That's amazing. I actually had a similar internship.
David Choi
Host
04:48
My first real estate internship ever was at Cresa. They did tenant lease update. They represented tenants right, and I had to do the exact same thing. I had to sneak into office buildings. I had to pretend like I was an employee of one of the companies, take pictures of all the office tenants, bring it back into a database and verify the owners for it.
Bob Knakal
Guest
05:12
You could do that back in those days because pre-911, you didn't have all this high security and everything else. So you, literally in New York, you could go in. That was the way you canvassed. You had a clipboard and you walked into an office building, got on the elevator, went up to the top floor and just got off at every floor and talked to every tenant, tried to get a decision maker, and that's what the office leasing guys did. That was the way it was done in those days.
David Choi
Host
05:38
So you said 40 years Congratulations, by the way, that's a huge, huge milestone 40 years. I'm sure you've seen a lot. What were your most significant challenges that you faced during your career and how'd you overcome them?
Bob Knakal
Guest
05:55
Yeah, well, there were a lot of challenges. I mean, 40 years is a long time. But I'll tell you the first challenge we hit we opened the doors of our firm. Well, actually the first challenge was before we opened the doors of our firm. We wanted to start MasiNackle in 1986. And we were hotshot brokers.
06:15
Thought we were hotshot brokers, went down to our bank and I still remember branch manager on Madison and must have been 46th. 47th was a woman named Nancy Stockwell. We showed up one day. We always used to chitchat with her Like, hey, nancy, we wanna start our own company, we need a $500,000 loan. Where do we sign? And of course she starts laughing at us and say, guys, that's not the way it works. Go start your firm, have a three year track record, then come back and talk to us and we'll work out some kind of a credit line or something. So we went back to the office all dejected and for the next two years we just we took money out of every deal we closed. Paul and I. In those days we had breakfast, lunch and dinner together just about every day, and every day at breakfast Paul would pull out his pen and on the back of a napkin we'd write all the deals we had under contract, how much we were gonna make, how much we were gonna take out of each deal.
Eric Panecki
Host
07:11
There's no software CRM, I guess at that point.
Bob Knakal
Guest
07:14
No, definitely not Look, let me tell you something. Back in the mid-80s, not only was there no CRM, there was no computer on your desk, no cell phone, no fax machine.
Eric Panecki
Host
07:26
I can't even imagine how do you close, how do you even close?
Bob Knakal
Guest
07:29
The first fax machine was basically called ZAP mail and FedEx had it, and what you would do is you'd bring a document to a FedEx office. They would effectively fax it to another FedEx office and then it would be hand delivered, and that was $8 a page. But that was the first form of fax machine $8 a page. But, what you did. We had the.
07:52
Brooks Brothers Day Timer, which was a little book you kept in your breast pocket and you wrote all your appointments in there and you carried around a roll of quarters because if you were waiting to show a building and somebody didn't show up, you went down to the corner and called them. I mean, it's really remarkable how things have changed in a relatively short period of time.
Eric Panecki
Host
08:12
How did you do a closing? I mean, I think about the 200 person email chain right now, right like, or 200 email email chain, like if that's all getting mailed back.
Bob Knakal
Guest
08:23
Yeah, you sat in a room. Look back in the old days. In a lot of ways it actually worked a little better in some cases because a lot of our contract signings back in those days you got the principals in a room, the attorneys were in a room and you sat there and you'd sit there for sometimes 10 hours, 12 hours, 16 hours and you didn't leave until the contract was signed and the attorneys would work on language and take it to the secretary Secretary, would type it up, bring it back in. They would review it. That was actually a great way to get it done. Now stuff goes back and forth and people forget and you know weeks go by. I actually prefer the old way of getting it done.
John Libretti
Host
09:02
It almost sounds like it was quicker to get the old contract signed in the old days. Well, you had everybody, all the decision makers in a room and you're not leaving the room until it's done.
Bob Knakal
Guest
09:09
Yeah, I remember one night we signed a contract on what was the Simcoeitz portfolio. It was called. It was a $109 million multifamily portfolio. We started that contract signing meeting at about 9 am and I went home Friday night or actually it was Saturday morning at 2 am oh my goodness. But we got the contract signed. It was a great thing. I remember it was weird going home so late, but I was so pumped up that we had gotten the deal signed. That it was. It was just. It was a great feeling. That's amazing.
09:48
That was the way we did it back in those days.
Eric Panecki
Host
09:53
So you go and you start your own brokerage, paul, with your partner Paul, right? I mean you guys are going into the hardest real estate market by most intensive measures, right, and you guys are going to start your own. Talk me through, you know kind of that decision and what gave you guys the confidence to go and say we're going to go compete with the big dog.
Bob Knakal
Guest
10:16
Yeah, look we. Well, we didn't think we were going to compete with the big dogs. We said you know what? We think we have a formula, a platform, a method of operating that's going to get traction with people. We saw in our little territories that we worked in. You know we would be competing against brokers who had been in the business for a decade or two and we had only sold three buildings. And we'd go into an owner and say, yeah, we've only sold three buildings, but one was down the block, one was across the street, one was right next door to you. We know everything that's going on in this neighborhood and we know who's buying, who's selling, what zoning changes are affecting value, what new developments are going on. We know this area cold so we're going to be able to be a better advocate for you in terms of convincing buyers why they should pay more for your property. That got us great traction and got us up the curve really quickly. But it was a in hindsight.
11:10
You know the fact that we didn't get the bank loan was a blessing, because by the time we we didn't, we started the firm in November of 88. The stock market had crashed in October of 87. 88 was still a good year. The volume really didn't start to slow down until 89. But at the time our burn rate was only $15,000 a month. If we had started in 86, the burn may have been 25 or 30 grand a month and we wouldn't have been able to make it through the SNL crisis as it was.
11:41
We got to the point where we had $15,000 in the bank. We had no deals under contract and we looked at each other and said what the heck do we do? Do we like pay all the expenses next month and see what happens? Do we pay $5,000 a month for three months of the most important expenses to keep the lights on? And we really didn't know what the heck to do. And we realized we had really good credit. So we went around to every bank and got a $2,000 credit card at this one and a $4,000 credit card at this one. Between the two of us we amassed $60,000 in credit card debt. We had done the business on credit cards for about two years and then had maxed out the credit cards Before the RTC really started forcing banks to dump stuff, which really didn't happen until late 93 and into 94. And we had the credit cards maxed out had no money.
12:40
We had a client who had done a couple of deals with Forbes 400 guy and this is going to sound just like an early iteration of Shark Tank. But we go to him and we say Mr X, we need $75,000. We've done some deals. You seem like you like us. Could you give us the $75,000? This guy was worth hundreds of millions at the time. And he said I like you, fellas, I'll give you the $75,000, but I want 50% of the stock in your business. So we were like we weren't expecting that at all. So of course we walked back to the office chin on our chest, looking down at the ground. They were like what the heck do we do?
13:17
Paul's stepfather in law, jack Holler, ran a mortgage brokerage business in New Jersey. So we set up a meeting with Jack. We got me with him. Jack, we need $75,000. We give you 25% of the stock in our business. He says guys, look, I'm going to give you the $75,000. I don't want the stock. Someday you're going to be very successful and you'll be really upset that you gave me the stock. So I don't want the stock. I mean just another talk about serendipity and good luck and everything I mean that was unbelievable of him to do. In fact, we named our salesperson of the year award after Jack and gave that out every year. But we got the loan from him that kept us going. And then, slowly but surely, you started to get some bank work, started to get some RTC work. We were able to pay all those bills off and then I still personally. The company was doing okay, but personally I was running my life on credit cards, probably for a total of 10 years, with my net worth fluctuating between zero and minus 180,000.
14:17
We had used the credit card so much that my credit was great. So personally I got my lines up to $180,000. But I would be like zero minus 40, minus 70, minus 120, close a DLO and back to minus 50. And it was bouncing around in that range for a long time until probably about 1998 or 1990 or 1999.
David Choi
Host
14:40
Wow, a decade of living off credit card debt.
Bob Knakal
Guest
14:44
Yeah, without a debt.
David Choi
Host
14:45
The amount. I can't even fathom the amount of stress you were going through. How did you tolerate that?
Bob Knakal
Guest
14:51
You know, it kind of it didn't bother me so much because I just was so used to it that when I got back to being zero I felt great. I felt like a million dollars.
Eric Panecki
Host
15:03
I'm rich.
Bob Knakal
Guest
15:04
So you know, it was like you just got so used to it, but the whole time we kept believing that what we were doing made sense, it was the right thing we were going to. You know we were going to get there.
15:16
And you know sure enough, we get to the point where it's starting to do really well. The recession of the early 2000s comes along. Then 9-11 happens and we did something that was a big inflection point for the company because a couple of things happened. We saw all these companies laying people off, really great quality people were getting cut, companies were downsizing and at the same time we had filled all our territories in Manhattan. So we said, okay, what do we do now? Do we start doing we're only selling buildings? Our value proposition at the time was very straightforward we only sell buildings, we only represent sellers, we only work on exclusives, we only work in Manhattan. So we said what do we do now? Do we get into office leasing, store leasing? Do we do debt, or do we go out to the boroughs? And we said you know, we don't know anything about those other disciplines, we know how to sell buildings. Let's go open up an office in Queens.
16:19
And at the time the boroughs weren't cool, like most Manhattan brokers thought if I go over the river, my shoes are going to get dirty, I'm not going to go out there. So we opened up in Queens, we opened up in Brooklyn, we went out right after 9-11. We said you know what New Yorkers are tough, we're going to come back from these attacks. There were some people leaving the city saying, oh, we're going to be bombed. And we hired a director of HR because Paul and I had been interviewing everybody up to that point. So we started with just the two of us. By 9-11, we had 21 people. We hired a director of HR and within two years we had 150 people at the firm.
17:00
So we basically went all in. We shoved all our chips into the center of the table, hoping that New York would recover. We believed it would. Fortunately it did, and so we were in a position that, when the market came back, our business just accelerated.
17:15
I remember 2001 was the first time CoStar did a ranking of sales brokers in New York and I remember we were number one and Eastern Consolidated was number two. We were shocked because Peter Hausberg, brian Iserati, dawn Parris they were good friends of ours, the nicest people in the world, and we always thought that they were doing much more volume than us. We were shocked that we were number one and from 2001 until the time we sold the company in 2014, we stayed at number one and some years we were 3X, 4x what the number two company was doing, which made us feel really good because we were a little popcorn stand and competing against these global giants, but we were eating their lunch because our business model made so much sense and got so much traction. We believed in proof stacking, promoting the deals that we had done in a way that would get us more deals. And so it really. It was a business plan that was fundamentally sound, made sense, enabled us to differentiate ourselves from every other broker, and that differentiation created a competitive advantage for us.
Eric Panecki
Host
18:30
So talk me through that business plan, because you're basically a no name 20 guys. All sudden you go all in on personnel. It sounds like there's a lot of good talent in the marketplace that you took advantage of, but it's not just a personnel. You guys had a strong value proposition. So what were you offering owners in New York that was so different than everybody else?
Bob Knakal
Guest
18:55
Yeah, well, look, the two main assets that a broker has are your knowledge and your time. You're always getting more knowledge. You can't make more time, so you have to use your time in a way where everything you're doing is a creative towards getting the next deal. In the 80s, when we started, the amount of publicly available information was not so great and not so accurate. So we adopted this geographic approach to the business where we put one broker in each small neighborhood. They got to know everything about that neighborhood, like the example I used before, we sold all the buildings around the subject building we were pitching. That got a lot of traction with people and if I find out about a building for sale in someone else's territory, I brought that territory expert in and that guy knew his territory as well as I knew my territory and so you'd go in to meet with the client. The client's very, very impressed with the local market knowledge and everything. So we spent all of our time each broker working in their neighborhood, getting to be the market expert, demonstrating that expertise.
20:08
We focused on market presence even before we knew what market presence was. I've worked with a broker coach I have for 12 years now and he told me you have to focus on market presence. What's that? That's being top of mind with people? We were doing that all the time. We were doing market reports and newsletters before anybody even thought to do those. And how many buildings are selling? What's the average price of the building selling? What's the average price for square foot? What are the cap rates? We tracked all this data before it was really invoked to do that and every time we got a listing, it got mailed out to everybody. Every time we sold the building, that information got mailed out to everybody. We got to the point before email became popular, we were sending out 3 million pieces of mail a year. Whoa, wow. So yeah, it was, and we were saturating the market. I still I'm doing work now. We sold MK in 2014.
21:05
I'm doing work in Willets Point now for a couple of clients and I'm you know I don't know if you know Willets Point, but there are parts of it like a third world country. The streets are not paved, there are no utilities going to some parcels and these owners generally own stuff. The owners in Willets Point only own in Willets Point, and I'd call them up and say, hey, it's Bob Knackle from JLL and they're like JL. What what's JLL? And I said, bob Knackle, do you remember the old Massey Knackle company? Oh yeah, the green and white mail. The green and white mail, how come you? Guys, don't send me that mail anymore.
21:43
So I mean it resonated with people because the mail went out. Every month Somebody got a piece of hard mail from us, whether it was a market report, a postcard, information on a listing a sale. We did, and so we just fully saturated the market. Our newsletter went from. First newsletter we did was in at the beginning of 89. It was an 11 and a half by 17 sheet. No, it was actually, it was eight and a half by 17, folded in half, copied on the copy machine. And we got that to the point where we had a 36 page newsletter when we were selling ads in it and all kinds of things.
22:23
But and that newsletter circulation was over 300,000 at its peak. But it was just, it was a fundamentally sound business plan where we just we saturated the market, we had market knowledge and reports that were were unparalleled and it really resonated with people. And so you know the years where we were selling 500 buildings a year, 600 buildings a year. The number two company was like barely over a hundred. It really was a a very successful platform for us.
David Choi
Host
22:57
So I just want to be clear you sold to kushman, or JLO to kushman.
Bob Knakal
Guest
23:01
I sold we sold to kushman. We had five-year contracts there and in fact, interestingly, the decision To sell in 2014 was made in 2007. In 2007 we weren't thinking about selling the firm. Cb approached us, offered us 50 million bucks. We said, whoa, we gotta think about this. And for a variety of reasons, that deal didn't happen. But what it did teach us was that when we did sell the firm, we'd be on five-year service contracts. So we we looked at it and said, well, paul's turning 55 in 2015. These contracts are going to be perceived at better value if we're in our 50s than if we're in our 80s. So in 2014, if the market doesn't stink, we should really think about selling.
23:55
So 2014 rolls around, the markets rolling. You know it turned out that in 2014, 5534 buildings were sold in New York City, which is an all-time record by more than 10% and still the highest total number of buildings that ever sold. And in our world, number of properties sold much more important than dollar volume of sales. The all-time record dollar volume was in in 2015, which was 80 point one billion. But if you look back, absolutely the optimal, the best possible time to sell. Through no fault or genius of our own. It was made.
24:31
That decision was made in 2007, so the market was good. We went out, hired an investment banker, sold to kushman. In that was the closing was the New Year's Eve of 14. In October of 16, kushman brought over the investment sales team from East ill. That was a breach of our contracts. So based on that, we were able to shorten the contracts from five years to three and a half years, got a couple of more bucks, a couple of other things, and, and so after three and a half years at the time Paul was running for mayor I left kushman, went to JLL. I brought 53 people with me, all of whom were with me back in the MK days also. So that's how I ended up at JLL.
John Libretti
Host
25:24
Wow, and then what year did you go to JLL? Was that 2000?
Bob Knakal
Guest
25:28
2018, 2018, september of 18, wow that's.
Eric Panecki
Host
25:32
That's amazing story. I can't. I Just, I mean, it seems like kushman at that time. You know they, they brought your whole team and then you're still, you still kind of got best of both worlds. You have your team, you have um, you know, it's it to me, it's like you, you, you kind of got the best of everything you could have wanted at that point.
Bob Knakal
Guest
25:52
Yeah, no, look that was. It was a Really nice setup for us. Um, when Kushman acquired the East still team, you know our platform was doing more Number of sales than anyone else. The East still guys Were doing more dollar volume than anyone else and they focused mainly on institutional stuff and office building sales, which was a donut hole in the massy knuckle platform. And but those two platforms not to be able to be put together, I think there's a huge, huge missed opportunity. Um, maybe one of the biggest in the history of real estate, given what those two platforms were at the time in new york history. Anyway. Um, but, uh, you know it is what it is. We went on and I'm still, uh, still selling buildings today and loving what I do, and so all as well, that's amazing.
Eric Panecki
Host
26:49
I I've been following you on on social media for a while. One thing I see often is I think it's the map room, mm-hmm. Well, talk us through the what. What is the map room?
Bob Knakal
Guest
26:58
Yeah, sure. Well, first let's talk about social media a little bit, because I was for many, many years. I was like what the heck is the social media stuff? Why are people wasting the time on this? And for years people were after you, bob, you know you should get on. It's great, you'll meet people. You have stories to tell, you know you, you should go on, go on you do have great stories.
Eric Panecki
Host
27:16
You do have great stories Thanks.
Bob Knakal
Guest
27:18
And I uh. So finally I cave in and uh, january 1st of this year I said, let me give it a try. I'll try it for three months, see how it is. If it, if it, if it's good, I'll keep with it. But if not, you know, three month trial.
27:31
I've been blown away and I give you story after story of relationships I have with people, people I've met, people I haven't talked to in 40 years. Um had a Um fraternity brother of mine I hadn't talked to since since college. Reach out, he's been buying medical office buildings for the past 30 years. I wanted to sell the whole portfolio. It's just. It's just one thing after the next. So social media, I think, is awesome. I love it, the. But the map room so uh. I've always Related to the sandborn map Um of of properties in new york. Much better than even looking at pictures of buildings, I look at the map. The map speaks to me. I've been doing these maps in my post uh on social media today was a picture of 30 years ago of me having these maps on the wall behind my desk, and so the the origin of of the map room was that A big part of my practice is selling.
28:26
Development sites sell a lot of land and in order to To analyze and do a evaluation on land, you need to know what the supply pipeline is like for any particular product type. And, remarkably, that information is very, very tough to find in new york. Um, the most robust dataset you'll find is of condo construction how many condos are being brought to market? Um, and you'll see that, um, every company's report is very, very different. So it's like what? What metrics are they using? What buildings are they counting? What aren't they counting? So for 10 years, I wanted to go do a count myself, um, and when it comes to office construction, um, hotel room construction, rental housing construction, there's no datasets at all. So I'm like I'm going to go out and I'm going to count every building under construction, so I know for myself what, what is out there, wow. So Of course, you never have time to do it. You're so busy. I mean traffic in the city. It takes you an hour to get across town today. So, march of 2012, or March of 2020, we're told to go home for two weeks and then you know COVIDs will go away, and then you come back and of course you know it's months and months go by and nobody's back in town.
29:51
But I moved out of New York. I got a call from a friend of mine who said hey, I heard they're gonna lock the city down, they're gonna close the bridges and tunnels. Get out of town. I live in Manhattan, have a country house up in Connecticut. So I grabbed my wife and I'm like, look, let's grab our daughter, get up to Connecticut. I don't wanna get stuck in the city. And so we head up to Connecticut and I'm up there. I realize, hey, there's a couple of things I could use up here.
30:17
So towards the end of March I drive into the city to go to my apartment to pick some stuff up. And it was surreal. It was like a scene from a movie. You saw a couple of homeless people and a couple of cops and there was nobody else around. And so I thought to myself, wow, if I'm ever gonna walk and drive the city, now's the time to do it. So I basically came into the city. I made copies of the Sandborn maps in little sections, came into the city. Once a week I was driving around with either John Hagamon, who's been my partner for 20 years, or one of the other guys on our team. We'd drive around and I would park the car sometimes right in the middle of the street because there's no traffic.
31:07
Get out, walk around for 20 minutes with highlighters highlighting everything. Get in the car, go down 10 blocks, go again and, interestingly, the biggest problem we had doing it was that there was no place to go to the bathroom. Oh my gosh every store was closed. The restaurants were closed, fast food places. There was no place to go. We had to get in the car and go back to my apartment so I could go to the bathroom. To get back to where we were going.
David Choi
Host
31:34
That's insane.
Bob Knakal
Guest
31:35
But so we have the highlighters. I'm highlighting every building under construction is green, every single parcel development site. I highlighted an orange. Potential assemblage sites I highlighted in yellow. Finish up the whole city tape, the whole thing together. That's the map. Then we've done probably 3000 hours of research on those to determine which of the assemblage sites are higher quality than ones that aren't. Doing research on who the owners of all these properties were. And since we did the walking tour we've been tracking every building permit that's been filed, every demolition permit, every foundation permit. So we're on top.
32:23
Of our pipeline is the most accurate I guarantee is the most accurate pipeline that exists in the city today and that really helps us when we're doing valuations on sites to know how much of each product type is coming online in a particular neighborhood. Sometimes it dictates on a commercial site whether it should be office or should be hotel. So it is a. In the brokerage business, information is key. In fact, we consider ourselves being in the information business, not in the real estate business. The real estate just happens to be the thing the information is based on. But the quality of the information we got from this process has been fantastic and I get clients coming into the map room and they don't want to leave. We can sit there for hours looking at different neighborhoods, looking at sites, talking about what's going on, and it's great. And every time somebody comes in I have my highlighters out and there's new things that they're telling me and it's just it's getting more and more robust as we go.
Eric Panecki
Host
33:27
That's invaluable information. It sounds like.
David Choi
Host
33:30
Bob, I need to ask when you've seen and negotiated countless deals, can you share some of your most memorable, most influential negotiations you've been involved in? Oh?
Bob Knakal
Guest
33:43
gosh. Well, I'll tell you a story of a transaction that I actually won the Robert Lawrence Award in the real estate board's most ingenious deal of the year contest A small deal, I think, one of the smallest ever win. It was a building at 41 West 47th Street, one of the that's the jewelry block. Between 15th and 6th and 47th. Almost every business is a jeweler. This building happened to be a bookstore. The owner of the bookstore owned the building, converted a C course to an S corp and was telling everybody on the block when my S corp benefits kick in, I'm gonna sell the building. So everybody knew for a long time he was gonna sell Puts it. He calls me up, I give him a proposal, he hires me to represent him.
34:37
And the craziness that revolved around that deal was amazing. We'd have people come making bids, people offering cash and diamonds, cash and cash, cash and gold, and I tell Andy Brown was the owner. I tell Andy, hey, this guy offered some bag of diamonds. He's like, yeah, yeah, he's offered me diamonds. And the guy offered yeah he offered me gold.
35:00
And so we were marketing the building and it seemed like somebody would make an offer and then five minutes later somebody else would call offering like 200,000 less than that person offered. And we think that buyers had shills calling up making lower bids than they bid to make their bid look better. And then it seemed like everybody in the market knew what was going on in terms of who was bidding, how much they were bidding, and what we found out was that one of the employees of the bookstore was being paid to go get the faxes off the fax machine and tell people what the bids were. So we figured this out. So we said no more bids by fax, I'll send them over in a sealed envelope. And to top it off, we said a bid deadline.
36:00
Andy goes to lunch at Burgers Deli, which is across the street from his building, and he's paying his check and the cashier says oh, mr Brown, I hear your bids are due today and the high bid's gonna be five and a half million. So he's like okay, let's go. And we have all the bids come over in sealed bids. So we're in this back room just hanging an eye opening the bids and we had 30 bids. The two high bids were five and a half million. So like what the heck is going on here? This is crazy.
36:34
So Andy says Bob, this is something's wrong. This cashier told me the bid, the high bid, was gonna be five and a half. What do we do? So I said, well, look, we have two bids that are tied at the top, so we don't have a high bid. So what I suggest you do, andy? Go to your attorney. Tell them to start drafting a contract. I can go back to every buyer and honestly say you were not the high bid, because if you were tied with somebody else, you're not the high bid, or it's the high bid.
37:06
You're one of the high bids yeah a high bid, so it was kind of a little finagling, but basically I called everybody, all the bidders. You were not the high bid and we're drafting a contract. And I said, Andy, don't talk to anybody, Just use that line. You weren't the high bid, we're drafting a contract. Four days go by, five days, go by a week, Get a call from one of the bidders. Hey, so what would happen if I offered 5.7 for the property? I don't know. We're drafting a contract. I'll talk to the owner, I'll get back to you. Don't call them back. Couple of days later, another guy calls. What would happen if I offered 5.9 million for the building? I don't know. I'll submit it, we'll get back to you. This goes on for about three weeks. We end up selling the building for 7.5 million bucks.
Eric Panecki
Host
38:01
Whoa.
Bob Knakal
Guest
38:05
So that was an interesting story, but that's New York real estate for you. You never know what the heck is gonna happen. How many units was that building? It was just a bookstore on the first two floors and then there was one apartment above where the owner lived.
Eric Panecki
Host
38:20
How do you think the cashier knew? No idea overhearing people who knows, so they were in Cahoots, Nobody was supposed to go above 5.5, that's Well her saying that to Andy got you another two million dollars just about on the property. That's amazing.
David Choi
Host
38:37
You're doing multiple I mean you're doing a lot of real estate transactions, but what it seems like to me is that, even though this particular transaction was not your biggest sale it was one of your run of the mill smaller deals for you you put your time, effort and energy to making sure your client got top top dollar.
Bob Knakal
Guest
39:00
Yeah, look, at the end of the day, it's all about helping the client right.
39:04
And, if you think about it, one of the things I love about the way we approach the business is only representing sellers. As of last week, I've closed 2,259 deals. I exclusively represented the seller in 2,257 of those. So there were two deals where they were just fluky things. In one case, teachers came to us and said we need to do a training center for our. Our chairman wants to do this, we'll pay. Whatever we have to pay, we have to have something within this very small block. So we got a property for them. And then we had the Beretta Gun Company come to us and say look, we need to buy a building on Madison Avenue between 60th and 72nd. We'll pay anything, just we gotta get a building. And so we found them a building.
39:56
But those are the only two deals that were not exclusively representing the seller. And when you're exclusively representing the seller, all you're doing is trying to maximize price. And I like that approach for a couple of reasons. One, we never have conflicts of interest and number two, I never have to remember what I say to anybody. All I'm trying to do is maximize price all the time and that's ultimately. It's about satisfying the client, making the client happy, helping them achieve their objectives, and we do whatever we have to do to make that happen.
David Choi
Host
40:25
I love that. I love that. So you would attribute exclusively representing sellers as part of the reason why your sellers have such a great and positive experience with you. What are some other things that you did to build such a positive reputation in the industry?
Bob Knakal
Guest
40:43
Yeah, well, I think part of it. Really, the lack of conflict, I think made people comfortable, the fact that we always demonstrated we had the ability to successfully represent them by this proof stack. The proof stacking is you put together a summary of every transaction you do and you use that to help get the next one and after a while you have a whole stack of these things and you can go. So you see, look, I've done this, I've helped people in similar circumstances, and so I think that's a way that people will come to rely on you. They trust you. People will talk to who they know and like they'll hire who they trust. So you know, and focusing on your reputation is also very, very important in a service business. But you know the fact that we were only representing sellers and all we wanted to do all times is just get the highest price as possible.
41:40
If you think about it, I always tell people look, if you hire me, you know I'm gonna push to get the highest possible price because I only represent sellers. If I sell your property at a low price, I'm out of business. I need to sell for high price. What I wanna do is get such a high price. I wanna go out and get 200 people interested in your building. I wanna sell it to one and have the other 199 say how the heck did they get such a high price? If I ever sell, I'm gonna use those guys.
David Choi
Host
42:07
That's exactly what I was thinking.
Bob Knakal
Guest
42:10
And we have clients who will say to us look, bob, I will never buy a property from you, but if I ever sell, you'll be my first call and that's okay. I'm okay with that, because you can't be all things to all people. And in fact it got to the point where in 0506, an appraisal company, miller Cicero, would call us for comps all the time. And one time John Cicero says Bob, how come your sales are always so much higher than everything else in the market? I said, you know, I explained the way we do things. And they actually did a study and showed that our transactions produced prices that were 31% above the rest of the market In the whole way and they Miller, cicero, called this the Masi Nackle Premium.
42:56
But two years they published it and of course we've published the heck out of this and they had to end up stop to stop publishing it because the other brokers wouldn't cooperate with them and give them information, because it was as if they were advocating for us.
Eric Panecki
Host
43:13
There's no better proof than that.
Bob Knakal
Guest
43:14
Yeah, and that's a third party. That was not our data. That's a third party appraisal firm saying that our sales were 31% higher in price than the rest of the market. That's crazy.
Eric Panecki
Host
43:26
That's amazing. Yeah, unbelievable.
David Choi
Host
43:29
That's unbelievable. Bob, you know you might be the only person I call when it comes to figuring out what's going on with New York City development trends. Are there any specific trends or developments you foresee in the future in New York City?
Bob Knakal
Guest
43:47
Well, I think you know the biggest problem I see on the development front is that, while every politician says they want rents to be more affordable for people, every single piece of legislation that's either been implemented or ignored since 2018 has done nothing but exerted upward pressure on rents. So if you're a free market tenant living in New York and you feel you're paying too much, just blame your local politician, Blame your assembly person, your council person, your mayor, your governor, your local senator. It's policy that is exerting upward pressure on rents. Because there's no new supply and even if you believe that an economics 101 textbook is capitalist propaganda, look no further than the pandemic. People were moving out of the city, Vacancy was high, which effectively is supply increasing. Rent's dropped by 30%. You want rents to be more affordable, Create more supply, but what do you do? You don't renew the 421A. There's no tax abatement program. There's zero rental housing being constructed. Now there is a huge air bubble in the pipeline. You enact a rent regulation system where you marginalize the MCI and the IAI programs, such that you have tens of thousands of rent stabilized apartments that are vacant and nailed shut because it doesn't make any sense to you know if you think about just that one program.
45:18
I'll take you back to 1977, Yankees Dodgers World Series. Reggie Jackson's hitting his home runs. Goodyear Blimp pans out from Yankee Stadium six fires going on within three blocks of the stadium. That was happening because in those days, the dilapidation rate in New York City housing was 14%, meaning 14% of all units were uninhabitable. So it made more sense for somebody to burn their building down than to invest in it. Collect the insurance money, go on your way. So smartly, the city implemented the major capital improvement program and the individual apartment improvement program, and that incentivized the private sector to dump tens of billions of dollars into the housing stock, such that in 2019, the dilapidation rate was 0.04%. Wow. So what did the politicians do? They marginalized both of those programs, such that there's no incentive for the private sector to invest in the housing stock.
46:21
A rent stabilized apartment becomes vacant, it's nailed shut, it's not being rented to anybody Again, constraining supply. So you have no tax abatement program. You have policy that is disincentivizing investment in the housing stock. The quality of the housing stock is deteriorating. There's no new housing being created, and what the heck are you thinking it's the simplest solution? Every time I speak to a politician, I say you want to solve New York City's housing issues, all you have to do is increase supply, and there are so many different ways to do it converting offices to residential, lifting the 12 FAR cap on residential density, changing zoning districts, giving bonuses for rental construction as opposed to condo construction A million different things that could be done. But they just say they want rents to be lower, but yet all of their actions are exactly the opposite.
David Choi
Host
47:22
That's great insight. I appreciate that. Do you think that there's going to be any change on the political scene that's going to make a positive impact on this issue?
Bob Knakal
Guest
47:31
Well, you would think that the political pendulum swings back and forth. For most of my career, the New York State Assembly was always a majority of I'll describe as non-friendly real estate to real estate people. The Senate always had a very slim majority one way or the other. Even when the Democrats had a majority, there was an independent Democratic caucus that voted with the Republicans. Today there is a supermajority of non-friendly to real estate folks in the Senate also. It may take longer for that pendulum to swing back, but I will tell you that with the disincentive to invest in the housing stock and the housing stock quality deteriorating, those people are going to get pissed at some point and are going to start complaining. It's all an issue of policy. I think it will change. That's one sector In the rental housing sector of development in New York you have a huge air bubble.
48:39
No new starts. Last month there were no new building permits at all filed in New York First time I can ever remember that happening. You have on the condo front. Condo land in Manhattan is selling but values are down probably 20 to 30% just since last September. Because of the increase in interest rates, lending spreads have gotten very wide. Construction loan today is going to be 10% plus or minus, even with very, very low, 50%, 55% LTC. It's expensive but yet deals are getting done in that space. In the hotel market, very, very little hotel land selling because a lot of the hotels are available for sale in New York at lower prices per square foot than the land value.
49:33
In the office market, office is interesting, probably the most challenged. There's a big difference between new construction class A office and everything else. But there are just not a lot of land trades in that office sector. There are definitely challenges out there, but I do sense that for most of the market, for all segments other than office, I think that at some point next year things are going to turn around. In fact I think the retail market is already turning around. But retail has been taking it on the chin for many, many years now. But it's generally perceived that retail rents have stopped going down, leasing activities picking up and for the first time in five years we're getting investors calling us saying, hey, what retail properties do you have for sale? I think that retail is already turning the corner a little bit.
Eric Panecki
Host
50:30
Do you feel like most of this is just a function of interest rates and sellers maybe having expectations of what their buildings are worth and buyers not being able to make sense of it with current options?
Bob Knakal
Guest
50:42
Look, interest rates are important. I think, if you look over the long term, the correlation to cap rates is much more closely aligned with the flow of capital than interest rates. I think the flow of capital and interest rates are also very highly correlated, but the fact is, the flow of capital is not as robust as it has been, so there is a need to have your cap rate be closer to lending rates, because the flow of capital is disrupted the way it is. I think that if you want to sell today, you're selling at a price that is lower because the cap rate is higher.
David Choi
Host
51:29
Bob, you have the career that every young aspiring real estate professional wants to have. Just speaking personally, I am working my tail off. I just want to ask how did you manage a work-life balance and avoid burnout over the last 40 years?
Bob Knakal
Guest
51:49
I think work-life balance is the most challenging thing for all of us. I think that it's all so there's a different answer for everybody when you look at all the things that you want to try to balance in your life your work, your personal life, your family, your friends, your health, your faith all the different aspects of your life.
52:15
It's a different balance for everybody and the balance also is different at different points in your life.
52:21
I think when you're starting out in a career, and probably for your first several years, maybe up to 10 years you really don't have, and probably shouldn't have, a work-life balance.
52:31
A kid coming out of college that says, oh well, I want to work, but I also want to enjoy myself, and that is off base. You have to jump in beat first and there's not a life, a live work balance at the beginning of your career. Over time you adjust and you figure out what the most important things are for you personally and I think the great exercise I read about that you do to determine what your right balance is is take five people, different aspects of your life, maybe your spouse or a family member or a friend, somebody that you went to college with, somebody on your country club or your community, somebody from your church or synagogue and pretend that you died, and those people are going to write a eulogy about you. Write those eulogies, what you want those people to say about you, and that actually is the blueprint for the way you want to live your life and it will be very insightful.
53:39
I've done this a couple of times. It's very insightful and it will show you I'm not spending enough time doing this, I should be spending more time doing that, less time doing this, and it really is your personal blueprint for your own work, life balance.
David Choi
Host
53:55
Wow, I love that. That's great advice.
Bob Knakal
Guest
53:57
That's amazing.
Eric Panecki
Host
53:57
I've never thought I've never heard that, but that's amazing.
Bob Knakal
Guest
54:00
Yeah, you do it. I'm telling you it's going to flip you out when you sit there and you write this stuff down and think about okay, well, what's Joe going to say? What's Sally going to say about me at my funeral? And all of a sudden you're like, wow, this is all that stuff. That's what you really want for yourself. That will guide what you do, how you do it, how much you spend doing each thing, and it's a great exercise.
John Libretti
Host
54:28
That might be one of the best pieces of advice I've ever heard.
David Choi
Host
54:31
I was going to ask you for your last piece of advice just now, but I think that was a bomb just now.
Eric Panecki
Host
54:39
I mean, look, Bob, it's been a pleasure. Is there any parting words, anything that you'd like to put out to the audience, that maybe you'd like?
Bob Knakal
Guest
54:47
to cover. I think real estate is just such a great business. It's one that you never have to retire from. I've always say I don't think I'll ever retire and I talk for a living, so it's not manual labor. I think I'll be able to talk for a while overly, but just try to. I guess.
55:12
I love to read books about a bunch of different topics, about psychology, persuasion, selling, human behavior.
55:22
One of the great books that I've read is Jim Collins, good to Great, and what Collins says is that every great company has a hedgehog concept, and that hedgehog concept is they identify the thing that they believe they can do better in the world than anybody else.
55:40
Every decision they make goes back to how is that going to help us get there? I think for all of us, you guys at your company or if you're individual or whatever, you want to figure out where do you want to go, where do you want to be, who do you want to be, how do you want to get there? And then, if you have that hedgehog concept and everything you do is focused on attaining that position, then it makes the decision making process relatively easy, because you guys will be sitting around saying, all right, should we go left or right and then you'll think about okay, ultimately the objective is to get there. Definitely, right is going to get us there much sooner than left, and it's a good thing. I think everybody identify what your hedgehog concept is and then live your life around achieving that goal and it'll make it much more attainable, I think.
David Choi
Host
56:40
Amen, bob, this was, hands down, my favorite podcast ever. You've shared so much gold. Thank you so much for your time. We really appreciate it.
Bob Knakal
Guest
56:50
It's great to be with you guys and I wish you tremendous, tremendous luck and success. Thank you.
Eric Panecki
Host
56:55
Thank you. And for those of anybody who wants to find you, just Bob Knackle, I'm sure if you Google it they'll find a million ways to find you.
Bob Knakal
Guest
57:01
Yeah, you can always email me at bobknacklejllcom or I'm on social media all over the place. I don't know what my handles are, but you know Google Bob Knackle and you'll find me Amazing.
Eric Panecki
Host
57:14
Amazing.
Bob Knakal
Guest
57:15
Thank you so much. Thank you, thank you, thank you.
RELEVANT LINKS
ABOUT BOB KNAKAL
Robert Knakal is a sales broker selling investment properties in New York City since 1984. Bob is currently leading the Private Capital Group for JLL in New York. It is generally accepted that Bob has brokered the sale of more properties (2,252) in New York City than any individual broker ever.
Bob was Chairman and Founding Partner of Massey Knakal Realty Services, New York’s #1 building sales firm. He started his real estate career in 1984 at CB Richard Ellis where he met Paul J. Massey Jr. They both left CB in 1988 to form Massey Knakal.
From 1988 through 2014, Massey Knakal closed over 6,000 transactions with an aggregate value in excess of $23 billion. To date,
Bob has been personally responsible for the sale of over 2,252 buildings (generally considered to be the highest total ever for a single broker in New York) and over $21 billion in sales.
On December 31, 2014, Cushman & Wakefield acquired Massey Knakal. At Cushman & Wakefield, Bob acted as Chairman of New York Investment Sales. He was ranked the top originating investment sales broker at Cushman & Wakefield in 2014, 2015 and 2016.
Since 2009, Bob has written a weekly column on the New York City Real Estate Market called Concrete Thoughts for the Commercial Observer.
Bob graduated from the Wharton School of Business at the University of Pennsylvania with a bachelor’s degree in economics in 1984.
In 1999, at the age of 36, Bob was named to Crain’s New York Business’s Forty Under Forty/New York Rising Stars list for his outstanding achievement in the New York City business community. He is a two-time winner of the Real Estate Board of New York’s Robert T. Lawrence Award in the Most Ingenious Deal of the Year contest.
