Bob Knakal W’84, Chairman, New York Investment Sales, Cushman & Wakefield
Let’s say you want to broker the sale of more properties than any other single broker in the history of New York City — and we’re talking commercial investment properties — office buildings, multi-family buildings, warehouses,
retail properties and development sites.
Step 1: Attend Wharton. Step 2: Read this interview! Step 3: Work harder than Bob Knakal, W’84, who by the way, is not stopping anytime soon. I know because I visited Bob at the Cushman & Wakefield office in Midtown Manhattan, looked around for his office, and he waved to me from his desk among a sea of brokers. It turns out he’s never had a corner office.
And it will help if you start young. Bob recalled, “My freshman year at Wharton, I wanted to be a Wall Street guy. For a potential summer internship, I ran around New Jersey, where I grew up, dropping off my resume at every
commercial bank and investment bank I saw. I came out of a Paine Webber office and saw a sign that said “Coldwell Banker.” Thinking it was a bank, I dropped off my resume, and later that afternoon, they called me to come in the next day for an interview. That evening, I went to the library to research this bank and discovered it was a real estate brokerage firm, and almost didn’t go to the interview. That company was the only one hiring college kids for the summer, so I did end up working there and had a fantastic experience, but still wanted to be an investment banker.
Then in my sophomore year, I took an entrepreneurial management class. This guy who ran a dog food business came in and spoke to us. He told us, “When I was at Wharton, all my friends wanted to be Wall Street guys, and they ended up being Wall Street guys. I sell dog food, and I love it! So don’t think you have to be a Wall Street guy.”
That made me think, and I spent the next two summers at Coldwell Banker (CBRE) and began to take the few real estate classes that Wharton offered at the time, and here we are today.”
After four years at CBRE in Manhattan, Bob Knakal co-founded Massey Knakal Realty Services in 1988. He grew it to become the premier brokerage service for midmarket buildings, and sold it for $100 million on December 31, 2014 to Cushman & Wakefield. If you heard Bob speak at WCNY’s real estate-focused events over the years, you likely noticed how intentionally he approaches real estate in New York City. Working in real estate myself, I was excited
to have the chance to dig deeper into how he thinks.
You said that, early on, you recognized that you weren’t in the real estate business — you were in the information business. So Massey Knakal focused on gathering and analyzing data. What was one of the first analyses that you did?
Analytics have a lot to do with figuring out what you’re doing. When I got out of Wharton in 1984, there were 60 brokers doing leasing and only four in the building sales business at CBRE: Paul Massey, who had joined the previous year, and three brokers who had been at it for over 20 years. I knew I wanted to sell buildings, so
the boss said, “Why don’t you hang out with Paul, and he’ll show you where the coffee machine is.”
We quickly realized that we were on our own, and decided to split everything 50/50, and one year later, we were the heads of that building sales department. We ran it for three years until we decided to start our own firm.
A couple of take-aways from my Wharton education. First, in statistics, we learned that a higher probability leads to a higher expected value, so we decided that we would represent only sellers. We analyzed transactions, and saw that most brokers represented buyers and sellers. Representing buyers was a lot less work, but the likelihood of success was much lower than if you represented only the sellers.
Second, when we realized that our investment sales business was actually an information business, we designed
a territory system that allowed us to put a broker in each neighborhood. That broker knew more about that
neighborhood than anyone else, which allowed us to apply analytics with a much higher degree of accuracy than
other brokers. That set a foundation for us to grow the firm like a jigsaw puzzle, neighborhood by neighborhood, block by block and building by building. It was very pragmatic and required great discipline, but was probably the simplest brokerage platform ever developed because it was so highly specialized.
How would that advice apply to other industries?
Specialize. You need to differentiate yourself and create a competitive advantage — you have to articulate how
you are different from all of the other people who are doing what you are doing, and why clients should work with you. By focusing on working only with sellers and only on exclusive listings and by implementing our territory system, we were able to differentiate ourselves very early on. This made our learning curve much steeper than it would have been otherwise and established a tangible track record very quickly.
Understanding the information to focus on is key as there is such a massive amount of information out there. It helps to compartmentalize the information. For example, there are 165,000 commercial properties in our statistical sample in New York City. By disaggregating that into bitesize portions, you can understand much more about that sample. And presenting it in such a way that it provides benefit to your customers, creates value. This was the basis for Massey Knakal’s territory system.
Think about baseball. If you specialize in data on pitchers, the speed they throw, what pitches they throw, the frequency they throw, the pitch they like to throw, depending on the counts of the batter, you can come up with a much more compelling argument than someone who studies all baseball statistics. Regardless of the field you are in, by specializing, you can stand out above the pack.
On your first day of work after graduating from Wharton, you met Paul Massey, and continued working together through to the sale of your company. What has made your partnership work?
More than anything, I believe partners need to have the same work ethic. Our growth, both personally and professionally, was very interesting. In the beginning, we did everything together from sales, interviewing potential employees and doing the books, to taking the trash out and painting each office. The past 15 years of
Massey Knakal, Paul ran the company, and I focused on sales. I was involved in the strategic direction of the company, from the 40,000-foot level, but Paul did the day-to-day oversight.
I’ve probably spent more time with him than any other human being, and I bet if you added up the thousands of hours that we individually worked over the past 32 years, maybe there is less than 10 hours’ difference in the number of hours we’ve each worked. So you can have similar or complementary skill sets, but as long as the work ethic is the same, I think it will work out. If one of our employees had an issue with something and wanted our opinions and spoke to each of us separately, we almost always gave the same advice.
Name some early significant decisions that drove your success.
Unbeknownst to me at the time, playing baseball was actually a great decision. My older brother Jeff attended Wharton and played baseball at Penn. As a kid, I always wanted to follow in my brother’s footsteps. Our high school baseball coach was the brother of the baseball coach at Penn. Excelling in high school baseball helped with college. It wasn’t a scholarship, but I’m pretty sure that helped me get in.
With regard to our business, looking at things pragmatically and deciding to really understand the business was a great decision. That’s why, when it was time to sell the firm, we were so attractive to Cushman & Wakefield and other buyers. We really knew the market, and market participants knew that.
For example: take Manhattan as a microcosm. South of 96th Street, there are 27,649 buildings. Of that stock, the
average turnover has been 2.6% a year over the past 32 years, which means, when somebody buys a building here, they hold it for 40 years on average before selling it. Half of the product that goes on the market actually sells, which means about 5% of the total stock of buildings are for sale at any time. When we began calling property
owners, 19 out of 20 times, someone would say, “No, I’m not selling.” That never got us down because it made us feel like we were much more likely to get a “yes” on the next call. If you know what the numbers are in the market, it makes analysis much easier.
Let’s talk about the market — 2015 was a banner year.
2014 and 2015 were the two best back-to-back years for commercial real estate investment sales in New York City history. There were 5,533 buildings sold in NYC in 2014, the highest number ever! And in 2015, building sales reached the highest dollar volume of all time at $74.5 billion! Today, it appears the market may have begun a correction phase as values have gotten well ahead of fundamentals. Land and hotels are facing challenges, which
is not surprising as they are typically the first sectors to correct. Other sectors are hanging in, but headwinds are present. Today, we are seeing positives mixing with the negatives, and the direction in the short term is not very clear.
In New York, we are very lucky that people from around the country and around the world want to continue to come to the city to live and work. This has led to over 600,000 jobs being created within the past six years here. This is a period of unprecedented growth and has helped our fundamentals considerably. If the current administration can keep crime in check, this trend should continue.
What did you learn from your father?
He taught me good study habits. In the 1970s, school systems were experimenting with what was called “open classrooms.” We used to get our week’s worth of homework on Mondays. My father pushed me to get all my work done by Tuesday night so I could have more time for sports.
I also learned a lot from my older brother Jeff, especially how to be competitive. Jeff was six years older than I, and coached me in basketball and baseball and pretty much everything else. Certainly, in a commercial brokerage, it’s very competitive. So on resumes we receive, we look for some sign that competitiveness is part of a candidate’s makeup. Brokers are very autonomous, so they have to be self-starters as well.
Why did you sell Massey Knakal?
We built the business to someday sell the business. We were approached over the years because I believe our competitors admired our platform. It was a platform that was very difficult to replicate. It’s impossible to morph an existing building sales platform into a territory-based system because you’d be telling brokers — who normally could do anything, anywhere, any time — that they’d need to work in a disciplined manner within strict geographical boundaries. The only alternative is to grow the territory system organically from scratch, and that takes a long time.
We almost sold the business around 2000. We wanted $8 million, and the buyer wanted to pay only $7 million. Then, in 2007, we had a compelling $50 million offer, which fell through for a variety of reasons, but it taught Paul and I that, whenever we did sell the business, we would be on five-year employment contracts with the buyer. We thought that buyers would perceive the five-year contracts having more value if we were in our 50s and not in our 80s.
So in the summer of 2014, knowing Paul would be 55 in 2015, we hired Perella Weinberg to market the firm. We closed on the sale December 31, 2014. Perella did great work, and obtained 10 offers for us, with two bidders at $100 million, which gave us negotiating power to get very advantageous terms.
One of the great things that have come out of selling the company, is that I can spend more time with my wife and 7-year-old daughter.
What is your approach to work, your philosophy in business?
I love what I do, and in fact, when I speak to young people about their career moves, I always advise them to find something they love doing. I have the best job in the world. All I have to do is talk! As long as I keep talking, I can keep doing this. No reason to slow down! I do tend to work too much, as my wife Cynthia often reminds me. And
that presents one of the biggest challenges in life. The most difficult thing in life is finding the right balance between your work, your family, your community, your faith and your health. Clearly, you make sacrifices in some areas at different times.
Most importantly, I think there are two philosophies that you can have in business. If you have the philosophy that, in business, there is enough to go around for everybody, then you’ll be happy. For example: I was retained as the exclusive agent to sell One Court Square in Long Island City. The ownership decided to refinance the property’s $310M mortgage instead and kept me on as their advisor during the process. If they decide to sell in the future,
I’ll be there for them. If you think it’s a zero-sum game, and everything the competitor gets is one less for you, you won’t be happy. And to develop young people is very rewarding. Of the top 20 brokerage firms in New York City, three of those companies were founded by people who started at Massey Knakal. We were happy. We are proud of them!