The Daily Dirt: Brodsky’s unusual response to FARE Act
Erik Engquist | The Real Deal
The Brodsky Organization must know the adage, “When life serves you lemons, make lemonade.”
As the real estate industry kvetched (and sued) over a new city law preventing landlords from passing their rental brokers’ fees on to tenants, Brodsky tried to use the law to its advantage — and may have succeeded.
On June 11, the day the FARE Act took effect, the developer did not jack up rents — as some landlords did — at 499 President Street, its new Gowanus apartment building. Instead, it started offering brokers twice what they would normally get paid to bring a tenant to a property.
Instead of the typical one month’s rent that owners pay brokers, Brodsky offered two.
For Residence 418, the lowest-priced listing among the 262 market-rate units, brokers would score $6,364 if their client signs a two-year lease, based on the net effective rent. For Residence 916, the broker’s haul would be $16,364.
“As we approached the date when the FARE Act went live,” said Brodsky leasing director Joe Porritt, “we realized that there was an opportunity to really lean into our relationship with the brokers and show that we were committed to working with them and show we believe they bring a lot of value.”
To do that, he said, “We decided to double our commission.”
Move-ins at 499 President, which also has 88 income-restricted units and ground-floor retail, began in April. Brodsky has its own internal leasing program, as most large developers do, and tenants had been coming to the building on their own. But before the fee change, few brokers were bringing clients.
“Leading up to that, there was very little broker traffic,” Porritt said in an interview. “Since then, there has been a huge increase.”
Brodsky paired the higher commission offer with a new portal to make it easier for brokers to close deals at 499 President. The portal shows available units, floor plans and marketing materials, and allows brokers to book appointments, submit and track applications and invoices, and connect directly with the developer.
The company introduced the changes to brokers with a rooftop event at the property. It’s impossible to know how much of the increased traffic from brokers is attributable to the event, the portal, or the higher OP (“owner pays”), but the fee is likely the largest factor.
There’s an adage for that, too: “Money talks.”
What we’re thinking about: People who buy vacant or underdeveloped land and don’t build on it are castigated as “speculators” by critics, but an argument could be made that they serve a valuable purpose. Speculators keep land available for larger projects that require assemblages or simply more capital than is available at the moment. Do you agree? Send your thoughts to eengquist@therealdeal.com. A thing we’ve learned: In my interview with Joe Porritt about 499 President Street, the Brodsky leasing director said, “We are ahead of our absorption schedule, as I believe are many of the other buildings in the area.” He added that the plethora of Gowanus developments has not depressed rents because demand has been high and the product is differentiated.
