Today’s guest is Bob Khakal.
Bob has sold 2,283 buildings, totaling $21B+ — the most ever for an individual broker in the history of NYC real estate. Bob previously cofounded Massey Knakal Realty Services, which grew from 2 to 250+ employees and was sold for $100M.
Show summary:
In this episode, Bob Nicoll shares his experiences transitioning from running his own company to working at JLL. He discusses the challenges and opportunities in the New York City real estate market, particularly in land and multifamily properties. Nicoll also talks about the changing behavior of lenders in economic corrections and highlights the differences between the current correction and past ones. He recommends two books that have influenced his career.
————————————————————–
Intro ([00:00:00])
Bob Nicoll’s career journey ([00:01:16])
Selling his company and transitioning to JLL ([00:03:59])
Lender Behavior in Past Corrections ([00:10:52])
Different Performance of Product Types ([00:11:58])
Opportunities in the Land Market ([00:14:07])
Book recommendations for productivity and delegation ([00:21:44])
Closing ([00:22:33])
————————————————————–
Connect with Bob:
Email: bob.knakal@jll.com
Linkedin: https://www.linkedin.com/in/bobknakal/
Twitter: https://twitter.com/bobknakal?lang=en
Instagram: https://www.instagram.com/bobknakalnyc/
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234
Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f
————————————————————–
Want to read the full show notes of the episode? Check it out below:
Bob Knakal ([00:00:00]) – The class back office building market is really facing a lot of challenges today, but the values of those buildings are the same at the same price per square foot that they were 20 or 25 years ago. If you believe the market is going to come back, if you believe in New York, that would seem to be a good investment. I think the land market also significantly below where it could be the peak of every cycle, is greatly exceeded the prior peak.
Sam Wilson ([00:00:29]) – Welcome to the how to scale commercial real estate show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big.
Sam Wilson ([00:00:42]) – Bob Nicoll has sold over 2283 buildings totaling over $21 billion in volume. He’s the most, which is the most ever for an individual broker in the history of New York City real estate. Bob, welcome to the show.
Bob Knakal ([00:00:56]) – Hey, Sam, great to be with you today.
Sam Wilson ([00:00:58]) – Man, that’s a crazy statistic. I’ll just I’ll just say that 2283 buildings, as we commented here before the show kicked off, who’s actually keeping track? But that’s that’s actually amazing.
Sam Wilson ([00:01:08]) – Bob. There are three questions, however. Ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there?
Bob Knakal ([00:01:16]) – Well, I started as a college kid at the Wharton School looking for a summer job that would look good on my resume. I wanted to get into investment banking. Investment banking jobs weren’t available for college kids. Ended up walking into a Coldwell Banker office thinking it was a bank. They offered me a job, took it even though I didn’t want to get into real estate, loved it from day one and went back my next two summers. And then started with CCB in Manhattan when I got out of school, met Paul Massey there. He had just gotten out of a training program. We both were starting in sales day two. On the job. We said, hey, let’s work together, see how things go. We’ll split everything 5050. That was the start of a 30 year partnership.
Bob Knakal ([00:02:04]) – And, you know, I’ve been doing it for 40 years in New York now, for 26 of those years, Paul and I had our own company, which we sold in 2014 at Cushman Wakefield. And, you know, I’m the head of New York Private Capital Group at JLL now running private capital sales in New York.
Sam Wilson ([00:02:24]) – Wow, that’s a colorful career. I mean, there’s so many different parts of your story I’d love to love to dig into, but why do you let me start here? Maybe let’s start with today. Why do you do what you do today? Like why are you still so active in real estate? You’ve got an awesome career behind you. You’ve built a huge company. You sold it. What keeps you going?
Bob Knakal ([00:02:45]) – Sam, I love it. It’s something that I. I truly enjoy. You know, I tell folks it’s not only a job for me, it’s my hobby. I have a wife and a 14 year old daughter, and they’re the most important things in the world to me.
Bob Knakal ([00:02:58]) – But if they were away for the weekend, on a girls weekend, I’d be working all weekends. So I just really enjoy it. And I think that’s the thing that that keeps driving me. And with each, you know, each day brings new opportunities to get wins. I’m addicted to winning. And and that’s one of the things that really drives me.
Sam Wilson ([00:03:22]) – That’s really cool. I love that answer and good for you. There’s very few people I think that can say that what they do is both their built their career and their hobby. So that’s that’s really fun and it shines through, I think both in your in your smile when you say, hey, this is what I’m doing and I and I enjoy it and this is, this is why I’m doing it. So that’s that’s really cool. Good, good for you. Let’s talk a little bit about the company that you sold for what was $100 million that you sold your company for. Yeah. What was that transition like? I mean, you’re, you know, your knee deep into your own business, you sell it.
Sam Wilson ([00:03:56]) – And then what did you transition into?
Bob Knakal ([00:03:59]) – Well, you know, the we sold the business in 2014. We almost sold the business in 2007 for a variety of reasons. We didn’t sell it then. We had been offered 50,000,000 in 2007, and that deal didn’t happen. But what it did teach us was that when we did sell the business, we would be on five year contracts with whoever bought us. So we actually decided in 2007 that if the market was not really bad in 2014, it would be a great time to think about selling, because in 2015 Paul would be turning 55. We thought the perception would be that our contracts would have more value if we were in our 50s than if we were in our 70 or 80s. So we we get to 2014, the market’s chugging along, we hire an investment bank, sell the firm. And in hindsight, it was the absolutely perfect time to sell. 2014 was the peak year. Still, historically, 5534 buildings were sold in New York in 2014.
Bob Knakal ([00:05:12]) – That was an all time record by more than 10%. That still stands, and it was a perfect time to do it. So we we went to Cushman Wakefield and ran our, our business as a, as a division of of C and W. And then there were some moves that the company made that were not congruent with our contracts. So we shorten our contracts, negotiated some other things. And. And the you know, I left in 2018 to go to jail with 53 people that had been with me at Massey Narco back in the old days. We actually the company, when we sold it had over 250 people in four offices in New York. And, you know, I took 53 of those people with me when I went over to jail.
Sam Wilson ([00:06:04]) – Wow, wow. That’s really that’s really a wild, a wild story. And you’re to this day still with JL.
Bob Knakal ([00:06:11]) – Yes.
Sam Wilson ([00:06:12]) – What’s it like over.
Bob Knakal ([00:06:13]) – Five years now? Which I can’t believe. Right.
Sam Wilson ([00:06:15]) – It happens fast. It happens fast.
Sam Wilson ([00:06:16]) – What what what’s it like now being housed under JL versus running your own shop. And what are some things that you like and maybe, you know, just some things, maybe if you had gone back in time that you would reconsider.
Bob Knakal ([00:06:31]) – Yeah. Well Sam, I think you, you always look at the difference between having your own shop and working somewhere else. Working at a small company, a medium sized company, a big company. And I tell people there are pros and cons to everything. You know, clearly, if you’re running your own shop, you call the shots. There’s a lot of freedom associated with that. But then if you’re at a big company, you’re you’re one of 102,000 people and there’s somebody who’s an expert at everything within that platform. So you have tremendous resources available to you. And at the end of the day, it’s all about helping our clients achieve the best results that they can achieve. And when you have all those resources behind you, it just puts you in a different position to to create more value for those folks.
Sam Wilson ([00:07:23]) – I would imagine that. That’s great. Thank you for clarifying that. That’s super helpful because I know there’s people out here are listening to this wondering, do I do I start my own shop? Do I go work for somebody else such as JLL or any of the other big name shops? But I guess at this point in your career, you can pick who you want to work with. I would imagine, as a client as well, because I’m sure that you are well sought out as a broker there in New York City. So what’s what’s an ideal client or an ideal product type maybe that you’re working on right now that is exciting for you.
Bob Knakal ([00:07:57]) – Yeah. Well, I’ve been a generalist selling all kinds of properties my entire career. I think now dovetailing more into doing land sales and multifamily, a lot of the office and retail stuff that were that have come my way. We have actually gone on and and handed that off to other folks in the office that have that as a specialty. But, you know, we’ve seen that that by specializing in one particular type of property, it allows you to leverage your time a little more.
Bob Knakal ([00:08:31]) – And that’s always a positive thing, because as a broker, you have two main assets. You have your knowledge and your time. You’re always trying to to increase your knowledge base, and you have to use your time as efficiently and effectively as you possibly can, because they don’t make any more of it.
Sam Wilson ([00:08:47]) – That they don’t, that they don’t. Well, let’s talk about that land and multifamily. What what does that look like in New York City right now? Yeah.
Bob Knakal ([00:08:56]) – Well, as you can imagine, there’s not a lot of rolling pastures available in New York City. So most of our land deals consist of of acquiring small buildings, demolishing them to create a pad on which to build a new building. And so land really consists of, of taking older buildings that are not in good condition, knocking them down and creating a development site on which a new building can be built.
Sam Wilson ([00:09:31]) – Is that is that slowing down with the rise in interest rates? Are there any headwinds that are being faced in that particular strategy?
Bob Knakal ([00:09:40]) – Yeah.
Bob Knakal ([00:09:40]) – Well, you know, everything has slowed down. If you look at where the market is in terms of number of buildings sold. The market is down about 34% from where it was last year, and down almost 70% from where it was at the peak of the market. So clearly things have slowed down. But interestingly, in this downturn, every product type meaning multifamily, office, land, retail, hotel, every product type is, is performing differently based upon dynamics that are going on with respect to that particular sector. So it’s a very, very different downturn relative to the past four big ones that we’ve had. But you just have to look for opportunity. Keep doing the fundamental things. I always tell people brokerage is a very simple business. It’s just very difficult. And you have to do those very simple, mundane things over and over again, day after day, week after week, month after month. And and then you eventually get to your, your objective.
Sam Wilson ([00:10:48]) – When you say that this downturn is different.
Sam Wilson ([00:10:51]) – In what ways?
Bob Knakal ([00:10:52]) – Oh well, it’s different. Number one lender behavior in the past, corrections will go back to the savings and loan crisis. In the early 90s, lenders went through a 2 or 3 year foreclosure process, took title to the property, and and then hired brokers to sell it in the in the early 2000 and again during the GFC. Lenders didn’t want to go through that process, so they would just sell the debt. Hired brokers does that. This time around, they’ve been a little more covert about the way they’re dealing with their issues. Mainly, I think, you know, Silicon Valley Bank and signature Bank going down created a lot of concern in the marketplace about what their books look like for existing banks. So, you know, they’d be playing everything very close to the vest today. But if banks or any type of lender has been active making loans in the past five years, they have problems on their balance sheet. There’s no way you cannot have problems on your balance sheet.
Bob Knakal ([00:11:58]) – If you were lending in the last five years and they just, you know, are trying to do it in as covert a way as possible, so far, that may change as we get further into this, but so far lenders have been behaving differently than they have in the past. And then the fact that in the past, corrections we’ve had, every product type was heading downward just to varying degrees. This time, each segment, as I said, is operating and performing kind of autonomously. You look at the retail sector, for instance, I believe the retail sector is on the upswing in New York today because rents have stopped going down. Rents have been on the the downward path for over six years now, but they’ve stopped going down, leasing activities picking up, and an investor demand is coming back for retail. Now clearly cap rates are up across the board because lending rates are up. But each of the different product sectors is performing differently. That’s the other big difference between this correction and past corrections.
Sam Wilson ([00:13:07]) – Yeah.
Sam Wilson ([00:13:07]) – And that’s that’s an interesting one I think to to discern, you know, where is opportunity? I mean that’s what a lot of people I think are thinking about. Okay. Well, and we’re seeing people pivot out of one thing into the next. You know, maybe they were all into multifamily and maybe they’re going into retail, as you’re suggesting, or anything else. But I think that’s that’s one of the questions I have for you is like. What do you see as the best opportunity right now?
Bob Knakal ([00:13:31]) – Yeah, I think it really depends. You know, I think that if you look at certain asset classes like the the class back office building market is really facing a lot of challenges today. But the values of those buildings are the same at the same price per square foot that they were 20 or 25 years ago. If you believe the market is going to come back, if you believe in New York, that would seem to be a good investment. I think the land market also significantly below where it could be the peak of every cycle, is greatly exceeded the prior peak.
Bob Knakal ([00:14:07]) – We hit a peak in in the beginning of 2022. That was less than 50% of the peak of the cycle before that. So I think there’s pent up value in the land market. But I think you have to really be wise about what you’re buying, how you’re buying it, and really know the market. As is always the case with real estate, you have to know the market. But I do believe there’s a lot of opportunity out there tonight.
Sam Wilson ([00:14:31]) – There really is. What are people doing with office space? I mean, I’ve talked to a few other guests here on the show. It’s been maybe, oh, probably 3 or 4 months since we’ve talked about New York City office space. But what are people doing with that right now? I mean, what’s the what’s the what’s the play there, if any?
Bob Knakal ([00:14:47]) – Well, number one thing, and I think it’s important to also differentiate between new construction, Class-A office and everything else, new construction Class-A is doing pretty well. The buildings are just incredible in terms of what they offer a tenant, but it’s really the secondary and tertiary space that is facing the biggest challenges.
Bob Knakal ([00:15:08]) – Some of it is being converted to residential use. I think the city needs more of that to occur. We could very easily have over 100,000,000ft of empty office space in New York, and we desperately need housing, so conversion would be a good thing. But we’re also seeing values get to the point where the value of the building and the cost to demolish the building together are less than the land value. So a lot of these buildings, I think, will be demolished to make way for new construction. So again, need to know each sector of the market, each neighborhood, figure out what drives each. And I think there is a lot of opportunity.
Sam Wilson ([00:15:51]) – That’s really, really great. Thank you for taking the time to shed some light on that. Let’s talk a little bit about the private capital group that you run. What what what’s the story there? I know private is probably the key word, but what’s the story there. And I guess what, you know, what are people looking for today from an investment perspective.
Bob Knakal ([00:16:09]) – Well, the private capital group in investment sales, you have institutional work which is done with the largest corporations in the city, in the in the country, and then private capital. That generally describes high net worth individuals and families who are active in the market. That’s where I spend the overwhelming majority of my time. And, you know, what people are looking for is a a reasonable return in a market that, you know, has dynamics and metrics that are moving in the right direction. So we’ve seen our multifamily market has probably seen the biggest change. The apartment building market here is very closely correlated to public policy. We have rent regulation here, rent stabilization and rent control. And those policies have shifted so far against owner’s interests that a lot of the old line New York investors that for decades only bought here are now buying in Florida and Texas and Tennessee. And you know, they won’t touch anything in New York anymore. And consequently, that has driven cap rates down around the country. And folks are selling buildings in those areas and coming here to buy in New York, because for the first time ever, cap rates are actually higher in New York than they are around the rest of the country in the apartment building sector.
Bob Knakal ([00:17:35]) – So really interesting to see how the market ebbs and flows and what folks are looking for. But, you know, people are always looking for something that will provide a good return with relatively low risk. And there are still some folks that are willing to take big risks with opportunistic type of investments. But for the most part, folks are looking for something that can provide a stable return.
Sam Wilson ([00:18:03]) – Absolutely, absolutely. That’s that’s really interesting, talking about things that, you know, just watching kind of the psych, not the cycle, but the the path of the money. Like you’re saying, the money leaves, it goes to the south. You know, it’s heading to Texas, Florida, places where they can get a better return. And as it leaves, then cap rates in New York City, then start to climb. Then the money comes back to New York City and just kind of makes that that circuitous route of, of travel there where the investment gets the best. A turn, as you’re mentioning, a place that you’re getting a personal return is social media, which I think you mentioned was something that you never thought you would be involved in.
Bob Knakal ([00:18:39]) – Yeah. You know, I’m kind of old school when it comes to technology and social media fell into that that basket. A bunch of folks are saying, hey, Bob, you really should get on. You have you have great stories to tell. You’ve been around for a long time, and you know you can make great connections through social media. So in January, I said, you know what? I’ll give it a try for three months. See how it goes. I’ve been really shocked at the reach that it has, the opportunities that it’s presented, the folks that I’ve met. Relationships that I have now. And it’s really been eye opening. But, you know, the definitely technology has made the world a lot smaller. And it’s been really eye opening to see what what social media affords people.
Sam Wilson ([00:19:25]) – Absolutely. Yeah. It’s one of those things that and and you have more years in the industry than I do. But it’s it’s it’s yeah, it’s something it’s a discipline I think for, for some of us, you know, myself included, where it’s like, well, I don’t really necessarily love being on social media, but it’s something that.
Sam Wilson ([00:19:43]) – Need to invest in and need to keep engaging with. So that’s really interesting. If you were to rewind your career, go back, what was it, 40 years maybe? Yeah. What’s what’s one piece of advice you would give to yourself starting out if you could go back and say, hey, Bob, 40 years ago, this is something you should know. Yeah.
Bob Knakal ([00:20:00]) – Well, number one, Sam, we we did everything by trial and error in the early years and so consequently made thousands of mistakes. Didn’t make a lot of them twice, which was good. But I wish that we had reached out and asked more experienced people for input on things before we dove in. At first, you know, in later years we had an advisory board, some of the the top folks in our industry and in business that really provided great insight for us and helped us steer the ship of the company in a very meaningful way. And I wish we had done that. And I also wish that we had hired folks to help, to help us do things earlier.
Bob Knakal ([00:20:48]) – You know, it seemed like every time we hired a new position, whether it was someone to be the COO of the company or someone to be the CFO of the company, or director of HR, or, you know, someone that took one of the main responsibilities off of all of my shoulders. We seem to get a big bump from doing that. And I think we we probably waited a little bit too long to bring on that additional help, but that was that was a regret as well.
Sam Wilson ([00:21:19]) – Yeah.
Sam Wilson ([00:21:19]) – That’s a that’s an interesting point. And that’s something that an email came to you this morning with that same kind of idea in there that obviously the one thing that you can’t get back as your time or that your time is one of the most precious things you have. And I think that’s a challenge many of us face is knowing when to bring the right people on and when to, you know, get out of your own way, if you will. So that’s not.
Bob Knakal ([00:21:39]) – Yeah, well, I’m a big fan of Dr. Benjamin Hardy.
Bob Knakal ([00:21:44]) – I’ve written a couple of great books with Dan Sullivan. Um, ten X is easier than two. X is a recent one where, you know, he says, just look at what you do all day long, and you probably make the overwhelming majority of your money from 20% of the stuff you do, do as much as you can of that 20%, the other 80%, either delegate it to somebody else or or don’t do it. And then another one of his books who not how that whenever you ask yourself, you know, how am I going to get this done? You’re asking yourself the wrong question. It’s who can get this done for me. And so I think, I wish I had those two books available to me way back when, when we started out, because I think it would have helped a lot. But, you know, never too late to to pick up new things.
Sam Wilson ([00:22:33]) – Absolutely not. Bob, thank you for taking the time here to come on the show today. This was a lot of fun having you on.
Sam Wilson ([00:22:39]) – You’ve got a wealth of experience to to share with us. We’ve talked about a whole variety of things here on the show today, both from your views on the market to your private capital group, to what it was like to build and then sell your own company and then go to work for JLL and just. Yeah, this is a pleasure to have you on the show today. I certainly appreciate it. If our listeners want to get in touch with you and learn more about you, what is the best way to do that?
Bob Knakal ([00:23:00]) – Yeah, best way to get me is you can email me at Bob at JLL is CNA Michael so Bob McCall at JLL. Or you can find me on social media. I don’t know what my particular handles are, but you know, I’m on just about every platform. Just put in Bob Nicole, you should be able to track me down.
Sam Wilson ([00:23:23]) – Absolutely, Bob. But I do have your social media handles. We’ll make sure we include those there in the show. Notes.
Sam Wilson ([00:23:28]) – If you’re looking for Bob’s social media handles, we’ll have those there. And again, thank you for taking the time to come on the show today. I certainly appreciate it.
Bob Knakal ([00:23:34]) – You got it. Sam, it was great to be with you.
Sam Wilson ([00:23:36]) – Hey, thanks for.
Sam Wilson ([00:23:37]) – Listening to the How to Scale Commercial Real Estate podcast. If you can do me a.
Sam Wilson ([00:23:40]) – Favor.
Sam Wilson ([00:23:41]) – And subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
