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The Real Estate Philosopher


An Insidious Danger to Your Business in the Real Estate Industry

Jun 25, 2018

There is something particularly dangerous and awful lurking out there that can potentially destroy just about any business – even a very successful one – and that is letting someone get between you and your “customer.” 
 
 To be clear what I mean here by “customer,” it could mean:

  • Your money partner, if you are a sponsor

  • Your investors in your fund, if you are a fund

  • Your tenants, if you are a landlord (office, retail, multifamily, etc.)

  • Your condo buyers, if you are in condo development

  • Your clients, if you are a lawyer, accountant or other service provider

And it is so innocuous at first. 
 
Indeed, it starts out almost all the time with someone trying to “help” you, probably with customer acquisition, and maybe they do “help” you at first, but then – maybe before you even realize it -- you are caught like a fish on the line.  Consider……
 
How did those publishers feel when Amazon got between them and the people who buy the books?  It started out Amazon was just helping them distribute books, didn’t it?
 
How did the music people feel when Apple – and then Spotify – got between them and the people who buy the songs?
 
How wonderful – or awful – does a public company feel getting into a nice safe index – or kicked out of one?  As I write this I read that GE was just kicked out of the Dow after I think over 100 years.  
 
Hitting closer to – real estate home – how do the hotel companies feel about Expedia and Priceline?  I am sure it is a love-fest.
 
And all you financial fund-like players, how do you feel about Townsend between you and the investors?  Loving every minute of it?
  
And consider the battle – titanic in proportion – between Google, Amazon and Apple – as to who will get that snarky little “device” into your living room so that when you clap your hands and say “honey we need soap,” it will direct you to Google Soap, Amazon Soap or Apple Soap? 
 
The above is an anecdotal list of what I could whip out in about eight minutes.  But there are stories everywhere and everyplace about these kinds of things happening. 
 
So now, as a hypothetical, consider what happens to condominium sellers when someone starts a new company called “NYC CondoBuyersUnite.Com,” and that site starts to aggregate all sorts of data.  At first no one really notices.  Then more and more people hear about it.  Maybe it has all sorts of interesting tips about how to negotiate with the seller, which is just moderately annoying.  But then the site starts to put in pricing data, which is even more annoying.  But then when there are a lot of people using it, at some point the site asks condo sellers if they might want to advertise on the website to drive traffic to their condominiums, and at least one significant condominium seller likes the idea and puts its project on the site.  Then someone else similarly situated realizes that it can hardly not be on the site if its competition is there.  And then, all of a sudden, the game has changed hasn’t it?  The website holds some real cards and it is too late to do anything about it. 
 
And this is not just fanciful.  Indeed, as I write this, my head is spinning in the brokerage world as versions of the foregoing seem to have been happening there, resulting in the destruction of some long-time venerable and respected brokerage institutions that, not so long ago, were doing just fine.
 
The bottom line is that whatever business you are in, you simply cannot allow anyone to get between you and your customer – or sooner or later your customer will become the (middleman) party that got between you and your customer.  And that (middleman) party will have no incentive to do anything but transfer (almost) all of the economic upside of your business from you to that (middleman) party.  Which is just plain awful!
 
Interestingly, as an aside, I have a related philosophical thought here – as follows:
 
One of the things everyone thinks the internet does is cut out the “middleman.”  However, as I think on it, perhaps it can also create a middleman – in the way I outline above? 
 
This leads me to suggest that if you look at the point I am making from the other direction – i.e., getting between a business and a customer as an opportunity – if you can figure out a way to do this successfully, you will end up owning that business, won’t you….?

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As the Chairman of Duval & Stachenfeld – a law firm in mid-town NYC known as The Pure Play in Real Estate Law – I am inviting you to join The Real Estate Philosopher™. This will consist of my thoughts and also thoughts of friends and colleagues.

It will not be published in any traditional media – it will go only to friends of our firm. The purpose here is very simple – to put forth thoughts in the real estate world that are different, provocative, and challenging of accepted wisdom. Hopefully, nothing said here will be mainstream thinking.

You may be wondering how I am qualified to write on these topics since I am “just” a lawyer. However, I have an unusual place in the real estate world. As the Chairman of The Pure Play in Real Estate Law (one of the largest real estate law practices in NYC), I interact with an incredible number of real estate players. This ranges from small real estate shops with nothing but a gleam in their eyes, to some of the largest real estate institutions in the world, and everything in between. This gives me a unique and global perspective and allows me to act as an amateur philosopher in the real estate world. This has always been my hobby and it is what I love doing.

Regards,

Bruce Stachenfeld
a.k.a The Real Estate Philosopher™

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