Why Real Estate Specialists Win Bigger Deals: Bob Knakal on Brokerage, Data, and Discipline

Bob Knakal (00:00)
You know, I’ve been very fortunate. I’ve had a front row seat to seeing thousands of sales situations. And I’ve seen just about everything. I’ve seen people walk into conference rooms very, very confident and just get totally battered and then walk out with their tail between their legs. I’ve been on phone calls where a single sentence has either made or break a hundred broken a hundred million dollar deal. And, you know,

So, in experiencing that and watching the very top people in our industry, I think the top people all possess three characteristics very, very vividly.

Scott Bursey (02:08)
Welcome back to the Real Estate Pros Podcast powered by Investor Fuel. I’m your host Scott Bursey. And today we are talking about institutional level brokerage, high octane deal volume and massive market value. Our guest, Bob Knakal, known as BK, is legendary in the investment community. He brings the fuel of unparalleled transaction mastery, having personally brokered the sale over 2,300 buildings worth of market value north of

21 billion. We’re not just breaking records today, pros. We’re studying the playbook of a true market maker. Get ready to fill up your knowledge tanks. BK is in the house. BK, welcome to the show. Good.

Bob Knakal (02:48)
Hey Scott, how are you? Thank you so much. Thanks

for having me on.

Scott Bursey (02:52)
This is just an honor having you on, BK.

Bob Knakal (02:56)
Pleasure to be here, Scott. I’ve been looking forward to this. Thanks. just for whatever it’s worth, just to let you know, my stats, you know, last week we had a couple of close things and that put me over 2400. So now I’m at 2,401 sales to my career and it’s over 24 billion now.

Scott Bursey (03:14)
Noted. BK, welcome once again and here at the Real Estate Pros, we love to know where your drive comes from. For our listeners getting to know you, walk us through your origin. How did you get your start and where are you putting your fuel right now?

Bob Knakal (03:32)
Yeah, well, you know, I got my start quite by accident. I was a freshman at the Wharton School in 1981. I wanted to be an investment banker like every other Wharton kid and looked for a summer job that first summer in college between freshman and sophomore year that would look good on my resume and was dropping my resume off in Northern Jersey where I grew up.

at every commercial bank and investment bank I saw and I came out of a Coldwell banker, or I came out of a Paine Webber office across the hall, saw a big Coldwell banker sign, walked in thinking it was a bank. One thing led to another. They were the only ones hiring college kids for the summer, took the job, loved it, went back my next two summers and then started with CB in New York when I got out of school in 1984. So very, very serendipitous entry into the business.

I feel really blessed because not only has selling buildings been a career for me, but it’s my hobby. I really love it. And, you know, that’s how the start came about.

Scott Bursey (04:32)
That is one heck of a start and it is one heck of a trajectory. Bob, what really caught my attention about you was the way that you’ve been able to execute with such incredible scale and consistency. know, brokering, all that you have, that is a level of transaction mastery that only the top 1 % achieve.

Bob Knakal (05:41)
Well, you look at the numbers and I think the thing that sticks with me the most is that, that’s 1.1 buildings sold a week, $11 million of sales per week for 42 years. So you talk about how to be successful in real estate. think it’s, you do the right things the right way for a long,

You know, it’s been fun to see how things have grown. know, the sales numbers are great. I started and ran a business for 26 years, which we sold for a lot of money and that was a great thing. But the thing that I’m most proud of and my proudest legacy by far is that today in the New York City investment sales world, there are 35 companies.

or divisions of companies that are run by people that I taught the business to. So, you know, that is something I’m extraordinarily proud of.

Scott Bursey (06:42)
as you should be. BK, let’s flow some fuel now. What core operational strength allows BKREA to manage such high volume transaction flows successfully?

Bob Knakal (06:55)
Well, I think, you know, as I always say, Scott, we’re not in the real estate business. We’re in the information and relationship business. And our information is is very, very significantly better than the competition. I spent four months and two hundred and twenty hours walking every street of Manhattan back in.

During COVID in 2020, we came up with a development pipeline that nails the construction pipeline down to the Square Range for Rezikondo, Rezirento, hotel, office, and then a miscellaneous bucket for education, health care, things like that. So our information systems are fantastic. We completed a study that we call our NACA land index, which is a study of every development site sale that has occurred in Manhattan, South of

6th Street going back to 1984 that’s 2,489 sales and just the quality of our information is really head and shoulders above the competition and that is giving us a competitive advantage. I always say you know you have to differentiate yourself from the competition the best way to do that is by specializing. We are very very highly specialized and narrowly focused and that specialization leads to the differentiation and the

leads to a competitive advantage. you know, I always say that, you know, generalists get considered, but specialists get selected.

Scott Bursey (08:23)
That focus on process is what separates volume from noise. A streamlined system is the backbone of big deals, BK.

Bob Knakal (08:32)
Yep, without a doubt, without a doubt.

Scott Bursey (08:34)
In today’s market, if you could walk us through this, what is the single biggest constraint on identifying new high volume building inventory?

Bob Knakal (08:42)
Well, the biggest constraint from a new construction point of view is that our new construction tax abatement program has been watered down so significantly that it doesn’t really work. It’s very misguided policy. It’s interesting. We have two very significant tax abatement policies in New York. And Scott, I know you have a national and global audience. I don’t want to talk too myopically about New York, but we have two tax abatement programs, one for new constructions.

which is called 485 X and one for the conversion of non-residential buildings older obsolete office buildings into residential and the tax abatement for the conversions is 467 to ends of the spectrum 485 X misguided doesn’t work huge failure Needs to be modified and then on the flip side of the coin 467 ⁓ which is robust it works. It’s created incentives. We have 84 raw

office

buildings that are under conversion now to residential. That’s 25.7 million feet of older obsolete office that’s being converted to residential because that tax abatement program works so well. And I say to every policymaker that I speak to, create the right incentives and the private sector will do anything you want it to do. The wrong incentives, you don’t get the activity and that’s exactly

what we’re seeing at two ends of the spectrum with 485X at one end and 467M at the other.

Scott Bursey (10:49)
Certainly is. BK, let’s rev up the engines. Which secondary market sector, in your view, shows the greatest unseen opportunity for institutional-sized asset acquisition?

Bob Knakal (11:03)
Well, I don’t know. Again, I apologize. I can only speak to the New York market. I don’t transact anywhere else. But in New York, think an overlooked sector of the market today is retail. think retail started to get beat up and value started to drop well before any other asset class did. But for a couple of years now, retail has been on the upswing. Retail leasing activity is going up.

demand is back and you know I think that’s a very very overlooked sector of the market today.

Scott Bursey (11:36)
You see the biggest opportunity right now, BK

Bob Knakal (11:40)
I think it’s in new construction. that the current administration, you know you’ve read a lot about our new mayor, but the new mayor and the new administration is very pro-development. We do have to fix that 485X, which is not working properly, but it’s never been easier to get rezoning in the city, to get plans approved for large buildings and…

I think that is something that’s going to change the skyline of New York very significantly over the next several years.

Scott Bursey (12:08)
What’s the more of the mid-range vision the next five let’s say five years?

Bob Knakal (12:16)
Yeah, five years, think that we’re seeing every single property type increase in value and there’s a big recovery going on. know, Scott, we’ve been, I should say there’s one exception to what I just said, which I’ll get to in a second, but the… ⁓

The market, if you look at Manhattan as a microcosm of New York City, south of 96th Street, there’s 27,649 buildings. The average turnover of that stock of buildings over the last 42 years has been 2.5%. For the last seven years, we’ve had a turnover ratio that is at or below trend. That’s the longest period we’ve ever seen like that.

Even during the savings and loan crisis in the early 90s, we only had six years that were at or below trend. So we’re in uncharted territory now. But I think things are definitely on the upswing, as I said, every property type.

is on the upswing doing really well with the exception of rent stabilized housing, which has lost about 75 % of its value and is likely to lose even more, maybe another 10 or 15 % of value because of the new guidelines and rules that the administration putting in relative to that sector. But other than that, things are looking up. I’m very optimistic about where New York is headed

over the next several years.

Scott Bursey (13:40)
any challenges you’re watching closely market risk competition access to deals or capital you know that sort of thing. BK

Bob Knakal (14:29)
I don’t know, does it really market risk other than what I just explained? You know, and I think even in the multifamily sector, the rules are going to have to change just based simply on math, not on ideology. you know, stabilized apartment buildings carry an expense load today of about 50%. Expenses have been going up for the last few years by about 7 % a year.

And rents are very likely to freeze for several years. Well, if that dynamic continues in 10 years, every building will have expenses that are higher than their revenue, which is not the way to run real estate. You know, if the boiler breaks, if the roof leaks, there’s no money to make those repairs. So how the city is going to deal with that is that they will have to change the guidelines. It’s just a matter of when, you know, when they’re

Typical fashion, they’ll probably wait until the very last second or even after the last second when it’s too late. But there are a number of people who have really been negatively impacted very significantly by the rent law changes that we’ve had.

Scott Bursey (15:35)
And on that note, what non-interest rate factor currently poses the largest threat to closing high value deals on schedule?

Bob Knakal (15:43)
Well, if closing on schedule, you would tend to say, well, if the financing is slower, that will slow deals down. But I think what I’m seeing now and I’ve seen for the past few years is that due diligence is slowing things down. And in New York, again, we don’t really give post-execution due diligence, but that due diligence is done before the contract is signed. And that is taking longer and longer as

People are very careful about understanding completely what they’re buying. So we always encourage our clients who are always the seller to do a lot of that work proactively so that we fill in the missing variables and the equation for people before they get to the point where they want to try to fill them in themselves.

Scott Bursey (16:31)
BK, after brokering over an astonishing $24 billion, what red flag in a seller’s portfolio immediately signals a bad deal?

Bob Knakal (16:42)
Well, again, that would be dependent upon property type. ⁓ And I know in the rent stabilized sector, for instance, we’re really not selling the buildings anymore. We’re selling the boxes of paperwork that are in the manager’s office because there is such a high level of proof, a burden of proof on sellers to prove that their rents are legal is astonishing.

And almost nobody has clean paperwork relative to how the rules have changed. And it creates an administrative nightmare for running properties in that sector.

Scott Bursey (17:21)
Take us all the way back. Let’s say you have 100k. Where would you put that to work right now?

Bob Knakal (17:29)
Well, in the real estate market, think that, you know, because every property type is on the upswing, I would look at the sectors where they have been negatively impacted the most. That is in B and C office and in retail. and so, you know, forgetting about multifamily because I would not invest in rent stabilized housing today unless you had a very, very long term perspective.

on those investments. think it may take 10 or 15 years before those buildings really fully recover, unless it’s a shocking change to the rent laws. But I like the value proposition that is afforded investors in BNC office in New York, making an extraordinarily strong comeback. retail, think, very, as I said, overlooked.

Scott Bursey (18:19)
All right, BK, it’s time for the money question, where you supply the high octane fuel. For a real estate pro looking to transition from local brokering to managing multi-billion dollar institutional sales, what is the most critical mindset shift or team structure they must implement to earn and manage trust at that level?

Bob Knakal (18:42)
Well, I think several things. One is demonstrating.

That you have capability and credibility that you understand the market again show that you know the information and then that that’s the Information side of the business, but then the relationship side of it You know you have to know people get to meet people as a broker you have to develop relationships the best way to develop those relationships to start by making a lot of phone calls and talking to a lot of people and then get out to meet them and Keep providing them with valuable information

I always say treat your clients like they’re your parents and usually things will go pretty well for you.

Scott Bursey (19:21)
That is the kind of high octane fuel that truly unlocks a new level of thinking. And BK, you have supplied so much knowledge and information, valuable information thus far, but what golden nuggets or additional information could you leave with our listeners today?

Bob Knakal (19:39)
Sure, well, I think, you know, understanding that when it comes to brokerage or any type of sales or I think really any type of position in commercial real estate.

You know, I’ve been very fortunate. I’ve had a front row seat to seeing thousands of sales situations. And I’ve seen just about everything. I’ve seen people walk into conference rooms very, very confident and just get totally battered and then walk out with their tail between their legs. I’ve been on phone calls where a single sentence has either made or break a hundred broken a hundred million dollar deal. And, you know,

So, in experiencing that and watching the very top people in our industry, I think the top people all possess three characteristics very, very vividly.

One, tremendous passion.

passion for the business, a love of the business, or a love of the things that success in the business will bring you. Security, independence, financial wealth, and so that passion and drive, that is something that all top folks have. Secondly, expertise. I always say, you I said earlier, the generalist gets considered, the specialist gets hired.

Let give you this example. So you’re out for a run and you tear the meniscus in your knee. And you go see the first doctor and the doctor says, knee meniscus, no problem. I’ve done dozens of those. I do knees, I do elbows, I do ankles, I do hips, wrists. I got you covered, I’m great. And you go to the next doctor and he says, torn meniscus in your knee. That’s all I do is knee surgery. I’ve done 14,741 of them.

Where are you gonna have surgery? So it’s important to understand that the more specialized you are, the more expertise you have, the more you can articulate really understanding what you do on a very, very granular level makes a big difference and all top people are truly experts at what they do. And then the third characteristic is that all of those top performers

use discipline extraordinarily well. And notice, Scott, I said use discipline, not have discipline. Discipline is not a genetic component of your makeup. It is a tool. Every human being has access to the same exact amount of discipline as anyone else. It’s just we all choose to use it differently. And so when you are able to put all three of those things together,

You find something totally incredible happens and that is consistency. Why is consistency important? Consistency is important because the goal of everything is not one big year or one big deal or one moment. The goal of everything is excellence over a long period of time, sustained excellence. And so if you…

If you have those three things, great things can happen for you.

Scott Bursey (22:53)
Thank you for that BK. And listeners, as BK highlighted, when dealing with high value transactions, focus on providing certainty of close. A top pro’s true value isn’t the price, it’s the guarantee of flawless execution. BK, this has been an incredible session.

Bob Knakal (23:15)
Well, Scott, it’s pleasure to be with you today. And if anybody would like to reach out to me, I can always be reached at my email address, [email protected] or in my cell at 917-509-9501. ⁓ Or you can find me on social media. I’m on all the major social media platforms.

Scott Bursey (23:37)
BK, thank you so much for joining us here today.

Bob Knakal (23:41)
Great to be with you, Scott. Thanks again for having me.

Scott Bursey (23:43)
and for our listeners, appreciate each and every one of you. If you got value from today’s episode, please subscribe. We’ve got a lineup of exceptional guests, just like BK, who are making huge moves in the market. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.