Marcus & Millichap’s Alan Cafiero (center) leads a team of brokers including junior partners David Cafiero, Brent Hyldahl, Mark Gjonbalaj and Matt Leszyk. The team marked a banner year in 2021, closing 62 deals for a combined $245 million in sales. — Photo by Aaron Houston for Real Estate NJ
By Joshua Burd
Alan Cafiero thinks back to 2007 with a healthy dose of hindsight, recalling his early days as a broker in what then seemed like “the worst time ever” to break into commercial real estate.
“When I look back now, it actually was the best time to start, because a lot of people were able to meet a young person in the business (when) there weren’t a lot of deals happening,” he said. “So we really planted a lot of seeds during those years.”
He also sees the irony in how he stumbled upon one key asset class in particular.
“We were calling industrial owners just to see if they’re active — do you want to sell, do you want to buy?” he recalled. “And they’d end up telling me, ‘I want to buy a shopping center’ or ‘I want to buy a triple-net retail property.’ This kept happening over and over again.”
It would become the foundation of a business that is now Marcus & Millichap’s largest and top-performing investment sales team in New Jersey, led by Cafiero, with a platform anchored by triple-net-lease and multitenant retail deals, along with industrial and office. The unit marked a banner year in 2021, closing 62 transactions for a combined $245 million in sales volume, he said, with a focus on deals in the $2 million to $30 million range.
The Saddle Brook-based team, which has grown to 18 members, has carried that momentum through the first half of 2022. The group through May had closed $160 million in transactions year to date, with another $275 million under contract and listings valued at some $250 million.
“It’s still very strong,” Cafiero said in a mid-May interview, with “lots of liquidity” across many asset types, despite some recent caution by buyers that are grappling with the rapid uptick in interest rates. Sellers will also need time to adjust before moving their prices, which he expects to happen late this year if borrowing costs stay level or continue to rise.
The veteran broker will soon mark 15 years with Marcus & Millichap. Cafiero came to the firm in October 2007 and initially focused on industrial buildings, working alongside Ben Sgambati while navigating the global financial crisis that was unfolding at the time.
Sgambati, who recently retired, served as Cafiero’s mentor and was at his side when it became clear that there was an opportunity in the retail space. The latter recalls thinking: “We’re hardly trying in retail and we’re selling retail properties,” so they opted around 2010 to go all in on triple-net-leased, single-tenant assets and multitenant shopping centers.
They began to expand their team some two years later, he said, as its volume grew largely on the back of the retail sector but also continued to incorporate office and industrial.
“There’s always been lots of velocity in retail,” said Cafiero, a senior managing director for investments, despite the negative headlines that loom over the asset class. That helped the platform enjoy steady growth over the past decade, allowing both agents to receive Marcus & Millichap’s Sales Recognition Award annually from 2011 to 2021.
Cafiero notes that their momentum was threatened when COVID-19 struck in spring 2020, but the team moved to save deals that were under contract, while also helping clients renegotiate leases, work with lenders and take other steps to navigate the uncertainty of the pandemic.
“Those are the things we were working on during those first couple of slow months of COVID,” he said, noting that most of his clients are private operators without the resources of an institution. But “then it started to pick up again” by June, as investors and banks felt comfortable enough to transact again.
“Buyers still wanted to buy and the prices were still good, so I would say by the summer we were getting new listings again,” said Cafiero, whose junior partners include his brother, David Cafiero, along with Mark Gjonbalaj, Brent Hyldahl, Matt Leszyk. Even so, the team saw stronger demand for properties with triple-net leases with credit tenants, while multitenant retail was slower to rebound.
That equated to surging demand and lower capitalization rates for properties with the likes of Dollar General, which remained open as an essential business, along with fast-food sites with drive-thrus. Overall investor demand improved in 2021, which marked a banner year for the team and resulted in Cafiero receiving Marcus & Millichap’s Chairman’s Club Award.
Among the team’s key deals during that time was the sale of 40 Beechwood Road, a nearly 20,000-square-foot office building in Summit that it sold on behalf of Saxum Real Estate. The renovated property, home to a private equity firm, traded last summer for $12.57 million, or nearly $630 per square foot, to a New York-based buyer that was “concerned about what was happening in the boroughs and wanted to move their capital to the suburbs.”
That has become increasingly common, he said, however unfortunate it may be “that it took a pandemic to get all these people to New Jersey, but I think it’s benefited New Jersey in terms of commercial real estate because a lot more New York folks are here.”
He noted that the Summit deal involved a so-called 1031 buyer, referring to investors that have sold property and are looking to redeploy the proceeds into a like-kind asset, allowing them to defer capital gains taxes under Section 1031 of the U.S. tax code. The investor group has been integral to the success of Cafiero’s team, he said, and will likely continue to be so.
“You just never know where a 1031 buyer is going to come from,” he said, noting that New Jersey has drawn investors from Miami, Chicago and Los Angeles, among other locales. “It’s just that the power of the Marcus platform really is strong, and I think that’s how we win a lot of business because we are able to cast a really wide net and get maximum exposure.”