Do real estate brokerage firms have any intrinsic value?

David Goldsmith

All Powerful Moderator
Staff member

Which resi brokerages grew and shrunk during the pandemic​

Half of New York City’s largest firms have fewer agents today than before Covid​

Residential brokerages scrambled to keep their businesses intact as Covid-19 flipped New York City upside down. Some doubled down on recruiting and M&A while others made big staff cuts to stay afloat. Now, several top firms that pared back are finally seeing their agent headcounts bounce back.
Just over half of NYC’s 15 largest residential real estate brokerages have seen net growth in licensed agents between March of last year — when the city locked down — and May 2021, according to TRD’s analysis of Department of State data.

Compass which led residential firms with just over 2,400 licensed agents as of May 1, has enjoyed steady growth, with agent count increasing by 18 percent since the pandemic started. Despite the Softbank-backed brokerage’s deep cuts in March 2020 when in-person home showings were suspended, Compass saw about a 12 percent gain in agent headcount the following month, which Compass CEO Robert Reffkin attributed in part to onboarding agents virtually.

Reffkin has also bolstered the company’s headcount with as much as $300 million in acquisitions since 2018 and a hiring spree in the latter half of 2020.
Brown Harris Stevens responded to the market instability created by Covid by merging with sister company Halstead under the BHS banner. The move by Terra Holdings helped consolidate two powerhouse brands when the pandemic exacerbated already thin margins in luxury real estate.

BHS Regional President Richard Grossman said in a phone interview that the two firms were in merger talks before the pandemic, but that the coronavirus added incentive to act on the plans. “This really brought home that this was the best thing for the company, which was to be together,” said Grossman. “We’re stronger than we were as two separate firms.”

The strategic merger gave BHS the largest percentage gain in headcount, as its agent total more than doubled. The big jump occurred in September and October, when BHS started transferring agent licenses from Halstead, according to Grossman.
Keller Williams NYC also grew substantially — by 55 percent — via a merger. The franchise combined its Midtown and Tribeca locations under the new ownership of Richard Amato.

Keller Williams NYC CEO Lauren Balbuena said the brokerage’s relaunch gave it the opportunity to grow despite the uncertainty in the industry. “We’re speaking to a lot of people who may have left Keller Williams under the former ownership,” said Balbuena in a phone interview. “[But] we homed back in on those relationships.”

While all of the large residential firms in New York City dealt with coronavirus challenges including layoffs and furloughs and a dramatic drop in listings, stalwarts Douglas Elliman and Corcoran took the biggest hits to their workforces. Elliman reduced agent count by almost 14 percent and Corcoran by more than 4 percent. Overall, seven of the 15 biggest residential firms in the city have fewer agents today than before the pandemic.

David Goldsmith

All Powerful Moderator
Staff member
Back in the 1980s Belmarc started a trend of lots of small local offices. More recently we saw a trend for a while to open large offices (like Keller Williams). Could this be the start of going back to the small and local model?

Triplemint moves forward with 3 new offices​

Residential brokerage opened HQ in Union Square​

Three words to describe Triplemint’s new growth strategy: Divide and conquer.
The residential brokerage is moving forward with three new offices in the Tri-state area, including its new, smaller headquarters in Union Square.
The team moved out of its Midtown office at 1500 Broadway and into its new 5,500-square-foot HQ at 7 West 18th Street in May. Triplemint is leasing the office from George Comfort & Sons and plans to open more space as more people return to the office full time, a spokesperson said.

The brokerage also signed a lease for a 2,800-square-foot Westchester office at 151 Mamaroneck Avenue. It is leasing the office from Palladium Management, a boutique real estate investment and development firm.
Triplemint is also finalizing a lease for its Brooklyn office in Fort Greene, which is expected to be finalized later this month.
Both the Westchester and Brooklyn spaces will require roughly two months of buildout before agents can settle in, according to Triplemint co-founder and CEO David Walker.

The move to the smaller locations are an effort to take a more local approach amid a more favorable office market.

“We want to be part of that positive shift back to commercial real estate and [take] more space,” Walker said.
Spreading out those locations also helps the brokerage appeal to a more “fluid” clientele that have expanded their living options beyond Manhattan, Walker added.
Like many other brokerages, Triplemint faced losses and gains caused by the pandemic. In April 2020, it laid off two employees and made executive salary cuts.

During that time, the brokerage offered free tools to teach agents how to set up virtual tours when making that digital shift. But as more people are vaccinated and New York reopens, the future looks like it’ll be hybrid.
“Ultimately what we realized is that if you’re going to be competitive in the next 10 years as a brokerage, I think you have to be able to do business both virtually and in person,” Walker said.

An in-person perk for the Westchester and Brooklyn locations: community event spaces. Walker envisions people heading to Triplemint’s Westchester office to host and attend events, be it a panel with designers or a birthday party.
Owen Berkowitz, one of the co-founding agents of the Westchester business, chose the office’s Mamaroneck location because of the restaurants and local organizations nearby that they can partner with for such events.

“The pandemic provided rocket fuel for Westchester as people wanted a place where they could have bathrooms and bedrooms — both plural — backyard, barbeque and birdsong,” Berkowitz said. “We got that.”
The Westchester market saw historic home sales numbers last year. Overall, Triplemint saw a 60 percent increase in agent productivity and a 120 percent growth in sales year-over-year, Berkowitz said.

Triplemint expanded to New Jersey in 2019, when it merged with Hoboken-based Court Street Property Group.

David Goldsmith

All Powerful Moderator
Staff member
Bankrupt Winick being forced to sell stake in brokerage

Auctioneer to unload mogul’s 63% share in eponymous firm​

Winick Realty Group CEO Jeff Winick
Bankrupt brokerage mogul Jeff Winick is being forced to sell a majority stake in his eponymous retail brokerage — a palpable symbol of how far New York City’s once high-flying retail brokerage market has fallen.
A 63 percent stake in Winick Realty Group is up for sale, according to a notice published by Maltz Auctions.
The auctioneer is seeking offers for an immediate sale and is willing to “discuss and explore creative structures to any potential sale.” Court records show a bankruptcy judge in New York’s Southern District Court approved the hiring of Maltz in June.
Representatives for Winick Realty Group, Maltz Auctions and Gregory Messer, the trustee in the bankruptcy case, were not immediately available for comment.
Jeff Winick filed for personal bankruptcy nearly a year ago, claiming he owed $9.7 million in back taxes with just $530,000 in assets.

Winick Realty for a long time was the face of New York’s retail real estate boom, with its signs posted all over city storefronts and its brokers signing deal after deal as retail rents rose astronomically.
The 50-agent firm has leased more than 15 million square feet over the past 30 years, and Winick himself personified the business’s success. He rented out the most expensive and desirable cabanas at the Wynn pool party at the annual ICSC convention in Las Vegas, real estate’s biggest schmoozefest.
But the scene is much different now. After retail rents peaked several years ago the market took a sharp downturn, and with it went Winick’s professional and personal fortunes.

David Goldsmith

All Powerful Moderator
Staff member

Auction date set for 63% stake in Winick Realty Group​

63% interest in bankrupt Jeff Winick’s brokerage to be sold Nov. 9​

An auction date for a majority stake in Jeff Winick’s Winick Realty Group has been set for Nov. 9.
A 63 percent interest in the commercial brokerage will be sold to the highest bidder by Maltz Auctions. The auction will be virtual and only bidders will be allowed to participate.

A bankruptcy judge in New York’s Southern District Court approved the hiring of Maltz in June.
Neither Winick nor Maltz Auctions immediately responded to requests for comment.

Winick filed for personal bankruptcy in August of last year. In Chapter 7 bankruptcy filings, he claimed to have $530,000 in assets and $9.7 million in back taxes and fines owed to the Internal Revenue Service and the New York State Department of Taxation and Finance. He declared $122,800 in monthly income.

However, a few months later, in May, the IRS sued Winick. In a complaint, the agency alleged that Winick underpaid taxes on approximately $23 million in income between 2012 and 2016, including by renting and leasing his homes and cars and transferring assets to his daughter and other friends.
Winick, who specializes in retail, has been a longtime fixture in Manhattan’s brokerage scene, leasing more than 15 million square feet over the past 30 years. He’s also known for playing hard, renting out cabanas in Las Vegas during ICSC’s annual event.

David Goldsmith

All Powerful Moderator
Staff member

Cash to burn: How brokerages are spending capital in a record year​

From VC investing to expansion into new markets, the nation’s biggest brokerages are doubling down​

Big U.S. real estate brokerages, awash in cash amid a housing rebound that shows few signs of slackening, are repaying debt and rewarding investors as they push to expand market share.
Douglas Elliman’s parent, Vector Group, plans to plow money into its venture capital investment arm. EXp Holdings announced a cash dividend for the first time. Realogy, meanwhile, aims to keep paying down debt. And Compass, after opening 15 new markets and announcing a mortgage business, is facing mounting pressure to show profits.
All four, among the nation’s biggest brokerages by volume of closed sales, are in an unusual situation: With so much cash on hand, they’re under pressure to stay ahead of rivals without overcommitting to markets that can turn fickle in a hurry. The decisions they’re making now represent a big bet on the future of the housing market.
“These firms are in a position to know better than anyone,” said David Trainer, CEO of investment research firm New Constructs. “We can look at them as an early indicator of whether the real estate market will be beginning to cool off or continuing to stay hot.”

Rising demand is outpacing supply, pushing the median price for an existing home up 17.8 percent to $359,900 in July from the same month a year ago, when the median topped $300,000 for the first time. Although the pace of sales dropped in the past year, economists have largely blamed low inventory, not prices, citing historically low mortgage rates and massive fiscal stimulus.

Red hot

Elliman brought in $392 million in revenue last quarter, the least among the nation’s biggest brokerages by volume. Still, the firm is implementing a bold strategy to deploy excess capital. Its parent, Vector, has been de-leveraging for the past six months. With $490 million of cash and cash equivalents on hand — $155 million of which is at Elliman — the company plans on making a series of big wagers on its real estate business.

“I’m pretty bullish on where we are at today and where the near future, at least for the next couple of years, will be,” Howard Lorber, executive chairman of Elliman and CEO of Vector, said on an August earnings call.
Vector is looking to deploy capital in “a couple of places,” including proptech venture capital investment arm New Valley Ventures, chief financial officer Bryant Kirkland said on the call. New Valley’s investment criteria is linked to prospects for Elliman’s luxury real estate market, not housing market cycles, according to Dan Sachar, the division’s managing director.

Sachar categorized initial bets into two main categories: “table stakes” investments — investments that Elliman agents must have access to — and innovative new startups. New Valley’s inaugural investment in digital transaction management platform Rechat is an example of the first, while wagers on property services startups, Humming Homes and MoveEasy, represent the latter.

New Valley Ventures reported investing in six companies in the last quarter. They range from Purlin, an AI platform that helps home buyers narrow their search based on customized criteria, to EVPassport, an electronic vehicle-charging platform.
“We have to do all the things that our competitors are doing, and we are doing them,” said Sachar. “And then we have to go further.”

Tech investing won’t displace M&A activity. Scott Durkin, Elliman’s chief executive, said that the brokerage is poised to expand in new and existing markets, though he wouldn’t say whether any plans are in motion. He said the firm is bringing back its in-person events and is looking at ancillary services such as mortgage services. In June, Vector took a 50 percent stake in nascent mortgage company Biscayne Mortgage, filings show.

Warning signs

At eXp World Holdings, a virtual brokerage, revenue rose to almost $1 billion, a quarterly record, up from $353 million in the second quarter of 2020. EXp announced its first cash dividend this month. The brokerage’s cash on hand totals $107.4 million, compared with $63.3 million last year.
Glenn Sanford, eXp’s CEO, said on an earnings call that his goal is to make the quarterly dividend “relatively permanent.” The firm bought back almost $55 million of its shares in the past quarter, aiming to benefit agents, who are all shareholders.

“That’s to keep the company as concentrated as possible in the hands of our agents and brokers,” he said in an interview. “We believe in investing in ourselves and our agents.”
Sanford expressed skepticism about starting new initiatives as the market booms. The company explored launching a technology incubator program, but it didn’t move forward, he said. “The best time to launch new products is at the bottom of the market.”

That doesn’t mean eXp is standing still. The company announced a joint venture with mortgage company Kind Lending in July, and it’s investing in its iBuying business, which uses algorithms to make cash offers for homes. EXp is ramping up a new media venture with the publisher of SUCCESS, a magazine devoted to personal and professional coaching. The brokerage also expanded into Israel, Spain, Colombia and Panama this year, bringing the total number of nations where eXp operates to 17.

‘We need the growth’

Realogy reaped in $2.3 billion of revenue last quarter, almost double the amount compared to the same period a year earlier. It also cut its senior secured debt level to the lowest since going public in 2012. Realogy has $859 million in cash.
“We’re going to keep investing in the business,” Ryan Schneider, Realogy’s CEO, said during an interview at a Barclays conference in August. “We absolutely will think about other capital deployment opportunities here, potentially for investors, but you should always be thinking we’re about investing in the business for growth.”

Schneider emphasized that the residential brokerage’s business is cyclical, suggesting the firm doesn’t expect the market to remain strong and that he wants to expand key areas of Realogy’s business now.
Segments he singled out as ripe for investment include its iBuying program, RealSure, which Realogy runs with Home Partners of America, a title business that HPA and Realogy recently launched and its corporate franchise business and luxury brands, including the Corcoran Group and Sotheby’s International Realty. Sotheby’s was Realogy’s top performing brand last quarter.

“We want to drive the growth,” said Schneider. “We need the growth.”
The iBuyer, RealSure, expanded into eight markets during the second quarter, and its partner HPA was recently acquired by Blackstone Group for $6 billion, which Schneider told investors was a “vote of confidence.”

Strike now

Compass, the second-largest brokerage after Realogy in terms of closed sale volume, is similarly growth-minded. After going public on April 1, the brokerage is under pressure to prove to investors that it has a path to profitability after its stock price plummeted almost 40 percent to a low of $12.25 in July.

Compass reported $1.95 billion in revenue last quarter and announced a mortgage joint venture with Guaranteed Rate in July that will start originating loans by the end of the year. Compass has already begun offering title services through its digital platform, which it says will be completed by next summer.
The company also launched 15 new markets, far more than its typical average of two per quarter. That means Compass is operating in 62 different markets across the nation. Robert Reffkin, the CEO, said that the expansion is opportunistic.

“We saw an opportunity to accelerate expansion in the first half of the year that was originally planned for the back half of the year,” he said on an earnings call. Even though he said that growth at Compass will probably slow for the rest of the year, he’s confident that the housing market will remain strong.
“Yes, 7.5 million Americans have already moved, but millions more are looking,” Reffkin said on the call. “Remember, when you hear about 10 offers being put on a home, only one is chosen, meaning nine buyers are still in the market.”

David Goldsmith

All Powerful Moderator
Staff member

Majority stake in Winick Realty auctioned to insiders as IRS waves red flags
The majority stake in bankrupt Jeff Winick’s namesake brokerage has sold to the highest bidder, but the IRS is less than satisfied with the result.

A group of Winick Realty Group insiders walked away from a bankruptcy auction Tuesday with a 63 percent stake in the firm, sources told The Real Deal. Louis Eisinger, Lee Block and Steven Baker — who sources say is already a 10 percent partner in the brokerage — were selected as stalking horse bidders, setting the original bid at $310,000. It’s unclear how much the group ended up paying.

The proceeding was not without controversy. On Monday evening, less than 24 hours before the auction was to commence, U.S. Attorney Damian Williams submitted a letter on behalf of the IRS to the bankruptcy judge overseeing the sale, raising concerns over the apparent late inclusion of Winick’s daughter Danielle Winick Lapidus, an executive vice president at the brokerage, as part of the stalking horse bid.

Under the agreement between Winick Lapidus and the other bidders, Williams wrote, Eisinger, Block and Baker would receive 36 percent of the Winick stake up for bid, while Lapidus would walk away with “the lion’s share,” 48 percent. Two other previously undisclosed bidders would get 16 percent, according to Williams.

“The last-minute inclusion of Danielle Winick Lapidus in the WRG insiders’ bidding group raises questions about whether that bidding group can establish that they are good-faith purchasers of the Winick Interests,” Williams wrote. “Danielle Winick Lapidus’ involvement contradicts the plain terms of the sale agreement entered into by the WRG insiders over a month ago.”

Williams speculated that the group may have intentionally concealed Winick Lapidus’ involvement in order to secure their selection as the stalking-horse bidder.

Williams noted that the government is not making any allegations of impropriety, but is asking the court to look into the timeline of the arrangement between the stalking-horse bidders and Winick Lapidus. A hearing on the sale is scheduled for Thursday, Nov. 18.

The auction house, Maltz Auctions, declined to comment. Winick, Winick Lapidus, Eisinger, Block and Baker did not immediately respond to requests for comment.

Once one of New York’s top retail brokers, Jeff Winick filed for personal bankruptcy a year ago, claiming he owed $9.7 million in back taxes and had just $530,000 in assets. The IRS filed a lawsuit against him in May, alleging that he was rearranging his assets to avoid paying his debts.

Though Winick was poised to lose a majority stake in his brokerage, sources told TRD last month that he remains an active dealmaker, listed as an exclusive agent on many of his namesake brokerage’s listings.

It’s not the first time others have owned pieces of Winick’s brokerage. The late Stanley Chera and Lloyd Goldman paid $1 million for a 50 percent stake in Winick Realty Group in 2002. They no longer own a stake in the firm.

David Goldsmith

All Powerful Moderator
Staff member
Bellmarc was the first firm I worked for getting my license in 1986.

Coldwell Banker v. Bellmarc suit ends in defeat for Neil Binder​

Defunct Manhattan brokerage ordered to pay $8M in damages, interest​

As Coldwell Banker moves on to bigger and better things in New York City, the Bellmarc Group has been an apparition for years.
Yet their legal battle has continued. And now the Realogy-owned franchise has won an $8 million judgment against Bellmarc, a defunct Manhattan residential brokerage, court documents show.
Coldwell Banker declined to dance on Bellmarc’s grave, saying only that it looked forward to supporting and growing all of its affiliates in the New York City area. That includes Warburg Realty, which Coldwell acquired last month.
The ruling is another nail in the long-buried coffin of Bellmarc, which had been entangled in a series of lawsuits over the past several years.
Long ago, when it was known as Bellmarc Realty, it was one of Manhattan’s top residential sales brokerages. Life was good: It acquired AC Lawrence Real Estate — a brokerage that specialized in rentals — in 2012. The next year, it entered a franchise agreement with Coldwell Banker, which invested money into the brokerage and sent its agent count soaring.

But a year later, Bellmarc’s co-founder, Neil Binder, was sued by his business partners, Anthony DeGrotta and Larry Friedman, who alleged that Binder embezzled hundreds of thousands of dollars from the company.
Agents fled to other firms as the scandal unfolded, and the suit was settled in December 2014, with DeGrotta and Friedman paying Binder $25,000 and relinquishing interest in the company. Sources at the time said the payments freed DeGrotta and Friedman from their noncompete agreements.
That same year, Coldwell Banker asked a judge to appoint a receiver to oversee Bellmarc’s finances, claiming it was owed $270,000 in franchise fees. It later severed ties with Bellmarc, citing the firm’s continued failure to meet contractual obligations.

Binder claimed that he stopped paying the franchise fees because Coldwell Banker didn’t provide referrals and leads as promised, adding that the fees were offset by larger amounts that Coldwell Banker owed Bellmarc. He vowed to bring Coldwell Banker to court.
The litigation culminated in Binder’s defeat on Sept. 9, with a federal court in New Jersey ordering Binder and his companies to pay Coldwell Banker $7.6 million in damages for breach of contract, plus legal fees and interest.

The Bellmarc Group has all but vanished since Binder downsized between 2014 and 2016, shrinking the brokerage from five offices to one in the Flatiron District.
Bellmarc’s LinkedIn page says the firm has 170 employees and “has been in business since 1979.” But a phone call to the number associated with its last location at 936 Broadway cuts off before it can finish the first ring. A Google search for Bellmarc Group yields a red banner reading “Permanently closed.” Its website says its domain name is available for 2,400 euros.
“Bell Marc is a highly brandable .com name for a local real estate site,” a notice on the otherwise vacant page reads. “It served as an online presence for a Manhattan-based real estate company.”

David Goldsmith

All Powerful Moderator
Staff member

@properties acquires Christie’s International Real Estate​

Brand licensing agreement expected to close Dec. 1​

Two of the biggest names in residential real estate, @properties and the far larger Christie’s International Real Estate, are joining forces.
The real estate brokerage and tech firm said on Wednesday that it entered a “long-term global brand license agreement” under which Christie’s brokerages and affiliates will be transferred to @properties on Dec. 1. The acquisition will allow the luxury broker to use technology, marketing and support platforms of @properties.

The Christie’s International Real Estate brand will remain, according to Inman, which reported the deal earlier. Its name is coming under the @properties umbrella in a 100-year lease, according to Crain’s. Other terms of the acquisition weren’t disclosed.
“@properties is excited to combine the world’s preeminent luxury real estate brand with the brokerage industry’s best technology, marketing, and operational platform,” said @properties co-CEO Thad Wong.

The acquisition comes one month after Coldwell Banker bought Warburg Realty to Coldwell Banker, a combination that will be rebranded in January as Coldwell Banker Warburg. Just last week, Douglas Elliman said it will spin itself off as a public company from parent Vector Group.
Chicago-based @properties is among the fastest-growing brokerages in the nation, accounting for 75 offices in 13 states prior to the Christie’s acquisition, Crain’s reported. The brokerage had $16.4 billion in sales volume in 2020, compared with $500 billion in the past five years for Christie’s.

Christie’s, which is associated with the legendary auction house, has about 900 global affiliate offices, all of which will be transferred to @properties. It finished 23rd in last year’s The Real Deal ranking of New York City brokerages by closed sales.
@properties made its own expansion plans clear last year by franchising its brand. The firm was founded in 2000 by Wong and Michael Golden and used in-house tech tools to expand quickly.

David Goldsmith

All Powerful Moderator
Staff member

Public relations: What’s next for an independent Douglas Elliman?​

Brokerage will face immediate pressure to retain talent, demonstrate growth​

It was the spring of 2020, and Lampen had just pulled off the sale of two of Vector Group’s portfolio companies for more than $1.5 billion. But what would follow was trickier: how to get top dollar for Douglas Elliman, a traditional real estate brokerage, at the height of a pandemic that had frozen the industry.

By late 2020, however, the housing market had roared back to life and Elliman, after narrowly remaining in the black in 2018 and 2019 and racking up $74 million in net losses during the first half of 2020, was once more making money. The brokerage reported a net income of $12 million in the third quarter and has reported quarterly profits since. And investors were back, eager to pour money into brokerages that could apply technology to gain a bigger slice of the $8.5 trillion residential market.

Lampen was ready to capitalize on the moment. He had been building out Vector’s proptech arm, knowing that investors were sweet on the sector. In August, roughly a year after getting started, an independent Elliman was incorporated in Delaware.
In November, Vector announced that Elliman would be spun off as its own entity, trading on the New York Stock Exchange under the ticker DOUG. The proptech investment arm, New Valley Ventures, would be part of it. Though the spinoff was billed by Vector boss Howard Lorber as a way for the brokerage to directly tap the capital markets, many wonder whether it’s the opening move in a much bigger game — gearing Elliman up for a sale that would allow Lorber and his partners to cash out at a time when the business of brokerage is in flux.

If Elliman were to be valued at one or 1.5 times revenue, the company could fetch up to $2 billion, according to Steve Murray, a brokerage valuation consultant and co-founder at REAL Trends. That’s despite the fact that brokerages pass on most of their revenue to agents.
“There’s an opening for them to get a very premium price for that brokerage right now,” Murray said. “It’s a smart move by Howard and Richard.”

Citing an SEC-mandated quiet period, Elliman declined to comment for this story. A high-level source with knowledge of the company denied there were any plans for Elliman to be sold and said Lorber, 73, has no plans to leave or retire.

Proptech plays​

Lampen, 68, is certainly battle-tested. Over nearly two decades, his mandate has been to boost profitability at Vector’s subsidiaries, and he’s done it in a way that’s often led to a sale. The type of business hasn’t seemed to matter. Lampen has been at the helm of a chain of specialty music stores, a textile company, a liquor brand conglomerate and an independent broker-dealer.

Armed with that experience, he got to work. He enlisted Daniel Sachar and David Ballard, two former colleagues with tech pedigree. They began interviewing founders and placing bets on startups they hoped could revolutionize residential real estate. Sachar, who is Lampen’s son-in-law, became the face of the venture, while Lampen handled the M&A.

The Elliman spinoff would debut with $200 million in cash on its balance sheet and no debt, compared with Vector’s $1.4 billion debt load and $207 million in cash.
Analysts that have been following Vector weren’t surprised. Oppenheimer’s Ian Zaffino called it a move he’s waited seven years for, citing Vector’s “very entrepreneurial” management and the fact that “real estate and tobacco never made much sense together.” Oppenheimer upgraded Vector’s rating on the news, as did Barclays.

Lorber would be the new company’s CEO, Lampen would be COO and Ballard CTO. Sachar would continue to helm the proptech VC arm. In September, he spoke at Las Vegas proptech conference BLUEPRINT, where he called Elliman an example of “a business that was doing very well with the way things were done for a long time” until the pandemic.

“It forced upon us, and many other businesses in our industry, the investments and innovations that were very much necessary and probably long overdue,” he said.
So far, New Valley Ventures has poured more than $7 million into 13 companies, including an electric vehicle charging company and a custom home search AI platform. Residential proptech startups may see it as an attractive partner as Elliman already has an in with many of their potential customers.

“They’re not just investing in a ton of companies off the bat,” said Jonathan Klein, a proptech consultant who was in the audience at BLUEPRINT. “They’re definitely in touch with the right sort of niche conversations.”

Worthy of consideration​

By going public, Elliman might be able to take advantage of a fundamental misunderstanding of the brokerage business.

According to Murray, there’s a massive mismatch between the real-world values of brokerages and what the public markets seem to think they’re worth. He’s fielding calls from investment bankers with billions they’re looking to spend on residential brokerages that are “technology-enabled” and come with a compelling “growth story.”

It’s insane. They don’t understand the nature of our business.
Steve Murray, REAL Trends
Brokerages are typically valued at about eight times EBITDA, which should peg Elliman’s worth at about $850 million, Murray said. But public investors are willing to value brokerages on a multiple of revenue, a valuation approach that’s typical of high-growth software-as-a-service companies.

That approach, however, ignores the fact that brokerages pass on the lion’s share of revenues to their agents in the form of commissions. Simply put, $500 million of revenue for Elliman means a lot less than $500 million of revenue does for Salesforce.
“It’s insane,” Murray said. “They don’t understand the nature of our business.”

Elliman’s spinoff indicates that management believes it should be trading at a premium compared with Vector, which closed at $15.26 per share on Dec. 1, or its competitors, according to a former investment banker. At the close on Dec. 1, Compass shares were $8.64, Realogy was $14.82, Redfin at $38.16 and eXp Holdings at $34.51.

A premium share price means a company can offer fewer shares by way of payment in an acquisition, which rewards shareholders instead of diluting them. Oppenheimer pegged Elliman’s valuation post-spinoff at $12 per share, or just over $900 million, while Barclays gave a higher range of $16 to $21, which means it could be worth between $920 million and $1.7 billion.

“A cyclical stock in an up cycle can attract punchy multiples (it should ideally be reverse),” Barclays analysts wrote in their research note on the spinoff.
Once the separation is complete, Elliman will need to show investors explosive growth, and it’s likely they’ll try to do that through acquisitions. Compass went on an M&A spree after raising hundreds of millions of dollars in venture capital, buying up smaller brokerages, title insurance companies and other residential startups.

Murray said Lampen asked him to keep an eye out for good opportunities for the firm and he’s also gotten questions from brokerages about whether it’s more advantageous to market themselves to Elliman pre- or post-public spinoff. Murray’s answer is, unequivocally, after.
Elliman, like Compass and Realogy before it, is also planning to build out its ancillary businesses such as mortgage, title and escrow. For Zach Aarons, co-founder of proptech venture firm Metaprop, the convergence of business models between startup brokerages like Compass and Side (which Metaprop backs) and traditional incumbents reinventing themselves could be a concern in the long run.

“A lot of other people are rolling out a similar playbook,” said Aarons, who has taken money from New Valley Ventures for Metaprop. “That’s caused an obfuscation of people’s brands and what they stand for…. It’s like if you can go everywhere for everything, where do you start?”

Talent wars​

There will also be pressure on Elliman to retain top agents and the workhorses who bring in the bulk of its revenue. At the moment, it’s hard to tell what they think because the company has them under what amounts to a gag order.

“I can’t defy the orders,” one agent said via text.
Elliman will have 10 million shares to offer as rewards to agents, employees, executives and acquisition targets starting next year. One top team at Elliman had been considering leaving the firm as of early November, sources said. When asked, all parties denied the accounts and the team leaders pointed to the coming spinoff.

“Right now is my best time at Elliman,” said one top broker. “I’m going to get a lot of shares.”
There’s an undeniable comparison to how agents viewed stock options at Compass, which made waves for luring brand-name agents with equity. The company was once valued at $6.4 billion in the private markets and went public in April, with some agents comparing their shares to Apple and Tesla stock.

As Christmas approaches I sing my favorite carol: It’s beginning to look a lot like Compass.
Leonard Steinberg, Compass
But Compass’ shares have plunged more than 50 percent since then, amid a broader market reckoning in the public markets – about half of companies that IPO’d this year at a valuation of $1 billion or higher are now trading below their listing price, according to the Financial Times.
For rival brokerage leaders, it’s a cautionary tale that underlines why cash is king. But for those that prefer upfront payment, Elliman has that covered — its new award program also includes discretionary cash awards.
Leonard Steinberg, a longtime top agent at Elliman before joining Compass in 2014, noted that the whole narrative around technology, growth and agent equity feels familiar.
“As Christmas approaches I sing my favorite carol,” he joked before breaking out into song: “It’s beginning to look a lot like Compass.”