Is Compass the next WeWork?

David Goldsmith

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Compass denies talks of private equity takeover​

An Insider report stated that Vista Equity Partners was in talks to take the brokerage private
Compass denies that it has been approached to take the company private as part of a deal with private equity firm Vista Equity Partners.
According to a report from Business Insider published Wednesday evening, three unnamed sources claimed that Vista Equity Partners is exploring a deal to take Compass private. Business Insider reported that, per sources, another private-equity firm could also be involved in the deal, which might include a property technology startup to bolster Compass’s digital offerings.
A Compass spokesperson denied that any talks have occurred, telling The Real Deal: “no private-equity firm has contacted Compass expressing any interest in taking the company private.”
Vista Equity Partners declined to comment to Business Insider.
If a sale was to occur, Compass’s CEO Robert Reffkin would have to approve a deal as he controls roughly half of the voting power of the firm.
Compass raised $450 million in its New York Stock Exchange debut in April 2021, reaching a market capitalization of $8 billion on its first day of trading. Since then, its stock has dropped more than 85% and the brokerage is currently valued at just over $1 billion. The company has lost nearly $800 million over the last 18 months.
Compass’s share surged 11.4 percent during after-hours trading after news of the deal to take it private broke.
In addition, Compass has undergone three rounds of layoffs in the past five months, including the firing of the firm’s chief technology officer Joseph Sirosh, whom the brokerage does not intend to replace.
During the second quarter of 2022, Compass lost $101 million. The firm attributed the net loss to “higher expenses related to strategic business initiatives, non-cash stock compensation, depreciation and amortization as well as restructuring charges due to the cost-saving actions announced on June 14.” The brokerage’s largest expense was for “commissions and other related expenses,” which came in at $1.62 billion.
The company plans to cut its expenses by $320 million this year.
Despite its financial struggles, Compass is a prolific real estate brokerage. The New York-based firm ranked as the No. 1 brokerage in the country by sales volume in the 2021 RealTrends 500 rankings, recording $251.02 billion in sales volume and 224,067 transaction sides.


David Goldsmith

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There will be blood: Inside Compass’ wartime playbook​

Brokerage in cost-cutting mode as it grapples with a slow market and plummeting stock​

When Compass was raising record-shattering sums of venture capital, rattling the residential industry in the process, a rival brokerage leader described it as the “greatest fundraising machine in the history of America.”
Unfortunately for the company, it has since earned another, more dubious distinction: becoming the most unprofitable publicly traded residential brokerage of its era.
Its losses between January 2021 and June 2022 totaled nearly $800 million, filings show — including almost $500 million last year during a bonanza for the residential market — and the macro environment in which it’s operating is taking a turn for the worse.
Mortgage rates have hit 2007 highs (6.7 percent as this story went to press), and the luxury market across the country is basically on ice. Compass’ stock price has plummeted more than 75 percent so far this year, to below $2.50 from an opening-day price of $20 in April 2021. (By way of comparison, Redfin is down 85 percent, eXp is down 66 percent, Douglas Elliman 63 percent and Anywhere Real Estate 51 percent.)
Compass’ market capitalization upon going public was nearly $7 billion; today, it hovers around $1 billion — $500 million less than it raised from venture capitalists during its heady growth days. SoftBank, its largest investor, disclosed in August that its losses from its bet on Compass exceeded $500 million.
Compass and its CEO, Robert Reffkin, are now in wartime mode. Reffkin insists that the company is on firm financial footing: “Let me be very clear,” he told agents in August, “Compass will not run out of cash,” later saying that “our critics will continue to try and create confusion.”
He and other Compass leaders have pointed to the firm’s cash reserves of more than $400 million, its low debt levels relative to competitors and its technology investments as a long-term competitive advantage.
Inside Compass' wartime playbook, from TRD's October issue:
In September, Reffkin embarked on a roadshow across the brokerage’s markets, meeting with agents to shed light on its strategy to weather the storm.
A core part of that strategy will be to cut costs — rapidly and across the board. Compass hopes to reduce its expenses by more than $300 million by the end of this year and has already conducted rounds of layoffs, scaled back its popular Compass Concierge program, announced the end of equity grants for new agents and said it will tighten up commission splits.
Meanwhile, the brokerage adjusted its outlook for 2022. Its rosiest projection is that revenues could hit $6.5 billion, down from an earlier estimated high of $8 billion. And, in what sources said is a highly unusual situation for a public company, it remains without a chief financial officer — Reffkin is serving as interim CFO.
“I am focusing the efforts around the following three objectives,” Reffkin said during the company’s second-quarter earnings call. “One, generating free cash flow. Two, profitably gaining market share; and three, retaining our agents.”
The company’s COO, Greg Hart, reiterated the firm’s new emphasis on profitability, hinting at tough decisions to come.
“If the market gets worse,” he said, “we will pursue the necessary steps to achieve that goal.”
All of this leads to a lot of questions about how Compass’ moves are affecting its agents, acquired firms, staffers, investors, rivals and the industry at large. The Real Deal broke down the current state of play and analyzed how it would affect each group of stakeholders.

David Goldsmith

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Robert Refkin says:
"Hope is not a strategy."
Robert Reffkin gets real at Compass REtreat: ‘Hope is not a strategy’

Inman Connect New York delivers the perfect blend of outside-the-box thinkers, cutting-edge leaders, and hard-working, successful agents. Join us Jan. 24-26 for crucial content, education, and networking opportunities to help you thrive in today’s changing market. Register here.

Much of Robert Reffkin’s early life was based on hope.

His mother, Ruth, was forced to raise Reffkin alone after his father left and her family disowned her for having a Black son. To make ends meet, Ruth juggled a number of jobs including a position at the Jewish Community Center of the Greater East Bay, a brief stint as an insurance salesperson and then a difficult career as a real estate agent.

“I remember her going to these big houses, when I was just a young person, and someone in there would make her feel less than,” Reffkin said during his Compass REtreat keynote on Wednesday. “I remember her coming home in tears because there was a check that she was really counting on that didn’t come through.”

Reffkin, then a 15-year-old self-professed slacker, said his mother’s struggles lit a fire underneath him to do better. And for Reffkin, better was getting into Columbia University in New York City — a tall task for a kid who often chose DJing over schoolwork and had the grades to prove it.

But once again, Reffkin said, his mother’s hope pushed them to leave Berkeley for New York City and hatch a wild plan to get into Columbia University.

“She said, ‘Okay, here’s what we’re going to do. We’re going to go out to New York,'” he said. “I was a DJ at the time. [My mom said] ‘Give the admissions officer your business card and then you’ll fax all the information about your DJ business. You’ll write a handwritten note.’ We applied early and guess what? We got in.”

That sense of hope pushed Reffkin through college, and his early years at McKinsey, Lazard and Goldman Sachs. It then carried him to co-founding Urban Compass — now Compass — in 2012. It slingshot him into the real estate stratosphere with venture capitalist firms throwing hundreds of millions of dollars behind his company and vision.

However, Reffkin learned hope wouldn’t be enough to get him through an ill-timed initial public offering or the sudden shift into a perilous real estate market.

“That was the only time in my life where I had no hope,” he said of the days leading up to Compass’ IPO. “That was my lowest low.”

Reffkin said he was riding high during the week leading up to the IPO as he crushed investor presentations, also called a Roadshow, and drummed up a groundswell of support. Compass was poised to become one of the highest-valued real estate companies ever with a $10 billion valuation based on an initial offering of $23 to $26 per share.

Then, a day before going live on the NASDAQ, Compass cut its offering, a move that stoked rumors about how the Roadshow actually went.

Although Reffkin put on a brave face on IPO day — “The goal was never a valuation [and] the goal was never a price,” he said on Bloomberg mere hours after ringing the opening bell — the true story was that Reffkin had considered pulling the IPO and spent the morning of the bell ringing crying on his shower floor.

“I meet with an investor, one of the best in the world, who just said a few months before they wanted to invest in our IPO,” he said. “He says, ‘Robert, I’m really sorry but something is happening right now. You’re gonna read about it in the press. It is a global event in the investment world, one of the largest companies [Archegos] that invest in companies just like you, fast-growing technology-powered businesses, is going bankrupt and they’re selling all their investments in 20 to 30 percent off in block trades. I’m sorry, I have to go.”

Reffkin said an advisor gave him two choices — wait to go public in 2022 or put all of your family’s money on the line and forge forward.

“I call my wife I say, ‘Honey, I know what we have to do. We just sold everything as a family and invested in IPO. There are 30,000 people that have put their blood, sweat and tears into this company. They have invested their own money in this company. We need to go all in,'” she said. “And so we did. She said yes. The next day was better. Because of the commitment I made.”

With his family’s full net worth now wrapped up in Compass, Reffkin said the stakes were higher than ever. Although he felt a temporary high from securing a “a top 100 IPO in the history of the United States,” the weight of possible failure and the words of doubters had him in tears once again. “I cried so hard that I couldn’t stand up. My legs were shivering. I tried as hard as I could, but I couldn’t stand up. I cried so loud, that my wife heard me two rooms away with earplugs in,” he said.

Once again, his mother’s journey came to mind and gave him the strength to plow through the first year as the leader of a public company. As he dealt with a paltry stock market performance and increasing scrutiny about Compass’ profitability, Reffkin said he kept his eye on a worsening global financial outlook that was poised to bring the industry to its knees.

“What I soon realized is that the Fed will be raising rates to such a level that companies would lose revenue. And people would lose jobs. That was the goal. The feds mandate is not jobs. It’s not company revenue is not the economy is not the stock market. It is 2 percent inflation period,” he said. “Everyone else is collateral damage.”

“Now we are an optimistic people as entrepreneurs. We like to believe things are always gonna get better, but there was a moment in June where I realized that hope is not a strategy,” he added. “You need to plan for the worst and hope for the best. An investor calls me and says Robert, ‘I hope you’re able to make the hard decision.'”

Those hard decisions have played out in the headlines, with Compass cutting 10 percent of its full-time workforce in June and ditching stock and financial incentives for new agents in early August. The company also let go of Chief Technology Officer Joseph Sirosh on Aug. 25 before cutting its 1,500 tech staff in half a few days later.

“We’ve all worked way too hard to depend on luck. I’m gonna make the hard decisions. If the real estate market goes down 30 percent, our expenses go down as well. I see all the agents bringing their expenses down. They should be more concerned if I don’t do anything,” he said. “So I made the hard decision. It was a heartbreaking one. But it was the right one.”

“Our technology team as an example went from 1,500 people to 700. But here’s where we are now,” he added. “Seven hundred people is still likely larger than every other traditional brokerage firm’s technology combined. It’s larger than we were just two years ago.”

Reffkin said more difficult decisions are likely on the way, but he’s still optimistic about Compass’ future.

“It’s like a marathon. One through 10 are amazing. Then 11 through 25, we’re halfway there,” he said in reference to meeting his personal goal of running 50 marathons. “I gotta tell you, 26 to 40 is a long, boring haul. There’s no excitement. I think the IPO was marathon 25, and I think right now, we’re around marathon 30.”

“Then you have the 30s. But then when you get to 40, things start getting really good and 50 is euphoric. We will have that moment together and I will be with you every step of the way,” he added. “And here is what that moment is going to feel like we will have delivered on the North Star, anything an agent needs compass provides, we will have realized the promise of technology. It’ll be Apple easy and Google fast.”

He ended, “Our stock market’s gonna go from two to 20 and well beyond. Many companies have gotten to 20 —Why not us? The book will be how a group of 30,000 entrepreneurs banded together to improve in industry and where will we be located? Of course, all the major cities in the US but not just there. We will be in London, Hong Kong, Singapore, Dubai, and Sao Paulo.”

“I promise you on our 20th anniversary, I will be on this stage still working for you. Yes, we will have a little more gray hair. Few more wrinkles. But we will have a lot more pride in the company that we have built together the future of real estate.”

David Goldsmith

All Powerful Moderator
Staff member


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Compass Names Kalani Reelitz as Chief Financial Officer​

a leading tech-enabled real estate brokerage, today announced the appointment of Kalani Reelitz as Chief Financial Officer of Compass, effective November 15, 2022. As CFO, he will be responsible for all aspects of the company's financial operations, including investor relations. He will be a key member of the executive management team and focus on building sustained profitability and free cash flow generation.

Reelitz joins Compass after nearly 20 years of finance, business and operational experience across the real estate and retail industries, serving in several senior financial and business leadership roles at Cushman & Wakefield Americas including Chief Financial Officer and Chief Operating Officer. Prior to Cushman & Wakefield, Reelitz spent 12 years at Walgreens in a variety of roles, including strategy and business integration, strategic finance, financial planning and analysis, and internal audit. He holds a Bachelor of Business Administration and a Master of Science in Accounting from Loyola University Chicago.
"Kalani is a strong leader with a deep understanding of the real estate business," said Robert Reffkin, Chief Executive Officer of Compass. "The combination of Kalani's operational excellence and financial discipline gained from many years of helping large public companies grow profitably will be an incredible asset as we accelerate our path to profitability."

"I could not be more excited to join the team at Compass at this critical time in the company's journey to profitability," said Reelitz. "With its strong foundation and a loyal, high-performing agent team, Compass has accomplished amazing things in its first decade, becoming the largest brokerage in the country by sales volume and joining the Fortune 500. I am excited to be a part of the next chapter of growth and success with this team."

David Goldsmith

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If you notice Compass isn't the only one whose shares are tanking - they're just tanking the hardest. The recently spun off Douglas Elliman is down 60% since December IPO. Anywhere (Realogy; parent of Corcoran, Sotheby's, etc) is down over 50% from about the same time. IF transaction volumes continue to tank nationwide not only will these numbers get worse but there's a very good chance you will see large numbers of agents leave the business. The good news for these large companies is that if they somehow all decided to cut commission splits at the same time and also agree to some form of agreement to stop poaching each other's talent they could probably get away with commission split cuts because for agents who have gotten used to working for large firms the incentives to jump (in a bad market nonetheless) would be limited. Some would go independent or to smaller shops but many aren't prepared to do that.

Also if you look at this thread you'll see (as I think I correctly predicted) we have already seen a lot of the top producing talent bouncing as market turmoil has increased since the start of the pandemic.
Am i allowed to take credit for calling this?

As profits fall 50%, Anywhere says commission splits could change​

Brokerage conglomerate sees market getting worse in coming months​

A challenging housing market halved Anywhere’s third-quarter profits compared to last year, and company executives said on an earnings call they think the market will get slower yet.
That could mean more layoffs and lower commission splits for some brokers, an area that executives acknowledged as a potential cost-saver.

The real estate conglomerate formerly known as Realogy, whose flagship brands include Corcoran, Sotheby’s International Realty and Coldwell Banker, reported $55 million in quarterly income, down from $114 million in the same period last year.
Transaction volume was down 17 percent, and Anywhere CEO Ryan Schneider warned it could worsen to 25 percent through the end of the year.
“The biggest challenge today is the rapid deterioration of the housing market,” Schneider said. It’s not that home prices are plummeting, but that much less buying and selling is happening than a year ago.

Sales were constrained by rising interest rates and a shortage of inventory, which contributed to a nearly $380 million drop in Anywhere’s revenues compared with the third quarter of 2021. The market downturn has triggered aggressive cost-cutting by the company, including a major round of layoffs last quarter.
The firm is “beginning to identify more structural savings” that were outlined earlier this year, said Anywhere CFO Charlotte Simonelli, who said on the call that the company is on track to trim roughly $150 million from its budget by the end of the year.
Brokers may see lower commission splits as the company looks to save money, a move Anywhere says could be possible as other brokerages offer less competitive packages, according to Schneider.
“I think the reality is we’re seeing a better competitive environment for us because as you go into a downturn, it kind of exposes different people’s strengths and weaknesses, and you see a lot of competitors pulling back,” Schneider said. “You see a return or flight to quality, given our financial performance.”
One such competitor is Compass, which for the past decade has disrupted established firms by offering equity and high commission splits to poach top-performing agents. But Compass has stopped offering equity and is paring back the splits it gives to brokers as it seeks to turn a profit for the first time.
According to Anywhere, commission splits are not a lever the company can pull at will, as changing them depends on market conditions. During the call, an analyst asked if the percentage of commissions the firm shares could fall next year if transactions drop. Simonelli replied, “There’s no magic number I can give you.”

David Goldsmith

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Compass losses jump to $154M​

Brokerage's cash reserves fell by $76M in the third quarter​

Compass’ losses continued to mount in the third quarter as the housing market cooled.
Its net loss in the third quarter was $154 million, including noncash–related expenses such as $50 million in stock compensation, $29 million in restructuring expenses associated with recent layoffs and $21 million in depreciation and amortization. The loss is up from $101 million in the second quarter and $100 million a year ago.

The tech-forward brokerage said Thursday its cash reserves fell by $76 million last quarter, compared with a $45 million drop in the second quarter, which is typically the most profitable for brokerages.
Its adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — was a loss of $42 million, compared with a gain of $12 million a year ago. Revenue was $1.49 billion, a 14 percent year-over-year decrease.

The earnings were released after the market closed Thursday, during which Compass’ share price shot up 31 percent to $2.43. However, it is still down 17 percent in the past month and 75 percent this year.
The losses come after CEO Robert Reffkin in August announced a $320 million cost reduction program. The brokerage also enacted two waves of layoffs in recent months and cut roughly 800 tech employees this year, Reffkin said earlier this week in a video conference with brokers.

Compass finished the quarter with $355 million in cash and cash equivalents, down from $431 million at the end of the second quarter. It also has $300 million available under its revolver.

Reffkin, who last month stepped in as chief financial officer on an interim basis, said the company “made progress in a number of important areas during the third quarter,” a challenging time in the housing market. He pointed to Compass’ rolled-out tech platform as reason for optimism.

“Our platform offers important differentiation in the marketplace and it is a conduit to drive incremental revenue lift and cost efficiency,” he said. “Importantly, in line with our major cost savings program announced in August, we have achieved significant cost reductions in our technology, engineering and general and administrative expenses.”

The upstart firm has risen to the top of the industry in its decade of existence, but has never turned a profit.
Reffkin said on the earnings call that the company is aiming to be cash flow positive by the second quarter next year. “We are managing the business to reduce the cost base with a very specific goal to become free cash flow positive in 2023,” he said.

Despite the staff reductions, Compass grew its principal agent headcount to 13,314, up 355 from the second quarter and an increase of 15 percent year-over-year.
Compass’ market share increased to 4.6 percent over the past 12 months, up from 4.3 percent the year prior. But transactions fell 12 percent, which the company said was in comparison to an industry-wide decline of 21 percent year-over-year. Quarterly gross transaction volume fell year-over-year to $57.3 billion from $69.1 billion.

Hours before the earnings came out, Reffkin was at The Real Deal’s South Florida Real Estate Showcase & Forum, where he emphatically said during a panel discussion that “there is no scenario where I’m going to let this company fold.”
“Nobody gave us money to put in a bank account,” he said. “Every time you read a headline that Compass lost money, what you’re really reading is that Compass decided to invest in its agents.”

David Goldsmith

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Compass shares soar 90% around earnings report​

Firm added agents, market share; stock still down over 60% this year​

Compass shares climbed to a nearly three-month high Friday after an earnings report revealed mounting losses but gains in market share and progress in its cost-cutting efforts.
The run-up began Thursday, before earnings were released at the market close. The share price gained 32 percent that day, then another 73 percent in the first hour of trading Friday before retreating a bit.

The brokerage’s stock was hovering around $3.50 at midday, up nearly 50 percent since markets opened Friday morning and 90 percent from Wednesday afternoon, when it fell to an all-time low of $1.85.
The iShares U.S. Real Estate ETF, an index that tracks the broader real estate sector, stood at $88.04 per share, up 7.2 percent from Wednesday afternoon.
Compass released its earnings after the market closed Thursday, when shares rose 31 percent in after-hours trading to $2.43. Its stock remains down more than 60 percent since the start of the year.

The company reported a $154 million net loss in the third quarter as rising mortgage rates curtailed demand in the housing market, but its $1.49 billion in revenue beat Wall Street estimates of around $1.45 billion.

Though it has stopped offering equity or cash incentives to attract new agents as it looks to trim $320 million in annual expenses, Compass added to its agent count in the quarter and gained market share from what CEO Robert Reffkin called “weakening competitors” on a conference call with analysts Thursday afternoon.

The brokerage added 355 principal agents in the third quarter for a total of 13,314, and grew its market share to 4.6 percent over the past 12 months, up from 4.3 percent in the prior-year period.
“Every time you read a headline that Compass lost money, what you’re really reading is that Compass decided to invest in agents,” Reffkin told a crowd at The Real Deal’s South Florida Real Estate Showcase + Forum Thursday afternoon, hours before the earnings release.
At the event, Reffkin also shot down rumors that the brokerage was in talks regarding a private-equity takeover and stood by Compass’ decision to spend nearly $1 billion building out its tech platform, which it has said will give it a recruiting and retention edge over its rivals.

“We raised almost $2 billion,” he said. “Nobody gave us money to put it in a bank account.”
The percentage of Compass shares that investors shorted fell 5 percent in the last two weeks of October, the latest period for which short-selling reports are available, after climbing 10 percent in the first half of the month.
Compass stock was buoyed along with broader markets on Thursday on news that inflation in the U.S. economy showed signs of slowing.

David Goldsmith

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Another C-suite shakeup at Compass: Top HR exec is out​

Priyanka Singh will leave brokerage Dec. 15​

Priyanka Singh, the top human-resources executive at Compass, is leaving the firm.
Singh, who became the residential brokerage’s Chief People Officer about a year ago, has resigned, according to the firm’s most recent filing with the Securities and Exchange Commission. Her last day will be Dec. 15.

Singh’s departure is the latest in a string of C-Suite shakeups at the company over the past year. Cushman & Wakefield alum Kalani Reelitz started as CFO this week, ending a two-month stretch during which the firm operated with CEO Robert Reffkin as interim CFO. The company laid off its chief technology officer, Joseph Sirosh, this summer, saying it had completed the rollout of its tech platform, which the firm claims it has invested $900 million in and believes will be its long-term competitive advantage in the market.
Compass is looking to slash costs by $320 million by the end of this year. It has engaged in multiple rounds of layoffs toward that end, most pronounced in its product and engineering teams.
Singh’s compensation last year was $265,000, according to SEC filings, though her base salary was listed as $350,000. She got a $150,000 sign-on bonus and a $140,000 performance-related bonus. She also held $2.2 million in stock awards, according to the filings. Singh will be replaced by her deputy, Margaret Smith, who has been with the firm for five years.
Singh took over the CPO position in December 2021 from Anand Mehta, who held the position for a year-and-a-half. Mehta’s predecessor, Sara Patterson, lasted just 90 days in the position.
Compass stock rebounded last week after its third-quarter earnings were released, despite another quarter in the red. The company’s total losses amounted to $154 million and their quarterly cash burn rose to $76 million, but investors were enthused by the company’s growing market share and rising agent count. The stock has since dropped to $2.82 on Friday, after hovering at $3.50 post earnings.

David Goldsmith

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Compass’ path to profitability comes into view​

If brokerage hits Q4 revenue target of $1.3B and cuts expenses, it could break even​

Compass is facing a pivotal six-month stretch.
As it aims for profitability, with an interim goal of being cash flow–positive by the end of June, the brokerage must thread a needle by cutting costs without losing agents and revenue.
It has taken a hatchet to its product and engineering team, along with other cuts that Compass hopes will reduce its expenses by $320 million this year.

That size of that number, equal to a 20 percent reduction in operating expense, is a reminder of how the company has burned cash with abandon. It also points to the degree of belt-tightening required to reach profitability amid the biggest housing market slowdown in company history.
And yet, profitability may not be as distant as it seems: Were Compass to reach its fourth-quarter revenue projection of $1.3 billion and achieve the savings it advertised to investors, it would be within reach of breaking even.

Whether it can do that is far from certain. So too is how the housing market will fare in an era of higher mortgage rates.
Steve Murray, co-founder of Real Trends and a residential brokerage analyst, said one of his biggest clients said it was “pulling out our 2008 playbook” to survive the sharp decline in sales.
“This is going to take some tough decisions,” Murray said.

Real estate technology analyst Mike DelPrete, who invests in the brokerage Side, calculates that for Compass to break even next year, its revenue can’t fall below $5.3 billion, meaning no more than 14 percent.
The headwinds are strong, however. The number of U.S. homes sold fell 28 percent in October year-over-year, continuing a trend that has presented a major revenue challenge for brokerages.

“Never in my time at Compass have we seen such a big downturn in such a short period of time,” said CEO Robert Reffkin last summer. October marked the ninth straight month of home sales falling — the longest slide on record.
Despite that, the brokerage is on track for a banner year revenue-wise, as it added agents and gained market share. But it might not be able to bring in another $6 billion in 2023. Rising mortgage rates are scaring off buyers and discouraging listings by owners who don’t want to give up their low-interest mortgages.

Compass needs $1.32 billion in revenue per quarter to become profitable by the end of next year, according to DelPrete’s math. Winter is typically the slowest season for home sales, and if mortgage rates rise another 1.5 percentage points, as some predict, it could take the wind out of the spring and summer selling seasons.
The good news for Compass is that its agent count and market share have continued to grow even as the firm stopped using cash and equity to recruit. It needs to continue grabbing a bigger slice of what is now a smaller pie. A recent dip in mortgage rates and uptick in listings are also positive signs.

Compass’ dwindling cash position makes any decline in revenue more challenging still. That cash position, moverever, is not as strong as it may seem.
Its cash on hand has fallen by more than 40 percent this year, to $355 million from $618 million. But Compass has to keep $150 million of that in the bank to satisfy the terms of its $300 million revolver loan. So although Compass has said it has access to over $600 million in cash, the true figure is closer to $500 million.

That’s still substantial, but Compass burned through $120 million in the past two quarters. Should revenue fall below $3.8 billion, an unlikely scenario, it could lose access to its revolver.
“We don’t ever see a scenario where that comes into play,” said a Compass executive. “[The revolver] is really there for a rainy day. If we get to next year and revenue is significantly down because the market is significantly down, it’s there.”

Compass’ fortunes could hinge on its ability to attach services to the sales it brokers. The company is integrating title, mortgage and escrow services into its end-to-end tech platform. Executives say that could double the revenue of each transaction and dramatically increase the margin retained by the company – though other brokerages calculate the benefits of those services far more conservatively.

“The impact of these tools is starting to be felt,” Rory Golod, a top executive at the brokerage, previously said. “That will eventually manifest itself in financial outcomes.”

David Goldsmith

All Powerful Moderator
Staff member

Reffkin to Compass leaders: Get poor performers out​

More layoffs appear to be coming at the embattled firm​

An email from Compass CEO Robert Reffkin suggests the bloodletting isn’t over at the firm that’s struggling to reach profitably in the face of a significant market downturn, Insider reported.
The Dec. 4 email the outlet obtained calls on the leadership team to identify employees who are poor performers, chronically absent without approved time off or leave, quiet-quitting, or turn in bad work, and “move them out.”

“If you have an employee who isn’t doing the work you expect and you don’t know what to do next, we can help,” Reffkin wrote in the email. “Bring the issue to your managers (sic) attention, or to P&C’s attention. They will help.”
“If someone is ‘quietly quitting,’ that is on their manager as much as it is on the employee. If you see evidence that someone doesn’t want to stay at Compass and help us weather this storm, say something.”
While not exactly Elon Musk calling on Twitter employees to go “hardcore” and work 80 hours a week, the message is a clear call to action to cull employees who aren’t committed to the company.

“To put a fine point on it, it’s your responsibility to help your employees perform at their highest potential — even in tough times,” the email says. “It’s also your responsibility to manage our employees who can’t, or aren’t, performing at that level. If you don’t, you are not performing. I hold myself and my leadership team to this same standard. So let’s get it done.”
The firm’s struggles — which resulted in efforts to slash 20 percent (about $320 million) in operating expenses by the end of the year — are well known.
After raising record amounts of capital and being hailed as “the greatest fundraising machine in the history of America,” Compass has endured massive losses since the beginning of the year — its stock price has fallen to $2.57 at Friday’s close, down from a high of $20 in April 2021 — resulting in significant belt-tightening measures, including about some 1,200 layoffs.

The company still has more than 3,000 employees.
Despite the bleeding, Compass was the No. 1 residential brokerage in the U.S. in terms of sales volume in 2021.
In an interview with The Real Deal publisher Amir Korangy last month in Miami, Reffkin shot down rumors of a possible takeover and defended the decision to spend $1 billion on the company’s tech platform.
“We raised almost $2 billion,” he said. “Nobody gave us money to put it in a bank account.”
He also wouldn’t entertain a question concerning the company, which he founded in 2012, going under.
“There is no scenario where I’m going to let this company fold,” he said.

The road to at least breaking even is possible if Compass reaches its fourth-quarter revenue projection of $1.3 billion, while also reaching its cost-saving goals.

David Goldsmith

All Powerful Moderator
Staff member

Compass agents predict their markets will outperform others​

Brokers optimistic about cities, Southeast; see big yards losing appeal​

Local bias explains a phenomenon in investing in which people concentrate their portfolios in their own country. Only one nation’s stock market can perform the best, which means investors everywhere else are making a mistake.
Apparently it exists in residential brokerage as well.
A Compass survey of its agents found nearly 70 percent predicted home prices in their areas would increase next year, even as almost 80 percent said prices would stagnate or decline nationally.
Some local bias was evident in brokers’ prediction about sales volume as well, as 22.5 percent predicted it would grow in their area, but only 15.9 percent said it would grow nationally.

The more than 440 Compass brokers who responded were also bullish on cities and thought the Northeast would slightly outperform a slowing national market in 2023.
Compass CEO Robert Reffkin took a pessimistic view in the company’s third-quarter earnings call, during which he said 2022 was a “generationally bad year in residential real estate.”

“The past 12 months have been tough and the next 18 months appear that they can be tougher,” he said, adding that does not think the market will contract by 25 percent, as some have predicted.
Leonard Steinberg, one of Compass’ top Manhattan brokers, was more optimistic.
“In 2023, we may see a mirror image of 2022: a somewhat trying first half that gives way to a surprisingly strong back half of the year,” he said in a press release about the survey. “The would-be buyers that stepped back from the market in late 2022 can’t and won’t stay away forever, especially given the competing demands from first-time buyers looking to get into the market and retirees looking to move or downsize.”

Although two-thirds of Compass brokers share Reffkin’s pessimism about the national market, which they predict will have “somewhat or much fewer” home sales in 2023. A majority said people will continue to return to cities.

Buyers, they believe, will be drawn to shared amenities as they grow less worried about Covid, and will need to return to cities in response to return-to-office policies. They also believe large yards — a big draw during the lockdown period of the pandemic — will fade in popularity.
If they’re right, it could mean business remains relatively in line with 2022 levels for brokers in major cities, while their suburban and rural counterparts see their commission pools decline.

Perhaps not coincidentally, Compass’ business is concentrated in luxury markets.
Roughly 70 percent predicted that sales volume and price growth in the Northeast, which includes New England, New York, New Jersey and Pennsylvania, will stay roughly in line with or modestly outperform the national market.
Brokers forecast that the Southeast will be the strongest market next year. It was the only region where a majority of respondents believe sales and prices will exceed the national average. The Southeast includes South Carolina through Florida and extends west to the Mississippi River.

“As the market normalizes, we expect the population in the Southeast to continue to grow, fueled by a tax-friendly environment and opportunities for job growth,” said Jeff Polashuk, Compass’ regional vice president for Florida. “This continued demand will position the Southeast for another decent year.”

David Goldsmith

All Powerful Moderator
Staff member
"Compass announced another round of layoffs Thursday, which the company said is the last wave of staff cutbacks it will need to undertake to reduce its expenses to a point where it can be cash-flow positive by mid-2023."
Compass executes third layoffs in one year
Compass announced another round of layoffs Thursday, which the company said is the last wave of staff cutbacks it will need to undertake to reduce its expenses to a point where it can be cash-flow positive by mid-2023.

“The company believes its actions allow for a path to achieve positive free cash flow in 2023 accounting for market scenarios that are worse than Fannie Mae’s negative 22.6% estimate for residential real estate transaction volume (price and units) in 2023,” Compass said in an SEC filing, in which it noted its target yearly expenses are between $850 million and $950 million.

The brokerage did not say how many employees are affected in the latest round. The filing announcing the reductions said the move would incur $10 million to $12 million in severance costs, just under the $15 million to $16 million incurred when it laid off 450 employees last June.

The company said in the SEC filing its US technology and engineering team, hit hard by previous layoffs, was not affected.

A company spokesperson declined to comment on the layoffs.

CEO Robert Reffkin said in the company’s third quarter earnings call that it was planning for a “significant double-digit decline” in the market this year.

The New York-based company, which was the top brokerage nationally by sales volume in 2021, is seeking to become profitable for the first time amid a market downturn and a pullback from its largest investor, Softbank.

Compass said it lost $154 million in the third quarter of last year, up from $101 million in quarter two, along with an increased cash-burn rate. Investors initially responded well to information in the earnings report and the stock rose 90 percent the following day, though it was still down more than 60 percent since the start of 2022.

The company is expected to announced its fourth quarter and full-year earnings in February.

David Goldsmith

All Powerful Moderator
Staff member
A couple of days ago someone contacted me on Instagram saying they wanted to refer me a buyer but I immediately spotted it as a scam because why would a Compass agent be contacting me out of the blue on Instagram rather than referring in house. So I tried to look up the agent's name on Compass website and surprise surprise didn't find her.

I tried to do the right thing and contact compass. It's really hard to get a contact email for management so I submitted a form on their website. I told them that someone was impersonating being one of their agents and sent a link to the Instagram profile. This is the email I received from them:

Hi David,

Thanks for reaching out. The best place to get current information on a property is our website. From the Compass home page, select the Buy or Rent tab above the search bar and enter the address you're looking for. Select the property from the dropdown results to see the current listing page. We recommend reaching out to the listing agent on the page using the Contact Agent(s) form.

Please mark those messages as phishing attempts and do not interact with attachments or links in the thread.

To find an agent who knows your area best, visit

Let us know if you've got additional questions,
Kuldeep with Compass Support

Also CC'd on ticket::

David Goldsmith

All Powerful Moderator
Staff member

The Compass Chronicles: March 2023 Edition​

A continuing saga…

Mike DelPrete, who came out of nowhere a few years ago and morphed into the go-to analyst for all things tech real estate, continues to chronicle the former unicorn of Softbank, brokerage firm Compass.

As someone once said, Cash is King, and so is profit. I’ve long discussed their predicament, having pitched themselves to investors as tech play when they are really a traditional brokerage now forced to survive by making a profit—”disruption by capital.”

Their continuing slide, as measured by their “burn rate,” does not reflect their brokers, who power the firm. It’s all about the founder’s business model, which has never been profitable and has been forced to slash costs to extend survival. DelPrete thinks that:

Despite another quarter of high cash burn, the company appears to be positioned to achieve breakeven in 2023 after massive cuts made over the previous 12 months.

That’s good to hear for the sake of all my friends there. The gamble with those necessary cuts is whether agents will stand for the lack of the services that were the draw in the first place.

Compass revenue falls in Q4 — but losses narrow despite ‘difficult year’ [Inman]

DelPrete shared quite the chart this week about their cash flow and how they had to draw down from a line of credit.