Upheaval For Agents

David Goldsmith

All Powerful Moderator
Staff member
In light of this comment...I'm intrigued by models like Side if/when they come to NYC.

With a $2.5B valuation, Side prepares to take on NYC. Will agents buy in?​

Speeding toward an IPO, the unicorn of the residential brokerage world preps for its toughest challenges yet​

Side has had an explosive year.
In March, the white-label brokerage’s $150 million Series D propelled its valuation above $1 billion. A few months later, that valuation more than doubled to $2.5 billion after Tiger Global Management, the world’s most active venture investor in the second quarter, led a $50 million round.

To both its champions and its rivals, Side’s ascent represents tech investors’ zeal for residential real estate. But as the brokerage prepares to go public and enter New York City’s dog-eat-dog market, questions swirl around how its behind-the-scenes model will scale — and whether agents will buy into the pitch.

Side’s model pits its agents and back-end suite of tools and support teams against legacy firms entrenched in their markets and supported by long-cultivated relationships with local business and political establishments.
The fundamental stumbling block Side must overcome is one of name recognition.

Side’s critics — and even its supporters in the brokerage world — say that the company fills a niche, but it could never displace the big household names that have dominated for decades. The cardinal rule, they argue, is that consumers trust big brands more than individual agents.
Side’s co-founder and chief executive, Guy Gal, calls this “a big brokerage lie.”

“Consumers prefer boutique experiences to big brand experiences in all things in life, that’s just a fact,” he said via email after declining an interview for this story — an uncharacteristic move for the typically vocal entrepreneur.
“The brand only matters to part-time and inexperienced agents who use the big brand as a way to make consumers believe that they are actually experienced,” he continued. “That is how the brokerage system is set up.”

With $250 million in funding, Gal and his co-founders, Edward Wu and Hilary Saunders, are throwing down the gauntlet. How much success their four-year-old company finds could change the game for an industry in the throes of consolidation.

Building blocks

Although the brokerage’s fortunes have skyrocketed in the past six months, investors first planted the seeds six years ago.

Zach Aarons, co-founder and managing partner at real estate-focused venture firm MetaProp, recalled meeting Gal and his co-founders in 2015. The trio came to MetaProp’s office with nothing but some mockups and a demo version of a transaction management platform.
Aarons said that MetaProp committed to back the unnamed, unestablished company right then.

“The idea that you could put a brokerage in somebody’s pocket… is something that I always wanted to do,” he said. He attributed his confidence in the San Francisco-based trio to a certain je ne sais quoi.
“You meet somebody, you get the feeling that they’re going to walk through walls,” he said.
Camber Creek’s Jeffrey Berman, another early-stage investor, felt something similar. Meeting Gal, Wu and Saunders at a WeWork in 2016, he gathered they had a clear vision and “humility mixed with enough arrogance to be able to say ‘I can do something that no one else has before.’”

What was that something? According to Berman, Side’s anti-big-brands ethos taps into the world of creators and influencers like no real estate brokerage has before. At the heart of the company, he said, is its technology tools for agents, such as marketing automation and contract-writing software.
Gal previously founded three different companies focused on monetizing video content. After selling the final venture, Kingmaker, to rival Joyous in an all-stock deal in 2013, Gal told tech news site Pando he wished he’d spent more time building out the business before raising money. With Side, Gal took his time.

He moved to San Francisco to join Joyous and spent two years leading its business development. From 2015 to 2016, he spent a year as an “entrepreneur-in-residence” at Matrix Partners, an early-stage and seed venture investment firm. (Matrix has since participated in Side’s Series D round after managing partner Dana Stalder personally invested in the firm’s Series C.)

A childhood friend-turned-realtor inspired Gal to jump into the world of residential brokerage. The friend, Phil, worked as an agent in Toronto, one of Canada’s hottest real estate markets, and tried to launch his own brokerage before getting fed up with the bureaucracy of running a business, according to an interview Gal gave to Disclosures.io’s blog.

Gal first crossed paths with Wu — now Side’s chief technology officer — after advising Vidyard, a video platform startup Wu co-founded in 2009. While doing market research on how “we could fix the broken brokerage system,” as Gal put it, the pair encountered Saunders, a former real estate litigator and Coldwell Banker broker in San Francisco who founded Reside Network, seemingly a precursor to Side, in 2014 to help agents and brokers build their personal brands.

“This is not an overnight success,” said Berman. “Side has a playbook.”

The playbook

Side has made headlines over the years for its provocative recruiting slogan: “Not all agents, just the best agents.” The fact that the brokerage only recruits one top agent per geographic area means interested agents need to hurry or risk their niche being filled.

While investors steadfastly see Side’s technology as the heart of the company, tech is only one aspect of its offering.
Side provides each “partner” — an agent who starts a brand at the brokerage — with a business manager who checks in weekly and creates business plans for the team. A 50-person in-house staff recruits new agents for partners’ brands and acts as the go-to for any vendor or service a team needs. Side also provides its own custom tools, such as transaction management software, and its company identity is always behind-the-scenes.

Ryan-Serhant-quote.jpg

There is, of course, a catch. If partners elect to leave within their first two years, Side keeps their brands. Side partners also have to bear the cost of many services and business expenses, such as marketing and office leases, but Side’s nearly 400 employees, dubbed “inSiders,” handle logistics and develop the technology to make it happen.

High-profile agents who’ve jumped to Side include Los Angeles-based Kofi Nartey and former Los Angeles Dodgers outfielder Matt Luke. Anthony Marguleas, who previously ran an independent firm, Amalfi Estates, in Los Angeles, joined Side in 2019.
“I would pay Side double what they’re charging me,” said Marguleas, who noted that he hasn’t lost an agent to another firm since making the jump. “I don’t want to handle managing my website and managing our marketing and managing the commission checks.”

Multiple sources and reports say that Side’s commission split is 90-10 with a $50,000 annual cap, and partners must often pay an annual sum of $25,000 per agent. Gal disputed those numbers, which he said vary.
Ben Bacal, who founded his brand Revel Real Estate with Side in 2019, said the brokerage has saved him from hiring back-office staff — an annual expense he estimates to be about $700,000.

“They just streamlined my business,” he said.
But it’s not all happy endings. Side’s wooing process has generated tension in California, where the brokerage has operated the longest. Its calling card to agents comes in the form of branded giveaways: boxed bottles of sparkling wine from Napa Valley and RocketBooks, reusable notebooks designed to digitize handwritten notes. Retailing for roughly $35 a pop, the gifts are accompanied by a note. One viewed by The Real Deal summarizes the pitch: “Go from agent to founder.”

In California, these packages are often sent to agents’ offices, which means that some managers at rival firms have accumulated samples of Side’s gifts and their accompanying pitches, eliciting a mix of laughs and scoffs.
“That’s a little bit over the line,” said one executive who spoke on the condition of anonymity. “They’re really aggressive in some ways.”

Gal, who self-identifies as a compulsive gifter, vigorously defended the practice.
“Side gets postcards at our office all the time from other brokerages that are being sent to agents in an attempt to recruit,” he said via email. “Instead of sending a postcard, we send something of value and use, which is consistent with our mission.”

He also noted that Side doesn’t offer signing bonuses, a veiled reference to Compass and other brokerages that have begun kicking in all-cash offerings as part and parcel of recruiting. However, Side’s first seven agent partners received equity, and stock options are listed as perks included on a slew of Side’s job postings.

“It’s just the new kid on the block trying to sell the same story over and over,” said Jeff Hyland, president of Hilton & Hyland. He expressed skepticism of Side’s no-brand model, adding that “you can’t do that when you get into luxury markets.”
It’s no secret that Gal holds little regard for many of Side’s competitors. During a July interview, he lambasted brokerages including Compass, Realogy firms, eXp Holdings and REMAX.
“There are not a lot of top producing agents at those companies anymore,” he told the podcast “Real Trends.” When the interviewer gently called him out, he sighed.
“It’s just what’s true,” he said. “I’m not looking to pick fights, I’m just very sober about what is and what isn’t.”
In an email to The Real Deal, Gal responded to a question about the founders’ real estate bona fides by saying, “we have a very high bar for who we hire, and unfortunately most of the corporate leadership and management inside real estate brokerages do not meet that bar.”

Biting into the Big Apple

Love it or hate it, Side’s war chest and appetite for growth are attracting attention.
Over the summer, there have been rumblings within the New York City brokerage community that Side has begun hunting for someone to serve as its broker of record in the state and interview agents. In August, Saunders put a call out on LinkedIn that Side was looking to hire managing brokers in Oregon, Washington, New York, Colorado and the Washington, D.C., area. Gal said the firm planned to launch its New York operations early next year.
Side’s eastward expansion comes as another California staple, The Agency, is setting up shop in New York, with its first office slated to open this month in Long Island City. The migration shows the scope of opportunity the New York market represents to firms, but it won’t be a cakewalk.
Ryan Serhant, who started his own brokerage last year and arguably could have been a top recruit for Side if the clocks were wound back, said he loves the firm’s concept but expressed doubts about how the model would fare in a luxury market like New York.
“Consumers want large brands to represent them, it’s just the way it works,” he said. “Look what they’re wearing. Look where they buy. Look what they spend just to be on Fifth Avenue just because they can say they live on Fifth Avenue. It’s just a different type of clientele.”
Richard Grossman of Brown Harris Stevens agreed, questioning how many top agents would be lured by the support services at Side and the dream of owning their own brand.
“My experience is that companies support their biggest brokers and largest teams in a very, very significant way,” he said. “It’s an interesting idea, but I really question whether that is going to be scalable.”
Time will tell how many agents will truly jump at the chance to start their own brand, but once an agent takes the plunge, hopping to another firm would be challenging, according to Bacal.
“If you leave, it’s major failure,” said Bacal. “You’re telling the world you can’t create your own business, so you’d never leave.”

user-matching
 

David Goldsmith

All Powerful Moderator
Staff member
#LoyCarlos #RyanSerhant #CarryChiang #RichardSteinberg

Loy Carlos leaves Corcoran for Serhant luxury unit​

Carlos was a long-time member of Carrie Chiang’s top-producing team​

Loy Carlos sealed his deal with Ryan Serhant this summer over mussels and roast chicken and some memorable duress — the Flatiron restaurant where they dined lacked air-conditioning.
The Manhattan dinner led Carlos, the veteran real estate agent who worked with so-called condo queen Carrie Chiang at Corcoran Group, to jump to Serhant’s shop. He’ll lead Serhant’s “Signature” divisions, for properties asking at least $10 million, and build his own team.
“We just had so much fun talking,” Carlos said in an interview yesterday.

It’s a return of sorts for Carlos, who studied journalism at New York University and said he’s been seeking a change for years. He left real estate in 2011 to consult for nonprofits and small businesses and founded a lifestyle magazine featuring some of his clients. He also started a company that handled aspects of luxury living, from property management to event planning.

“I needed a change in direction and career,” he said of that period. “Otherwise, I would be showing apartments for the rest of my life. I never intended to be just full-time doing real estate.”
Even so, in 2017 he rejoined Chiang, whose team was the top producer at Corcoran. Three years later, after reflecting on his goals during the lockdown hit, he left the team to work alone at Corcoran. That move didn’t reflect a falling out with his former team leader, he said. Corcoran spokesperson Johnna Muscente called Carlos a valued employee and said the firm wished him well.

Although Carlos and Serhant have known each other for years, Serhant said a recent deal was top of mind when he approached the agent. Last spring, while real estate showings were still banned, Carlos and Serhant worked together to close an $8.2 million sale at 829 Park Avenue, a white-glove co-operative 829 Park Avenue. The seller was comedian Rodney Dangerfield’s daughter, Melanie Roy-Friedman, property records show. Serhant said Carlos impressed him.

“He is a sales sniper,” said Serhant. “Watching him get that deal done was amazing.”
Carlos said Serhant’s vision for his new brokerage, which officially launched last October, resonated. It set the firm apart from others that tried to recruit him after he left Chiang’s team, Carlos said.
“Ryan reminded me of me 30 years ago, when everything was an opportunity,” Carlos said.. “I got really excited.”

Several agents and executives who’ve spent major chunks of their career at one firm have recently moved elsewhere. Last week, Douglas Elliman agent Richard Steinberg said he was moving his team to Compass. Earlier this year, Steven James, Elliman’s New York CEO and manager Brad Loe moved to Berkshire Hathaway’s HomeServices of America, followed last month by Diane Ramirez.
 

David Goldsmith

All Powerful Moderator
Staff member

Tricia Lee jumps to Serhant from Compass​

Broker assembling team with agents from Compass and EXR Group​

Tricia Lee is joining celebrity broker Ryan Serhant’s firm and starting her own team with agents from Compass and EXR Group.
The Brooklyn-based Lee got her real estate license in 2015 and began working at the Corcoran Group in 2016. She was named rookie agent of the year and was recruited by Compass and won rookie of the year there as well. She said she’s done over $100 million in sales.
Lee said her decision to leave Compass was guided by “where I could grow the most.”

“I have had a phenomenal, quote that, phenomenal experience at Compass,” she said.
Lee previously owned and operated a chain of beauty salons, Polish Bar Brooklyn, for a decade. She decided to close them after Hurricane Sandy flooded them in 2012. After launching her real estate business, Lee continued working mostly in Brooklyn, with many salon clients calling her when looking to buy or sell homes.

“I want to help people,” she said. This year, she said, she’s worked with 20 women buying their first home.

Serhant said he first approached Lee about joining his firm in the spring after following her deals for some time.
“She’s the luxury face of Brooklyn,” he said. “I told her that I had always been a big fan.”
Lee was not as certain. She began listening to Serhant’s books to get a sense of who she would be dealing with if she made the move. About halfway through “Big Money Energy,” she decided to join.

“I was working on the toughest deal of my career, and hopefully my life,” she said. “That book got the deal done.”
The deal was the $5 million sale of a landmarked, 6,852-square-foot brownstone and development site at 164-168 Hancock Street in Bedford-Stuyvesant. The challenges ahead of the July closing ranged from dealing with tenants to family turmoil to unmoved vehicles.

“The day before the closing I was on one of the lots covered in mosquito bites having cars towed off the lot at 9 o’clock at night,” she said. “I could not have closed this deal if I wasn’t listening to that book.”
Lee is bringing two agents with her from Compass: her fiance Jeffrey St. Arromand — a former sports producer at CBS and NBC — and Brianah Moore. Agent Zola Abraham is joining her team from EXR Group. Lee said she began assembling the team this summer so she could hit the ground running.

“Over the summer I’ve been working to grow the foundation,” said Lee. “I didn’t want to walk in this room and not feel prepared.”
Serhant has been making a number of hires of late. Last week, Loy Carlos, a veteran Corcoran agent who worked with Carrie Chiang, joined his eponymous firm. The brokerage, which started last fall, has about 70 agents and 40 employees.
 

David Goldsmith

All Powerful Moderator
Staff member

Brown Harris Stevens’ NYC president Richard Grossman steps down​

Former Halstead exec will exit brokerage Sept. 30, wait out non-compete in Europe​

Another former Halstead executive is exiting Brown Harris Stevens.
Richard Grossman, the brokerage’s New York regional president, is stepping down effective Sept. 30, BHS CEO Bess Freedman announced in an internal memo Thursday.

“Richard Grossman has decided to focus on personal endeavors and explore new career opportunities outside of New York real estate,” Freedman wrote in the message, which was viewed by The Real Deal.

Freedman added that Sara Rotter, an executive vice president, would assume oversight of the two offices she and Grossman had jointly managed in Soho and the West Village. Steve Kliegerman, president of Brown Harris Stevens Development Marketing, will also be available to “offer his support” in the wake of Grossman’s exit, Freedman said.

Reached by phone, Grossman said he was leaving BHS for personal reasons but plans on staying in the business.
“Nothing to do with the firm or the company or anything like that,” he said. “I’m just looking for my next step in life.”
Grossman became BHS’ regional New York City president last year after the firm’s parent Terra Holdings merged its secondary firm, Halstead, into BHS. Grossman had been at Halstead for 16 years, most recently as president, reporting directly to Diane Ramirez, Halstead’s co-founder and CEO.

His exit comes two months after Ramirez stepped down as BHS’ executive chairman and senior advisor. A few weeks later, she joined Berkshire Hathaway HomeServices New York Properties as the firm’s chief strategy officer.
Grossman said he’s planning to move to Paris and travel around Europe for the rest of the year before returning to the city. His contract with BHS has a non-compete in Manhattan that expires at the end of February, and he said he has been having conversations with other firms but hasn’t committed to a new role.

He said he’s looking for a role that’s more national in scope and that he wants to step outside the “traditional brokerage” world. Speaking about Halstead’s merger into BHS last year, he said “it sort of highlighted for me that maybe I wanted to do something different.”
“I’m looking to surround myself with people who are thinking differently,” he said. “I’m looking for something on a grander scale.”

In Freedman’s memo, she said the past year had been a challenge for “many reasons” but stressed that BHS’ future “has never been brighter.” She cited an upcoming marketing campaign and a new Upper West Side office near Lincoln Center at 1930 Broadway as examples and promised agents a new “suite of agent tech solutions.”

“Right now, all of us at BHS have the rare chance to build a company we are proud of, molded by the suggestions and feedback of our agents,” she wrote. “My door is always open, and your sales managers are here for you too.”
 

David Goldsmith

All Powerful Moderator
Staff member
Warburg Realty is sold to Coldwell Banker

Realogy gets first company-owned brokerage in NYC; Clelia Peters departs​

The self-proclaimed “last man standing” at the helm of an independent residential brokerage in New York City, Frederick Peters, has sold his firm of 30 years.
Warburg Realty was sold to Coldwell Banker in a deal that closed Tuesday, the companies told The Real Deal. Financial terms were not disclosed but the firm will be rebranded as Coldwell Banker Warburg in January. It will be the first time Coldwell Banker has had a company-owned presence in the city.

Peters, the former CEO of Warburg, will be president of the new firm and report directly to Ryan Gorman, CEO of Coldwell Banker. His daughter Clelia Peters, Warburg’s president since 2016, has left her post to focus on proptech investing but will remain an adviser to Warburg. She had joined Bain Capital Ventures in February 2020 as a partner but had continued at Warburg until now.

Fred Peters said the decision to sell boiled down to a “kind of a paradigm shift” in his thinking about the future of his firm and what Warburg could offer its agents.
“There are a number of things my competitors do that I would never do, but there are opportunities and services that they can offer because of their financial heft which I couldn’t,” he said. “So I assessed all my options and this was clearly the way to most powerfully equip the people who work for me in this new environment.”

He pointed to Coldwell Banker’s national and international referral network and staging program in particular.
“I’ve had this conversation a lot in the last five years and this was the first time that it ended up really feeling compelling to me,” Peters said, adding that there were no financial concerns motivating the sale.
Peters founded his firm in 1991 by buying a majority stake in Albert B. Ashforth after working his way up the ranks. The firm then operated as Ashforth Warburg before changing its name to Warburg Realty in 2003.

The firm has consistently ranked in the top 10 of The Real Deal’s annual brokerage ranking. Last year it made the list with $238 million in closed sales volume on the sell-side. Its 120 agents work out of two offices, in Tribeca and on the Upper East Side, according to its website. In 2008 it had 150 agents across five Manhattan offices.
Clelia Peters, who joined Warburg in 2014, said that working alongside her father and Warburg’s agents has been “an extraordinary experience” and that she was “looking forward to cheering from the sidelines as this partnership raises the bar for luxury agents in New York.”

For Coldwell Banker, the acquisition gives the brand an established base in Manhattan from which to build. In an interview, Gorman said that before connecting with Peters, he had been planning to build a New York City brokerage from the ground up.
The two men met in 2019 at an Inman conference in Las Vegas. Peters was there as the unofficial nanny for his 6-month-old granddaughter while mom Clelia spoke at the event.

“Everybody stops to talk to a man with a baby,” said Peters. “We hit it off and we stayed in touch.”
Gorman, who is based in Morristown, New Jersey, said he and Peters often took long walks through Central Park, discussing the New York market as he mulled how Coldwell Banker would break into the city’s notoriously tough brokerage landscape.

Though Coldwell Banker has had franchises based in Manhattan before, none lasted. Coldwell Banker Hunt Kennedy was the sixth largest brokerage in the city, with more than 200 agents, before it shuttered in 2009 after its debts grew to $12 million. In 2013 Coldwell Banker paired with Bellmarc to take another shot, investing a pile of money into Neil Binder’s brokerage and pushing the agent count to about 550, but the move ended badly.
In 2019 another franchise, Coldwell Banker Reliable Real Estate, based in Brooklyn, opened an office in Harlem. It remains open.
Gorman said the idea of an acquisition came up organically with Peters.
“We just got on famously and really enjoyed one another’s company,” said Gorman.
Warburg joins a long list of small, independently owned brokerages that have been snapped up in recent years by larger companies seeking market share.

Stribling & Associates was acquired by Compass in 2019 as part of a $2 billion deal ostensibly to grow out its new development business in New York. (It was after Stribling’s sale that Peters famously declared himself “the last man standing” as the owner of a boutique residential Manhattan brokerage.)
Last year alone, the Corcoran Group absorbed Citi Habitats (both are Realogy-owned), while Terra Group moved Halstead under the Brown Harris Stevens brand.

Though a few boutique firms remain independent, such as Jed Garfield’s Leslie J. Garfield, Adam Modlin’s Modlin Group and, most recently, Ryan Serhant’s year-old firm, Warburg’s status as a stalwart had been unshakeable for three decades.
What changed for Peters appears to be two-fold. He attributed the evolution in his thinking in part to the “philosophical concerns” raised by the pandemic and in part to his daughter and long-time colleague, Clelia Peters.

“The pandemic did sort of reshuffle my head about thinking about ways for the company to go forward into the future, even beyond the point that I was there,” he said. “[Clelia] is a businesswoman so I think she has helped me in a lot of ways [about] how to think in a more business-like way about Warburg.”
Peters vowed that the “personal touch” his boutique firm is known for will not change and said he has no plans on leaving any way besides “feet first.”

Some loose ends around the deal remain. In April, Warburg launched a referral partnership with Edgardo Defortuna’s Fortune International Realty in Miami in a bid to compete with larger, multi-market firms and increase offerings to clients. Peters said on Tuesday the status of the Fortune partnership has to be worked out.
 

David Goldsmith

All Powerful Moderator
Staff member

Richard Grossman joins Avenue 8 to lead East Coast expansion​

Former BHS exec will be president of brokerage for states from New York to Florida​

That was fast. In less than two weeks, Richard Grossman, the recently departed New York City regional president for Brown Harris Stevens, has figured out his next act.
The industry veteran is joining Avenue 8, a mobile-first brokerage based in San Francisco founded last year by agent Justin Fichelson and Michael Martin, a former managing partner at marketing and design agency Code and Theory.

Grossman is Avenue 8’s first hire outside of California, where it has 125 agents. Martin said the firm, which has raised $18 million to date, closed $600 million in sales in its inaugural year.

Late last month, Grossman announced he was stepping down from his post at BHS and heading to Paris to wait out his Manhattan non-compete and work out what to do next.

Grossman said he was introduced to Martin and Fichelson by an unnamed intermediary and was immediately impressed.

“I felt they were smart and they were thinking about the business in a very forward-thinking way,” he said. “I believe a lot of agents will be drawn to what they have to offer.”
Martin said he and Fichelson were “beyond excited” to meet Grossman and bring him on board.
“He has unparalleled experience navigating the complexities of real estate,” said Martin.

Grossman’s role will be president of brokerage for the eastern states, from New York to Florida.
“We have a road map of expansion that has been identified but we also want to remain opportunistic and nimble,” said Martin.
Avenue 8’s New York operations won’t launch until the new year, according to Martin, but the firm is licensed there, has become a member of the Real Estate Board of New York and is at work building out its city flagship. Martin wouldn’t disclose the location but said it will be “more like a clubhouse than an office.”

The firm has hired several veteran executives in California recently including Compass’ Nick Segal and Alan Long, formerly of Sotheby’s International Realty.
 

David Goldsmith

All Powerful Moderator
Staff member

Inside Avenue 8: A look at the playbook of the resi brokerage snapping up funding and big names​

SF-based startup readying an NYC expansion​

When Richard Grossman, a longtime executive and sales manager at Halstead and then Brown Harris Stevens, said he was joining Avenue 8, an 18-month-old San Francisco-based startup, even his own boss was left dumbfounded.
“I thought ‘Who the hell is that?’” said Bess Freedman, CEO of Brown Harris Stevens, New York’s biggest privately owned brokerage. “I had never heard of Avenue 8.”
Founded last year and backed by big names such as Warby Parker co-founders Neil Blumenthal and Jeff Raider and Joey Zwillinger, who created Allbirds, the brokerage says it closed $600 million of California sales in its first year of business. Now, Grossman is spearheading its expansion into New York’s clubby real estate market. Fittingly, it calls its first outpost a clubhouse, not an office, part of Avenue 8’s effort to shun the more typical storefronts used by its competitors.

The pitch: offer agents high commission splits and keep overhead low. The biggest infrastructure is a platform designed for mobile phones, drawing inspiration from Uber or Doordash rather than Salesforce. Avenue 8 is also striking relationships with direct-to-consumer home and lifestyle brands such as Brooklinen.
Breaking into New York can be an expensive and challenging move for outside firms. The residential market is dominated by co-op buildings, which can throw off even seasoned New York agents. Unlike most major markets, moreover, Manhattan lacks a multiple listing service, making solid data hard to come by without a reliable agent. And that’s not to mention the growing competition: At least two other West Coast brokerages plan to open in New York by early 2022.

“You have to be willing to invest a tremendous amount of capital and at least 10 years before people are going to look to the left and right and say ‘I think you should pay attention to these guys,’” said Eddie Shapiro, CEO of Nest Seekers International, the sixth-largest brokerage by closed sales volume in Manhattan, Brooklyn and Queens, according to The Real Deal’s annual ranking.

Yet Avenue 8, which has raised $18 million so far, is willing to pony up for talent like Grossman. While it has only 125 agents in the Bay Area and Los Angeles, and 40 full-time employees, the firm aims to eventually hire about 1,000 agents in New York. If they succeed, that would make it the city’s fifth-largest by headcount, trailing Compass, with 2,500, and Brown Harris, which has 1,420.

“It’s big enough to have scale, but not big enough to feel like Walmart,” said Michael Martin, who founded the company with Justin Fichelson, a former cast member of “Million Dollar Listing San Francisco.”
New York was the first East Coast destination in part because agents typically have lower commission splits, giving Avenue 8 an opportunity to up the ante. The firm is likely to offer splits of higher than 80 percent, in line with California and Florida, though Martin declined to give an exact figure.

Brown Harris and Douglas Elliman offer their top performers about 75 percent.
Avenue 8 will also charge agents a monthly platform fee starting at $200 and give them a choice to pay for additional services such as printing mailers.
“Agents at traditional brokerages don’t feel appreciated and they aren’t having fun,” Martin said. “Those companies are very, very big and kind of stuck in their ways. We’re building something that doesn’t exist yet.”

It took Compass about four years after its 2012 launch to establish itself as a contender despite a war chest of funding. By 2018, the firm’s aggressive recruiting tactics pushed splits in the city higher and forced several firms to adopt similar tactics.

Also eyeing New York is Side, a San Francisco brokerage that offers agents back-end services to develop their own independent brand and team. Side aims to launch in New York early next year. The Agency, a Los Angeles brokerage co-founded by Mauricio Umansky, plans to open offices serving Manhattan and the Hamptons late this year or in early 2022.
Umansky said Avenue 8 hasn’t “hit my radar” and said he doesn’t believe in entering a new market quietly.

“I never wanted to enter New York unless The Agency was going to be in a strong financial position to make some noise and go in there with tremendous strength,” he said.
Side CEO Guy Gal acknowledged the ascent of Compass as an example of how a new entrant can make an impact in the city, though he drew a line between it and his own firm.

“That’s not how Side does business,” he said. “We’re just about identifying really great agents and teams that effectively already run a business but don’t own it,” said, adding, “that’s not an existential threat to anyone.”

At Brown Harris, meantime, Freedman said she’s interested to see how Avenue 8’s model works in practice. She said the key for any new firm is whether they spend enough time learning the nuances.
“You don’t just show up on the scene and think you know everything. Knowledge is experience and we have 150 years of doing this,” she said. “We’ll see.”
 
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