The Real Deal New York

National brokerage network opens Manhattan office

Lee & Associates, little-known in NYC, faces classic challenges expanding into local market

November 01, 2011 08:25AM
By Adam Pincus

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From left: James Wacht, principal of Sierra Realty and co-founder of Lee & Associates NYC, Edward Indvik, vice chairman of the Lee & Associates investment group, and 12 East 46th Street (building credit: PropertyShark)

Los Angeles-based real estate brokerage firm Lee & Associates, which reported
$4.4 billion in transactions nationally last year, but has been off the radar in New
York City, opens its first office here today, company executives told The Real
Deal.

James Wacht and Peter Braus, principals of commercial brokerage Sierra Realty,
formed the new entity that will operate as Lee & Associates NYC, based in
Midtown and operating in Manhattan. The new company now has 14 brokers and
agents (brought over from Sierra Realty), but by the end of next year they expect
it to have 10 new hires in office, retail and multi-family leasing, Wacht said.
Wacht and Edward Indvik, vice chairman of the Lee & Associates investment
services group, spoke with The Real Deal yesterday.

“What we are going after are brokers who have a pretty good track record,
probably in excess of half a million dollars in gross commissions on an annual
basis,” Wacht said. “In terms of neighborhood [focus], that is to be determined. A
lot of that is going to be a function of which brokers we hire.”

Lee & Associates was founded in Irvine, Calif., in 1979 by broker Bill Lee, and
since then has grown to 44 offices in 15 states, although it remains heavily
concentrated on the West Coast with 26 locations in California alone. Trade
publication National Real Estate Investor ranked the firm 19 among commercial
brokerage firms with $4.4 billion in transactions in 2010.

The new Manhattan firm will focus on mid-sized office deals between 5,000
square feet and 25,000 square feet, as well as retail and residential. Initially it will
be based at 12 East 46th Street, but Wacht expects to move to new offices soon.
About 44 percent of the approximately 25 million square feet leased each year
in Manhattan are made up of deals less than 25,000 square feet, figures from
Cushman & Wakefield show.

Leslie Himmel, a partner with landlord Himmel + Meringoff Properties, which
owns about 2 million square feet in Manhattan, was not familiar with Lee &
Associates, but said she believed a small firm could break into the New York
market, although it is not easy.

“We’ve had so many mergers and large firms sell out, the question is can a
smaller company with national exposure have a place to compete in New York
City?” she said. “I think there is still room for smaller-sized leasing companies
who remain nimble and a little more entrepreneurial but I wonder how they will
compete with the economies of scale of the [larger firms].”

Edward Indvik, a broker based in Los Angeles, and a top executive in the
national firm as chairman of the Lee Advisory Board, played up the firm, which
has opened 14 offices over the past four years across the country, bringing the
company broker count to about 650.

Each Lee & Associates office is independently owned and operated, although the
firm allows more than half of its brokers nationally to invest in new offices under
an unusual profit-sharing arrangement.

“What ties us together in one way is that relationship that is created because we
have now all invested in each other,” Indvik said.

Profit sharing comes in many forms in real estate brokerage. For example,
residential brokerage Keller Williams shares profits with agents who have
recruited others to the firm.

The somewhat complex revenue sharing system at Lee & Associates gives
brokers the chance to invest in new offices and reap a piece of the gross
commissions earned by the brokers’ own office as well as other locations.

Under the structure, each office directs 6 percent of its gross commissions
to those who invested in the office, made up of the top principals in the new
office, company brokers who facilitated the creation of the new office, and select
brokers in the new office, as well as brokers throughout the entire network invited
to invest.

Even as the office are connected by shared investors, the firm’s central
headquarters has a very light touch, leaving each office to arrange for its own
affairs, including research. In fact, each office only pays about $1,200 per broker
yearly to the headquarters, totaling a national annual budget of only about
$800,000.

Wacht’s new firm will operate only in Manhattan, but Indvik expects other
firms under the Lee & Associates umbrella will open in the boroughs. The 14
residential, mixed-use and commercial properties owned by Sierra Realty will not
be part of the new brokerage company, Wacht said.

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