It was the shot heard ’round the real estate world.
Last month, Leonard Steinberg ended his 13-year tenure with Douglas Elliman to join real estate technology startup Urban Compass as its president.
In a blog post describing his move, Steinberg, one of the city’s top-ranked brokers (see related story on page 32) said that he saw “the future of real estate” in Urban Compass. But whatever crystal ball Steinberg is peering into appears murky to many in the industry.
“That’s really unbelievable,” said Core broker Emily Beare upon hearing the news. “Leonard is one of the most professional and talented agents in the city.”
Many other brokers and managers of residential firms were equally flabbergasted by his decision. Though there was unanimous acclaim for Steinberg’s skills as a broker, sources said they didn’t see how the company, despite its ability to raise vast sums of cash from investors, could compete with the bigger brokerages.
During an interview with The Real Deal at Urban Compass’ new Union Square digs, Steinberg, sporting a goatee and a white polo shirt, seemed to relish the uncertainty of his new position.
“I like to feel like a bit of a maverick,” he said, comparing his move to the creation of 520 West 28th Street, the dynamic starchitect-designed condo project going up along the High Line. “When Zaha Hadid builds that building in West Chelsea, everyone’s going to say ‘That’s crazy,’ but it’s going to do really well. Let me prove the naysayers wrong over time.”
Disillusioned at Elliman?
The South African-born Steinberg, 49, came to New York in the mid-1990s. He spent several years in the fashion industry, and one year as a full-time pianist, though he said he wasn’t good enough to play the piano bars. “I recorded an album of my own compositions but it went nowhere!” he said.
He kicked off his real estate career in 1995 at the Corcoran Group, and moved to Elliman in 2001. Paul Purcell, a managing director at William Raveis New York and a former president of Elliman, remembers that Steinberg stood out even then. “He’s never changed,” said Purcell, who recruited Steinberg to Elliman. “He was charming and very witty.”
Steinberg brought Hervé Senequier, who is French and has a background in risk management, banking and nuclear engineering, to Elliman with him and started the “luxury loft” team.
Senequier, who now holds a vice-president title at Urban Compass, described Steinberg as the yin to his yang. “I’m very Cartesian, very analytical and very organized,” he said, “while Leonard is a connector and a communicator. He can talk to people in a light way and make them laugh.”
Together, the duo was consistently among Elliman’s top-producing teams; Steinberg estimates that he’s sold over $2 billion worth of property in his career. He and Senequier, who were once romantically involved, closed sales and signed contracts for over $500 million in 2013 alone, he said.
They’ve brought many of Downtown’s premier new developments to market, including the Witkoff Group’s 150 Charles Street, Young Woo’s 200 Eleventh Avenue, also known as the “Sky Garage,” and Grasso Holdings’ 245 Tenth Avenue. Senequier said the team’s new development business has increased steadily over the years, to the point where new development sales are now about half their overall transactions.
Steinberg said his exit from Elliman, the most high-profile exodus from the company since Dolly Lenz struck out on her own last year, happened on the best of terms. Two key members of their team, Matthew Amico and Yoko Sanada, stayed at Elliman, while Lois Planco moved with them.
Elliman Chairman Howard Lorber praised Steinberg in a statement to TRD as “a true professional who enjoyed tremendous success” at Elliman. “We wish him nothing but the best,” Lorber continued, “as we will undoubtedly work together in the future as colleagues.”
A top executive at a rival firm said, however, that ever since 2011, when Elliman began to move toward a more centralized approach to new development under Susan de França, Steinberg and some other top brokers began feeling marginalized. Lorber countered by saying that “since Susan de França became president and CEO of our development marketing group in 2011, business has skyrocketed 1000 percent – from $2 billion to $20 billion.”
A high-ranking Elliman insider said that Steinberg had been quietly searching for a more boutique atmosphere for the past few years.
Moving the bacon
Steinberg and Senequier brought over more than $200 million worth of listings from Elliman to Urban Compass, a review of Urban Compass’ website shows. These include Jon Bon Jovi’s $37.5 million penthouse at 158 Mercer Street, a $22 million townhouse at 146 Waverly Street and an $18 million penthouse at One York Street.
On the new development front, they are marketing 560 West 24th Street, an eight-unit condo project by Adam Gordon and Tavros Capital Partners, as well as a 12-unit condo at 7 Harrison Street in Tribeca, developed by Matrix Development and Clarion Partners.
The duo will also soon be co-listing the $23 million penthouse at the Sky Garage with Nest Seekers International’s Ryan Serhant. To convince Serhant to team up, Steinberg very publicly wined and dined the “Million Dollar Listing New York” star last month. Both brokers posted pictures on their social media accounts. Coming just weeks after Steinberg’s move, the meetings stirred speculation that Steinberg was looking to recruit Serhant to Urban Compass. But Steinberg denied that, saying the meetings were all about the penthouse.
Among the listings Steinberg and Senequier left at Elliman was a $36 million penthouse at 250 West Street, which they were co-listing with Elliman’s Raphael De Niro. The 7,250-square-foot pad is now being exclusively marketed by De Niro.
“I handed it to him on a silver platter and with my very best wishes,” Steinberg said, “because if there was any broker on this planet I’d wish great things on, it’d be Raphael.”
Steinberg met the Urban Compass team at a meeting last fall organized by Kathy Braddock, who was Purcell’s chief lieutenant at Elliman and has been his business partner ever since. At a Downtown hotel, the startup’s CEO Robert Reffkin urged Steinberg, as well as other brokers from Elliman, Brown Harris Stevens, Corcoran and Halstead Property to share their frustrations about their jobs. “Both Leonard and Hervé were vocal at the meeting,” recalled Purcell, who believed at the time that Urban Compass was looking to build a platform that they would then license out to brokerages.
Reffkin said that when the firm was searching for a leader on the brokerage side, Steinberg’s name kept coming up. “It wasn’t just because he has expertise,” Reffkin said. “He’s also highly likeable.”
In January, Urban Compass invited Steinberg to breakfast for another meeting.
Steinberg admitted that until that second meeting, he was skeptical about Urban Compass. But after researching some more, he began to take the company more seriously. The prospect of a new environment invigorated him, he said, and he was interested in seeing how the firm’s technological horsepower could shake up the industry.
At Elliman, “he was at the pinnacle,” Braddock said. “I think he just wants a new challenge, and it must be interesting for him to work for a firm that has venture [capital] money.”
Senequier then got involved in the discussions, and he said that they both went through a “very thoughtful process” of weighing the pros and cons. “I’m extremely risk-adverse,” Senequier said, “but I looked at this and thought, ‘How can we lose?’”
Sources told TRD that Steinberg was likely promised an extremely high salary for his duties as company president — up to $2 million a year — as well as a lump-sum payment that could also be north of $2 million to cover business he lost by jumping ship.
But Steinberg denied claims of a big payday. “Everyone anticipates that I was paid a big chunk of money to come over here,” he said. “The exact opposite is true.”
“I’m in a position in life where I can afford to take losses,” he added. “The most important thing to me was that the future was exciting and interesting.”
Both Steinberg and Senequier confirmed that they have equity stakes in Urban Compass. Purcell said, “there’ll come a time when Leonard doesn’t want to work at the level he works. Maybe an ownership stake is part of the cushion.”
Another factor to consider in terms of compensation, said Town Residential founder Andrew Heiberger, is enterprise value, or the monetary value of a broker’s reputation and brand.
Urban Compass’s true north
Urban Compass launched in May 2013 with a business model that combined a StreetEasy-style listings website with a team of salaried “neighborhood specialists.”
Co-founder Ori Allon’s Silicon Valley pedigree (he sold his previous companies to Twitter and Google), combined with the company’s decision to position itself as a technology firm rather than a brokerage, helped Urban Compass attract more than $33 million in investment, sources said.
But some industry veterans felt the company was merely cashing in on the tech boom.
Urban Compass “reminds me a little of the dotcom era,” one source said. “It must feel sexy to the investors, because it is technological.”
In December, however, the company did an about-face on its business model, embracing a more traditional commission structure. At the time, many in the industry said that was evidence that the startup was struggling to find its feet. But Steinberg had a different take. “They were very smart in having shifted gears” he said, noting that the speedy change in strategy spoke to a tech company’s nimble mindset.
“A real estate company may have tried that model for four years before realizing it doesn’t work,” he said.
Steinberg said the firm’s tech-powered approach would make doing business more efficient.
“One side of the technology is to help the consumer and one side is to help the brokers,” he said, adding that the model would reduce busywork and give agents more time to focus on deals. “Just the way Apple made buying and listening to music significantly different, I think this company can have the same effect on real estate.”
The firm is now developing software tools around Steinberg to help support his high-end sales business, as well as to “attract brokers of his caliber,” Reffkin said. The company is also building out its analytics platform, he said, for which they hired former StreetEasy data guru Sofia Song. Based on market information, “we’ll be able to tell our users the right price to list a property and the best day to list it,” Reffkin said.
I have a dream
Steinberg said he will spend the majority of his day doing deals, but will devote about 10 percent of his time to mentoring other brokers.
“I have a dream that one day brokers will not be viewed as drink-throwing lunatics on TV shows,” he said, “[but] rather as professionals who provide great advice and guidance to the consumer in what is a big investment for them.”
Steinberg stressed that he wouldn’t be actively recruiting in his new role. Still, he hopes his move will attract brokers interested in his work and in the Urban Compass model.
“I knew that when I joined a company like this that the real estate world would take note,” he said. “I’ve had calls like, ‘Oh my God, Leonard! What the hell are you doing?’ And then they say: ‘You know what? I think it’s brilliant.’ That’s 90 percent of the calls; 10 percent of the people still think I’m completely insane.”
Since Steinberg’s move, a number of fast-rising brokers, including Warburg Realty’s Jay Glazer and Town’s Tinnie Chan Sassano, have joined Urban Compass.
The next few years, Steinberg said, will be about cementing a legacy in the industry. “I’ve made a lot of money and I’ve broken a lot of records,” he said. “That stuff is all done, done, done. Now it’s about sharing and growing other brokers and making this industry that I entered 18 years ago better.”