The Real Deal New York

BHS Goes on Buying Spree

August 01, 2004
By Stuart W. Elliott

Last month, a more fitting name for Brown Harris Stevens would have been Buy Harris Stevens.

The firm went on a shopping spree whose price tag wasn t disclosed, but which is easily worth in the hundreds of millions of dollars a year in new business. Brown Harris Stevens bought three brokerages and one property management company, expanding its reach in the outer boroughs and in the Hamptons.

The purchases included William B. May s operations in Brooklyn, Hamptons firms Hahn Realty and Resort Properties International and building management firm Heron Ltd.

That, plus a new office at Madison Avenue and 84th Street with at least 20 agents from William B. May s Manhattan operation, means the firm has added more than 115 agents in the last two months or so.

While the buys don t add up to anything like the size of Corcoran s acquisition of Citi Habitats or Cendant s purchase of Sotheby s, they increased the company s size more than 60 percent, from around 186 agents this May to more than 300, according to the firm s Web site.

“We won t be the largest in each area, but we hope to have the most professional brokers there,” said David Burris, co-chairman of Terra Holdings, the parent company of Brown Harris Stevens.

The buys also show further consolidation in an industry that has seen plenty of it lately, and points to a similar trend in property management as well.

“We are substantially consolidated in Manhattan now,” said Frederick Peters, president of Warburg Realty Partnership. On a scale of 1 to 10, he said, “if five years ago we were at a 1, now we re at a 7.”

“Within three or four years it will be pretty much a carbon copy of what you see in California it will be just a few brands,” said Dottie Herman, CEO of Douglas Elliman, adding there will still be plenty of room for small independent brokerages consisting of a few agents each, which number in the hundreds now.

Banks will also get involved in real estate brokerage at some point, Herman predicted. Financial holding companies and subsidiary national banks aren t currently permitted to engage in brokerage because it is defined by the government as a commercial activity, rather than a financial one, a classification they are lobbying to change and real estate trade groups are vehemently fighting.

“I do believe that banks will be in the brokerage business sooner or later,” said Herman.

For Terra, which entered the Hamptons market earlier this year by buying Dunmere Associates, and also has offices in Palm Beach, the plan is to remain focused on those markets.

“We re going to solidify the geographic areas in which our clients live,” said Burris.

Burris contrasted his company with much larger rivals Douglas Elliman and Corcoran, saying the average agent at Brown Harris Stevens grosses double what the average agent at those companies gross, a claim which appears to be generally borne out by a study of listings by The Real Deal earlier this year.

“We don t take brokers that are new to the business,” Burris said.

In Brooklyn, the firm s buy of William B. May s operations in that borough came following a prickly situation that nearly resulted in dueling lawsuits between the two companies.

In April, Terra had purchased a 50 percent stake in William B. May s Brooklyn operations and a 20 percent stake in the company s Manhattan operations from Peter Marra, the former president of William B. May, who also married into the May family.

In the end, Terra Holdings traded Marra s equity in the Manhattan operation of William B. May for the entire Brooklyn operation. It includes offices in Brooklyn Heights and Park Slope and 50 brokers.

Burris said of Marra and the May family, “I think they are back to having very good relations.”

“There were influences outside the family that caused friction at some point,” he said. “Outside employees were pulling the firm in a direction it didn t want to go. At least that was my observation.”

Going forward, Burris said expansion in Brooklyn would be “a logical thing.”

“Williamsburg is one area that comes to mind, and the Fort Greene area is another,” he said.

In the Hamptons, Brown Harris Stevens purchase of Hahn Realty, with offices in Greenport and Cutchogue, marks its first foray onto the North Fork, “an area that has become increasingly popular,” Burris said. The firm has 20 agents, according to its Web site.

On the South Fork, the acquisition of Resort Properties International in Westhampton Beach gives it another 25 agents, according to the firm s Web site.

Hahn s founder Suzanne Hahn and Lawrence Porter, owner of Resort Properties, will join Brown Harris as executive vice presidents.

On the building management side, Terra s buy of Heron Ltd. comes close to doubling its market share in the business. Heron manages 7,000 units in 78 buildings, which will be added to Brown Harris Stevens current roster of 10,000 units in 170 buildings.

The firm will continue to operate under the Heron name and president Ronni Lynn Arougheti will remain in her current post.

“Brown Harris Stevens has a lot of back office capabilities, like technical and accounting expertise, that make for economies of scale,” Burris said. “In terms of physical property management, it s a very personalized thing, and there are no economies of scale, but we don t overload the manager.”

Burris also said Brown Harris Stevens has carved out a niche in serving high-end buildings.

“In term of high-end properties, I think we are the leading company,” he said. “We won t manage non doorman product, or large complexes.”

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