The Real Deal Los Angeles

Compass now claims its agents account for $8B in sales — but what’s that number made of?

Brokerage reported its agents generate $6B in annual sales just two months ago

September 02, 2016 10:00AM
By Katherine Clarke

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compass-numberFrom the New York site: Compass’ math keeps getting fuzzier.

The venture capital-backed brokerage, now valued at north of $1 billion, said Friday that its agents now account for a whopping $8 billion in annual sales, up from $6 billion in July. That’s a 33 percent leap in two months.

The rapid rise in the firm’s self-reported numbers can be attributed at least in part to its expansion into the San Francisco market, which it announced Friday. It’s recruited several high-producing agents in that market, including Coldwell Banker’s Malin Giddings and Monica Pauli, who did a combined $1 billion in sales in 2015, according to Compass.

Their logic goes as follows: While Compass certainly doesn’t have an $8 billion business now — in its biggest market, Manhattan, the company closed just $663.3 million in deals during the 12 months ending Feb. 29., according to a recent analysis by The Real Deal — it could have in the future, provided that all of its recruits close at least as many deals in their first full year at Compass as they did they did the prior year.

As TRD reported in July, the figures Compass has been touting are heavily linked to the historical performance of their agents, in many cases from well before they joined the firm. That’s especially the case in new markets such as San Francisco, where Compass agents have yet to close a deal.

The company’s competitors say the likelihood of Compass agents repeating their prior year sales volume in the coming year is low, since agent production typically drops temporarily when agents switch firms. That, combined with a dip in velocity in the luxury market, could eat into Compass’ estimates.

The San Francisco launch comes just days after Compass announced it had raised another $75 million in VC funding, bringing its valuation to more than $1 billion. The round, led by Wellington Management, means the residential brokerage has raised $210 million from venture investors.

“Now that Compass has a footprint in one of the world’s leading tech hubs, I am confident that we will achieve even greater success building a more transparent and efficient real estate experience for agents and consumers” Compass co-founder and chairman Ori Allon said in a statement.

Wellington’s involvement in the latest raise prompted speculation from some industry insiders that Compass could be gunning for an IPO in the near future. The mutual fund typically invests in late-stage startups and shepherds them into the public markets.

The company’s other Bay Area recruits include Butch Haze, Rick Teed and Amanda Jones, all from Sotheby’s International Realty.