Separating fact from fiction

TRD New York /
Dec.December 09, 2008 06:09 PM

The Edward Lee Cave holiday party will be interesting this year.

The fete is scheduled for tonight, the same day rumors swirled that the longstanding white shoe real estate firm would close.

“It’s 100 percent not true,” Kathryn Steinberg, a senior vice president at the company, said of the rumor. “We are celebrating our Christmas party tonight. We did not cancel this year, as many firms did.”

The society Web site New York Social Diary reported that Edward Lee Cave would be closing and that the company’s top brokers would move to Brown Harris Stevens. The site also caused quite a stir by reporting a similar story about the Corcoran Group, one of the city’s largest brokerages. The Web site retracted the post after emphatic denials by both companies.

Corcoran attorneys called New York Social Diary’s David Patrick Columbia this morning and threatened legal action if the site did not retract the post, said Corcoran CEO Pamela Liebman. Columbia did so shortly thereafter.

“There’s no truth whatsoever [to the rumors],” Liebman told The Real Deal. “It’s all nonsense.”

Corcoran is “uniquely positioned” to weather the current downturn, she said, because its parent company, NRT, owns rental brokerage Citi Habitats as well as Corcoran Sunshine Marketing Group, which focuses on new developments, adding: “We have top brokers in the industry.”

Columbia’s report that top agents from Corcoran would be moving to Brown Harris Stevens are false, Liebman said.

One name tossed around was Corcoran Senior Vice President Leighton Candler.

“At this time, I have no plans to change firms,” Candler said in an e-mail.

Corcoran has taken some steps to cut costs, however. Liebman said the company is “cutting unnecessary expenses,” reducing advertising and marketing costs and has eliminated back-office positions through both attrition and layoffs.

“We have eliminated some positions because when you’re doing less volume of sales, it’s not necessary to have so many people to support the back office,” she said, but declined to comment on the number of positions the company has eliminated.

Columbia may have gotten the details wrong, but the economic pressure felt by brokerages is real, industry experts said, with many small and mid-sized brokerages expected to close their doors in the coming months.

Veteran broker Alice Mason will close her Madison Avenue office after 45 years in the business, she told the Post’s Braden Keil.

She said that she and many of her brokers will continue selling property from their “home offices.”

Hers will not be the last firm to close, said former Douglas Elliman President Paul Purcell, a founding partner in real estate consultancy Braddock + Purcell and brokerage New York’s Charles Rutenberg Realty.

Due to the severe drop in real estate transactions since October’s stock market crash, real estate firms are facing “a tremendous cash flow issue,” he said. “The money that was coming through the doors has shriveled up tremendously.”

In addition to slower sales, apartments are selling for lower prices, which also cuts into brokerage’s profits, said Purcell, who recently had to tell a seller that her home, originally priced at $1.75 million, would now need to be listed for just under $1 million.

He said that while firms can cut expenses like holiday parties, they often cannot easily get out of leases for their offices or reduce brokers’ portions of the proceeds. As a result, many firms may soon run out of cash.

“If you don’t have the transactions, how long can a company sustain themselves without a business flow?” he said. While brokerages of Corcoran’s size are unlikely to fail at this point, “I’d be worried about mid-sized firms.”

For the time being, though, Edward Lee Cave’s Steinberg said her firm, which specializes in Upper East Side residential sales, is doing fine.

“I’m sitting at my desk anticipating a closing, with two big exclusives,” she said.

The firm currently has no plans for restructuring, and “there are no talks about being bought out or merging,” she said.

Still, what the future holds is anyone’s guess.

“The current environment is not good,” she said. “None of us knows anything about any of our industries at this point. We’re all waiting.”

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