The dust has settled following the mid-year “league table” season, with Midtown-based investment bank and brokerage Eastdil Secured taking the top slot, ahead of its chief rival, CBRE Group, for local and national sales during the first half of 2012. Yet behind the simple and sparse rankings by data firms and trade publications —The Real Deal, among them — there was a flurry of phone calls and emails among brokerages, principals and those creating the rankings to challenge and sort out who received credit on which deals.
The Real Deal learned of industry efforts involving top firms aggressively seeking clarification of claims of credit from rival firms’ deals in Manhattan, including 14 Wall Street and 530 Fifth Avenue. The effort had mixed results. Some groups assigned credit for these deals to Eastdil; others, including TRD, did not. The confusion raises questions about how brokerage firms should be given credit.
After all, there is no single standard to determine what constitutes “brokering” a deal or at how much it should be valued. For example, brokers debate whether a firm should get credit for $100 million on a $100 million deal if the broker only represented a $10 million equity piece. In addition, brokers debate whether an agent who brings in financing but does not bring together the main buyer and seller should get credit.
“There are always gray areas if you get uber-complicated with the first position [debt] and [mezzanine debt], or where you have a bankruptcy,” broker Timour Shafran, managing principal with the boutique investment firm Citicore, told The Real Deal. “It can get complicated who is representing who and who is the representative for the transaction.”
This past January the real estate data firm Real Capital Analytics revised its methodology for ranking brokers — spelling out its standards that define how an agent gets broker credit, the firm’s website says. For example, now brokers are given partial interest sales at the pro-rated share, whereas before minority interests were not included.
The rankings put out by such outlets as The Real Deal, Real Capital Analytics and by the Hoboken, N.J.-based trade publication Real Estate Alert are vital to many in the industry and brokers said they are used in marketing materials to prospective clients to show the breadth and market share. In addition, real estate research firms like Real Capital Analytics and CoStar Group note which brokers are involved in which transactions in their online databases.
The background tug-of-war over deal credit underscores how important the rankings are to firms, and how many see it as setting the record straight as much as defending a firm’s turf.
“There is a lot of competition in this industry, and brokers by nature are very competitive,” Adelaide Polsinelli, a senior director at investment firm Eastern Consolidated, said. “There is a lot at stake. It is a competitive advantage to take [rivals] off deals, to drop them down a notch.”
In the 530 Fifth Avenue sale, sources close to the buyers, Murray Hill Properties and Crown Acquisitions, said Eastdil was not involved, and industry sources said Eastdil did not represent the sellers, a joint venture including the Moinian Group and the Chetrit Group. But a source affiliated with an equity partner on the buyers’ side told TRD that Eastdil did represent the firm.
The sellers did not respond to TRD’s requests to verify whether Eastdil was involved. TRD did not give credit to them for the deal, nor did CoStar. However Real Capital Analytics and Real Estate Alert, whose lists came out after TRD’s —and may have received additional information from the parties confirming Eastdil’s involvement — did.
In another example, in which Russian investor Alexander Rovt recapitalized Capstone Equities’ 14 Wall Street in April, several industry sources claimed Eastdil had been hired to sell $75 million in mezzanine debt on the building held by California-based Shorenstein Realty Services, but had failed to sell that debt. Then, Capstone hired Howard Michaels’ Carlton Group to help put together a final deal, sources said. Contradicting that, a source with knowledge of Capstone’s thinking, told TRD that Eastdil had in fact also been hired to put the deal together, along with the Carlton Group, and both should get credit.
Complicating the deal further, a source with knowledge of the Carlton Group provided evidence that Carlton was the sole broker on the deal, so TRD did not credit Eastdil on the transaction. As in the case of 530 Fifth Avenue, Real Estate Alert did give credit to Eastdil, as did Real Capital Analytics. CoStar did not give any firm credit.
The main industry rivalry is between Eastdil Secured and CBRE Group, which dominate the large investment sales market, both nationally and in Manhattan. TRD ranked Eastdil first in Manhattan sales greater than $50 million in 2012 through June with $1.9 billion. CBRE was second with $1 billion.
Eastdil has a specialty in “off market” deals, which by their nature can be more difficult for outsiders to know what the firm’s involvement was.
Real Estate Alert reported last week that nationally Eastdil was the top office broker with $6.1 billion in transactions greater than $25 million during the first half of 2012, while CBRE was second with $4.9 billion.
Of course, brokerage disputes are nothing new. Michaels’ firm Carlton Advisory Services this month filed suit in New York State Supreme Court against the Sapir Organization, claiming Sapir never paid Carlton an $8 million commission on an $806 million loan made in 2006. The Sapir Organization acknowledged in a statement to TRD that it did not pay the commission, but said no commission was due. “We find the accusations odd in light of the fact Mr. Michaels waited six years to claim credit for the successful transaction with Credit Suisse to which he had no connection,” a Sapir spokesperson said.