The heads of Manhattan’s two largest residential brokerages have very different ideas when it comes to deploying cash.
While Douglas Elliman plasters its logo on seats at Madison Square Garden and shells out on costs related to its expansion into markets like Los Angeles and Aspen, the Corcoran Group, backed by public company Realogy, has taken a more conservative approach to investment. That’s also true of its new development business, where it prefers to assign dedicated on-site sales people to new developments, rather than giving them over to star resale brokers as a recruiting and retention tool.
The brokerage chiefs traded burns and compliments throughout the 45-minute debate, and each took pains to defend their business strategies.
“Her model is a much better way for a company to make money, there’s no question,” Lorber said during the debate, which was moderated by TRD publisher Amir Korangy. “Her new development division is much more profitable than ours, but being an entrepreneur I look past that and say, ‘so, we make a little less money or a lot less money during our growth mode? It’s ok. I’m willing to invest that money to build.”
Lorber, whose firm counted only $100,000 in profits in the first quarter, admitted that many of Elliman’s expenditures may not pay off in the immediate term — “All those markets in the beginning are losers,” he said of Aspen and L.A. But Lorber said he has the luxury of being able to think longer-term, since he doesn’t have Realogy calling the shots.
“She makes bonuses and the bonuses are based on profits,” he said of Liebman. “If she spends more, and it doesn’t have an instant result, it comes out of her pocket. I just look at it differently.”
The Elliman executive was also quick to point out that Realogy didn’t have a sterling first quarter either, noting its adjusted net loss of $23 million (it lost $17 million during the same period in 2016).
“You can assume that part of that came from the losses in Corcoran,” he said.
For her part, Liebman defended her company’s approach, contending that she’s just better at getting value for money.
“If I returned results of $100,000 a quarter, I’d be calling all of you here begging for a job,” she said, citing Elliman’s first quarter earnings. “It’s not Realogy holding my hands behind my back. I do what I think delivers the best results. I think we’ve become very adept at getting more bang for the buck.”
As for handing out new developments to resale brokers, she said agents shouldn’t necessarily think of the projects as golden tickets.
“New development: it’s not so easy. What do you think, that you just show up and they give you a big check? It’s not a gift that Howard is giving someone. They have to work,” she said.
Liebman on an Elliman exec she’d like to have on her team: “If there was one, I’d have them.” #TRDForum
— The Real Deal (@trdny) May 15, 2017
The two executives also sounded off on some of the big issues facing the market, including the rise of venture capital-backed brokerage Compass, with which both of their firms have locked horns over broker poaching.
Lorber cited an interview given by Los Angeles broker Mauricio Umansky to The Real Deal last month, in which he said Compass would be dead in five years.
“I don’t agree that it’s going to take that long for it to happen,” he quipped.
— The Real Deal (@trdny) May 15, 2017
Lorber also said that he and the heads of other firms have been reluctant to send their agents to new development open houses hosted by Compass, for fear they’re just a guise under which to recruit agents. “I don’t see their plan happening,” he said.
Liebman and Lorber also sounded off in on the state of the luxury market, which is widely said to have slowed over the past year.
“Sometimes we have to part ways with developers because we don’t agree on strategy,” Liebman said. “They’ll say, ‘But I have to get those prices.’ But if it’s overpriced, it’s not moving. There’s no forgiveness for overpriced apartments in this market.”