The Real Deal New York

Tumult at Keller Williams NYC: Interim head out, Midtown office hemorrhages agents, talk of cutting office space

Layoffs and defections have fed rumors of firm's demise
By E.B. Solomont | May 22, 2018 06:57PM

Ilan Bracha

UPDATED: May 23, 1:30 p.m.: Keller Williams NYC is going through a major shakeup, with resignations in quick succession of two leaders of its Midtown office and plans to significantly downsize its footprint amid a bruising few months marked by manager layoffs and agent defections.

Josiah Hyatt, who had been the interim “team leader” for the Midtown-based franchise since April, left the firm Friday to start his own brokerage, sources said. He had been leading the office since Lezley Charles, who held the position of CEO of that franchise, was reportedly laid off.

Charles, a veteran manager, oversaw a massive hiring spree that some sources said the firm was unable to absorb. It has been hemorrhaging agents in recent months, and several managers were also laid off.

Ilan Bracha, who along with business partner Haim Binstock owns the Midtown franchise as well as the Keller Williams franchise in Tribeca, said the firm is actively searching for a replacement for Charles, who Bracha said “remains active in the KW network.”

Keller Williams NYC placed fourth on The Real Deal‘s recent ranking of Manhattan residential firms by agent headcount. Its headcount across both Manhattan-based franchises ballooned to 820 as of January 2018, representing a 38 percent year-over-year increase.

With the exception of Compass — whose venture capital-fueled recruiting spree saw headcount jump 138 percent year-over-year — Keller Williams NYC was the fastest-growing firm in Manhattan last year.

But more bodies doesn’t always mean more business.

When it came to closing deals, Keller Williams NYC was down 18 percent year-over-year to $193.1 million in sell-side transactions, placing 13th among Manhattan firms.

“If you have one of the highest agent counts and one of the lowest incomes,” said one former staffer, “it tells you all you need to know, doesn’t it?”

In recent months, the Midtown franchise lost scores of agents who went to rival firms like Compass and even to Keller Williams Realty Empire, a Brooklyn-based franchise. In May, the two Manhattan franchises of Keller Williams together had 465 agents, down 43 percent from the time of TRD’s January ranking.

With its ranks depleted, sources said Bracha and Binstock had been looking to downsize the Midtown office’s footprint.

Since 2015, the firm has occupied 29,000 square feet at 1155 Avenue of the Americas, space it subleased from Dow Jones. (That deal was reportedly for $48 per foot, which works out to $1.4 million a year.)

According to sources, Keller Williams has been looking to sub-sublease at least half of the space. But that helped to fuel rumors that the firm was shutting down entirely, particularly in the wake of Town Residential’s shutdown last month.

“We have no changes to report at this time,” said Darryl Frost, a spokesperson for Austin, Texas-based Keller Williams’ corporate office. “We are continuing to work with our independently owned and operated franchisees in the region on further growth opportunities.”

According to one source, some agents who were loyal to Charles left after her departure. But a former staffer said many of Charles’ hires were inexperienced agents who struggled to close deals, making it difficult for them to pay brokerage fees to Keller Williams ($150/month) and dues to the Real Estate Board of New York ($400/year).

Earlier this year, Keller Williams purged non-active agents from its rolls to avoid warehousing licenses for agents who weren’t active. The owners also took steps to cut costs.

In March, they laid off seven managers in an office “restructuring.” Among those who were demoted or let go included Alexa Johnson, director of marketing; David Popplewell, director of growth (he’s now an agent); Elizabeth Waterman, director of agent services; Joe Hartman, executive assistant to the team leader; Justin Stolarik, interim director of agent services; and Susan LeFevre, market center administrator (who’s also now an agent).

Sources said the restructuring was seen as an effort to be more in line with other Keller Williams franchises around the world. Most don’t have marketing directors, for example, based on the premise that agents can keep more commission dollars but have to pay for more marketing themselves.

Keller Williams agents receive a 70 percent commission split until they hit a certain GCI, when they earn 100 percent.

Sources said Hyatt, who served as interim team leader briefly, was well-liked and that the departure of his team would be a blow to the Midtown office.

“After 13 years as a real estate agent, I have decided it is time to launch my own brokerage!” he said in a Facebook post on Friday. “With 89 deals already closed this year, I look forward to the this summer and closing out 2018 strong.”

Nationwide, Keller Williams is the largest franchise brokerage in the U.S. It said it sold over $300 billion worth of real estate in 2017, up 15 percent year-over-year.

In New York, Bracha and Binstock launched Keller Williams NYC in 2011. In 2016, they launched a separate franchise — Keller Williams Tribeca — which is headed by CEO Mark Chin.

On Tuesday evening, as this story published, Bracha was on a REBNY panel titled: “Inside Secrets of Top Brokers.”