“A cloud on the industry:” After Futterman’s firing, questions arise about Newmark’s growth strategy

Analyst wonders if acquisition of RKF is paying off
By David Jeans and Rich Bockmann | May 31, 2019 03:30PM

Robert Futterman (Credit: Getty Images)

Robert Futterman through the years (Credit: Getty Images)

Newmark Group’s firing of top retail executive Robert Futterman this week highlighted the risks of big firms trying to turbocharge growth through acquisitions.

“It puts a cloud on the industry in a way that you don’t want to see,” said Joe Harbert, who oversees Avison Young’s Northeast operations and is a longtime friend of Futterman’s. “Obviously something happened, and companies do not terminate people for cause lightly.”

Futterman, an icon of retail brokerage who has represented global brands including Apple, FedEx and Nordstrom, was put on leave at the end of April. Since his dismissal this week, Futterman has been holed up in Montauk, according to the New York Post. He told the publication that he was “unjustly persecuted,” “falsely accused” of using drugs and alcohol, and does “not plan on sitting back.”

The messy incident puts Newmark’s acquisition of RKF – a centerpiece of the public company’s strategy to expand its retail business – into the spotlight.

Alex Goldfarb, a senior analyst at Sandler O’Neill who covers Newmark, noted that the firing comes at a time where Newmark’s stock is trading at around $8 per share – or roughly half of its initial public offering price in December 2017. He noted that Newmark’s fundamentals are performing well and the company’s made positive moves to address things like its diluted stock, but said that the Futterman firing could have Wall Street questioning Newmark’s acquisitions strategy.

“You put those two together and I think it’s fair that analysts ask, are these acquisitions really creating value?” Goldfarb said. “Does this call into question, maybe you guys are trying to grow too much through acquisitions and – given where the stock is trading right now – maybe that’s not the right strategy.”

Neither Futterman nor RKF responded to requests for comment.

Futterman, 60, has attracted headlines for the wrong reasons before. In 2012, he pleaded guilty to a felony charge for aggravated driving while intoxicated, and a misdemeanor charge for DWI, according to the Suffolk County District Attorney. Four children aged under 16, including his daughter, were in the vehicle at the time of the arrest on Long Island.

Last month, he was arrested in Texas, reportedly found in possession of marijuana. He then flew to Newmark’s annual conference in Los Angeles, where, according to people in the room, he interrupted a speech being given by Newmark’s chief executive Barry Gosin.

After those events, Futterman was banned by Newmark from attending the International Council of Shopping Centers’ annual retail expo in Las Vegas earlier this month, before he was ultimately fired for cause this week. According to the Post, as per the contract Futterman signed when he closed on the sale of his company to Newmark in September 2018, the dismissal means he is barred from working in real estate for 11 years.

“No acquisition is ever 100 percent perfect,” Harbert said. “It’s the risk of human behavior; they try to mitigate those risks with contractual provisions to make sure people come and do the things they came to do.”

RKF had been in talks to be acquired by Colliers International in 2015, but those talks fell apart at the eleventh hour when executives at RKF refused to drop the company name as part of the agreement, according to a source with knowledge of those discussions. Futterman had also been in prior discussions with CBRE regarding an acquisition.

The firm is on the hunt for a new chief executive, and Michael Flood, RKF’s chief operating officer, is serving as the interim leader. A source at Newmark said that operations at the firm will remain largely unchanged, as Futterman’s role was limited to recruitment and building the retail brokerage unit.

“It’s business as usual, nothing has changed,” the source said. “It’s been a couple of years since [Futterman has] been on the day-to-day.”

The source added: “It’s just a sad, sad situation.”