As rental firms grapple with rising costs and threats to their commission fees, two mid-sized brokerages — Living New York and Mdrn. Residential — are joining forces, The Real Deal learned.
Living, a Midtown firm focused on landlord representation, has acquired Mdrn., the companies said Thursday. Founded in 2004, Living owns a portfolio of buildings and it has 120-plus exclusive landlord relationships across 375 buildings, according to its website.
In a statement, Living co-founder Devin Someck said his company will absorb 40 agents and staffers from Mdrn., for a total headcount of 125. “Adding this core group of top producing agents to our growing platform is a strategic moment for Living New York,” he said. Mdrn. founder Zach Ehrlich will not join Living, but CEO Kobi Lahv will.
According to Ehrlich, the deal was motivated in part by market “headwinds.”
“We’re trying to position the company to have more exclusives under its control,” he said. “Open listings are essentially listings that any brokerage can work, but there’s no guarantee they can rent those apartments.”
With a business model split between rentals and sales, Ehrlich said Mdrn. generated $3 million in revenue in 2019, which was flat compared to 2018.
Before the deal with Living, Mdrn. had 49 licensed agents, according to an analysis of state licenses by The Real Deal. That’s down from 71 listed on the company’s website in July, according to the Internet archive’s “Wayback Machine.”
According to Lahav, selling Mdrn. to Living was a “natural progression” based on market forces. “I think brokerages, to survive in the future, will have to have a component of management capability, whether they manage the buildings or provide brokerage services, he said.
Although Ehrlich said the company wasn’t in trouble, Mdrn. was sued last month after it defaulted on rent at its office at 443 Park Avenue South. According to a lawsuit, filed by landlord Recycle Track Systems, the company hadn’t paid rent since September 2019 and owed $203,922.
“It’s a disputed rent amount; it’s not like we were evicted or anything,” according to Ehrlich, who said Mdrn. moved out of the office two weeks ago. “Our lease was up at the end of January anyway,” he said.
Not all of Mdrn.’s agents joined Living, however.
Bond New York said Wednesday that it hired a veteran manager Cammy Cutler, as well as 20 agents from Mdrn. Cutler worked at Citi Habitats before joining Mdrn. in January 2018, according to her LinkedIn profile.
Led by co-founders Noah Freedman and Bruno Ricciotti, Bond is one of city’s biggest residential brokerages with more than 500 agents and four offices, according to TRD’s most recent ranking of top firms. The influx of agents from Mdrn. comes a month after Bond acquired Caliber, a 56-agent firm in Midtown.
“We’ve just gotten a lot stronger very quickly, so that’s exciting,” said Ricciotti, who said the batch of agents from Mdrn. brings Bond up to around 580 agents.
Asked about Cutler’s departure, Ehrlich characterized the move as a “disassociation” and said, “We had redundancies to a certain extent.” He said her expertise in open listings didn’t fit into the company’s new business model. Of the agents who left, he said, most were “mediocre agents” who were “non-performing.”
According to Ehrlich, the agents who remained at Living account for 88 percent of the firm’s gross production, Ehrlich said. “Bottom line, our top producers are with us.”
Overall, rental firms have been squeezed by StreetEasy’s rising fees, a soft market and a wave of pro-tenant legislation, including a cap on rental application fees. Last month, the Corcoran Group and Citi Habitats merged after operating as sister companies for nearly two decades.
This month, rental agents were dealt another blow when the Department of State unexpectedly issued guidance banning tenant-paid commission fees.
On Feb. 10, however, a judge issued a temporary restraining order on the rule after the Real Estate Board of New York and others filed a lawsuit to block the guidance from taking effect.
Last year, Bond’s business was about 55 percent rentals and 45 percent sales. Ricciotti said both markets are picking up.
“Barring any more manipulation from political influence, I think we’re going to have one of the strongest rental markets I’ve ever seen this spring,” said Ricciotti. “In February, which is a notoriously high-inventory time of year, there are landlords with a few thousand units with no vacancy for March and April.”
Write to E.B. Solomont at [email protected]