Is @properties scaling up, or selling out?

Brokerage’s deal with a private equity firm fuels speculation that big change is afoot

Chicago Archive /
Jan.January 28, 2019 11:00 AM

Clockwise from top left: @properties’ Michael Golden and Thad Wong and Quad-C Chairman Terry Daniels (Credit: @properties, Quad-C, and iStock)

Thad Wong and Michael Golden, the urbane and media-savvy founders of @properties, had plenty to celebrate as the clock ran out on 2018.

The firm opened seven new offices last year, extending its dominion from the Fox Valley to southwest Michigan. It nabbed star broker Debora McKay from Coldwell Banker, setting it up to potentially overtake the national giant in 2019 as the Chicago region’s largest brokerage by deal volume. And it managed to prevent an exodus of agents to Compass, whose arrival here in late 2017 sucked up much of the market’s top talent.

There was one important caveat, however: In 2018, Wong and Golden didn’t own all their success themselves.

In April, with no fanfare, the partners sold a significant share of their company to Quad-C, a Virginia-based private-equity firm that controls an umbrella of diverse businesses. The size of the stake wasn’t disclosed, but Quad-C lists “majority positions” among its investment criteria. Quad-C still doesn’t list @properties as a portfolio company on its website, and its managers didn’t respond to requests for comment.

When The Real Deal broke news of the sale in November, Wong and Golden affirmed they will “continue to own and operate” @properties. Quad-C’s investment, they said, would “expand the development and deployment” of new technology and marketing tools that would “help agents run their businesses more efficiently and profitably.”

Wong and Golden declined to comment for this story. But several brokers within and outside the brokerage interpreted the Quad-C deal as a reaction to Compass, the venture-capital backed residential brokerage that was most recently valued at $4.4 billion and has transformed the industry’s national landscape through a flurry of acquisitions and marquee agent recruitments.

With Compass entering its second year in Chicago, and the residential industry facing a host of existential challenges, sources said @properties likely saw its options as clear: beef up or wither away.

“The brokerage business is under assault from tech companies and new programs that are continually trying to disintermediate brokers from the sales process,” said Jeff Berman of Camber Creek, a venture-capital firm that invests in real estate technology. “So in order to grow, they’re going to have to incorporate that new technology to stay relevant.”

Who said it: Reffkin or Wong?

“Somebody needs to build a real estate company whose sole focus is servicing their brokers, so that brokers can be better at their craft, so that they can generate more revenue,” Wong, looking more like a liberal-arts professor than a luxury broker, said during a 2015 keynote speech.

The sentiment mirrored Robert Reffkin’s battle cry. A former chief of staff to then-Goldman Sachs COO Gary Cohn, Reffkin founded Compass in 2013 with Ori Allon, an engineer who sold his companies to Google and Twitter. Reffkin, through six funding rounds that have raised an incredible $1.2 billion, defined Compass as a firm focused on empowering agents by saving them time and trouble so they can focus on selling.

Compass aims to have 20 percent of Chicago’s market by 2020 and is already one of the city’s top 10 firms, with over $1.4 billion in total sales, according to TRD’s review of Cook County property transactions from December 2017 to November 2018. (The figure includes more than $300 million in deals done by agents from Conlon Real Estate and the Hudson Company, which were acquired by Compass in April and June.) The company has positioned itself as a disruptor with big ambitions, not unlike Wong and Golden during their rise.

Today, @properties remains the market leader, with $6.5 billion in Cook County sales volume during the same 11-month period. Publicly, at least, the firm has talked down Compass as a competitive threat.

“A lot of national firms tend to purposely ignore the reality that Chicago is the most competitive market in the country for real estate brokerages,” Wong told Crain’s in June. “Dropping a national platform into this market is rarely a recipe for success.”

That nonchalance didn’t prevent @properties from giving its new rival a backhanded welcome in March, when the firm put up a billboard outside of Compass’ Lakeview digs with the slogan: “Don’t ask for directions from a tourist.”


Since 2012, when Realogy (parent company of Coldwell Banker and Sotheby’s International Realty) went public, independent shops have faced compounding pressure to scale up or get out of the way.

“Just in the past two or three years, you’ve seen the largest platforms in real estate, including Realogy’s brands, RE/MAX, Keller Williams, Berkshire Hathaway Home Services, Compass, and others really ramp up their growth ambitions and go after market share,” said Anthony Paolone, an analyst with JPMorgan.

Companies have had to grow in part through innovations in apps and software that help agents generate leads and track clients, Paolone added.

Tying up with private equity could give @properties the funds and know-how to invest in the long-term health of the firm. Agents could tap into various technologies developed or controlled by Quad-C’s portfolio of companies, said Zach Aarons, co-founder of MetaProp, a New York-based real estate tech incubator and investor.

“An investor like this [Quad-C] will usually try to roll up a handful of companies in the same industry, and extract synergies from back-office consolidation,” Aarons said. “Suddenly, [@properties] would have a much bigger balance sheet to play off of, and they’d be able to leverage the funding of a bunch of different companies.”

It’s unclear which tools from Quad-C’s portfolio, which spans industries from health care to transportation to manufacturing, could be useful for a residential firm. One of its companies, a Missouri-based education software firm called Colibri, counts real estate companies among its clients.

Wong and Golden have credited their early emphasis on tech as a key growth factor. The brokerage uses an in-house app that supports instant communication between employees and agents, and the duo backed a $5 million Series A round for lead-generating software

In 2018, Wong was named one of Inman’s “Innovators of the Year.”

In their November statement, Wong and Golden said Quad-C’s investment would help them market their in-house software to “independent firms outside the Chicago market.” Compass announced a similar technology-licensing initiative last year, but scrapped it after agent backlash.

Laura Ellis, president of residential sales at Baird & Warner, said outside investors often rush to the promise of new technology before it’s been battle-tested.

“People get infatuated with new bright shiny things that look and sound innovative,” Ellis said, “but there’s nothing under the hood.” Baird & Warner brokers, she added, are content to buy software that works for them, instead of being tied to some shared platform.

“We don’t get hyped up on whether our tech is in-house proprietary,” Ellis said. “We want the best stuff, and we don’t get hung up on ego.”

Who’s the boss?

Software companies are usually forced to take a piecemeal approach to selling their product to brokerages, pitching one field office at a time, according to Camber Creek’s Berman. But “if a private-equity firm owns a big chunk of the company, suddenly it become possible to scale, and you can say: ‘We’re buying this tech for the entire firm,’” he said.

But this access doesn’t come without a cost. By opening themselves up to outside capital, Wong and Golden are giving up some ownership of the company they built from scratch, and whose Chicago-centrism they’ve cast at the center of their brand.

Selling a stake to an out-of-state firm means they can no longer claim to be a hometown company and will have to relinquish some control, according to a senior member of a competing brokerage, speaking on condition of anonymity.

“From our perspective, @ is basically sold,” the broker said. “Now that Thad and Mike have put themselves in a position where they’re beholden to an investor, they won’t be able to shoot from the hip with their own strategy and direction. In a way, they’ve handcuffed themselves.”

At least one assumption is considered safe: Quad-C will seek a fat return on its investment. And even if agents benefit from new tech, it’s hard to see how a company with little name recognition outside the Chicago area could keep expanding its territory, sources said.

@properties may be near the top of the market now, but its industry is facing ominous signs. Realogy saw its stock nosedive last year, and Warren Buffett’s $130 million buyout of Brookfield Asset Management’s in-house brokerage “dragged down the market, ” a New York-based industry executive said.

“People are not paying big numbers for brokerage firms right now,” the executive said. Elliman’s CEO Dottie Herman recently sold her stake in the firm to her partner for $40 million, a number that many industry observers felt was low and said demonstrated the tenuous state of residential brokerage.

Wong and Golden have also kept busy outside of @properties, fueling speculation that they could be looking to move out of the business. Golden teamed up with MCZ Development in 2016 to build an apartment building in Fulton Market, securing a $41 million loan on the property last month. And in 2017, Wong invested in Enodo, a software that evaluates multifamily deals.

In June, Wong told Crain’s the partners weren’t interested in selling, saying there was “more to accomplish in terms of building @properties’ brand in the local marketplace and driving innovation within the industry.” But that was after they had already sold a chunk to Quad-C.

“If you’re at the top of the market in a tough business and you’ve got a lot of competition coming at you from all sides,” Aarons said, “that’s a good time to be a seller.”

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