Quantcast

The Real Deal Los Angeles

The final days of John Aaroe Group: A shuttered office, and a sudden retirement

Calabasas opening brought with it financial and managerial drama
By Natalie Hoberman | September 18, 2017 09:30AM

In 1998, after selling his first namesake company, John Aaroe & Associates, to Prudential California, John Aaroe said he was done with the real estate business. But it was a temporary retirement – 11 years later, he was back with the John Aaroe Group.

JAG quickly became one of Southern California’s top brokerages, with nine offices and roughly 400 agents around the area. Star brokers like Sally Forster Jones and Aaron Kirman flew its flag, allowing the firm to hit over $2 billion in sales in 2015. In early July, the firm announced its 10th office would be in Calabasas, a glitzy enclave put on the map by the Kardashians.

But this month, after less than two months in operation, JAG shuttered its Calabasas office. Ten days later, Aaroe himself headed into retirement, not providing a reason for his sudden departure. The brokerage he leaves behind will not continue as John Aaroe Group; instead, it’ll be rebranded as Pacific Union, which acquired the firm earlier this year.

The motivation for Aaroe’s retirement remains unclear, and representatives for JAG declined multiple requests to comment for this story. But through interviews with brokers and leadership at the firm, The Real Deal has learned that the launch of the Calabasas office brought with it financial headaches, a lawsuit, and even talk of a mutiny against management.

Here’s a deeper dive into what doomed the brokerage in Calabasas before it even got the chance to put up a sign.

An aborted expansion
On July 6, John Aaroe Group joined the Calabasas rat race, choosing the town for its tenth office just months after the firm was acquired by the Bay Area’s leading brokerage, Pacific Union.

JAG took over a 7,000-square-foot space at 23647 Calabasas Road from Ewing & Associates, and hired nine Ewing agents.

Aaroe tapped Donna Schrank from Dilbeck Real Estate to run the show. But almost immediately, insiders said, she struggled. She was only able to convince agents to sign with the firm by offering hefty commission splits and promising to pay marketing costs, according to sources. But Schrank didn’t deliver on those financial sweeteners, they said.

In an interview, Schrank denied ever making the claims regarding splits. She did say she received zero support from the mothership to get things off the ground – money wasn’t even available for toilet paper.

“It was a no-win situation for me,” Schrank said. “[John Aaroe Group] came in with no preparation, no guidance and no plan on what to do.”

After just 35 days in charge, Schrank was let go for failing to meet “recruiting expectations,” she said, despite bringing in four agents. When confirming the closure of the office to TRD, Aaroe said in a statement that “regardless of how well-positioned the location may be, no John Aaroe Group office can be successful without ideal leadership.”

The Price isn’t right
A small claims court lawsuit brought by agent Adam Price shines a light on some of the drama at the firm.

Court records show that Price, who is now at Rodeo Realty, alleged the firm owes him $950 for stealing a deal he procured while at Ewing. The agent had intended to join JAG, but the firm “let him go” before he could even officially sign with the company — after he voiced concerns to Aaroe himself about management, he said.

“This is not the way I wanted to go about getting my commission but unfortunately they left me no other options,” Price said. “They continued to stand by the manager when they shouldn’t have.”

In an email exchange obtained by TRD, Aaroe, who at the time was vacationing in Africa, responded to an email where Price complained about Schrank by firing him.

“The agents are not happy–we have all gotten together and decided that Donna is not an appropriate fit as manager for this location,” the initial email from Price to Aaroe reads. Schrank, Price alleges, hired her friends for positions, prompting him to write to Aaroe: “Donna having her friend is a conflict of interest and the agents feel they have no support or say here.”

Aaroe was unaware, Price said, that he was never officially hired.

“I have personally been faced with having to reinvent myself many times during my career,” Aaroe wrote. “Both as a successful sales agent and later as owner of three highly successful real estate companies. Yes, I have certainly been to the Rodeo many, many times.”

And then, the kicker: “After days of careful though I have come to the unfortunate decision that JAG is not a match for you. It is best that we part amicably today.”

The firm settled with Price for the full amount of the claim, plus filing fees, on Sept. 12, court records show.

Besides having enough broker drama for a Bravo show, the company looks to have been contending with financial struggles.

JAG was paying over $30,000 in rent for the Calabasas space, sources said, and with only a handful of agents and hardly any advertising, the office wasn’t earning its keep. Though it’s a wealthy town, Calabasas has only 25,000 residents, so deal flow could not have been high.

Five JAG brokers moved on to other brokerages as a result of the closing and a few are doing business out of the firm’s Sherman Oaks office, a JAG spokesperson said early September.

What’s in a name
Some industry veterans, such as Ernie Wish, whose Wish Sotheby’s is another recent entrant to Calabasas, said the shutdown of one office could not have been the catalyst for Aaroe’s retirement.

“The man is a legend,” Wish said.

Other observers speculated Aaroe’s retirement could have been set in motion by Pacific Union’s acquisition of JAG.

“You have one company that bought two companies in a similar area with some overlap, so I understand it was probably good timing for John to retire and let somebody else deal with handling the cultures of two different companies,” said Michael Nourmand of Nourmand & Associates.

Mark McLoughlin, chief executive at Pacific Union, declined to comment.

When the acquisition was announced, Pacific Union said JAG would keep its name, as would Beverly Hills-based Partners Trust, which Pacific Union acquired in August. But on Sept. 8, Pacific Union said both firms would eventually operate under the Pacific Union brand.

“There’s definitely something behind him [Aaroe] retiring,” one industry executive said. “Usually if you retire, you may retire but your company [name] doesn’t retire.”

In a statement, the company’s CEO Nick Segal said that “Partners Trust and all of its associates are excited for when the time comes to unify under the Pacific Union name but for now, we’re still operating as Partners Trust and I am still leading the company.”

“I think that it will be interesting when Pac Union starts changing the Partners Trust name,” a source said. “I would think they are probably feeling a bit of uncertainty on what’s next.”

And as for Aaroe himself, it’s unclear whether he’ll have a third act in the brokerage business.

“I’m just imagining,” said HOM Sotheby’s chairman Mike Shapiro, that “he wants to sail off into the sunset and do something else.”