Edging out East End rivals

Competition intensifies in Hamptons as brokerages bleed offices and agents

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The sprawling sandy beaches, glitzy nightclubs and manicured green lawns of the Hamptons may make a relaxing getaway for the rich and famous, but it’s become a fiercely contested battleground for major New York City real estate firms.

At the height of the market, home prices on the East End of Long Island soared to some of the highest in the world, even topping the $100 million mark, and real estate companies expanded aggressively in the region. But the Hamptons market is now contracting violently, as Wall Street tycoons burned by this fall’s financial crisis no longer have the cash for second (or third) homes. Many of the large Manhattan firms that have taken up residence in the Hamptons are now shrinking along with the market, creating opportunities for smaller firms to gain ground.

The Corcoran Group, which in 2003 began an aggressive buying spree in the Hamptons, is still the largest firm in the area with 333 agents, according to The Real Deal’s annual survey of top firms. But Corcoran has lost agents and closed four spaces in the last few months.

While competitors Prudential Douglas Elliman and Brown Harris Stevens are closing the gap, both companies have also seen their growth stymied by the slow market.

Enter fast-growing independent firm Town & Country Real Estate, founded in 2005 by Corcoran alum Judi Desiderio. Town & Country, which did not make it on to The Real Deal’s survey the last time data was collected in 2007, leapfrogged ahead of two older companies to take the fourth slot.

“We expect to have the number one market share in a few years,” said Desiderio, adding that her company doesn’t need to be the biggest to do that. “If you have the right agents, you’ll make the most commission dollars, which is what counts.”

Town & Country, which now has 86 agents, has nearly doubled in size since 2007, when it had 51. It maintains two offices on the North Fork and seven offices in the Hamptons, including a newly opened branch in North Sea Harbor, an enclave sandwiched between the villages of Sag Harbor and Southampton.

Corcoran, by contrast, dropped 80 East End agents in the past two years, and has reacted to this fall’s Wall Street meltdown by closing brokerage offices in Hampton Bays, Cutchogue and Sag Harbor, and an administrative office in Southampton. It is also scheduled to close a brokerage office at 20 Main Street in East Hampton and move all the agents there to its office at 51 Main Street in the same town. That leaves Corcoran with 11 offices on the East End, tied with Elliman’s 11 branches and more than Brown Harris Stevens’ nine.

Pamela Liebman, the president and CEO of Corcoran, said it made financial sense to close some Hamptons offices since sales have slowed in the region.

“We’ve done some consolidations in the Hamptons, with deal volume the way it is,” said Liebman. “The Hamptons are a market that definitely has changed. The disconnect between buyers and sellers is significant.”

According to a market report by Elliman, the number of home sales in the Hamptons and the North Fork fell 50 percent to 201 in the first quarter of 2009, down from 400 in the same period last year.

The median sales price plummeted 23 percent to $605,000, slipping from $790,000 in the prior-year quarter.

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Corcoran’s cutbacks represent a marked contrast to its business model during the boom, when it gobbled up East End firms like Dayton-Halstead, Desiderio’s Cook Pony Farm and the 12-office firm Allan M. Schneider Associates.

“Corcoran bought up the East End,” said Paul Brennan, regional director of the Hamptons for Elliman.

Elliman, which now has 319 East End agents, has gained some ground since 2007, when it had 295. But it, too, is struggling in the face of the difficult market, Brennan said.

“We’re a second-home market,” he said. “It’s not a rosy picture out here.”

Elliman has not yet closed any of its offices, but has had to cut staff in order to keep them operating, he said. “We’re trying to keep them open in hopes that things begin to turn around,” said Brennan.

Howard Lorber, chairman of Elliman, said, however, that the company will consolidate its two East Hampton offices when the lease on one of them is up in September, and is considering closing several others.

Brown Harris Stevens, ranked third on the survey, has also steadily expanded its physical presence since first entering the East End market back in 2004. “We’re a very permanent player out here,’ said Peter Turino, the president of Brown Harris Stevens of the Hamptons. “We believe in the longevity of the market.’

He said the company will stick with nine offices for now. However, it has lost East End agents since 2007, when it had 171. Now, it has 149, according to The Real Deal’s survey.

Turino said the company is also cutting back on advertising.

“We’re going through a transition period,’ he said, but added that the company is committed to growing its Hamptons presence. “It’s only a temporary setback.’

The fifth spot on the survey was a tie between Century 21 Albertson, which had 84 agents, down from 134 in 2007, and Sotheby’s International Realty, which grew modestly from 82 agents to 84 since the last time the survey was done.

Desiderio said her company has benefited from relationships with independent Manhattan firms like Warburg Realty and Stribling, who refer clients to Town & Country rather than send them to competitors Corcoran, Elliman and Brown Harris.

Desiderio left Corcoran because she “didn’t see the Manhattan business structure working out here,’ she recalled. “The environments are so vastly different. They just don’t realize the constraints of doing business out here.’

She does a large chunk of business with year-round East End residents and in the lower- to middle-end of the market, she said, while some of the larger companies are more reliant on increasingly rare sales of multi-million dollar second homes.

She expects her company to continue to thrive while the larger companies struggle. “No matter what industry you’re in, the big companies are not nimble enough to navigate these waters,’ she said.