For Compass backers, ROI remains far off

IPO may be in the cards -- but brokerage’s numbers warrant scrutiny
By E.B. Solomont and Katherine Clarke | July 22, 2016 11:15AM

Compass Listings from Aspen, Los Angeles, New York City and the Hamptons and Robert Reffkin Illustration by Lexi Pilgrim for The Real Deal

Compass Listings from Aspen, Los Angeles, New York City and the Hamptons and Robert Reffkin Illustration by Lexi Pilgrim for The Real Deal

From the New York website: For investors in Compass, there are no shortcuts to a payday.

The brokerage is looking to raise about $50 million at a $1.3 billion valuation, which would make it the most valuable residential brokerage in the country by a distance — at least on paper. But according to the firm’s CEO Robert Reffkin, profitability isn’t a pressing goal, and investors shouldn’t expect to reap rewards anytime soon.

“They’re making an investment alongside the management team,” Reffkin said. “The luxury of our capital base is that we can think long-term.”

Compass strutted into New York’s residential market in 2013, vowing to transform the art of selling real estate. By deploying a $135 million venture capital-funded war chest, it expanded aggressively, bagging several firms and top agents along the way. It is now in eight regions, and in New York City, its largest market, it closed over $650 million worth of sell-side deals during a 12-month period ending Feb. 29. At some point down the road, Reffkin said, it could very well go public.

But what would investors in a Compass IPO be buying into? Critics from within the industry say it’s just a brokerage masquerading as a technology company, while admirers see it as the brokerage of the future. That’s still up for debate, but here’s what we know for sure: The firm is burning through money fast, and its numbers aren’t quite what they seem. Read TRD‘s special report on Compass