In late 2016, Miami-based Cervera Real Estate and Stribling & Associates in New York announced a brokerage affiliation, essentially utilizing the expertise each firm has in its respective market to sell homes.
The companies had informally been partnering for years, but the timing of the official rollout, less than a month after Donald Trump was elected president, proved prescient. The federal tax reform bill Trump had been pushing passed in December 2017, with a provision that has boosted the Florida residential real estate industry. Now, the Cervera-Stribling affiliation has kicked into a higher gear.
In recent months, a number of ultra-wealthy, out-of-state buyers have established residence in South Florida by buying homes, a trend luxury brokers and developers attribute to the federal Tax Cuts and Jobs Act.
The law now limits the ability to deduct state and local taxes from federal taxable income, starting in 2018. Because Florida has no state income tax, it is now reaping the benefits. The new tax provision has proved so onerous for some, that it has motivated an increasing number of wealthy New York, New Jersey and Connecticut residents to lay down roots in the Sunshine State. (Other states without income tax are Alaska, Nevada, South Dakota, Texas, Washington and Wyoming.)
In response, residential brokerages are leveraging their existing affiliations or trying to create new ones in hopes of closing more deals.
Since President Trump signed the tax reform bill, Cervera director of general real estate Alexandra Goeseke said the firm has seen more referrals from Stribling for potential buyers in New York. She declined to cite a specific number.
Earlier this year, the two companies — which have a combined 610 agents — hosted a pair of seminars in New York. One gathering was to educate their agents about purchasing homes in Florida and establishing residency, and the other detailed the implications of the tax law changes.
Fortune International Group is now weighing the pros and cons of forming partnerships with outside firms as high-end home buyers flock to markets like Miami Beach and Palm Beach. For some residents who move to Florida, the tax savings from that switch could potentially pay for their multimillion-dollar homes.
Fortune International, led by CEO Edgardo Defortuna; and the Fite Group in Palm Beach, led by David Fite, both lost their New York affiliations when boutique brokerage Town Residential abruptly shuttered in April. The Manhattan firm, founded and led by Andrew Heiberger, inked broker alliance deals with Fortune International in February 2015 and the Fite Group about a year ago.
Defortuna said there were “certainly a lot of deals that came from” its relationship with Town, and that the company is deciding whether to partner with another firm. Manhattan is a “very important market for us today,” he said. Another benefit is a 2016 measure by the New York state attorney general, which simplified the process of marketing out-of-state projects in the city.
David Fite did not respond to requests for comment.
Brokerage affiliation agreements vary when it comes to splitting commissions and paying licensing or franchise fees. Their success often depends on how an alliance is promoted by both firms, according to insiders.
Defortuna said Heiberger pushed Town to “get familiar with Miami” and sent agents to Miami for events like Art Basel. He declined to provide how many deals came from the partnership.
At Cervera, agents receive a minimum 30 percent of the 3 percent commission on a sale. If it’s for new development, referring agents would get the outside broker commission, typically 5 percent, Goeseke said.
Attention must be paid
The brokerage alliance between Cervera and Stribling does require attention and maintenance, Goeseke said.
“What makes partnerships successful is that you have to be there…If they see you all the time, they’re going to remember, ‘Oh right, we have people in Miami,’” she said. Goeseke travels to New York monthly to meet with her Stribling counterparts; About 12 Cervera agents shuttled between Miami and New York City last winter.
Elizabeth Ann Stribling-Kivlan, president of Stribling, said the agreement with Cervera gives her firm a presence in South Florida without having to open an office there. “I do what I do up in New York really, really well,” she said. “I don’t think I could serve the Miami community in the capacity.” Stribling also has a director of referrals, Sarah Alvarez, who flies down to Miami every quarter.
South Florida brokerages may be touting their affiliations more so now thanks to the tax law changes, but the push to make those connections can be traced in part to Douglas Elliman’s aggressive expansion in Florida, according to Compass Florida’s Beth Butler.
“Agents want to be able to say we have a New York connection,” said Butler, the office’s managing broker. But unless an agent or staffer “is dedicated to promoting it, it’s not going to generate much. It’s not something you [just] put on your web page.”
Companies like Elliman and Brown Harris Stevens will use their internal referral networks to attract buyers from New York and their other markets.
Phil Gutman, president of Brown Harris Stevens Miami, said the firm is pushing its referrals to its out-of-state agents via weekly emails that includes listings, and the agents’ names and headshots. Gutman has seen the number of referrals from the company’s Hamptons and New York City offices increase from six to 12 in recent months.
Managers are also tasked with promoting Brown Harris Stevens referrals during sales meetings. An agent providing the referral would receive a fee on top of the typical commission.
Elliman’s agents, meanwhile, also have access to the brokerage’s partnership with Knight Frank, a real estate consultancy with 450 offices and 14,000 agents around the world. Jay Parker, CEO of Elliman Florida, said his firm benefits from co-hosting events like city-specific presentations of the Wealth Report — Knight Frank’s annual report on ultra high-net worth individuals and top property markets — as well as having some of its listings on the Knight Frank website.
The company’s listings are shared after meeting a certain threshold, he said. “We don’t put $300,000 listings on the Knight Frank website.”
Elliman is now starting to see the results from the Knight Frank agreement, which began two years ago. He said the affiliation with Knight Frank took time to develop, and is now paying off with help from the tax law changes. It’s a “perfect storm,” he said.
The Elliman-Knight Frank partnership is another way that brokerages align themselves with other brands. But Parker was skeptical about affiliations between two regional firms, like Fortune International and Fite’s agreement with Town; and the Cervera and Stribling alliance. While those kinds of arrangements may appear to be successful, he said, they are “more of a representation of a solution.”
In addition to the agreements that Elliman, Cervera and others have formed with competing brokerages, some firms will join referral networks to boost their ties to other markets.
Coral Gables-based EWM Realty International is part of the Leading Real Estate Companies of the World, a referral network with more than 550 real estate firms and 140,000 agents. It is a subsidiary of Berkshire Hathaway’s 41,000-agent HomeServices of America. The Keyes Company in South Florida, among the largest brokerages in the region, is also part of Leading RE Companies.
Ron Shuffield, president and CEO of EWM Realty, said it continues to work with Leading RE Companies, including with his company’s luxury division. Shuffield declined to comment on the specifics, citing confidentiality agreements between the two firms.
EWM Realty leaned heavily on its referral network to sell properties in the beginning, Shuffield said. “While we value the relationships we’ve built with all of these organizations, Miami is the brand we’ve come to recognize,” he added.
Butler of Compass, who’s resume includes more than a decade at EWM Realty International and nearly four years at One Sotheby’s International Realty — which has its own network of offices — said Leading RE Companies charges a “nominal” membership fee. The agent who originated the referral would keep 25 percent of the commission and the brokerage would keep 10 percent.
“What it says is brokerages and agencies will pay for things that are generating business,” she added.
For family run firms like Cervera and Stribling, creating an official partnership has allowed the agents to share more of the benefits, said Veronica Cervera Goeseke, principal and CEO. “We’ve found that as the Stribling agent meets the Cervera agent and they get to know each other, it becomes a more profitable alliance.”