Brokerage Execs Claim “Opportunity” in Compass, Anywhere Deal

Douglas Elliman executives gathered for an impromptu town hall Monday, hours after Compass announced a seismic deal to acquire competitor Anywhere Real Estate.

CEO Michael Liebowitz kicked off the meeting, saying the deal, valued at $1.6 billion, presents a “tremendous opportunity for Elliman.”

New development heads Susan de França and Jay Parker added that the differences between Elliman and the two residential giants, which combined would have more than 340,000 agents under their umbrella, came down to their focus on agents and value proposition to developers.

“We want to have the strength of a cruise liner but the agility of a power boat,” said Parker.

Liebowitz also dismissed the companies’ claims that Anywhere’s independent firms — such as the Corcoran Group, Sotheby’s International Real Estate and Coldwell Banker — would operate as usual under the merger.

“That is impossible, financials don’t work if you leave everything as is,” Liebowitz said. “If I was told nothing was changing, I would question that. What is coming is a lot of uncertainty.”

Liebowitz also said the deal could draw scrutiny from federal regulators tasked with evaluating the pending transaction for signs of monopoly. The deal isn’t expected to close until the second half of next year, a long runway which Liebowitz attributed, in part, to Compass’ ongoing lawsuit with Zillow over its listing guidelines.

“If I was an agent, I would be afraid of their ultimate goal to become more of a Zillow or an online business that doesn’t need agents anymore,” Liebowitz said, referring to the firm’s expressed goal to expand their own technology platform.

“We are a brokerage business, not a technology company, we are in the agent business,” Liebowitz said.

Reffkin emphasized in a Monday call discussing the merger news that cutting operating expenses would be a top priority for the firm, and Liebowitz hypothesized that the $3 billion debt Compass was taking on in the deal could mean heavy cost cuts.

Liebowitz left the meeting with a promise that Elliman was looking to be “aggressive in every respect.”

“We are hiring,” he added.

Liebowitz’s bullish take for his firm echoed sentiments expressed by other brokerage executives. Following news of the merger, leaders of private firms largely congratulated Reffkin on the announcement and said it wasn’t surprising given Compass’ acquisition tear over the last few years.

“We all have to respect it,” said Brown Harris Stevens CEO Bess Freedman, who has been a vocal opponent of Reffkin’s campaign for private listings. “It’s nothing to sneeze at. It’s a huge deal.”

Freedman added that “bigger isn’t always better,” though she acknowledged that there was room for all industry players in the sandbox.

“Some people bank with Chase, and some use a family office,” Freedman said. “Our goals are different. They have earnings calls and shareholders and other things they have to do… we’re different animals.”

To some, brokerage leads may appear to be putting on a brave face, though the Agency CEO Mauricio Umansky plainly denied that the joining of the two firms posed any issues for brokerages like his still clinging to independent ownership amid a swell of consolidation across the industry.

“We’re definitely not scared of this,” Umansky said. “There are a lot of agents who want to work for boutique firms.”

Umansky said that the deal would give Compass “more market power” and could “put a lot of pressure on Zillow.” Similar to Liebowitz, he added that he expected the Federal Trade Commission to step in on some aspect of the deal.

“If they act responsibly, [the deal] could be fine,” Umansky said. “Or if irresponsibly, it could be a real problem” for regulators.

In a video posted to Instagram, Ryan Serhant, the founder of an eponymous brokerage that has been on an expansion tear of its own, said the deal was in line with the typical evolution of “mature industries,” repeating the mantra, “when innovation slows, consolidation grows.”

However, Serhant said the idea doesn’t necessarily translate to real estate, where relationships between companies and their agents and between agents and their clients are key to maintaining their value proposition.

“For agents and clients, scale does not automatically equal better outcomes,” he said. “Corporate objectives and client outcomes are not always aligned, and when size becomes the headline, individual agents, human beings and their brand, can feel like they’re being treated as units inside a system they did not choose to be a part of.”

Ellen Cranley contributed reporting.