On Thursday afternoon, Eastdil Secured CEO Roy March received the industry’s equivalent of the 3 a.m. phone call.
On the line were his star brokers Doug Harmon and Adam Spies, who had catapulted Eastdil to the top of the New York investment sales food chain. The duo informed March they were leaving the firm for Cushman & Wakefield. Minutes later, the news hit the press.
In 2015, Eastdil brokered $22.7 billion in New York City investment sales, putting them in first place on The Real Deal’s ranking and netting the firm an estimated $65 million to $80 million in commissions. Harmon and Spies did the lion’s share of those deals, including the Crown Building for $1.78 billion, a 50 percent stake in an RXR office portfolio for $2 billion, and the $5.3 billion sale of Stuyvesant Town-Peter Cooper Village, the year’s biggest transaction. And 2015 wasn’t a one-off; Eastdil was on top of the charts for five consecutive years.
Harmon and Spies’ departure could mark the end of this domination, sources said.
“Eastdil is changed forever,” one senior-level broker said. “The interesting thing is, for the last 20 years, the top brokers in the city haven’t changed much. Only their business cards have.”
For his part, March expects Eastdil to soldier on.
“Our intention is to do what we’ve always done – to support our clients and utilize our talent within the firm,” March said in an interview with TRD Friday. “No individuals are greater than the cause.”
Recruiting the pair is a huge coup for Cushman, which has been a laggard in investment sales ever since the downturn. In 2010, it lost its star sales team of Richard Baxter, Jon Caplan, Yoron Cohen and Scott Latham to JLL. In 2014, it did just $875 million worth of deals, compared to Eastdil’s $11.2 billion, according to TRD’s analysis. In 2015, after absorbing Massey Knakal Realty Services, Cushman did $3.4 billion in deals — but keep in mind that Massey Knakal by itself did $3.8 billion the previous year. Last fall, Cushman lost two of its top investment sales brokers, Helen Hwang to Meridian Capital Group and Nat Rockett to Marcus & Millichap.
Cushman declined to comment on the move, except to confirm that Harmon and Spies were on board, and that they would both hold the title of Chairman, Capital Markets. Another senior broker on Harmon and Spies’ team, Kevin Donner, is also joining Cushman as executive managing director.
Harmon and Spies declined to comment for this story. It remains unclear whether they will bring some of their pending deals over with them to Cushman.
“The clients are not their property,” a source close to Eastdil said.
Player-coaches
Eastdil was not a strong player in the New York investment sales market until Harmon joined in 1993. Spies’ hire in 1999 added further firepower. The firm now has offices in 13 cities worldwide, including New York, Los Angeles, Hong Kong and London.
Though losing Harmon and Spies is a big blow for Eastdil, sources said the firm would be able to somewhat mitigate the damage by leaning on March and Eastdil’s two other top leaders, Chairman Ben Lambert and President Mike Van Konyenburg, who are all widely considered serious brokers in their own right.
March and his team brokered the Blackstone Group’s $39 billion purchase of Sam Zell’s Equity Office Properties Trust portfolio in 2007, and March then brokered Blackstone’s sale of a $7 billion chunk of that portfolio to Harry Macklowe. His involvement was chronicled in the book “The Liar’s Ball.”
“Harmon and Spies aside, March is the straw that stirs the drink,” a leading sales broker said. “He is one of the world’s top brokers.”
According to sources both within Eastdil and involved in the deals, some blockbuster Eastdil-brokered sales last year were led not by Harmon and Spies, as was widely reported, but by March. Anbang Insurance’s $1.95 billion purchase of the Waldorf Astoria from the Blackstone Group was handled by March, Lawrence Wolfe and Mark Schoenholtz, the sources said, while March also led Ivanhoe Cambridge’s stake purchases of 330 Hudson Street and 1211 Sixth Avenue, as well as their $2.2 billion purchase of 3 Bryant Park.
Sources speculated that the ongoing Wells Fargo fraudulent accounts scandal was a catalyst for the move. After news of the scandal broke last month, the bank fired more than 5,000 employees and its board forced CEO John Stumpf to forfeit $41 million in stock awards and forgo his salary during the investigation.
Wells Fargo bought Eastdil Realty in 1999 and then investment banking firm Secured Capital in 2006. The two firms were merged and renamed Eastdil Secured, which operates today as a wholly owned subsidiary of Wells Fargo.
Some said that in the wake of the scandal, Wells Fargo may opt to sell Eastdil and other subsidiaries. Concerns of further compensation regulation likely contributed to the timing of the Eastdil team’s exit, they added.
A source close to Eastdil refuted that, however, saying their departure was about one thing only: compensation
“The reason for them leaving was over a paycheck,” the source said. “Maybe they had concerns, but if someone says the reason is Wells Fargo, it’s an excuse,” the source said.
The source added that Harmon and Spies left on good terms.
“This is not World War III or the War of the Roses,” the source said. “I have great respect for them, but our clients come first.”
Carpe diem
Some of Eastdil’s competitors view this as a chance to pounce and gain ground in the trophy assets market.
“We have been predicting major movement as a result of a variety of market conditions and expect to take advantage of them,” said Simon Ziff, president of Ackman-Ziff Real Estate, which is ramping up its investment sales practice.
On the whole, brokers were optimistic that March’s pedigree combined with Eastdil’s depth of resources and quality staff would allow it to maintain its competitive edge. While Eastdil only has a few hundred employees, it competes with — and in New York beats — brokerages with tens of thousands of employees.
“Companies the size and scope of Eastdil have a way of reinventing themselves and recruiting new talent,” said Meridian Capital Group’s David Schechtman. “Just like baseball – on any given day, any team can make the playoffs. Or not.”
JLL’s Cohen said Eastdil “will do just fine because they will get younger versions of those who left, some of whom are in their system already. The only issue is Wells, who owns them and is in a bit of trouble now.”
And while Eastdil has long held court at the winners’ table, the firm will now face one of its biggest tests.
One executive at a rival brokerage put it this way: “You’re going to see, who was really able to execute: the platform or the people?”
Adam Pincus contributed reporting.