The pre-IPO brain drain at Cushman & Wakefield is no secret. But it’s also become increasingly clear that some of the company’s resources have been sacrificed to get to this point.
In recent months, the brokerage has laid off a number of support staffers, including some who prepare marketing and presentation materials for brokers. The firm also implemented a new policy restricting the reimbursement of travel expenses for brokers — a move that has not been good for agent morale. And sources inside the company say there are more layers of approval than ever to collect reimbursements for business expenses.
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Will Cushman fall flat on Wall Street?
Internally, the practice of cutting staff and dressing up financial statements has been referred to as “preening up the doll,” said one Cushman broker.
“Expense reductions do suck, especially for the brokers,” said a high-level source who formerly worked at the firm. “But it’s not uncommon to primp and dress up the earnings to do something like that. The cuts are not sustainable in the long term. The thinking is, ‘Let’s be sure our finances and metrics are in line with our competitors.’”
Some market experts, however, are skeptical of too much cutting.
“A lot of housecleaning, in my opinion, doesn’t jibe with an IPO,” said Josh Barber, a research analyst at Diamond Hill Capital Management.
While shaving zeros off the expense ledger might make the company’s financial statement look more attractive to outside investors, it’s causing friction — and turnover — at Cushman’s Midtown office.
Late last year, Tod Lickerman stepped down as CEO of the Americas and went to a Chicago-based private equity investor. But Lickerman told TRD he thinks the company is moving in the right direction. “Cushman was built to get to and perform at this level,” he said. “Whatever the board decides to do, the company is in good shape and should continue to grow.”
Then, in March, Executive Vice Chairman Peter Hennessy was fired after lashing out at Lickerman’s replacement, Shawn Mobley, over the firm’s new expense policy.
Others have left in recent months of their own accord.
In April, office leasing veteran Gus Field, who spent 30 years at Cushman, jumped to mega-developer Tishman Speyer, where he was tapped as leasing director. And last month, Gene Spiegelman — who previously managed the company’s retail arm — defected to Ripco Real Estate, where he’ll be one of three principals.
Meanwhile, the leadership team from Massey Knakal Realty Services, which Cushman acquired in late 2014 for $100 million, is all but gone.
Power broker James Nelson decamped in January for Avison Young, where he’s now building up a 30-person team that will likely compete against Cushman in the midmarket investment sales space. And Paul Massey — who co-founded his namesake firm with Knakal — left in April to start his own firm focusing on debt and investment sales. He’s now aiming to be in as many as 10 cities.
One broker who left called it a “sin” that the firm couldn’t find a place for Massey — a highly regarded business mind and manager in the industry. Although Massey’s contract bars him from recruiting from Cushman, sources said Massey is already courting Cushman’s Massey Knakal alumni.
According to several sources, Knakal is actively talking to JLL, Colliers International and other brokerages and also considering either teaming up with Massey again or starting his own shop. Both Massey and Knakal declined to comment.
Some of Cushman’s remaining Massey Knakal alumni, meanwhile, are said to be waiting to see what the duo hatches before renewing their own contracts. If — or when — those brokers hightail it out of the firm, they could alter the playing field in the midmarket space, particularly in the outer boroughs.
Sources said that while the IPO restructuring and loss of additional Massey Knakal brokers could mean a reduced presence in the outer boroughs, they noted that Cushman is not likely to abandon the boroughs altogether.
Still, Shimon Shkury, president of the multifamily-centric brokerage Ariel Property Advisors, said Cushman’s IPO is good news for smaller firms like his. He said that as the industry continues to consolidate and bigger firms go public, smaller private firms that focus on the outer boroughs, or specific asset types, will have those areas to themselves.
“As a privately held company, we’re happy to see Cushman go public,” said Shimon Shkury, president of the multifamily-centric brokerage Ariel Property Advisors.