Compass: We can survive slump of 6 to 9 months
SoftBank-backed brokerage laid off 15% of staff in March
Compass is one of the richest residential brokerages, fortified with $1.5 billion in venture capital. Now facing an uncertain economic future, the company said it has enough cash to withstand a slump of two or three quarters.
“We can sustain a downturn for six months, eight months, nine months,” CEO Robert Reffkin said during an interview on Los Angeles agent Danny Brown’s podcast, The Deal. “We have the capital to be able to do so.”
Reffkin’s comments come as the SoftBank-backed firm faces a potential 50 percent drop in revenue thanks to the coronavirus pandemic. The firm, valued at $6.4 billion, sold $88 billion worth of real estate last year, up from $45.5 billion in 2018. As of October 2019, it was projecting $2 billion in 2019 revenue and said it had run-rate revenue of $3 billion.
Last month, Compass laid off 15 percent of its staff — roughly 375 people — in anticipation of an “economic standstill.” At the time, Reffkin projected a steep revenue decrease over the next six months.
On the podcast, he said Compass was in a lucky position, and that firms that are not so well capitalized are likely to pursue mergers or partnerships to stay afloat.
He noted, too, that Compass has seen an uptick in agents joining the firm. “We’re able to onboard agents virtually,” he said. “The great agents always gain market share in a downturn. It’s a question of how much market share you can gain.”
Residential firms around the country have laid off and furloughed employees in recent weeks, as have other VC-backed companies in real estate, including WeWork, Lyric and Sonder.
On the podcast, Reffkin predicted the residential market is likely to bounce back as early as this summer. He said that he personally made two offers on property last week. “I know the buildings, I know the neighborhood,” he said.
Write to E.B. Solomont at firstname.lastname@example.org
— Reporting by Erin Hudson