UPDATED, April 24, 2020, 2:55 p.m.: Over the past few weeks, as rival brokerages enacted furloughs and pay cuts, Core employees continued to work full-time for full pay. Some hoped that the Related Companies’ partial ownership in the boutique brokerage would insulate it from the economic fallout of Covid-19.
But on Thursday, the residential firm laid off about 40 percent of its staff, or 10 of approximately 25 staffers, sources said. It reduced pay for those who remained.
Several sources said employees learned about the cuts during a video call in which executives said they had to make some hard decisions and would be contacting those directly affected.
During the call, Core also disclosed that it had shuttered its Madison Avenue office this month. It now has three locations, including two in Manhattan — its headquarters at 104 Fifth Avenue and 149 Fifth Avenue — and one in Brooklyn, at 180 Smith Street.
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In a statement, CEO Shaun Osher said companies around the world are making “gut-wrenching” decisions and that Core is no different. “Expenses had to be cut, office space had to be reduced, and most unfortunately, we had to release some truly amazing and talented people,” he said.
After publication, Core disputed the 40 percent figure and said it laid off 10 employees out of 40, or 25 percent.
He said Core kept its people employed as long as possible and, like others in the industry, faced no alternative. “We simply had to manage the hand that we were dealt,” Osher said.
Putting the layoffs in perspective, he said the true loss is greater than economic. “Over 15,000 New Yorkers have lost their lives to this pandemic,” the CEO said. “Businesses, jobs, the economy will all come back — these lives will not.”
Earlier this month, the city’s major brokerages enacted severe cost-cutting measures. Douglas Elliman laid off approximately 100 staffers and the Corcoran Group furloughed staff, suspended ad budgets and enacted across-the-board pay cuts. Compass, which laid off 15 percent of its staff, enacted sweeping pay cuts this week. The SoftBank-backed firm did not cut engineers or recruiters, however, and it has continued to court agents.
Some Core staffers said the layoffs caught them by surprise, given Related’s deep pockets.
Core was founded in 2005 by Osher and developer Jack Cayre of Midtown Equities, and in 2014 Related bought a 50 percent stake in Core for an undisclosed sum. At the time, the deal was billed as a way for the developer to keep working with repeat buyers in its buildings.
In 2019, Core was No. 10 on The Real Deal’s annual ranking of residential firms, with $179.2 million in sell-side deals. As of January 2020, it had 121 agents.
But recently, Core has faced heavy market headwinds. In 2019, it lost 35 agents to Compass. Last month, it also lost a key new-development marketing assignment: JDS Development Group and Largo’s The Fitzroy, a 14-unit condo with available units asking $5.9 million to $12 million, according to StreetEasy. Christie’s International Real Estate is now representing the project.
As one of the most prominent developers in the U.S., Related is behind megaprojects including the $25 billion Hudson Yards. This week, Vanity Fair reported that in early February, Related landed a major investment from the Public Investment Fund, Saudi Arabia’s sovereign wealth fund. The debt investment is convertible to 15 percent of Related’s equity.
But the Stephen Ross-founded firm is facing serious issues of its own. It is struggling to collect rent from its retail tenants, and Equinox, which counts Related executives as owners, did not pay rent earlier this month.
Related’s Hudson Yards mall is also on shaky ground: Neiman Marcus, its anchor retail tenant, is heading toward bankruptcy. Related and Oxford Properties paid for the store’s buildout and agreed to take a percentage of sales in lieu of rent for several years. Some of the mall’s other tenants are tied to Neiman’s presence.
In an interview with Bloomberg, Related CEO Jeff Blau predicted a wave of defaults on commercial and hotel loans. With May 1 looming, landlords are again wondering about rent.
Write to E.B. Solomont at eb@therealdeal.com
UPDATE: After publication, Core disputed the 40 percent figure, and said 25 percent of staffers had been let go.