Controversies

Round 2: City Landlords Kick and Scream Back Following Allegations of Broker Leapfrogging

Some city landlords are kicking and screaming back after an article published in The Commercial Observer yesterday morning cited sources who allege that a new wave of city landlords are leapfrogging brokers to get at retail tenants directly—but many continue to claim that the landlords do just that.

Wharton Properties’ Jeff Sutton, who sources name among several landlords, sought to set the record straight yesterday, claiming that “95 percent of the deals I do have brokers” and calling the implication that he does otherwise “disgusting.”

“Some deals where I’ve had relationships [with] tenants for many years, who don’t have brokers, I do myself, but how could you put me in that category,” he said.  “I’ve never ever gone around anybody.”

(Photo: The Real Deal)

(Photo: The Real Deal)

He listed a number of recent deals he paid commissions on, including the Express deal at 1552-1560 Broadway, mentioned in this morning’s article.  The Commercial Observer had been unable to identify the brokers involved by press time, but Mr. Sutton said he worked with CBRE’s David LaPierre, who repped the tenant, on the deal.

“I paid a $7 million commission on the Express deal,” he said, adding, “I have no gal working in Rome or anywhere else in Europe.”

Mr. LaPierre, who is out of the country, according to a receptionist who answered the phone at his office, did not return an email requesting confirmation.  But Cliff Simon at CNS Real Estate, who worked with Mr. Sutton to bring Burlington Coat Factory to Harlem last summer, did call his experience working with Mr. Sutton “great.”

Mr. Sutton also said he worked with Jacqueline Klinger and Chase Wells at Northwest Atlantic to bring Whole Foods to the corner of 125th Street and Lenox Avenue; Susan Kurland from CBRE to bring Alexander McQueen to 747 Madison Avenue; and Laura Pomerantz from PBS Real Estate and Robert Futterman from RKF to bring Abercrombie & Fitch to 720 5th Avenue.

Ms. Kurland confirmed.  Ms. Klinger and Ms. Wells could not be reached.  And Ms. Pomerantz and Mr. Futterman were not immediately available for comment.

Even if a broker is involved in his deals, Mr. Sutton claimed he and his firm often give its own presentations to potential tenants because “we feel we are very, very good at doing it,” but that he in turn pays the “whole commission” to the brokers.

A spokesperson for Joe Sitt, who was also mentioned by brokers as among the offenders skipping over them, provided the following in a prepared statement.

“Thor Equities is involved with a tremendous number of leasing deals every month, and we utilize an intermediary in nearly every single transaction,” it read.  “We pride ourselves in having strong and respectful relationships with brokers throughout the city.”

Despite the push back, brokers speaking anonymously—as well as some retailers—continue to claim that Mr. Sutton and Mr. Sitt are skipping the middle man, and even going the extra mile in that regard, although perhaps in the wrong direction.

“We happen to be one of the companies approached by both of the landlords you mention,” said Eleonora Parkinson, retail director of strategy and development for clothing company DSQUARED2, referring specifically to Thor Equities and Wharton Properties.  “It would be fine if they would just offer to deal directly without a broker in the middle for the properties they own.”

“The more ‘dishonest’ part is that they ask for a broker fee of 3 percent on their own buildings,” she added, referring only to Thor Equities.

One broker, speaking anonymously, added, “There will be a backlash.  Brokers have been relatively quiet and content to moan loudly about it to each other, but the controversy is bubbling to the top.”

Know of any other landlords leapfrogging retail brokers? Send us an anonymous tip at tips@commercialobserver.com. As always your identity will be protected.

Follow Al Barbarino on Twitter or via RSS. abarbarino@observer.com