The city’s biggest and most established commercial real estate firms are looking to woo top Newmark Grubb Knight Frank brokers who face individual contract expirations come the end of 2015, Commercial Observer has learned.
Firms like CBRE, JLL, Savills Studley and Colliers International have approached the brokers “trying to find out what our intention is and express the weaknesses in [NGKF]’s platform in contrast to [theirs],” said one source on the condition of anonymity.
NGKF’s top 10 moneymakers, who account for what the source said is a huge chunk of the firm’s business, are William Cohen, David Falk, Neil Goldmacher, Michael Ippolito, Paul V. Ippolito, Scott J. Klau, Merrill Roth, Moshe Sukenik, Brian Waterman and Mark Weiss.
“The top brokers here do significant business,” said another source, who also required anonymity.
Securing contracts from brokers often comes up when brokerages sell themselves to other firms.
Prior to BCG Partners buying Newmark Knight Frank toward the end of 2011 for $90.1 million (according to the firm’s 2011 annual report), Newmark’s partners (prior to the sale, the firm was referred to as Newmark) renegotiated contracts with five-year terms expiring at the end of 2015 and sold off their interest, for around 1 or 2 percent, in the company, one of the sources said. The lion’s share of Newmark was controlled by top executives Barry Gosin, Jeffrey Gural and Jimmy Kuhn.
Before the sale, “we didn’t have contracts,” one of the sources said. “They were one-page nothings. There was no term.”
While brokerages approach top-producing brokers industry-wide on a regular basis, come January, NGKF will have to step up its efforts to retain the top talent, one of the sources said, in response to competing brokerages who will start “fanatically pursuing the top five or six guys.”
Once the NGKF contracts expire at the end of 2015, they will roll year to year unless the brokers cancel them, but leaving NGKF isn’t an easy thing as the company awards its brokers 10 percent of their commission through restricted equity units over a number of years.
“You only get access to it over six years and if you leave the firm, you get none of it,” one of the sources said. “If you leave, you’re leaving money on the table and that’s part of their retention strategy.”
Many commercial real estate companies have the majority of their brokers working at-will with basic commission agreements, but NGKF brought on Alison Lewis—who has a corporate strategy, sales management and business development background—in 2013 to convince the rest of the firm’s 1,400 brokers to sign contracts, and one of the sources said “she has had success with that.”
For the average broker industry-wide, there is a basic brokerage agreement including commission breakdowns and exclusion periods, “but rarely a contract,” a broker at another firm said.
In response to a query about the potential loss of his biggest brokers upon contract expiration next year, Mr. Gosin said: “We were up 20 percent in revenue, 60 percent in profit. The company is growing in leaps and bounds. It’s an incredible company. We continue to hire people every single day. We’re the hottest place to work. We’re the best place to work. The proof is in the pudding.”
Time will tell what will happen at NGKF.
“This is a topic that will play itself out over the next year,” one of the sources said.