Be Afraid. Be Very Afraid: a Major Wall Street Real Estate Disruptor has finally landed in DFW. Compass aims to own 20% of the US real estate market by 2020.
Compass, which bills itself as a real estate technology company that also sells real estate, has launched their first Dallas office by merging with the small but mighty boutique firm known as The Collective Residential. The Collective, launched by Christy Berry and Jonathan Rosen almost one year ago, branded itself as an elevated real estate experience for the agents and the clients they serve. Rosen and Berry came from Briggs Freeman Sotheby’s, where they were two of the most consistently high producing agents.
Calling itself “a unique boutique luxury brokerage comprised of dynamic real estate advisors (never agents) in Dallas- Fort Worth, with a focus on enhanced design and innovation that guarantees clients maximum efficiency and premier access to the city’s most exclusive properties and listings,” the firm vowed to limit itself to 30 or 40 agents at most. They currently have 13. Most recently Gaynelle Henger left Coldwell Banker to join The Collective, which boasts a beautiful office on Oak Lawn just south of Highland Park that resembles a sleek ad agency more than a real estate office. The firm also added Erin Duvall, Molly Duvall Thomas, Callie Brickman and Duke Jimerson III shortly before the holidays. Jimerson is the son of veteran Dallas agent Duke Jimerson at Allie Beth Allman & Associates. The Collective has clearly been building a team of millennial dynamo associates with deep family roots in Texas real estate.
The merger with Compass was actually something the duo sought before creating their company.
“We we went to New York City two years ago and talked them into opening Dallas then, but they just were not ready,” says Christy. “The Compass philosophy is much the same as our’s, very agent-centric, but they have this huge, impressive tech component that we could never compete with.”
Nor, says Christy, will others. In the New York City office, Compass has a full time tech department of about 80 engineers sitting in one room consistently working on the company’s intuitively designed software for agents to advance and improve, she says.
“They hire from Pixar, Apple, Google,” says Jonathan. “The mantra is to have full time tech people in every Compass office.”
Compass’s large marketing department is also populated with talent.
“The head of their marketing department came from the Tribeca Film Festival,” adds Christy. “The whole platform elevates the real estate experience for the client as well as the agent.”
Compass is one of the first real estate companies created by two non-Realtors, Robert Reffkin and Ori Allon, with the mission of disrupting the status quo and bringing a data-driven system to valuations, as well as help real estate agents sell more effectively by growing their business on one end-to-end platform. Agents rely on the company’s agent-specific mobile app, designed with a level of functionality and intuitiveness not typically found in most proprietary software. Data fed into their system, at the agent’s fingertips on an iphone, will build an intellect of real estate information that will help buyers and sellers determine values and predict responsiveness:
“Across the real estate value chain–buyers, sellers, agents, developers, renters, et cetera–everyone is making decisions that have enormous financial ramifications, and the big secret is that no one is confident in making those decisions,” says Allon. “We’re building proprietary analytics technologies to help our agents triangulate the value of properties, develop property-specific marketing ROI plans, predict how the market will respond to new properties entering the market. We are bringing the science to what has for too long been only an art.”
Founder Robert Reffkin has a Wall Street background, coming from Goldman Sachs and the esteemed consulting firm, McKinsey & Company. According to The Real Deal, he was “chief of staff to the president and COO of Goldman Sachs immediately prior to co-founding Compass with Ori Allon.”
Allon is the technical brain of the duo, with real industry cred: according to FastCompany, he “sold his first company, a search startup named Orion, to Google, which won a bidding war with Yahoo and Microsoft over Allon’s creation. Orion’s code is now part of Google’s core search algorithm. His second company–a real-time search product called Julpan–got snatched up by Twitter in 2011.” Allon was the engineering director of Twitter’s New York office immediately prior to founding Compass. Allon has a PhD in computer science from the University of New South Wales in Australia.
Reffkin also put in time at Lazard and graduated from Columbia, where he earned an MBA, and once worked as a White House Fellow in the Treasury Department. Oh and the tall, lanky entrepreneur “has run nearly 50 marathons to boot, one in each state.” Reffkin’s mother is a Real Estate agent.
Compass launched in 2013 as Urban Compass, for residential rentals, before changing its name, mission and website in 2015 to residential real estate sales. With headquarters in Union Square, the Wall Street CEO and the Tech Genius as co-founders, the company’s early buzz was in-house technology (those 80 engineers) that “supposedly not only cut down on administrative work but also facilitated faster reaction to listing changes and debuts. Skepticism remains, however, about just how liberating and fast Compass technology is.” For all the IPO cash, Compass remains the 7th or 8th largest brokerage in Manhattan, a tiny fraction of Elliman or Corcoran.
But the company clearly picked up star real estate agents in NYC very quickly: Leonard Steinberg, long one of Douglas Elliman‘s top-performing Manhattan brokers, Kyle Blackmon, formerly of Brown Harris Stevens; Jay Glazer of Warburg Realty; and Gene Martinez from the Corcoran Group. Not all stars remained, however. There is also Toni Haber from Douglas Elliman, Lindsay Barton Barrett from Corcoran, and Julia Hoagland from Brown Harris Stevens. Word from my NYC sources is that Compass goes after top real estate talent ruthlessly, offering large sign-on bonuses and perks. The company denies that, says the average incentive is 1.3% of annual Gross Commissions Income. Agents say they like the corporate, Wall-Street like atmosphere that tends to be more structured. And there are mutterings of a future IPO offering that could put significant cash in agent-investor’s pockets.
And the company has picked up big name NYC/Wall Street investors, from developer Bill Rudin and SalesForce.com founder Marc Benioff to Goldman Sachs. In 2015 the company raised $73 million through seed, Series A, and Series B financing rounds and claimed to be valued at at $360 million. The company just received a cash infusion of $450 million from SoftBank Corp, a Japanese-based multinational telecommunications company that interestingly acquired Ziff-Davis Publishing in 1996. SoftBank recently invested in WeWork and Uber.
In the past five years, Compass has grown, it says, to a $2.2 billion company with more than 40 offices in 12 cities nationwide servicing 2,200 agents in New York City, Los Angeles, San Francisco, Boston, Washington, D.C., Chicago, Miami, Orange County, The Hamptons, Santa Barbara, Montecito, and Aspen.
“Real estate agents are the most neglected player in the real estate ecosystem. Agents, as our customers, are at the center of everything we do at Compass. We believe that we can make the experience of buying or selling a home better for everyone involved by building technology and providing support designed to make agents’ lives simpler,” said Robert Reffkin, co-founder and CEO of Compass. “Christy, Jonathan and the agents at The Collective Residential will be incredible partners to us. As the founders of The Collective Residential and now, Compass Dallas, they embody the innovative, agent-centric approach that we believe will help Compass clients sell their homes faster and for more money.”
Compass says it aims to grow its Dallas presence in the coming months with two additional offices totalling more than 15,000 square feet. Compass will also hire a team of Dallas-based employees including expert marketers, designers and administrators to serve agents. For now, says Christy, Compass will operate out of their Oak Lawn Office. In addition to Dallas, Compass is planning to enter eight more major national markets in 2018, in addition to opening 50 new offices in their existing markets.
“By joining the Compass family, The Collective Residential will be able to bring the elevated real estate experience we’ve offered our agents and clients to a whole new level,” said Christy Berry in a statement. “Compass’ focus on agent service, technology and immaculate branding will allow us to best serve Dallas home buyers and sellers with the personal touch we pride our business on.”
“Leveraging the marketing expertise and technology Compass brings to the table will elevate the newest development projects and luxury properties in Dallas to the national stage,” said Jonathan Rosen, in a statement.
“Wall Street doesn’t always understand real estate, so it makes me wonder how what appears to be a traditional real estate brokerage company can be marketed as a “tech” play,” says Jonathan J. Miller, President/CEO of Miller Samuel, Inc., the largest residential appraisal and consulting company in New York City and frequently quoted by The Wall Street Journal, The Street, Bloomberg, Curbed, and other business publications.
“What is the actual “tech” that most real estate brokers don’t already have?” he asks.
Dallas is about to find out!
11:00 am: This story has been updated to include more information provided by Compass Real Estate and a quote from Jonathan Miller.